<PAGE> 1
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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 April 17, 1994, or
/X/ Transition report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the transition period from __________ to __________
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Commission File Number 0-7961
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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 20,306,029 (as of May 26, 1994).
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<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>
April 17, December 26,
1994 1993
----------- ------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 17,570 $ 16,664
Accounts receivable-trade . . . . . . . . . . . . . . 1,369 984
Inventories . . . . . . . . . . . . . . . . . . . . . 11,498 11,424
Deferred tax benefit . . . . . . . . . . . . . . . . 6,734 6,734
Other current assets . . . . . . . . . . . . . . . . 2,496 5,514
---------- ----------
Total current assets . . . . . . . . . . . . . . . . 39,667 41,320
---------- ----------
Property and equipment (at cost) . . . . . . . . . . . 238,785 232,240
Less accumulated depreciation and amortization . . . 62,755 57,802
Less allowance for unit closings . . . . . . . . . . 18,311 18,695
---------- ----------
157,719 155,743
Other assets: ---------- ----------
Goodwill (net of accumulated amortization of $7,267
in 1994 and $6,973 in 1993) . . . . . . . . . . . . . 38,560 38,954
Other intangible assets (net of accumulated
amortization of $4,401 in 1994 and $3,420 in 1993). . 21,409 21,923
Other . . . . . . . . . . . . . . . . . . . . . . . . 833 899
---------- ----------
60,802 61,776
---------- ----------
$ 258,188 $ 258,839
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . $ 1,734 $ 1,728
Accounts payable-trade . . . . . . . . . . . . . . . 16,097 19,910
Accrued expenses and other current liabilities . . . 29,802 29,829
Income taxes currently payable . . . . . . . . . . . 381 649
---------- ----------
Total current liabilities . . . . . . . . . . . . . 48,014 52,116
---------- ----------
Long-term debt . . . . . . . . . . . . . . . . . . . . 110,601 106,773
---------- ----------
Reserve for restructuring . . . . . . . . . . . . . . . 18,885 20,230
---------- ----------
Deferred income taxes . . . . . . . . . . . . . . . . . 6,734 6,734
---------- ----------
Other liabilities . . . . . . . . . . . . . . . . . . . 2,365 2,427
---------- ----------
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 - 33,143,558 shares in
1994 and 33,118,614 shares in 1993 . . . . . . . . . 331 331
Additional paid-in capital . . . . . . . . . . . . . 225,601 225,417
Deficit . . . . . . . . . . . . . . . . . . . . . . . (84,398) (85,244) <PAGE>
---------- ----------
141,534 140,504
Less treasury stock, at cost, 12,846,094 common
shares in 1994 and 1993 . . . . . . . . . . . . . . 69,945 69,945
---------- ----------
Total shareholders' equity . . . . . . . . . . . . 71,589 70,559
---------- ----------
$ 258,188 $ 258,839
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended
------------------------
April 17, April 18,
1994 1993
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Restaurant revenues . . . . . . . . . . . . . . . . . . . $ 87,397 $ 85,133
--------- ---------
Costs and expenses:
Food, supplies and uniforms . . . . . . . . . . . . . . 30,993 29,794
Restaurant labor and benefits . . . . . . . . . . . . . 26,000 24,854
Restaurant depreciation and amortization . . . . . . . 4,350 3,886
Other restaurant operating expenses . . . . . . . . . . 15,412 14,591
General and administrative expenses . . . . . . . . . . 6,886 6,953
Other . . . . . . . . . . . . . . . . . . . . . . . . . (74) 301
--------- ---------
83,567 80,379
--------- ---------
Operating income . . . . . . . . . . . . . . . . . . . . 3,830 4,754
--------- ---------
Other income and expenses:
Interest income . . . . . . . . . . . . . . . . . . . . 77 170
Interest expense . . . . . . . . . . . . . . . . . . . (3,060) (3,369)
Other . . . . . . . . . . . . . . . . . . . . . . . . . --- (54)
--------- ---------
(2,983) (3,253)
--------- ---------
Income before provision for income taxes . . . . . . . . 847 1,501
Provision for income taxes . . . . . . . . . . . . . . . --- 525
--------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 847 $ 976
========= =========
Net income per common share . . . . . . . . . . . . . . . $ 0.04 $ 0.05
========= =========
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . 20,430 19,376
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
-----------------------
April 17, April 18,
1994 1993
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 847 $ 976
Adjustments to reconcile net income to net cash --------- ---------
provided:
Depreciation and amortization . . . . . . . . . . . 6,044 5,363
Deferred income taxes . . . . . . . . . . . . . . . --- 559
Changes in assets and liabilities:
Accounts receivable-trade . . . . . . . . . . . . . (385) (457)
Inventories . . . . . . . . . . . . . . . . . . . . (74) 245
Other current assets . . . . . . . . . . . . . . . 3,018 (204)
Other assets . . . . . . . . . . . . . . . . . . . (405) (399)
Accounts payable-trade . . . . . . . . . . . . . . (3,813) 2,074
Accrued expenses and other current liabilities . . (27) (2,289)
Income taxes currently payable . . . . . . . . . . (268) (107)
Reserve for restructuring . . . . . . . . . . . . . (1,345) (1,905)
Other liabilities . . . . . . . . . . . . . . . . . (62) 52
--------- ---------
Total adjustments . . . . . . . . . . . . . . . 2,683 2,932
--------- ---------
Net cash provided by operating activities . . . . . 3,530 3,908
Cash flows from investing activities:
Acquisition of property and equipment . . . . . . . . . (8,040) (11,498)
Disposition of property and equipment . . . . . . . . 1,416 1,792
Other . . . . . . . . . . . . . . . . . . . . . . . . . (17) (108)
--------- ---------
Net cash used in investing activities . . . . . . . (6,641) (9,814)
--------- ---------
Cash flows from financing activities:
Common shares issued . . . . . . . . . . . . . . . . . 184 16,009
Proceeds of 5% Senior Subordinated Debentures . . . . . --- 14,893
Net proceeds (payments) on Credit Facilities . . . . . 4,500 (9,050)
Other long-term debt payments . . . . . . . . . . . . . (667) (843)
--------- ---------
Net cash provided by financing activities . . . . . 4,017 21,009
--------- ---------
Net cash provided by continuing operations . . . . . . . 906 15,103
--------- ---------
Net cash used in discontinued operations . . . . . . . . --- (35)
--------- ---------
Net increase in cash and cash equivalents . . . . . . 906 15,068
Cash and cash equivalents, beginning of period . . . . . 16,664 21,020
--------- ---------
Cash and cash equivalents, end of period . . . . . . . . $ 17,570 $ 36,088
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash payments (refunds) during the quarter for:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 3,790 $ 4,310
Interest capitalized . . . . . . . . . . . . . . . . . --- (52)
Income taxes refunded . . . . . . . . . . . . . . . . (2,500) (44)
Income taxes paid . . . . . . . . . . . . . . . . . . 268 ---
</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 sheets as of April 17, 1994 and the
consolidated statements of operations and cash flows for the periods
ended April 17, 1994 and April 18, 1993, have been prepared by the
Company without audit. Certain amounts appearing for the period ended
April 18, 1993 have been reclassified to conform to the presentation
for the period ended April 17, 1994. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the consolidated financial position at
April 17, 1994 and the consolidated results of operations and
consolidated cash flows for the periods ended April 17, 1994 and April
18, 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 sixteen week period ended April 17, 1994 are not
necessarily indicative of the operating results for the full year.
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.
Reported primary per share amounts include common equivalents relating
to dilutive stock options of 145,000 at April 17, 1994 and 709,000 at
April 18, 1993.
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 April 17, 1994 and April 18, 1993
computation due to their antidilutive effect during these periods.
<PAGE> 7
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 volume
than the first and fourth quarters.
Results of Operations
Revenues
Revenues for 1994 increased to $87.4 million, 2.7% over the $85.1
million earned last year. New restaurants accounted for $11.9 million
of 1994 revenues, while comparable store sales declined $3.0 million,
or 4.8%, in the Shoney's concept and increased $0.8 million, or 6.1%,
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 $7.4 million relating to 34 underperforming
units, which were either closed subsequent to the first 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 the
end of the first quarter of 1994 compared to 186 Shoney's and 70
Captain D's operating at the end of the same period for the prior
year.
The Company is implementing a number of programs to address the
softness in comparable store sales. Testing will begin on a new menu
that is more streamlined and geared towards improving margins. The
Company is in the initial phase of the introduction of rotisserie
chicken, which is being well received presently in two test
markets. Training programs are being enhanced by the establishment of
certified training stores in each region. Also, the Company's
incentive compensation programs have been modified to encourage sales
growth and performance improvement.
<PAGE> 8
Cost 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.
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Food, supplies and uniforms 35.5% 35.0%
Restaurant labor and benefits 29.7% 29.2%
Restaurant depreciation and amortization 5.0% 4.6%
Other restaurant operating expenses 17.6% 17.1%
------ ------
87.8% 85.9%
====== ======
</TABLE>
The Company's food costs suffered from significant price increases
in several high volume commodities, including pork, vegetable
shortening, produce and shrimp. These increases were partially offset
by a decrease in white fish prices, which contributed to a decrease in
food costs as a percentage of revenues in the Company's Captain D's
restaurants. 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 $344,000. Restaurant labor and benefits increased
primarily as a result of increases in workers' compensation insurance
expense. As discussed in its 1993 Annual Report on Form 10-K, the
Company made a significant 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.
General and administrative expenses have decreased $67,000, or 0.3%
as a percentage of revenue 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.
<PAGE> 9
Other costs and expenses improved by $375,000 primarily as a result
of a $400,000 gain on the disposition of assets.
Other Income and Expenses
Interest income decreased $93,000 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 $153,000 relating to interest
on capital leases included in the restructuring reserve and an
additional $83,000 due to the termination of the Company's retirement
plan at the end of 1993.
Liquidity and Capital Resources
The Company has a working capital deficit of $8,347,000 at April
17, 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 $378,000 to
$3,530,000 in 1994 from $3,908,000 in 1993. During the first quarter
of 1994, the Company received a federal income tax refund of
$2,500,000. Accounts payable, which includes payables relating to
operations and construction, declined by $3,813,000 during the first
quarter of 1994 compared to an increase of $2,074,000 in the first
quarter of 1993. Accrued expenses decreased during the first quarter
of 1993 due to a lump sum benefit payment of $1,850,000 relating to
the early retirement of a senior executive officer.
Investing Activities
Net cash used in investing activities decreased $3,173,000. The
decrease in cash used is primarily a result of the Company's plan to
build fewer restaurants in 1994 compared to 1993. The Company spent
$4,634,000 on new stores in 1994, or $3,259,000 less than the
$8,093,000 spent on new stores in the same period of 1993. Although
four new Shoney's and one new Captain D's were opened in both the
first quarter of 1994 and the first quarter of 1993, three of the
units opened in 1994 were substantially complete at the end of 1993.
In addition, funds used for remodeling of existing stores has
decreased by $1,389,000 to $687,000.
<PAGE> 10
Financing Activities
Net cash provided by financing activities decreased by $16,992,000
due primarily to the investment in the Company by The Airlie Group
L.P. and certain related parties on March 19, 1993. This transaction
provided the Company with 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. A portion of these proceeds were used to
pay down the Company's credit facilities.
As of April 17, 1994, the Company had borrowings of $23,500,000 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 four additional new Shoney's
restaurants and five to six new Captain D's during the remainder of
1994. Currently, the average cost to purchase land and construct and
equip a new restaurant is approximately $1,450,000 for each new
Shoney's and approximately $700,000 for each new Captain D's. The
Company intends to spend approximately $7,600,000 on remodeling,
refurbishing and maintaining its restaurants during the remainder of
1994. In addition, the Company plans to spend $750,000 in 1994 for the
development and installation of point-of-sale and back office computer
systems at approximately half of its Captain D's restaurants, with the
remaining Captain D's restaurants to be converted to the new systems
in 1995. 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.
The Company believes that 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. During the remainder of 1994, the Company is committed to build
one Shoney's in its Houston, TX reserved area and the same number as
opened by Shoney's Inc., estimated to be two, in eastern Michigan.
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.
The extent of the Company's expansion plans beyond 1994 depend on
the ability of the Company's existing operations to generate
sufficient cash flow for future expansion. Management believes
sufficient funds will be 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> 11
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 April 26, 1994, the court dismissed two of the 16 counts
brought by Maxcell and denied the remainder of McCaw's motion to
dismiss the claims of Maxcell. The court also denied McCaw's motion
to stay discovery, and subsequently, granted Maxcell's motion to
compel discovery. In a procedural ruling, while permitting 14 claims
of Maxcell to go forward, the court dismissed TPI Enterprises itself
as a plaintiff. This procedural ruling does not impede the ability of
TPI to seek recovery on its claims through its wholly-owned
subsidiary, Maxcell. 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> 12
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders of the Company was held on
May 19, 1994.
(b) Not Applicable
(c) 1. Election of Directors. All nominees for director were
elected pursuant to the following vote:
Name of Nominee Votes in favor Withheld
Stephen R. Cohen 17,599,722 389,550
J. Gary Sharp 17,603,038 386,234
Frederick W. Burford 17,603,425 385,847
Osvaldo Cisneros 17,604,537 384,735
Paul James Siu 17,604,337 384,935
Edwin B. Spievack 17,603,225 386,047
Thomas M. Taylor 17,605,137 384,135
Lawrence W. Levy 17,604,037 385,235
John L. Marion, Jr. 17,604,637 384,635
Douglas K. Bratton 17,604,237 385,035
2. Approval of the amendment to the Company's Non-Employee
Directors Stock Option Plan: 16,944,918 votes in favor;
929,330 votes against; and 115,024 shares abstained from
voting.
3. Ratification of the appointment of Deloitte & Touche as
independent auditors for the Company's fiscal year ending
December 25, 1994: 17,875,915 votes in favor; 48,932 votes
against; and 64,425 shares abstained from voting.
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K:
Registrant filed a current report on Form 8-K, dated April 28,
1994, reporting Item 5 - Other Events. Under Item 7 - Financial
Statements and Exhibits, the Registrant filed press releases dated
April 28, 1994 and May 6, 1994.
<PAGE> 13
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: May 31, 1994 /s/ J. Gary Sharp
--------------------------
J. Gary Sharp
President & Chief
Executive Officer
Date: May 31, 1994
/s/ Frederick W. Burford
--------------------------
Frederick W. Burford
Executive Vice President &
Chief Financial Officer
