SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 24, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
COMMISSION FILE NO. 0-10717
BAYPORT RESTAURANT GROUP, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1827559
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION IDENTIFICATION NUMBER)
OR ORGANIZATION)
4000 HOLLYWOOD BOULEVARD; SUITE 695-S; HOLLYWOOD, FLORIDA 33021
---------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 967-6700
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO THE FILING
REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.
YES X NO ______
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
9,871,940 SHARES OF COMMON STOCK, $.001 PAR VALUE AS OF AUGUST 6, 1996
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1 Financial Statements
Consolidated Statements of Earnings for 3
the three months ended June 24, 1996 and
June 25, 1995
Consolidated Statements of Earnings for 4
the six months ended June 24, 1996 and
June 26, 1995
Consolidated Balance Sheets as of 5 - 6
June 24, 1996 and December 25, 1995
Consolidated Statements of Cash Flows for 7 - 8
the six months ended June 24, 1996
and June 26, 1995
Notes to Consolidated Financial Statements 9
Item 2 Management's Discussion and Analysis of 10 - 12
the Financial Condition and Results of Operations
PART II. OTHER INFORMATION PAGE NO.
Item 1 Litigation 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Securities-Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Signature Page 15
2
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<TABLE>
<CAPTION>
Bayport Restaurant Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended June 24, 1996 and June 26, 1995
(Unaudited)
JUNE 24, JUNE 26,
1996 1995
------------ ------------
<S> <C> <C>
Revenues
Restaurant Sales $ 18,104,270 $ 11,564,029
Processing Plant Sales 2,001,094 1,746,023
Interest and other 11,264 24,247
------------ ------------
Total Revenues $ 20,116,628 $ 13,334,299
Costs and expenses
Cost of sales 5,920,058 4,075,682
Payroll and related expenses 4,859,787 2,830,222
Other operating expenses 2,881,068 1,745,769
Occupancy and related expenses 1,505,443 893,357
Processing plant cost of sales and operating expenses 2,286,415 1,869,209
Restaurant opening expenses 655,110 116,460
General and administrative 1,331,035 1,186,883
Interest expense 410,442 -0-
------------ ------------
Total costs and expenses 19,849,358 12,717,582
------------ ------------
Earnings before income taxes 267,270 616,717
Provision for income taxes 90,872 209,684
------------ ------------
NET EARNINGS 176,398 407,033
============ ============
Earnings per common share and common share equivalents 0.02 0.04
============ ============
Weighted average number of 10,340,452 10,394,571
shares outstanding ============ ============
</TABLE>
The accompanying notes are an integral part of these statements
3
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<TABLE>
<CAPTION>
Bayport Restaurant Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
For the Six Months Ended June 24, 1996 and June 26, 1995
(Unaudited)
JUNE 24, JUNE 26,
1996 1995
------------ ------------
<S> <C> <C>
Revenues
Restaurant Sales $ 34,846,227 $ 22,306,414
Processing Plant sales 3,510,368 3,401,041
Interest and other 27,845 55,790
------------ ------------
Total Revenues $ 38,384,440 $ 25,763,245
Costs and expenses
Cost of sales $ 11,417,048 $ 7,817,352
Payroll and related expenses 9,188,432 5,272,595
Other operating expenses 5,560,537 3,392,422
Occupancy and related expenses 3,039,738 1,805,006
Processing Plant cost of sales and operating expenses 3,908,081 3,633,109
Restaurant opening expenses 1,214,299 215,710
General and administrative 2,673,604 2,109,211
Interest expense 625,918 -0-
------------ ------------
Total costs and expenses $ 37,627,657 $ 24,245,405
------------ ------------
Earnings before income taxes 756,783 1,517,840
Provision for income taxes 257,306 516,066
------------ ------------
NET EARNINGS $ 499,477 $ 1,001,774
============ ============
Earnings per common share and common share equivalents 0.05 0.10
============ ============
Weighted average number of 10,352,004 10,387,899
shares outstanding ============ ============
</TABLE>
The accompanying notes are an integral part of these statements
4
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<TABLE>
<CAPTION>
Bayport Restaurant Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 24, 1996 and December 25, 1995
(Unaudited)
ASSETS
JUNE 24, DECEMBER 25,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 92,636 $ 1,073,017
Investments In Marketable Securities -0- 300,000
Accounts receivable 3,126,408 1,918,081
Inventories 2,815,490 5,461,381
Prepaid expenses and other current assets 1,155,294 735,648
Deferred Pre-opening costs 2,203,041 1,928,078
------------ ------------
Total current assets 9,392,869 11,416,205
PROPERTY AND EQUIPMENT - AT COST,
less accumulated depreciation 46,433,944 34,010,527
OTHER ASSETS
Note Receivable 125,000 125,000
Deposits 671,103 525,698
Other 2,121,791 1,687,351
Goodwill 97,101 100,026
------------ ------------
Total other assets 3,014,995 2,438,075
------------ ------------
TOTAL ASSETS 58,841,808 47,864,807
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
<TABLE>
<CAPTION>
Bayport Restaurant Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 24, 1996 and December 25, 1995
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 24, DECEMBER 25,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term
obligations (Note 2) $ 23,468,159 $ 2,283,576
Due to related parties 94,332 94,332
Accounts payable 7,521,549 5,521,837
Accrued liabilities 1,725,681 759,042
------------ ------------
Total current liabilities 32,809,721 8,658,787
LONG-TERM OBLIGATIONS 735,486 14,680,446
DUE TO RELATED PARTIES 1,116,279 1,155,586
DEFERRED INCOME TAXES 1,046,613 789,307
STOCKHOLDERS' EQUITY
Preferred stock - authorized and issued 15,000,000 shares
of $.01 par value; issued and outstanding 2,026,249 shares
at June 24, 1996 and 2,293,999 shares at December 25, 1995 20,262 22,940
Common stock - authorized 50,000,000
shares of $.001 par value; issued and outstanding
9,705,784 at June 24, 1996 and 9,600,568 shares
at December 25, 1995 9,706 9,602
Paid in capital 22,220,129 22,113,189
Retained earnings (Deficit) 1,319,196 819,719
------------ ------------
23,569,293 22,965,450
Notes receivable from
officers (435,584) (384,769)
------------ ------------
Total stockholders' equity 23,133,709 22,580,681
------------ ------------
Total Liabilities & Stockholders'
Equity 58,841,808 47,864,807
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
6
<PAGE>
<TABLE>
<CAPTION>
Bayport Restaurant Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 24, 1996 and June 26, 1995
(Unaudited)
JUNE 24, JUNE 26,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 499,477 $ 1,001,774
Increase in deferred tax liability 257,306 480,866
Depreciation of property,
plant and equipment 838,047 527,343
Amortization of intangible
assets 24,667 24,390
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating activities
(Increase) in accounts
receivable (1,208,327) (630,148)
Decrease in inventories 2,645,891 1,953
(Increase) in prepaid expenses (419,646) (180,961)
(Decrease) in accounts payable and
accrued expenses and restructuring 2,966,351 2,078,838
(Increase) in deposits, goodwill
and other assets (576,920) (1,705,081)
(Increase) in deferred
pre-opening costs (274,963) (659,424)
------------ ------------
Net cash provided by
operating activities $ 4,751,883 $ 939,550
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (13,334,741) (6,759,468)
Proceeds from sale and maturity of
marketable securities 293,859 3,678,109
------------ ------------
Net cash used in
investing activities (13,040,882) (3,081,359)
</TABLE>
The accompanying notes are an integral part of these statements
7
<PAGE>
<TABLE>
<CAPTION>
Bayport Restaurant Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CON'T
For the Six Months Ended June 24, 1996 and June 26, 1995
(Unaudited)
JUNE 24, JUNE 26,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal borrowings of long-term debt $ 8,248,413 $ 6,500,000
Principal payment of debt (1,044,160) (2,887,236)
Proceeds from issuance of stock 104,365 -0-
Net cash provided by (used in)
financing activities 7,308,618 3,612,764
========== ==========
Increase (decrease) in cash and
cash equivalents (980,381) 1,470,955
Cash and cash equivalents at
beginning of the period 1,073,017 404,513
------------ ------------
Cash and cash equivalents at end
of the period 92,636 1,875,468
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for
interest 800,674 146,62
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
8
<PAGE>
Bayport Restaurant Group, Inc. and Subsidiaries
BASIS OF PRESENTATION
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ARE NOT NECESSARILY INDICATIVE OF
THE RESULTS TO BE ATTAINED FOR THE ENTIRE PERIOD. IN THE OPINION OF THE COMPANY,
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS CONTAIN ALL
ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING ACCRUALS) NECESSARY TO PRESENT
FAIRLY THE CONSOLIDATED FINANCIAL POSITION AS OF JUNE 24, 1996 AND DECEMBER 25,
1995 AND RESULTS OF OPERATIONS AND CASH FLOWS FOR THE THREE AND SIX MONTHS ENDED
JUNE 24, 1996 AND JUNE 26, 1995. FOR A SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES AND ADDITIONAL FINANCIAL INFORMATION, SEE THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 25, 1995 ("FORM 10-K").
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Merger with Landry's Seafood Restaurants, Inc.
On April 18, 1996, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Landry's Seafood Restaurants, Inc.
("Landry's") and Landry's Acquisition Corp. The closing of the merger
contemplated by the Merger Agreement (the "Merger") is subject to
various closing conditions, including the receipt of shareholder
approval of the Company's shareholders. For a description of the terms
of the Merger Agreement, see the Company's Current Report on Form 8-K
(the "Form 8-K") filed on May 1, 1996.
On July 30, 1996, the Company held a Special Meeting of its
Shareholders for the purpose of voting on the Merger Agreement. At this
meeting, the Merger Agreement was approved by the holders of more than
a majority of the Company's outstanding common stock and Class B
Preferred Stock. The closing of the merger is expected to occur on or
about August 9, 1996.
Note 2 Changes in Status of Debt Obligations.
The Company is presently in violation of certain non-monetary covenants
contained in its credit agreements with certain financial institutions.
See Note D to Notes to Consolidated Financial Statements for the year
ended December 25, 1995 for a description of debt due to financial
institutions. All covenants have been waived through the end of 1996
so long as the Merger Agreement remains in effect and all required
payments of interest are made. However, due to this violation, current
maturities of long term debt includes 15,900,672 of debt due to
financial institutions.
On April 18, 1996, the Company entered into a loan agreement with
Landry's whereby Landry's agreed to loan the Company up to $11 million
(the "Loan") to pay costs to complete construction of four restaurants.
If the Merger is not consummated, Bayport will have 120 days from the
termination date of the Merger Agreement to repay the Loan. At August
1, 1996, $6,896,774 was due to Landry's under this loan agreement.
For a description of the terms of the Loan, see the Form 8-K.
9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain factors which
have affected the Company's financial position and operating results during the
periods included in the accompanying financial statements. This discussion and
analysis should be read in conjunction with Management's Discussion and Analysis
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1995. This Quarterly Report on Form 10-Q contains certain forward
looking statements which involve risks and uncertainties. The Company's actual
results could differ from the results anticipated herein.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio at June 24, 1996 was approximately .29 to 1. The
decrease from a current ratio of 1.3 to 1 at December 25, 1995 is due to the
continued use by the Company of its available resources in connection with its
restaurant expansion program, additional short term borrowings and the inclusion
at June 24, 1996 of certain amounts due to financial institutions in current
liabilities, as opposed to long term obligations. See Note 2 to Notes to
Consolidated Financial Statements.
The increase in accounts receivables of approximately $1.2 million and the
approximately $2.6 million decrease in inventory from the end of December 1995
to the end of June 1996 is primarily attributable to a change subsequent to year
end in the manner in which the Company purchases its seafood commodity
requirements. Prior to year end, the Company purchased its seafood commodities
and shipped them to various food distributors which would then service the
Company's restaurants in different markets. Under this agreement, the Company
retained title to the inventory and the distributor charged the Company a
nominal fee for shipping and handling. Subsequent to year end, the Company's
distributors have begun to purchase seafood commodities from the Company as
needed to service the Company's restaurants. Under the new arrangement, the
distributor obtains title to the inventory and then resells it to the Company
based on orders from the Company's restaurants, relieving the Company of the
burden of tracking and monitoring its distributors' inventory for shrinkage and
theft. This arrangement, in turn, creates a receivable due to the Company and
reduces the Company's inventory. In addition, there was a decrease in inventory
at the Company's processing plant at June 24, 1996 as compared to December 25,
1995, consistent with the processing plant's seasonality.
The increase in property, plant and equipment from December 25, 1995 to June 24,
1996 principally results from the development of two restaurants opened during
the first quarter of 1996, two restaurants opened during the second quarter of
1996 and the construction in progress of two new restaurants (one of which was
not opened as planned, as set forth below). At the present time, the Company has
one restaurant under construction and leases for an additional three restaurant
sites on which construction has not yet commenced.
During the first half of 1996, the Company was in the process of building a
restaurant in Baltimore, Maryland and had expected to open that restaurant
by the end of the second quarter. In early June 1996, the Company stopped the
construction work it was doing on this site and stopped paying rent under its
lease for this site because of its inability to resolve certain outstanding
issues with the landlord regarding, among other things, ingress and egress to
the restaurant and signage for the restaurant. Additionally, the hotel on the
property which was supposed to be open by April or May was several months behind
schedule making it, in the Company's view, impractical to open the restaurant.
As result, in late June 1996, the Company was sued by the landlord of the
Baltimore restaurant site with respect to this lease. See Part II, Item 1 for
information regarding the current status of this litigation. As a result of this
dispute, it has not been determined as to when or if the Company will open a
restaurant on the Baltimore site.
The increase in accounts payable and accrued liabilities from period to period
was primarily due to the construction in progress of four new restaurants during
the period and the additional expenses incurred in connection with the operation
of the four new restaurants opened by the Company during 1996.
Effective December 14, 1994, Bayport and certain of its 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 Bayport 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
10
<PAGE>
three years, the facility is structured as a revolving loan; (ii) at the end of
three years, so long as Bayport is not then in default under the Credit
Agreement, Bayport 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. Bayport 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. Bayport 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 (waived in connection with the Merger Agreement). Bayport is
presently in violation of certain non monetary covenants contained in the Credit
Agreement, but has received a waiver of these covenants for the period that the
Merger Agreement is in effect. See Note 2 to Consolidated Financial Statements.
In June 1995, Bayport entered into an agreement to cap at 14% interest on a $7.0
million portion of debt due to the Lenders until January 31, 1998. Bayport paid
a fee of $14,000 in connection with this agreement.
In February 1996, the Lenders agreed to increase the credit facility from $14.0
million to $16.0 million on the same terms and conditions as the Credit
Agreement. As of August 1, 1996, approximately $15,998,000 was outstanding under
the Credit Agreement.
Additionally, on December 15, 1995, Bayport 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 Bayport, as determined by a
borrowing base of 80% of Bayport's seafood commodity inventory which is located
at a bonded warehouse 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 August 1, 1996, $2.0
million was outstanding under this facility.
On April 18, 1996, the Company entered into the Loan Agreement with Landry's to
borrow up to $11.0 million to pay costs to complete construction of four
restaurants. If the Merger is not completed, Bayport will have 120 days to repay
the funds borrowed from Landry's. If funding cannot be obtained, Landry's has
the obligation to convert the Loan into the ownership of the five restaurants
which collateralized the Loan. Additionally, if the Merger were not to be
completed, Bayport might have become obligated to pay a termination fee, which
would be due six months after the termination of the Merger Agreement. See Note
1 and 2 to Notes to Consolidated Financial Statements. At August 1, 1996,
$6,896,774 was outstanding under this Loan Agreement.
On July 30, 1996, the holders of a majority of Bayport's outstanding common
stock and a majority of Bayport's outstanding Class B Preferred stock approved
the Merger Agreement. Bayport expects that the Merger will be completed on or
about August 9, 1996. However, in the event the Merger is not completed, Bayport
believes that it will need approximately $16.0 million to complete its 1996
expansion program, which includes repayment of the $11.0 million being loaned to
Bayport by Landry's pursuant to the Loan Agreement. The failure to obtain this
required funding would likely cause Bayport to lose the five restaurants
collateralizing the Loan and to have to curtail its restaurant expansion
program. Bayport is also currently obligated on leases for three restaurant
sites as to which it has not yet commenced construction of new restaurants.
If the Merger is not completed, Bayport will most likely seek to raise the
capital which it requires for restaurant expansion and to repay debt through
sales of equity securities of Bayport (or debt securities convertible into
equity securities of Bayport). Issuances of these securities would likely be at
substantial discounts to current market and would likely substantially dilute
the interest of Bayport's existing equity holders. If capital cannot be obtained
in this manner, Bayport will seek alternative types of financing, such as
build-to-suits, sale leasebacks, or joint ventures. There can be no assurance
that any financing will be available to Bayport for any or all of these
purposes. No funding has been committed at this date. The failure to obtain the
required funding would likely have a material adverse effect on Bayport's
operations, financial position and results of operations.
RESULTS OF OPERATIONS
Total revenues for the quarter ended June 24, 1996 were $20,116,628 representing
an increase of approximately 51.0% over total revenues of $13,334,299 for the
same quarter of 1995. The increase in total revenues is primarily attributable
to a 57.0% increase in restaurant sales, which is due to the fact that the
Company has opened nine new restaurants since June 26, 1995. Total revenues for
the six months ended June 24, 1996 were $38,384,440, an increase of 49.0% over
total revenues of $25,763,245 for the six months ended June
11
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26, 1995.
Same store sales for the three and six months ended June 24, 1996 were down
approximately 2.1% and 2.0%, respectively, as compared to same store sales for
the three and six months ended June 25, 1995. This reduction was primarily due
to the impact on restaurant sales of the severe winter during the first quarter
of 1996 and to the impact on existing restaurants of having opened three new
restaurants during 1995 and 1996 in markets where the Company already had
restaurants in operation.
Cost of sales, as a percentage of restaurant sales, was 32.7% and 32.8%,
respectively, for the three months and six months ended June 24, 1996, compared
with 35.2% and 35.0%, respectively, for the quarter and six months ended June
26, 1995. The decrease in cost of sales is primarily attributable to an overall
reduction in seafood commodity costs.
Operating expenses (consisting primarily of payroll, occupancy and other
operating expenses) as a percentage of restaurant sales increased for the three
months and six months ended June 24, 1996 over the same periods in 1995, from
47.0% to 51.0% for the three month period and from 47.0% to 51.0% for the six
month period. Payroll and related expenses increased significantly from the
three months and six months ended June 26, 1995 as compared to the three months
and six months ended June 24, 1996 as a result of increased labor costs in the
Company's new restaurants, particularly in those restaurants which are in
hotels.
During 1995, the Company opened three restaurants in hotels (Gulfport, Biloxi
and Singer Island). The Company's operating expenses for these three restaurants
are substantially higher than the Company's other restaurants, due to other
services (banquet and room service) provided at these restaurants. The operating
profits from these restaurants will tend to be lower than has historically been
the case in the Company's restaurants, despite lower cost of sales at these
facilities.
Same store operating profit (after rent and depreciation) for the stores
operating in both the 1995 and 1996 second quarters was up 2.3% from 18% in the
second quarter of 1995 to 20.3% for the second quarter of 1996. Total store
operating profit for the three months and six months ended June 24, 1996 was up
45% and 40%, respectively, compared to the same periods in 1995.
Subsequent to quarter end, the Company determined to close its two Capt. Crab's
Take-Away restaurants in Maryland. These units had been losing money and were
not believed to fit within the Company's restaurant expansion program.
Additionally, the Company's two restaurants located in hotels in Biloxi and
Gulfport, Mississippi were sold on July 30, 1996 to the landlord of these
restaurants. The net purchase price paid for these restaurants was approximately
$2.25 million, plus the cost of the inventory located at these restaurants.
Restaurant opening expenses increased significantly during the three and six
months ended June 24, 1996, respectively, to approximately $655,000 and
$1,214,000, from $116,000 and $216,000 for the same periods in 1995. The
increase in restaurant opening expenses from period to period is attributable
to the opening of nine new restaurants between July 1995 and June 1996.
General and administrative expenses increased by 12% and 27% for the quarter and
six months ended June 24, 1996, respectively, as compared to the 1995 comparable
periods. The increase is primarily attributable to the addition of
administrative and operations personnel required to handle the Company's
restaurant expansion program. General and administrative expenses, as a
percentage of total revenues, were 6.6% and 7.0%, respectively, for the three
months and six months ended June 24, 1996, down from 8.9% and 8.2%,
respectively, for the three months and six months ended June 26, 1995. This
decrease results from economies of scale resulting from increased revenues from
period to period.
Interest expense was up significantly to approximately $410,000 and $626,000,
respectively, for the three months and six months ended June 24, 1996, as
compared to the same periods in 1995. The Company reported no interest expense
for the three and six months ended June 24, 1996.
The Company's seafood processing operation incurred losses of approximately
$285,000 and $398,000, respectively, for the three and six months ended June 24,
1996. For the three months and six months ended June 26, 1995, the Company's
seafood processing company incurred losses of approximately $123,000 and
$232,000, respectively.
As a result of the above, net earnings were down by approximately $231,000, from
$407,033 for the quarter ended June 26, 1995 to $176,398 for the quarter ended
June 24, 1996. Similarly, earnings for the six months ended June 24, 1996 were
$499,477, as compared to $1,001,774 for the six months ended June 26, 1995.
12
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PART II - OTHER INFORMATION
Item 1. LITIGATION
The Company has been sued by the landlord of the Company's
restaurant site in Baltimore, Maryland. The Company had been
in the process of constructing a restaurant in Baltimore and
had expected to open that restaurant at the end of the second
quarter of 1996. In early June 1996, based upon, among other
things, the fact that the hotel attached to the restaurant was
several months behind its construction schedule and was not
expected to open until later in the year, there were ingress
and egress problems with respect to the restaurant, and
because the landlord of this restaurant site had not yet
approved required signage with respect to this restaurant, the
Company ceased construction of this restaurant and stopped
paying rent pending resolution of these issues with the
landlord and refused to pay any future rent. As a result, the
Landlord sued the Company and its subsidiary, Crab House, Inc.
for unpaid rent and for anticipatory breach of the lease.
The suit; styled: THE INN AT PIER 5 LIMITED PARTNERSHIP V.
CRAB HOUSE, INC., BAYPORT RESTAURANT GROUP, INC. AND LANDRY'S
SEAFOOD RESTAURANTS, INC., was initially filed in the
Baltimore City Circuit Court. The suit was removed to the U.S.
Federal District Court for the District of Maryland upon
motion of the defendants based upon the diversity of the
parties to the action (Case No. JFM 96-2195). The suit alleges
breach of the lease by Crab House, Inc., breach of contract by
Bayport as a guarantor of the lease and, as to the Company and
Landry's, tortious interference with the lease agreement
between the landlord and Crab House, Inc. The suit seeks full
payment under the lease (including unpaid rent), plus
consequential damages, interest and attorneys fees. With
respect to the claim for tortious interference, the suit seeks
$5.0 million in compensatory damages and $10.0 million in
punitive damages, plus interest and attorneys fees.
The Company and Crab House have answered the complaint and
denied liability and have countersued the landlord for breach
of the lease. The Company has also moved to dismiss the
tortious interference claim. The Company and Crab House, Inc.
are vigorously contesting this claim and believe that they
have no liability to the Baltimore landlord. There can be no
assurance as to the outcome of this claim.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES-HOLDERS
On July 30, 1996, the Company held a Special Meeting of its
Shareholders. At the meeting, the Company's shareholder's
approved, by the vote of the holders of more than a majority
of the Company's outstanding common stock and outstanding
Class B Preferred stock, the Agreement and Plan of Merger
between Landry's Seafood Restaurants, Inc., Landry's
Acquisition Corp. and the Company. The shares voted on the
proposal were as follows: (i) Common Stock: for - 6,055,976;
against - 109,180; abstain - 393,188; outstanding on record
date - 9,697,785; and (ii) Class B Preferred Stock: For -
1,797,348; against - 8,400; abstain - 0; outstanding on record
date - 2,057,749.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
EX-27 Financial Data Schedule
13
<PAGE>
(B) Reports of Form 8-K
On May 1, 1996, the Company filed a Current Report on Form 8-K
disclosing the terms of the Merger Agreement between Landry's Seafood
Restaurants, Inc., Landry's Acquisition Corp. and the Company and the terms of
the Loan Agreement between the Company and Landry's Seafood Restaurants, Inc.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BAYPORT RESTAURANT GROUP, INC.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ WILLIAM D. KORENBAUM President, Chief August 8, 1996
- ----------------------------- Financial and
William D. Korenbaum Operating Officer
/s/ DAVID J. KIRINCIC Controller and Chief
- ----------------------------- Accounting Officer August 8, 1996
David J. Kirincic
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains Summary Financial Information extracted from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 24, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-24-1996
<PERIOD-START> DEC-25-1995
<PERIOD-END> JUN-24-1996
<CASH> 92,636
<SECURITIES> 0
<RECEIVABLES> 3,126,408<F1>
<ALLOWANCES> 0
<INVENTORY> 2,815,490
<CURRENT-ASSETS> 9,392,869
<PP&E> 46,433,944<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,841,808
<CURRENT-LIABILITIES> 32,809,721
<BONDS> 2,898,378<F3>
0
20,262
<COMMON> 9,706
<OTHER-SE> 23,103,741<F4>
<TOTAL-LIABILITY-AND-EQUITY> 58,841,808
<SALES> 34,846,227<F5>
<TOTAL-REVENUES> 38,384,440
<CGS> 11,417,048
<TOTAL-COSTS> 25,584,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 625,918
<INCOME-PRETAX> 756,783
<INCOME-TAX> 257,306
<INCOME-CONTINUING> 499,477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 499,477
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<FN>
<F1>Net of allowances.
<F2>Net of accumulated depreciation.
<F3>Long term obligations, due to related parties and deferred income taxes.
<F4>Paid in capital and retained earnings, less notes receivable from officers.
<F5>Restaurant sales.
</FN>
</TABLE>
