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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 25, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to ___________________
Commission File No. 0-10717
BAYPORT RESTAURANT GROUP, INC.
(Exact name of issuer in its charter)
FLORIDA 59-1827599
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 HOLLYWOOD BLVD., HOLLYWOOD, FLORIDA 33021
(Address of principal executive offices) (Zip Code)
(305) 967-6700
(Issuer's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- - - ------------------- -----------------------------------------
NONE NOT APPLICABLE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK, $.001 PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter periods 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 __
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this Form, and no disclosure will 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. [ ]
As of March 4, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $32.0 million, based on the
last sale price on that date of $3.87 on the NASDAQ-NMS. As of that date, there
were 9,639,036 shares of the Registrant's Common Stock outstanding. There were
also outstanding on that date 2,162,749 shares of Class B Convertible Preferred
Stock, which are convertible into an aggregate of 540,687 shares of Common
Stock.
The following documents are incorporated by reference: THE INFORMATION REQUIRED
BY PART III OF FORM 10-K IS INCORPORATED BY REFERENCE FROM THE REGISTRANT'S
DEFINITIVE PROXY STATEMENT, WHICH WILL BE FILED WITHIN 120 DAYS AFTER THE END OF
THE REGISTRANT'S FISCAL YEAR.
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PART I
ITEM 1. BUSINESS
UNLESS THE CONTEXT INDICATES OTHERWISE, THE "COMPANY" REFERS TO BAYPORT
RESTAURANT GROUP, INC., A FLORIDA CORPORATION, AND ITS SUBSIDIARIES.
GENERAL
The Company's business is principally the operation of casual
full-service seafood restaurants. As of this date, the Company operates 17
full-service restaurants under the name "The Crab House" and has five
full-service restaurants in various stages of construction. The Company plans to
open seven additional full-service restaurants during 1996 and between eight and
ten additional full-service restaurants during 1997.
The Company is pursuing an aggressive growth strategy for its
full-service restaurant concept and its continued success will be dependent upon
its ability to obtain the capital required to continue to grow its restaurant
chain, and on its ability to develop and operate new restaurants on a cost
effective and profitable basis, particularly in new markets, and to manage
effectively the resulting larger business.
The Company also operates five take-away seafood restaurants. The
Company has decided not to expand its take-away restaurant concept and is
presently exploring its options with respect to this operation.
CRAB HOUSE FULL-SERVICE RESTAURANTS
CONCEPTS AND STRATEGY. The Company's full-service restaurants feature a
broad assortment of crab, shrimp and fresh-fish entrees and all but three of
which also offer a distinctive seafood salad bar. The restaurants range in size
from 4,500 square feet to 13,000 square feet and operate in both tourist markets
and densely populated areas with upper middle income demographics. The Company's
current restaurants have capacities ranging from 200 to 400 seats. The average
check per person at The Crab House (with liquor) is between $11 and $12 for
lunch and $20 and $22 for dinner.
The Company's full-service restaurant strategy is to attract a large,
broad and loyal base of affluent customers by: (I) selecting locations in
shopping and tourist areas frequented by upper middle income individuals and
families; (ii) featuring higher quality seafood through disciplined procurement
standards and skilled preparation; (iii) achieving high value for the customer
by offering quality at moderate prices; (iv) providing a casual dining
atmosphere that is clean, tasteful and comfortable, with attentive service; and
(v) hiring, retaining and motivating experienced restaurant management by
rewarding general managers with cash bonuses for achieving financial and quality
standards, and with significant stock options for long term commitment and
loyalty.
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MENU. The Crab House menu features a selection of shellfish appetizers;
chowders; blue, king, snow and stone crab specialties; a variety of fresh fish
fillets hand-cut from whole fish; lobster and shrimp; and seafood pastas. In
addition, all but three of the Company's Crab House restaurants feature a salad
and seafood raw bar. The seafood raw bar is a signature item, with freshly
shucked oysters and clams, cold steamed shrimp, mussels and assorted fresh
vegetables and salads.
ATMOSPHERE. The Crab House is conducive to casual dining. Its decor
has a simple, clean nautical motif, with generous use of varnished wood
wainscoting, high ceilings, exposed wooden beams, colorful ceramic tile, and
gentle lighting. The design objective is to create a light, airy, comfortable
space. As a signature design statement, brown paper is used instead of linen
table cloths highlighting the casual nature of the restaurant and its origins as
a simple crab house. Crab House guests come dressed in a mixture of attire, with
both Bermuda shorts and business suits well represented.
CLIENTELE. The Crab House restaurants are located in shopping and
tourist areas frequented by upper middle income individuals and families, and in
other densely populated areas. The decor, quality of food, and attentiveness of
service personnel are meant to appeal to a clientele that has moderately high
income, but enjoys a relaxed atmosphere and good value. The clientele is a
broad, balanced mixture of families, couples in their 30's and over, and
business people.
CURRENT RESTAURANT LOCATIONS
As of this date, the Company operates 17 full-service Crab House
restaurants. The location and year opened of the existing restaurants is as
follows:
LOCATION YEAR OPENED
-------- -----------
FLORIDA
Miami 1976
Lauderhill 1986
Orlando I 1989
Orlando II 1993
Boca Raton 1994
Key West* 1994
Plantation 1995
Palm Beach/Singer Island* 1995
Aventura 1996
Jupiter 1996
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* See footnote on next page.
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LOCATION YEAR OPENED
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SOUTH CAROLINA
Myrtle Beach I 1994
Myrtle Beach II 1995
MISSISSIPPI
Biloxi* 1995
Gulfport, MS* 1995
ILLINOIS
Chicago 1995
GEORGIA
Smyrna 1985
Atlanta 1988
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* The Company's restaurants in Biloxi and Gulfport, Mississippi and in
Key West and Palm Beach/Singer Island, Florida are in hotels. In addition to
their regular dining room and lounge services, these restaurants provide
complete food and beverage service for each of the related hotels, including
banquets and room service.
Additionally, the Company has entered into leases for, and plans,
during 1996, to open Crab House restaurants in, the following locations:
ANTICIPATED
LOCATION OPENING
-------- -------
New York (Chelsea Piers), NY Second Quarter
Baltimore, MD Second Quarter
Nashville, TN Second Quarter
Great Neck, NY Third Quarter
Fairfax, VA Third Quarter
Edgewater, NJ Third Quarter
Bethesda, MD Fourth Quarter
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EXPANSION STRATEGY AND SITE SELECTION
The Company's present development plan calls for the opening of seven
additional full-service Crab House restaurants during 1996, in addition to the
two restaurants already opened in 1996, and eight to ten full- service Crab
House restaurants during 1997. The Company opened six full- service restaurants
during 1995. The Company reviews its development plans from time to time and
reserves the right to make changes to it in the future. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for information regarding the capital required to fund the continued
development of the Company's restaurant chain.
The Company will generally seek to enter markets which can support
several Crab House restaurants, although it may open a single Crab House
restaurant in one or more markets where the economics appear to allow the
successful development of a single restaurant in that market.
The Company leases all but one of its present full-service restaurant
sites and expects to lease its new full-service restaurant sites in the future.
Crab House restaurants will either be free-standing buildings on stand-alone
sites or on out-parcels in shopping centers or in line or at an end-cap in a
shopping center. The Company considers the location of a restaurant to be
critical to its long-term success and intends to devote significant effort to
the investigation and evaluation of potential sites. The site selection process
focuses on trade area demographics, target population density and household
income levels, as well as specific site characteristics, such as visibility,
accessibility and traffic volume. In investigating a site, the Company will also
review the presence of potential competition from national restaurant chains and
local restaurants and the apparent viability of those restaurants. Senior
management will inspect and approve each restaurant site prior to signing a
lease.
The Company expects that its new full-service restaurants will be
developed on both sites on which new construction is required and on sites where
a restaurant has previously been located. The Company estimates that the cost of
developing a typical Crab House restaurant from the ground up (excluding land)
is between $2.7 and $3.2 million, which includes the building, fixtures,
equipment and pre-opening expenses. However, the cost of developing a restaurant
on a site where an existing restaurant has previously been located is between
$1.0 and $2.0 million. The Company estimates that it takes between 12 and 15
months after signing a lease and between five to seven months after obtaining
building permits to complete construction and open a full-service restaurant.
There can be no assurance that the Company will be able to locate and
acquire attractive restaurant sites to meet its expansion goals, attract and
retain competent management and other personnel necessary for its expansion
program, open new restaurants on a timely and cost-efficient basis or manage the
resulting larger business on a profitable basis.
Further, the results achieved to date by the Company's restaurants may
not be indicative of the prospects or market acceptance of a larger number of
restaurants, particularly in wider and
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more geographically dispersed areas with varied demographic characteristics.
Because of the Company's relatively small restaurant base, an unsuccessful new
restaurant could have a more significant effect on the Company's results of
operations than would be the case in a larger restaurant chain.
RESTAURANT MANAGEMENT SELECTION AND INCENTIVES
The Company believes that its success and ability to maintain high
standards is heavily dependent upon proper selection and motivation of
restaurant general managers. The compensation package for general managers is
designed to provide short-term cash rewards and longer term stock rewards.
Incentives for longer term dedication and loyalty to the Company are provided by
grants to each restaurant general manager of stock options, which vest over a
period of years.
The success of the Company will be highly dependent on the efforts of
its personnel. In order to implement successfully its proposed expansion and
manage anticipated growth, the Company will be dependent upon its ability to
retain existing and hire additional qualified personnel, including additional
restaurant general managers. The competition for qualified personnel in the
restaurant industry is intense and, accordingly, there can be no assurance that
the Company will be able to retain or hire necessary personnel.
MANAGEMENT AND EMPLOYEES
The management staff of a typical full-service Crab House restaurant
consists of a general manager, an assistant general manager, a kitchen manager,
and one or more assistant managers. Each Crab House restaurant employs
approximately 70 to 125 hourly employees, many of whom work part time.
The general manager of each full-service restaurant carries primary
responsibility for the day-to-day operations of his or her restaurant and is
required to abide by Company-established operating standards.
SUPERVISION AND TRAINING
The Company requires its full-service restaurant general managers, and
its assistant managers and kitchen managers, to have significant experience in
the restaurant industry. The Company has a six to eight week training program
for all of its new full-service restaurant managers, which emphasizes the
Company's operating strategy, procedures and standards. Managers are required to
have experience in all aspects of the operations of the Company's restaurants,
with particular emphasis on kitchen operations, because of the Company's focus
on quality.
Each restaurant's operations are regularly reviewed by the Company's
regional managers, the Company's Vice President - Food and Beverage and the
Company's Executive Vice-President-
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Operations to ensure that adherence to the Company's strategy and standards of
quality are being maintained. In addition, members of the Company's senior
management regularly visit all of the Company's restaurants.
Restaurant general managers, as well as the Company's senior management
responsible for operations and training, are responsible for selecting and
training employees for each restaurant. Ongoing training remains the
responsibility of the restaurant general manager. The Company utilizes written
reviews and physical observation to evaluate each employee's performance. These
reviews place special emphasis on the consistency and quality of food
preparation and service.
ADVERTISING AND MARKETING
The Company uses print media, billboards, direct mail and selected
radio and cable television advertising in particular markets where it is cost
effective. Two different marketing strategies have evolved for the Company's two
distinct customer bases: tourist/convention and local resident. To cater to the
tourist and convention markets, the Company advertises in tourist publications
and promotes relationships with hotel concierges and tour operators. In
addition, customers in its tourist market locations are able to pick from
special menus that are available in five languages. The local resident is
reached primarily through spots on local radio programs, newspaper
advertisements and billboard advertisements. The Company budgets between two and
one-half and three percent of each restaurant's sales for advertising and
promotion.
PURCHASING
The Company's ability to maintain consistent quality throughout its
chain of restaurants depends upon the ability to acquire food products and
related items from reliable sources. Many of the Company's seafood menu items,
including shrimp, scallops, snow and king crabs, are commodity items and are
generally shipped frozen throughout the restaurant industry. All of the
non-frozen seafood items served by the Company's restaurants are served fresh
and are easily available either locally or though air transport from other parts
of the country. These factors, together with having experienced restaurant
executives in charge of purchasing and maintaining culinary standards, should
ensure the Company's ability to procure quality seafood products to fulfill the
requirements of a large restaurant chain.
To maintain quality and to maximize value, the Company contracts
centrally for purchases of frozen seafood, including blue crabs purchased from
the Company's seafood processing operation. See "Seafood Processing" below.
Seafood purchases are made based upon strict quality standards established by
the Company's Vice President Food or Beverage. The Company's purchasing policy
is quality driven and not price driven.
Frozen seafood is distributed to individual restaurants by distributors
under contract with the Company based on orders placed by the individual
restaurants with the distributor. Individual restaurants also place orders
directly with these same distributors for dry goods, other food
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products, paper products and chemicals. In addition, restaurants place orders
directly with one or more suppliers designated by the Company for other food,
including produce and fresh fish.
Food products in the Company's restaurants are regularly checked for
quality and compliance with Company standards. The Company has not had, and does
not presently anticipate having, any difficulty in continuing to obtain an
adequate quantity and quality of food products and other supplies. The Company
believes that the food products and supplies used by the Company in its
restaurants are available from more than one supplier at competitive prices.
RESTAURANT REPORTING
Each restaurant has a stand-alone point of sale accounting system. Each
restaurant staff prepares daily cash and other reports regarding sales,
inventory, sales mix, labor costs and customer counts. Restaurants also prepare
weekly profit and loss statements and inventory counts. All reports are
forwarded weekly to senior management for analysis.
COMPETITION
The restaurant business is highly competitive and the Company competes
with numerous other restaurants and food service operations, many of which
possess greater financial resources and more experienced personnel and
management than does the Company, and many of which are better established in
the markets where the Company's restaurants are or may be located. The quality
of the food served in relation to its price and public reputation are important
factors in food service competition. Additionally, the restaurant business is
often affected by changes in consumer tastes, national, regional or local
economic conditions, demographic trends, traffic patterns and the type, number
and location of competing restaurants. Further, factors such as inflation,
increased food, labor and benefit costs and the lack of experienced management
and hourly employees may adversely affect the restaurant industry in general and
the Company's restaurants in particular.
The Company believes that at present, there are no national chains of
high quality seafood restaurants. The Company believes that its concept, which
focuses on quality seafood at a fair price, will be well received by the public
as the Company expands into and beyond its existing markets. The Company also
believes that its strict management, culinary standards and procurement policies
should allow it to develop a significant number of new restaurants on a
profitable basis without lessening the standard of quality and value which have
been achieved to date in the Company's existing restaurants.
TAKE-AWAY RESTAURANTS
The Company presently operates five carry-out restaurants, under the
name "Capt. Crab's Take-Away," which feature garlic crabs, steamed crabs and
other seafood entrees served with a selection of side dishes. Three of the
restaurants are located in Florida and two are in the Baltimore, MD/Washington,
D.C. area. The Florida restaurants are approximately 1,500 to 2,000
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square feet, with drive-thru pick-up windows, and little or no interior seating.
The two Baltimore, MD/Washington, D.C. restaurants are approximately 3,000
square feet and offer approximately 40 to 45 seats.
The Company has decided not to further expand its take-away concept at
this time. The Company is presently exploring alternatives with respect to its
existing take-away restaurants.
SEAFOOD PROCESSING OPERATION
To ensure that it has adequate supply of blue crab products to meet
customer demand, the Company processes and markets blue crab products through a
wholly-owned subsidiary, which operates a processing plant in North Carolina.
Blue crabs are found in the Atlantic Ocean and its tributaries, the Gulf of
Mexico, and in the waters of Africa, Central America, Mexico and South America.
This operation produces, on a seasonal basis, fresh crab meat,
pasteurized crab meat, frozen whole blue crabs and crab clusters. The Company
cooks, chills and picks crab meat and cooks and freezes whole blue crabs and
crab clusters. The crab meat is canned and pasteurized or sold fresh or vacuum
packed and frozen. The Company accounted for approximately 22 percent and 24
percent, respectively, of its subsidiaries' sales during the 1995 and 1994
fiscal years. The Company markets the balance of its production under the "Ocean
Blue Gourmet" and "Crystal Coast Gourmet" brands.
The Company believes that as its restaurant network expands, the
Company will utilize an increasingly larger portion of this subsidiary's output
in its own restaurants. The Company also believes that its seafood processing
plant can meet the blue-crab requirements of the Company's existing and
currently projected restaurants. To complement its subsidiary's output and to
further ensure adequate supply of crab products, the Company also imports
several crab products from Mexico. In addition, the Company believes that it
will be able increase the capacity at its existing facility and/or open
additional plants to process blue-crab, if and when required.
GOVERNMENT REGULATION
The restaurant business is subject to extensive federal, state and
local regulation relating to the development and operation of restaurants,
including laws and regulations relating to building and zoning requirements,
preparation and sale of food, health and sanitation and laws governing the
Company's relationship with its employees, including minimum wage requirements,
unemployment taxes and sales taxes, overtime and working conditions and
citizenship requirements. The failure to obtain or retain required licenses, or
a substantial increase in the minimum wage rate, could adversely affect the
operations of the Company's restaurants.
In addition, the Company's operations are subject to federal, state and
local regulations with respect to environmental and safety matters, including
regulations concerning discharges into air and water and regulations under the
Federal Occupational Safety and Health Act. To the best
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of the Company's knowledge and belief, the Company is not engaged in any
activity which constitutes a health, safety or environmental hazard or which
could be the subject or grounds upon which any governmental agency could require
the taking of certain remedial action by the Company. These regulations have
historically been subject to frequent change by regulatory authorities, and the
Company is unable to predict the future impact, if any, of such regulations on
the capital expenditures, earnings and competitive position of the Company.
These laws and regulations, in the Company's opinion, have not to date
materially affected its operations.
EMPLOYEES
As of March 1, 1996, the Company employed approximately 2,140 service
and management personnel in its restaurants and 44 management and administrative
personnel in its corporate office. The Company also employs approximately 70
persons, the majority of whom are seasonal, in its seafood processing operations
and also hires seasonally approximately 50 persons from Mexico to work in its
plant. The Company believes that its relationship with its employees is good.
None of the Company's employees are covered by a collective bargaining
agreement.
TRADEMARKS
The Company has trademarked and service marked the name, design and
logo used in its "Crab House Seafood" and "Capt. Crab's Take-Away" restaurants.
The Company believes that its service marks and trademarks have significant
value and are an important element in the marketing of its restaurants. The
Company is aware of names and marks similar to the service mark of the Company
used by other persons in certain geographic areas. However, the Company believes
that such uses will not adversely affect the Company. The Company's policy is to
pursue registration of its marks whenever possible and to oppose vigorously any
infringement of its marks.
ITEM 2. PROPERTIES
The Company's executive offices consist of approximately 10,000 square
feet in the Presidential Circle office building in Hollywood, Florida. The
Company pays approximately $260,000 in annual rent for its headquarters
facility. The Company's lease for its headquarters facility expires in 1997.
With the exception of the facilities housing the Company's take-away
restaurants in Miami, Carol City and Sunrise, Florida, and one of the Company's
full-service restaurants in Orlando, which are owned by the Company, all of the
restaurant facilities operated by the Company are leased.
The Company's leases on its restaurant properties expire between 2002
and 2019. See Note G to Notes to Consolidated Financial Statements.
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The seafood processing plant operated by the Company's seafood
processing subsidiary is located in South Creek, Beaufort County, North
Carolina. In December 1992, this subsidiary entered into a five year lease
agreement for the plant. This lease may be extended by the subsidiary, at its
option, for a maximum of fifteen years. The plant is located along a waterway,
allowing the subsidiary access to local crab fishermen.
The processing plant has crab meat picking, processing and cryogenic
freezing operations. The plant has 8,000 square feet available for processing,
including a room consisting of 2,000 square feet designated for crab meat
picking. In addition, the plant has 2,000 square feet available for frozen
product storage and 1,500 square feet of office space. The plant's interior has
been designed to facilitate the efficient and orderly flow of product from
selection of live crabs for purchase to processing and/or cryogenic freezing to
packing, storage and shipping.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation, other than litigation
which arises in the usual and ordinary course of its business and none of which
litigation is material to the Company's financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 25, 1995.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Common Stock is listed on the NASDAQ National Market System
("NASDAQ-NMS") under the NASDAQ symbol "PORT."
The following table sets forth the range of closing high and low last
sale prices for the Company's Common Stock as reported on NASDAQ-NMS. Such
quotes represent quotes between dealers in securities and do not include retail
markups, markdowns or commissions and may not necessarily represent actual
transactions:
HIGH LOW
---- ---
YEAR ENDED 1994
First Quarter 5.125 3.875
Second Quarter 5.125 3.75
Third Quarter 4.25 3.00
Fourth Quarter 4.25 2.625
YEAR ENDED 1995
First Quarter 4.06 2.875
Second Quarter 4.625 3.75
Third Quarter 5.125 4.25
Fourth Quarter 4.875 3.125
YEAR ENDED 1996
First Quarter* 4.25 3.50
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*Through March 4, 1996.
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HOLDERS OF COMMON STOCK
As of March 4, 1996, there were 9,639,036 shares of Common Stock
outstanding held by approximately 6,600 holders of record. Many of these record
holders hold these securities for the benefit of their customers. Additionally,
as of March 4,1996, there were 2,162,749 shares of Class B Convertible Preferred
Stock (the "Class B Shares") outstanding held by 25 holders of record. Each of
the Company's outstanding Class B Shares is convertible into 1/4 share of Common
Stock (aggregating 10,179,723 shares of Common Stock, assuming all of the Class
B Shares were converted).
As of March 4, 1996, the last sale price, as reported by NASDAQ-NMS, for
the Company's Common Stock was $3.875.
The Company may, from time to time, solicit holders of ten or less
shares of its Common Stock to sell their shares back to the Company. This action
may be taken to assist very small holders in disposing of their securities and
to reduce the number of record holders of the Company's Common Stock. Any such
purchases will be made in open-market transactions or in privately negotiated
transactions and are expected to be conducted in accordance with Rule 10b-18
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934. Such purchases will, therefore, be subject to the price,
volume and timing restrictions of Rule 10b-18, which are designed generally to
limit the influence of such purchases on the market price of shares of Common
Stock.
DIVIDEND POLICY
The Company has never declared a cash dividend on its Common Stock. The
Board of Directors anticipates that, for the foreseeable future, earnings, if
any, will be retained for use in the business, and no cash distributions will be
made on the Company's Common Stock. In the event the Board of Directors declares
any cash dividends on the Common Stock, the Board must also declare a cash
dividend on the Class B Shares in an amount equal to the common equivalent per
share dividend declared on the Common Stock. Additionally, the Company is
prohibited from paying dividends on its Common Stock pursuant to its outstanding
credit agreements with certain financial institutions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
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<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
YEARS ENDED
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12/25/95 12/26/94 12/27/93 12/28/92 12/30/91
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues
Restaurant sales $ 45,719,186 $ 33,735,307 $ 23,799,997 $ 18,241,029 $ 20,272,096
Processing plant sales 7,883,637 4,511,097 2,625,961 1,859,026 2,714,886
Interest and other 74,986 243,740 568,457 732,843 17,888
------------ ------------ ------------ ------------ ------------
Total Revenue 53,677,809 38,490,144 26,994,415 20,832,898 23,004,870
Cost and expenses
Cost of sales 16,346,607 12,150,640 8,299,384 6,568,197 7,497,453
Payroll and related expenses 11,878,029 8,269,479 5,997,628 4,715,509 5,422,010
Other operating expenses 6,454,309 5,596,002 4,122,028 2,454,038 2,202,179
Occupancy and related expenses 3,704,135 2,739,770 2,096,768 2,266,615 2,573,833
Processing plant cost of
sales and
operating expenses 7,812,463 4,444,153 2,625,038 1,890,195 3,001,563
Restructuring costs -- -- -- -- 1,838,000
Restaurant opening expenses 903,313 286,635 80,794 25,000 90,572
General and Administrative 4,008,975 3,381,316 2,295,134 1,596,769 2,127,527
Interest expense 428,808 39,861 212,512 266,795 565,316
Loss on sale of fixed assets -- -- -- -- 14,756
Net loss on investment
securities (9,449) 248,768 -- -- --
------------ ------------ ------------ ------------ ------------
Total costs and expenses 51,527,190 37,156,624 25,729,286 19,783,118 25,333,209
------------ ------------ ------------ ------------ ------------
Earnings (loss) before income
taxes, minority interest and
cumulative effect of
accounting change 2,150,619 1,333,520 1,265,129 1,049,780 (2,328,339)
Provision for income taxes 686,616 393,695 -- -- --
------------ ------------ ------------ ------------ ------------
Earnings (loss) before minority
interest and cumulative effect
of accounting change 1,464,003 939,825 1,265,129 1,049,780 (2,328,339)
Minority interest in net earnings of
subsidiary -- -- 121,765 175,921 --
------------ ------------ ------------ ------------ ------------
Earnings (loss) before
cumulative effect of
accounting change 1,464,003 939,825 1,143,364 873,859 (2,328,339)
Cumulative effect of accounting
change -- -- 223,295 -- --
------------ ------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ 1,464,003 $ 939,825 $ 1,366,659 $ 873,859 $ (2,328,339)
============ ============ ============ ============ ============
Earnings (loss) per common share
Earnings (loss) before cumulative
effect of accounting change $ .14 $ .09 $ .15 $ .17 $ (.56)
Cumulative effect of accounting
change -- -- .03 -- --
------------ ------------ ------------ ------------ ------------
Net earnings (loss) $ .14 $ .09 $ .18 $ .17 $ (.56)
============ ============ ============ ============ ============
Weighted average number of shares
outstanding 10,478,711 10,434,240 7,427,614 5,159,516 4,221,265
============ ============ ============ ============ ============
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------------------------------------
12/25/95 12/26/94 12/27/93 12/28/92 12/30/91
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Current Assets $ 11,416,205 $ 10,415,075 $ 7,374,249 2,994,536 1,339,453
Property, plant and equipment 34,010,527 16,646,073 8,843,417 6,045,653 5,878,977
Other assets 2,438,075 1,465,050 7,200,575 905,288 1,612,805
Total assets 47,864,807 28,526,198 23,418,241 9,945,477 8,831,235
Current liabilities 8,658,787 2,634,133 2,104,120 2,969,505 3,667,127
Long-term obligations 14,680,446 4,885,478 1,260,427 3,008,252 3,298,311
Stockholder's equity 22,580,681 21,006,587 20,005,841 3,967,720 1,865,797
Book value per common share(1) $ 2.22 $ 2.08 $ 1.99 $ .77 $ .45
Common and Common
Equivalent Shares Outstanding 10,179,725 10,078,736 7,427,614 5,159,515 4,221,265
<FN>
- - - ----------
(1) Assumes that all shares of outstanding Class B Convertible Preferred Stock had been fully converted into shares of Common
Stock.
</FN>
</TABLE>
- 14 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FINANCIAL INFORMATION INCLUDED HEREIN SHOULD BE READ IN CONJUNCTION
WITH THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO. THIS
ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER FROM
THE RESULTS ANTICIPATED HEREIN AS A RESULT OF THE FACTORS SET FORTH IN THIS
REPORT.
RESULTS OF OPERATIONS
FISCAL YEAR 1995 VS. 1994.
Total revenues for 1995 were $53,677,809, representing an increase of
39.5% over total revenues of $38,490,144 for 1994. The increase in total
revenues from 1994 to 1995 is attributable to the opening of five new Crab House
and two new Capt. Crab's Take-Away restaurants during 1995, a full year of sales
from the three Crab House restaurants opened during 1994 and a 7% increase in
same store sales for restaurants open during both 1994 and 1995. Additionally,
sales increased by 74.8% from 1994 to 1995 at the Company's seafood processing
plant, from $4,511,097 for 1994 to 7,883,637 for 1995. This increase resulted
from availability of certain crab products imported by the subsidiary and
increased sales as result of this product availability.
Costs of sales as a percentage of restaurant sales declined slightly from
1994 to 1995, from 36.0% for 1994 to 35.8% for 1995. This reduction results from
the steps taken by the Company during 1995 to combat rising seafood costs
through minor modifications to the menu at the Company's Crab House restaurants.
The Company believes that costs of sales as a percentage of restaurant sales
will continue to be stable, or may decline slightly during 1996, as a result of
these changes and as a result of current reductions in the cost of seafood
products. Seafood commodity costs fluctuate on a regular basis and the trends
currently being experienced may not continue in the future.
Operating expenses (consisting primarily of payroll, occupancy and other
operating expenses) increased by $5,431,222, or 32.7%, from 1994 to 1995. The
increase is primarily attributable to the operating costs associated with the
five new Crab House and two Capt. Crab's Take-Away restaurants opened during
1995. Operating expenses, as a percentage of restaurant sales, decreased to
48.2% for 1995, compared to 49.2% for 1994.
Restaurant opening expenses increased significantly during 1995 to
$903,313, compared to $286,635 for 1994. The increase is due, in part, to the
opening of five Crab House and two Capt. Crab's Take-Away restaurants during
1995 and, in part, to the restaurant opening expenses for the two Crab House
restaurants opened during the latter part of 1994. Restaurant opening expenses
can be expected to continue to increase during 1996 as the Company opens
additional restaurants. See Item 1. "Business- Expansion Strategy & Site
Selection."
- 15 -
<PAGE>
General & Administrative ("G&A") expenses for 1995 were $4,008,975, an
18.6% increase over G&A expenses of $3,381,316 for 1994. G&A, as a percentage of
total revenues, was 7.5% for 1995, compared to 8.8% for 1994. The increase in
G&A resulted primarily from costs associated with the Company's restaurant
expansion program, including costs associated with increased personnel at the
Company's corporate office and the addition during 1995 of a regional manager
level within the Company's Crab House restaurant operation.
Interest expense for 1995 was $428,808, an increase of $388,947 over
interest expense of $39,861 incurred during 1994. Interest expense increased as
a result of borrowings during 1995 to fund the Company's restaurant expansion
program. During 1994, in connection with its restaurant expansion program, the
Company fully utilized the proceeds of its 1993 private placement and began
borrowing a significant amount to pay expenses relating to its restaurant
expansion program.
During 1994, the Company incurred a one-time net loss of approximately
$240,000 as a result of the write down and subsequent disposition of the
Company's interest in an intermediate term bond mutual fund. No comparable loss
was incurred during 1995.
As a result of the factors described above, earnings before income taxes
increased by 61.3% to $2,150,619 for 1995, compared to $1,333,520 for 1994.
In 1993, the Company's net operating losses for financial reporting
purposes, were utilized to eliminate the taxes that would otherwise be payable.
In 1994, the remaining net operating losses, and certain excess FICA credits,
were utilized to reduce the Company's effective tax rate to 30%. No such net
operating losses were available in 1995, so the effective rate increased to 32%.
As a result of the factors described above, net earnings increased by
55.8%, from $939,825 ($.09 per share) for 1994 to $1,464,003 ($.14 per share)
for 1995.
FISCAL YEAR 1994 VS. 1993.
Total revenues for 1994 were $38,490,144, representing an increase of
42.6% over total revenues of $26,994,415 for 1993. The increase in total
revenues from 1993 to 1994 was attributable to same store sales increases during
1994 of 9%, the opening of three additional full service restaurants during 1994
and the opening of one additional full service restaurant during the last
quarter of 1993.
Cost of sales as a percentage of restaurant sales increased slightly, from
34.9% for 1993 to 36.0% for 1994, primarily as a result of increased seafood
commodity costs.
Operating expenses (consisting primarily of payroll, occupancy and other
operating expenses) were $16,605,251 for 1994, an increase of 35.9% over 1993
operating expenses of $12,216,424. Operating expenses as a percentage of
restaurant sales declined slightly, from 51.3% in 1993 to 49.2% in 1994,
principally as a result of increased restaurant sales at existing restaurant
locations.
- 16 -
<PAGE>
The actual increase in operating expenses resulted from costs associated with
the operation of three additional full service restaurants opened during 1994
and a full years operation of one full service restaurant opened during the
fourth quarter of 1993.
G & A expenses for 1994 were $3,381,316, a 47.3% increase over G & A
expenses of $2,295,134 for 1993. The actual increase in G & A expenses resulted
principally from the increase in personnel required to implement the Company's
restaurant expansion program.
Restaurant opening expenses for 1994 increased to $286,635, a 254.8%
increase over restaurant opening expenses of $80,794 for 1993. This increase
resulted from the opening of one full service restaurant during the fourth
quarter of 1993 and three full service restaurants during 1994.
During 1994, the Company incurred a one-time net loss of approximately
$240,000 as the result of the sale of the Company's interest in an intermediate
term bond mutual fund. No such comparable loss was recorded during 1993.
As a result of the above described factors, earnings before income taxes,
minority interest and cumulative effect of accounting change increased by 5%,
from $1,265,129 for 1993 (4.6% of total revenue) to $1,333,520 for 1994 (3.5% of
total revenue).
Minority interest in net earnings of subsidiary was $121,765 for 1993. In
August 1993, the Company acquired this minority interest.
Effective December 29, 1992, the Company changed its method of accounting
for income taxes as a result of the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). As a
result of the adoption of FAS 109, the Company recorded income of $223,295
during 1993 as the cumulative effect of accounting changes. No such comparable
gain was recorded during 1994.
Since the Company was utilizing net operating losses against 1993 income,
no provision for income taxes was accrued during 1993. For 1994, the Company
accrued a provision for income taxes of $393,695.
After accounting for the matters described above, net earnings decreased
by $426,834 from $1,366,659 for 1993 ($.18 per share) to $939,825 for 1994 ($.09
per share).
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio at December 25, 1995 was approximately 1.3
to 1, compared to approximately 4.07 to 1 at December 26, 1994 and 3.4 to 1 at
December 27, 1993. The decrease from 1994 to 1995 results principally from the
use of the Company's resources in connection with the Company's restaurant
expansion program.
- 17 -
<PAGE>
The increase in account receivables from 1994 to 1995 resulted
principally from increased sales activity in the Company's seafood processing
subsidiary. The increase in inventory from 1994 to 1995 is primarily due to
substantial increases in sales at the Company's seafood processing subsidiary,
requiring that the Company maintain a larger inventory, and substantially higher
inventory required to service the Company's restaurant operations. The Company
operated 20 restaurants at the end of 1995, compared to 13 restaurants at the
end of 1994. Additionally, two full service restaurants have been opened to date
during the first quarter of 1996.
The increase in property, plant and equipment and other assets from 1994
to 1995 principally results from the new restaurants opened during 1995 and the
construction in progress of several new restaurants to be opened during 1996.
The increase in accounts payable was primarily due to construction in
progress of new restaurants under construction at the end of 1995 compared to
the end of 1994, as well the buildup of inventory resulting from the increase in
the number of restaurants in the Company's restaurant chain.
In 1995, cash provided by operating activities totaled $1,587,185, up
from $431,266 in 1994. Major sources of funds were net earnings of $1,464,003
and non-cash provisions for depreciation and amortization. Cash used in
investing activities was $13,575,664, primarily as a result of fixed asset
additions in connection with the opening of new restaurants. Cash was provided
by financing activities in the amount of $12,656,983, primarily as a result of
new borrowings. Investing and financing activities were much higher in 1995 than
in 1994 as a result of the new restaurants opened in 1995.
Effective December 14, 1994, the Company and each of its wholly-owned
subsidiaries (the "Subsidiaries") entered into a Revolving Credit and Term Loan
Agreement (the "Credit Agreement") with The First National Bank of Boston, as
Agent, and with the First National Bank of Boston and Capital Bank, as
"Lenders." In accordance with the Credit Agreement, the Lenders granted to the
Company a credit facility in the amount of $14.0 million. The credit facility is
for a term of seven years and is structured in two parts: (i) for the first
three years, the facility is structured as a revolving loan; (ii) at the end of
three years, so long as the Company is not then in default under the Credit
Agreement, the Company may convert the amount then due and payable to the
Lenders into a term loan payable in quarterly principal installments over an
additional four year period. For all purposes hereunder, "Loans" shall refer
collectively to the revolving and term loan portion of this credit facility. The
Company pays interest on the Loans at the Bank's "Base Rate", as announced from
time to time, plus one-half percent (.5%). Interest is payable monthly. The
Company is also obligated to pay the following fees to the Lenders: (i) a
commitment fee equal to 3/8 of one percent on the unused portion of the
revolving loan; and (ii) a fee for early termination of the revolving portion of
the credit facility. At December 25, 1995, the Company was in violation of
certain covenants contained in the Credit Agreement. The Company has received a
waiver of these covenants at that date.
- 18 -
<PAGE>
In June 1995, the Company entered into an agreement to cap at 14%
interest on a $7.0 million portion of the debt due to the Lenders until January
31, 1998. The Company paid a fee of $14,000 in connection with this agreement.
In February 1996, the Lenders and the Company entered into an Amendment
to the Credit Agreement (the "Amendment"), increasing the credit facility from
$14.0 million to $16.0 million under the same terms and conditions as the Credit
Agreement. As of March 18, 1996, $15,698,506 was outstanding under the Credit
Agreement, as amended.
Additionally, on December 15, 1995, the Company and each of its
wholly-owned subsidiaries, and Capital Bank entered into a Revolving Credit
Agreement whereby Capital Bank agreed to advance up to $2.0 million to the
Company, as determined by a borrowing base of 80% of inventory at the Company's
central warehouse located in Jacksonville, Florida. The unpaid balance bears
interest at the rate of 1% over the prime rate as set forth from time to time in
THE WALL STREET JOURNAL and is payable monthly. As of March 18, 1996, $2.0
million was outstanding under this facility.
The Company is presently engaged in an aggressive expansion program of
its Crab House restaurant chain. See Item 1. "Business-General." The Company
anticipates that it will need approximately $16 and $11 million, respectively,
of additional capital to complete its 1996 and 1997 expansion program. The
Company is presently seeking the required capital. The Company expects to be
able to obtain the required capital in order to allow its expansion program to
continue without interruption. However, there can be no assurance that the
capital required to fund the Company's restaurant expansion program will be
obtained.
The Company believes that in connection with obtaining the capital
required to continue its restaurant expansion program, it will likely be
required to issue equity securities of the Company (or debt securities
convertible into equity securities of the Company). Issuances of securities may
dilute the interest of the Company's existing equity holders. The Company also
expects that a portion of the capital which it requires will be obtained from
the Company's lenders through the availability of increased lines of credit,
although the Company believes that substantial increases in its available lines
of credit will only be available if the Company first raises additional equity
or quasi-equity capital. To date, no agreements have been reached with respect
to raising any of the capital required. If capital cannot be obtained in this
manner, the Company will seek alternative types of financing, such as
build-to-suits, sale leaseback, or joint ventures. There can be no assurance
that any such financing will be available to the Company.
In the event that the Company is not able to raise the capital required
to continue to fund its restaurant expansion program, it will be forced to
curtail its expansion program until it obtains the required capital.
- 19 -
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements required by Item 8 are attached to this Form
10-K as follows:
PAGE
----
Independent Auditors' Report............................................... F-1
Consolidated Balance Sheets for the two years ended December
25, 1995 and December 26, 1994............................................. F-2
Consolidated Statements of Earnings for the three years in the
period ended December 25, 1995............................................. F-3
Consolidated Statement of Stockholders' Equity for the three
years in the period ended December 25, 1995................................ F-4
Consolidated Statements of Cash Flows for the three years in
the period ended December 25, 1995......................................... F-5
Notes to Consolidated Financial Statements................................. F-7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
- 20 -
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTIONS 16(A) OF THE EXCHANGE ACT
The response to this item will be included in a definitive proxy
statement filed within 120 days after the end of the Company's fiscal year and
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item will be included in a definitive proxy
statement filed within 120 days after the end of the Company's fiscal year and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item will be included in a definitive proxy
statement filed within 120 days after the end of the Company's fiscal year and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item will be included in a definitive proxy
statement filed within 120 days after the end of the Company's fiscal year and
is incorporated herein by reference.
- 21 -
<PAGE>
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3(i).1 Articles of Incorporation, as amended (previously filed as
Exhibit 3(a) to the Company's Annual Report on Form 10-K
for the year ended August 30, 1987 (the "Annual Report")
and as Exhibit 2(a) to the Company's Registration Statement
on Form S-18, File No. 2-74997-A (the "S-18 Registration
Statement")).
3(i).2 Amendment to Articles of Incorporation dated May 31, 1990
(previously filed as Exhibit 3(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1990 (the "1990 Annual Report")).
3(i).3 Amendment to Articles of Incorporation filed with the
Department of State, State of Florida on January 30, 1992
(previously filed as Exhibit 3(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1991 (the "1991 Annual Report")).
3(i).4 Amendment to Articles of Incorporation filed with the
Department of State, State of Florida on July 12, 1993
(previously filed as Exhibit A(1) to the Company's
Quarterly Report on Form 10-QSB for the quarter ended June
28, 1993 (the "June 1993 Quarterly Report")).
3(i).5 Amendment to the Company's Articles of Incorporation filed
with the Department of State, State of Florida on August 2,
1993 (previously filed as Exhibit A(3) to the June 1993
Quarterly Report).
3(i).6 Amendment to the Company's Articles of Incorporation filed
with the Department of State, State of Florida on August 4,
1993 (previously filed as Exhibit A(5) to the June 1993
Quarterly Report and incorporated herein by reference).
3(i).7 Amendment to the Company's Articles of Incorporation
designating the rights and preferences of the Class B
Shares (incorporated by reference to Exhibit (A)(5) to Form
10-QSB for the Quarter ended June 28, 1993).
3(ii).1 ByLaws, as previously amended, previously filed as Exhibit
3(b) to the Company's Registration Statement on Form S-1,
File No. 2-84392 (the "S-1 Registration Statement") and
Exhibit 3(d) to the 1990 Annual Report.
3(ii).2 Amendments to ByLaws, previously filed as Exhibit 3(e) to
the 1991 Annual Report.
- 22 -
<PAGE>
3(ii).3 Amendment to ByLaws dated August 4, 1993, previously filed
as Exhibit 3.9 to the Company's Registration Statement on
Form S-3, File No. 33-68794.
4.1 1985 Incentive Stock Option Plan (previously filed as
Exhibit A to the Company's Definitive Proxy Statement dated
March 1, 1985, File No. 0-10717).
4.2 Form of Series B Warrant and Series C Warrant (previously
filed as Exhibits 1.01(d), 1.01(e) and 1.01(f) to Exhibit 1
to Schedule 13D with respect to shares of the Company's
Common Stock filed by Bayport Partners Limited Partnership,
et al. (the "Schedule 13D")).
4.3 Form of Warrant dated August 19, 1993 issued in connection
with the Private Placement (previously filed as Exhibit 4.4
to the S-3 Registration Statement, File No. 33-63794).
4.4 Class B Convertible Stock Purchase Agreement (incorporated
by reference to Exhibit A(4) to the June 1993 Quarterly
Report).
4.5 Common Stock Purchase Agreement used in connection with the
issuance of Common Stock in the Private Placement
(incorporated by reference to Exhibit A(6) to the June 1993
Quarterly Report).
4.6 1993 Stock Option Plan (previously filed as Exhibit A(2) to
the June 1993 Quarterly Report).
4.7 1995 Stock Option Plan (incorporated by reference from the
Company's 1995 Proxy Statement).
10.1 Employment Agreement dated as of June 1, 1993 by and
between David J. Connor and the Company (previously filed
as Exhibit 10.1 to the S-3 Registration Statement, File No.
33-68794).
10.2 Employment Agreement dated as of June 1, 1993 by and
between William D. Korenbaum and the Company. (previously
filed as Exhibit 10.2 to the S-3 Registration Statement,
File No. 33-68794).
10.3 Employment Agreement dated as of September 1, 1993 by and
between the Company and Dennis Snuszka (previously filed as
Exhibit 10.3 to the Company's Form 10-K for the fiscal year
ended December 27, 1993 (the "1993 Annual Report").
- 23 -
<PAGE>
10.4 Form of Registration Rights Agreement of January 31, 1992
by and among the Company and BPLP (previously filed as
Exhibit 9.01(p) to Exhibit 1 to Schedule 13D).
10.5 Office Lease Agreement and amendments thereto of May 20,
1991 by and between the Company and Hollywood Corporate
Circle Associates (previously filed as Exhibit 10(k) to the
1991 Annual Report) and Office Lease Agreement Addendum
dated August 13, 1993. (previously filed as Exhibit 10.6 to
the S-3 Registration Statement, File No. 33-68794).
10.6 Agreement of Sale of January 31, 1992 by and between Fast
Food Properties II and Franchise Management Services, Inc.
(previously filed as Exhibit 10(l) to the 1991 Annual
Report).
10.7 Agreement of Sale of January 31, 1992 by and between Fast
Food Properties II and the Company (previously filed as
Exhibit 10(m) to the 1991 Annual Report).
10.8 Asset Purchase and Sales Agreement dated November 17, 1992
by and between the Company and Cryotech Industries, Inc.
(previously filed as Exhibit 10(p) to the Company's Form
10-K for the fiscal year ended December 28, 1993 (the "1993
Annual Report")).
10.9 Shopping Center Lease by and between BDC Center, Inc. and
Crab House Seafood Restaurant of Orlando, Inc. dated April
1, 1992 (previously filed as Exhibit 10(q) to the 1993
Annual Report).
10.10 Guaranty by the Company, dated April 1, 1992, of Shopping
Center Lease by and between BDC Center, Inc. and Crab House
Seafood Restaurant of Orlando II, Inc. (previously filed as
Exhibit 10(r) to the 1993 Annual Report).
10.11 Consulting Agreement by and between the Company and
Radcliffe & Associates dated September 8, 1992 (previously
filed as Exhibit 10(v) to the 1993 Annual Report).
10.12 Stock option granted by the Company to Radcliffe &
Associates dated as of September 9, 1992 (previously filed
as Exhibit 10(w) to the 1993 Annual Report).
10.13 Stock Option granted by the Company to Louis Hirsh in
connection with a loan to the Company (previously filed as
Exhibit 10.16 to the Company's 1993 Annual Report.)
10.14 Credit Agreement between the Company and The First National
Bank of Boston, as Agent (incorporated by reference from
the Company's Current Report on Form 8-K, dated December
14, 1994).
- 24 -
<PAGE>
10.15 First Amendment to Credit Agreement between the Company and
the First National Bank of Boston, as Agent.*
10.16 Revolving Credit Agreement between the Company and Capital
Bank (incorporated by reference from the Company's Current
Report on Form 8-K, dated December 26, 1995).
21 Subsidiaries of the Company.*
23 Consent of Grant Thornton LLP relating to the Company's
Registration Statements on Form S-3 (File No. 33-61013 and
33-68794) and Form S-8 (File No. 33-63071, 33- 63067,
33-62981 and 33-62875).*
- - - ----------
* Filed herewith.
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated December 26, 1995,
reporting an event under Item 5. No financial statements were required to be
filed with the Form 8-K.
- 25 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Hollywood,
Florida on the 22 day of March, 1996.
BAYPORT RESTAURANT GROUP, INC.
By: /s/ DAVID J. CONNOR
------------------------------------
David J. Connor, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
- - - --------- ----- ----
/s/ DAVID J. CONNOR Chairman of the Board of March 22, 1996
- - - ------------------------ Directors and Chief Executive
David J. Connor Officer
/s/ WILLIAM D. KORENBAUM President and Chief Operating March 22, 1996
- - - ------------------------ and Financial Officer
William D. Korenbaum
/s/ DAVID KIRINCIC Controller and Chief March 22, 1996
- - - ------------------------ Accounting Officer
David Kirincic
/s/ ARTHUR H. KAPLAN Director March 25, 1996
- - - ------------------------
Arthur H. Kaplan
/s/ ALBERT A. CLAPPS Director March 22, 1996
- - - ------------------------
Albert A. Clapps
/s/ ALOYSIUS D. ROSSI Director March 22, 1996
- - - ------------------------
Aloysius D. Rossi
Director March __, 1996
- - - ------------------------
Martin Rudolph
- 26 -
<PAGE>
SIGNATURE TITLE DATE
- - - --------- ----- ----
/s/ ROBERT STETSON Director March 22, 1996
- - - ------------------------
Robert Stetson
/s/ THOMAS R. HITCHNER March 22, 1996
- - - ------------------------
Thomas R. Hitchner Director
- 27 -
<PAGE>
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
BAYPORT RESTAURANT GROUP, INC.
AND SUBSIDIARIES
DECEMBER 25, 1995 AND DECEMBER 26, 1994
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Bayport Restaurant Group, Inc.
We have audited the accompanying consolidated balance sheets of Bayport
Restaurant Group, Inc. and Subsidiaries as of December 25, 1995 and December 26,
1994 and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the three years in the period ended December 25,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 Bayport Restaurant
Group, Inc. and Subsidiaries as of December 25, 1995 and December 26, 1994, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended December 25, 1995, in conformity
with generally accepted accounting principles.
Miami, Florida
March 8, 1996
F-1
<PAGE>
<TABLE>
<CAPTION>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 25, 1995 AND DECEMBER 26, 1994
ASSETS
1995 1994
--------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,073,017 $ 404,513
Certificates of deposit 300,000 -
Securities available for sale, at market (Notes A and B) - 5,205,557
Accounts receivable - trade, net of allowance for doubtful accounts of
$13,000 and $70,000 on December 25, 1995 and
December 26, 1994, respectively 1,918,081 1,452,789
Inventories (Note A) 5,461,381 2,847,324
Prepaid expenses and other current assets 735,648 586,912
Deferred pre-opening costs, net (Note A) 1,928,078 217,980
--------------- --------------
Total current assets 11,416,205 10,715,075
PROPERTY, PLANT AND EQUIPMENT - AT COST, less
accumulated depreciation (Notes A and C) 34,010,527 16,346,073
OTHER ASSETS
Certificates of deposit (Note A) - 300,000
Note receivable 125,000 -
Goodwill, net (Note A) 100,026 105,911
Deposits 525,698 254,187
Other, net 1,687,351 804,952
--------------- --------------
2,438,075 1,465,050
--------------- --------------
$ 47,864,807 $ 28,526,198
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations (Note D) $ 2,283,576 $ 489,368
Due to related party (Notes D and F) 94,332 94,332
Accounts payable 5,521,837 1,215,739
Income taxes payable (Note I) - 29,150
Accrued liabilities (Note E) 759,042 805,544
--------------- --------------
Total current liabilities 8,658,787 2,634,133
DEFERRED INCOME TAXES (Notes A and I) 789,307 107,250
LONG-TERM OBLIGATIONS (Note D) 14,680,446 3,520,449
DUE TO RELATED PARTY (Notes D and F) 1,155,586 1,257,779
COMMITMENTS AND CONTINGENCIES (Notes G and H) - -
STOCKHOLDERS' EQUITY (Notes A, G, and H)
Preferred stock, authorized 15,000,000 shares at $.01 par value; Series A
Convertible Preferred Stock, 0 shares issued and outstanding in 1995 and
1994; Series B Convertible Preferred Stock, 2,293,999 and
2,700,055 shares, respectively, issued and outstanding in 1995 and 1994 22,940 27,001
Common stock - authorized 50,000,000 shares of $.001 par value; issued
and outstanding 9,600,568 shares in 1995 and 9,403,722 in 1994 9,602 9,404
Paid-in capital 22,113,189 21,941,526
Retained earnings (accumulated deficit) 819,719 (644,284)
Net unrealized losses on investment in marketable securities - (55,191)
Notes receivable from officers (Note J) (384,769) (271,869)
--------------- --------------
Total stockholders' equity 22,580,681 21,006,587
--------------- --------------
$ 47,864,807 $ 28,526,198
=============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
1995 1994 1993
--------------- --------------- ----------------
<S> <C> <C> <C>
Revenues
Restaurant sales $ 45,719,186 $ 33,735,307 $ 23,799,997
Processing plant sales 7,883,637 4,511,097 2,625,961
Interest and other 74,986 243,740 568,457
--------------- --------------- ----------------
Total revenues 53,677,809 38,490,144 26,994,415
Cost and expenses
Cost of sales 16,346,607 12,150,640 8,299,384
Payroll and related expenses 11,878,029 8,269,479 5,997,628
Other operating expenses 6,454,309 5,596,002 4,122,028
Occupancy and related expenses 3,704,135 2,739,770 2,096,768
Processing plant cost of sales and
operating expenses 7,812,463 4,444,153 2,625,038
Restaurant opening expenses (Note A) 903,313 286,635 80,794
General and administrative 4,008,975 3,381,316 2,295,134
Interest expense 428,808 39,861 212,512
Net (gain) loss on investment securities
(Notes A and B) (9,449) 248,768 -
Minority interest in net earnings of subsidiary - - 121,765
--------------- --------------- ----------------
Total costs and expenses 51,527,190 37,156,624 25,851,051
--------------- --------------- ----------------
Earnings before income taxes and
cumulative effect of accounting change 2,150,619 1,333,520 1,143,364
Provision for income taxes (Note I) 686,616 393,695 -
--------------- --------------- ----------------
Earnings before cumulative effect
of accounting change 1,464,003 939,825 1,143,364
Cumulative effect of accounting change - - 223,295
--------------- --------------- ----------------
NET EARNINGS $ 1,464,003 $ 939,825 $ 1,366,659
=============== =============== ================
Earnings per common share (Note A)
Earnings before cumulative effect of
accounting change $ .14 $ .09 $ .15
Cumulative effect of accounting change - - .03
--------------- --------------- ----------------
Net earnings $ .14 $ .09 $ .18
=============== =============== ================
Weighted average number of shares
outstanding (Note A) 10,478,711 10,434,240 7,427,614
=============== =============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
PREFERRED STOCK
---------------------------------------
SERIES A SERIES B COMMON STOCK
----------------- -------------------- ----------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
-------- ------- ---------- -------- --------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1992 500,000 $ 5,000 - $ - 4,883,672 $4,884 $ 7,057,748 $(2,950,768)
Proceeds from issuance of Series B
convertible preferred stock and
common stock - - 15,000,000 150,000 406,875 407 13,977,218 -
Exercise of Series A warrants (Note H) - - - 525,000 525 1,049,475 -
Repurchase of 20% interest in
restaurant - - - - - - (896,886) -
Conversion of Series A and B convertible
preferred stock (500,000) (5,000) (7,795,727) (77,957) 2,073,932 2,074 80,883 -
Conversion of note payable - - - - 210,000 210 419,790 -
Exercise of stock options (Note H) - - - - 11,500 11 12,268 -
Issuance of notes receivable from officers
for exercise of stock options - - - - 125,000 125 154,875 -
Repayment of notes receivable
from officers - - - - - - - -
Increase in valuation allowance for
net unrealized losses on marketable
securities - - - - - - - -
Net earnings - - - - - - - 1,366,659
-------- ------- ---------- -------- --------- ------ ----------- ----------
Balance at December 27, 1993 - - 7,204,273 72,043 8,235,979 8,236 21,855,371 (1,584,109)
Conversion of Series B convertible
preferred stock - - (4,504,218) (45,042) 1,126,055 1,126 43,916 -
Exercise of stock options (Note H) - - - - 22,750 23 23,508 -
Issuance of notes receivable from officer
for exercise of stock options - - - - 18,750 19 18,731 -
Renewal of note receivable from officer - - - - - - - -
Change in valuation allowance for net
unrealized losses on marketable
securities - - - - - - - -
Cumulative effect of change in method
of accounting for securities designated
as available for sale - - - - - - - -
Net earnings - - - - - - - 939,825
-------- ------- ---------- -------- --------- ------ ----------- ----------
Balance at December 26, 1994 - - 2,700,055 27,001 9,403,534 9,404 21,941,526 (644,284)
Conversion of Series B convertible
preferred stock - - (406,056) (4,061) 101,514 102 3,959 -
Exercise of stock options and warrants
(Note H) - - - - 36,770 37 54,863 -
Issuance of notes receivable from officer
for exercise of stock options (Note J) - - - - 58,750 59 112,841 -
Change in valuation allowance for net
unrealized losses on marketable
securities - - - - - - - -
Net earnings - - - - - - - 1,464,003
-------- ------- ---------- -------- --------- ------ ----------- ----------
Balance at December 25, 1995 - $ - 2,293,999 $ 22,940 9,600,568 $9,602 $22,113,189 $ 819,719
======== ======= ========== ======== ========= ====== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
LOSSES ON NOTES
MARKETABLE RECEIVABLE
SECURITIES FROM OFFICERS TOTAL
-------------- ------------- -----------
<S> <C> <C> <C>
Balance at December 29, 1992 $ - $(149,144) $ 3,967,720
Proceeds from issuance of Series B
convertible preferred stock and
common stock - - 14,127,625
Exercise of Series A warrants (Note H) - - 1,050,000
Repurchase of 20% interest in
restaurant - - (896,886)
Conversion of Series A and B convertible
preferred stock - - -
Conversion of note payable - - 420,000
Exercise of stock options (Note H) - - 12,279
Issuance of notes receivable from officers
for exercise of stock options - (155,000) -
Repayment of notes receivable
from officers - 59,610 59,610
Increase in valuation allowance for
net unrealized losses on marketable
securities (101,166) - (101,166)
Net earnings - - 1,366,659
-------- --------- -----------
Balance at December 27, 1993 (101,166) (244,534) 20,005,841
Conversion of Series B convertible
preferred stock - - -
Exercise of stock options (Note H) - - 23,531
Issuance of notes receivable from officer
for exercise of stock options - (18,750) -
Renewal of note receivable from officer - (8,585) (8,585)
Change in valuation allowance for net
unrealized losses on marketable
securities 101,166 - 101,166
Cumulative effect of change in method
of accounting for securities designated
as available for sale (55,191) - (55,191)
Net earnings - - 939,825
-------- --------- -----------
Balance at December 26, 1994 (55,191) (271,869) 21,006,587
Conversion of Series B convertible
preferred stock - - -
Exercise of stock options and warrants
(Note H) - - 54,900
Issuance of notes receivable from officer
for exercise of stock options (Note J) - (112,900) -
Change in valuation allowance for net
unrealized losses on marketable
securities 55,191 - 55,191
Net earnings - - 1,464,003
-------- --------- -----------
Balance at December 25, 1995 $ - $(384,769) $22,580,681
======== ========= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
<TABLE>
<CAPTION>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
1995 1994 1993
--------------- --------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 1,464,003 $ 939,825 $ 1,366,659
Adjustments to reconcile net earnings
to net cash provided by operating activities
Cumulative effect of accounting change - - (223,295)
Minority interest in earnings of subsidiary - - 121,765
Depreciation of property, plant and equipment 1,270,666 857,354 583,573
Amortization of intangible assets 129,852 24,952 5,884
(Gain) loss on securities (9,449) 248,768 -
Premium amortization 36,703 86,368 -
Provision for losses on accounts receivable (57,000) 11,000 2,500
Change in assets and liabilities:
(Increase) in accounts receivable (408,292) (894,599) (483,378)
Decrease in insurance proceeds receivable - - 413,579
(Increase) in inventories (2,614,057) (246,881) (1,345,910)
(Increase) in prepaid expenses and other
current assets (148,736) (398,148) (134,470)
(Increase) in deferred pre-opening costs (1,710,098) (139,383) (50,557)
(Increase) in note receivable (125,000) - -
Decrease in deferred tax asset - 257,295 -
(Decrease) increase in income taxes payable (29,150) (4,850) 34,000
Increase in deferred tax liability 682,057 107,250 -
(Decrease) increase in accounts payable and
accrued expenses 4,259,596 129,951 (294,910)
(Increase) in deposits and other assets (1,153,910) (547,636) (186,559)
--------------- --------------- ----------------
Net cash provided by (used in)
operating activities 1,587,185 431,266 (191,119)
Cash flows from investing activities
Purchase of securities - (58,021) (8,876,462)
Proceeds from maturity of securities 1,500,000 1,300,000 -
Proceeds from sale of securities 3,696,108 1,510,609 -
Purchase of 20% interest in Orlando - - (1,050,000)
Additions to property, plant and equipment (18,771,772) (5,484,786) (3,383,835)
--------------- --------------- ----------------
Net cash used in investing activities (13,575,664) (2,732,198) (13,310,297)
Cash flows from financing activities
Borrowings under line of credit 15,829,106 2,628,397 -
Principal repayments of short-term debt - - (494,252)
Principal borrowings of long-term obligations - - 1,100,000
Proceeds from exercise of stock options 43,430 23,531 12,279
Net proceeds from issuance of stock - - 14,127,624
Dividends paid to minority stockholder - - (147,685)
Proceeds from exercise of warrants 11,540 - 1,050,000
Repayment of notes receivable from officers - - 59,610
Principal payments of long-term obligations (3,227,093) (1,041,030) (2,280,892)
--------------- --------------- ----------------
Net cash provided by financing activities 12,656,983 1,610,898 13,426,684
--------------- --------------- ----------------
</TABLE>
(continued)
F-5
<PAGE>
<TABLE>
<CAPTION>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 25, 1995, DECEMBER 26, 1994, AND DECEMBER 27, 1993
1995 1994 1993
--------------- --------------- ----------------
<S> <C> <C> <C>
(Decrease) increase in cash and cash equivalents $ 668,504 $ (690,034) $ (74,732)
Cash and cash equivalents at beginning of year 404,513 1,094,547 1,169,279
--------------- --------------- ----------------
Cash and cash equivalents at end of year $ 1,073,017 $ 404,513 $ 1,094,547
=============== =============== ================
Supplemental cash flow data:
Cash paid for interest $ 785,000 $ 222,000 $ 226,350
=============== =============== ================
Cash paid for income taxes $ 135,400 $ 34,000 $ -
=============== =============== ================
Non-cash investing and financing activities:
Issuance of promissory note totalling
$250,000 for lease acquisition in 1995.
Issuance of promissory and mortgage notes
totalling $1,825,000 for purchase of building,
leasehold improvements and certain equipment.
Reduction in amounts due to related party of
approximately $420,000 for a promissory note
converted into 210,000 shares of common stock in 1993.
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
BAYPORT RESTAURANT GROUP, INC. SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
Bayport Restaurant Group, Inc. (Bayport) and its subsidiaries (collectively, the
"Company") own and operate full service seafood restaurants under the name "The
Crab House Seafood Restaurant" and take-out seafood restaurants under the name
"Capt. Crab's Take-Away". At December 25, 1995, the Company operates fifteen
full service restaurants and five take-away restaurants. The Company also
operates a seafood processing plant.
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements
follows.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany balances and transactions
are eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year ends on the last Monday in December. The years
ending December 25, 1995, December 26, 1994 and December 27, 1993 consisted
of 52 weeks.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less, when purchased, to be cash equivalents.
USE OF ESTIMATES
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
SECURITIES AVAILABLE FOR SALE
In accordance with Statement of Financial Accounting Standards No. 115
("SFAS No. 115") securities available for sale are carried at fair value
(market value), inclusive of unrealized gains and/or losses, and net of
discount accretion and premium amortization computed using the level yield
method. Net unrealized gains and losses are reflected as a separate
component of stockholders' equity. Securities are designated as held for
investment or available for sale at the time of purchase.
(continued)
F-7
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
STOCK OPTIONS
Options granted under the Company's Stock Option Plans are accounted for
under APB Opinion 25, "Accounting for Stock Issued to Employees" and
related interpretations. In November 1995, the Financial Accounting
Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), which will require additional proforma
disclosures for companies that will continue to account for employee stock
options under the intrinsic value method specified in APB 25. The Company
plans to continue to apply APB 25 and the only effect of adopting SFAS 123
in 1996 will be the new disclosure requirement.
INVENTORIES
Inventories consist of frozen processed seafood (finished goods) at the
processing plant and restaurant inventory which is comprised of various
food and beverage items. Inventory is stated at the lower of cost or
market. Cost is determined using the first-in, first-out (FIFO) method.
Inventory at the processing plant was $1,828,674 and $1,109,227 at December
25, 1995 and December 26, 1994, respectively. Restaurant inventory was
$3,632,707 and $1,738,097 at December 25, 1995 and December 26, 1994,
respectively.
PROPERTY AND EQUIPMENT
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets, including capitalized interest, to operations over
their estimated service lives utilizing straight-line and accelerated
methods. Leasehold improvements are depreciated on a straight-line basis
over the shorter of the term of the lease, including options, or the life
of the asset. Leased property under capital leases is depreciated on a
straight-line basis over the basic term of the lease unless ownership
reverts to the Company at the end of the lease, in which case the property
is depreciated over its estimated useful life. For income tax purposes,
property and equipment is depreciated utilizing accelerated methods.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This Statement had no impact on the
Company's results of operations or financial position upon adoption in
January 1996.
DEFERRED PRE-OPENING COSTS
Restaurant pre-opening costs consisting of salaries and other direct costs
incidental to the opening of the Company's restaurants are deferred and
amortized over a one year period following the completion of the
restaurant's opening.
(continued)
F-8
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
GOODWILL
The excess of the Company's cost over the net assets of the business
acquired is being amortized by the straight-line method over 20 years.
On an ongoing basis, management reviews the valuation and amortization of
goodwill. As part of this review, the Company estimates the value and
future benefits of the net income generated by the related subsidiary to
determine that no impairment has occurred.
INTANGIBLE ASSETS
Intangible assets, other than goodwill, have been included in the caption
other assets in the accompanying consolidated financial statements.
Intangible assets primarily consist of deferred loan costs, trademarks, and
liquor licenses which are being amortized on a straight-line basis over
periods ranging from three to forty years. Intangible assets were $356,131
and $246,878 at December 25, 1995 and December 26, 1994, respectively, and
the related accumulated amortization was $28,679 and $24,952, respectively.
The remaining portion of other assets on the balance sheet consists
primarily of restaurant china, glassware, and utensils. Replacements of
these items are charged to expense as incurred.
INCOME TAXES
Income taxes are provided based on earnings reported for tax return
purposes in addition to a provision for deferred income taxes. Deferred
income taxes are provided in order to reflect the tax consequences in
future years of differences between the financial statement and tax basis
of assets and liabilities at each year end.
COST OF SALES OF SECURITIES
Costs incurred by the Company in connection with the sale of equity
securities are charged to paid-in capital.
EMPLOYEE BENEFIT PLAN
The Company established in fiscal 1993 a contributory 401(K) plan to which
the Company makes certain matching contributions based upon the level of
its employees' contributions. The amount charged to earnings in fiscal
1995, 1994 and 1993 were insignificant. The Company does not provide any
health or other benefits to retirees.
(continued)
F-9
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
RECLASSIFICATIONS
Certain prior period amounts within the accompanying consolidated financial
statements have been reclassified in order to conform with the current year
presentation.
EARNINGS PER SHARE
Earnings per share is computed based upon the weighted average number of
common shares outstanding during the applicable period. Stock options,
warrants, and convertible preferred stock are considered common stock
equivalents unless their inclusion would be antidilutive.
NOTE B - SECURITIES
Pursuant to the provisions of SFAS No. 115, securities designated as
available for sale are carried at fair value (market value) with the
resultant value appreciation or depreciation from amortized cost reflected
as an addition to, or deduction from, stockholders' equity. In 1994, the
Company's securities were comprised of mutual funds and corporate bonds. On
December 26, 1994, the Company wrote-down, through a charge to earnings of
approximately $240,000, its mutual fund investment which was considered to
be permanently impaired since it was sold on December 28, 1994. At December
26, 1994, the Company's corporate bond securities had gross unrealized
losses of $55,121.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
1995 1994
----------- -----------
Buildings $ 3,483,311 $ 3,266,007
Leasehold improvements 17,181,596 6,947,174
Leasehold acquisition 1,570,000 1,570,000
Equipment and furniture 8,879,874 5,546,467
----------- -----------
31,114,781 17,329,648
Less accumulated depreciation
and amortization 4,638,619 3,381,504
----------- -----------
26,476,162 13,948,144
Construction in progress 6,936,900 1,800,465
Land 597,465 597,464
----------- -----------
$34,010,527 $16,346,073
=========== ===========
(continued)
F-10
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE C - PROPERTY AND EQUIPMENT - Continued
The Company has capitalized interest relating to construction in progress
of approximately $357,000 and $105,000 in 1995 and 1994, respectively.
NOTE D - LONG-TERM OBLIGATIONS
1995 1994
----------- -----------
Line of credit (1) (2) $15,829,106 $ 2,628,397
Mortgages payable (3) 1,843,584 2,073,531
Other loans (4) 541,251 660,000
----------- -----------
18,213,941 5,361,928
Less current maturities 2,377,909 583,700
----------- -----------
15,836,032 4,778,228
Less due to related party (Note F) 1,155,586 1,257,779
----------- -----------
$14,680,446 $ 3,520,449
=========== ===========
(1) In December 1994, the Company entered into revolving credit
arrangement with a financial institution under which the
Company has a $14,000,000 line of credit, which was
increased to $16,000,000 in February 1996, available for
restaurant expansion and general corporate needs. The line
bears interest at the lender's prime rate plus .5% (9% as of
December 25, 1995) and converts to a term note on December
31, 1997, requiring all outstanding amounts are to be
repaid, with interest, in 16 quarterly installments,
commencing March 31, 1998. Beginning December 1995, the
Company must pay a commitment fee equal to .375% of the
average unused portion of the line. The Company entered into
a protected interest rate agreement for a premium paid of
approximately $14,000 during June 1995. The agreement caps
the rate at 14% for $7 million of the Bank of Boston line of
credit until January 31, 1998. The premium is being
amortized over the related life of the agreement. The loan
is collateralized by substantially all of the assets of the
Company. In addition, the loan agreement includes certain
restrictive covenants, as defined, which prohibit the
payment of dividends and contain, restrictions relating to
the maintenance of minimum levels of tangible net worth, and
other financial ratios. The Company is in violation of
certain financial covenants. The Company has received a
waiver of these the related covenants as of December 25,
1995 from the bank.
(continued)
F-11
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE D - LONG-TERM OBLIGATIONS - Continued
(2) In December 1995, the Company entered into a revolving
credit agreement under which the Company has a $2,000,000
revolving line of credit available for working capital
needs. The line bears interest at prime plus 1% (9.5% as of
December 25, 1995) and is due on demand. The revolving
credit facility provides for a borrowing base not to exceed
80% of the qualified inventory as defined. The line of
credit expires in 2002. The loan agreement is collateralized
by the inventory maintained in the Company's central
warehouse under an intercreditor agreement. In addition, the
loan agreement includes certain restrictive covenants as
defined, which prohibit the payment of dividends and
contains restrictions relating to the maintenance of minimum
levels of tangible net worth and other financial ratios.
(3) Included in mortgages payable at December 26, 1994 is a note
payable of $1,352,111 to a partnership controlled by a
shareholder (see Note G). The note requires monthly
principal payments of approximately $7,800 plus interest at
the rate of prime plus 1.5% (10% as of December 25, 1995)
through April 1999, at which time the remaining principal
balance and unpaid interest is due. The note is
collateralized by the restaurant facility purchased with the
note. Mortgage notes payable also includes notes which
require combined monthly payments of approximately $11,600
plus interest at prime plus 1% (9.5% as of December 25,
1995). The notes are collateralized by certain real property
and mature in January 2000.
(4) In November 1993, the Company purchased leasehold
improvements and certain equipment for a restaurant which
was opened in March 1994. The purchase price was $785,000,
for which the Company issued a promissory note for $400,000
and paid the balance of the purchase price in cash. The
promissory note is collateralized by the assets of the
restaurant. The note bears interest at the prime rate (8.5%
as of December 25, 1995) and requires equal quarterly
principal payments of $20,000 plus interest over the next
five years.
Also, during 1994, the Company executed two promissory notes
for the purchase of leasehold improvements and certain
equipment for a restaurant opened in May 1994. The
promissory notes are collateralized by the assets of the
restaurant. One of the notes requires monthly interest
payments of 8% with the entire principal balance of $200,000
paid in January 1995. The other promissory note bears
interest equal to the prime rate plus 1% (9.5% as of
December 25, 1995) and matures in September 1996. This note
requires monthly principal payments of $14,000 during the
months of May through September.
(continued)
F-12
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE D - LONG-TERM OBLIGATIONS - Continued
The maturities of long-term obligations at December 25, 1995 are summarized
as follows:
YEAR ENDED DECEMBER
-------------------
1996 $ 2,377,909
1997 323,770
1998 3,781,883
1999 4,575,378
2000 3,506,263
2001 and thereafter 3,648,738
-----------
18,213,941
Less current maturities 2,377,909
-----------
$15,836,032
===========
NOTE E - ACCRUED LIABILITIES
Accrued liabilities consist of the following items:
1995 1994
-------- --------
Payroll $395,975 $347,532
Sales tax 76,408 7,063
Other accruals 286,659 450,949
-------- --------
$759,042 $805,544
======== ========
NOTE F - RELATED PARTY TRANSACTIONS
In November 1992, the Company leased a building under an operating lease as
well as restaurant equipment for a new restaurant from a partnership
controlled by a shareholder. This partnership also leased equipment to the
Company for use in an existing restaurant. The equipment leases were
treated as capital leases for financial statement purposes. In April 1994,
the Company purchased the related equipment from the partnership for
$601,576, which represented the unpaid principal balance on the leases. The
Company also purchased the aforementioned building and ground lease from
the partnership for $1,615,000. The Company issued a purchase money
mortgage note of $1,415,000 to the partnership (see Note D) and paid the
balance of the purchase price in cash. The balance of the mortgage note is
included in the caption(s) "due to related parties" at December 26, 1994.
Rent of approximately $131,000 and $523,000 was paid under these leases in
1994 and 1993, respectively.
(continued)
F-13
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE F - RELATED PARTY TRANSACTIONS - Continued
The facility which houses one of the Company's restaurants is subleased
from a partnership controlled by a shareholder. The total rent paid under
this sublease for the periods ending December 25, 1995, December 26, 1994
and December 27, 1993 was approximately $352,684, $283,708 and $234,762,
respectively. A portion of the Company's assets are pledged to
collateralize the obligation to pay rent under this lease.
One of the directors of the Company is a partner in a law firm utilized for
certain legal work in 1995, 1994 and 1993. Total fees paid to the firm were
approximately $105,000, $35,300 and $32,800 in 1995, 1994 and 1993,
respectively.
In 1994, pursuant to Bayport's request, a seafood processing plant,
controlled by an officer of the Company's subsidiary, CryoTech Industries
of North Carolina, Inc., purchased excess live crab from Bayport and then
sold processed and packaged pasteurized crab meat to the Company for
distribution and re-sale. The Company's purchases from and sales to this
related company amounted to $164,420 and $94,902, respectively.
In December 1995, the Company leased a restaurant site in Jupiter, Florida
that required the Company to pay a down payment of $1,140,000, and a rental
payment of $360,000 annually over 20 years. The lessor is a company
controlled by a director of the Company.
NOTE G - COMMITMENTS AND CONTINGENCIES
LEASES
The Company conducts a portion of its operations and maintains its
administrative offices in leased facilities. The following is a schedule by
years of approximate minimum rental payments under such operating leases
which expire at various dates through 2038. Certain leases provide for the
Company to pay its proportionate share of increases in real estate taxes,
additional rental based upon increases in the Consumer Price Index as well
as amounts based upon a percentage of sales in excess of specified amounts.
Rent expense for the periods ending December 25, 1995, December 26, 1994
and December 27, 1993, was approximately $2,355,740, $2,061,190 and
$1,626,130, respectively.
(continued)
F-14
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE G - COMMITMENTS AND CONTINGENCIES - Continued
Minimum payments under non-cancelable operating leases are summarized as
follows:
YEAR ENDING DECEMBER
--------------------
1996 $ 4,819,498
1997 5,460,892
1998 5,443,838
1999 5,455,213
2000 5,516,992
2001 and thereafter 81,593,008
------------
Total $108,289,441
============
The Company has entered into additional operating lease agreements for new
restaurants to be opened during 1996, and it is likely that additional
leases will be executed in 1996.
In connection with the opening of the new Crab House restaurants and
Take-Aways, the Company has entered into contracts for the purchase and/or
construction of certain leasehold improvements, equipment and furniture for
the restaurant. At December 25, 1995, the Company had an obligation of
approximately $6,300,000 remaining on these contracts. Also, the Company
will likely enter into additional commitments for construction and the
purchase of equipment for other new restaurants.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with its key officers which provide
for certain levels of base compensation, bonuses, stock options and
noncompete covenants. The agreements expire in 1999 unless renewed prior to
that date.
LITIGATION
In the normal course of business, the Company is subject to various
litigation. In the opinion of management, the ultimate resolution of the
litigation will not have a material effect on the financial statements.
F-15
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE H - STOCK OPTIONS AND WARRANTS
The Company has two Incentive Stock Option Plans under which options to
purchase an aggregate of 325,000 shares of common stock are authorized.
In addition, various non-qualified options have been granted to key
employees. During 1995, employment agreements granted certain officers
950,000 options. Further information on the non-qualified and qualified
options is provided in the tables below.
NON-QUALIFIED OPTIONS
NUMBER OF OPTION
SHARES PRICE AMOUNT
--------- ------------- -----------
Outstanding at
December 29, 1992 245,000 $1.00 - $3.00 $ 329,750
Exercised (125,000) $1.24 (155,000)
Granted 446,250 $3.36 - $5.87 2,005,675
------- -----------
Outstanding at
December 27, 1993 566,250 $1.00 - $5.87 2,180,425
Cancelled or expired (25,000) $5.00 (125,000)
Exercised (18,750) $1.00 (18,750)
Granted 40,000 $4.12 - $6.12 204,800
------- -----------
Outstanding at
December 26, 1994 562,500 $1.00 - $6.12 2,241,475
Cancelled or expired - -
Exercised (74,750) $1.00 - $3.36 (134,660)
Granted 1,020,500 $3.13 - $4.25 4,048,665
--------- -----------
Outstanding at
December 25, 1995 1,508,250 $ 6,155,480
========= ===========
The option price is at least equal to the market value at the date of the
grant. The options are generally exercisable over a three-year period.
Options for 591,750 shares were exercisable at December 25, 1995.
(continued)
F-16
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE H - STOCK OPTIONS AND WARRANTS - Continued
QUALIFIED OPTIONS
Under the provisions of the Incentive Stock Option Plan, the option price
must be equal to, or in excess of, the market value of the stock on the
date of the grant. Options are generally exercisable in equal annual
installments over a period of two to three years. At December 25, 1995,
81,000 of these options were exercisable.
NUMBER OF OPTION
SHARES PRICE AMOUNT
--------- ------------- -----------
Outstanding at
December 29, 1992 93,750 $0.80 - $3.00 $ 134,850
Cancelled or expired (8,500) $1.00 - $1.52 (11,620)
Exercised (11,500) $0.80 - $1.52 (12,280)
Granted 130,000 $4.25 - $6.87 719,450
------- -----------
Outstanding at
December 27, 1993 203,750 $1.00 - $6.87 830,400
Cancelled or expired (13,500) $1.52 - $4.62 (32,145)
Exercised (22,750) $1.00 - $1.52 (23,530)
Granted 83,750 $3.06 - $4.19 321,275
------- -----------
Outstanding at
December 26, 1994 251,250 $1.00 - $6.87 1,096,000
Cancelled or expired (45,000) $5.12 - $6.87 (223,875)
Exercised (15,000) $1.12 - $1.76 (21,600)
Granted 422,500 $3.00 - $4.50 1,758,990
------- -----------
Outstanding at
December 25, 1995 613,750 $ 2,609,515
======= ===========
WARRANTS
In January 1992, the Company issued warrants to BPLP to purchase an
aggregate of 962,500 shares of common stock at an average price of $1.92
per share. During 1993, BPLP exercised one of these warrants to purchase
525,000 shares of common stock for a total of $1,050,000. The proceeds of
this exercise were used by the Company to repurchase the 20% minority
interest in the Orlando restaurant as required by the warrant agreement.
The remaining warrants are exercisable through January 2002 and have an
average price of $1.86 per share.
F-17
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE I - INCOME TAXES
As of December 26, 1994, Bayport Restaurant Group, Inc. has net operating
loss and FICA tip credit carryforwards for federal income tax purposes of
approximately $4,234,000 and $137,000, respectively, which are available to
offset taxable income and income taxes, if any, through the year 2010. The
Company has utilized its net operating loss carryforward in 1994 to offset
the taxes that otherwise would be payable.
The provision (benefit) for income taxes is as follows:
1995 1994
-------- --------
Current
Federal $ -- $ --
State 4,559 25,400
-------- --------
4,559 25,400
Deferred
Federal 682,057 368,295
State -- --
-------- --------
682,057 368,295
-------- --------
Total $686,616 $393,695
======== ========
Reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1995 1994
--------- ---------
Tax expense at statutory rate $ 731,210 $ 453,305
State income taxes net of federal tax benefit 3,009 16,764
Tax credits (77,030) (40,001)
Utilization of net operating losses - (96,705)
Other 29,427 60,332
--------- ---------
Total provision $ 686,616 $ 393,695
========= =========
(continued)
F-18
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE I - INCOME TAXES - Continued
Deferred tax liabilities (assets) consist of the following:
1995 1994
---------- ----------
Deferred liabilities
Excess of book over tax basis of property,
plant and equipment $1,809,393 $ 460,487
Excess of book over tax basis of deferred
pre-opening costs 594,359 -
Other 167,392 151,107
---------- ----------
2,571,144 611,594
Deferred assets
AMT and excess FICA credits carryforwards 172,580 77,750
Net operating loss carryforward 1,439,427 258,400
Other 169,830 168,194
---------- ----------
1,781,837 504,344
---------- ----------
Total $ 789,307 $ 107,250
========== ==========
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes" on December 29, 1992, which
changed the Company's method of accounting for income taxes to an asset and
liability approach. The cumulative effect of this change in method of
accounting for income taxes at December 29, 1992, was a benefit of $223,295
(net of valuation allowance of $468,289). The cumulative effect adjustment
primarily consists of the recognition of the tax benefit associated with
the Company's net operating loss carryforward.
NOTE J - NOTES RECEIVABLE FROM OFFICERS
During fiscal 1995, four officers of the Company exercised stock options
previously granted to them. The officers executed promissory notes payable
to the Company as consideration based upon the terms of the grants. Notes
receivable due at December 25, 1995 represent promissory notes for these
stock options and a loan receivable from an officer. These notes bear
interest between 7% to 10% per annum. The stock option notes are
collateralized by the common stock issued under the exercise of the
options. The total amount of these notes is reflected as a reduction of
total stockholders' equity.
F-19
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE K - BUSINESS SEGMENT INFORMATION
The Company's business segments in 1995, 1994 and 1993 were restaurant
operations and seafood processing. A summary by business segments of sales,
operating earnings, identifiable assets, depreciation, amortization, and
capital expenditures for 1995, 1994 and 1993 follows.
Sales and transfers to other segments of the business are made at an
approximate market price. Assets not allocated to segments consist
principally of cash, miscellaneous receivables, and certain fixed assets.
<TABLE>
<CAPTION>
DECEMBER 25, 1995
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------
SEAFOOD
RESTAURANT PROCESSING GENERAL
OPERATIONS PLANT CORPORATE ELIMINATIONS TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Sales and transfers
To unaffiliated
customers $ 45,719 $ 7,884 $ - $ - $ 53,603
To other segments - 2,275 - (2,275) -
----------- ----------- ----------- ----------- -----------
45,719 10,159 - (2,275) 53,603
Operating earnings 6,473 32 - - 6,505
Interest income
and other revenues 75 - - - 75
General corporate
expenses (2,626) - (1,374) - (4,000)
Interest expense (429) - - - (429)
----------- ----------- ----------- ----------- -----------
Earnings before
income taxes $ 3,493 $ 32 $ (1,374) $ - $ 2,151
=========== =========== =========== =========== ===========
Assets $ 29,882 $ 3,608 $ 14,893 $ (518) $ 47,865
=========== =========== =========== =========== ===========
Depreciation and
amortization $ 1,251 $ 120 $ 30 $ - $ 1,401
=========== =========== =========== =========== ===========
Capital expenditures $ 18,481 $ 102 $ 189 $ - $ 18,772
=========== =========== =========== =========== ===========
</TABLE>
(continued)
F-20
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE K - BUSINESS SEGMENT INFORMATION - Continued
<TABLE>
<CAPTION>
DECEMBER 26, 1994
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------
SEAFOOD
RESTAURANT PROCESSING GENERAL
OPERATIONS PLANT CORPORATE ELIMINATIONS TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Sales and transfers
To unaffiliated
customers $ 33,735 $ 4,511 $ - $ - $ 38,246
To other segments - 1,456 - (1,456) -
----------- ----------- ----------- ------------ -----------
33,735 5,967 - (1,456) 38,246
Operating earnings 4,693 79 - (12) 4,760
Interest income
and other revenues 244 - - - 244
General corporate
expenses (2,000) - (1,630) - (3,630)
Interest expense (40) - - - (40)
------------ ----------- ----------- ----------- ------------
Earnings before
income taxes $ 2,897 $ 79 $ (1,630) $ (12) $ 1,334
=========== =========== ============ =========== ===========
Assets $ 15,796 $ 3,004 $ 10,523 $ (797) $ 28,526
=========== =========== =========== ============ ===========
Depreciation and
amortization $ 726 $ 108 $ 23 $ - $ 857
=========== =========== =========== =========== ===========
Capital expenditures $ 5,118 $ 139 $ 228 $ - $ 5,485
=========== =========== =========== =========== ===========
</TABLE>
(continued)
F-21
<PAGE>
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 25, 1995, DECEMBER 26, 1994 AND DECEMBER 27, 1993
NOTE K - BUSINESS SEGMENT INFORMATION - Continued
<TABLE>
<CAPTION>
DECEMBER 27, 1993
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------
SEAFOOD
RESTAURANT PROCESSING GENERAL
OPERATIONS PLANT CORPORATE ELIMINATIONS TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Sales and transfers
To unaffiliated
customers $ 23,800 $ 2,626 $ - $ - $ 26,426
To other segments - 874 - (874) -
----------- ----------- ----------- ----------- -----------
23,800 3,500 - (874) 26,426
Operating earnings 3,204 45 - (44) 3,205
Interest income
and other revenues 568 - - - 568
General corporate
expenses (1,344) - (1,073) - (2,417)
Interest expense (194) (19) - - (213)
----------- ----------- ----------- ----------- -----------
Earnings before income
taxes and cumulative
effect of accounting
change $ 2,234 $ 26 $ (1,073) $ (44) $ 1,143
=========== =========== =========== =========== ===========
Assets $ 8,062 $ 2,890 $ 13,373 $ (907) $ 23,418
=========== =========== =========== =========== ===========
Depreciation and
amortization $ 468 $ 106 $ 10 $ - $ 584
=========== =========== =========== =========== ===========
Capital expenditures $ 3,265 $ 82 $ 37 $ - $ 3,384
=========== =========== =========== =========== ===========
</TABLE>
F-22
EXHIBIT 10.15
BAYPORT RESTAURANT GROUP, INC.
AND SUBSIDIARIES
FIRST AMENDMENT
THIS AMENDMENT (this "Amendment") is entered into as of February 6, 1996
by and among Bayport Restaurant Group, Inc., Crab House, Inc., Capt. Crab's
Take-Away of 79th Street, Inc., Take-Away/King Shopping Plaza, Inc. and Cryotech
Industries of North Carolina, Inc. (each collectively referred to herein as the
"Borrower" or the "Borrowers"), the financial institutions party to the
Agreement (as defined below) (the "Lenders"), and The First National Bank of
Boston, a national banking association having its head office at 100 Federal
Street, Boston, Massachusetts, its successors and assigns, as agent for the
Lenders (the "Agent").
R E C I T A L S
WHEREAS, the Borrowers, the Agent and the Lenders have entered into a
Revolving Credit and Term Loan Agreement dated December 14, 1994 (the
"Agreement"), all capitalized terms used, but not otherwise defined, herein
having the meanings ascribed to them in the Agreement;
WHEREAS, the Borrowers have requested that the Lenders agree to modify
certain terms of the Agreement, including increasing the Maximum Commitment to
$16,000,000, and the Lenders are willing to grant such request;
WHEREAS, the Borrowers are continuing to operate and carry on their
respective businesses on an interrelated and integrated basis with each being
interdependent on the others for certain aspects of their operations, and the
Lenders, in recognition thereof, are continuing to rely on the consolidated
financial strength of the Borrowers;
NOW THEREFORE, in consideration of the foregoing premises and the mutual
benefits to be derived by the parties from a continuing relationship under the
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each of the parties agrees as
follows:
#. The defined terms "Maximum Commitment" and "Property or Properties"
appearing in Section 1 of the Agreement are hereby amended in their entirety to
read as follows:
"MAXIMUM COMMITMENT. The sum of the Commitments, not to
exceed $16,000,000.00."
"PROPERTY OR PROPERTIES. Shall mean
(i) EXISTING PROPERTIES. The real estate purchased, leased or licensed
by the Borrower and described in Exhibit 1.1(a) attached hereto and
incorporated herein by reference which represent the location at which
the Borrower has, as of the date hereof, existing operations or
facilities under construction; and
1
<PAGE>
(ii) ADDITIONAL PROPERTIES. Any parcel of real estate
purchased, leased or licensed by the Borrower after the
Closing Date."
#. Section 2.4(b) is hereby amended by deleting the table of Early
Termination Periods and Early Termination Fees contained therein and
substituting therefor the following:
"EARLY TERMINATION PERIODS EARLY TERMINATION FEE
-------------------------- ---------------------
From December 15, 1995
to December 14, 1996 2% of the Maximum
Commitment
From December 15, 1996
to December 31, 1997 1% of the Maximum
Commitment"
#. Section 5.1 is hereby amended by relettering subclause
(i) as new subclause (j), and by substituting the following as
new subclause (i):
"(i) as soon as available, but in any event within forty-five (45) days
after the end of each fiscal quarter, an income statement reporting income
and expense for each restaurant operated by the Borrowers in operation as of
the end of such fiscal quarter;"
#. The Commitments appearing on the signature pages of the
Agreement are hereby amended as follows: (a) the Commitment
of The First National Bank of Boston is $11,000,000; and (b)
the Commitment of Capital Bank is $5,000,000.
#.Section 6.3 of the Agreement is hereby amended by the addition of the
following new subclause (h) at the end thereof:
"(h) Encumbrances in favor of Capital Bank ("Capital") on certain "Jax
Inventory" (expressly excluding proceeds other than insurance proceeds), as
such term is defined in the Revolving Credit Agreement dated December 12,
1995 betwen Capital and the Borrowers for Indebtedness incurred thereunder
up to an amount not to exceed the "Capital Limit," as defined in that
certain Intercreditor Agreement dated as of December 12, 1995 between
Capital and the Agent, as may be amended from time to time."
#. The section numbered "11.5" appearing on page 69 of the Agreement
is hereby corrected to read "11.15."
#. EFFECTIVENESS OF AMENDMENT. This Amendment shall become
effective, as of the date first written above, upon the
satisfaction of the following conditions precedent:
(a) receipt by the Agent of this Amendment executed by each
of the parties hereto;
(b) receipt by the Agent of new Revolving Credit Notes to the order of each
of the
2
<PAGE>
Lenders in the amount of their respective new Commitments,
accompanied by an Affidavit of Out-of-State Delivery or, if executed in the
state of Florida, the required amount of documentary stamps affixed thereto;
(c) a certificate of the secretary or an assistant secretary of the
Borrowers with respect to resolutions of their respective Boards of
Directors authorizing the execution and delivery of this Amendment,
confirming the resolutions previously adopted by such Boards of Directors of
the Borrowers on October 19, 1994 authorizing the borrowings and other
transactions contemplated under the Agreement, identifying the officer(s)
authorized to execute, deliver and take all other actions required under
this Amendment, or the Agreement, and confirming that each of the Borrowers'
Articles of Organization and By-Laws previously delivered and certified to
the Agent on November 22, 1994 have not been amended, substituted, rescinded
or otherwise modified in any way since the date of said prior certification;
(d) a certificate of the president or chief financial officer of the
Borrowers with respect to representations and warranties under the Agreement
(to include a list of Properties acquired since the Closing Date), and the
absence of any Defaults or Events of Default;
(e) an opinion of legal counsel to the Borrowers as to due organization and
good standing, due authorization of this Amendment and the transactions
contemplated hereby, enforceability of this Amendment, the existence of no
conflicts with laws or other agreements, and the satisfaction or payment of
all necessary recording, documentary, filing or other fees;
(f) such other items or documents as may be requested by the
Agent or the Lenders.
#. EFFECT UPON THE AGREEMENT. Upon and after the date of this Amendment
all references to the Agreement in that document, any Loan Document, or in any
other related document shall mean the Agreement as amended by this Amendment.
Except as expressly provided in this Amendment, the execution and delivery of
this Amendment does not and will not amend, modify or supplement any provision
of, or constitute a consent to or a waiver of any non-compliance with the
provisions of the Agreement, and, except as specifically provided in this
Amendment, the Agreement shall remain in full force and effect.
#. NO IMPAIRMENT OF LIEN. Nothing set forth herein shall affect the
priority or extent of the lien of the Agreement or any other Loan Document, nor
release or change the liability of any party who may now be or after the date of
this, become liable primarily or secondarily, thereunder.
#. FURTHER ASSURANCES. The Borrowers hereby agree to
execute and deliver such other instruments, and take such other
action, as the Agent or the Lenders may reasonably request in
connection with this Amendment, including, without limitation,
the delivery of all
3
<PAGE>
additional Uniform Commercial Code financing
statements which the Agent may deem appropriate for the perfection, protection
and enforcement of its security interests in the Collateral.
#. MISCELLANEOUS. (a) This Amendment shall be construed according to and
governed by the laws of The Commonwealth of Massachusetts without regard to its
internal conflicts rules; (b) if any provision of this Amendment is adjudicated
to be invalid, illegal or unenforceable, in whole or in part, it will be deemed
omitted to that extent and all other provisions of this Amendment will remain in
full force and effect; (c) the captions contained in this Amendment are for
convenience of reference only and in no event define, describe or limit the
scope of intent or any of the provisions or terms hereof; (d) this Amendment
shall be binding upon and inure to the benefit of the parties and their
respective heirs, legal representatives, successors and assigns; and (e) this
Amendment may be executed in one or more counterparts.
4
<PAGE>
IN WITNESS WHEREOF, each of the Borrowers, the Agent and the Lenders in
accordance with Section 11.7 of the Agreement, has caused this Amendment to be
executed and delivered by their respective duly authorized officers as an
instrument under seal as of the date first set forth above.
BORROWER:
BAYPORT RESTAURANT GROUP, INC.
WITNESSED:
By:______________________ By: /s/ William D. Korenbaum
Name:____________________ Name: William D. Korenbaum
Print Name Print Name
Title: President
Signed At:
CRAB HOUSE, INC.
WITNESSED:
By:______________________ By: /s/ William D. Korenbaum
Name:____________________ Name: William D. Korenbaum
Print Name Print Name
Title: President
Signed At:
CAPT. CRAB'S TAKE-AWAY OF 79TH
STREET., INC.
WITNESSED:
By:______________________ By: /s/ William D. Korenbaum
Name:____________________ Name: William D. Korenbaum
Print Name Print Name
Title: President
Signed At:
5
<PAGE>
CRYOTECH INDUSTRIES OF NORTH
CAROLINA, INC.
WITNESSED:
By:______________________ By: /s/ William D. Korenbaum
Name:____________________ Name: William D. Korenbaum
Print Name Print Name
Title: President
Signed At:
TAKE-AWAY/KING SHOPPING
PLAZA, INC.
WITNESSED:
By:______________________ By: /s/ William D. Korenbaum
Name:____________________ Name: William D. Korenbaum
Print Name Print Name
Title: President
Signed At:
AGENT:
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
WITNESSED:
By:______________________ By: /s/ William C. Purinton
Name:____________________ Name: William C. Purinton
Print Name Print Name
Title: Vice President
Signed At:
6
<PAGE>
LENDERS:
Commitment THE FIRST NATIONAL BANK OF
Amount: $11,000,000 BOSTON
WITNESSED:
By:______________________ By: /s/ William C. Purinton
Name:____________________ Name: William C. Purinton
Print Name Print Name
Title: Vice President
Signed At:
Commitment CAPITAL BANK
Amount: $5,000,000
WITNESSED:
By:______________________ By: /s/ Edward P. Tietjen
Name:____________________ Name: Edward P. Tietjen
Print Name Print Name
Title: Senior Vice President
Signed At:
7
EXHIBIT 21
SUBSIDIARIES
1. Crab House, Inc., a Florida corporation
2. Capt. Crab's Take-Away of 79th Street, Inc., a Florida corporation
a. Take-Away/Kings Shopping Plaza, Inc., a Maryland corporation
(a wholly-owned subsidiary of Capt. Crab's Take-Away of 79th
Street, Inc.)
3. CryoTech Industries of North Carolina, Inc., a North Carolina corporation
4. Cryo Realty Corp., a Florida corporation
EXHIBIT 23
AUDITOR'S CONSENT
We have issued our report dated March 8, 1996, accompanying the consolidated
financial statements included in the Annual Report of Bayport Restaurant Group,
Inc. and Subsidiaries on Form 10-K for the year ended December 25, 1995. We
hereby consent to the incorporation by reference of said report in the
Registration Statements of Bayport Restaurant Group, Inc. and Subsidiaries on
Form S-3 (File No. 33-68794, effective September 29, 1993 and File No. 33-61013,
effective July 13, 1995) and on Form S-8 (File No. 33-63071, effective September
29, 1995, File No. 33-63067, effective September 29, 1995, File No. 33-62981,
effective September 27, 1995, and File No. 33-62875, effective September 25,
1995).
/s/ GRANT THORNTON LLP
Miami, Florida
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-25-1995
<PERIOD-END> DEC-25-1995
<CASH> 1,373,017<F1>
<SECURITIES> 0
<RECEIVABLES> 1,918,081<F2>
<ALLOWANCES> 0
<INVENTORY> 5,461,381
<CURRENT-ASSETS> 11,416,205
<PP&E> 34,010,527<F3>
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,864,807
<CURRENT-LIABILITIES> 8,658,787
<BONDS> 16,625,339<F4>
0
22,940
<COMMON> 9,602
<OTHER-SE> 22,965,450
<TOTAL-LIABILITY-AND-EQUITY> 47,864,807
<SALES> 53,602,372
<TOTAL-REVENUES> 53,677,809
<CGS> 0<F5>
<TOTAL-COSTS> 51,527,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,150,619
<INCOME-TAX> 686,616
<INCOME-CONTINUING> 1,464,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,464,003
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
<FN>
<F1>Includes certificates of deposit in the amount of $300,000.
<F2>Net of allowances.
<F3>Net of depreciation.
<F4>Includes Long-Term Obligations, Due to Related Parties and Deferred Income
Taxes.
<F5>Not applicable.
</FN>
</TABLE>
