<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
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 28, 1997
COMMISSION FILE NUMBER 0-19810
BACK BAY RESTAURANT GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 284 NEWBURY STREET 04-2812651
(State or other BOSTON, MASSACHUSETTS 02115 (I.R.S. Employer
jurisdiction of (Address of principal executive Identification No.)
incorporation or offices, including Zip Code)
organization)
(617) 536-2800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
--------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
--------------------------------------
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 2, 1998 was $10,481,288.
On March 2, 1998, there were 3,435,176 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1998 Annual
Meeting of Stockholders are incorporated by reference into Part III.
1
<PAGE> 2
BACK BAY RESTAURANT GROUP, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Stock and Related 12
Stockholder Matters
Item 6. Selected Consolidated Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition 14
and Results of Operations
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements With Accountants on Accounting 37
Disclosure and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 38
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and 38
Management
Item 13. Certain Relationships and Related Transactions 38
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 39
2
<PAGE> 3
CAUTIONARY STATEMENT
This Form 10-K Annual Report, including without limitation "Management's
Discussion and Analysis of Financial Condition and Results of Operation,"
contains various "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
and Exchange Act of 1934, as amended. Forward-looking statements represent the
Company's expectations or belief concerning future events, including the
following: any statements regarding future sales and gross profit percentages,
any statements regarding the continuation of historical trends, and any
statements regarding the sufficiency of the Company's cash balances and cash
generated from operating and financing activities for the Company's future
liquidity and capital resource needs. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," and similar expressions are
intended to identify forward-looking statements. The Company cautions that
these statements are further qualified by important economic and competitive
factors that could cause actual results to differ materially from those in the
forward-looking statements, including, without limitation, risks of the
restaurant industry, including a highly competitive industry with many
well-established competitors with greater financial and other resources than
the Company, and the impact of changes in consumer tastes, local, regional and
national economic conditions, demographic trends, traffic patterns, employee
availability and cost increases. In addition, the Company's ability to expand
is dependent upon various factors, such as the availability of attractive sites
for new restaurants, the ability to negotiate suitable lease terms, the ability
to generate or borrow funds to develop new restaurants and obtain various
government permits and licenses and the recruitment and training of skilled
management and restaurant employees. Accordingly, such forward-looking
statements do not purport to be predictions of future events or circumstances
and may not be realized.
3
<PAGE> 4
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, 1998, the Company operated 34 restaurants, 14 of which
feature Northern Italian cuisine and are operated under the Papa.Razzi trade
name 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'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.
4
<PAGE> 5
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 popularity of Italian food. The Papa.Razzi restaurants have
proven equally suitable for urban and shopping mall locations.
In 1997 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 24.9% of Papa.Razzi revenues in 1997.
AMERICAN-STYLE MENUS, CONCEPTS AND TRADE NAMES
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
trade names, 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 1997, 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 28.7% of American concept revenues in
1997.
5
<PAGE> 6
RESTAURANT LOCATIONS
The following table presents certain information regarding the restaurants
operated by the Company as of March 1, 1998.
<TABLE>
<CAPTION>
APPROX. RESTAURANT
DATE SEATING SIZE (APPROX. LEASE(1)
OPENED LOCATION NAME CAPACITY SQ. FT.) EXPIRATION
Northern Italian Concept
- ------------------------
<S> <C> <C> <C> <C> <C>
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 Joe's American Bar & Grill(3) 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
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
May 1997 Boston, MA Joe's American Bar & Grill 344 7,500 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.
(3) Operated as J.C. Hillary's until November of 1997.
6
<PAGE> 7
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 domestic 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 architect.
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 minimal 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.
7
<PAGE> 8
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
controlling 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 28, 1997, the Company employed approximately 2,700 persons,
approximately 20 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.
8
<PAGE> 9
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 1997, the Company's expenditures for advertising
were less than one percent of its revenues.
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, 1998, the
Company had approximately 20,000 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.
9
<PAGE> 10
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.
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., Rayz Riverside Cafe, and Abe & Louie's 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.
10
<PAGE> 11
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 1997.
11
<PAGE> 12
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, 1998, there were
approximately 58 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 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1st Fiscal Quarter $5.00 $3.50 $4.00 $2.63
2nd Fiscal Quarter 5.50 3.00 5.50 2.88
3rd Fiscal Quarter 4.75 3.25 8.00 4.25
4th Fiscal Quarter 4.13 2.63 8.50 5.50
</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 26, 1993, December 25, 1994, December 31, 1995,
December 29, 1996 and December 28, 1997 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.
12
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 26, DEC. 25, DEC. 31, DEC. 29, DEC. 28,
1993 1994 1995 1996 1997
------- ------- -------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales $74,172 $85,831 $ 93,496 $87,753 $94,904
Costs and expenses:
Cost of sales 20,286 23,230 25,980 24,785 26,401
Payroll and related costs 22,301 27,633 30,102 28,327 30,221
Operating expenses 14,567 18,948 21,440 20,398 22,121
Depreciation and amortization 3,876 4,541 4,891 3,880 4,197
------- ------- -------- ------- -------
Total restaurant operating expenses 61,030 74,352 82,413 77,390 82,940
------- ------- -------- ------- -------
Income from restaurant operations 13,142 11,479 11,083 10,363 11,964
General and administrative expenses 8,532 10,517 15,129 8,874 8,669
------- ------- -------- ------- -------
Operating income/(loss) 4,610 962 (4,046) 1,489 3,295
Interest expense 104 118 795 748 548
Interest income (49) (4) -- -- --
Gain on sale of property (1,202) -- -- -- --
------- ------- -------- ------- -------
Income/(loss) from continuing
operations before income taxes 5,757 848 (4,841) 741 2,747
Income taxes 2,303 347 (2,031) 274 1,016
------- ------- -------- ------- -------
Income/(loss) from continuing 3,454 501 (2,810) 467 1,731
operations
Discontinued operations:
Income from operations of discontinued
division (net of income taxes) 83 -- -- -- --
Estimated loss on disposal of discontinued
division (net of income taxes) (75) -- -- -- --
------- ------- -------- ------- -------
Net income/(loss) $ 3,462 $ 501 $ (2,810) $ 467 $ 1,731
======= ======= ======== ======= =======
Income/(loss) from continuing operations per
share Basic/Diluted $ 0.95 $ 0.14 $ (0.82) $ 0.14 $ 0.50
======= ======= ======== ======= =======
Net income/(loss) per share Basic/Diluted $ 0.95 $ 0.14 $ (0.82) $ 0.14 $ 0.50
======= ======= ======== ======= =======
Average common shares and equivalents
Basic 3,637 3,600 3,430 3,434 3,432
Diluted 3,654 3,623 3,431 3,436 3,474
RESTAURANT OPERATING DATA:
Average sales per restaurant open for full period(1) $ 2,674 $ 2,570 $ 2,595 $ 2,613 $ 2,744
Restaurants open for full period 25 30 33 33 32
Percentage change in comparable restaurant sales(1) 0.6% (3.5%) (2.2%) (0.8%) 0.04%
Total restaurants open at end of period 31 37 33 34 34
BALANCE SHEET DATA (AT YEAR END):
Total assets $38,884 $47,314 $ 46,100 $43,911 $43,072
Long term debt -- 7,600 7,525 6,025 4,000
Current maturities of long term debt 683 542 2,500 1,500 --
Total stockholders' equity 28,831 27,537 24,727 25,202 27,012
</TABLE>
(1) Does not include the 53rd week in the fiscal year ended December 31, 1995.
13
<PAGE> 14
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 31, DECEMBER 29, DECEMBER 28,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 27.8 28.2 27.8
Payroll and related costs 32.2 32.3 31.9
Operating expenses 22.9 23.3 23.3
Depreciation and amortization 5.2 4.4 4.4
----- ----- -----
Total restaurant operating expenses 88.1 88.2 87.4
----- ----- -----
Income from restaurant operations 11.9 11.8 12.6
General and administrative expenses 16.2 10.1 9.1
----- ----- -----
Operating income/(loss) (4.3) 1.7 3.5
Interest expense 0.9 0.9 0.6
----- ----- -----
Income/(loss) before income taxes (5.2) 0.8 2.9
Income taxes (2.2) 0.3 1.1
----- ----- -----
Net income/(loss) (3.0) 0.5 1.8
===== ===== =====
</TABLE>
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<PAGE> 15
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Sales
Sales increased by $7,151,000, or 8.2%, to $94,904,000 in 1997 from
$87,753,000 in 1996. Same store sales increased $31,000, or 0.04%, in the 52
weeks in 1997 as compared to the 52 weeks in 1996.
The overall increase in sales in 1997 as compared with 1996 was primarily
attributable to sales from two new stores opened by the Company in September,
1996 and May, 1997, which contributed $8,057,000. This amount was partially
offset by one store which closed in June 1997. The decrease in sales from the
closed store was approximately $909,000.
The Company operated 34 restaurants at December 28, 1997, and 34
restaurants at December 29, 1996. Total restaurant customer count for 1997
increased 4.6% to 5,307,000 from 5,076,000 in 1996.
Cost of Sales
Cost of sales as a percentage of sales decreased to 27.8% in 1997 from
28.2% in 1996. This decrease was attributable to a 0.3% decrease in food cost as
a percentage of food revenue (29.6% in 1997 versus 29.9% in 1996), and a 0.7%
decrease in beverage cost as a percentage of beverage revenue (23.0% in 1997
versus 23.7% in 1996). The food cost decreases were due principally to price
decreases in olive oil and pasta. The beverage cost decreases were due
principally to modest sales price increases in selected wines.
Payroll and Related Costs
Payroll and related costs as a percentage of sales decreased to 31.9% in
1997 from 32.3% in 1996. Payroll and related costs increased by $1,894,000 in
1997 to $30,221,000 from $28,327,000 in 1996. The increase in dollars is
primarily attributable to the payroll for the two new restaurants referred to
above.
Operating Expenses
Operating expenses increased by $1,723,000 in 1997 to $22,121,000 from
$20,398,000 in 1996. The increase in operating expenses is primarily
attributable to the two new restaurants referred to above. Operating expenses as
a percentage of sales remained constant from year to year at 23.3%.
15
<PAGE> 16
Depreciation and Amortization
Depreciation and amortization increased by $317,000 in 1997 to $4,197,000
from $3,880,000 in 1996. The increase in depreciation and amortization is
principally attributable to the two new restaurants referred to above. 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.
General and Administrative Expenses
General and administrative expenses decreased by $205,000 in 1997 to
$8,669,000 from $8,874,000 in 1996. The decrease is primarily attributable to a
decrease in insurance expense which was partially offset by increases in
salaries and wages and marketing expenses.
Interest Expense
Interest expense decreased by $200,000 in 1997 to $548,000 from $748,000 in
1996. This decrease was attributable to the Company's reduced borrowings in 1997
as compared to 1996.
Income Taxes
Income taxes increased by $742,000 in 1997 to an expense of $1,016,000 from
an expense of $274,000 in 1996. The increased expense in 1997 reflects the
pre-tax income of $2,747,000 in 1997 as compared to the pre-tax income of
$741,000 in 1996. The estimated effective tax rate was 37% for both periods.
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.
16
<PAGE> 17
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 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 under performing 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 under performing 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 under performing 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.
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.
17
<PAGE> 18
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.
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 28, 1997, the Company's cash position was $1,915,000 and
the Company had a net working capital deficit of $7,736,000. 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.
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 1998. The
Company expects to fund any capital expenditures for 1998 from internally
generated cash. The Company believes that cash flow from operations and credit
available under the revolving loan agreement will be sufficient to meet future
needs.
On March 24, 1998, the Company reached an agreement with BankBoston, NA to
amend its loan agreement. Under the amended loan agreement, the Company can
borrow up to $20,000,000 on a three year revolver that thereafter converts to a
4 year term note.
YEAR 2000 DISCLOSURE
Certain of the Company's internal computer systems are not Year 2000 ready
(i.e., such systems use only two digits to represent the year in date data
fields and, consequently, may not accurately distinguish between the 20th and
21st centuries or may not function properly at the turn of the century). The
Company has been taking actions intended to either correct such systems or
replace them with Year 2000 ready systems. The Company expects to implement
successfully the systems and programming changes necessary to address Year 2000
issues and does not believe that the cost of such actions will have a material
effect on the Company's results of operations or financial condition.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
Report of Independent Accountants 20
Consolidated Balance Sheets as of December 29, 1996 and
December 28, 1997 21
Consolidated Statements of Operations for the Years
Ended December 31, 1995, December 29, 1996 and
December 28, 1997 22
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1995,
December 29, 1996 and December 28, 1997 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, December 29, 1996 and December 28, 1997 24
Notes to Consolidated Financial Statements 25
19
<PAGE> 20
COOPERS Coopers & Lybrand L.L.P.
&LYBRAND
a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
To the Back Bay Restaurant Group, Inc. Board of Directors and Stockholders:
We have audited the accompanying consolidated balance sheets of the Back Bay
Restaurant Group, Inc. and subsidiaries as of December 29, 1996 and December
28, 1997, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the three fiscal years in the period ended
December 28, 1997. 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 29, 1996 and
December 28, 1997, and the consolidated results of its operations and cash
flows for each of the three fiscal years in the period ended December 28, 1997
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
Boston, Massachusetts
February 16, 1998, except
as to information presented
in Note 4, for which the date
is March 24, 1998.
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
20
<PAGE> 21
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands)
<TABLE>
<CAPTION>
DECEMBER 29, 1996 DECEMBER 28, 1997
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,344 $ 1,915
Accounts receivable 252 219
Inventories 687 783
Prepaid expenses and other current assets 904 874
Deferred income taxes 169 259
------- -------
Total current assets 3,356 4,050
------- -------
Buildings and improvements 4,303 4,303
Furniture, fixtures and equipment 16,124 18,119
Leasehold improvements 31,965 32,339
Lease rights 2,826 2,826
------- -------
55,218 57,587
Less: accumulated depreciation and amortization 23,436 27,182
------- -------
Net property, plant and equipment 31,782 30,405
------- -------
Other assets:
Goodwill, net of accumulated amortization 5,052 4,884
Trade names and trademarks, net of
accumulated amortization 1,286 1,252
Deferred income taxes 1,698 1,698
Other assets, net of accumulated amortization 737 783
------- -------
Total other assets 8,773 8,617
------- -------
Total assets $43,911 $43,072
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,709 $ 3,333
Accrued expenses 7,750 8,058
Current maturities of long-term debt 1,500 --
Income taxes payable 284 395
------- -------
Total current liabilities 12,243 11,786
------- -------
Deferred rent 441 216
Other long term liability -- 58
Long term debt 6,025 4,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized
20,000 shares; 3,434 shares issued and
outstanding in 1996 and 3,431 in 1997 36 36
Additional paid-in capital 23,039 23,118
Retained earnings 3,926 5,657
------- -------
27,001 28,811
Less treasury stock, 208 shares at cost
in 1996 and 1997 1,799 1,799
------- -------
Total stockholders' equity 25,202 27,012
------- -------
Total liabilities and stockholders' equity $43,911 $43,072
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE> 22
BACK BAY RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
FIFTY-THREE FIFTY-TWO FIFTY-TWO
WEEKS ENDED WEEKS ENDED WEEKS ENDED
DECEMBER 31, 1995 DECEMBER 29, 1996 DECEMBER 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Sales $93,496 $87,753 $94,904
Costs and expenses:
Cost of sales 25,980 24,785 26,401
Payroll and related costs 30,102 28,327 30,221
Operating expenses 21,440 20,398 22,121
Depreciation and amortization 4,891 3,880 4,197
------- ------- -------
Total restaurant operating expenses 82,413 77,390 82,940
------- ------- -------
Income from restaurant operations 11,083 10,363 11,964
General and administrative expenses 15,129 8,874 8,669
------- ------- -------
Operating income/(loss) (4,046) 1,489 3,295
Interest expense 795 748 548
------- ------- -------
Income/(loss) before income taxes (4,841) 741 2,747
Income taxes (2,031) 274 1,016
------- ------- -------
Net income/(loss) $(2,810) $ 467 $ 1,731
======= ------- =======
Net income/(loss) per share Basic/Diluted $ (0.82) $ 0.14 $ 0.50
======= ======= =======
Average common shares and equivalents
Basic 3,430 3,434 3,432
Diluted 3,431 3,436 3,474
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE> 23
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 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
Net income -- -- 1,731 -- 1,731
Exercise of stock option -- 7 -- -- 7
Restricted stock compensation -- (8) -- -- (8)
Deferred stock compensation -- 80 -- -- 80
------- ------- ------- -------- -------
Balance, December 28, 1997 $ 36 $23,118 $ 5,657 $ (1,799) $27,012
======= ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE> 24
BACK BAY RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 29, DECEMBER 28,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $(2,810) $ 467 $ 1,731
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,916 3,966 4,293
Loss on disposal of fixed assets 2,919 -- --
Loss on equity investment 44 473 --
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (135) 103 33
(Increase)/decrease in inventories 21 2 (96)
(Increase)/decrease in prepaid expenses and other
current assets 259 (371) (265)
Decrease in prepaid income taxes 204 13 --
(Increase)/decrease in other assets 52 22 (87)
(Increase)/decrease in accounts payable and accrued expense 1,664 (404) 1,059
Increase in income taxes payable -- 284 111
Decrease in deferred rent (44) (44) (225)
Increase in other long term liability -- -- 58
(Increase)/decrease in deferred taxes (2,125) 282 (90)
------- ------- -------
Net cash provided by operating activities 4,965 4,793 6,522
------- ------- -------
Cash flows from investing activities:
Investment in partnership (360) (157) --
Capital expenditures (3,304) (3,843) (3,887)
Acquisition of other assets -- (275) --
Proceeds from sale of fixed assets 5 -- 1,382
------- ------- -------
Net cash used for investing activities (3,659) (4,275) (2,505)
------- ------- -------
Cash flows from financing activities:
Proceeds from debt 1,925 300 --
Principal payments of debt (42) (2,800) (3,525)
Cancellation of stock option -- -- (8)
Cancellation of deferred stock compensation -- -- 80
Exercise of stock option -- -- 7
------- ------- -------
Net cash provided by (used for) financing activities 1,883 (2,500) (3,446)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 3,189 (1,982) 571
Cash and cash equivalents at beginning of period 137 3,326 1,344
------- ------- -------
Cash and cash equivalents at end of period $ 3,326 $ 1,344 $ 1,915
======= ======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 766 $ 823 $ 584
======= ======= =======
Income taxes paid $ 761 $ 315 $ 1,032
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE> 25
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, 1998, the
Company operated 34 restaurants, 14 of which feature Northern Italian cuisine
and are operated under the Papa.Razzi trade name 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 53 weeks in 1995, 52 weeks in 1996 and 52 weeks in 1997.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Back Bay
Restaurant Group, Inc. and its wholly owned subsidiaries. All inter-company
balances and transactions have been eliminated. Investments in non-consolidated
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.
25
<PAGE> 26
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
PRE-OPENING COSTS
Pre-opening 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 $23,000 in 1995, $23,000 in 1996 and $0 in 1997.
INTANGIBLE ASSETS
Intangible assets, including goodwill, trade names and trademarks are
stated at cost and are amortized over 40 years on a straight-line basis.
Accumulated amortization was approximately $2,079,000 and $2,291,000 as of
December 29, 1996 and December 28, 1997, 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.
26
<PAGE> 27
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income", which is effective for fiscal years beginning after December 15, 1997,
including interim periods. SFAS 130 requires the presentation of comprehensive
income and its components. Comprehensive income presents a measure of all
changes in equity that result from recognized transactions and other economic
events of the period other than transactions with owners. SFAS 130 requires
restatement of all prior-period statements presented after the effective date.
The Company will adopt SFAS 130 in its fiscal year ended December 31, 1998 and
has not yet determined the impact of such adoption.
In July 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information" which is effective for fiscal
years beginning after December 15, 1997. The interim reporting disclosures are
not required in the first year of adoption. SFAS 131 specifies revised
guidelines for determining an entity's operating segments and the type and level
of financial information to be disclosed. SFAS 131 changes current practice
under SFAS 14 by establishing a new framework on which to base segment
reporting. The "management" approach expands the required disclosures for each
segment. The Company will adopt SFAS 131 in its fiscal year ended December 31,
1998 and has not yet determined the impact of such adoption.
27
<PAGE> 28
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 COMMON SHARE
In 1997 the Company adopted FAS 128 where basic net income (loss) per
common share is calculated by dividing the net income (loss) for the period by
the weighted average number of common shares outstanding for the period. Diluted
earnings per common share is calculated by considering the impact of common
stock equivalents (outstanding stock options) as if they were converted into
common stock at the beginning of the period. Diluted earnings per share amounts
are not applicable for loss periods.
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 29, 1996 December 28, 1997
----------------- -----------------
<S> <C> <C>
Preopening costs $147 $73
Prepaid insurance 57 25
Prepaid rent 552 548
Other 148 228
---- ----
Total $904 $874
==== ====
</TABLE>
28
<PAGE> 29
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 29, 1996 December 28, 1997
----------------- -----------------
<S> <C> <C>
Payroll and payroll taxes $1,701 $1,889
Rent expense 1,917 2,275
Reserve for store closings 1,245 771
Insurance 1,379 1,204
Other 1,508 1,919
------ ------
Total accrued expenses $7,750 $8,058
====== ======
</TABLE>
4. LONG-TERM DEBT (in thousands)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 29, 1996 December 28, 1997
----------------- -----------------
<S> <C> <C>
Revolving Credit and Term Loan Agreement base
rate or, at the option of the Company, LIBOR
plus 1.0% (9.0 % at December 28, 1997) 7,525 4,000
Less: current maturities 1,500 --
------ ------
Total long-term debt $6,025 $4,000
====== ======
</TABLE>
29
<PAGE> 30
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has a revolving credit and term loan agreement (the "Loan
Agreement") with BankBoston (the "Bank"). At December 28, 1997, the Company had
an outstanding balance of $4,000,000 under the Loan Agreement. On March 24,
1998, the Company reached an agreement with the Bank to amend its Loan
Agreement. Under the amended Loan Agreement, the Company can borrow up to
$20,000,000 on a three year revolver that converts to a 4 year term note. The
pricing of the loan is on a sliding scale based on a ratio of senior debt to
EBITDA. The Company's obligation under the Loan Agreement is collateralized by
certain property, plant and equipment and intangible assets. 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 the total debt service
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 29, 1998, to maintain a ratio of consolidated cash available to pay
fixed charges to consolidated fixed charges of not less than 1.50 to 1.
30
<PAGE> 31
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 31, 1995, December
29, 1996 and December 28, 1997 was approximately $6,139,000, $5,518,000 and
$6,083,000 respectively (including approximately $727,000, $734,000 and $855,000
in 1995, 1996 and 1997 respectively, attributable to percentage rent in excess
of base amounts).
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 28, 1997
are as follows:
<TABLE>
<CAPTION>
Years Amount
----- ------
<S> <C>
1998 $ 5,084,000
1999 5,136,000
2000 4,916,000
2001 4,759,000
2002 4,631,000
Thereafter 26,957,000
-----------
$51,483,000
===========
</TABLE>
31
<PAGE> 32
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.
6. INCOME TAXES
The following is a comparative analysis of the provisions for income taxes:
<TABLE>
<CAPTION>
December 31, 1995 December 29, 1996 December 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Income/(loss) before income taxes $(4,841,000) $741,000 $2,747,000
=========== ======== ==========
Provision/(benefit) for income taxes
Federal (1,967,000) 183,000 701,000
State (64,000) 91,000 315,000
----------- -------- ----------
Income tax provision/(benefit) $(2,031,000) $274,000 $1,016,000
=========== ======== ==========
Components of the provision/benefit
Current
Federal $ 123,000 $177,000 $686,000
State 217,000 124,000 421,000
----------- -------- ----------
94,000 301,000 1,107,000
Deferred
Federal (1,844,000) 6,000 15,000
State (281,000) (33,000) (106,000)
----------- -------- ----------
(2,125,000) (27,000) (91,000)
----------- -------- ----------
Total $(2,031,000) $274,000 $1,016,000
=========== ======== ==========
</TABLE>
32
<PAGE> 33
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 31, 1995 DECEMBER 29, 1996 DECEMBER 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
Pre-opening costs $ 276,000 $ 129,000 $ 134,000
Deferred rentals 195,000 177,000 87,000
Reserves and accruals 1,602,000 1,234,000 1,060,000
Step-rents 427,000 520,000 820,000
Credit carryforwards 472,000 358,000 --
State net operating loss carryforwards 313,000 435,000 566,000
Other 11,000 32,000 --
Fixed assets
-- -- 403,000
---------- ---------- ----------
GROSS DEFERRED TAX ASSETS $3,296,000 $2,885,000 $3,070,000
---------- ---------- ----------
LIABILITIES
Fixed assets $ 551,000 $ 13,000 --
Intangibles 593,000 570,000 547,000
---------- ---------- ----------
GROSS DEFERRED TAX LIABILITIES $1,144,000 $ 583,000 $ 547,000
---------- ---------- ----------
NET (LIABILITY)/ASSET BEFORE VALUATION $2,152,000 $2,302,000 $2,523,000
ALLOWANCE
Valuation allowance (313,000) (435,000) (566,000)
---------- ---------- ----------
Adjusted net (liability)/asset $1,839,000 $1,867,000 $1,957,000
========== ========== ==========
</TABLE>
The state net operating losses expire between 1999 and 2012.
The valuation allowance is provided against state net operating loss
carry-forwards, the realization of which are uncertain due to state separate
entity limitations and short carry-forward periods.
33
<PAGE> 34
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. 31, 1995 DEC. 29, 1996 DEC. 28, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Statutory federal rate (34.0%) 34.0% 34.0%
State income taxes, net of federal benefit (0.9) 8.1 7.6
Non-deductible goodwill amortization 1.2 7.7 2.1
Wage based tax credits (8.2) (12.8) (7.3)
Other -- -- 0.6
----- ----- ----
(41.9%) 37.0% 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 was
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 28, 1997 the Company has granted options for 576,832 shares of common
stock at prices of $2.88 to $18.00 per share. At December 28, 1997, there were
35,700 options outstanding that are vested. At December 28, 1997, 151,091 shares
were available for future option grants.
34
<PAGE> 35
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the Company's stock option activity as of December 28, 1997,
December 29, 1996 and December 31, 1995 is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
------------------- -------------------- --------------------
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 471,521 $14.27 447,056 $8.67 459,615 $7.87
Granted at fair market value 208,188 7.07 106,764 4.13 530,337 4.17
Granted below fair market value 129,300 7.18 -- -- -- --
Exercised -- -- -- -- (1,811) 4.25
Canceled (361,953) 14.52 (94,205) 7.27 (411,309) 8.15
-------- ------- --------
Outstanding at end of year 447,056 8.67 459,615 7.87 576,832 4.28
======== ======= =======
Options exercisable at year-end 427,106 8.84 355,201 8.97 35,700 6.21
======== ======= =======
Options available for future grant 282,678 270,119 151,091
======== ======= =======
Weighted average fair value of options
granted during the year $ 4.11 $2.32 $2.07
====== ===== =====
</TABLE>
35
<PAGE> 36
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The fair value of each option granted during 1997 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 5.77% to 6.85% and (4) expected life of 5.0
years.
The following table summarizes information about stock options
outstanding at December 28, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ---------------------------
Number Wgtd. Ave. Wgtd. Ave. Number Wgtd. Ave.
Outstanding Remaining Exercise Exercisable Exercise
Range of Exercise Prices at 12/28/97 Contr. Life Price at 12/28/97 Price
- ------------------------ ----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
$ 2.5000 - $ 6.0000 554,569 9.3 $4.1018 21,437 $3.9802
$ 6.0100 - $10.0000 18,863 8.3 $7.6300 10,863 $7.7873
$10.0100 - $14.0000 400 5.3 $12.5000 400 $12.5000
$14.0100 - $18.0000 3,000 5.6 $15.6166 3,000 $15.6166
------- --- ------- ------ -------
576,832 9.2 $4.2829 35,700 $6.2120
======= === ======= ====== =======
</TABLE>
Had compensation cost for the Company's 1997 grants under the Plan been
determined consistent with SFAS 123, the Company's compensation expense would
have increased by $242,000, $63,000 and $1,246,000, respectively for 1997, 1996
and 1995. The Company's net income, net income applicable to common share
owners, and net income per common share for 1997 would approximate the pro forma
amounts below (in thousands except per share data):
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
1997 1996 1995 1997 1996 1995
------ ----- ------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net income/(loss) $1,731 $ 467 $(2,810) $1,578 $ 427 $(3,534)
Net income/(loss) applicable to common
share owners $1,731 $ 467 $(2,810) $1,578 $ 427 $(3,534)
Net income/(loss) per share $ 0.50 $0.14 $ (0.82) $ 0.45 $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.
36
<PAGE> 37
BACK BAY RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. FASB 128 EARNINGS PER SHARE
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
DECEMBER 28, 1997 DECEMBER 29, 1996 DECEMBER 31, 1995
------------------------ ------------------------ -------------------------
Per Per Per
Income Shares Share Income Shares Share Income Shares Shares
------ ------ ----- ------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
common stockholders $1,731 3,432 $0.50 $467 3,434 $0.14 $(2,810) 3,430 $(0.82)
Effect of Diluted Securities
Stock options -- 42 -- -- 2 -- -- 1 --
Diluted EPS $1,731 3,474 $0.50 $467 3,436 $0.14 $(2,810) 3,431 $(0.82)
</TABLE>
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 under-performing 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.
At December 29, 1996 the Company had settled its lease obligations for
two of the three stores that closed in 1995 at terms more favorable than
originally estimated and had 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. During 1997 the Company closed another location and sold
one undeveloped restaurant site. The net asset value of both these locations
were offset against the accrual. Included in the charges for 1997 were cash
payments of approximately $312,000 to settle lease obligations. The Company has
added to the plan a provision for the conversion of a location to a different
concept. As of December 28, 1997 the remaining accrual is $771,000, which
management believes is adequate to complete the plan by the end of fiscal 1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
37
<PAGE> 38
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 1998
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 1998
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 1998 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 1998
Annual Meeting under the caption "Transactions with Management and Affiliates"
is incorporated herein by reference.
38
<PAGE> 39
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 certain executives.
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
39
<PAGE> 40
21 List of Subsidiaries of the Company
23 Consent of Coopers & Lybrand to the incorporation of its
report 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.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 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 15, 1998
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.
SIGNATURE TITLE DATE
/s/ Charles F. Sarkis Chairman of the Board of March 15, 1998
- -------------------------- Directors, President and
Charles F. Sarkis Chief Executive Officer
/s/ Francis P. Bissaillon Director, Executive Vice March 15, 1998
- -------------------------- President, Chief Financial
Francis P. Bissaillon Officer and Secretary
/s/ Robert J. Ciampa Vice President, Chief March 15, 1998
- -------------------------- Accounting Officer and
Robert J. Ciampa Treasurer
/s/ Joseph M. Cassin Director March 15, 1998
- --------------------------
Joseph M. Cassin
/s/ Irwin Chafetz Director March 15, 1998
- --------------------------
Irwin Chafetz
/s/ Richard P. Dalton Director March 15, 1998
- --------------------------
Richard P. Dalton
/s/ Richard K. Howe Director March 15, 1998
- --------------------------
Richard K. Howe
/s/ Robert S. Parker Director March 15, 1998
- --------------------------
Robert S. Parker
<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 RESTAURNT, INC.
THE WESTWOOD HARTFORD RESTAURANT GROUP, INC.
THE WESTWOOD NEWTON RESTAURANT GROUP, INC.
THE WESTWOOD SHORT HILLS RESTAURNT GROUP, 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 16, 1998, except
as to the information presented in Note 4 for which the date is March 24, 1998,
on our audits of the consolidated financial statements of Back Bay Restaurant
Group, Inc. as of December 18, 1997, which report is included in this Annual
Report on Form 10-K.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 24, 1998
<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 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FILING.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1997
<PERIOD-END> DEC-28-1997
<EXCHANGE-RATE> 1
<CASH> 1,915,000
<SECURITIES> 0
<RECEIVABLES> 219,000
<ALLOWANCES> 0
<INVENTORY> 783,000
<CURRENT-ASSETS> 4,050,000
<PP&E> 57,587,000
<DEPRECIATION> 27,182,000
<TOTAL-ASSETS> 43,072,000
<CURRENT-LIABILITIES> 11,786,000
<BONDS> 4,274,000
0
0
<COMMON> 3,431,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 43,072,000
<SALES> 94,904,000
<TOTAL-REVENUES> 94,904,000
<CGS> 26,401,000
<TOTAL-COSTS> 82,940,000
<OTHER-EXPENSES> 8,669,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 548,000
<INCOME-PRETAX> 2,747,000
<INCOME-TAX> 1,016,000
<INCOME-CONTINUING> 1,731,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,731,000
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
