-----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, BOoEeBUPsJyKbnPz3zppgWXyQXy5Ae8ZSTlBhoLvqTumnAjx7UZCrGAscL5e8e0u QmmQfOsRzGopS+/WO0QmCA== 0000950109-95-004166.txt : 19951016 0000950109-95-004166.hdr.sgml : 19951016 ACCESSION NUMBER: 0000950109-95-004166 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950830 FILED AS OF DATE: 19951013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RECREATION CENTERS INC CENTRAL INDEX KEY: 0000005719 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 941441151 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02849 FILM NUMBER: 95580610 BUSINESS ADDRESS: STREET 1: 11171 SUN CENTER DR SUITE 120 CITY: RANCHO COROVA STATE: CA ZIP: 95670 BUSINESS PHONE: 9168528005 MAIL ADDRESS: STREET 1: PO BOX 580 CITY: RANCHO COROVA STATE: CA ZIP: 95741 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 --------------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE THIRTEEN WEEK PERIOD ---------------------------- ENDED AUGUST 30, 1995 --------------------- Commission File Number 0-2849 AMERICAN RECREATION CENTERS, INC. Incorporated in California Federal Employer No. 94-1441151 11171 Sun Center Drive, Suite 120, Rancho Cordova, CA 95670 Mail Address: P.O. Box 580, Rancho Cordova, CA 95741 ------------------------------------------------------- Telephone: Area Code (916) 852-8005 ------------------------------------ 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 ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Capital Stock Outstanding as of August 30, 1995 - 5,055,592 shares AMERICAN RECREATION CENTERS, INC. INDEX TO FORM 10-Q FOR THE THIRTEEN WEEK PERIOD ENDED AUGUST 30, 1995 PART I - FINANCIAL INFORMATION Item 1. Financial Statements (all of which are unaudited) Condensed Consolidated Balance Sheet 3 Consolidated Statement of Income and Retained Earnings 4 Condensed Consolidated Statement of Cash Flows 5 Notes To Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K Form 8-K, dated August 4, 1995, is herein incorporated by reference SIGNATURES 11 2 CONDENSED CONSOLIDATED BALANCE SHEET (in thousands)
August 30, May 31, 1995 1995 (Unaudited) (Audited) ----------- --------- ASSETS ------ Current assets: Cash and equivalents $ 11,433 $ 4,508 Other current assets 2,175 2,294 Net investment in discontinued operations -- 6,683 -------- -------- Total current assets 13,608 13,485 -------- -------- Property, equipment and leaseholds, at cost Land and buildings 40,486 40,466 Machinery and equipment 35,648 34,922 Leaseholds and leasehold improvements 7,331 7,201 Construction in progress 1,700 892 -------- -------- 85,165 83,481 Less - accumulated depreciation and amortization (26,835) (26,018) -------- -------- 58,330 57,463 -------- -------- Property held for sale 2,545 2,545 Notes receivable 2,259 2,267 Other assets 1,092 1,165 -------- -------- $ 77,834 $ 76,925 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable and accrued expenses $ 6,197 $ 5,593 Income taxes payable 3,421 2,311 Current maturities of long-term debt 1,643 1,638 -------- -------- Total current liabilities 11,261 9,542 -------- -------- Long-term debt and capital leases 26,673 28,747 -------- -------- Deferred taxes and other liabilities 7,233 7,233 -------- -------- Minority interests in consolidated partnerships 1,653 1,732 -------- -------- Shareholders' equity Common stock: Authorized - 21,484,375 shares Issued and outstanding - 1995 and 1994, 5,055,592 and 5,013,532 shares 12,781 12,773 Preferred stock: Authorized - 5,000,000 shares Issued and outstanding - none -- -- Retained earnings 18,233 16,898 -------- -------- Total shareholders' equity 31,014 29,671 -------- -------- Commitments and contingencies $ 77,834 $ 76,925 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (in thousands except per share amounts) (Unaudited)
Thirteen Weeks Ended ------------------------ August 30, August 24, 1995 1994 ----------- ----------- Operating revenue: Bowling $ 8,571 $ 8,022 Other 254 288 ------- ------- 8,825 8,310 ------- ------- Operating, general and administrative expense: Bowling 8,945 8,236 Other 170 161 Corporate 242 249 ------- ------- 9,357 8,646 ------- ------- Operating income (loss): Bowling (374) (214) Other 84 127 Corporate (242) (249) ------- ------- Operating loss (532) (336) ------- ------- Interest expense (749) (669) Interest and other income 126 58 Gain on property transactions -- 1,939 ------- ------- Income (Loss) before provision for income taxes and minority interests (1,155) 992 (Provision for) benefit from income taxes 422 (309) Minority interests 79 (187) ------- ------- Income (Loss) from continuing operations (654) 496 Discontinued operations: Gain from sale of investment in The Right Start, Inc., net of applicable income taxes of $1,568 2,251 -- Income from operations of The Right Start, Inc., net of applicable income taxes of $49 and $35 54 34 ------- ------- Net income 1,651 530 Retained earnings, beginning of period 16,898 16,494 Cash dividends ($.0625 and $.06 per share) (316) (301) ------- ------- Retained earnings, end of period $18,233 $16,723 ======= ======= Earnings per share Continuing operations ($0.13) $0.10 Discontinued operations 0.46 0.01 ------- ------- $0.33 $0.11 ======= =======
See accompanying notes to condensed consolidated financial statements. 4 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (Unaudited)
Thirteen Weeks Ended ------------------------ August 30, August 24, 1995 1994 ----------- ----------- Cash Flows from (used in) Operating Activities: Net income $ 1,651 $ 530 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 908 778 Gain on sale of The Right Start, Inc. (2,251) -- Gain on property transactions -- (1,939) Results attributed to minority interests (79) 187 Income from discontinued operations (54) (35) (Increase) Decrease in other current assets 119 (1,610) Increase (Decrease) in income taxes payable (458) 591 Increase in accounts payable and accrued expenses (651) (159) ------- ------- Net cash used in operations ( 815) (1,657) ------- ------- Cash Flows from (used in) Investing Activities: Expenditures for property, equipment and property held for development (1,707) (647) Proceeds from property transactions (net of minority interest) - 3,333 Proceeds from sale of The Right Start, Inc. 11,811 - Payments received on loan to ESOP - 54 Other 13 121 ------- ------- Net cash from investing activities 10,117 2,861 ------- ------- Cash Flows from (used in) Financing Activities: Repayment of long-term debt (2,879) (3,008) Issuance of long-term debt 810 - Dividends to shareholders (316) (301) Issuance of common stock, net 8 47 ------- ------- Net cash used in financing activities (2,377) (3,262) ------- ------- Net increase (decrease) in cash and equivalents 6,925 (2,058) Cash and equivalents at beginning of period 4,508 3,513 ------- ------- Cash and equivalents at end of period $11,433 $ 1,455 ======= =======
See accompanying notes to condensed consolidated financial statements. 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - Description of Business and Significant Accounting Policies: -------------------------------------------------------------------- American Recreation Centers, Inc. and its subsidiaries (the Company) operate bowling centers in California, Texas, Wisconsin, Oklahoma, Kentucky and Missouri. There have been no changes in the Company's significant accounting policies as set forth in the Company's annual report. These unaudited financial statements as of August 30, 1995 and for the three month periods ended August 30, 1995 and August 24, 1994 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Reflecting the sale of The Right Start, Inc. on August 4, 1995, its revenues and expenses are no longer consolidated in ARC's operating income and expenses. Right Start's profit or loss is now shown as "Discontinued Operations" in ARC's statement of income. Prior year statements have been restated to reflect this change. NOTE 2 - Long-term Debt: ----------------------- Long-term debt is comprised of the following (in thousands):
August 30, May 31, 1995 1995 ---------- ------- Long-term notes: Secured notes payable in monthly installments with a weighted average interest rate of 9.36% at August 30, 1995 $27,543 $29,554 Other 773 831 ------- ------- 28,316 30,385 Less-amounts due within one year 1,643 1,638 ------- ------- $26,673 $28,747 ======= =======
6 NOTE 3 - Operations: ------------------- The results of operations for this thirteen week period is not necessarily indicative of the results to be expected for the entire year. Bowling is highly seasonal with revenues during the first quarter normally not exceeding 20% to 22% of those for a full year. NOTE 4 - Earnings Per Share of Common Stock: ------------------------------------------- Earnings per share is computed on the weighted average number of shares of common stock and common stock equivalents outstanding during each period. Common stock equivalents include the Company's stock options. The weighted average number of common shares and common stock equivalents outstanding were 5,054,924 and 5,003,741 for the thirteen week periods ended August 30, 1995 and August 24, 1994. NOTE 5 - Acquisitions and Dispositions: -------------------------------------- In July 1994, the Company's 90 percent-owned partnership sold its Budget Mini- Storage facility in Milpitas, California for $3,600,000. Proceeds were used to retire $2,500,000 in long-term debt and to acquire bowling centers in Milwaukee, Wisconsin. The Company recorded an after-tax gain of approximately $1,000,000, or $.22 per share. On September 16, 1994, the Company's 85 percent-owned joint venture, American Red Carpet, completed the acquisition of substantially all of the Red Carpet bowling chain in Milwaukee, Wisconsin. The $8,000,000 purchase price included the land, building and equipment of six bowling centers totaling 316 lanes. The sale of the Budget Mini-Storage and the acquisition of the Milwaukee centers was accounted for as a like-kind exchange for income tax purposes. NOTE 6 - Gain on Sale of Right Start, Inc.: ------------------------------------------ On August 4, 1995, the Company sold its 62.5 percent ownership in The Right Start, Inc. for $11,811,000 in cash and recorded a $2,251,000 after-tax gain, equal to $.45 per share, in the first quarter of fiscal 1996. Also, the Company received an option to reacquire up to 400,000 shares of Right Start common stock at exercise prices ranging from $3.30 to $6.00 over a seven year period. In connection with the transaction, the Company has agreed to reimburse Right Start up to $680,000 should it be unable to sustain ordinary loss treatment for its deferred loss tax carry-forward and it have sufficient taxable income in or before its fiscal year 2000. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Continuing Operations -------------------------------- Revenue for the first quarter of fiscal 1996 increased 6% from $8.3 million to $8.8 million while income (loss) from continuing operations declined from $496,000, or $.10 per share last year to a net loss of ($654,000) or ($.13) per share this year. However, last year's results included an after-tax gain on property transactions of $1.9 million, or $.21 per share. First quarter bowling revenue increased 7% from $8.0 million to $8.6 million due to the acquisition in the second quarter of last year of six centers in Milwaukee, Wisconsin. Revenue for comparable centers was off almost 1%. Revenue from bowling lineage, which comprises approximately 53% of total revenue was off 10% for the quarter as a combination of a 13% volume decline was partially offset by a 3% increase in the average price per game. Revenue from all other ancillary sources which includes beverage, food, vending, billiards, video games, darts and other recreational activities advanced an aggregate 9%. This increase was due the expansion of these non-bowling activities, particularly vending, billiards and darts, to provide a wider variety of entertainment attractions. The first quarter operating loss for bowling widened from a $214,000 loss last year to a $374,000 loss this year, again due to the acquisition of the six Milwaukee centers. We anticipate the results for these centers in the second quarter and beyond should more than offset the first quarter losses they contributed this year. Operating results for comparable centers improved $170,000 over last year due to improved cost controls, particularly in staffing costs. Late in 1995, the Company embarked upon a plan to test the concept of broadening the Company's operations from one that offers primarily bowling as family entertainment into one that offers a broader menu of recreation options, with bowling being only one alternative. Two test locations are currently underway and expected to be in operation by the end of the second quarter of 1996. Ten bowling lanes of a 60-lane center in San Jose, California are being converted to space that provides for other forms of entertainment and expanded food and beverage operations targeted primarily to families with young children. Secondly, a 49,000 square foot family entertainment center in Addison, Texas is under construction. This facility will blend bowling with other recreation formats designed to attract young adult customers. Both concepts are designed to create a broader base of entertainment revenue in our facilities. Future expansion of these concepts will be based on the results of these two tests. Results of Discontinued Operations ---------------------------------- Discontinued operations includes the gain on sale of the Company's investment in The 8 Right Start, Inc. on August 4, 1995 and the Company's share of that entity's operations through the date of sale. The purchase price for the 3,937,000 shares was $11,811,000 cash plus an option to reacquire up to 400,000 shares of Right Start's common stock at exercise prices ranging from $3.30 to $6.00 over a seven year period. Corporate and Other ------------------- Other operating activities include the Company's non-bowling real estate activities. The decline in the first quarter revenue for other activities and for operating income from other activities was due to the sale of the Budget Mini-Storage in Milpitas, California (see Gain on Property Transactions below). Corporate expense includes the costs of the corporate office and staff, shareholder relations, directors' fees, professional and consulting fees, and other costs not allocable to bowling. First quarter corporate expenses were down 3% over last year. Gain on Property Transactions ----------------------------- During the first quarter of last year, the Company's 90% owned partnership sold its Budget Mini-Storage facility in Milpitas, California for $3,600,000. Proceeds were used to retire $2,500,000 in long-term debt and to acquire the six Red Carpet bowling centers in Milwaukee, Wisconsin. Liquidity and Capital Resources ------------------------------- At August 30, 1995, the Company had $10,100,000 available under an unused bank commitment. Advances can be used to acquire, construct or refurbish bowling centers or to acquire other compatible recreation businesses and would bear interest at the prime rate plus .75%. An 85% owned joint venture has $2,700,000 available under a separate bank commitment that can be used for the acquisition of bowling centers. Advances under this facility would bear interest at the prime rate plus 1%. The Company also maintains various line-of-credit arrangements to augment seasonal shortfalls in working capital. At August 30, 1995 and August 24, 1994, there were no borrowings outstanding under the Company's $2,000,000 line- of-credit. Advances under this line would bear interest at the prime rate plus .5%. There was $415,000 and $445,000 outstanding at August 30, 1995 and August 24, 1994 under a $1,000,000 line-of-credit which is designated for use by one of the Company's wholly-owned subsidiaries. This line bears interest at the prime rate plus 1%. The line was repaid in full subsequent to August 30, 1995. The Company has paid quarterly cash dividends for over 27 consecutive years. The first quarter dividend of $.0625 per share represents a 4% increase over last year when the quarterly dividend was $.06 per share. 9 PART II Item 4. Submission of Matters to a Vote of Security Holders On September 26, 1995 the Company held its annual meeting of shareholders. The shareholders voted upon the following matters: (1) the election of directors: the number of directors who stood for re-election was reduced from seven to five, which comprises the entire Board of Directors; and (2) the ratification of the appointment of Price Waterhouse as independent auditors for the fiscal year ended May 31, 1995. Each matter was approved. The results of the vote were as follows: (1) Board of Directors:
WITHHOLD FOR AUTHORITY --- --------- Stewart Bloom 4,165,730 32,384 Stephen R. Chanecka 4,165,850 32,264 Robert A. Crist 4,158,023 40,091 Robert Feuchter 4,170,938 27,176 Stanley B. Schneider 4,169,260 28,854
(2) Ratification of Price Waterhouse as auditors for fiscal year 1995: WITHHOLD FOR AUTHORITY --- --------- 4,155,904 42,210 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN RECREATION CENTERS, INC. Date 10-13-95 Robert A. Crist -------------------- ----------------------------------------- Robert A. Crist, President Date 10-13-95 Karen B. Wagner -------------------- ----------------------------------------- Karen B. Wagner, Vice President/Treasurer 11 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ======================================= FORM 8-K CURRENT REPORT ======================================= Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 4, 1995 AMERICAN RECREATION CENTERS, INC. (Exact name of Registrant as specified in charter) California 0-2849 94-1441151 (State of other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 11171 Sun Center Drive, Suite 120, Rancho Cordova, CA 95741 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (916) 852-8005 Not Applicable (Former name or former address, if changed, since last report) Item 2. Acquisition of Disposition of Assets On August 4, 1995, the Registrant sold 3,937,000 shares of Common Stock of The Right Start, Inc. to Kayne, Anderson Investment Management and affiliated partnerships and persons (collectively, the "Purchasers") pursuant to a Stock Purchase Agreement dated August 3, 1995 among the Registrant and the Purchasers (the "Stock Purchase Agreement"), at a purchase price of $3.00 per share, for an aggregate cash purchase price of $11,811,000. A copy of the Stock Purchase Agreement is attached hereto as Exhibit 2.1 and incorporated by reference. Pursuant to the Stock Purchase Agreement, the Registrant acquired options to purchase up to 400,000 shares of Common Stock of The Right Start, Inc. from the Purchasers pursuant to Option Certificates substantially in the form attached hereto as Exhibit 4.1 and incorporated by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (b) Pro Forma Financial Information. Pro Forma Financial Information is not included. As a result of the sale of The Right Start, Inc. Common Stock, the Company's investment in the stock, and the results of operations of The Right Start, Inc. have been fully reflected as discontinued operations in the historical financial statements filed in the Registrant's May 31, 1995 Form 10-K. (c) Exhibits. Exhibit Number 2.1 Stock Purchase Agreement, dated August 3, 1995 between the Registrant and Kayne, Anderson Investment Management and certain of its affiliates. 4.1 Form of Option Certificate for options granted to the Registrant by the Purchasers for the purchase by the Registrant of an aggregate of 400,000 shares of Common Stock of The Right Start, Inc. 10.5 Contract, dated December 20, 1994 for financial advisory services relative to The Right Start, Inc. between the Company and Cruttenden & Company. 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 hereunto duly authorized. AMERICAN RECREATION CENTERS, INC. Date: August 4, 1995 By: Robert A. Crist --------------------------------- Robert A. Crist, President EXHIBIT INDEX The following exhibit is attached hereto and incorporated by reference: Exhibit Number 2.1 Stock Purchase Agreement, dated August 3, 1995 between the Registrant and Kayne, Anderson Investment Management and certain of its affiliates. 4.1 Form of Option Certificate for options granted to the Registrant by the Purchasers for the purchase by the Registrant of an aggregate of 400,000 shares of Common Stock of The Right Start, Inc. 10.5 Contract, dated December 20, 1994 for financial advisory services relative to The Right Start, Inc. between the Company and Cruttenden & Company. EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAY-29-1996 JUN-01-1995 AUG-30-1995 11,433 0 490 16 530 13,608 85,165 26,835 77,834 11,261 28,316 12,781 0 0 18,223 77,834 8,825 8,951 924 9,357 0 0 749 (1,076) (422) (654) 2,305 0 0 1,651 .33 .33
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