<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
For Quarter Ended: Commission File Number
April 19, 1995 0-14370
BUFFETS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1462294
(State of incorporation) (I.R.S. Employer Identification No.)
10260 Viking Drive, Suite 100, Eden Prairie, MN 55344
(Address of principal executive offices)
(612) 942-9760
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Class Outstanding as of May 19, 1995
----- ------------------------------
Common Stock, $.01 par value 31,047,731 shares
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets-
December 28, 1994 and April 19, 1995 . . . . . . 3
Consolidated Statements of Earnings-
Sixteen Weeks ended April 20, 1994
and April 19, 1995 . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows-
Sixteen Weeks ended April 20, 1994 and
April 19, 1995 . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . .10
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 28, APRIL 19,
ASSETS 1994 1995
----------- --------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $ 6,822 $ 9,073
Receivable from landlords . . . . . . . . . . . . . . 4,291 2,476
Inventory . . . . . . . . . . . . . . . . . . . . . . 2,438 2,920
Notes receivable. . . . . . . . . . . . . . . . . . . 133 83
Other current assets. . . . . . . . . . . . . . . . . 1,587 2,077
Deferred income taxes . . . . . . . . . . . . . . . . 5,249 5,707
-------- --------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . 20,520 22,336
-------- --------
PROPERTY AND EQUIPMENT:
Land. . . . . . . . . . . . . . . . . . . . . . . . . 3,936 4,801
Building. . . . . . . . . . . . . . . . . . . . . . . 8,013 11,875
Equipment . . . . . . . . . . . . . . . . . . . . . . 141,261 150,549
Leasehold improvements. . . . . . . . . . . . . . . . 95,852 101,825
-------- --------
249,062 269,050
Less accumulated depreciation and amortization. . . . 65,962 72,947
-------- --------
183,100 196,103
GOODWILL, net of accumulated amortization of $1,046 and
$1,113, respectively . . . . . . . . . . . . . . . . . . 4,319 4,252
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . 587 549
-------- --------
$208,526 $223,240
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . $ 21,757 $ 20,317
Accrued payroll and related benefits. . . . . . . . . 10,308 11,140
Accrued rents . . . . . . . . . . . . . . . . . . . . 7,685 7,255
Accrued sales taxes . . . . . . . . . . . . . . . . . 1,998 2,714
Other accrued expenses. . . . . . . . . . . . . . . . 6,584 7,960
Income taxes. . . . . . . . . . . . . . . . . . . . . 356 1,451
-------- --------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . 48,688 50,837
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . 7,000 12,000
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES . . . . . . 544 582
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . 10,772 10,930
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 5,000 shares;
none issued and outstanding
Common stock, $.01 par value; authorized 60,000 shares;
issued and outstanding 30,939 and
31,006 shares, respectively. . . . . . . . . . . . 309 310
Additional paid-in capital. . . . . . . . . . . . . . 49,158 49,717
Retained earnings . . . . . . . . . . . . . . . . . . 92,055 98,864
-------- --------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . 141,522 148,891
-------- --------
$208,526 $223,240
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
----------------------
APRIL 20, APRIL 19,
1994 1995
-------- --------
(in thousands, except per share amounts)
<S> <C> <C>
RESTAURANT SALES . . . . . . . . . . . . . $112,488 $142,090
RESTAURANT COSTS:
Food Costs . . . . . . . . . . 38,507 49,832
Labor Costs . . . . . . . . . 30,794 40,505
Direct and occupancy costs . . 25,134 32,623
-------- --------
Total restaurant costs . . . . 94,435 122,960
-------- --------
RESTAURANT PROFITS . . . . . . . . . . . . 18,053 19,130
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . . . . . . 8,183 8,214
-------- --------
9,870 10,916
OTHER INCOME (EXPENSE) . . . . . . . . . . 174 66
-------- --------
EARNINGS BEFORE INCOME TAXES . . . . . . . 10,044 10,982
INCOME TAXES . . . . . . . . . . . . . . 4,020 4,173
-------- --------
NET EARNINGS . . . . . . . . . . . . . . $ 6,024 $ 6,809
-------- --------
-------- --------
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE . . . . . . . . . $.19 $.22
-------- --------
-------- --------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING . . . . . . . . . . . . . . 31,994 31,156
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
---------------------------
APRIL 20, APRIL 19,
1994 1995
---------- ----------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 6,024 $ 6,809
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 5,519 7,173
Tax benefit from early disposition of common stock . . 670 37
Deferred income taxes . . . . . . . . . . . . . . . . . 423 (300)
Changes in assets and liabilities:
Inventory . . . . . . . . . . . . . . . . . . . . . . (223) (482)
Other current assets . . . . . . . . . . . . . . . . (451) (440)
Other assets . . . . . . . . . . . . . . . . . . . . (52) 44
Accounts payable . . . . . . . . . . . . . . . . . . 1,328 (1,440)
Accrued payroll and related benefits . . . . . . . . 1,057 832
Other accrued expenses . . . . . . . . . . . . . . . 1,616 1,662
Income taxes currently payable . . . . . . . . . . . 425 1,095
------- -------
Total adjustments . . . . . . . . . . . . . . . . 10,312 8,181
------- -------
Net cash provided by operating activities . . . . 16,336 14,990
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . (15,387) (21,797)
Cash received from landlords. . . . . . . . . . . . . 2,627 3,535
------- -------
Net cash used in investing activities . . . . . . (12,760) (18,262)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of employees' stock options . 1,045 523
Borrowing under long-term debt. . . . . . . . . . . . 5,000
------- -------
Net cash (used in) provided by
financing activities. . . . . . . . . . . . . . . 1,045 5,523
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . 4,621 2,251
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . 12,193 6,822
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . $16,814 $ 9,073
------- -------
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized interest of $12,000 and
$175,000 in 1994 and 1995, respectively). . . . . . . $ 1 $ 0
Income taxes . . . . . . . . . . . . . . . . . . . . 2,502 3,341
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of Buffets, Inc. and subsidiaries as of April 19,
1995 and the results of operations and cash flows for the sixteen weeks
ended April 20, 1994 and April 19, 1995.
2. These statements should be read in conjunction with the Notes to Financial
Statements contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1994 and with Management's Discussion and
Analysis of Financial Condition and Results of Operations appearing on
pages 7 thru 9 of this quarterly report.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company operates on a fifty-two or fifty-three week fiscal year, which
ends on the Wednesday nearest December 31. The Company's first quarter consists
of sixteen weeks; all other quarters are comprised of twelve weeks. When a
fifty-three week year occurs, the Company's fourth quarter consists of thirteen
weeks.
RESULTS OF OPERATIONS
SIXTEEN WEEKS ENDED APRIL 19, 1995
RESTAURANT SALES. Restaurant sales of $142.1 million during the first sixteen
weeks of 1995 represented a 26.3% increase over sales of $112.5 million for the
comparable period of 1994, primarily due to sales generated by new restaurants.
Seventeen new restaurants opened in the first quarter of 1995, bringing the
total number of Company-owned restaurants to 225 at the end of the quarter,
compared to 179 restaurants open at the end of the 1994 period. Average weekly
sales per restaurant for the first sixteen weeks of 1995 increased slightly by
1.1% from the comparable period of 1994. The seventeen new restaurants opened
during the quarter generated average weekly sales of $56,843, well above the
Company average. Comparable restaurant sales were down 2.0% for the comparable
periods. The Company's price increases have been nominal.
RESTAURANT COSTS. As a percentage of restaurant sales, total restaurant costs
increased to 86.5% for the first sixteen weeks of 1995 from 84.0% for the first
sixteen weeks of 1994. Food costs as a percentage of restaurant sales increased
to 35.1% from 34.2%, due primarily to increases in the cost of bakery and
dessert items and vegetables; labor costs increased to 28.5% from 27.4% due to
increased training and staffing of hourly employees coinciding with the
Company's introduction of a new customer service program in the first quarter of
1995. The Company anticipates food and labor costs to be higher than 1994
throughout 1995 due to the customer service program. Direct and occupancy costs
increased to 22.9% from 22.4%, due to increases in various restaurant costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of restaurant sales decreased to 5.8% in
the first sixteen weeks of 1995 from 7.3% in the first sixteen weeks of 1994.
Expenses in absolute terms increased only $21,000 for the first sixteen weeks of
1995 from the comparable period of 1994, primarily as a result of increases in
training and opening costs due to the opening of seventeen new restaurants
during the first quarter of 1995 compared to five during
7
<PAGE>
the first quarter of 1994, offset by a $1.4 million decrease in advertising
expense. Advertising costs as a percentage of restaurant sales for the period
decreased to .3% in 1995 from 1.6% in 1994. The Company expects to hold
advertising expenditures to less than 1% of restaurant sales through the
remainder of the current year.
INCOME TAXES. Income taxes were 38.0% of earnings before taxes for the first
sixteen weeks of 1995, compared to 40.0% for the first sixteen weeks of 1994,
resulting from lower effective tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company has an unsecured $40 million revolving line of credit. The
Company is required to pay a quarterly commitment fee equal to 1/4 of 1% per
annum of the unused balance. On May 1, 1997, providing no default or event of
default has occurred and is continuing, the line of credit is convertible, at
the Company's option, to a three year term loan, maturing on April 30, 2000.
As of April 19, 1995, the Company had borrowings of $12 million outstanding
under this credit line.
The Company continues to require substantial amounts of capital to fund its
growth. The Company currently expects to open approximately 35 to 40 new
restaurants during 1995, with 18 already opened at May 25, 1995. The Company
expects to spend an aggregate of approximately $33 to $43 million during the
remainder of 1995 on its restaurants being opened in 1995 and an additional $15
to $20 million in 1995 for restaurants that are not expected to open until early
1996, depending on the level of contributions obtained from landlords for
leasehold improvements and the amount of land purchased for freestanding
buildings. The Company expects to spend approximately $10 to $15 million during
1995 and 1996 remodeling restaurants to include an improved bakery/dessert area.
The Company anticipates that, as it further pursues the development of
freestanding locations, the cost per location and related cash requirements will
increase substantially over prior years and these costs will not be offset by
landlord contributions that typically have been associated with strip mall
locations. The capital expenditure required for a freestanding location can be
over 100% greater than for a mall location. The Company estimates that 25% of
1995 new locations will be purchased freestanding units, and that another 25%
will be freestanding leased units. Sources of capital for these restaurant
development and remodeling projects are anticipated to be funds provided by
operations, credit received from trade suppliers, landlord contributions to
leasehold improvements and current bank financing. The Company believes that
these sources
8
<PAGE>
will be adequate to finance operations and the additional restaurants and
remodeling costs included in the Company's restaurant development plans for the
next twelve months. However, in order to remain prepared for further
significant growth in future years, the Company will continue to evaluate its
financing needs and seek additional funding if appropriate.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No material developments.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
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
a) Exhibits
(27) Financial Data Schedule
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
sixteen weeks ended April 19, 1995.
10
<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.
BUFFETS, INC.
(Registrant)
Date: May 25, 1995
/s/ Roe H. Hatlen
---------------------------
Roe H. Hatlen
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ Clark C. Grant
----------------------------
Clark C. Grant
Executive Vice President of
Finance and Administration
and Treasurer
(Principal Financial
Officer)
/s/ Marguerite C. Nesset
----------------------------
Marguerite C. Nesset
Vice President and
Controller(Principal
Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibits Page
-------- ----
27 Financial Data Schedule ......................... Filed Electronically
____________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF APRIL 19, 1995 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE PERIOD ENDED APRIL 19, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JAN-03-1996
<PERIOD-START> DEC-29-1994
<PERIOD-END> APR-19-1995
<CASH> 9,073
<SECURITIES> 0
<RECEIVABLES> 2,476
<ALLOWANCES> 0
<INVENTORY> 2,920
<CURRENT-ASSETS> 22,336
<PP&E> 269,050
<DEPRECIATION> 72,947
<TOTAL-ASSETS> 223,240
<CURRENT-LIABILITIES> 50,837
<BONDS> 12,000
<COMMON> 310
0
0
<OTHER-SE> 148,581
<TOTAL-LIABILITY-AND-EQUITY> 223,240
<SALES> 142,090
<TOTAL-REVENUES> 142,090
<CGS> 49,832
<TOTAL-COSTS> 122,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> 10,982
<INCOME-TAX> 4,173
<INCOME-CONTINUING> 6,809
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,809
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
