<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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 0-27366
RAINFOREST CAFE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1779527
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
720 South Fifth Street
Hopkins, MN 55343
(Address of principal executives offices, including zip code)
(612) 945-5400
(Registrant's telephone number, including area code)
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
--- ---
Number of shares of Common Stock, $.01 par value per share outstanding as of
May 12, 1997:
17, 278,436
<PAGE> 2
RAINFOREST CAFE, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page number
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 30, 1997 and December 29, 1996............ 2
Consolidated Statements of Operations for the thirteen weeks ended
March 30, 1997 and March 31, 1996 ................................................ 3
Consolidated Statements of Cash Flows for the thirteen weeks ended
March 30, 1997 and March 31, 1996 ................................................ 4
Notes to Condensed Consolidated Financial Statements.............................. 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................. 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................ 13
Item 2. Exhibits and Reports on Form 8-K ................................................ 13
Signature Page............................................................................ 14
</TABLE>
1
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RAINFOREST CAFE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 30, December 29,
(In Thousands, Except Share Data) 1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 50,703 $ 83,894
Short-term investments 55,966 35,934
Accounts receivable and other 6,072 5,072
Inventories 2,205 2,865
Preopening expenses 1,494 2,302
-------- --------
Total current assets 116,440 130,067
Long-Term Investments 49,194 42,274
Property, Equipment and Leasehold Improvements, net 62,369 48,351
Deferred Income Taxes 2,009 2,009
Other Assets 405 -
-------- --------
$230,417 $222,701
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 13,009 $ 6,237
Accrued liabilities-
Payroll and payroll taxes 776 466
Other 2,557 843
Income taxes payable 576 4,201
-------- --------
Total current liabilities 16,918 11,747
Deferred Rent 6,376 7,000
-------- --------
Total liabilities 23,294 18,747
-------- --------
Commitments and Contingencies
Shareholders' Equity:
Common stock, no par value, 50,000,000 shares authorized;
17,240,889 and 17,186,506 shares issued and outstanding 201,105 199,542
Retained earnings 6,018 4,412
-------- --------
Total shareholders' equity 207,123 203,954
-------- --------
$230,417 $222,701
======== ========
</TABLE>
2
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RAINFOREST CAFE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen weeks Thirteen weeks
ended ended
(In Thousands, Except Share Data) March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Revenues:
Restaurant sales $ 16,621 $ 4,711
Retail sales 4,998 1,033
Licensing fee 250 -
----------- -----------
Total revenues 21,869 5,744
----------- -----------
Costs and Expenses:
Food and beverage costs 3,962 1,224
Cost of retail goods sold 2,356 469
Restaurant operating expenses 8,179 2,373
Retail operating expenses 1,568 368
Depreciation and amortization 1,169 281
Amortization of preopening expenses 821 171
----------- -----------
Total costs and expenses 18,055 4,886
----------- -----------
Income from Unit Operations and Licensing 3,814 858
----------- -----------
Other (Income) Expenses:
General, administrative and development expenses 1,510 857
Interest income (2,129) (843)
Write-off of development costs 1,935 -
Other 6 -
----------- -----------
Total other (income) expenses 1,322 14
----------- -----------
Income before Income Taxes 2,492 844
Provision for Income Taxes 886 296
----------- -----------
Net income $ 1,606 $ 548
=========== ===========
Net Income Per Common Share: $ 0.09 $ 0.04
=========== ===========
Weighted Average Shares Outstanding 17,762,393 13,899,300
=========== ===========
</TABLE>
3
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RAINFOREST CAFE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen weeks Thirteen weeks
ended ended
(In Thousands, Except Share Data) March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Operating Activities:
Net income $ 1,606 $ 548
Adjustments to reconcile net income to cash
flows provided by operating activities-
Depreciation and amortization 1,516 656
Write-off of discontinued development costs 1,935 -
Change in operating assets and liabilities-
Accounts receivable and other (1,000) 571
Inventories 660 115
Preopening expenses (13) (82)
Accounts payable 6,772 698
Accrued liabilities (1,295) 346
--------- ---------
Net cash provided by operating activities 10,181 2,852
--------- ---------
Investing Activities:
Purchases of short-term investments, net (20,032) -
Purchases of long-term investments, net (6,920) -
Purchases of furniture, equipment and
leasehold improvements, net (17,273) (9,448)
Purchases of other assets (405) -
--------- ---------
Net cash used in investing activities (44,630) (9,448)
--------- ---------
Financing Activities:
Proceeds from the sale of common stock, net 57 73,551
Proceeds from sale of put options and
stock options exercised 1,201 35
--------- ---------
Net cash provided by financing activities 1,258 73,586
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (33,191) 66,990
Cash and Cash Equivalents, beginning of period 83,894 16,323
--------- ---------
Cash and Cash Equivalents, end of period $ 50,703 $ 83,313
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for-
Interest $ - $ -
Income taxes 4,475 45
</TABLE>
4
<PAGE> 6
RAINFOREST CAFE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1997
(UNAUDITED)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of Rainforest Cafe,
Inc. and its wholly-owned and majority-owned subsidiaries (the Company). All
significant intercompany balances and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations. Although management believes that the
accompanying disclosures are adequate to make the information presented not
misleading, it is suggested that these interim condensed financial statements
be read in conjunction with the Company's most recent audited financial
statements and notes thereto. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods presented have been made. Operating results for the
thirteen weeks ended March 30, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 28, 1997.
(2) NET INCOME PER COMMON SHARE
Net income per common share has been computed by dividing net income by the
weighted average number of common shares outstanding during the period. Common
stock equivalent shares which relate to stock options, are included in the
weighted average only when the effect is dilutive.
(3) TERMINATION OF PLANNED UNITS
During the first quarter of 1997, the Company wrote off development costs of
approximately $1.9 million related to previously planned units at Trump Taj
Mahal (Atlantic City, New Jersey) and Stratosphere (Las Vegas, Nevada). The
Company determined that future negotiations for Trump Taj Mahal would not
result in a mutually agreeable space by both parties for the planned Unit. The
Company also determined that due to Stratosphere's announcement that it was
seeking a bankruptcy reorganization, that the required space for the unit would
not be delivered according to the required timeline.
(4) NEW ACCOUNTING PRONOUNCEMENT
The Company will adopt in the fiscal year ending December 28, 1997, Statement
of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS No. 128),
which was issued in February
5
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1997. SFAS No. 128 requires disclosure of basic earnings per share (EPS)
and diluted EPS, which replaces the existing primary EPS and fully diluted
EPS, as defined by APB No. 15. Basic EPS is computed by dividing net income by
the weighted average number of shares of Common Stock outstanding during the
year. Dilutive EPS is computed similar to EPS as previously reported provided
that, when applying the treasury stock method to common equivalent shares, the
Company must use its average share price for the period rather than the more
dilutive greater of the average share price or end-of-period share price
required by APB No. 15.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company, founded in February 1994, owns, operates, and licenses themed
restaurant/retail facilities ("Unit") under the name "Rainforest Cafe -- A Wild
Place to Shop and Eat(R)." As of March 30, 1997, the Company operated six Units.
The Company's initial Unit opened on October 3, 1994 in the Mall of America in
Bloomington, Minnesota. The Company's second Unit opened on October 20, 1995
in the Woodfield Mall in Schaumburg, Illinois, a suburb of Chicago. The
Company's third Unit opened June 2, 1996, in the Gurnee Mills Mall in Gurnee,
Illinois, also a suburb of Chicago.
The Company opened its fourth and largest Unit on July 25, 1996, at Walt Disney
World Marketplace near Orlando, Florida. The Walt Disney World Marketplace
Unit is approximately 30,000 square feet, which includes approximately 6,000
square feet of retail selling space. The Walt Disney World Marketplace Unit
had revenues for the thirty-five and one half weeks ended March 30, 1997 of
$21.4 million, which is not necessarily indicative of the results that would
actually occur for a full fiscal year of operations. The Company opened its
fifth unit on October 3, 1996, at Tysons Corner Center I, in McLean Virginia, a
suburb of Washington, D.C. and its sixth unit on November 22, 1996, at Sawgrass
Mills Mall in Fort Lauderdale, Florida.
The Company presently plans to develop eight domestic Units each in 1997 and
1998. Because the Company anticipates rapid expansion, period to period
comparisons may not be meaningful. The Company intends to lease its domestic
Units and anticipates that most of its future domestic Units will range in size
from approximately 16,000 to 23,000 square feet, with between 300 and 400
restaurant seats and approximately 20-25% of square footage dedicated to retail
selling space. However, some Units may be significantly larger, such as the
free-standing Walt Disney World Marketplace Unit, and the planned free-standing
Disney's Animal Kingdom Unit, which is expected to comprise approximately
36,000 square feet and have approximately 550 restaurant seats.
In September 1996, the Company entered into an exclusive license agreement with
Empresas de Comunicacion y Entretenimiento ("ECE"), a Mexican based owner and
operator of seven Hard Rock Cafes, three Planet Hollywoods and an Official
All-Star Cafe in Mexico, under which ECE will develop seven Rainforest Cafes in
Mexico over a ten year period. Pursuant to this agreement, the Company
received a non-refundable licensing fee of $750,000 in September, 1996. Under
the terms of the agreement the Company will receive per Unit development and
licensing fees of $100,000 and royalties of six percent of food and beverage
sales and ten percent of merchandise sales. The Company anticipates that the
first Unit will be opened in Cancun in the third quarter of 1997.
In October 1996, the Company completed an exclusive license agreement with
Glendola Leisure, Ltd., ("Glendola") a wholly-owned subsidiary of the
Foundation Group, a London-based hotel and restaurant operator, under which
Glendola will develop five Rainforest Cafes in the United Kingdom and Ireland
over a ten year period. Pursuant to this agreement, the Company will have the
option to purchase up to 20% of the equity interest in any Unit developed by
Glendola. The Company will receive per Unit development fees of $100,000 and
will receive royalties of approximately five percent of sales. The Company has
elected to purchase twenty-percent of the first Unit to be opened under this
agreement at
7
<PAGE> 9
the Trucadero in London, England. Management anticipates this first London
Unit to open in late June of 1997.
In March 1997, the Company completed a joint venture and exclusive license
agreement with the Elephant and Castle Group ("E & C"), a Vancouver based owner
and operator of Elephant and Castle pubs and restaurants. E & C and the
Company agreed to develop five Rainforest Cafes in Canada over a seven year
period. Under the terms of the above agreements, the Company will receive from
E & C a $500,000 non refundable licensing fee, of which $250,000 was recorded
in first quarter of 1997, and a warrant to purchase 600,000 shares of E & C
stock at $8.00 per share exercisable for a period of five years. In addition,
the Company and E & C will have a fifty-percent equity interest in the joint
venture Rainforest Cafe Canada, Inc. ("RCCI"). The Company will receive per
Unit development fees of $100,000 and will receive royalties of approximately
six percent of food and beverage sales and ten percent of merchandise sales.
The Company will have the option to purchase the remaining fifty-percent of
RCCI after seven years based on a predetermined formula of cash flow and
investment.
Components of operating expenses include operating payroll and fringe benefits
costs, occupancy costs, maintenance costs related to the bird habitat and
aquariums, and advertising and promotion costs. The majority of these costs
are variable and will increase with sales volume. Management projects that
when a new Unit opens, it will incur higher than normal levels of labor and
food costs as Unit personnel complete training. Management believes, however,
that as new staff gain experience, hourly labor schedules over the ensuing
30-60 day period will be gradually adjusted to provide operating efficiencies
similar to those at established Units. Each of the Company's current leases
includes both fixed rate and percentage rent provisions.
The Company's policy is to capitalize costs associated with the opening of
Units, including the cost of hiring and training the initial workforce, travel
and other direct costs, if it is determined these costs are recoverable. These
costs are then amortized over the eleven month period following the opening of
a Unit beginning the first full month of operation. Preopening costs for units
opened in fiscal years 1995 and 1996 averaged approximately $650,000 per unit
except for the Walt Disney World Marketplace Unit which incurred approximately
$1.2 million of preopening costs.
General, administrative and development expenses include all corporate and
administrative functions that serve to support existing operations and provide
an infrastructure to support future growth. In addition, certain expenses of
recruiting and training Unit management personnel prior to meeting the criteria
to be capitalized as preopening expenses are also included. Management,
supervisory and staff salaries, employee benefits, travel, information systems,
training, rent and office supplies are major items of costs in this category.
The Company uses a 52 or 53 week fiscal year ending on the Sunday nearest
December 31.
8
<PAGE> 10
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1997, COMPARED TO
THE THIRTEEN WEEKS ENDED MARCH 31, 1996.
The operating results of the Company expressed as a percentage of total
revenues (except where noted) were as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------------
March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Revenues
Restaurant sales 76.0% 82.0%
Retail sales 22.9 18.0
Licensing fee 1.1 -
----- -----
Total revenues 100.0 100.0
===== =====
Costs and Expenses
Food and beverage costs (1) 23.8 26.0
Cost of retail goods sold (2) 47.1 45.4
Restaurant operating expenses (1) 49.2 50.4
Retail operating expenses (2) 31.4 35.6
Depreciation and amortization (3) 5.4 4.9
Amortization of preopening expenses (3) 3.8 3.0
----- -----
Total costs and expenses (3) 83.5 85.1
----- -----
Income from Unit Operations and Licensing 17.4 14.9
----- -----
Other (Income) Expenses:
General, administrative and development 6.9 14.9
Interest income (9.7) (14.7)
Write-off of development costs 8.9 -
Other 0.0 -
----- -----
Total other (income) expenses 6.1 .2
----- -----
Income before Income Taxes 11.4 14.7
Provision for Income Taxes 4.1 5.2
----- -----
Net income 7.3% 9.5%
===== =====
</TABLE>
(1) Percentage of restaurant sales
(2) Percentage of retail sales
(3) Percentage of unit sales
Total revenues increased 281% to $21.9 million for the thirteen week period
ended March 30, 1997 from $5.7 million for the thirteen week period ended March
31, 1996. The increase in revenues is primarily due to the addition of four
Rainforest Cafe Units. Retail sales increased as a percentage of total
revenues from 18.0% for the first fiscal quarter in 1996 to 22.9% for the
comparable period in 1997. The increase in the percentage of retail sales is
primarily due to the addition of the Walt Disney World Marketplace Unit where
retail sales as a percentage of total sales were 29.2%.
9
<PAGE> 11
Food and beverage costs increased 224% to $4 million for the first quarter in
fiscal 1997 compared to $1.2 million for the comparable quarter in fiscal 1996.
The increase in food and beverage costs was due to Unit expansion. Food and
beverage costs decreased as a percentage of restaurant sales for the first
quarter of 1997 compared to the first quarter in 1996 largely due to
improvements in food preparation, purchasing efficiencies, favorable commodity
prices and upselling of higher margin, add-on menu items.
Cost of retail goods sold increased 402% to $2.4 million for the first quarter
of 1997 compared to $.5 million for the first quarter of 1996. The increase in
cost of retail goods sold was due to Unit expansion and the addition of an
expanded retail distribution center during the second half of 1996. Cost of
retail goods sold increased as a percentage of retail sales from 45.4% in the
first quarter of 1996 to 47.1% for the comparable period in 1997. The increase
as a percentage of sales was primarily due to the expanded distribution center
and merchandise markdowns taken during the first quarter of 1997. The markdowns
were taken to facilitate the transition to an increased level of Rainforest
Cafe branded merchandise being carried by the retail line by second and third
quarters of 1997.
Restaurant and retail operating expenses increased 245% and 326% respectively
from the first quarter of 1996 to the comparable quarter in 1997. The increase
in restaurant and retail operating expenses was primarily due to unit
expansion. Restaurant operating expenses decreased as a percentage of
restaurant sales from 50.4% in the first quarter of 1996 to 49.2% in the first
quarter of 1997. Retail operating expenses decreased from 35.6% of retail
sales in the first quarter of 1996 to 31.4% in the first quarter of 1997. The
decrease as a percentage of restaurant sales was primarily due to more
efficient labor usage, negotiated price reductions for supplies and lower
occupancy costs as a percentage of sales for the Company's Tysons Corner and
Sawgrass Mills Units. Retail operating expenses as a percentage of retail
sales were favorably affected by the higher retail volume experienced by the
Company.
Depreciation and amortization increased 316% to $1.2 million in the first
quarter of 1997 compared to $.3 million for the comparable period in 1996.
Amortization of preopening expenses increased from $.2 million in the first
quarter of 1996 to $.8 million in the same period of 1997. Amortization of
preopening expenses for the 1996 thirteen week period includes expense for the
Woodfield Mall Unit only. The increase in depreciation and amortization and
amortization of preopening expenses was due to Unit expansion in 1996.
General, administration and development expenses increased 76.2% to $1.5
million in the first quarter of 1997 compared to $.9 million in the first
quarter of 1996. The increase in general administrative and development
expenses was due to the increase of senior management employees, corporate
employees and Unit management personnel involved with and in training.
Interest income of $2.1 million for the first quarter of 1997 was generated
primarily by investing the proceeds from the Company's two follow-on public
offerings completed in January and September 1996. Interest income of $.8
million for the first quarter of 1996 was generated primarily by investing the
proceeds of the Company's January 1996 follow-on public offering.
The write-off of development costs of $1.9 million in the first quarter of 1997
was the result of the termination of planned Units at Trump Taj Mahal (Atlantic
City, New Jersey) and Stratosphere (Las Vegas, Nevada).
10
<PAGE> 12
The provision for income taxes in the 1997 thirteen week period is based upon
the Company's estimated effective tax rate, including tax exempt interest
income. The provision for income taxes in the 1996 thirteen week period based
upon the Company's effective tax rate, including benefits for approximately
$350,000 in net operating loss carryforwards and tax exempt interest income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital needs arise from the development and opening of
new Units. In January 1996, the Company issued an aggregate of 4,140,000
shares of Common Stock pursuant to a secondary public offering at $19.00 per
share. The net proceeds to the Company, after payment of underwriting fees and
offering expenses was approximately $73.6 million. In May 1996, the Company
received approximately $1.0 million in net proceeds from the exercise of
warrants at $4.80 per share issued to Underwriters of the Company's Initial
Public Offering. In September 1996, the Company issued an aggregate of
3,225,000 shares of Common Stock pursuant to an additional public offering at
$31.50 per share. The net proceeds to the Company, after payment of
underwriting fees and offering expenses, were approximately $96.0 million. On
March 30, 1997 the Company had working capital of approximately $99.5 million
and long-term investments of $49.2 million.
During the first quarter of 1997, the Company generated $10.3 million in cash
flow from operating activities compared to $2.9 million in cash flow from
operating activities in the first quarter of 1996. In addition the Company
generated approximately $1.0 million cash from the sale of put
options on approximately 550,000 shares of the Company's Common Stock. The
sale of the put options was executed as part of a stock repurchase
program announced in January 1997 pursuant to which up to one million shares
of the Company's Common Stock may be repurchased. In April 1997, 10,000 shares
of Common Stock were purchased through put option assignments. The Company
believes that it will continue to generate cash from operating activities and
earn interest income, both of which will be utilized for future development and
working capital purposes.
The Company's total expenditures required to develop the Mall of America Unit
were approximately $4.1 million, including costs related to the expansions of
its restaurant and enhancements of thematic elements, net of landlord
contributions of approximately $500,000. Total expenditures required to open
the Woodfield Mall Unit were approximately $5.7 million, net of landlord
contributions of $1.0 million. Additionally, the Company incurred $630,000 in
preopening costs and purchased approximately $320,000 of inventory in connection
with the opening of its Woodfield Mall Unit.
The average gross investment to open the Company's Gurnee Mills, Tysons Corner,
and Sawgrass Mills Units during 1996 was $6.6 million. The Company recorded
landlord contributions of $2.7, $1.0 and $.5 million associated with the Gurnee,
Tysons and Sawgrass Units respectively. Total expenditures to develop the Walt
Disney World Marketplace Unit were $11.2 million net of $1.5 million landlord
contributions. Additionally, the Company averaged approximately $650,000 in
preopening expenses and purchased an average of $300,000 of inventory in
connection with the 1996 openings of the Gurnee, Tysons, and Sawgrass Units.
Preopening expenses incurred for the opening of the Walt Disney World
Marketplace Unit were approximately $1.2 million and the initial inventory
purchased was approximately $600,000.
During the first quarter of 1997, the Company spent approximately $15.1
million, before deducting landlord contributions related to the development of
Units planned to be opened in 1997 and early 1998.
11
<PAGE> 13
Management anticipates capital expenditures of approximately $30.0 million net
of landlord contributions for the remainder of fiscal 1997, related to the
completion and opening of eight domestic Units in 1997, a portion of the costs
associated with the opening of Units in 1998 and capital expenditures
associated with maintenance of its existing Units and corporate office
expansion. Currently anticipated international Units are expected to require
in aggregate approximately $5.0 million in investment during 1997. The Company
expects that future domestic locations will cost between $4.0 million and $6.0
million to develop, net of anticipated landlord contributions. In addition,
the Company expects that it will incur approximately $650,000 in preopening
costs and purchase approximately $300,000 of inventory in connection with the
opening of these Units. The Company also expects to open selected, larger
Units, such as its planned Units in downtown Chicago, the MGM Grand Hotel and
Casino and Disney's Animal Kingdom, which may cost significantly more. In
connection with the construction of existing Units, the Company has received
landlord contributions, reducing the cost of opening these Units. There can be
no assurance, however, that landlord contributions will be available in the
future.
The Company contemplates that the development and opening of each of its Units
in 1997 through 1999 will be financed with existing cash on hand and cash flow
from operations. The Company may require additional equity or debt financing
for expansion beyond 1999.
It is not anticipated that the Company's business will require substantial
working capital to meet its operating requirements. Virtually all of the
Company's revenues are collected in cash or pursuant to credit card processing.
Food and beverage inventories and merchandise inventories are expected to
increase in relation to trade accounts payable.
QUARTERLY FLUCTUATIONS, SEASONALITY AND INFLATION
As a result of the substantial revenues associated with each new Unit, the
timing of new Unit openings will result in significant fluctuations in
quarterly results. The mall-based Units may also have higher third or fourth
quarter revenues than the other two quarters as a result of seasonal traffic
increases at mall locations and seasonally stronger retail sales. Units at
entertainment centers or Disney theme parks may show fluctuations in accordance
with any overall seasonality at these locations.
The primary inflationary factors affecting the Company's operations include
food and beverage and labor costs. Management does not anticipate any
significant labor cost increases as a result of the minimum wage increases
enacted in 1996 and 1997. In addition, the Company's leases require the
Company to pay taxes, maintenance, repairs and utilities, and these costs are
subject to inflationary increases. The Company believes low inflation rates
have contributed to relatively stable costs. There is no assurance, however,
that low inflation rates will continue.
FORWARD LOOKING DISCLOSURE
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed by
12
<PAGE> 14
statements or other written statements made or to be made by the
Company) contain statements that are forward-looking, such as statements
relating to plans for future expansion and other business development
activities as well as other capital spending, financial sources and the effects
of competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks
and uncertainties include, but are not limited to, those relating to
development and construction activities, including delays in opening new Units,
acceptance of the Rainforest Cafe concept, the quality of the Company's
restaurant and retail operations, dependence on discretionary consumer
spending, the Company's failure to defend its intellectual property rights,
dependence on existing management, general economic conditions, changes in
federal or state laws or regulations.
13
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Exhibits and Reports on Form 8-K
A. Exhibits: None
B. Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the quarter ended March 30, 1997.
14
<PAGE> 16
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.
RAINFOREST CAFE, INC.
Date: May 13, 1997 /s/ Kenneth Brimmer
------------------------------------
Kenneth Brimmer
President
Date: May 13, 1996 /s/ Mark S. Robinow
------------------------------------
Mark S. Robinow
Chief Financial Officer
(Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS
ENDED MARCH 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
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0
0
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