-----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, TffySRGXJhHEPDleNFas40YTpxGEvTh7kNoAZiiW9ZKvkqrJdxuiyyo+lxZSNVaA V4SkVOAAWUJ+z1eASVdGYQ== 0000916080-96-000017.txt : 19961120 0000916080-96-000017.hdr.sgml : 19961120 ACCESSION NUMBER: 0000916080-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961118 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOBLE ROMANS INC CENTRAL INDEX KEY: 0000709005 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 351281154 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11104 FILM NUMBER: 96668337 BUSINESS ADDRESS: STREET 1: ONE VIRGINIA AVE STREET 2: SUITET 800 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176343377 MAIL ADDRESS: STREET 1: ONE VIRGINIA AVENUE STREET 2: SUITE 800 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 10-Q 1 UNITED STATES 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 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 OR ___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . ------- ----------- Commission file number: 0-11104 NOBLE ROMAN'S, INC. (Exact name of registrant as specified in its charter) Indiana 35-1281154 (State or other (I.R.S. Employer jurisdiction of organization) Identification No.) One Virginia Avenue, Suite 800 Indianapolis, Indiana 46204 (Address of principal executive offices) (Zip Code) (317) 634-3377 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or l5(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 ----- ----- As of November 13, 1996, there were 4,131,324 shares of Common Stock, no par value, outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The following condensed consolidated financial statements are included herein: Condensed consolidated balance sheets as of December 31, 1995 and September 30, 1996 Page 3 Condensed consolidated statements of operations for the nine and three months ended September 30, 1995 and 1996 Page 4 Condensed consolidated statements of cash flows for the nine and three months ended September 30, 1995 and 1996 Page 5 The interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented, which adjustments are of a normal recurring nature. Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) December 31 September 30 1995 1996 ------------- ---------- Assets Current assets: Cash $ 229,462 $ 127,448 Accounts receivable 950,622 988,733 Inventories 980,534 1,063,463 Prepaid expenses 412,949 761,583 ------------- ---------- Total current assets 2,573,567 2,941,227 Property and equipment, less accumulated depreciation and amortization of $3,737,594 and $4,321,110 9,135,949 9,304,355 Costs in excess of assets acquired, net 6,722,812 6,527,327 Other assets 1,471,387 1,634,761 ------------- ---------- $ 19,903,715 $20,407,670 ------------- ---------- Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 3,230,003 $ 3,689,364 Notes payable - current 761,128 1,750,000 ------------- ---------- Total current liabilities 3,991,131 5,439,364 Long-term liabilities: Revolving line of credit 2,914,919 4,000,000 Notes payable-less current portion 8,150,793 7,435,765 Capital leases 258,037 103,652 ------------- ---------- Total long-term liabilities 11,323,749 11,539,417 Stockholders' equity Common stock, no par value, authorized 9,000,000 shares, issued 4,131,324 and 4,131,324 5,458,431 5,458,431 Retained earnings (869,596) (2,029,542) ------------- ---------- Total stockholder's equity 4,620,835 3,428,889 ------------- ---------- $ 19,903,715 $20,407,670 ------------- ----------
Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Nine Months Ended Three Months Ended September 30 September 30 1995 1996 1995 1996 ------- ------- ------- ------- Restaurant revenue $24,384,749 $25,207,049 $ 8,561,058 $ 8,346,239 Royalties 171,950 154,599 55,733 56,180 Administrative fees and other 305,692 173,148 111,020 30,647 ----------- -------- ---------- ---------- Total revenue 24,862,391 25,534,796 8,727,811 8,433,066 Restaurant operating expenses: Cost of revenue 4,481,613 4,805,084 1,620,356 1,496,318 Salaries and wages 7,650,428 8,245,459 2,704,038 2,763,536 Rent 2,028,361 2,248,265 695,357 758,388 Advertising 1,620,499 1,556,715 561,988 416,961 Other 5,703,978 6,171,920 2,008,569 2,096,904 Depreciation and amortization 863,978 893,036 297,273 297,292 General and administrative 1,385,058 1,807,121 428,956 614,153 Cost of attempted acquisition and equity offering 768,389 ----------- -------- ---------- ---------- Operating income 1,128,477 (961,193) 411,275 (10,486) Interest and other expense 884,244 1,199,233 300,812 436,591 ----------- -------- ---------- ---------- Income (loss) before income taxes 244,233 (2,160,426) 110,463 (477,077) Income taxes 82,234 (756,149) 30,192 (156,477) ----------- ------- ---------- ---------- Net income (loss) before loss on discontinued operations 161,999 (1,404,277) 80,271 (290,600) Loss on discontinued operations 48,750 ----------- --------- ---------- ----------- Net income (loss) $161,999 $(1,453,027) $ 80,271 $ (290,600) ----------- ------- ---------- ---------- Net income (loss) per share before discontinued operations $ .04 $ (.34) $ .02 $ (.07) ----------- -------- --------- ----------- Net income (loss) per share $ .04 $ (.35) $ .02 $ (.07) ----------- -------- --------- ------------ Weighted average number of common shares outstanding 3,996,336 4,131,324 3,997,992 4,131,324
Noble Roman's and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30 ------------------------------------------- 1995 1996 ------------------------------------------- OPERATING ACTIVITIES Net income $ 161,999 $(1,453,027) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,001,728 982,124 Changes in operating assets and liabilities (increase) decrease in: Accounts receivable (143,758) (38,311) Inventory (212,046) (82,929) Prepaid expenses (207,151) (348,634) Other assets 10,000 (249,975) Increase (decrease) in: Accounts payable and accrued expenses 761,338 459,361 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,372,110 (731,391) INVESTING ACTIVITIES Purchase of fixed assets (1,824,326) (696,060) Payments received on notes receivable 1,023 -- ---------- ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,823,303) (696,060) FINANCING ACTIVITIES Proceeds from borrowing 371,002 1,585,081 Proceeds from sale of common stock 17,510 -- Principal payments on long-term debt and capital lease obligations (253,388) (259,644) ---------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (135,124) 1,325,437 ---------- ----------- INCREASE (DECREASE) IN CASH (316,069) (102,014) Cash at beginning of period 621,726 229,462 ---------- ----------- Cash at end of period $ 305,657 $ 127,448 ---------- -----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Noble Roman's, Inc. and Subsidiaries Results of Operations - Nine month and three month periods ended September 30, 1995 and 1996 The following table sets forth the percentage relationship to total revenue of the listed items included in Noble Roman's consolidated statement of operations. Certain items are shown as a percentage of restaurant revenue. Nine Months Ended Three Months Ended September 30 September 30 1995 1996 1995 1996 -------- -------- -------- -------- Revenue: Restaurant revenue 98.1% 98.7% 98.1% 99.0% Royalties .7 .6 .6 .7 Administrative fees and other 1.2 .7 1.3 .4 -------- -------- -------- -------- 100.0 100.0 100.0 100.0 Restaurant operating expenses (1): Cost of revenue 18.4 19.1 18.9 17.9 Salaries and wages 31.4 32.7 31.6 33.1 Rent 8.3 8.9 8.1 9.1 Advertising 6.6 6.2 6.6 5.0 Other 23.4 24.5 23.5 25.1 Depreciation and amortization 3.5 3.5 3.4 3.5 General and administrative 5.6 7.1 4.9 7.3 Loss from withdrawn acquisition and offering -- 3.0 -- -- -------- -------- -------- -------- Operating income 4.5 (3.8) 4.7 (.1) Interest 3.6 4.7 3.4 5.2 -------- -------- -------- -------- Income before federal income taxes 1.0% (8.5%) 1.3% (5.7%) (1) As a percentage of restaurant revenue
Total revenue increased 2.7% in the nine months and decreased 3.4% in the three months ended September 30, 1996. The increase for the nine month period was primarily attributable to revenue at the two new restaurants opened after the third quarter in 1995 and the two new restaurants opened during 1996. The reason for the decline in the three month period ended September 30, 1996 was because same store net sales declined by 6.6% which was partially offset by the additional restaurants. Cost of revenue as percentage of restaurant revenue increased from 18.4% in the first nine months of 1995 to 19.1% in the same period in 1996 and declined from 18.9% to 17.9% in the three month period ended September 30, 1995 and 1996, respectively. The increase for the nine month period was primarily the result of increased cheese prices and a 25th Anniversary price rollback promotion in April, 1996 and the reason for the decrease in the three month period was primarily a menu price increase. Salaries and wages increased as a percentage of restaurant revenue from 31.4% and 31.6% for the nine and three month periods ended September 30, 1995 compared to 32.7% and 33.1% in the same periods in 1996. The increase was attributable to a higher average hourly wage and to inefficient scheduling of hourly employees, both of which were the result of senior management's focus on an acquisition during the first six months of 1996 and salary percentage was higher due to same store declines. Other expenses increased as a percentage of revenue from 23.4% and 23.5% in the nine and three month periods ended in 1995 to 24.5% and 25.1% in the same periods in 1996. This increase was primarily attributable to the lack of execution of the operating controls as a result of the Company's senior management being focused on an acquisition which was subsequently withdrawn. General and administrative expenses as a percentage of total revenue increased from 5.6% and 4.9% during the nine and three month periods ended September 30, 1995 to 7.1% and 7.3% in the same periods in l996. This increase as a percentage of total revenue was primarily attributable to increasing the supervisory staff by one person and to training and hiring expense to upgrade the quality of restaurant level management and supervisory personnel. The Company has hired and trained three new and experienced supervisors and many new management personnel during the most recent quater. Operating income decreased from $1,128 thousand and $411 thousand in the nine and three month periods ended September 30, 1995 to ($961 thousand) and ($10 thousand) in the same periods in 1996. Operating income decreased because of the poor operating controls discussed in the three previous paragraphs and because of the $768 thousand cost incurred in the second quarter 1996 for an acquisition and equity offering which was abandoned in June, 1996. Interest expense increased from $884 thousand and $301 thousand for the nine and three month periods ended September 30, 1995 to $1,199 thousand and $437 thousand in the same periods in 1996. This increase is the result of a higher interest rate on the Company's debt as a result of the refinancing in December, 1995 in order to repay notes which had a short term maturity and because of an increase in the amount of outstanding debt. Income before federal income taxes decreased from $244 thousand and $110 thousand for the nine and three month periods ended September 30, 1995 to ($2,160 thousand) and ($477 thousand) in the same periods in 1996. This decrease was primarily attributable to the attempted acquisition of a 180 restaurant pizza chain and the withdrawal of that attempt which resulted in cost directly attributable to that effort and to the inefficiencies in the Company's operations as a result of senior management's focus and time involvement in that acquisition. LIQUIDITY AND CAPITAL RESOURCES As a result of the $768 thousand spent on the attempted acquisition of 180 restaurants located in Boston, Massachusetts and surrounding areas and the poor operating results in the last two quarters as a result of the Company's attempted acquisition and of senior management's time and focus on that acquisition, the Company is in technical default of the terms of its senior credit facility as the Company is out of compliance with the various financial covenants and has a shortage of working capital. The third quarter results were much improved over the second quarter and management believes the Company will again be profitable in the fourth quarter of 1996. Management of the Company has had ongoing discussions with representatives of the Bank which provides the senior credit facility regarding restructuring the credit facility to meet the current needs. The Company has requested the Bank to increase its credit facility by $2.2 million and to revise the various financial covenants contained in the credit facility agreement. Representatives of the Bank have demonstrated a desire to work with the Company and management believes the Company will reach agreement with the Bank for such restructuring within the next few days on terms which it believes are fair to both the Company and the Bank. Management believes that cash generated from future operations will be sufficient to meet its needs provided the existing credit facility is restructured as discussed in the previous paragraph. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is involved in litigation relating to claims arising out of its normal business operations. The Company believes that none of its current proceedings, individually or in the aggregate, will have a material adverse effect on the Company. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. As a result of the $768 thousand spent on the attempted acquisition of 180 restaurants located in Boston, Massachusetts and surrounding areas and the poor operating results in the last two quarters as a result of the Company's attempted acquisition and of senior management's time and focus on that acquisition, the Company is in technical default of the terms of its senior credit facility as the Company is out of compliance with the various financial covenants and has a shortage of working capital. The third quarter results were much improved over the second quarter and management believes the Company will again be profitable in the fourth quarter of 1996. Management of the Company has had ongoing discussions with representatives of the Bank which provides the senior credit facility regarding restructuring the credit facility to meet the current needs. The Company has requested the Bank to increase its credit facility by $2.2 million and to revise the various financial covenants contained in the credit facility agreement. Representatives of the Bank have demonstrated a desire to work with the Company and management believes the Company will reach agreement with the Bank for such restructuring within the next few days on terms which it believes are fair to both the Company and the Bank. 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 Exhibit 27 Financial Data Schedule 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. NOBLE ROMAN'S, INC. Date: November 15, 1996 By: /s/ Paul W. Mobley ------------------------- Paul W. Mobley, President (Principal Executive Officer and Chief Financial Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000709005 NOBLE ROMAN'S, INC. 9-MOS DEC-31-1996 SEP-30-1996 127,448 0 1,088,733 (100,000) 1,063,463 2,941,227 13,625,465 (4,321,110) 20,407,670 5,439,364 13,289,417 0 0 5,458,431 (2,029,542) 20,407,670 25,207,049 25,534,796 4,805,084 18,222,359 3,468,546 0 1,199,233 (2,160,426) (756,149) (1,404,277) (48,750) 0 0 (1,453,027) (.35) (.35)
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