- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 March 31, 1997
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------------
Commission File Number 33-66392
HOULIHAN'S RESTAURANT GROUP, INC.
Incorporated pursuant to the Laws of Delaware State
------------------------------------
Internal Revenue Service - Employer Identification No. 43-0913506
Two Brush Creek Boulevard, Kansas City, Missouri 64112
(816) 756-2200
------------------------------------
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 requirements
for the past 90 days. Yes x No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes x No
Number of shares of common stock outstanding as of May 7, 1997: 9,998,012
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets............................. 3
Consolidated Statements of Income....................... 4
Consolidated Statements of Cash Flows................... 5
Notes to Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial Condition... 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 14
Signatures............................................................. 15
2
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
March 31, Dec. 30,
1997 1996
-------- --------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents............................. $ 14,851 $ 15,620
Receivables .......................................... 1,257 1,252
Inventories .......................................... 2,402 2,455
Other current assets ................................. 2,853 2,971
Deferred income taxes ................................ 3,132 3,011
-------- --------
Total current assets ............................. 24,495 25,309
Property, equipment and leaseholds, net ................. 104,072 105,481
Reorganization value in excess of amounts allocable to
identifiable assets, net ............................. 57,545 58,458
Deferred debt issuance costs, net ....................... -- 218
Other assets, net ....................................... 6,164 6,209
-------- --------
Total assets ..................................... $192,276 $195,675
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capitalized
lease obligations ................................ $ 3,652 $ 8,135
Accounts payable ..................................... 5,380 7,317
Accrued interest ..................................... 68 590
Accrued liabilities .................................. 14,646 15,449
-------- --------
Total current liabilities ........................ 23,746 31,491
Long-term debt, including capitalized lease obligations,
less current portion ................................. 74,674 71,594
Other liabilities ....................................... 13,025 12,284
Deferred income taxes ................................... 4,477 4,917
-------- --------
Total liabilities ................................ 115,922 120,286
-------- --------
Stockholders' equity:
Common stock-par value $.01 per share, 20,000,000
shares authorized, 9,998,012 shares issued and
outstanding....................................... 100 100
Additional paid-in capital............................ 59,900 59,900
Retained earnings .................................... 16,354 15,389
-------- --------
Total stockholders' equity ....................... 76,354 75,389
-------- --------
Total liabilities and stockholders' equity........ $192,276 $195,675
======== ========
See accompanying notes to consolidated financial statements.
3
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
----------------------------
March 31, March 25,
1997 1996
------------ ------------
Net sales ...................................... $ 67,070 $ 66,974
Cost of sales:
Food and bar costs .......................... 19,550 19,528
Labor costs ................................. 21,770 21,351
Operating expenses (exclusive of depreciation
and amortization shown separately) ........ 14,712 15,829
------------ ------------
Total cost of sales ..................... 56,032 56,708
------------ ------------
Gross profit ............................ 11,038 10,266
Depreciation and amortization .................. 3,995 3,784
General and administrative expenses ............ 4,635 4,419
Loss on disposition of properties, net ......... 42 139
Other (income), net ............................ (1,367) (1,279)
Interest expense................................ 1,864 1,840
------------ ------------
Income before taxes ..................... 1,869 1,363
Income tax provision ........................... 904 691
------------ ------------
Net income .............................. $ 965 $ 672
============ ============
Earnings per common and common equivalent share. $ 0.10 $ 0.07
============ ============
Weighted average common and common equivalent
shares......................................... 10,022,836 9,998,012
============ ============
See accompanying notes to consolidated financial statements.
4
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirteen Weeks Ended
---------------------
March 31, March 25,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income .......................................... $ 965 $ 672
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 3,995 3,784
Amortization of deferred debt issuance costs .... 218 27
Loss on disposition of properties, net .......... 42 139
Deferred income tax benefit ..................... (561) (316)
Changes in operating assets and liabilities:
Receivables ................................... (5) 153
Inventories ................................... 53 134
Other current assets .......................... 118 677
Accounts payable .............................. (1,937) (1,942)
Accrued interest .............................. (522) 15
Accrued liabilities ........................... (803) (1)
Other assets .................................... 56 138
Other liabilities ............................... 741 614
--------- ---------
Net cash provided by operating activities ..... 2,360 4,094
--------- ---------
Cash flows from investing activities:
Capital expenditures, excluding capital leases ...... (1,727) (3,863)
Proceeds from disposition of properties ............. 1 66
--------- ---------
Net cash used for investing activities ........ (1,726) (3,797)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of long-term debt,
excluding capitalized lease obligations............ 4,152 5,000
Payments on long-term debt, including capitalized
lease obligations................................. (5,555) (48)
--------- ---------
Net cash provided by (used for) financing
activities................................... (1,403) 4,952
--------- ---------
Net increase (decrease) in cash and cash equivalents ... (769) 5,249
Cash and cash equivalents at beginning of period ....... 15,620 10,314
--------- ---------
Cash and cash equivalents at end of period ............. $ 14,851 $ 15,563
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the period for:
Interest ............................................ $ 2,168 $ 1,798
========= =========
Income taxes ........................................ $ 670 $ (663)
========= =========
Disclosure of Accounting Policy:
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
See accompanying notes to consolidated financial statements.
5
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 1997
(Unaudited)
1. Basis of Presentation
The consolidated financial statements of Houlihan's Restaurant Group, Inc. and
its wholly-owned subsidiary, Houlihan's Restaurants, Inc. and its subsidiaries
(the "Company") included in this Form 10-Q have been prepared without audit
(except that the balance sheet information as of December 30, 1996 has been
derived from consolidated financial statements which were audited) in accordance
with the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
Company believes that the disclosures are adequate to make the information
presented not misleading. The accompanying consolidated financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 30, 1996.
Company management believes that the information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of the interim periods presented. The results
of operations for the interim periods presented are not necessarily indicative
of those to be expected for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company owns and operates full service casual dining restaurants under the
names of "Houlihan's", "Darryl's", "Bristol", "Braxton", "Chequers", "J.
Gilbert's", "Charley's Place", "Phineas" and the "Buena Vista Cafe".
2. Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share are based on the weighted
average number of shares outstanding and the assumed exercise of outstanding
dilutive stock options issued under the Company's stock option plans less the
number of treasury shares assumed to be purchased from the proceeds using the
average market price of the Company's common stock. At March 31, 1997, warrants
to purchase up to 47,740 shares of common stock at a price of $37.92 per share
were outstanding. Additional shares of common stock issuable upon the exercise
of these warrants have not been considered in the calculation as the effect
would be antidilutive.
6
<PAGE>
3. Long-Term Debt
Long-term debt, including capitalized lease obligations, is comprised of the
following (in thousands):
March 31, December 30,
1997 1996
---------------- ---------------
Bank debt:
Term Loan $ 23,612 $ 29,112
Real Estate Loan 40,000 40,000
Revolving Credit Loan 12,102 7,950
Capitalized lease obligations 2,612 2,667
---------------- ---------------
78,326 79,729
Less: Current portion 3,652 8,135
---------------- ---------------
$ 74,674 $ 71,594
================ ===============
During March 1997, the Company borrowed a total of $4,152,000 on its Revolving
Credit Facility to fund the drawdown of two outstanding standby letters of
credit by the beneficiaries. The letters of credit were scheduled to expire upon
the maturity of the Revolving Credit Facility on March 31, 1997. The Bank Credit
Agreement was amended (the "Fifth Amendment") on March 31, 1997 to extend the
maturity date of all outstanding bank debt to May 15, 1997. The new maturity
date allowed for the closing of a new $90 million secured credit facility (see
Note 5). Additionally, the Fifth Amendment revised the required fixed charge
coverage ratio for the fourth quarter of 1996. The Company also made a scheduled
principal payment of $5,500,000 on the Term Loan on March 31, 1997. As a result,
the Company remains in compliance with all covenants of its bank credit
agreement as amended.
4. Contingencies and Commitments
Severance Agreements
In prior years, the Company entered into agreements with certain officers which
provide for severance payments in the event the employment of such officers is
terminated upon a change of control of the Company, as defined in the
agreements. As of March 31, 1997, the contingent liability under the agreements
for all participants was approximately $1,700,000.
5. Subsequent Event
The Company made a Net Cash Proceeds payment (as defined in the Bank Credit
Agreement) of $129,000 on April 4, 1997. Then on April 15, 1997, the Company
signed a new bank credit agreement and obtained a new $90,000,000 secured credit
facility. The proceeds from the new credit facility of $75,000,000, along with
$585,000 of the Company's existing unrestricted cash, were used to repay and
permanently retire $75,585,000 of the existing bank indebtedness at April 15,
1997.
7
<PAGE>
The new credit facility consists of a senior bank term loan facility and a
senior bank revolving credit facility. The term loan facility consists of a
five-year tranche A term loan in the principal amount of $20,000,000 and a
seven-year tranche B term loan in the principal amount of $55,000,000. The
tranche A loan requires annual amortization of $4,000,000 and the tranche B loan
requires annual amortization of $550,000 for the first five years and
$26,125,000 in the sixth and seventh years. All amortization on the term loans
is to be paid in equal quarterly installments.
The new credit facility also contains a five-year revolving credit facility in
the principal amount of $15,000,000 that includes a $5,000,000 swingline
facility. The revolving credit facility will be available to provide for the
working capital requirements and general corporate purposes of the Company and
provides for letters of credit up to $10,000,000. At April 30, 1997, the Company
had $10,314,000 available to it under the new revolving credit facility, reduced
by $4,686,000 of outstanding standby letters of credit.
Substantially all of the Company's assets are pledged as collateral under the
new bank credit agreement. In addition, borrowings under the new facility are
guaranteed by the parent company and by each of its active wholly-owned
subsidiaries. This guarantee is secured by a pledge of all of the capital stock
of Houlihan's Restaurants, Inc., and the guarantees of the active wholly-owned
subsidiaries are collateralized by security interests in all of the assets of
each such subsidiary.
The new credit facility allows the Company to enter into a sale leaseback
transaction involving certain of its owned restaurant properties. The Company
signed a letter of intent on April 23, 1997 to complete the sale leaseback
transaction. The letter provides for the sale leaseback of up to 25 properties
for proceeds of approximately $30,000,000 subject to appraised values. The
transaction is to be completed as soon as practicable. The Company has not
determined the number of properties to include in the sale leaseback
transaction, and therefore, cannot make a determination of the gain or loss that
will result upon the completion of the transaction. The Company intends to use
the proceeds from this transaction to either (i) repurchase shares of the
Company's common stock not owned by the Glazer Group for an aggregate repurchase
price of not in excess of $8.00 per share or $21,400,000 in aggregate value (the
"Repurchase"), (ii) prepay the new credit facility term loans or (iii) construct
or acquire additional new restaurants. If the Company decides to complete the
Repurchase, the Repurchase is expected to be completed as soon as practicable
after the closing of the sale leaseback transaction, but in any event by
November 15, 1997.
8
<PAGE>
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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" presented in the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1996. The information contained herein includes certain
forward looking information regarding restaurant openings, operating margins,
capital requirements, cash flow from operations and assumptions regarding the
availability of new credit facilities. This forward looking information could be
affected by changes in monetary and fiscal policies, laws and regulations, and
social and economic conditions, such as inflation or a recession, increased
competition in the restaurant industry, the current trend towards "dining out"
and the amount, type and cost of financing available to the Company.
General
The Company operates full service casual dining restaurants in 23 states. At
March 31, 1997, it operated 101 restaurants, including 62 Houlihan's, 28
Darryl's, four upscale Seafood restaurants and seven specialty restaurants
comprised of four dinnerhouses, two upscale steakhouses and the Buena Vista
Cafe. At that date, the Company also franchised 30 Houlihan's restaurants in
twelve states and the Commonwealth of Puerto Rico.
Results of Operations
The following table sets forth information derived from the Company's
Consolidated Statements of Income expressed as a percentage of net sales.
Quarter Ended
-------------------------------
March 31, March 25,
1997 1996
------------- --------------
Net sales 100.0 % 100.0 %
Cost of sales:
Food and bar costs 29.1 29.2
Labor costs 32.5 31.9
Operating expenses 21.9 23.6
------------- --------------
Total cost of sales 83.5 84.7
------------- --------------
Gross profit 16.5 15.3
Depreciation and amortization 6.0 5.6
General and administrative expense 6.9 6.6
Loss on disposition of properties, net 0.1 0.2
Other (income), net (2.0) (1.8)
Interest expense 2.8 2.7
------------- --------------
Income before income taxes 2.7 2.0
Income tax provision 1.3 1.0
------------- --------------
Net income 1.4 % 1.0 %
============= ==============
9
<PAGE>
Net Sales. Net sales for the first quarter increased to $67,070,000, 0.1% up
from $66,974,000 generated for the same quarter of 1996. The increase was
primarily due to sales generated by five new restaurants opened during 1996,
consisting of three Houlihan's, one Seafood restaurant and one J. Gilbert's. The
increase was partially offset by a 1.8% decrease in comparable restaurant sales
during the first quarter.
"Comparable restaurants" are restaurants open throughout fiscal years 1996 and
1997. The increases (decreases) in comparable restaurant sales, by concept, for
the first quarter of 1997 versus 1996 were as follows:
First Quarter
-----------------------------------
Food Bar Total
--------- --------- ---------
Houlihan's (1.7) % (7.9) % (3.2) %
Darryl's 0.9 1.3 1.0
Seafood 6.0 0.8 5.0
Specialty (3.9) (2.1) (3.3)
Total Company (0.7) % (5.6) % (1.8) %
Cost of Sales. Cost of sales as a percentage of net sales decreased during the
first quarter of 1997 from the same period of 1996. Cost of sales is composed of
three major items: food and bar costs, labor costs and operating expenses.
Combined food and bar costs as a percentage of net sales decreased to 29.1%
during the first quarter of 1997 from 29.2% for the same period in 1996. The
decrease was the result of increased efficiencies gained over the prior year
when a new menu was implemented in all of the Company's Darryl's restaurants.
The new menu, which emphasizes quality wood-fired steaks, resulted in higher
food costs due to the shift in the menu mix to higher priced items such as
steak.
Labor costs as a percentage of net sales increased to 32.5% in 1997 from 31.9%
in 1996. Labor costs were impacted by an increase in management labor due to
increases in base pay made in order to remain competitive in the industry and
retain quality managers. The increase was also due in part to lower sales
experienced during the first quarter by the Company's comparable restaurants as
management salaries are predominantly a fixed cost.
Operating expenses decreased from 23.6% of net sales in the 1996 quarter to
21.9% of net sales in the 1997 quarter due primarily to a reduction in
promotional expenses during the first quarter in comparison to the prior year.
During the first quarter of 1996, the Company tested various advertising
promotions in selected markets using radio, print, billboard and television.
Depreciation and Amortization Expense. Depreciation and amortization expense as
a percentage of net sales increased during the first quarter due to increased
capital expenditures from the five
10
<PAGE>
new restaurants that were opened in 1996, as well as ongoing restaurant
renovation and replacements.
General and Administrative Expenses. General and administrative expenses as a
percent of net sales increased during the first quarter of 1997 as compared to
the same period of 1996. The increase is due primarily to the creation of two
new regional vice president positions in the Houlihan's concept to provide
additional oversight responsibilities to both Company-owned restaurants as well
as franchise restaurants. Additionally, general and administrative expenses
increased during the quarter due to severance payments related to the
centralization of the Company's restaurant bookkeeping efforts for the
Houlihan's concept. Staffing efficiencies were made possible by a new
point-of-sale management information system that was implemented in all of the
Company's restaurants during 1995 and the first quarter of 1996.
Other Income. Other income as a percentage of net sales increased primarily as a
result of a 16.8% increase in franchise revenues over the prior period. As of
the end of the quarter, the Company franchised 30 restaurants and had signed
agreements with 20 franchise development groups providing for the development of
an aggregate of 77 additional Houlihan's over a five to six year period.
Interest Expense. Interest expense increased slightly in the 1997 first quarter
to 2.8% of net sales compared to 2.7% of net sales for the same quarter of 1996.
The increase was primarily attributable to interest on two new borrowings the
Company made on its Revolving Credit Facility in March 1997.
Income Taxes. The Company's effective income tax rate was 48.4% for the 1997
first quarter, compared to 50.7% for the same period of 1996. The lower
effective rate was a result of the increase in pretax income in relation to the
fixed amortization of the reorganization value in excess of amounts allocable to
identifiable assets.
Net Income. Net income for the first quarter of 1997 increased to $965,000, or
$0.10 per share, from $672,000, or $0.07 per share, from the first quarter of
1996. The increase is attributable to an increase in net sales for the quarter
as well as the decline in certain operating expenses mentioned above.
Liquidity and Capital Resources
At March 31, 1997, the Company had cash and cash equivalents of $14,851,000 and
excess working capital of $749,000. The Company relies principally upon
internally generated funds to finance its restaurant operations and to fund
working capital expenditures. Historically, the Company has operated with
working capital deficiencies. The Company's ability to operate with such
deficiencies is due to the nature of the restaurant business, which does not
require significant investments in accounts receivable or inventories and which
generally allows the procurement of food and supplies on trade credit.
11
<PAGE>
At March 31, 1997, the Company had $307,000 available to it under the
$12,500,000 Revolving Credit Facility, reduced by a $91,000 outstanding standby
letter of credit and a $12,102,000 outstanding loan. During March 1997, two
outstanding standby letters of credit were drawn by the beneficiaries, resulting
in the Company borrowing $676,646 on March 18, 1997 and $3,475,000 on March 24,
1997 on its Revolving Credit Facility. The borrowings under the Revolving Credit
Facility, as well as all other outstanding bank debt was subsequently refinanced
(see "New Credit Facility").
Capital expenditures totalled $1,727,000 for the quarter as compared to
$3,863,000 for the same period in 1996. A majority of the amount was
attributable to ongoing remodeling projects and normal restaurant renovations
and replacements in the Company's restaurants. The Company expects to incur
capital expenditures of approximately $9,200,000 for the remainder of 1997, a
majority of which will be continued to be used for remodeling projects and
maintenance, as well as the opening of one Seafood restaurant.
On March 31, 1997, the Bank Credit Agreement was amended to extend the maturity
date of all outstanding bank debt to May 15, 1997. The new maturity date allowed
for the closing of a new $90 million secured credit facility (see "New Credit
Facility"). The Company also made two payments on the Term Loan consisting of a
scheduled principal payment of $5,500,000 on March 31, 1997 and a Net Cash
Proceeds payment (as defined in the Bank Credit Agreement) of $129,000 on April
4, 1997. As a result, the Company remains in compliance with all covenants of
its current bank credit agreement as amended.
New Credit Facility
The Company signed a new bank credit agreement and obtained a new $90,000,000
secured credit facility on April 15, 1997. The proceeds from the new credit
facility of $75,000,000, along with $585,000 of the Company's existing
unrestricted cash, were used to repay and permanently retire $75,585,000 of the
existing bank indebtedness at April 15, 1997.
The new credit facility consists of a senior bank term loan facility and a
senior bank revolving credit facility. The term loan facility consists of a
five-year tranche A term loan in the principal amount of $20,000,000 and a
seven-year tranche B term loan in the principal amount of $55,000,000. The
tranche A loan requires annual amortization of $4,000,000 and the tranche B loan
requires annual amortization of $550,000 for the first five years and
$26,125,000 in the sixth and seventh years. All amortization on the term loans
is to be paid in equal quarterly installments.
The new credit facility also contains a five-year revolving credit facility in
the principal amount of $15,000,000 that includes a $5,000,000 swingline
facility. The revolving credit facility will be available to provide for the
working capital requirements and general corporate purposes of the Company and
provides for letters of credit up to $10,000,000. At April 30, 1997, the Company
had $10,314,000 available to it under the new revolving credit facility, reduced
by $4,686,000 of outstanding standby letters of credit.
12
<PAGE>
Substantially all of the Company's assets are pledged as collateral under the
new bank credit agreement. In addition, borrowings under the new facility are
guaranteed by the parent company and by each of its active wholly-owned
subsidiaries. This guarantee is secured by a pledge of all of the capital stock
of Houlihan's Restaurants, Inc., and the guarantees of the active wholly-owned
subsidiaries are collateralized by security interests in all of the assets of
each such subsidiary.
The new credit facility allows the Company to enter into a sale leaseback
transaction involving certain of its owned restaurant properties. The Company
signed a letter of intent on April 23, 1997 to complete the sale leaseback
transaction. The letter provides for the sale leaseback of up to 25 properties
for proceeds of approximately $30,000,000 subject to appraised values. The
transaction is to be completed as soon as practicable. The Company has not
determined the number of properties to include in the sale leaseback
transaction, and therefore, cannot make a determination of the gain or loss that
will result upon the completion of the transaction. The Company intends to use
the proceeds from this transaction to either (i) repurchase shares of the
Company's common stock not owned by the Glazer Group for an aggregate repurchase
price of not in excess of $8.00 per share or $21,400,000 in aggregate value (the
"Repurchase"), (ii) prepay the new credit facility term loans or (iii) construct
or acquire additional new restaurants. If the Company decides to complete the
Repurchase, the Repurchase is expected to be completed as soon as practicable
after the closing of the sale leaseback transaction, but in any event by
November 15, 1997.
Impact of Inflation
In the past, the Company has been able to recover inflationary cost increases
through increased food and beverage menu prices. There have been, and there may
be in the future, delays in implementing such menu price increases, and
competitive pressures may limit the Company's ability to recover such cost
increases in their entirety. Historically, the effects of inflation on the
Company's net income have not been materially adverse.
A majority of the Company's employees are paid hourly rates related to federal
and state minimum wage and tip credit laws. An increase in the federal minimum
wage was effective October 1, 1996, and other minimum wage increases are
currently proposed by various state governments. Although the Company has and
will continue to attempt to pass along any increased labor costs through food
and beverage price increases, there can be no assurance that all such increased
labor costs can be reflected in its prices or that increased prices will be
absorbed by consumers without diminishing to some degree consumer spending at
the restaurants. However, the Company has not experienced to date a significant
reduction in gross profit margins as a result of changes in such laws, and
management does not anticipate any related future significant reductions in
gross profit margins.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits listed on the accompanying Exhibit Index are filed as part of
this report.
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HOULIHAN'S RESTAURANT GROUP, INC.
(Registrant)
Date: May 7, 1997 By: /s/ Frederick R. Hipp
-------------------------------- --------------------------
Frederick R. Hipp
President/Chief Executive Officer
Date: May 7, 1997 By: /s/ Paul R. Geist
-------------------------------- --------------------------
Paul R. Geist
Vice President/Controller
(Principal Accounting Officer)
15
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC.
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ---------- ------------------------------------------------------------------
27 Financial Data Schedule (filed with EDGAR version)
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Company's Quarterly Report on Form 10-Q and is qualified
in its entirety by reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,851
<SECURITIES> 0
<RECEIVABLES> 1,257
<ALLOWANCES> 0
<INVENTORY> 2,402
<CURRENT-ASSETS> 24,495
<PP&E> 153,496
<DEPRECIATION> 49,424
<TOTAL-ASSETS> 192,276
<CURRENT-LIABILITIES> 23,746
<BONDS> 74,674
0
0
<COMMON> 100
<OTHER-SE> 76,254
<TOTAL-LIABILITY-AND-EQUITY> 192,276
<SALES> 67,070
<TOTAL-REVENUES> 67,070
<CGS> 56,032
<TOTAL-COSTS> 64,662
<OTHER-EXPENSES> 42
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,864
<INCOME-PRETAX> 1,869
<INCOME-TAX> 904
<INCOME-CONTINUING> 965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 965
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
