SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934.
For the quarterly period ended March 19, 1995
--------------
Commission File Number 0-14650
RUDY'S RESTAURANT GROUP, INC.
Nevada 88-0210808
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11900 Biscayne Blvd., Suite 806, Miami, FL 33181
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(305) 895-7200
--------------
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
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 June 2, 1995
----------------------- ---------------------------
Common Stock, par value 3,520,000
$.01 per share
PAGE
<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 19, 1995
and October 2, 1994 1
Consolidated Statements of Operations -
Twenty-four weeks ended March 19, 1995 and
March 20, 1994 2
Consolidated Statements of Cash Flows -
Twenty-four weeks ended March 19, 1995 and
March 20, 1994 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 1: Legal Proceedings 9
PAGE
<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
<TABLE>
<S> <C> <C>
3/19/95 10/2/94
Current Assets: ------------ -----------
Cash and cash equivalents $ 946,141 $ 341,477
Accounts receivable 2,032 8,113
Inventories 163,858 153,222
Prepaid expenses 69,299 103,779
------------ -----------
Total current assets 1,181,330 606,591
------------ -----------
Property and Equipment, net 2,015,879 2,076,434
Goodwill, net of accumulated amortization
of $298,148 at March 19, 1995 and
$288,464 at October 2, 1994 540,951 550,635
Intangible and other assets 204,940 204,401
------------ ------------
$ 3,943,100 $ 3,438,061
============ ============
<CAPTION> LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Due to related parties $ 102,343 $ 100,000
Accounts payable and accrued expenses 764,213 692,774
------------ ------------
Total current liabilities 866,556 792,774
------------ ------------
Commitments, contingencies and related
party transactions
Stockholders' Equity:
Preferred stock, $.01 par value. Authorized
10,000,000 shares, none issued.
Common stock, $.01 par value. Authorized
30,000,000 shares; issued and outstanding
3,520,000 shares. 35,200 35,200
Paid-in capital 17,823,603 17,823,603
Accumulated (deficit) (14,782,259) (15,213,516)
------------ ------------
Net stockholders' equity 3,076,544 2,645,287
------------ ------------
$ 3,943,100 $ 3,438,061
============ ============
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> Page 1<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
(unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Twelve Weeks Ended Twenty-four Weeks Ended
3/19/95 3/20/94 3/19/95 3/20/94
----------- ---------- ----------- -----------
Total Revenues $2,721,248 $1,979,298 $5,171,779 $3,797,518
Costs and expenses applicable
to revenues 1,437,825 1,016,218 2,762,292 1,957,880
Restaurant operating expenses 754,083 622,174 1,505,775 1,225,171
Depreciation and amortization 51,013 22,957 124,400 45,915
----------- ---------- ----------- -----------
Earnings from restaurant
operations 478,327 317,949 779,312 568,552
Administrative expenses 135,137 142,420 258,070 271,957
Interest expense 1,684 9,422 3,358 26,805
Other (expense) income (1,227) 71,589 (1,227) (324,208)
----------- ---------- ----------- -----------
Income (Loss) before
income taxes 340,279 237,696 516,657 (54,418)
Income taxes 58,900 13,600 85,400 18,700
----------- ---------- ----------- -----------
Net income (loss) $ 281,379 $ 224,096 $ 431,257 $ (73,118)
=========== ========== =========== ===========
Net income (loss) per common
and common equivalent share$ .08 $ .06 $ .12 $ (.02)
=========== ========== =========== ===========
Average number of common and
common equivalent shares 3,709,853 3,680,541 3,703,704 3,680,541
=========== ========== =========== ===========
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
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RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<S> <C> <C>
Twenty-four Weeks Ended
3/19/95 3/20/94
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 431,257 $ (73,118)
Non-cash items:
Depreciation and amortization 139,004 74,064
Loss on retirement of assets 1,227 ---
Changes in assets and liabilities:
Decrease in due from affiliate --- 15,596
Increase in indebtedness to related parties 2,343 454,297
Decrease/(Increase) in accounts receivable 6,081 (275)
(Increase)in inventories (10,636) (11,032)
Decrease in prepaid expenses 34,480 43,099
Increase/(Decrease) in accounts payable and
accrued expenses 71,439 (131,374)
Decrease in deferred income --- (170,129)
---------- ----------
Total adjustments 243,938 274,246
---------- ----------
Net cash provided by operating activities 675,195 201,128
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfers of proceeds from insurance recovery
of property losses from restricted cash escrow --- 415,121
Capital expenditures (67,162) (989,871)
Principal received on note receivable --- 58,571
Purchases of other assets (3,369) (13,094)
---------- ----------
Net cash (used in) investing activities (70,531) (529,273)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under note payable --- (8,571)
---------- ----------
Net cash (used in) financing activities --- (8,571)
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents 604,664 (336,716)
Cash and Cash Equivalents, October 2, 1994
and October 3, 1993, respectively 341,477 513,021
---------- ----------
Cash and Cash Equivalents, March 19, 1995
and March 20, 1994, respectively $ 946,141 $ 176,305
========== ==========
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> Page 3<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Financial Statement Presentation
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K
for the year ended October 2, 1994. Certain amounts included herein for the
twenty-four weeks ended 3/20/94 have been restated to reflect changes
effective with Form 10-K as of 10/2/94.
The accompanying financial statements have not been examined by independent
accountants in accordance with generally accepted auditing standards, but
in the opinion of management, such financial statements include all adjust-
ments, consisting of only normal recurring accruals, necessary to summarize
fairly the financial position of Rudy's Restaurant Group, Inc. and
Subsidiaries (the "Company") as of March 19, 1995 and the results of
operations for the twenty-four weeks ended March 19, 1995 and March 20,
1994. The results of operations for the period ended March 19, 1995 are not
necessarily indicative of the results to be expected for the full year.
BUSINESS. Rudy's Restaurant Group, Inc. (the "Company"), is a Nevada
corporation which, through its wholly-owned subsidiaries, owns and operates
six Japanese-style steak and seafood restaurants. The Company owns 100% of
the stock of The Samurai, Inc. ("The Samurai"), Maxwell's International
Inc. ("Maxwell's") and Rudy's Sirloin Steakburgers, Inc. ("Rudy's").
INCOME (LOSS) PER SHARE. Income (loss) per share is calculated using the
weighted average number of shares of common stock outstanding and common
stock equivalents if dilutive.
Note 2: Contingencies
In May 1995 the Company's Samurai subsidiary and certain employees of The
Samurai were served with a lawsuit alleging discrimination under the Civil
Rights Act of 1870, 42 U.S.C. 1981, as amended (1992 Supp). The lawsuit
seeks various remedies including monetary damages of $800,000. Management
believes that the claims as set forth in this complaint are without merit
and intends to vigorously defend the allegations made against The Samurai
and its employees. The significance of the complaint and its ultimate
effect on the operations and financial condition of the Company cannot be
determined at this time.
<PAGE> PAGE 4<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
---------------------
SECOND QUARTER 1995 COMPARED TO SECOND QUARTER 1994
BUSINESS OVERVIEW. The Company's Miami Samurai restaurant, destroyed by
Hurricane Andrew in August 1992, reopened in March 1994. Thus revenues,
expenses and earnings in fiscal 1995 include the operations of six
restaurants as compared to five restaurants in fiscal 1994. Certain
discussion and analysis herein is presented as "same-restaurant" for an
accurate understanding of the Company's current operations.
Although costs and expenses rose, improved sales and reductions in
restaurant operating expenses resulted in a $57,000 increase in net income
in the second quarter fiscal 1995 to $281,000, $.08 per share, as compared
to $224,000, $.06 per share in the second quarter fiscal 1994.
REVENUES. Total revenues increased $742,000, 37.5%, including sales at the
Miami restaurant. Same-restaurant sales increased 5.9%, including a 4.4%
increase in customer traffic. The balance of the increase in sales is the
result of both higher menu prices and a change in customer eating habits to
higher priced menu items.
Because of the limited number and diverse geographic location of its
restaurants, it is not economically beneficial for the Company to use
extensive mass-media advertising available to larger restaurant companies.
In addition to being highly competitive, the restaurant industry is
affected by changes in the public's eating habits and local and national
economic conditions. Therefore, management believes the increase in
revenues in 1995 does not necessarily represent a trend but rather
parallels economic conditions in the areas in which the Company's
restaurants are located.
COSTS AND EXPENSES APPLICABLE TO REVENUES.
PERCENT OF REVENUES
COSTS AND EXPENSES: FY 1995 FY 1994 Change
------------------- ----------------------------
Food, beverage and supplies 29.5% 28.8% .7%
Labor and related costs 23.3% 22.5% .8%
----------------------------
52.8% 51.3% 1.5%
============================
While food, beverage and supplies costs rose .7% when compared to revenues,
on a per customer served basis these costs rose 4.6%. Substantially all of
the increase in food, beverage and supplies costs is attributable to
increases in the cost of the major components of the Company's foods costs,
including an average 18.8% increase in the cost of seafood and an average
increase in the cost of meat of over 11%. The cost of meat, chicken and
seafood changes with market supply and demand. Current market conditions
indicate that these costs will continue to increase in the third quarter
1995.
<PAGE> PAGE 5<PAGE>
Labor costs increased .8% to 23.3% in the second quarter 1995 as compared
to 22.5% in 1994. Although a portion of the increase in labor costs is
attributable to the high cost of labor at the Miami restaurant, labor costs
have risen as a result of increases in base wage rates at other locations
to meet local prevailing wage scales. Management expects labor costs to
remain at current levels or increase as the economy improves making higher
base wage rates necessary to retain qualified personnel.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses include
restaurant management and supervision, occupancy costs, repairs and
maintenance, utilities, advertising and property and liability insurance.
These expenses increased in the second quarter fiscal 1995 due to the
addition of the Miami operations. Same-restaurant expenses as a percent of
revenues declined 1.8% in the second quarter 1995 as compared to the second
quarter 1994 due to improved cost containment.
ADMINISTRATIVE EXPENSES. Administrative expenses declined $7,000 in the
second quarter 1995 as compared to the second quarter 1994. This decrease
is primarily the result of costs incurred in 1994 to develop a plan for the
Company's compliance with the Americans with Disabilities Act ("ADA") and a
modest reduction in professional fees in fiscal 1995 as compared to fiscal
1994.
OTHER INCOME (EXPENSE). The accompanying statement of operations for the
second quarter fiscal 1994 includes $71,600 representing proceeds from
business interruption insurance for estimated profits lost as a result of
Hurricane Andrew, net of continuing expenses incurred during the second
quarter fiscal 1994. This deferred income was fully amortized in the third
quarter fiscal 1994.
TWENTY-FOUR WEEKS ENDED MARCH 19, 1995 COMPARED TO TWENTY-FOUR WEEKS ENDED
MARCH 20, 1994
BUSINESS OVERVIEW. Net income for the twenty-four weeks ended March 19,
1995 is $431,000, $.12 per share as compared to a net loss of $73,000, $.02
loss per share in 1994. Earnings from restaurant operations in fiscal 1995
improved $210,000, 37%, as a result of the change in number of operating
restaurants and the factors discussed above. The fiscal 1994 net loss
includes a net loss of $324,000 consisting of certain non-recurring
transactions more fully discussed below.
REVENUES. Total revenues through the second quarter fiscal 1995 rose
$1,374,000, 36.2%, including sales at the Miami restaurant. Same-restaurant
sales increased 6.7%, including a 4% increase in customer traffic. The
balance of the increase in revenues is the result of both higher menu
prices and a change in customer eating habits to higher priced menu items.
COSTS AND EXPENSES APPLICABLE TO REVENUES.
PERCENT OF REVENUES
------------------------------
COSTS AND EXPENSES: FY 1995 FY 1994 CHANGE
------------------- ------- ------- ------
Food, beverage and supplies 29.5% 28.3% 1.2%
Labor and related costs 23.9% 23.3% .6%
------- ------- ------
53.4% 51.6% 1.8%
======= ======= ======
<PAGE> PAGE 6<PAGE>
Year-to-date fiscal 1995 food, beverage and supply costs rose 1.2% as a
percent of revenues. However, on a per customer basis these costs rose
6.8%. This increase is primarily due to increased costs of seafood (up
18.2%) and meat and chicken (up 10%). Labor costs rose .6% due primarily to
the higher cost of labor at the Miami restaurant and wage increases
necessitated by the Company's need to meet local prevailing wage rates and
secure qualified personnel at other locations.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses rose $281,000
due to costs associated with the Miami restaurant operations. However, as a
result of improved cost containment and other efficiencies, these costs
declined over 3% as a percent of revenues.
ADMINISTRATIVE EXPENSES. Administrative expenses in the twenty-four weeks
ended 1995 declined $14,000 as a result of several factors including, as
discussed above, costs incurred in 1994 to develop a plan for compliance
with the ADA.
OTHER INCOME (EXPENSE). Other income (expense) in fiscal 1994 includes
$110,100 income from the amortization of proceeds from business
interruption insurance for estimated lost profits as a result of Hurricane
Andrew, net of a loss of $434,300 on the Company's guaranty of certain
indebtedness of Bright Star Holding, Inc. ("BSH"), formerly the Company's
majority shareholder. See the Company's Form 10-K for the year ended
October 2, 1994 for a detailed discussion of this transaction.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operating activities through the twenty-four weeks
ended March 19, 1995 is $675,000 as compared to $201,000 in 1994. At March
19, 1995 the Company's current assets exceed its current liabilities by
approximately $315,000.
CAPITAL EXPENDITURES. Capital expenditures to be funded from cash flow are
expected to total approximately $250,000 in fiscal 1995, of which $67,000
was paid in the twenty-four weeks ended March 19, 1995.
OTHER. The restaurant industry is highly labor intensive. Therefore,
although the Company presently pays a significant portion of its employees
in excess of the Federal minimum wage and a large number of the Company's
employees are tipped employees whose wages are subject to the Federal tip
credit, increases in state and federal minimum wage rates, if significant,
would have an adverse impact on the Company's results of operations.
Further, although the Company currently provides health insurance benefits
to its employees, the introduction of a national health care program which
would require employers to pay a significant portion of employee health
care costs would have a significant impact on the Company's results of
operations.
Excluding the newly reopened Miami restaurant facility, the Company's
restaurant facilities were built prior to the enactment of Federal
regulations regarding equal opportunity for individuals with disabilities,
the ADA. The ADA includes certain requirements to alter public facilities,
including restaurants, as necessary to make facilities accessible to and
useable by individuals with disabilities. Although Federal regulations
consider the cost of alterations and the overall financial resources of the
Company in determining the nature and timing of compliance, the cost of
such alterations
<PAGE> PAGE 7<PAGE>
could have a significant impact on the Company's cash flow. The Company has
engaged certain architects and engineers to develop plans to implement
those alterations which are economically feasible. The required alterations
will be made as soon as possible.
SUBSEQUENT EVENTS. In May 1995 the Company's Samurai subsidiary and certain
employees of The Samurai were served with a lawsuit alleging discrimination
under the Civil Rights Act of 1870, 42 U.S.C. 1981, as amended (1992 Supp).
The lawsuit seeks various remedies including monetary damages of $800,000.
Management believes that the claims as set forth in this complaint are
without merit and intends to vigorously defend the allegations made against
The Samurai and its employees. The significance of the complaint and its
ultimate effect on the operations and financial condition of the Company
cannot be determined at this time.
<PAGE> PAGE 8<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
GARRY A. TYSON, PLAINTIFF VS. THE SAMURAI, INC., YSMAEL (MIKE)
VINAS, AND ALICDE LIPAR, DEFENDANTS, UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OHIO, EASTERN DIVISION, CIVIL ACTION NUMBER
1:95CV1060.
On May 12, 1995 the Company's Samurai subsidiary and certain
employees of The Samurai were served with a lawsuit alleging discrimination
under the Civil Rights Act of 1870, 42 U.S.C. 1981, as amended (1992 Supp).
The lawsuit alleges racial discrimination in the hiring and promotion of
individuals to the chef position and seeks injunctive and other relief
including monetary damages of $800,000. Management believes that the claims
as set forth in this complaint are without merit and intends to vigorously
defend the allegations made against The Samurai and its employees. The
significance of the complaint and its effect on operations and the
financial condition of the Company cannot be determined at this time.
PAGE 9
PAGE
<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.
RUDY'S RESTAURANT GROUP, INC.
(Registrant)
Dated: June 16, 1995 /s/ Douglas M. Rudolph
---------------------------------
Douglas M. Rudolph, President
Dated: June 16, 1995 /s/ Marie G. Peterson
---------------------------------
Marie G. Peterson
Vice President,
Chief Financial Officer and
Principal Accounting Officer
<PAGE> PAGE 10<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
balance sheets and consolidated statements of operation and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-END> MAR-19-1995
<CASH> 946,141
<SECURITIES> 0
<RECEIVABLES> 2,032
<ALLOWANCES> 0
<INVENTORY> 163,858
<CURRENT-ASSETS> 1,181,330
<PP&E> 839,099
<DEPRECIATION> 298,148
<TOTAL-ASSETS> 3,943,100
<CURRENT-LIABILITIES> 866,556
<BONDS> 0
<COMMON> 35,200
0
0
<OTHER-SE> 3,041,344
<TOTAL-LIABILITY-AND-EQUITY> 3,943,100
<SALES> 5,171,779
<TOTAL-REVENUES> 5,171,779
<CGS> 2,762,292
<TOTAL-COSTS> 2,762,292
<OTHER-EXPENSES> 1,505,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,358
<INCOME-PRETAX> 516,657
<INCOME-TAX> 85,400
<INCOME-CONTINUING> 431,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 431,257
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
