UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 29, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-20716
TACO CABANA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2201241
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8918 Tesoro Drive, Suite 200
San Antonio, Texas 78217
(Address of principal executive offices)
Telephone Number (210) 804-0990
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
Indicate the number of shares of each of the
issuer's classes of common stock as of the latest
practicable date:
Class Outstanding at August 8 , 1997
Common Stock 14,826,537 shares
TACO CABANA, INC.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at June 29, 1997 2
and December 29, 1996
Condensed Consolidated Statements of Operations for the 3
Thirteen Weeks Ended June 29, 1997 and June 30, 1996
Condensed Consolidated Statements of Operations for the 4
Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
Condensed Consolidated Statements of Cash Flows for the 5
Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 7-14
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted since the
registrant has no reportable events in relation to the
items
Item 6. Exhibits and Reports on Form 8-K 15
Signature
TACO CABANA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 29, June 29,
1996 1997
------------ ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 748,000 $ 26,000
Receivables, net 792,000 603,000
Inventory 1,858,000 2,131,000
Prepaid expenses 1,353,000 1,377,000
Pre-opening costs, net 129,000 266,000
Federal income taxes receivable 363,000 520,000
Deferred income taxes 1,827,000 1,457,000
---------- ---------
Total current assets 7,070,000 6,380,000
PROPERTY AND EQUIPMENT, net 88,963,000 90,921,000
NOTES RECEIVABLE, net 738,000 703,000
INTANGIBLE ASSETS, net 45,394,000 44,657,000
OTHER ASSETS 541,000 512,000
----------- ----------
TOTAL $142,706,000 $143,173,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,181,000 $ 3,986,000
Accrued liabilities 3,171,000 2,422,000
Current maturities of long-term debt
and capital leases 2,409,000 2,637,000
Line of credit 625,000 3,039,000
---------- ----------
Total current liabilities 10,386,000 12,084,000
LONG-TERM OBLIGATIONS, net of current
maturities:
Capital leases 4,041,000 3,929,000
Long-term debt 6,593,000 5,299,000
---------- ---------
Total long-term obligations 10,634,000 9,228,000
ACQUISITION LIABILITIES 4,212,000 4,017,000
DEFERRED LEASE PAYMENTS 657,000 513,000
DEFERRED INCOME TAXES 3,645,000 4,176,000
STOCKHOLDERS' EQUITY:
Common stock 157,000 157,000
Additional paid-in capital 97,095,000 97,095,000
Retained earnings 15,920,000 17,352,000
Less: Treasury stock at cost
(360,000 shares) - (1,449,000)
----------- ----------
Total stockholders' equity 113,172,000 113,155,000
----------- -----------
TOTAL $142,706,000 $143,173,000
=========== ===========
See notes to Condensed Consolidated Financial Statements.
TACO CABANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Thirteen Weeks Ended
----------------------------
June 30, June 29,
1996 1997
------- ---------
REVENUES:
Restaurant sales $35,174,000 $34,104,000
Franchise fees and royalty income 134,000 96,000
----------- ----------
Total revenues 35,308,000 34,200,000
----------- ----------
COSTS AND EXPENSES:
Restaurant cost of sales 11,074,000 10,572,000
Labor 9,064,000 9,292,000
Occupancy 2,045,000 2,052,000
Other restaurant operating costs 6,284,000 6,276,000
General and administrative 1,585,000 1,782,000
Depreciation and amortization 2,216,000 2,570,000
Litigation Settlement 3,400,000 -
---------- ----------
Total costs and expenses 35,668,000 32,544,000
----------- ----------
INCOME (LOSS) FROM OPERATIONS (360,000) 1,656,000
----------- ----------
INTEREST EXPENSE, NET (356,000) (265,000)
----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (716,000) 1,391,000
BENEFIT (PROVISION) FOR INCOME
TAXES 163,000 (515,000)
----------- ---------
NET INCOME (LOSS) $ 553,000 $ 876,000
========== ==========
NET INCOME (LOSS) PER SHARE $ 0.04 $ 0.06
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 15,687,689 15,680,713
========== ==========
See notes to Condensed Consolidated Financial Statements.
TACO CABANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Twenty-Six Weeks Ended
------------------------------
June 30, June 29,
1996 1997
-------- ---------
REVENUES:
Restaurant sales $ 66,293,000 $64,204,000
Franchise fees and royalty income 280,000 182,000
----------- ----------
Total revenues 66,573,000 64,386,000
----------- -----------
COSTS AND EXPENSES:
Restaurant cost of sales 20,777,000 19,734,000
Labor 17,239,000 17,378,000
Occupancy 4,096,000 4,099,000
Other restaurant operating costs 11,942,000 11,751,000
General and administrative 3,317,000 3,575,000
Depreciation and amortization 4,584,000 5,060,000
Litigation settlement 3,400,000 -
---------- -----------
Total costs and expenses 65,355,000 61,597,000
---------- ----------
INCOME FROM OPERATIONS 1,218,000 2,789,000
---------- ----------
INTEREST EXPENSE, NET (768,000) (516,000)
---------- ----------
INCOME BEFORE INCOME TAXES 450,000 2,273,000
PROVISION FOR INCOME TAXES (269,000) (841,000)
---------- ----------
NET INCOME $ 181,000 $1,432,000
========= =========
NET INCOME PER SHARE $ 0.01 $ (0.09)
========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 15,952,239 15,693,625
========== ==========
See notes to Condensed Consolidated Financial Statements.
TACO CABANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Twenty-Six Weeks Ended
-----------------------------
June 30, June 29,
1996 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 181,000 $ 1,432,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,584,000 5,060,000
Litigation Settlement 2,950,000 -
Deferred income taxes 846,000 901,000
Capitalized interest - (45,000)
Deferred lease payments (199,000) (144,000)
Changes in operating working capital
items (2,167,000) (993,000)
---------- ---------
Net cash provided by operating
activities 6,195,000 6,211,000
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,753,000) (6,720,000)
Investment in joint venture (250,000 -
----------- -----------
Net cash used for investing activities (3,003,000) (6,720,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and draws on line of credit - 2,414,000
Principal payments under long-term debt
and line of credit (3,047,000) (1,073,000)
Principal payments under capital leases (98,000) (105,000)
Purchase of treasury stock - (1,449,000)
Exercise of stock options 42,000 -
Net cash used by financing activities (3,103,000) (213,000)
NET INCREASE (DECREASE) IN CASH 89,000 (722,000)
CASH AND CASH EQUIVALENTS, beginning of
period 2,749,000 748,000
---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 2,838,000 $ 26,000
=========== ========
See notes to Condensed Consolidated Financial Statements.
TACO CABANA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Principles of Consolidation - The consolidated financial
statements include all accounts of Taco Cabana, Inc. and its
wholly-owned subsidiaries (the Company). All significant
intercompany balances and transactions have been eliminated.
The unaudited Condensed Consolidated Financial Statements include
all adjustments, consisting of normal, recurring adjustments and
accruals, which the Company considers necessary for fair
presentation of financial position and the results of operations
for the periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted. The interim financial statements
should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 29, 1996.
Recently Issued Accounting Pronouncements - In February 1997, the
Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share,, which is required to be adopted by the
Company in the reporting period ending December 28, 1997. At
that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be
excluded. The Company has determined there would be no impact of
SFAS 128 on the calculation of earnings per share for the
thirteen weeks and the twenty-six weeks ended June 29, 1997.
2. Earnings per Share
Net income per share has been computed by dividing net income by
the weighted average number of common shares outstanding during
each period. Common stock equivalent shares, which relate to
stock options, are included in the weighted average when the
effect is dilutive.
3. Supplemental Disclosure of Cash Flow Information
Twenty-Six Weeks Ended
----------------------
June 30, June 29,
1996 1997
(Unaudited) (Unaudited)
----------- -----------
Cash paid for interest $879,000 $ 604,000
Interest capitalized on construction
costs - 45,000
Cash paid for income taxes 20,000 62,000
Cash received for income taxes 413,000 4,000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company commenced operations in 1978 with the opening of the
first Taco Cabana restaurant in San Antonio. As of August 1, 1997
the Company had 107 company-owned, one joint-venture owned and 13
franchised restaurants. The Company's revenues are derived
primarily from sales by company-owned restaurants, with franchise
fees and royalty income contributing less than 1% of total
revenues for the first six months of the 1997 fiscal year.
During the twenty-six weeks ended June 29, 1997, the Company
opened one free-standing restaurant and two non-traditional
restaurants located within the H-E-B grocery stores. The Company
also converted two free-standing Sombrero Rosa restaurants and
two Two Peso mall units to the Taco Cabana concept during the
same period. Additionally, a franchisee of the Company closed one
restaurant and a franchisee of the Company, in which the Company
has a joint venture interest, closed two restaurants.
The following table sets forth for the periods indicated the
percentage relationship to total revenues, unless otherwise
indicated, of certain operating statement data. The table also
sets forth certain restaurant data for the periods indicated.
13 Weeks Ended 26 Weeks Ended
-------------- --------------
June 30, June 29, June 30, June 29,
1996 1997 1996 1997
-------- ------- ------- -------
Operating Statement Data:
REVENUES:
Restaurant sales 99.6% 99.7% 99.6% 99.7%
Franchise fees and royalty
income 0.4 0.3 0.4 0.3
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
====== ====== ======= ======
COSTS AND EXPENSES:
Restaurant cost of sales (1) 31.5% 31.0% 31.3% 30.7%
Labor (1) 25.8 27.2 26.0 27.1
Occupancy (1) 5.8 6.0 6.2 6.4
Other restaurant operating
costs (1) 17.9 18.4 18.0 18.3
General and administrative
costs 4.5 5.2 5.0 5.6
Depreciation and
amortization 6.3 7.5 6.9 7.9
Litigation settlement 9.6 - 5.1 -
----- ----- ----- -----
INCOME (LOSS) FROM OPERATIONS (1.0) 4.8 1.8 4.3
INTEREST EXPENSE, net (1.0) (0.8) (1.2) (0.8)
----- ----- ----- ------
INCOME (LOSS) BEFORE INCOME
TAXES (2.0) 4.1 0.7 3.5
BENEFIT (PROVISION) FOR
INCOME TAXES 0.5 (1.5) (0.4) (1.3)
----- ------ ----- -------
NET INCOME (LOSS) (1.6)% 2.6% 0.3% 2.2%
======= ===== ===== =======
Restaurant Data:
Company-owned restaurants:
Beginning of period 104 106 106 104
Opened - 1 - 3
Closed - - (2) -
--- --- --- ---
End of period 104 107 104 107
Franchised (2) and joint-
venture owned restaurants: 22 14 22 14
--- --- --- ---
Total restaurants: 126 121 126 121
=== === === ===
(1) Percentage is calculated based upon restaurant sales.
(2) Excludes Two Pesos licensed restaurants.
The Thirteen Weeks Ended June 29, 1997 Compared to the Thirteen
Weeks Ended June 30, 1996
Restaurant Sales. Restaurant sales decreased by $1.1 million, or
3.0%, to $34.1 million for the second quarter of 1997 from $35.2
million for the second quarter in 1996. Comparable store sales,
defined as Taco Cabana restaurants that have been open 18 months
or more at the beginning of the quarter, decreased 5.4%.
Comparable store sales in the Company's core markets of San
Antonio, Austin, Houston and Dallas, which represent over 90% of
the Company's sales volume, decreased 4.3%. Management attributes
much of the decline in sales in its core markets to the increased
competitive environment in the quick-service restaurant industry.
Franchise Fees and Royalty Income. Franchise and royalty fees
decreased by $38,000 to $96,000 for the second quarter of 1997
compared to the second quarter of 1996, due primarily to a
decrease in franchise royalties. This decrease was due to a
decrease in the number of franchise restaurants open during the
second quarter in 1997 compared to the second quarter in 1996.
Cost of Sales. Restaurant cost of sales, calculated as a
percentage of restaurant sales, decreased to 31.0% in the second
quarter of 1997 from 31.5% for the second quarter of 1996. The
decrease was due primarily to the continued negotiation of
favorable commodity prices as well as continued operational
emphasis on this area.
Labor. Labor costs increased slightly during the second quarter
of 1997 compared to the second quarter of 1996, primarily due to
the greater number of restaurants in operation during the
quarter. As a percentage of sales, labor costs increased to 27.2%
in the second quarter of 1997 compared to 25.8% in the second
quarter of 1996. The increase is due to lower average unit
volumes. Management has committed to not reduce labor dollars at
the restaurant level in the face of declining sales.
Occupancy. Occupancy costs increased slightly during the second
quarter of 1997 compared to the second quarter of 1996. As a
percentage of restaurant sales, occupancy costs increased to 6.0%
in the second quarter of 1997 compared to 5.8% in the second
quarter of 1996, due to decreased sales at the restaurant level.
Other Restaurant Operating Costs. Other restaurant operating
costs remained relatively constant during the second quarter of
1997 as compared to the same period of 1996. As a percentage of
restaurant sales, other restaurant operating costs increased to
18.4% compared to 17.9% in the second quarter of 1996 due to
decreased sales at the restaurant level.
General and Administrative. General and administrative expenses
increased to $1.8 million from $1.6 million, and increased as a
percentage of total revenues to 5.2% for the second quarter of
1997 from 4.5% for the comparable period in 1996. This increase
was primarily attributable to the addition of corporate support
staff, as well as an increased level of expenditures to support
the Company's operations.
Depreciation and Amortization. Depreciation and amortization
expense consisted of the following:
Thirteen Weeks Ended
------------------------------
June 30, 1996 June 29, 1997
------------- -------------
(Unaudited) (Unaudited)
Depreciation of property
and equipment $ 1,689,000 $ 2,102,000
Amortization of intangible assets 416,000 396,000
Amortization of pre-opening costs 111,000 72,000
Depreciation expense increased by approximately $413,000 for the
quarter ended June 29, 1997 compared to the quarter ended June 30
1996. The increase was primarily due to capital expenditures at
existing restaurants during the past twelve months.
Interest Expense, net. Interest expense, net of interest
capitalized on construction costs, decreased to $265,000 in the
second quarter of 1997 from $356,000 in the same period in 1996,
primarily as a result of average debt outstanding being reduced
by $2.1 million during the second quarter of 1997 compared to the
second quarter of 1996. In addition the Company capitalized
$24,000 of interest during the second quarter of 1997. No
interest was capitalized during the second quarter of 1997. The
Company earned $13,000 of interest income during the thirteen
weeks ended June 29, 1997, compared to $47,000 of interest income
earned during the thirteen weeks ended June 30, 1996. The
decrease was due to a reduction in short-term investments during
the twelve months ended June 29, 1997.
Net Income(Loss) and Net Income (Loss) Per Share. Net income
increased to $876,000 for the second quarter of 1997 from a net
loss of $553,000 for the same period in 1996. Net income was 2.6%
of total revenues for the second quarter of 1997 compared to a
net loss of 1.6% for the same period in 1996. Earnings per share
was $0.06 for the second quarter of 1997 compared to a loss per
share of $0.04 in the same period of 1996. Disregarding the
litigation settlement, recorded in the second quarter of 1996,
the Company would have reported net income of $1,691,000 for the
second quarter of 1996, equal to $0.11 per share. Disregarding
the litigation settlement, management believes that the decrease
is largely due to lower sales at Company-owned restaurants.
The Twenty-Six Weeks Ended June 29, 1997 Compared to the Twenty-
Six Weeks Ended June 30, 1996
Revenues. Restaurant sales decreased by $2.1 million, or 3.1%,
to $64.2 million for the twenty-six weeks ended June 29, 1997
from $66.3 million for the comparable period in 1996. Comparable
store sales, defined as Taco Cabana restaurants that have been
open 18 months or more at the beginning of the year, decreased
4.8% during the twenty-six weeks ended June 29, 1997. Management
attributes much of this decline in sales to increased levels of
competition in the Company's core markets and inclement weather
during the first quarter of 1997. Franchise and royalty fees
decreased by $98,000 to $182,000 for the twenty-six weeks ended
June 29, 1997 compared to the same period of 1996, due primarily
to a decrease in the number of franchise restaurants open during
the twenty-six week ended June 29, 1997 compared to the same
period in 1996.
Cost of Sales. Restaurant cost of sales, calculated as a
percentage of restaurant sales, decreased to 30.7% in the twenty-
six weeks ended June 29, 1997 from 31.3% for the twenty-six weeks
ended June 30, 1996. The decrease was due primarily to the
continued negotiation of favorable commodity prices as well as
continued operational emphasis on this area.
Labor. Labor costs increased slightly during the twenty-six weeks
ended June 29, 1997 compared to the same period of 1996,
primarily due to the greater number of restaurants in operation
during the period. As a percentage of sales, labor costs
increased to 27.1% in the twenty-six week ended June 29, 1997
compared to 26.0% in the same period of 1996. The increase is due
to lower average unit volumes. Management has committed to not
reduce labor dollars at the restaurant level in the face of
declining sales.
Occupancy. Occupancy costs increased slightly during the twenty-
six weeks ended June 29, 1997 compared to the same period in
1996. As a percentage of restaurant sales, occupancy costs
increased to 6.4% in the twenty six weeks ended June 29, 1997
compared to 6.2% in the same period of 1996, due to decreased
sales at the restaurant level.
Other restaurant operating costs. Other restaurant operating
costs remained relatively constant during the twenty-six weeks
ended June 29, 1997 compared to the same period of 1996. As a
percentage of restaurant sales, other restaurant operating costs
increased to 18.3% during the twenty-six weeks ended June 29,
1997 compared to 18.0% in the same period of 1996 due to
decreased sales at the restaurant level.
General and Administrative. General and administrative expenses
increased to $3.6 million from $3.3 million, and increased as a
percentage of total revenues to 5.6% for the twenty-six weeks
ended June 29, 1997 from 5.0% for the comparable period in 1996.
This increase was primarily attributable to the addition of
corporate support staff, as well as an increased level of
expenditures to support the Company's operations.
Depreciation and Amortization. Depreciation and amortization
expense consisted of the following:
Twenty-Six Weeks Ended
-----------------------------
June 30.1996 June 29,1997
------------ -------------
(Unaudited) (Unaudited)
Depreciation of property and equipment $ 3,337,000 $ 4,137,000
Amortization of intangible assets 820,000 812,000
Amortization of pre-opening costs 427,000 111,000
Depreciation expense increased by approximately $800,000 for the
twenty-six weeks ended June 29, 1997 compared to the twenty-six
weeks ended June 30, 1996. The increase was due primarily to four
restaurant openings during the most recent twelve month period,
as well as capital expenditures at existing restaurants during
the past twelve months. Amortization of pre-opening costs
decreased by approximately $316,000 in the twenty-six weeks ended
June 29, 1997 compared to the twenty-six weeks ended June 30,
1996, due to the decrease in the number of stores opened during
the most recent twelve-month period compared to the twelve-month
period ended June 30 1996.
Interest Expense, net. Interest expense, net of interest
capitalized on construction costs, decreased to $516,000 in the
twenty-six weeks ended June 29, 1997 from $768,000 in the twenty-
six weeks ended June 30, 1996, primarily as a result of average
debt outstanding being reduced by $3.4 million during the twenty-
six weeks ended June 29, 1997 compared to the same period in
1996. In addition, the Company capitalized $45,000 of interest
during the twenty-six weeks ended June 29, 1997. No interest was
capitalized during the same period of 1996. The Company earned
$42,000 of interest income during the twenty-six weeks ended June
29, 1997, compared to $102,000 of interest income earned during
the twenty-six weeks ended June 30, 1996. The decrease was due to
a reduction in short-term investments during the twelve months
ended June 29, 1997.
Net Income(Loss) and Net Income (Loss) Per Share. Net income
increased to $1,432,000 for the twenty-six weeks ended June 29,
1997 from $181,000 for the same period in 1996. Net income was
2.2% of total revenues for the twenty-six weeks ended June 29,
1997 compared to 0.3% for the twenty-six weeks ended June 30,
1996. Earnings per share was $0.09 for the twenty-six weeks ended
June 29, 1997 compared to earnings per share of $0.01 in the same
period of 1996. Disregarding the litigation settlement recorded
in the second quarter of 1996, the Company would have reported
net income of $2,425,000 for the twenty-six weeks ended June 30,
1996, equal to $0.15 per share. Disregarding the litigation
settlement, management believes that the decrease in net income
is largely due to lower sales at Company-owned restaurants.
Liquidity and Capital Resources
Historically, the Company has financed business and expansion
activities by using funds generated from operating activities,
build-to-suit leases, equity financing, long-term debt and
capital leases. The Company maintains loan facilities totaling
$20.0 million, including a $5.0 million unsecured revolving line
of credit. As of August 8, 1997 $11.1 million had been used under
these facilities.
Net cash provided by operating activities was $6.2 million for
each of the twenty-six week periods ended June 29, 1997 and June
30, 1996. Net cash used in investing activities was $6.7 million
for the twenty-six weeks ended June 29, 1997, representing
primarily capital expenditures for improvements to existing
restaurants, the construction of one free-standing and two non-
traditional restaurants, and the conversion of two Sombrero Rosa
and two Two Pesos restaurants to the Taco Cabana concept,
compared to $3.0 million for the twenty-six weeks ended June 30,
1996, representing primarily capital expenditures for
improvements to existing restaurants.
Net cash used by financing activities was $213,000 for the twenty-
six weeks ended June 29, 1997, representing primarily the
purchase of treasury stock, which was offset by borrowings under
the Company's debt facilities, compared to net cash used by
financing activities of $3.1 million in the same period of 1996,
representing repayment of the Company's line of credit and long-
term debt.
On April 16, 1997, the Company's Board of Directors approved a
plan to repurchase up to 1,500,000 shares of the Company's common
stock. As of June 29, 1997 the Company had repurchased 360,000
shares at an average cost of $4.03 per share. As of August 8,
1997, the Company had repurchased 880,000 shares at an average
cost of $4.09 per share. The timing, price, quantity and manner
of remaining purchases, if any, will be made at the discretion of
management and will be dependent upon market conditions. The
Company has funded the repurchases through available bank credit
facilities, as well as the liquidation of the Company's short
term investment portfolio. Remaining purchases, if any, will be
funded through a combination of cash provided by operations or
through available bank credit facilities.
The special charge recorded during the fourth quarter of 1996
included an accrual of approximately $1.0 million for the
estimated lease obligations, legal and professional costs and
other costs associated with the closing of two of the three
restaurants operated by a joint venture in which the Company has
a 50% interest. Cash requirements for this accrual were
approximately $25,000 in the twenty-six weeks ended June 29,
1997.
The special charge recorded in the second quarter of 1995
included an accrual of approximately $1.2 million to record the
estimated monthly lease payments, net of expected sublease
receipts, associated with certain restaurants which have been
closed. Cash requirements for this accrual were approximately
$280,000 in the twenty-six weeks ended June 29, 1997. Several of
the restaurants which have been closed, as well as the Company's
previous corporate offices, are currently for sale. Although
there can be no assurance of the particular price at which any of
such properties will be sold, the Company will receive funds upon
the actual disposition of these properties. In addition, certain
acquisition and accrued liabilities related to the Two Pesos
acquisition were reduced by payments of approximately $522,000
during the twenty-six weeks ended June 29, 1997.
The Company believes that existing cash balances, funds generated
from operations, its ability to borrow, and the possible use of
lease financing will be sufficient to meet the Company's capital
requirements through 1998, including the planned opening of five
to six free-standing restaurants during the remainder of 1997 and
twelve to fifteen free-standing restaurants during 1998.
Impact of Inflation
Although increases in labor, food or other operating costs could
adversely affect the Company's operations, management does not
believe that inflation has had a material adverse effect on the
Company's operations to date.
Seasonality and Quarterly Results
The Company's sales fluctuate seasonally. Historically, the
Company's highest sales and earnings occur in the second and
third quarters. In addition, quarterly results are affected by
the timing of the opening and closing of stores. Therefore,
quarterly results cannot be used to indicate results for the
entire year
Forward-Looking Statements
Statements in this quarterly report, including those contained in
the foregoing discussion and other items herein, concerning the
Company which are (a) projections of revenues, capital
expenditures or other financial items, (b) statements of plans
and objectives for future operations, (c) statements of future
economic performance, or (d) statements of assumptions or
estimates underlying or supporting the foregoing are forward-
looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of
1934. The ultimate accuracy of forward-looking statements is
subject to a wide range of business risks and changes in
circumstances, and actual results and outcomes often differ from
expectations. Any number of important factors could cause actual
results to differ materially from those in the forward-looking
statements herein, including the following: the timing and
extent of changes in prices; actions of our customers and
competitors; state and federal environmental, economic, safety
and other policies and regulations, any changes therein, and any
legal or regulatory delays or other factors beyond the Company's
control; execution of planned capital projects; weather
conditions affecting the Company's operations or the areas in
which the Company's products are marketed; natural disasters
affecting operations; and adverse rulings, judgments, or
settlements in litigations or other legal matters. The Company
undertakes no obligation to publicly release the result of any
revisions to any such forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report.
Signature
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.
Dated: August 13, 1997 Taco Cabana, Inc.
/s/ David G. Lloyd
--------------------------------
David G. Lloyd
Vice President, Chief Financial
Officer, Secretary and Treasurer
Signing on behalf of the registrant
and as the principal financial and
accounting officer
Exhibit 11
TACO CABANA, INC.
Statement re
Computation of Per Share Earnings
13 Weeks Ended 26 Weeks Ended
--------------------- -----------------------
June 30, June 29, June 30, June 29,
1996 1997 1996 1997
-------- -------- -------- ---------
Net Income $ (553,000) $ 876,000 $ 181,000 $1,432,000
Net Income per share Computation:
Average Common Shares
Outstanding 15,687,689 15,680,713 15,685,360 15,693,625
Common stock equivalents-
dilutive options - - 266,379 -
----------- ---------- --------- ----------
Average outstanding
common and common
equivalent shares 15,687,689 15,680,713 15,952,239 15,693,625
Net Income per share $ 0.04 $ 0.06 $ 0.01 $ (0.09)
=========== ========== =========== =========
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> JUN-30-1997
<CASH> 26,000
<SECURITIES> 0
<RECEIVABLES> 1,414,000
<ALLOWANCES> 108,000
<INVENTORY> 2,131,000
<CURRENT-ASSETS> 6,380,000
<PP&E> 116,195,000
<DEPRECIATION> 25,274,000
<TOTAL-ASSETS> 143,173,000
<CURRENT-LIABILITIES> 12,084,000
<BONDS> 5,299,000
0
0
<COMMON> 157,000
<OTHER-SE> 112,998,000
<TOTAL-LIABILITY-AND-EQUITY> 143,173,000
<SALES> 34,104,000
<TOTAL-REVENUES> 34,200,000
<CGS> 10,572,000
<TOTAL-COSTS> 19,864,000
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<INCOME-TAX> 515,000
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