-----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, R0TRDsOzkyzqvsGIKLh+sQ05/aS2+MFox43P7uOQKvTgYh+azVdnkKxa7JMAMjdm RBc1sgtckZTQBlahXqGqrw== 0000950148-96-002003.txt : 19960913 0000950148-96-002003.hdr.sgml : 19960913 ACCESSION NUMBER: 0000950148-96-002003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960912 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA BEACH RESTAURANTS INC CENTRAL INDEX KEY: 0000738274 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 952693503 STATE OF INCORPORATION: CA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12226 FILM NUMBER: 96629363 BUSINESS ADDRESS: STREET 1: 17383 SUNSET BLVD STE 140 CITY: PACIFIC PALISADES STATE: CA ZIP: 90272 BUSINESS PHONE: 3104599676 MAIL ADDRESS: STREET 2: 17351 SUNSET BLVD STE 404 CITY: PACIFIC PALISADES STATE: CA ZIP: 90272 FORMER COMPANY: FORMER CONFORMED NAME: IHV CORP DATE OF NAME CHANGE: 19900912 FORMER COMPANY: FORMER CONFORMED NAME: NATURAL ORGANICS INC DATE OF NAME CHANGE: 19860318 10-Q 1 FORM 10-Q FOR PERIOD ENDED JULY 31, 1996 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31,1996 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 0-12226 CALIFORNIA BEACH RESTAURANTS, INC. (Exact name of Registrant as specified in its charter) CALIFORNIA 95-2693503 ---------------------------------- --------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 17383 Sunset Boulevard, Suite 140, Pacific Palisades, CA 90272 (Address and zip code of Principal executive offices) (310) 459-9676 (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 the filing requirements for at least 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:
Number of Shares Outstanding Class at September 6 , 1996 ----- --------------------------- Common Stock, $.01 par value 3,400,975 - ---------------------------- ---------------------------
2 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES JULY 31, 1996 INDEX Part I - FINANCIAL INFORMATION
Page Number ----------- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at July 31, 1996 and April 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Income for the Three Months Ended July 31, 1996 and 1995 . . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows for the Three Months Ended July 31, 1996 and 1995 . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 9 Part II - OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . 12 Item 3. Defaults on Senior Securities . . . . . . . . . . . . . . . . . . . . 12 Item 4. Submission of Matters to a Vote of Securities Holders . . . . . . . . 12 Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 12 Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 3 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
July 31, 1996 April 30, 1996 ------------- -------------- (Unaudited) (1) Current Assets: Cash $ 674,000 $ 624,000 Restricted cash 500,000 500,000 Trade and other receivables 32,000 27,000 Inventories 277,000 261,000 Prepaid expenses 246,000 203,000 ------------- ------------- Total current assets 1,729,000 1,615,000 Fixed Assets (at cost) - net of accumulated depreciation and amortization (Note C) 1,368,000 1,410,000 Other Assets: Goodwill, net of accumulated amortization 2,690,000 2,855,000 Other 190,000 180,000 ------------- ------------- $5,977,000 $6,060,000 ============= =============
The accompanying notes to consolidated financial statements are an integral part of this statement. (1) The April 30, 1996 amounts have been extracted from the Company's Annual Report on Form 10-K for the year ended April 30, 1996. 3 4 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, 1996 April 30, 1996 ------------- -------------- (Unaudited) (1) Current Liabilities: Accounts payable $ 741,000 $ 697,000 Accrued liabilities 608,000 770,000 Current portion of long-term debt (Note D) 1,244,000 1,216,000 ----------- ----------- Total current liabilities 2,593,000 2,683,000 Long-term debt, less current portion (Note D) 1,179,000 1,500,000 Stockholders' Equity: Common stock, $.01 par value, authorized 25,000,000 shares, issued and outstanding, 3,401,000 shares at July 31, 1996 and at April 30, 1996 34,000 34,000 Additional paid-in capital 13,175,000 13,175,000 Deficit in retained earnings (11,004,000) (11,332,000) ----------- ----------- Total stockholders' equity 2,205,000 1,877,000 ----------- ----------- $ 5,977,000 $ 6,060,000 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of this statement. (1) The April 30, 1996 amounts have been extracted from the Company's Annual Report on Form 10-K for the year ended April 30, 1996. 4 5 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended July 31, -------------------------- 1996 1995 ---- ---- Sales $4,084,000 $3,743,000 Costs and Expenses: Cost of goods sold 3,242,000 2,904,000 Selling, general and administrative 216,000 228,000 Legal and litigation settlement 24,000 54,000 Depreciation 108,000 99,000 ----------- ---------- 494,000 458,000 Other income (expenses): Interest expense (1,000) (16,000) Amortization of intangible assets (165,000) (165,000) Other, net 8,000 4,000 ---------- ---------- Income before income taxes 336,000 281,000 Provision for income taxes 8,000 2,000 ---------- ---------- Net Income $ 328,000 $ 279,000 ========== ========== Net Income per common share (Note E): Primary $ .10 $ .11 ========== ========== Fully-diluted $ .10 $ .09 ========== ========== Weighted average number of common shares outstanding: Primary 3,401,000 2,461,000 Fully-diluted 3,401,000 3,400,000
The accompanying notes to consolidated financial statements are an integral part of this statement. 5 6 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JULY 31, (UNAUDITED)
1996 1995 ---- ---- Cash flows from operating activities: Net Income $ 328,000 $ 279,000 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 273,000 264,000 Changes in assets and liabilities: Accounts receivable, trade (5,000) (1,000) Inventories (16,000) (29,000) Prepaid expenses (43,000) (41,000) Accounts payable 44,000 79,000 Accrued interest - 16,000 Accrued liabilities (162,000) (6,000) --------- --------- Cash provided by operations 419,000 561,000 --------- --------- Cash flows used in investing activities: Increase in other assets (10,000) (4,000) Additions to fixed assets (67,000) (73,000) --------- --------- Net cash used in investing activities (77,000) (77,000) --------- --------- Cash flows used in financing activities: Borrowings pursuant to capital lease - 21,000 Principal payments on borrowings (292,000) (337,000) --------- --------- Net cash used in financing activities (292,000) (316,000) --------- --------- Net increase in cash 50,000 168,000 Cash at beginning of period 624,000 493,000 --------- --------- Cash at end of period $ 674,000 $ 661,000 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,000 $ - ========= ========= Income taxes $ 12,000 $ - ========= =========
The accompanying notes to consolidated financial statements are an integral part of this statement. 6 7 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The unaudited consolidated financial statements presented herein include the accounts of California Beach Restaurants, Inc., and its wholly- owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. The unaudited consolidated financial statements presented herein have been prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q and article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Company's financial position and results of operations. The results of operations for the three month period ended July 31, 1996 may not be indicative of the results that may be expected for the year ending April 30, 1997. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year-ended April 30, 1996. NOTE B - ACCOUNTING PERIODS The Company's restaurant operations are conducted through its wholly-owned subsidiary, Sea View Restaurants, Inc. ("Sea View"). The Company's consolidated financial statements for the three months ended July 31, 1996 and 1995 include Sea View's operations for the twelve weeks ended July 25, 1996 and July 20, 1995, respectively. NOTE C - FIXED ASSETS
July 31, 1996 April 30, 1996 ------------- -------------- Leasehold improvements $2,739,000 $2,727,000 Furniture and equipment 896,000 842,000 ---------- ---------- 3,635,000 3,569,000 Less accumulated depreciation and amortization (2,267,000) (2,159,000) ---------- ---------- $1,368,000 $1,410,000 ========== ==========
7 8 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE D - NOTES PAYABLE AND LONG-TERM DEBT On December 22, 1994 Sea View completed a restructuring of its bank debt and entered into an Amended and Restated Loan Agreement ("Amended Loan"). The Amended Loan included a senior secured note in the principal amount of $3,000,000, bearing interest at 12% per annum, and payable at varying monthly amounts through October 31, 1997, and a junior secured note in the amount of $400,000 accruing interest at 12% per annum with both interest and principal payable in a single lump sum on October 31, 1997. Interest to maturity on the senior secured and junior secured notes is included in the carrying value of such notes, in accordance with Financial Accounting Standards Board Statement No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring," and will not be recognized as interest expense in current and future years. At July 31, 1996 the balance of the senior secured note was $1,858,000, including $158,000 of future interest costs, while the balance on the junior secured note was $557,000, including $73,000 of future interest costs. NOTE E - EARNINGS PER SHARE Primary earnings per common share are calculated by dividing net earnings applicable to common stock by the average of common stock outstanding and common stock equivalents. On a fully-diluted basis, both net earnings and shares outstanding are adjusted to assume the conversion of the 9.75% convertible subordinated notes as of May 1, 1995. 8 9 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS RESTAURANT REVENUES Restaurant operations include the results of Gladstone's 4 Fish ("Gladstone's") in Pacific Palisades, California and RJ's - Beverly Hills in Beverly Hills, California. The Registrant operates Gladstone's pursuant to a concession agreement with the County of Los Angeles ("County") which expires October 31, 1997. The County's standard operating procedure for contracts in excess of a certain minimum length and amount is to distribute a Request for Proposal ("RFP") seeking bids prior to entering into new agreements. In August 1996, the County published an RFP for a twenty year concession agreement to operate at the restaurant site where Gladstone's currently operates. The Registrant believes that this process will be concluded, based on the County's current schedule, in early 1997. Except for the restaurant structure itself, the Registrant owns all personal property, fixtures and leasehold improvements at Gladstone's. The Registrant also owns the Gladstone's trade name and existing liquor licenses and operates certain sections of the restaurant pursuant to permits granted by the California Coastal Commission. Gladstone's has operated at the present site since 1981. The Registrant intends to complete a proposal to remain as the operator of this site but there can be no assurance that such proposal will ultimately be accepted by the County. The Registrant is currently reviewing other potential restaurant sites for both expansion possibilities as well as for an alternate location to reduce the impact on the business should it be unsuccessful in retaining the present location. If the Registrant does not continue to operate Gladstone's at the present site after October 31, 1997, or if the Registrant is unsuccessful in finding an alternate location, it will have a material adverse impact on the Registrant's operations. Total sales for the three months ended July 31, 1996 were $4,084,000 compared with $3,743,000 for the same period last year, an increase of $341,000 or 9.1%. This increase consisted of a 7.3% increase in total customer counts and a 1.8% increase in average guest check. Gladstone's is located on the beach in Pacific Palisades, California and is dependent, to a certain extent, on favorable weather and tourism. Gladstone's has a large outside deck overlooking the Pacific ocean which is a very popular destination but is only open as weather permits. Sales at Gladsone's for the three months ended July 31, 1996 benefitted from favorable weather and strong tourism in the Los Angeles area. As a result of typically more favorable weather and higher tourism during the summer months from May through September, the Registrant's sales and operating profits have historically been higher in the first and second quarters of its fiscal year. 9 10 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES COST OF GOODS SOLD Cost of goods sold includes all food, beverages, liquor, direct labor and other operating expenses, including rent, of the Registrant's restaurant operations. Cost of goods sold for the three months ended July 31, 1996 was $3,242,000, or, as a percentage of sales, 79.4% compared with $2,904,000, or, as a percentage of sales, 77.6% during the same period last year. This increase is primarily due to significantly higher prices paid for certain key food products, including live Maine lobster, fresh whole chickens and chicken breasts and most dairy products. Except for the lobster, these price increases are due to the severe drought in certain parts of the country which resulted in higher grain costs and reduced milk supplies. These higher prices have continued through August 1996. Federal legislation was recently signed mandating a $.50 per hour increase in the minimum wage as of October 1, 1996. Additionally, a second increase of $.40 per hour will take place on September 1, 1997. At present, the state of California does not allow any adjustment of minimum wage for employees that receive tips. These increases, unless offset by an adjustment for tipped employees, will have an adverse impact on the Registrant's labor costs. The Registrant does expect to increase certain menu prices to partially offset the above-mentioned increases in both food products as well as labor costs. Cost of goods sold will typically be slightly lower during the first and second quarters due to additional economies of scale that can be achieved with labor and certain other costs when sales levels are higher. For the fiscal year ended April 30, 1996, cost of goods sold, as a percentage of sales, was 80.9%. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES For the three months ended July 31, 1996, selling, general and administrative expenses were $216,000 compared with $228,000 for the same period last year, a decrease of $12,000 or 5.3%. This decrease is primarily due to expenses incurred in connection with the Registrant's reverse stock split which became effective on May 1, 1995. Such expenses were not incurred during the quarter ended July 31, 1996. LEGAL AND LITIGATION SETTLEMENT EXPENSES For the three months ended July 31, 1996, legal and litigation settlement expenses were $24,000 compared with $54,000 for the same period last year, a decrease of $30,000 or 55.5%. This decrease is primarily due to the elimination of certain litigation that was active during the three months ended July 31, 1995. INTEREST EXPENSE For the three months ended July 31, 1995, interest expense of $16,000 related to the Registrant's 9.75% Convertible Subordinated Notes. In October 1995, these notes were partially redeemed, with the balance converting into common stock. AMORTIZATION OF INTANGIBLE ASSETS For the three months ended July 31, 1996 and 1995, amortization expense was $165,000. Amortization expense relates completely to the Registrant's Goodwill and will approximate $714,000 per year. 10 11 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES The Registrant currently has no outside sources of short-term or long-term financing. The Registrant is seeking to refinance its existing bank debt and borrow an additional amount to provide for capital expenditures at Gladstone's (assuming retention of the concession agreement beyond October 31, 1997) and for future growth opportunities. The Registrant may also consider other forms of financing, if appropriate. There can be no assurance that additional financing will be available on favorable terms, if at all. Although the Registrant remains highly leveraged, due primarily to the repayment terms of the remaining loan principal, the Registrant believes that its existing cash and cash flow from operations over the next year will allow it to meet its debt obligations under the Amended Loan as well as its normal operating expenses. If the concession agreement is retained and the Registrant continues to meet its currently scheduled debt obligations, the Registrant would anticipate that its liquidity position will improve significantly. Capital expenditures for the three months ended July 31, 1996 totaled approximately $67,000. The Registrant estimates that capital requirements for fiscal 1997 will be approximately $175,000. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS Except for the historical information contained herein, certain statements in this Form 10-Q, including statements in this item, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of the Registrant, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others, the following: whether the Registrant is able to enter into a new concession agreement with the County of Los Angeles with respect to the operation of Gladstone's at its current location or, failing that, is able to secure a suitable alternate location; the indebtedness of the Registrant, including the Registrant's ability to service its indebtedness to the bank and to comply with certain restrictive covenants; that the Registrant currently has no short term or long term borrowing capacity, is highly leveraged and its principal source of cash are funds generated from operations; that restaurants historically have represented a high risk investment in a very competitive industry; general and local economic conditions, which can, among other things, impact tourism, consumer spending and restaurant revenues; quality of management; changes in, or the failure to comply with, governmental regulations; unexpected increases in the cost of key food products, labor and other operating expenses in connection with the Registrant's business; and other factors referenced in this Form 10-Q and in the Registrant's Annual Report on Form 10-K for the year ended April 30, 1996. 11 12 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings. On July 2, 1996, a former employee of the Registrant, filed a complaint in the Superior Court for the State of California, County of Los Angeles (BC 153053), against the Registrant's wholly owned subsidiary, Sea View Restaurants, Inc., and three of its current and former employees. The complaint arises out of the plaintiff's former employment, and alleges sexual harassment, wrongful termination and various related causes of action. The Registrant believes that this case is without merit, and is vigorously contesting it. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K. Exhibits 27 - Financial Data Schedule Reports on Form 8-K None 12 13 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES Signature(s) Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. California Beach Restaurants, Inc. (Registrant) Dated: September 10, 1996 By: Alan Redhead ___________________________ Alan Redhead Chief Executive Officer (Duly Authorized Officer) By Mark E. Segal ___________________________ Mark E. Segal Vice President - Finance and Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE COMPANY'S CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. 3-MOS APR-30-1997 MAY-01-1996 JUL-31-1996 1,174,000 0 32,000 0 277,000 1,729,000 3,635,000 (2,267,000) 5,977,000 2,593,000 0 0 0 34,000 2,171,000 5,977,000 4,084,000 4,084,000 3,242,000 3,590,000 157,000 0 1,000 336,000 8,000 328,000 0 0 0 328,000 .10 .10
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