<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 28, 1997
-------------------
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
-----------------------------------------
UNO RESTAURANT CORPORATION
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(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
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(Address of principal executive offices) (Zip Code)
(617) 323-9200
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(Registrant's telephone number, including area code)
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(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 January 28, 1998, 10,939,055 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
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UNO RESTAURANT CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS.....................................3
Consolidated Balance Sheets --
December 28, 1997 and September 28, 1997.................3
Consolidated Statements of Income -- Thirteen weeks
ended December 28, 1997 and December 29, 1996............4
Consolidated Statements of Cash Flows --
Thirteen weeks ended December 28, 1997 and
December 29, 1996........................................5
Notes to Consolidated Financial
Statements...............................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................7
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISKS...........................10
PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................11
2
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
Dec. 28, Sept 28,
1997 1997
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,937 $ 1,486
Royalties receivable 348 728
Consumer products receivable 416 844
Inventory 2,357 2,326
Deferred pre-opening costs 1,158 949
Prepaid expenses and other assets 2,606 1,959
--------- ---------
TOTAL CURRENT ASSETS 8,822 8,292
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Land 15,933 15,883
Buildings 27,357 25,265
Leasehold improvements 89,540 87,047
Equipment 50,855 49,802
Construction in progress 2,087 4,201
--------- ---------
185,772 182,198
Less allowance for depreciation and amortization 59,834 56,841
--------- ---------
125,938 125,357
OTHER ASSETS
Deferred income taxes 7,044 6,599
Royalty fee 220 241
Liquor licenses and other assets 3,266 3,243
--------- ---------
$ 145,290 $ 143,732
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,691 $ 6,966
Accrued expenses 8,334 7,563
Accrued compensation and taxes 2,263 2,641
Income taxes payable 1,869 2,076
Current portion of long-term debt and capital
lease obligations 4,059 3,132
--------- ---------
TOTAL CURRENT LIABILITIES 21,216 22,378
Long-term debt, net of current portion 43,992 42,516
Capital lease obligations, net of current portion 818 867
Other liabilities 7,166 7,091
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, 10,965,455 and 13,754,480 shares issued and out-
standing in Fiscal Years 1998 and 1997, respectively 138 138
Additional paid-in capital 53,813 53,803
Retained earnings 38,024 36,816
--------- ---------
91,975 90,757
Treasury Stock (2,790,597 shares at cost, in Fiscal
Years 1998 and 1997, respectively) (19,877) (19,877)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 72,098 70,880
--------- ---------
$ 145,290 $ 143,732
========= =========
</TABLE>
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------
Dec 28, Dec 29,
1997 1996
------- ------
<S> <C> <C>
REVENUES
Restaurant sales $41,611 $38,967
Consumer product sales 2,285 2,162
Franchise income 1,072 1,035
------- -------
44,968 42,164
COSTS AND EXPENSES
Cost of sales 11,331 10,703
Labor and benefits 13,749 12,899
Occupancy 6,990 6,574
Other operating costs 3,758 3,601
General and administrative 3,126 3,110
Depreciation and amortization 3,288 3,012
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42,242 39,899
------- -------
OPERATING INCOME 2,726 2,265
OTHER EXPENSE 923 610
------- -------
Income before income taxes 1,803 1,655
Provision for income taxes 595 563
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NET INCOME $ 1,208 $ 1,092
======= =======
BASIC EARNINGS PER SHARE $ .11 $ .09
======= =======
Weighted average shares outstanding 10,965 12,202
======= =======
DILUTED EARNINGS PER SHARE $ .11 $ .09
======= =======
Weighted average shares outstanding-
including common stock equivalents 11,021 12,279
======= =======
</TABLE>
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------
Dec 28, Dec 29,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,208 $ 1,092
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,315 3,038
Deferred income taxes (445) (324)
Provision for deferred rent 139 140
(Gain)loss on disposal of equipment (24)
Changes in operating assets and liabilities, net Of effects from business
acquisitions:
Royalties receivable 380 22
Inventory (31) 188
Prepaid expenses and other assets (732) (2,232)
Accounts payable and other liabilities (1,915) (510)
Income taxes payable (207) (197)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,712 $ 1,193
INVESTMENT ACTIVITIES
Additions to property, equipment and
leasehold improvements (3,625) (3,529)
Proceeds from sale of fixed assets 41
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (3,625) (3,488)
FINANCING ACTIVITIES
Proceeds from revolving credit agreement 15,765 15,995
Principal payments on revolving credit agreement
and capital lease obligations (13,411) (15,423)
Exercise of stock options 10 33
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,364 605
-------- --------
INCREASE/(DECREASE) IN CASH 451 (1,690)
CASH AT BEGINNING OF PERIOD 1,486 1,828
-------- --------
CASH AT END OF PERIOD $ 1,937 $ 138
======== ========
</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 28, 1997.
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.
NOTE B - EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements. Basic and diluted earnings per share were equivalent
to each other for the quarter ended December 28, 1997.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
Dec 28, Dec 29,
1997 1996
----------- -----------
<S> <C> <C>
Numerator for Basic Earnings per Share:
Weighted average shares outstanding 10,965,252 12,202,097
Common Stock equivalents:
Stock options 55,884 77,308
----------- -----------
Numerator for Diluted Earnings per Share:
Weighted average shares outstanding-
including common stock equivalents 11,021,136 12,279,405
=========== ===========
Net Income $ 1,208,000 $ 1,092,000
=========== ===========
BASIC EARNINGS PER COMMON SHARE $ .11 $ .09
=========== ===========
DILUTED EARNINGS PER COMMON SHARE $ .11 $ .09
=========== ===========
</TABLE>
6
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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.
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 28, 1997 COMPARED TO THIRTEEN WEEKS ENDED
DECEMBER 29, 1996
<TABLE>
<CAPTION>
13 Weeks 13 Weeks
Ended Ended
12/28/97 12/29/96
-------- --------
<S> <C> <C>
REVENUES:
Restaurant sales 92.5% 92.4%
Consumer product sales 5.1 5.1
Franchise income 2.4 2.5
----- -----
Total 100.0% 100.0%
----- -----
COSTS AND EXPENSES:
Cost of food & beverages (1) 25.8% 26.0%
Labor and benefits (1) 31.3 31.4
Occupancy costs (1) 15.9 16.0
Other operating costs (1) 8.6 8.8
General and administrative 7.0 7.4
Depreciation and amortization (1) 7.5 7.3
----- -----
Operating income 6.1 5.4
Other expense 2.1 1.5
----- -----
Income before income taxes 4.0 3.9
Provision for income taxes 1.3 1.3
----- -----
Net income 2.7% 2.6%
===== =====
</TABLE>
(1) Percentage of restaurant and consumer product sales
7
<PAGE> 8
NUMBER OF RESTAURANTS
AT END OF QUARTER:
<TABLE>
<S> <C> <C>
Company-owned Uno's - full service 95 86
Franchised Uno's - full service 66 64
</TABLE>
Total revenue increased 6.7% to $45.0 million from $42.2 million last year.
Company-owned restaurant sales rose 6.8% to $41.6 million from $39.0 million
last year due primarily to a 9.1% growth in store operating weeks of
full-service Pizzeria Uno units resulting from the addition of nine restaurants
during the past four quarters. Comparable-store sales for Uno units for the
first three months of the fiscal year were 0.6% 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 0.6% above last year, reflecting
higher-than-average sales levels for the nine new prototype units opened during
the past four quarters.
Consumer product sales rose slightly to $2.3 million for the first quarter of
fiscal 1998 as compared to $2.2 million in the first quarter last year. Sales to
food service providers were up as the company continued its initial shipments of
product to Sainsbury's Supermarket PLC. Sales volumes in the fresh retail and
wholesale segments have declined during the first quarter due in part to a
reduction in promotional activities and an increase in competition in the
supermarket segment.
Franchise income, which includes royalty income and initial franchise fees,
increased slightly to $1,072,000 from $1,035,000 last year. Royalty income
increased 6.4% as operating weeks increased 4.9% and average weekly sales
improved by 2.8% for the first three months of the fiscal year. One full-service
restaurant was opened during the quarter and six 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 dropped slightly to 25.8% this year from 26.0% last year. Slightly lower
cheese costs this year versus last year contributed to the cost reduction for
the quarter. Labor and benefits as a percentage of restaurant and consumer
product sales dropped by 10 basis points from the prior year. Increases in the
average wage rate, primarily from the September 1997 minimum wage increase, were
more than offset by savings achieved from lower benefit cost. Occupancy costs
and other operating expenses declined slightly, principally due to operating
leverage associated with higher average unit volumes. General and administrative
expenditures were up less than 1% from a year ago, however, as a percentage of
total revenues these expenses declined to 7.0% from 7.4% last year. Depreciation
and amortization expenses as a percentage of restaurant and consumer product
sales increased to 7.5% from 7.3% last year principally due to higher
amortization of pre-opening costs as the Company's unit growth rate has
increased slightly versus the prior year.
8
<PAGE> 9
Operating income for the first quarter of the fiscal year increased 20.4% to
$2,726,000 from $2,265,000 last year. The operating margin for the period
increased to 6.1% from 5.4%. The increase in operating income and margin are
based on the factors mentioned above.
Other expense of $923,000 increased from $610,000 last year. Interest expense
increased from $621,000 last year to $884,000 this year due to higher debt
level. The increase in debt levels was a result of the Company's share
repurchase program completed in the fourth quarter of fiscal 1997. The effective
tax rate of 33% for the quarter compared favorably to last year's rate of 34%
due in part to the impact of various tax credits. Net income increased to
$1,208,000 from $1,092,000 last year based on the factors noted above.
LIQUIDITY AND SOURCES OF CAPITAL
The following table presents a summary of the Company's cash flows for the
period ended December 28, 1997.
<TABLE>
<CAPTION>
<S> <C>
Net cash provided by operating activities $1,712
Net cash used in investing activities (3,625)
Net cash provided by financing activities 2,364
-------
Increase (Decrease) in cash $ 451
=======
</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 1998,
the Company's investment in property, equipment and leasehold improvements was
$3.6 million.
The Company currently plans to open approximately six restaurants in fiscal
1998. 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.
On November 4, 1997 the Company entered into a $55 million credit facility (the
"$55 million facility") to replace its $50 million revolver. The $55 million
facility consists of three components, a $26.6 million unsecured revolver, a $20
million secured mortgage facility and a $8.4 million term loan. The $26.6
million unsecured revolver is due in October 2002. The $20 million secured
mortgage facility is due in 27 quarterly installments of $500,0000 plus interest
commencing on January 31, 1998 with a final installment of the outstanding
principal plus interest due in October 2004. The $8.4 million term loan is due
in 20 quarterly installments of $420,000 plus interest commencing on January 31,
1998. Amounts borrowed under the $55 million facility accrue interest at
variable rates based on, at the election of the Company, either the LIBOR plus
100-175 basis points or prime plus 0-50 basis points. The agreement contains
certain financial covenants including a cash flow coverage ratio and a
consolidated leverage ratio. The
9
<PAGE> 10
Company anticipates using the unsecured revolver of the $55 million facility for
the development of additional restaurants and for working capital needs. The
Company used the proceeds of the $20 million secured mortgage facility component
to refinance certain owned properties and used the $8.4 million term loan
component to finance the "Dutch Auction" tender offer completed in the fourth
quarter of fiscal 1997. As of December 28, 1997, the Company had outstanding
indebtedness of $42.9 million under its $55 million revolving credit and term
loan agreement, $4.9 million under its MetLife Capital mortgage program, and
$1.0 million in capital lease obligations.
In December 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 did not repurchase any stock during the first fiscal
quarter and currently has 2.8 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 92 leases, including 90 leases for
Company-owned restaurants and two leases for its executive offices. The Company
is currently negotiating the renewal of a lease for an office building
containing one of its restaurants and continues to pay rent on a tenancy at will
basis in the interim.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
NOT APPLICABLE.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
Uno Restaurant Corporation did not file any Reports on Form
8-K during the quarter ended December 28, 1997.
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, 1998 By: /s/ Craig S. Miller
----------------- -------------------
Craig S. Miller
Chief Executive Officer
(Principal Executive Officer)
Date: February 6, 1998 By: /s/ Robert M. Vincent
----------------- ---------------------
Robert M. Vincent
Senior Vice President-Finance,
and Chief Financial Office
(Principal Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> DEC-28-1997
<CASH> 1,937
<SECURITIES> 00
<RECEIVABLES> 764
<ALLOWANCES> 00
<INVENTORY> 2,357
<CURRENT-ASSETS> 8,822
<PP&E> 185,772
<DEPRECIATION> 59,834
<TOTAL-ASSETS> 145,290
<CURRENT-LIABILITIES> 21,216
<BONDS> 51,976
00
00
<COMMON> 138
<OTHER-SE> 71,960<F1>
<TOTAL-LIABILITY-AND-EQUITY> 145,290
<SALES> 44,968
<TOTAL-REVENUES> 44,968
<CGS> 11,331
<TOTAL-COSTS> 42,242
<OTHER-EXPENSES> 00
<LOSS-PROVISION> 00
<INTEREST-EXPENSE> 923
<INCOME-PRETAX> 1,803
<INCOME-TAX> 595
<INCOME-CONTINUING> 1,208
<DISCONTINUED> 00
<EXTRAORDINARY> 00
<CHANGES> 00
<NET-INCOME> 1,208
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<FN>
<F1>Net of treasury stock.
</FN>
</TABLE>
