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 June 11, 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 August 31, 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 - June 11, 1995
and October 2, 1994 1
Consolidated Statements of Operations -
Twelve weeks and Thirty-six weeks ended
June 11, 1995 and June 12, 1994 2
Consolidated Statements of Cash Flows -
Thirty-six weeks ended June 11, 1995 and
June 12, 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)
<TABLE> ASSETS
<C> <S> <S>
6/11/95 10/2/94
Current Assets: ------------ ------------
Cash and cash equivalents $ 1,108,200 $ 341,477
Accounts receivable 3,665 8,113
Inventories 164,029 153,222
Prepaid expenses 93,143 103,779
------------ ------------
Total current assets 1,369,037 606,591
------------ ------------
Property and Equipment, net 2,066,948 2,076,434
Goodwill, net of accumulated amortization
of $302,990 at June 11, 1995 and
$288,464 at October 2, 1994 536,109 550,635
Intangible and other assets 203,526 204,401
------------ ------------
$ 4,175,620 $ 3,438,061
============ ============
<CAPTION> LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to related parties $ 103,514 $ 100,000
Accounts payable and accrued expenses 805,106 692,774
------------ ------------
Total current liabilities 908,620 792,774
------------ ------------
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) (14,591,803) (15,213,516)
------------ ------------
Net stockholders' equity 3,267,000 2,645,287
------------ ------------
$ 4,175,620 $ 3,438,061
============ ============
</TABLE>
[FN] See accompanying notes to consolidated financial statements.
<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 Thirty-six Weeks Ended
6/11/95 6/12/94 6/11/95 6/12/94
----------- ---------- ----------- -----------
Total Revenues $2,585,224 $2,613,326 $7,757,003 $6,410,844
Costs and expenses applicable
to revenues 1,394,620 1,406,662 4,156,912 3,364,542
Restaurant operating expenses 743,818 781,251 2,249,593 2,006,422
Depreciation and amortization 51,013 51,621 175,413 97,536
----------- ---------- ----------- -----------
Earnings from restaurant
operations 395,773 373,792 1,175,085 942,344
Administrative expenses 131,591 123,048 389,661 395,005
Interest expense 1,026 9,420 4,384 36,225
Other (expense) income (50,000) 12,361 (51,227) (311,847)
----------- ---------- ----------- -----------
Income before income taxes 213,156 253,685 729,813 199,267
Income taxes 22,700 19,300 108,100 38,000
----------- ---------- ----------- -----------
Net income $ 190,456 $ 234,385 $ 621,713 $ 161,267
=========== ========== =========== ===========
Net income per common and
common equivalent share $ .05 $ .06 $ .17 $ .04
=========== ========== =========== ===========
Average number of common and
common equivalent shares 3,714,597 3,714,597 3,707,335 3,714,597
=========== ========== =========== ===========
</TABLE>
[FN] See accompanying notes to consolidated financial statements.
<PAGE> Page 2<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE> Increase (Decrease) in Cash and Cash Equivalents
<S> <C> <C>
Thirty-six Weeks Ended
6/11/95 6/12/94
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 621,713 $ 161,267
Non-cash items:
Depreciation and amortization 197,318 133,658
Loss on retirement of assets 1,227 ---
Changes in assets and liabilities:
Decrease in due from affiliate --- 18,368
Increase in indebtedness to related parties 3,514 463,718
Decrease in accounts receivable 4,448 17,504
(Increase)in inventories (10,807) (46,603)
Decrease in prepaid expenses 10,636 9,075
Increase/(Decrease) in accounts payable and
accrued expenses 112,332 (49,339)
Decrease in deferred income --- (177,157)
---------- ----------
Total adjustments 318,668 369,224
---------- ----------
Net cash provided by operating activities 940,381 530,491
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfers of proceeds from insurance recovery
of property losses from restricted cash escrow --- 409,157
Capital expenditures (170,289) (1,151,181)
Principal received on note receivable --- 63,887
Purchases of other assets (3,369) (26,304)
---------- ----------
Net cash (used in) investing activities (173,658) (704,441)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under note payable --- (13,887)
---------- ----------
Net cash (used in) financing activities --- (13,887)
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents 766,723 (187,837)
Cash and Cash Equivalents, October 2, 1994
and October 3, 1993, respectively 341,477 513,021
---------- ----------
Cash and Cash Equivalents, June 11, 1995
and June 12, 1994, respectively $1,108,200 $ 325,184
=========== ==========
</TABLE>
[FN] See accompanying notes to consolidated financial statements.
<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 thirty-six weeks ended 6/12/94 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 adjustments, 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 June 11,
1995 and the results of operations for the thirty-six weeks ended June
11, 1995 and June 12, 1994. The results of operations for the period
ended June 11, 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 PER SHARE. Income 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).
Although the Company believes that the claims as set forth in this
complaint are without merit, due to the prohibitive cost of defending
such allegations, in September 1995 the Company and Plaintiff entered
into a Settlement Agreement wherein, in return for certain monetary
consideration, the Plaintiff agreed to release all existing claims
against the Company and its employees. Pursuant to the terms of the
Agreement the complaint was dismissed in September 1995.
The Company estimates that the costs of settlement, including legal
fees incurred, will approximate $50,000. Accordingly, the Company has
recorded a non-recurring charge of $50,000, included in the
accompanying statements of operations as other expense.
<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
---------------------
THIRD QUARTER 1995 COMPARED TO THIRD QUARTER 1994
BUSINESS OVERVIEW. Although total revenues in the third quarter
declined slightly, earnings from restaurant operations improved. Net
income in the third quarter fiscal 1995 declined $44,000 to $190,000,
$.05 per share, as compared to $234,000, $.06 per share, in the third
quarter fiscal 1994 as a result of $50,000 non-recurring charge for
costs and expenses related to the settlement of a lawsuit (see
discussion below).
REVENUES. The Company's Miami restaurant reopened in the third quarter
fiscal 1994 after having been closed for reconstruction for over
eighteen months after Hurricane Andrew. Sales at this location during
the first six months after the restaurant reopened reflected strong
pent-up customer demand and, while current sales remain significantly
higher than sales prior to Hurricane Andrew, current revenues at this
location have declined when compared to sales immediately following
the reopening in 1994.
Total revenues including sales at the Miami restaurant decreased
$28,000; however, restaurant sales excluding the Miami location
increased 6.9%, including a 2% 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 29.8% 29.4% .4%
Labor and related costs 24.1% 24.4% (.3%)
----------------------------
53.9% 53.8% .1%
============================
<PAGE> PAGE 5<PAGE>
When compared to revenues, food, beverage and supplies costs rose .4%;
however, per customer served 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 5.9% increase in the cost of seafood and
an average increase in the cost of meat of approximately 4.3%. The
cost of meat, chicken and seafood changes with market supply and
demand. Current market conditions indicate that these costs will
continue to increase through the end of 1995.
Labor costs decreased .3% to 24.1% in the third quarter 1995 as
compared to 24.4% in 1994 as a result of the increase in average
check. However, labor per customer served rose 2.1%, in part as a
result of increases in base wage rates to meet local prevailing wage
scales. Management expects labor costs to increase as the economy
improves making higher base wage rates necessary to match increased
cost of living and 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 decreased $37,000, 1.1% of revenues, in the
third quarter fiscal 1995. The decline in costs is the result of
various cost control measures implemented, including a $21,000
reduction in the cost of general liability insurance in the third
quarter 1995.
ADMINISTRATIVE EXPENSES. Administrative expenses increased $8,000 in
the third quarter 1995 as compared to the third quarter 1994 primarily
as a result of increased professional and consultant fees.
OTHER (EXPENSE) INCOME. 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).
Although the Company believes that the claims as set forth in this
complaint are without merit, due to the prohibitive cost of defending
such allegations, in September 1995 the Company and Plaintiff entered
into a Settlement Agreement wherein, in return for certain monetary
consideration, the Plaintiff agreed to release all existing claims
against the Company and its employees. Pursuant to the terms of the
Agreement the complaint was dismissed in September 1995.
The Company estimates that the costs of settlement, including legal
fees incurred, will approximate $50,000. Accordingly, the Company
recorded a non-recurring charge of $50,000, included in the
accompanying statements of operations as other expense.
The accompanying statement of operations for the third quarter fiscal
1994 includes $12,400 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.
THIRTY-SIX WEEKS ENDED JUNE 11, 1995 COMPARED TO THIRTY-SIX WEEKS
ENDED JUNE 12, 1994
<PAGE> Page 6<PAGE>
BUSINESS OVERVIEW. As discussed above, the Company's Miami Samurai
restaurant reopened in March 1994. Thus revenues, expenses and
earnings in the first half of 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.
Net income for the thirty-six weeks ended June 11, 1995 is $621,700,
$.17 per share as compared to $161,300, $.04 per share in 1994. Fiscal
1994 income includes a net charge to income of $311,800 consisting of
certain non-recurring transactions more fully discussed below.
Earnings from restaurant operations in fiscal 1995 improved $232,700,
24.7%, as a result of the change in number of operating restaurants
and the factors discussed above.
REVENUES. Total revenues through the third quarter fiscal 1995 rose
$1,346,000, 21%, including sales at the Miami restaurant. Same-
restaurant sales increased 6.5%, including a 3.3% 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 29.6% 28.8% .8%
Labor and related costs 24.0% 23.7% .3%
------- ------- ------
53.6% 52.5% 1.1%
======= ======= ======
Year-to-date fiscal 1995 food, beverage and supply costs rose .8% as a
percent of revenues. This increase is primarily due to increased costs
of seafood (up 13.2%) and meat and chicken (up 8.1%). Labor costs rose
.3% 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.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses rose
$243,200 due to costs associated with the Miami restaurant operations.
These costs declined over 2.3% as a percent of revenues, however, as a
result of improved cost containment and other efficiencies.
ADMINISTRATIVE EXPENSES. Overall administrative expenses in the
thirty-six weeks ended 1995 did not change significantly when compared
to 1994.
OTHER (EXPENSE) INCOME. See above discussion for discussion of other
expense in fiscal 1995.
Other (expense) income in fiscal 1994 includes $122,500 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.
<PAGE> Page 7<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operating activities through the thirty-six weeks
ended June 11, 1995 is $940,000 as compared to $369,000 in 1994. At
June 11, 1995 the Company's current assets exceed its current
liabilities by approximately $460,000.
CAPITAL EXPENDITURES. Capital expenditures to be funded from cash
flow are expected to total approximately $250,000 in fiscal 1995, of
which $170,000 was paid in the thirty-six weeks ended June 11, 1995.
EXPANSION. The Company is currently exploring expansion through either
acquisition of existing restaurants or development of new restaurants.
The Company anticipates that expansion, if any, will require certain
cash outlays and financing. There are no assurances that the Company
will be successful in locating either existing properties or sites
appropriate for the development of new restaurants.
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 could have a
significant impact on the Company's cash flow. Alterations which are
determined to be economically feasible will be made as soon as
possible.
<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.
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 alleged racial discrimination in the hiring and promotion
of individuals to the chef position and sought injunctive and other
relief including monetary damages of $800,000.
Although the Company believes that the claims as set forth in this
complaint are without merit, due to the prohibitive cost of defending
such allegations, in September 1995 the Company and Plaintiff entered
into a Settlement Agreement wherein, in return for certain monetary
consideration, the Plaintiff agreed to release all existing claims
against the Company and its employees. Pursuant to the terms of the
Agreement the complaint was dismissed in September 1995.
The Company estimates that the costs of settlement, including legal
fees incurred, will approximate $50,000.
<PAGE> PAGE 9<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: September 18, 1995 /s/ Douglas M. Rudolph
---------------------------
Douglas M. Rudolph,
President
Dated: September 18, 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, CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-END> JUN-11-1995
<CASH> 1,108,200
<SECURITIES> 0
<RECEIVABLES> 3,665
<ALLOWANCES> 0
<INVENTORY> 164,029
<CURRENT-ASSETS> 1,369,037
<PP&E> 839,099
<DEPRECIATION> 302,990
<TOTAL-ASSETS> 4,175,620
<CURRENT-LIABILITIES> 908,620
<BONDS> 0
<COMMON> 35,200
0
0
<OTHER-SE> 3,231,800
<TOTAL-LIABILITY-AND-EQUITY> 4,175,620
<SALES> 7,757,003
<TOTAL-REVENUES> 7,757,003
<CGS> 4,156,912
<TOTAL-COSTS> 4,156,912
<OTHER-EXPENSES> 2,249,593
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,384
<INCOME-PRETAX> 729,813
<INCOME-TAX> 108,100
<INCOME-CONTINUING> 621,713
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 621,713
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
