SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended April 23, 1995 Commission File
Number 1-8881
SBARRO, INC.
(Exact name of registrant as specified in its Charter)
NEW YORK 11-2501939
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
763 Larkfield Road, Commack, New York 11725
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (516)864-0200
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 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 at May 26, 1995
Common Stock, $.01 par value 20,333,481<PAGE>
SBARRO, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGES
Consolidated Financial Statements:
Balance Sheets - April 23, 1995 (unaudited)
and January 1, 1995 . . . . . . . . . . . . . . . . . . 3-4
Statements of Income (unaudited) - Sixteen
Weeks ended April 23, 1995 and April 24, 1994. . . . . . .5
Statements of Cash Flows (unaudited) - Sixteen
Weeks ended April 23, 1995 and April 24, 1994. . . . . .6-7
Notes to Unaudited Consolidated Financial
Statements - April 23, 1995. . . . . . . . . . . . . . . .8
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 9-11
PART II. OTHER INFORMATION. . . . . . . . . . . . . . 12
Pg. 2<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
April 23, January 1,
1995 1995
(unaudited)
Current assets:
Cash and cash equivalents $37,743 $42,362
Marketable securities 22,332 27,033
Receivables:
Franchisees 479 445
Other 1,900 2,270
2,379 2,715
Inventories 2,532 2,792
Prepaid expenses 3,051 1,570
Total current assets 68,037 76,472
Marketable securities 10,014 11,585
Property and equipment, net 139,969 140,709
Other assets:
Deferred charges, net of accumulated
amortization of $1,913,000 at
April 23, 1995 and $1,548,000 at
January 1, 1995 1,942 1,874
Other 1,254 1,411
3,196 3,285
$221,216 $232,051
(continued)
Pg. 3<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands)
April 23, January 1,
1995 1995
(unaudited)
Current liabilities:
Accounts payable $5,516 $6,375
Accrued expenses 14,889 18,711
Dividend payable 3,253
Income taxes 965 4,862
Total current liabilities 21,370 33,201
Deferred income taxes 19,446 19,270
Shareholders' equity:
Preferred stock, $1 par value;
authorized 1,000,000 shares;
none issued
Common stock, $.01 par value;
authorized 40,000,000 shares;
issued and outstanding
20,333,481 shares at April 23,
1995 and 20,328,981 shares at
January 1, 1995 203 203
Additional paid-in capital 30,139 30,066
Retained earnings 150,058 149,311
180,400 179,580
$221,216 $232,051
See notes to unaudited consolidated financial statements
Pg. 4<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
For the sixteen weeks ended:
April 23, April 24,
1995 1994
Revenues:
Restaurant sales $82,285 $75,418
Franchise related income 1,510 1,452
Interest income 812 541
Total revenues 84,607 77,411
Costs and expenses:
Cost of food and paper products 18,033 16,347
Restaurant operating expenses:
Payroll and other employee
benefits 22,632 19,757
Occupancy and other 24,909 21,616
Depreciation and amortization 6,925 6,307
General and administrative 5,085 3,916
Other income (460) (563)
Total costs and expenses 77,124 67,380
Income before income taxes 7,483 10,031
Income taxes 2,873 3,862
Net income $4,610 $6,169
Per share data:
Earnings per common and common
equivalent share $0.23 $0.30
Weighted average number of
shares used in the
computation 20,332,356 20,298,426
See notes to unaudited consolidated financial statements
Pg. 5<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
For the sixteen weeks ended:
April 23, April 24,
1995 1994
Operating activities:
Net income $4,610 $6,169
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,925 6,307
Provision for deferred income
taxes 176 151
Changes in operating assets
and liabilities:
Decrease (increase) in
receivables 336 (710)
Decrease in inventories 260 265
Increase in prepaid expenses (1,481) (1,707)
Increase in deferred charges (433) (400)
Decrease (increase) in other
assets 95 (118)
Decrease in accounts payable
and accrued expenses (4,681) (4,850)
Decrease in income taxes
payable (3,897) (2,238)
Net cash provided by operating
activities 1,910 2,869
Investing activities:
Proceeds from disposition of
marketable securities 10,022 519,252
Purchases of marketable securities (3,750) (521,485)
Purchases of property and equipment (5,758) (11,424)
Net cash provided by (used in)
investing activities 514 (13,657)
(continued)
Pg. 6<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(In thousands)
For the sixteen weeks ended:
April 23, April 24,
1995 1994
Financing activities:
Proceeds from exercise of stock
options 73 65
Cash dividends paid (7,116) (5,955)
Net cash used in financing
activities (7,043) (5,890)
Decrease in cash and cash
equivalents (4,619) (16,678)
Cash and cash equivalents
at beginning of period 42,362 33,305
Cash and cash equivalents
at end of period $37,743 $16,627
Supplemental disclosure of cash
flow information:
Cash paid during the period
for income taxes $6,549 $5,650
See notes to unaudited consolidated financial statements
Pg. 7<PAGE>
SBARRO, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. The accompanying unaudited consolidated financial
statements have been prepared in accordance with the
instructions for Form 10-Q and Regulation S-X related
to interim period financial statements and, therefore,
do not include all information and footnotes required
by generally accepted accounting principles. However,
in the opinion of management, all adjustments
(consisting of normal recurring adjustments and
accruals) considered necessary for a fair presentation
of the consolidated financial position of the Company
and its subsidiaries at April 23, 1995 and their
consolidated results of operations and cash flows for
the sixteen weeks ended April 23, 1995 and April 24,
1994 have been included. The results of operations for
the interim periods are not necessarily indicative of
the results that may be expected for the entire year.
Reference should be made to the annual financial
statements, including footnotes thereto, included in
the Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1995.
2. All share and per share data have been adjusted to give
effect to a 3-for-2 stock split in the form of a 50%
stock dividend distributed on September 22, 1994.
Pg. 8<PAGE>
SBARRO, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The Company's business is subject to seasonal
fluctuations, the effects of weather and economic
conditions. Earnings have been highest in its fourth
quarter due primarily to increased traffic in shopping malls
during the holiday shopping season. Normally, the fourth
fiscal quarter accounts for approximately 40% of net income
for the year. In each of 1993 and 1994, the fourth quarter
accounted for approximately 39% of the full year's net
income. The length of the holiday shopping period between
Thanksgiving and Christmas and the number of weeks in the
fourth quarter can produce changes in the fourth quarter
earnings relationship from year to year.
The following table provides information
concerning the number of Company-owned and franchised
restaurants in operation during each indicated period:
16 Weeks 16 Weeks
Ended Ended Fiscal Year
04/23/95 04/24/94 1994 1993
Company-owned restaurants:
Opened during period 14 8 53 59
Acquired from (sold to)
franchisees during
period-net - - 2 7
Closed during period (2) (2) (3) (7)
Open at end of period 579 521 567 515
Franchised restaurants:
Opened during period 9 7 38 24
Purchased from (sold to)
Company during period-net - - (2) (7)
Closed or terminated
during period - (6) (8) (14)
Open at end of period 171 135 162 134
All restaurants:
Opened during period 23 15 91 83
Closed or terminated
during period (2) (8) (11) (21)
Open at end of period 750 656 729 649
In addition, franchisees operate seven kiosk/cart units.
Pg. 9<PAGE>
Restaurant sales from Company-owned units increased 9.1% to
$82,285,000 for the sixteen weeks ended April 23, 1995 from
$75,418,000 for the sixteen weeks ended April 24, 1994.
This increase resulted primarily from an increase in the
number of units in operation during the sixteen weeks ended
April 23, 1995, and a .7% increase (from $75,087,000 in 1994
to $75,591,000 in 1995) in comparable unit sales. In March
1995, the Company selectively increased menu prices by less
than 1%. In as much as these menu price increases were
instituted in the later part of the quarter, they did not
materially affect the comparison of sales to the prior
year's quarter. Comparable restaurant sales are made up of
sales at locations that were open during the entire current
period and prior fiscal year.
Franchise related income increased 4.0% to $1,510,000 for
the sixteen weeks ended April 23, 1995 from $1,452,000 for
the sixteen weeks ended April 24, 1994. This increase
resulted from higher royalties due principally to a larger
number of franchise units in operation in 1995.
Interest income increased to $812,000 for the sixteen weeks
ended April 23, 1995 from $541,000 for the sixteen weeks
ended April 24, 1994. This increase was primarily due to
larger amounts of cash invested and higher investment yields
on invested cash and marketable securities in the current
period over the comparable period in 1994.
Cost of food and paper products as a percentage of
restaurant sales increased to 21.9% for the sixteen weeks
ended April 23, 1995 from 21.7% for the sixteen weeks ended
April 24, 1994. This increase was primarily a result of
higher paper product and certain food ingredient prices
offset somewhat by lower cheese prices.
Restaurant operating expenses - payroll and other employee
benefits increased to 27.5% for the sixteen weeks ended
April 23, 1995 from 26.2% of restaurant sales for the period
ended April 24, 1994. This increase is primarily due to the
higher cost of providing benefits to employees. Restaurant
operating expenses - occupancy and other increased to 30.3%
of restaurant sales from 28.7% for the same periods,
respectively. This increase is principally attributable to
rent and lease related charges which increased at a faster
rate than sales.
Depreciation and amortization expenses increased to
$6,925,000 for the sixteen weeks ended April 23, 1995 from
$6,307,000 for the sixteen weeks ended April 24, 1994 as a
Pg. 10<PAGE>
result of the number of additional Company-owned units in
operation during the sixteen weeks ended April 23, 1995 over
the number of units in operation during the comparable
period in fiscal 1994.
For the sixteen weeks ended April 23, 1995, general and
administrative expenses were $5,085,000 or 6.0% of total
revenues, compared to $3,916,000 or 5.1% of total revenues
in the sixteen weeks ended April 24, 1994. The dollar
increase was primarily a result of a provision of $200,000
for the closing of two stores, and increased costs
associated with supervising and administering the additional
restaurants in operation and adding management level
personnel.
The effective income tax rate for the sixteen weeks ended
April 23, 1995 and April 24, 1994 was 38.4% and 38.5%,
respectively.
Liquidity and Capital Resources
At April 23, 1995, the Company had cash, cash equivalents
and marketable securities of approximately $70,089,000 and
its working capital was approximately $46,667,000. Cash
provided by operations for the sixteen weeks ended April 23,
1995 of $1,910,000 and a portion of the available working
capital was used to purchase restaurant property and
equipment of $5,758,000 and to pay two quarterly dividends
aggregating $7,116,000. The Company believes, based on
current projections, that its liquid assets presently on
hand, together with cash generated from operations, should
be sufficient for its presently contemplated operations,
dividends and the purchase of property and equipment
relating to its development of restaurants, as well as
renovating and equiping the Company's new headquarters
building.
Dividends
On February 23, 1995, the Company increased its quarterly
dividend to $.19 per share, or an aggregate annual rate of
$.76 per share. This dividend was paid on April 5, 1995 to
shareholders of record on March 21, 1995, and amounted to
$3,863,361.
On May 25, 1995, the Company declared a quarterly cash
dividend of $.19 per share. The cash dividend will be paid
on July 6, 1995 to shareholders of record on June 21, 1995.
Pg. 11<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
At the Company's 1995 Annual Meeting of Shareholders held on
May 24, 1995, shareholders:
(a) Elected the following to serve as Class 3 directors
until the Company's 1998 Annual Meeting of Shareholders and
until their respective successors are elected and qualified,
by the following vote:
For Withheld
Mario Sbarro 18,459,082 178,056
Thomas J. Sandleitner 18,295,082 342,056
Bernard Zimmerman 18,407,784 229,354
(b) Ratified the action of the Board of Directors in
appointing Arthur Andersen LLP as the Company's independent
public accountants for the Company's fiscal year ending
December 31, 1995, by the following vote:
For Against Abstain Non-Votes
18,602,158 13,091 21,889 0
Item 5. Other Information
During the first quarter of fiscal 1995, the Company
entered into a joint venture arrangement with two
unaffiliated third parties for the purpose of developing and
testing, in two to three locations, a steakhouse restaurant
concept. The Company has a 40% interest in the joint
venture and expects that its capital investment in this
venture initially will not exceed $1,200,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K during the quarter
of the period covered by this Report. Subsequent to the end
of the quarter, the Company filed Reports on Form 8-K dated
(date of earliest event reported): (i) May 1, 1995 reporting
under Item 5, Other events and Item 7, Financial Statements
and Exhibits, which reported on a press release covering
preliminary results for the first quarter of 1995 and (ii)
May 9, 1995, reporting under Item 5, Other events, which
reported that a shareholder had instituted a lawsuit against
the Company and certain officers which seeks class action
status. No financial statements were filed with those
reports.
Pg. 12<PAGE>
SIGNATURE
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.
SBARRO, INC.
Registrant
Date: June 5, 1995 By: /s/ Mario Sbarro
Mario Sbarro
Chairman of the Board
Date: June 5, 1995 By: /s/ Robert S. Koebele
Robert S. Koebele
Vice President-Finance
Pg. 13<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-START> JAN-02-1995
<PERIOD-END> APR-23-1995
<CASH> $37,743
<SECURITIES> $22,332
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0
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<OTHER-SE> $180,197
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