<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number: 0-22422
POLLO TROPICAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0100964
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
7300 N. KENDALL DRIVE, 8TH FLOOR, MIAMI, FLORIDA 33156
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 305/670-7696
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 8, 1997: 8,133,799 shares of common stock, par value
$.01.
Page 1 of 14
<PAGE> 2
POLLO TROPICAL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
QUARTER ENDED MARCH 30, 1997
Page
----
Part I - Financial Information
Condensed Consolidated Balance Sheets
December 29, 1996 and March 30, 1997 .......................... 3
Condensed Consolidated Statements of Income
Quarters Ended March 31, 1996 and March 30, 1997 .............. 4
Condensed Consolidated Statements of Cash Flows
Quarters Ended March 31, 1996 and March 30, 1997 .............. 5
Notes to Condensed Consolidated Financial Statements ............ 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ....................... 13
Signature Page .................................................. 14
Page 2 of 14
<PAGE> 3
POLLO TROPICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 29, March 30,
1996 1997
------------ ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................... $ 94,490 $ 656,471
Inventories .................................................. 314,865 313,134
Prepaid expenses ............................................. 294,589 468,718
Prepaid income taxes ......................................... 354,062 281,617
Deferred income taxes ........................................ 1,583,649 1,065,755
Other current assets ......................................... 554,689 355,616
----------- -----------
Total current assets ........................................ 3,196,344 3,141,311
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation and amortization ................................ 42,539,997 40,447,380
DEFERRED RESTAURANT PRE-OPENING COSTS, net ...................... 99,213 61,353
INTANGIBLE ASSETS, net .......................................... 431,892 433,844
LEASEHOLD ACQUISITION COSTS, net ................................ 1,423,334 1,401,456
DEPOSITS AND DEFERRED COSTS ON FUTURE
RESTAURANT LOCATIONS ......................................... 93,338 174,916
OTHER ASSETS .................................................... 737,345 730,234
----------- -----------
Total assets ................................................ $48,521,463 $46,390,494
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................. $ 2,673,868 $ 1,656,221
Accrued liabilities .......................................... 1,545,805 1,821,241
Current maturities of long-term debt ......................... 83,773 85,459
Accrued restaurant closure expenses .......................... 6,273,830 5,435,418
----------- -----------
Total current liabilities ................................... 10,577,276 8,998,339
LONG-TERM DEBT, net of current maturities ....................... 11,290,952 9,684,945
DEFERRED RENT ................................................... 1,361,353 1,409,591
DEFERRED FRANCHISE FEE INCOME ................................... 270,000 270,000
DEFERRED INCOME TAXES ........................................... 879,830 858,579
----------- -----------
Total liabilities ........................................... 24,379,411 21,221,454
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock .............................................. -- --
Common stock ................................................. 81,498 81,588
Additional paid-in capital ................................... 21,708,161 21,735,034
Retained earnings ............................................ 2,352,393 3,352,418
----------- -----------
Total shareholders' equity .................................. 24,142,052 25,169,040
----------- -----------
Total liabilities and shareholders' equity................... $48,521,463 $46,390,494
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3 of 14
<PAGE> 4
POLLO TROPICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Quarter Ended
----------------------------
March 31, March 30,
1996 1997
--------- ---------
<S> <C> <C>
REVENUES:
Restaurant sales ............................................. $ 14,496,368 $ 15,621,608
Franchise revenues ........................................... 97,961 180,654
------------ ------------
14,594,329 15,802,262
------------ ------------
OPERATING EXPENSES:
Cost of sales ................................................ 5,223,404 5,524,230
Restaurant payroll ........................................... 3,694,407 3,701,565
Other restaurant operating expenses .......................... 2,791,982 2,665,591
General and administrative ................................... 1,363,054 1,503,801
Depreciation and amortization of property and equipment ...... 528,042 497,745
Amortization of deferred restaurant pre-opening costs ........ 128,727 57,265
Other amortization ........................................... 28,023 24,318
------------ ------------
13,757,639 13,974,515
------------ ------------
INCOME FROM OPERATIONS .......................................... 836,690 1,827,747
------------ ------------
OTHER INCOME (EXPENSE):
Interest, net ................................................ (246,992) (218,336)
Other income (expense), net .................................. 11,101 3,273
------------ ------------
(235,891) (215,063)
------------ ------------
INCOME BEFORE INCOME TAXES ...................................... 600,799 1,612,684
PROVISION FOR INCOME TAXES ...................................... 228,244 612,659
------------ ------------
NET INCOME ...................................................... $ 372,555 $ 1,000,025
============ ============
NET INCOME PER COMMON SHARE ..................................... $ 0.05 $ 0.12
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................................... 8,140,124 8,220,065
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4 of 14
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Quarter Ended
---------------------
March 31, March 30,
1996 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ....................................................................... $ 372,555 $ 1,000,025
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................................... 684,792 579,327
Loss on disposal of property and equipment ...................................... 7,731 2,343
Deferred rent ................................................................... 49,129 48,239
Amortization of deferred compensation ........................................... 1,929 10,144
Deferred income taxes ........................................................... 298,796 496,642
Amortization of deferred loan costs ............................................. 4,134 5,072
Changes in operating assets and liabilities:
(Increase) decrease in-
Inventories .................................................................. 31,437 1,731
Prepaid expenses ............................................................. (104,582) (174,129)
Prepaid income taxes ......................................................... (101,153) 86,654
Other current assets ......................................................... (14,429) 199,073
Deferred restaurant pre-opening costs ........................................ (139,884) (19,404)
Other assets ................................................................. 26,098 7,111
Increase (decrease) in-
Accounts payable and accrued liabilities ..................................... (93,650) (742,211)
Deferred franchise fee income ................................................ (27,500) --
Accrued restaurant closure expenses .......................................... (56,633) 906,867
Income taxes payable ......................................................... -- --
----------- -----------
Total adjustments ............................................................ 566,215 1,407,459
----------- -----------
Net cash provided by operating activities .................................... 938,770 2,407,484
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................................. (1,990,361) (151,024)
Payment for intangible assets .................................................... (7,498) (11,189)
Payment for leasehold acquisition costs .......................................... (1,900) --
(Increase) decrease in deposits and deferred costs on future
restaurant locations .......................................................... 111,660 (81,579)
----------- -----------
Net cash used in investing activities ........................................ (1,888,099) (243,792)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit agreement ..................... 1,100,313 (1,604,321)
Proceeds from exercise of stock options .......................................... 5,799 2,610
----------- -----------
Net cash (used in) provided by financing
activities .................................................................. 1,106,112 (1,601,711)
----------- -----------
Net increase in cash and cash
equivalents ................................................................. 156,783 561,981
Cash and cash equivalents, beginning of period ................................... 691,324 94,490
----------- -----------
Cash and cash equivalents, end of period ......................................... $ 848,107 $ 656,471
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest, net ................................................................ $ 250,298 $ 218,530
=========== ===========
Income taxes ................................................................. $ 18,086 $ 23,085
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Tax benefit from exercise of stock options
recorded to additional paid-in capital ....................................... $ 11,860 $ 14,209
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5 of 14
<PAGE> 6
POLLO TROPICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheet as of December 29, 1996, which has been
derived from audited financial statements, and the unaudited interim condensed
financial statements included herein, have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and note disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made herein are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K (File No. 0-22422) for the year
ended December 29, 1996.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of the
Company and the results of operations and cash flows for the periods indicated.
Results of operations for the quarter ended March 30, 1997 are not necessarily
indicative of the results to be expected for the year ending December 28, 1997.
(2) ACCOUNTING POLICIES
During interim periods the Company follows the accounting policies set forth in
its consolidated financial statements included in its Annual Report on Form 10-K
(File No. 0-22422). Reference should be made to such financial statements for
information on such accounting policies and further financial details.
(3) NEWLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS No.
128 supercedes the previous standard (Accounting Principles Board Opinion No.
15), modifies the methodology for calculating earnings per share, and is
effective for annual periods ending after December 15, 1997; early adoption is
not permitted. Upon adoption in its annual financial statements for the year
ending December 28, 1997, the Company will be required to restate previously
reported earnings per share data to conform with the requirements of SFAS No.
128. Had the provisions of SFAS No. 128 been applicable to the accompanying
condensed consolidated financial statements, basic and diluted earnings per
share, as calculated in accordance with the provisions of SFAS No. 128, would
not have been different than the historical earnings per share amounts reported
herein.
Page 6 of 14
<PAGE> 7
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "Forward Looking
Statements" within the meaning of the Private Securities Litigation Reform Act
of 1955. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of Pollo Tropical, Inc. stores to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: competition; success of operating initiatives; advertising and
promotional efforts; adverse publicity; acceptance of new product offerings;
availability, locations, and terms of sites for store development and the real
estate market conditions in general; changes in business strategy or development
plans; availability and terms of capital; food, labor, and employee benefit
costs; changes in government regulations; regional weather conditions; and other
factors referenced in this Form 10-Q or in the Company's Annual Report on Form
10-K for the year ended December 29, 1996.
Page 7 of 14
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's operating results showed substantial improvement during the first
quarter ended March 30, 1997 reflecting several strategic changes made in 1996
which will continue to affect operating results in 1997. The implementation of
effective marketing strategies continue to have positive results for the fourth
consecutive quarter with same-store sales increasing 7.8% for the first quarter
of 1997 compared with the same period of the prior year. The company believes
that the trend of improvement in the same-store sales is primarily due to the
more effective implementation in its core markets of its marketing strategies
including everyday value pricing on selected menu items, separate advertising
campaigns aimed toward its dual-target audiences, a successful new product
launch and improved customer service. The Company also made the strategic
decision to focus Company-owned growth in the South and Central Florida markets
and close the six stores outside of those markets, as well as the strategic
decision to upgrade the organization with an emphasis on improved controls and
operational execution. As a result of these changes the Company's operating
margins have improved substantially to 11.7% as a percentage of restaurant sales
for the first quarter of 1997 compared with 5.8% for the same period of the
prior year. During the first quarter of 1997 one store closed, the last of the
six Company-owned restaurants outside of the South and Central Florida markets,
and one additional store opened, bringing the total number of Company-owned
restaurants to 35.
Two additional franchised units opened in Puerto Rico and the first franchised
unit opened in the Dominican Republic during the first quarter of 1997
reflecting the strategic decision to grow the franchise program through
international area development agreements in Central and South America and the
Caribbean. The Company further expects to have franchise units open in Ecuador
and the Netherland Antilles by the end of 1997. The Company receives exclusivity
fees upon signing of area development agreements. Such fees are recognized as
revenue when franchise restaurants open or when such agreements terminate.
Additionally, when franchise restaurants become operational the Company
receives continuing royalties based on sales. As the Company does not control
the timing of franchise openings and/or terminations of agreements; the
recognition of franchise revenues cannot be accurately predicted and, therefore,
may fluctuate significantly on a quarter to quarter basis. The Company has
developed, and continues to develop, its corporate infrastructure in order to
manage and administer its franchise program.
Page 8 of 14
<PAGE> 9
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
selected income statement data as a percentage of restaurant sales, except
general and administrative expenses, which is shown as a percentage of total
revenues, and certain restaurant data:
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MARCH 31, MARCH 30,
1996 1997
---- ----
<S> <C> <C>
INCOME STATEMENT DATA:
Cost of sales ....................................... 36.0% 35.4%
Restaurant payroll .................................. 25.5 23.7
Other restaurant operating expenses ................. 19.3 17.1
General and administrative .......................... 9.3 9.5
Depreciation and amortization of property
and equipment ................................... 3.6 3.2
Amortization of deferred restaurant
pre-opening costs ............................... .9 .4
Other amortization .................................. .2 .2
Income from operations .............................. 5.8 11.7
Other income (expense), net ......................... (1.6) (1.4)
Net income .......................................... 2.6 6.4
RESTAURANT DATA:
Aggregate restaurant sales increase from
prior period ....................................... 3% 8%
Number of restaurants open at end of
period ............................................. 37 35
</TABLE>
Page 9 of 14
<PAGE> 10
QUARTER ENDED MARCH 30, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996
RESTAURANT SALES. Restaurant sales for the quarter ended March 30, 1997
increased $1.1 million (8%) to $15.6 million from $14.5 million for the
comparable quarter of 1996. This increase was due primarily to a sales increase
in restaurants open for the entire quarter for both years. Same-store sales for
the quarter ended March 30, 1997 increased 7.8% from the comparable quarter of
1996. This increase in restaurant sales was also due to the additional
restaurant sales generated by three new stores added during 1996 and one
during the first quarter of 1997 which were offset by the restaurant sales lost
by the closing of five stores in the fourth quarter of 1996 and one store in the
first quarter of 1997. During the quarter, 34 restaurants operated for the full
quarter and two operated for part of the quarter, one of which opened and one
of which closed in January 1997, as compared to the prior year quarter when 36
restaurants operated for the full quarter and one operated for part of the
quarter.
FRANCHISE REVENUES. Franchise revenues for the quarter ended March 30,
1997 increased $83,000 to $181,000 from $98,000 for the comparable 1996 period.
Franchise revenues generally consist of initial franchise fees which are
recognized when a restaurant opens, continuing royalties and fees from operating
franchised restaurants, and forfeiture of exclusivity fees when area development
agreements are terminated.
During the quarter ended March 30, 1997, two franchise restaurants
opened in Puerto Rico, and one franchise restaurant opened in the Dominican
Republic. Between March 30, 1997 and the date of this filing, one additional
franchise restaurant opened in Puerto Rico which brings the total number of
franchise restaurants open as of the date hereof to eleven. The Company
anticipates the opening of six additional international franchise restaurants
during the remainder of Fiscal 1997.
COST OF SALES. Cost of sales which consists of food, beverage, and
paper and supply costs, decreased 60 basis points for the quarter ended March
30, 1997 to 35.4%, as a percentage of restaurant sales, from 36.0% for the
comparable quarter of the prior year. This decrease was primarily due to
favorably re-negotiated contract prices on certain paper products. Food cost as
a percent of sales remained the same even though the average market price for
chicken increased approximately 11% for the quarter ended March 30, 1997
compared to the same quarter of the prior year. The successful launch of the new
pork product line in the Company's South Florida markets during the third
quarter of Fiscal 1996 also increased the relative food costs. These factors
were offset by re-negotiated contract prices on certain food items and
distribution services, selective menu re-pricing implemented in the third
quarter of Fiscal 1996, improved operating efficiencies and controls, and the
Company's strategy of concentrating store growth in its core markets of South
and Central Florida resulting in the closing of six Company-owned restaurants
which had high cost of sales relative to their restaurant sales.
RESTAURANT PAYROLL. Restaurant payroll expense, which consists of
restaurant management and hourly employee wages, payroll taxes, workers'
compensation insurance and group health insurance, decreased 180 basis points
for the quarter ended March 30, 1997 to 23.7%, as a percentage of restaurant
sales, from 25.5% for the comparable quarter of the prior year. This decrease
was primarily due to the Company's strategic decision to close six Company-owned
restaurants which had high payroll expenses relative to their sales. In
addition, higher sales volumes for the quarter ended March 30, 1997 and
increased controls placed on labor scheduling at the unit level further reduced
payroll expense as a percentage of sales as compared to the same quarter of the
prior year.
Page 10 of 14
<PAGE> 11
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating
expenses consist of all restaurant operating costs other than cost of sales,
payroll expenses and include occupancy costs, utilities and advertising
expenses. These expenses decreased 220 basis points for the quarter ended March
30, 1997 to 17.1%, as a percentage of restaurant sales, from 19.3% for the same
period of the prior year. The largest component of this change was advertising
expense, which decreased 120 basis points to 4.0%, as a percentage of restaurant
sales, from 5.2% during the comparable quarter of the prior year. This decrease
was due to the Company's strategic decision to close six Company-owned
restaurants and eliminating the marketing expenditures in those areas. The
decrease in operating expenses was also a result of a decrease in occupancy
costs of 70 basis points to 4.4%, as a percentage of restaurant sales from 5.1%,
for the comparable quarter of the prior year. This decrease was due to the
Company's strategic decision to close six Company-owned restaurants which had
high occupancy costs relative to their sales. In addition, the fixed cost nature
of occupancy costs relative to the higher sales volume experienced during the
quarter also contributed to the improvement.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative ("G &
A") expenses increased 20 basis points for the quarter ended March 30, 1997 to
9.5%, as a percentage of total revenues, from 9.3% for the comparable quarter of
the prior year.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT. Depreciation
and amortization of property and equipment decreased 40 basis points for the
quarter ended March 30, 1997 to 3.2%, as a percentage of restaurant sales, from
3.6% for the comparable quarter of the prior year. This decrease was due to the
Company's strategic decision to close six Company-owned restaurants in the
expansion markets which had high depreciation costs relative to their sales
volumes.
AMORTIZATION OF DEFERRED RESTAURANT PRE-OPENING COSTS. Amortization of
deferred pre-opening costs decreased 50 basis points for the quarter ended March
30, 1997 to 0.4%, as a percentage of restaurant sales, from 0.9% for the same
period of the prior year. This decrease was the result of fewer new restaurants
opened during the 12 months ended March 30, 1997 as compared to the 12 months
period ended March 31, 1996.
OTHER AMORTIZATION. Other amortization consists of amortization of
intangibles such as trademarks, prepaid loan costs, organization costs and
leasehold acquisition costs. Other amortization remained level at 0.2%, as a
percentage of restaurant sales, for the quarter ended March 30, 1997 as compared
to the same quarter of the prior year.
OTHER INCOME (EXPENSES). The Company incurred interest costs of
$218,531 during the quarter ended March 30, 1997. Interest costs were not
significantly offset by interest income. During the same quarter of the prior
year, the Company incurred interest costs of $270,154 of which $19,856 was
capitalized as construction cost. Such interest cost was further offset by
$3,306 in interest income.
Page 11 of 14
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
As is customary in the restaurant industry, the Company is able to
operate with a working capital deficit because its restaurant sales are in cash,
it receives trade credit from its vendors and its operations do not require
significant investment in receivables or inventories. Historically, the Company
has used the majority of its available capital for the development of new
restaurants. Consequently, prior to the Initial Public Offering in 1993 and
since the quarter ended April 3, 1994, the Company has operated with working
capital deficits.
During the quarter ended March 30, 1997, the Company generated an
aggregate of $2.4 million of cash flow from operations and reduced its long-term
indebtedness by $1.6 million. During such period, the Company opened one new
restaurant, of which most of the capitalizable expenditures were incurred during
Fiscal 1996. Capital expenditures for the quarter totaled $.2 million. The
anticipated capital needed for the development of the restaurant to open in the
third quarter is approximately $.9 million.
The Company has a $25 million line of credit facility from a commercial
bank, which provides for advances of up to $25,000,000; however, the lender has
no obligation to make further advances after July 13, 1998. Borrowing capacity
under the Loan can also be used to secure letters of credit, $150,000 of which
were outstanding as of March 30, 1997. As of the quarter ended March 30, 1997,
there was an additional borrowing capacity under the credit line of $15.3
million, and as of May 8, 1997 the available borrowing capacity under the line
was $18.1 million.
The Company anticipates that the funds under its existing credit
facility combined with cash flow from operations will be sufficient to fund its
planned new restaurant openings and other cash needs throughout Fiscal 1997.
Page 12 of 14
<PAGE> 13
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description
------- ------------
27.1 Article 5 of Regulation S-X
Financial Data Schedule for
1st Quarter 10-Q (for SEC use only)
10.27 Amendment, dated May 7, 1997, to the
Employment Agreement of Nicholas A. Castaldo.
(b) During the quarter ended March 30, 1997, the Company
did not file any reports on Form 8-K.
All other items under Part II are not applicable.
Page 13 of 14
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLLO TROPICAL, INC.
/s/Larry J. Harris
-----------------------
LARRY J. HARRIS
Chief Executive Officer
/s/William Carl Drew
-----------------------
WILLIAM CARL DREW
Chief Financial Officer
/s/ Vivian Lopez-Blanco
-----------------------
VIVIAN LOPEZ-BLANCO
Controller
DATE: May 13, 1997
Page 14 of 14
<PAGE> 1
Exhibit 10.27
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") made and
entered into as of this 5th day of May, 1997, by and between POLLO TROPICAL,
INC., a Florida corporation (the "Company"), and NICHOLAS A. CASTALDO
("Employee").
W I T N E S S E T H
WHEREAS, the Company and Employee are parties to that certain
Employment Agreement dated as of September 19, 1995 (the "Employment
Agreement"); and
WHEREAS, the Company and Employee desire to amend certain provisions
of the Employment Agreement relating, among other things, to certain payments
and benefits to which Employee may be entitled following certain events of
termination of Employee's employment with the Company and/or non-renewal or
expiration of term of the Employment Agreement; and
WHEREAS, as consideration for entering into this Amendment, employee
has agreed to forego certain bonus compensation to which Employee may otherwise
be entitled; and
WHEREAS, the Company believes this amendment is desirable and in the
best interests of the Company and its shareholders.
NOW, THEREFORE, for and in consideration of the mutual premises,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
A M E N D M E N T
1. AMENDMENTS TO EMPLOYMENT AGREEMENT
(a) Section 2 of the Employment Agreement shall be amended by
deleting said existing Section 2 in its entirety and by inserting in its place
and stead the following new Section 2 of the Employment Agreement:
" 2. TERM OF EMPLOYMENT
2.1 INITIAL TERM. The initial term of this Agreement, and of
Employee's employment hereunder, shall be from the date hereof through
September 30, 1998 (the "Initial Term"), subject to earlier
termination pursuant to any of Sections 6, 7 or 8 hereof.
<PAGE> 2
2.2 RENEWAL TERMS. The term of this Agreement, and of
Employee's employment hereunder, may, at the Company's option,
exercisable in its sole and absolute discretion, be renewed and
extended as follows:
(i) through September 30, 1999 (the "First Renewal
Term"), provided the Company provides written notice to
Employee of such renewal and extension by no later than July
31, 1998. If this Agreement, and Employee's employment
hereunder, is not so renewed and extended by the Company, then
such Agreement shall automatically cease and terminate upon
the expiration of the Initial Term; and
(ii) if the Company exercises its option to renew and
extend the term of this Agreement, and of Employee's
employment hereunder, pursuant to clause (i) of this Section
2.2 above, then the Company may, at its option, exercisable in
its sole and absolute discretion, renew and extend same again
through September 30, 2000 (the "Second Renewal Term"),
provided the Company provides written notice to Employee of
such renewal and extension by no later than July 31, 1999; and
(iii) if the Company exercises its option to renew
and extend the term of this Agreement, and of Employee's
employment hereunder, pursuant to clause (ii) or this clause
(iii) of this Section 2.2, then the Company may, at its
option, exercisable in its sole and absolute discretion, renew
and extend same again for a one-year term (and successive
one-year terms) of employment (a "Subsequent Renewal Term"
and, collectively with the First Renewal Term and Second
Renewal Term, each a "Renewal Term" and together the "Renewal
Terms") ending on the date which is the first anniversary of
the date upon which Employee's employment under this Agreement
(or a renewal hereof) is scheduled to expire (an "Expiration
Date"), provided the Company provides written notice to
Employee of such one-year renewal and extension by no later
than 60 days prior to such Expiration Date. "
(b) Section 8.1 of the Employment Agreement shall be amended
by deleting said existing Section 8.1 in its entirety and by inserting in its
place and stead the following new Section 8.1 of the Employment Agreement:
" 8.1 Termination by Company Without Cause. The Company shall
have the right, in its sole and absolute discretion, to terminate the
employment of Employee, at any time, without Cause, or otherwise
without any cause, reason or justification, provided that the Company
provides to Employee at least thirty (30) days' prior written notice
(the "Termination Notice") of such termination. In the event of any
such termination by the Company, (i) Employee's employment with the
Company shall cease and terminate on the date specified in the
Termination Notice (or, if no date is so specified, on the date which
is 30 days following the date of such notice), and (ii) Employee shall
be entitled to receive and be paid solely the amounts, on the terms,
provided in Section 8.4 below, and the Company shall have
2
<PAGE> 3
no further obligation or liability to Employee hereunder (other than
for any reimbursement of reasonable out-of-pocket business expenses
properly incurred by Employee prior to such termination and documented
to the Company in accordance with Sections 5.2(b) and 5.2(c) hereof).
"
(c) Subsection (a) of Section 8.2 of the Employment Agreement
shall be amended by deleting said existing Subsection (a) of Section 8.2 in its
entirety and by inserting in its place and stead the following new Subsection
(a) of Section 8.2 of the Employment Agreement (and subsections (b) and (c) of
such Section 8.2 shall remain and continue, unamended, in full force and
effect):
" 8.2 TERMINATION BY EMPLOYEE FOR GOOD REASON; PROCEDURES.
(a) Employee shall have the right to terminate his employment with the
Company, at any time, for Good Reason (as such term is defined in
Section 8.2(c) below), provided that Employee provides not less than
forty-five (45) days' prior written notice to the Company, which
notice shall explain in reasonable detail the cause or reason for such
termination, and provided Employee satisfies the provisions and
procedures set forth in this Section 8.2. On a mutually agreed date
which shall be within fifteen (15) days following receipt of
Employee's notice to the Company, Employee shall meet with
representatives of the Company's Board of Directors and Employee shall
present testimony and other evidence as to the bona fides of his
purported termination for Good Reason hereunder. Within fifteen (15)
days following such meeting, the Company shall have the opportunity to
correct or cure the matter, or otherwise to address Employee's "Good
Reason" concerns, such that there is no further reasonable basis for
Employee's purported termination for Good Reason hereunder. If, at the
conclusion of such second fifteen (15) day period, Employee continues
to maintain in good faith that he has grounds to terminate his
employment for Good Reason under this Section 8.2, he shall provide
written notice of such, within five (5) days, to the Company, and
thereupon the parties shall endeavor, for a period not to exceed ten
(10) days, to amicably resolve, settle and compromise the matter. If
no such resolution, settlement or compromise is reached by the
conclusion of such 10-day period, the matter shall promptly be
submitted to arbitration in accordance with the procedures set forth
in Section 10.4 hereof. The determination of the arbitration panel
selected pursuant to Section 10.4 hereof -- which shall determine
whether Employee has properly terminated his employment for Good
Reason in accordance with this Agreement and, if so, the date of such
termination, and shall assess the fees and costs associated with
arbitration in accordance with Section 10.4 -- shall be final and
binding on all parties. "
(d) Section 8.3 of the Employment Agreement shall be amended
by deleting said existing Section 8.3 in its entirety and by inserting in its
place and stead the following new Section 8.3 of the Employment Agreement:
" 8.3 NON-RENEWAL OR EXPIRATION OF EMPLOYMENT TERM. Pursuant
to Section 2.2 hereof, the Company, in its sole and absolute
discretion, has the option, among other things, to renew and extend
this Agreement, and the employment of Employee hereunder. Pursuant to
such Section 2.2, the Company also has the right,
3
<PAGE> 4
in its sole and absolute discretion, not to renew or extend this
Agreement, and the employment of Employee hereunder, beyond the
Initial Term. In the event this Agreement is not renewed and extended
by the Company beyond the expiration of the Initial Term or any
Renewal Term, or otherwise expires in accordance with its terms (in
each case, an "Expiration"), then (i) this Agreement and Employee's
employment shall automatically cease and terminate upon such
Expiration, and (ii) Employee shall be entitled to receive and be paid
solely the amounts, on the terms, provided in Section 8.4 below, and
the Company shall have no further obligation or liability to Employee
hereunder (other than for any reimbursement of reasonable
out-of-pocket business expenses properly incurred by Employee prior to
such termination and documented to the Company in accordance with
Sections 5.2(b) and 5.2(c) hereof). Notwithstanding any other term or
provision in this Agreement (except as expressly provided in Section
8.4 hereof), no right to payments or benefits shall arise hereunder or
otherwise in the event the Company does not elect to renew or extend
Employee's employment term (or this Agreement) beyond the Initial Term
or any Renewal Term. "
(e) Section 8.4 of the Employment Agreement shall be amended
by deleting said existing Section 8.4 (and subsections (a), (b) and (c)
thereof) in its entirety and by inserting in its place and stead the following
new Section 8.4 of the Employment Agreement:
" 8.4 PAYMENTS UPON SECTION 8 TERMINATION OR EXPIRATION. (a)
In the event of either (a) a termination of Employee's employment
under, pursuant to and in compliance with Section 8.1 or Section 8.2
hereof, which termination of employment occurs at any time, or (b) in
the event of an Expiration (as such term is defined in Section 8.3
hereof) of this Agreement, then Employee shall be entitled solely to
the following payments and benefits:
(i) Employee's Base Salary then in effect, through
the date which is twelve (12) months following the date on
which Employee's employment is terminated or expires under the
terms of this Agreement (the "Special Severance Date"),
payable over such 12-month period at the Company's regular and
customary intervals for the payment of salaries as then in
effect; and
(ii) Employee's Stock Options to be granted under
the Option Agreement (as such terms are defined and described
in Section 4.1 hereof) shall vest as set forth in and in
accordance with the terms and provisions of the Option
Agreement; and
(iii) Employee's Restricted Stock to be granted to
Employee under and pursuant to the terms, restrictions and
provisions of the Restricted Stock Agreement (as such terms
are defined and described in Section 4.2 hereof) shall vest
as set forth in and in accordance with the schedule and other
terms and provisions of the Restricted Stock Agreement; and
4
<PAGE> 5
(iv) Employee's health and medical insurance
benefits described under Section 5.1(c) (in accordance with
the terms and provisions of such benefits and related plans),
shall be continued at the Company's expense through the date
which is six (6) months following the date on which
Employee's employment is terminated or expires under the
terms of this Agreement.
(b) Employee shall accept payment pursuant to this Section 8
in full discharge and release of the Company of and from any further
obligation or liability under this Agreement. "
(f) The reference in the parenthetical contained in the first
sentence of Section 9.2 of the Employment Agreement to "Section 8.4(b)(i)"
shall be amended by deleting said reference in its entirety and by inserting in
its place and stead the following Section reference: "SECTION 8.4".
2. UNAMENDED PROVISIONS CONTINUE IN EFFECT
All provisions of the Employment Agreement not specifically amended by
the provisions of Section 1 of this Amendment shall remain and continue in full
force and effect.
3. MISCELLANEOUS
(a) This Amendment (together with the provisions of the
Employment Agreement not specifically amended by this Amendment) represents the
entire agreement between the parties with respect to the subject matter hereof
and shall not be modified or affected by, and supersedes, any and all prior
offers, proposals, statements, understandings, promises, assurances, warranties
or representations, oral or written, made by, for or on behalf of either party.
This Amendment may not be amended or modified except by an instrument in
writing signed by the Company and Employee.
(b) The fact that one party initially prepared the first
draft, or was responsible for revising subsequent drafts, of this Agreement
shall be accorded no weight, shall give rise to no presumption regarding
bargaining position, and otherwise shall not affect the construction, meaning
or interpretation of any term or provision hereof, each party having been
represented by counsel having reviewed and discussed the document and having
thoughtfully considered and weighed the relative merits and costs, benefits and
detriments, of each of the provisions hereof before entering into this
Agreement.
(c) This Amendment, and all questions as to its validity,
interpretation, meaning, performance and enforcement, shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Florida.
5
<PAGE> 6
(d) If the Company so desires, the Employment Agreement, as
amended by and pursuant to this Amendment, may be restated in its entirety by
incorporating the revisions contained and specified in this Amendment into an
amended and restated form of employment agreement.
(e) This Amendment may be executed in separate counterparts,
each of which shall be deemed to be an original as against any party whose
signature (or, in the case of the Company, whose officer's signature) appears
thereon, and all of which together shall constitute one and the same instrument
and agreement. This Amendment shall be and become binding when both parties
hereto have signed or executed one or more counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
Witnesses: POLLO TROPICAL, INC.
By: /s/LARRY J. HARRIS
- - --------------------------------- -------------------------------
Name: Larry J. Harris
Title: Chairman and Chief
Executive Officer
EMPLOYEE
/s/ NICHOLAS A. CASTALDO
- - --------------------------------- -----------------------------------
NICHOLAS A. CASTALDO
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED INCOME STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 656,471
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 313,134
<CURRENT-ASSETS> 3,141,311
<PP&E> 46,657,379
<DEPRECIATION> 6,209,999
<TOTAL-ASSETS> 46,390,494
<CURRENT-LIABILITIES> 8,998,339
<BONDS> 0
0
0
<COMMON> 81,588
<OTHER-SE> 25,087,452
<TOTAL-LIABILITY-AND-EQUITY> 46,390,494
<SALES> 15,621,608
<TOTAL-REVENUES> 15,802,262
<CGS> 5,524,230
<TOTAL-COSTS> 8,450,285
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218,336
<INCOME-PRETAX> 1,612,684
<INCOME-TAX> 612,659
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,000,025
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
