<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
MARCH 30, 1997 0-19810
BACK BAY RESTAURANT GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2812651
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
284 NEWBURY STREET, BOSTON, MASSACHUSETTS 02115
(Address of principal executive offices)
(617) 536-2800
(Registrant's telephone number, including area code)
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
On April 29, 1997, there were 3,434,032 shares of the registrant's Common Stock
outstanding.
<PAGE> 2
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS (in thousands)
<CAPTION>
MARCH 30, 1997 DECEMBER 29, 1996
-------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 967 $ 1,344
Accounts receivable, net of allowance for
doubtful accounts ($970 in 1996 and 1997) 252 252
Inventories 657 687
Prepaid expenses and other current assets 935 904
Deferred income taxes 169 169
------- -------
Total current assets 2,980 3,356
------- -------
Buildings and improvements 4,303 4,303
Furniture, fixtures and equipment 16,655 16,124
Leasehold improvements 32,103 31,965
Lease rights 2,826 2,826
------- -------
55,887 55,218
Less: accumulated depreciation and amortization 24,302 23,436
------- -------
Net property, plant and equipment 31,585 31,782
------- -------
Other assets:
Goodwill, net of accumulated amortization 5,010 5,052
Tradenames and trademarks, net of
accumulated amortization 1,275 1,286
Deferred income taxes 1,698 1,698
Other assets, net of accumulated amortization 797 737
------- -------
Total other assets 8,780 8,773
------- -------
Total assets $43,345 $43,911
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,812 $ 2,709
Accrued expenses 7,326 7,750
Current maturities of long-term debt 1,500 1,500
Income taxes payable 97 284
------- -------
Total current liabilities 11,735 12,243
------- -------
Deferred rent 430 441
Other long term liability 40 -
Long term debt 6,025 6,025
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized
20,000 shares; 3,434 shares issued and
outstanding in 1996 and 1997 36 36
Additional paid-in capital 23,041 23,039
Retained earnings 3,837 3,926
------- -------
26,914 27,001
Less treasury stock, 208 shares at cost in 1996
and 1997 1,799 1,799
------- -------
Total stockholders' equity 25,115 25,202
------- -------
Total liabilities and stockholders' equity $43,345 $43,911
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 3
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
13 WEEKS ENDED
MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Sales $ 21,896 $ 20,483
Costs and expenses:
Cost of sales 6,095 5,821
Payroll and related costs 7,376 6,801
Operating expenses 5,283 4,965
Depreciation and amortization 952 956
-------- --------
Total restaurant operating expenses 19,706 18,543
-------- --------
Income from restaurant operations 2,190 1,940
General and administrative expenses 2,166 2,246
-------- --------
Operating income/(loss) 24 (306)
Interest expense net 165 208
-------- --------
Loss before income taxes (141) (514)
Income tax benefit (52) (190)
-------- --------
Net loss $ (89) $ (324)
======== ========
Net loss per share $ (.03) $ (.09)
======== ========
Weighted average common and common
equivalent shares outstanding 3,434 3,436
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 25, 1994 $ 36 $ 23,031 $ 6,269 $ (1,799) $ 27,537
Net loss - - (2,810) - (2,810)
---- -------- -------- -------- --------
Balance, December 31, 1995 36 23,031 3,459 (1,799) 24,727
Net income - - 467 - 467
Restricted stock - 8 - - 8
---- -------- -------- -------- --------
Balance, December 29, 1996 36 23,039 3,926 (1,799) 25,202
Net loss - - (89) - (89)
Restricted stock compensation - 2 - - 2
---- -------- -------- -------- --------
Balance, March 30, 1997 $ 36 $ 23,041 $ 3,837 $ (1,799) $ 25,115
==== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
13 WEEKS ENDED
MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (89) $ (324)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 974 977
Loss on equity investment - 85
Changes in operating assets and liabilities:
Decrease in accounts receivable - 35
Decrease in inventories 30 77
Increase in prepaid expenses and
other current assets (80) (143)
Increase in prepaid income taxes - (357)
(Increase)/decrease in other assets (66) 13
Decrease in accounts payable and
accrued expenses (321) (449)
Decrease in income taxes payable (187) -
Decrease in deferred rent (11) (11)
Increase in other long term liability 41 -
------- -------
Net cash provided by/(used for) operating
activities 291 (97)
------- -------
Cash flows from investing activities:
Investment in partnership - (52)
Capital expenditures (668) (781)
------- -------
Net cash used for investing activities (668) (833)
------- -------
Net decrease in cash and cash equivalents (377) (930)
Cash and cash equivalents at beginning of period 1,344 3,326
------- -------
Cash and cash equivalents at end of period $ 967 $ 2,396
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 175 $ 215
======= =======
Income taxes paid $ 170 $ 185
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED
MARCH 30, 1997 AND MARCH 31, 1996
NOTE 1 -- BASIS OF PRESENTATION
The preceding data is unaudited but, in the opinion of management,
includes all adjustments (consisting of normal recurring accruals
and deferrals) that management considers necessary for a fair
presentation of the financial position and results of operations for
the interim periods presented in accordance with generally accepted
accounting principles and practices consistently applied.
The results of operations for the thirteen weeks ended March 30,
1997 and March 31, 1996 are not necessarily indicative of the
results that may be expected for the entire year, because the
Company's business is subject to seasonal influences.
NOTE 2 -- LONG TERM DEBT
The Company has a revolving credit and term loan agreement (the
"Loan Agreement") with BankBoston, N.A. (the "Bank"). At March 30,
1997, the Company had an outstanding balance of $7,525,000 under the
Loan Agreement. On April 30, 1997, the Company and the Bank amended
the Loan Agreement. A principal payment of $25,000 was made upon the
execution of the Amendment. The Amendment provides for the
conversion of the existing term loan to a revolving credit facility
in the amount of $7,500,000 through December 31, 1997, at which time
the revolving credit is converted to a term loan with quarterly
installments of principal in the amount of $250,000 commencing March
31, 1998, with a final principal payment due March 31, 1999.
The amendment also reduces the Company's borrowing rate to base rate
plus .75% or, at the option of the Company, Libor plus 3.0% percent.
The amendment of the loan agreement also requires the maintenance of
certain financial ratios and covenants, of which the most
restrictive covenant is fixed charge coverage for which the Company
and its subsidiaries are required, for each period of four
consecutive fiscal quarters, commencing with the period ending June
29, 1997, to maintain a ratio of consolidated cash available to pay
fixed charges to consolidated fixed charges of not less than
1.4 to 1.
6
<PAGE> 7
NOTE 3 -- NEWLY ISSUED ACCOUNTING STANDARD
In February 1997, Statement of Financial Accounting Standards Number
128, "Earning Per Share" ("SFAS 128") was issued. SFAS 128, which
revises the traditional computation, presentation and disclosure
requirements for earnings per share, is effective for financial
statements issued for periods ending after December 15, 1997.
Adoption of SFAS 128 would not have a material impact on the
Company's reported earnings per share.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 30, 1997 COMPARED TO THIRTEEN WEEKS ENDED MARCH 31,
1996
The following table sets forth the percentage of net sales represented by
certain items included in the Company's income statements for the periods
indicated:
<TABLE>
<CAPTION>
13 WEEKS ENDED
MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Sales 100.0% 100.0%
Costs and expenses:
Cost of sales 27.8 28.4
Payroll and related costs 33.7 33.2
Operating expenses 24.1 24.2
Depreciation and amortization 4.4 4.7
Total restaurant operating expenses 90.0 90.5
Income from restaurant operations 10.0 9.5
General and administrative expenses 9.9 11.0
Operating income/(loss) 0.1 (1.5)
Interest expense net 0.7 1.0
Loss before income taxes (0.6) (2.5)
Income tax benefit (0.2) (0.9)
Net loss (0.4)% (1.6)%
Number of restaurants:
Restaurants open at beginning
of period 34 33
Restaurants open at end of period 34 33
</TABLE>
8
<PAGE> 9
SALES
Sales increased by $1,413,000, or 6.9%, to $21,896,000 in the thirteen
week period ended March 30, 1997, from $20,483,000 in the same period in 1996.
Same store sales increased $16,000, or 0.08%, in the thirteen week period ended
March 30, 1997, compared to the same period in 1996.
The overall increase in sales in the thirteen weeks ended March 30, 1997,
compared to the same period in 1996 was primarily attributable to sales from a
new store, which contributed $1,377,000.
The Company operated 34 restaurants at March 30, 1997, up from 33
restaurants at March 31, 1996. Total restaurant customer count for the thirteen
weeks ended March 30, 1997 increased 4.2% to 1,229,000 from 1,179,000 in the
comparable period in 1996.
COST OF SALES
Cost of sales as a percentage of sales decreased to 27.8% in the thirteen
week period ended March 30, 1997, from 28.4% in the same period in 1996. This
decrease was attributable to a 0.6% decrease in food cost as a percentage of
food revenue (29.5% in the 1997 period versus 30.1% in the 1996 period), and a
0.3% decrease in beverage cost as a percentage of beverage revenue (23.5% in the
1997 period versus 23.8% in the 1996 period). The food cost decreases were due
principally to price decreases in olive oil, pasta and produce items.
PAYROLL AND RELATED COSTS
Payroll and related costs as a percentage of sales increased to 33.7% in
the thirteen weeks ended March 30, 1997, from 33.2% in the same period in 1996.
Payroll and related costs increased by $575,000 in the thirteen weeks ended
March 30, 1997, to $7,376,000 from $6,801,000 in the same period in 1996. The
increase in dollars is primarily attributable to the Company having an
additional restaurant opened in the thirteen weeks ended March 30, 1997 as
compared to the same period in 1996.
OPERATING EXPENSES
Operating expenses increased by $318,000 in the thirteen weeks ended
March 30, 1997 to $5,283,000 from $4,965,000 in the same period in 1996. The
increase in operating expenses is primarily attributable to the Company having
an additional restaurant opened in the thirteen weeks ended March 30, 1997 as
compared to the same period in 1996.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased by $4,000 in the thirteen weeks
ended March 30, 1997 to $952,000 from $956,000 in the same period in 1996.
Included in the 1997 and 1996 amortization is the amortization of pre-opening
costs of new restaurants opened during the prior 12-month period. The Company
amortizes such pre-opening costs over the 12-month period immediately following
an opening or conversion.
9
<PAGE> 10
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased by $80,000 in the thirteen
weeks ended March 30, 1997 to $2,166,000 from $2,246,000 in the same period in
1996. The decrease is primarily attributable to a decrease in insurance expense.
INTEREST EXPENSE
Interest expense decreased by $43,000 in the thirteen weeks ended March
30, 1997 to $165,000 from $208,000 in the same period in 1996. This decrease was
attributable to decreased borrowings.
INCOME TAXES
Income tax benefit decreased by $138,000 in the thirteen weeks ended
March 30, 1997 to a benefit of $52,000 from a benefit of $190,000 in the same
period in 1996. The decreased benefit in the thirteen weeks ended March 30, 1997
reflects the pre-tax loss of $141,000 as compared to the pre-tax loss of
$514,000 for the same period in 1996. The estimated effective tax rate was 37%
for both periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company, similar to many restaurant businesses, requires little or no
working capital because it does not have significant inventory or trade
receivables and receives several weeks of trade credit in purchasing food and
supplies. At March 30, 1997, the Company's cash position was $967,000 and the
Company had a net working capital deficit of $8,755,000.
The Company has a revolving credit and term loan agreement (the "Loan
Agreement") with BankBoston, N.A. (the "Bank"). At March 30, 1997, the Company
had an outstanding balance of $7,525,000 under the Loan Agreement. On April 30,
1997, the Company and the Bank amended the Loan Agreement. A principal payment
of $25,000 was made upon the execution of the Amendment. The Amendment provides
for the conversion of the existing term loan to a revolving credit facility in
the amount of $7,500,000 through December 31, 1997, at which time the revolving
credit is converted to a term loan with quarterly installments of principal in
the amount of $250,000 commencing March 31, 1998, with a final principal payment
due March 31, 1999.
The amendment also reduces the Company's borrowing rate to base rate plus
.75% or, at the option of the Company, Libor plus 3.0% percent. The amendment of
the loan agreement also requires the maintenance of certain financial ratios and
covenants, of which the most restrictive covenant is fixed charge coverage for
which the Company and its subsidiaries are required, for each period of four
consecutive fiscal quarters, commencing with the period ending June 29, 1997, to
maintain a ration of consolidated cash available to pay fixed charges to
consolidated fixed charges of not less than 1.4 to 1.
The Company requires capital primarily for the development and
construction of new restaurants and the conversion of existing restaurants. In
recent years, the Company's primary sources of capital have been cash flow from
its operations, borrowings and landlord contributions to restaurant construction
costs. The Company intends to be very selective in its approval of sites for new
units and will be limiting the number of restaurant openings in 1997. The
Company expects to fund any capital expenditures for the remainder of 1997 from
internally generated cash. The Company believes that cash flow from operations
will be sufficient to meet future needs.
10
<PAGE> 11
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 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
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.
BACK BAY RESTAURANT GROUP, INC.
May 2, 1997 /s/ Francis P. Bissaillon
-----------------------------------
Francis P. Bissaillon
Director, Executive Vice President
and Chief Financial Officer
May 2, 1997 /s/ Robert J. Ciampa
-----------------------------------
Robert J. Ciampa
Vice President, Chief Accounting
Officer and Treasurer
12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
11 Computation of Earnings Per Share
27 Financial Data Schedule
13
<PAGE> 1
EXHIBIT 11
<TABLE>
BACK BAY RESTAURANT GROUP, INC.
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
13 WEEKS ENDED
MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Net loss $ (89) $ (324)
======= =======
Weighted average number of common
shares outstanding 3,434 3,434
Add
Weighted average number of common
equivalent shares outstanding - 2
------- -------
Weighted average number of common
and common equivalent shares
outstanding 3,434 3,436
======= =======
Net loss per share $ (.03) $ (.09)
======= =======
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5 <LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BACK BAY RESTAURANT GROUP, INC. FOR THE QUARTER ENDED
MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<EXCHANGE-RATE> 1
<CASH> 967,000
<SECURITIES> 0
<RECEIVABLES> 252,000
<ALLOWANCES> 0
<INVENTORY> 657,000
<CURRENT-ASSETS> 2,980,000
<PP&E> 55,887,000
<DEPRECIATION> 24,302,000
<TOTAL-ASSETS> 43,345,000
<CURRENT-LIABILITIES> 11,735,000
<BONDS> 6,495,000
0
0
<COMMON> 3,434,032
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 43,345,000
<SALES> 21,896,000
<TOTAL-REVENUES> 21,896,000
<CGS> 6,095,000
<TOTAL-COSTS> 19,706,000
<OTHER-EXPENSES> 2,166,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165,000
<INCOME-PRETAX> (141,000)
<INCOME-TAX> (52,000)
<INCOME-CONTINUING> (89,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,000)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
