<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
- --- Securities Exchange Act of 1934
For the quarterly period ended December 31, 1997 or
- --- Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 1-9822
BFX HOSPITALITY GROUP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 75-1732794
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
226 Bailey Avenue, Suite 101, Fort Worth, Texas 76107
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(Address and zip code of principal executive offices)
(817) 332-4761
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(Registrant's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares outstanding at:
Class February 9, 1998
- ---------------------------- --------------------------------
Common stock, $.05 par value 5,598,728
1
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BFX HOSPITALITY GROUP, INC.
Index
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Page
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Part I - Financial Information............................................ 3
Item 1 - Financial Statements............................................. 3
Consolidated Condensed Balance Sheets December 31, 1997 (Unaudited)
and September 30, 1997.................................................. 3
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended December 31, 1997 and 1996........................... 4
Consolidated Condensed Statements of Cash Flow (Unaudited)
Three Months Ended December 31, 1997 and 1996........................... 5
Supplemental Disclosures of Cash Flow Information (Unaudited)............. 5
Notes to Consolidated Condensed Financial Statements (Unaudited).......... 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 7
Part II - Other Information............................................... 9
Signatures................................................................ 10
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
BFX HOSPITALITY GROUP, INC.
Consolidated Condensed Balance Sheets
-------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
------------ -------------
(Unaudited)
Assets (In thousands)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $14,510 $16,356
Accounts receivable........................................ 121 66
Inventories................................................ 78 79
Prepaid and other current assets........................... 41 62
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Total current assets..................................... 14,750 16,563
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Property, plant and equipment, at cost:
Land, building and improvements............................ 11,170 9,387
Less: Accumulated depreciation and amortization........... (3,141) (2,970)
------- -------
Net property, plant and equipment........................ 8,029 6,417
------- -------
Goodwill, net of amortization of $1,297,000 and
$1,206,000, respectively................................. 3,668 3,758
Deferred income taxes........................................ 833 833
Other assets, net............................................ 27 513
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$27,307 $28,084
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt.......................... $ 138 $ 138
Accounts payable........................................... 337 300
Accrued liabilities........................................ 5,342 5,014
Income taxes............................................... 56 314
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Total current liabilities................................ 5,873 5,766
Long-term debt............................................... 1,178 1,212
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Total liabilities........................................ 7,051 6,978
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Stockholders' equity:
Preferred stock $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding............. - -
Common stock $.05 par value; 30,000,000 shares
authorized; outstanding shares 7,786,878................. 389 389
Additional paid-in capital................................. 16,582 16,578
Retained earnings.......................................... 9,453 9,816
Treasury stock, at cost, 2,207,050 and
1,812,350 shares, respectively........................... (6,045) (4,487)
Employee notes for stock purchase.......................... (123) (1,190)
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Total stockholders' equity............................... 20,256 21,106
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$27,307 $28,084
======= =======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
3
<PAGE>
BFX HOSPITALITY GROUP, INC.
Consolidated Condensed Statements of Operations (Unaudited)
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<TABLE>
<CAPTION>
Three Months
Ended December 31,
--------------------
1997 1996
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(In thousands, except per
share amounts)
<S> <C> <C>
Net revenues..................................... $2,206 $2,435
------ ------
Cost of goods sold (exclusive of depreciation)... 487 554
Selling, general and administrative.............. 2,197 2,070
Depreciation and amortization.................... 261 256
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Total operating costs and expenses 2,945 2,880
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Net loss from continuing operations before other
income and income taxes........................ (739) (445)
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Other income (expense):
Interest income................................ 211 33
Interest expense............................... (30) (55)
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181 (22)
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Loss from continuing operations before income
taxes.......................................... (558) (467)
Income tax benefit............................... 195 167
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Loss from continuing operations.................. (363) (300)
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Discontinued operations:
Income from operations, net of income tax
expense of $242,000........................... - 413
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Net income....................................... $ (363) $ 113
====== ======
Basic earnings per share:
Continuing operations............................ $(0.06) $(0.05)
Discontinued operations.......................... - 0.07
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Net income (loss)................................ $(0.06) $ 0.02
====== ======
Weighted average common shares outstanding....... 5,615 6,593
====== ======
Diluted earnings per share:
Continuing operations............................ $(0.06) $(0.05)
Discontinued operations.......................... - 0.07
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Net income (loss)................................ $(0.06) $ 0.02
====== ======
Weighted average common shares outstanding....... 5,615 6,593
====== ======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
4
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BFX HOSPITALITY GROUP, INC.
Consolidated Condensed Statements of Cash Flow (Unaudited)
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<TABLE>
<CAPTION>
Three Months
Ended December 31,
--------------------
1997 1996
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(In thousands)
<S> <C> <C>
Net cash provided by operating activities........ $ 500 $ 324
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Cash flows from investing activities:
Additions to property, plant and equipment..... (1,784) (358)
Increase in other assets....................... - (138)
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Net cash used in investing activities............ (1,784) (496)
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Cash flows from financing activities:
Repayments of long-term debt................... (34) (47)
Treasury stock purchases....................... (528) -
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Net cash used in financing activities............ (562) (47)
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Net decrease in cash............................. (1,846) (219)
Cash at beginning of period...................... 16,356 1,659
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Cash at end of period............................ $14,510 $1,440
======= ======
</TABLE>
Supplemental Disclosures of Cash Flow Information (Unaudited)
-------------------------------------------------------------
Supplemental schedule of cash payments:
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-------------------
1997 1996
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(In thousands)
<S> <C> <C>
Cash paid for:
Interest........................................ $ 30 $ 55
Income taxes.................................... 63 121
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
5
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BFX HOSPITALITY GROUP, INC.
Notes to Consolidated Condensed Financial Statements (Unaudited)
----------------------------------------------------------------
Note A
- ------
In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of BFX
Hospitality Group, Inc. (the Company), as of December 31, 1997, and the results
of its operations and its cash flows for the three month periods ended December
31, 1997 and 1996.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements in the 1997 BFX Hospitality Group, Inc.
Form 10-K.
Note B
- ------
The results of operations for the three-month period ended December
31, 1997 are not necessarily indicative of the results to be expected for the
full year.
Note C
- ------
During the three months ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, Earnings Per Share. This
statement requires interim and annual presentation of basic and diluted earnings
per share ("EPS") by all entities that have issued common stock or potential
common stock if those securities are traded in a public market. The objective
of basic and diluted EPS is to measure the performance of an entity over the
reporting period while giving effect to the dilutive potential of all common
shares that were outstanding during the period. This statement also requires a
reconciliation of the numerator and denominator of the diluted EPS computation.
EPS data for the period ended December 31, 1997 and all prior periods have been
restated to conform with the provisions of this statement.
Note D
- ------
During 1992, the United States Environmental Protection Agency (EPA)
issued a Record of Decision (ROD) with respect to the Company's Superfund Site
in Vestal, New York. The ROD required the Company to construct a water
treatment facility at the site and to pump contaminated ground water from
bedrock and overburden extraction wells for 15 to 30 years until remediation
goals were met. Due to concerns about the correctness of the remedy provided
for in the ROD, the Company performed additional fieldwork and, in 1995, the EPA
agreed the remedy needed to be modified. After additional discussions with the
EPA, a revised ROD was issued in July 1997. The revised ROD eliminates certain
provisions of the original ROD and primarily includes the removal and treatment
of contaminated soil. The Company is currently negotiating a Consent Decree
with the EPA in regard to the implementation of the remedy and ongoing
monitoring of the property.
6
<PAGE>
BFX HOSPITALITY GROUP, INC.
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL INFORMATION
At December 31, 1997, the Company owned and operated food service,
lodging and entertainment facilities in Texas and Louisiana.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed herein are forward-looking statements about
the business, financial condition and prospects of the Company. The actual
results could differ materially from those indicated by such forward-looking
statements because of various risks and uncertainties. Such risks and
uncertainties may include, but are not limited to regional and national economic
conditions, changes in customer demand for products offered by the Company, and
other matters that may adversely affect the availability of products and
pricing, state and federal regulatory environment, possible future acquisitions
or dispositions, amendments to the Record of Decision issued by the
Environmental Protection Agency (see Liquidity and Capital Resources) and other
risks indicated in the Company's previous filings with the Securities and
Exchange Commission. The Company cannot control these risks and uncertainties,
and in many cases, cannot predict the risks and uncertainties that could cause
its actual results to differ materially from those indicated by the forward-
looking statements.
RESULTS OF OPERATIONS
Revenues for the 1997 three month period decreased 9% due to closing
of the food and beverage operations at the Stockyards Hotel (SYH), due to the
construction of the new H3 Ranch Restaurant, scheduled to open in March 1998.
After the restaurant opens (which will replace the food and beverage operations
at SYH), revenues should increase over prior levels at SYH. Future revenues
will also be impacted by the opening of the second Cabo unit in downtown Houston
(scheduled to open in March 1998) and the opening of the third Cabo unit in
downtown Fort Worth (projected to open in June 1998).
Consolidated costs of sales (which consist primarily of food and
beverage costs) during the 1997 three-month period versus 1996 decreased 12%.
As a percent of related revenue, these costs were 22% during the 1997 three-
month period versus 23% a year earlier. The decrease in absolute dollars was
due to decreased sales and the decrease in costs as a percent of revenue is due
to increased operating efficiencies.
Consolidated selling, general and administrative expenses for the 1997
three-month period increased 6%, compared to 1996. The primary reason for the
increase was the additional salary expense incurred as a result of the
acquisition of Hotels of Distinction.
The increase in interest income to $211,000 for the 1997 three-month
period from $33,000 in 1996 is due to the interest income earned on the proceeds
of the CTI sale.
The decrease in interest expense to $30,000 for the 1997 three month
period from $55,000 in 1996 is primarily due to the assumption of the related
$1,169,000 mortgage loan in connection with the sale of a commercial office
building in July 1997.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During 1992, the United States Environmental Protection Agency (EPA)
issued a Record of Decision (ROD) with respect to the Company's Superfund Site
in Vestal, New York. The ROD required the Company to construct a water
treatment facility at the site and to pump contaminated ground water from
bedrock and overburden extraction wells for 15 to 30 years until remediation
goals were met. Due to concerns about the correctness of the remedy provided
for in the ROD, the Company performed additional fieldwork and, in 1995, the EPA
agreed the remedy needed to be modified. After additional discussions with the
EPA, a revised ROD was issued in July 1997. The revised ROD eliminates certain
provisions of the original ROD and primarily includes the removal and treatment
of contaminated soil. The Company is currently negotiating a Consent Decree
with the EPA in regard to the implementation of the remedy and ongoing
monitoring of the property. At December 31, 1997, the Company has a liability
accrued of $3,550,000 for future EPA costs.
In 1997, the Company began construction on a second Cabo unit to be
located in the historical district of downtown Houston, Texas. The unit is
expected to open during March 1998. The Company's third Cabo location is under
construction in Fort Worth, Texas and is projected to open in the third quarter
of fiscal 1998. A new restaurant at SYH is under construction and is expected
to open during the second quarter of fiscal 1998. Capital expenditures for
these three projects are expected to approximate $3,500,000, of which
approximately $1,700,000 had been incurred as of December 31, 1997, and are
expected to be funded from existing cash and operating cash flow.
In October 1997, pursuant to the terms of their respective note
agreements, Robert H. McLean, Chief Executive Officer and Director of the
Company and Robert Korman, Chief Financial Officer tendered to the Company
284,430 and 62,825 shares, respectively, of the Company's stock to repay their
loans and to reimburse the Company for certain taxes paid by the Company on
behalf of Mr. McLean and Mr. Korman in the amount of $400,695 and $90,065,
respectively. The shares were tendered on October 8, 1997 at a value of $4.13
per share, which was the closing price per share of the Company's common stock
on that date.
In October 1997, pursuant to the terms of his note agreement, Walter D.
Rogers, a Director of the Company, tendered to the Company 52,045 shares of its
common stock owned by Mr. Rogers in payment of one-half of the principal balance
of the note in the amount of $123,500 and to reimburse the Company for certain
taxes paid by the Company on Mr. Rogers' behalf in the amount of $91,446. Mr.
Rogers tendered the shares on October 8, 1997 at a value of $4.13 per share,
which was the closing price per share of the Company's common stock on that
date. The Company also amended the note as of October 21, 1997, to (i) extend
the due date for the principal sum of $26,500 until February 3, 2000; (ii)
extend the due date for the principal sum of $97,000 until September 6, 2001;
(iii) eliminate any interest charges prior to maturity; and (iv) provide for the
payment of the note by the delivery of shares of the Company's common stock
valued at the greater of book or market value.
8
<PAGE>
BFX HOSPITALITY GROUP, INC.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. - Legal Proceedings
None
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Report dated October 27, 1997 reporting
acquisition of stock from Robert H. McLean
9
<PAGE>
BFX HOSPITALITY GROUP, INC.
SIGNATURES
----------
Pursuant to 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.
BFX HOSPITALITY GROUP, INC.
(Registrant)
By: /s/ Robert H. McLean
-----------------------------------
Chairman of the Board
and President
February 13, 1998
- -----------------
By: /s/ Robert Korman
-----------------------------------
Vice President and
Chief Financial Officer
February 13, 1998
- -----------------
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,510
<SECURITIES> 0
<RECEIVABLES> 121
<ALLOWANCES> 0
<INVENTORY> 78
<CURRENT-ASSETS> 14,750
<PP&E> 11,170
<DEPRECIATION> 3,141
<TOTAL-ASSETS> 27,307
<CURRENT-LIABILITIES> 5,873
<BONDS> 0
0
0
<COMMON> 389
<OTHER-SE> 19,867
<TOTAL-LIABILITY-AND-EQUITY> 27,307
<SALES> 2,206
<TOTAL-REVENUES> 2,206
<CGS> 487
<TOTAL-COSTS> 2,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (558)
<INCOME-TAX> 195
<INCOME-CONTINUING> (363)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (363)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
