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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly Period Ended September 25, 2000
Commission File Number: 000-18668
MAIN STREET AND MAIN INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 11-294-8370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5050 N. 40TH STREET, SUITE 200, PHOENIX, ARIZONA 85018
(Address of principal executive offices)
(602) 852-9000
(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 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 [ ]
Number of shares of common stock, $.001 par value, of registrant outstanding at
November 6, 2000: 14,041,521
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<PAGE>
MAIN STREET AND MAIN INCORPORATED
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements - Main Street and Main Incorporated
Consolidated Balance Sheets - September 25, 2000
and December 27, 1999 3
Consolidated Statements of Operations - Three Months and
Nine Months Ended September 25, 2000 and September 27, 1999 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 25, 2000 and September 27, 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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MAIN STREET AND MAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 25, December 27,
2000 1999
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,171 $ 3,055
Accounts receivable, net 4,123 3,434
Inventories 1,594 1,453
Prepaid expenses 797 621
--------- ---------
Total current assets 7,685 8,563
Property and equipment, net 61,499 58,006
Other assets, net 1,762 2,072
Franchise costs, net 29,187 17,884
--------- ---------
$ 100,133 $ 86,525
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,830 $ 1,830
Accounts payable 7,938 14,033
Short-term debt 5,000 --
Other accrued liabilities 9,414 9,352
--------- ---------
Total current liabilities 24,182 25,215
--------- ---------
Long-term debt, net of current portion 43,512 31,513
--------- ---------
Other liabilities and deferred credits 2,605 2,414
--------- ---------
Commitments and contingencies
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000 shares
authorized; 10,029,576 and 10,025,116 shares
issued and outstanding in 2000 and 1999,
respectively 10 10
Additional paid-in capital 44,142 44,190
Accumulated deficit (14,318) (16,817)
--------- ---------
29,834 27,383
--------- ---------
$ 100,133 $ 86,525
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
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MAIN STREET AND MAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 25, September 27, September 25, September 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 48,293 $ 35,291 $ 139,928 $ 102,371
RESTAURANT OPERATING EXPENSES:
Cost of sales 13,561 9,911 40,531 28,955
Payroll and benefits 14,061 10,599 41,792 30,502
Depreciation and amortization 2,004 1,073 5,354 3,184
Other operating expenses 13,737 9,732 38,632 28,149
--------- --------- --------- ---------
Total restaurant operating expenses 43,363 31,315 126,309 90,790
--------- --------- --------- ---------
Income from restaurant operations 4,930 3,976 13,619 11,581
OTHER OPERATING (INCOME) EXPENSES:
Amortization of intangible assets 240 239 741 751
General and administrative expenses 2,019 1,567 5,518 4,297
Preopening expenses 340 500 1,144 1,542
New manager training expenses 486 497 1,420 1,171
Management fee income (151) (215) (432) (701)
--------- --------- --------- ---------
Operating income 1,996 1,388 5,228 4,521
Non-operating gain -- -- (11) --
Interest expense, net 892 653 2,715 1,907
--------- --------- --------- ---------
Net income before taxes 1,104 735 2,524 2,614
Income tax expense 75 -- 9 --
--------- --------- --------- ---------
Net income before cumulative effect of change in
accounting principle and extraordinary loss 1,029 735 2,515 2,614
Extraordinary loss from debt extinguishment 16 -- 16 --
Cumulative effect of change in accounting principle -- -- -- 168
--------- --------- --------- ---------
Net income $ 1,013 $ 735 $ 2,499 $ 2,446
========= ========= ========= =========
BASIC EARNINGS PER SHARE:
Net income before cumulative effect of change in
accounting principle and extraordinary loss $ 0.10 $ 0.07 $ 0.25 $ 0.26
Extraordinary loss from debt extinguishment -- -- -- --
Cumulative effect of change in accounting principle -- -- -- (0.02)
--------- --------- --------- ---------
Net income $ 0.10 $ 0.07 $ 0.25 $ 0.24
========= ========= ========= =========
DILUTED EARNINGS PER SHARE:
Net income before cumulative effect of change in $ 0.10 $ 0.07 $ 0.24 $ 0.25
accounting principle and extraordinary loss
Extraordinary loss from debt extinguishment -- -- -- --
Cumulative effect of change in accounting principle -- -- -- (0.02)
--------- --------- --------- ---------
Net income $ 0.10 $ 0.07 $ 0.24 $ 0.23
========= ========= ========= =========
Weighted average shares outstanding-basic 10,030 10,023 10,030 10,023
Weighted average shares outstanding-diluted 10,169 10,591 10,203 10,591
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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MAIN STREET AND MAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months Ended
----------------------------
September 25, September 27,
2000 1999
-------- --------
Cash Flows From Operating Activities:
Net income $ 2,499 $ 2,446
Adjustments to reconcile net income to net
cash flows operating activities:
Depreciation and amortization 6,095 3,935
Non-cash compensation expense for issuance
of common stock to certain employees 10 --
Changes in assets and liabilities:
(Increase) in Accounts receivable, net (689) (1,363)
(Increase) in Inventories (141) (327)
(Increase) in Prepaid expenses (176) (107)
Decrease/ (Increase) in other assets, net 114 (3)
(Decrease) in accounts payable (6,095) (779)
Increase/(Decrease) in other accrued liabilities
and deferred credits 195 (68)
-------- --------
Net cash provided by operating activities 1,812 3,734
-------- --------
Cash Flows From Investing Activities:
Purchases of property and equipment (13,761) (18,740)
Cash received from sale-leaseback transactions, net 5,110 6,038
Cash paid to acquire franchise rights (44) (38)
Cash paid to acquire new restaurant concepts (12,000) (500)
-------- --------
Net cash flows used in investing activities (20,695) (13,240)
-------- --------
Cash Flows From Financing Activities:
Proceeds from sale of stock -- 31
Short-term debt borrowings 5,000 --
Long-term debt borrowings 15,020 3,700
Early long-term debt extinguishments (1,603) --
Principal payments on long-term debt (1,418) (1,157)
-------- --------
Net cash provided by financing activities 16,999 2,574
-------- --------
Net change in cash and cash equivalents (1,884) (6,932)
Cash and cash equivalents, beginning of period 3,055 7,294
-------- --------
Cash and cash equivalents, end of period $ 1,171 $ 362
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 2,455 $ 2,218
======== ========
Cash paid during the period for income taxes $ -- $ --
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
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MAIN STREET AND MAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL REPORTING
The accompanying financial statements have been prepared without an independent
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which are, in the
opinion of management, necessary to fairly state the operating results for the
respective periods. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations, although our management believes that the disclosures are adequate
to make the information presented not misleading. For a complete description of
the accounting policies, see our Form 10-K Annual Report for the year ended
December 27, 1999.
We operate on fiscal quarters of 13 weeks.
The results of operations for the three and nine months ended September 25,
2000, are not necessarily indicative of the results to be expected for a full
year.
Certain amounts in 1999 have been reclassified to conform with the 2000
presentation.
2. START-UP COSTS
On the first day of our 1999 fiscal year, December 29, 1998, we adopted
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities". Pursuant to this accounting requirement, the costs of start-up
activities are expensed as incurred. The adoption of SOP 98-5 resulted in
deferred pre-opening costs on our consolidated balance sheet at December 28,
1998 of $168,000, or $0.02 per share, being charged to operations as the
cumulative effect of a change in accounting principle during the quarter ended
March 29, 1999. Additionally, pursuant to SOP 98-5, pre-opening costs of
$340,000 and $1,144,000, or $0.03 and $0.11 per share, were charged to
operations during the three and nine months ended September 25, 2000 and
$500,000 and $1,542,000, or $.05 and $.15 per share for the comparable periods
in 1999.
3. LEGAL AND CONDEMNATION COSTS
During the nine months ended September 25, 2000, we charged approximately
$1,080,000 in legal and condemnation costs against the reserve for projected
losses, principally as the result of the settlement of a lawsuit in February
2000 as noted in our Form 10-K for the year ended December 27, 1999. The reserve
balance in other accrued liabilities at September 25, 2000 was approximately
$74,000 for legal and condemnation costs.
Reserves for projected losses and contingencies were reduced significantly due
to the settlement and payment of a pending lawsuit in February 2000. Management
feels current reserves are adequate to cover all known losses and contingencies.
4. SEGMENT REPORTING
Effective December 30, 1997, we adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which established revised standards for the reporting of financial
and descriptive information about operating segments in financial statements. We
have determined that we have one reportable operating segment. Accordingly, we
have only presented financial information for our one reportable segment.
5. ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards 133 ("SFAS 133") "Accounting for Derivative
Instruments and Hedging Activities". This statement
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establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. In June 1999, the FASB issued Statement of Financial Accounting
Standards 137 "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133". This statement
deferred the effective date of SFAS No. 133 to our fiscal year beginning January
1, 2001. Although we have not used derivative instruments and hedging activities
in the past, we are currently evaluating the impact of SFAS No. 133 on our
future results of operations and financial position.
6. EARNINGS PER SHARE
The following table sets forth basic and diluted earnings per share "EPS"
computations for the three and nine months ended September 25, 2000 and
September 27, 1999 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
September 25, 2000 September 27, 1999
------------------------- -------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic $1,013 10,030 $ 0.10 $ 735 10,023 $ 0.07
Effect of stock options and warrants -- 139 -- -- 568 --
------ ------ ------ ------ ------ ------
Diluted $1,013 10,169 $ 0.10 $ 735 10,591 $ 0.07
====== ====== ====== ====== ====== ======
Nine Months Ended
-----------------------------------------------------
September 25, 2000 September 27, 1999
------------------------- -------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Basic $2,499 10,030 $ 0.25 $2,446 10,023 $ 0.24
Effect of stock options and warrants -- 173 (.01) -- 568 (.01)
------ ------ ------ ------ ------ ------
Diluted $2,499 10,203 $ 0.24 $2,446 10,591 $ 0.23
====== ====== ====== ====== ====== ======
</TABLE>
7. UNAUDITED BAMBOO CLUB PRO FORMA STATEMENT OF OPERATIONS
The following unaudited pro forma combined statements of operations for the nine
month periods ended September 25, 2000, and September 27, 1999, present our
operating results as if the Bamboo Club restaurant acquisition (accounted for
using the purchase method) occurred at the beginning of 1999. In addition, the
pro forma earnings per share is presented as if the additional shares issued in
connection with the rights offering, as disclosed in footnote #8, had been
outstanding as of the beginning of 1999. The total purchase price for both the
restaurants and the concept was $12,000,000. Goodwill will be amortized over 15
years on a straight line basis. There are no contingent payments or commitments
in connection with this acquisition. Earnings per share are calculated based
upon earnings before taxes, cumulative effect of change in accounting principle,
and extraordinary loss from debt extinguishment. Pro forma results are as
follows (in thousands, except for per share data):
Nine Months Ended
(in thousands)
--------------------------
September 25, September 27,
2000 1999
----------- -----------
Revenue $ 144,980 $ 106,928
Net income before cumulative effect of change in
accounting principle and extraordinary loss 2,993 3,181
Basic earnings per share .21 .23
Diluted earnings per share .21 .22
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8. SUBSEQUENT EVENTS
On October 10, 2000, fifteen days after the close of our third quarter, we
completed our stockholder rights offering by issuing 4,011,740 additional
shares, or the maximum number available to our qualified stockholders. The
proceeds of $9.3 million were used to repay the $5.0 million bridge loan and
will be used to fund future new store development. If the shares had been issued
and outstanding in the the beginning of the year, pro forma diluted earnings per
share would have been $0.07 and $0.21 on a three month and nine month basis,
respectively.
We have re-negotiated our future franchisee development obligations for new
T.G.I. Friday's locations primarily in Northern California. Our re-negotiated
development schedule has reduced our development obligations in Northern
California, extended the dates for new store development in all of California
and increased to a lesser extent our development obligations in other
territories. As part of the new agreement, the franchisor now has the right to
co-develop the Northern California market. We expect to comply with the amended
development agreements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages that
certain items of income and expense bear to total revenue:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------- ---------------------
September 25, September 27, September 25, September 27,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue 100% 100% 100% 100%
RESTAURANT OPERATING EXPENSES:
Cost of sales 28.1 28.1 29.0 28.3
Payroll and benefits 29.1 30.0 29.9 29.8
Depreciation and amortization 4.1 3.0 3.8 3.1
Other operating expenses 28.5 27.6 27.6 27.5
------ ------ ------ ------
Total restaurant operating expenses 89.8 88.7 90.3 88.7
------ ------ ------ ------
Income from restaurant operations 10.2 11.3 9.7 11.3
OTHER OPERATING (INCOME) EXPENSES:
Amortization of intangible assets 0.5 0.7 0.6 0.7
General and administrative expenses 4.2 4.5 3.9 4.2
Preopening expenses 0.7 1.4 0.8 1.5
New manager training expenses 1.0 1.4 1.0 1.1
Management fee income (0.3) (0.6) (0.3) (0.7)
------ ------ ------ ------
Operating income 4.1 3.9 3.7 4.5
Interest expense, net 1.8 1.8 1.9 1.9
------ ------ ------ ------
Net income before taxes 2.3% 2.1% 1.8% 2.6%
====== ====== ====== ======
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 25, 2000 AND COMPARABLE PERIODS IN 1999
Revenue for the three months ended September 25, 2000, increased by 37% to
$48,293,000 compared with $35,291,000 for the comparable period in 1999. On a
year-to-date basis for the nine months ended September 25, 2000 versus the
comparable period in 1999, revenue increased 37% to $139,928,000 from
$102,371,000. The significant increase is attributed to the opening of five new
restaurants in the fourth quarter of 1999, the opening of seven new restaurants
in the first three quarters of 2000 and the acquisition of the Bamboo Club
restaurants during the third quarter of 2000. At the same time, we achieved a
same-store sales increase of 5.3% for the quarter as compared with a 2.4%
increase for the comparable period in 1999. Through the nine months ended
September 25, 2000, same-store sales were up 5.8% as compared to a same-store
increase of 5.0% for the first nine months of 1999. In
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addition, the sales performance of the majority of our new units continue to
exceed our expectations.
Cost of sales as a percentage of revenue for the three months ended September
25, 2000, remained constant at 28.1% as compared with 28.1% for the comparable
period in 1999. For the nine months ended September 25, 2000, cost of sales was
29.0 %, up from 28.3% for the comparable period in 1999. Cost of sales increased
as a result of higher food costs incurred in the first two quarters as we sought
alternative food supply distributors when our major food supplier, Ameriserve,
declared bankruptcy.
Payroll and benefit costs as a percentage of revenue were 29.1% for the three
months ended September 25, 2000, as compared with 30.0 % for the comparable
period in 1999. For the nine months ended September 25, 2000, payroll and
benefit costs were 29.9% of revenue as compared to 29.8% for the comparable
period in 1999. This expense category significantly improved over the first two
quarters of 2000. A large part of our quarterly improvement came from new stores
which opened in 1999 that brought their operating labor expense down to more
efficient levels. The year-to-date increase is the result of the Ameriserve
bankruptcy impact during the first two quarters of 2000, which caused related
labor inefficiencies.
Depreciation and amortization expense has increased to 4.1% for the three months
ended September 25, 2000, as compared with 3.0% for comparable period in 1999.
For the nine months ended September 25, 2000, depreciation and amortization
increased to 3.8% compared to 3.1% for the comparable period in 1999. The
increase was due to new restaurant capital expenses and acquisition costs for
the Bamboo Club purchase.
Other operating expenses increased as a percentage of revenue to 28.5 % for the
three months ended September 25, 2000 from 27.6% for the comparable period in
1999. For the nine months ended September 25, 2000, other operating expenses
increased to 27.6% compared to 27.5% for the comparable period in 1999. The
increase in these costs are due to utility cost increases in Southern California
and workers compensation insurance rate increases throughout our California
operating area.
Amortization of non-goodwill intangible assets declined as a percentage of
revenue to 0.5% for the three months ended September 25, 2000, as compared with
0.7% for the comparable period in 1999. For the nine months ended September 25,
2000, amortization of intangible assets decreased to 0.6% compared to 0.7% for
the comparable period in 1999. The decrease resulted from the fixed nature of
intangibles spread over a much larger revenue base.
General and administrative expenses decreased as a percentage of revenue to 4.2%
for the three months ended September 25, 2000 as compared with 4.5 % for the
comparable period in 1999. For the nine months ended September 25, 2000, general
and administrative costs decreased to 3.9% of revenue as compared with 4.2% for
the comparable period in 1999. Our efforts to ensure that administrative costs
do not grow in excess of sales growth have been effective.
During the first quarter of 1999, we adopted SOP 98-5, as promulgated by the
American Institute of Certified Public Accountants, which requires us to expense
pre-opening expenses as they are incurred. Prior to 1999, such expenses were
capitalized and amortized over a period of one year. Pursuant to SOP 98-5,
pre-opening expenses of $340,000, or 0.7% of revenue, were charged to operations
during the quarter ended September 25, 2000, as compared with $500,000, or 1.4%
of revenue, for the comparable period in 1999. On a year-to-date basis,
pre-opening costs were $1,144,000, or 0.8% of revenue, as compared to
$1,542,000, or 1.5% of revenue, for the comparable period in 1999. We opened
seven new restaurants in the first three quarters of 2000 and eight during the
comparable period in 1999. Our continued efforts to control pre-opening costs
are reflected in the significant decline of average cost per new restaurant.
New manager training expenses are those costs incurred in training newly hired
or promoted managers and related relocation expenses. Due to our aggressive
growth, these expenses continued at a high level of $486,000, or 1.0% of
revenue, for the three months ended September 25, 2000, as compared with
$497,000, or 1.4 % of revenue, for the comparable period in 1999. Year-to-date
new manager training costs were $1,420,000, or 1.0% of revenue, and $1,171,000,
or 1.1% of revenue, for 2000 and 1999, respectively. The decline as a percent of
revenue for 2000 is attributable to fewer new store openings.
Management fee income declined significantly to 0.3% of revenue for the three
and nine months ended September 25, 2000, as compared with 0.6% and 0.7%,
respectively, for the comparable periods in 1999. Three Louisiana
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T.G.I. Friday's stores that were operated under a management contract were sold
in January 2000. The sale terminated our contract to operate the three stores,
which caused the decrease in management fee income.
Interest expense was $892,000, or 1.8% of revenue, and $2,715,000, or 1.9% of
revenue, for the three and nine month periods ended September 25, 2000, as
compared with $653,000, or 1.8% of revenue, and $1,907,000, or 1.9% of revenue,
for the comparable periods in 1999. Interest expense has increased because of
debt incurred for the development of new restaurants in 1999 and 2000 along with
related market rate increases.
We recognized tax expense of $75,000 during the quarter ended September 25,
2000, which leaves us with a year-to-date $9,000 net tax expense. We recognized
the third quarter tax expense because we expect certain states, particularly
California, to have taxable income in excess of net operating losses before the
end of 2000.
During the third quarter of 2000, we replaced two older loans from Franchise
Finance Corporation of America (FFCA) with a loan from Bay View Franchise
Mortgage Acceptance Company (FMAC) because the terms were more favorable to our
company. As part of the transaction, we incurred early payment penalties of
$16,000, which were recognized as extraordinary loss from debt extinguishment.
LIQUIDITY AND CAPITAL RESOURCES
Current liabilities exceeded our current assets because of the longer payment
terms on our development obligations, inventories and other current liabilities
(payment terms are normally 15 to 30 days). Comparatively, the restaurant
business cash cycle is very short and receives substantially immediate payment
for sales transactions. As of September 25, 2000, we had a cash balance of
$1,171,000 with monthly cash receipts sufficient to pay all short- term
outstanding obligations. On a year-to-date basis, our current position improved
despite a $5,000,000 bridge loan. The bridge loan was repaid early in the fourth
quarter from the proceeds of our rights offering.
As of September 25, 2000, we had long-term debt of $43,512,000 and a current
portion of long-term debt of $1,830,000. This $2,171,000 increase in long term
debt was caused by borrowings for our continued restaurant development
commitments.
We opened two new restaurants in the third quarter for a total of seven new
restaurants for the nine months ended September 25, 2000, and have three
additional restaurants under construction. In addition, we acquired two Bamboo
Club restaurants and the Bamboo Club concept for $12,000,000 on July 21, 2000.
One Bamboo Club restaurant is located in Phoenix, Arizona and the other is
located in Scottsdale, Arizona. Another Bamboo Club restaurant is currently
under development in Tempe, Arizona and is expected to be under construction in
early 2001.
As of September 25, 2000, we had outstanding long-term debt and sale/leaseback
financing commitments totaling $11,024,000, which will be utilized to fund
development activity through the first quarter of 2001. We are currently
negotiating with several lenders for financing arrangements to fund future
development.
We lease our restaurants with terms ranging from 10 to 25 years. Minimum
payments on our existing lease obligations are approximately $9,900,000 per year
through 2004. Our total obligation for all signed leases is $125,500,000, with
the last base lease expiring February, 2024.
We believe that our current operating cash resources, lines of credit,
sale/leaseback financing commitments, the proceeds from our rights offering and
expected future cash flows from operations will be sufficient to fund our
capital needs during the next 12 months. We might be required to obtain
additional capital funding for our planned growth during the next 12 to 18
months and beyond. Potential sources of any such capital may include bank
financing, sale/lease-back financing, strategic alliances, and additional
offerings of our equity or debt securities. We cannot provide assurance that
such capital will be available from these or other potential sources, and the
lack of capital could have a material adverse effect on the growth of our
business.
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RECENT DEVELOPMENTS
Subsequent to the end of the third quarter, we completed our shareholder rights
offering with additional stock issued during the week of October 9, 2000. The
rights offering was over-subscribed by approximately 15%. In total, 4,011,740
shares were issued and we received approximately $9.3 million in new capital
(net of expenses). A portion of the proceeds was utilized to repay a bridge loan
obtained to fund the Bamboo Club acquisition. The remainder will be utilized to
fund our future growth.
We intend to continue operating the existing Bamboo Club restaurants and we are
developing plans to expand the concept by opening additional restaurants. Early
operating results since the acquisition validate our purchase assumptions. The
Bamboo Club restaurants have been successfully assimilated into the company's
processes and reporting systems.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, including statements regarding
our business strategies, our business, and the industry in which we operate.
These forward-looking statements are based primarily on our expectations and are
subject to a number of risks and uncertainties, some of which are beyond our
control. Actual results could differ materially from the forward-looking
statements as a result of numerous factors, including those set forth in our
Form 10-K for the year ended December 27, 1999, as filed with the Securities and
Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our net exposure to interest rate risk consists of floating rate instruments
that are benchmarked to U.S. short-term interest rates. We incur interest on
mortgage loans made under lines of credit at variable interest rates of 1.125%
over prime and 2.65% over "30-Day Dealer Commercial Paper Rates" As of September
25, 2000, we had outstanding borrowings on these lines of credit of
approximately $4,700,000.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a Report on Form 8-K on August 17, 2000.
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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.
MAIN STREET AND MAIN INCORPORATED
Dated: November 9, 2000 /s/ Bart A. Brown Jr.
---------------------------------------
Bart A. Brown Jr., President and
Chief Executive Officer
Dated: November 9, 2000 /s/ Lawrence K. White
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Lawrence K White, Vice President of
Finance, Secretary and Treasurer
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