<PAGE> 1
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
For Quarter Ended August 6, 1995 Commission file number O-11514
----------------- --------
Max & Erma's Restaurants, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 31-1041397
- -------------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
4849 Evanswood Dr., Columbus, Ohio 43229
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 431-5800
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, and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
-------- -------
As of the close of the period covered by this report, the registrant had
outstanding 4,096,746 common shares.
-1-
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
MAX & ERMA'S RESTAURANTS, INC.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
------
August 6, October 30,
Current Assets: 1995 1994
----------- ----------
<S> <C> <C>
Cash $ 640,145 $ 993,349
Receivables 239,538 83,065
Inventories 483,029 439,478
Supplies 141,124 109,442
Prepaid Expenses 416,643 409,007
----------- -----------
Total Current Assets 1,920,479 2,034,341
Property - At Cost 50,820,372 39,743,141
Less Accumulated Depreciation
and Amortization 14,336,879 12,214,390
----------- -----------
Property - Net 36,483,493 27,528,751
Other Assets:
Goodwill - Net 347,682 386,365
Other Assets - Net 2,794,588 2,433,607
----------- -----------
Total Other Assets 3,142,270 2,819,972
----------- -----------
Total $41,546,242 $32,383,064
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current Liabilities:
Current Maturities of Long-Term
Obligations $ 711,914 $ 484,661
Accounts Payable 2,213,324 2,030,551
Accrued Liabilities 2,440,998 2,340,682
----------- -----------
Total Current Liabilities 5,366,236 4,855,894
Long-Term Obligations -
Less Current Maturities 20,986,251 13,638,885
Minority Interests in
Affiliated Partnerships 148,514 176,737
Stockholders' Equity:
Preferred Stock - $.10 Par Value;
Authorized 500,000 Shares
none outstanding
Common Stock - $.10 Par Value;
Authorized 10,000,000 Shares,
Issued and Outstanding 4,096,746 Shares
At August 6, 1995 and 3,768,189
Shares at October 30, 1994 409,669 376,819
Additional Capital 11,238,899 8,657,770
Retained Earnings 3,396,673 4,676,959
----------- -----------
Total Stockholders' Equity 15,045,241 13,711,548
----------- -----------
Total $41,546,242 $32,383,064
=========== ===========
</TABLE>
See Notes to Financial Statements
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<PAGE> 3
MAX & ERMA'S RESTAURANTS, INC.
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended Forty Weeks Ended
------------------ -----------------
August 6, August 7, August 6, August 7,
1995 1994 1995 1994
------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $15,130,904 $13,337,057 $48,677,607 $43,075,791
Games and Other 49,886 71,782 164,016 209,596
----------- ---------- ----------- -----------
Total Revenues 15,180,790 13,408,839 48,841,623 43,285,387
COSTS AND EXPENSES:
Cost of Goods Sold 3,864,388 3,446,576 12,676,782 11,157,522
Payroll and Benefits 4,601,477 4,117,178 14,654,709 13,185,718
Other Operating Expenses 4,549,696 3,925,312 14,477,724 12,842,837
Administrative Expenses 1,082,730 960,787 3,608,464 3,304,671
Interest Expense 287,763 206,298 915,069 620,371
Minority Interest In
Income of Affiliated
Partnerships 17,692 1,535 125,788 67,691
---------- ---------- ----------- -----------
Total Costs and Expenses 14,403,746 12,657,686 46,458,536 41,178,810
---------- ---------- ----------- -----------
INCOME BEFORE TAXES 777,044 751,153 2,383,087 2,106,577
INCOME TAXES 235,000 206,000 739,000 616,000
---------- ---------- ----------- -----------
NET INCOME $ 542,044 $ 545,153 $ 1,644,087 $ 1,490,577
========== ========== =========== ===========
NET INCOME PER
COMMON SHARE $ .13 $ .13 $ .39 $ .35
========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,265,279 4,332,336 4,266,265 4,208,961
========== =========== ============ ===========
</TABLE>
See Notes To Financial Statements.
-3-
<PAGE> 4
MAX & ERMA'S RESTAURANTS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Forty Weeks Ended
-----------------
August 6, August 7,
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,644,087 $ 1,490,577
Depreciation and Amortization 3,125,128 2,728,199
Minority interest in income of
affiliated partnerships 125,789 67,691
Changes in other assets and liabilities (393,728) 430,707
------------ ------------
Net cash provided by
operating activities 4,501,276 4,717,174
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property Additions (10,534,311) (5,777,813)
Construction cost reimbursement 275,000 200,000
Increase in other assets (175,384) (65,881)
Proceeds from sale of assets 4,424 5,650
----------- -----------
Net cash used by investing activities (10,430,271) (5,638,044)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under
long-term obligations (12,179,406) (12,568,486)
Proceeds from long-term obligations 18,337,565 13,670,362
Proceeds from sale of common stock 53,921 316,107
Cash paid for purchase of common stock (480,049)
Distributions to minority interests
in Affiliated Partnership (154,012) (115,509)
Cash paid in lieu of fractional
shares upon stock split (2,228)
----------- -----------
Net cash provided by
financing activities 5,575,791 1,302,474
----------- ------------
NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS (353,204) 381,604
CASH AND EQUIVALENTS
BEGINNING OF THE PERIOD 993,349 442,163
----------- -----------
CASH AND EQUIVALENTS AT
END OF THE PERIOD $ 640,145 $ 823,767
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 794,638 $ 554,379
Income taxes $ 812,700 $ 727,570
Noncash activities:
Property additions financed by
capital leases $ 1,107,256 $ 538,037
Property additions
financed by accounts payable $ 1,313,981 $ 224,198
Property additions financed by
the issuance of common stock $ 1,189,000
Tax benefit of stock options exercised
and sold within one year $ 72,640
Stock issued as a dividend $ 2,922,145
</TABLE>
See Notes to Financial Statements.
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<PAGE> 5
MAX & ERMA'S RESTAURANTS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Presentation
------------
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and include all of the
information and disclosures required by generally accepted accounting
principles for interim reporting, which are less than those required
for annual reporting. In the opinion of the management, all
adjustments consisting of only normal recurring accruals, considered
necessary for a fair presentation have been included.
The Company's year consists of one sixteen-week and three twelve-week
quarters.
2. Stock Dividend
--------------
Earnings per share and weighted average common equivalent shares
outstanding have been adjusted for the effect of a 10% stock
dividend payable April 21, 1995, to stockholders of record March
31, 1995.
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<PAGE> 6
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
REVENUE
- -------
Net sales for the third quarter of 1995 rose $1,794,000 or 13.5% from
the third quarter of 1994. The increase was a result of the opening of four
restaurants through the first three quarters of 1995 and an approximately 1.5%
menu price increase from last year to this year. The Company operated 30
restaurants at August 6, 1995 as compared to 26 at August 7, 1994.
Year-to-date net sales increased $5,602,000 or 13.0% from 1994 to 1995.
The increase was a result of the openings and price increases referred to
above, plus the opening of three restaurants during 1994.
During the third quarter and year-to-date periods of 1995, same-store
sales were up approximately 1.0% over the corresponding periods of 1994. The
increase was a result of the 1.5% price increase referred to above, which was
partially offset by a sharp drop in net sales at the Company's Cleveland
"Flats" location. During the quarter and for the year-to-date, this location
experienced sales declines of 27% and 17%,respectively, due to road and sewer
work which substantially closed access to the entire Flats area. Exclusive of
this location, same store sales rose 2.5% from the third quarter of 1994 to the
third quarter of 1995 and 1.7% for the year-to-date periods of 1994 to 1995.
Management is very optimistic about the outlook for the Cleveland "Flats"
location for various reasons. Completion of the road and sewer work is
expected to occur during the fourth quarter of 1995 and will coincide with the
opening of the Rock and Roll Hall of Fame nearby. A downtown Cleveland rail
system, which stops in front of the Company's Flats restaurant, is under
construction and should increase customer traffic into the Flats area. And
finally, during the first quarter of 1995, prior to commencement of the
construction, sales were up 8% over the first quarter of 1994, which is an
indication of the growing vitality of the downtown Cleveland market.
COSTS AND EXPENSES
- ------------------
Cost of goods sold, as a percentage of net sales, declined from 25.8% for
the third quarter of 1994 to 25.5% for the third quarter of 1995. Year-
to-date cost of goods sold, as a percentage of net sales, rose slightly from
25.9% in 1994 to 26.0% in 1995. The slight year-to-date increase was a result
of a sharp increase in produce prices to record levels during the second
quarter of 1995. Cost of sales declined during the third quarter of 1995, as
produce prices declined steadily during the quarter to below normal levels.
Payroll and benefits, as a percentage of net sales, decreased from 30.9%
for the third quarter of 1994 to 30.4% for the third quarter of 1995. Year-
to-date payroll and benefits, as a percentage of net sales, experienced a
similar decrease from 30.6% for 1994 to 30.1% for 1995. The decreases were
primarily a result of reduced benefit costs due to implementation of a self-
funded health insurance plan and lower workers' compensation insurance costs.
Other operating expenses, as a percentage of net sales, increased from
29.4% for the third quarter of 1994 to 30.1% for the third quarter of 1995.
-6-
<PAGE> 7
The increase was the result of the decline in net sales at the Cleveland
"Flats" restaurant and the opening of one restaurant during the third quarter
of 1995. Both these factors had the effect of increasing fixed costs as a
percentage of net sales. Year-to-date, other operating expenses, as a
percentage of net sales, declined slightly from 29.8% in 1994 to 29.7% in 1995.
ADMINISTRATIVE EXPENSES
- -----------------------
Administrative expenses increased 13% and 9%, respectively, from the third
quarter of 1994 to the third quarter of 1995 and for the year-to-date periods
of 1994 to 1995. Management expects growth in administrative expenses to
remain modest through the balance of 1995 and into 1996, as it believes the
personnel are generally in place to achieve the Company's growth plan.
Administrative expenses, as a percentage of net sales, remained constant at
7.2% for the third quarter of 1995 and 1994 and declined from 7.7% to 7.4% for
the year-to-date periods. With the planned addition of nine restaurants over
the next three quarters, management expects a further decline in administrative
expenses, as a percentage of net sales.
INTEREST EXPENSE
- ----------------
Interest expense increased 40% and 48%, respectively, from the third
quarter of 1994 to the third quarter of 1995 and for the year-to-date periods
of 1994 to 1995. The increase reflects an increase in the balance of long-term
obligations from the 1994 periods to the 1995 periods and an increase in
average interest rates from 8.0% at August 7, 1994, to 9.1% at August 6, 1995.
The Company capitalized approximately $184,000 of construction period interest
through the first 40 weeks of 1995 as compared to $52,000 capitalized during
the comparable 1994 period.
INCOME TAXES
- ------------
The Company's effective income tax rate for the comparable 40 week periods
increased from 29% in 1994 to 31% in 1995. The increase in the effective tax
rate from 1994 to 1995 is the result of the expiration of the targeted jobs tax
credit on December 31, 1994. However, tax credits are still available on
qualified employees hired on or before that date. The Company expects to
utilize all available credits during 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's working capital ratio remained constant at .4 to 1 at August
6, 1995 and October 30, 1994. Historically, the Company has been able to
operate with a working capital deficiency because 1) restaurant operations are
primarily conducted on a cash basis, 2) high turnover (about once every 10
days) permits a limited investment in inventory, and 3) trade payables for
food purchases usually become due after receipt of cash from the related sales.
Through the third quarter of 1995, the Company expended approximately
$10,534,000 for property additions of which $275,000 was reimbursed by a
landlord, $12,179,000 to reduce long-term obligations, $480,000 to repurchase
66,550 shares of its common stock and $175,000 to increase other assets and
distributed $154,000 to minority interests in the affiliated partnerships.
Funds for such expenditures were provided primarily by $18,338,000 from
proceeds of long-term obligations, $4,501,000 from operations, and $353,000
from cash on hand. The Company routinely draws down and repays balances under
its revolving credit agreement, the gross amounts of which are included in the
above numbers.
-7-
<PAGE> 8
At August 6, 1995, the Company was committed to the opening of three
additional restaurants during 1995, one of which opened August 14, 1995 in
Hoffman Estates, Illinois, a suburb of Chicago. At August 6, 1995, five
restaurants were under construction. Including Hoffman Estates, Illinois,
three of the five are scheduled to open through the end of 1995. A total of
eight restaurants are planned for 1996. In addition to two currently under
construction, four are under contract with construction expected to commence
during the fourth quarter of 1995. The Company is negotiating for the two
remaining 1996 locations.
Funding for new restaurants will be provided primarily by cash flow from
operations, equipment leasing and, to the extent necessary, the Company's
revolving credit line. At August 6, 1995, the Company had approximately $5.4
million available under its $12.0 million revolving credit line and
approximately $3,500,000 under equipment lease commitments.
PART II - OTHER INFORMATION
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits
The exhibits listed in the accompanying index to exhibits on page
10 are filed as part of this report.
(b) Reports on Form 8-K
None
-8-
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAX & ERMA'S RESTAURANTS, INC.
--------------------------------------------
Registrant
Todd B. Barnum
--------------------------------------------
Todd B. Barnum
Chairman of the Board
(Chief Executive Officer)
William C. Niegsch, Jr.
--------------------------------------------
William C. Niegsch, Jr.
Executive Vice President &
Chief Financial Officer
August 31, 1995
- ---------------------
Date
-9-
<PAGE> 10
MAX & ERMA'S RESTAURANTS INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page No.
- ----------- ------- --------
<S> <C> <C>
2 Not applicable
4 (a) Form of Common Stock Certificate
(incorporated by reference to
Registration Statement on
Form S-1, No. 2-85585)
4 (b) Form of Common Stock Purchase
Warrant (incorporated by
reference to Registration
Statement on Form S-1,
No. 2-85585)
11 Not applicable
15 Not applicable
18 Not applicable
19 Not applicable
20 Not applicable
23 Not applicable
24 Not applicable
25 Not applicable
27 Financial Data Schedule
28 Not applicable
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-30-1994
<PERIOD-START> OCT-31-1994
<PERIOD-END> AUG-06-1995
<CASH> 640,145
<SECURITIES> 0
<RECEIVABLES> 239,538
<ALLOWANCES> 0
<INVENTORY> 483,029
<CURRENT-ASSETS> 1,920,479
<PP&E> 50,820,372
<DEPRECIATION> 14,336,879
<TOTAL-ASSETS> 41,546,242
<CURRENT-LIABILITIES> 5,366,236
<BONDS> 20,986,251
<COMMON> 409,669
0
0
<OTHER-SE> 14,635,572
<TOTAL-LIABILITY-AND-EQUITY> 41,546,242
<SALES> 48,677,607
<TOTAL-REVENUES> 48,841,623
<CGS> 12,676,782
<TOTAL-COSTS> 41,809,215
<OTHER-EXPENSES> 3,734,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 915,069
<INCOME-PRETAX> 2,383,087
<INCOME-TAX> 739,000
<INCOME-CONTINUING> 1,644,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,644,087
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
