-----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, V0ZiSY9CEG7TuXU65lslw88YdV2aCU0IOxY3jMaLE78msFLYPs/+sSPM9T7KDdih q0tsohU73DDc+Iwm+Rw1mA== 0000926274-97-000068.txt : 19970625 0000926274-97-000068.hdr.sgml : 19970625 ACCESSION NUMBER: 0000926274-97-000068 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970624 SROS: NONE 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: 97628968 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 MARCH 31, 1997 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 jurisdiction of organization) (I.R.S. Employer 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 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 --- --- As of June 13, 1997, there were 4,131,324 shares of Common Stock, no par value, outstanding. Page 1 of 11 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, 1996 and March 31, 1997 Page 3 Condensed consolidated statements of operations for the three months ended March 31, 1996 and 1997 Page 4 Condensed consolidated statements of cash flows for the three months ended March 31, 1996 and 1997 Page 5 Notes to condensed consolidated financial statements Page 6 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. Page 2 of 11 Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited) December 31, March 31, 1996 1997 Assets ------------ ----------- ------ Current assets: Cash $ 74,502 $ 82,551 Accounts receivable 947,924 968,069 Inventories 947,644 981,406 Prepaid expenses 363,074 744,723 ------------- ------------- Total current assets 2,333,144 2,776,749 Property and equipment, less accumulated depreciation and amortization of $4,372,980 and $4,612,690 9,475,794 9,455,135 Deferred tax asset - 405,622 Costs in excess of assets required, net 6,464,678 6,399,683 Other assets 1,177,069 1,211,419 ------------- ------------- $ 19,450,685 $ 20,248,608 ------------- ------------- Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 3,484,743 $ 3,465,426 Current portion of long-term debt (net of warrant valuation of $176,667 and $176,667) 14,251,373 16,035,661 Other current liabilities 848,098 688,802 ------------- ------------- Total current liabilities 18,584,214 20,189,889 Long-term liabilities: Notes payable 41,540 36,850 Capital leases 33,646 33,427 ------------- ------------- Total long-term obligations 75,186 70,277 Stockholders' equity Common stock, no par value, authorized 9,000,000 shares, issued 4,131,324 and 4,131,324 5,518,431 5,518,431 Retained earnings (4,727,146) (5,529,989) ------------- ------------- Total stockholders' equity 791,285 (11,558) ------------- ------------- $ 19,450,685 $ 20,248,608 ============= =============
See accompanying notes to condensed consolidated financial statements Page 3 of 11 Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, ------------------ 1996 1997 ---- ---- Restaurant revenue $ 8,715,445 $ 7,797,678 Royalties 58,719 32,749 Administrative fees and other 112,026 68,663 ------------ ----------- Total revenue 8,886,190 $ 7,899,090 Restaurant operating expenses: Cost of revenue 1,625,209 1,557,240 Salaries and wages 2,721,127 2,926,114 Rent 715,860 788,794 Advertising 658,285 389,836 Other 2,035,329 1,890,884 Depreciation and amortization 297,122 324,874 General and administrative 425,804 763,213 ------------ ----------- Operating income 407,454 (741,865) Interest 358,517 474,564 ------------ ----------- Income (loss) before income taxes 48,937 (1,216,429) Income taxes (benefit) 17,128 (413,586) ------------ ----------- Net income (loss) $ 31,809 $ (802,843) ============ =========== Net income (loss) per share $ .01 $ (.19) Weighted average number of common shares outstanding 4,131,324 4,131,324
See accompanying notes to condensed consolidated financial statements Page 4 of 11 Noble Roman's Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, ------------------ 1996 1997 ---- ---- OPERATING ACTIVITIES -------------------- Net income $ 31,809 $ (802,843) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 297,122 324,874 Deferred federal income taxes - (405,622) Changes in operating assets and liabilities (increase) decrease in: Accounts receivable (486) (20,145) Inventory 2,981 (33,762) Prepaid expenses (228,354) (381,649) Other assets - (54,080) Increase (decrease) in: Accounts payable 260,036 (19,317) Accrued expenses (403,592) (155,912) ------------- ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (40,484) (1,548,456) INVESTING ACTIVITIES -------------------- Purchase of equipment (314,610) (219,490) ------------- ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (314,610) (219,490) FINANCING ACTIVITIES -------------------- Proceeds from long-term debt 363,279 2,034,288 Principal payments on long-term debt and capital lease obligations (14,568) (258,293) ------------- ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 348,711 1,775,995 ------------- ------------ INCREASE (DECREASE) IN CASH (6,383) 8,049 Cash at beginning of period 229,462 74,502 ------------- ------------ Cash at end of period $ 223,079 $ 82,551 ------------- ------------
See accompanying notes to condensed consolidated financial statements Page 5 of 11 Noble Roman's Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) 1. SUBSEQUENT EVENTS On May 31, 1997, the Company closed 18 of its restaurants. This action was taken because some of those restaurants were operating at a loss, some were only marginally profitable, and others were closed because they were competing in market areas where the Company has newer restaurants and where the delivery area and some of the dine-in market can be serviced by the newer facility. This action also allows the Company to consolidate management and supervision to have better operations by the utilization of the Company's most effective supervision staff directly supervising the remaining restaurants. The Company expects a substantial charge-off of equipment, leasehold improvements and an accrual for ongoing expenses to be reported in the quarter ending June 30, 1997. The net book value of the assets relating to the closed restaurants is approximately $2 million. Page 6 of 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Noble Roman's, Inc. and Subsidiaries Results of Operations - Comparison of three month periods ended March 31, 1996 and 1997 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.
Three Months Ended March 31, ------------------ 1996 1997 ---- ---- Revenue: Restaurant revenue 98.0% 98.7% Royalties .7 .4 Administrative fees and other 1.3 .9 ----- ----- 100.0 100.0 Restaurant operating expenses (1): Cost of revenue 18.6 20.0 Salaries and wages 31.2 37.5 Rent 8.2 10.1 Advertising 7.6 5.0 Other 23.4 24.2 Depreciation and amortization 3.3 4.1 General and administrative 4.8 9.7 ----- ----- Operating income (loss) 4.6 (9.4) Interest 3.8 6.0 ----- ----- Income (loss) before federal income taxes .8% (15.4%)
(1) As a percentage of restaurant revenue Page 7 of 11 Total revenue decreased 11.1% in the three months ended March 31, 1997, from $8.9 million in 1996 to $7.9 million in the three months ended March 31, 1997, most significantly from a 10.5% decrease in restaurant revenue. This decrease is primarily the result of a decline in same store sales primarily as a result of doing a very high discount promotion in order to rebuild customer count. Customer count did increase, however, not enough to offset the discount in menu prices. Cost of revenue as a percentage of restaurant revenue increased from 18.6% in the first three months of 1996 to 20.0% in the same period in 1997. The increase was primarily the result of the discounts to the menu price in an effort to rebuild customer count during February and March, 1997. Salaries and wages increased as a percentage of restaurant revenue from 31.2% for the first three month period in 1996 to 37.5% in the same period in 1997. The increase was a result of heavily staffing to accommodate the increased customer count from the discount promotion, however, the revenue declined as a result of the steep discounting. General and administrative expenses as a percentage of total revenue increased from 4.8% during the three months ended March 31, 1996 to 9.7% in the same period in 1997. This increase was partially attributable to the decline in revenue and partially due to having more supervisory staff during the first three months of 1997 compared to the same period in 1996. Since March 31, 1997, these costs have been reduced substantially. Operating income decreased from $407 thousand in the three month period ended March 31, 1996 to a loss of $742 thousand in the same period in 1997. Operating income decreased as a percentage of total revenue from 4.6% in the first three months of 1996 to a loss of 9.4% in the same period in 1997. Interest expense increased from $359 thousand for the first three month period ended March 31, 1996 to $475 thousand in the same period in 1997. The increase is the result of an increase in the amount of outstanding debt. Income before federal income taxes decreased from $49 thousand for the three month period in 1996 to a loss of $1,216 thousand in the same period in 1997. The decrease was primarily attributable to the factors discussed above. 1997 net income decreased from $32 thousand for the three month period in 1996 to a loss of $803 thousand in the same period in 1997. The company recognized a tax benefit of $414 thousand related to its operating loss. Management believes it likely that the deferred tax credits will be utilized in the current fiscal year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's principal capital requirements arise from the costs associated with the development and opening of new restaurants and refurbishment of existing restaurants. The Company's primary sources of working capital are cash flow from operations and borrowings under its credit facilities. Capital expenditures were $314,610 for the first three month period in 1996 and $219,490 in the same period in 1997. The Company expands primarily through the use of leased land and buildings. The capital requirement for new restaurants in free-standing leased facilities is approximately $150,000 per restaurant and $15,000 to remodel an existing facility. Page 8 of 11 On December 4, 1995, the Company obtained a new credit facility consisting of a $9,000,000 term loan and a $4,000,000 revolving line of credit with stated maturity in 2001. This credit facility was used to refinance substantially all prior outstanding indebtedness of the Company. On March 25, 1996, the Company signed a Letter of Intent whereby it would have acquired Papa Gino's Holdings Corp. (a 180 unit pizza restaurant chain in seven northeastern states) through a merger transaction whereby the stockholders of Papa Gino's Holding Corp. would have received approximately 2.25 million shares of a to-be-authorized class of non-voting common stock of the Company. Among other things, this transaction was conditioned on a public equity offering, implementation of a senior credit facility, a definitive agreement and shareholder approval. Because of delays and uncertainties in negotiating a definitive agreement, the Company and Papa Gino's mutually agreed to terminate the Letter of Intent on June 10, 1996. The expenses incurred with regard to the proposed acquisition and offering aggregated approximately $880,862. In addition, deterioration in operating controls during this effort as a result of senior management's focus on that activity created a severe shortage of working capital. On December 24, 1996, the Company entered into an Amended Credit Agreement with its bank. This amended agreement added $1.7 million to the term loan and maintained the $4.0 million revolving line of credit and amended the financial covenants contained in the agreement consistent with the Company's then current and anticipated financial condition. From March, 1995 through June, 1996 the Company's senior management had to focus almost 100% of its time on arranging for financing and the unsuccessful attempted acquisition of a 180 unit regional pizza restaurant chain operating in seven northeastern states. As a result, the Company's current operations severely deteriorated resulting in personnel turnover, poor service and difficulties with operational standards and controls. The resulting financial performance now has the Company in a severely over-leveraged financial condition and in default of the terms of its bank credit facility. As a result, approximately $16 million of bank debt was reclassified as a current liability at March 31, 1997. The Company is currently negotiating with the lender with a view to reducing substantially its bank debt in exchange for issuing equity. There can be no assurance that the parties will reach an agreement. Management has sought to improve operations with the ongoing addition of new management and supervisory personnel, extensive training and the implementation of better controls. On May 31, 1997, the Company closed 18 of its restaurants. This action was taken because some of those restaurants were operating at a loss, some were only marginally profitable, and others were closed because they were competing in market areas where the Company has newer restaurants and where the delivery area and some of the dine-in market can be serviced by the newer facility. This action also allows the Company to consolidate management and supervision to have better operations by the utilization of the Company's most effective supervision staff directly supervising the remaining restaurants. The Company expects a substantial charge-off of equipment, leasehold improvements and an accrual for ongoing expenses to be reported in the quarter ending June 30, 1997. The net book value of the assets relating to the closed restaurants is approximately $2 million. Page 9 of 11 The Company believes its improvement plans are beginning to demonstrate improved results, and management believes it can return its restaurants to their historical profitability levels. However, failure to significantly improve its operating results and/or failure to negotiate an agreement with its lender will jeopardize the Company's ability to meet its obligations. The accompanying financial statements do not include any adjustments that might arise from an adverse outcome of these uncertainties. 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. From March, 1995 through June, 1996 the Company's senior management had to focus almost 100% of its time on arranging for financing and the unsuccessful attempted acquisition of a 180 unit regional pizza restaurant chain operating in seven northeastern states. As a result, the Company's current operations severely deteriorated resulting in personnel turnover, poor service and difficulties with operational standards and controls. The resulting financial performance now has the Company in a severely over-leveraged financial condition and in default of the terms of its bank credit facility. As a result, approximately $16 million of bank debt was reclassified as a current liability at March 31, 1997. The Company is currently negotiating with the lender with a view to reducing substantially its bank debt in exchange for issuing equity. There can be no assurance that the parties will reach an agreement. 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 Page 10 of 11 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: June 24, 1997 /s/ Paul W. Mobley ------------------------- --------------------------- Paul W. Mobley, President (Principal Executive Officer) Date: June 24, 1997 /s/ Mitchell E. Katz ------------------------- --------------------------- Mitchell E. Katz (Chief Financial Officer) Page 11 of 11 EX-27 2
5 3-MOS DEC-31-1997 MAR-31-1997 82,551 0 968,069 0 981,406 2,776,749 14,067,825 4,612,690 20,248,608 20,189,889 70,277 0 0 5,518,431 (5,529,989) 20,248,608 7,797,678 7,899,090 1,557,240 5,995,628 1,088,087 0 474,564 (1,216,429) (413,586) (802,843) 0 0 0 (802,843) (.19) (.19)
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