<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 11, 1996
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: 0-22786
TIMBER LODGE STEAKHOUSE, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Minnesota 41-1810126
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
4021 Vernon Avenue South
St. Louis Park, Minnesota 55416
(Address of Principal Executive Offices)
(612) 929-9353
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) has 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.
X Yes No
----- -----
As of September 1, 1996 there were 3,572,500 shares outstanding of the
issuer's Common Stock, $.01 par value per share.
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . 5
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIMBER LODGE STEAKHOUSE, INC.
BALANCE SHEETS
(unaudited)
September 11, January 3,
1996 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 488,740 $ 2,020,096
Accounts receivable . . . . . . . . . . . . . . 111,011 87,716
Inventory . . . . . . . . . . . . . . . . . . . 198,189 166,002
Pre-opening costs . . . . . . . . . . . . . . . 280,049 156,544
Deferred tax assets . . . . . . . . . . . . . . 259,200 259,200
Prepaid expenses and other current assets . . . 328,172 274,696
------------ ------------
Total current assets . . . . . . . . . . . . 1,665,361 2,964,254
Property and equipment, net. . . . . . . . . . . . 10,797,063 7,972,221
Note receivable, related party - Note 2. . . . . . 396,000 406,000
Other assets . . . . . . . . . . . . . . . . . . . 219,856 242,010
------------ ------------
Total assets . . . . . . . . . . . . . . . . $ 13,078,280 $ 11,584,485
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . $ 773,687 $ 777,329
Short-term borrowing. . . . . . . . . . . . . . 370,000 --
Accrued salaries and wages. . . . . . . . . . . 257,164 186,913
Sales tax payable . . . . . . . . . . . . . . . 169,787 116,332
Gift certificates payable . . . . . . . . . . . 203,966 429,326
Income tax payable. . . . . . . . . . . . . . . 179,347 --
Accrued expenses and other liabilities. . . . . 200,663 177,350
------------ ------------
Total current liabilities. . . . . . . . . . 2,154,614 1,687,250
Deferred rent. . . . . . . . . . . . . . . . . . . 1,193,618 826,412
Deferred tax liabilities . . . . . . . . . . . . . 28,900 28,900
------------ ------------
Total liabilities. . . . . . . . . . . . . . 3,377,132 2,542,562
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares -- 10,000,000
Issued shares -- 3,572,500 at June 19, 1996
and 3,575,500 at January 3, 1996 . . . . . . 35,725 35,755
Additional paid-in capital. . . . . . . . . . . 8,814,945 8,825,015
Retained earnings . . . . . . . . . . . . . . . 850,478 181,153
------------ ------------
Total shareholders' equity . . . . . . . . . 9,701,148 9,041,923
------------ ------------
Total liabilities and shareholders' equity . . . . $ 13,078,280 $ 11,584,485
------------ ------------
------------ ------------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
1
<PAGE>
TIMBER LODGE STEAKHOUSE, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED THIRTY-SIX WEEKS ENDED
--------------------------- ---------------------------
September 11, September 6, September 11, September 6,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $ 4,798,921 $ 3,546,988 $ 13,815,768 $ 11,695,122
Costs and expenses:
Food and beverage costs . . . . . . . . . . . . 1,794,490 1,378,130 5,210,380 4,557,784
Labor and benefits costs. . . . . . . . . . . . 1,390,174 1,013,768 3,967,807 3,402,033
Restaurant operating expenses . . . . . . . . . 422,177 318,104 1,203,308 1,021,206
Occupancy costs . . . . . . . . . . . . . . . . 549,066 416,927 1,488,773 1,379,865
------------ ------------ ------------ ------------
Restaurant costs and expenses. . . . . . . . 4,155,907 3,126,929 11,870,268 10,360,888
------------ ------------ ------------ ------------
Restaurant operating income. . . . . . . . . . . . 643,014 420,059 1,945,500 1,334,234
General and administrative . . . . . . . . . . . . 335,013 279,215 965,858 1,113,366
Amortization of pre-opening costs. . . . . . . . . 72,017 95,452 189,277 370,412
Loss on sale and abandonment of. . . . . . . . . .
restaurants, net - Note 2 . . . . . . . . . . . -- -- -- 294,880
------------ ------------ ------------ ------------
Operating income (loss) . . . . . . . . . . . . 235,984 45,392 790,365 (444,424)
Interest and other (income) expense. . . . . . . . (5,611) (46,862) (46,260) (126,230)
------------ ------------ ------------ ------------
Income (loss) before income taxes. . . . . . . . . 241,595 92,254 836,625 (318,194)
Income taxes (benefit). . . . . . . . . . . . . 43,350 (10,079) 167,300 (63,679)
------------ ------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . $ 198,245 $ 102,333 $ 669,325 $ (254,515)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per share. . . . . . . . . . . . $0.06 $0.03 $0.19 ($0.07)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of common and
common equivalent shares outstanding. . . . . . 3,572,500 3,614,278 3,573,310 3,616,425
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
2
<PAGE>
TIMBER LODGE STEAKHOUSE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
---------------------------
September 11, September 6,
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $ 669,325 $ (254,515)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 801,002 871,135
Deferred rent. . . . . . . . . . . . . . . . . . . . . . 367,206 256,587
Loss on sale and abandonment of assets, net. . . . . . . -- 100,885
Changes in operating assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . (23,295) 6,648
Inventories . . . . . . . . . . . . . . . . . . . . . (32,187) 21,647
Pre-opening costs . . . . . . . . . . . . . . . . . . (310,082) (117,230)
Prepaid expenses and other current assets . . . . . . (53,476) (49,862)
Accounts payable. . . . . . . . . . . . . . . . . . . (3,642) (368,666)
Accrued salaries and wages. . . . . . . . . . . . . . 70,251 (1,519)
Sales tax payable . . . . . . . . . . . . . . . . . . 53,455 24,578
Gift certificates payable . . . . . . . . . . . . . . (225,360) (214,994)
Income taxes payable. . . . . . . . . . . . . . . . . 179,347 (372,589)
Other accrued expenses. . . . . . . . . . . . . . . . 23,313 558,132
------------ ------------
Net cash provided by operating activities. . . . . . . . . . . 1,515,857 460,237
INVESTING ACTIVITIES
Proceeds used in restaurant development. . . . . . . . . . . . -- 943,893
Purchases of property and equipment. . . . . . . . . . . . . . (3,436,567) (1,956,445)
Cash from sale of restaurant . . . . . . . . . . . . . . . . . -- 125,000
Principal collected on long term note. . . . . . . . . . . . . 10,000 --
Purchases of marketable securities . . . . . . . . . . . . . . -- (1,530,967)
Maturities of marketable securities. . . . . . . . . . . . . . -- 2,972,161
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 19,454 (9,920)
------------ ------------
Net cash provided by (used in) investing activities. . . . . . (3,407,113) 543,722
FINANCING ACTIVITIES
Proceeds from short-term borrowings. . . . . . . . . . . . . . 370,000 150,000
Common stock repurchased . . . . . . . . . . . . . . . . . . . (10,100) (66,390)
------------ ------------
Net cash provided by financing activities. . . . . . . . . . . 359,900 83,610
Net increase (decrease) in cash and cash equivalents . . . . . (1,531,356) 1,087,569
Cash and cash equivalents at beginning of year . . . . . . . . 2,020,096 380,643
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . $ 488,740 $ 1,468,212
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
3
<PAGE>
TIMBER LODGE STEAKHOUSE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 11, 1996
(unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying condensed Financial
Statements contain all normal recurring adjustments necessary for a fair
presentation. The results of operations for the thirty-six week period ended
September 11, 1996 are not necessarily indicative of the results to be expected
for the full year.
The significant accounting policies followed by the Company are set forth
in the Notes to Financial Statements in the Company's 1995 Annual Report and
Form 10-KSB/A filed with the Securities and Exchange Commission. These
condensed Financial Statements should be read in conjunction with the Financial
Statements in the 1995 Annual Report and Form 10-KSB/A.
2. SALE AND ABANDONMENT OF RESTAURANTS
The Company sold its Q.Cumbers unit, a high quality soup and salad buffet,
to the existing store manager, a related party, on June 14, 1995. The Company
retained the services of an independent consultant to assess the fair market
value of the business and validate the Company's selling price. The store was
sold for $531,000. The Company received $125,000 in cash and a promissory note
for $406,000. The sale resulted in a pre-tax gain of $278,120.
The Company decided in May 1995 to close its Williamsville, NY restaurant.
The store had under performed since its opening in April 1994. The abandonment
costs of $573,000 consists of the write-off of non-reusable assets and related
close down costs.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following table sets forth the percentage relationship to net sales of
certain items included in the Company's statements of operations.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED THIRTY-SIX WEEKS ENDED
--------------------------- ---------------------------
SEPT. 11, SEPT. 6, SEPT. 11, SEPT. 6,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Costs and Expenses:
Food and beverage costs . . . . . . . . . . . . . . 37.4 38.9 37.7 39.0
Labor and benefits costs. . . . . . . . . . . . . . 29.0 28.6 28.7 29.1
Restaurant operating expenses . . . . . . . . . . . 8.8 9.0 8.7 8.7
Occupancy costs . . . . . . . . . . . . . . . . . . 11.4 11.7 10.8 11.8
------------ ------------ ------------ ------------
Restaurant costs and expenses. . . . . . . . . . 86.6 88.2 85.9 88.6
------------ ------------ ------------ ------------
Restaurant operating income. . . . . . . . . . . . . . 13.4 11.8 14.1 11.4
General and administrative . . . . . . . . . . . . . . 7.0 7.9 7.0 9.5
Amortization of pre-opening costs. . . . . . . . . . . 1.5 2.7 1.4 3.2
Loss on sale and abandonment of
restaurants, net - Note 2 . . . . . . . . . . . . . -- -- -- 2.5
------------ ------------ ------------ ------------
Operating income (loss) . . . . . . . . . . . . . . 4.9 1.2 5.7 (3.8)
Interest and other (income)/expense. . . . . . . . . . (0.1) (1.4) (0.3) (1.1)
------------ ------------ ------------ ------------
Income (loss) before income taxes. . . . . . . . . . . 5.0 2.6 6.0 (2.7)
Income taxes (benefit). . . . . . . . . . . . . . . 0.9 (0.3) 1.2 (0.5)
------------ ------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . 4.1% 2.9% 4.8% (2.2)%
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
TWELVE WEEKS ENDED SEPTEMBER 11, 1996, COMPARED TO TWELVE WEEKS ENDED
SEPTEMBER 6, 1995.
NET SALES. Total sales for the twelve weeks ending September 11, 1996
increased 35.3% to $4,798,921 compared to $3,546,988 for the same period last
year. The increase is attributable to opening four new stores since the
beginning of the 3rd quarter last year. Same store sales for stores open at
least 18 months were down 4.2%.
COSTS AND EXPENSES. Food and beverage costs, decreased 1.5% to 37.4%
compared to 38.9% for the same period last year. This decrease is due in part
to the addition of a new menu design that features several new entrees with
lower food costs, as well as a continuing operational effort to reduce food
waste. Menu price increases were taken on only a very few menu items
commensurate with the new menu. In aggregate, commodity costs of beef and
seafood were even with last year.
Labor and related benefit costs increased .4% to 29.0% for the third
quarter 1996 compared to 28.6% for the same quarter last year. The increase
is due primarily to an increase in health insurance expense as more employees
achieve eligibility, but offset by a reduction in workers' compensation
insurance rates compared to the same period last year.
5
<PAGE>
Restaurant operating expenses include all other unit-level costs, the major
components of which are rent, real estate taxes, utilities, store supplies,
repairs and maintenance and other related occupancy costs. Restaurant operating
costs are semi-variable while most of the occupancy expenses are fixed.
Restaurant operating expenses and occupancy costs combined decreased .5% to
20.2% of net sales compared to 20.7% for the same period last year. The
reduction is due in part to the leverage impact of increasing sales combined
with the impact of lower property insurance costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased to 7.0% of net sales compared to 7.9% for the same period last year.
The decrease is due to the leverage impact of continuing sales growth outpacing
the increase in G & A expenses.
AMORTIZATION OF PRE-OPENING COSTS. Amortization of pre-opening costs
decreased to 1.5% of net sales compared to 2.7% for the same period last year.
The decrease is attributable to amortizing lower pre-opening costs for three new
restaurants in the third quarter this year compared to the three new restaurants
the same quarter last year. The Company amortizes pre-opening costs for new
restaurants over a twelve month period commencing with the first full period
after the restaurant's opening.
INTEREST AND OTHER INCOME. Interest and other income for the third
quarter was $5,611 compared to $46,862 for the same period last year. The
decrease is due to a reduction in interest income from marketable securities
used to finance new restaurant construction.
PROVISION FOR INCOME TAXES. The Company's effective tax rate is estimated
at 20% in 1996. The company recognized a tax benefit as a result of the loss for
the same quarter last year.
NET INCOME. The Company's net income was $198,245 or $.06 per share in
the third quarter compared to an income of $102,333 or $.03 per share for the
same quarter last year.
THIRTY-SIX WEEKS ENDED SEPTEMBER 11, 1996, COMPARED TO THIRTY-SIX WEEKS ENDED
SEPTEMBER 6, 1995.
NET SALES. Total sales for thirty-six weeks ending September 11, 1996
increased 18.1% to $13,815,768 compared to $11,695,122 for the same period last
year. The increase is attributable to opening three new stores since the
beginning of 1996 but offset from closing an underperforming store and selling
the Q. Cumbers restaurant, both of which were open the first two quarters of
1995. Same store sales for stores open at least 18 months were down 3.9% year-
to-date.
COSTS AND EXPENSES. Cost of restaurant sales consisting of food and
beverage costs decreased 1.3% to 37.7% compared to 39.0% for the same period
last year. This decrease is due in part to the elimination of an
underperforming store that experienced higher food costs last year combined with
opportunities to feature temporary menu items with lower food costs.
Labor and related benefit costs were 28.7% as a percentage of sales year-
to-date compared to 29.1% for the same period last year. Labor productivity
gains combined with reduced worker's compensation insurance costs were achieved
during the period but offset by an increase in health insurance costs as more
employees met eligibility requirements.
Restaurant operating expenses and occupancy costs combined were 19.5% year-
to-date compared to 20.5% for the same period last year. The decrease is
attributable to the leverage impact on fixed occupancy costs combined with the
impact of lower property insurance premiums.
6
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased to 7.0% of net sales year-to-date compared to 9.5% for the same period
last year. The decrease is due to the one-time costs the company experienced
last year in changing the name of the restaurants and reincorporating in
Minnesota.
AMORTIZATION OF PRE-OPENING COSTS. Amortization of pre-opening costs
decreased to 1.4% of net sales compared to 3.2% for the same period last year.
The decrease is attributable to amortizing lower pre-open costs for five new
restaurants compared to five the same period last year.
INTEREST AND OTHER INCOME. Interest and other income year-to-date was
$46,260 compared to $126,230 for the same period last year. The decrease is due
to a reduction in interest income from marketable securities used to finance new
restaurant construction.
LOSS ON SALE AND ABANDONMENT OF RESTAURANTS. The company reflected the
gain on the sale of its' Q. Cumbers restaurant and the closing of an
underperforming store in Williamsville, New York. The net result was a loss of
$294,880.
PROVISION FOR INCOME TAXES. The Company's effective tax rate is estimated
at 20% in 1996. The Company recognized a tax benefit as a result of the loss
year-to-date last year.
NET INCOME. The Company's net income was $669,325 or $.19 per share year-
to-date compared to a loss of ($254,515) or ($.07) per share for the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
All the proceeds raised from the Company's initial public offering of its
Common Stock in December 1993 (approximately $6,300,000) have been used to
develop steakhouse restaurants. Historically, the Company has leased its
restaurant sites under non-cancelable leases for periods of six to fifteen
years, with renewal options of between three and ten years. The Company plans
to continue leasing sites for expansion in the foreseeable future.
Cash provided by operating activities was $1,515,857 compared to cash
provided of $460,237 for the same period last year. The Company had a net
working capital deficit of ($489,253) at September 11, 1996 compared to working
capital of $1,277,004 at January 3, 1996. The decrease in working capital is a
result of new restaurant development. The Company has a $500,000 line of credit
which it has used to fund short-term cash needs. At the end of the third
quarter 1996 this line had an outstanding balance of $370,000. This balance is
planned to be paid down in the subsequent quarter. The Company finalized a
sale/leaseback arrangement on its Madison, Wisconsin property eliminating the
short term note payable with the original seller. Most of the Company's sales
are paid by cash, check, or credit card and the Company generally receives 30
days credit from trade suppliers.
The Company's Board of Directors passed a resolution in May 1995
authorizing the purchase of shares of the Company's Common Stock in the open
market as management of the Company deems appropriate. No repurchase activity
occurred during the third quarter.
The Company currently intends to focus its expansion on steakhouse
restaurants and estimates that the average costs of developing a new steakhouse
restaurant to be approximately $1,200,000. The actual cost will vary depending
on the size of the restaurant, the amount of landlord contributions, if any, and
whether extensive renovation or remodeling is required. Pre-opening costs,
primarily labor, advertising, travel and other costs related to the two new
steakhouses opened in 1995 were $105,000 per restaurant. Expenses for new
restaurants opening in the future are expected to be similar.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. Exhibit
----------- -------
11.1 Statement Regarding Computation
of Per Share Earnings.(1)
(b) No reports on Form 8-K have been filed during the quarter for which
this report was filed.
- ---------------
(1) See Financial Statements -- Statements of Income.
8
<PAGE>
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.
TIMBER LODGE STEAKHOUSE, INC.
Date: October 1, 1996 By: /s/ Dermot F. Rowland
------------------------------------
Dermot F. Rowland
Its: Chief Executive Officer
Date: October 1, 1996 By: /s/ Robert G. Cornell
------------------------------------
Robert G. Cornell
Its: Chief Financial Officer
S-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-01-1997
<PERIOD-START> JAN-04-1996
<PERIOD-END> SEP-11-1996
<CASH> 488,740
<SECURITIES> 0
<RECEIVABLES> 111,011
<ALLOWANCES> 0
<INVENTORY> 198,189
<CURRENT-ASSETS> 1,665,361
<PP&E> 10,797,063
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,078,280
<CURRENT-LIABILITIES> 2,154,614
<BONDS> 0
0
0
<COMMON> 35,725
<OTHER-SE> 9,665,423
<TOTAL-LIABILITY-AND-EQUITY> 13,078,280
<SALES> 13,815,768
<TOTAL-REVENUES> 13,815,768
<CGS> 5,210,380
<TOTAL-COSTS> 11,870,268
<OTHER-EXPENSES> 1,095,562
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,313
<INCOME-PRETAX> 836,625
<INCOME-TAX> 167,300
<INCOME-CONTINUING> 669,325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 669,325
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
