<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 April 22, 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)
3916 STATE STREET, SUITE 300
SANTA BARBARA, CALIFORNIA 93105
(Address of principal executive offices) (Zip Code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 491-6400
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 May 25, 1999, the registrant had 16,246,293 shares outstanding of
its Common Stock, $.08 par value.
<PAGE> 2
SANTA BARBARA RESTAURANT GROUP, INC.
INDEX TO FORM 10-Q
<TABLE>
PART I. FINANCIAL INFORMATION
Page
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at April 22, 1999
and December 31, 1998.......................................................3
Condensed Consolidated Statements of Income for the periods ended
April 22, 1999 and March 31, 1998 ..........................................4
Condensed Consolidated Statements of Cash Flows for the periods ended
April 22, 1999 and March 31, 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 6. Exhibits and Reports on Form 8-K...........................................11
Signatures............................................................................12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
April 22, December 31,
1999 1998
---------- ------------
(Dollars in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,832 $ 7,043
Short-term investments 478 --
Accounts receivable, net of allowance for doubtful accounts
of $136,000 in 1999 and $125,000 in 1998 1,021 874
Current portion of notes receivable 243 239
Inventories 923 990
Deferred income taxes, net 1,152 1,152
Prepaid expenses 540 443
Other current assets 324 472
-------- --------
Total current assets 9,513 11,213
Property and equipment, net 27,703 27,447
Property under capital leases, net 5,109 5,214
Investments in affiliated companies 9,351 9,447
Notes receivable, net 1,684 1,732
Related party notes receivable, net 4,592 --
Costs in excess of net assets acquired, net of accumulated
amortization of $289,000 in 1999 and $139,000 in 1998 20,088 20,320
Other assets 373 457
-------- --------
$ 78,413 $ 75,830
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 45 $ 44
Current portion of capital lease obligations 899 886
Accounts payable and accrued expenses 6,470 5,151
Accrued salaries, wages and employee benefits 3,354 3,573
Other current liabilities 4,011 4,829
-------- --------
Total current liabilities 14,779 14,483
Long-term debt, less current installments 572 585
Capital lease obligations, less current portion 5,358 5,650
Deferred income taxes, net 336 336
Other long-term liabilities 4,780 5,302
Shareholders' equity:
Common stock, $.08 par value, authorized 50,000,000 shares;
16,246,293 and 15,238,908 shares issued and outstanding
in 1999 and 1998, respectively 1,300 1,219
Additional paid in capital 61,982 59,416
Accumulated deficit (10,694) (11,161)
-------- --------
Total shareholders' equity 52,588 49,474
-------- --------
$ 78,413 $ 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 per share amounts)
<TABLE>
<CAPTION>
Sixteen Weeks Three Months
Ended Ended
April 22, 1999 March 31,1998
-------------- -------------
<S> <C> <C>
Revenues:
Restaurant operations $ 29,648 $ 699
Franchised restaurants 945 401
Other 145 137
-------- --------
Total revenues 30,738 1,237
-------- --------
Restaurant operating costs:
Food and packaging 9,906 274
Payroll and other employee benefits 9,993 223
Occupancy and other operating costs 6,447 200
-------- --------
Total restaurant operating costs 26,346 697
-------- --------
Advertising 968 61
Pre-opening expense 171 --
General and administrative 2,593 312
-------- --------
Total 3,732 373
-------- --------
Operating income 660 167
Interest expense (145) --
Other income, net 141 92
-------- --------
Income before income taxes 656 259
Income tax expense 189 6
-------- --------
Net income $ 467 $ 253
======== ========
Basic net income per share $ .03 $ .04
======== ========
Diluted net income per share $ .03 $ .03
======== ========
Basic weighted average shares outstanding 15,283 6,396
======== ========
Diluted weighted average shares outstanding 15,505 7,813
======== ========
</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
(Dollars in thousands)
<TABLE>
<CAPTION>
Sixteen Weeks Three Months
Ended Ended
April 22, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 467 $ 253
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 1,245 62
Changes in operating assets and liabilities:
Accounts receivable (147) (37)
Inventory, prepaids and other current assets 118 3
Accounts payable and accrued expenses 1,319 179
Accrued salaries, wages and employee benefits (219) (31)
Other current liabilities (818) --
------- -------
Net cash provided by operating activities 1,965 429
------- -------
Cash flows from investing activities:
Proceeds from maturity of short-term investments -- 5,851
Purchases of short-term investments (478) (7,241)
Issuance of related party notes receivable (1,946) --
Collection of notes receivable 44 113
Net change in other assets 235 (30)
Purchases of property and equipment (1,218) (49)
------- -------
Net cash used in investing activities (3,363) (1,356)
------- -------
Cash flows from financing activities:
Repayment of capital lease obligations (279) --
Repayment of revolving line of credit and long-term debt (12) --
Proceeds from issuance of common stock -- 29
Net change in other long-term liabilities (522) (3)
------- -------
Net cash provided by (used in) financing activities (813) 26
------- -------
Net decrease in cash and cash equivalents (2,211) (901)
Cash and cash equivalents at beginning of period 7,043 1,130
------- -------
Cash and cash equivalents at end of period $ 4,832 $ 229
======= =======
Supplemental information:
Cash paid during the period for:
Interest $ 134 $ --
Income taxes $ 8 $ 6
Non cash investing and financing activities:
Issuance of common stock to acquire related party
notes receivable $ 2,646 $ --
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE> 6
SANTA BARBARA RESTAURANT GROUP, INC.
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") 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. and JB's Family Restaurants, Inc. which the Company
acquired on September 1, 1998. At April 22, 1999, the Company operated 55 JB's
restaurants, 21 Timber Lodge Steakhouse restaurants, six Galaxy Diner
restaurants and six Green Burrito restaurants. The Company also has 39 Green
Burrito stand-alone franchise restaurants, 188 dual-concept franchise
restaurants and 28 franchised JB's restaurants for a total of 343 restaurants.
2. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of the
Company and its subsidiaries have been prepared in accordance with generally
accepted accounting principles, the instructions to Form 10-Q and Article 10 of
Regulation S-X. These statements should be read in conjunction with the
condensed 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 quarter of fiscal 1999, ended April 22, 1999, includes 16
weeks of operations and each of the remaining quarters of fiscal 1999 will
include 12 weeks of operations. The first quarter of fiscal 1998 included the
three month period ended March 31, 1998 and therefore is not comparable to the
first quarter of fiscal 1999. Certain reclassifications have been made to 1998
amounts to conform to the 1999 presentation.
3. MERGER WITH TIMBER LODGE STEAKHOUSE, INC. AND ACQUISITION OF JB'S FAMILY
RESTAURANTS, INC.
The following table presents selected unaudited pro forma results of operations
for the Company, assuming the Timber Lodge Steakhouse, Inc. and JB's Family
Restaurants, Inc. acquisitions had occurred on January 1, 1998 and that the
first quarter of 1998 included 16 weeks of operations. The unaudited pro forma
results of operations do not reflect certain cost savings that management
believes may be realized following the merger. 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.
<TABLE>
<CAPTION>
Period ended
April 30,
1998
---------------------
(Amounts in
thousands except EPS)
<S> <C>
Total revenues $31,019
Net income $ 731
EPS - basic $ .06
EPS - diluted $ .05
Weighted averages shares outstanding - basic 12,524
Weighted average shares outstanding - diluted 13,941
</TABLE>
6
<PAGE> 7
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 which serves dinner only. The Quick Serve
Mexican segment is comprised of Green Burrito restaurants which are positioned
in the "fast food" segment of the restaurant industry. The Company evaluates the
performance of its operating segments based on income before income taxes.
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 all periods presented. In 1999,
total assets in the corporate column also include investments in affiliated
companies, corporate notes receivable, and deferred income taxes. The corporate
component of segment profit before tax in 1999 includes $630,000 of costs
incurred related to the attempted acquisition of Long John Silver's Restaurants,
Inc. ("Long John Silver's") and corporate general and administrative expenses.
<TABLE>
<CAPTION>
Family Quick Serve
Dining Steakhouse Mexican Corporate Total
-------- ---------- ------------ --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Sixteen Weeks Ended April 22, 1999
Revenues $ 17,513 $ 11,906 $ 1,319 $ -- $ 30,738
Interest revenue 65 15 -- 109 189
Interest expense (145) -- -- -- (145)
Depreciation & amortization 591 578 76 -- 1,245
Pre-opening expense -- 171 -- -- 171
Segment profit before tax 776 429 193 (742) 656
Toal assets as of April 22, 1999 $ 34,073 $ 23,480 $ 1,874 $ 18,986 $ 78,413
Three Months Ended March 31, 1998
Revenues $ -- $ -- $ 1,237 $ -- $ 1,237
Interest revenue -- -- -- 92 92
Interest expense -- -- -- -- --
Depreciation & amortization -- -- 62 -- 62
Segment profit before tax -- -- 167 92 259
Total assets as of December 31, 1998 $ 34,091 $ 24,760 $ 2,004 $ 14,975 $ 75,830
</TABLE>
5. RELATED PARTY NOTES RECEIVABLE
The Company acquired $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., Rally's Hamburgers, Inc. and Fidelity National Financial,
Inc., related parties of the Company, maintain an equity interest in Checkers
and/or hold notes receivable from Checkers.
7
<PAGE> 8
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
Steakhouse and JB's Family Restaurants, Inc. 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 merger
and acquisition are the principal reasons for the significant differences when
comparing results of operations for the 16 week period ending April 22, 1999
with the results of operations for the three month period ending March 31,1998.
The comparability of future periods will also be affected by the aforementioned
transactions and may also from time to time 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 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
consolidated statements of income for the first quarter of fiscal 1999, the
sixteen weeks ended April 22, 1999 and the first quarter of fiscal 1998, the
three months ended March 31, 1998.
<TABLE>
<CAPTION>
Sixteen Weeks Three Months
Ended April 22, Ended March 31,
1999(1) 1998
--------------- ---------------
<S> <C> <C>
Revenues:
Restaurant operations ............. 96.5% 56.5%
Franchised restaurants and other .. 3.5 43.5
------ ------
Total revenues ................. 100.0 100.0
------ ------
Restaurant operating costs: (2)
Food and packaging ................ 33.4 39.2
Payroll and other employee benefits 33.7 31.9
Occupancy and other operating costs 21.8 28.6
------ ------
88.9 99.7
Advertising (2) ..................... 3.3 8.7
Pre-opening expense (2) ............. 0.6 --
General and administrative .......... 8.4 25.2
------ ------
Operating income .................... 2.1 13.5
Interest expense .................... (0.5) --
Other income, net ................... 0.5 7.4
Income before income taxes .......... 2.1 20.9
Income tax expense .................. 0.6 0.5
------ ------
Net income .......................... 1.5% 20.4%
------ ------
</TABLE>
8
<PAGE> 9
(1) Includes the operating results of Timber Lodge Steakhouse, Inc. and JB's
Family Restaurants, Inc. for the entire first quarter of fiscal 1999.
(2) As a percentage of revenues from Company-operated restaurants.
Revenues from Company-operated restaurants increased $28.9 million to $29.6
million for the first quarter of fiscal 1999 as compared with revenues of
$699,000 during the first quarter of fiscal 1998. The increase in revenues is
mostly attributable to the addition of JB's and Timber Lodge Steakhouse
restaurants as of September 1, 1998 which generated $17.0 million and $11.9
million in revenues, respectively, during the first quarter of fiscal 1999.
Additionally, the first quarter of 1999 includes 16 weeks of operations versus
the first quarter of 1998 which contained three calendar months.
Revenues from franchised restaurants increased $544,000 to $945,000 for the
first quarter of fiscal 1999 as compared with revenues of $401,000 during the
first quarter of fiscal 1998. The increase in revenues from franchised
restaurants is principally due to the addition of royalties earned by the JB's
franchise system. Green Burrito generated increased royalty revenue due to the
increased number of franchised units and the change in the length of the first
fiscal quarter.
Food and packaging costs as a percentage of restaurant sales decreased to 33.4%
for the first quarter of fiscal 1999 as compared with 39.2% during the first
quarter of fiscal 1998. The decrease is primarily due to the addition of JB's
restaurants in September 1998 which operate with significantly lower food and
packaging costs as a percent of sales (31.2%) as compared to Green Burrito.
Payroll and other employee benefits increased as a percentage of restaurant
sales to 33.7% for the first quarter of fiscal 1999 as compared with 31.9% for
the first quarter of fiscal 1998. The increase is attributable to the addition
of JB's and Timber Lodge in September 1998 which operate with higher payroll and
other employee benefits costs as a percentage of restaurant sales than Green
Burrito.
Occupancy and other operating costs decreased as a percentage of restaurant
sales to 21.8% for the first quarter of fiscal 1999 as compared with 28.6% for
the first quarter of fiscal 1998. The decrease in occupancy and other operating
costs 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 restaurant sales than Green Burrito.
Advertising costs decreased to 3.3% of restaurant sales for the first quarter of
fiscal 1999 as compared with 8.7% for the first quarter of fiscal 1998. The
decrease in advertising costs as a percentage of restaurant sales is entirely
due to the addition of JB's restaurants and Timber Lodge in fiscal 1998 which
typically spend three to four percent of restaurant sales on advertising costs.
Pre-opening expense of $171,000 for the first quarter of fiscal 1999 represents
costs associated with the conversion of two JB's restaurants to Timber Lodge
Steakhouse restaurants during the quarter.
General and administrative expenses were $2.6 million or 8.4% of total revenues
for the first quarter of fiscal 1999 and include a charge of approximately
$630,000 for costs incurred by the Company related to the attempted acquisition
of Long John Silver's. General and administrative expenses were $312,000 or
25.2% of total revenues for the first quarter of fiscal 1998. The decrease in
general and administrative expense as a percentage of total revenues is
attributable to the addition of JB's restaurants and Timber Lodge, which are
primarily comprised of Company-operated restaurants that operate with
significantly lower general and administrative expenses as a percentage of sales
than the primarily franchise oriented operations of the Company prior to the
acquisitions.
Interest expense primarily reflects interest costs associated with capitalized
real property leases associated with JB's restaurants.
Other income, net, primarily reflects interest income on invested cash,
short-term investments and notes receivable. During the first quarter of fiscal
1999, other income, net, increased $49,000 to $141,000 as compared to $92,000
during the first quarter of fiscal 1998. The increase in other income, net, is
primarily due to an increase in cash and cash equivalents and the addition of
$4.9 million of notes receivable, bearing interest at 13%, during the first
quarter of fiscal 1999 (see note 5).
9
<PAGE> 10
YEAR 2000
The Company is currently working 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 time-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 is
investigating 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 the businesses recently acquired by the Company. Based on
the preliminary review of the Company's existing and recently acquired
businesses, 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 initiated
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 been informed 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 and those of the businesses
recently acquired indicates that the point of sale cash register systems in
certain restaurants must be replaced. In addition, the Company will have to
modify certain applications and replace some of the hardware used in the
processing of financial information. In conjunction with these upgrades, which
are expected to be completed by the end of September, 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 $1.5 million to $2.0 million. As of April 22, 1999, the Company has
incurred and expensed approximately $100,000 of expenditures consisting of
internal staff costs, as well as outside consulting and other expenditures
related to this upgrade process. These costs are being funded through operating
cash flows. To the extent possible, the Company will be developing and executing
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 to date 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, cash equivalents and short-term investments of $5.3
million at April 22, 1999 and $7.0 million at December 31, 1998. The decrease in
cash, cash equivalents and short-term investments is primarily due to the use of
approximately $1.9 million to fund the purchase of notes receivable (see note
5), $1.2 million to fund purchases of equipment and other capital improvements
and $813,000 utilized in financing activities partially offset by $2.0 million
provided by operating activities.
Net cash provided by operating activities was $2.0 million during the first
quarter of fiscal 1999 which included an increase in accounts payable and
accrued expenses of $1.3 million partially offset by a decrease of $0.8 million
in other current liabilities. Investing activities required the Company to use
$1.9 million in cash to fund the purchase of notes receivable (see note 5) and
$1.2 million of cash to fund capital additions. Financing
10
<PAGE> 11
activities required the Company to use $0.5 million of cash to reduce other
long-term liabilities and $0.3 million of cash to repay capital lease
obligations.
During the first quarter of 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 two additional JB's to Timber Lodge conversions
by the end of the third quarter of 1999. In addition, in the second quarter of
1999, the Company will begin remodeling certain JB's restaurants to improve and
update the customer areas of the restaurants. These remodels are expected to
cost between $75,000 and $100,000 per restaurant and the Company plans to
complete between 12 and 20 of these remodels in 1999. The Company also plans to
open one new Timber Lodge Steakhouse restaurant in Minnesota during the third
quarter of 1999 which will require the use of approximately $1.1 million of
cash. The Company expects to fund JB's conversions to Timber Lodge, JB's
remodels and new unit development through available cash and cash equivalents on
hand and cash flow from operations.
During the second quarter of 1999, the Company will begin replacing certain
point of sale cash registers in the Company's restaurants and other hardware in
order to meet Year 2000 requirements. The Company expects to utilize equipment
lease financing to fund the anticipated $1.5 million cost of these replacements.
The Company may require additional funds to support its working capital
requirements 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 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 April 22, 1999 was
$4.4 million. The potential loss in fair value, using hypothetical 10% and 20%
declines in prices, is estimated to be approximately $440,000 and $880,000,
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.
PART II
OTHER INFORMATION
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 April 8, 1999 to report that
on March 30, 1999 the Board of Directors elected Mssrs. Charles Rolles
and Burt Sugarman to serve as directors of the Registrant.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Santa Barbara Restaurant Group, Inc.
(Registrant)
Date: By: /s/ TED ABAJIAN
--------------------------------------------
June 4, 1999 Ted Abajian
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
Exhibit 11 Calculation of Earnings per Share
Exhibit 27 Financial Data Schedule (included in electronic filing only)
</TABLE>
<PAGE> 1
Exhibit 11
SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Sixteen Three Months
Weeks Ended Ended
April 22, March 31,
1999 1998
------------ -------------
(In thousands, except
per share amounts)
<S> <C> <C>
Basic Earnings Per Share:
Numerator
Net income $ 467 $ 253
======== ========
Denominator
Weighted average
shares outstanding 15,462 6,575
Escrowed restricted
shares (179) (179)
-------- --------
Basic weighted average
shares outstanding 15,283 6,396
======== ========
Basic earnings per share: $ .03 $ .04
======== ========
Diluted Earnings Per Share:
Numerator
Net income $ 467 $ 253
======== ========
Denominator
Basic weighted average
shares outstanding 15,283 6,396
Incremental common shares attributable
to exercise of:
Escrowed restricted shares 179 179
Outstanding options 43 254
Outstanding warrants -- 984
-------- --------
222 1,417
Diluted weighted
average shares
outstanding 15,505 7,813
======== ========
Diluted earnings
per share $ 0.03 $ 0.03
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-22-1999
<CASH> 4,832,000
<SECURITIES> 478,000
<RECEIVABLES> 1,157,000
<ALLOWANCES> 136,000
<INVENTORY> 923,000
<CURRENT-ASSETS> 9,513,000
<PP&E> 30,638,000
<DEPRECIATION> 2,935,000
<TOTAL-ASSETS> 78,413,000
<CURRENT-LIABILITIES> 14,779,000
<BONDS> 0
0
0
<COMMON> 1,300,000
<OTHER-SE> 51,288,000
<TOTAL-LIABILITY-AND-EQUITY> 78,413,000
<SALES> 29,648,000
<TOTAL-REVENUES> 30,738,000
<CGS> 19,899,000
<TOTAL-COSTS> 26,346,000
<OTHER-EXPENSES> 3,732,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,000
<INCOME-PRETAX> 656,000
<INCOME-TAX> 189,000
<INCOME-CONTINUING> 467,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 467,000
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
