<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
-----------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 7, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-10576
SANTA BARBARA RESTAURANT GROUP, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter.)
DELAWARE 33-0403086
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
360 S. HOPE STREET, SUITE C300
SANTA BARBARA, CALIFORNIA 93105
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 563-3644
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 November 8, 1999, the registrant had 19,973,131 shares
outstanding of its Common Stock, $.08 par value.
<PAGE> 2
SANTA BARBARA RESTAURANT GROUP, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of October 7, 1999
and December 31, 1998....................................................3
Condensed Consolidated Statements of Income for the periods ended
October 7, 1999 and October 8, 1998 .....................................4
Condensed Consolidated Statements of Cash Flows for the forty week
periods ended October 7, 1999 and October 8, 1998 .......................5
Notes to Condensed Consolidated Financial Statements.....................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................13
Item 6. Exhibits and Reports on Form 8-K........................................13
Signatures.........................................................................13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATON
Item 1. Condensed Consolidated Financial Statements
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
October 7, December 31,
1999 1998
---------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $4,118 $7,043
Short-term investments................................................... 914 --
Accounts receivable, net of allowance for doubtful accounts
of $260 in 1999 and $125 in 1998 .................................... 1,616 874
Current portion of notes receivable...................................... 691 239
Current portion of related party notes receivable........................ 4,646 --
Inventories.............................................................. 1,492 990
Deferred income taxes, net............................................... 1,152 1,152
Prepaid expenses......................................................... 1,073 443
Other current assets..................................................... 287 472
-------- -------
Total current assets............................................ 15,989 11,213
-------- -------
Property and equipment, net.............................................. 37,223 27,447
Property under capital leases, net....................................... 4,730 5,214
Investments in affiliated companies...................................... 9,349 9,447
Notes receivable, net.................................................... 1,087 1,732
Related party notes receivable........................................... 100 --
Costs in excess of net assets of businesses acquired, net of
accumulated amortization of $575 in 1999 and $139 in 1998.............. 30,107 20,320
Other assets............................................................. 2,237 457
-------- -------
$100,822 $75,830
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................ $1,647 $ 44
Current portion of capital lease obligations............................. 934 886
Accounts payable and accrued expenses.................................... 7,850 5,151
Accrued salaries, wages and employee benefits............................ 4,451 3,573
Other current liabilities ............................................... 6,374 4,829
-------- -------
Total current liabilities.......................................... 21,256 14,483
Long-term debt, less current portion..................................... 4,199 585
Capital lease obligations, less current portion.......................... 4,906 5,650
Deferred income taxes, net............................................... 336 336
Other long-term liabilities.............................................. 5,191 5,302
-------- -------
Total liabilities.................................................. 35,888 26,356
-------- -------
Shareholders' equity:
Common stock, $.08 par value, authorized 50,000,000 shares;
20,746,293 and 15,238,908 shares issued and 20,183,453 and
15,238,908 outstanding in 1999 and 1998, respectively................... 1,660 1,219
Additional paid in capital............................................... 73,616 59,416
Less cost of treasury stock, 562,840 shares in 1999...................... (1,176) --
Accumulated deficit...................................................... (9,166) (11,161)
-------- -------
Total shareholders' equity........................................... 64,934 49,474
-------- -------
$100,822 $75,830
======== =======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE> 4
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks July 1, 1998 Forty Weeks Forty Weeks
Ended to Ended Ended
October 7, October 8, October 7, October 8,
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Company-operated restaurant operations $ 29,867 $ 9,968 $ 81,083 $ 11,399
Franchised restaurants ................ 1,049 578 2,625 1,418
Other ................................. 109 152 363 412
-------- -------- -------- --------
Total revenues ...................... 31,025 10,698 84,071 13,229
-------- -------- -------- --------
Restaurant operating costs:
Food and packaging .................... 9,753 3,404 26,809 3,943
Payroll and other employee benefits ... 9,774 3,598 27,219 4,047
Occupancy and other operating costs ... 6,872 2,191 18,122 2,588
-------- -------- -------- --------
Total restaurant operating costs .... 26,399 9,193 72,150 10,578
-------- -------- -------- --------
Advertising ........................... 1,051 172 2,634 290
Pre-opening expense ................... 13 -- 334 --
General and administrative ............ 2,496 888 6,456 1,535
-------- -------- -------- --------
Total ............................... 3,560 1,060 9,424 1,825
-------- -------- -------- --------
Operating income ...................... 1,066 445 2,497 826
Interest expense ...................... (198) (64) (431) (63)
Other income, net ..................... 213 109 706 268
-------- -------- -------- --------
Income before income tax expense ...... 1,081 490 2,772 1,031
Income tax expense .................... 304 17 778 24
-------- -------- -------- --------
Net income ............................ $ 777 $ 473 $ 1,994 $ 1,007
======== ======== ======== ========
Basic net income per share .............. $ 0.04 $ 0.05 $ 0.12 $ 0.14
======== ======== ======== ========
Diluted net income per share ............ $ 0.04 $ 0.05 $ 0.12 $ 0.12
======== ======== ======== ========
Basic weighted average shares outstanding 19,950 8,727 17,138 7,226
======== ======== ======== ========
Diluted weighted average shares
outstanding ............................. 20,055 9,283 17,284 8,172
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
<PAGE> 5
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Forty Forty
Weeks Ended Weeks Ended
October 7, October 8,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................. $ 1,994 $ 1,007
Adjustments to reconcile net income to net cash flows
provided by (used in) operating activities:
Depreciation and amortization ..................... 3,527 439
Changes in operating assets and liabilities:
Accounts receivable ............................... (282) (152)
Inventory, prepaids and other current assets ...... 230 170
Accounts payable and accrued expenses ............. 1,213 (2,541)
Accrued salaries, wages and employee benefits ..... 397 (214)
Other current liabilities ......................... (993) 9
------- --------
Net cash provided by (used in) operating activities . 6,086 (1,282)
------- --------
Cash flows from investing activities:
Proceeds from maturity of short-term investments ....... -- 18,737
Purchases of short-term investments .................... (914) (22,485)
Cash received from acquisition, net .................... 792 1,501
Issuance of notes receivable ........................... (2,100) (92)
Collection of notes receivable ......................... 192 198
Net change in other assets ............................. 193 22
Purchases of property and equipment .................... (3,951) (932)
------- --------
Net cash used in investing activities ............... (5,788) (3,051)
------- --------
Cash flows from financing activities:
Repayment of capital lease obligations ................. (695) (67)
Repayment of long-term debt ............................ (359) (3)
Proceeds from issuance of common stock ................. -- 29
Proceeds from issuance of warrants ..................... -- 5,000
Proceeds from short-term borrowings .................... -- 200
Purchase of treasury stock ............................. (1,176) --
Net change in other long-term liabilities .............. (993) (26)
------- --------
Net cash provided by (used in) financing activities . (3,223) 5,133
------- --------
Net increase (decrease) in cash and cash equivalents ..... (2,925) 800
Cash and cash equivalents at beginning of period ......... 7,043 1,130
------- --------
Cash and cash equivalents at end of period ............... $ 4,118 $ 1,930
======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................... $ 431 $ 15
Income taxes ....................................... $ 193 $ 7
Non cash investing and financing activities:
Issuance of common stock to acquire related party
notes receivable ................................. $ 2,646 $ --
Issuance of common stock to acquire businesses
described in Note 3 .............................. $ 7,725 $ 26,151
Issuance of warrants to acquire La Salsa ........... $ 407 $ --
Issuance of common stock to retire convertible
subordinated promissory notes .................... $ 3,863 $ --
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE> 6
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY
Santa Barbara Restaurant Group, Inc., (formerly known as GB Foods Corporation) a
Delaware corporation, and subsidiaries (the "Company" or "SBRG") is engaged in
the food service industry. Information relating to periods ending prior to
September 1, 1998 included in this report relates to the historical operations
of the Company and, except as otherwise indicated, does not reflect the
operations of Timber Lodge Steakhouse, Inc. ("Timber Lodge") and JB's Family
Restaurants, Inc. ("JB's") which the Company acquired on September 1, 1998.
Additionally, information relating to periods ending prior to July 15, 1999
included in this report, except as otherwise indicated, excludes the operations
of La Salsa, Inc., formerly La Salsa Holding Co., ("La Salsa") and its wholly
owned subsidiaries which the Company acquired on July 15, 1999. As of October 7,
1999, the Company operated 54 JB's restaurants, 22 Timber Lodge Steakhouse
restaurants, 50 La Salsa restaurants, six Galaxy Diner restaurants and five
Green Burrito restaurants. The Company also franchises 37 Green Burrito
stand-alone restaurants, 208 dual-concept restaurants, 44 La Salsa restaurants
and 29 JB's restaurants for a total of 455 restaurants.
2. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of the
Company and subsidiaries have been prepared in accordance with generally
accepted accounting principles contained in instructions to Form 10-Q and
Article 10 of Regulation S-X. These statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1998.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation have been included.
Operating results for interim periods are not necessarily indicative of results
expected for a full year. During the third quarter of 1998, the Company changed
from a calendar year/quarter to a fiscal year ending the last Thursday of
December. The first, second and third quarters of fiscal 1999, ended April 22,
1999, July 15, 1999 and October 7, 1999, respectively, and included 16, 12 and
12 weeks of operations, respectively. The first and second quarters of fiscal
1998 include the three month periods ending March 31, 1998 and June 30, 1998,
respectively, and the third quarter of fiscal 1998 includes the period from July
1, 1998 to October 8, 1998. Certain reclassifications have been made to the 1998
amounts to conform to the 1999 presentation.
3. MERGER WITH TIMBER LODGE AND ACQUISITION OF JB'S AND LA SALSA
On July 15, 1999, the Company acquired La Salsa pursuant to an Agreement and
Plan of Merger. As a result of the acquisition, the stockholders of La Salsa
received 3.0 million shares of SBRG common stock and convertible subordinated
promissory notes ("notes") valued at $3.9 million. On August 16, 1999, SBRG's
shareholder's voted to convert the notes into 1.5 million shares of the
Company's common stock. Additionally, stockholders of La Salsa received warrants
to purchase an aggregate of 500,000 shares of the Company's common stock at
exercise prices ranging between $7.00-$7.50 per share, valued at $407,000. At
the time of the acquisition, La Salsa owned 51 restaurants in California and
Nevada and franchised 45 restaurants in 8 states, predominantly in the western
United States, and Puerto Rico.
The Company, in recording the fair value of assets acquired and liabilities
assumed for La Salsa, has made certain estimates. These estimates consist
primarily of i) recording property and equipment at estimated fair value, ii)
providing for negative operating cash flows on certain underperforming
restaurants acquired, and iii) the cost of closing the then existing corporate
office of La Salsa. This acquisition has been accounted for as a purchase and
the resulting estimated costs in excess of net assets of business acquired in
the amount of $10.4 million are being amortized using a straight-line method
over a 40 year period. The allocation of purchase price to the fair value of
assets acquired and liabilities assumed is dependent upon certain valuations and
other studies that have not progressed to a stage where there is sufficient
information to make a definitive allocation. Although the purchase price
allocation is preliminary, the Company does not anticipate any significant
changes necessary to arrive at a final allocation.
The Company assumed La Salsa's obligations associated with a $10.0 million
credit agreement with Bank Boston, N.A. At the completion of the acquisition, La
Salsa had an outstanding term loan of $5.1 million and an outstanding revolving
loan of $400,000. The term loan carries an interest rate of LIBOR plus 4.00%.
Quarterly principal payments of $300,000 commenced September 30, 1999. The
revolving loan carries an interest rate of LIBOR plus 3.75%, and is due
September 30, 2003.
The following table presents selected unaudited pro forma results of operations
for the Company, assuming the Timber Lodge, JB's, and La Salsa acquisitions had
occurred on January 1, 1998. The unaudited pro forma results of operations do
not reflect certain cost savings that management believes may be realized
following the transactions. The pro forma results of operations are not
indicative of the results of operations of the combined companies that would
have occurred had the acquisitions occurred on January 1, 1998, nor are they
indicative of future operating results.
6
<PAGE> 7
<TABLE>
<CAPTION>
Forty Forty
Weeks Ended Weeks Ended
October 7, October 8,
1999 1998
----------- -----------
(In thousands, except share and
per share amounts)
<S> <C> <C>
Total revenues.................................. $101,054 $90,447
Net income...................................... $ 2,035 $ 2,403
EPS - basic..................................... $ .10 $ .14
EPS - diluted................................... $ .10 $ .13
Weighted average shares outstanding - basic..... 20,317 17,023
Weighted average shares outstanding - diluted... 20,463 17,957
</TABLE>
4. SEGMENT AND RELATED INFORMATION
Prior to the acquisitions described in Note 3, the Company had one reportable
segment. As a result of the acquisitions, the Company has three reportable
segments in fiscal 1999: Family Dining, Steakhouse and Quick Serve Mexican.
The Family Dining segment includes the Company's JB's and Galaxy Diner
restaurants which serve breakfast, lunch and dinner. The Steakhouse segment is
comprised of Timber Lodge Steakhouse. The Quick Serve Mexican segment is
comprised of Green Burrito and La Salsa restaurants which are positioned in the
"fast food" segment of the restaurant industry. La Salsa assets are included in
the Quick Serve Mexican segment in 1999, as well as its operating results
subsequent to the acquisition date of July 15, 1999. The Company evaluates the
performance of its operating segments based on income before income tax expense.
Summarized financial information concerning the Company's reportable segments is
shown in the following table. The corporate assets consist of corporate cash and
cash equivalents and short-term investments for each period presented. In 1999,
total assets in the corporate column also include investments in affiliated
companies, related party notes receivable and deferred income taxes. The
corporate component of segment profit before tax for both forty week periods
presented includes corporate general and administrative expenses, and interest
income earned on corporate assets. The corporate component of segment profit for
the forty week period ended October 1, 1999 also includes $630,000 of costs
incurred related to an attempted acquisition.
<TABLE>
<CAPTION>
Family Quick Serve
Dining Steakhouse Mexican Corporate Total
------- ---------- ----------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Forty Weeks Ended October 7, 1999
- ---------------------------------
Revenues ........................... $42,821 $29,548 $11,702 $ -- $ 84,071
Interest income .................... 142 43 127 327 639
Interest expense ................... 332 -- 99 -- 431
Depreciation and amortization ...... 1,460 1,466 601 -- 3,527
Pre-opening expense ................ -- 331 3 -- 334
Segment profit before tax .......... 1,510 936 876 (550) 2,772
Total assets as of October 7, 1999 . $30,398 $28,350 $25,716 $ 16,358 $100,822
Forty Weeks Ended October 8, 1998
- ---------------------------------
Revenues ........................... $ 5,884 $ 3,447 $ 3,898 $ -- $ 13,229
Interest income .................... 6 3 32 104 145
Interest expense ................... 57 6 -- -- 63
Depreciation and amortization ...... 112 149 178 -- 439
Segment profit before tax .......... 94 162 696 79 1,031
Total assets as of December 31, 1998 $34,091 $24,760 $ 2,004 $ 14,975 $ 75,830
</TABLE>
7
<PAGE> 8
5. RELATED PARTY NOTES RECEIVABLE AND OTHER RELATED PARTY TRANSACTIONS
The Company acquired an aggregate principal amount of $4.9 million of 13.0%
senior secured Checkers Drive-In Restaurants, Inc. ("Checkers") debt from three
unaffiliated parties during the quarter ended April 22, 1999. First, on March
30, 1999, the Company acquired $3.0 million of Checkers' senior secured debt in
exchange for approximately 998,000 unregistered shares of the Company's common
stock. The Company recorded the difference between the fair market value of the
Company's common stock and the stated value of the note receivable as a
reduction, or discount, to the note receivable from Checkers in the amount of
$350,000. Second, on April 8, 1999, the Company acquired, for cash,
approximately $1.9 million of Checkers' senior secured debt from two
unaffiliated parties. The $4.9 million of 13% senior secured debt provides for
the payment of monthly interest, and the principal balance is due on April 30,
2000.
The Company and Checkers share certain officers and directors. Additionally, CKE
Restaurants, Inc., and Fidelity National Financial, Inc., related parties of the
Company, maintain an equity interest in Checkers and/or hold notes receivable
from Checkers.
On August 9, 1999 Checkers and Rally's Hamburgers, Inc. ("Rally's") completed a
merger and Checker's shareholders approved a 1-for-12 reverse stock split.
Pursuant to the Checker's and Rally's merger and simultaneous reverse stock
split, SBRG now owns 399,471 shares, or 4.3%, of the outstanding Checkers'
common stock which is accounted for under the equity method of accounting due to
commonality of certain board members.
During the third quarter of 1999, the Company issued promissory notes to certain
executives in the total amount of $153,000.
6. COMMITMENTS AND CONTINGENCIES
On December 11, 1998, Jack and Terry Brown and Green Burrito #22, Alhambra, a
California limited partnership, filed an action entitled Brown, et al. v. Santa
Barbara Restaurant Group, et al., in Superior Court of the State of California
for the County of Orange and on March 5, 1999 filed a first amended complaint
alleging causes of action for unfair competition, unfair trade practices,
intentional misrepresentation, negligent misrepresentation, concealment and
suppression, breach of fiduciary duty arising from agency, accounting, breach of
covenant of good faith and fair dealing and common law unfair competition. It is
difficult to quantify plaintiffs' alleged damages. Volume incentives paid to the
Company which could be attributed to plaintiffs' purchases of food products is
less than $50,000. Plaintiffs, however, have made additional claims for damages
which at this time the Company is unable to quantify. For example, plaintiffs
seek to act on behalf of other, as yet undisclosed, franchisees and on behalf of
the public. Plaintiffs also claim damages to the value of their franchises.
Discovery has been completed and the case is set for trial on January 31, 2000.
Although the results in litigation are always uncertain, the Company believes it
has meritorious defenses to plaintiffs' allegations and intends to vigorously
defend against the claims.
On October 5, 1999, La Salsa Franchise, Inc. served a demand for arbitration
pursuant to the commercial arbitration rules of the American Arbitration
Association, on DeNata, Inc., Neil Breton and Paul Marsh (collectively, "DeNata,
Inc."), a La Salsa franchisee with eight restaurants in the state of Utah. La
Salsa Franchise, Inc. filed the demand because DeNata, Inc. ceased performing
and materially breached its Franchise Agreements, including the duty to pay
royalties and advertising fees and to report its sales from which payments are
calculated. DeNata, Inc. also breached its Area Development Agreement by failing
to open an additional restaurant as provided in the agreement DeNata, Inc. has
previously asserted that it is not required to perform under its Franchise
Agreements and is entitled to rescission of all eight agreements upon various
grounds. In response to the demand for arbitration, on November 2, 1999 DeNata,
Inc. sent a letter to the arbitration case administrator with a copy of a
complaint that DeNata, Inc. filed in the United States District Court, District
of Utah, Central Division, on the same date, against La Salsa Franchisee, Inc.,
La Salsa and other defendants. The complaint alleges numerous "counts,"
including price fixing in violation of the federal and Utah antitrust laws,
tortious interference with economic relations, violations of the Utah Business
Opportunity Act, relief from arbitration agreements, common law fraud as to all
franchise and area development agreements, and breaches of contracts between the
parties. The complaint seeks termination of all agreements between the parties
and seeks various types of damages, including treble damages, in unspecified
amounts that exceed $100,000 as well as attorney fees and costs. DeNata, Inc.
also stated in the letter that it believes the binding arbitration provisions in
its Franchise Agreements to be unenforceable and requested that the arbitration
proceeding be stayed pending a determination by the Court on this issue. La
Salsa intends to vigorously defend the case, and attempt to proceed with the
arbitration, contending the claims lack merit.
The Company is from time to time the subject of complaints or lawsuits from
customers alleging illness, injury or other food quality, health or operational
concerns. The Company also is the subject of claims or allegations from
employees and franchisees from time to time. The Company believes that these
lawsuits and claims are not material to the Company's financial condition or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
On September 1, 1998, the Company completed the acquisitions of Timber Lodge and
JB's and on July 15, 1999, the Company completed the acquisition of La Salsa.
The following Management's Discussion and Analysis should be read in conjunction
with the unaudited condensed consolidated financial statements and the notes
thereto. The addition of 86 Company-operated and 29 franchised restaurants
associated with the acquisition of JB's and Timber Lodge are the principal
reasons for the significant differences when comparing results of operations for
the 40 week period ended October 7, 1999 with the results of operations for the
forty week period ended October 8, 1998. The addition of 51 Company operated and
45 franchised restaurants associated with the acquisition of La Salsa, coupled
with the JB's and Timber Lodge acquisitions, are the principal reasons for the
significant differences when comparing results of operations for the quarter
ended October 7, 1999 with the results of operations for the quarter ended
October 8, 1998. The comparability of future periods will also be affected by
the aforementioned transactions, and may continue to be affected by the
implementation of the Company's acquisition strategy. The costs associated with
integrating new restaurants or underperforming or unprofitable restaurants, if
any, acquired or otherwise operated by the Company, may have a material adverse
effect on the Company's results of operations.
All statements, other than statements of historical fact, included in this Form
10-Q are, or may be deemed to be, "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934. Such forward-looking statements
involve assumptions, known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements contained in this Form
10-Q. Such potential
8
<PAGE> 9
risks and uncertainties include, without limitation, competitive pricing and
other pressures from other restaurant operations, economic conditions generally
and in the Company's primary markets, consumer spending patterns, perceived
quality and value of the Company's products, availability of capital, cost of
labor, food costs, occupancy costs and other risk factors detailed in other of
the Company's filings with the Securities and Exchange Commission. The
forward-looking statements are made as of the date of this Form 10-Q and the
Company assumes no obligation to update the forward-looking statements or to
update the reasons actual results could differ from those projected in such
forward-looking statements. Therefore, readers are cautioned not to place undue
reliance on these forward-looking statements.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenues,
unless otherwise indicated, of certain items included in the Company's condensed
consolidated statements of income for the twelve and forty week periods ended
October 7, 1999, the period from July 1, 1998 through October 8, 1998 and the
forty week period ended October 8, 1998. The twelve-week period ended October 7,
1999 is referred to throughout this document as the third quarter of fiscal 1999
and the period from July 1, 1998 through October 8, 1998 is referred to as the
third quarter of fiscal 1998.
<TABLE>
<CAPTION>
Twelve Weeks July 1, Forty Weeks Forty Weeks
Ended 1998 to Ended Ended
Oct. 7, 1999(1) Oct. 8, 1998 Oct. 7, 1999(1) Oct. 8, 1998
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Company-operated restaurant operations 96.3% 93.2% 96.4% 86.2%
Franchised restaurants and other ..... 3.7 6.8 3.6 13.8
----- ----- ----- -----
Total revenues .................... 100.0 100.0 100.0 100.0
----- ----- ----- -----
Restaurant operating costs: (2)
Food and packaging ................... 32.7 34.1 33.1 34.6
Payroll and other employee benefits .. 32.7 36.1 33.6 35.5
Occupancy and other operating costs .. 23.0 22.0 22.3 22.7
----- ----- ----- -----
Total restaurant operating costs .. 88.4 92.2 89.0 92.8
Advertising (2) ........................ 3.5 1.7 3.2 2.5
Pre-opening expense (2) ................ 0.0 0.0 0.4 0.0
General and administrative ............. 8.0 8.3 7.7 11.6
----- ----- ----- -----
Operating income ....................... 3.4 4.2 3.0 6.2
Interest expense ....................... (0.6) (0.6) (0.5) (0.5)
Other income, net ...................... 0.7 1.0 0.8 2.0
Income before income taxes ............. 3.5 4.6 3.3 7.8
Income tax expense ..................... 1.0 0.2 0.9 0.2
----- ----- ----- -----
Net income ............................. 2.5% 4.4% 2.4% 7.6%
----- ----- ----- -----
</TABLE>
(1) Includes the operating results of Timber Lodge and JB's for the entire
fiscal 1999 period presented and the results of La Salsa from July 15,
1999.
(2) As a percentage of revenues from Company-operated restaurants.
Revenues from Company-operated restaurants increased $19.9 million to $29.9
million for the third quarter of fiscal 1999 as compared with revenues of $10.0
million during the third quarter of fiscal 1998. Revenues from Company-operated
restaurants increased $69.7 million to $81.1 million for the forty weeks ended
October 7, 1999 as compared with revenues of $11.4 million during the forty
weeks ended October 8, 1998. The increase in revenues for both periods is
primarily attributable to the addition of JB's and Timber Lodge restaurants on
September 1, 1998 and the acquisition of La Salsa on July 15, 1999. JB's
generated $12.2 million and $41.7 million in revenues during the third quarter
and forty weeks ended October 7, 1999, respectively. Timber Lodge generated $9.0
million and $29.5 million in revenues, respectively, during the third quarter
and forty weeks ended October 7, 1999. La Salsa generated $8.1 million in
revenues during the third quarter of fiscal 1999. JB's and Timber Lodge, which
were operated by the Company for five weeks during the third quarter of 1998,
generated revenues of $5.7 million and $3.4 million during the third quarter of
fiscal 1998.
Revenues from franchised restaurants increased $471,000 to $1.0 million for the
third quarter of fiscal 1999 as compared with revenues of $578,000 during the
third quarter of fiscal 1998. The increase in revenues from franchised
restaurants is due to the addition of royalties earned by the JB's and La Salsa
franchise systems which generated franchise fees and royalties of $359,000 and
$272,000, respectively, during the third quarter of fiscal 1999. Revenues from
franchised restaurants increased $1.2 million to $2.6 million for the forty
weeks ended October 7, 1999 as compared with revenues of $1.4 million during the
forty weeks ended October 8, 1998. The increase in revenues from franchised
restaurants for the forty weeks ended October 7, 1999 as compared with the prior
year, is principally due to the addition of royalties earned by the JB's and La
Salsa franchise systems which generated franchise fees and royalties of $1.1
million and $272,000, respectively.
Food and packaging costs as a percentage of revenue from Company-operated
restaurants decreased to 32.7% for the third quarter of fiscal 1999 as compared
with 34.1% during the third quarter of fiscal 1998. For the forty weeks ended
October 7, 1999, food and
9
<PAGE> 10
packaging costs as a percentage of revenue from Company-operated restaurants
decreased to 33.1% as compared with 34.6% for the forty weeks ended October 8,
1998. The decrease in food and packaging costs as a percentage of revenue from
Company-operated restaurants for both the third quarter of fiscal 1999 and the
forty weeks ended October 7, 1999, as compared with the prior year, is primarily
due to the addition of JB's restaurants in September 1998 and La Salsa on July
15, 1999, which operate with significantly lower food and packaging costs as
compared to Green Burrito.
Payroll and other employee benefits decreased as a percentage of revenue from
Company-operated restaurants to 32.7% for the third quarter of fiscal 1999 as
compared with 36.1% for the third quarter of fiscal 1998. For the forty weeks
ended October 7, 1999, payroll and other employee benefits decreased as a
percentage of revenue from Company-operated restaurants to 33.6% as compared
with 35.5% for the forty weeks ended October 8, 1998. The decrease in payroll
and other employee benefits as a percent of revenue from Company-operated
restaurants for both the third quarter of fiscal 1999 and the forty weeks ended
October 7, 1999, as compared with the prior year, is attributable to the
addition of JB's and Timber Lodge in September 1998 and La Salsa in July 1999.
The Timber Lodge and La Salsa restaurants operate with lower payroll and other
employee benefits costs as a percentage of revenue from Company-operated
restaurants than Green Burrito; while the JB's restaurants operate with higher
payroll and other employee benefits as a percent of revenues than the Green
Burrito restaurants.
Occupancy and other operating costs increased as a percentage of revenue from
Company-operated restaurants to 23.0% for the third quarter of fiscal 1999 as
compared with 22.0% for the third quarter of fiscal 1998. The increase is
primarily due to the acquisition of La Salsa. Although La Salsa has lower
occupancy and other costs as a percentage of revenue than both Green Burrito and
Timber Lodge, its occupancy rates as a percentage of revenues are higher than
JB's. For the forty weeks ended October 7, 1999, occupancy and other operating
costs as a percentage of revenue from Company-operated restaurants decreased to
22.3% as compared with 22.7% for the forty weeks ended October 8, 1998. The
decrease in occupancy and other operating costs as a percent of revenue from
Company-operated restaurants for the forty weeks ended October 7, 1999, as
compared with the prior year, is attributable to the addition of JB's
restaurants and Timber Lodge in fiscal 1998, which operate with lower occupancy
and other costs as a percentage of revenue from Company-operated restaurants
than Green Burrito.
Advertising costs increased to 3.5% of revenue from Company-operated restaurants
for the third quarter of fiscal 1999 as compared with 1.7% for the third quarter
of fiscal 1998. For the forty weeks ended October 7, 1999, advertising costs as
a percentage of revenue from Company-operated restaurants increased to 3.2% as
compared with 2.5% for the period ended October 8, 1998. The increase in
advertising costs as a percent of revenue from Company-operated restaurants for
both the third quarter of fiscal 1999 and the forty weeks ended October 7, 1999,
as compared with the prior year, is entirely due to the addition of JB's
restaurants and Timber Lodge in fiscal 1998 and La Salsa in July 1999 which
typically spend three to four percent of restaurant sales on advertising costs.
Pre-opening expense of $13,000 for the third quarter of fiscal 1999 and $334,000
for the forty weeks ended October 7, 1999 primarily represents costs associated
with the conversion of two JB's restaurants during fiscal 1999 to Timber Lodge
Steakhouse restaurants.
General and administrative costs were $2.5 million or 8.0% of total revenues for
the third quarter of fiscal 1999 as compared with $888,000 or 8.3% of total
revenues for the third quarter of 1998. The general and administrative costs for
the third quarter of 1999 includes litigation related expenses in the amount of
$182,000. For the forty weeks ended October 7, 1999, general and administrative
costs were $6.5 million or 7.7% of total revenues and include a charge of
approximately $630,000 for costs incurred by the Company related to an attempted
acquisition. General and administrative expenses were $1.5 million or 11.6% of
total revenues for the forty weeks ended October 8, 1998. The decrease in
general and administrative expense as a percentage of total revenues for both
the third quarter of fiscal 1999 and the forty weeks ended October 7, 1999, as
compared with the prior year, is attributable to the addition of JB's
restaurants and Timber Lodge in September, 1998 and La Salsa in July, 1999,
which are primarily comprised of Company-operated restaurants that operate with
significantly lower general and administrative expenses as a percentage of total
revenue than the primarily franchise oriented operations of the Company prior to
the acquisitions.
Interest expense of $198,000 for third quarter of fiscal 1999 consists of
$99,000 of interest expense related to capitalized real property leases and
$99,000 of interest expense related to the $5.5 million of outstanding
borrowings under the La Salsa credit agreement (See note 3). Interest expense of
$64,000 during the third quarter of fiscal 1998 was attributable to the
acquisition of JB's restaurants and the aforementioned capitalized real property
leases. Interest expense of $431,000 for the forty weeks ended October 7, 1999
primarily reflects $332,000 of capital lease interest and $99,000 of interest
expense associated with La Salsa's credit agreement.
Other income, net, primarily reflects interest income on invested cash,
short-term investments and notes receivable. During the third quarter of fiscal
1999, other income, net, increased $104,000 to $213,000 as compared to $109,000
during the third quarter of fiscal 1998. For the forty weeks ended October 7,
1999 other income, net, increased $438,000 to $706,000 as compared to $268,000
for the period ended October 8, 1998. The increases in other income, net, are
primarily due to the addition during the first quarter of fiscal 1999 of $4.9
million of related party notes receivable, bearing interest at 13% (see Note 5).
10
<PAGE> 11
YEAR 2000
The Company expects to complete during the fourth quarter of fiscal 1999 all
necessary software and hardware upgrades and testing required to resolve the
potential impact of the Year 2000 on the processing of data-sensitive
information by the Company's computerized information systems. The Year 2000
problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Any of the Company's programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the Year 2000, which could result in miscalculations or system
failures. The Company has evaluated the impact of the Year 2000 problem on its
business, including the Company's operational, information and financial
systems, as well as the operational systems of La Salsa, which was acquired on
July 15, 1999 and the Company does not expect the Year 2000 problem, including
the cost of making the Company's computerized information systems Year 2000
compliant, to have a material adverse impact on the Company's financial position
or results of operations in future periods. However, the inability of the
Company to resolve all potential Year 2000 problems in a timely manner could
have a material adverse impact on the Company. The Company has also completed
communications with significant suppliers and vendors on which the Company
relies in an effort to determine the extent to which the Company's business is
vulnerable to the failure by these third parties' to remediate their Year 2000
problems. While the Company has not learned of any material risks associated
with the Year 2000 problem on these entities, there can be no assurance that the
computerized information systems of these third parties will be Year 2000
compliant on a timely basis. The inability of these third parties to remediate
their Year 2000 problems could have a material adverse impact on the Company.
The Company's review of its information systems indicates that the point of sale
cash register systems in certain restaurants must be replaced in order to be
Year 2000 compliant. The replacement of said systems will be completed during
the fourth quarter of fiscal 1999. In addition, the Company has modified certain
applications and replaced some of the hardware used in the processing of
financial information. In conjunction with these upgrades, which are on schedule
to be completed by the end of 1999, the Company believes it will have addressed
any potential significant Year 2000 issues. Total expenditures related to the
upgrade of the information systems are expected to range from $1.4 million to
$1.6 million, of which approximately $1.2 million will be funded through
equipment lease financing. As of October 7, 1999, the Company has incurred and
expensed approximately $200,000 of expenditures consisting of internal staff
costs, as well as outside consulting and other expenditures related to this
upgrade process. In addition, the Company has incurred costs related to the
acquisition of new equipment of approximately $50,000 which have been
capitalized. These costs are being funded through operating cash flows. To the
extent possible, the Company has developed contingency plans designed to allow
continued operation in the event of failure of the Company's or third parties'
computer information systems.
EFFECT OF INFLATION
Food and labor costs are significant inflationary factors in the Company's
operations. Many of the Company's employees are paid hourly rates related to the
statutory minimum wage; therefore, increases in the minimum wage increase the
Company's costs. In addition, most of the Company's leases require it to pay
base rents with escalation provisions based on the consumer price index, in
addition to percentage rentals based on revenues, and to pay taxes, maintenance,
insurance, repairs, and utility costs, all of which are expenses subject to
inflation. The Company has generally been able to offset the effects of
inflation and increases in the minimum wage through small menu price increases.
There can be no assurance that the Company will be able to continue to offset
the effects of inflation through menu price increases.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of approximately $4.1 million at
October 7, 1999 and $7.0 million at December 31, 1998. The decrease in cash and
cash equivalents is primarily due to the use of approximately $2.1 million to
fund the purchase of and increase in notes receivable (see Note 5), $4.0 million
to fund purchases of equipment and other capital improvements and $3.2 million
utilized in financing activities, partially offset by $6.1 million provided by
operating activities.
Net cash provided by operating activities was $6.1 million during the forty week
period ended October 7, 1999 which included net income of $2.0 million,
depreciation and amortization of $3.5 million, and an increase in accounts
payable and accrued expenses of $1.2 million, offset by a decrease of $1.0
million in other current liabilities. Investing activities required the Company
to use $2.1 million in cash to fund the purchase of and increase in related
party notes receivable (see note 5) and $4.0 million of cash to fund capital
additions. In addition, the Company received net cash from the acquisition of La
Salsa of $792,000 and used $914,000 to purchase short term investments.
Financing activities required the Company to use $993,000 of cash to reduce
other long-term liabilities and $695,000 of cash to repay capital lease
obligations. In addition, the Company used $1.2 million to repurchase 562,840
shares of the Company's common stock on the open market.
11
<PAGE> 12
During the forty week period ended October 7, 1999, the Company completed the
conversion of two under-performing JB's restaurants to the Timber Lodge
Steakhouse concept at an average conversion cost of approximately $850,000,
including pre-opening costs. The Company expects to complete one additional JB's
to Timber Lodge conversion during the first quarter of fiscal 2000. In addition,
through the end of the third quarter of fiscal 1999, the Company has remodeled
four JB's restaurants at an average cost of approximately $150,000. The Company
expects to remodel one additional JB's restaurant during the remainder of fiscal
1999. The Company also plans to open one new Timber Lodge restaurant in
Minnesota during the fourth quarter of fiscal 1999 requiring the use of
approximately $1.1 million of cash. During the third and fourth quarter of
fiscal 1999, the Company will complete the installation of new point of sale
cash registers in the Company's JB's restaurants at a total cost of
approximately $1.2 million which the Company will fund through equipment lease
financing. The Company expects to fund its remaining fiscal 1999 capital
expenditures, excluding the aforementioned leased equipment, through available
cash and cash equivalents on hand and cash flow from operations.
In connection with the acquisition of La Salsa, the Company assumed La Salsa's
obligations associated with a $10.0 million credit agreement with Bank Boston,
N.A. At October 7, 1999, La Salsa had an outstanding term loan of $4.8 million
and an outstanding revolving loan of $400,000. The term loan carries an interest
rate of LIBOR plus 4.00%. Quarterly principal payments of $300,000 commenced
September 30, 1999, and continue each quarter thereafter until the term loan is
repaid. The revolving loan carries an interest rate of LIBOR plus 3.75%, and is
due September 30, 2003.
During fiscal 2000, the Company plans to open an additional two to three Timber
Lodge restaurants in Minnesota. The total cost of each restaurant will be
approximately $2.5 to $2.7 million including the cost of land. The Company
expects to utilize approximately $1.2 million of cash for each restaurant to
fund the purchase of equipment and leasehold improvements. The Company
anticipates that the remaining $1.3 to $1.5 million required to complete each
restaurant will be provided through a long term lease with a third party. In
addition, during fiscal year 2000, the Company expects to open approximately 10
to 20 new La Salsa restaurants in California at an average cost of $325,000 per
restaurant.
The Company may require additional funds to support its working capital
requirements, capital expenditures or for other purposes, including
acquisitions, and may seek to raise such additional funds through public or
private equity and/or debt financings, the sale of assets or from other sources.
In addition, substantially all of the 14 real properties owned by the Company
and used for its restaurant operations are unencumbered and could be used by the
Company as collateral for debt financing; however, there can be no assurance
that real estate financing or other financing will be available or that, if
available, such financing will be obtainable on terms favorable to the Company.
MARKET RISK
The Company maintains investments in the publicly-traded common stock of certain
affiliated companies. The fair value of these securities at October 7, 1999 was
$2.6 million with a cost value of $9.4 million. The potential loss in fair
value, using hypothetical 10% and 20% declines in prices, is estimated to be
approximately $260,000 and $520,000, respectively. Such loss in fair value would
not impact the Company's financial position, results of operations or cash
flows, unless the Company liquidated their investments in affiliated companies,
as such investments are accounted for under the equity method of accounting.
Accordingly, such investments will not be adjusted to market value unless an
other than temporary impairment exists. As of October 7, 1999, management does
not believe the investment in these affiliated companies has been permanently
impaired.
12
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 11, 1998, Jack and Terry Brown and Green Burrito #22, Alhambra, a
California limited partnership, filed an action entitled Brown, et al. v. Santa
Barbara Restaurant Group, et al., in Superior Court of the State of California
for the County of Orange and on March 5, 1999 filed a first amended complaint
alleging causes of action for unfair competition, unfair trade practices,
intentional misrepresentation, negligent misrepresentation, concealment and
suppression, breach of fiduciary duty arising from agency, accounting, breach of
covenant of good faith and fair dealing and common law unfair competition. It is
difficult to quantify plaintiffs' alleged damages. Volume incentives paid to the
Company which could be attributed to plaintiffs' purchases of food products is
less than $50,000. Plaintiffs, however, have made additional claims for damages
which at this time the Company is unable to quantify. For example, plaintiffs
seek to act on behalf of other, as yet undisclosed, franchisees and on behalf of
the public. Plaintiffs also claim damages to the value of their franchises.
Discovery has been completed and the case is set for trial on January 31, 2000.
Although the results in litigation are always uncertain, the Company believes it
has meritorious defenses to plaintiffs' allegations and intends to vigorously
defend against the claims.
On October 5, 1999, La Salsa Franchise, Inc. served a demand for arbitration
pursuant to the commercial arbitration rules of the American Arbitration
Association, on DeNata, Inc., Neil Breton and Paul Marsh (collectively, "DeNata,
Inc."), a La Salsa franchisee with eight restaurants in the state of Utah. La
Salsa Franchise, Inc. filed the demand because DeNata, Inc. ceased performing
and materially breached its Franchise Agreements, including the duty to pay
royalties and advertising fees and to report its sales from which payments are
calculated. DeNata, Inc. also breached its Area Development Agreement by failing
to open an additional restaurant as provided in the agreement DeNata, Inc. has
previously asserted that it is not required to perform under its Franchise
Agreements and is entitled to rescission of all eight agreements upon various
grounds. In response to the demand for arbitration, on November 2, 1999 DeNata,
Inc. sent a letter to the arbitration case administrator with a copy of a
complaint that DeNata, Inc. filed in the United States District Court, District
of Utah, Central Division, on the same date, against La Salsa Franchisee, Inc.,
La Salsa and other defendants. The complaint alleges numerous "counts,"
including price fixing in violation of the federal and Utah antitrust laws,
tortious interference with economic relations, violations of the Utah Business
Opportunity Act, relief from arbitration agreements, common law fraud as to all
franchise and area development agreements, and breaches of contracts between the
parties. The complaint seeks termination of all agreements between the parties
and seeks various types of damages, including treble damages, in unspecified
amounts that exceed $100,000 as well as attorney fees and costs. DeNata, Inc.
also stated in the letter that it believes the binding arbitration provisions in
its Franchise Agreements to be unenforceable and requested that the arbitration
proceeding be stayed pending a determination by the Court on this issue. La
Salsa intends to vigorously defend the case, and attempt to proceed with the
arbitration, contending the claims lack merit.
The Company is from time to time the subject of complaints or lawsuits from
customers alleging illness, injury or other food quality, health or operational
concerns. The Company also is the subject of claims or allegations from
employees and franchisees from time to time. The Company believes that these
lawsuits and claims are not material to the Company's financial condition or
results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 Calculation of Earnings per Share
Exhibit 27 Financial Data Schedule (included in electronic filing
only)
(b) Current Reports on Form 8-K:
(i) A current report on Form 8-K was filed on July 28, 1999, as
amended by the current report on Form 8-K/A dated September
27, 1999, to report that on July 15, 1999 the Company acquired
all of the issued and outstanding stock of La Salsa Holding
Co., pursuant to the terms of an Agreement and Plan of Merger.
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.
Santa Barbara Restaurant Group, Inc.
(Registrant)
Date: By: /s/ TED ABAJIAN
--------------------------------
November 22, 1999 Ted Abajian
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<PAGE> 1
EXHIBIT 11
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Twelve Weeks July 1, 1998 Forty Weeks Forty Weeks
Ended to Ended Ended
October 7, October 8, October 7, October 8,
1999 1998 1999 1998
------------ ------------ ----------- -----------
(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Numerator
Net income ......................... $ 777 $ 473 $ 1,994 $ 1,007
======== ======= ======== =======
Denominator
Weighted average
shares outstanding ............... 20,050 8,905 17,264 7,404
Escrowed restricted
shares ........................... (100) (178) (126) (178)
-------- ------- -------- -------
Basic weighted average
shares outstanding ............... 19,950 8,727 17,138 7,226
======== ======= ======== =======
Basic earnings per share: .......... $ 0.04 $ 0.05 $ 0.12 $ 0.14
======== ======= ======== =======
Diluted Earnings Per Share:
Numerator
Net income ......................... $ 777 $ 473 $ 1,994 $ 1,007
======== ======= ======== =======
Denominator
Basic weighted average
shares outstanding ............... 19,950 8,727 17,138 7,226
Incremental common shares attributable
to exercise of:
Escrowed restricted shares ........... 100 178 126 178
Outstanding options .................. 5 265 20 487
Outstanding warrants ................. -- 113 -- 281
-------- ------- -------- -------
105 556 146 946
Diluted weighted
average shares
outstanding ........................ 20,055 9,283 17,284 8,172
======== ======= ======== =======
Diluted earnings
per share .......................... $ 0.04 $ 0.05 $ 0.12 $ 0.12
======== ======= ======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> OCT-07-1999
<CASH> 4,118,000
<SECURITIES> 914,000
<RECEIVABLES> 1,876,000
<ALLOWANCES> 260,000
<INVENTORY> 1,492,000
<CURRENT-ASSETS> 15,989,000
<PP&E> 40,196,000
<DEPRECIATION> 4,678,000
<TOTAL-ASSETS> 100,822,000
<CURRENT-LIABILITIES> 21,256,000
<BONDS> 0
0
0
<COMMON> 1,660,000
<OTHER-SE> 63,274,000
<TOTAL-LIABILITY-AND-EQUITY> 100,822,000
<SALES> 81,083,000
<TOTAL-REVENUES> 84,071,000
<CGS> 54,028,000
<TOTAL-COSTS> 72,150,000
<OTHER-EXPENSES> 9,424,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 431,000
<INCOME-PRETAX> 2,772,000
<INCOME-TAX> 778,000
<INCOME-CONTINUING> 1,994,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,994,000
<EPS-BASIC> .12
<EPS-DILUTED> .12
</TABLE>
