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Previous: TOCQUEVILLE ASSET MANAGEMENT LP, 13F-HR, 2000-11-15 |
Next: RARE HOSPITALITY INTERNATIONAL INC, 10-Q, EX-27, 2000-11-15 |
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.
As of November 10, 2000, there were 18,653,613 shares of common stock of the Registrant outstanding.
Part I - Financial Information Page
----
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of
October 1, 2000 and December 26, 1999 1
Consolidated Statements of Earnings
for the Quarter and the Nine Months Ended
October 1, 2000 and September 26, 1999 2
Consolidated Statement of Shareholders' Equity
for the Nine Months Ended October 1, 2000 3
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended October 1, 2000
and September 26, 1999 4
Notes to the Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Securities
Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
October 1, December 26,
Assets 2000 1999
---- ----
Current assets:
Cash and cash equivalents $ 2,996 $ 8,864
Accounts receivable 5,195 3,047
Inventories 10,516 10,213
Prepaid expenses 700 815
Refundable income taxes 4,920 2,568
Deferred income taxes 7,541 8,179
-------- --------
Total current assets 31,868 33,686
Property & equipment, less accumulated
depreciation 210,147 187,281
Goodwill, less accumulated amortization 20,540 13,185
Deferred income taxes 230 -
Other 2,348 2,966
-------- --------
Total assets $265,133 $237,118
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 15,059 $ 17,870
Accrued expenses 29,318 26,847
-------- --------
Total current liabilities 44,377 44,717
Debt, net of current installments 51,200 40,000
Deferred income taxes - 1,103
Obligations under capital leases 9,732 9,732
-------- --------
Total liabilities 105,309 95,552
Minority interest 1,470 3,982
Shareholders' equity:
Preferred stock - -
Common stock 122,132 110,258
Unearned compensation-restricted stock (330) (376)
Retained earnings 46,303 29,589
Treasury stock at cost; 870,750
shares in 2000 and 216,750 shares
in 1999 (9,751) (1,887)
-------- --------
Total shareholders' equity 158,354 137,584
-------- --------
Total liabilities and shareholders'
equity $265,133 $237,118
======== ========
See accompanying notes to consolidated financial statements
Quarter Ended Nine Months Ended
------------- -----------------
Revenues: Oct. 1, Sept. 26, Oct. 1, Sept. 26,
2000 1999 2000 1999
---- ---- ---- ----
Restaurant sales:
LongHorn Steakhouse $ 79,716 $ 65,089 $242,865 $192,556
The Capital Grille 14,866 12,917 47,184 41,278
Bugaboo Creek 15,904 15,277 47,578 42,355
Specialty concepts 1,958 1,871 5,651 5,256
-------- -------- -------- --------
Total restaurant sales 112,444 95,154 343,278 281,445
Franchise revenues 92 45 289 124
-------- -------- -------- --------
Total revenues 112,536 95,199 343,567 281,569
Costs and expenses: -------- -------- -------- --------
Cost of restaurant sales 40,533 34,624 123,043 101,394
Operating expenses - restaurants 50,464 43,719 151,478 126,868
Depreciation and amortization - restaurants 4,292 3,846 12,655 11,203
Pre-opening expense - restaurants 1,015 699 2,854 2,160
Provision for litigation settlement - - 1,000 -
General and administrative expenses 7,786 6,432 23,246 19,291
-------- -------- -------- --------
Total costs and expenses 104,090 89,320 314,276 260,916
-------- -------- -------- --------
Operating income 8,446 5,879 29,291 20,653
Interest expense, net 1,016 870 3,063 2,832
Minority interest 122 291 1,259 1,194
Earnings before income taxes and -------- -------- -------- --------
cumulative effect of change in
accounting principle 7,308 4,718 24,969 16,627
Income tax expense 2,405 1,560 8,255 5,485
Earnings before cumulative effect of -------- -------- -------- --------
change in accounting principle 4,903 3,158 16,714 11,142
Cumulative effect of change in accounting
principle net of tax benefit - - - 1,587
-------- -------- -------- --------
Net earnings $ 4,903 $ 3,158 $ 16,714 $ 9,555
Basic earnings per common share: ======== ======== ======== ========
Basic earnings before cumulative effect
of change in accounting principle $ 0.26 $ 0.17 $ 0.92 $ 0.62
Cumulative effect of change in
accounting principle - - - (0.09)
-------- -------- -------- --------
Basic earnings per common share $ 0.26 $ 0.17 $ 0.92 $ 0.53
Diluted earnings per common share: ======== ======== ======== ========
Diluted earnings before cumulative
effect of change in accounting principle $ 0.25 $ 0.17 $ 0.87 $ 0.59
Cumulative effect of change in accounting
principle - - - (0.08)
-------- -------- -------- --------
Diluted earnings per common share $ 0.25 $ 0.17 $ 0.87 $ 0.51
======== ======== ======== ========
See accompanying notes to consolidated financial statements
Unearned
Compensation Total
Common Stock Restricted Retained Treasury Shareholders'
Shares Amount Stock Earnings Stock Equity
------ ------ ----- -------- ----- ------
Balance, December 26, 1999 18,576 $110,258 $(376) $29,589 $(1,887) $137,584
Net earnings - - - 16,714 - 16,714
Issuance of shares pursuant
to exercise of stock options 523 4,973 - - - 4,973
Purchase of common stock - - - - (7,864) (7,864)
Issuance of shares in
connection with purchase
of minority interest 356 6,827 - - - 6,827
Issuance of shares pursuant
to restricted stock awards 4 74 (74) - - -
Amortization of restricted
stock - - 120 - - 120
------ -------- ------ ------- -------- --------
Balance, October 1, 2000 19,459 $122,132 $(330) $46,303 $(9,751) $158,354
====== ======== ====== ======= ======== ========
See accompanying notes to consolidated financial statements
Nine Months Ended
-----------------
October 1, September 26,
2000 1999
---- ----
Cash Flows from operating activities:
Net earnings $ 16,714 $ 9,555
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 14,278 12,255
Changes in working capital accounts (5,175) (4,343)
Cumulative change in accounting principle - 1,587
Minority interest 1,259 1,194
Deferred tax(benefit) expense (695) (1,587)
-------- --------
Net cash provided by operating activities 26,381 18,661
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (36,242) (24,892)
Asset acquisitions (3,742) (191)
-------- --------
Net cash used by investing activities (39,984) (25,083)
-------- --------
Cash flows from financing activities:
Proceeds from (repayments of) credit facilities 11,200 (8,000)
Proceeds from minority partners' contributions 92 1,689
Distributions to minority partners (1,144) (1,896)
Increase in bank overdraft included in accounts
payable 478 5,054
Purchase of common stock for treasury (7,864) (1,139)
Principal payments on capital leases -- (26)
Proceeds from exercise of stock options 4,973 1,924
-------- --------
Net cash provided by (used in) financing
activities 7,735 (2,394)
-------- --------
Net decrease in cash and cash equivalents (5,868) (8,816)
Cash and cash equivalents, beginning of period 8,864 12,060
-------- --------
Cash and cash equivalents, end of period $ 2,996 $ 3,244
======== ========
See accompanying notes to consolidated financial statements
The consolidated financial statements of RARE Hospitality International, Inc. and subsidiaries (the “Company”) as of October 1, 2000 and December 26, 1999 and for the quarters and nine months ended October 1, 2000 and September 26, 1999 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 26, 1999.
The Company’s fiscal year is a 52- or 53-week year ending on the last Sunday in each calendar year. Each of the four fiscal quarters is typically made up of 13 weeks; however, since fiscal 2000 will be a 53-week period, the first quarter of 2000 contained 14 operating weeks.
In March 2000, an ongoing legal dispute with a former joint venture partner was resolved by an arbitrator, resulting in a judgment against the Company in the amount of $2.0 million. The Company’s consolidated statement of earnings for the first quarter of 2000 reflected a nonrecurring charge of $1.0 million ($670,000 net of income taxes) for amounts not previously reserved for this dispute.
Income tax expense for the nine months ended October 1, 2000 has been provided for based on the estimated effective tax rate then currently expected to be applicable for the full 2000 fiscal year. The effective income tax rate of 32.9% for the quarter ended October 1, 2000 differs from applying the statutory federal income tax rate of 35% to pre-tax earnings primarily due to employee FICA tip tax credits (a reduction in income tax expense) and work opportunity tax credits partially offset by state income taxes.
At October 1, 2000, $51.2 million was outstanding under the Company’s $100 million revolving credit agreement at a weighted average interest rate of 7.95%. Under an interest rate swap agreement, the interest rate on $35.0 million of the amount outstanding under the revolving credit facility is effectively fixed at 6.1%, plus a margin of 1.25% to 2.0% (depending on the Company’s leverage ratio). The margin on October 1, 2000 was 1.25%; however, the margin is expected to be 1.5% during the fourth quarter of 2000.
The Company effected a three-for-two stock split in the form of a 50% stock dividend paid on September 5, 2000 to shareholders of record on August 15, 2000. All references to the number of common shares and common share amounts have been restated to give retroactive effect to the stock split for all periods presented.
Basic earnings per common share equals net earnings divided by the weighted average number of common shares outstanding and does not include the dilutive effect of stock options or restricted stock. Diluted earnings per common share equals net earnings divided by the weighted average number of common shares outstanding, after giving effect to dilutive stock options and restricted stock. A reconciliation between basic and diluted weighted average shares outstanding and the related earnings per share calculation is presented below (in thousands, except per share amounts):
13 Weeks 13 Weeks 40 Weeks 39 Weeks
Ended Ended Ended Ended
Oct. 1, Sept. 26, Oct. 1, Sept. 26,
2000 1999 2000 1999
---- ---- ---- ----
Basic weighted average shares outstanding 18,504 18,074 18,167 17,976
Dilutive effect of stock options 1,243 927 1,027 725
Dilutive effect of restricted stock 59 41 56 37
------- ------- ------- -------
Diluted weighted average shares outstanding 19,806 19,042 19,250 18,738
======= ======= ======= =======
Earnings before cumulative effect of change
in accounting principle $ 4,903 $ 3,158 $16,714 $ 11,142
Cumulative effect of change in accounting
principle - - - (1,587)
------- ------- ------- -------
Net earnings $ 4,903 $ 3,158 $16,714 $ 9,555
======= ======= ======= =======
Basic earnings per common share:
Basic earnings before cumulative effect
of change in accounting principle $ 0.26 $ 0.17 $ 0.92 $ 0.62
Cumulative effect of change in accounting
principle - - - (0.09)
------- ------- ------- -------
Basic earnings per common share $ 0.26 $ 0.17 $ 0.92 $ 0.53
======= ======= ======= =======
Diluted earnings per common share:
Diluted earnings before cumulative effect
of change in accounting principle $ 0.25 $ 0.17 $ 0.87 $ 0.59
Cumulative effect of change in accounting
principle - - - (0.08)
------- ------- ------- -------
Diluted earnings per common share $ 0.25 $ 0.17 $ 0.87 $ 0.51
======= ======= ======= =======
For the quarters and nine months ended October 1, 2000 and September 26, 1999, there was no difference between the Company’s net earnings and comprehensive income.
In February 2000, the Company’s Board of Directors authorized the Company to purchase up to $10.0 million of its common stock, through open market transactions, block purchases, or in privately negotiated transactions. In April 2000, the Company’s Board of Directors further increased the dollar amount of the Company’s common stock authorized to be repurchased from $10.0 million to $25.0 million. During the first nine months ended October 1, 2000, the Company purchased an aggregate 654,000 shares of its common stock for a total purchase price of $7,864,000(average price of $12.02 per share).
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for the Company beginning in the first quarter of fiscal year 2001. The Company believes that the adoption of the Statements will not have a material effect on its financial statements, based on current activities.
In July 2000, the Company acquired the ownership interest of its partners in two joint ventures. The first partner, located in the Tampa, Florida market, had an ownership interest of approximately 10% in five LongHorn Steakhouse restaurants. The interest was purchased for an aggregate price of approximately $1.2 million, comprised of $312,500 in cash and 48,492 shares of Company common stock. Two partners, located in the North Carolina market, had an approximate one-third ownership interest in 14 LongHorn Steakhouse restaurants. Their interests were purchased for an aggregate price of approximately $9.0 million, comprised of $3.0 million in cash and 307,035 shares of Company common stock. Both of these transactions were accounted for under the purchase method of accounting.
In October 2000, the Company entered into an interest rate swap agreement with a commercial bank, which effectively fixes the interest rate at 6.52%, plus a margin of 1.25% to 2.0% (depending on the Company’s leverage ratio) on $15.0 million of the Company’s borrowings through May 2001, increasing to $25.0 million through March 2003, and increasing to $50.0 million through October 2003. When combined with the Company’s existing interest rate swap agreement, the interest rate on $50.0 million of the Company’s borrowings has effectively been fixed at 6.226%, plus the margin, through May 2001; 6.31%, plus the margin, through March 2003; and 6.52%, plus the margin, through October 2003. The margin on October 1, 2000 was 1.25%; however, the margin is expected to be 1.5% during the fourth quarter of 2000.
The Company currently derives all of its revenues from restaurant sales and franchise revenues. Total revenues increased 18.2% and 22.0% for the quarter and nine months ended October 1, 2000, respectively, as compared to the same periods of the prior fiscal year.
The Company’s fiscal year is a 52- or 53-week year ending on the last Sunday in each calendar year. Each of the four quarters is typically made up of 13 weeks; however, since fiscal 2000 will be a 53-week period, the first quarter of 2000 contained 14 weeks. This additional week had a favorable effect on the Company’s revenue comparisons and operating results for the first nine months of 2000.
Same store sales comparisons for each of the Company’s restaurant concepts for the quarter ended October 1, 2000, consist of sales at restaurants opened prior to December 28, 1998.
Sales in the LongHorn Steakhouse restaurants for the quarter and nine months ended October 1, 2000, increased 22.5% and 26.1%, respectively, as compared to the same periods of the prior fiscal year. The increases reflect a 15.5% and 17.8% increase in restaurant operating weeks in the quarter and nine months ended October 1, 2000, respectively, as compared to the same periods of the prior fiscal year, resulting primarily from an increase in the restaurant base from 114 LongHorn Steakhouse restaurants at the end of the third quarter of 1999 to 133 at the end of the third quarter of 2000. Total operating weeks for the nine months ended October 1, 2000 were positively affected by the additional week in the first quarter 2000 14-week operating period as compared to 13-weeks in the first quarter of 1999. Average weekly sales for all LongHorn Steakhouse restaurants in the third quarter of 2000 was $47,169, a 6.0% increase over the comparable period in 1999. Same store sales for the comparable LongHorn Steakhouse restaurants increased 4.9% in the third quarter of 2000 as compared to the same period in 1999, primarily due to an increase in customer counts.
Sales in The Capital Grille restaurants increased 15.1% and 14.3% for the third quarter and nine months ended October 1, 2000, compared to the same periods in 1999. There were 11 The Capital Grille restaurants open during all of periods presented; however total operating weeks for the nine months ended October 1, 2000 were positively affected by the additional week in the first quarter 2000 14-week operating period. Average weekly sales for all The Capital Grille restaurants in the third quarter of 2000 was $103,959, a 15.1% increase from the comparable period in 1999. Same store sales for the comparable The Capital Grille restaurants increased 11.8% in the third quarter of 2000, as compared to the same period in 1999, primarily due to an increase in customer counts.
Sales in the Bugaboo Creek restaurants for the quarter and nine months ended October 1, 2000 increased 4.1% and 12.3%, respectively, as compared to the same periods of the prior year. The increases reflect a 3.5% and 7.8% increase in restaurant weeks in the quarter and nine months ended October 1, 2000, respectively, compared to the same periods of the prior year, resulting primarily from an increase in the restaurant base from 17 Bugaboo Creek restaurants at September 26, 1999 to 18 restaurants at the end of the third quarter 2000. Total operating weeks for the nine months ended October 1, 2000 were positively affected by the additional week in the first quarter 2000 14-week operating period. Average weekly sales for all Bugaboo Creek restaurants in the third quarter of 2000 was $67,967, a 0.5% increase from the comparable period for 1999. Same store sales for the comparable Bugaboo Creek restaurants in the third quarter of 2000 increased 1.1% as compared to the same period in 1999, primarily due to an increase in customer counts.
Franchise revenues increased to $92,000 and $289,000 for the quarter and nine months ended October 1, 2000, respectively, as compared to $45,000 and $124,000 for the quarter and nine months ended September 26, 1999, respectively. These increases were primarily the result of the opening of franchised LongHorn Steakhouse restaurants in September 1999 and February 2000.
Cost of restaurant sales as a percentage of restaurant sales decreased to 36.0% from 36.4% for the third quarter of 2000 and decreased to 35.8% from 36.0% for the nine months ended October 1, 2000, as compared to the respective periods in 1999. The decreases for the periods ended October 1, 2000 were due to more favorable pricing on products utilized by the Company.
Restaurant operating expense as a percentage of restaurant sales decreased to 44.9% from 45.9% for the third quarter of 2000 and to 44.1% from 45.1% for the first nine months of 2000 as compared to the respective periods in 1999. The decrease in restaurant operating expense as a percent of sales was due to higher aggregate and average unit sales levels and the corresponding leverage of fixed and semi-fixed expenses, as well as lower promotional and advertising expenses, particularly at the Bugaboo Creek concept, along with lower credit card fees and insurance expense.
Restaurant depreciation and amortization decreased as a percentage of restaurant sales compared to the corresponding periods of the prior year due to an increase in average unit sales providing greater leverage of this fixed expense.
In March 2000, an ongoing legal dispute with a former joint venture partner was resolved by an arbitrator, resulting in a judgment against the Company in the amount of $2.0 million. Accordingly, the Company recognized a nonrecurring charge of $1.0 million ($670,000 net of income taxes) in the first quarter of 2000, for amounts not previously reserved for this dispute.
Pre-opening expense for the third quarter 2000 was $1,015,000 relating to the six LongHorn restaurants opened during the quarter, as well as incurred expenses relating to restaurants that had not yet opened as of the end of the quarter.
General and administrative expenses as a percentage of total revenues increased to 6.9% from 6.8% for the third quarter of 2000 and decreased to 6.8% from 6.9% for the nine months ending October 1, 2000 as compared to the respective periods for 1999. The increase for the third quarter of 2000, as compared to the same period of the prior year, was primarily due to higher goodwill amortization resulting from the purchase in July 2000 of the ownership interest of joint venture partners in the Tampa, Florida and North Carolina markets, as well as the increased goodwill amortization resulting from the purchase of the joint venture interest in South Florida in September 1999. The decrease for the nine months ended October 1, 2000, was principally due to greater leverage of fixed and semi-fixed general and administrative expenses partially offset by the increase in goodwill amortization.
As a result of the relationships between revenues and expenses discussed above, the Company’s operating income increased to $8.4 million for the third quarter of 2000 from $5.9 million for the corresponding period of the prior year.
Interest expense, net increased to approximately $1.0 million in the third quarter of 2000 from $870,000 for the corresponding period of the prior year primarily due to higher average borrowings under the Company’s revolving credit facility and the amortization of loan costs associated with the amendment of the credit facility in October 1999.
Minority interest expense decreased to $122,000 for the third quarter of 2000 from $291,000 for the same period of the prior year primarily due to the July 2000 and September 1999 purchase of joint venture partnership interests eliminating the minority interest charge relating to these restaurants. The decrease in minority interest was partially offset by improved operating results at the remaining joint venture owned LongHorn Steakhouse restaurants.
Income tax expense for the third quarter of 2000 was 32.9% of earnings before income taxes bringing the Company’s effective tax rate for the first nine months of 2000 to 33.1%. This compares to 33.1% of earnings before income taxes and cumulative effect of change in accounting principle for the third quarter of 1999 and 33.0% for the first nine months of 1999. The Company’s effective income tax rate differs from applying the statutory federal income tax rate of 35% to pre-tax income, primarily due to employee FICA tip tax credits and work opportunity tax credits partially offset by state income taxes.
Net earnings increased to $4.9 million for the third quarter of 2000 from net earnings of $3.2 million for the third quarter of 1999, reflecting the net effect of the items discussed above.
The Company requires capital primarily for the development of new restaurants, selected acquisitions and the remodeling of existing restaurants. During the first nine months of 2000 the Company’s principal sources of working capital were cash provided by operating activities ($26.4 million), proceeds from the exercise of employee stock options ($4.9 million), and borrowing under the Company’s revolving credit facility ($11.2 million). For the nine months ended October 1, 2000 the principal uses of working capital were capital expenditures ($36.2 million) for new and improved facilities and the purchase of Company common stock for treasury ($7.9 million). As of October 1, 2000 the Company had $51.2 million outstanding under the Company’s $100 million revolving credit facility.
The Company intends to open 17 Company-owned LongHorn Steakhouse restaurants, one The Capital Grille restaurant and one Bugaboo Creek restaurant in fiscal year 2000. The Company estimates that its capital expenditures for fiscal year 2000 will be approximately $45-50 million. During the first nine months of 2000, the Company opened 15 LongHorn Steakhouse restaurants, and as of November 10, 2000, has opened two LongHorn Steakhouse restaurants in the fourth quarter 2000. One Bugaboo Creek restaurant and one The Capital Grille restaurant are expected to be opened by the end of 2000. Management believes that available cash, cash provided by operations, and available borrowings under the Company’s $100 million revolving credit facility will provide sufficient funds to finance the Company’s expansion plans through the year 2002.
Since substantially all sales in the Company’s restaurants are for cash, and accounts payable are generally due in seven to 30 days, the Company operates with little or negative working capital.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for the Company beginning in the first quarter of fiscal year 2001. The Company believes that the adoption of the Statements will not have a material effect on its financial statements, based on current activities.
Statements contained in this Report concerning future results, performance or expectations are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements in this Report are based upon information available to the Company on the date of this Report. All forward-looking statements involve risks and uncertainties that could cause actual results, performance or developments to differ materially from those expressed or implied by those forward-looking statements, such as: the Company’s ability to open the anticipated number of new restaurants on time and within budget; the Company’s ability to continue to increase same-store sales at anticipated rates; a recession or other negative effect on business dining patterns, or some other negative effect on the economy in general; unexpected increases in cost of sales or other expenses; and the impact of any negative publicity or public attitudes related to the consumption of beef. Other risks and uncertainties include fluctuations in quarterly operating results, seasonality, guest trends, competition and risks associated with the development and management of new restaurant sites. More information about factors that potentially may affect the Company’s results, performance or development is included in the Company’s other filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 26, 1999, and the Company’s press releases and other communications.
As of November 10, 2000, $56.4 million was outstanding under the Company’s $100 million revolving credit facility. Amounts outstanding under such credit facility bear interest at LIBOR plus a margin of 1.25% to 2.0% (depending on the Company’s leverage ratio), or the administrative agent’s prime rate of interest plus a margin of 0% to 0.75% (depending on the Company’s leverage ratio) at the Company’s option. Accordingly, the Company is exposed to the impact of interest rate fluctuations. To achieve the Company’s objective of managing its exposure to interest rate changes, the Company from time to time uses interest rate swaps.
The Company has interest rate swap agreements with commercial banks, which effectively fix the interest rate on $50.0 million of the Company’s borrowings at 6.226%, plus the margin, through May 2001; 6.31%, plus the margin, through March 2003; and 6.52%, plus the margin, through October 2003. The margin on October 1, 2000 was 1.25%; however, the margin is expected to be 1.5% during the fourth quarter of 2000. The Company is exposed to credit losses on this interest rate swap in the event of counterparty non-performance, but does not anticipate any such losses.
While changes in LIBOR and the administrative agent’s prime rate of interest could affect the cost of borrowings under the credit facility in excess of amounts covered by the interest rate swap agreement (of which only $6.4 million was outstanding in excess of amounts covered by the interest rate swap agreement as of November 10, 2000) in the future, the Company does not consider its current exposure to changes in such rates to be material, and the Company believes that the effect, if any, of reasonably possible near-term changes in interest rates on the Company’s financial condition, results of operations or cash flows would not be material.
The Company invests portions of its excess cash, if any, in highly liquid investments. At October 1, 2000, the Company had $149,000 invested in high-grade overnight repurchase agreements.
In March 2000, an ongoing legal dispute with a former joint venture partner was resolved by an arbitrator, resulting in a judgment against the Company in the amount of $2.0 million. The Company recognized a nonrecurring charge of $1.0 million ($670,000 net of income taxes) in the first quarter 2000, for amounts not previously reserved for this dispute.
On July 3, 2000, the Company issued an aggregate of 307,035 shares of its common stock, no par value, to two joint venture partners in Carolina Steakhouse Ventures, W.B. Dukes & Associates, Inc. and WBD Columbia, Inc. in partial consideration for the assignment to the Company of all of their ownership interest in and right and title to Carolina Steakhouse Ventures. The Company also paid approximately $3.0 million in cash to W.B. Dukes & Associates, Inc. and WBD Columbia, Inc. These shares of common stock were issued in an unregistered, non-public offering in which no underwriters participated. The issuance of these was made in reliance upon exemptions from registration under Section 4(2) of the Securities Act of 1933 and of Regulation D of the Securities and Exchange Act of 1934. See note 9 of the Notes to Consolidated Financial Statements for further information regarding this transaction.
On July 11, 2000, the Company issued 48,492 shares of its common stock, no par value, to RMA Enterprises, Inc. in partial consideration for the assignment to the Company of all of RMA Enterprises, Inc.‘s ownership interest in and right and title to RMA-LSI Joint Venture. The Company also paid approximately $300,000 in cash to RMA Enterprises, Inc. The shares of common stock were issued in an unregistered, non-public offering in which no underwriters participated. The issuance of these securities was made in reliance upon exemptions from registration under Section 4(2) of the Securities Act of 1933 and of Regulation D of the Securities and Exchange Act of 1934. See Note 9 of the Notes to Consolidated Financial Statements for further information regarding this transaction.
(a) Exhibits Filed.
27 -- Financial Data Schedule (for SEC use only)
(b) Reports filed on Form 8-K.
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 15, 2000 /s/ W. Douglas Benn
------------------ ------------------------
W. Douglas Benn
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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