-----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, AGnUFHABW9UF6e4hOnH6vfRNIk59yH154mIkQMBTr6jZc6dp0U4YBnpN8Aa+KSTN /Wzp82ku+i5ovBshMevRXg== 0000912057-01-516577.txt : 20010518 0000912057-01-516577.hdr.sgml : 20010518 ACCESSION NUMBER: 0000912057-01-516577 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010403 FILED AS OF DATE: 20010517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURRS RESTAURANT GROUP INC CENTRAL INDEX KEY: 0000872548 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 752350724 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10725 FILM NUMBER: 1642099 BUSINESS ADDRESS: STREET 1: 3001 E PRESIDENT GEORGE BUSH HWY STREET 2: SUITE 200 CITY: RICHARDSON STATE: TX ZIP: 75085-5943 BUSINESS PHONE: 972-808-2923 MAIL ADDRESS: STREET 1: P.O. BOX 852800 CITY: RICHARDSON STATE: TX ZIP: 75085-2800 FORMER COMPANY: FORMER CONFORMED NAME: FURRS BISHOPS INC DATE OF NAME CHANGE: 19930328 10-Q 1 a2049806z10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-10725 FURR'S RESTAURANT GROUP, INC. INCORPORATED IN DELAWARE IRS EMPLOYER INDENTIFICATION NO. 75-2350724 3001 E. PRESIDENT GEORGE BUSH HWY., SUITE 200, RICHARDSON, TEXAS 75082 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 808-2923 - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 May 1, 2001, there were 9,758,743 shares of Common Stock outstanding. 1 FURR'S RESTAURANT GROUP, INC. INDEX
PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets - April 3, 2001 (Unaudited) and January 2, 2001 3 Unaudited Condensed Consolidated Statements of Operations - For the thirteen weeks ended April 3, 2001 and March 28, 2000 5 Unaudited Consolidated Statement of Changes in Stockholders' Deficit - For the thirteen weeks ended April 3, 2001 6 Unaudited Condensed Consolidated Statements of Cash Flows - For the thirteen weeks ended April 3, 2001 and March 28, 2000 7 Notes to Unaudited Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosure About Market Risk 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 SIGNATURES 12
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements FURR'S RESTAURANT GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS APRIL 3, 2001 AND JANUARY 2, 2001 (DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
(Unaudited) April 3, January 2, 2001 2001 ----------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,412 $ 5,694 Accounts and notes receivable, net 1,200 1,260 Inventories 7,225 6,908 Prepaid expenses and other 770 887 -------- -------- Total current assets 16,607 14,749 -------- -------- PROPERTY, PLANT AND EQUIPMENT, NET 50,102 54,876 DEFERRED TAX ASSETS 18,639 19,178 OTHER ASSETS 615 628 -------- -------- TOTAL ASSETS $ 85,963 $ 89,431 ======== ========
(Continued) 3 FURR'S RESTAURANT GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS APRIL 3, 2001 AND JANUARY 2, 2001 (DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
(Unaudited) April 3, January 2, 2001 2001 ----------- ---------- LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Current maturities of long-term debt $ 4,250 $ 3,000 Trade accounts payable 7,011 6,051 Other payables and accrued expenses 12,212 15,859 Reserve for store closings, current 754 795 -------- -------- Total current liabilities 24,227 25,705 -------- -------- RESERVE FOR STORE CLOSINGS, NET OF CURRENT MATURITIES 2,175 2,270 LONG-TERM DEBT, NET OF CURRENT MATURITIES 48,223 52,219 OTHER PAYABLES 10,060 10,197 EXCESS OF FUTURE LEASE PAYMENTS OVER FAIR VALUE, NET OF AMORTIZATION 1,381 1,474 STOCKHOLDERS' DEFICIT: Preferred Stock, $.01 par value; 5,000,000 shares authorized, none issued - - Common Stock, $.01 par value; 15,000,000 shares authorized, 9,757,918 shares issued and outstanding 98 98 Additional paid-in capital 56,386 56,386 Accumulated other comprehensive loss (3,521) (3,521) Accumulated deficit (53,066) (55,397) -------- -------- Total stockholders' deficit (103) (2,434) -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 85,963 $ 89,431 ======== ========
See accompanying notes to condensed consolidated financial statements. 4 FURR'S RESTAURANT GROUP, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED APRIL 3, 2001 AND MARCH 28, 2000 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Thirteen weeks ended --------------------------- April 3, March 28, 2001 2000 ----------- ----------- Sales $ 47,487 $ 47,764 Costs and expenses: Cost of sales (excluding depreciation) 13,322 14,036 Selling, general and administrative 29,040 28,459 Depreciation and amortization 2,600 2,646 ----------- ----------- 44,962 45,141 ----------- ----------- Operating income 2,525 2,623 Gain on disposal of assets (439) - Interest expense 94 85 ----------- ----------- Earnings before income taxes 2,870 2,538 Income tax expense 539 442 ----------- ----------- Net income $ 2,331 $ 2,096 =========== =========== Weighted average number of shares of common stock outstanding: Basic 9,757,918 9,747,599 =========== =========== Diluted 9,757,918 9,754,349 =========== =========== Net income per share: Basic $ 0.24 $ 0.22 =========== =========== Diluted $ 0.24 $ 0.21 =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 FURR'S RESTAURANT GROUP, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THIRTEEN WEEKS ENDED APRIL 3, 2001 (DOLLARS IN THOUSANDS)
Accumulated Additional Other Preferred Common Paid-In Comprehensive Accumulated Stock Stock Capital Loss Deficit Total --------- ------- ---------- ------------- ----------- --------- BALANCE, JANUARY 2, 2001 $ - $ 98 $ 56,386 $ (3,521) $ (55,397) $ (2,434) Net income - - - - 2,331 2,331 ------- ------- --------- --------- --------- ------- BALANCE, APRIL 3, 2001 $ - $ 98 $ 56,386 $ (3,521) $ (53,066) $ (103) ======= ======= ========= ========= ========= =======
See accompanying notes to condensed consolidated financial statements. 6 FURR'S RESTAURANT GROUP, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Thirteen weeks ended --------------------------- April 3, March 28, 2001 2000 ----------- ----------- Cash flows from operating activities: Net income $ 2,331 $ 2,096 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,600 2,646 Deferred tax expense 539 442 Gain on disposal of assets (439) - Changes in operating assets and liabilities: Accounts and notes receivable 60 (149) Inventories (317) 64 Prepaid expenses and other 130 (111) Reserve for store closings (136) (369) Trade accounts payable, other payables, accrued expenses and other liabilities (2,824) (1,059) ----------- ----------- Net cash provided by operating activities 1,944 3,560 ----------- ----------- Cash flows from (used in) investing activities: Purchases of property, plant and equipment (517) (3,646) Proceeds from the sale of property, plant and equipment 3,037 - ----------- ----------- Net cash provided by (used in) investing activities 2,520 (3,646) ----------- ----------- Cash flows from financing activities: Payment of indebtedness (2,746) - ----------- ----------- Net cash used in financing activities (2,746) - ----------- ----------- Increase (decrease) in cash and cash equivalents 1,718 (86) Cash and cash equivalents at beginning of period 5,694 5,172 ----------- ----------- Cash and cash equivalents at end of period $ 7,412 $ 5,086 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest (including $2,746 in 2001 classified as payment of indebtedness) $ 2,906 $ 152 Cash paid for income taxes - -
See accompanying notes to condensed consolidated financial statements. 7 FURR'S RESTAURANT GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in Thousands) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended January 2, 2001. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. Interim results of operations may not be indicative of the results that may be expected for a full fiscal year. EARNINGS PER SHARE The following table reconciles the denominators of basic and diluted earnings per share for the thirteen week periods ended April 3, 2000 and March 28, 2000.
April 3, March 28, 2001 2000 --------- ---------- Weighted average common shares outstanding-basic 9,757,918 9,747,599 Options - 6,750 Warrants - - --------- --------- Weighted average common shares outstanding-diluted 9,757,918 9,754,349 ========= =========
For the thirteen weeks ended April 3, 2001 and March 28, 2000, outstanding options totaling 743,000 and 647,663, respectively, and outstanding warrants totaling 0 and 512,246, respectively, were not included in the computation of diluted earnings per share because their effect would have been anit-dilutive. INCOME TAXES We have provided income tax expense of $539 and $442 for the thirteen weeks ended April 3, 2001 and March 28, 2000, respectively. The effective income tax rate is lower than the statutory Federal rate of 35% due to interest expense on restructured debt reduction, which is reported as debt rather than interest expense pursuant to Statement of Financial Accounting Standards No. 15, "Troubled Debt Restructurings". DEBT REFINANCING On April 10, 2001, the Company entered into a new $55 million Revolving Credit and Term Loan Agreement (Credit Agreement) with various banks and lenders. Concurrent with the execution of this new agreement the Company defeased and gave notice of redemption of its 12% Senior Secured Notes due December 31, 2001 and repaid in full the $2.6 million of 10.5% Notes 8 due December 31, 2001. Accordingly, the balance of these notes, less the current portion of the new term loan, has been classified as long term at April 3, 2001 and January 2, 2001. After the redemption of the 12% Notes and the repayment in full of the 10.5% Notes, the Company had $44 million outstanding under the new Credit Agreement. The Credit Agreement contains covenants with regard to maintaining certain leverage ratios, achieving certain levels of EBITDA, operating cash flow and limits on capital expenditures. In addition there are certain restrictions on the payment of dividends and additional indebtedness. The Credit Agreement allows the Company to borrow at either a Federal Funds Rate plus an applicable margin or at a Eurocurrency Reserve Rate plus an applicable margin. The Credit Agreement provides that the Company can borrow up to $20 million on a revolving basis until April, 2006, of which $9 million was drawn at closing, with the remaining $11 million of available borrowings to be used for working capital and capital expenditures. The Credit Agreement contains a $30 million Term Loan A and a $5 million Term Loan B. The Term Loan A and Term Loan B provide for quarterly amortization through April, 2006 and April, 2007, respectively, with the remaining amounts outstanding then due. The Company's obligations under the Credit Agreement are secured by a security interest in and liens upon substantially all of the Company's assets. As a result of defeasing the 12% Senior Secured Notes, the Company has been legally released as obligors and will report an extraordinary pre-tax gain of approximately $3.5 million in the second quarter of fiscal 2001. BUSINESS SEGMENTS Following is a summary of segment information of the Company for the thirteen weeks ended April 3, 2001 and March 28, 2000:
Dynamic Cafeterias Foods Total ---------- ------- --------- 2001: External revenues $ 47,078 $ 409 $ 47,487 Intersegment revenues - 14,424 14,424 Depreciation and amortization 2,337 263 2,600 Segment profit 2,014 511 2,525 2000: External revenues $ 47,438 $ 326 $ 47,764 Intersegment revenues - 15,099 15,099 Depreciation and amortization 2,392 254 2,646 Segment profit 2,442 181 2,623
Following is a reconciliation of reportable segments to the Company's consolidated totals for the thirteen weeks ended April 3, 2001 and March 28, 2000:
April 3, 2001 March 28, 2000 ------------- -------------- Revenues Total revenues of reportable segments $ 61,911 $ 62,863 Elimination of inter-segment revenue (14,424) (15,099) ------------- -------------- Total consolidated revenues $ 47,487 $ 47,764 ============= ==============
9 RECENT ACCOUNTING MATTERS The Company has adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and requires the Company to recognize all derivatives on its balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives are either offset against the change in fair value of the hedged item through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. As of January 3, 2001, the date of adoption, and April 3, 2001, the Company was not a party to any derivative financial instruments. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Sales for the first fiscal quarter of 2001 were $47.5 million, a decrease of $.3 million from the same quarter of 2000. Operating income for the first quarter of 2001 was $2.5 million compared to $2.6 million in the comparable period in the prior year. The net income for the first quarter of 2001 was $2.3 million, which includes a $.4 million gain on disposal of assets, compared to $2.1 million in the first quarter 2000. SALES. Restaurant sales in comparable units decreased $.3 million, or .6% in the first quarter of 2001 compared to the same quarter of 2000. First quarter 2000 was the best first quarter in Company history, with first quarter 2001 being the second best. First quarter sales for the three new units opened after first quarter 2000 were $1.9 million, an increase of $50 thousand over the aggregate sales of the 5 units that were closed after first quarter 2000. Sales by Dynamic Foods to third parties were $83 thousand higher in the first quarter 2001 than that of first quarter 2000. COST OF SALES. Excluding depreciation, cost of sales were 28.1% of sales for the first quarter of 2001 as compared to 29.4% for the same quarter of 2000. The decrease in the percentage of sales was the result of lower product costs and operational efficiencies at Dynamic Foods. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative ("SG&A") expense was higher in the aggregate by $581 thousand in the first quarter of 2001 as compared to 2000. The change in SG&A expense included an increase of $512 thousand in utility expenses and $239 thousand in marketing expense. We had a decrease of $200 thousand in labor and related benefits. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was lower by $46 thousand in the first quarter of 2001. INCOME TAXES. Income tax expense of $.5 million was provided in the first quarter of 2001 compared to $.4 million provided in the first quarter of 2000. Our effective tax rate is lower than the statutory Federal rate of 35% due to interest expense on restructured debt reduction, which is reported as debt rather than interest expense pursuant to Statement of Financial Accounting Standard No. 15, "Troubled Debt Restructurings." 10 LIQUIDITY AND CAPITAL RESOURCES During the thirteen weeks ended April 3, 2001, cash provided by operating activities was $2.0 million compared to $3.6 million in the same period of 2000. We made capital expenditures of $.5 million during the first thirteen weeks of 2001 compared to $3.6 million during the same period of 2000. Cash and temporary investments were $7.4 million at April 3, 2001 compared to $5.1 million at March 28, 2000 and $5.7 million at January 2, 2001. Our current ratio was .69:1 at April 3, 2001 compared to .49:1 at March 28, 2000 and .57:1 at January 2, 2001. Total assets at April 3, 2001 aggregated $86.0 million, compared to $90.0 million at March 28, 2000 and $89.4 million at January 2, 2001. Our restaurants are a cash business. Funds available from cash sales are not needed to finance receivables and are not generally needed immediately to pay for food, supplies and certain other expenses of the restaurants. Therefore, the business and operations of the Company have not historically required proportionately large amounts of working capital, which is generally common among similar restaurant companies. On April 10, 2001, we entered into a new $55 million Revolving Credit and Term Loan Agreement (Credit Agreement) with various banks and lenders. Concurrent with the execution of this new agreement we defeased and gave notice of redemption of our 12% Senior Secured Notes due December 31, 2001 and repaid in full the $2.6 million of 10.5% Notes due December 31, 2001. The Credit Agreement contains covenants with regard to maintaining certain leverage ratios, achieving certain levels of EBITDA, operating cash flow and limits on capital expenditures. In addition there are certain restrictions on the payment of dividends and additional indebtedness. The Credit Agreement allows us to borrow at either a Federal Funds Rate plus an applicable margin or at a Eurocurrency Reserve Rate plus an applicable margin. Our obligations under the Credit Agreement are secured by a security interest in and liens upon substantially all of our assets. The Credit Agreement provides that we can borrow up to $20 million on a revolving basis until April, 2006, of which $9 million was drawn at closing, with the remaining $11 million of available borrowings to be used for working capital and capital expenditures. The Credit Agreement contains a $30 million Term Loan A and a $5 million Term Loan B. The Term Loan A and Term Loan B provide for quarterly amortization through April, 2006 and April, 2007, respectively, with the remaining amounts outstanding then due. Our obligations under the Credit Agreement are secured by a security interest in and liens upon substantially all of our assets. As a result of defeasing the 12% Senior Secured Notes, we have been legally released as obligors and will report an extraordinary pre-tax gain of approximately $3.5 million in the second quarter of fiscal 2001. Item 3. Quantitative and Qualitative Disclosure About Market Risk We are exposed to market risk from changes in commodity prices. We purchase certain commodities used in food preparation. These commodities are generally purchased based upon market prices established with vendors. These purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices because these purchase arrangements help control the ultimate cost paid and any commodity price aberrations are generally short term in nature. 11 Our long-term debt does not expose us to market risk as all interest accrues at fixed rates. We do not use derivative financial instruments to manage overall borrowing costs. This market risk discussion contains forward-looking statements. Actual results may differ materially from this discussion based upon general market conditions and changes in domestic and global financial markets. PART II. OTHER INFORMATION Item 1. Legal Proceeding None. Items 2, 3, 4 and 5 are not applicable and have been intentionally omitted. Item 6. Exhibits and Reports on Form 8-K None. 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. DATE: May 14, 2001 FURR'S RESTAURANT GROUP, INC. /s/ Phillip Ratner ------------------------------------- Phillip Ratner President and Chief Executive Officer /s/ Paul G. Hargett ------------------------------------- Paul G. Hargett Chief Financial Officer 12 -----END PRIVACY-ENHANCED MESSAGE-----