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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 March 27, 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
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TABLE OF CONTENTS
Page
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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
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIMBER LODGE STEAKHOUSE, INC.
BALANCE SHEETS
(unaudited)
March 27, January 3,
1996 1996
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ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,255,732 $ 2,020,096
Accounts receivable................................................. 246,248 87,716
Inventory........................................................... 166,528 166,002
Pre-opening costs................................................... 195,334 156,544
Deferred tax assets................................................. 259,200 259,200
Prepaid expenses and other current assets........................... 296,573 274,696
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Total current assets.............................................. 2,419,615 2,964,254
Property and equipment, net........................................... 9,224,347 7,972,221
Note receivable, related party ....................................... 406,000 406,000
Other assets.......................................................... 228,462 242,010
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Total assets...................................................... $ 12,278,424 $ 11,584,485
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 837,940 $ 777,329
Short-term borrowing................................................ 100,000 --
Accrued salaries and wages.......................................... 238,779 186,913
Sales tax payable................................................... 102,686 116,332
Gift certificates payable........................................... 266,097 429,326
Income tax payable.................................................. 70,947 14,597
Accrued expenses and other liabilities.............................. 172,346 162,753
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Total current liabilities......................................... 1,788,795 1,687,250
Deferred rent......................................................... 1,193,639 826,412
Deferred tax liabilities.............................................. 28,900 28,900
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Total liabilities................................................. 3,011,334 2,542,562
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares -- 10,000,000
Issued shares -- 3,572,500 at March 27, 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................................................... 416,420 181,153
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Total shareholders' equity........................................ 9,267,090 9,041,923
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Total liabilities and shareholders' equity............................ $ 12,278,424 $ 11,584,485
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
1
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TIMBER LODGE STEAKHOUSE, INC.
STATEMENTS OF INCOME
(unaudited)
Twelve Weeks Ended
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March 27, March 22,
1996 1995
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Net sales.................................................... $ 4,280,714 $ 4,058,631
Costs and expenses:
Food and beverage costs.................................... 1,621,055 1,574,779
Labor and benefits costs................................... 1,220,268 1,156,960
Restaurant operating expenses.............................. 383,977 340,165
Occupancy costs............................................ 413,799 439,769
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Restaurant costs and expenses............................ 3,639,099 3,511,673
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Restaurant operating income.................................. 641,615 546,958
General and administrative................................... 311,214 262,418
Amortization of pre-opening costs............................ 58,241 135,928
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Operating income .......................................... 272,160 148,612
Interest and other (income)/expense.......................... (22,007) (44,260)
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Income before income taxes................................... 294,167 192,872
Income taxes............................................... 58,900 61,800
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Net income................................................... $ 235,267 $ 131,072
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Net Income per share......................................... $0.07 $0.04
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Weighted average number of common and
common equivalent shares outstanding....................... 3,574,927 3,617,500
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
2
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<TABLE>
<CAPTION>
TIMBER LODGE STEAKHOUSE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Twelve Weeks Ended
--------------------------------
March 27, March 22,
1996 1995
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OPERATING ACTIVITIES
Net income ............................................................. $ 235,267 $ 131,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................................... 239,667 297,155
Deferred rent....................................................... 367,227 204,982
Changes in operating assets and liabilities:
Receivables....................................................... (158,532) (21,296)
Inventories....................................................... (526) (8,039)
Pre-opening costs................................................. (97,031) (122,381)
Prepaid expenses and other current assets...................... (21,877) (67,145)
Accounts payable.................................................. 60,611 (390,587)
Accrued salaries and wages........................................ 51,866 21,606
Sales tax payable................................................. (13,646) (5,706)
Gift certificates payable......................................... (163,229) (137,600)
Income taxes payable.............................................. 56,350 (243,200)
Other accrued expenses............................................ 9,593 42,906
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Net cash provided by (used in) operating activities..................... 565,740 (298,233)
INVESTING ACTIVITIES
Proceeds used in restaurant development................................. -- 688,025
Purchases of property and equipment..................................... (1,432,652) (645,317)
Purchases of marketable securities...................................... -- (1,486,799)
Maturities of marketable securities..................................... -- 2,972,161
Other assets............................................................ 12,648 (1,070)
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Net cash provided by (used in) investing activities..................... (1,420,004) 1,527,000
FINANCING ACTIVITIES
Proceeds from short-term borrowings 100,000 --
Common stock repurchased................................................ (10,100) --
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Net cash provided by financing activities............................... 89,900 --
Net increase (decrease) in cash and cash equivalents.................... (764,364) 1,228,767
Cash and cash equivalents at beginning of year.......................... 2,020,096 380,643
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Cash and cash equivalents at end of period.............................. $ 1,255,732 $ 1,609,410
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
3
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TIMBER LODGE STEAKHOUSE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 27, 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 twelve week period ended March
27, 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.
4
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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.
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TWELVE WEEKS ENDED
--------------------------------
MARCH 27, MARCH 22,
1996 1995
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Net Sales........................................ 100.0% 100.0%
Costs and Expenses:
Food and beverage costs..................... 37.9 38.8
Labor and benefits costs.................... 28.5 28.5
Restaurant operating expenses............... 9.0 8.4
Occupancy costs............................. 9.6 10.8
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Restaurant costs and expenses.......... 85.0 86.5
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Restaurant operating income...................... 15.0 13.5
General and administrative....................... 7.3 6.5
Amortization of pre-opening costs................ 1.3 3.4
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Operating income ............................ 6.4 3.6
Interest and other (income)/expense.............. (0.5) (1.1)
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Income before income taxes....................... 6.9 4.7
Income taxes................................ 1.4 1.5
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Net income....................................... 5.5% 3.2%
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Number of restaurants open at end of period 10 10
</TABLE>
TWELVE WEEKS ENDED MARCH 27, 1996, COMPARED TO TWELVE WEEKS ENDED MARCH 22,
1995.
NET SALES. The Company's net sales increased 5.5% to $4,280,714 compared
to $4,058,631 for the first quarter last year. The increase is attributable to
the three new restaurants opened since the beginning of the first quarter of
fiscal 1995 but offset by the sale of the salad bar restaurant "Q. Cumbers" and
closing an underperforming restaurant in Williamsville, New York (both of which
were open during the first quarter 1995). Same store sales for stores open at
least 18 months were down 6.8%. The decline was due in part to the severe
winter weather the restaurants experienced in January.
5
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COSTS AND EXPENSES. Cost of restaurant sales, consisting of food and
beverage costs, decreased .9% to 37.9% compared to 38.8% for the same period
last year. This decrease is primarily the result of opportunities during the
quarter that allowed us to feature high value, supplementary menu entrees with
lower food costs. In aggregate, costs of beef and seafood were up just slightly
above last year.
Labor and related benefit costs were 28.5% as a percentage of sales for
the first quarter 1996 and the same period last year. Labor productivity gains
were achieved during the quarter but were offset by an increase in health
insurance costs as more employees entered the program upon meeting
eligibility requirements.
Restaurant operating expenses include all other unit-level costs, the major
components of which are rents, 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. In the
aggregate for the first quarter, restaurant operating expenses and occupancy
costs decreased .6% to 18.6% of net sales compared to 19.2% for the same period
last year. The decrease is attributable to the sales increase for the quarter
combined with the effect of lower property insurance costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased .8% to 7.3% of net sales compared to 6.5% for the same period last
year. The increase is due primarily to an incremental increase in newspaper and
radio advertising for the Minneapolis/St. Paul market compared to the same
quarter last year.
AMORTIZATION OF PRE-OPENING COSTS. Amortization of pre-opening costs
decreased to 1.3% of net sales compared to 3.4% for the same period last year.
The decrease is attributable to amortizing pre-opening costs for five new
restaurants in the first quarter 1995 compared to three new restaurants the same
quarter this 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 first
quarter was $22,007 compared to $44,260 for the same period last year. The
decrease is due to a reduction of marketable securities used to finance new
restaurant construction.
PROVISION FOR INCOME TAXES. The Company's effective tax rate is estimated
at 20% compared to 32% for the same period last year. The company's tax rate is
impacted by tax credits for FICA tax paid on tips received by restaurant
employees.
NET INCOME. The Company's net income was $235,267 in the first fiscal
quarter of 1996 compared to $131,072 for the same period last year. Earnings
per share were $.07 in the first quarter 1996 compared to $.04 for the same
quarter last year.
6
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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 $565,740 compared to cash used of
$298,233 for the same period last year. The Company had net working capital of
$630,820 at March 27, 1996 compared to $1,277,004 at January 3, 1996. The
decrease in working capital is a result of utilizing existing cash to fund new
restaurant development. The Company has a $200,000 bank line of credit which it
has used to fund short-term cash needs. At the end of first quarter 1996 this
line had an outstanding balance of $100,000. This balance is planned to be paid
down in the subsequent quarter. Most of the Company's sales are paid by cash 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. During the first quarter
1996, the Company purchased 3,000 shares of its Common Stock on the open market
at an average price of $3.37 per share. These repurchases represent less than
.1% of the Company's outstanding stock.
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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. Exhibit
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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.
7
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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: May 6, 1996 By:/s/ Dermot F. Rowland
------------------------------------------
Dermot F. Rowland
Its: Chief Executive Officer
Date: May 6, 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> MAR-27-1996
<CASH> 1,255,732
<SECURITIES> 0
<RECEIVABLES> 246,248
<ALLOWANCES> 0
<INVENTORY> 166,528
<CURRENT-ASSETS> 2,419,615
<PP&E> 9,224,347
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,278,424
<CURRENT-LIABILITIES> 1,788,795
<BONDS> 0
0
0
<COMMON> 35,725
<OTHER-SE> 9,231,365
<TOTAL-LIABILITY-AND-EQUITY> 12,278,424
<SALES> 4,280,714
<TOTAL-REVENUES> 4,280,714
<CGS> 1,621,055
<TOTAL-COSTS> 3,639,099
<OTHER-EXPENSES> 347,448
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 294,167
<INCOME-TAX> 58,900
<INCOME-CONTINUING> 235,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235,267
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
