<PAGE> 1
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
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 20, 1997 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.)
P.O. BOX 382460
GERMANTOWN, TENNESSEE 38138-2460
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (901) 752-3889
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
20,664,512 as of May 21, 1997.
================================================================================
<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.
TPI Restaurants, Inc.(1)
Insurex Agency, Inc. (1)(2)
Insurex Benefit Administrators, Inc. (1)(2)
TPI Entertainment, Inc. (1)
TPI West Palm, Inc. (1) (2)
TPI Commissary, Inc.(1) (2)
TPI Transportation, Inc.(1) (2)
TPI Insurance Corporation (1)
(1) Subsidiaries were sold to Shoney's, Inc. in a transaction consummated on
September 9, 1996. See Note 2 to Notes to Consolidated Financial Statements.
(2) Wholly-owned subsidiaries of TPI Restaurants, Inc.
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APRIL 20, DECEMBER 29,
1997 1996
------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 870 $1,190
Investments 5,170 5,078
------ ------
Total assets 6,040 6,268
LIABILITIES
Reserve for estimated costs during the period of liquidation 863 1,053
Accrued expenses 342 480
------ ------
Total liabilities 1,205 1,533
------ ------
NET ASSETS IN LIQUIDATION $4,835 $4,735
------ ------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
NET ASSETS IN LIQUIDATION, DECEMBER 29, 1996 $4,735
Investment Earnings 100
------
NET ASSETS IN LIQUIDATION, APRIL 20, 1997 $4,835
======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(GOING CONCERN BASIS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 21
1996
---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
RESTAURANT REVENUES $ 84,934
COSTS AND EXPENSES:
Food, supplies and uniforms 31,033
Restaurant labor and benefits 27,458
Restaurant depreciation and amortization 3,594
Other restaurant operating expenses 16,409
General and administrative expenses 6,968
Provision for asset valuation (16,167)
Restructuring (34)
Other 1,866
--------
Total costs and expenses 71,127
--------
OPERATING INCOME 13,807
OTHER INCOME AND EXPENSES:
Interest income 305
Interest expense (3,497)
--------
Total other income and expenses 3,192
--------
INCOME BEFORE PROVISION
FOR INCOME TAXES 10,615
PROVISION FOR INCOME TAXES -
--------
NET INCOME $ 10,615
========
Net income per common share $ 0.51
--------
Weighted average number of common
and common equivalent shares outstanding 20,615
--------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(GOING CONCERN BASIS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED
APRIL 21,
1996
-----------
(DOLLARS IN
THOUSANDS)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,615
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,146
Deferred income taxes (185)
Reserve for restructuring (34)
Provision for asset valuation (16,167)
Changes in assets and liabilities:
Accounts receivable-trade 306
Litigation settlement receivable 30,000
Inventories 2,258
Other current assets 1,593
Other assets (118)
Accounts payable-trade (2,432)
Accrued expenses and other current liabilities (13,416)
Reserve for restructuring (510)
Income taxes currently payable 22
Other liabilities (62)
--------
Net cash provided by operating activities 17,016
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,360)
Disposition of property and equipment 509
Other 5
--------
Net cash used in investing activities (846)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on credit facilities 2,500
Other long-term debt payments (432)
Common shares issued 33
--------
Net cash provided by financing activities 2,101
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,271
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,744
--------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 27,015
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash transactions:
Capitalized lease obligations entered into $ 299
Cash payments during the quarter for:
Interest 3,360
Income taxes paid 200
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - Pursuant to the terms of the Plan of Tax-Free
Reorganization under Section 368(a)(1)(c) of the Internal Revenue Code and
Agreement, dated March 15, 1996, as amended, by and among TPI Enterprises,
Inc. (the "Company"), Shoney's, Inc. ("Shoney's") and TPI Restaurants
Acquisition Corporation, a wholly-owned subsidiary of Shoney's (the
"Agreement"), the Company completed the sale of substantially all of the
Company's assets to Shoney's (the "Transaction") on September 9, 1996. In
connection with the Transaction, the Company's Board of Directors approved
a Plan of Complete Liquidation as required by the Agreement. Under the
Plan of Complete Liquidation, the Company is required to wind-down its
operations and distribute its assets after paying or making provision for
its liabilities. On October 1, 1996, the Company distributed 6,785,114
shares of Shoney's common stock, $1.00 par value ("Shoney's Common Stock"),
representing the total number of shares of Shoney's Common Stock received
pursuant to the Transaction, to its shareholders of record as of September
24, 1996.
As a result of the Transaction, the Company adopted the liquidation basis
of accounting for all periods subsequent to September 9, 1996. Under the
liquidation basis of accounting, assets are stated at their estimated
realizable value and liabilities, including a provision for the estimated
costs of liquidation, are stated at their anticipated settlement amounts.
The valuations of assets and liabilities are based on management estimates
and assumptions as of the date of the financial statements; actual
realization of assets and settlement of liabilities could be higher or
lower than amounts indicated.
CONSOLIDATED FINANCIAL STATEMENTS - The consolidated statement of net
assets in liquidation as of April 20, 1997, the consolidated statement of
changes in net assets in liquidation for the period ended April 20, 1997
and the consolidated statements of income and cash flows for the period
ended April 21, 1996 have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated change
in net assets in liquidation for the period ended April 20, 1997 and the
consolidated results of operations and cash flows for the period ended
April 21, 1996 have been made. The Company's first quarter consists of a
16 week period with 12 week periods in each of the three remaining
quarters.
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 audited financial statements of the
Company included in its Annual Report on Form 10-K for the year ended
December 29, 1996.
NET INCOME PER COMMON SHARE - As explained above in "Basis of
Presentation", effective September 9, 1996, the Company adopted the
liquidation basis of accounting, which reports an excess of assets over
liabilities. Accordingly, the presentation of per common share information
on a liquidation basis is not considered meaningful and has been omitted.
7
<PAGE> 8
Income (loss) per common share data for the sixteen weeks ended April 21,
1996 has been computed as that period is reported on the going concern
basis of accounting. As the Company's options, warrants, and convertible
debentures had an antidilutive effect during that period, earnings per
share is computed by dividing net income by the weighted average number of
common shares outstanding during the period.
INVESTMENTS - The Company's $5,170,000 in investments at April 20, 1997
represent U.S. Treasury bills due June 13, 1997. At April 20, 1997, the
cost of the investments, which includes accrued interest, approximates net
realizable value.
2. SHONEY'S, INC. TRANSACTION
GENERAL - On September 9, 1996, the Company consummated the sale of
substantially all of its assets to Shoney's pursuant to the terms of the
Agreement.
The Company's results of operations for 1996 include a gain on the
Transaction of approximately $7.1 million. This gain reflects the excess
of the net proceeds and assumption of debt by Shoney's in excess of the
Company's basis in the assets sold. At December 31, 1995, the Company
recorded a provision of $17.0 million to reduce the carrying value of the
net assets to be exchanged to the estimated fair value of the consideration
to be received from Shoney's. During the first quarter of 1996, the
Shoney's Common Stock price increased, resulting in an increase in the fair
value of the consideration to be received by the Company. As a result of
the increase in the Shoney's Common Stock price, the Company determined the
valuation allowance was no longer required and reversed the allowance
during 1996.
CONSIDERATION - In exchange for substantially all of the assets of the
Company, including the shares of capital stock of TPI Restaurants, Inc.
("TPIR"), TPI Entertainment, Inc., and TPI Insurance Corporation, at the
closing of the Transaction (the "Closing"), the Company received from
Shoney's an aggregate of 6,785,114 shares of Shoney's Common Stock and was
permitted to retain approximately $4,650,000 in cash, plus certain
additional cash to pay the Company's remaining Specified Wind-up Expenses
(as defined in the Agreement). As noted under the caption "Initial
Distribution" below, on October 1, 1996, the 6,785,114 shares of Shoney's
Common Stock were distributed to the Company's shareholders of record as of
September 24, 1996.
The Agreement entitled the Company to retain up to $7,500,000 in cash
("Retained Cash") and up to $7,350,000 to pay Specified Wind-up Expenses,
in each case subject to certain adjustments. Approximately $1,150,000 in
Retained Cash was exchanged for additional shares of Shoney's Common Stock
pursuant to the Agreement, thereby reducing the amount of Retained Cash to
approximately $6,350,000. Specified Wind-up Expenses (net of investment
income) are currently estimated to be approximately $1,515,000 in excess of
the $7,350,000 allotment. Such excess included a payment of approximately
$1,300,000 to Shoney's at the Closing in settlement of certain liabilities
or contingent liabilities which exceeded the liabilities agreed to be
retained by Shoney's in the Agreement. The $1,300,000 payment included
approximately $550,000 for Excess Repair and Maintenance Expenses (as
defined in the Agreement).
Current estimates indicate that Retained Cash will be $4,835,000, or $0.234
per share of the Company's Common Stock. This assumes that no liabilities
of the Company, other than those presently known, arise prior to its
liquidation. This amount also assumes that the Company's actual
liabilities are the same in amount as its budgeted liabilities; such actual
liabilities may be higher or lower. Of the $4,835,000, a maximum of up to
approximately $400,000 will be required to be retained by the Company for
the benefit of holders of the stock options of the Company which were
8
<PAGE> 9
assumed by Shoney's in the Transaction ("Shoney's Options"), until such
time as such options are exercised, are terminated, or expire. Under the
Company's Plan of Complete Liquidation, if Shoney's Options are not
exercised prior to the final liquidating distribution record date, such
cash, after providing for the expenses of the distribution thereof, will be
distributed to the Company's shareholders. The final liquidating
distribution record date will occur no earlier than December 31, 1998.
INITIAL DISTRIBUTION - On October 1, 1996, the Board of Directors of the
Company (the "Company's Board") made an initial distribution to its
shareholders of all of the shares of Shoney's Common Stock received by the
Company in the Transaction (the "Initial Distribution") to holders of
record of the Company's Common Stock on September 24, 1996.
RESIGNATION OF OFFICERS AND BOARD MEMBERS - Effective as of September 9,
1996, all of the officers of the Company resigned, except for Frederick W.
Burford, who was elected as the Company's President, Chief Financial
Officer and Secretary, and Paul J. Siu, who was elected as Assistant
Secretary. Effective as of October 10, 1996, all of the members of the
Company's Board resigned, except for Mr. Burford and Mr. Siu.
PLAN OF DISSOLUTION - The Company's Board intends to dissolve the Company
in accordance with the provisions of the New Jersey Business Corporation
Act (the "NJBCA") by obtaining tax clearance and by causing a certificate
of dissolution to be filed in the office of the Secretary of State of the
State of New Jersey. The application for tax clearance was approved on
December 31, 1996, at which time a certificate of dissolution was filed.
On each of February 3, 10 and 17, 1997, the Company gave notice requiring
all then-known creditors of the Company to present their claims in writing
on or prior to August 26, 1997, which notice was published in newspapers of
general circulation as provided in the NJBCA. Generally, any creditor who
does not file a claim as provided in the notice, and all those claiming
through and under such creditor, would be forever barred from suing on such
claim or otherwise realizing upon or enforcing it.
The Company's Board does not currently intend to make any cash
distributions to its shareholders until such time as the period for
creditors of the Comapny to present written proof of their claims shall
have expired, which period terminates on August 26, 1997. At such time,
the Company's Board intends to review the assets and liabilities of the
Company and consider the effect of all then known or anticipated
liabilities, including the audit discussed in Note 3 below. After such
review, the Company's Board intends to declare a distribution consisting of
all of the then remaining cash other than cash in escrow, cash that the
Company's Board deems necessary to satisfy liabilities (if any) and
expenses associated with the audit discussed in Note 3 below, or cash
required to be retained for holders of Shoney's Options. It is expected
that such distribution will be made on or prior to September 8, 1997.
3. TAX MATTERS
On April 11, 1997, the Company received a notification from the Internal
Revenue Service (the "IRS") indicating that the IRS would be auditing the
Company's 1995 tax return. At the present time, the Company is not aware
of any amounts that would be owed as a result of this review. However, any
findings by the IRS which would result in additional monies owed by the
Company would affect the Company's estimate of the remaining cash available
for distribution. To the extent
9
<PAGE> 10
that the audit is not completed on or before August 26, 1997, the Board
will consider the effect of the anticipated liabilities (if any) and
expenses associated with the audit prior to declaring a distribution of the
remaining cash available for distribution. There can be no assurance that
the Board will not decide to delay any cash distribution pending the
results of the audit.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
As a result of the sale of the majority of the Company's assets (Note 2) and
the Company's Board's approval to adopt a Plan of Complete Liquidation, the
financial statements have been prepared on a liquidation basis of accounting.
Accordingly, assets have been valued at their estimated net realizable value
and liabilities include estimated costs to carry out the Plan of Complete
Liquidation.
RESULTS OF OPERATIONS
Prior to the Transaction, the Company's results of operations for the sixteen
week period from December 30, 1996 to April 21, 1996 is presented in the
accompanying financial statements. Since results for the current quarter only
include the change in net assets in liquidation, the quarters are not
comparable. Therefore, a comparison of material changes in results of
operations is not applicable.
SIGNIFICANT OR UNUSUAL ITEMS
At December 31, 1995, the Company recorded a provision of $17.0 million to
reduce the carrying value of the net assets to be exchanged to the estimated
fair value of the consideration to be received from Shoney's. During the first
quarter of 1996, the Shoney's Common Stock price increased, resulting in an
increase in the fair value of the consideration to be received by the Company.
As a result of the increase in the Shoney's Common Stock price, the Company
determined the valuation allowance was no longer required and reversed the
allowance during the first quarter of 1996.
Other costs for the sixteen weeks ended April 21, 1996 included on the
Consolidated Statements of Income includes $1.3 million of costs incurred in
connection with the Transaction.
LIQUIDITY AND CAPITAL RESOURCES
The Company has no available short-term or long-term facilities. The Company
believes that its present cash and cash equivalents, short-term investments,
and earnings on such investments will allow it to implement its Plan of
Complete Liquidation. The Company made its initial distribution under its Plan
of Complete Liquidation on October 1, 1996 by distributing all of the Shoney's
Common Stock received in the Transaction to its shareholders of record at
September 24, 1996. As of October 6, 1996, the Company has approximately $4.8
million in assets in excess of its liabilities. The Company does not currently
intend to make any cash distributions to its shareholders until such time as
the period for creditors of the Company to present written proof of their
claims, if any, shall have expired. At such time, the Company's Board intends
to review the assets and liabilities of the Company and consider the effect of
all then known or anticipated liabilities and, after paying or making provision
for all then known or anticipated liabilities, it intends to declare a
distribution consisting of all of the then remaining cash other than cash in
escrow, cash that the Company's Board deems necessary to satisfy liabilities
(if any) and expenses associated with the audit discussed in Note 3 above, and
the cash required to be retained for holders of Shoney's Options. It is
expected that such distribution will be made on or prior to September 8, 1997.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
TPI Restaurants, Inc. v. Marlin Services, Inc., Marlin Electric, Inc., d/b/a
Marlin Services and the Aetna Casualty and Surety Company and Marlin Electric,
Inc. v. TPI Restaurants, Inc. and Related Matters
On March 7, 1996, the Company filed a civil action in the Circuit Court of
Palm Beach County; captioned TPI Restaurants, Inc. v. Marlin Services,
Inc., Marlin Electric, Inc., d/b/a Marlin Services, Inc. ("Marlin") and The
Aetna Casualty and Surety Company. The Company contended, among other
things, that Marlin breached terms of a maintenance service agreement that
Restaurant had entered into with Marlin by failing to perform timely
maintenance as required by the agreement, overcharging for parts and
materials, improperly billing for labor and improper charging for overhead.
On March 7, 1996, Marlin filed a separate action in the U.S. District
Court of Virginia against Restaurants alleging among other things that
Restaurants breached its contract with Marlin by failing to pay amounts
owed under the contract. Marlin claimed damages in excess of $2.2 million
through March 1996.
On June 27, 1996, the Company entered into a settlement with Marlin. The
settlement provided for the payment to Marlin of an aggregate of $1,150,000
in cash in settlement of the civil action brought by Marlin against
Restaurants. Under the terms of the settlement agreement, Marlin was
obligated to use settlement proceeds to fulfill its obligations with all
subcontractors hired by Marlin to perform work under Marlin's maintenance
service agreement with Restaurants, and Marlin was entitled to the excess,
if any, after all of the subcontractors had been paid. No payment was to
have been made to any subcontractor unless the subcontractor fully released
Restaurants from any liability and released all liens, if any, filed
against Restaurants. As part of the settlement, mutual releases were
exchanged among the parties and the two civil actions were dismissed.
On March 12, 1997, the Company amended the settlement agreement with Marlin
pursuant to which the Company paid Marlin $95,000 of the remaining
settlement funds on March 3, 1997. The remainder of the settlement funds,
in the amount of approximately $69,000 will be held by the Company in an
escrow account until such time as the Company is satisfied that Marlin has
complied with all remaining obligations under the original settlement
agreement. Marlin will not be able to apply for these funds until February
1, 1998. The Company also has the right to pay any subcontractors directly
from this fund.
Other Proceedings
To the Company's knowledge, the Company and its subsidiaries are not party to
any other outstanding lawsuits.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27- Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K: (None)
13
<PAGE> 14
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 hereunto duly authorized.
TPI ENTERPRISES, INC.
(Registrant)
By: /s/ Frederick W. Burford
---------------------------
Date June 4, 1997 Frederick W. Burford
President, Chief Financial
Officer and Secretary
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000096919
<NAME> TPI ENTERPRISES, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> APR-20-1997
<EXCHANGE-RATE> 1
<CASH> 870
<SECURITIES> 5,170
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,040
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,040
<CURRENT-LIABILITIES> 1,205
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,835<F2>
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>REPRESENTS NET ASSETS IN LIQUIDATION AS OF APRIL 20, 1997
</FN>
</TABLE>
