<PAGE>
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 March 31, 1995
-----------------
[_] 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 1-9684
----------------
CHART HOUSE ENTERPRISES, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0147725
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(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
115 South Acacia Avenue, Solana Beach, California 92075-1803
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(Address of principal executive offices, including zip code)
(619)755-8281
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(registrant's telephone number, including area code)
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 periods 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
------ ------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 31, 1995:
Common Stock ($.01 par value) - 8,208,348
---------
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
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(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 237 $ 245
Accounts Receivable 2,468 3,722
Inventories 3,988 3,992
Prepaid Expenses and Other Current Assets 1,245 1,310
-------- --------
Total Current Assets 7,938 9,269
-------- --------
Property and Equipment, at Cost:
Land 10,283 9,400
Buildings 30,776 29,742
Equipment 44,424 43,224
Leasehold Interests & Improvements 79,540 79,332
Construction in Progress 3,686 3,752
-------- --------
168,709 165,450
Less: Accumulated Depreciation and Amortization 50,274 48,276
-------- --------
Net Property & Equipment 118,435 117,174
-------- --------
Leased Property under Capital Leases, Less
Accumulated Amortization of $4,840 in 1995
and $4,702 in 1994 5,082 5,285
-------- --------
Other Assets and Goodwill, Net 24,733 24,981
-------- --------
$156,188 $156,709
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
----------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Current Portion of Lease Obligations $ 567 $ 646
Accounts Payable 1,870 3,226
Accrued Liabilities 10,810 10,509
-------- --------
Total Current Liabilities 13,247 14,381
-------- --------
Long-Term Debt 55,800 56,000
-------- --------
Long-Term Obligations under Capital Leases 5,869 5,982
-------- --------
Deferred Income Taxes 6,408 6,388
-------- --------
Stockholders' Equity:
Preferred Stock, $1.00 par value,
authorized 10,000,000 shares; none
outstanding _ _
Common Stock, $.01 par value, authorized
30,000,000 shares; 8,208,348 shares
outstanding in 1995 and 8,196,213 in 1994 82 82
Additional Paid-In Capital 42,054 42,036
Retained Earnings 32,728 31,840
-------- --------
Total Stockholders' Equity 74,864 73,958
-------- --------
$156,188 $156,709
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Revenues $42,772 $40,290
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Operating Expenses:
Cost of Food and Supplies 12,406 11,968
Payroll and Related Taxes 11,414 11,093
Other Operating Costs 10,034 8,966
Depreciation and Amortization 2,593 2,374
------- -------
Total Operating Expenses 36,447 34,401
------- -------
Income from Restaurant Operations 6,325 5,889
Selling, General and Administrative Expenses 3,820 3,638
Interest Expense, Net 1,217 1,073
------- -------
Income Before Income Taxes 1,288 1,178
Provision for Income Taxes 400 450
------- -------
Net Income $ 888 $ 728
======= =======
Net Income Per Common Share $.11 $.09
======= =======
Weighted Average Shares Outstanding 8,283 8,319
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-------------------------
1995 1994
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<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 888 $ 728
Adjustments to Reconcile Net Income to
Cash Flows from Operating Activities:
Depreciation and Amortization 2,593 2,374
Deferred Income Taxes 20 22
Loss on Disposition of Assets 86 166
Change in Net Current Liabilities 268 (2,927)
------- -------
Cash Provided by Operating Activities 3,855 363
------- -------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (3,539) (2,945)
Reductions (Additions) of Other Assets
and Goodwill 16 (84)
Proceeds from Disposition of Assets 1 25
Payments Received on Notes 33 105
------- -------
Cash Used in Investing Activities (3,489) (2,899)
------- -------
Cash Flows from Financing Activities:
Principal Payments of Long-Term Obligation
under Capital Leases (192) (190)
Net Borrowings (Payments) under Revolving
Credit Agreement (200) 2,700
Proceeds from Common Stock Issuance 18 28
------- -------
Cash Provided by (Used in) Financing
Activities (374) 2,538
------- -------
Increase (Decrease) in Cash (8) 2
Cash, Beginning of Period 245 218
------- -------
Cash, End of Period $ 237 $ 220
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-------------------------
1995 1994
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<S> <C> <C>
The Change in Net Current Liabilities is
Comprised of the Following:
Decrease (Increase) in Accounts Receivable $ 1,254 $ (265)
Decrease in Inventories 4 75
Decrease (Increase) in Prepaid Expenses
and Other Current Assets 65 (47)
Decrease in Accounts Payable (1,356) (2,285)
Increase (Decrease) in Accrued Liabilities 301 (405)
------- -------
Change in Net Current Liabilities $ 268 $(2,927)
======= =======
Supplemental Cash Flow Disclosures:
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 1,673 $ 866
Income Taxes $ 116 $ 140
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements of Chart House
Enterprises, Inc. and subsidiaries (the "Company") for the quarterly periods
ended March 31, 1995 and 1994 have been prepared in accordance with generally
accepted accounting principles, and with the instructions to Form 10-Q. These
financial statements have not been audited by independent public accountants,
but include all adjustments (consisting of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial condition, results of operations and cash flows for such periods.
However, these results are not necessarily indicative of results for any other
interim period or for the full year.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to requirements of the Securities and Exchange Commission.
Management believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1994.
(2) NET INCOME PER COMMON SHARE
Per share calculations are based on the weighted average number of common
shares and dilutive common stock equivalents (stock options) outstanding during
the period. Fully diluted earnings per share equals primary earnings per share
for all periods presented.
(3) STOCKHOLDERS' EQUITY
In the first quarter of 1995, employees of the Company exercised stock
options to purchase an aggregate of 12,135 shares of common stock under the
Company's 1985 Incentive Stock Option Plan at a purchase price of $1.54 per
share.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
- ---------------------
The following is a comparative discussion of the results of operations for
the quarter ended March 31, 1995 and 1994. The results of operations for the
first quarter of 1995 are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 1995. The dollar amounts in
the table below are in thousands.
<TABLE>
<CAPTION>
First Quarter Ended March 31,
-------------------------------------------
1995 1994
--------------------- -------------------
Dollars Percent Dollars Percent
--------- --------- --------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues 42,772 100.0 40,290 100.0
------ ----- ------ -----
Operating Expenses:
Cost of Food and Supplies 12,406 29.0 11,968 29.7
Payroll and Related Taxes 11,414 26.7 11,093 27.5
Other Operating Costs 10,034 23.4 8,966 22.3
Depreciation and Amortization 2,593 6.1 2,374 5.9
------ ----- ------ -----
Total Operating Expenses 36,447 85.2 34,401 85.4
------ ----- ------ -----
Income from Restaurant Operations 6,325 14.8 5,889 14.6
Selling, General and
Administrative Expenses 3,820 8.9 3,638 9.0
Interest Expense 1,217 2.9 1,073 2.7
------ ----- ------ -----
Income Before Income Taxes 1,288 3.0 1,178 2.9
Provision for Income Taxes 400 .9 450 1.1
------ ----- ------ -----
Net Income 888 2.1 728 1.8
====== ===== ====== =====
</TABLE>
Management believes that the most meaningful approach to analyzing results of
operations is through margin analysis, which requires critically reviewing the
relationships that certain costs and expenses bear to Revenues. Accordingly,
the discussion below follows this approach.
Revenues for the first quarter increased by $2,482,000 from $40,290,000 in
1994 to $42,772,000 in 1995. Comparable restaurant sales (sales at restaurants
open the entire quarter of both years) increased by 2% for Chart House and 1%
for all restaurants. Newly-opened Islands restaurants accounted for an increase
in Revenues of $2,060,000. Also, the Company's wholesale bakery increased its
quarterly sales by $505,000 over the previous year, due primarily to the
addition of the Starbucks retail account. The sale of the Cork 'N Cleaver
restaurants at the end of 1994 accounted for a decrease in Revenues of $764,000.
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<PAGE>
Restaurant operating margins (Income from Restaurant Operations as a
percentage of Revenues) increased to 14.8% for the first quarter of 1995 from
14.6% for the first quarter of 1994. Cost of Food and Supplies decreased as a
percentage of Revenues mainly because of lower costs of beef and chicken
products and improved control of food costs at Islands restaurants. Reductions
in hourly employee labor were the primary reason for the favorable decrease in
Payroll and Related Taxes as a percentage of Revenues, as management intensified
its efforts to control labor costs at the restaurant level. However, Other
Operating Costs as a percentage of Revenues increased in 1995 due to increased
direct promotional costs of redeeming Aloha Club awards at the Chart House
restaurants, an increase in insurance expenses over last year's quarter and from
new Islands restaurants, which initially have higher occupancy and other
operating costs as a percentage of Revenues. Deprecation and Amortization
increased slightly as a percentage of Revenues in 1995 because of the addition
of several new Islands restaurants, which generally have shorter asset lives
than do Chart House restaurants.
Selling, General and Administrative Expenses increased by $182,000, but as a
percentage of Revenues decreased from 9.0% in 1994 to 8.9% in 1995. The first
quarter of 1994 was benefited by income recognition of $300,000 from settlement
of an insurance claim, which decreased 1994 first quarter expenses as a
percentage of Revenues by .7%. Also, marketing expenditures were lower in 1995
than in 1994, mainly due to the maturing of the Aloha Club. In addition,
personnel and overhead costs were reduced in 1995 following the successful
transition of the Islands organization to the Company's control in mid-1994.
Interest Expense increased by $144,000 from the prior year first quarter due
to increases in borrowings in the latter half of 1994 to fund the expansion
of Islands restaurants and higher prevailing interest rates under the revolving
credit agreement in 1995.
The Provision for Income Taxes reflects an effective rate of 31% for the
first quarter of 1995, compared with 38% a year ago. The decrease in the rate
primarily reflects and the increased amount of federal tax credit for
employment-related FICA taxes paid on tip earnings reported by the Company's
employees.
As a result of the foregoing, Net Income increased by $160,000 from $728,000
for the first quarter of 1994, to $888,000 for the first quarter of 1995.
Liquidity and Capital Resources
- -------------------------------
The Company requires capital principally for the acquisition and construction
of new restaurants and the remodeling and refurbishing of existing restaurants.
The Company's primary sources of working capital are cash flows from operations
and borrowings under a revolving credit agreement with two banks which provides
a $30,000,000 line of credit with interest at the lead bank's base rate. Any
excess cash flows from operating and investing activities are used primarily to
reduce those borrowings. In the first quarter of 1995, the Company decreased
its revolving credit debt by $200,000. At March 31, 1995, the Company had
outstanding borrowings of $21,800,000 under the revolving credit agreement.
The Company opened one restaurant, an Islands in Pembroke Pines, Florida, in
the first quarter of 1995. Capital Expenditures, which totalled $3.5 million,
also include expenditures for Islands restaurants under construction and for
remodels of certain Chart House restaurants.
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<PAGE>
The Company expects to open six additional Islands restaurants and one Chart
House restaurant in the remaining nine months of 1995. Total capital
expenditures for 1995 are projected to be approximately $21.0 million.
Management believes that cash flows from operations will be sufficient to fund a
significant portion of the capital expenditures for the planned new restaurants
for 1995, the ongoing maintenance and remodeling of existing restaurants and
construction of restaurants which will open in 1996. Borrowings under the
revolving credit agreement will meet funding requirements not met by cash flows
from operations in 1995.
In April 1995, the Company increased its revolving credit commitment amount
from $30,000,000 to $40,000,000. A third bank was added to the existing two
banks in connection with the increased commitment.
Seasonality
- -----------
Historically, the Company's business is seasonal in nature with Revenues and
Net Income for the second and third quarters being greater than in the first and
fourth quarters.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter of which this report is filed.
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.
CHART HOUSE ENTERPRISES, INC. (Registrant)
Date: May 1, 1995 By: /s/ JOHN M. CREED
------------------------------------
John M. Creed
President, Chief Executive Officer
and Chairman of the Board
By: /s/ HAROLD E. GAUBERT, JR.
------------------------------------
Harold E. Gaubert, Jr.
Vice President, Treasurer and Chief
Financial Officer
By: /s/ JAMES C. WENDLER
------------------------------------
James C. Wendler
Vice President and Chief Accounting
Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (IDENTIFY
SPECIFIC FINANCIAL STATEMENTS) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 237
<SECURITIES> 0
<RECEIVABLES> 2,468
<ALLOWANCES> 0
<INVENTORY> 3,988
<CURRENT-ASSETS> 7,938
<PP&E> 168,709
<DEPRECIATION> 50,274
<TOTAL-ASSETS> 156,188
<CURRENT-LIABILITIES> 13,247
<BONDS> 61,669
<COMMON> 82
0
0
<OTHER-SE> 74,782
<TOTAL-LIABILITY-AND-EQUITY> 74,864
<SALES> 42,772
<TOTAL-REVENUES> 42,772
<CGS> 12,406
<TOTAL-COSTS> 12,406
<OTHER-EXPENSES> 24,041
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,217
<INCOME-PRETAX> 1,288
<INCOME-TAX> 400
<INCOME-CONTINUING> 888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 888
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
