-----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, O79bfHdzEDfYkOOjjB93Eprv5u97Jyjf3pPzwoWObMTg3wT5I3+KdHdk8IaK8Mjw YwGQxMgY0txFOIF3UhHEvQ== 0000914427-98-000127.txt : 19980529 0000914427-98-000127.hdr.sgml : 19980529 ACCESSION NUMBER: 0000914427-98-000127 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980418 FILED AS OF DATE: 19980528 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS INC CENTRAL INDEX KEY: 0000874971 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 042947209 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19315 FILM NUMBER: 98633402 BUSINESS ADDRESS: STREET 1: 14 AUDUBON RD CITY: WAKEFIELD STATE: MA ZIP: 01880 BUSINESS PHONE: 6172466700 MAIL ADDRESS: STREET 1: 14 AUDUBON ROAD CITY: WAKEFIELD STATE: MA ZIP: 01880 FORMER COMPANY: FORMER CONFORMED NAME: BERTUCCIS HOLDING CORP DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 18, 1998 Commission File Number 0-19315 Bertucci's, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2947209 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 14 Audubon Road, Wakefield, Massachusetts, 01880 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (781) 246-6700 Indicate by check mark whether the registrant (1) has filed all reports required to be filled by section 13 or 15(d) of the Securities Exchange Act of the 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 the past 90 days. Yes X No_____ On May 28, 1998, 8,912,821 shares of the registrant's Common Stock were outstanding. BERTUCCI'S, INC. FORM 10-Q TABLE OF CONTENTS
PAGE PART I: FINANCIAL INFORMATION Item 1. Financial Statements: 1) Consolidated Condensed Balance Sheets April 18, 1998, and December 27, 1997 4 2) Consolidated Condensed Statements of Operations For Sixteen Weeks Ended April 18, 1998, and April 19, 1997 5 3) Consolidated Condensed Statements of Shareholders' Equity For Sixteen Weeks Ended April 18, 1998 6 4) Consolidated Condensed Statements of Cash Flows For Sixteen Weeks Ended April 18, 1998, and April 19, 1997 7 5) Notes to Consolidated Condensed Financial Statements 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9-11 PART II: OTHER INFORMATION 12-13 Item 1. Legal Proceedings Item 2. Changes In Securities Item 3. Defaults Upon Senior Securities Item 4. Submission Of Matters To A Vote Of Security Holders Item 5. Other Information Item 6. Exhibits And Reports On Form 8-K SIGNATURES 14
PART I: FINANCIAL INFORMATION BERTUCCI'S, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
April 18, December 27, 1998 1997 ---------------------------------- (in thousands) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,395 $ 5,755 Inventories 1,110 1,222 Accounts receivable 308 242 Note receivables 4 4 Other receivables 832 832 Prepaid expenses 900 678 Deferred preopening costs 343 434 Prepaid taxes 1,104 1,104 -------------- -------------- Total current assets 9,996 10,271 -------------- -------------- PROPERTY AND EQUIPMENT, at cost: Land 2,902 2,902 Buildings 10,477 10,474 Leasehold improvements 76,497 76,045 Machinery and equipment 40,613 39,972 Construction in progress 1,319 222 -------------- -------------- 131,808 129,615 Less - Accumulated depreciation 40,733 38,090 -------------- -------------- Net property and equipment 91,075 91,525 PREPAID TAXES 1,865 1,865 OTHER ASSETS 1,907 1,855 -------------- -------------- $ 104,843 $ 105,516 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable-current $ 25 $ 25 Accounts payable 5,427 5,983 Accrued expenses 1,455 2,384 Accrued payroll and employee benefits 3,368 3,738 Accrued taxes 2,024 1,880 -------------- -------------- Total current liabilities 12,299 14,010 DEFERRED RENT 6,764 6,610 NOTES PAYABLE - 25 LONG-TERM DEBT 13,500 13,500 SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value - Authorized - 200,000 shares, none issued - - Common stock, $.005 par value - Authorized - 15,000,000 shares Issued and outstanding - 8,896,016 shares at December 27, 1997, and 8,908,621 shares at April 18, 1998 45 45 Additional paid-in capital 45,238 45,165 Retained earnings 26,997 26,161 -------------- -------------- Total shareholders' equity 72,280 71,371 -------------- -------------- $ 104,843 $ 105,516 ============== ==============
The accompanying notes are an integral part of these consolidated condensed financial statements. BERTUCCI'S, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Sixteen Weeks Ended ------------------------------------------- April 18, April 19, 1998 1997 -------------- ---------------- (in thousands, except share data) NET SALES $ 43,956 $ 40,337 -------------- -------------- COSTS AND EXPENSES: Cost of sales 10,925 10,118 Operating expenses 23,165 20,945 General and administrative expenses 3,097 2,432 Depreciation and amortization 2,789 2,719 Taxes other than income 2,370 2,181 -------------- -------------- Total costs and expenses 42,346 38,395 -------------- -------------- Operating income 1,610 1,942 INTEREST EXPENSE, net 299 367 INTEREST INCOME 1 4 -------------- -------------- Income before income tax expense 1,312 1,579 INCOME TAX EXPENSE 476 576 -------------- -------------- Net income $ 836 $ 1,003 ============== ============== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING AND DILUTIVE POTENTIAL COMMON SHARES 9,003,406 8,883,801 ============== ============== EARNINGS PER SHARE BASIC AND DILUTED INCOME PER COMMON SHARE $ 0.09 $ 0.11 ============== ==============
The accompanying notes are an integral part of these consolidated condensed financial statements. BERTUCCI'S, INC. CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Common Stock Additional ------------------- Paid-In Retained Shareholders' Shares Par Capital Earnings Equity --------- --------- --------- --------- ------------- (in thousands) BALANCE, December 27, 1997 8,896 $ 45 $ 45,165 $ 26,161 $ 71,371 Issuance of stock 9 - 49 - 49 Exercise of options 4 - 24 - 24 Net income - - - 836 836 --------- --------- --------- --------- ------------- BALANCE, April 18, 1998 8,909 $ 45 $ 45,238 $ 26,997 $ 72,280 ========= ========= ========= ========= =============
The accompanying notes are an integral part of these consolidated condensed financial statements. BERTUCCI'S, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Sixteen Weeks Ended ---------------------------------- April 18, April 19, 1998 1997 -------------- --------------- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 836 $ 1,003 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,906 2,822 (Increase) decrease in inventories 112 (7) Increase in prepaid expenses, accounts receivable, notes receivable and other assets (298) (368) Decrease in accounts payable (556) (374) Increase in accrued expenses and deferred rent (1,145) 500 Increase in accrued, deferred and prepaid taxes 144 198 -------------- -------------- Net cash provided by operations 1,999 3,774 -------------- -------------- CASH FLOWS USED FROM INVESTING ACTIVITIES: Additions to preopening costs (63) (90) Additions to property and equipment (2,299) (2,179) Purchases of liquor licenses (45) (110) -------------- -------------- Net cash used by investing activities (2,407) (2,379) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 73 69 Paydown of debt - (2,000) Decrease in notes payable (25) (25) -------------- -------------- Net cash provided by (used by) financing activities 48 (1,956) -------------- -------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (360) (561) CASH AND CASH EQUIVALENTS, beginning of period 5,755 4,266 -------------- -------------- CASH AND CASH EQUIVALENTS, end of period $ 5,395 $ 3,705 ============== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for --- Interest, net of amount capitalized $ 354 $ 370 ============== ============== Income taxes $ 312 $ 547 ============== ==============
The accompanying notes are an integral part of these consolidated condensed finanical statements. BERTUCCI'S, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS April 18, 1998 1. Basis of Presentation In the opinion of management, the accompanying consolidated condensed financial statements contain all normal recurring adjustments necessary for a fair presentation. The results of operations for the sixteen-week period ended April 18, 1998 are not necessarily indicative of the results to be expected for the full year. The significant accounting policies followed by the Company are set forth in the notes to Consolidated Financial Statements in the Company's 1997 Form 10-K filed with the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements included in the 1997 Form 10-K. 2. Earnings Per Share During 1997, the Company adapted the provisions of SFAS No. 128, Earnings Per Share, which was effective for financial statements for periods ending after December 15, 1997. SFAS No. 128 requires replacement of primary earnings per share (EPS) with basic EPS, which is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted EPS, which gives effect to all dilutive potential common shares outstanding, is also required. For the sixteen-week periods ended April 18, 1998, and April 19, 1997, basis and diluted earnings are the same amount at $0.09 and $0.11, respectively. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following table sets forth the percentage relationship to net sales of certain items included in the Company's income statements for the periods indicated.
Sixteen Weeks Ended ------------------------------------- April 18, April 19, 1998 1997 ------------- ------------ NET SALES 100.0% 100.0% ------------- ------------ COSTS AND EXPENSES: Cost of sales 24.9 25.1 Operating expenses 52.7 51.9 General and administrative expenses 7.0 6.0 Depreciation and amortization 6.3 6.8 Taxes other than income 5.4 5.4 ------------- ------------ Total costs and expenses 96.3 95.2 ------------- ------------ Operating income 3.7 4.8 INTEREST EXPENSE, net 0.7 0.9 INTEREST INCOME - - ------------- ------------ Income before income tax expense 3.0 3.9 INCOME TAX EXPENSE 1.1 1.4 ------------- ------------ Net income 1.9% 2.5% ============= ============ RESTAURANT OPERATING DATA: Average sales per restaurant open for full period $ 1,685 $ 1,680 Percentage change in average sales per restaurant open for full period 0.3% (1.2)% Percentage change in comparable restaurant sales 3.2% 1.0 % NUMBER OF RESTAURANTS: Restaurants open at beginning of period 85 80 Restaurants opened during period - 1 Restaurants closed during period - - ------------- ------------ Restaurants open at end of period 85 81
Sixteen Weeks Ended April 18, 1998, Compared to Sixteen Weeks Ended April 19, 1997 Net sales increased $3.6 million, or 9.0%, to $44.0 million in the first quarter of fiscal year 1998, from $40.3 million in the first quarter of fiscal year 1997. The increase in net sales primarily came from the five new restaurants opened in fiscal year 1997. Comparative restaurant sales during the first quarter were positive by 3.2%. This modest increase was attributable to the milder than normal winter in the Northeast and increased customer counts in the Chicago area due to better awareness of the concept. Cost of sales, primarily food and beverages, increased from $10.1 million in the sixteen weeks ended April 19, 1997, to $10.9 million in the corresponding 1998 period. As a percentage of net sales, these costs were 25.1% in the 1997 fiscal period, and 24.9% in the 1998 fiscal period. The percentage decrease came from better buying opportunities and better efficiency at the operations level. Restaurant operating expenses for the sixteen-week period increased from $20.9 million in fiscal year 1997, to $23.2 million in fiscal year 1998. As a percentage of net sales, operating expenses increased from 51.9% in 1997, to 52.7% in the 1998 fiscal period. The percentage increase was attributable to increased labor costs, driven by an increase in the average wage rate and a tight labor market as a result of low unemployment and increased industry competition. General and administrative expenses increased from $2.4 million in the sixteen weeks ended April 19, 1997, to $3.1 million in the corresponding 1998 period. As a percentage of net sales, general and administrative costs increased from 6.0% in 1997, to 7.0% in the 1998 fiscal period. Approximately $300,000 of the increase in 1998 is attributable to earlier advertising production costs than in the prior year. Advertising expense for the remainder of the year is expected to be approximately $800,000 to $1 million less than the comparable prior period. The remainder of the increase was the result of increased costs associated with a bonus plan implemented in 1997, and payroll costs associated with training and development of the managers for the new restaurant openings scheduled for 1998. Depreciation and amortization expense decreased, as a percentage of net sales, from 6.8% in the 1997 period, to 6.3% in the 1998 sixteen-week period. This decrease was attributable to the amortization expense on fewer new restaurants. Taxes other than income increased from $2.2 million during the sixteen weeks ended April 19, 1997, to $2.4 million in the corresponding 1998 period, due to increases in real property taxes and payroll taxes. Interest expense decreased from $367,000 to $299,000 for the sixteen weeks of 1997 and 1998, respectively. This decrease was attributable to the lower amount of bank borrowings and lower interest rate charged during the 1998 sixteen-week period. The effective income tax rate decreased from 36.5% for the sixteen weeks ended April 19, 1997, to 36.3% for the corresponding period ending April 18, 1998. Liquidity and Sources of Capital To date, the Company has financed its expansion from operations, bank borrowings, and the private placements and public offerings of equity securities. The Company does not have significant receivables or inventory. The Company receives trade credit based upon negotiated terms for purchasing food and supplies. The Company has a bank line-of-credit, refinanced in November 1997, effect until November 30, 2002, under which it may borrow up to $22.5 million. The Company pays a commitment fee to the bank and interest is calculated using LIBOR plus an applicable LIBOR margin. The applicable LIBOR margin and the applicable commitment fee rate for any fiscal quarter shall be determined at the end of the previous fiscal quarter based on the ratio of Consolidated Total Funded Debt to Consolidated EBITDA. Based on the determination of the aforementioned ratio, the Company will pay between .50% and 1.25% as a LIBOR margin and between .125% and .250% as an applicable commitment fee rate. There are no compensating-balance arrangements or legal restrictions as to the withdrawal of these funds. At April 19, 1997, and April 18, 1998, the amounts outstanding under this line-of-credit were $16.4 million and $13.5 million, respectively. During the sixteen weeks ended April 19, 1997, and April 18, 1998, the Company's investment in property and equipment was $2.2 million and $2.3 million, respectively. The investments were funded with cash provided by operations and with the proceeds of financing activities. During the sixteen weeks ended April 19, 1997, and April 18, 1998, the Company generated net cash, from continuing operations, of $3.8 million and $2.0 million, respectively. The Company expects to open six restaurants in fiscal year 1998 and five to six restaurants in fiscal year 1999. The Company expects to expend approximately $9.0 million in fiscal year 1998, and approximately $7.5 million in fiscal year 1999 to finance its planned expansion. The Company believes that it will have sufficient working capital and bank borrowing to finance its expansion plan through the end of fiscal year 1999. New Accounting Pronouncements In April 1998, the AICPA issued its Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-Up Activities. SOP 98-5 requires that costs incurred during start-up activities, including organization costs, be expensed as incurred. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998, although early application is encouraged. Initial application of SOP 98-5 should be as of the beginning of the fiscal year in which it is first adopted and should be reported as a cumulative effect of a change in accounting principle. The Company currently intends to early adopt SOP 98-5 on January 1, 1999. Upon adoption, the Company estimates it will incur a cumulative effect of a change in accounting principle that will range from $300,000 to $400,000. This estimate primarily includes unamortized preopening costs which were previously amortized over the 12-month period subsequent to a restaurant opening. Forward-Looking Information Information and statements in this Form 10-Q contains certain forward-looking statements and information relating to the Company that are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to, the Company's management. When used in the Form 10-Q, words such as "believe", "expect" and similar expressions, as they relate to the Company or the Company's management, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the operations and results of operations of the Company, competitive factors and pricing pressures, shifts in consumer demand, the costs of products and services, general economic conditions and acts of third parties, as well as other factors described in the Form 10-Q and, from time to time, in the Company's periodic earnings releases and reports filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein as believed or expected. PART II: OTHER INFORMATION Item 1. LEGAL PROCEEDINGS After the announcement of the agreement among the Company, Ten Ideas, Inc. and Ten Ideas Acquisition Corp., pursuant to which the Company would be merged with Ten Ideas Acquisition Corp. (the "Ten Ideas Merger"), the following three (3) purported class action lawsuits were filed in February 1998 in Massachusetts Superior Court against the Company and its Board of Directors in connection with the Ten Ideas Merger (the "Stockholder Actions"): (i) Marietta Brewster, v. Joseph Crugnale, et al., Civil Action No. 98-793; (ii) Sandra Weiss, on behalf of herself and all others similarly situated v. Bertucci's, Inc., et al. Civil Action No. 98-811; and (iii) Keith Jamison, on behalf of himself and all others similarly situated v. Joseph Crugnale, et al., Civil Action No. 98-877. The Stockholder Action were consolidated into one action on May 21, 1998. The plaintiffs claim that the Ten Ideas Merger is, or consummation thereof will be, wrongful, unfair, and in breach of the individual defendants' fiduciary duties. The plaintiffs alleged that the price per share in the Ten Ideas Merger is grossly inadequate, that consummation of the Ten Ideas Merger would be without an auction of the Company or other market check, and that the defendants possessed non-public information concerning the condition and prospects of the Company. The plaintiffs in the Stockholder Action seek preliminary and permanent injunctive relief against the Ten Ideas Merger, unspecified monetary damages and other relief. To date, the plaintiffs have not filed a motion for preliminary injunction or other preliminary relief. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION On Wednesday, May 13, 1998, the Company terminated the Agreement and Plan of Merger, dated as of February 13, 1998, by and among the Company Ten Ideas, Inc. and Ten Ideas Acquisition Corp. Later that same day, the Company entered into an Agreement and Plan of Merger with NE Restaurant Company, Inc., a Delaware corporation ("NERC"), and NERC Acquisition Corp., a Massachusetts corporation ("NERC Acquisition") (the "Merger Agreement"). Pursuant to the terms of the Merger Agreement, on May 20, 1998, NERC Acquisition commenced a tender offer to purchase all of the outstanding shares of the Company's common stock for $10.50 per share. In the merger to occur following consummation of the tender offer, each share of the Company's common stock which is outstanding and not purchased pursuant to the tender offer will be converted into the right to receive $10.50 per share in cash. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27: Financial Data Schedule (b) Reports on Form 8-K The Company filed a Current Report on Form 8-K on February 26, 1998, to report the execution of the Merger Agreement with Ten Ideas, Inc., pursuant to Item 5 of Form 8-K. The Company filed a Current Report on Form 8-K on May 15, 1998 to report the execution of the Merger Agreement with NE Restaurant Company, Inc. pursuant to Item 5 of Form 8-K. 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. BERTUCCI'S, INC. (Registrant) Date: May 28, 1998 By: /s/ Joseph Crugnale ------------------------------ Joseph Crugnale President and Chief Executive Officer Date: May 28, 1998 By: /s/ Norman S. Mallett ------------------------------- Norman S. Mallett Vice President-Finance Chief Financial Officer and Treasurer EX-27 2 ARTICLE 5 FDS FOR FIRST QUARTER 10-Q
5 (Replace this text with the legend) 0000874971 BERTUCCI'S, INC. 1,000 3-MOS DEC-26-1998 APR-18-1998 5,395 0 1,144 0 1,110 9,996 131,808 40,733 104,843 12,299 0 0 0 45 72,280 104,843 43,956 43,956 10,925 10,925 28,324 0 298 1,312 476 836 0 0 0 836 0.09 0.09
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