-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UyAXFDqnkzHby36gJSqu1/BTg3YFSPHA2/z9q79pYFgyvG0MzFuQVxR0IzlZ4N7X K+BEbc7OmQcIFT26sl/ACg== /in/edgar/work/20000531/0000912057-00-026882/0000912057-00-026882.txt : 20000919 0000912057-00-026882.hdr.sgml : 20000919 ACCESSION NUMBER: 0000912057-00-026882 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000329 FILED AS OF DATE: 20000531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NE RESTAURANT CO INC CENTRAL INDEX KEY: 0001061588 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 333-62775 FILM NUMBER: 646991 BUSINESS ADDRESS: STREET 1: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: 80 A TURNPIKE RD CITY: WESTBOROUGH STATE: MA ZIP: 01581 10-Q/A 1 a10-qa.txt 10-Q/A FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Quarterly Period Ended MARCH 29, 2000 Commission File Number 333-62775 NE RESTAURANT COMPANY, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1311266 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5 CLOCK TOWER PLACE, MAYNARD, MASSACHUSETTS 01754 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (978) 897-1400 Indicate by check mark whether the registrant (1) has filed all reports required to be filled by Section 13 or 15(d) of the Securities Exchange Act of the 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 the filing requirements for the past 90 days. Yes _X_ No ___ 2,986,622 shares of the registrant's Common Stock were outstanding on May 15, 2000. NE RESTAURANT COMPANY, INC. FORM 10-Q/A TABLE OF CONTENTS
PAGE PART I: FINANCIAL INFORMATION Item 1. Financial Statements: 1) Consolidated Balance Sheets March 29, 2000 and December 29, 1999 3 2) Consolidated Statements of Operations For the Three Months Ended March 29, 2000 and March 31, 1999 4 3) Consolidated Statement of Shareholders' Equity for the Three Months Ended March 29, 2000 5 4) Consolidated Statements of Cash Flows for the Three Months Ended March 29, 2000 and March 31, 1999 6 5) Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 PART II: OTHER INFORMATION 13 Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 14
PART I: FINANCIAL INFORMATION Item 1. Financial Statements NE RESTAURANT COMPANY, INC. CONSOLIDATED BALANCE SHEETS
March 29, December 29, 2000 1999 --------- ------------ ASSETS CURRENT ASSETS: Cash 2,867,926 7,578,632 Credit card receivables 1,298,138 1,630,844 Inventories 1,855,402 1,804,346 Prepaid expenses and other current assets 298,925 668,698 Short-term assets held for sale 457,417 1,847,584 Prepaid and current deferred income taxes 8,647,600 8,647,600 ------------ ------------- Total current assets 15,425,407 22,177,704 ------------ ------------ PROPERTY AND EQUIPMENT, AT COST: Land and land right 8,402,915 8,422,025 Buildings 12,454,927 12,199,895 Leasehold improvements 79,923,595 76,017,712 Furniture and equipment 46,500,793 44,732,345 ------------ ------------ 147,282,230 141,371,977 Less-Accumulated depreciation (30,755,112) (27,662,046) ------------ ------------ 116,527,118 113,709,930 Construction work in process 1,995,600 4,300,112 ------------ ------------ Net property and equipment 118,522,718 118,010,042 Goodwill, net 30,112,637 30,682,037 Deferred Finance Costs, net 8,575,362 8,761,004 Liquor licenses 3,057,235 3,057,235 Restricted investments 63,715 1,177,685 Deferred taxes, noncurrent 4,294,982 4,294,982 Other assets, net 1,411,410 1,417,140 ------------ ------------ $181,463,465 $189,577,830 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITES: Current portion of mortgage loan and bonds payable 1,255,406 1,255,406 Accounts Payable 13,810,126 13,720,971 Accrued Expenses 17,064,948 23,337,877 Capital lease obligation-current portion 72,647 72,647 ------------ ------------ Total current liabilities 32,203,127 38,386,901 Capital lease obligation, net of current portion 34,109 57,861 Mortgage Loan Payable, net of current portion 38,793,722 38,017,489 Bonds Payable, net of current portion 100,000,000 100,000,000 Deferred Rent and Other Long-Term Liabilities 4,378,727 5,590,011 ------------ ------------ Total liabilities 175,409,685 182,052,261 Commitments and Contingencies Stockholders' Equity: Common stock 36,760 36,774 Less Treasury stock--689,344 shares at cost (8,017,070) (8,017,070) Additional paid in capital 29,003,920 29,003,920 Accumulated deficit (14,969,830) (13,489,055) ------------ ------------ Total stockholders' equity (deficit) 6,053,780 7,525,569 ------------ ------------ $181,463,465 $189,577,830 ============ ============
The accompanying notes are an integral part of these consolidated financial statements NE RESTAURANT COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 29, March 31, 2000 1999 ------------ ------------ Net Sales $ 67,034,661 $ 63,034,185 ------------ ------------ Cost of Sales and Expenses Cost of Sales 17,563,051 17,353,337 Operating expenses 38,957,634 36,992,233 General and administrative expenses 4,488,004 3,688,604 Deferred rent, depreciation and amortization and preopening expenses 4,529,443 4,232,789 ------------ ------------ Total cost of sales and expenses 65,538,132 62,266,963 ------------ ------------ Income from operations 1,496,529 767,222 Interest Expense, net 3,673,804 3,363,344 ------------ ------------ Loss before benefit for income taxes and change in accounting principle (2,177,275) (2,596,122) Income Tax Benefit (705,500) (944,611) ------------ ------------ Loss before change in accounting principle (1,471,775) (1,651,511) Change in accounting principle (net of tax) -- (677,968) ------------ ------------ Net Loss $ (1,471,775) $ (2,329,479) ============ ============ Basic and diluted loss per share before change in accounting principle $ (0.49) $ (0.55) Change in accounting principle per share -- (0.23) ------------- ------------ Basic and diluted loss per share $ (0.49) $ (0.78) ============ ============ Weighted Average Shares Outstanding 2,986,622 2,977,026
The accompanying notes are an integral part of these consolidated financial statements NE RESTAURANT COMPANY, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY (Unaudited) For the three months ended March 29, 2000
Common Stock Treasury Stock Total ---------------------------------------------------- Stockholders' Number of $.01 per Number of Additional Paid Accumulated (Deficit) Shares Share Shares Amount In Capital Deficit Equity ---------------------------------------------------- --------------- -------------- ------------- Balance December 29, 1999 3,675,966 $ 36,760 (689,344) $(8,017,070) $ 29,003,920 $ (13,498,055) $ 7,525,555 Net (Loss) -- -- -- -- -- (1,471,775) (1,471,775) --------- -------- -------- ----------- ------------ ------------- ----------- Balance March 29, 2000 3,675,966 $ 36,760 (689,344) $(8,017,000) $ 29,003,920 $ (14,969,830) $ 6,053,780 ========= ======== ======== =========== ============ ============= ===========
The accompanying notes are an integral part of these consolidated financial statements NE RESTAURANT COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOW
Three months ended Three months ended March 29, 2000 March 31, 1999 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(1,471,775) $(2,329,479) ----------- ----------- Adjustments to reconcile net loss to net cash used in operating activities Change in accounting principle -- 1,135,055 Total Depreciation, amortization and deferred rent 4,152,897 4,232,789 Change in deferred taxes -- (443,566) Changes in operating assets and liabilities Inventories (51,056) 94,331 Prepaid expenses, receivables and other 702,480 12,713 Accrued expenses (6,272,943) (4,508,593) Accounts payable 89,156 1,032,837 Other operating assets and liabilities (396,372) (478,874) ----------- ----------- Total adjustments (1,775,838) 1,076,692 ----------- ----------- Net cash used in operating activities (3,247,613) (1,252,787) =========== =========== CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (3,605,742) (4,106,891) Proceeds from sale of restaurant properties 1,390,167 -- Acquisition of liquor licenses -- (71,293) ----------- ----------- Net cash used for investing activities (2,215,575) (4,178,184) =========== =========== CASH FLOWS FROM FINANCING ACTIVITIES Borrowings of mortgage loans 1,100,000 949,381 Repayments of mortgage loans (323,767) (235,834) Principal payments under capital lease obligations (23,752) (22,857) ----------- ----------- Net cash provided by financing activities 752,481 690,690 =========== =========== Net Increase (Decrease) in Cash (4,710,706) (4,740,281) Cash, beginning of period 7,578,632 5,456,110 ----------- ----------- Cash, end of period $ 2,867,926 $ 715,829 =========== =========== Supplemental Disclosure of Cash Flow Information: Cash paid for interest, net of amounts capitalized $ 6,260,642 $ 5,805,534 =========== =========== Cash paid for income taxes $ 69,423 $ 1,130 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements NE RESTAURANT COMPANY, INC. Notes To Consolidated Financial Statements (Unaudited) 1. The unaudited consolidated financial statements (the "Unaudited Financial Statements") presented herein have been prepared by NE Restaurant Co., Inc. and include all of its subsidiaries (collectively, the "Company") after elimination of intercompany accounts and transactions, without audit, and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been omitted, although the Company believes that the disclosures included are adequate to make the information presented not misleading. It is suggested that the Unaudited Financial Statements be read in conjunction with the financial statements and notes included in the Company's Form 10K. In 1998, the Company changed its fiscal year to the 52 or 53 week period ended on the Wednesday closest to December 31st. The Company's fiscal quarters end March 29, June 28, September 27, 2000 and January 3, 2001. In 1999, the Company's fiscal quarters ended March 31, June 30, September 29 and December 29, 1999. 2. In April 1988, the AICPA issued its Statement of Position 98-5 ("SOP 98-5"), REPORTING ON THE COSTS OF START-UP ACTIVITIES. SOP 98-5 requires that costs incurred during start-up activities, including organization costs, be expensed as incurred. SOP 98-5 was effective for financial statements for fiscal years beginning after December 15, 1998. The Company adopted SOP 98-5 on December 31, 1998, the first day of fiscal 1999. Upon adoption, the Company incurred a cumulative effect of a change in accounting principle of approximately $678,000, net of tax. This includes unamortized preopening costs which were previously amortized over the 12-month period subsequent to restaurant openings. 3. In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities. This statement established accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts and for hedging activities) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedging accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS 133, as amended by SFAS 137, is effective for fiscal years beginning after June15, 2000. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 cannot be applied retroactively. The Company has not determined the timing of adoption, but does not anticipate the adoption of this new standard to have a material impact on the Company's fiscal position or results of operations. 4. Under the terms of the corporation agreements, the stockholders have consented to the payment of an ongoing financial consulting fee to Jacobson Partners, Limited Partnership ("Jacobson Partners"), a stockholder of the corporation. Under this agreement, Jacobson Partners will provide various financial advisory services to the Company, including, among other things, assistance in preparing internal budgets, performing cash management activities, maintaining and improving accounting and other management information systems, negotiating financing arrangements, complying with public reporting and disclosure requirements and communicating with creditors and investors. In consideration of these services, the Company has entered into an agreement with Jacobson Partners whereby the Company would pay Jacobson Partners $500,000 per year together with reimbursement of certain travel and other incidental expenses. During 1999, Jacobson Partners agreed to reduce its annual fee to $250,000 until further notice. Effective with the beginning of fiscal year 2000, the Company has agreed to reinstate the annual fee of $500,000 retroactive to July 1, 1999 which required an additional payment in the first fiscal quarter 2000 of $125,000. 5. Certain prior year amounts have been reclassified to conform to the current year presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the consolidated financial statements of NE Restaurant Company, Inc. ("The Company") and the notes thereto included herein. All mentions of period data refer to the Company's fiscal periods as defined in Note #1 to the consolidated financial statements. GENERAL The Company was founded in 1991 as a Massachusetts corporation, serving first as a general partner to a Massachusetts limited partnership and then as the successor entity to such partnership and two other limited partnerships, and was re-incorporated in Delaware on October 20, 1994. The Company was formed to acquire 15 Chili's restaurants from a prior franchisee. The Company is an operator of full-service, casual dining restaurants in the northeastern United States. The Company's wholly owned subsidiary, Bertucci's Restaurant Corp. ("Bertucci's") owns and operates a restaurant concept under the name Bertucci's Brick Oven Pizzeria(R). In July 1998, the Company completed its acquisition of Bertucci's' parent entity, Bertucci's, Inc., a publicly-owned restaurant company for a purchase price, net of cash received, of approximately $89.4 million (the "Acquisition"). The Company financed the Acquisition primarily through the issuance of $100 million of 10 3/4% senior notes due 2008 (the "Senior Notes"). The Acquisition included 90 Bertucci's restaurants and one Sal & Vinnie's restaurant. During 1999, the Company closed the Bertucci's test kitchen restaurant in Wakefield, Massachusetts and closed ten under performing Bertucci's restaurants. Between December 29, 1999 and January 31, 2000, the Company closed seven additional under performing Bertucci's restaurants, thereby completing the planned closings identified shortly after the Acquisition. As of March 29, 2000, Bertucci's owned and operated 72 full-service, casual dining, Italian-style restaurants under the name Bertucci's Brick Oven Pizzeria(R) located primarily in New England and Mid-Atlantic United States and one Sal and Vinnie's Sicilian Steakhouse(TM) ("Sal and Vinnie's") located in Massachusetts. The Company also develops and operates two distinct restaurant franchises, Chili's Grill & Bar(R) ("Chili's") and On The Border Mexican Cafe(R) ("On The Border"), under franchise agreements with Brinker International, Inc., a publicly-owned company ("Brinker" or the "Franchisor"). The Company is the world's largest Chili's franchisee and as of March 29, 2000, the Company operated 38 Chili's and 7 On The Border restaurants in five New England states. The Company offers its targeted customer base three distinct yet complementary casual dining menus: Italian at Bertucci's, "American/southwestern" at Chili's and "Tex-Mex" at On The Border. RESULTS OF OPERATIONS The following table sets forth the percentage relationship to net sales, unless otherwise indicated, of certain items included in the Company's income statement, as well as certain operating data, for the periods indicated:
Three Months Ended: MARCH 29, MARCH 31, 2000 1999 --------- --------- Net Sales 100.0% 100.0% --------- --------- Cost of sales and expenses Cost of sales 26.2 27.5 Operating expenses 58.1 58.7 General and administrative expenses 6.7 5.9 Deferred rent, depreciation, amortization and preopening expenses 6.8 6.7 --------- --------- Total cost of sales and expenses 97.8 98.8 --------- --------- Income from operations 2.2 1.2 Interest expense, net 5.5 5.3 --------- --------- Income (loss) before income tax expense (benefit) (3.2) (4.1) Income tax expense (benefit) (1.1) (1.5) --------- --------- Income (loss) before cumulative effect of change in accounting principle (2.2) (2.6) ========= ========= Cumulative effect of change in accounting principle (net of tax) - (1.1) --------- --------- Net Income (2.2) (3.7) ========= =========
RESTAURANT OPERATING DATA (DOLLARS IN THOUSANDS): - -------------------------------------------------------------------------------- EBITDA (a) $ 6,026 $ 5,000 Comparable restaurant sales (b) 5.6% -0.7% Number of restaurants - Brinker restaurants: Restaurants open at beginning of period 43 37 Restaurants opened 2 1 --------- --------- Total restaurants open at end of period 45 38 Number of restaurants - Bertucci's restaurants: (c) Restaurants open at beginning of period 79 90 Restaurants opened - - Restaurants closed 7 - --------- --------- Total restaurants open at end of period 72 90
(a) "EBITDA" is defined as income from operations before deferred rent, depreciation, amortization and preopening costs. EBITDA is not a measure of performance defined by Generally Accepted Accounting Principles ("GAAP"). EBITDA should not be considered in isolation or as a substitute for net income or the statement of cash flows which have been prepared in accordance with GAAP. The Company believes EBITDA provides useful information regarding the Company's ability to service its debt and the Company understands that such information is considered by certain investors to be an additional basis for evaluating a company's ability to pay interest and repay debt. The EBITDA measures presented herein may not be comparable to similarly titled measures of other companies. (b) The Company defines comparable restaurant sales as net sales from restaurants that have been open for at least one full fiscal year. (c) Does not include Sal & Vinnie's. THREE MONTHS ENDED MARCH 29, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999 NET SALES. Net sales increased $4.0 million, or 6.3%, to $67.0 million during the first quarter 2000 from $63.0 million during the first quarter 1999. The increase in net sales primarily was due to increased comparable restaurant sales and the addition of five new Chili's and three new On The Border restaurants. This increase was partially offset by closing 18 Bertucci's restaurants. Approximately $4.8 million of the increase in net sales was attributable to the additional Chili's and On The Border restaurants. Last year's sales included the 18 Bertucci's restaurants that have subsequently been closed. Comparable restaurant sales for the Bertucci's restaurants increased by 5.2% in the first quarter 2000 as compared to the comparable period in 1999. Comparable restaurant sales increased by 5.8% for the Brinker concept restaurants operated by the Company in the first quarter 2000 as compared to the first quarter 1999. Faced with increases in the minimum wage in some states and the increasing upward pressure on hourly labor rates, the Company raised menu prices early in the first quarter 2000. The Company believes that the majority of the sales increases were the result of increased guest satisfaction resulting in repeat visits and the aforementioned menu price increases that took effect in late January 2000. COST OF SALES. Cost of sales increased by approximately $210,000, or 1.2%, to $17.6 million during the first quarter 2000 from $17.4 million during the first quarter 1999. The dollar increase in cost of sales primarily was due to increased sales volume partially offset by the closing of the Bertucci's restaurants, most of which closed during 1999. Expressed as a percentage of net sales, overall cost of sales decreased to 26.2% during the first quarter 2000 from 27.5% during the first quarter 1999. This percentage decrease was due to several factors, namely, cost control measures at Bertucci's, a reduced cheese price slightly offset by increased prices of beef and pork, the favorable impact of closing the Bertucci's restaurants and menu price increases. OPERATING EXPENSES. Operating expenses increased by $2.0 million, or 5.3%, to $39.0 million during the first quarter 2000 from $37.0 million during the first quarter 1999. Expressed as a percentage of net sales, operating expenses decreased to 58.1% in the first quarter 2000 from 58.7% during the first quarter 1999. The dollar increase in operating expenses primarily was due to an increase in advertising expense and from the additional Chili's and On The Border restaurants ("Brinker concept restaurants") but partially offset by the closing of the Bertucci's restaurants. Furthermore, the dollar increase was partially because of increased hourly labor costs driven by a tight labor market that was a result of low unemployment and mandated state minimum wage increases. The percentage decrease primarily was attributable to increased efficiency at the restaurants as well as menu price increases. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased by approximately $800,000, or 21.7%, to $4.5 million during the first quarter 2000 from $3.7 million during the first quarter 1999. The dollar increase in general and administrative expenses was due to rent associated with the new corporate office, higher costs of staffing new positions, higher incentive payout accruals based on improved performance, higher professional fees and one-time start-up costs of a new point of sale system for Bertucci's. Expressed as a percentage of net sales, general and administrative costs increased to 6.7% during the first quarter 2000 from 5.9% during the first quarter 1999. The increase was attributable to the aforementioned dollar increases. DEFERRED RENT, DEPRECIATION, AMORTIZATION AND PREOPENING EXPENSES. Deferred rent, depreciation, amortization and preopening expenses increased by approximately $300,000 or 7.0%, to $4.5 million during the first quarter 2000 from $4.2 million during the first quarter 1999. The increase was primarily due to additional depreciation on new restaurant development as well as capital improvements made to existing restaurants in 1999. Preopening costs of approximately $375,000 in the first quarter 2000 were almost $115,000 favorable to the approximate $490,000 expensed in the first quarter 1999. INTEREST EXPENSE. Interest expense increased by approximately $300,000 to $3.7 million during the first quarter 2000 from $3.4 million during the first quarter 1999. This increase was primarily attributable to approximately $10.4 million of additional mortgage loan financing for new restaurant development. Interest was approximately $2.7 million on the Senior Notes, $912,000 on the mortgage loans and $82,000 on the Company's revolving credit facility, during the first quarter 2000. INCOME TAXES. The effective income tax benefit rate decreased to 32.4% during the first quarter 2000 from 36.4% during the first quarter 1999. The difference in rate was mainly due to timing differences in estimated taxes during 1999. LIQUIDITY AND CAPITAL RESOURCES The Company has historically met its capital expenditures and working capital needs through a combination of operating cash flow, mortgage loan financing and borrowing under the Company's revolving credit facility, which provides for borrowings of up to $20.0 million. Net cash flows used by operating activities were $3.2 million for the first quarter 2000 or $2.7 million more than the $504,000 used during the first quarter 1999. A primary reason for the change was a decrease in accrued expenses of approximately $6.3 million during the first quarter this year versus a decrease of approximately $4.5 million during the first quarter last year. The change was due mainly to reductions of deferred compensation accruals, accrued bonus and accrued exit costs associated with closed restaurants. In addition, the Company showed a change in accounts payable to account for most of the remaining variance. The Company's capital expenditures decreased by $1.3 million to $3.6 million for the first quarter 2000 compared to $4.9 million of capital expenditures for the first quarter 1999. The decrease in capital expenditures was primarily due to less new construction of restaurants (approximately $600,000 variance) and a change in accounting principle whereby the company accounted for almost $700,000 of preopening costs in capital expenditures during the first quarter 1999 but none during the first quarter 2000. The Company received almost $1.4 million of proceeds from the sale of five previously closed Bertucci's restaurants in the first quarter 2000 as a result of adopting the new accounting required for preopening costs. As of March 29, 2000, the Company had approximately $140.2 million in consolidated indebtedness, including $100.0 million of indebtedness pursuant to the Senior Notes, $40.1 million of mortgage loan financing and $0.1 million of capital lease obligations. Significant liquidity demands will arise from debt service on the Senior Notes, the mortgage loans and borrowings under the Senior Bank Facility. The Company believes that the cash flow generated from its operations, together with available borrowings under the Senior Bank Facility and mortgage loan financing and similar secured indebtedness, should be sufficient to fund its debt service requirements, lease obligations, current expected capital expenditures and other operating expenses for the next twelve months. The Senior Bank Facility provides the Company with available borrowing up to an aggregate amount of $20.0 million. As of March 29, 2000, there were no borrowings under the Senior Bank Facility. The Company's future operating performance and ability to service or refinance the Senior Notes, mortgage loan financing, and the Senior Bank Facility will be subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. SEASONALITY The Company's quarterly results of operations have fluctuated and are expected to continue to fluctuate depending on a variety of factors, including the timing of new restaurant openings and related pre-opening and other startup expenses, net sales contributed by new restaurants, increases or decreases in comparable restaurant sales, competition and overall economic conditions. The Company's business is also subject to seasonal influences of consumer spending, dining out patterns and weather. As is the case with many restaurant companies, the Company typically experiences lower net sales and net income during the first and fourth quarters. Because of these fluctuations in net sales and net income (loss), the results of operations of any quarter are not necessarily indicative of the results that may be achieved for a full year or any future quarter. FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate" or "believe" or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements will prove to have been correct, it can give no assurance that such expectations will prove to have been correct. Factors including those set forth herein, as well as those set forth in the Company's Form 10K filed with the Securities and Exchange Commission ("SEC") on March 28, 2000 and other filings with the SEC may affect such expectations. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS The Company has market risk associated with interest rate risk. The Company manages its exposure through its regular financing activities. Interest rate changes would result in a change in the fair value of the Company's debt facilities due to the difference between the market interest rate and the rate at the date of issuance of the debt facilities. Furthermore, the Company has no exposure to specific risks related to derivatives or other "hedging" types of financial instruments. PART II: OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is involved in various legal proceedings from time to time incidental to the conduct of its business. In the opinion of management, any ultimate liability arising out of such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company. Management is not aware of any litigation to which the Company is a party that is likely to have a material adverse effect on the Company. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 10.24 Second Amendment to the On The Border Restaurant Development Agreement as of May 30, 1999 by and between Brinker International, Inc. and NERCO as previously filed with Form 10-Q on May 15, 2000 10.25 Primary Distribution Agreement dated as of May 13, 1999 by and between Maine's Paper & Food Service, Inc. and NERCO as previously filed with Form 10-Q on May 15, 2000 10.26 NERCO Savings and Investment Plan dated as of April 29, 1999 as previously filed with Form 10-Q on May 15, 2000 10.27 NE Restaurant Company, Inc. Executive Savings and Investment Plan dated September 2, 1999 as previously filed with Form 10-Q on May 15, 2000 27.1 Financial Data Schedule as previously filed with Form 10-Q on May 15, 2000 (b) The Company did not file a Current Report on Form 8-K during the first quarter 2000. 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. NE RESTAURANT COMPANY, INC. (Registrant) Date: May 31, 2000 BY: /S/ BENJAMIN R. JACOBSON ----------------------------- Benjamin R. Jacobson Chairman of the Board of Directors Date: May 31, 2000 BY: /S/ DAVID J. NACE ------------------------------ David J. Nace Chief Financial Officer and Executive Vice President Exhibit Index 10.24 Second Amendment to the On The Border Restaurant Development Agreement as of May 30, 1999 by and between Brinker International, Inc. and NERCO as previously filed with Form 10-Q on May 15, 2000 10.25 Primary Distribution Agreement dated as of May 13, 1999 by and between Maines Paper & Food Service, Inc. and NERCO as previously filed with Form 10-Q on May 15, 2000 10.26 NERCO Savings and Investment Plan dated as of April 29, 1999 as previously filed with Form 10-Q on May 15, 2000 10.27 NE Restaurant Company, Inc. Executive Savings and Investment Plan dated September 2, 1999 as previously filed with Form 10-Q on May 15, 2000 27.1 Financial Data Schedule as previously filed with Form 10-Q on May 15, 2000 -----END PRIVACY-ENHANCED MESSAGE-----