FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the Quarterly Period Ended October 4, 1997
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: (781) 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 14, 1997, 8,875,716 shares of the registrant's Common Stock were
outstanding.
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BERTUCCI'S, INC.
FORM 10-Q
TABLE OF CONTENTS
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<CAPTION>
<S> <C> <C> <C>
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
1) Consolidated Condensed Balance Sheets
October 4, 1997, and December 28, 1996 4
2) Consolidated Condensed Statements of Operations
For Twelve Weeks And Forty Weeks Ended
October 4, 1997, and October 5, 1996 5
3) Consolidated Condensed Statements of Shareholders'
Equity For The Forty-Week Period Ended
October 4, 1997 6
4) Consolidated Condensed Statements of Cash
Flows For Forty Weeks Ended October 4, 1997,
and October 5, 1996 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
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PART I:FINANCIAL INFORMATION
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BERTUCCI'S, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 4, December 28,
1997 1996
--------------------------------------
(in thousands)
--------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,161 $ 4,266
Inventories 1,077 1,048
Accounts receivable 157 179
Note receivable 76 76
Prepaid expenses 1,131 475
Deferred preopening costs 324 510
Prepaid taxes 1,027 1,027
--------------------- --------------------
Total current assets 7,953 7,581
--------------------- --------------------
PROPERTY AND EQUIPMENT, at cost:
Land 2,902 2,902
Buildings 10,434 10,360
Leasehold improvements 75,019 72,416
Machinery and equipment 38,549 35,674
Construction in progress 227 250
--------------------- --------------------
127,131 121,602
Less - Accumulated depreciation 36,144 29,705
--------------------- --------------------
Net property and equipment 90,987 91,897
PREPAID TAXES 1,275 1,275
OTHER ASSETS 1,834 1,776
--------------------- --------------------
$ 102,049 $ 102,529
===================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-current $ 25 $ 25
Accounts payable 4,382 4,179
Accrued expenses 2,496 1,078
Accrued payroll and employee benefits 3,271 3,298
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Accrued taxes 1,271 1,859
--------------------- --------------------
Total current liabilities 11,445 10,439
DEFERRED RENT 6,569 6,064
NOTES PAYABLE 25 50
LONG-TERM DEBT 13,500 18,438
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 -
8,790,428 shares at December 28, 1996 and
8,873,966 shares at October 4, 1997 44 44
Additional paid-in capital 45,073 44,841
Retained earnings 25,393 22,653
--------------------- --------------------
Total shareholders' equity 70,510 67,538
--------------------- --------------------
$ 102,049 $ 102,529
===================== ====================
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BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
------------------------------------------ ----------------------------------------
October 4, October 5, October 4, October 5,
1997 1996 1997 1996
------------------ ------------------ -- --------------- -- ---------------
(in thousands, except per share data)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 32,663 $ 29,549 $ 104,644 $ 98,043
------------------ ------------------ -- --------------- -- ---------------
COSTS AND EXPENSES:
Cost of sales 8,130 7,538 26,077 24,925
Operating expenses 17,253 15,195 55,029 50,920
General and administrative expenses 1,992 1,683 6,324 5,938
Depreciation and amortization 1,935 2,074 6,642 6,829
Taxes other than income 1,630 1,516 5,453 5,184
------------------ ------------------ -- --------------- -- ---------------
Total costs and expenses 30,940 28,006 99,525 93,796
------------------ ------------------ -- --------------- -- ---------------
Operating income 1,723 1,543 5,119 4,247
INTEREST EXPENSE 214 279 835 1,020
INTEREST INCOME 18 3 25 13
------------------ ------------------ -- --------------- -- ---------------
Income before income tax expense 1,527 1,267 4,309 3,240
INCOME TAX EXPENSE 554 475 1,569 1,214
------------------ ------------------ -- --------------- -- ---------------
Net income $ 973 $ 792 $ 2,740 $ 2,026
================== ================== == =============== == ===============
EARNINGS PER SHARE $ 0.11 $ 0.09 $ 0.31 $ 0.23
================== ================== == =============== == ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,927,595 8,860,253 8,901,860 8,883,798
================== ================== == =============== == ===============
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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 28, 1996 8,790 $ 44 $ 44,841 $ 22,653 $ 67,538
Issuance of stock 29 - 130 - 130
Exercise of options 55 - 102 - 102
Net income - - - 2,740 2,740
---------- ------------ -- ---------- ------------- -- ------------
BALANCE, October 4, 1997 8,874 $ 44 $ 45,073 $ 25,393 $ 70,510
========== ============ == ========== ============= == ============
</TABLE>
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BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Forty Weeks Ended
----------------------------------------------
October 4, October 5,
1997 1996
----------------------------------------------
(in thousands)
----------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,740 $ 2,026
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 6,905 7,041
Increase in inventories (29) (46)
(Increase) decrease in prepaid expenses and accounts receivable,
notes receivable and other assets (581) 231
Increase (decrease) in accounts payable 202 (1,311)
Increase in accrued expenses and deferred rent 1,897 227
Increase (decrease) in accrued, deferred and prepaid taxes (588) 1,102
----------------------------------------------
Net cash provided by operations 10,546 9,270
----------------------------------------------
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Additions to preopening costs (279) (982)
Additions to property and equipment (5,530) (8,075)
Purchases of liquor licenses (112) -
----------------------------------------------
Net cash used by investing activities (5,921) (9,057)
----------------------------------------------
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----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 232 122
Paydown of debt (4,937) -
Decrease in notes payable (25) (25)
----------------------------------------------
Net cash provided by financing activities (4,730) 97
----------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (105) 310
CASH AND CASH EQUIVALENTS, beginning of period 4,266 1,384
----------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 4,161 $ 1,694
==============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for ---
Interest, net of amount capitalized $ 900 $ 1,019
==============================================
Income taxes $ 2,490 $ 80
==============================================
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BERTUCCI'S, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 4, 1997
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 4, 1997, 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 1996
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 1996 Annual Report and Form 10-K.
2. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128).
This Statement establishes standards for computing and presenting earnings
per share and applies to entities both publicly traded common stock or
potential common stock. SFAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997, and early
adoption is not permitted. When adopted, the Statement will require
restatement of prior years' earnings per share. The Company will adopt this
Statement for its annual report on Form 10-K for the year ended December
27, 1997. Assuming that SFAS 128 had been implemented, basic earnings per
share would have been $0.11 versus $0.09 for the twelve-week period, and
$0.31 versus $0.23 for the forty- week period, ended October 4, 1997, and
October 5, 1996, respectively, and $0.36 for the year ended December 28,
1996. Under this Statement, diluted earnings per share would not have
differed from the earnings per share disclosed on the consolidated
condensed statement of operations.
<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.
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<CAPTION>
12 Weeks Ended 40 Weeks Ended
---------------------------------- ---------------------------------
October 4, October 5, October 4, October 5,
1997 1996 1997 1996
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% 100.0%
---------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Cost of sales 24.9 25.5 24.9 25.4
Operating expenses 52.8 51.5 52.6 51.9
General and administrative expenses 6.1 5.7 6.0 6.1
Depreciation and amortization 5.9 7.0 6.4 7.0
Taxes other than income 5.0 5.1 5.2 5.3
---------------- --------------- --------------- ---------------
Total costs and expenses 94.7 94.8 95.1 95.7
---------------- --------------- --------------- ---------------
Operating income 5.3 5.2 4.9 4.3
INTEREST EXPENSE 0.6 0.9 0.8 1.0
INTEREST INCOME 0.0 0.0 0.0 0.0
---------------- --------------- --------------- ---------------
Income before income tax expense 4.7 4.3 4.1 3.3
INCOME TAX EXPENSE 1.7 1.6 1.5 1.2
---------------- --------------- --------------- ---------------
Net income 3.0% 2.7% 2.6% 2.1%
================ =============== =============== ===============
NUMBER OF RESTAURANTS:
Restaurants open at beginning of period 81 77 80 76
Restaurants opened during period 2 2 3 6
Restaurants closed during period 0 0 0 (3)
---------------- --------------- --------------- ---------------
Restaurants open at end of period 83 79 83 79
</TABLE>
<PAGE>
Twelve Weeks Ended October 4, 1997,
Compared To Twelve Weeks Ended October 5, 1996
Net sales increased $3.1 million, or 10.5%, to $32.7 million in the third
quarter of fiscal year 1997, from $29.5 million in the third quarter of fiscal
year 1996. Comparable restaurant sales for the twelve-week period increased
7.4%. The Company opened two new restaurants in the twelve-week period ended
October 4, 1997.
Cost of sales, primarily food and beverages, increased from $7.5 million in the
twelve weeks ended October 5, 1996, to $8.1 million in the corresponding 1997
period. As a percentage of net sales, these costs were 25.5% in the 1996 fiscal
period, and 24.9% in the corresponding 1997 fiscal period. The percentage
decrease was the result of lower prices for flour and cheese, and more efficient
operations.
Restaurant operating expenses for the twelve-week period increased from $15.2
million in fiscal year 1996, to $17.3 million for the corresponding period in
fiscal year 1997. As a percentage of net sales, operating expenses increased
from 51.5% during the twelve weeks ended October 5, 1996, to 52.8% during the
corresponding period in 1997. The increase was the result of higher advertising
costs.
General and administrative expenses increased, as a percentage of net sales,
from 5.7% during the twelve weeks ended October 5, 1996, to 6.1% during the
corresponding period of fiscal year 1997. The increase was the result of higher
training and in-house marketing costs.
Depreciation and amortization expense decreased, as a percentage of net sales,
from 7.0% in the 1996 twelve-week period, to 5.9% in the 1997 twelve-week
period. This decrease was attributable to the amortization expense on fewer new
restaurants.
Taxes, other than income taxes, increased from $1.5 million during the twelve
weeks ended October 5, 1996, to $1.6 million for the corresponding period in
1997, and decreased, as a percentage of net sales, from 5.1% in 1996, to 5.0% in
1997.
Interest expense decreased from $279,000 to $214,000 for the corresponding
twelve weeks of 1996 and 1997, respectively. The decrease was attributable to
the lower amount of bank borrowings during the 1997 period.
The effective income tax rate decreased from 37.5% for the twelve weeks ended
October 5, 1996, to 36.3% for the corresponding period ending October 4, 1997.
<PAGE>
Forty Weeks Ended October 4, 1997,
Compared To Forty Weeks Ended October 5, 1996
Net sales increased $6.6 million, or 6.7%, to $104.6 million for the forty-week
period in 1997, compared to $98.0 million in the same period last year. New
restaurants that were opened in 1996 and 1997 contributed to the increase.
Comparative restaurant sales during the forty-week period were positive by 2.7%.
Menu price-increases for the period under comparison were approximately 1.2%
Cost of sales, primarily food and beverages, increased from $24.9 million for
the 1996 forty- week period, to $26.1 million for the 1997 forty-week period,
and decreased, as a percentage of net sales, from 25.4% to 24.9% for the
forty-week periods ended in 1996 and 1997, respectively. The percentage decrease
came from better buying opportunities and improved efficiency at the operations
level.
Restaurant operating expenses for the forty-week period increased from $50.9
million in fiscal year 1996, to $55.0 million in fiscal year 1997. As a
percentage of net sales, operating expenses increased from 51.9% during the
forty weeks ended October 5, 1996, to 52.6% during the corresponding period in
1997. The increase was the result of higher payroll and advertising costs.
General and administrative expenses increased from $5.9 million for the
forty-week period in 1996, to $6.3 million in the same period of 1997, and
decreased, as a percentage of net sales, from 6.1% to 6.0% for the forty-week
periods ended in 1996 and 1997, respectively.
Depreciation and amortization expense, as a percentage of net sales, decreased
from 7.0% in the 1996 forty-week period, to 6.4% in the 1997 forty-week period.
This decrease was attributable to the amortization expense on fewer new
restaurants.
Taxes, other than income taxes, increased from $5.2 million during the forty
weeks ended October 5, 1996, to $5.5 million for the corresponding period in
1996, and decreased, as a percentage of net sales, from 5.3% in 1996, to 5.2% in
1997.
Interest expense decreased from $1.0 million to $835,000 for the corresponding
forty-week periods of 1996 and 1997, respectively. The decrease was attributable
to the lower amounts of bank borrowings during the 1997 period.
The effective income tax rate decreased from 37.5% for the forty weeks ended
October 5, 1996, to 36.4% for the corresponding period ending October 4, 1997.
<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. At
October 5, 1996, and October 4, 1997, the amounts outstanding under this bank
line-of-credit were $19.4 million and $13.5 million, respectively.
During the forty weeks ended October 5, 1996, and October 4, 1997, the Company's
investment in property and equipment was $8.1 million and $5.5 million,
respectively. The investments were funded with cash provided by operations and
with the proceeds of financing activities.
Cash provided by operations amounted to $9.3 million and $10.5 million for the
forty weeks ended October 5, 1996, and October 4, 1997, respectively.
The Company opened three new restaurants in the first forty weeks of 1997, and
expects to open two more new restaurants by the end of fiscal year 1997, with an
additional 8 to 10 restaurants planned for fiscal year 1998. The Company expects
to expend approximately $8.5 million in fiscal year 1997, and approximately
$11.0 million in fiscal year 1998, to finance expansion. The Company believes
that it will have sufficient working capital and bank borrowings to finance its
expansion plans throught the end of fiscal year 1998.
<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 14, 1997 By: /s/ Joseph Crugnale
Joseph Crugnale
President and Chief
Executive Officer
Date: November 14, 1997 By: /s/ Norman S. Mallett
Norman S. Mallett
Vice President - Finance
Chief Financial Officer and
Treasurer
<TABLE> <S> <C>
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<NAME> Bertucci's Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> OCT-04-1997
<CASH> 4,161
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<ALLOWANCES> 0
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0
0
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