<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 June 19, 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 June 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)
<TABLE>
<CAPTION>
June 19, January 3,
1996 1996
------------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 691,530 $ 2,020,096
Accounts receivable............................. 125,173 87,716
Inventory....................................... 188,990 166,002
Pre-opening costs............................... 244,423 156,544
Deferred tax assets............................. 259,200 259,200
Prepaid expenses and other current assets....... 261,969 274,696
------------- -------------
Total current assets........................ 1,771,285 2,964,254
Property and equipment, net....................... 10,797,801 7,972,221
Note receivable, related party - Note 2........... 396,000 406,000
Other assets...................................... 219,021 242,010
------------- -------------
Total assets................................ $ 13,184,107 $ 11,584,485
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 569,953 $ 777,329
Note payable.................................... 499,474 --
Short-term borrowing............................ 375,000 --
Accrued salaries and wages...................... 255,435 186,913
Sales tax payable............................... 164,099 116,332
Gift certificates payable....................... 247,439 429,326
Income tax payable.............................. 135,997 --
Accrued expenses and other liabilities.......... 172,615 177,350
------------- -------------
Total current liabilities................... 2,420,012 1,687,250
Deferred rent..................................... 1,232,291 826,412
Deferred tax liabilities.......................... 28,900 28,900
------------- -------------
Total liabilities........................... 3,681,203 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............................... 652,234 181,153
------------- -------------
Total shareholders' equity.................. 9,502,904 9,041,923
------------- -------------
Total liabilities and shareholders' equity........ $ 13,184,107 $ 11,584,485
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to the financial statements
1
<PAGE>
TIMBER LODGE STEAKHOUSE, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
--------------------------------- --------------------------------
June 19, June 14, June 19, June 14,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales..................................... $ 4,736,133 $ 4,089,503 $ 9,016,848 $ 8,148,134
Costs and expenses:
Food and beverage costs..................... 1,794,835 1,604,875 3,415,890 3,179,654
Labor and benefits costs.................... 1,357,366 1,231,156 2,577,634 2,388,265
Restaurant operating expenses............... 397,154 363,085 781,131 703,102
Occupancy costs............................. 525,908 523,170 939,707 962,939
------------ ------------ ------------ ------------
Restaurant costs and expenses............. 4,075,263 3,722,286 7,714,362 7,233,960
------------ ------------ ------------ ------------
Restaurant operating income................... 660,870 367,217 1,302,486 914,174
General and administrative.................... 319,630 571,734 630,845 834,151
Amortization of pre-opening costs............. 59,019 139,031 117,260 274,959
Loss on sale and abandonment of
restaurants, net - Note 2................... -- 294,880 -- 294,880
------------ ------------ ------------ ------------
Operating income (loss)................... 282,221 (638,428) 554,381 (489,816)
Interest and other (income) expense........... (18,642) (35,108) (40,650) (79,368)
------------ ------------ ------------ ------------
Income (loss) before income taxes............. 300,863 (603,320) 595,031 (410,448)
Income taxes (benefit)...................... 65,050 (115,400) 123,950 (53,600)
------------ ------------ ------------ ------------
Net income (loss)............................. $ 235,813 $ (487,920) $ 471,081 $ (356,848)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per share................... $0.07 ($0.13) $0.13 ($0.10)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of common and
common equivalent shares outstanding........ 3,572,500 3,617,500 3,573,712 3,617,500
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to the financial statements
2
<PAGE>
TIMBER LODGE STEAKHOUSE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
June 19, June 14,
1996 1995
------------- --------------
<S> <C> <C>
Operating activities
Net income (loss)................................................ $ 471,081 $ (356,848)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization................................ 507,215 623,294
Deferred rent................................................ 405,879 251,654
Loss on sale and abandonment of assets, net.................. -- 100,885
Changes in operating assets and liabilities:
Receivables................................................ (37,457) (43,784)
Inventories................................................ (22,988) 13,267
Pre-opening costs.......................................... (205,139) (95,668)
Prepaid expenses and other current assets.................. 12,727 (41,894)
Accounts payable........................................... (207,376) (471,577)
Accrued salaries and wages................................. 68,522 42,277
Sales tax payable.......................................... 47,767 (16,789)
Gift certificates payable.................................. (181,887) (175,943)
Income taxes payable....................................... 135,997 (358,600)
Other accrued expenses..................................... (4,735) 616,345
------------- --------------
Net cash provided by operating activities........................ 989,606 86,619
Investing activities
Proceeds used in restaurant development.......................... -- 943,893
Purchases of property and equipment.............................. (2,714,261) (1,421,776)
Cash from sale of restaurant..................................... -- 125,000
Principal collected on long term note............................ 10,000 --
Purchases of marketable securities............................... -- (1,508,883)
Maturities of marketable securities.............................. -- 2,972,161
Other assets..................................................... 21,189 (16,536)
------------- --------------
Net cash provided by (used in) investing activities.............. (2,683,072) 1,093,859
Financing activities
Proceeds from short-term borrowings.............................. 375,000 --
Common stock repurchased......................................... (10,100) --
------------- --------------
Net cash provided by financing activities........................ 364,900 --
Net increase (decrease) in cash and cash equivalents............. (1,328,566) 1,180,478
Cash and cash equivalents at beginning of year................... 2,020,096) 380,643
------------- --------------
Cash and cash equivalents at end of period....................... $ 691,530 $ 1,561,121
------------- --------------
------------- --------------
</TABLE>
See accompanying notes to the financial statements
3
<PAGE>
TIMBER LODGE STEAKHOUSE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 19, 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 twenty-four week period ended
June 19, 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 TWENTY-FOUR WEEKS ENDED
---------------------- -----------------------
---------------------- -----------------------
JUNE 19, JUNE 14, JUNE 19, JUNE 14,
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...................... 37.9 39.2 37.9 39.0
Labor and benefits costs..................... 28.7 30.1 28.6 29.3
Restaurant operating expenses................ 8.4 8.9 8.7 8.6
Occupancy costs.............................. 11.0 12.8 10.4 11.9
------- ------- ------- -------
Restaurant costs and expenses........... 86.0 91.0 85.6 88.8
------- ------- ------- -------
Restaurant operating income....................... 14.0 9.0 14.4 11.2
General and administrative........................ 6.7 14.0 7.0 10.2
Amortization of pre-opening costs................. 1.3 3.4 1.3 3.4
Loss on sale and abandonment of
restaurants, net - Note 2 - 7.2 - 3.6
------- ------- ------- -------
Operating income (loss)..................... 6.0 (15.6) 6.1 (6.0)
Interest and other (income)/expense............. (0.4) (0.9) (0.5) (0.9)
------- ------- ------- -------
Income (loss) before income taxes............... 6.4 (14.7) 6.6 (5.1)
Income taxes (benefit)..................... 1.4 (2.8) 1.4 (0.7)
------- ------- ------- -------
Net income (loss)............................... 5.0 % (11.9)% 5.2% (4.4)%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
TWELVE WEEKS ENDED JUNE 19, 1996, COMPARED TO TWELVE WEEKS ENDED JUNE 14, 1995.
NET SALES. Total sales for the twelve weeks ending June 19, 1996
increased 15.8% to $4,736,133 compared to $4,089,503 for the same period last
year. The increase is attributable to opening three new stores since the
beginning of the 2nd quarter last year but offset from closing an
underperforming store in Williamsville, New York and the sale of our salad bar
restaurant, Q. Cumbers. Same store sales for stores open at least 18 months
were down 2.9%.
5
<PAGE>
COSTS AND EXPENSES. Cost of restaurant sales, consisting of food and
beverage costs, decreased 1.3% to 37.9% compared to 39.2% 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
concerted operational efforts to reduce food waste. In aggregate, commodity
costs of beef and seafood were even with last year.
Labor and related benefit costs decreased 1.4% to 28.7% for the second
quarter 1996 compared to 30.1% for the same quarter last year. Labor
productivity gains achieved in new stores combined with closing an
underperforming store last year contributed to the reduced labor cost.
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.
Restaurant operating expenses and occupancy costs combined decreased 2.3% to
19.4% of net sales compared to 21.7% for the same period last year. The
reduction is due in part to the elimination of an underperforming store combined
with the impact of lower property insurance costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased to 6.7% of net sales compared to 14.0% for the same period last year.
The decrease is due to the one-time costs the Company recognized in the 2nd
quarter last year in reincorporating in Minnesota and changing the name of the
restaurants.
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 second
quarter was $18,642 compared to $35,108 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 in the
second quarter last year the gain from the sale of its Q. Cumbers salad bar
restaurant and offset by the closing of an underperforming store in
Williamsville, New York.
PROVISION FOR INCOME TAXES. The Company's effective tax rate is estimated
at 21% 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 $235,813 or $.07 per share in
the second quarter compared to a loss of ($487,920) or ($.13) per share for the
same quarter last year.
6
<PAGE>
TWENTY-FOUR WEEKS ENDED JUNE 19, 1996, COMPARED TO TWENTY-FOUR WEEKS ENDED JUNE
14, 1995.
NET SALES. Total sales for twenty-four weeks ending June 19, 1996
increased 10.7% to $9,016,848 compared to $8,148,134 for the same period last
year. The increase is attributable to opening four new stores since the
beginning of 1995 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 5.3% year-
to-date.
COSTS AND EXPENSES. Cost of restaurant sales consisting of food and
beverage costs decreased 1.1% to 37.9% 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 28.6% as a percentage of sales
year-to-date compared to 29.3% for the same period last year. Labor
productivity gains were achieved during the period but offset by an increase
in health insurance costs as more employees entered the program upon meeting
eligibility requirements.
Restaurant operating expenses and occupancy costs combined were 19.1%
year-to-date compared to 20.5% for the same period last year. The decrease is
attributable to the increase in sales combined with the impact of lower property
insurance premiums.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased to 7.0% of net sales year-to-date compared to 10.2% 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 1.3% of net sales compared to 3.4% for the same period last year.
The decrease is attributable to amortizing costs for three new restaurants
compared to five the same period last year.
INTEREST AND OTHER INCOME. Interest and other income year-to-date was
$40,650 compared to $79,368 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 21% 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 $471,081 or $.13 per share
year-to-date 1996 compared to a loss of ($356,848) or ($.10) per share for the
same period last year.
7
<PAGE>
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 $989,606 compared to cash
provided of $86,619 for the same period last year. The Company had net working
capital of ($648,727) at June 19, 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 $500,000 line of credit
which it has used to fund short-term cash needs. At the end of the second
quarter 1996 this line had an outstanding balance of $375,000. This balance is
planned to be paid down the balance of year 1996. In addition, the Company has
acquired property in Madison, Wisconsin via cash and a short term note payable
with the seller. The Company is finalizing a sale/leaseback arrangement on this
property with completion expected in the subsequent quarter. 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 second 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.
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: July 16, 1996 By: /s/ Dermot F. Rowland
------------------------------------
Dermot F. Rowland
Its: Chief Executive Officer
Date: July 16, 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> JUN-19-1996
<CASH> 691,530
<SECURITIES> 0
<RECEIVABLES> 125,173
<ALLOWANCES> 0
<INVENTORY> 188,990
<CURRENT-ASSETS> 1,771,285
<PP&E> 10,797,801
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,184,107
<CURRENT-LIABILITIES> 2,420,012
<BONDS> 0
0
0
<COMMON> 35,725
<OTHER-SE> 9,467,179
<TOTAL-LIABILITY-AND-EQUITY> 13,184,107
<SALES> 9,016,848
<TOTAL-REVENUES> 9,016,848
<CGS> 3,415,890
<TOTAL-COSTS> 7,714,362
<OTHER-EXPENSES> 707,455
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 595,031
<INCOME-TAX> 123,950
<INCOME-CONTINUING> 471,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 471,081
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
