UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -------------------------------------------------------------------------
FORM 10-Q
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(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 number: 0-11104
NOBLE ROMAN'S, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1281154
(State or other (I.R.S. Employer
jurisdiction of organization) Identification No.)
One Virginia Avenue, Suite 800
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
(317) 634-3377
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of November 13, 1996, there were 4,131,324 shares of Common Stock, no par
value, outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following condensed consolidated financial statements are included herein:
Condensed consolidated balance sheets as of December 31, 1995
and September 30, 1996 Page 3
Condensed consolidated statements of operations for the nine and three
months ended September 30, 1995 and 1996 Page 4
Condensed consolidated statements of cash flows for the nine and three
months ended September 30, 1995 and 1996 Page 5
The interim condensed consolidated financial statements included herein
reflect all adjustments which are, in the opinion of management, necessary
for a fair statement of the results for the interim periods presented, which
adjustments are of a normal recurring nature.
<PAGE>
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
(Unaudited)
December 31 September 30
1995 1996
------------- ----------
<S> <C> <C>
Assets
Current assets:
Cash $ 229,462 $ 127,448
Accounts receivable 950,622 988,733
Inventories 980,534 1,063,463
Prepaid expenses 412,949 761,583
------------- ----------
Total current assets 2,573,567 2,941,227
Property and equipment, less
accumulated depreciation and
amortization of $3,737,594
and $4,321,110 9,135,949 9,304,355
Costs in excess of assets
acquired, net 6,722,812 6,527,327
Other assets 1,471,387 1,634,761
------------- ----------
$ 19,903,715 $20,407,670
------------- ----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and
accrued expenses $ 3,230,003 $ 3,689,364
Notes payable - current 761,128 1,750,000
------------- ----------
Total current liabilities 3,991,131 5,439,364
Long-term liabilities:
Revolving line of credit 2,914,919 4,000,000
Notes payable-less current portion 8,150,793 7,435,765
Capital leases 258,037 103,652
------------- ----------
Total long-term liabilities 11,323,749 11,539,417
Stockholders' equity
Common stock, no par value,
authorized 9,000,000 shares,
issued 4,131,324 and 4,131,324 5,458,431 5,458,431
Retained earnings (869,596) (2,029,542)
------------- ----------
Total stockholder's equity 4,620,835 3,428,889
------------- ----------
$ 19,903,715 $20,407,670
------------- ----------
</TABLE>
<PAGE>
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
Nine Months Ended Three Months Ended
September 30 September 30
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Restaurant revenue $24,384,749 $25,207,049 $ 8,561,058 $ 8,346,239
Royalties 171,950 154,599 55,733 56,180
Administrative fees and other 305,692 173,148 111,020 30,647
----------- -------- ---------- ----------
Total revenue 24,862,391 25,534,796 8,727,811 8,433,066
Restaurant operating expenses:
Cost of revenue 4,481,613 4,805,084 1,620,356 1,496,318
Salaries and wages 7,650,428 8,245,459 2,704,038 2,763,536
Rent 2,028,361 2,248,265 695,357 758,388
Advertising 1,620,499 1,556,715 561,988 416,961
Other 5,703,978 6,171,920 2,008,569 2,096,904
Depreciation and amortization 863,978 893,036 297,273 297,292
General and administrative 1,385,058 1,807,121 428,956 614,153
Cost of attempted acquisition and
equity offering 768,389
----------- -------- ---------- ----------
Operating income 1,128,477 (961,193) 411,275 (10,486)
Interest and other expense 884,244 1,199,233 300,812 436,591
----------- -------- ---------- ----------
Income (loss) before income taxes 244,233 (2,160,426) 110,463 (477,077)
Income taxes 82,234 (756,149) 30,192 (156,477)
----------- ------- ---------- ----------
Net income (loss) before loss
on discontinued operations 161,999 (1,404,277) 80,271 (290,600)
Loss on discontinued operations 48,750
----------- --------- ---------- -----------
Net income (loss) $161,999 $(1,453,027) $ 80,271 $ (290,600)
----------- ------- ---------- ----------
Net income (loss) per share
before discontinued operations $ .04 $ (.34) $ .02 $ (.07)
----------- -------- --------- -----------
Net income (loss) per share $ .04 $ (.35) $ .02 $ (.07)
----------- -------- --------- ------------
Weighted average number of
common shares outstanding 3,996,336 4,131,324 3,997,992 4,131,324
</TABLE>
<PAGE>
Noble Roman's and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
Nine Months Ended
September 30
-------------------------------------------
1995 1996
-------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 161,999 $(1,453,027)
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 1,001,728 982,124
Changes in operating assets
and liabilities (increase) decrease in:
Accounts receivable (143,758) (38,311)
Inventory (212,046) (82,929)
Prepaid expenses (207,151) (348,634)
Other assets 10,000 (249,975)
Increase (decrease) in:
Accounts payable and accrued expenses 761,338 459,361
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,372,110 (731,391)
INVESTING ACTIVITIES
Purchase of fixed assets (1,824,326) (696,060)
Payments received on
notes receivable 1,023 --
---------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,823,303) (696,060)
FINANCING ACTIVITIES
Proceeds from borrowing 371,002 1,585,081
Proceeds from sale of common stock 17,510 --
Principal payments on long-term debt
and capital lease obligations (253,388) (259,644)
---------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (135,124) 1,325,437
---------- -----------
INCREASE (DECREASE) IN CASH (316,069) (102,014)
Cash at beginning of period 621,726 229,462
---------- -----------
Cash at end of period $ 305,657 $ 127,448
---------- -----------
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Noble Roman's, Inc. and Subsidiaries
Results of Operations - Nine month and three month periods ended September
30, 1995 and 1996
The following table sets forth the percentage relationship to total revenue
of the listed items included in Noble Roman's consolidated statement of
operations. Certain items are shown as a percentage of restaurant revenue.
<TABLE>
Nine Months Ended Three Months Ended
September 30 September 30
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Restaurant revenue 98.1% 98.7% 98.1% 99.0%
Royalties .7 .6 .6 .7
Administrative fees and other 1.2 .7 1.3 .4
-------- -------- -------- --------
100.0 100.0 100.0 100.0
Restaurant operating expenses (1):
Cost of revenue 18.4 19.1 18.9 17.9
Salaries and wages 31.4 32.7 31.6 33.1
Rent 8.3 8.9 8.1 9.1
Advertising 6.6 6.2 6.6 5.0
Other 23.4 24.5 23.5 25.1
Depreciation and amortization 3.5 3.5 3.4 3.5
General and administrative 5.6 7.1 4.9 7.3
Loss from withdrawn acquisition and offering -- 3.0 -- --
-------- -------- -------- --------
Operating income 4.5 (3.8) 4.7 (.1)
Interest 3.6 4.7 3.4 5.2
-------- -------- -------- --------
Income before federal income taxes 1.0% (8.5%) 1.3% (5.7%)
(1) As a percentage of restaurant revenue
</TABLE>
Total revenue increased 2.7% in the nine months and decreased 3.4% in the
three months ended September 30, 1996. The increase for the nine month period
was primarily attributable to revenue at the two new restaurants opened after
the third quarter in 1995 and the two new restaurants opened during 1996. The
reason for the decline in the three month period ended September 30, 1996 was
because same store net sales declined by 6.6% which was partially offset by the
additional restaurants.
Cost of revenue as percentage of restaurant revenue increased from 18.4% in
the first nine months of 1995 to 19.1% in the same period in 1996 and declined
from 18.9% to 17.9% in the three month period ended September 30, 1995 and
1996, respectively. The increase for the nine month period was primarily
the result of increased cheese prices and a 25th Anniversary price rollback
promotion in April, 1996 and the reason for the decrease in the three month
period was primarily a menu price increase. Salaries and wages increased as
a percentage of restaurant revenue from 31.4% and 31.6% for the nine and
three month periods ended September 30, 1995 compared to 32.7% and 33.1%
in the same periods in 1996. The increase was attributable to a higher
average hourly wage and to inefficient scheduling of hourly employees, both
of which were the result of senior management's focus on an acquisition during
the first six months of 1996 and salary percentage was higher due to same store
declines. Other expenses increased as a percentage of revenue from 23.4% and
23.5% in the nine and three month periods ended in 1995 to 24.5% and 25.1%
in the same periods in 1996. This increase was primarily attributable
to the lack of execution of the operating controls as a result of the
Company's senior management being focused on an acquisition which was
subsequently withdrawn.
<PAGE>
General and administrative expenses as a percentage of total revenue
increased from 5.6% and 4.9% during the nine and three month periods ended
September 30, 1995 to 7.1% and 7.3% in the same periods in l996. This
increase as a percentage of total revenue was primarily attributable to
increasing the supervisory staff by one person and to training and hiring
expense to upgrade the quality of restaurant level management and supervisory
personnel. The Company has hired and trained three new and experienced
supervisors and many new management personnel during the most recent quater.
Operating income decreased from $1,128 thousand and $411 thousand in the
nine and three month periods ended September 30, 1995 to ($961 thousand) and
($10 thousand) in the same periods in 1996. Operating income decreased
because of the poor operating controls discussed in the three previous
paragraphs and because of the $768 thousand cost incurred in the second
quarter 1996 for an acquisition and equity offering which was abandoned
in June, 1996.
Interest expense increased from $884 thousand and $301 thousand for the nine
and three month periods ended September 30, 1995 to $1,199 thousand and
$437 thousand in the same periods in 1996. This increase is the result of a
higher interest rate on the Company's debt as a result of the refinancing in
December, 1995 in order to repay notes which had a short term maturity and
because of an increase in the amount of outstanding debt.
Income before federal income taxes decreased from $244 thousand and $110
thousand for the nine and three month periods ended September 30, 1995 to
($2,160 thousand) and ($477 thousand) in the same periods in 1996. This
decrease was primarily attributable to the attempted acquisition of a 180
restaurant pizza chain and the withdrawal of that attempt which
resulted in cost directly attributable to that effort and to the
inefficiencies in the Company's operations as a result of senior
management's focus and time involvement in that acquisition.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the $768 thousand spent on the attempted acquisition of 180
restaurants located in Boston, Massachusetts and surrounding areas and
the poor operating results in the last two quarters as a result
of the Company's attempted acquisition and of senior management's time and
focus on that acquisition, the Company is in technical default of the terms
of its senior credit facility as the Company is out of compliance with the
various financial covenants and has a shortage of working capital. The third
quarter results were much improved over the second quarter and management
believes the Company will again be profitable in the fourth quarter of 1996.
Management of the Company has had ongoing discussions with representatives of
the Bank which provides the senior credit facility regarding restructuring the
credit facility to meet the current needs. The Company has requested the Bank
to increase its credit facility by $2.2 million and to revise the various
financial covenants contained in the credit facility agreement. Representatives
of the Bank have demonstrated a desire to work with the Company and management
believes the Company will reach agreement with the Bank for such restructuring
within the next few days on terms which it believes are fair to both the
Company and the Bank.
Management believes that cash generated from future operations will be
sufficient to meet its needs provided the existing credit facility is
restructured as discussed in the previous paragraph.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is involved in litigation relating to claims
arising out of its normal business operations. The Company believes that
none of its current proceedings, individually or in the aggregate, will have
a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
As a result of the $768 thousand spent on the attempted acquisition of 180
restaurants located in Boston, Massachusetts and surrounding areas and the poor
operating results in the last two quarters as a result of the Company's
attempted acquisition and of senior management's time and focus on that
acquisition, the Company is in technical default of the terms of its senior
credit facility as the Company is out of compliance with the various
financial covenants and has a shortage of working capital. The third quarter
results were much improved over the second quarter and management believes the
Company will again be profitable in the fourth quarter of 1996.
Management of the Company has had ongoing discussions with representatives of
the Bank which provides the senior credit facility regarding restructuring
the credit facility to meet the current needs. The Company has requested the
Bank to increase its credit facility by $2.2 million and to revise the
various financial covenants contained in the credit facility agreement.
Representatives of the Bank have demonstrated a desire to work with the
Company and management believes the Company will reach agreement with the Bank
for such restructuring within the next few days on terms which it believes are
fair to both the Company and the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule
<PAGE>
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.
NOBLE ROMAN'S, INC.
Date: November 15, 1996 By: /s/ Paul W. Mobley
-------------------------
Paul W. Mobley, President
(Principal Executive Officer
and Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000709005
<NAME> NOBLE ROMAN'S, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 127,448
<SECURITIES> 0
<RECEIVABLES> 1,088,733
<ALLOWANCES> (100,000)
<INVENTORY> 1,063,463
<CURRENT-ASSETS> 2,941,227
<PP&E> 13,625,465
<DEPRECIATION> (4,321,110)
<TOTAL-ASSETS> 20,407,670
<CURRENT-LIABILITIES> 5,439,364
<BONDS> 13,289,417
0
0
<COMMON> 5,458,431
<OTHER-SE> (2,029,542)
<TOTAL-LIABILITY-AND-EQUITY> 20,407,670
<SALES> 25,207,049
<TOTAL-REVENUES> 25,534,796
<CGS> 4,805,084
<TOTAL-COSTS> 18,222,359
<OTHER-EXPENSES> 3,468,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,199,233
<INCOME-PRETAX> (2,160,426)
<INCOME-TAX> (756,149)
<INCOME-CONTINUING> (1,404,277)
<DISCONTINUED> (48,750)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,453,027)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
