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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 JUNE 29, 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, no par value per share outstanding as of
August 13, 1997:
17, 291,330
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RAINFOREST CAFE, INC.
INDEX
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Page number
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
June 29, 1997 and December 29, 1996 .................................... 2
Statements of Operations for the second quarter and six months ended
June 29, 1997 and June 30, 1996 ........................................ 3
Statements of Cash Flows for the second quarter and six months ended
June 29, 1997 and June 30, 1996 ........................................ 4
Notes to Consolidated Financial Statements ................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................................ 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders ................. 15
Item 6. Exhibits and Reports on Form 8-K .................................... 15
Signature Page ............................................................... 16
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RAINFOREST CAFE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 29, December 29,
(In Thousands) 1997 1996
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ASSETS
Current Assets:
Cash and cash equivalents $57,483 $83,894
Short-term investments 35,812 35,934
Accounts receivable and other 6,337 5,072
Inventories 3,540 2,865
Preopening expenses 1,271 2,302
---------- -----------
Total current assets 104,443 130,067
Long-Term Investments 49,985 42,274
Furniture, Equipment and Leasehold Improvements, net 82,864 48,097
Deferred Income Taxes 2,009 2,009
Other Assets 1,144 254
---------- -----------
Total Assets $240,445 $222,701
========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Accounts payable $19,073 $6,237
Accrued liabilities-
Payroll and payroll taxes 629 466
Other 3,885 843
Income taxes payable 210 4,201
---------- -----------
Total current liabilities 23,797 11,747
Deferred Rent 6,266 7,000
---------- -----------
Total liabilities 30,063 18,747
---------- -----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, no par value, 50,000,000 shares authorized;
17,271,330 and 17,186,506 issued and outstanding 201,411 199,542
Retained earnings 8,971 4,412
---------- -----------
Total shareholders' equity 210,382 203,954
---------- -----------
Total Liabilities and Shareholders' Equity $240,445 $222,701
========== ===========
</TABLE>
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RAINFOREST CAFE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Second Six Second Six
Quarter Ended Months Ended Quarter Ended Months Ended
June 29, June 29, June 30, June 30,
(In Thousands, Except Share Data) 1997 1997 1996 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales $18,107 $34,728 $5,600 $10,311
Retail sales 5,479 10,477 1,470 2,502
Licensing fees and royalties 5 255 -- --
----------- ---------- ---------- ----------
Total revenues 23,591 45,460 7,070 12,813
----------- ---------- ---------- ----------
Costs and Expenses:
Food and beverage costs 4,201 8,163 1,400 2,624
Cost of retail goods sold 2,545 4,901 669 1,137
Restaurant operating expenses 8,900 17,079 2,724 5,098
Retail operating expenses 1,776 3,344 464 832
Depreciation and amortization 1,214 2,383 324 605
Amortization of preopening expenses 805 1,626 171 342
----------- ---------- ---------- ----------
Total costs and expenses 19,441 37,496 5,752 10,638
----------- ---------- ---------- ----------
Income from Unit Operations and Licensing 4,150 7,964 1,318 2,175
----------- ---------- ---------- ----------
Other (Income) Expense:
General, administrative and development expenses 1,865 3,375 1,125 1,982
Interest income (2,347) (4,476) (1,094) (1,937)
Write-off of development costs -- 1,935 -- --
Other 4 10 -- --
----------- ---------- ---------- ----------
Total other (income) expense (478) 844 31 45
----------- ---------- ---------- ----------
Income before Income Taxes 4,628 7,120 1,287 2,130
Provision for Income Taxes 1,673 2,559 454 750
----------- ---------- ---------- ----------
Net income $2,955 $4,561 $833 $1,380
=========== ========== ========== ==========
Earnings Per Common Share: $0.17 $0.26 $0.06 $0.10
=========== ========== ========== ==========
Weighted Average Shares Outstanding 17,817,657 17,790,025 14,454,956 14,026,655
=========== ========== ========== ==========
</TABLE>
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RAINFOREST CAFE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Second Six Second Six
Quarter Ended Months Ended Quarter Ended Months Ended
June 29, June 29, June 30, June 30,
(In Thousands) 1997 1997 1996 1996
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Operating Activities:
Net income $ 2,955 $ 4,561 $ 833 $ 1,380
Adjustments to reconcile net income to net cash
flows from operating activities-
Depreciation and amortization 2,073 3,589 3,242 3,898
Write-off of discontinued development costs -- 1,935 -- --
Change in operating assets and liabilities-
Accounts receivable and other (265) (1,265) (1,752) (1,181)
Inventories (1,335) (675) (514) (399)
Preopening expenses (582) (595) (1,460) (1,543)
Accounts payable 6,064 12,836 3,229 3,927
Accrued liabilities 989 (306) 748 1,094
---------- ------- ------- -------
Net cash provided by operating activities 9,899 20,080 4,326 7,176
---------- ------- ------- -------
Investing Activities:
(Purchases) sales of short-term investments, net 20,154 122 -- --
(Purchases) sales of long-term investments, net (791) (7,711) -- --
Purchases of furniture, equipment and leasehold
improvements, net (22,128) (39,401) (12,280) (21,728)
Purchases of other assets (485) (890) -- --
---------- ------- ------- -------
Net cash used in investing activities (3,250) (47,880) (12,280) (21,728)
---------- ------- ------- -------
Financing Activities:
Proceeds from the sale of common stock, net 112 169 -- 73,551
Proceeds from the sale of put options and stock options exercised 213 1,414 232 267
Proceeds from warrants exercised -- -- 1,003 1,003
Repurchase of common stock (194) (194) -- --
---------- ------- ------- -------
Net cash provided by financing activities 131 1,389 1,235 74,821
---------- ------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents 6,780 (26,411) (6,720) 60,269
Cash and Cash Equivalents, beginning of period 50,703 83,894 83,313 16,323
---------- ------- ------- -------
Cash and Cash Equivalents, end of period $ 57,483 $57,483 $76,593 $76,592
========== ======= ======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for-
Interest -- -- -- --
Income taxes 1,865 6,340 -- 45
</TABLE>
4
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RAINFOREST CAFE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 29, 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
twenty-six weeks ended June 29, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 28, 1997.
(2) EARNINGS PER COMMON SHARE
Earnings 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
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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.
(5) RECLASSIFICATIONS
Certain amounts for December 29, 1996 have been reclassified to conform to the
June 29, 1997 financial statement presentation. These reclassifications have
no effect on previously reported net income or shareholders' equity.
6
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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 June 29, 1997, the Company operated
seven 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 Company opened its fifth Unit on
October 3,1996, at Tysons Corner Center I, in McLean, Virginia, a suburb of
Washington, D.C., its sixth Unit on November 22, 1996, at Sawgrass Mills Mall
in Fort Lauderdale, Florida and its seventh Unit on June 5, 1997 in the South
Coast Plaza Mall in Costa Mesa (Orange County), California.
The Company presently plans to develop seven additional domestic Units in 1997
and eight domestic Units in 1998. Because the Company anticipates rapid
expansion, period to period comparisons may not be meaningful. The Company
intends to lease the sites for all future 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 existing
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 open in Cancun during the third quarter of 1997 and a second
unit in Mexico City during the fourth 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
7
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Company has elected to purchase 20% of the first Unit opened under this
agreement. The first Unit opened at the Trucadero, Piccadilly Circus, in
London, England on June 23, 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 received
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 each have a 50% equity interest in the joint venture
Rainforest Cafe Canada, Inc. ("RCCI"). The Company will receive development
fees of $100,000 per Unit opened 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 E & C's interest of RCCI after
seven years based on a predetermined formula of cash flow and investment.
Management intends to open its first Canadian Unit during the second quarter of
1998.
In July 1997, the Company completed an agreement with Movie Dream Corporation
("MDC"), a subsidiary of Far East Holdings International Limited. Under the
terms of the agreement, the Singapore based group will develop a minimum of
five Rainforest Cafe units, opening over ten years. Countries covered by this
agreement include Singapore, Malaysia, Indonesia, Thailand, Philippines,
Vietnam, Cambodia, Brunei and Burma. MDC has the right to establish
sub-franchisees within the territory, with terms and conditions which include a
right of the Company to approve of all investors along with all other rights in
the master License agreement. The license agreement includes terms
substantially similar to those of the Company's prior international agreements
including a regional development fee, a per unit opening fee and ongoing
royalties based on sales. The license agreement also grants MDC an option for
the development rights to India, subject to meeting future performance
criteria.
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 because of operating efficiencies
and then be 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
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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 primary items of
costs in this category.
The Company uses a 52 or 53 week fiscal year ending on the Sunday nearest
December 31.
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RESULTS OF OPERATIONS FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 29,
1997, COMPARED TO THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1996.
The operating results of the Company expressed as a percentage of total
revenues (except where noted) were as follows:
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
---------------------------- ----------------------------
June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales 76.8 % 79.2 % 76.4 % 80.5 %
Retail sales 23.2 20.8 23.0 19.5
Licensing fees and royalties - - 0.6 -
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Costs and Expenses:
Food and beverage costs (1) 23.2 25.0 23.5 25.4
Cost of retail goods sold (2) 46.5 45.5 46.8 45.4
Restaurant operating expenses (1) 49.2 48.6 49.2 49.4
Retail operating expenses (2) 32.4 31.6 31.9 33.2
Depreciation and amortization (3) 5.1 4.6 5.2 4.7
Preopening amortization (3) 3.4 2.4 3.6 2.7
----- ----- ----- -----
Total costs and expenses (3) 82.4 81.4 82.5 83.0
----- ----- ----- -----
Restaurant and retail operating income 17.6 18.6 17.5 17.0
----- ----- ----- -----
Other (Income) Expense:
General, administrative and development 7.9 15.9 7.4 15.5
Interest income (9.9) (15.5) (9.8) (15.1)
Write-off of development costs - - 4.3 -
Other - - - -
----- ----- ----- -----
Total other (income) expense (2.0) 0.4 1.9 0.4
----- ----- ----- -----
Income before Income taxes 19.6 18.2 15.6 16.6
Provision for income taxes 7.1 6.4 5.6 5.8
----- ----- ----- -----
Net income (loss) 12.5 % 11.8 % 10.0 % 10.8 %
===== ===== ===== =====
</TABLE>
(1) Percentage of restaurant sales
(2) Percentage of retail sales
(3) Percentage of unit sales
Total revenues increased 234% to $23.6 million for the second quarter and 255%
to $45.5 million for the six months of 1997 from $7.1 million for the second
quarter and $12.8 million for the six months of 1996. Revenue growth resulted
primarily from the operation of four additional Units. Retail sales increased
as a percentage of total revenues from 20.8% for the second quarter and 19.5%
for the six months in 1996 to 23.2% and 23.0%, respectively, for the comparable
periods in 1997. The increase in the percentage of retail sales is primarily
due to the addition of the Walt Disney World
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Marketplace Unit where 1997 retail sales as a percentage of total sales were
29.6% for the second quarter and 29.4% for six months.
Food and beverage costs increased 200% to $4.2 million for the second quarter
and 211% to $8.2 million for the six months of 1997 compared to $1.4 million
and $2.6 million for the comparable periods 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 1997 periods 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 280% to $2.5 million for the second quarter
of 1997 compared to $0.7 million for the second quarter of 1996, and 331% to
$4.9 million for the six months of 1997 from $1.1 million for the comparable
period in 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.
Restaurant and retail operating expenses increased 227% and 283%, respectively,
for the second quarter and 235% and 302%, respectively, for the six months of
1997, primarily due to Unit expansion. Both restaurant and retail operating
expenses as a percentage of applicable restaurant and retail sales remained
stable due to efficient labor usage, negotiated price reductions for supplies
and high retail volume experienced by the Company.
Depreciation and amortization increased 275% to $1.2 million in the second
quarter of 1997 compared to $0.3 million for the comparable period in 1996 and
294% to $2.4 million for the six months of 1997 from $0.6 million in 1996.
Amortization of preopening expenses increased 371% to $0.8 million for the
second quarter and 375% to $1.6 million for the six months of 1997 from $0.2
million for the second quarter and $0.3 million for the six months of 1996. The
increase in depreciation and amortization and amortization of preopening
expenses was due to Unit expansion.
General, administration and development expenses increased 65.8% to $1.9
million and 70.3% to $3.4 million for the second quarter and six months of 1997
compared with $1.1 million and $2.0 million for the comparable periods of 1996.
The increase in general, administrative and development expenses was due to
the increase of senior management, corporate employees and Unit management
personnel focused on maximizing companywide growth strategies.
Interest income of $2.3 million and $4.5 million for the second quarter and six
months 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 $1.9 million for the six months 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).
The provision for income taxes in the 1997 twenty-six week period is based upon
the Company's estimated effective tax rate, including tax-exempt interest
income. The provision for income taxes in the
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1996 twenty-six week period is based upon the Company's effective tax rate,
including the benefits of approximately $350,000 in net operating loss
carryforwards and tax exempt interest income.
Net income was $3.0 million ($0.17 per share) and $4.6 million ($0.26 per
share) for the second quarter and six months of 1997 compared with $0.8 million
($0.06 per share) and $1.4 million ($0.10 per share) for the second quarter and
six months of 1996.
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
June 29, 1997 the Company had working capital of approximately $80.6 million
and long-term investments of $50.0 million.
The Company generated cash flow from operating activities of $9.9 million and
$20.1 million for the second quarter and six months of 1997 compared to $4.3
million and $7.2 million for the second quarter and six months of 1996. In
addition the Company generated approximately $1.1 million cash from the sale of
put options on approximately 650,000 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 1.0 million shares of the
Company's common stock may be repurchased. In April 1997, 10,000 shares of
common stock were repurchased 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 $0.5 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
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Marketplace Unit were approximately $1.2 million and the initial inventory
purchased was approximately $600,000.
During the second quarter of 1997, the Company spent approximately $21.6
million, before deducting landlord contributions related to the development of
Units planned to be opened in 1997 and early 1998.
Management anticipates capital expenditures of approximately $20.0 million net
of landlord contributions for the remainder of fiscal 1997, related to the
completion and opening of seven additional 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 costs that are subject to inflationary increases, such as taxes,
maintenance, repairs and utilities. The Company believes low inflation rates
have contributed to relatively stable costs. There is no assurance, however,
that low inflation rates will continue.
13
<PAGE> 15
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 the Company with the Securities and
Exchange Commission (as well as information included in oral 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.
14
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 4. Submission of Matters to a Vote of Security Holders
A. The Annual Meeting of Shareholders was held on May 22, 1997.
B. Matters voted upon:
(1) Directors elected at meeting:
AFFIRMATIVE NEGATIVE
VOTES VOTES ABSTENTIONS
----------- -------- -----------
Lyle Berman 14,696,808 36,997 2,501,275
Kenneth W. Brimmer 14,700,914 32,891 2,501,275
David L. Rogers 14,700,044 33,761 2,501,275
Steven W. Schussler 14,696,509 37,296 2,501,275
Ercu Ucan 14,688,926 44,879 2,501,275
Joel N. Waller 14,699,924 33,881 2,501,275
Item 6. 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 June 29, 1997.
15
<PAGE> 17
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: August 13, 1997 ____________________________________
Kenneth W. Brimmer
President
Date: August 13, 1997 ____________________________________
Mark S. Robinow
Chief Financial Officer
(Principal Financial Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 10-Q.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> JUN-29-1997
<CASH> 57,483
<SECURITIES> 85,797
<RECEIVABLES> 6,337
<ALLOWANCES> 0
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<CURRENT-ASSETS> 104,443
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0
<COMMON> 201,411
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