<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 25, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File No. 0-23226
GRILL CONCEPTS, INC.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3319172
---------------------------- --------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11661 San Vicente Blvd., Suite 404, Los Angeles, California 90049
-----------------------------------------------------------------
(Address of principal executive offices)(Zip code)
(310) 820-5559
----------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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____
---
As of August 4, 2000, 4,203,738 shares of Common Stock of the issuer
were outstanding.
<PAGE>
GRILL CONCEPTS, INC.
--------------------
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
June 25, 2000 and December 26, 1999............................................................... 1
Consolidated Condensed Statements of Operations -
For the three months and six months ended June
25, 2000 and June 27, 1999........................................................................ 3
Consolidated Condensed Statements of Cash Flows - For the six months
ended June 25, 2000 and
June 27, 1999..................................................................................... 4
Notes to Consolidated Condensed Financial Statements................................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................... 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 12
Item 6. Exhibits and Reports on Form 8-K................................................................. 13
SIGNATURES................................................................................................ 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
June 25, December 26,
2000 1999
------------ -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 553,531 $ 352,453
Inventories 540,572 426,680
Receivables 495,242 738,757
Prepaid expenses 222,321 294,251
------------ -----------
Total current assets 1,811,666 1,812,141
------------ -----------
Furniture, equipment, & improvements, net 9,706,834 8,272,509
Goodwill, net 217,245 221,437
Liquor licenses 678,284 646,647
Other assets 363,656 334,818
------------ ------------
Total assets $ 12,777,685 $ 11,287,552
============ ============
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Continued)
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 25, December 26,
2000 1999
------------ --------------
(unaudited)
<S> <C> <C>
Current liabilities:
Bank line of credit $ 500,000 $ 935,000
Accounts payable 1,742,185 1,881,908
Accrued expenses 2,010,206 1,663,590
Current portion of long term debt 608,650 463,853
Note payable - related party 321,227 553,058
------------ -----------
Total current liabilities 5,182,268 5,497,409
Long-term debt 2,186,147 1,537,994
Notes payable - related parties 471,000 495,295
------------ -----------
Total liabilities 7,839,415 7,530,698
Minority interest 1,324,057 295,478
Stockholders' equity:
Series I, Convertible Preferred Stock, $.001 par
value; 1,000,000 shares
authorized, 1,000 shares
issued and outstanding in 2000 and 1999 1 1
Series II, 10% Convertible Preferred Stock,
$.001 par value; 1,000,000 shares,
authorized, 500 shares
issued and outstanding in 2000 and 1999 1 1
Common stock, $.00004 par value; 7,500,000 shares
authorized, 4,003,738 shares issued and outstanding
in 2000 and 1999 160 160
Additional paid-in capital 11,071,062 11,071,062
Accumulated deficit (7,457,011) (7,609,848)
------------ -----------
Total stockholders' equity 3,614,213 3,461,376
------------ -----------
Total liabilities, minority interest and
stockholders' equity $12,777,685 $11,287,552
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
2
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ---------------------------------
June 25, 2000 June 27, 1999 June 25, 2000 June 27, 1999
------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales $10,195,015 $9,455,959 $20,871,005 $19,619,154
Management and license fees 146,350 111,464 296,090 236,311
------------ ------------ ------------- -------------
Total revenues 10,341,365 9,567,423 21,167,095 19,855,465
Cost of sales 2,938,597 2,614,415 5,948,282 5,430,097
------------ ------------ ------------- -------------
Gross profit 7,402,768 6,953,008 15,218,813 14,425,368
Costs and expenses:
Restaurant operating expenses 6,017,244 5,639,126 12,321,357 11,641,226
General and administrative 874,668 797,473 1,675,963 1,601,902
Depreciation and amortization 296,684 283,045 583,368 570,865
Preopening costs 437,419 - 457,928 -
------------ ------------ ------------- -------------
Total operating expenses 7,626,015 6,719,644 15,038,616 13,813,993
Income (loss) from operations (223,247) 233,364 180,197 611,375
Interest expense, net (96,750) (111,558) (180,657) (207,114)
Provision for income taxes (1,600) (2,000) (5,600) (4,000)
Equity in loss of joint venture - - (9,469) -
Minority interest in loss (earnings) of
subsidiary 201,002 (10,017) 168,366 (28,189)
------------ ------------ ------------- -------------
Net income (loss) $ (120,595) $ 109,789 $ 152,837 $ 372,072
------------ ------------ ------------- -------------
Preferred stock:
Preferred dividends accrued or paid (12,500) (12,500) (25,000) (25,000)
------------ ------------ ------------- -------------
Net income (loss) applicable to
common stock $ (133,095) $ 97,289 $ 127,837 $ 347,072
============ ============ ============= =============
Net income (loss) per share:
Basic net income (loss) $ (0.03) $ 0.02 $ 0.03 $ 0.09
------------ ------------ ------------- -------------
Preferred stock
Dividends: (0.00) (0.00) (0.00) (0.00)
------------ ------------ ------------- -------------
Basic net income (loss) applicable to
common stock $ (0.03) $ 0.02 $ 0.03 $ 0.09
============ ============ ============= =============
Average weighted shares outstanding 4,003,738 4,003,738 4,003,738 4,003,738
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 25, June 27,
2000 1999
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 152,837 $ 372,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 583,368 570,865
Minority interest in net loss 168,366 28,189
Changes in operating assets and liabilities
Inventories (113,892) (77,301)
Receivables 243,515 (144,069)
Prepaid expenses 71,930 (10,227)
Liquor Licences and other assets (60,475) 78,092
Accounts payable (139,723) (22,035)
Accrued liabilities 346,616 375,545
---------- -----------
Net cash provided by operating activities 1,252,542 1,171,131
---------- -----------
Cash flows from investing activities:
Additions to furniture, equipment and improvements (2,013,501) (524,346)
---------- -----------
Net cash used in investing activities (2,013,501) (524,346)
---------- -----------
Cash flows from financing activities:
Proceeds from equipment financing 995,096 -
Net proceeds from investment in Chicago Grill 860,213 -
Net change on line of credit (435,000) 9,974
Payments on long-term debt (458,272) (561,686)
---------- -----------
Net cash provided by (used in) financing activities 962,037 (551,712)
---------- -----------
Net increase in cash and cash equivalents 201,078 95,073
Cash and cash equivalents, beginning of period 352,453 438,184
---------- -----------
Cash and cash equivalents, end of period $ 553,531 $ 533,257
========= ==========
Supplemental cash flow information: Cash paid during the period for:
Interest $ 215,608 $ 157,151
Income taxes - -
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL PRESENTATION
The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. These financial statements have
not been audited by independent accountants. The December 26, 1999 balance
sheet data was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes included in the
Company's Form 10-K dated December 26, 1999. In the opinion of management,
these interim financial statements reflect all adjustments of a normal
recurring nature necessary for a fair statement of the results for the
interim periods presented. The current period results of operations are not
necessarily indicative of results which ultimately will be reported for the
full year ending December 31, 2000.
Certain prior year amounts have been reclassified to conform to current
year presentation.
2. PREOPENING COSTS
In accordance with AICPA Statement of Position (SOP) 98-5, "Reporting on
the Costs of Start-Up Activities," the Company expenses all start-up and
pre-opening costs as they are incurred.
3. FUTURE ACCOUNTING REQUIREMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives will be recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. The new rules will be effective the
first quarter of 2001. The new standard will not have a material impact on
the Company's financial statements.
4. REVERSE STOCK SPLIT
On August 9, 1999, the Company effected a 1-for-4 reverse stock split of
the Company's common stock. All share and per share data have been restated
to reflect the reverse stock split.
5
<PAGE>
5. SUBSEQUENT EVENTS
On July 11, 2000 the Company made a strategic decision to close and closed, its
Pizzeria Uno restaurant in Media, Pennsylvania due to declining operations.
Management does not anticipate significant losses due to the closure.
In July 2000, the holder of Series I Convertible Preferred Stock converted 1,000
shares of preferred stock into 200,000 shares of common stock.
On August 1, 2000 the Company received a $400,000 loan from private individuals.
The loan bears interest at 9% and is payable in monthly installments over the
next four years. In connection with the loan, the Company issued 40,000
warrants.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere in this Form
10-Q. Except for the historical information contained herein, the discussion in
this Form 10-Q contains certain forward looking statements that involve risks
and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-Q
should be read as being applicable to all related forward statements wherever
they appear in this Form 10-Q. The Company's actual results could differ
materially from those discussed here. For a discussion of certain factors that
could cause actual results to be materially different, refer to the Company's
Annual Report on Form 10-K for the year ended December 26, 1999.
Results of Operations.
The following table sets forth, for the periods indicated, information derived
from the Company's consolidated statements of operations expressed as a
percentage of total operating revenues, except where otherwise noted.
Percentages may not add due to rounding.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- ----------------------------
June 25, June 27, June 25, June 27,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales 98.6 % 98.8 % 98.6 % 98.8 %
Management and license fees 1.4 1.2 1.4 1.2
------- ------ ------- -------
Total operating revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 28.4 27.3 28.1 27.3
------- ------ ------- -------
Gross profit 71.6 72.7 71.9 72.7
------- ------ ------- -------
Restaurant operating expense 58.2 58.9 58.2 58.6
General and administrative expense 8.5 8.3 7.9 8.1
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Depreciation and amortization 2.9 3.0 2.8 2.9
Preopening costs 4.2 0.0 2.2 0.0
------- ------ ------- -------
Total operating expenses 73.7 70.2 71.0 69.6
------- ------ ------- -------
Operating income (loss) (2.2) 2.4 0.9 3.1
Interest expense, net (0.9) (1.2) (0.9) (1.0)
Provision for taxes 0.0 0.0 0.0 0.0
Minority interest in loss (earnings) of subsidiary 1.9 (0.1) 0.8 (0.1)
Equity in loss of joint venture 0.0 0.0 0.0 0.0
------- ------ ------- -------
Net income (loss) (1.2)% 1.1% 0.7% 1.9%
======= ====== ======= =======
</TABLE>
The following table sets forth certain unaudited financial information and other
restaurant data relating to Company owned restaurants and Company managed and/or
licensed restaurants.
<TABLE>
<CAPTION>
Second Quarter Year-to-date Total open at
Openings Openings End of Quarter
----------------- ------------------- --------------------
FY 2000 FY 1999 FY 2000 FY 1999 FY 2000 FY 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Daily Grill restaurants:(1)
Company owned -- -- -- -- 10 9
Managed and/or licensed -- 1 -- 3 3 4
Grill on the Alley restaurants:
Company owned 1 -- 1 -- 3 2
Pizza restaurants -- -- -- -- 3 3
Other restaurants(1)
Managed and/or licensed -- -- -- -- 1 1
----- ----- ----- ----- ---- ----
Total 1 1 1 3 20 19
===== ===== ===== ===== ==== ====
</TABLE>
(1) The Company's Licensed Daily Grill restaurant at LAX has been moved from
the Other restaurant category and is now included as a Daily Grill
restaurant. The prior year information has been adjusted to reflect this
change.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- --------------------------
June 25, June 27, June 25, June 27,
2000 1999 2000 1999
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
Weighted average weekly sales per company owned restaurant:
Daily Grill $ 57,965 $ 54,960 $ 59,925 $ 57,004
Grill on the Alley 74,863 66,915 79,401 71,071
Pizza restaurants 31,216 32,644 31,671 32,971
Change in comparable restaurant (1):
Daily Grill 5.3% --% 5.0% 1.2%
Grill on the Alley 11.9% 4.2% 11.7% 2.8%
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Pizza restaurants (4.4)% (1.0)% (3.9)% (1.2)%
Total system revenues:
Daily Grill $ 6,781,888 $6,443,071 $14,022,510 $13,351,688
Grill on the Alley 2,195,714 1,739,782 4,378,119 3,695,705
Pizza restaurants 1,217,413 1,273,106 2,470,376 2,571,761
Management and license fees 146,350 111,464 296,091 236,311
-------------- ------------ ------------ ------------
Total $10,341,365 $9,567,423 $21,167,095 $19,855,465
============== ============ ============ ============
</TABLE>
(1) When computing comparable restaurant sales, restaurants open for at least
12 months are compared from period to period.
Material Changes in Results of Operations for the Three and Six Months Ended
June 25, 2000 as compared to the Three and Six Months Ended June 27, 1999
During the 2000 period, the Company, through its 50% partnership interest,
operated a Daily Grill Short Order at Universal Studios CityWalk. The results of
that restaurant are reported under the equity method and, therefore, are not
included in consolidated revenues or operating results, other than management
fees from that restaurant. Additionally, the 2000 periods include two weeks of
operations of the Company's newly opened Chicago - The Grill on the Alley
restaurant.
Revenues
Revenues for the second quarter of fiscal year 2000 increased to $ 10.3 million,
or 7.3% over the $ 9.6 million generated for the same quarter of fiscal 1999.
Revenues for the six months ended June 25, 2000 rose 6.6% to $ 21.2 million from
the $ 19.9 million generated for the same period of fiscal year 1999. Total
revenues included $ 10.2 million of restaurant sales revenues and $ 146,000 of
management and licensing fees for the second quarter and $ 20.9 million of
restaurant sales revenues and $ 296,000 of management and licensing fees for the
first six months of 2000. This compares to $ 9.5 million of restaurant sales
revenues and $ 111,000 of management and licensing fees for the 1999 quarter and
$ 19.6 million of restaurant sales revenues and $ 236,000 of management and
licensing fees for the first six months of 1999. The increase in restaurant
sales revenues for both the quarter ($ 0.7 million, or 7.4 %) and the six months
($ 1.3 million, or 6.6%) was primarily attributable to an increase in same store
sales, plus two weeks of sales ($249,000) at the Chicago Grill on the Alley,
which opened in June 2000.
Same store sales (for restaurants open at least 12 months) increased 5.2 % for
the quarter and 5.1% for the six-month period. The increase in management and
licensing fees for both the quarter ($ 35,000, or 31%) and the six months
($ 60,000, or 25%) was primarily attributable to the additional fees from the
Universal CityWalk Daily Grill, which opened in July 1999.
In addition to the restaurants owned by the Company, which sales are
consolidated and included in the results of operations for the Company, the
Company manages four other restaurants. Total
8
<PAGE>
revenues for all 19 restaurants owned and managed by the Company were
$12,738,000 and $11,498,000 for the three months and $25,930,000 and $23,015,000
for the six months ended June 2000 and 1999, respectively. This represents an
increase of $1,241,000, or 10.8% and $2,915,000 and 12.7%, respectively.
Cost of Sales
Cost of sales increased by 12.4 % for the quarter and 9.5 % for the six months
ended June 25, 2000 as compared to the same periods in 1999. As a percentage of
sales revenues, cost of sales was 28.4% for the quarter and 28.1 % for the six
months as compared to 27.3 % for the second quarter of 1999 and 27.3 % for the
year-to-date period in 1999. The increase in cost of sales as a percentage of
sales during the 2000 three and six month periods was primarily attributable to
higher food costs associated with the San Jose Grill and the Beverly Hills Grill
Restaurants.
Restaurant Operating Expenses
Restaurant operating expenses increased by 6.7 % for the quarter and 5.8 % for
the six months as compared to the same periods in 1999. The dollar increase in
restaurant operating expenses was primarily attributable to additional sales in
same stores. However restaurant operating expenses, as a percentage of revenues,
decreased in the second quarter from 58.9% in 1999 to 58.2% in 2000. For the
six-month periods, the percentages were 58.6% in 1999 and 58.2% in 2000. The
decrease in restaurant operating expenses as a percentage of total revenues was
primarily attributable to the spreading of fixed costs over higher same store
sales. The increase in management fees also favorably affected these
percentages.
General and Administrative Expense
General and administrative expense increased 9.7 % for the quarter and 4.6 % for
the six month period as compared to the same periods in 1999. As a percentage of
total revenues, general and administrative expense totaled 8.5 % for the quarter
and 7.9 % for the six month period as compared to 8.3 % for the quarter and
8.1 % for the six month period in 1999. The increase in total general and
administrative expense during 2000 of approximately $75,000 for both the quarter
and six month periods, was primarily increased corporate salaries.
Depreciation and Amortization
Depreciation and amortization expense increased by 4.8 % for the quarter and
2.2 % for the six month period as compared to 1999. The small increase in
depreciation and amortization expense was primarily attributable to the opening
of the Chicago Grill in June of 2000.
Preopening Costs
All preopening costs incurred during the periods relate to the opening of
Chicago-The Grill on the Alley, in June 2000, and were expensed as incurred.
Minority Interest and Equity in Loss of Joint Venture
The three and six month expenses also reflect a net minority interest in the
(earnings) and losses of
9
<PAGE>
subsidiaries of $201,000 and $168,000 respectively, compared with a ($10,000)
and ($28,000) in the same periods in 1999. This resulted primarily from losses
at the Chicago Grill on the Alley partially offset by income at the San Jose
Grill.
The Company incurred a charge of $9,000 for its equity in loss of joint venture
during the three and six month periods of 2000, which reflects the Company's 50%
interest in the Daily Grill Short Order at Universal Studios City Walk.
Dividends
The Company reported dividends on preferred stock of $12,500 in each of the
three month periods and $25,000 in each of the six month periods ended June 25,
2000 and June 27, 1999.
Interest Expense, Net
Interest expense, net, decreased by 13 % during both the quarter and six-month
periods compared to the same periods in 1999. The decrease in interest expense
was primarily attributable to reduced borrowing during 2000.
Net Income
Net income was negatively impacted by the one time preopening costs incurred at
Chicago-The Grill on the Alley. Without such one time charge, net income would
have been $317,000 for the quarter and $626,000 for the six months as compared
to $110,000 for the quarter and $372,000 for the six months ended June 27, 1999.
Material Changes in Financial Condition, Liquidity and Capital Resources.
At June 25, 2000 the Company had negative working capital of $ 3.4 million and a
cash balance of $0.6 million compared to negative working capital of $3.7
million and a cash balance of $0.4 million at December 26, 1999. The change in
working capital was primarily attributable to a significant reduction in current
debt.
The Company's need for capital resources has resulted from, and for the
foreseeable future is expected to relate primarily to, the construction of
restaurants. Historically, the Company has funded its day-to-day operations
through its operating cash flow, while funding growth through a combination of
bank borrowing, loans from stockholders/officers, the sale of Debentures, the
sale of Preferred Stock, the issuance of warrants, loans and tenant allowances
from certain of its landlords and through joint venture arrangements. At June
25, 2000, the Company had existing bank borrowing of $ 1.5 million, a loan from
a San Jose Grill L.L.C. member of $ 0.1
10
<PAGE>
million, an SBA loan of $ 0.1 million, loans from stockholders/officers of $ 0.7
million, equipment loans of $ 1.6 million and loans/advances from a landlord of
$ 0.1 million.
On August 1, 2000 the Company received a $400,000 Loan from private individuals.
The Loan bears interest at 9% and is payable in monthly installments over the
next four years. In connection with the loan, the Company issued 40,000
warrants.
In July 2000 the holder of Series I Convertible Preferred Stock converted 1,000
shares of preferred stock into 200,000 shares of common stock.
As of June 25, 2000 the Company had opened a majority owned hotel-based The
Grill restaurant in the Chicago Westin Hotel. The cost to construct the Chicago
Grill was $3.4 million.
Management anticipates that new non-hotel based restaurants will cost between $1
million and $2 million per restaurant to build and open depending upon the
location and available tenant allowances. Hotel based restaurants may involve
remodeling existing facilities, substantial capital contributions from the hotel
operators and other factors which will cause the cost to the Company of opening
such restaurants to be substantially less than the Company's cost to build and
open non-hotel based restaurants.
The Company may enter into investment/loan arrangements in the future on terms
similar to the San Jose Fairmont Grill and Chicago Westin Grill arrangements to
provide for the funding of selected restaurants. Management believes that the
Company has adequate resources on hand and operating cash flow to sustain
operations for at least the following 12 months. In order to fund the opening of
additional restaurants, the Company will require, and intends to raise,
additional capital through additional bank borrowings, the issuance of debt or
equity securities, or the formation of additional investment/loan arrangements,
or a combination thereof. The Company presently has no commitments in that
regard.
Future Accounting Requirements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives will be recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction. The
new rules will be effective the first quarter of 2001, as amended by SFAS No.
137 in June 1999. The Company does not believe that the new standard will have a
material impact on the Company's financial statements.
Certain Factors Affecting Future Operating Results
In addition to the opening of a new restaurant during 2000, as described above,
and the various factors described in the Company's Annual Report on Form 10-K
for the year ended December 26, 1999, the following developments during the
first half of this year may impact future operating results.
On July 11, 2000 the Company made a strategic decision to close, and closed, its
Pizzeria Uno restaurant in Media, Pennsylvania due to declining operations.
Management does not anticipate incurring significant losses due to the closure.
The Company continues its efforts to sell its Pizza Restaurants.
There can be no assurance that the Company will be successful in opening new
restaurants in accordance with its anticipated opening schedule; that sufficient
capital resources will be available to fund scheduled restaurant openings and
start-up costs; that new restaurants can be operated profitably; that hotel
restaurant management services will produce satisfactory cash flow and operating
results to support such operations; or that additional hotels will elect to
retain the Company's hotel restaurant management services.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates on funded
debt. This exposure relates to its $2,100,000 revolving credit and term loan
facility (the "Credit Facility"). Borrowings outstanding under the Credit
Facility totaled $ 1,500,000 at June 25, 2000. Borrowings under the Credit
Facility bear interest at the lender's reference rate plus 0.25%. A hypothetical
1% interest rate change would not have a material impact on the Company's
results of operations.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) On June 21, 2000, an annual meeting of shareholders of Grill Concepts, Inc.
was held.
(b) The following directors were elected (by the vote indicated) at such
meeting:
Robert Wechsler 2,705,810 For 0 Against 3,937 Abstain
Michael Weinstock 2,705,810 For 0 Against 3,937 Abstain
Charles Frank 2,705,810 For 0 Against 3,937 Abstain
Glenn Golenberg 2,705,810 For 0 Against 3,937 Abstain
Keith Wolff 2,705,810 For 0 Against 3,937 Abstain
Robert Spivak 2,705,810 For 0 Against 3,937 Abstain
(c) In addition to the election of directors as noted above, the following
matters were voted upon at such meeting:
(i) Ratification of appointment of PricewaterhouseCoopers LLP as the
Company's independent certifying accountants ( 2,707,205 For, 25
Against, 2,517 Abstain)
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GRILL CONCEPTS, INC.
Dated: August 8, 2000 By: /s/ ROBERT SPIVAK
_______________________________
Robert Spivak, President
and C.E.O
Dated: August 8, 2000 By: /s/ MARGARET L. DEBEVEC
_______________________________
Margaret L. Debevec, Principal
Accounting Officer
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