<PAGE> 1
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Securities and Exchange Commission
Washington, D.C. 20549
---------------------
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended July 10, 1994, or
/X/ Transition report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the transition period from ___________ to __________
---------------------------
Commission File Number 0-7961
---------------------------
TPI ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1899681
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 South Flagler Drive
Phillips Point East Tower, Suite 909
West Palm Beach, Florida 33401
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (407) 835-8888
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, Par Value $.01 per Share
(Title of Class)
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 \ \
The number of shares outstanding of the registrant's common stock
is 20,333,959 (as of August 12, 1994).
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
Companies for which information is furnished:
TPI Enterprises, Inc.
Telecom Plus Shared Tenants Services, Inc.
Maxcell Telecom Plus, Inc.
Maxcell Telecom Plus of Rhode Island, Inc. (2)
TPI Restaurants, Inc.
Shoney's Construction, Inc. (1)
Mid-South Restaurant Distributors, Inc. (1)
Danver's International, Inc. (1)
The Insurex Agency, Inc. (1)
Insurex Benefit Administrators, Inc. (1)
TPI Entertainment, Inc.
TPI West Palm, Inc. (1)
TPI Commissary, Inc. (1)
TPI Transportation, Inc. (1)
TPI Insurance Corporation
(1) Wholly-owned subsidiaries of TPI Restaurants, Inc.
(2) Wholly-owned subsidiary of Maxcell Telecom Plus, Inc.
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 10, December 26,
1994 1993
---------- -----------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 18,864 $ 16,664
Accounts receivable-trade . . . . . . . . . . . . . . 962 984
Inventories . . . . . . . . . . . . . . . . . . . . . 13,719 11,424
Deferred tax benefit . . . . . . . . . . . . . . . . 6,674 6,734
Other current assets . . . . . . . . . . . . . . . . 2,416 5,514
---------- -----------
Total current assets . . . . . . . . . . . . . . . . 42,635 41,320
---------- -----------
Property and equipment (at cost) . . . . . . . . . . . 241,014 232,240
Less accumulated depreciation and amortization . . . 65,648 57,802
Less allowance for unit closings . . . . . . . . . . 17,803 18,695
---------- -----------
157,563 155,743
---------- -----------
Other assets:
Goodwill (net of accumulated amortization of $7,562
in 1994 and $6,873 in 1993) . . . . . . . . . . . . . 38,265 38,954
Other intangible assets (net of accumulated
amortization of $5,096 in 1994 and $3,420 in 1993) . 20,823 21,923
Other . . . . . . . . . . . . . . . . . . . . . . . . 662 899
---------- -----------
59,750 61,776
---------- -----------
$ 259,948 $ 258,839
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . $ 1,729 $ 1,728
Accounts payable-trade . . . . . . . . . . . . . . . 17,408 19,910
Accrued expenses and other current liabilities . . . 32,654 29,829
Income taxes currently payable . . . . . . . . . . . 481 649
---------- -----------
Total current liabilities . . . . . . . . . . . . . 52,272 52,116
---------- -----------
Long-term debt . . . . . . . . . . . . . . . . . . . . 108,795 106,773
---------- -----------
Reserve for restructuring . . . . . . . . . . . . . . . 17,887 20,230
---------- -----------
Deferred income taxes . . . . . . . . . . . . . . . . . 6,574 6,734
---------- -----------
Other liabilities . . . . . . . . . . . . . . . . . . . 2,319 2,427
---------- ----------- <PAGE>
Commitments and contingencies
Shareholders' equity:
Preferred shares - no par value - authorized -
20,000,000 shares; none issued and outstanding . . --- ---
Common shares - $.01 par value - authorized -
100,000,000 shares; issued - 33,172,564 shares in
1994 and 33,118,614 shares in 1993 . . . . . . . . . 332 331
Additional paid-in capital . . . . . . . . . . . . . 225,775 225,417
Deficit . . . . . . . . . . . . . . . . . . . . . . . (84,061) (85,244)
---------- -----------
142,046 140,504
Less treasury stock, at cost, 12,846,094 common shares
in 1994 and 1993 . . . . . . . . . . . . . . . . . . 69,945 69,945
---------- -----------
Total shareholders' equity . . . . . . . . . . . . . 72,101 70,559
---------- -----------
$ 259,948 $ 258,839
========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Twelve Weeks Twenty-eight Weeks
Ended Ended
----------------- -------------------
July 10, July 11, July 10, July 11,
1994 1993 1994 1993
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Restaurant revenues . . . . . . . . . . . $68,730 $69,850 $156,127 $154,983
------- ------- -------- --------
Costs and expenses:
Food, supplies and uniforms . . . . . . 23,877 24,512 54,870 54,306
Restaurant labor and benefits . . . . . 20,726 20,510 46,726 45,364
Restaurant depreciation and amortization 3,262 3,071 7,612 6,957
Other restaurant operating expenses . . 12,447 11,664 27,859 26,255
General and administrative expenses . . 5,577 5,654 12,463 12,607
Other . . . . . . . . . . . . . . . . . 274 182 200 483
------- ------- -------- --------
66,163 65,593 149,730 145,972
------- ------- -------- --------
Operating income . . . . . . . . . . . . 2,567 4,257 6,397 9,011
------- ------- -------- --------
Other income and expenses:
Interest income . . . . . . . . . . . . 76 190 153 360
Interest expense . . . . . . . . . . . (2,307) (2,619) (5,367) (5,988)
Other . . . . . . . . . . . . . . . . . --- 54 --- ---
------- ------- -------- --------
(2,231) (2,375) (5,214) (5,628)
------- ------- -------- --------
Income from continuing operations before
provision for income taxes . . . . . . 336 1,882 1,183 3,383
Provision for income taxes . . . . . . . --- 757 --- 1,282
------- ------- -------- --------
Income from continuing operations . . . 336 1,125 1,183 2,101
Gain on disposal of discontinued
operations, net of income taxes . . . . --- 6,115 --- 6,115
------- ------- -------- --------
Net income . . . . . . . . . . . . . . . $ 336 $ 7,240 $ 1,183 $ 8,216
======= ======= ======== ========
Earnings per share:
Primary:
Continuing operations . . . . . . . . . $ 0.02 $ 0.06 $ 0.06 $ 0.11
Discontinued operations . . . . . . . . --- 0.30 --- 0.30 <PAGE>
------- ------- -------- --------
Net income per common share . . . . . $ 0.02 $ 0.36 $ 0.06 $ 0.41
======= ======= ======== ========
Weighted average number of common and
common equivalent shares outstanding . 20,465 20,393 20,445 19,884
======= ======= ======== ========
Fully diluted:
Continuing operations . . . . . . . . . $ 0.02 $ 0.06 $ 0.06 $ 0.12
Discontinued operations . . . . . . . . --- 0.21 --- 0.21
------- -------- -------- --------
Net income per common share . . . . . $ 0.02 $ 0.27 $ 0.06 $ 0.33
======= ======= ======== ========
Weighted average number of common and
common equivalent shares outstanding . 20,465 29,941 20,445 29,321
======= ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE> Twenty-eight Weeks Ended
------------------------
July 10, July 11,
1994 1993
----------- ---------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 1,183 $ 8,216
--------- --------
Adjustments to reconcile net income to net cash
provided:
Depreciation and amortization . . . . . . . . . . . 10,495 9,790
Deferred income taxes . . . . . . . . . . . . . . . (100) 777
(Gain) loss on disposal of assets . . . . . . . . . (433) 59
Gain on disposal of discontinued operations . . . . --- (6,115)
Changes in assets and liabilities:
Accounts receivable-trade . . . . . . . . . . . . . 22 (374)
Inventories . . . . . . . . . . . . . . . . . . . . (2,295) 2,379
Other current assets . . . . . . . . . . . . . . . 2,493 540
Other assets . . . . . . . . . . . . . . . . . . . (508) (810)
Accounts payable-trade . . . . . . . . . . . . . . (2,502) 2,219
Accrued expenses and other current liabilities. . . 2,825 508
Income taxes currently payable . . . . . . . . . . (168) 474
Reserve for restructuring . . . . . . . . . . . . . (2,343) (1,470)
Other liabilities . . . . . . . . . . . . . . . . . (108) 104
-------- --------
Total adjustments . . . . . . . . . . . . . . . 7,378 8,081
-------- --------
Net cash provided by operating activities . . . . . 8,561 16,297
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment . . . . . . . . . (13,242) (22,103)
Disposition of property and equipment . . . . . . . . . 4,289 463
Other, net . . . . . . . . . . . . . . . . . . . . . . 210 (106)
-------- --------
Net cash used in investing activities . . . . . . . (8,743) (21,746)
-------- --------
Cash flows from financing activities:
Common shares issued . . . . . . . . . . . . . . . . . 359 15,723
Proceeds of 5% Senior Subordinated Debentures . . . . . --- 15,000
Net proceeds (payments) on Credit Facilities . . . . . 3,000 (31,922)
Other long-term debt payments . . . . . . . . . . . . . (977) (4,132)
-------- --------
Net cash provided by (used in) financing activities 2,382 (5,331)
-------- --------
Net cash provided by (used in) continuing operations . 2,200 (10,780)
-------- --------
Net cash provided by discontinued operations . . . . . . --- 16,078
-------- --------
Net increase in cash and cash equivalents . . . . . . 2,200 5,298
Cash and cash equivalents, beginning of period . . . . . 16,664 21,020 <PAGE>
--------- --------
Cash and cash equivalents, end of period . . . . . . . . $ 18,864 $ 26,318
========= ========
Supplemental Disclosure of Cash Flow Information:
Cash payments (refunds) during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 4,614 $ 4,636
Interest capitalized . . . . . . . . . . . . . . . . . (77) (154)
Income taxes paid (refunded) . . . . . . . . . . . . . (2,232) (44)
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of July 10, 1994 and the
consolidated statements of operations and cash flows for the periods
ended July 10, 1994 and July 11, 1993, have been prepared by the
Company without audit. Certain amounts appearing for the period ended
July 11, 1993 have been reclassified to conform to the presentation
for the period ended July 10, 1994. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the consolidated financial position at
July 10, 1994 and the consolidated results of operations and
consolidated cash flows for the periods ended July 10, 1994 and July
11, 1993, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the 1993 audited
financial statements of the Company included in its Annual Report on
Form 10-K for the year ended December 26, 1993. The results of
operations for the twelve week and twenty-eight week periods ended
July 10, 1994 are not necessarily indicative of the operating results
for the full year.
<PAGE> 7
NOTE 2 - NET INCOME PER COMMON SHARE
Primary earnings per share amounts are computed by dividing net
income by the weighted average number of common and common equivalent
shares (dilutive options and warrants) outstanding during the period.
Fully diluted earnings per share amounts are similarly computed,
but also include the effect, when dilutive, of the Company's 8 1/4%
Convertible Subordinated Debentures and 5% Convertible Senior
Subordinated Debentures, after the elimination of the related interest
requirements, net of income taxes. The Company's convertible
debentures are excluded from the computation for the twelve week and
twenty-eight week periods ended July 10, 1994 due to their
antidilutive effect during these periods.
Earnings per share amounts are computed for the quarters ended July
10, 1994 and July 11, 1993 as follows:
<TABLE>
Twelve Weeks Twelve Weeks
Ended Ended
July 10, 1994 July 11, 1993
------------------ ------------------
Fully Fully
Primary Diluted Primary Diluted
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Income:
Income from continuing operations . . . . $ 336 $ 336 $ 1,125 $ 1,125
Interest (less tax) on convertible
debentures . . . . . . . . . . . . . . --- --- --- 695
------- ------ ------ -------
Adjusted income from continuing
operations . . . . . . . . . . . . . . 336 336 1,125 1,820
Discontinued operations . . . . . . . . . --- --- 6,115 6,115
------- ------ ------- -------
$ 336 $ 336 $ 7,240 $ 7,935
======= ====== ======= =======
Number of shares:
Weighted average shares outstanding . . . 20,313 20,313 19,866 19,866
Incremental shares for outstanding stock
options . . . . . . . . . . . . . . . . 152 152 527 750
Shares issued upon conversion of
debentures . . . . . . . . . . . . . . --- --- --- 9,325
------- ------ ------- -------
20,465 20,465 20,393 29,941
======= ====== ======= =======
</TABLE>
<PAGE> 8
Earnings per share amounts are computed for the twenty-eight weeks
ended July 10, 1994 and July 11, 1993 as follows:
<TABLE>
Twenty-eight Weeks Twenty-eight Weeks
Ended Ended
July 10, 1994 July 11, 1993
------------------- ------------------
Fully Fully
Primary Diluted Primary Diluted
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income:
Income from continuing operations . . . . $ 1,183 $ 1,183 $ 2,101 $ 2,101
Interest (less tax) on convertible
debentures . . . . . . . . . . . . . . --- --- --- 1,571
------- ------- ------- -------
Adjusted income from continuing
operations . . . . . . . . . . . . . . 1,183 1,183 2,101 3,672
Discontinued operations . . . . . . . . . --- --- 6,115 6,115
------- ------- ------- -------
$ 1,183 $ 1,183 $ 8,216 $ 9,787
======= ======= ======= =======
Number of shares:
Weighted average shares outstanding . . . 20,297 20,297 19,267 19,267
Incremental shares for outstanding stock
options . . . . . . . . . . . . . . . 148 148 617 729
Shares issued upon conversion of
debentures . . . . . . . . . . . . . . --- --- --- 9,325
------- ------- ------- -------
20,445 20,445 19,884 29,321
======= ======= ======= =======
</TABLE>
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Continuing operations primarily includes the results of TPI
Restaurants, Inc. ("Restaurants"), whose revenues are derived from
restaurant sales. The first quarterly reporting period consists of 16
weeks and the remaining three quarters are 12 weeks each. The
restaurant business is seasonal in nature with the second and third
fiscal quarters (Spring and Summer) having higher weekly sales volumes
than the first and fourth quarters.
Results of Operations
Year to Date 1994 Compared to Year to Date 1993
Revenues
Revenues for 1994 increased to $156,127,000, 0.7% over the
$154,983,000 earned last year. New restaurants accounted for
$18,246,000 of 1994 revenues, while comparable store sales declined
$5,571,000, or 4.9%, in the Shoney's concept and increased $1,544,000,
or 6.6%, in the Captain D's concept. The first twelve weeks of new
restaurants' operations are excluded from the comparable store sales
computation. Revenues for 1993 include $13,075,000 relating
primarily to 31 underperforming units, which were either closed
subsequent to the second quarter of 1993 or are scheduled to be closed
in accordance with the Company's restructuring plan adopted in 1993.
Revenues and expenses related to units provided for in the reserve for
restructuring have been excluded from the 1994 statement of
operations. The Company's operating results include 182 Shoney's and
66 Captain D's units operating at July 10, 1994 compared to 191
Shoney's and 70 Captain D's operating at July 11, 1993.
The Company has taken significant steps to address the
deterioration of comparable store sales and to improve the Shoney's
concept. Training efforts have been significantly increased in every
region to improve customer service. The Company has recently begun
testing a new menu design and is testing several new menu items,
including rotisserie chicken, barbecued riblets and Caesar salads, in
certain markets. The Company is closely monitoring the impact of
these new menu items and related advertising before introducing these
items system-wide. The Company completed a new restaurant remodel
prototype in one of its stores in early August. Pending an evaluation
of this remodel as well as the remodeling program being undertaken at
Shoney's, Inc., the Company has currently postponed construction of
new Shoney's restaurants and major remodels.
<PAGE> 10
Costs and Expenses
Cost of sales includes food, supplies and uniforms, restaurant
labor and benefits, restaurant depreciation and amortization, and
other restaurant operating expenses. A summary of cost of sales as a
percentage of revenues for 1994 and 1993 is shown below.
======================================================================
1994 1993
----- ------
Food, supplies and uniforms 35.1% 35.0%
Restaurant labor and benefits 29.9% 29.3%
Restaurant depreciation and amortization 4.9% 4.5%
Other restaurant operating expenses 17.9% 16.9%
------ ------
87.8% 85.7%
====== ======
======================================================================
The Company experienced price increases in several high volume
commodities, including pork, vegetable shortening and shrimp during
1994. However, these increases were offset by decreases in produce
and white fish prices. The decrease in white fish prices has
resulted in a decrease in food costs as a percentage of revenues in
the Company's Captain D's restaurants. In an effort to improve
customer service, staffing levels have been increased in the Company's
Shoney's restaurants, resulting in increased labor costs as a
percentage of sales. Restaurant labor and benefits was also impacted
by an increase in workers' compensation insurance expense of
$761,000, or 0.5% as a percentage of revenue. Other restaurant
operating expenses includes an increase in insurance expense of 0.4%
as a percentage of revenues, or $617,000. As discussed in its 1993
Annual Report on Form 10-K, the Company made a significant fourth
quarter adjustment to its workers' compensation and general liability
insurance reserves based on improved data available to the Company for
assessing its potential exposure. The Company continues to recognize
workers' compensation and general liability insurance expense at a
higher rate than in the prior year to better reflect the likely
outcome of its liability. The Company has undertaken a program to
address the increase in insurance costs, including, among other
things, the installation of a risk management information system,
utilization of a new floor chemical to prevent slips and falls and use
of plastic instead of glass in the kitchen where possible. Most
restaurant operating expenses, including depreciation and
amortization, repairs and maintenance, utilities, franchise fees, and
property taxes, are relatively fixed, and accordingly, a decrease in
comparable store sales results in an unfavorable margin impact.
<PAGE> 11
General and administrative expenses have decreased $144,000.
Savings relating to the restructuring activities at the end of 1993,
including reductions in field management and corporate staff,
termination of the pension plan and reductions in senior level
compensation, have been partially offset by the write-off of
approximately $200,000 of development expenditures incurred prior to
the Company's decision to postpone construction of new Shoney's
restaurants.
Other costs and expenses improved by $283,000 primarily as a result
of a $413,000 gain on the disposition of assets. This gain was
partially offset by an $86,000 decline in profits from the Company's
insurance operations.
Other Income and Expenses
Interest income decreased $207,000 due to the unusually high amount
of cash on hand in the prior year following the investment in the
Company by the Airlie Group L.P. and certain related parties on March
19, 1993. Interest expense decreased by $621,000, with $258,000
relating to interest on capital leases included in the restructuring
reserve and an additional $167,000 due to the termination of the
Company's retirement plan at the end of 1993.
Second Quarter 1994 Compared to Second Quarter 1993
Revenues
Revenues for 1994 decreased to $68,730,000, 1.6% less than the
$69,850,000 earned last year. New restaurants accounted for
$6,346,000 of 1994 revenues, while comparable store sales declined
$2,573,000, or 5.0%, in the Shoney's concept and increased $719,000,
or 7.2%, in the Captain D's concept. Revenues for 1993 include
$5,612,000 relating primarily to 31 underperforming units, which were
either closed subsequent to the second quarter of 1993 or are
scheduled to be closed in accordance with the Company's restructuring
plan.
<PAGE> 12
Costs and Expenses
Cost of sales includes food, supplies and uniforms, restaurant
labor and benefits, restaurant depreciation and amortization, and
other restaurant operating expenses. A summary of cost of sales as a
percentage of revenues for 1994 and 1993 is shown below.
======================================================================
1994 1993
------- ------
Food, supplies and uniforms 34.7% 35.1%
Restaurant labor and benefits 30.2% 29.4%
Restaurant depreciation and amortization 4.7% 4.4%
Other restaurant operating expenses 18.1% 16.7%
------ ------
87.7% 85.6%
====== ======
======================================================================
The Company's food costs were favorably impacted by significant
commodity price decreases in white fish and produce and a minimal menu
price increase. These decreases were partially offset by increases in
the commodity prices of pork, vegetable shortening and shrimp.
Staffing levels have been increased in the Shoney's stores in an
effort to improve customer service, resulting in an increase in store
labor costs. Restaurant labor and benefits also includes an increase
in workers' compensation insurance expense of $209,000, or 0.3% as a
percentage of revenue. See discussion of insurance reserves in the
year to date discussion above. Most restaurant operating expenses,
including depreciation and amortization, repairs and maintenance,
utilities, franchise fees, and property taxes, are relatively fixed,
and accordingly, a decrease in same store sales results in an
unfavorable margin impact. In addition to the effect of the decline
in comparable store sales, the increase in other restaurant operating
expenses reflects an increase in insurance expense of 0.4% as a
percentage of revenues, or $272,000.
General and administrative expenses have decreased $77,000 due
primarily to the restructuring activities at the end of 1993 involving
reductions in field management and corporate staff, termination of the
pension plan and reductions in senior level compensation. These
savings were offset by the write-off of $200,000 in development
expenditures incurred prior to the Company's decision to postpone
construction of new Shoney's restaurants.
Other costs and expenses, net, increased $92,000 primarily as a
result of a $95,000 decline in the Company's insurance operations.
<PAGE> 13
Other Income and Expenses
Interest income decreased $114,000 due to the unusually high amount
of cash on hand in the prior year following the investment in the
Company by the Airlie Group L.P. and certain related parties on March
19, 1993. Interest expense decreased by $312,000, including $108,000
relating to interest on capital leases included in the restructuring
reserve and an additional $84,000 due to the termination of the
Company's retirement plan at the end of 1993.
Income taxes
The Company has no provision for income taxes in 1994 due to the
utilization of net operating loss and alternative minimum tax
carryforwards.
Liquidity and Capital Resources
The Company has a working capital deficit of $9,637,000 at July 10,
1994 compared to a working capital deficit at December 26, 1993 of
$10,796,000. Approximately 92% of the Company's restaurant sales are
for cash and the remainder are for credit card receivables which are
generally collected within 3 days. Because the Company's payables,
including amounts for inventory and other operating expenses, are paid
over a longer period of time, it is not unusual for the Company, like
many others in the restaurant industry, to operate with a working
capital deficit. Furthermore, the Company uses available cash for
capital spending or repayment of advances under its revolving credit
facility.
Operating Activities
Net cash provided by operating activities decreased $7,736,000 to
$8,561,000 in 1994 from $16,297,000 in 1993 due primarily to the
change in working capital. The significant factors contributing to
this net decrease are an increase in inventories of $2,295,000,
primarily fish, in 1994 compared to a decrease in inventories of
$2,379,000 during the same period of 1993 and a decrease of $2,502,000
in accounts payable in 1994, including significant amounts relating to
construction, compared to an increase of $2,219,000 in 1993. These
decreases in cash were partially offset by the receipt of a federal
income tax refund of $2,500,000 in 1994.
<PAGE> 14
Investing Activities
Net cash used in investing activities decreased $13,003,000. The
decrease in cash used is primarily the result of the Company building
fewer restaurants in 1994 compared to 1993. The Company has spent
$7,035,000 on new and replacement stores in 1994, or $7,627,000 less
than the $14,662,000 spent on new and replacement stores in the same
period of 1993. Four new Shoney's, one replacement Shoney's and two
new Captain D's were opened in the first half of 1994, while ten
Shoney's and one Captain D's opened during the first half of 1993. In
addition, funds used for remodeling of existing stores has decreased
by $3,242,000 to $1,506,000. Cash provided by dispositions of
property and equipment increased from $463,000 in 1993 to $4,289,000
in 1994. Proceeds in 1994 include $3,166,000 from the disposal of
four restaurants and $1,042,000 from the sale of excess property and
other property and equipment.
Financing Activities
Financing activities provided $2,382,000 in 1994 compared to
$5,331,000 used in the prior year. The Company used proceeds of
$3,000,000 under its credit facilities and proceeds of $359,000 from
the issuance of stock pursuant to employee stock plans primarily to
fund capital expenditures during 1994. On March 19, 1993, The Airlie
Group L.P. and certain related parties made an investment in the
Company which resulted in net proceeds of $29,099,000 from the
issuance of $15,000,000 of convertible debentures and $15,000,000 of
common stock and warrants. These proceeds were used to reduce
borrowings under the Company's credit facilities and pay other long-
term debt.
As of July 10, 1994, the Company had borrowings of $22,000,000 and
standby letters of credit of $10,951,000 outstanding on its
$50,000,000 credit facility.
Expansion Plans
The Company currently plans to open one Shoney's restaurant and two
Captain D's during the remainder of 1994. As of July 10, 1994, the
estimated cost to complete these units was approximately $2,400,000.
The Company plans to spend approximately $2,700,000 on maintaining its
restaurants during the remainder of 1994. In addition, the Company
plans to complete the development and installation of point-of-sale
and back office computer systems at its Captain D's restaurants for a
total cost of approximately $1,500,000, with half of the restaurants
to be converted to the new systems by the end of 1994. The Company
believes it will be able to provide funds for this capital expenditure
schedule through its cash flow from operations and borrowings on the
credit facility.
<PAGE> 15
The Company has currently postponed further new construction and
major remodels of Shoney's restaurants, while monitoring and
evaluating the operating results of a new remodel prototype completed
in early August 1994, the Shoney's, Inc., remodeling program and other
current initiatives intended to improve Shoney's sales. The Company
believes that if the operating results of the Shoney's concept improve
there is potential to expand its Shoney's and Captain D's restaurants
within its existing markets as well as within the other areas in which
the Company has been granted exclusive rights by Shoney's, Inc. In
order to maintain the exclusive rights to certain reserved areas, the
Company has entered into various development agreements to open
restaurants over defined periods of time. The Company has satisfied
its construction requirements through the end of 1994. Subsequent to
1994, these agreements require the construction of an additional 33
Shoney's prior to April 6, 2003, and 32 Captain D's prior to July 31,
2011.
Management believessufficient funds willbe available from cash
on hand, cash flows from operations and borrowings under the credit
facility to meet its debt service requirements, as well as its working
capital and capital expenditure requirements in the foreseeable
future.
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Maxcell Telecom Plus, Inc., et al., v. McCaw Cellular
Communications, Inc., et al.
On November 1, 1993, the Company and its wholly-owned subsidiary,
Maxcell Telecom Plus, Inc.("Maxcell"), filed a complaint in the
Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida. On August 23, 1994, the Company received a favorble
ruling on the Defendants' Joint Motions for Partial Reconsideration of
the Order Denying Stay of Litigation in Maxcell's case against McCaw
Cellular Communications, Inc. ("McCaw") and former shareholders of
Charisma Communications Corporation ("Charisma"). McCaw and Charisma
had filed Motions to Stay the Florida litigation in favor of other
litigation pending between Charisma and McCaw in the U.S. District
Court for the District of Columbia. On June 29, 1994, that Motion was
denied by the Florida court. In July, McCaw and Charisma jointly
filed motions to reconsider the decision. The fuling on August 23,
1994 denied the July Motion in favor of Maxcell. Maxcell's case is
expected to proceed in Florida. The litigation is still in its early
stages and there can be no assurance as to what the ultimate outcome
will be.
The Company and its subsidiaries are defendants in various
lawsuits arising in the ordinary course of business. It is the
opinion of the management of the Company that the outcome of such
litigation will not have a significant adverse effect on the
consolidated financial statements.
<PAGE> 17
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
<PAGE> 18
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.
TPI Enterprises, Inc.
(Registrant)
Date: August 23, 1994 /s/ J. Gary Sharp
--------------------------
J. Gary Sharp
President & Chief
Executive Officer
Date: August 23, 1994
/s/ Frederick W. Burford
--------------------------
Frederick W. Burford
Executive Vice President &
Chief Financial Officer
