FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the Quarterly Period Ended October 5, 1996
Commission File Number 0-19315
Bertucci's, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2947209
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14 Audubon Road, Wakefield, Massachusetts, 01880
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 246-6700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filled by section 13 or 15(d) of the Securities Exchange Act of the 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 the filing
requirements for the past 90 days.
Yes [X] No
On November 18, 1996, 8,761,428 shares of the registrant's Common Stock were
outstanding.
<PAGE>
BERTUCCI'S, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
1) Consolidated Condensed Balance Sheets
October 5, 1996, and December 30, 1995 4
2) Consolidated Condensed Statements of Operations
For Twelve Weeks And Forty Weeks Ended
October 5, 1996, and October 7, 1995 5
3) Consolidated Condensed Statements of Shareholders'
Equity For The Forty-Week Period Ended
October 5, 1996 6
4) Consolidated Condensed Statements of Cash
Flows - Forty Weeks Ended October 5, 1996,
and October 7, 1995 7
5) Notes to Consolidated Condensed Financial
Statements 8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9-12
PART II: OTHER INFORMATION 13
<PAGE>
PART I: FINANCIAL INFORMATION
<PAGE>
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 5, December 30,
1996 1995
----------------------------------------
(in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,694 $ 1,384
Inventories 997 951
Accounts receivable 200 154
Note receivable 70 70
Prepaid expenses 464 366
Deferred preopening costs 666 818
Prepaid taxes 758 758
---------------- ----------------
Total current assets 4,849 4,501
---------------- ----------------
PROPERTY AND EQUIPMENT, at cost:
Land 2,902 2,902
Buildings 10,350 10,324
Leasehold improvements 71,689 69,028
Machinery and equipment 35,671 32,274
Construction in progress 403 1,216
Equipment under capital lease 164 164
---------------- ----------------
121,179 115,908
Less - Accumulated depreciation 29,151 26,048
---------------- ----------------
Net property and equipment 92,028 89,860
---------------- ----------------
PREPAID TAXES 2,405 2,405
OTHER ASSETS 1,797 2,172
---------------- ----------------
$ 101,079 $ 98,938
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-current $ 25 $ 25
Accounts payable 2,932 4,243
Accrued expenses 892 513
Accrued restaurant closing expense 751 1,539
Accrued payroll and employee benefits 2,640 2,419
Accrued taxes 2,121 1,019
---------------- ----------------
Total current liabilities 9,361 9,758
DEFERRED RENT 5,990 5,575
NOTES PAYABLE 50 75
LONG-TERM DEBT 19,438 19,438
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Authorized - 200,000 shares, none issued - -
Common stock, $.005 par value -
Authorized - 15,000,000 shares
Issued and outstanding -
8,728,442 shares at December 30, 1995 and
8,752,928 shares at October 5, 1996 44 44
Additional paid-in capital 44,742 44,620
Retained earnings 21,454 19,428
---------------- ---------------
Total shareholders' equity 66,240 64,092
---------------- ----------------
$ 101,079 $ 98,938
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
---------------------------------- ----------------------------------
October 5, October 7, October 5, October 7,
1996 1995 1996 1995
-------------- --------------- --------------- --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 29,549 $ 28,211 $ 98,043 $ 92,178
-------------- --------------- --------------- --------------
COSTS AND EXPENSES:
Cost of sales 7,538 7,240 24,925 23,569
Operating expenses 15,195 14,351 50,920 46,057
General and administrative expenses 1,683 1,673 5,938 6,344
Depreciation and amortization 2,074 2,173 6,829 7,147
Taxes other than income 1,516 1,474 5,184 4,922
-------------- --------------- --------------- --------------
Total costs and expenses 28,006 26,911 93,796 88,039
-------------- --------------- --------------- --------------
Operating income 1,543 1,300 4,247 4,139
INTEREST EXPENSE, net 279 317 1,020 932
INTEREST INCOME 3 5 13 18
-------------- --------------- --------------- --------------
Income before income tax expense 1,267 988 3,240 3,225
INCOME TAX EXPENSE 475 378 1,214 1,188
-------------- --------------- --------------- --------------
Net income $ 792 $ 610 $ 2,026 $ 2,037
============== =============== =============== ==============
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,860,253 8,848,273 8,883,798 8,877,257
============== =============== =============== ==============
EARNINGS PER SHARE $ 0.09 $ 0.07 $ 0.23 $ 0.23
============== =============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
---------------------- Paid-In Retained Shareholders'
Shares Par Capital Earnings Equity
--------- ---------- -------- --------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, December 30, 1995 8,728 $ 44 $ 44,620 $ 19,428 $ 64,092
Issuance of stock 25 - 122 - 122
Net income - - - 2,026 2,026
--------- ---------- ---------- ----------- ----------
BALANCE, October 5, 1996 8,753 $ 44 $ 44,742 $ 21,454 $ 66,240
========= ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Forty Weeks Ended
-------------------------------------
October 5, October 7,
1996 1995
--------------- -----------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,026 $ 2,037
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 7,041 7,320
Increase in inventories (46) (138)
(Increase) decrease in prepaid expenses and accounts receivable,
notes receivable and other assets 231 (402)
Decrease in accounts payable (1,311) (2,222)
Increase in accrued expenses and deferred rent 227 1,194
Increase (decrease) in accrued, deferred and prepaid taxes 1,102 (1,439)
--------------- ---------------
Net cash provided by operations 9,270 6,350
--------------- ---------------
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Additions to preopening costs (982) (1,088)
Additions to property and equipment (8,075) (11,201)
--------------- ---------------
Net cash used by investing activities (9,057) (12,289)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 122 122
Proceeds from debt - 5,438
Decrease in notes payable (25) (25)
Exercise of options - 10
--------------- ---------------
Net cash provided by financing activities 97 5,545
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 310 (394)
CASH AND CASH EQUIVALENTS, beginning of period 1,384 750
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 1,694 $ 356
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for ---
Interest, net of amount capitalized $ 1,019 $ 875
=============== ===============
Income taxes $ 80 $ 1,674
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
BERTUCCI'S, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 5, 1996
1. Basis of Presentation
In the opinion of management, the accompanying consolidated condensed
financial statements contain all normal recurring adjustments necessary for a
fair presentation. The results of operations for the twelve-week and forty-week
periods ended October 5, 1996, are not necessarily indicative of the results to
be expected for the full year.
The significant accounting policies followed by the Company are set
forth in the notes to Consolidated Financial Statements in the Company's 1995
Annual Report and Form 10-K filed with the Securities and Exchange Commission.
These financial statements should be read in conjunction with the financial
statements included in the 1995 Annual Report and Form 10-K.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following table sets forth the percentage relationship to net sales of
certain items included in the company's income statements for the periods
indicated.
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
--------------------------- ---------------------------
October 5, October 7, October 5, October 7,
1996 1995 1996 1995
------------ ------------- ------------- ------------
NET SALES 100.0% 100.0% 100.0% 100.0%
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
COSTS AND EXPENSES:
Cost of sales 25.5 25.7 25.4 25.6
Operating expenses 51.5 50.9 51.9 49.9
General and administrative expenses 5.7 5.9 6.1 6.9
Depreciation and amortization 7.0 7.7 7.0 7.8
Taxes other than income 5.1 5.2 5.3 5.3
------------ ------------- ------------- ------------
Total costs and expenses 94.8 95.4 95.7 95.5
------------ ------------- ------------- ------------
Operating income 5.2 4.6 4.3 4.5
INTEREST EXPENSE, net 0.9 1.1 1.0 1.0
INTEREST INCOME 0.0 0.0 0.0 0.0
------------ ------------- ------------- ------------
Income before income tax expense 4.3 3.5 3.3 3.5
INCOME TAX EXPENSE 1.6 1.3 1.2 1.3
------------ ------------- ------------- ------------
Net income 2.7% 2.2% 2.1% 2.2%
============ ============= ============= ============
NUMBER OF RESTAURANTS:
Restaurants open at beginning of
period 77 73 76 67
Restaurants opened during period 2 1 6 7
Restaurants closed during period 0 0 (3) 0
------------ ------------- ------------- ------------
Restaurants open at end of period 79 74 79 74
</TABLE>
<PAGE>
Twelve Weeks Ended October 5, 1996, Compared To Twelve Weeks Ended
October 7, 1995
Net sales increased $1.3 million, or 4.7%, to $29.5 million in the third
quarter of fiscal year 1996, from $28.2 million in the third quarter of fiscal
year 1995. Comparable restaurant sales for the twelve-week period decreased
0.45%. The Company opened two additional new restaurants in the twelve-week
period ended October 5, 1996.
Cost of sales, primarily food and beverages, increased from $7.2 million
in the twelve weeks ended October 7, 1995, to $7.5 million in the corresponding
1996 period. As a percentage of net sales, these costs were 25.7% in the 1995
fiscal period, and 25.5% in the corresponding 1996 fiscal period. The percentage
decrease was the result of more efficient operations. The price of flour and
cheese remained high throughout the period.
Restaurant operating expenses for the twelve-week period increased from
$14.4 million in fiscal year 1995, to $15.2 million for the corresponding period
in fiscal year 1996. As a percentage of net sales, operating expenses increased
from 50.9% during the twelve weeks ended October 7, 1995, to 51.5% during the
corresponding period in 1996. The increase was the result of higher payroll
costs.
General and administrative expenses decreased, as a percentage of net
sales, from 5.9% during the twelve weeks ended October 7, 1995, to 5.7% during
the corresponding period of fiscal year 1996. The decrease has come from
attrition at the corporate level, and a reduction of in-house marketing costs.
Depreciation and amortization expense decreased, as a percentage of net
sales, from 7.7% in the 1995 twelve-week period, to 7.0% in the 1996 twelve-week
period. This decrease was attributable to the amortization expense on fewer new
restaurants.
Taxes, other than income taxes, were $1.5 million for both twelve-week
periods in 1995 and 1996. However, taxes, other than income taxes, decreased, as
a percentage of net sales, from 5.2% for 1995 to 5.1% for 1996. The percentage
decrease was due to lower state unemployment tax rates on payroll.
Interest expense decreased from $317,000 to $279,000 for the
corresponding weeks of 1995 and 1996, respectively. The decrease was
attributable to the higher amount of interest capitalized on new locations
during the 1996 period.
The effective income tax rate decreased from 38.4% for the twelve weeks
ended October 7, 1995, to 37.5% for the corresponding period ending October 5,
1996.
<PAGE>
Forty Weeks Ended October 5, 1996, Compared To Forty Weeks Ended October 7, 1995
Net sales increased $5.9 million, or 6.4%, to $98.0 million for the
forty-week period in 1996, compared to $92.1 million in the same period last
year. New restaurants that were opened in 1995 and 1996 contributed to the
increase. Comparative restaurant sales during the forty-week period were
positive by 0.4%. Menu price-increases for the period under comparison were less
than 2.0%.
Cost of sales, primarily food and beverages, increased from $23.6
million for the 1995 forty-week period, to $24.9 million for the 1996 forty-week
period, and decreased slightly, as a percentage of net sales, from 25.6% to
25.4% for the forty-week periods ended in 1995 and 1996, respectively. While the
costs of flour, cheese, and produce increased during the comparable period, the
Company was able to offset the increase through more efficient operations.
Restaurant operating expenses for the forty-week period increased from
$46.1 million in fiscal year 1995, to $50.9 million in fiscal year 1996. As a
percentage of net sales, operating expenses increased from 49.9% during the
forty weeks ended October 7, 1995, to 51.9% during the corresponding period in
1996. The increase was the result of advertising costs of 1.3%, as a percentage
of net sales, that were over and above the amount expensed in the first forty
weeks of 1995. In addition, costs for maintenance and labor also increased
during the 1996 fiscal year period.
General and administrative expenses, as a percentage of net sales for
the forty-week period, decreased from 6.9% in 1995, to 6.1% in 1996. This
decrease was the result of attrition at the corporate level, reduction in
training costs associated with new restaurant openings, and a reduction of
in-house marketing costs.
Depreciation and amortization expense, as a percentage of net sales,
decreased from 7.8% in the 1995 forty-week period, to 7.0% in the 1996
forty-week period. This decrease was attributable to the amortization expense on
fewer new restaurants.
Taxes, other than income taxes, increased from $4.9 million during the
forty weeks ended October 7, 1995, to $5.2 million for the corresponding period
in 1996, and remained, as a percentage of net sales, at 5.3% for both the 1995
and 1996 periods.
Interest expense increased from $932,000 to $1.0 million for the
corresponding forty-week periods of 1995 and 1996, respectively. The increase
was attributable to higher interest rates and the higher amounts of bank
borrowings during the 1996 period.
The effective income tax rate increased from 36.8% for the forty weeks
ended October 7, 1995, to 37.5% for the corresponding period ending October 5,
1996. The increase in tax rate is attributable to the expiration of the Targeted
Sales Tax Credit program, and reduction of start-up costs associated with fewer
new store openings.
<PAGE>
Liquidity and Sources of Capital
To date, the Company has financed its expansion from operations, bank
borrowing, and private placements and public offerings of equity securities. The
Company does not have significant receivables or inventory, and receives trade
credit based upon negotiated terms in purchasing food and supplies.
The Company has a bank line-of-credit in effect until November 30, 1997,
under which it may borrow up to $30.0 million. On November 30, 1997, the Company
will be able to convert the balance, if any, to a term loan maturing on November
30, 2000. The Company pays a fee of 1/4 of 1% on the unused balance, and
interest is calculated using LIBOR plus 1.25%. There are no compensating balance
arrangements or legal restrictions as to the withdrawal of these funds. The
amount outstanding under this bank line-of-credit for both October 7, 1995, and
October 5, 1996, was $19.4 million.
During the forty weeks ended October 7, 1995, and October 5, 1996, the
Company's investment in property and equipment was $11.2 million and $8.1
million, respectively. The investments were funded with cash provided by
operations and with the proceeds of financing activities.
Cash provided by operations amounted to $6.4 million and $9.3 million
for the forty weeks ended October 7, 1995, and October 5, 1996, respectively.
Cash from financing activities amounted to $5.5 million for the forty-week
period in 1995.
The Company opened six new restaurants in the first forty weeks of 1996,
and expects to open one additional new restaurant by the end of fiscal year
1996, with five to six new restaurants planned for fiscal year 1997. The Company
expects to expend approximately $11.0 million in fiscal year 1996, and
approximately $10.0 million in fiscal year 1997, to finance expansion. The
Company believes that it will have sufficient working capital and bank
borrowings to finance its expansion plans through the end of fiscal year 1997.
<PAGE>
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report.
<PAGE>
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.
BERTUCCI'S, INC.
(Registrant)
Date: November 18, 1996 By: /s/ Joseph Crugnale
-----------------------------
Joseph Crugnale
President and Chief
Executive Officer
Date: November 18, 1996 By: /s/ Norman S. Mallett
-----------------------------
Norman S. Mallett
Vice President - Finance
Chief Financial Officer and
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000874971
<NAME> BERTUCCI'S, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> OCT-5-1996
<CASH> 1,694
<SECURITIES> 0
<RECEIVABLES> 269
<ALLOWANCES> 0
<INVENTORY> 997
<CURRENT-ASSETS> 4,849
<PP&E> 121,179
<DEPRECIATION> 29,151
<TOTAL-ASSETS> 101,079
<CURRENT-LIABILITIES> 9,361
<BONDS> 0
0
0
<COMMON> 44
<OTHER-SE> 66,197
<TOTAL-LIABILITY-AND-EQUITY> 101,079
<SALES> 98,043
<TOTAL-REVENUES> 98,043
<CGS> 24,925
<TOTAL-COSTS> 24,925
<OTHER-EXPENSES> 62,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,007
<INCOME-PRETAX> 3,240
<INCOME-TAX> 1,214
<INCOME-CONTINUING> 2,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,026
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
