<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 29, 1996
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -------------------------
Commission file number 1-9573
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UNO RESTAURANT CORPORATION
------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2953702
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Charles Park Road, West Roxbury, Massachusetts 02132
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 323-9200
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
As of February 7, 1997, 12,212,638 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE> 2
UNO RESTAURANT CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS............................3
Consolidated Balance Sheets --
December 29, 1996 and September 29, 1996........3
Consolidated Statements of Income --
Thirteen weeks ended
December 29, 1996 and December 31, 1995.........4
Consolidated Statements of Cash Flows --
Thirteen weeks ended December 29, 1996 and
December 31, 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
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS...............................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................11
2
<PAGE> 3
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
<CAPTION>
Dec. 29, Sept 29,
1996 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 138 $ 1,828
Royalties receivable 688 710
Consumer product receivable 534 322
Inventory 2,145 2,333
Deferred pre-opening costs 457 470
Prepaid expenses and other assets 3,999 2,267
-------- --------
TOTAL CURRENT ASSETS 7,961 7,930
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Land 14,862 14,796
Buildings 22,183 22,037
Leasehold improvements 83,952 82,014
Equipment 46,259 45,690
Construction in progress 2,819 2,119
-------- --------
170,075 166,656
Less allowance for depreciation and amortization 48,873 46,146
-------- --------
121,202 120,510
OTHER ASSETS
Deferred income taxes 3,937 3,613
Royalty fee 304 324
Liquor licenses and other assets 2,671 2,568
-------- --------
$136,075 $134,945
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,501 $ 6,009
Accrued expenses 6,179 5,163
Accrued compensation and taxes 2,169 2,187
Income taxes payable 1,384 1,581
Current portion of long-term debt and capital
lease obligations 181 178
--------- --------
TOTAL CURRENT LIABILITIES 14,414 15,118
Long-term debt, net of current portion 37,700 37,085
Capital lease obligations, net of current portion 1,010 1,056
Other liabilities 4,690 4,550
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000,000 shares
authorized, none issued
Common Stock, $.01 par value, 25,000,000 shares auth-
orized, 12,205,526 and 13,697,526 shares issued and out-
standing in Fiscal Years 1997 and 1996, respectively 137 137
Additional paid-in capital 53,542 53,509
Retained earnings 35,235 34,143
-------- --------
88,914 87,789
Treasury Stock (1,500,000 shares at cost, in Fiscal
Years 1997 and 1996, respectively) (10,653) (10,653)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 78,261 77,136
-------- --------
$136,075 $134,945
======== ========
</TABLE>
3
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
<CAPTION>
Thirteen Weeks Ended
--------------------
Dec 29, Dec 31,
1996 1995
------- -------
<S> <C> <C>
REVENUES
Restaurant sales $38,967 $37,370
Consumer product sales 2,162 2,185
Franchise income 1,035 1,005
------- -------
42,164 40,560
COSTS AND EXPENSES
Cost of sales 10,703 10,295
Labor and benefits 12,899 12,486
Occupancy 6,574 6,406
Other operating costs 3,601 3,576
General and administrative 3,110 3,042
Depreciation and amortization 3,012 3,283
------- -------
39,899 39,088
------- -------
OPERATING INCOME 2,265 1,472
OTHER INCOME (EXPENSE) (610) (620)
-------- --------
Income before income taxes 1,655 852
Provision for income taxes 563 307
------- -------
NET INCOME $1,092 $ 545
======= =======
EARNINGS PER COMMON SHARE $.09 $.04
======= =======
Weighted average shares outstanding 12,279 13,315
======= =======
</TABLE>
4
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
Thirteen weeks Ended
--------------------
Dec 29, Dec 31,
1996 1995
------ ------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,092 $ 545
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,038 3,308
Deferred income taxes (324) (315)
Provision for deferred rent 140 168
(Gain) loss on disposal of equipment (24) 82
Changes in operating assets and liabilities,
net of effects from business acquisitions:
Royalties receivable 22 (109)
Inventory 188 (119)
Prepaid expenses and other assets (2,232) (1,823)
Accounts payable and other liabilities (510) (789)
Income taxes payable (197) 371
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,193 $ 1,319
INVESTMENT ACTIVITIES
Additions to property, equipment and
leasehold improvements (3,529) (7,147)
Proceeds from sale of fixed assets 41 125
------- ------
NET CASH USED FOR INVESTING ACTIVITIES (3,488) (7,022)
FINANCING ACTIVITIES
Proceeds from revolving credit agreement 15,995 14,588
Principal payments on revolving credit
agreement and capital lease obligations 15,423) (7,457)
Purchase of Treasury Stock (2,379)
Exercise of stock options 33 17
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 605 4,769
------- -------
DECREASE IN CASH (1,690) (934)
CASH AT BEGINNING OF PERIOD 1,828 1,305
------- -------
CASH AT END OF PERIOD $ 138 $ 371
======= =======
</TABLE>
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis Of Presentation
The accompanying unaudited, consolidated financial statements have been
prepared in accordance with instructions to Form 10-Q and, therefore, do not
include all information and footnotes normally included in financial statements
prepared in conformity with generally accepted accounting principles. They
should be read in conjunction with the financial statements of the company for
the fiscal year ended September 29, 1996.
The accompanying financial statements include all adjustments (consisting
only of normal recurring accruals) that management considers necessary for a
fair presentation of its financial position and results of operations for the
interim periods presented.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
Safe Harbor Cautionary Statement
From time to time, information and statements provided by the Company in filings
with the Securities and Exchange Commission, shareholder reports, press releases
and oral statements may include forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
Forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that all forward-looking statements involve risks and uncertainties, which could
cause actual results to differ materially from historical results or those
anticipated. The Company undertakes no obligation to publicly update or revise
any forward- looking statements, whether as a result of new information, future
events or otherwise. Risks and uncertainties include, without limitation, the
Company's ability to open new restaurants profitably, changes in local, regional
and national economic conditions, especially economic conditions in the areas in
which the Company's restaurants are concentrated, increasingly intense
competition in the restaurant industry, increases in food, labor, employee
benefits and similar costs, and other risks detailed from time to time in the
Company's news releases, reports to shareholders and periodic reports filed with
the Securities and Exchange Commission.
<TABLE>
The following table sets forth the percentage relationship to total revenues,
unless otherwise indicated, of certain items included in the Company's income
statements and operating data for the periods indicated:
Thirteen Weeks Ended December 29, 1996 Compared To Thirteen Weeks Ended
December 31, 1995
<CAPTION>
13 Weeks 13 Weeks
Ended Ended
12/29/96 12/31/95
-------- --------
<S> <C> <C>
REVENUES:
Restaurant sales 92.4% 92.1%
Consumer product sales 5.1 5.4
Franchise income 2.5 2.5
----- -----
Total 100.0% 100.0%
----- -----
COSTS AND EXPENSES:
Cost of food & beverages (1) 26.0% 26.0%
Labor and benefits (1) 31.4 31.6
Occupancy costs (1) 16.0 16.2
Other operating costs (1) 8.8 9.0
General and administrative 7.4 7.5
Depreciation and amortization (1) 7.3 8.3
----- -----
Operating income 5.4 3.6
Other income (expense) (1.5) (1.5)
----- -----
Income before taxes 3.9 2.1
Provision for income taxes 1.3 .8
----- -----
Net income 2.6 1.3
===== =====
[/FN]
(1) Percentage of restaurant and consumer product sales
</TABLE>
7
<PAGE> 8
NUMBER OF RESTAURANTS
AT END OF QUARTER:
Company-owned Uno's full service 86 80
Franchised Uno's - full service 64 60
Total revenue increased 4% to $42.2 million from $40.6 million last year.
Company-owned restaurant sales rose 4.3% to $39.0 million from $37.4 million
last year due primarily to 7.8% growth in store operating weeks of full-service
Pizzeria Uno units resulting from the addition of seven restaurants during the
past four quarters. One full-service Pizzeria Uno restaurant closed during the
quarter for which the asset value was written off as part of the Company's
adoption of SFAS 121 in the second fiscal quarter of 1996. Comparable-store
sales for Uno units for the first three months of the fiscal year were 1.2%
below the same period last year. During the same period, average weekly sales,
which includes sales at comparable stores as well as new units, were 1.9% below
last year, reflecting lower-than-average sales levels for the seven units
opened during the past four quarters.
Consumer product sales remained virtually flat at $2.2 million for the first
quarter of fiscal 1997 as compared to the first quarter last year. Sales growth
continues within the frozen products and contract food service categories, while
sales volumes in the fresh retail segment have declined during the first quarter
due in part to a reduction in promotional activities. Recently, the company has
entered into a two year agreement with Doubletree Hotels, to provide Uno brand
pizzas and calzones to its guests through the various food venues of the hotel.
Franchise income, which includes royalty income and initial franchise fees,
increased slightly to $1,035,000 from $1,005,000 last year. Royalty income
increased 3.1% as average weekly sales improved by .9% for the first three
months of the fiscal year. One full-service restaurant was opened during the
quarter and five new full-service units have been added during the past four
quarters.
Cost of food and beverage as a percentage of restaurant and consumer product
sales remained unchanged from last year at 26.0%. Recently however, cheese costs
have declined from record levels and many other commodity costs have stabilized
or declined as well, which should result in improved food and beverages costs
trends in subsequent quarters. Labor and benefits, occupancy costs and other
operating expenses each declined by 20 basis points from the prior year
primarily due to greater emphasis on cost controls. General and administrative
expenditures were up approximately 2% from a year ago, however, as a percentage
of total revenues these expenses declined to 7.4% from 7.5% last year.
8
<PAGE> 9
Depreciation and amortization expenses as a percentage of restaurant and
consumer product sales decreased to 7.3% from 8.3% last year principally due to
lower amortization of pre-opening costs as the Company's unit growth rate has
moderated.
Operating income for the first quarter of the fiscal year increased to
$2,265,000 from $1,472,000 last year. The operating margin for the period
increased to 5.4% from 3.6%. The increase in operating income and margin are
based on the factors mentioned above.
Other expense of $610,000 declined from $620,000 last year. The Company
recorded a loss of approximately $90,000 on the disposition of various fixed
assets during the first quarter of fiscal 1996. Interest expense increased from
$530,000 last year to $618,000 this year due to higher debt levels this year
compared to last year.
The effective tax rate of 34% for the quarter compared favorably to last year's
rate of 36% due in part to the impact of various tax credits. Net income
increased to $1,092,000 from $545,000 last year based on the factors noted
above.
Liquidity And Sources Of Capital
<TABLE>
The following table presents a summary of the Company's cash flows for the
period ended December 29, 1996
<S> <C>
Net cash provided by operating activities $ 1,193
Net cash used in investing activities (3,488)
Net cash provided by financing activities 605
-------
Increase (Decrease) in cash $(1,690)
=======
</TABLE>
Historically, the Company has leased most of its restaurant locations and
pursued a strategy of controlled growth, financing its expansion principally
from operating cash flow, public equity offerings, the sale of senior, unsecured
notes, and revolving lines of credit. During the first quarter of fiscal 1997,
the Company's investment in property, equipment and leasehold improvements was
$3.5 million.
The Company currently plans to open approximately eight restaurants in fiscal
1997. The Company expects that the average cash investment required to open a
full service Pizzeria Uno restaurant, excluding land and pre-opening costs, will
be approximately $1.6 million.
As of December 29,1996, the Company had outstanding indebtedness of $37.7
million under its $50.0 million unsecured revolving credit facility and $1.2
million in capital lease obligations. The current revolving credit facility will
convert to a three year term loan in December 1997. Advances under the revolving
credit facility will accrue interest at the lender's prime rate, or
alternatively, 100- 175 basis points above LIBOR. The Company anticipates using
the revolving credit facility in the future for the development of additional
restaurants, and for working capital.
9
<PAGE> 10
The Company recently negotiated a mortgage commitment for five of its
Company-owed restaurant properties. This commitment is for $5,000,000, at a
fixed interest rate of 8.75% over a 15 year term. During the first quarter, the
Company received proceeds of $3,500,000 under this commitment.
On January 22, 1997, the Board of Directors of the Company authorized the
repurchase of up to 500,000 shares of the Company's Common Stock in the market
from time to time. The shares of Common Stock to be purchased will be held in
treasury and may be used by the Company from time to time for its employee
benefit plans. The Company currently has 1.5 million shares in its treasury
account.
The Company believes that existing cash balances, cash generated from operations
and borrowings under its mortgage commitment and revolving line of credit will
be sufficient to fund the Company's capital requirements for the foreseeable
future.
The company is currently obligated under 87 leases, including 84 leases for
Company-owned restaurants, two leases for its executive offices, and a lease for
an office building containing one of its restaurants.
Impact of Inflation
Inflation has not been a major factor in the Company's business for the last
several years. The Company believes it has historically been able to pass on
increased costs through menu price increases, but there can be no assurance that
it will be able to do so in the future. Future increases in local area
construction costs could adversely affect the Company's ability to expand.
Seasonality
The Company's business is seasonal in nature, with revenues and, to a greater
degree, operating income being lower in its first and second fiscal quarters
than its other quarters. The Company's seasonal business pattern is due to its
concentration of units in the Northeast, and the resulting lower winter volumes.
10
<PAGE> 11
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
The Company agreed to a proposed consent order (the "agreement") with the
Federal Trade Commission (the "FTC") on October 23, 1996. The agreement was
announced by the FTC on January 22, 1997 for public comment and is expected to
become final 60 days later. The agreement is based on a complaint by the FTC
involving a print advertisement which ran once and a television commercial
which ran for two weeks. Although the FTC did not allege that the Company
intended any deception, it contended that portions of these advertisements
misrepresented that all of the Company's thin crust pizzas were low fat. The
Company disputed the FTC's interpretation of the commercial, and believed that
it had a reasonable basis for the advertising claims in question. However,
rather than contest this matter further, the Company chose to accept the
proposed agreement, which, among other things; imposes no fine; orders the
Company to not misrepresent the existence or amount of total fat or any other
nutrient or substance in any food product containing a baked crust; and
requires the Company to maintain substantiation for nutrition claims for its
pizza products for five years.
On January 23, 1997, a class action complaint (the "Complaint") was filed by
Rhonda D'Ambrosio against the Company and certain of its subsidiaries in the
Suffolk Superior Court of the Commonwealth of Massachusetts. The Complaint
alleges that the Company, through its advertisements, made false and misleading
representations about the fat content of the Company's thin crust pizzas. The
plaintiff seeks to have the action maintained as a class action and seeks to
recover unspecified damages allegedly sustained by the plaintiff and the other
members of the class. The class is alleged to include all purchasers of the
Company's "Thinzettas" thin crust pizzas who relied upon, and sustained damage
as a result of, the alleged misrepresentations. The Company intends
to defend vigorously against the Complaint.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
11. Statement re: computation of per share earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Uno Restaurant Corporation did not file any Reports on Form
8-K during the quarter ended December 29, 1996.
11
<PAGE> 12
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.
UNO RESTAURANT CORPORATION
--------------------------
(Registrant)
Date: February 6, 1997 By: /s/ Robert M. Brown
------------------- -------------------
Robert M. Brown
Senior Vice President-Finance,
and Chief Financial Officer
12
<PAGE> 1
Exhibit 11
<TABLE>
Statement re: computation of per share earnings
- ------------------------------------------------
<CAPTION>
Thirteen Weeks Ended
----------------------
Dec 29, Dec 31,
1996 1995
---------- ----------
<S> <C> <C>
Weighted average shares outstanding 12,202,097 13,225,612
Common Stock equivalents:
Stock options 77,308 89,351
----------- -----------
12,279,405 13,314,963
=========== ===========
Net Income $ 1,092,000 $ 545,000
=========== ===========
EARNINGS PER COMMON SHARE $ .09 $ .04
=========== ===========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<EXCHANGE-RATE> 1
<CASH> 138
<SECURITIES> 0
<RECEIVABLES> 1,222
<ALLOWANCES> 0
<INVENTORY> 2,145
<CURRENT-ASSETS> 7,961
<PP&E> 170,075
<DEPRECIATION> 48,873
<TOTAL-ASSETS> 136,075
<CURRENT-LIABILITIES> 14,414
<BONDS> 38,710
0
0
<COMMON> 137
<OTHER-SE> 78,124<F1>
<TOTAL-LIABILITY-AND-EQUITY> 136,075
<SALES> 42,164
<TOTAL-REVENUES> 42,164
<CGS> 10,703
<TOTAL-COSTS> 39,899
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 610
<INCOME-PRETAX> 1,655
<INCOME-TAX> 563
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,092
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
<FN>
<F1> 5-02 (31) NET OF TREASURY STOCK
</FN>
</TABLE>
