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
For the fiscal year ended JUNE 30, 1999
[ ] 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
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
Securities registered pursuant to Section 12(g) of the Act:
NONE
(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 20, 1999 was
$67,587,128.
The number of shares outstanding of Common Stock, without par value, as of
September 20, 1999 was 10,528,368.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended June
30, 1999 are incorporated by reference into Part II.
Portions of the definitive proxy statement for the 1999 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.
On May 28, 1998, the Company completed a $5.00 per share tender offer for
all outstanding shares of Morrison Restaurants, Inc. (Morrison), acquiring
approximately 89% of the outstanding shares (the Morrison Acquisition). A
merger was then completed on July 31, 1998 in which the remaining Morrison
shares were converted into the right to receive $5.00 per share and Morrison
became a wholly-owned subsidiary of the Company. The Company believes that the
acquisition of Morrison provides broader market coverage and opportunities for
improved operating efficiencies.
As of June 30, 1999, the Company has converted 99 Morrison units into
Piccadilly units (the Morrison Conversions). The Company expects to complete
the 13 remaining scheduled Morrison Conversions by the end of the first quarter
of 2000. Eleven units will continue to operate as Morrison units for an
indefinite period.
The conversion process involves the replacement of signage and employee
uniforms. Some minor renovations may be done if necessary. The most popular
Morrison recipes are integrated with Piccadilly recipes to appease the loyal
Morrison customers.
At June 30, 1999, the Company operated 244 cafeterias in 17 states. Of
these, 121 are in suburban malls, 26 are in suburban strip centers, and 97 are
free-standing suburban locations. The Company also operates a Piccadilly
Express unit in an Associated Grocer supermarket and nine Morrison's Quick-
Serve restaurants, "QSR's", located primarily in mall food courts. Up to four
new cafeterias are expected to be opened during the year ending June 30, 2000.
The following table sets forth certain information regarding development of the
Company's cafeteria chain during the five years ended June 30, 1999:
<TABLE>
<CAPTION>
Year Ended June 30 1999 (A) 1998 (B) 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales per unit (in thousands)(C) $ 1,920 $ 2,226 $ 2,179 $ 2,058 $ 1,990
Units opened -- 4 3 1 5
Units closed 15 3 4 3 3
Units open at year-end 253 130 129 130 132
Total customer volume (in thousands) 75,653 48,786 49,483 49,629 48,098
</TABLE>
(A) The average net sales per unit for units acquired in the Morrison
Acquisition was $1,613,000 while the net sales per unit for other
Piccadilly cafeteria units was $2,195,000.
(B) Fiscal 1998 data excludes the one month of operations of Morrison's.
(C) Excludes sales from Piccadilly Express units and QSR's. Excludes
cafeterias opened or closed during period.
On March 30, 1999, the Company completed the sale of the Ralph & Kacoo's
seafood restaurants and related commissary business (Cajun Bayou Distributors
and Management, Inc.) to Cobb Investment Company, Inc. for $21,314,000 in cash.
The Company believes that the sale will allow the Company to focus on its core
business, the operation of the company-owned cafeterias. The following table
sets forth certain information regarding the Ralph & Kacoo's seafood
restaurants in Alabama, Louisiana and Mississippi.
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30 1999 (A) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales per unit (in thousands)(B) $2,759 $3,509 $3,428 $3,394 $3,394
Units opened 0 0 0 0 1
Units closed 1 0 1 0 0
Units open at year-end 0 7 7 8 8
</TABLE>
(A) Includes sales through March 30, 1999.
(B) Excludes restaurants opened or closed during period.
Although the Company's operations are primarily in the southeast and
mid-Atlantic 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 OPERATIONS
The Company's traditional cafeterias, including those acquired in the
Morrison acquisition, seat from 250 to 450 customers each. During 1997, the
Company 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 and seats from 165 to 200 customers. This
smaller cafeteria allows the Company to access a broader range of markets
at a lower investment cost.
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 customer 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
food inventory at June 30, 1999 was $13,500 per cafeteria.
Each cafeteria, express unit, and QSR 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. Twenty-one district
managers, under the supervision of one general manager, and the chief
executive officer oversee and regularly inspect cafeteria operations. The
Company employed approximately 13,200 persons at June 30, 1999, of whom all
but 99 corporate headquarters employees worked at Piccadilly's 255 units.
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 29 of the cafeterias, express and QSR units operated by the
Company at June 30, 1999, were operated on premises held under long-term
leases with differing provisions and expiration dates. The 29 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:
<TABLE>
<CAPTION>
Five-year periods Units Units
ending June 30 Operating Closed
<S> <C> <C>
2004 144 13
2009 62 7
2014 14 4
2019 5 ---
Total 225 24
</TABLE>
Reference is made to Note 6 of the Notes to Consolidated Financial
Statements for certain additional information regarding the Company's
leases.
The Company's maintenance program provides for remodels of existing
properties generally on ten-year cycles. All equipment is maintained and
modernized as necessary to maintain appearance and utility. The list below
provides a general geographic review of the locations of the Company's
operations at June 30, 1999:
<TABLE>
<CAPTION>
Piccadilly
State Cafeterias Express & QSR's
<S> <C> <C>
Alabama 22
Arizona 2
Florida 64
Georgia 37 2
Kansas 1
Kentucky 5
Louisiana 31 1
Maryland 2 2
Mississippi 11 1
Missouri 3
North Carolina 6
Oklahoma 3
South Carolina 9
Tennessee 16 1
Texas 16
Virginia 15 3
West Virginia 1
</TABLE>
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 continues to pursue strategies to increase the capacity
and utilization of its cafeterias. The Company is converting its "order
pick-up" counters to Piccadilly Express hot counters where the physical
facilities are conducive to doing so. The new counters allow customers to
view and select their choices rather than simply ordering to go items from
a menu. This delivery system increases the number of take-out orders that
can be filled at peak order times.
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 36, has held such
positions since July 1996. From May 1992 to July 1996 he was Vice
President and Assistant Controller.
Robert E. Brown, Executive Vice President and Director of Operations, age
47, has held such positions since September 1998. From March 1996 to
September 1998 he was Divisional Vice President with Morrison Restaurants,
Inc. Prior to March 1996 he served in various capacities with Morrison
predecessor companies as District Manager.
Frederick E. Fuchs Jr., Executive Vice President and Director of Real
Estate, age 52, has held such positions since June 1986.
Jere W. Goldsmith Jr., Executive Vice President and Director of Training,
age 53, 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 48, Executive Vice President, Secretary and Treasurer,
has held such positions since September 1999. From November 1995 through
September 1999, he was Executive Vice President, Treasurer and Chief
Financial Officer. 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 43, 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.
D. Thomas Landry, Executive Vice President and Director of Maintenance,
Construction and Design, age 47, has held such positions since May 1992.
Mark L. Mestayer, Executive Vice President and Chief Financial Officer, age
41, has held such positions since September 1999. From July 1996 to
September 1999, he was Executive Vice President, Secretary and Director of
Finance. From January 1992 to July 1996, he was Executive Vice President,
Secretary and Controller.
Joseph S. Polito, Executive Vice President and General Manager, age 57, has
held such positions since July 1995. From October 1992 to July 1995, he
was Executive Vice President and Director of Training.
Patrick R. Prudhomme, Executive Vice President and Region Manager, age 49,
has held such positions since September 1998. From February 1992 to
September 1998, he was Executive Vice President and Region Manager.
C. Warriner Siddle, Executive Vice President and Director of Development,
age 48, has held such positions since July 1995. From February 1992 to
July 1995 he was Executive Vice President and Region Manager.
Donovan B. Touchet, Executive Vice President and Director of Data
Processing, age 50, has held such positions since June 1988.
Brian G. Von Gruben, Executive Vice President and Director of
Administrative Services, age 51, 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 the
inside cover of the Annual Shareholders Report for the year ended June 30,
1999, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Selected and Other Financial Data", on page 11 of the Annual Shareholders
Report for the year ended June 30, 1999, 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 12 through 15 of the Annual Shareholders Report for
the year ended June 30, 1999, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks related to interest rates as a
result of the variable interest rates on its $100,000,000 credit
arrangement, where the Company's earnings are exposed to changes in
short-term interest rates. If (i) the variable rates on the Company's
credit arrangement were to increase by 1% from the rate at June 30, 1999
and (ii) the Company borrowed the maximum amount available under its
senior credit agreement ($100.0 million) for all of 2000, solely as a
result of the increase in interest rates, then the Company's interest
expense would increase resulting in a $630,000 decrease in net income,
assuming an effective tax rate of 37%. The fair value of the Company's
credit arrangement is not affected by changes in market interest rates.
This discussion does not consider the effects of the reduced level of
overall economic activity that could exist following such changes.
Further, in the event of changes of such magnitude, management would likely
take actions to mitigate its exposure to such changes. The Company has not
used derivative instruments to engage in speculative transactions or
hedging activities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary data,
included on pages 16 through 29 of the Annual Shareholders Report for the
year ended June 30, 1999, are incorporated herein by reference:
Consolidated balance sheets as of June 30, 1999 and 1998
Consolidated statements of income for the fiscal years ended June 30,
1999, 1998 and 1997
Consolidated statements of changes in shareholders' equity for the
fiscal years ended June 30, 1999, 1998 and 1997
Consolidated statements of cash flows for the fiscal years ended June
30, 1999, 1998 and 1997
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 1999 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 SCHEDULE 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, 1999:
<TABLE>
<CAPTION>
ANNUAL SHAREHOLDERS
DESCRIPTION REPORT PAGE
<S> <C>
Consolidated balance sheets as of June 30, 1999 and 1998 16
Consolidated statements of income for the fiscal years ended June
30, 1999, 1998 and 1997 17
Consolidated statements of changes in shareholders' equity for the
fiscal years ended June 30, 1999, 1998 and 1997 17
Consolidated statements of cash flows for the fiscal years ended
June 30, 1999, 1998 and 1997 18
Notes to consolidated financial statements 19-29
Report of independent auditors 30
</TABLE>
(2) Schedule - The following consolidated schedule and
information is 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.
<TABLE>
<CAPTION>
FORM 10-K
DESCRIPTION PAGE
<S> <C>
Schedule II-Valuation and qualifying accounts 10
</TABLE>
(3) Listing of Exhibits - See sub-section (c) below.
(b) Reports on Form 8-K: None.
(c) EXHIBITS
2. Plan and Agreement of Merger dated April 22, 1998,
among Piccadilly, Purchaser and Morrison. (1)
3. (a) Articles of Incorporation of the Company, restated through
March 2, 1999 (2).
(b) By-laws of the Company, as amended and restated through March
12, 1999 (2).
10. (a) Amended and Restated Piccadilly Cafeterias, Inc. 1993 Incentive
Compensation Plan (3).
(b) 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 (4).
(c) Form of Director Indemnity Agreement, effective April 27, 1995,
unless otherwise indicated, between Piccadilly Cafeterias, Inc.
and each of Messrs. LaBorde, Francis (September 25, 1995),
Guyton (July 1, 1996), Murrill, Redman (September 25, 1995),
Simmons and Smith (4).
(d) $125,000,000 Credit Agreement dated as of June 24, 1998 and
First Amendment to Credit Agreement dated July 31, 1998 (5).
(e) Second Amendment to Credit Agreement dated October 30, 1998
filed herewith on pages 12 through 20.
(f) Third Amendment to Credit Agreement dated June 28,1999 filed
herewith on pages 20 through 28.
(g) Stock and Asset Purchase Agreement, dated as of January 15,
1999, by and among Piccadilly Cafeterias, Inc., Piccadilly
Restaurants, Inc. and Cobb Investment Company, Inc. (2)
13. Select portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended June 30, 1999, filed herewith on pages 28
through 51.
21. List of Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule.
(1) Incorporated by reference from Exhibit (c) (1) to the Company's Schedule
14D-1 dated April 29, 1998.
(2) Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
(3) Incorporated by reference from Appendix A of the Company's definitive
Proxy Statement filed with the Commission on September 23, 1998.
(4) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
(5) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1998.
<PAGE>
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 27, 1999
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
/s/ Norman C. Frances 9/23/99 /s/ Dale E. Redman 9/22/99
Norman C. Frances, Director Date Dale E. Redman, Director Date
/s/ Robert P. Guyton 9/23/99 /s/ Christel C. Slaughter 9/22/99
Robert P. Guyton, Director Date Christel C. Slaughter, Director Date
/s/ Ronald A. LaBorde 9/27/99 /s/ Edward M. Simmons, Sr. 9/23/99
Ronald A. LaBorde, President, Date Edward M. Simmons, Sr., Director Date
Chief Executive Officer and Director
/s/ Paul W. Murrill 9/27/99 /s/ C. Ray Smith 9/23/99
Paul W. Murrill, Chairman of the Board Date C. Ray Smith, Director Date
/s/ Mark L. Mestayer 9/22/99
Ralph Erben, Director Date Mark L. Mestayer Date
Executive Vice President and
and Chief Financial Officer
(Principal Financial Officer)
/s/ W. Scott Bozzell 9/22/99
W. Scott Bozzell, Date
Vice President and Controller
(Principal Accounting Officer)
</TABLE>
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
Balance at (1) (2)
Beginning of Charged to costs Charged to Other Deduction-- Balance at
Description Period and expenses Accounts-Describe Describe End of Period
<S> <C> <C> <C> <C> <C>
Reserves for Unit Closings:
Year ended June 30, 1999:
Property, plant & equipment allowance $ 1,927,511 $ $ 451,696(A) $ 1,475,815
Current liability
Long-term liability 20,104,102 1,350,000 (6,777,231)(B) 1,983,678(A) 12,693,193
------------- ------------ ------------ ------------ -------------
$ 22,031,613 $ 1,350,000 $ (6,777,231) $ 2,435,374 $ 14,169,008
============= ============ ============ ============ =============
Year ended June 30, 1998:
Property, plant & equipment allowance $ 2,046,488 $ 939,000 $ 1,057,977(A) $ 1,927,511
Current liability --- ---
Long-term liability 2,774,941 2,514,000 16,466,339(B) 1,651,178(A) 20,104,102
------------- ------------ ------------ ------------ -------------
$ 4,821,429 $ 3,453,000 $ 16,466,339 $ 2,709,155 $ 22,031,613
============= ============ ============ ============ =============
Year ended June 30, 1997:
Property, plant & equipment allowance $ 4,407,472 $ 2,360,984(A) $ 2,046,488
Current liability 347,496 347,496(A) ---
Long-term liability 5,049,509 2,274,568(A) 2,774,941
------------- ------------ -------------
$ 9,804,477 $ 4,983,048 $ 4,821,429
============= ============ =============
</TABLE>
(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 years ended June 30, 1992, 1997 and 1999.
During 1997, the Company reduced its accrued liability for rental and other
occupancy costs associated with these properties by $600,000 as a result of a
favorable change in management's estimate of future sublease income.
(B) Represents reserves for Morrison units which were recorded as part of the
allocation of purchase price.
EXHIBIT 10(e)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AGREEMENT TO CREDIT AGREEMENT (this "Amendment") is
made as of the 30th day of October, 1998, by and among PICCADILLY CAFETERIAS,
INC. (the "Borrower"), HIBERNIA NATIONAL BANK, as Co-Arranger, Administrative
Agent, Letter of Credit Issuer and a Bank, WACHOVIA BANK, N.A., as Co-Arranger,
Documentation Agent and as a Bank, SOUTH TRUST BANK, NATIONAL ASSOCIATION,
AMSOUTH BANK, BRANCH BANKING AND TRUST COMPANY, WHITNEY NATIONAL BANK, BANKONE
LOUISIANA, N.A., THE FUJI BANK, LIMITED, FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, and DEPOSIT GUARANTY NATIONAL BANK (collectively referred to
herein as the "Banks"), PICCADILLY RESTAURANTS, INC. and MORRISON RESTAURANTS
INC. (collectively referred to here as the Guarantors).
R E C I T A L S:
The Borrower, the Administrative Agent, the Documentation Agent and
the Banks have entered into a certain Credit Agreement dated June 24, 1998, as
amended by a First Amendment to Credit Agreement dated July 31, 1998 (the
"Credit Agreement"). Capitalized terms used in this Amendment which are not
otherwise defined in this Agreement shall have the respective meanings assigned
to them in the Credit Agreement.
The Guarantors have executed a certain Guaranty Agreement dated
June 24, 1998 (the "Guaranty").
The Borrower and Guarantors have requested the Administrative
Agent, the Documentation Agent and the Banks to amend the Credit Agreement upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the Recitals and the mutual
promises contained herein and for the other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Administrative Agent, the Documentation Agent and the Banks, intending to be
legally bound hereby, agree as follows:
SECTION 1. RECITALS. The Recitals are incorporated herein by
reference and shall be deemed to be a part of this Amendment.
SECTION 2. AMENDMENTS. The Credit Agreement is hereby amended as
set forth in this SECTION 2.
SECTION 2.1. AMENDMENT TO SECTION 1.01. The following definitions
set forth in Section 1.01 are hereby amended and restated to read in their
entirety as follows:
"EBITDA" means for any period the sum of: (a) Consolidated Net Income,
plus (b) the amount deducted in determining the Consolidated Net Income for
such period for (I) taxes on income, (ii) Consolidated Interest Expense, (iii)
Depreciation and Amortization, (iv) all non-cash asset impairment charges, and
(v) all non-cash unit closing charges, all determined with respect to the
Borrower and its Consolidated Subsidiaries on a consolidated basis for such
period and in accordance with GAAP; provided, however, the calculation of
EBITDA made at the Fiscal Quarters ending (1) September 30, 1998, shall be
based upon the actual EBITDA determined with respect to the Borrower and its
Consolidated Subsidiaries (excluding Morrison Restaurants Inc.) and an
annualized EBITDA for Morrison Restaurants Inc. based upon the Fiscal Quarter
ending September 30, 1998; (2) December 31, 1998 shall be based upon the actual
EBITDA determined with respect to the Borrower and its Consolidated
Subsidiaries (excluding Morrison Restaurants Inc.) and an annualized EBITDA for
Morrison Restaurants Inc. based upon the Fiscal Quarters ending September 30,
1998 and December 31, 1998; and (3) March 31, 1999, shall be based upon the
actual EBITDA determined with respect to the Borrower and its Consolidated
Subsidiaries (excluding Morrison Restaurants, Inc.) and an annualized EBITDA
for Morrison Restaurants Inc. based upon the Fiscal Quarters ending September
30, 1998, December 31, 1998 and March 31, 1999. Beginning with the Fiscal
Quarter ending September 30, 1999, for purposes of determining the "Applicable
Margin" under Section 2.6 and the "Applicable Commitment Fee Rate" under
Section 2.7, items (iv) and (v) from above shall be removed from the above
definition of EBITDA.
"Income Available for Fixed Charges" means, for any period, the sum of
(a) EBITDA for such period, PLUS, (b) the amount deducted in determining EBITDA
for such period for expenses of the Borrower and its Consolidated Subsidiaries
with respect to common area maintenance charges, but expressly excluding any
and all prepayments under any leases or rental agreements).
2.02 AMENDMENT TO SECTION 5.25. Section 5.25 of the Credit
Agreement is hereby amended and restated to read as follows:
SECTION 5.25 EXISTING LETTERS OF CREDIT. The Borrower shall
cause the
Existing Letters of Credit to be terminated on or before November 30,
1998.
SECTION 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment and the obligations of the Banks hereunder are subject to the
following conditions, unless the Required Banks waive such conditions.
(a) receipt by the Administrative Agent from each of the
parties hereto of a duly executed counterpart of this Amendment signed by
such party; and
(b) the fact that the representations and warranties of the
Borrower and Guarantors contained in Section 5 of this Amendment shall be
true on and as of the date hereof.
SECTION 4. NO OTHER AMENDMENT. Except for the amendments set
forth above, the text of the Credit Agreement shall remain unchanged and in
full force and effect. This Amendment is not intended to effect, nor shall it
be construed as a novation. The Credit Agreement and this Amendment shall be
construed together as a single agreement. Nothing herein contained shall
waive, annul, vary or affect any provision, condition, covenant or agreement
contained in the Credit Agreement, except as herein amended, nor affect nor
impair any rights, powers or remedies under the Credit Agreement as hereby
amended. The Banks, the Documentation Agent and the Administrative Agent do
hereby reserve all of their rights and remedies against all parties who may be
or may hereafter become secondarily liable for the repayment of the Notes. The
Borrower promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended, the Credit Agreement, as amended, being hereby
ratified and affirmed. The Borrower hereby expressly agrees that the Credit
Agreement, as amended, is in full force and effect.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Borrower and
Guarantors hereby represent and warrant to each of the Banks as follows:
(a) No Default or Event of Default, nor any act, event, condition
or circumstance which with the passage of time or the giving of notice, or
both, would constitute an Event of Default, under the Credit Agreement or any
other Loan Document has occurred and is continuing unwaived by the Banks on the
date hereof.
(b) The Borrower and Guarantors have the power and authority to
enter into this Amendment and to do all acts and things as are required or
contemplated hereunder, or thereunder, to be done, observed and performed by
it.
(c) This Amendment has been duly authorized, validly executed and
delivered by one or more authorized officers of the Borrower and Guarantors and
constitutes a legal, valid and binding obligation of the Borrower and each
Guarantor enforceable against it in accordance with its terms, provided that
such enforceability is subject to general principles of equity.
(d) The execution and delivery of this Amendment and the
performance of the Borrower and Guarantors hereunder do not and will not
require the consent or approval of any regulatory authority or governmental
authority or agency having jurisdiction over the Borrower or any Guarantor, nor
be in contravention of or in conflict with the articles of incorporation or
bylaws of the Borrower or any Guarantor, or the provision of any statute, or
any judgment, order or indenture, instrument, agreement or undertaking, to
which the Borrower or any Guarantor is party or by which the assets or
properties of the Borrower and Guarantors are or may become bound.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
multiple counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same agreement.
SECTION 7. GOVERNING LAW. This Amendment shall be considered in
accordance with and governed by any applicable federal laws of the United
States of America and in the absence of applicable federal laws of the United
States of America, the laws of the State of Georgia.
SECTION 8. CONSENT BY GUARANTORS. The Guarantors consent to the
foregoing amendments. The Guarantors promise and agree to perform all of the
requirements, conditions, agreements and obligations under the terms of the
Guaranty, said Guaranty being hereby ratified and affirmed. The Guarantors
hereby expressly agree that the Guaranty is in full force and effect.
SECTION 9. EFFECTIVE DATE. This Amendment shall be effective as
of September 30, 1998.
[Remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered,
or have caused their respective duly authorized officers or representatives to
execute and deliver, this Amendment as of the day and year first above written.
BORROWER:
PICCADILLY CAFETERIAS, INC.
By: /S/ RONALD A. LABORDE
Title: PRESIDENT AND CEO
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<PAGE>
HIBERNIA NATIONAL BANK,
As Co-Arranger, Administrative Agent,
Letter of Credit Issuer and a Bank
By: /S/ JANET O. RACK
Title: SENIOR VICE PRESIDENT
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<PAGE>
WACHOVIA BANK, N.A.,
As Documentation Agent, Co-Arranger and as
a Bank
By: /S/ C.L. BATTLE
Title: SENIOR VICE PRESIDENT/GROUP EXECUTIVE
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<PAGE>
SOUTHTRUST BANK, NATIONAL ASSOCIATION,
as a Bank
By: /S/ HAL CLEMMER
Title: VICE PRESIDENT
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<PAGE>
AMSOUTH BANK,
as a Bank
By: /S/ D. M. SINCLAIR
Title: VICE PRESIDENT
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<PAGE>
BRANCH BANKING AND TRUST COMPANY,
as a Bank
By: /S/ THATCHER TOWNSEND
Title: SENIOR VICE PRESIDENT
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<PAGE>
WHITNEY NATIONAL BANK,
as a Bank
By: /S/ MICHAEL DOERR
Title: ASSISTANT VICE PRESIDENT
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<PAGE>
BANKONE LOUISIANA, N.A.,
as a Bank
By: /S/ JEFF GOULD
Title: SENIOR VICE PRESIDENT
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<PAGE>
THE FUJI BANK, LIMITED,
as a Bank
By: /S/ RAYMOND VENTURA
Title: VICE PRESIDENT AND MANAGER
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<PAGE>
FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
as a Bank
By: /S/ ROSEMARY MOODY
Title: VICE PRESIDENT
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<PAGE>
Guarantor:
PICCADILLY RESTAURANTS, INC.
By: /S/ RONALD A. LABORDE
Title: PRESIDENT
ATTEST:
/S/ J.F. JOHNSON
Secretary
[CORPORATE SEAL]
[Remainder of this page intentionally left blank]
<PAGE>
Guarantor:
MORRISON RESTAURANTS INC.
By: /S/ RONALD A. LABORDE
Title: PRESIDENT
ATTEST:
/S/ J.F. JOHNSON
Secretary
[CORPORATE SEAL]
[Remainder of this page intentionally left blank]
EXHIBIT 10(f)
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AGREEMENT TO CREDIT AGREEMENT (this "Amendment") is made
as of the 28th day of June, 1999, by and among PICCADILLY CAFETERIAS, INC.
(the "Borrower"), HIBERNIA NATIONAL BANK, as Co-Arranger, Administrative Agent,
Letter of Credit Issuer and a Bank, WACHOVIA BANK, N.A., as Co-Arranger,
Documentation Agent and as a Bank, SOUTH TRUST BANK, NATIONAL ASSOCIATION,
AMSOUTH BANK, BRANCH BANKING AND TRUST COMPANY, WHITNEY NATIONAL BANK, BANKONE
LOUISIANA, N.A., THE FUJI BANK, LIMITED, FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, and DEPOSIT GUARANTY NATIONAL BANK (collectively referred to
herein as the "Banks"), PICCADILLY RESTAURANTS, INC. and MORRISON RESTAURANTS
INC. (collectively referred to here as the Guarantors).
R E C I T A L S:
The Borrower, the Administrative Agent, the Documentation Agent and
the Banks have entered into a certain Credit Agreement dated June 24, 1998, as
amended by a First Amendment to Credit Agreement dated July 31, 1998 and a
Second Amendment to Credit Agreement dated October 30, 1998 (the "Credit
Agreement"). Capitalized terms used in this Amendment which are not otherwise
defined in this Agreement shall have the respective meanings assigned to them
in the Credit Agreement.
The Guarantors have executed a certain Guaranty Agreement dated
June 24, 1998 (the "Guaranty").
The Borrower and Guarantors have requested the Administrative
Agent, the Documentation Agent and the Banks to amend the Credit Agreement upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the Recitals and the mutual
promises contained herein and for the other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Administrative Agent, the Documentation Agent and the Banks, intending to be
legally bound hereby, agree as follows:
SECTION 1. RECITALS. The Recitals are incorporated herein by
reference and shall be deemed to be a part of this Amendment.
SECTION 2. AMENDMENTS. The Credit Agreement is hereby amended as
set forth in this SECTION 2.
SECTION 2.1. AMENDMENT TO SECTION 1.1. The following definition
is added to Section 1.1 of the Credit Agreement:
"Sale of Ralph & Kacoo's" shall mean the sale by Piccadilly Restaurants,
Inc. and the Borrower of certain assets principally used in the operation of
Ralph & Kacoo's Seafood Restaurants and the sale by the Borrower of the issued
and outstanding capital stock of Cajun Bayou Distributors & Management, Inc. to
Cobb Investment Company, Inc.
2.02 AMENDMENT TO SECTION 5.13(B). Section 5.13(b) of the Credit
Agreement is hereby amended and restated to read as follows.
(b) The Borrower shall not, nor shall it permit any of its
Subsidiaries to, sell, assign, lease, transfer, convey or otherwise
dispose of, all or any substantial part of its properties, segment
(whether now owned or hereafter acquired), other than: (I) dispositions
of inventory in the ordinary course of business; and (ii) the foregoing
limitation on the sale, assignment, lease, transfer, conveyance or other
disposition of assets and on the discontinuation or elimination of a
business line or segment shall not prohibit, during any Fiscal Quarter, a
transfer of assets or the discontinuance or elimination of a business
line or segment (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred or
utilized in a business line or segment to be so discontinued, when
combined with all other assets transferred, and all other assets utilized
in all other business lines or segments discontinued during such Fiscal
Quarter (the "Current Fiscal Quarter") and the immediately preceding
three Fiscal Quarters (the "Current Fiscal Quarter") and the immediately
preceding three Fiscal Quarters (excluding from such computation: (1)
the acquisition by Piccadilly Acquisition Corp. of the common stock of
Morrison Restaurants, Inc.; and (2) the Sale of Ralph & Kacoo's),
contributed more than 10% of EBITDA, for the four Fiscal Quarters
immediately preceding the Current Fiscal Quarter.
SECTION 3. REDUCTION IN COMMITMENTS. Pursuant to Section 2.8 of
the Credit Agreement, effective June 30, 1999, the Borrower reduces the
Commitments (and effective June 30, 1999 the Commitments shall be reduced), by
an aggregate amount equal to $25,000,000. Accordingly, the Commitment of each
Bank set forth on the signature pages of the Credit Agreement is hereby amended
to be equal to the amount designated as the Commitment set forth on the
signature pages of this Amendment opposite such Bank's name.
SECTION 4. CONDITIONS TO EFFECTIVENESS: The effectiveness of this
Amendment and the obligations of the Banks hereunder are subject to the
following conditions, unless the Required Banks waive such conditions:
(a) receipt by the Administrative Agent from each of the
parties hereto of a duly executed counterpart of this Amendment signed by
such party; and
(b) the fact that the representations and warranties of the
Borrower and Guarantors contained in Section 6 of this Amendment shall be
true on and as of the date hereof.
SECTION 5. NO OTHER AMENDMENT. Except for the amendments set
forth above, the text of the Credit Agreement shall remain unchanged and in
full force and effect. This Amendment is not intended to effect, nor shall it
be construed as a novation. The Credit Agreement and this Amendment shall be
construed together as a single agreement. Nothing herein contained shall
waive, annul, vary or affect any provision, condition, covenant or agreement
contained in the Credit Agreement, except as herein amended, nor affect nor
impair any rights, powers or remedies under the Credit Agreement as hereby
amended. The Banks, the Documentation Agent and the Administrative Agent do
hereby reserve all of their rights and remedies against all parties who may be
or may hereafter become secondarily liable for the repayment of the Notes. The
Borrower promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended, the Credit Agreement, as amended, being hereby
ratified and affirmed. The Borrower hereby expressly agrees that the Credit
Agreement, as amended, is in full force and effect.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower and
Guarantors hereby represent and warrant to each of the Banks as follows:
(a) No Default or Event of Default, nor any act, event, condition
or circumstance which with the passage of time or the giving of notice, or
both, would constitute an Event of Default, under the Credit Agreement or any
other Loan Document has occurred and is continuing unwaived by the Banks on the
date hereof.
(b) The Borrower and Guarantors have the power and authority to
enter into this Amendment and to do all acts and things as are required or
contemplated hereunder, or thereunder, to be done, observed and performed by
it.
(c) This Amendment has been duly authorized, validly executed and
delivered by one or more authorized officers of the Borrower and Guarantors and
constitutes a legal, valid and binding obligation of the Borrower and each
Guarantor enforceable against it in accordance with its terms, provided that
such enforceability is subject to general principles of equity.
(d) The execution and delivery of this Amendment and the
performance of the Borrower and Guarantors hereunder do not and will not
require the consent or approval of any regulatory authority or governmental
authority or agency having jurisdiction over the Borrower or any Guarantor, nor
be in contravention of or in conflict with the articles of incorporation or
bylaws of the Borrower or any Guarantor, or the provision of any statute, or
any judgment, order or indenture, instrument, agreement or undertaking, to
which the Borrower or any Guarantor is party or by which the assets or
properties of the Borrower and Guarantors are or may become bound.
SECTION 7. COUNTERPARTS. This Amendment may be executed in
multiple counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same agreement.
SECTION 8. GOVERNING LAW. This Amendment shall be considered in
accordance with and governed by the laws of the State of Georgia.
SECTION 9. CONSENT BY GUARANTORS. The Guarantors consent to the
foregoing amendments. The Guarantors promise and agree to perform all of the
requirements, conditions, agreements and obligations under the terms of the
Guaranty, said Guaranty being hereby ratified and affirmed. The Guarantors
hereby expressly agree that the Guaranty is in full force and effect.
SECTION 10. EFFECTIVE DATE. This Amendment shall be effective as
of March 30, 1999.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered,
or have caused their respective duly authorized officers or representatives to
execute and deliver, this Amendment as of the day and year first above written.
BORROWER:
PICCADILLY CAFETERIAS, INC.
By: /S/ RONALD A. LABORDE
Title: PRESIDENT AND CEO
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<PAGE>
HIBERNIA NATIONAL BANK,
As Co-Arranger, Administrative Agent,
Letter of Credit Issuer and a Bank
Commitment:
$20,000,000.00 By: /S/ JANET O. RACK
Title: SENIOR VICE PRESIDENT
Swing Line Commitment:
$10,000,000.00
Letter of Credit Subcommitment:
$20,000,000.00
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<PAGE>
WACHOVIA BANK, N.A.,
As Documentation Agent, Co-Arranger and as
a Bank
Commitment:
$20,000,000.00 By: /S/ MARCUS A. BRUMFIELD
Title: SENIOR VICE PRESIDENT
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<PAGE>
SOUTHTRUST BANK, NATIONAL ASSOCIATION,
as a Bank
Commitment:
By: /S/ ALEX MORTON
$9,000,000.00 Title: ASSISTANT VICE PRESIDENT
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<PAGE>
AMSOUTH BANK,
as a Bank
Commitment:
By: /S/ D. M. SINCLAIR
$9,000,000.00 Title: VICE PRESIDENT
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<PAGE>
BRANCH BANKING AND TRUST COMPANY,
as a Bank
Commitment:
By: /S/ THATCHER TOWNSEND
$9,000,000.00 Title: SENIOR VICE PRESIDENT
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<PAGE>
WHITNEY NATIONAL BANK,
as a Bank
Commitment:
By: /S/ MICHAEL DOERR
$9,000,000.00 Title: ASSISTANT VICE PRESIDENT
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<PAGE>
BANKONE LOUISIANA, N.A.,
as a Bank
Commitment:
By: /S/ MICHAEL HOSKINS
$7,200,000.00 Title: SENIOR VICE PRESIDENT
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<PAGE>
THE FUJI BANK, LIMITED,
as a Bank
Commitment:
By:
$7,200,000.00 Title:
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<PAGE>
FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
as a Bank
Commitment:
By: /S/ ROSEMARY MOODY
$4,800,000.00 Title: VICE PRESIDENT
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<PAGE>
DEPOSIT GUARANTY NATIONAL BANK,
as a Bank
Commitment:
By: /S/ NEMESIO J. VISO
$4,800,000.00 Title: VICE PRESIDENT
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<PAGE>
Guarantor:
PICCADILLY RESTAURANTS, INC.
Ronald A. LaBorde
By: /S/ RONALD A. LABORDE
Title: PRESIDENT
ATTEST:
/S/ J.F. JOHNSON
Secretary
J. Fred Johnson
[CORPORATE SEAL]
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<PAGE>
Guarantor:
MORRISON RESTAURANTS INC.
Ronald A. LaBorde
By: /S/ RONALD A. LABORDE
Title: PRESIDENT
ATTEST:
/S/ J.F. JOHNSON
Secretary
J. Fred Johnson
[CORPORATE SEAL]
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EXHIBIT 13
SELECTED AND OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Amounts in thousands - except per share data)
June 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales $495,597 $335,388 $304,838 $300,550 $287,848
Cost of Sales 298,565 194,898 175,685 171,224 163,830
Other operating expense 170,200 109,725 100,334 101,459 97,213
Net income 4,000 (A) 7,903 (B) 9,390 385 (B) 4,051
Per share data:
Net income .38 (A) .75 (B) .89 .04 (B) .40
Cash dividends .48 .48 .48 .48 .48
Long-term debt 74,226 78,979 27,240 25,700 18,000
Shareholders' equity 79,402 80,436 77,604 73,293 76,445
Total assets 232,939 254,584 147,332 148,280 165,121
</TABLE>
<TABLE>
<CAPTION>
Other Data
(Amounts in thousands - except number of employees)
June 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Operating income (C) $26,932 $30,765 $28,819 $27,867 $26,805
Depreciation 17,293 12,657 12,116 12,916 12,880
Amortization of goodwill 512 20 -- -- --
Capital expenditures for new
projects (D) 7,000 10,287 5,616 1,247 22,303
Other capital expenditures 8,460 4,641 5,254 5,440 4,639
Total capital expenditures 15,460 14,928 10,870 6,687 26,942
Cash flow provided by
operating activities 12,915 23,268 14,857 21,404 20,823
Free cash flow (E) 14,196 18,114 16,252 13,426 12,292
Net income as a percent of
beginning shareholders' equity 5.07% (A) 10.2% (B) 12.8% 0.5% (B) 5.3%
Number of employees 13,200 15,800 8,200 8,500 7,600
</TABLE>
(A) Includes $1,350,000 ($851,000 after-tax effect or $.08 per share) for
future rent commitments for operating units for which closure decisions were
made during 1999 (see Note 4 for further discussion). Also includes a recorded
gain of $1,556,000 and a net tax benefit of $826,000 from the sale of Ralph &
Kacoo's (see Note 3 for further discussion).
(B) Includes $3,453,000 ($2,175,000 after-tax effect or $.21 per share) and
$9,404,000 ($5,830,000 after-tax effect or $.56 per share) in 1998 and 1996,
respectively, for the write-down of long-lived assets in accordance with
Statement of Financial Accounting Standards (SFAS) No. 121 (see Note 4 for
further discussion).
(C) Defined as net sales less cost of sales and other operating expense.
(D) See Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(E) Defined as net income adjusted for depreciation and amortization and
reduced by other capital expenditures. The 1998 and 1996 amounts exclude the
non-cash effect of the charges discussed in (A) and (B). Free cash flow is not
a measure defined by generally accepted accounting principals. Management
believes that free cash flow is a relevant indicator of liquidity. The amounts
presented may not be comparable to similarly titled measures reported by other
companies.
STOCK INFORMATION
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 years. As of August 31, 1999, there were
approximately 2,579 record holders of the Company's Common Stock.
<TABLE>
<CAPTION>
Per Share
Cash
Quarter High Low Dividends
<S> <C> <C> <C> <C>
Year ended 1ST $13.50 $10.36 $.12
June 30, 1999 2ND 11.50 9.63 .12
3RD 11.13 10.00 .12
4TH 11.50 8.00 .12
</TABLE>
<TABLE>
<CAPTION>
Per Share
Cash
Quarter High Low Dividends
<S> <C> <C> <C> <C>
Year ended 1st $14.50 $10.50 $.12
June 30, 1998 2nd 15.38 12.38 .12
3rd 13.13 10.00 .12
4th 14.00 12.19 .12
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
In May 1998, the Company acquired 89% of the common stock of Morrison
Restaurants, Inc. (Morrison) for $5.00 per share. The acquisition 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 for the Morrison shares, including debt assumed, was
approximately $57,270,000. The Morrison Acquisition was financed through
borrowings under a senior credit arrangement described below.
During 1999, cash generated from operations combined with cash available under
a senior credit arrangement were used primarily to fund $15,460,000 of capital
expenditures and $5,042,000 of dividends. Maintenance capital expenditures
were $8,460,000. Capital expenditures for new projects amounted to $7,000,000.
New projects include $2,441,000 for signage and renovations related to the
conversion of Morrison units to Piccadilly units (the Morrison Conversions),
costs for land and building under construction at year end amounting to
$3,078,000, and twelve in-store express take-out counters were completed at a
cost of $1,481,000.
Net cash provided by operating activities was $12,915,000, reflecting a
decrease of $10,353,000 from the prior year. Net changes in operating assets
and liabilities decreased cash flow by $9,683,000, reflecting an increase of
$3,749,000 in recoverable income taxes, net reductions in accrued employee
benefits of $2,280,000 and other reductions of operating liabilities from
payments in the ordinary course of business. Net investing activities for 1999
include proceeds from the sale of Ralph & Kacoo's, sale of a Morrison property
and payment of Morrison Acquisition related costs.
The Company's long-term debt facility includes a senior credit arrangement with
a syndication of banks for which up to $100,000,000 can be borrowed. At June
30, 1999, $25,774,000 was available under this senior credit arrangement.
For 2000, capital expenditures are expected to approximate $13,000,000. These
expenditures include $3,100,000 for new investments including purchasing land,
completing four new units, constructing up to 10 Piccadilly Express units, and
converting several Morrison units to Piccadilly units. Management anticipates
that cash generated from operations, together with funds available from its
senior credit arrangement, will be sufficient to fund capital expenditures and
dividends.
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 "oo" as the year
1900 rather than the year 2000. This could cause a system failure of
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 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 was approximately $725,000, primarily
for the purchases of new software, which was capitalized. The Company believes
these costs would have been incurred notwithstanding the Year 2000 Issues.
The majority of the Company's purchases are for food and supplies. The Company
is not dependent on any one vendor for these items, and therefore, does not
believe that there exist any material third party risks with respect to Year
2000 Issues.
With respect to the Morrison Acquisition, the Company has absorbed the IT
requirements of Morrison into the Company's systems during 1999. No additional
Year 2000 Issues are anticipated as a result of the Morrison Acquisition.
The Company believes that with conversions to new IT, Year 2000 Issues will not
pose significant operational problems for its computer systems. As of June 30,
1999, 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.
The Company has no contingency plan, nor does it intend to create one, in the
event 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.
RESULTS OF OPERATIONS
1999 COMPARED TO 1998. Total sales increased $160,309,000, or 47.8%, from
1998. Cafeteria sales increased $168,215,000. The increase in cafeteria sales
is the net result of the Morrison Acquisition, customer traffic changes, new
unit openings, and unit closings.
The following table reconciles total cafeteria sales to same-store cafeteria
sales (units that were open for 12 full months in both periods) for the years
ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
(Sales in thousands)
1999 1998 Sale
Sales Units Sales Units Change
<S> <C> <C> <C> <C> <C>
Total cafeteria sales $478,013 267 $309,798 275 (B) 54.3%
Less units opened in 1999 - -
Less units opened in 1998 6,916 7 (A) 3,033 7 (A)
Less units closed in 1999 4,014 7 (A) 7,067 7 (A)
Less units closed in 1998 - 2,438 3 (C)
Less Morrison Acquisition 198,379 131 21,285 136
Net same-store cafeteria
sales $268,704 122 $275,975 122 -2.6%
</TABLE>
(A) Includes four cafeterias and three Piccadilly Express (Associated Grocers
supermarkets) units opened and closed in 1999 and 1998.
(B) Includes approximately one month of sales for units acquired in the Morrison
Acquisition.
(C) Includes three cafeterias closed in 1998.
The decrease in same-store sales of 2.6% is the net result of a 3.5% decline in
customer traffic and a 1.2% increase in check average. The Company made no
significant price changes during 1999.
Sales relating to the Morrison Acquisition accounted for $177,094,000 of the
overall net sales increase. The 1998 results include only the sales from May
28, 1998 (the effective date of the Morrison Acquisition) to June 30, 1998.
Same-store sales for units included in the Morrison Acquisition declined 4.5%
reflecting a general decline in customer traffic in those units.
Ralph & Kacoo's restaurant sales decreased $7,906,000. The decrease results
from the sale of Ralph & Kacoo's on March 30, 1999. See Note 3 of the
Financial Statements for further discussion.
Beginning in the third quarter, the Company accelerated the Morrison
Conversions, which had a significant impact on the operating results for those
units. 71 units were converted in the third and fourth quarters, compared to
28 conversions in the first two quarters. Expenses associated with each
conversion averaged approximately $40,000 for training team labor, new uniforms
and supplies. Additional costs amounting to approximately $25,000 per unit,
primarily for signage, were capitalized.
The operating efficiency of a converted unit is impacted by the conversion
process. Food and labor costs are higher in units for periods subsequent to
the conversion to ensure that high quality food and excellent dining room
service are provided to our customers. The Company expects the converted units
to gradually reach performance levels consistent with Piccadilly units with
comparable customer traffic.
During 1999 and 1998, operating income (net sales less cost of sales and other
operating expenses) as a percentage of net sales was 5.4% and 9.2%,
respectively. Food costs as a percentage of net sales increased 0.6% due to
the Morrison Acquisition. Food costs as a percentage of sales for Morrison
units were higher than Piccadilly units. Labor costs as a percentage of net
sales increased 1.5% reflecting higher hourly wage rates, increasing the
average number of managers at the Morrison units, and the Morrison Conversions.
Other operating expenses as a percentage of net sales increased 1.6% due to the
Morrison Conversions and a higher ratio of leased units to total units
resulting from the Morrison Acquisition.
The Company expects to complete the remaining scheduled Morrison Conversions by
the end of the first quarter of 2000. Thirteen conversions are scheduled for
the first quarter of 2000. Eleven units will continue to operate as Morrison
units for an indefinite period.
General and administrative expenses decreased from 3.8% of sales to 3.4% of
sales reflecting the leveraging effect of the Morrison Acquisition on corporate
overhead. Interest expense increased $3,741,000 in 1999 reflecting the
increased debt levels associated with the Morrison Acquisition.
The Company's effective income tax rate is impacted by the non-deductibility of
goodwill amortization, resulting in a higher rate than in the prior year.
Excluding the tax benefit from the Ralph & Kacoo's sale, the Company's
effective tax rate would have been 43.6% compared to 37.1% in the prior year.
During the fourth quarter, the Company recorded a $1,350,000 charge for the
lease related costs of operating units for which closure decisions were made.
As of June 30, 1999, the Company had continuing rent obligations not offset by
sublease arrangements for four properties related to closed units including
three properties relating to the Morrison Acquisition. Management will pursue
disposition of these properties at terms favorable to the Company. See further
discussion in Notes 2 and 4 to the Consolidated Financial Statements.
1998 COMPARED TO 1997. Total sales increased $30,550,000, or 10.0%, from 1997.
Increases in cafeteria sales account for $30,145,000 of the total increase.
Ralph & Kacoo's restaurant sales increased $405,000.
Cafeteria sales for 1998 include approximately one month of sales of Morrison
Restaurants, Inc. amounting to $21,285,000. The remaining increase in
cafeteria sales is the net result of price changes, customer traffic changes,
new unit openings, and unit closings.
The following table reconciles total cafeteria sales to same-store cafeteria
sales (units that were open for 12 full months in both periods) for the years
ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
(Sales in thousands)
1998 1997 Sale
Sales Units Sales Units Change
<S> <C> <C> <C> <C> <C>
Total cafeteria sales $309,798 274 $279,653 133 10.8%
Less units opened in 1998 3,033 7 (A) - -
Less units opened in 1997 7,067 4 (B) 2,644 4 (B)
Less units closed in 1998 2,438 3 (C) 3,273 3 (C)
Less units closed in 1997 - - 1,889 4
Less Morrison Acquisition 21,285 138 - -
-------- --------
Net same-store cafeteria
sales $275,975 122 $271,847 122 1.5%
======== ========
</TABLE>
(A) Includes four cafeterias and three Piccadilly Express (Associated Grocers
supermarkets) units opened in 1998.
(B) Includes three cafeterias and one Piccadilly Express (Associated Grocers
supermarkets) units opened in 1997.
(C) Includes three cafeterias closed in 1997.
The increase in same-store sales of 1.5% is the net result of a 2.9% decline in
customer traffic and a 4.5% increase in check average. Cafeteria prices were
increased an average of 4.0% in September 1997.
During 1998 and 1997, operating income (net sales less cost of sales and other
operating expenses) as a percentage of net sales was 9.2% and 9.5%,
respectively. Food costs as a percentage of sales decreased 0.1%. Labor costs
as a percentage of sales increased 0.5%.
Other operating expenses as a percentage of sales improved from 32.9% in 1997
to 32.7% in 1998. Initiatives to increase take-out sales increased advertising
and supplies expenses by 0.5% of sales. These increases were offset by
decreases in repairs and utilities expenses as a percent of sales.
Interest expense decreased $200,000 in 1998. Payments of $4,500,000 and
$7,500,000 of the 10.2% senior notes were made in 1998 and 1997, respectively,
using funds available under one of the Company's line-of-credit arrangements,
which had an average interest rate of 7.1% during 1998. Interest expense of
$357,000 was recorded relating to the Morrison Acquisition.
KNOWN TRENDS OR UNCERTAINTIES
Same-store cafeteria sales declined 2.6% in 1999. Same-store cafeteria sales
for units acquired in the Morrison Acquisition declined 4.5% in 1999 (see
discussion above for impact of these declines on results of operations). These
declines reflect a general decline in customer traffic. Customer traffic began
trending downward in 1997. The Company attributes its customer count decline
to intense competition and market saturation within the restaurant industry.
Continued deterioration in customer traffic could result in the closing of
additional units and additional charges under SFAS 121, including impairment
charges related to goodwill. The Company launched an extensive marketing
campaign in the second half of 1999 to build brand awareness and encourage
additional customer traffic. Advertising expenditures are expected to
approximate 1.3% of sales in 2000.
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 has provided no valuation allowance for deferred tax assets.
Management believes the deferred tax assets at June 30, 1999 are realizable
through carrybacks and future reversals of existing taxable temporary
differences, and, if necessary, the implementation of tax planning strategies.
Uncertainties that affect the ultimate realization of deferred tax assets
include the risk of not being able to complete tax planning strategies, such as
sale-leaseback transactions. This factor has been considered in determining
the valuation allowance. Management will continue to assess the adequacy of
the valuation allowance on a quarterly basis.
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.
FORWARD-LOOKING STATEMENTS
Forward-looking statements regarding management's present plans or expectations
for new unit openings, remodels, other capital expenditures, advertising
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.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Amounts in thousands)
Balances at June 30
1999 1998
<S> <C> <C>
ASSETS
Current Assets
Accounts and notes receivable $ 1,970 $ 1,602
Inventories 12,595 12,489
Deferred income taxes 11,216 10,559
Recoverable income taxes 5,578 724
Other current assets 888 1,634
---------- ----------
Total Current Assets 32,247 27,008
Property, Plant and Equipment
Land 22,511 26,323
Buildings and leasehold improvements 150,138 165,481
Furniture and fixtures 120,469 117,269
Machinery and equipment 13,796 17,088
Construction in progress 3,371 6,757
---------- ----------
310,285 332,918
Less allowances for depreciation and unit closings 134,035 129,053
---------- ----------
Net Property, Plant and Equipment 176,250 203,865
Goodwill, net of $532,000 accumulated at June 30, 1999
and $20,000 at June 30, 1999 12,982 12,447
Other Assets 11,460 11,264
---------- ----------
Total Assets $ 232,939 $ 254,584
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 18,612 $ 18,359
Accrued interest 275 418
Accrued salaries, benefits and related taxes 22,824 24,869
Accrued rent 5,183 5,036
Other accrued expenses 6,267 12,179
---------- ----------
Total Current Liabilities 53,161 60,861
Long-Term Debt, less current portion 74,226 78,979
Deferred Income Taxes 3,992 1,417
Reserve For Unit Closings 12,693 20,104
Accrued Employee Benefits, less current portion 9,465 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 June 30, 1999 and at June 30, 1998 19,141 19,141
Additional paid-in capital 18,735 18,735
Retained earnings 41,804 42,810
---------- ----------
79,680 80,686
Less treasury stock, at cost: 25,000 common shares at
June 30, 1999 and at June 30, 1998 278 250
---------- ----------
Total Shareholders' Equity 79,402 80,436
---------- ----------
Total Liabilities and Shareholders' Equity $ 232,939 $ 254,584
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
(Amounts in thousands - except per share data)
Year Ending June 30 1999 1998 1997
<S> <C> <C> <C>
Net sales $495,697 $335,388 $304,838
Costs and expenses:
Cost of sales 298,565 194,898 175,685
Other operating expenses 170,200 109,725 100,334
Provision for unit impairments and
closings 1,350 3,453 ---
General and administrative expenses 17,458 12,832 11,465
Interest expense 6,255 2,514 2,714
Other expenses (income) (1,000) (590) (505)
-------- -------- --------
492,828 322,832 289,693
======== ======== ========
Gain from sale of Ralph & Kacoo's 1,556 -- --
-------- -------- --------
Income Before Income Taxes 4,425 12,556 15,145
Provision for income taxes 425 4,653 5,755
-------- -------- --------
Net Income $ 4,000 $ 7,903 $ 9,390
======== ======== ========
Weighted average number of shares
outstanding 10,503 10,503 10,506
======== ======== ========
Net income per share - basic and diluted $ .38 $ .75 $ .89
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Amounts in thousands - except per share data)
Additional
Common Stock Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1996 10,503 $ 19,096 $ 18,555 $ 35,642 --- $ ---
Net income 9,390
Cash dividends declared ($.48 per
share) (5,047)
Sales under dividend reinvestment
plan (20)
Sales under employee stock option
plan 25 45 180
Purchases of treasury stock 25 237
--------- -------- -------- -------- ------ ---------
Balances at June 30, 1997 10,528 19,141 18,735 39,965 25 237
Net income 7,903
Cash dividends declared ($.48 per
share) (5,044)
Sales under dividend reinvestment
plan (23)
Stock issuances from treasury 9 (5) (50)
Purchases of treasury stock 5 63
--------- -------- -------- -------- ------ ---------
Balances at June 30, 1998 10,528 19,141 18,735 42,810 25 250
Net income 4,000
Cash dividends declared ($.48 per
share) (5,042)
Sales under dividend reinvestment
plan (26)
Stock issuances from treasury 62 (23) (238)
Purchases of treasury stock 23 266
--------- -------- -------- -------- ------ ---------
Balances at June 30, 1999 10,528 $ 19,141 18,735 $ 41,804 25 $ 278
========= ======== ======== ======== ====== =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Amounts in thousands - except per share data)
Year Ending June 30 1999 1998 1997
<S> <C> <C> <C>
Operating activities
Net Income $ 4,000 $ 7,903 $ 9,390
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of goodwill 17,805 12,677 12,116
Amortization of financing costs 145 12 --
Costs associated with closed units (2,091) (1,132) (1,522)
Provision for unit impairments and closings 1,350 3,453 ---
Provision for deferred income taxes 4,411 100 343
Gain on sale of Ralph & Kacoo's, net of taxes (2,691) -- --
Loss on disposition of assets 120 148 194
Pension expense - net of contributions (451) (467) (339)
Changes in operating assets and liabilities, net
of effects from Morrison Acquisition:
Accounts and notes receivable (418) 32 8
Inventories (365) 110 (313)
Recoverable income taxes (3,749) 188 (1,674)
Other current assets 486 (292) (187)
Other assets 553 (75) (101)
Accounts payable (1,426) 1,708 (292)
Accrued interest 137 (756) (2,647)
Accrued expenses (2,621) (346) (119)
Accrued employee benefits (2,280) 5 --
----------- ----------- ----------
Net Cash Provided by Operating Activities 12,915 23,268 14,857
Investing activities
Net proceeds from sale of Ralph & Kacoo's,
including net tax benefit 22,597 -- --
Acquisition of business (10,933) (41,974) ---
Purchases of property, plant and equipment (15,460) (14,928) (10,870)
Proceeds from sale of property, plant and
equipment 757 2,288 1,052
----------- ----------- ----------
Net Cash Used by Investing Activities (3,039) (54,614) (9,818)
Financing activities
Proceeds from long-term debt 17,392 81,515 7,540
Payments on long-term debt (22,145) (44,636) (7,500)
Financing costs -- (467) ---
Proceeds from issuances of treasury stock 185 --- 205
Purchases of treasury stock (266) (22) (237)
Dividends paid (5,042) (5,044) (5,047)
----------- ----------- ----------
Net Cash Provided (Used) by Financing
Activities (9,876) 31,346 (5,039)
----------- ----------- ----------
Changes in cash and cash equivalents --- --- ---
Cash and cash equivalents at beginning of year --- --- ---
----------- ----------- ----------
Cash and cash equivalents at end of year $ --- $ --- $ ---
=========== =========== ==========
Supplementary Cash Flow Disclosures
Income taxes paid (net of refunds received) $ 1,756 $ 3,805 $ 6,071
=========== =========== ==========
Interest paid $ 6,177 $ 3,145 $ 5,461
=========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 primarily in the Southeast and Mid-Atlantic
regions of the United States.
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 has 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 original lease term, including
expected 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.
Expenditures for 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, including goodwill,
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, except for
goodwill. Assets are evaluated for impairment at the operating unit level.
Goodwill is evaluated in total for the Morrison units acquired. 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 taxes.
STOCK-BASED COMPENSATION. The Company accounts for its stock compensation
arrangements under the provisions of Accounting Principles Board (APB) No. 25,
"Accounting for Stock Issued to Employees," and makes the pro forma information
disclosures required under the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
EARNINGS PER SHARE. Earnings per share of Common Stock are calculated under
the provisions of SFAS No. 128, "Earnings Per Share".
ADVERTISING EXPENSE. The cost of advertising is expense as incurred. The
Company incurred $5,801,000, $3,203,000, and $2,607,000 in advertising costs
during 1999, 1998 and 1997, respectively.
RECLASSIFICATIONS. Certain balances in prior years have been reclassified to
conform with the presentation adopted in the current year.
NOTE 2: MORRISON ACQUISITION
On May 28, 1998, the Company completed a $5.00 per share cash tender offer for
all outstanding shares of Morrison Restaurant, Inc. (Morrison), acquiring
approximately 89% of the outstanding Morrison shares. 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 total acquisition
cost, including $9,588,000 of debt assumed, was approximately $57,270,000. On
May 28, 1998, Morrison operated 142 restaurants in 13 southeastern and mid-
Atlantic states.
This acquisition has been accounted for using the purchase method of accounting
and the results of operations have been included in the accompanying
Consolidated Financial Statements since May 28, 1998. At the acquisition date,
a preliminary allocation of the purchase price of Morrison was made, resulting
in goodwill of $12,467,000. During 1999, management revised certain estimates
used in determining the allocation of purchase price to the assets and
liabilities acquired, resulting in a $1,047,000 net increase in goodwill. The
final allocation of purchase price based on the fair value of assets and
liabilities acquired resulted in recording assets of $88,520,000 and
liabilities of $54,352,000. Goodwill is being amortized using the straight-
line method over 30 years.
Unaudited pro forma results of operations of the Company for the years ended
June 30, 1998 and 1997, giving effect to the Morrison Acquisition as if it had
occurred as of July 1, 1996, are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net sales $532,586 $533,399
Operating income 40,712 54,850
Net income 5,386 14,484
Net income per share - basic and diluted .51 1.38
</TABLE>
The unaudited pro forma results of operations for the years ended June 30, 1998
and 1997 include pro forma adjustments for unfavorable leases; the incremental
increase in amortization of goodwill; incremental depreciation of property,
plant and equipment; interest expense; and income taxes associated with the
acquisition. It does not reflect all anticipated cost savings and other
operating synergies which management expects to achieve at Morrison during the
periods presented.
In connection with the Morrison Acquisition, the Company recorded liabilities
of $13,460,000 at the date of acquisition for lease buyouts, occupancy costs
and employee termination costs (Morrison Closing Costs) related to the planned
closing of 18 Morrison units and for 23 Morrison units that were closed prior
to the acquisition date. As of June 30, 1999, the Company has closed 15 of the
above-mentioned Morrison units and anticipates closing seven other units in the
quarter ending September 30, 1999, making the total closed 22, compared to the
original estimate of 18. During 1999, the Company revised its original
estimate of Morrison Closing Costs and reduced the recorded liability and
goodwill by $6,777,000. During 1999, the Company paid Morrison Closing Costs
of $1,134,000. While management believes the remaining accrual of $6,045,000
is adequate to finalize the closure of these Morrison units, the actual
settlements may result in additional adjustments to this accrual.
<PAGE>
NOTE 3: SALE OF RALPH & KACOO'S
On March 30, 1999, the Company completed the sale of the Ralph & Kacoo's
seafood restaurants and related commissary business (Cajun Bayou Distributors &
Management, Inc.) to Cobb Investment Company, Inc. for $21,314,000 in cash.
The transaction resulted in a recorded gain of $1,556,000, and a net tax
benefit of $826,000.
The tax benefit was the result of the sale of the stock of Cajun Bayou
Distributors & Management, Inc. The tax basis in the stock was $6,057,000
higher than the book basis in the stock due to differences that were not
classified as temporary differences under SFAS 109, and resulted in a loss on
the stock sale for tax purposes when compared to the amount recorded for
financial statement purposes. The tax loss on the stock sale generated a net
overall tax loss on the sale of Ralph & Kacoo's.
The remaining portion of the Ralph & Kacoo's business, a catering facility sold
on June 1, 1999, generated a gain of $491,000 and is included in Other income.
Operating results for Ralph & Kacoo's and Cajun Bayou Distributors &
Management, Inc. for years 1997 and 1998 and the period ended March 30, 1999
are not material to the results as presented in the Company's Consolidated
Statements of Income (see page 17).
NOTE 4: IMPAIRMENTS OF LONG-LIVED ASSETS AND RESERVES FOR UNIT CLOSINGS
During 1999 and 1998, the Company recorded charges of $1,350,000 ($851,000
after tax or $.08 per share) and $3,453,000 ($2,175,000 after tax or $.21 per
share), respectively, for asset write-downs and the lease related costs of
operating units for which closure decisions were made. The closure decisions
primarily related to certain Piccadilly units expected to close in connection
with the Morrison Acquisition.
The Company is responsible for minimum rent obligations of $16,927,000 related
to 23 closed units and 10 units scheduled to close, $5,076,000 of which relate
to the Morrison Acquisition. Sublease arrangements exist relating to 16 of
these units providing for future sublease rentals of $13,994,000. The Company
has recorded liabilities of $12,693,000 to settle the minimum rent obligations,
other lease-related charges, and lease settlements, $6,045,000 of which related
to the Morrison Acquisition. During 1999, the Company charged $2,091,000
against these reserves for lease-related payments net of sublease rentals
received, of which $1,134,000 relate to the Morrison Acquisition (see Note 2
for further discussion).
NOTE 5: INCOME TAXES
Significant components of the Company's deferred tax liabilities and assets are
as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
June 30 1999 1998
<S> <C> <C>
Deferred tax assets:
Accrued expenses $11,375 $13,203
Unit closing reserves 5,787 8,185
Intangible assets -- 1,339
NOL and tax credit carryforwards 7,824 7,094
------- -------
24,986 29,821
Deferred tax liabilities:
Property, plant and equipment 12,964 16,751
Prepaid pension costs 3,279 3,048
Inventories 1,519 880
------- -------
17,762 20,679
------- -------
Net deferred tax assets $ 7,224 $ 9,142
======= =======
</TABLE>
At June 30, 1999 the Company has net operating loss carryforwards of
$18,288,000 and general business tax credit carryforwards of $264,000 resulting
from the Morrison Acquisition. These carryforwards, which expire from 2010
through 2012, give rise to deferred tax assets. SFAS 109 specifies that
deferred tax assets are to be reduced by a valuation allowance if it is more
likely than not that some portion of the deferred tax assets will not be
realized. Although provisions of the Internal Revenue Code limit the amount of
the net operating loss carryforward that can be utilized each year to
$2,332,000, management believes that carrybacks and future reversals of
existing taxable differences should be sufficient to realize all of the
Company's deferred tax; therefore, a valuation allowance has not been
established.
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year Ended June 30 1999 1998 1997
<S> <C> <C> <C>
Current:
Federal $(3,826) $ 4,371 $ 4,719
State (160) 182 693
------- ------- -------
(3,986) 4,553 5,412
Deferred:
Federal $ 4,234 $ 96 $ 254
State 177 4 89
------- ------- -------
4,411 100 343
------- ------- -------
Total provision for income taxes $ 425 $ 4,653 $ 5,755
======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year Ended June 30 1999 1998 1997
<S> <C> <C> <C>
Income taxes at statutory rate $ 1,505 $ 4,269 $ 5,201
State income taxes, net of federal taxes 177 502 464
------- ------- -------
1,682 4,771 5,665
Sale of Ralph & Kacoo's (1,158) -- --
Goodwill amortization 178 15 --
Tax credits (158) (161) (163)
Other items (119) 28 253
------- ------- -------
Total provision for income taxes $ 425 $ 4,653 $ 5,755
======= ======= =======
</TABLE>
NOTE 6: LEASED PROPERTY
The Company rents most of its cafeteria and restaurant facilities under long-
term leases with varying provisions and with original lease terms generally of
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, 1999, including $12,757,000 for closed units, are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year Ending June 30
<S> <C>
2000 $ 18,477
2001 16,459
2002 14,693
2003 12,171
2004 9,890
Subsequent 31,891
---------
103,581
Less sublease income 11,924
---------
Net minimum lease commitments $ 91,657
=========
</TABLE>
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. Rentals for the periods
shown below does not include these executory costs.
<TABLE>
<CAPTION>
(Amounts in thousands)
Year Ended June 30 1999 1998 1997
<S> <C> <C> <C>
Minimum rentals $15,950 $10,581 $ 7,999
Contingent rentals 4,998 1,385 2,482
------- ------- -------
Total $20,948 $11,966 $10,481
======= ======= =======
</TABLE>
NOTE 7: LONG-TERM DEBT
<TABLE>
<CAPTION>
(Amounts in thousands)
June 30 1999 1998
<S> <C> <C>
Note payable to banks, due at maturity on June 22, 2001
(fair value at June 30, 1999 - $74,226,000; fair value
at June 30, 1998 - $78,979,000) $74,226 $78,979
======= =======
</TABLE>
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.
The Company has a credit agreement totaling $100,000,000 with a syndicated
group of banks. This credit agreement was amended during 1999 to reduce the
amount available from $125,000,000 to $100,000,000. The related borrowings are
unsecured and bear interest (6.97% and 7.15% at June 30, 1999 and June 30,
1998, respectively) based upon the London InterBank Offered Rate (LIBOR) plus a
margin rate based upon the Company's debt to EBITDA ratios, as defined in the
Credit Agreement. The Company pays quarterly commitment fees which range
from .25% to .375%, based upon the Company's debt to EBITDA ratios, per annum
of the unused portion of the available credit under the notes. The facilities
contain covenants that 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, 1999, 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 agreements.
The Company capitalized interest costs of $145,000 in 1999, $120,000 in 1998
and $100,000 in 1997 with respect to qualifying construction. Total interest
cost incurred was $6,400,000 in 1999, $2,634,000 in 1998 and $2,814,000 in
1997.
NOTE 8: PENSION PLANS
The Company has a defined benefit pension plan covering substantially all
employees, except for Morrison 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, 1999 and June 30, 1998 with a fair value of $3,056,000
and $4,734,000, respectively.
At the time of its acquisition by the Company on May 28, 1998, Morrison
maintained two non-qualified employee defined benefit pension plans and one
frozen qualified defined benefit pension plan.
<PAGE>
The two Morrison employee defined benefit pension plans continue to accrue
benefits for covered employees. To provide a source for the payment of
benefits under these plans, the Company owns whole-life insurance contracts on
some participants.
Morrison is a co-sponsor of the Morrison Restaurants Inc. Retirement Plan along
with Ruby Tuesday, Inc. and Morrison Health Care, Inc. The MRI Retirement Plan
was frozen on December 31, 1987. The Plan's assets include common stock, fixed
income securities, short-term investments and cash. The Company will continue
to share in future expenses of the Plan, and will make contributions to the
Plan as necessary.
The Company has adopted SFAS No. 132, "Employers' Disclosures about Pension and
Other Postretirement Benefits", which revises the required disclosures about
pension and other postretirement benefit plans. Changes in plan assets and
obligations during the years ended June 30, 1999 and 1998 and the funded status
of the defined pension plans described in the preceding paragraphs (referred to
collectively as "Pension Benefits") at June 30, 1999 and 1998, were as follows:
<TABLE>
<CAPTION>
(Amount in thousands)
Pension Benefits
1999 1998
<S> <C> <C>
June 30
Change in benefit obligation
Benefit obligation at beginning of year $ 82,335 $ 55,775
Morrison acquisition (2,669) 14,482
Service cost 2,717 2,207
Interest cost 5,475 4,364
Benefits paid (3,798) (2,573)
Actuarial (gain) loss (7,507) 8,080
-------- --------
Benefit obligation at end of year $ 76,553 $ 82,335
======== ========
Change in plan assets
Fair value of plan assets at beginning of year $ 74,176 $ 53,072
Morrison acquisition (1,523) 8,738
Actual return 6,136 12,539
Employer contributions 2,500 2,400
Benefits paid (3,640) (2,573)
-------- --------
Fair value of plan assets at end of year $ 77,649 $ 74,176
======== ========
Funded (unfunded) status $ 1,096 $ (8,159)
Unrecognized actuarial (gain) loss 1,408 (32)
Unrecognized prior service cost (27) 8,203
-------- --------
Net prepaid pension cost $ 2,477 $ 12
======== ========
Net prepaid benefit cost consists of:
Prepaid benefit cost $ 6,816 $ 5,756
Accrued benefit liability (4,339) (5,744)
-------- --------
Net prepaid pension cost $ 2,477 $ 12
======== ========
</TABLE>
<PAGE>
Net periodic pension cost for the Pension Benefits for 1999, 1998 and 1997
include the following components:
<TABLE>
<CAPTION>
(Amounts in thousands)
1999 1998 1997
<S> <C> <C> <C>
June 30
Net pension expense:
Service cost $ 2,717 $ 2,207 $ 1,942
Interest cost on projected benefit obligation 5,475 4,364 4,001
Actual return on plan assets (6,136) (12,540) (6,547)
Net amortization and deferral (5) 7,902 2,765
-------- -------- --------
$ 2,051 $ 1,933 $ 2,161
======== ======== ========
</TABLE>
Assumptions used in actuarial calculations were as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
1999 1998 1997
<S> <C> <C> <C>
June 30
Actuarial assumptions:
Discount rate 7.75% 7.0%-7.25% 8.0%
Compensation increases 3.5% 3.5%-4.0% 4.0%
Long-term rate of return 9.0% 9.0% 9.0%
</TABLE>
Management is in the process of evaluating the benefits it offers its
employees, including various Morrison plans included in the Morrison
Acquisition. As a result of this process, which management expects to complete
by December 31, 1999, the benefit plans may undergo changes, including the
possible termination of certain plans.
NOTE 9: 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. At June 30, 1999, there were 255,389 unissued Common Shares reserved
under the plan.
On November 2, 1998, the Company's stockholders approved the Amended and
Restated Piccadilly Cafeterias, Inc. 1993 Incentive Compensation Plan (the 1993
Plan). Under the terms of the Plan, which amends and restates the Piccadilly
Cafeterias, Inc. 1993 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, key employees, or the Chairman of the Board of Directors of the
Company. 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 1,450,000 shares, in total, for issuance under the 1993 and 1988
Plans. At June 30, 1999, 413,500 shares were available for future option grants
and options to purchase 753,650 shares were exercisable. Options outstanding at
June 30, 1999, have exercise prices which range from $8.50 to $12.00 and a
weighted average remaining contractual life of 8.2 years. Transactions under
the 1993 Plan for the last three years are summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands - except per share data)
Common Weighted
Stock Average
Shares Exercise Price Total
<S> <C> <C> <C>
Outstanding at June 30, 1996 895,000 $10.26 $ 9,184
Cancelled/expired (676,000) 10.37 (7,013)
Exercised (25,000) 9.00 (225)
Granted --- --- ---
----------- ----------
Outstanding at June 30, 1997 194,000 10.03 1,946
Cancelled/expired (14,000) 12.75 (179)
Exercised --- --- ---
Granted 634,675 12.00 7,616
----------- ----------
Outstanding at June 30, 1998 814,675 11.52 9,383
Cancelled/expired (29,900) 10.50 (314)
Exercised (17,600) 10.10 (178)
Granted 162,725 9.51 1,548
----------- ----------
Outstanding at June 30, 1999 929,900 11.23 $10,439
=========== ==========
</TABLE>
PRO FORMA SFAS NO. 123 RESULTS. Pro forma information regarding net income and
net income per share is required by SFAS No. 123, and has been determined as if
the Company had accounted for its employee stock options under the fair value
method of SFAS No. 123. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions: risk-free interest rate of 5.0%; dividend yield
of 5.0%; volatility factors of the expected market price of the Company's
common stock of 23%; and a weighted average expected life of the options of 5.0
years. The weighted average fair value of the stock options granted in 1999
and 1998 were $1.32 and $1.84 per share, respectively. 1999 and 1998 pro forma
net income and net income per share, assuming that the Company had accounted
for its employee stock options using the fair value method would have been
reduced by $111,000 and $.01 and $624,000 and $.06, respectively. 1997 amounts
would not be different from those reported.
EARNINGS PER SHARE. A reconciliation of the income and common stock share
amounts used in the calculation of basic and diluted net income per share for
the years ended June 30, 1999, 1998 and 1997 are as follows (net income in
thousands).
<TABLE>
<CAPTION>
Net Income Shares Per Share Amount
<S> <C> <C> <C>
For the Year Ended June 30, 1999
Basic net income $4,000 10,503,368 $0.38
Effect of dilutive securities --- 25,458 ---
-------- ------------ -------
Diluted net income $4,000 10,528,826 $0.38
======== ============ =======
For the Year Eneded June 30, 1998
Basic net income $7,903 10,503,368 $0.75
Effect of dilutive securities --- 65,014 ---
-------- ------------ -------
Diluted net income $7,903 10,568,382 $0.75
======== ============ =======
For the Year Ended June 30, 1997
Basic net income $9,390 10,505,602 $0.89
Effect of dilutive securities --- 236 ---
-------- ------------ -------
Diluted net income $9,390 10,505,838 $0.89
======== ============ =======
</TABLE>
<PAGE>
NOTE 10: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in thousands -- except per share data)
Year Ended June 30, 1999 Year Ended June 30, 1998
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 $128,935 $130,376 $122,498 $113,888 $78,952 $79,189 $76,641 $100,606
Cost of sales and
other operating expense 119,602 121,376 116,134 111,653 72,105 71,679 69,124 91,715
Net income (loss) 1,888 1,976 2,798 (2,662) 2,076 2,827 2,592 408
Net income (loss) per
share - basic and
diluted $ .18 $ .19 $ .27 $ (.25) $ .20 $ .27 $ .25 $ .04
</TABLE>
During the quarters ended June 30, 1999 and 1998, the Company recorded a
$1,350,000 ($851,000 after-tax or $.08 per share) and $3,453,000 ($2,175,000
after-tax or $.21 per share) charge, respectively, for the write-down of long-
lived assets in accordance with SFAS No. 121 (see Note 4 for further
discussion) and lease related costs for units to be closed.
During the quarter ended March 31, 1999, the Company sold its Ralph & Kacoo's
seafood restaurants and related commissary business resulting in a recorded
gain of $1,556,000, and a net tax benefit of $826,000 (see Note 3 for further
discussion).
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, 1999 and 1998, 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, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ ERNST & YOUNG LLP
New Orleans, Louisiana
September 24, 1999
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
(1) Morrison Restaurants, Inc.
Georgia Corporation
100% owned
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We 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
September 24, 1999, with respect to the consolidated financial statements and
schedule of Piccadilly Cafeterias, Inc. included in this Annual Report (Form
10-K) for the year ended June 30, 1999.
/S/ ERNST & YOUNG LLP
New Orleans, Louisiana
September 27, 1999
<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, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,970
<ALLOWANCES> 0
<INVENTORY> 12,595
<CURRENT-ASSETS> 32,247
<PP&E> 310,285
<DEPRECIATION> 132,559
<TOTAL-ASSETS> 232,939
<CURRENT-LIABILITIES> 53,161
<BONDS> 0
0
0
<COMMON> 19,141
<OTHER-SE> 60,261
<TOTAL-LIABILITY-AND-EQUITY> 232,939
<SALES> 495,697
<TOTAL-REVENUES> 495,697
<CGS> 298,565
<TOTAL-COSTS> 475,370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,255
<INCOME-PRETAX> 4,425
<INCOME-TAX> 425
<INCOME-CONTINUING> 4,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,000
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
</TABLE>
