______________________________________________________________________
______________________________________________________________________
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 July 12, 1998
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 August 12, 1998
Common Stock, $.01 par value 20,528,309
______________________________________________________________________
______________________________________________________________________<PAGE>
SBARRO, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGES
Consolidated Financial Statements:
Balance Sheets - July 12, 1998 (unaudited) and
December 28, 1997 . . . . . . . . . . . . . . . . . . . . . 3-4
Statements of Income (unaudited) - Twenty-Eight
Weeks ended July 12, 1998 and July 13, 1997 and Twelve
Weeks ended July 12, 1998 and July 13, 1997 . . . . . . . . .5-7
Statements of Cash Flows (unaudited) - Twenty-Eight
Weeks ended July 12, 1998 and July 13, 1997 . . . . . . . . .8-9
Notes to Unaudited Consolidated Financial
Statements - July 12, 1998 . . . . . .. . . . . . . . . . . 10-11
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 12-16
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . 17
Pg. 2<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
July 12, 1998 December 28, 1997
(unaudited)
Current assets:
Cash and cash equivalents $115,527 $119,810
Marketable securities 7,500 7,500
Receivables:
Franchisees 1,018 810
Other 2,167 1,565
3,185 2,375
Inventories 2,661 2,962
Prepaid expenses 4,808 1,768
Total current assets 133,681 134,415
Property and equipment, net 138,600 136,798
Other assets 5,974 7,436
$278,255 $278,649
(continued)
Pg. 3<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands)
July 12, 1998 December 28, 1997
(unaudited)
Current liabilities:
Accounts payable $9,412 $10,086
Accrued expenses 22,933 26,025
Dividend payable - 5,521
Income taxes 191 4,777
Total current liabilities 32,536 46,409
Deferred income taxes 10,962 11,801
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
20,528,309 shares at July 12,
1998 and 20,446,654 shares at
December 28, 1997 205 204
Additional paid-in capital 34,516 32,444
Retained earnings 200,036 187,791
234,757 220,439
$278,255 $278,649
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 twenty-eight weeks ended:
July 12, 1998 July 13, 1997
Revenues:
Restaurant sales $174,028 $165,098
Franchise related income 4,154 3,296
Interest income 2,545 2,271
Total revenues 180,727 170,665
Costs and expenses:
Cost of food and paper products 36,423 33,798
Restaurant operating expenses:
Payroll and other employee
benefits 46,899 43,099
Occupancy and other 52,985 49,347
Depreciation and amortization 11,725 12,418
General and administrative 10,367 9,261
Provision for unit closings 1,525 -
Terminated transaction costs 986 -
Other income (1,259) (835)
Total costs and expenses 159,651 147,088
Income before income taxes and
cumulative effect of change in
method of accounting for
start-up costs 21,076 23,577
Income taxes 8,009 8,959
Income before cumulative effect
of accounting change 13,067 14,618
Cumulative effect of change in
method of accounting for
start-up costs, less
income taxes of $504 (822) -
Net income $12,245 $14,618
(continued)
Pg. 5<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
For the twenty-eight weeks ended:
July 12, 1998 July 13, 1997
Per share information:
Net income per share:
Basic:
Income before accounting change $.64 $.72
Accounting change (.04) -
Net income $.60 $.72
Diluted:
Income before accounting change $.63 $.71
Accounting change (.04) -
Net income $.59 $.71
Shares used in computing net income
per share:
Basic 20,507,204 20,413,183
Diluted 20,606,707 20,525,199
See notes to unaudited consolidated financial statements
Pg. 6<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
For the twelve weeks ended:
July 12, 1998 July 13, 1997
Revenues:
Restaurant sales $75,897 $72,839
Franchise related income 1,848 1,503
Interest income 1,099 959
Total revenues 78,844 75,301
Costs and expenses:
Cost of food and paper products 15,755 14,863
Restaurant operating expenses:
Payroll and other employee
benefits 20,348 18,845
Occupancy and other 23,093 21,539
Depreciation and amortization 5,055 5,381
General and administrative 4,403 4,119
Provision for unit closings 1,525 -
Terminated transaction costs 986 -
Other income (559) (305)
Total costs and expenses 70,606 64,442
Income before income taxes 8,238 10,859
Income taxes 3,131 4,126
Net income $ 5,107 $ 6,733
Per share information:
Net income per share:
Basic:
Net income $.25 $.33
Diluted:
Net income $.25 $.33
Shares used in computing net
income per share:
Basic 20,526,633 20,428,711
Diluted 20,605,477 20,599,676
See notes to unaudited consolidated financial statements
Pg. 7<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
For the twenty-eight weeks ended:
July 12, 1998 July 13, 1997
Operating activities:
Net income $12,245 $14,618
Adjustments to reconcile net
income to net cash provided
by operating activities:
Cumulative effect of change
in method of accounting
for start-up costs 822 -
Depreciation and amortization 11,725 12,418
Deferred income taxes (335) (183)
Provision for unit closings 1,525 -
Changes in operating assets
and liabilities:
Increase in receivables (810) (86)
Decrease in inventories 301 156
Increase in prepaid expenses (3,040) (3,223)
Increase in other assets (70) (1,481)
Decrease in accounts payable
and accrued expenses (2,852) (2,625)
Decrease in income taxes
payable (4,586) (4,696)
Net cash provided by operating
activities 14,925 14,898
Investing activities:
Proceeds from maturities of
marketable securities - 2,500
Purchases of property and equipment (15,760) (14,792)
Net cash used in investing activities (15,760) 12,292)
(continued)
Pg. 8<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(In thousands)
For the twenty-eight weeks ended:
July 12, 1998 July 13, 1997
Financing activities:
Proceeds from exercise of
stock options 2,073 1,077
Cash dividends paid (5,521) (15,719)
Net cash used in
financing activities (3,448) (14,642)
Decrease in cash and cash
equivalents (4,283) (12,036)
Cash and cash equivalents
at beginning of period 119,810 104,818
Cash and cash equivalents
at end of period $115,527 $92,782
Supplemental disclosure
of cash flow information:
Cash paid during the period
for income taxes $13,841 $13,763
See notes to unaudited consolidated financial statements
Pg. 9<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 July 12, 1998 and their
consolidated results of operations for the twenty-eight and
twelve weeks ended July 12, 1998 and July 13, 1997 have been
included. The results of operations for the interim periods
are not necessarily indicative of 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 December 28, 1997.
2. The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants has issued
Statement of Position (SOP) 98-5 which requires companies
that capitalize pre-opening and similar costs to write off
all existing such costs, net of tax benefit, as a
``cumulative effect of accounting change'' and to expense
all such costs as incurred in the future. In accordance
with its early application provisions, the Company has
implemented the SOP as of the beginning of its 1998 fiscal
year.
3. The provisions of Statement of Financial Accounting
Standards (``SFAS'') No. 128, ``Earnings Per Share'' became
effective as to the Company for the quarter and year ended
December 28, 1997. SFAS No. 128 requires the presentation
of both basic and diluted earnings per share on the face of
the income statement. The number of shares of common stock
subject to stock options included in diluted earnings per
share were 99,503 and 78,844 for the twenty-eight and twelve
weeks ended July 12, 1998, respectively, and 171,441 and
112,016 for the twenty-eight and twelve weeks ended July 13,
1997, respectively. As required by SFAS 128, all prior
period amounts have been restated to conform to the new
presentation.
Pg. 10<PAGE>
SBARRO, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (continued)
4. In the first quarter of 1998, the Company adopted SFAS 130,
``Reporting Comprehensive Income'' which establishes new
rules for the reporting of comprehensive income and its
components. The adoption of this statement had no impact on
the Company's net income or shareholders' equity. For the
twenty-eight weeks and twelve weeks ended July 12, 1998 and
July 13, 1997, the Company's operations did not give rise to
items includible in comprehensive income which were not
already included in net income. Therefore, the Company's
comprehensive income is the same as its net income for all
periods presented.
5. Following the Company's announcement of a proposal for the
merger of the Company with a company to be owned by members
of the Sbarro Family, seven lawsuits were instituted against
the Company, certain directors and/or members of the Sbarro
Family. Certain of the actions have been consolidated and
all are presently pending in Suffolk County, New York.
While each of the complaints varies, in general, they allege
a breach of fiduciary duties by the directors and members of
the Sbarro Family, that the proposed price per share to be
paid to public shareholders is inadequate and that the
proposal serves no legitimate business purpose of the
Company. Although varying, the complaints seek, generally,
a declaration of class action status, damages in unspecified
amounts alleged to be caused to the plaintiffs, and other
relief (including injunctive relief, rescission if the
transaction is consummated, and rescissory damages), costs
and disbursements, including a reasonable allowance for
counsel fees and expenses. To date, the actions have not as
yet been discontinued despite the fact that negotiations
with regard to the proposed transaction were terminated in
June 1998.
On June 18, 1997, an action entitled Kenneth Hoffman and
Gloria Curtis, on behalf of themselves and all others
similarly situated v. Sbarro, Inc., was filed in the United
States District Court for the Southern District of New York.
The plaintiffs, former restaurant level management
employees, allege that the Company required general managers
and co-managers to reimburse the Company for cash and
certain other shortages sustained by the Company and thereby
lost their status as managerial employees exempt from the
overtime compensation provisions of the Fair Labor Standards
Act (the ``FLSA''). The plaintiffs seek unpaid overtime
compensation, as well as liquidated damages in an amount
equal to any overtime compensation awarded, reasonable
attorney's fees, costs and expenses. The plaintiffs seek
Pg. 11<PAGE>
SBARRO, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (continued)
such further and general legal and/or equitable relief to
which they may be entitled. The action also seeks to join
similarly situated past and present employees in the
lawsuit. The Company believes that it has substantial
defenses to the claims, including that it has availed itself
of a ``window of correction'' which, the Company believes,
under applicable regulations of the FLSA and court
decisions, preserves employees' exempt status and, thus,
precludes any overtime liability. On October 22, 1997, the
Court granted plaintiffs' request to send notices to
determine whether similarly situated past and present
employees of the Company wished to join the lawsuit. In
response to these notices, 191 individuals have elected to
join the lawsuit. The Company intends to continue
vigorously defending this action.
Pg. 12<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 1997, the
fourth fiscal quarter accounted for 38% of net income for the year before a
provision for unit closings. The length of the holiday shopping period
between Thanksgiving and Christmas, the number of weeks in the fourth
quarter and other factors 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:
28 Weeks 28 Weeks 12 Weeks 12 Weeks
Ended Ended Ended Ended Fiscal Year
7/12/98 7/13/97 7/12/98 7/13/97 1997 1996
Company-owned restaurants:
Opened during period 15 14 5 3 30 29
Acquired from (sold to)
franchisees during
period-net 1 1 - 1 4 1
Closed during period (13) (5) (7) (3) (8) (4)
Open at end of period * 626 607 626 607 623 597
Franchised restaurants:
Opened during period 15 17 6 10 47 36
Purchased from (sold to)
Company during
period-net (1) (1) - (1) (4) (1)
Closed or terminated
during period (6) (19) (2) (7) (23) (16)
Open at end of period 247 216 247 216 239 219
All restaurants:
Opened during period 30 31 11 13 77 65
Closed or terminated
during period (19) (24) (9) (10) (31) (20)
Open at end of period * 873 823 873 823 862 816
Kiosks (all franchised)
open at end of period 9 7 9 7 7 7
_______________
* Included are joint venture mall
locations which operate as Umberto
of New Hyde Park 5 5 5 5 5 3
Pg. 13<PAGE>
Restaurant sales from Company-owned and consolidated joint
venture units increased 5.4% to $174,028,000 for the twenty-eight
weeks ended July 12, 1998 and increased 4.2% to $75,897,000 for
the twelve weeks ended July 12, 1998. These increases resulted
primarily from a higher number of units in operation during both
periods of the current fiscal year. An increase of .9% in
comparable restaurant sales also contributed to the increase in
restaurant sales for the twenty-eight week period. Comparable
restaurant sales for the twelve-week period were relatively
unchanged. Comparable unit sales for the twenty-eight week
period were $161,035,000 and for the twelve week period were
$69,523,000. Selective menu price increases of approximately .7%
at Company-owned units became effective in mid February 1998.
Comparable unit sales are made up of sales at locations that were
open during the entire current and prior fiscal year.
Franchise related income increased 26.0% to $4,154,000 for the
twenty-eight weeks ended July 12, 1998 from $3,296,000 for the
twenty-eight weeks ended July 13, 1997, and increased 23.0% to
$1,848,000 for the twelve weeks ended July 12, 1998 from
$1,503,000 for the twelve weeks ended July 13, 1997. These
increases resulted from greater continuing royalties due to a
larger number of franchise units in operation in 1998 and an
increase in initial franchise and development fees due to opening
more international franchise units in the 1998 periods than in
the comparable periods in 1997. Comparable sales at franchise
locations decreased .1% for the twenty-eight week period ended
July 12, 1998 and decreased .9% for the twelve weeks ended July
12, 1998, compared to the similar periods in 1997.
Interest income increased to $2,545,000 for the twenty-eight
weeks ended July 12, 1998 from $2,271,000 for the comparable
period last year. Interest income increased to $1,099,000 for
the twelve weeks ended July 12, 1998 from $959,000 for the
comparable period of the prior year. These increases were due to
larger amounts of cash being invested in the current periods over
the comparable periods in 1997. Interest rates were comparable
in the periods reported.
Cost of food and paper products as a percentage of restaurant
sales increased to 20.9% for the twenty-eight weeks ended July
12, 1998 from 20.5% for the twenty-eight weeks ended July 13,
1997, and to 20.8% for the twelve weeks ended July 12, 1998 from
20.4% for the twelve weeks ended July 13, 1997. The increased
cost was principally due to higher cheese prices during 1998,
which increased food costs by approximately $655,000 and $325,000
for the twenty-eight and twelve weeks ended July 12, 1998,
respectively. Cheese prices increased in the middle of the
fourth quarter of fiscal 1997, decreased toward the end of the
first quarter of 1998 but increased significantly throughout the
second quarter of 1998. Current cheese prices remain higher than
those in the comparable prior year period.
Restaurant operating expenses - payroll and other employee
benefits increased to 26.9% of restaurant sales for the twenty-
Pg. 14<PAGE>
eight weeks ended July 12, 1998 from 26.1% for the twenty-eight
weeks ended July 13, 1997 and increased to 26.8% for the twelve
weeks ended July 12, 1998 from 25.9% for the twelve weeks ended
July 13, 1997. These percentage increases were attributable to
the $539,000 and $244,000 payroll and benefit component of start-
up costs incurred and expensed during the twenty-eight and twelve
weeks ended July 12, 1998, respectively, under Statement of
Position 98-5 of the American Institute of Certified Public
Accountants (the ``SOP'') implemented by the Company in the
quarter (which expenses in prior years' quarters would have been
capitalized and charged to amortization expense over a two year
period), as well as higher costs of providing benefits to
employees and, to a lesser extent, the effects of the increase in
the Federal minimum wage which became effective in September
1997. Restaurant operating expenses - occupancy and other
expenses increased to 30.4% of restaurant sales for the twenty-
eight weeks ended July 12, 1998 from 29.9% for the twenty-eight
weeks ended July 13, 1997 and increased to 30.4% for the twelve
weeks ended July 12, 1998 from 29.6% for the twelve weeks ended
July 13, 1997. These increases are attributable to the overall
cost of non-payroll operating expenses (principally rent and
other landlord charges) which increased at a higher rate than the
sales increase in the comparable periods of 1997.
Depreciation and amortization expense for the twenty-eight and
twelve weeks of 1998 were approximately $693,000 and $326,000
lower than the same periods in 1997 principally as the result of
the absence of amortization of previously capitalized start-up
costs which, as discussed below, were fully written off as of the
beginning of the year with the implementation of the SOP. Had
the Company not implemented the SOP, it would have incurred
additional amortization expenses of $531,000 and $206,000 for the
twenty-eight and twelve weeks ended July 12, 1998 and July 13,
1997, respectively. The balance of the decrease relates to the
absence of depreciation and amortization in 1998 on certain older
units and also to the closing of certain Company-owned units.
General and administrative expenses were $10,367,000 or 5.7% of
total revenues for the twenty-eight weeks ended July 12, 1998
compared to $9,261,000 or 5.4% of total revenues for the twenty-
eight weeks ended July 13, 1997. General and administrative
expenses were $4,403,000 or 5.6% of total revenues for the twelve
weeks ended July 12, 1998 compared to $4,119,000 or 5.5% for the
twelve weeks ended July 13, 1997. The increase, which occurred
principally in the sixteen weeks ended April 19, 1998, was
primarily due to higher costs associated with the administration
of additional Company-owned restaurants, additional supervisory,
administrative and travel expenses related to increased
international franchising activities and the $449,000 and
$196,000 general and administrative expense component of start-up
costs incurred and expensed during the twenty-eight and twelve
Pg. 15<PAGE>
weeks ended July 12, 1998, respectively, under the SOP (which
expenses in prior years' quarters would have been capitalized and
charged to amortization expense over a two year period).
Results for the twelve and twenty-eight weeks ended July 12, 1998
include provisions of $1,525,000 before tax ($946,000 after tax
or $.05 basic and diluted earnings per share) for the closing of
certain Company-owned restaurants and $986,000 before tax
($611,000 after tax or $.03 basic and diluted earnings per share)
for the costs associated with the terminated negotiations of a
proposed acquisition by members of the Sbarro family of all the
shares of the Company not owned by them.
The effective income tax rate was 38.0% for both the twenty-eight
and twelve weeks ended July 12, 1998 and July 13, 1997.
The cumulative effect of the change in method of accounting
resulted from the Company's implementation of the SOP which
requires companies that have capitalized pre-opening and similar
costs to write off all existing such costs, net of tax benefit,
as a ``cumulative effect of accounting change'' and to expense
all such costs as incurred in the future. In accordance with its
early application provisions, the Company implemented the SOP as
of the beginning of its 1998 fiscal year. In addition to on-
going start-up costs incurred and expenses during the quarter
with respect to restaurant operating expenses - payroll and other
employee benefits and general and administrative expenses, the
Company incurred a one-time charge during the sixteen weeks ended
April 19, 1998 of $822,000 (net of an income tax benefit of
$504,000) to write-off all start-up costs existing as of the
beginning of the year.
Liquidity and Capital Resources
During the twenty-eight weeks ended July 12, 1998, operating
activities contributed $14,925,000 to cash flow resulting
primarily from net income of $12,245,000, non-cash expenses of
$11,725,000 for depreciation and amortization, $822,000 for the
one time charge as a result of the change in the method of
accounting for start-up costs pursuant to the SOP and a
$1,525,000 provision for unit closings, offset, in part, by an
increase in prepaid expenses of $3,040,000, a decrease of
$2,852,000 in accounts payable and accrued expenses from their
peak year-end balances and a decrease in income taxes payable of
$4,586,000. During the twenty-eight weeks ended July 12, 1998,
the Company expended approximately $15,760,000 for the
acquisition of property and equipment related primarily to the
opening of 15 Company-owned restaurants, the Company's share of
construction costs related to consolidated joint venture
operations and the renovation of the Company's new headquarters
building. In addition, $5,521,000 was used to pay, in early
1998, the quarterly cash dividend declared in late 1997 to the
Pg. 16
Company's shareholders (see ``Dividends''). At July 12, 1998,
the Company had cash and cash equivalents and marketable<PAGE>
securities of approximately $123,027,000 and its working capital
was approximately $101,145,000. The Company believes, based on
current projections, that its liquid assets presently on hand,
together with funds expected to be generated from operations,
should be sufficient for its presently contemplated operations,
the investment in property and equipment for the opening of
additional restaurant locations, and the completion of the
renovation and equipping of the Company's new headquarters
building.
Dividends
The Company's Board of Directors deferred consideration of the
Company's first two 1998 quarterly cash dividends pending
consideration of the transaction that had been proposed by
members of the Sbarro Family. The proposal was conditioned upon,
among other things, the suspension of dividends by the Company.
Following the termination of that proposed transaction, the
Company's Board of Directors determined to consider various
strategic alternatives for the benefit of all shareholders. As
part of the overall process, the Board of Directors has
determined to continue the suspension of cash dividends and did
not declare a dividend for the third quarter of fiscal 1998. The
Board will consider the payment of cash dividends in the overall
context of its decision on implementing a strategic alternative.
Year 2000
The Company does not believe, based upon its internal reviews and
other factors, that future external and internal costs to be
incurred relating to the modification of internal-use software
for the Year 2000 will have a material effect on the Company's
results of operations or financial position. In addition, the
Company has addressed the Year 2000 issue with its principal
suppliers and has been assured that they will be timely Year 2000
compliant.
Forward Looking Statement
Certain statements contained in this Report are forward-looking
statements which are subject to a number of known and unknown
risks and uncertainties that could cause the Company's actual
results and performance to differ materially from those described
or implied in the forward-looking statements. These risks and
uncertainties, many of which are not within the Company's
control, include, but are not limited to, general economic,
weather and business conditions; the availability of suitable
Pg. 17
restaurant sites in appropriate regional shopping malls and other
locations on reasonable rental terms; changes in consumer tastes;
changes in population and traffic patterns; the Company's ability<PAGE>
to continue to attract franchisees; the success of its present,
and any future, joint ventures and other expansion opportunities;
the availability of food (particularly cheese and tomatoes) and
paper products at reasonable prices; no material increase
occurring in the Federal minimum wage; and the Company's ability
to continue to attract competent restaurant and executive
managerial personnel.
Pg. 18<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
At the Company's 1998 Annual Meeting of Shareholders held on
August 19, 1998, shareholders:
(a) Elected the following to serve as Class 3 Directors until
the Company's Annual Meeting of Shareholders to be held in the
year 2001 and until their respective successors are elected and
qualified, by the following votes:
For Withheld
Mario Sbarro 16,656,842 2,422,172
Carmela Sbarro 16,061,621 3,017,393
Bernard Zimmerman 16,331,994 2,747,020
(b) A proposal to authorize an amendment to the Company's By-
laws with respect to the minimum size of the Company's Board of
Directors received the following vote:
For Against Abstain
13,342,360 5,689,339 47,315
Authorization of the proposal required the affirmative vote
of 13,685,539 shares (two-thirds of the Company's outstanding
shares) of Common Stock. Accordingly, the proposed By-law
amendment was not authorized.
(c) 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 January 3, 1999,
by the following vote:
For Against Abstain
18,856,049 209,383 13,582
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K.
Current Reports on Form 8-K filed by the Company during the
twelve weeks ended July 12, 1998 were reports dated (date of
earliest event reported): May 28, 1998 and June 17, 1998, each
reporting under Item 5, Other Events, and Item 7, Financial
Statements, Pro Forma Financial Information and Exhibits. No
financial statements were filed with any of the reports.
Pg. 19<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: August 21, 1998 By: MARIO SBARRO
Mario Sbarro
Chairman of the Board and President
Date: August 21, 1998 By: ROBERT S. KOEBELE
Robert S. Koebele
Vice President-Finance
Pg. 20<PAGE>
EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule<PAGE>
EXHIBIT 27<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JUL-12-1998
<CASH> 115,527
<SECURITIES> 7,500
<RECEIVABLES> 3,185
<ALLOWANCES> 0
<INVENTORY> 2,661
<CURRENT-ASSETS> 133,681
<PP&E> 294,644
<DEPRECIATION> 156,044
<TOTAL-ASSETS> 278,255
<CURRENT-LIABILITIES> 32,536
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 234,552
<TOTAL-LIABILITY-AND-EQUITY> 278,255
<SALES> 174,028
<TOTAL-REVENUES> 180,727
<CGS> 36,423
<TOTAL-COSTS> 83,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,076
<INCOME-TAX> 8,009
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (822)
<NET-INCOME> 12,245
<EPS-PRIMARY> 0.600
<EPS-DILUTED> 0.590
</TABLE>
