<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 3, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ------------------
Commission file number 1-12104
BACK YARD BURGERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 64-0737163
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2768 COLONY PARK DRIVE, MEMPHIS, TENNESSEE 38118
(Address of principal executive offices)
(901) 367-0888
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class - Common stock, par value $.01 per share
Outstanding at August 12, 1999 - 4,612,213
<PAGE> 2
BACK YARD BURGERS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I - Financial Information
Item 1 - Unaudited Consolidated Financial Statements:
Balance Sheet as of July 3, 1999 and January 2, 1999 3
Statement of Income for the Thirteen and Twenty-Six Weeks Ended
July 3, 1999 and July 4, 1998 4
Statement of Cash Flows for the Twenty-Six Weeks Ended
July 3, 1999 and July 4, 1998 5
Notes to Unaudited Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
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 13
Item 4 - Submission of Matters to a Vote
of Security Holders 13
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
BACK YARD BURGERS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1999 1999
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,090 $ 815
Receivables, net 238 200
Inventories 218 202
Current deferred tax asset 200 104
Prepaid expenses and other current assets 76 96
-------- --------
Total current assets 1,822 1,417
Property and equipment, at depreciated cost 14,350 13,365
Intangible assets 1,300 1,352
Noncurrent deferred tax asset 500 452
Note receivable 95 98
Other assets 269 264
-------- --------
$ 18,336 $ 16,948
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 482 $ 467
Accrued expenses 1,007 850
Income taxes payable 247 205
Current installments of long-term debt 444 361
-------- --------
Total current liabilities 2,180 1,883
Long-term debt, less current installments 5,132 5,097
Deferred franchise fees 362 254
Other deferred income 801 --
Other deferred liabilities 130 128
-------- --------
Total liabilities 8,605 7,362
-------- --------
Commitments and contingencies -- --
Stockholders' equity
Preferred stock, $.01 par value, 2,000,000 shares authorized; 23,123 shares
issued and outstanding at July 3, 1999
(23,123 at January 2, 1999) -- --
Common stock, $.01 par value, 12,000,000 shares authorized;
4,606,011 shares issued and outstanding at July 3, 1999
(4,596,471 at January 2, 1999) 46 46
Paid-in capital 10,114 10,098
Retained deficit (429) (558)
-------- --------
Total stockholders' equity 9,731 9,586
-------- --------
$ 18,336 $ 16,948
======== ========
</TABLE>
See accompanying notes to unaudited financial statements
3
<PAGE> 4
BACK YARD BURGERS, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
JULY 3, JULY 4, JULY 3, JULY 4,
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales $ 7,111 $ 6,598 $ 13,286 $ 12,406
Franchise and area development fees -- 1 54 50
Royalty fees 398 342 740 645
Advertising fees 136 127 279 237
Other 118 65 255 162
------- ------- -------- --------
Total revenues 7,763 7,133 14,614 13,500
------- ------- -------- --------
Expenses:
Cost of restaurant sales 2,453 2,127 4,572 3,987
Restaurant operating expenses 3,353 3,010 6,329 5,832
General and administrative 900 848 1,725 1,644
Advertising 439 382 851 729
Depreciation and amortization 322 291 647 575
------- ------- -------- --------
Total expenses 7,467 6,658 14,124 12,767
------- ------- -------- --------
Operating income 296 475 490 733
Interest income 7 6 14 14
Interest expense (144) (111) (273) (210)
Other, net (14) (4) (16) (6)
------- ------- -------- --------
Income before income taxes 145 366 215 531
Income taxes 58 -- 86 --
------- ------- -------- --------
Net income $ 87 $ 366 $ 129 $ 531
======= ======= ======== ========
Income per share:
Basic $ .02 $ .08 $ .03 $ .12
======= ======= ======== ========
Diluted $ .02 $ .08 $ .03 $ .11
======= ======= ======== ========
Weighted average number of common shares
and common equivalent shares outstanding
Basic 4,605 4,580 4,603 4,475
======= ======= ======== ========
Diluted 4,634 4,695 4,635 4,668
======= ======= ======== ========
</TABLE>
See accompanying notes to unaudited financial statements
4
<PAGE> 5
BACK YARD BURGERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
----------------------
JULY 3, JULY 4,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 129 $ 531
Adjustments to reconcile net income to net cash provided
(used) in operating activities
Depreciation and amortization of property and equipment 594 504
Deferred income taxes (144) 0
Amortization of intangible assets 53 53
Amortization of preopening costs -- 18
Provision for losses on receivables 85 97
Gain on sales of assets (6) --
(Increase) decrease in assets
Receivables (123) (43)
Inventories (16) (11)
Prepaid expenses and other current assets 20 (115)
Other assets (6) (20)
Increase (decrease) in liabilities
Accounts payable and accrued expenses 172 (445)
Income taxes payable 42 --
Other deferred income 801 --
Other deferred liabilities 2 10
Deferred franchise and area development fees 108 64
------- -------
Net cash provided by operating activities 1,711 643
------- -------
Cash flows from investing activities:
Proceeds from sale of property and equipment 8 --
Additions to property and equipment (1,578) (2,831)
------- -------
Net cash used in investing activities (1,570) (2,831)
------- -------
Cash flows from financing activities:
Issuance of stock 16 14
Principal payments on long-term debt and capital leases (171) (134)
Proceeds from issuance of long-term debt 289 1,653
Proceeds from exercise of stock options -- 85
------- -------
Net cash provided by financing activities 134 1,618
------- -------
Net increase (decrease) in cash and cash equivalents 275 (570)
Cash and cash equivalents
Beginning of period 815 1,328
------- -------
End of period $ 1,090 $ 758
======= =======
Supplemental disclosure of cash flow information
Income taxes paid $ 188 $ --
======= =======
Interest paid $ 273 $ 210
======= =======
</TABLE>
See accompanying notes to unaudited financial statements
5
<PAGE> 6
BACK YARD BURGERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Back Yard Burgers, Inc. owns and operates quick-service and fast-casual
restaurants and is engaged in the sale of franchises and the collection of
royalties based upon related franchise sales. The company grants franchise
rights for the use of "Back Yard Burgers," "BYB" or "BY Burgers" trade names and
other associated trademarks, signs, emblems, logos, slogans and service marks
which have been or may be developed.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include all
information and notes necessary for a fair presentation of financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles. The statements do reflect all adjustments (consisting of
only normal recurring accruals) which are, in the opinion of management,
necessary to present fairly the financial position and results of operations and
cash flows in conformity with generally accepted accounting principles. The
statements should be read in conjunction with the Notes to Financial Statements
for the year ended January 2, 1999 included in the company's 1998 Annual Report.
The financial statements include the accounts of Back Yard Burgers, Inc.
and its wholly-owned subsidiaries, Little Rock Back Yard Burgers, Inc., Atlanta
Burgers BYB Corporation and BYB Properties, Inc., as well as the Back Yard
Burgers National Advertising Fund. All significant intercompany transactions
have been eliminated.
The results of operations for the thirteen and twenty-six week periods are
not necessarily indicative of the results to be expected for the full year.
The company maintains its financial records on a 52-53 week fiscal year
ending on the Saturday closest to December 31.
NOTE 2 - NET INCOME PER SHARE
The company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share, which requires the
presentation of basic and diluted earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
NOTE 3 - DEFERRED FRANCHISE FEES
Amounts received for certain franchise and area development rights, net of
commissions paid, have been deferred. Revenues on individual franchise fees are
recognized when substantially all of the initial services required of the
company have been performed, which generally coincides with the opening of the
franchises. Under the terms of the franchise agreements, these fees are
non-refundable, and may be recognized as income should the franchisee fail to
perform as agreed. Area development fees are recognized on a pro-rata basis as
each unit opens. At July 3, 1999, deferred fees include franchise and area
development rights sold during the following years:
<TABLE>
<CAPTION>
<S> <C>
1999 $162
1998 98
Previous Years 102
----
$362
====
</TABLE>
NOTE 4 - OTHER DEFERRED INCOME
Amounts received from certain vendors relating to future purchases by the
company have been deferred. These funds are recorded as income in a
proportionate manner with respective future purchases. Under the terms of signed
contracts, the company is required to purchase specific volumes in future years.
If these purchase volumes are not met, the funds related to the volume shortages
will be refunded to the vendors.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The company is party to several incidental legal proceedings and claims.
Although the outcome of the proceedings and claims cannot be determined with
certainty, management of the company is of the opinion that it is unlikely that
these proceedings and claims will have a material adverse effect on the
financial condition or results of operations of the company.
6
<PAGE> 7
FORWARD-LOOKING INFORMATION
Certain information included herein may contain statements that are
forward-looking, such as statements related to financial items and results,
plans for future expansion and other business development activities, capital
spending or financing sources, capital structure and the effects of regulation
and competition. Forward-looking statements made by the company are based upon
estimates, projections, beliefs and assumptions of management at the time of
such statements and should not be viewed as guarantees of future performance.
Such forward-looking information involves important risks and uncertainties that
could significantly impact anticipated results in the future and, accordingly,
such results may differ materially from those expressed in any forward-looking
statements by or on behalf of the company. These risks and uncertainties
include, but are not limited to, increased competition within the industry for
customers, qualified labor and desirable locations, increased costs for beef,
chicken or other food products and management decisions related to restaurant
growth, financing, franchising and new product development, as well as items
described under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" below.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
As of July 3, 1999, the Back Yard Burgers system included 84
restaurants, of which 35 were company-operated and 49 were franchised. The
company's revenues are derived primarily from company-operated restaurant
sales, franchise and area development fees and royalty fees. Certain expenses
(cost of restaurant sales, restaurant operating expenses, depreciation and
amortization and advertising) relate directly to company-operated restaurants,
while general and administrative expenses relate to both company-operated
restaurants and franchise operations. The company's revenues and expenses are
affected by the number and timing of the opening of additional restaurants.
Sales for new restaurants in the period immediately following their opening tend
to be high because of trial by public and promotional activities. As a result,
the timing of openings can affect the average volume and other period-to-period
comparisons.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenue,
unless otherwise indicated, of certain items included in the company's
historical operations and operating data for the periods indicated.
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
--------------------------
JULY 3, JULY 4,
1999 1998
------ ------
<S> <C> <C>
Revenues
Restaurant sales 90.9% 91.9%
Franchise and area development fees .4 .4
Royalty fees 5.1 4.8
Advertising fees 1.9 1.8
Other operating revenue 1.7 1.1
----- -----
Total revenue 100.0% 100.0%
===== =====
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
--------------------------
JULY 3, JULY 4,
1999 1998
------ ------
<S> <C> <C>
Costs and Expenses
Cost of restaurant sales (1) 34.4% 32.1%
Restaurant operating expenses (1) 47.6 47.0
General and administrative 11.8 12.2
Advertising 5.8 5.4
Depreciation and amortization 4.4 4.3
Operating income 3.3 5.4
Interest income .1 .1
Interest expense (1.9) (1.6)
Other, net (.1) --
Income before income taxes 1.5 3.9
Income taxes (.6) --
Net income .9 3.9
</TABLE>
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
--------------------------
JULY 3, JULY 4,
1999 1998
------- -------
($000'S)
<S> <C> <C>
System-wide restaurant sales
Company-operated $13,286 $12,406
Franchised 18,921 17,069
------- -------
Total $32,207 $29,475
======= =======
Average annual sales per restaurant open for a
full year (2)
Company-operated $ 774 $ 809
Franchised $ 769 $ 755
System-wide $ 771 $ 776
Number of restaurants
Company-operated 35 31
Franchised 49 44
------- -------
Total 84 75
======= =======
</TABLE>
(1) As a percentage of restaurant sales.
(2) Includes sales for restaurants open for entire trailing twelve-month
period. Restaurants are included in the calculation after the completion
of eighteen months of operation as sales during the six-month period
immediately after the opening tend to be higher due to promotions and
trial by public.
8
<PAGE> 9
COMPARISON OF THE COMPANY'S RESULTS FOR THE THIRTEEN WEEKS ENDED JULY 3, 1999
AND JULY 4, 1998.
RESTAURANT SALES increased 7.8% to $7,111,000 during the thirteen weeks
ended July 3, 1999 compared to $6,598,000 for the same 1998 period. This
increase is primarily the result of the opening of four new company-operated
stores since the year-earlier period. This increase was partially offset by a
decrease in same-store sales of 0.8% for the thirteen weeks ended July 3, 1999.
Company management believes that the decreases in same-store sales for the
thirteen week period are the result of the cannabilization of some
company-operated stores in the Memphis market, as well as the fact that the
year- earlier period represented record same-store sales growth for the company.
ROYALTY FEES increased 16.4% to $398,000 during the thirteen week period
ended July 3, 1999 compared to $342,000 during the same period in 1998. The
increase is due to an increase in franchised restaurant sales upon which the
fees are based. Comparable same-store sales at franchised restaurants open for
more than one year increased 1.8%, representing an increase in royalty fees of
approximately $6,000. Seven franchised restaurants were opened and two
franchised restaurants were closed since July 4, 1998. This increase in net
franchised restaurants open accounted for the remainder of the increase in
royalty fees from the prior year.
ADVERTISING FEES increased 7.1% to $136,000 for the thirteen weeks ended
July 3, 1999 compared to $127,000 during the comparable period in 1998. The
increase in advertising fees is due to the increase in franchised restaurant
sales as noted above, upon which the fees are based.
OTHER REVENUES increased 81.5% to $118,000 for the thirteen weeks ended
July 3, 1999 compared to $65,000 during the year-earlier period. The increase is
due to revenues generated from sub-contractor vending sales at the Memphis Zoo,
where operations began in March of 1999.
COST OF RESTAURANT SALES, consisting of food and paper costs, totaled
$2,453,000 for the thirteen weeks ended July 3, 1999 and $2,127,000 during the
same period in 1998, increasing as a percentage of restaurant sales to 34.5%
from 32.2%. This percentage increase is primarily the result of an increase in
coupons and discounts, increases in the cost of beef as well as an increase in
waste, consisting of prepared food items not sold due to product hold time
requirements of the company and spoilage. The coupon and discount program
resulted in an increase in cost of sales as a percentage of restaurant sales of
1.7%. These increases were offset by minor decreases in the cost of certain
produce and dairy products.
RESTAURANT OPERATING EXPENSES, consisting of labor, supplies, utilities,
maintenance, rent and certain other unit level operating expenses, increased to
$3,353,000 for the thirteen weeks ended July 3, 1999 from $3,010,000 in the
year-earlier period. The percentage of restaurant sales for the thirteen weeks
ended July 3, 1999 was 47.1%, compared to 45.8% for the year-earlier period.
Labor costs as a percentage of sales increased by 0.1% over the year-earlier
period. The remainder of the increase was due to increases in repairs and
maintenance costs and other miscellaneous operating costs incurred during the
period.
GENERAL AND ADMINISTRATIVE COSTS which increased to $900,000 for the
thirteen weeks ended July 3, 1999 from $848,000 in the year-earlier period,
decreased as a percentage of total revenue for the thirteen weeks ended July 3,
1999 to 11.6% from 11.9% in the same period in 1998. The increase of $52,000 is
primarily the result of increased spending in the areas of recruiting and
training in efforts to attract quality employees as well as continuing to
enhance customer service.
ADVERTISING EXPENSE which increased to $439,000 for the thirteen weeks
ended July 3, 1999 from $382,000 in the same period in 1998, increased as a
percentage of total revenues to 5.7% from 5.4%. This is the result of an
increase in the number of company-operated restaurants creating the need for
additional local advertising as well as an increase in advertising fees, as
described above, which are used for the development and production of marketing
campaigns and collateral material.
9
<PAGE> 10
INTEREST EXPENSE increased 29.7% to $144,000 for the thirteen weeks ended
July 3, 1999 from $111,000 in the year-earlier period. This is due to a net
increase in long-term debt of $976,000, or 21.2%, since July 4, 1998.
INCOME TAX EXPENSE was $58,000 for the thirteen weeks ended July 3, 1999
compared to zero in the year-earlier period. In recent profitable years, the
company has been able to offset net income with previous net operating loss
carryforwards. For the thirteen weeks ended July 3, 1999 the company had income
tax expense based on the calculation of alternative minimum tax.
COMPARISON OF THE COMPANY'S RESULTS FOR THE TWENTY-SIX WEEKS ENDED JULY 3, 1999
AND JULY 4, 1998.
RESTAURANT SALES increased 7.1% to $13,286,000 during the twenty-six weeks
ended July 3, 1999 compared to $12,406,000 for the same 1998 period. The
increase is due primarily to the opening of four new company-operated stores
since the year-earlier period as well as a 2.0% increase in same store sales for
the twenty-six week period. Company management believes that the increases in
same-store sales are the results of improved customer service; the retrofit of
three double drive-thrus to dine-in facilities with single drive-thrus, and
ongoing training and attention to improved customer service.
FRANCHISE AND AREA DEVELOPMENT FEES increased 8.0% to $54,000 for the
twenty-six weeks ended July 3, 1999 compared to $50,000 during the comparable
period in 1998. There was an increase in fees recognized from area development
agreements which expired over the year-earlier period of $10,000. However, this
increase in fees was partially offset by lower franchise fees derived from new
stores opened by existing franchisees.
ROYALTY FEES increased 14.7% to $740,000 during the twenty-six week period
ended July 3, 1999 compared to $645,000 during the same period in 1998. The
increase is due to an increase in franchised restaurant sales upon which the
fees are based. Comparable same-store sales at franchised restaurants open for
more than one year increased 2.1%, representing an increase in royalty fees of
approximately $15,000. Seven franchised restaurants were opened and two
franchised restaurants were closed since July 4, 1998. This increase in net
franchised restaurants open accounted for the remainder of the increase in
royalty fees from the prior year.
ADVERTISING FEES increased 17.7% to $279,000 for the twenty-six weeks ended
July 3, 1999 compared to $237,000 during the comparable period in 1998. The
increase in advertising fees is related to the increase in franchised restaurant
sales as noted above, upon which the fees are based.
OTHER REVENUES increased 57.4% to $255,000 for the thirteen weeks ended
July 3, 1999 compared to $162,000 during the year-earlier period. The increase
is due to revenues generated from sub-contractor vending sales at the Memphis
Zoo, where operations began in March of 1999.
COST OF RESTAURANT SALES, consisting of food and paper costs, totaled
$4,572,000 for the twenty-six weeks ended July 3, 1999 and $3,987,000 during the
same period in 1998, increasing as a percentage of restaurant sales to 34.4%
from 32.1%. This percentage increase is primarily the result of an increase in
coupons and discounts, increases in the cost of beef as well as an increase in
waste, consisting of prepared food items not sold due to product hold time
requirements of the company and spoilage. The coupon and discount program
resulted in an increase in cost of sales as a percentage of restaurant sales of
1.6%. These increases were offset by minor decreases in the cost of certain
produce and dairy products.
RESTAURANT OPERATING EXPENSES, consisting of labor, supplies, utilities,
maintenance, rent and certain other unit level operating expenses, increased to
$6,329,000 for the twenty-six weeks ended July 3, 1999 from $5,832,000 in the
year-earlier period. The percentage of restaurant sales for the twenty-six weeks
ended July 3, 1999 was 47.6%, compared to 47.0% for the year-earlier period.
Labor costs as a percentage of sales increased by 0.2% over the year-earlier
period. The remainder of the increase was due to increases in repairs and
maintenance costs and other miscellaneous operating costs incurred during the
period.
10
<PAGE> 11
GENERAL AND ADMINISTRATIVE COSTS which increased to $1,725,000 for the
twenty-six weeks ended July 3, 1999 from $1,644,000 in the year-earlier period,
decreased as a percentage of total revenue for the twenty-six weeks ended July
3, 1999 to 11.8% from 12.2% in the same period in 1998. The increase of $81,000
is primarily the result of increased spending in the areas of recruiting and
training in efforts to attract quality employees as well as continuing to
enhance customer service.
ADVERTISING EXPENSE which increased to $851,000 for the twenty-six weeks
ended July 3, 1999 from $729,000 in the same period in 1998, increased as a
percentage of total revenues to 5.8% from 5.4%. This is the result of an
increase in the number of company-operated restaurants creating the need for
additional local advertising as well as an increase in advertising fees, as
described above, which are used for the development and production of marketing
campaigns and collateral material.
INTEREST EXPENSE increased 30.0% to $273,000 for the twenty-six weeks ended
July 3, 1999 from $210,000 in the year-earlier period. This is due to a net
increase in long-term debt of $976,000, or 21.2%, since July 4, 1998.
INCOME TAX EXPENSE was $86,000 for the twenty-six weeks ended July 3, 1999
compared to zero in the year-earlier period. In recent profitable years, the
company has been able to offset net income with previous net operating loss
carryforwards. For the twenty-six weeks ended July 3, 1999 the company had
income tax expense based on the calculation of alternative minimum tax.
IMPAIRMENT OF LONG-LIVED ASSETS
The company reviews the carrying value of its long-lived and intangible
assets for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable. A new cost
basis is established for impaired assets based on the fair value of these assets
as of the date the assets are determined to be impaired.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures totaled $1,578,000 for the twenty-six weeks ended July
3, 1999 and $2,831,000 for the same period of 1998. Generally, the company
constructs its restaurant buildings on leased properties for its
company-operated restaurants. The average monthly lease cost for the 18 company-
operated restaurants on leased sites at July 3, 1999 is approximately $3,148 per
month. For the 10 restaurants where the company leases the building as well as
the site, the average monthly lease cost is approximately $4,741.
Cash from operations for the company is primarily affected by net earnings
adjusted for deferred franchise fees and non-cash expenses which consist
primarily of depreciation and amortization. Depreciation and amortization
totaled $647,000 for the twenty-six weeks ended July 3, 1999 and $575,000 for
the year-earlier period. This increase is primarily the result of the addition
of four company-operated restaurants and the conversion of three double
drive-thru facilities to dine-in facilities with a single drive-thru since the
year-earlier period.
Cash provided by operations for the twenty-six week period ended July 3,
1999 and July 4, 1998 was $1,711,000 and $643,000, respectively. Since January
1, 1996, cash from operations and debt have been used for the addition of dining
rooms to certain existing double drive-thru restaurants, new restaurants and
equipment.
As of July 3, 1999, the company had total long-term debt of $5,576,000 and
unused lines of credit and loan commitments of potential additional borrowings
of $2,230,000.
The company is planning to spend approximately $3,000,000 on capital
expenditures during 1999 and plans to fund these expenditures through internally
generated cash flow as well as the borrowing commitments secured in 1999 or
before.
SEASONALITY AND INFLATION
While the company does not believe that seasonality affects its operations
in a materially adverse manner, first quarter results will generally be lower
than other quarters due to seasonal climate conditions in the locations of many
of its restaurants. Management does not believe that inflation has had a
material effect on income during the twenty-six weeks ended July 3, 1999.
Increases in food, labor or other
11
<PAGE> 12
operating costs could adversely affect the company's operations should
comparable menu price increases not be sustainable.
CONVERSION OF PREFERRED STOCK
The company's preferred stockholders have the right to convert preferred
stock to common stock, and the company anticipates that all shares of preferred
stock will eventually be converted. Such conversion began on July 5, 1995, at
which time there were 1,199,979 shares of preferred stock outstanding. As of
July 3, 1999, only 23,123 shares have yet to be converted.
YEAR 2000
The fact that many computers and other systems with embedded microchip
processors were programmed to record only the last two digits of the year for
all dates encountered gives rise to the year 2000 issue. On January 1, 2000,
many date-sensitive calculations could potentially go awry, creating substantial
negative ramifications throughout the business world.
The company has reviewed its computer systems and software and has
identified four major areas that are critical to the company with respect to the
year 2000 issue: (1) communications hardware and software, (2) network
hardware/software and accounting software, (3) point-of-sale terminals, and (4)
key third parties.
While the company has taken certain actions to address the year 2000 issue,
it has not completed its analysis of the issue. During 1998, the company
upgraded its phone system with a system represented by the outside vendor to be
year 2000 compliant. The company also has communication software in place with
certain financial institutions and is in the process of confirming that such
software is in fact year 2000 compliant. The company has completed a network and
accounting software upgrade, which included the replacement of the existing
network server as well as the replacement and enhancement of certain personal
computers. The company's accounting software is supplied by an outside vendor,
and the vendor has confirmed that the software installed upon upgrading the
network is year 2000 compliant. The company is also in the process of
determining whether certain of its spreadsheet and database software will need
to be upgraded during 1999. The company estimates the total cost of the software
and hardware enhancements and upgrades necessary to become year 2000 compliant
to be approximately $30,000.
All existing point-of-sale terminals used by the company and its
franchisees have been represented by outside suppliers to be year 2000 compliant
and all terminals currently being installed are also in compliance.
One of the greatest risks of year 2000 exists within the supply chain of
most businesses, and relates to year 2000 compliance by key third parties,
including food product suppliers, energy providers and others. These parties are
crucial to the continuing operations of the company. There is a certain amount
of uncontrollable risk associated with third party year 2000 readiness; however,
the company plans to gain assurance from key third parties, including all
franchisees and their suppliers, as to their year 2000 compliance efforts via
written confirmation by September 30, 1999.
The failure by the company to properly address its internal year 2000
issues or the inability of outside parties to supply goods and services
necessary to produce and sell the company's products could have a material
adverse impact on the results of operations, liquidity and the financial
condition of the company. These problems could ultimately result in the
cessation of material operations for an unknown period of time.
Although no formal contingency plan is currently in place, the company's
goals are to: (1) achieve internal year 2000 readiness with respect to all
material operations prior to October 31, 1999, (2) appropriately address any
material concerns over third party readiness with qualified alternate suppliers
as necessary, also prior to October 31, 1999, and (3) continue to monitor the
year 2000 issue and take all appropriate actions through early 2000.
KNOWN TRENDS AND UNCERTAINTIES
Labor will continue to be a critical factor for the company in the
foreseeable future. In most areas where the company operates restaurants, there
is a shortage of suitable labor. This, in itself, could result in higher wages
as the competition for employees intensifies, not only in the restaurant
industry, but in
12
<PAGE> 13
practically all retail and service industries. It will be crucial for the
company to develop and maintain programs to attract and retain quality
employees.
During the twenty-six weeks ended July 3, 1999, there were increases in the
cost of beef; however, management of the company expects the costs of beef and
chicken to continue to rise in the future, and that it will be difficult to
raise menu prices to fully cover these anticipated increases due to the
competitive state of the quick-service restaurant industry. Additional margin
improvements would have to be made through operational improvements, equipment
advances and increased volumes to help offset these potential increases.
Due to the competitive nature of the restaurant industry, site selection
will become more difficult as an increasing number of businesses will be vying
for locations with similar characteristics. This could result in higher
occupancy costs for prime locations.
Same-store sales increased 2.0% during the first twenty-six week period of
1999. The company implemented a balanced marketing strategy focused on
increasing guest awareness and increasing the frequency of guest visits. The
company will continue this strategy in 1999, however, there are no assurances
that the increases in same-store sales will continue.
The future success of the company will be determined, to a great extent, by
its ability to positively address these issues.
PART I (CONTINUED)
Item 3 Quantitative and Qualitative Disclosures About Market Risk
None
PART II OTHER INFORMATION
Item 1 Legal Proceedings
The company is involved in litigation incidental to its business,
including, but not necessarily limited to, claims alleging violations of the
Civil Rights Act of 1964 and/or discrimination. Aside from the cost of defense,
such litigation is not presently considered by management to be material to the
financial condition or results of operations of the company.
Item 2 Changes in Securities and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
On May 20, 1999, the Company held its Annual Meeting of
Stockholders in Memphis, Tennessee, for the purpose of: (1)
electing two Class II members to the Board of Directors; (2)
ratifying the appointment of PricewaterhouseCoopers LLP as
independent public accountants for 1999, and (3) to transact
such other business as may have properly come before the
meeting or an adjournment thereof.
The following table sets forth the Class II directors elected
at such meeting and the number of votes cast by the Company's
stockholders for, against and withheld for each director:
<TABLE>
<CAPTION>
Directors For Against Withheld
--------- --- ------- --------
<S> <C> <C> <C>
William B. Raiford III 4,229,983 3,450 43,285
Stephen J. King 4,229,983 3,450 43,285
</TABLE>
13
<PAGE> 14
The appointment of PricewaterhouseCoopers LLP as independent
public accountants was ratified at the meeting as follows:
<TABLE>
<S> <C>
For 4,229,983
Against 3,450
Abstentions 43,285
</TABLE>
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
Exhibits
10.32 - Lease agreement by and between Amplicon, Inc.
and Back Yard Burgers, Inc. dated May 6, 1999.
11 - Calculation of Income Per Share
27 - Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
Reports on Form 8-K
None
14
<PAGE> 15
SIGNATURES
In accordance with 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 thereto duly authorized.
BACK YARD BURGERS, INC.
Date: May 17, 1999 By: /s/Lattimore M. Michael
- ------------------ -------------------------------
Lattimore M. Michael
Chairman and Chief Executive
Officer
Date: May 17, 1999 By: /s/Michael G. Webb
- ------------------ -------------------------------
Michael G. Webb
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 10.32
[LOGO] AMPLICON FINANCIAL LEASE
5 HUTTON CENTRE DRIVE, SUITE 500 - SANTA ANA, CALIFORNIA 92707 AGREEMENT
714.751-7551 - 800.755-5055 - FACSIMILE 714.751-7557
ORDER NO. OL-10575
- -------------------------------------------------------------------------------
LESSEE
Back Yard Burgers, Inc.
- -------------------------------------------------------------------------------
STREET CITY STATE COUNTY ZIP
2768 Colony Park Drive Memphis TN Shelby 38118
- -------------------------------------------------------------------------------
1. AGREEMENT/LEASE: Amplicon, Inc. ("Amplicon") agrees to lease to Lessee the
hardware, software and/or other equipment ("Property") described on the
Lease Schedule (s) ("Schedule(s)") referencing this Lease Agreement
("Agreement") and Lessee agrees to lease from Amplicon the Property subject
to the terms set forth herein and on each Schedule(s) that the parties may
from time to time enter into with respect to this Agreement. Each Schedule
identified as being a part of this Agreement incorporates the terms of this
Agreement and constitutes a separate lease agreement and is referred to
herein as the "Lease." The Lease is in force and is binding upon Lessee and
Amplicon upon signed acceptance by Amplicon.
2. UNIFORM COMMERCIAL CODE ACKNOWLEDGMENT: Lessee acknowledges that it has
received and approved any written "Supply contract" covering the Property
purchased from the Supplier for lease and Amplicon has informed or advised
Lessee, either previously or by this lease, of the following: (i) the
identity of the Supplier; (ii) that Lessee may have rights under the Supply
Contract; and (iii) that Lessee may contact the Supplier for a description
of any such rights. This Lease is a "Finance Lease." (The terms "Finance
Lease," "Supply Contract" and "Supplier" as used in this Lease have the
meanings only as ascribed to them under Division 10 of the California
Uniform Commercial Code and have no effect on any tax or accounting
treatment of the Lease). This provision survives termination of the Lease.
3. NO WARRANTIES: AMPLICON IS NOT THE MANUFACTURER, DEVELOPER, PUBLISHER,
DISTRIBUTOR, LICENSOR OR "SUPPLIER" OF THE PROPERTY AND MAKES NO EXPRESS OR
IMPLIED WARRANTY OR REPRESENTATION AS TO FITNESS, QUALITY, DESIGN,
CONDITION, CAPACITY, SUITABILITY, VALUE, MERCHANTABILITY, OR PERFORMANCE OF
THE PROPERTY OR THE MATERIAL OR WORKMANSHIP THEREOF OR AGAINST INTERFERENCE
BY LICENSORS OR OTHER THIRD PARTIES, IT BEING AGREED THAT THE PROPERTY IS
LEASED "AS IS" AND THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. Lessee
selected the Property and represents that all the Property is suitable for
Lessee's purposes. Amplicon assigns to Lessee during the term of the lease
any warranty rights it may have received from the Supplier as a result of
Amplicon's purchase of the Property. If Lessee has any claims regarding the
Property or any other matter arising from Lessee's relationship with the
Supplier, Lessee must make them against the Supplier. This provision
survives termination of the Lease.
4. AUTHORIZATION DATE AND LEASE DURATION: A Schedule commences and rent is due
beginning on the date that Lessee certifies in writing to Amplicon that all
of the Property has been received and accepted by Lessee as installed,
tested and ready for use, and Lessee authorizes Amplicon in writing to
disburse payment to the Supplier ("Authorization Date"). Unless and until
Lessee provides such written authorization, Amplicon will not disburse
payment to Suppliers. The Term of each Schedule is reflected on the
Schedule and begins on the first day of the calendar quarter following the
Authorization Date. A calendar quarter commences on the first day of
January, April, July and October. Lessee has the right to use the Property
at the specific locations shown on the Schedule throughout the duration of
this Lease in accordance with the provisions of this Lease. The Term
extends for an additional twelve month period ("Extension Term") at the
rental rate delineated on the Schedule unless Lessee provides to Amplicon
written notice of Lessee's election not to extend the Term at least one
hundred eighty days prior to the expiration of the Term.
5. RENTALS: The rent payable is shown on the Schedule(s). The quarterly rent
is due to Amplicon, in advance, for each quarter or portion of a quarter
beginning on the Authorization Date and continuing for each quarter that
this Lease is in effect. Rent for portions of a quarter are based on a
daily rental equal to one-ninetieth of the quarterly rent. ALL RENTS SHALL
BE PAID WITHOUT NOTICE OR DEMAND AND WITHOUT ABATEMENT, DEDUCTION OR SETOFF
OF ANY AMOUNT WHATSOEVER. THE OPERATION AND USE OF THE PROPERTY IS SOLELY
AT THE RISK OF LESSEE AND THE OBLIGATION OF LESSEE TO PAY RENT UNDER THE
LEASE SHALL BE ABSOLUTE AND UNCONDITIONAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, LESSEE HEREBY WAIVES THE FOLLOWING RIGHTS AND REMEDIES
CONFERRED UPON LESSEE BY LAW: (I) RIGHT TO CANCEL OR TERMINATE THIS LEASE,
(II) RIGHT TO REJECT THE PROPERTY, (III) RIGHT TO REVOKE ACCEPTANCE OF THE
PROPERTY, (IV) RIGHT TO RECOVER DAMAGES FROM AMPLICON FOR ANY BREACH OF
WARRANTY, AND (V) RIGHT TO RECOVER ANY CONSEQUENTIAL DAMAGES WHATSOEVER.
Rents will be paid to Amplicon unless otherwise instructed in writing by
Amplicon or its assignee.
----------------------------
THIS LEASE AGREEMENT AND THE APPLICABLE SCHEDULE(S) CONTAIN THE ENTIRE
AGREEMENT BETWEEN AMPLICON AND LESSEE WITH RESPECT TO THE SUBJECT MATTER
HEREOF. THE LEASE CAN ONLY BE MODIFIED IN WRITING, WITH SUCH MODIFICATIONS
SIGNED BY A PERSON AUTHORIZED TO SIGN AGREEMENTS ON BEHALF OF LESSEE AND BY
AN AUTHORIZED SIGNER OF AMPLICON. NO ORAL OR OTHER WRITTEN AGREEMENTS,
REPRESENTATIONS OR PROMISES SHALL BE RELIED UPON BY, OR BE BINDING ON, THE
PARTIES UNLESS MADE A PART OF THIS LEASE BY A WRITTEN MODIFICATION SIGNED
BY AN AUTHORIZED SIGNER OF LESSEE AND AMPLICON.
LESSEE: AMPLICON, INC.
------------------------------ -------------------
(Signature) (Signature)
This Lease is subject to acceptance by Amplicon's Finance committee. BY
SIGNING BELOW, THE SIGNER CERTIFIES THAT HE OR SHE HAS READ THIS LEASE
AGREEMENT, INCLUDING THE REVERSE SIDE, HAS HAD AN OPPORTUNITY TO DISCUSS
ITS TERMS WITH AMPLICON, AND IS AUTHORIZED TO SIGN ON BEHALF OF LESSEE.
Until this Lease has been signed by an authorized signer of Amplicon, it
will constitute a firm offer by Lessee.
LESSEE/OFFEROR AMPLICON, INC.
OFFER: Back Yard Burgers, Inc. ACCEPTANCE:
By: By:
------------------------------- -------------------------------
Name: Michael G. Webb Name: Amplicon Finance Committee
----------------------------- ----------------------------
Title: Chief Financial Officer Title: Amplicon Finance Committee
---------------------------- ---------------------------
Date: May 6, 1999 Date: May 6, 1999
---------------------------- ----------------------------
<PAGE> 2
6. INDEMNITY: Lessee assumes liability for, and agrees at its own expense to
indemnify and defend Amplicon, its employees, officers, directors and
assigns, from and against any and all claims, liabilities, losses, damages,
and expenses (including legal expenses) of every kind or nature (including,
without limitation, claims based upon strict liability) arising out of the
use, condition (including latent and other defects, whether or not
discoverable by Lessee or Amplicon), operation or ownership of any items of
Property (including, without limitation, any claim for patent, trademark or
copyright infringement) or for any interruptions of service, loss of
business or consequential damages. These indemnities and assumptions
survive the termination of this Lease.
7. PERFORMANCE OF LESSEE'S OBLIGATIONS BY AMPLICON: If Lessee fails to perform
any of its obligations under this Lease, Amplicon may, at its option
perform them for Lessee without waiving Lessee's default. Any amount paid
by Amplicon, and any expense (including reasonable attorney's fees) or any
other liability incurred by Amplicon as a result of its performance of
Lessee's obligations will be payable by Lessee to Amplicon upon demand.
8. FURTHER ASSURANCES AND NOTICES: Lessee's signing of this Lease constitutes
a firm offer. In consideration of Amplicon's time and effort in reviewing
and acting on the offer, Lessee agrees that its offer is irrevocable for
twenty business days after Amplicon's receipt of the offer and of all
credit information requested by Amplicon. Amplicon's signing of the Lease,
including the Schedule, constitutes acceptance of Lessee's offer. Lessee
agrees to sign and provide any documents which Amplicon deems necessary for
the signing and filing of Uniform Commercial Code (UCC) Financing
Statements (which Lessee agrees may be signed by Amplicon on Lessee's
behalf). Lessee authorizes Amplicon to insert applicable dates as necessary
to complete all documentation for the Lease. Prior to Amplicon's acceptance
of the Lease and for the duration of the Lease, Lessee agrees to promptly
provide Amplicon with all credit information reasonably requested by
Amplicon including, but not limited to, comparative audited financial
statements for the most current annual and interim reporting periods.
Lessee's failure to provide such information to Amplicon is an event of
default under the Lease. ALL NOTICES TO AMPLICON MUST BE IN WRITING AND
SENT CERTIFIED MAIL RETURN RECEIPT REQUESTED TO THE ADDRESS SHOWN ABOVE OR
SUCH OTHER ADDRESS AS TO WHICH LESSEE HAS BEEN NOTIFIED IN WRITING.
9. DEFAULT: If rent or any other amount is not paid within ten days of its due
date, Lessee agrees to pay a late charge equal to five percent (5%) of the
unpaid amount. Each month thereafter, past due amounts remaining unpaid
hereunder shall bear interest at the lesser of one and one half percent
1 1/2%) per month, compounded monthly or the maximum rate allowed by law.
An Event of Default shall occur if: (a) Lessee fails to pay any rent or
other payment under the Lease when due and the failure continues for ten
days; (b) Lessee fails to perform or observe any of the covenants or
obligations in this Lease other than Lessee's rental obligations, and such
failure is not cured within ten days after written notice has been
provided; (c) Lessee makes an assignment for the benefit of its creditors,
files any petition or takes any action under any bankruptcy, reorganization
or insolvency laws; (d) an involuntary petition is filed under any
bankruptcy statute against Lessee or any receiver, trustee or custodian is
appointed to take possession of Lessee's properties, unless such petition
or appointment is set aside or withdrawn within sixty days of said filing
or appointment; (e) Lessee attempts to or does remove, transfer, sell,
sublicense, encumber, part with possession, or sublet any of the Property;
(f) Lessee attempts to assign or transfer this Lease or its interest under
the Lease or moves any of the Property from the locations(s) set forth on
the Schedule without Amplicon's prior written consent; or (g) Lessee
undergoes a sales, buyout, change in control, or change in ownership of any
type, form or manner which, as judged solely by Amplicon, results in a
material deterioration in Lessee's credit worthiness.
10. REMEDIES: Upon an Event of Default, Amplicon may exercise at its sole
option any one or more of the remedies permitted by law, including but not
limited to the following: (a) through legal action, enforce performance by
Lessee of the applicable covenants and obligations of this Lease or recover
damages for the breach of those covenants or obligations; (b) terminate the
Lease and Lessee's rights under the Lease; (c) by notice in writing to
Lessee, recover all amounts due on or before the date Amplicon declared
this Lease to be in default, plus, as liquidated damages for the loss of a
bargain and not as a penalty, accelerate and declare to be immediately due
and payable all rentals and other sums payable under the Lease without any
presentment, demand, protest or further notice (all of which are hereby
expressly waived by Lessee), at which time the same shall become
immediately due and payable; and (d) take immediate possession of the
Property, or any part of the Property, from Lessee free from claims by
Lessee. In the case of Software, it is agreed that Lessee's unauthorized
use, disclosure, or transfer of the Software will cause Amplicon
significant damages which, at the time the parties enter the lease, are
impossible to quantify or predict. Therefore, if Lessee is found to be
using (in any manner) all or any portion of the Software after the
termination of this Lease, or if Supplier terminates a license of Lessee's
right to use the Software for an alleged breach of the use, disclosure, or
transfer restrictions imposed on Lessee, the parties hereby agree that
liquidated damages shall be payable immediately by Lessee to Amplicon in an
amount which is equal to two times the amount paid by Amplicon for the
Software. The exercise of any of the foregoing remedies by Amplicon will
not constitute a termination of this Lease unless Amplicon so notifies
Lessee in writing. If Amplicon repossesses the Property, Amplicon may rent
or sell the Property in such a manner and at such times as Amplicon may
determine and without notice to Lessee. In the event Amplicon rents the
property, any rentals received by Amplicon for the remaining Term(s) of the
Schedule shall be applied to the payment of: (i) all costs and expenses
including reasonable attorneys' fees) incurred by Amplicon in enforcing its
remedies under this Lease, and (ii) the rentals for the remainder of the
Term(s) and all other sums then remaining unpaid under this Lease. All
rentals received by Amplicon for the period commencing after the remaining
Term(s) shall be retained by Amplicon. Lessee will remain liable to
Amplicon to the extent that the aggregate amount of the sums referred to in
clauses (i) and (ii) above exceed the aggregate rentals received by
Amplicon under such agreements for the remaining Term(s) applicable to the
Property covered by such agreements. In the event that Amplicon sells the
Property, the proceeds will be applied to the sum of: (1) all costs and
expenses (including reasonable attorneys' fees) incurred by Amplicon in
enforcing its remedies under this Lease and in disposing of the Property,
(2) the rentals accrued under this Lease, but unpaid up to the time of such
disposition, (3) any and all other sums other than rentals then owing to
Amplicon by Lessee under the Lease, and (4) the stipulated value as would
be determined in the event of a Casualty Occurrence (as defined in the
terms and conditions to the Schedule) on the date of the Property's
disposition. The remaining balance of such proceeds, if any, will be
applied first to reimburse Lessee for any sums previously paid by Lessee as
liquidated damages (as set forth in (c) above), and any remaining amounts
will be retained by Amplicon. Lessee will remain liable to Amplicon to the
extent that the aggregate amount of the sums referred to in clauses (1)
through (4) above exceeds the proceeds received by Amplicon in connection
with the disposition of the Property. Amplicon's remedies under this Lease
shall not be deemed exclusive. Waiver of any default or breach of this
Lease shall not be construed as a waiver of subsequent or continuing
defaults or breaches.
11. DISPUTE RESOLUTION: THE PARTIES AGREE THAT ALL DISPUTES, WHETHER BASED IN
TORT OR CONTRACT, RELATING TO OR ARISING OUT OF THIS LEASE (COLLECTIVELY,
"LEASE DISPUTES") WILL BE SUBMITTED TO THE ORANGE COUNTY, CALIFORNIA
OFFICE OF ENDISPUTE, INC., DBA J-A-M-S/ENDISPUTE ("JAMS") FOR A TRIAL OF
ALL ISSUES OF LAW AND FACT CONDUCTED BY A RETIRED JUDGE OR JUSTICE FROM THE
PANEL OF JAMS, APPOINTED PURSUANT TO A GENERAL REFERENCE UNDER CALIFORNIA
CODE OF CIVIL PROCEDURE SECTION 638(1) (OR ANY AMENDMENT, ADDITION OR
SUCCESSOR SECTION THERETO) UNLESS AMPLICON OR ITS ASSIGNEE SELECTS AN
ALTERNATIVE FORUM. IF THE PARTIES ARE UNABLE TO AGREE ON A MEMBER OF THE
JAMS PANEL, THEN ONE SHALL BE APPOINTED BY THE PRESIDING JUDGE OF THE
CALIFORNIA SUPERIOR COURT FOR THE COUNT OF ORANGE. IN THE EVENT THAT JAMS
IN THE COUNTY OF ORANGE CEASES TO EXIST, THEN THE PARTIES AGREE THAT ALL
LEASE DISPUTES WILL BE FILED AND CONDUCTED IN THE CALIFORNIA SUPERIOR COURT
FOR THE COUNT OF ORANGE, UNLESS AMPLICON OR ITS ASSIGNEE SELECTS AN
ALTERNATIVE FORUM. LESSEE AGREES TO SUBMIT TO THE PERSONAL JURISDICTION OF
THE CALIFORNIA SUPERIOR COURT FOR ALL LEASE DISPUTES. LESSEE WAIVES ITS
RIGHTS TO A JURY TRIAL IN ANY ACTION ARISING OUT OF OR RELATING TO THIS
LEASE. If any party to this Lease brings any action to enforce any of the
terms, or to recover for any breach, then the prevailing party is entitled
to recover from the other party reasonable attorneys' fees and costs,
including all JAMS related costs and costs of collection (including
judgment enforcement and collection costs).
12. MISCELLANEOUS: All agreements, representations and warranties contained in
this Lease, or in any document or certificate delivered pursuant to or in
connection with this Lease, shall expressly survive the termination of this
Lease. If any provision of this Lease is determined by competent authority
to be unenforceable, such determination shall not invalidate the remaining
provisions of the Lease. To the extent permitted by applicable law, Lessee
waives any provision of law which renders any provisions hereof prohibited
or unenforceable in any respect. This Lease has been entered into and shall
be performed in California and, therefore, THIS LEASE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA (EXCLUSIVE OF PRINCIPLES OF CONFLICT OF LAWS). Time is of the
essence of this Lease and each provision thereof.
<PAGE> 3
ADDENDUM "A"
WITH RESPECT TO
LEASE AGREEMENT ORDER NO. OL-10575
AND LEASE SCHEDULE NO. 01
This Addendum is supplemental to and made a part of Lease Agreement Order No.
OL-10575, dated May 6, 1999 (the "Agreement"), Lease Schedule No. 01, dated N/A
and other related documents under the Agreement and Lease Schedule (collectively
the "Lease"). The parties to the Lease include Back Yard Burgers, Inc.
("Lessee") and Amplicon, Inc. ("Amplicon").
Capitalized terms used in this Addendum without definition shall have the
meanings set forth in the Lease, unless specifically modified. This Addendum is
to be construed as supplemental to, and a part of, the Lease.
Lessee and Amplicon acknowledge and agree that the Lease is hereby amended with
respect to Lease Schedule No. 01, as follows:
Section J. USE, OPERATION AND MAINTENANCE OF THE PROPERTY:
In line two (2) delete the words, "keep in force for the duration of
the Lease the best standard Supplier's maintenance agreement(s) which
will cause the supplier(s) to"
In line three (3) delete the words, "in accordance with such
maintenance agreement(s) and entitle Lessee (through Amplicon, if
necessary) to obtain available enhancements, updates, upgrades and
changes." and replace it with "to maintain the satisfactory operation
of the Property throughout the Term of the Lease."
ADD THE FOLLOWING SECTION TO THE LEASE SCHEDULE
Section Q. EARLY TERMINATION/PURCHASE OPTION:
Provided no event of default, as the same is more fully described in
the Lease, has occurred or is continuing, Amplicon and Lessee hereby
agree that Lessee may, at its sole option and with at lest ninety (90)
days prior written notice to Amplicon, elect to exercise the Early
Termination/Purchase Option as more fully described herein. The first
date (the "First Exercise Date") on which Lessee may exercise the Early
Termination/Purchase Option shall occur at the end of the Twelfth (12)
month of the Term of the Lease; if not exercised on that date, by
providing written notice to Amplicon as specified herein, Lessee shall
have the same option at the end any quarter through the 51st month (the
"Last exercise date"). If Lessee does not elect to exercise the Early
Termination/Purchase Option on or prior to the Last Exercise Date Early
Termination/Purchase Option shall be null and void, and all other
provisions of the Lease shall remain in full force and effect.
Provided that Lessee has satisfied all of the foregoing conditions and
in order to exercise the Early Termination Option, Lessee shall pay to
Amplicon the total payment of:
1. all rentals accrued under this Lease, but unpaid up to the
Exercise Date;
2. the "Termination amount" equal to the present value of all
remaining rental obligations discounted at 5% per year, and
exercise either option (I) or (II) according to the terms and
conditions of the Lease Schedule.
3. all applicable taxes and any and all other sums other than
rentals then owing to Amplicon by Lessee under the Lease;
In all other respects, the terms and conditions of the Lease, as originally
written, shall remain in full force and effect. The Lease, as amended herein,
sets forth the entire and final understanding between the parties with respect
hereto. The terms of the Addendum have been negotiated and jointly drafted by
Amplicon and Lessee and, therefore, the language of the Addendum shall not be
construed in favor or against either party. The undersigned represent that they
have the authority to enter into the Lease, and that the same shall be legally
binding and enforceable on the respective principals.
IN WITNESS WHEREOF the parties hereto, by their authorized signatories have
executed this Addendum at the date set forth below their respective signatures.
LESSEE: BACK YARD BURGERS, INC. Amplicon, Inc.
--------------------------- ----------------------------------
By: By:
------------------------------- -------------------------------
Name: Michael G. Webb Name: Amplicon Finance Committee
----------------------------- ----------------------------
Title: Chief Financial Officer Title: Amplicon Finance Committee
---------------------------- ---------------------------
Date: May 6, 1999 Date: May 6, 1999
---------------------------- ----------------------------
<PAGE> 4
[LOGO] AMPLICON FINANCIAL LEASE
5 HUTTON CENTRE DRIVE, SUITE 500 - SANTA ANA, CALIFORNIA 92707 SCHEDULE
714.751-7552 - 800.755-5055 - FACSIMILE 714.751-7557
ORDER NO. OL-10575
- --------------------------------------------------------------------------------
LESSEE CONTACT
Back Yard Burgers, Inc. Mike Webb
- --------------------------------------------------------------------------------
STREET PHONE NO.
2168 Colony Park Drive (901) 367-0888 Ext. 1226
- --------------------------------------------------------------------------------
CITY STATE COUNTY ZIP FACSIMILE NO.
(901) 367-0999
Memphis TN Shelby 38118
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. THIS SCHEDULE IS ISSUED WITH RESPECT TO THE LEASE AGREEMENT ORDER
NO.OL-10575 DATED MAY 6, 1999. All of the terms of this Schedule and the
Lease Agreement combine to form an individual Lease with an independent
Term.
B. Any Deposit under this Schedule shall be returned to Lessee (without
interest thereon) if Amplicon does not accept this Schedule. Upon
acceptance of this Lease by Amplicon any such Deposit shall be applied to
the rent due in the last month of the Term unless otherwise specified
herein.
C. Term (months): 60 (Sixty) months
D. Deposit : $ 11,334.00
E. Monthly Rent : $ 11,334.00
F. Property : $600,000.00 to be used for Restaurant Equipment
THE ACTUAL MONTHLY PAYMENT WILL BE DETERMINED BY MULTIPLYING THE MONTHLY LEASE
RATE FACTOR OF 0.01889 BY THE ACTUAL PROPERTY COST. THE MONTHLY LEASE RATE
FACTOR MAY BE ADJUSTED UPWARD IN ACCORDANCE WITH MOVEMENT OF LIKE-KIND TERM
U.S. TREASURY NOTES. THIS ADJUSTED RATE SHALL THEN BE MULTIPLIED BY THE FINAL
ACTUAL PROPERTY COST TO DETERMINE THE FIXED RENTAL PAYMENT UPON AUTHORIZATION OF
THE LEASE. THE BASE U.S. TREASURY NOTE YIELD WILL BE 4.64%
Upon Lessee's request a Schedule can be closed at the end of any quarter where a
minimum of $100,000.00 of Property has been put on the Lease Schedule.
Quantity Property Description Serial #
PROPERTY TO BE MORE FULLY DESCRIBED ON EXHIBIT "A" ATTACHED HERETO AND MADE A
PART HEREOF AT A LATER DATE.
G. AT THE EXPIRATION OF THE TERM OR, IF EXTENDED, AT THE EXPIRATION OF THE
EXTENSION TERM LESSEE SHALL: (I) PURCHASE ALL, BUT NOT LESS THAN ALL, OF THE
PROPERTY FOR THE GREATER OF 15% OF THE TOTAL COST PAID BY AMPLICON WITH RESPECT
TO THE PROPERTY OR ITS THEN FAIR MARKET VALUE ("FMV"), PLUS ALL APPLICABLE
SALES/USE TAXES THEREON AND ALL ACCRUED BUT UNPAID INTEREST, TAXES PENALTIES
AND/OR OTHER SUMS DUE UNDER THE LEASE; (II) PROMPTLY RETURN ALL, BUT NOT LESS
THAN ALL, OF THE PROPERTY AND LEASE REPLACEMENT PROPERTY FROM AMPLICON WHICH AS
A COST EQUAL TO OR GREATER THAN THE ORIGINAL COST OF THE PROPERTY; OR (III)
EXTEND THE SCHEDULE FOR A PERIOD OF ONE ADDITIONAL YEAR AT THE RENTAL RATE
DELINEATED HEREIN. WITH RESPECT TO OPTION (I), FMV IS THE PRICE A WILLING BUYER
(WHO IS NEITHER A USED PROPERTY DEALER OR RESELLER) WOULD PAY FOR THE PROPERTY
IN AN ARM'S LENGTH TRANSACTION TO A WILLING SELLER UNDER NO COMPULSION TO SELL;
PROVIDED, (A) THE PROPERTY IS ASSUMED TO BE IN THE CONDITION IN WHICH IT IS TO
BE MAINTAINED UNDER THE LEASE; (B) THE PROPERTY IS VALUED ON AN INSTALLED BASIS;
AND (C) THE COST OF REMOVAL OF THE PROPERTY FROM ITS PRESENT LOCATION IS NOT A
DEDUCTION FROM THE VALUATION. IF LESSEE ELECTS TO PURCHASE THE PROPERTY AND THE
PARTIES ARE NOT ABLE TO AGREE ON FMV AT LEAST 30 DAYS PRIOR TO THE EXPIRATION OF
THE APPLICABLE TERM, AMPLICON WILL APPOINT AN INDEPENDENT APPRAISER (REASONABLY
ACCEPTABLE TO LESSEE) TO DETERMINE FMV, AND THAT DETERMINATION SHALL BE FINAL,
BINDING AND CONCLUSIVE AS LESSEE'S PURCHASE PRICE, AND LESSEE SHALL PAY ALL
SALES/USE TAXES THEREON. LESSEE SHALL BE RESPONSIBLE FOR THE COST OF THE
APPRAISAL WITH RESPECT TO OPTION (II), LESSEE AND AMPLICON SHALL EACH HAVE
ABSOLUTE DISCRETION REGARDING THEIR AGREEMENT OR LACK OF AGREEMENT TO THE TERMS
OF A LEASE FOR REPLACEMENT PROPERTY. IF LESSEE HAS NOT ELECTED OPTION (I) OR
(II) BY THE END OF THE TERM OR, IF EXTENDED, THE EXTENSION TERM, THEN OPTION
(III) SHALL PREVAIL. THEREAFTER, THIS LEASE WILL CONTINUE SUBJECT TO TERMINATION
BY EITHER LESSEE OR AMPLICON AT THE END OF ANY MONTH, PROVIDED AT LEAST NINETY
DAYS PRIOR WRITTEN NOTICE IS DELIVERED TO THE OTHER PARTY.
- --------------------------------------------------------------------------------
THE INDIVIDUAL SIGNING BELOW CERTIFIES THAT HE OR SHE HAS READ THIS SCHEDULE
(INCLUDING THE TERMS ON THE REVERSE SIDE) AND THE LEASE AGREEMENT, AND IS
AUTHORIZED TO SIGN THIS SCHEDULE ON BEHALF OF LESSEE.
THIS SCHEDULE ALONG WITH THE LEASE AGREEMENT CONTAIN THE ENTIRE AGREEMENT
BETWEEN AMPLICON AND LESSEE WITH RESPECT TO THE SUBJECT MATTER HEREOF. THIS
AGREEMENT CAN ONLY BE MODIFIED IN WRITING, WITH SUCH MODIFICATIONS SIGNED BY A
PERSON AUTHORIZED TO SIGN AGREEMENTS ON BEHALF OF LESSEE AND BY AN AUTHORIZED
SIGNER OF AMPLICON. NO ORAL OR OTHER WRITTEN AGREEMENTS, REPRESENTATIONS OR
PROMISES SHALL BE RELIED UPON OR BE BINDING ON THE PARTIES UNLESS MADE A PART OF
THIS LEASE BY A WRITTEN MODIFICATION SIGNED BY AN AUTHORIZED SIGNER OF BOTH
LESSEE AND AMPLICON.
LESSEE/OFFEROR AMPLICON, INC.
OFFER: Back Yard Burgers, Inc. ACCEPTANCE:
By: By:
------------------------------- -------------------------------
Name: Michael G. Webb Name: Amplicon Finance Committee
----------------------------- ----------------------------
Title: Chief Financial Officer Title: Amplicon Finance Committee
---------------------------- ---------------------------
Date: May 6, 1999 Date: May 6, 1999
---------------------------- ----------------------------
<PAGE> 5
H. RIGHT TO INSPECT THE PROPERTY: Amplicon may during reasonable business
hours enter upon any premises where the Property is located to confirm
compliance with the terms of the lease.
I. TAXES ON THE PROPERTY: All fees, assessments and taxes (except those based
upon the net income of Amplicon) which may now or hereafter become due or
are imposed upon the ownership, sale, possession and/or use of the Property
are to be paid by Lessee. While Lessee will be responsible for payment of
all personal property taxes, Amplicon will file all personal property tax
returns. Amplicon is not responsible for contesting any valuation of, or
tax imposed on, the Property (but may do so strictly as an accommodation to
Lessee) and will not be liable or accountable to Lessee therefor. Amplicon
retains any and all federal and state tax credits or benefits relating to
the Property.
J. USE, OPERATION AND MAINTENANCE OF THE PROPERTY: Lessee at its own expense,
will provide a suitable place for the operation of the Property, and keep
in force for the duration of the Lease the best standard Supplier's
maintenance agreement(s) which will cause the Supplier(s) to make all the
necessary repairs, adjustments, and replacements in accordance with such
maintenance agreement(s) and entitle Lessee (through Amplicon, if
necessary) to obtain available enhancements, updates, upgrades and changes.
K. ADDITIONS AND MODIFICATIONS TO THE PROPERTY: All additions and
modifications to the Property become a part of the Property and are owned
by Amplicon. Software, as described on any Schedule(s), includes all
updates, revisions, upgrades, new versions, enhancements, modifications,
derivative works, maintenance fixes, translations, adaptations, and copies
of the foregoing or of the original version of the Software whether
obtained from the Supplier, licensor or from any source whatsoever, and
references in this Lease to Software will be interpreted as references to
any and all of the foregoing. All additions and modifications to the
Property must be free and clear of any liens or rights of other parties.
L. INSURING THE PROPERTY: While the Property is in transit and for the
duration of the Lease, Lessee at its own expense shall maintain (i)
comprehensive public liability insurance (naming Amplicon or its assigns as
additional insured) for bodily injury and property damage resulting from
the maintenance, use or transport of the Property and (ii) property and
casualty insurance (naming Amplicon and/or its assigns as sole loss payee)
covering all risks of loss or damage to the Property from any cause
whatsoever including, without limitation, fire and theft. All insurance
will be from an insurer(s) and in a form and amount satisfactory to
Amplicon. Lessee shall deliver to Amplicon the original policies or
certificates of such insurance (and each renewal or replacement thereof)
and evidence of the payment of the premiums for such insurance policies.
All policies will provide that no cancellation or material modification of
such insurance shall be effective without thirty days prior written notice
to Amplicon.
M. RISK OF LOSS TO THE PROPERTY: While the Property is in transit and
throughout the duration of the Lease, Lessee assumes all responsibility for
loss or damage or other Casualty Occurrence, as defined herein, to the
Property and shall hold Amplicon harmless. A Casualty Occurrence occurs if,
for any reason whatsoever, any of the Property is lost, stolen,
requisitioned, taken, confiscated, destroyed or irreparably damaged by any
cause whatsoever. In the case of Software, the erasure, inoperability or
other incapacity of the Software triggered by a preprogrammed termination
of limiting design or routine embedded in the Software is also deemed a
Casualty Occurrence. In the event of a Casualty Occurrence as to any
Property, Lessee will immediately inform Amplicon in writing. On the next
succeeding rental payment date, Lessee will (i) either replace the Property
with like-kind Property, free and clear of any liens or rights of other
parties, acceptable to Amplicon or Amplicon's assignee and continue to pay
all rentals without interruption as they come due, or (ii) pay to Amplicon
all past due rentals and other amounts then late or due and an amount equal
to the stipulated value as determined by the Casualty Schedule annexed to
the Lease ("Stipulated Value"). When Lessee makes this payment to Amplicon,
the rentals cease to accrue and the Lease with respect to that Schedule
ends. Insurance proceeds received by Amplicon as a result of a Casualty
Occurrence will be applied to reduce Lessee's obligation to pay the
Stipulated Value.
N. OWNERSHIP OF THE PROPERTY: Amplicon at all times retains ownership, title
and/or control over Lessee's right to use the Property in accordance with
the terms of the Lease. Lessee shall protest and defend, at its own
expense, Amplicon's title and/or rights in the Property against all claims
and liens and keep the Property free and clear of all such claims and
liens. The Property is and shall remain personal property of Amplicon. To
the extent Software is being provided to Lessee solely because of payments
made by Amplicon to the Supplier and, accordingly, Lessee agrees that
Amplicon has an interest in the license. Lessee agrees that if it or any of
its affiliates receives anything of value from the Supplier (including
without limitation, a trade-in, substitution, discount or upgrade
allowance) other than Lessee's rights to use the Software reflected on the
Schedule for the duration of this Lease, Lessee will advise Amplicon and
pay to Amplicon an amount equal to such additional value obtained by
Lessee. Lessee agrees that it will not surrender, transfer or modify the
license agreement without first obtaining the written consent of Amplicon.
O. RETURN OF PROPERTY: If Lessee elects to return the Property as provided for
in the Lease, Lessee will discontinue the use of the Property, pay to
Amplicon an inspection refurbishment and restocking fee equal to five
percent of the Property's original cost, and immediately, at its own
expense, ship the Property, with all manuals, cables, cartons and packing
materials as originally furnished by Supplier, to a location within the
United States in accordance with the Property return instructions provided
by Amplicon. In the case of Software, Lessee will destroy all intangible
Software items, and deliver to Amplicon all tangible items constituting
Software. At Amplicon's request, Lessee will also certify in a written form
acceptable to Amplicon that: (i) all tangible Software has been delivered
to Amplicon; (ii) all intangible records have been destroyed; (iii) Lessee
has not retained the Software in any form; (iv) Lessee will not use the
Software after termination and (v) Lessee has not received from Supplier(s)
anything of value relating to or in exchange for Lessee's use, rental or
possession of the Software during the duration of the Lease (including a
trade-in, substitution or upgrade allowance). Until Lessee has complied
with all of the requirements of this Section, rent payment obligations will
continue from month to month at the rental rate delineated on the Schedule.
P. ASSIGNMENT OF LEASE AND/OR PROPERTY: AMPLICON MAY ASSIGN ANY OF ITS RIGHTS
IN THE LEASE AND/OR THE PROPERTY TO AN ASSIGNEE ("ASSIGNEE"). LESSEE HEREBY
CONSENTS TO SUCH ASSIGNMENT AND FURTHER AGREES AS FOLLOWS: (1) ASSIGNEE
DOES NOT ASSUME ANY OF THE OBLIGATIONS OF AMPLICON UNDER THE LEASE; (2) TO
PAY ALL ASSIGNED MONIES DUE UNDER THE LEASE UNCONDITIONALLY WITHOUT OFFSET
AND LESSEE FURTHER AGREES THAT SUCH MONIES SHALL BE PAYABLE NOTWITHSTANDING
ANY DEFENSE OR COUNTERCLAIM WHATSOEVER WHETHER BY REASON OF BREACH OF THE
LEASE, THE EXERCISE OF ANY RIGHT HEREUNDER, OR OTHERWISE, WHICH LESSEE MAY
NOW OR HEREAFTER HAVE AGAINST AMPLICON (LESSEE RESERVES ITS RIGHT TO ASSERT
ANY SUCH DEFENSE OR COUNTERCLAIM DIRECTLY AGAINST AMPLICON); (3) TO PROVIDE
AMPLICON WITH A COPY OF ANY NOTICES SENT BY LESSEE TO ASSIGNEE UNDER THE
LEASE; (4) THAT SUBJECT TO AND WITHOUT IMPAIRMENT OF LESSEE'S LEASEHOLD
RIGHTS IN AND TO THE PROPERTY COVERED UNDER THE LEASE; LESSEE SHALL HOLD
SAID PROPERTY AND THE POSSESSION THEREOF FOR THE ASSIGNEE TO THE EXTENT OF
THE ASSIGNEE'S RIGHTS THEREIN, AND (5) SUCH ASSIGNMENT DOES NOT CHANGE
LESSEE'S OBLIGATIONS UNDER THIS LEASE OR INCREASE THE BURDEN AND RISKS
IMPOSED ON LESSEE. WITHOUT THE PRIOR WRITTEN CONSENT OF AMPLICON, LESSEE
SHALL NOT ASSIGN THIS LEASE OR ITS INTEREST IN THE LEASE IN ANY FORM OR
MANNER INCLUDING, BUT NOT LIMITED TO, AN ASSIGNMENT DUE TO A SALE, MERGER,
LIQUIDATION, SUB-LEASE, LEVERAGED BUYOUT, CHANGE OF OWNERSHIP OR
CHANGE-IN-CONTROL.
<PAGE> 1
EXHIBIT 11
BACK YARD BURGERS, INC.
COMPUTATION OF INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- ----------------------
JULY 3, JULY 4, JULY 3, JUNE 28,
1999 1998 1999 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $ 87 $ 366 $ 129 $ 531
====== ====== ====== ======
Weighted average number
of common shares outstanding
during the period 4,605 4,580 4,603 4,475
====== ====== ====== ======
Basic income per share $ .02 $ .08 $ .03 $ .12
====== ====== ====== ======
Weighted average number
of common shares outstanding
during the period 4,605 4,580 4,603 4,475
Preferred shares convertible
to common shares 23 27 23 116
Stock options 6 88 9 77
------ ------ ------ ------
4,634 4,695 4,635 4,668
====== ====== ====== ======
Diluted income per share $ .02 $ .08 $ .03 $ .11
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF BACK YARD BURGERS, INC. FOR THE SIX MONTHS ENDED JULY 3,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 1,090
<SECURITIES> 0
<RECEIVABLES> 238<F1>
<ALLOWANCES> 0
<INVENTORY> 218
<CURRENT-ASSETS> 1,822
<PP&E> 14,350<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 18,336
<CURRENT-LIABILITIES> 2,180
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 9,685
<TOTAL-LIABILITY-AND-EQUITY> 18,336
<SALES> 13,286
<TOTAL-REVENUES> 14,614
<CGS> 4,572
<TOTAL-COSTS> 7,180
<OTHER-EXPENSES> 2,287
<LOSS-PROVISION> 85
<INTEREST-EXPENSE> 273
<INCOME-PRETAX> 215
<INCOME-TAX> 86
<INCOME-CONTINUING> 129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
<FN>
<F1>Asset value represents net amount.
</FN>
</TABLE>
