<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
----------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
COMMISSION FILE NUMBER 0-19810
BACK BAY RESTAURANT GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 284 NEWBURY STREET 04-2812651
(State or other jurisdiction of BOSTON, MASSACHUSETTS 02115 (I.R.S. Employer Identification No.)
incorporation or organization) (Address of principal executive offices,
including Zip Code)
</TABLE>
(617) 536-2800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
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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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
---
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price of the registrant's Common Stock as
quoted on the National Association of Securities Dealers Automatic Quotation
System on March 14, 1997 was $6,156,017.
On March 14, 1997, there were 3,434,032 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III.
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BACK BAY RESTAURANT GROUP, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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PAGE
<S> <C>
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder 10
Matters
Item 6. Selected Consolidated Financial Data 10
Item 7. Management's Discussion and Analysis of Financial Condition 12
and Results of Operations
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements With Accountants on Accounting 34
Disclosure and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain Beneficial Owners and 35
Management
Item 13. Certain Relationships and Related Transactions 35
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 36
</TABLE>
2
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PART I
ITEM 1. BUSINESS
GENERAL
Back Bay Restaurant Group, Inc. (the "Company") owns and operates full
service restaurants located in New England, New York, New Jersey and Washington,
D.C. As of March 1, 1997, the Company operated 34 restaurants, 14 of which
feature Northern Italian cuisine and are operated under the Papa.Razzi tradename
and 20 of which offer casual American dining. Since it opened its first
restaurant in 1964, the Company has followed an operating philosophy of
providing value to its customers by featuring generous portions of high quality
food, a level of service that is typical of higher priced restaurants, and
moderate prices.
The Company emphasizes freshness, quality, cleanliness, service and
distinctive decor in each of its restaurants. Menu items are prepared on the
restaurant premises from original recipes by skilled and experienced chefs. The
Company employs two executive chefs who are responsible for developing new menu
items, setting presentation standards and working with unit level chefs as
needed to improve performance and resolve problems. The Company's restaurants
use fresh ingredients almost exclusively and generally do not rely on frozen or
prepared foods as do some national chains. The Company employs quality control
consultants who conduct frequent unannounced inspections of its restaurants. The
Company believes that its adherence to the high-quality food standards has
promoted strong customer loyalty and has contributed to the longevity of its
restaurant concepts.
The Company recognizes that menus, and sometimes restaurant concepts, need
to be changed periodically to satisfy changing public tastes. The Company
believes that it has been successful at anticipating trends and changing its
concepts in response to such trends. The Company's core restaurant concepts have
proven adaptable to changing customer preferences and the Company believes that
its ability to modify and refresh its existing restaurants by periodically
revising their menus and concepts allows the Company to maintain or increase its
customer base within its market area.
The Company's restaurants provide specialty menus in addition to their
standard menus, such as weekend brunch menus. Both standard and specialty menus
are periodically updated by the executive chefs according to changing customer
preferences. The Company considers the extensive selection of items on its menus
to be an important factor in the appeal of its restaurants.
All of the Company's restaurants offer a full liquor selection and all have
a bar. The Company believes that, although such beverage service contributes to
the overall success of a restaurant, attention to the quality of the food and
service increases repeat customer business and minimizes volume fluctuations
associated with trends in bar popularity. All of the Company's restaurants are
open seven days a week and serve lunch and dinner.
3
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NORTHERN ITALIAN-STYLE MENU AND CONCEPT
The Papa.Razzi concept creates a distinctive upscale, casual dining
atmosphere. Each of the Papa.Razzi restaurants features earth colors, marble or
granite and light wood decor to create the ambiance of a European trattoria. The
Papa.Razzi menu is tailored to this dining atmosphere and offers a selected
array of Northern Italian cuisine featuring several types of freshly prepared
pasta with sauces. The menu also includes a variety of pizzas with creative
toppings which are flash cooked in brick ovens under extreme heat to create a
thin, light crust and preserve the flavor and consistency of the toppings.
The "secondi" or entree portion of the Papa.Razzi menu offers a selection
of grilled and sauteed veal, chicken, seafood and meat dishes.
The Papa.Razzi concept and menu allow the Company to take advantage of the
lower food costs and growing popularity of Italian food. The Papa.Razzi
restaurants have proven equally suitable for urban and shopping mall locations.
In 1996 the average lunch and dinner checks per customer at Papa.Razzi were
approximately $12.50 and $19.00, respectively. Sales of alcoholic beverages
accounted for 24.2% of Papa.Razzi revenues in 1996.
AMERICAN-STYLE MENUS, CONCEPTS AND TRADENAMES
The Company's American-style restaurants offer substantially similar menus
which emphasize fresh, moderately-priced fare, including a variety of chicken
and seafood dishes, grilled steaks, gourmet hamburgers, Mexican dishes, pasta,
soups and salads.
While the Company's American-style restaurants are operated under several
tradenames, each restaurant creates a warm, casual dining atmosphere attracting
a wide diversity of customers. The Company's strategy of using different
restaurant names enhances its ability to open a number of restaurants in a
strong restaurant market, such as the Back Bay section of Boston where the
Company operates four American-style restaurants. Although the menus of
American-style restaurants are substantially similar, menu items vary slightly
and different prices are charged, depending on the restaurant's location and
trade name.
In 1996, the average lunch and dinner checks per customer at the Company's
American-style restaurants were approximately $11.00 and $16.00, respectively.
Sales of alcoholic beverages accounted for 28.0% of American concept revenues in
1996.
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RESTAURANT LOCATIONS
The following table presents certain information regarding the restaurants
operated by the Company as of March 1, 1997.
<TABLE>
<CAPTION>
APPROX. RESTAURANT
DATE SEATING SIZE (APPROX. LEASE (1)
OPENED LOCATION NAME CAPACITY SQ. FT.) EXPIRATION
<S> <C> <C> <C> <C> <C>
Northern Italian Concept
- ------------------------
Nov. 1989 Boston, MA Papa.Razzi 220 6,700 2010
June 1991 Chestnut Hill, MA Papa.Razzi 160 4,050 2014
Oct. 1991 Cambridge, MA Papa.Razzi 219 6,170 2007
June 1992 Concord, MA Papa.Razzi 220 14,000 2019
Aug. 1992 West Hartford, CT Papa.Razzi 239 5,000 2014
Nov. 1992 White Plains, NY Papa.Razzi 280 6,750 2022
Dec. 1992 Burlington, MA Papa.Razzi 350 12,600 2017
Mar. 1993 Wellesley, MA Papa.Razzi 320 9,300 2018
June 1993 Cranston, RI Papa.Razzi 225 6,000 2018
Oct. 1993 Short Hills, NJ Papa.Razzi 202 5,450 2009
May 1994 Hanover, MA Papa.Razzi 230 7,200 2023
June 1994 Westbury, NY Papa.Razzi 280 10,200 2016
Sept. 1994 Paramus, NJ Papa.Razzi 220 5,800 2005
Feb. 1995 Georgetown, D.C. Papa.Razzi 243 8,400 2015
American Concept
- ----------------
June 1973 Chestnut Hill, MA Charley's Eating & Drinking Saloon 170 5,000 2014
Sept. 1975 Dedham, MA J.C. Hillary's 270 7,920 2011
Oct. 1975 Boston, MA J.C. Hillary's (2) 411 9,870 2006
Oct. 1978 Boston, MA The Famous Atlantic Fish Company (2) 169 4,557 2006
Dec. 1984 Boston, MA Joe's American Bar & Grill 251 6,317 2010
Nov. 1985 Waterford, CT Charley's Eating & Drinking Saloon 190 7,108 2000
Aug. 1986 Wayland, MA Hillary's 188 6,100 2015
Feb. 1987 Nashua, NH Charley's Eating & Drinking Saloon 208 6,597 2002
July 1988 Worcester, MA Charley's Eating & Drinking Saloon 205 6,370 2003
Sept. 1988 West Hartford, CT Joe's American Bar & Grill 230 8,000 2014
Sept. 1989 Woburn, MA J.C. Hillary's 275 8,100 2023
Jan. 1990 North Attleboro, MA Charley's Eating & Drinking Saloon 239 6,633 2005
July 1990 Trumbull, CT J.C. Hillary's 250 7,090 2005
Nov. 1990 Boston, MA Charley's Eating & Drinking Saloon 270 7,888 2011
Nov. 1991 Cambridge, MA Rayz Riverside Cafe 176 5,002 2007
Dec. 1992 Peabody, MA Joe's American Bar & Grill 268 6,016 2008
Dec. 1993 Hanover, MA Joe's American Bar & Grill 260 7,400 2023
Oct. 1994 Paramus, NJ Joe's American Bar & Grill 240 6,100 2005
Dec. 1994 Short Hills, NJ Joe's American Bar & Grill 195 5,300 2009
Sept.1996 Braintree, MA Joe's American Bar & Grill 310 9,200 2016
</TABLE>
(1) Assumes that the Company exercises all of its extension options.
(2) Operated under a lease with an affiliate of Charles F. Sarkis, President
and Chief Executive Officer of the Company.
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GROWTH STRATEGY
The Company's current growth strategy is to expand its operations on a
very select basis in markets along the Boston-Washington, D.C. corridor.
However, if a suitable opportunity arose, the Company would also consider
expansion into other metropolitan markets. The Company does not franchise and
currently has no plans to develop a franchise program. The ability of the
Company to open new restaurants and achieve its expansion goals is dependent
upon, among other factors, locating satisfactory sites, obtaining or generating
adequate capital, negotiating favorable leases or purchasing land or buildings
on acceptable terms, securing appropriate government permits and approvals,
obtaining liquor licenses and recruiting and training additional qualified
restaurant management personnel.
SITE SELECTION, DESIGN AND CONSTRUCTION
The Company believes that location is a key factor in a restaurant's
ability to operate a profitable lunch and dinner business and considers several
demographic factors in selecting sites, including the size of the middle to
upper income residential population, the proximity of retail and office
facilities, traffic patterns and the visibility of the location. Senior
management inspects and approves each restaurant site. The Company generally
designs its restaurants utilizing outside architects under the supervision of
its in-house architectural staff.
MANAGEMENT TRAINING AND RESTAURANT OPERATIONS
The Company invests a substantial amount of time in training and testing
its restaurant personnel. Management trainees must complete a ten-week on-site
training program during which they are familiarized with kitchen, bar and dining
room operations of the restaurant and are instructed in areas such as food
quality and preparation, customer service, alcoholic beverage service, liquor
liability avoidance and employee relations. Periodic seminars are conducted by
Company personnel and outside experts on a broad range of topics to provide
additional training for its managers. The training programs are designed to
ensure that uniform standards of quality and service are followed in all of the
restaurants and are further designed so that the managers can be transferred
from one American concept restaurant to another, or one Papa.Razzi restaurant to
another, with minimum disruption.
The Company believes that an important element of its success lies in
employee adherence to the Company's standard of quality. The Company encourages
the promotion of its qualified restaurant employees to managerial positions and
maintains employee morale by rewarding individual achievement through increased
salaries and bonuses. The Company has an incentive program under which general
managers, chefs and regional managers may receive bonuses and stock option
grants based on the contribution to the Company's earnings by the restaurants
for which they are responsible.
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The Company employs regional managers who are each responsible for
supervising an average of seven restaurants. The day-to-day operations of each
restaurant, including personnel management, food procurement, inventory control
and guest relations, are the responsibility of a general manager who generally
reports to a regional manager. The management staff of a typical Company
restaurant consists of one general manager, two assistant managers, one chef and
one sous chef. Each restaurant also employs approximately 80 hourly employees,
many of whom work part-time.
Centralized financial and management controls, which are fundamental in
improving restaurant operating margins, are maintained through the use of an
automated data processing system and prescribed reporting procedures. Each
restaurant has a point of sale system that captures restaurant operating
information. The restaurants forward daily sales reports, vendor invoices,
payroll information and other data to the Company's corporate headquarters.
Company management utilizes this data to monitor quality, cost and sales mix and
to prepare periodic financial and management reports. This system is also used
for budget analyses, planning, and determining menu composition. Restaurant
managers perform daily inventories on key products and weekly inventories on all
products. Cash is controlled through frequent deposits of sales proceeds in
local operating accounts, the balances of which are wire transferred regularly
to the Company's principal account.
PURCHASING AND SUPPLIES
The Company centrally controls the purchasing criteria for its
restaurants, including criteria related to acceptable suppliers and product
quality. Management develops product specifications and continually monitors
vendors to ensure that food suppliers comply with the Company's quality
standards. The Company's restaurants purchase certain perishable items,
beverages and other branded items directly from company-specified suppliers. The
Company is not dependent on any single supplier and believes that adequate
alternative suppliers are available.
EMPLOYEES
At December 29, 1996, the Company employed approximately 2,600 persons,
approximately 30 of whom were corporate personnel and approximately 220 of whom
were associated with the management or supervision of the restaurants. The
Company considers relations with its employees to be good.
MARKETING
Management believes that the Company's commitment to customer service and
value is the most effective approach to attracting customers. Accordingly, the
Company has historically focused its resources on providing its customers with
superior service and value, and has relied primarily on word of mouth to attract
new and repeat customers. Management believes that its strategy of locating
multiple restaurants under the same name within a defined geographic area has
enabled newer restaurants to benefit from the name recognition and reputation
for quality developed by existing restaurants. The Company employs little print
or direct mail advertising, and conducts some radio advertising and local
restaurant promotions. During 1996, the Company's expenditures for advertising
were less than one percent of its revenues.
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In September 1994, the Company instituted its Preferred Guest Program.
Under the program, preferred guests receive a $20 dining certificate good at any
of the Company's restaurants each time $200 in food and beverage purchases are
reflected in the customer's account. The Company records the liability
associated with dining certificates as they vest. As of March 1, 1997, the
Company had approximately 18,000 members in its Preferred Guest Program.
COMPETITION
The restaurant business is highly competitive and is affected by, among
other things, changes in eating habits and preferences, local, regional and
national economic conditions, population trends and traffic patterns. The
Company competes within each market with locally-owned restaurants as well as
with national and regional restaurant chains, some of which operate more
restaurants and have greater financial resources and longer operating histories
than the Company. The principal bases of competition in the industry are the
quality and price of the food products served. Restaurant location, quality and
speed of service, name identification and attractiveness of facilities are also
important. The acquisition of sites is highly competitive as well, with the
Company often competing with other restaurant companies and retail businesses
for suitable sites for the development of new restaurants.
GOVERNMENTAL REGULATION
The Company is subject to various federal, state and local laws affecting
its business. Each of the Company's restaurants is subject to licensing by
governmental authorities and a variety of regulatory provisions relating to
zoning of restaurant sites, alcoholic beverage control, sanitation, health and
safety and the environment. Difficulties or failures in obtaining required
licenses or approvals may delay or prevent the Company from opening new
restaurants.
Alcoholic beverage control regulations require each of the Company's
restaurants to apply to a state authority and, in certain locations, county and
municipal authorities for a license and permit to sell alcoholic beverages on
the premises. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of the daily operations of the Company's restaurants,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, and storage and dispensing
of alcoholic beverages. The failure to receive or retain, or a delay in
obtaining, a liquor license in a particular location could adversely affect the
Company's ability to obtain such a license elsewhere. The Company has not
encountered any material problems relating to alcoholic beverage licenses to
date.
Various federal and state labor laws govern the Company's relationship with
its employees, including such matters as minimum wage requirements, overtime and
other working conditions. Significant additional government-imposed increases in
minimum wages, paid leaves of absence, mandated health benefits or increased tax
payment requirements for employees who receive gratuities could have a material
adverse effect on the Company's results of operations.
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SERVICE MARKS
The Company regards its service marks as having significant value and as
being an important factor in the marketing of its services. The Company has
registered as service marks the words Papa.Razzi, Papa.Razzi's Cucina, Joe's
American Bar & Grill, J.C. Hillary's, Hillary's, Charley's Eating & Drinking
Saloon, Atlantic Fish Co. and Rayz Riverside Cafe with the United States Patent
and Trademark Office. The Company's policy is to pursue registration of its
marks and to strenuously oppose infringement of its marks.
The Company is aware of similar names being used in some areas. To the
extent that these names were in use prior to the Company's registration of the
name as a service mark, the Company may be prevented from operating under the
name in the area of such prior use. The Company does not expect any such prior
use of similar names to have a material effect on its operations.
SEASONALITY
A large proportion of the Company's restaurants are located in mall
locations or other retail areas. Consequently, the Company's sales are generally
highest during the holiday shopping season in the fourth quarter of each year
and lowest during the first quarter of each year.
ITEM 2. PROPERTIES
All of the Company's restaurant locations are held under long term leases.
See "Business - Restaurant Locations" and "Site Selection, Design and
Construction." The Company's leases generally provide for a fixed base rent plus
additional rent based on the level of sales generated by the restaurant. Most of
the Company's leases require the Company to pay all or a portion of the costs of
owning and operating the premises, including the cost of insurance, taxes and
maintenance.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various claims and legal actions, such as slip
and fall and other general liability claims, that arise in the ordinary course
of its business. The Company does not believe that any of these claims will have
a material adverse effect on its business or results from operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of stockholders during the fourth quarter
of fiscal year 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter on the NASDAQ
National Market System under the symbol PAPA. As of March 3, 1997, there were
approximately 67 holders of record of the Company's Common Stock. The Company
believes there are substantially more beneficial owners of its Common Stock than
there are holders of record.
The Company has not paid dividends since becoming a public company. The
Company presently intends to retain all earnings for use in the operation and
expansion of its business and has no present intention to pay cash dividends.
The quarterly range of high and low sales prices for the Common Stock as
reported on NASDAQ for fiscal years 1995 and 1996 are as follows:
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<CAPTION>
1995 1996
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1st Fiscal Quarter $9.00 $7.00 $5.00 $3.50
2nd Fiscal Quarter 7.75 4.50 5.50 3.00
3rd Fiscal Quarter 5.25 3.00 4.75 3.25
4th Fiscal Quarter 6.00 3.50 4.13 2.63
</TABLE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain historical financial information
derived from the Consolidated Financial Statements of the Company. The Selected
Consolidated Financial Information (except for Restaurant Operating Data) for
the fiscal years ended December 27, 1992, December 26, 1993, December 25, 1994,
December 31, 1995 and December 29, 1996 is derived from the audited Consolidated
Financial Statements. This information should be read in conjunction with and is
qualified by reference to the Consolidated Financial Statements of the Company
and the notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere in this Annual Report.
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<TABLE>
<CAPTION>
YEAR ENDED
DEC. 27, DEC. 26, DEC. 25, DEC. 31, DEC. 29,
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales $ 59,677 $ 74,172 $ 85,831 $ 93,496 $ 87,753
Costs and expenses:
Cost of sales 17,261 20,286 23,230 25,980 24,785
Payroll and related costs 18,075 22,301 27,633 30,102 28,327
Operating expenses 11,477 14,567 18,948 21,440 20,398
Depreciation and amortization 3,453 3,876 4,541 4,891 3,880
-------- -------- -------- -------- --------
Total restaurant operating expenses 50,266 61,030 74,352 82,413 77,390
-------- -------- -------- -------- --------
Income from restaurant operations 9,411 13,142 11,479 11,083 10,363
General and administrative expenses 5,182 8,532 10,517 15,129 8,874
-------- -------- -------- -------- --------
Operating income/(loss) 4,229 4,610 962 (4,046) 1,489
Interest expense 524 104 118 795 748
Interest income (115) (49) (4) -- --
Gain on sale of property -- (1,202) -- -- --
-------- -------- -------- -------- --------
Income/(loss) from continuing
operations before income taxes 3,820 5,757 848 (4,841) 741
Income taxes 1,596 2,303 347 (2,031) 274
-------- -------- -------- -------- --------
Income/(loss) from continuing 2,224 3,454 501 (2,810) 467
operations
Discontinued operations:
Income from operations of discontinued
division (net of income taxes) 370 83 -- -- --
Estimated loss on disposal of discontinued
division (net of income taxes) -- (75) -- -- --
-------- -------- -------- -------- --------
Net income/(loss) $ 2,594 $ 3,462 $ 501 ($ 2,810) $ 467
======== ======== ======== ======== ========
Income/(loss) from continuing operations per
share $ 0.68 $ 0.95 $ 0.14 ($ 0.82) $ 0.14
======== ======== ======== ======== ========
Net income/(loss) per share $ 0.80 $ 0.95 $ 0.14 ($ 0.82) $ 0.14
======== ======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding 3,260 3,654 3,623 3,431 3,436
RESTAURANT OPERATING DATA:
Average sales per restaurant open for full period (1) $ 2,686 $ 2,674 $ 2,570 $ 2,595 $ 2,613
Restaurants open for full period 21 25 30 33 33
Percentage change in comparable restaurant sales (1) 4.3% 0.6% (3.5%) (2.2%) (0.8%)
Total restaurants open at end of period 26 31 37 33 34
BALANCE SHEET DATA (AT YEAR END):
Total assets $ 35,897 $ 38,884 $ 47,314 $ 46,100 $ 43,911
Long term debt -- -- 7,600 7,525 6,025
Current maturities of long term debt 2,186 683 542 2,500 1,500
Total stockholders' equity 25,369 28,831 27,537 24,727 25,202
</TABLE>
(1) Does not include the 53rd week in the fiscal year ended December 31, 1995.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements which are included herein.
RESULTS OF OPERATIONS
The following table sets forth the components of income from operations as
a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 27.0 27.8 28.2
Payroll and related costs 32.2 32.2 32.3
Operating expenses 22.1 22.9 23.3
Depreciation and amortization 5.3 5.2 4.4
------- ------- -------
Total restaurant operating expenses 86.6 88.1 88.2
------- ------- -------
Income from restaurant operations 13.4 11.9 11.8
General and administrative expenses 12.3 16.2 10.1
------- ------- -------
Operating income/(loss) 1.1 (4.3) 1.7
Interest expense 0.1 0.9 0.9
------- ------- -------
Income/(loss) before income taxes 1.0 (5.2) 0.8
Income taxes 0.4 (2.2) 0.3
------- -------- -------
Net income/(loss) 0.6 (3.0) 0.5
======= ======== =======
</TABLE>
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FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Sales
Sales decreased by $5,743,000, or 6.1%, to $87,753,000 in 1996 from
$93,496,000 in 1995. The decrease in sales was attributable in part to
$1,821,000 of sales in the additional week in 1995 as compared to 1996. Same
store sales decreased $652,000, or 0.8%, in the 52 weeks in 1996 as compared to
the 52 weeks in 1995.
The overall decrease in sales was from five restaurants that closed in
1995 which contributed $5,018,000 in 1995. This decrease in closed store sales
was partially offset by an increase in new store sales and miscellaneous other
sales, which contributed $1,748,000 in 1996.
The Company operated 34 restaurants at December 29, 1996, up from 33
restaurants at December 31, 1995. Total restaurant customer count for 1996
decreased 11.5% to 5,076,000 from 5,733,000 in 1995, of which 300,000 is
attributable to closed locations.
Cost of Sales
Cost of sales as a percentage of sales increased to 28.2% in 1996 from
27.8% in 1995. This increase was attributable to a 0.5% increase in food cost as
a percentage of food revenue (29.9% in 1996 versus 29.4% in 1995). The food cost
increases were due principally to price increases in some food items. Beverage
cost as a percentage of beverage revenue was 23.7% for both the 1996 and 1995
years.
Payroll and Related Costs
Payroll and related costs as a percentage of net sales increased to 32.3%
in 1996 from 32.2% in 1995. The payroll and related costs decreased by
$1,775,000 in 1996 to $28,327,000 from $30,102,000 in 1995. This decrease is the
result of the Company closing four underperforming restaurants in 1995, as well
as having one less week of payroll in 1996 as compared to 1995.
Operating Expenses
Operating expenses decreased by $1,042,000 in 1996 to $20,398,000 from
$21,440,000 in 1995. The decrease in operating expenses is attributable to the
Company closing four underperforming restaurants in 1995. The decrease in
operating expenses from closed stores was partially offset by increases in
various general operating expenses.
Depreciation and Amortization
Depreciation and amortization decreased by $1,011,000 in 1996 to
$3,880,000 from $4,891,000 in 1995. The decrease is principally attributable to
the closing of four underperforming restaurants in 1995 and a lower amount of
pre-opening cost amortization in 1996 as compared to 1995. Included in the 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.
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General and Administrative Expenses
General and administrative expenses decreased by $6,255,000 in 1996 to
$8,874,000 from $15,129,000 in 1995. Included in the 1995 general and
administrative expenses are approximately $5,441,000 of charges that the Company
took in 1995. Included in the $5,441,000 is approximately $4,449,000 of charges
associated with the closing of three poorly performing restaurants at the end of
1995. The remaining balance consists principally of charges associated with
capitalized costs from restaurant projects that were abandoned and reserves the
Company provided for to close an additional unit. The adjusted general and
administrative decrease of $814,000 in 1996 as compared to 1995 is primarily
attributable to decreases in insurance, advertising and payroll expense.
Interest Expense
Interest expense decreased by $47,000 in 1996 to $748,000 from $795,000
in 1995. This decrease was attributable to the Company having less borrowings in
1996 as compared to 1995.
Income Taxes
Income taxes increased by $2,305,000 in 1996 to a tax expense of $274,000
from a tax benefit of $2,031,000. The increase in income taxes reflects the
pre-tax earnings of $741,000 in 1996 as compared to the pre-tax loss of
$4,841,000 in 1995.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Sales
Sales increased by $7,665,000, or 8.9%, to $93,496,000 in 1995 from
$85,831,000 in 1994. The increase in sales was attributable in part to
$1,821,000 of sales in the additional week in 1995 as compared to 1994. Same
store sales decreased $1,628,000, or 2.2%, in the 52 weeks in 1995 as compared
to the 52 weeks in 1994. The Company implemented a new menu for many of its
restaurant concepts in the fourth quarter of 1995 and executed a radio campaign
for Papa.Razzi in the Boston metropolitan market. The Company believes that the
new menu and advertising will help offset some of the same store sales decreases
in the future. Comparable unit sales in the fourth quarter of 1995 increased
1.0% as compared to the fourth quarter of 1994.
The overall increase in sales was from new stores which contributed
$11,648,000 in 1995 (exclusive of the 53rd week). This increase in new store
sales was partially offset by a decrease in sales of $4,087,000 from five
restaurants that closed in 1995.
The Company operated 33 restaurants at December 31, 1995, down from 37
restaurants at December 25, 1994. Total restaurant customer count for 1995
increased 8.0% to 5,733,000 from 5,308,000 in 1994.
14
<PAGE> 15
Cost of Sales
Cost of sales as a percentage of sales increased to 27.8% in 1995 from
27.0% in 1994. This increase was attributable to a 0.6% increase in food cost as
a percentage of food revenue (29.4% in 1995 versus 28.8% in 1994), and a 0.8%
increase in beverage cost as a percentage of beverage revenue (23.7% in 1995
versus 22.9% in 1994). The cost increases are due principally to price increases
from vendors.
Payroll and Related Costs
Payroll and related costs as a percentage of sales was 32.2% for both the
1995 and 1994 years. Payroll and related costs increased by $2,469,000 in 1995
to $30,102,000 from $27,633,000 in 1994. This increase is attributable
principally to a larger number of restaurants being open during 1995 as well as
an extra week of payroll in 1995 as compared to 1994 (53 weeks in 1995 versus 52
weeks in 1994).
Operating Expenses
Operating expenses increased by $2,492,000 in 1995 to $21,440,000 from
$18,948,000 in 1994. A significant portion of the increase in operating expenses
is attributable to a larger number of restaurants being open during 1995 as
compared to 1994, as well as the relatively higher occupancy costs of the newer
units and increases in various general operating expenses.
Depreciation and Amortization
Depreciation and amortization increased by $350,000 in 1995 to $4,891,000
from $4,541,000 in 1994. The increase in depreciation and amortization is
attributable principally to new restaurants and is partially offset by a
decrease in pre-opening amortization. Included in the 1995 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.
General and Administrative Expenses
General and administrative expenses increased by $4,612,000 in 1995 to
$15,129,000 from $10,517,000 in 1994. Included in the 1995 general and
administrative expenses are approximately $5,441,000 of charges that the Company
took in 1995. Included in the $5,441,000 is approximately $4,449,000 of charges
associated with the closing of three poorly performing restaurants at the end of
1995. The remaining balance consists principally of charges associated with
capitalized costs from restaurant projects that were abandoned and reserves the
Company provided to close an additional unit. Included in the 1994 general and
administrative expenses are approximately $1,500,000 of charges associated with
insurance expense charges as well as the write down in anticipation of closing a
poorly performing restaurant. The adjusted general and administrative expense
increase of $671,000 in 1995 as compared to 1994 is primarily attributable to
increased payroll and benefits.
15
<PAGE> 16
Interest Expense
Interest expense increased by $677,000 in 1995 to $795,000 from $118,000
in 1994. This increase in 1995 was attributable to increased borrowings and the
fact that a lower amount of interest was capitalized in conjunction with
construction in process than was capitalized in 1994.
Income Taxes
Income taxes decreased by $2,378,000 in 1995 to a benefit of $2,031,000
from a $347,000 expense in 1994. The benefit in 1995 reflects the pre-tax loss
of $4,841,000 in 1995 as compared to the pre-tax earnings of $848,000 in 1994.
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 December 29, 1996, the Company's cash position was $1,344,000 and
the Company had a net working capital deficit of $8,887,000. At December 31,
1995, the Company's cash position was $3,326,000 and the Company had a net
working capital deficit of $8,127,000.
The Company has a revolving credit and term loan agreement (the "Loan
Agreement") with The First National Bank of Boston (the "Bank"). At December 29,
1996, the Company had an outstanding balance of $7,525,000 under the Loan
Agreement. In March of 1996, the Company reached an agreement with The First
National Bank of Boston on the amendment of its Loan Agreement. Under the
amended Loan Agreement, the Company is required to pay monthly installments of
interest, and quarterly payments of principal in twelve installments of $500,000
beginning March 31, 1996, with a final principal payment of $3,525,000 due March
31, 1999.
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 1997 from internally
generated cash. The Company believes that cash flow from operations will be
sufficient to meet future needs.
16
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants 18
Consolidated Balance Sheets as of December 31, 1995 and 19
December 29, 1996
Consolidated Statements of Operations for the Years Ended 20
December 25, 1994, December 31, 1995 and December 29, 1996
Consolidated Statements of Changes in Stockholders' Equity for the Years 21
Ended December 25, 1994, December 31, 1995 and December 29, 1996
Consolidated Statements of Cash Flows for the Years Ended 22
December 25, 1994, December 31, 1995 and December 29, 1996
Notes to Consolidated Financial Statements 23
</TABLE>
17
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of the Back Bay Restaurant Group, Inc.:
We have audited the accompanying consolidated balance sheets of the Back Bay
Restaurant Group, Inc. and subsidiaries as of December 31, 1995 and December
29, 1996, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the three fiscal years in the period ended
December 29, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance as to whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Back Bay Restaurant Group, Inc. and subsidiaries as of December 31, 1995 and
December 29, 1996, and the consolidated results of its operations and cash
flows for each of the three fiscal years in the period ended December 29, 1996
in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Boston, Massachusetts
February 17, 1997
18
<PAGE> 19
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 29, 1996
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,326 $ 1,344
Accounts receivable, net of allowance for
doubtful accounts ($970 in 1995 and 1996) 355 252
Inventories 689 687
Prepaid expenses and other current assets 612 904
Prepaid taxes 13 --
Deferred income taxes 241 169
------- -------
Total current assets 5,236 3,356
------- -------
Buildings and improvements 4,303 4,303
Furniture, fixtures and equipment 15,262 16,124
Leasehold improvements 28,984 31,965
Lease rights 2,826 2,826
------- -------
51,375 55,218
Less: accumulated depreciation and amortization 19,792 23,436
------- -------
Net property, plant and equipment 31,583 31,782
------- -------
Other assets:
Goodwill, net of accumulated amortization 5,221 5,052
Tradenames and trademarks, net of
accumulated amortization 1,330 1,286
Deferred income taxes 1,908 1,698
Investment in partnership 316 --
Other assets, net of accumulated amortization 506 737
------- -------
Total other assets 9,281 8,773
------- -------
Total assets $46,100 $43,911
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,768 $ 2,709
Accrued expenses 8,095 7,750
Current maturities of long-term debt 2,500 1,500
Income taxes payable -- 284
------- -------
Total current liabilities 13,363 12,243
------- -------
Deferred rent 485 441
Long term debt 7,525 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 in 1995 36 36
Additional paid-in capital 23,031 23,039
Retained earnings 3,459 3,926
------- -------
26,526 27,001
Less treasury stock, 208 shares at cost in 1995
and 1996 1,799 1,799
------- -------
Total stockholders' equity 24,727 25,202
------- -------
Total liabilities and stockholders' equity $46,100 $43,911
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE> 20
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-THREE FIFTY-TWO
WEEKS ENDED WEEKS ENDED WEEKS ENDED
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Sales $ 85,831 $ 93,496 $87,753
Costs and expenses:
Cost of sales 23,230 25,980 24,785
Payroll and related costs 27,633 30,102 28,327
Operating expenses 18,948 21,440 20,398
Depreciation and amortization 4,541 4,891 3,880
-------- -------- -------
Total restaurant operating expenses 74,352 82,413 77,390
-------- -------- -------
Income from restaurant operations 11,479 11,083 10,363
General and administrative expenses 10,517 15,129 8,874
-------- -------- -------
Operating income/(loss) 962 (4,046) 1,489
Interest expense 118 795 748
Interest income (4) -- --
-------- -------- -------
Income/(loss) before income taxes 848 (4,841) 741
Income taxes 347 (2,031) 274
-------- -------- -------
Net income/(loss) $ 501 ($ 2,810) $ 467
======== ======== =======
Net income/(loss) per share $ 0.14 ($ 0.82) $ 0.14
======== ======== =======
Weighted average common and common 3,623 3,431 3,436
equivalent shares outstanding
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE> 21
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 26, 1993 $36 $23,027 $ 5,768 -- $ 28,831
Net income -- -- 501 -- 501
Exercise of stock option -- 4 -- -- 4
Purchase of 208 shares of
treasury stock -- -- -- ($1,799) (1,799)
--- ------- ------- ------- --------
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 compensation -- 8 -- -- 8
--- ------- ------- ------- --------
Balance, December 29, 1996 $36 $23,039 $ 3,926 ($1,799) $ 25,202
=== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE> 22
BACK BAY RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 501 ($ 2,810) $ 467
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,582 4,916 3,966
Loss on disposal of fixed assets 566 2,919 --
Loss on equity investment -- 44 473
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable 714 (135) 103
Decrease in inventories 84 21 2
(Increase)/decrease in prepaid expenses and other
current assets (692) 259 (371)
(Increase)/decrease in prepaid income taxes (217) 204 13
(Increase)/decrease in other assets (166) 52 22
Increase/(decrease) in accounts payable and accrued expenses 2,282 1,664 (404)
Increase/(decrease) in income taxes payable (219) -- 284
Decrease in deferred rent (44) (44) (44)
(Increase)/decrease in deferred taxes (908) (2,125) 282
-------- ------- -------
Net cash provided by operating activities 6,483 4,965 4,793
-------- ------- -------
Cash flows from investing activities:
Investment in partnership -- (360) (157)
Capital expenditures (14,381) (3,304) (3,843)
Acquisition of other assets -- -- (275)
Proceeds from sale of fixed assets -- 5 --
-------- ------- -------
Net cash used for investing activities (14,381) (3,659) (4,275)
-------- ------- -------
Cash flows from financing activities:
Proceeds from debt 7,600 1,925 300
Principal payments of debt (141) (42) (2,800)
Purchase of company stock (1,799) -- --
Exercise of stock option 4 -- --
-------- ------- -------
Net cash provided by (used for) financing activities 5,664 1,883 (2,500)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents (2,234) 3,189 (1,982)
Cash and cash equivalents at beginning of period 2,371 137 3,326
-------- ------- -------
Cash and cash equivalents at end of period $ 137 $ 3,326 $ 1,344
======== ======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 245 $ 766 $ 823
======== ======= =======
Income taxes paid $ 1,725 $ 761 $ 315
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE> 23
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Back Bay Restaurant Group, Inc. (the "Company") (formerly Westwood
Restaurant Group, Inc., a Massachusetts corporation) was reincorporated in
Delaware in 1991. The Company was a wholly-owned subsidiary of The Westwood
Group, Inc. ("WGI") prior to the Company's initial public offering effective on
March 13, 1992.
NATURE OF OPERATIONS
The Company owns and operates full service restaurants located in New
England, New York, New Jersey and Washington, D.C. As of March 1, 1997, the
Company operated 34 restaurants, 14 of which feature Northern Italian cuisine
and are operated under the Papa.Razzi tradename and 20 of which offer casual
American dining.
FISCAL YEAR
The Company's fiscal year ends on the Sunday closest to the end of
December and includes 52 weeks in 1994, 53 weeks in 1995 and 52 weeks in 1996.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Back Bay
Restaurant Group, Inc. and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated. Investments in nonconsolidated
companies which are at least 20% owned are carried on the equity method.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all certificates of deposit and highly liquid
marketable securities with maturities of three months or less at the date of
purchase to be cash equivalents.
INVENTORIES
Inventories, principally food supplies, are stated at cost, as determined
by the first-in, first-out method.
23
<PAGE> 24
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
PREOPENING COSTS
Preopening costs represent staff training costs, rent and other costs
incurred exclusively prior to and specifically for a restaurant opening. These
costs are deferred and amortized over a 12-month period following the month of
the opening.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated
using the straight-line method over the following estimated useful lives:
Asset Classification Estimated Useful Life
Buildings and improvements.............. 30 Years
Furniture, fixtures and equipment..... 5-10 Years
Leasehold improvements are amortized over the lesser of the assets'
estimated useful lives or the lease terms, principally fifteen to twenty years.
Lease rights are amortized over the lives of the related leases.
Gains or losses are recognized upon the disposal of property, plant and
equipment, and the related accumulated depreciation and amortization are removed
from the accounts. Fully depreciated assets and the related accumulated
depreciation are removed from the accounts upon retirement. Maintenance, repairs
and betterments that do not enhance the value of or increase the life of assets
are charged to operations as incurred.
Interest is capitalized in connection with the construction of new
locations. The capitalized interest is recorded as part of the asset to which it
relates and is amortized over the asset's estimated useful life. Capitalized
interest amounted to $157,000 in 1994, $23,000 in 1995 and $23,000 in 1996.
INTANGIBLE ASSETS
Intangible assets, including goodwill, tradenames and trademarks are
stated at cost and are amortized over 40 years on a straight-line basis.
Accumulated amortization was approximately $1,867,000 and $2,079,000 as of
December 31, 1995 and December 29, 1996, respectively.
IMPAIRMENT OF LONG LIVED ASSETS
Periodically, management assesses, based on undiscounted cash flows, if
there has been a permanent impairment in the carrying value of its long lived
assets and, if so, the amount of any such impairment by comparing anticipated
discounted future operating income from acquired businesses with the carrying
value of the related long lived assets. In performing this analysis, management
considers such factors as current results, trends and future prospects, in
addition to other economic factors.
24
<PAGE> 25
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INCOME TAXES
In the first quarter of 1993, the Company retroactively adopted Financial
Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109") which
requires a change from an income statement to a balance sheet approach for
accounting for income taxes. Under FAS 109, deferred tax assets and liabilities
are recognizable based on temporary differences between the financial statement
and tax basis of assets and liabilities using current statutory tax rates.
NET INCOME PER SHARE
Net income per share is computed based on the average number of common
shares outstanding for the respective periods adjusted for the dilutive effect
of stock options. Fully diluted earnings per share are not presented, because
the amount would not differ significantly from that presented.
PREFERRED GUEST PROGRAM
The Company provides a liability for gift certificates issued to
participants in its preferred guest program. The liability associated with these
certificates is recorded as they vest.
2. PREPAID EXPENSES AND OTHER CURRENT ASSETS (in thousands)
Prepaid expenses and other current assets consisted of the following:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Preopening costs $ 39 $147
Prepaid insurance (78) 57
Prepaid rent 456 552
Other 195 148
----- ----
Total $ 612 $904
===== ====
</TABLE>
25
<PAGE> 26
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. ACCRUED EXPENSES (in thousands)
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Payroll and payroll taxes $1,392 $1,701
Rent expense 1,716 1,917
Reserve for store closings 2,126 1,245
Insurance 1,424 1,379
Other 1,437 1,508
------ ------
Total accrued expenses $8,095 $7,750
====== ======
</TABLE>
4. LONG-TERM DEBT (in thousands)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Mortgage note, 8%, payable in quarterly installments of principal and
interest of $21, with a final payment due February 1996, collateralized
by certain property, plant and equipment and the pledge of the stock of a
subsidiary of the Company. 500 -
Revolving Credit and Term Loan Agreement base rate plus
1.25% or, at the option of the Company, LIBOR plus 3.5% (9.0625% at
December 29, 1996) payable in monthly installments of interest, principal
payable in twelve quarterly installments of $500, beginning March 31,
1996, with a final payment of $3,525 due March 31, 1999, collateralized
by certain property, plant and equipment. 9,525 7,525
------- ------
10,025 7,525
Less: current maturities 2,500 1,500
------- -------
Total long-term debt $ 7,525 $6,025
======= =======
</TABLE>
26
<PAGE> 27
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Maturities of long-term debt outstanding at December 29, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $1,500
1998 2,000
1999 4,025
------
$7,525
======
</TABLE>
The Company has a revolving credit and term loan agreement (the "Loan
Agreement") with The First National Bank of Boston (the "Bank"). At December 29,
1996, the Company had an outstanding balance of $7,525,000 under the Loan
Agreement. On March 5, 1996, the Company reached an agreement with the Bank on
the amendment of its loan agreement. Under the amended Loan Agreement, the
Company is required to pay monthly installments of interest, and quarterly
payments of principal in twelve installments of $500,000 beginning March 31,
1996, with a final principal payment of $3,525,000 due March 31, 1999. The
Company's obligation under the Loan Agreement is collateralized by certain
property, plant and equipment. The Loan Agreement contains restrictions relating
to future indebtedness, contingent liabilities, encumbrances, the merger,
acquisition or sale of assets, additional stock issuance, equity distributions,
cash dividends, and redemptions, capital expenditures, investments, ERISA and
transactions with affiliates. The Loan Agreement also requires the maintenance
of certain financial ratios and covenants, of which the most restrictive
covenant is a fixed charge coverage. Under this arrangement the Company and its
subsidiaries are required, for each period of four consecutive fiscal quarters,
commencing with the period ending March 31, 1996, to maintain a ratio of
consolidated cash available to pay fixed charges to consolidated fixed charges
of not less than 1.17 to 1. This fixed change coverage increases to 1.20 to 1
for the calculation commencing June 29, 1997.
On September 5, 1996, the Company and the Bank made certain modifications
to the Loan Agreement. These modifications included deferring a quarterly
payment of principal by thirty days, increasing allowable capital expenditures
by $1,300,000 and changing the borrowing rate. The Company's borrowing rate
under the Loan Agreement, as modified, is base rate plus 1.25% or, at the option
of the Company, LIBOR plus 3.5%.
27
<PAGE> 28
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases facilities under operating leases expiring at various
dates through October 2023, which includes available option renewal periods.
Most of the leases require payment of certain additional expenses such as
maintenance, repairs, insurance and real estate taxes, and additional contingent
rentals based on a percentage of sales specific to each leased facility. Rent is
charged to operations on a straight-line basis for certain leases with
escalation clauses. Rent expense for the years ended December 25, 1994, December
31, 1995 and December 29, 1996 was approximately $5,476,000, $6,139,000 and
$5,518,000 respectively (including approximately $616,000, $727,000 and $734,000
in 1994, 1995 and 1996, respectively, attributable to percentage rent in excess
of base amounts).
The Company had a lease agreement for one of its restaurant facilities
with a trust, the beneficiary of which is a wholly-owned subsidiary of WGI. The
annual rent under this lease was equal to the higher of $200,000 base rent or
7.5% of annual gross sales up to a maximum of $3,200,000 per year, so that in no
event shall the annual rent under this lease exceed $240,000. The lease
commenced on October 1, 1991 and ends September 30, 2001. The Company is also
liable for a portion of real estate taxes, insurance and building operating
expenses as defined in the lease. The lease agreement was terminated in November
1996, pursuant to the foreclosure of a mortgage, and as a result of such
foreclosure, the occupancy of the restaurant facility is tenant at sufferance.
The Company is in the process of negotiating a new lease with the new landlord.
The Company has entered into a lease for a restaurant space with Charles
F. Sarkis, Chief Executive Officer, stockholder and director of the Company and
beneficial owner of the leased property. Payments under this lease are $300,000
annually, commencing October 1, 1991 and ending September 30, 2006. The Company
is also liable for real estate taxes, insurance and building operating expenses
as defined in the lease.
Future minimum payments relating to all operating leases as of December 29, 1996
are as follows:
<TABLE>
<CAPTION>
Years Amount
----- -----------
<S> <C>
1997 $ 5,211,000
1998 5,285,000
1999 5,336,000
2000 5,110,000
2001 4,885,000
Thereafter 27,275,000
-----------
$53,102,000
===========
</TABLE>
28
<PAGE> 29
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
LITIGATION
The Company is involved in routine litigation from time to time. The
litigation in which the Company is currently involved, in the opinion of Company
management, is not material to the Company's consolidated financial condition or
results of operations.
LETTER OF CREDIT
At December 29, 1996, the Company had an irrevocable letter of credit
outstanding in the amount of $236,000 securing its obligations to a bonding
company in connection with ongoing construction litigation.
6. INCOME TAXES
The following is a comparative analysis of the provisions for income taxes:
<TABLE>
<CAPTION>
December 25, December 31, December 29,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C>
Income/(loss) from continuing operations
before income taxes $ 848,000 ($4,841,000) $ 741,000
Provisions/(benefits) for income taxes =========== =========== =========
Federal 87,000 (1,967,000) 183,000
State 260,000 (64,000) 91,000
----------- ----------- ---------
Income tax provision/(benefit) $ 347,000 ($2,031,000) $ 274,000
=========== =========== =========
Current and deferred components of the provision:
Current
Federal $ 672,000 ($ 123,000) $ 177,000
State 583,000 217,000 124,000
----------- ----------- ---------
1,255,000 94,000 301,000
Deferred
Federal (585,000) (1,844,000) 6,000
State (323,000) (281,000) (33,000)
----------- ----------- ---------
(908,000) (2,125,000) (27,000)
----------- ----------- ---------
Total $ 347,000 ($2,031,000) $ 274,000
=========== =========== =========
</TABLE>
29
<PAGE> 30
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The tax effects of the significant temporary differences which comprise
the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
ASSETS
Pre-opening costs $ 65,000 $ 276,000 $ 129,000
Deferred rentals 214,000 195,000 177,000
Reserves and accruals 663,000 1,602,000 1,234,000
Step-rents 169,000 427,000 520,000
Credit carryforwards -- 472,000 358,000
State net operating loss carryforwards -- 313,000 435,000
Other 85,000 11,000 32,000
---------- ----------- -----------
GROSS DEFERRED TAX ASSETS $1,196,000 $ 3,296,000 $ 2,885,000
---------- ----------- -----------
LIABILITIES
Fixed assets $ 865,000 $ 551,000 $ 13,000
Intangibles 617,000 593,000 570,000
---------- ----------- -----------
GROSS DEFERRED TAX LIABILITIES $1,482,000 $ 1,144,000 $ 583,000
---------- ----------- -----------
NET LIABILITY/(ASSET) BEFORE VALUATION $ 286,000 ($2,152,000) ($2,302,000)
ALLOWANCE
Valuation allowance -- 313,000 435,000
---------- ----------- -----------
Adjusted net liability/(asset) $ 286,000 ($1,839,000) ($1,867,000)
========== =========== ===========
</TABLE>
The credit carryforward relating to the general business credits of
$358,000 begins to expire in the year 2010. The state net operating losses
expire between 1999 and 2011.
The valuation allowance is provided against state net operating loss
carryforwards, the realization of which are uncertain due to state separate
entity limitations and short carryforward periods.
30
<PAGE> 31
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A reconciliation of the statutory federal income tax rate and effective
tax rate as a percentage of pretax income is as follows:
<TABLE>
<CAPTION>
DEC. 25, DEC. 31, DEC. 29,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Statutory federal rate 34.0% (34.0%) 34.0%
State income taxes, net of federal benefit 20.1 (0.9) 8.1
Non-deductible depreciation and amortization 6.8 1.2 7.7
Wage based tax credits (20.7) (8.2) (12.8)
Other 0.7 -- --
---- ---- -----
40.9% (41.9%) 37.0%
==== ====== =====
</TABLE>
7. STOCK-BASED COMPENSATION PLAN
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plan. FASB Statement No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") was issued by the FASB in 1995 and, if fully adopted,
changes the methods for recognition of cost on plans similar to that of the
Company. Adoption of SFAS 123 is optional; however, pro forma disclosures as if
the Company adopted the cost recognition requirements under SFAS 123 is required
in 1996. The Company adopted the disclosure provision of SFAS 123 and has
applied Opinion No. 25 and related Interpretations in accounting for its plans.
On December 26, 1991, the Company adopted a stock option plan (the
"Plan") pursuant to which certain directors, officers and key employees of the
Company may be granted options to acquire shares of the Company's common stock.
The Plan includes provisions for both incentive and non-qualified stock options.
Each grant that is issued has a term life of not greater than 10 years. At the
1993 Annual Meeting of Stockholders, the Company's stockholders approved an
amendment to the Plan to increase the number of shares of common stock available
for issuance under the Plan upon the exercise of stock options to 730,000
shares. Annual grants are determined by a disinterested committee (the
"Committee") of the Company's Board of Directors. Incentive Stock Options may be
granted at an exercise price of not less than the fair market value of the
common stock at the date of grant. Non-Qualified Stock Options may be granted at
an exercise price of not less than 85% of the fair market value of the common
stock at the date of the grant. Options granted to officers and key employees
vest on a schedule determined by the Committee and options granted to directors
become exercisable on December 31 of the year in which they are granted. At
December 29, 1996 the Company has granted options for 459,615 shares of common
stock at prices of $3.38 to $ 18.00 per share. At December 29, 1996, there were
355,201 options outstanding that are vested. At December 29, 1996, 270,119
shares were available for future option grants.
31
<PAGE> 32
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the Company's stock as of December 29, 1996, December 31,
1995 and December 26, 1994 and changes during the year ended on those dates is
presented below:
<TABLE>
<CAPTION>
1994 1995 1996
-------------------- --------------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 278,200 $ 13.72 471,521 $ 14.27 447,056 $ 8.67
Granted at fair market value 230,636 15.14 208,188 7.07 106,764 4.13
Granted below fair market value -- -- 129,300 7.18 -- --
Exercised (266) 14.00 -- -- -- --
Cancelled (37,049) 15.55 (361,953) 14.52 (94,205) 7.27
------- -------- --------
Outstanding at end of year 471,521 14.27 447,056 8.67 459,615 7.87
======= ======== =======
Options exercisable at year-end 155,505 13.79 427,106 8.84 355,201 8.97
======= ======== =======
Options available for future grant 258,479 282,678 270,119
======= ======== =======
Weighted average fair value of options
granted during the year $ 4.11 $ 2.32
======= ======
</TABLE>
The fair value of each option granted during 1996 is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
assumptions: (1) dividend yield of 0, (2) expected volatility of 60%, (3)
risk-free interest rate ranging from 5.29% to 6.75% and (4) expected life of 5.0
years.
The following table summarizes information about stock options
outstanding at December 29, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ----------------------------
Number Wgtd. Ave. Wgtd. Ave. Number Wgtd. Ave.
Outstanding Remaining Exercise Exercisable Exercise
Range of Exercise Prices at 12/29/96 Contr. Life Price at 12/29/96 Price
- ------------------------ ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 3.3750 - $ 7.0000 128,664 9.1 $ 4.2832 24,250 $ 4.9291
$ 7.0100 - $11.0000 239,884 8.3 $ 7.4347 239,884 $ 7.4347
$11.0100 - $15.0000 86,300 5.4 $13.8740 86,300 $13.8740
$15.0100 - $18.0000 4,767 7.1 $18.0000 4,767 $18.0000
======= === ======== ======= ==========
459,615 8.0 $ 7.8712 355,201 $ 8.9699
</TABLE>
32
<PAGE> 33
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The fair value of each option granted during 1995 is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
assumptions: (1) dividend yield of 0, (2) expected volatility of 60%, (3)
risk-free interest rate ranging from 5.53% to 7.84% and (4) expected life of 5.0
years.
The following table summarizes information about stock options
outstanding at December 31, 1995:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ----------------------------
Number Wgtd. Ave. Wgtd. Ave. Number Wgtd. Ave.
Outstanding Remaining Exercise Exercisable Exercise
Range of Exercise Prices at 12/29/95 Contr. Life Price at 12/29/95 Price
- ------------------------ ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 4.0625 - $ 7.0000 40,750 9.7 $ 4.9193 20,800 $ 4.9708
$ 7.0100 - $11.0000 312,672 9.2 $ 7.4412 312,672 $ 7.4412
$11.0100 - $15.0000 87,700 6.4 $13.8714 87,700 $13.8714
$15.0100 - $18.0000 5,934 8.1 $17.8736 5,934 $17.8736
======= === ======== ======= ========
447,056 8.7 $ 8.6089 427,106 $ 8.7838
</TABLE>
Had compensation cost for the Company's 1996 grants under the Plan been
determined consistent with SFAS 123, the Company's compensation expense would
have increased by $63,000 and $1,246,000, respectively for 1996 and 1995. The
Company's net income, net income applicable to common share owners, and net
income per common share for 1996 would approximate the pro forma amounts below
(in thousands except per share data):
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 467 ($2,810) $ 427 ($3,534)
Net income applicable to common
share owners $ 467 ($2,810) $ 427 ($3,534)
Net income per share $0.14 ($ 0.82) $0.12 ($ 1.03)
</TABLE>
The effects of applying SFAS in this pro forma are not indicative of
future amounts. SFAS 123 does not apply to awards prior to 1995, and additional
awards in future years are not anticipated.
33
<PAGE> 34
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. RELATED PARTY TRANSACTIONS
Until 1994, the Company operated two restaurants and food and beverage
concessions at Wonderland Greyhound Park ("Wonderland"), a parimutuel greyhound
racetrack owned and operated by WGI, pursuant to a concessions agreement (the
"Concessions Agreement").
The Company determined that the continued operation of concessions
facilities at two pari- mutuel racing facilities did not fit with the long-term
direction of the Company. Consequently, in May 1994, the Company sold its
concessions operations at Wonderland Greyhound Park and its contract for
managing the concessions operations at Foxboro Park to subsidiaries of The
Westwood Group, Inc. for a six-year term note in the amount of $770,000, to
which $200,000 owed by WGI to the Company at December 25, 1994 was added to
bring the total principal amount to $970,000. The Company has reserved $970,000
against amounts outstanding due to the uncertainty regarding the collectibility
of the receivable. The Company has not recognized any gain from the sale. Any
gain recognized pursuant to the sale of concessions rights will be realized as
cash payments are received due to the uncertainty regarding collectibility of
the $770,000 selling price.
See Note 5 for a summary of additional transactions with WGI.
9. STORE CLOSINGS AND RELATED MATTERS
During 1995 the Company recorded $5,138,000 in charges relating to
management's plan to reduce the Company's cost structure by taking a number of
steps, including closing three underperforming restaurants. These charges
related principally to severance payments to terminated employees, the write off
of certain professional and other fees and expenses incurred in the development
of locations anticipated to be built, but subsequently not built, outstanding
lease obligations and anticipated losses relating to the disposal of fixed
assets for locations closed in 1995 or anticipated to close in 1996. On December
31, 1995 the accrued reserve for store closings was approximately $2,126,000. To
date the Company has settled its lease obligations for two of the three stores
closed at terms more favorable than originally estimated and has closed an
additional location. The closed location, which was a joint venture accounted
for under the equity method of accounting, was closed during the third quarter
of 1996 and the related charges were offset against the accrual. The Company has
added to the plan a provision for the conversion of a location to a different
concept and a reserve for the potential sale of a leased but undeveloped
restaurant site. Additionally, the Company provided severance payments in excess
of the amounts anticipated as part of the original plan. As of December 29, 1996
the remaining accrual is $1,245,000, which management believes is adequate to
complete the plan by the end of fiscal 1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
34
<PAGE> 35
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Company's Directors and Executive
Officers contained in the Company's definitive Proxy Statement for its 1997
Annual Meeting under the captions "Directors" and "Executive Officers" is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to the compensation of the Company's executive
officers contained in the Company's definitive Proxy Statement for its 1997
Annual Meeting under the caption "Executive Compensation" is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to the ownership of the Company's securities by
certain beneficial owners and management contained in the Company's definitive
Proxy Statement for its 1997 Annual Meeting under the caption "Beneficial
Ownership of Shares" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions contained in the Company's definitive Proxy Statement for its 1997
Annual Meeting under the caption "Transactions with Management and Affiliates"
is incorporated herein by reference.
35
<PAGE> 36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
1. Financial Statements and related schedules filed as part of this report
are listed in the index to Financial Statements and Schedules.
2. The following exhibits are filed as part of this report.
Exhibit Index
Exhibit No.
3.1* Certificate of Incorporation of the Company, as amended
3.2* By-Laws of the Company, as amended
10.1* Amended and Restated Stock Option Plan
10.2* Lease dated January 10, 1992 between The Westwood Newbury
Restaurant, Inc., a subsidiary of the Company, and 284 Newbury
Street Trust First Amendment thereto dated as of July 1, 1993
10.3* Lease dated January 10, 1992 between the Company and 284 Newbury
Street Trust, and the First Amendment thereto dated as of July 1,
1993
10.4* Lease dated December 1, 1991 between Boraschi Cafe, Inc. and
Charles F. Sarkis
10.5* Employment Agreement dated as of January 16, 1992 between the
Company and Charles F. Sarkis
10.6* Form of Change of Control Severance Agreements between the Company
and each of Francis P. Bissaillon, Robert J. Ciampa, Timothy M.
Collins, Mark L. Hartzfeld, Charles F. Sarkis and Charles F.
Sarkis, Jr.
10.7* Letter Agreement dated January 16, 1992 between the Company and
The Westwood Group, Inc.
10.8** Revolving Credit and Term Loan Agreement dated August 10, 1993
between Back Bay Restaurant Group, Inc. and its subsidiaries and
The First National Bank of Boston (the "Loan Agreement"), as
amended
10.9* Fifth Amendment to the Loan Agreement dated March 5, 1996
11 Statement regarding Computation of Earnings Per Share
36
<PAGE> 37
21 List of Subsidiaries of the Company
23 Consent of Coopers & Lybrand to the incorporation of its report
into the Company's Registration Statements on Form S-8 and S-3
27 Financial Data Schedule
* Incorporated by reference from Back Bay Restaurant Group, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 26, 1993, as filed
with the Securities and Exchange Commission.
** Incorporated by reference from Back Bay Restaurant Group, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended September 24, 1995,
as filed with the Securities and Exchange Commission.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 14 or 15(d) 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.
By: /s/ Charles F. Sarkis
----------------------------------------
Charles F. Sarkis
Chairman, President and
Chief Executive Officer
March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Charles F. Sarkis Chairman of the Board of March 25, 1997
- ------------------------- Directors, President and
Charles F. Sarkis Chief Executive Officer
/s/ Francis P. Bissaillon Director, Executive Vice March 25, 1997
- -------------------------- President and Chief Financial
Francis P. Bissaillon Officer
/s/ Robert J. Ciampa Vice President, Chief March 25, 1997
- -------------------------- Accounting Officer and
Robert J. Ciampa Treasurer
/s/ Joseph M. Cassin Director March 25, 1997
- --------------------------
Joseph M. Cassin
/s/ Irwin Chafetz Director March 25, 1997
- --------------------------
Irwin Chafetz
/s/ Richard P. Dalton Director March 25, 1997
- --------------------------
Richard P. Dalton
/s/ Richard K. Howe Director March 25, 1997
- --------------------------
Richard K. Howe
/s/ Robert S. Parker Director March 25, 1997
- --------------------------
Robert S. Parker
</TABLE>
38
<PAGE> 1
EXHIBIT 11
<TABLE>
BACK BAY RESTAURANT GROUP, INC.
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<CAPTION>
Year Ended
----------
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Net income/(loss) $(2,810) $ 467
Weighted average number of
common shares outstanding 3,430 3,434
Add
Weighted average number of common
equivalent shares outstanding 1 2
------- ------
Weighted average number of
common and common equivalent
shares outstanding 3,431 3,436
======= ======
Net income/(loss) per share $ (0.82) $ 0.14
======= ======
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF
BACK BAY RESTAURANT GROUP, INC.
BBRG OPERATING, INC.
THE 199, INC.
BACK BAY MEDIA, INC.
BBRG MASSACHUSETTS RESTAURANTS, INC.
BBRG NEW JERSEY RESTAURANTS, INC.
BBRG PARAMUS RESTAURANTS, INC.
BBRG RHODE ISLAND RESTAURANTS, INC.
BBRG ROTISSERIE, INC.
BBRG WASHINGTON RESTAURANTS, INC.
BBRG WATERFRONT, INC.
BORASCHI CAFE, INC.
DANVERS RESTAURANT GROUP, INC.
EASTERN PURCHASING & DESIGN, INC.
LINPRO GREENTREE, INC.
PHEASANT MALL RESTAURANT GROUP, INC.
PRA, INC.
WATERFORD RESTAURANT GROUP, INC.
WESTFOUR, INC.
THE WESTWOOD BOYLSTON RESTAURANT, INC.
THE WESTWOOD COPLEY RESTAURANT GROUP, INC.
THE WESTWOOD DEDHAM RESTAURANT, INC.
THE WESTWOOD HARTFORD RESTAURANT GROUP, INC.
THE WESTWOOD NEWTON RESTAURANT GROUP, INC.
THE WESTWOOD SHORT HILLS RESTAURANT, INC.
THE WESTWOOD TRUMBULL RESTAURANT GROUP, INC.
THE WESTWOOD WHITE PLAINS RESTAURANT, INC.
THE WESTWOOD WOBURN RESTAURANT GROUP, INC.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Back Bay Restaurant Group, Inc. on Form S-8 (File Nos. 33-68574 and 33-68576)
and Form S-3 (File No. 33-76424) of our report dated February 17, 1997, on our
audits of the consolidated financial statements of Back Bay Restaurant Group,
Inc as of December 31, 1995 and December 29, 1996, and for each of the three
years in the period ended December 29, 1996, which report is included in this
Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 21, 1997
<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 YEAR ENDED
DECEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 1,344,000
<SECURITIES> 0
<RECEIVABLES> 252,000
<ALLOWANCES> 0
<INVENTORY> 687,000
<CURRENT-ASSETS> 3,356,000
<PP&E> 55,218,000
<DEPRECIATION> 23,436,000
<TOTAL-ASSETS> 43,911,000
<CURRENT-LIABILITIES> 12,243,000
<BONDS> 6,466,000
0
0
<COMMON> 3,434,032
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 43,911,000
<SALES> 87,753,000
<TOTAL-REVENUES> 87,753,000
<CGS> 24,785,000
<TOTAL-COSTS> 77,390,000
<OTHER-EXPENSES> 8,874,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 748,000
<INCOME-PRETAX> 741,000
<INCOME-TAX> 274,000
<INCOME-CONTINUING> 467,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 467,000
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
