-----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, RH5jBJRPgNYRMUvWhUi5RDzF++/V4KQ6z6CwnKNcmWxfaKhh8zOAlfdUOwpIMnH+ UV5ASBCJLfp0ACbC1NSmCA== 0000891082-96-000004.txt : 19960625 0000891082-96-000004.hdr.sgml : 19960625 ACCESSION NUMBER: 0000891082-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TACO CABANA INC CENTRAL INDEX KEY: 0000891082 STANDARD INDUSTRIAL CLASSIFICATION: 5812 IRS NUMBER: 742201241 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20716 FILM NUMBER: 96559354 BUSINESS ADDRESS: STREET 1: 8918 TESORO DRIVE STREET 2: SUITE 200 CITY: SAN ANTONIO STATE: TX ZIP: 78217-6219 BUSINESS PHONE: 2108040990 MAIL ADDRESS: STREET 1: 8918 TESORO DRIVE STREET 2: SUITE 200 CITY: SAN ANTONIO STATE: TX ZIP: 78217-6219 10-Q 1 TACO CABANA, INC. FORM 10-Q 3/31/96 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 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, 1996 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-20716 TACO CABANA, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2201241 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 8918 Tesoro Drive, Suite 200 San Antonio, Texas 78217 (Address of principal executive offices) Telephone Number (210) 804-0990 (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 ----- ----- Indicate the number of shares of each of the issuer's classes of common stock as of the latest practicable date: Class Outstanding at May 1, 1996 ----- -------------------------- Common Stock 15,687,162 shares TACO CABANA, INC. INDEX Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at March 31, 1996 2 and December 31, 1995 Condensed Consolidated Statements of Income for the 3 Thirteen Weeks Ended March 31, 1996 and April 2, 1995 Condensed Consolidated Statements of Cash Flows for the 4 Thirteen Weeks Ended March 31, 1996 and April 2, 1995 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial 7 Condition and Results of Operations PART II. OTHER INFORMATION Items 1 through 5 have been omitted since the registrant has no reportable events in relation to the items Item 6. Exhibits and Reports on Form 8-K 11 Signature 11 TACO CABANA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, December 31, 1996 1995 --------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,840,000 $ 2,749,000 Receivables, net 1,468,000 1,376,000 Inventory 1,762,000 1,846,000 Prepaid expenses 1,539,000 1,700,000 Pre-opening costs, net 189,000 500,000 Income taxes receivable 2,786,000 2,777,000 Deferred income taxes 676,000 497,000 ----------- ----------- Total current assets 11,260,000 11,445,000 PROPERTY AND EQUIPMENT, net 87,067,000 87,695,000 NOTES RECEIVABLE, net 621,000 780,000 INTANGIBLE ASSETS, net 46,636,000 47,038,000 OTHER ASSETS 921,000 934,000 INVESTMENT IN JOINT VENTURE 936,000 686,000 ----------- ----------- TOTAL $147,441,000 $148,578,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 4,500,000 $ 5,409,000 Accrued liabilities 2,477,000 3,864,000 Current maturities of long-term debt and capital leases 2,128,000 2,074,000 Line of credit 2,916,000 2,186,000 ----------- ----------- Total current liabilities 12,021,000 13,533,000 LONG-TERM OBLIGATIONS, net of current maturities: Capital leases 4,195,000 4,242,000 Long-term debt 10,288,000 10,788,000 ----------- ----------- Total long-term obligations 14,483,000 15,030,000 ----------- ----------- ACQUISITION LIABILITIES 4,577,000 4,888,000 DEFERRED LEASE PAYMENTS 796,000 935,000 DEFERRED INCOME TAXES 2,497,000 1,865,000 STOCKHOLDERS' EQUITY: Common stock 157,000 157,000 Additional paid-in capital 96,960,000 96,954,000 Retained earnings 15,950,000 15,216,000 ----------- ----------- Total stockholders' equity 113,067,000 112,327,000 ----------- ----------- TOTAL $147,441,000 $148,578,000 =========== =========== See Notes to Condensed Consolidated Financial Statements. TACO CABANA, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Thirteen Weeks Ended ---------------------------- March 31, April 2, 1996 1995 --------- -------- REVENUES: Restaurant sales $31,119,000 $32,065,000 Franchise fees and royalty income 145,000 772,000 ---------- ---------- Total revenues 31,264,000 32,837,000 ---------- ---------- COSTS AND EXPENSES: Restaurant cost of sales 9,702,000 10,374,000 Labor 8,176,000 8,478,000 Occupancy 2,051,000 2,024,000 Other restaurant operating costs 5,658,000 6,254,000 General and administrative 1,732,000 1,397,000 Depreciation and amortization 2,367,000 2,443,000 ---------- ---------- Total costs and expenses 29,686,000 30,970,000 ---------- ---------- INCOME FROM OPERATIONS 1,578,000 1,867,000 ---------- ---------- INTEREST EXPENSE, NET (412,000) (220,000) ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,166,000 1,647,000 ---------- ---------- PROVISION FOR INCOME TAXES (432,000) (609,000) ---------- ---------- NET INCOME $ 734,000 $ 1,038,000 ========== ========== NET INCOME PER SHARE $ 0.05 $ 0.07 ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING 15,867,382 15,746,087 ========== ========== See notes to Condensed Consolidated Financial Statements. TACO CABANA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Thirteen Weeks Ended ---------------------------- March 31, April 2, 1996 1995 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 734,000 $ 1,038,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,367,000 2,443,000 Deferred income taxes 453,000 (217,000) Changes in operating working capital items (2,406,000) (2,854,000) ---------- ---------- Net cash provided by operating activities 1,148,000 410,000 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (1,050,000) (9,728,000) Investment in joint venture (250,000) - ---------- ---------- Net cash used for investing activities (1,300,000) (9,728,000) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes payable and draws on line of credit 730,000 6,500,000 Principal payments under long-term debt (446,000) (209,000) Principal payments under capital leases (47,000) (39,000) Exercise of stock options 6,000 9,000 ---------- ---------- Net cash provided by financing activities 243,000 6,261,000 ---------- ---------- NET INCREASE (DECREASE) IN CASH 91,000 (3,057,000) CASH AND CASH EQUIVALENTS, beginning of period 2,749,000 7,275,000 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ 2,840,000 $ 4,218,000 ========== ========== See notes to Condensed Consolidated Financial Statements. TACO CABANA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Principles of Consolidation - The consolidated financial statements include all accounts of Taco Cabana, Inc. and its wholly-owned subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated. The unaudited Condensed Consolidated Financial Statements include all adjustments, consisting of normal, recurring adjustments and accruals, which the Company considers necessary for fair presentation of financial position and the results of operations for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. Special Charge During the second quarter of 1995, the Company recorded a reserve for notes and other receivables of $3.5 million and a special charge of $8.1 million. The charges were the result of a comprehensive review of the operations of the Company performed by management during the second quarter of 1995 and included approximately $2.6 million for market value adjustments resulting from a decision to close six Company-owned restaurants (including one mall unit). As of March 31, 1996, all of the identified restaurants had been closed. 3. Earnings per Share Net income per share has been computed by dividing net income by the weighted average number of common shares outstanding during each period. Common stock equivalent shares, which relate to stock options, are included in the weighted average when the effect is dilutive. 4. Supplemental Disclosure of Cash Flow Information Thirteen Weeks Ended ---------------------- March 31, April 2, 1996 1995 --------- -------- (Unaudited) (Unaudited) Cash paid for interest $ 337,000 $ 240,000 Interest capitalized on construction costs - 72,000 Notes receivable acquired in exchange for property, plant and equipment - 1,286,000 5. Litigation On September 13, 1995, a shareholder class action lawsuit was filed in the federal district court in San Antonio, Texas. The lawsuit names several of the current and former officers, directors and principal stockholders of the Company and underwriters of certain of the Company's public offerings. The lawsuit alleges that the defendants violated federal securities laws by alleged misrepresentations which the plaintiffs claim were designed to artificially inflate the Company's stock price. The suit alleges that the defendants misrepresented the condition of the Company's business, principally with regard to the success of its acquisition of Two Pesos restaurants, its future earnings prospects, and its declining sales volume. The allegations cover the time period from April 8, 1993 to September 17, 1994, including public offerings of the Company's stock on July 7, 1993 and December 7, 1993. The complaint seeks compensatory damages and other relief allowed by law. The Company believes that the allegations in the lawsuit are without merit, and intends to vigorously defend against them. The Company and individual defendants have filed answers denying the claims. Concurrently, a counterclaim and a motion for sanctions alleging that the complaint is frivolous, requesting that the complaint be dismissed and that the Court award sanctions against the plaintiffs was filed. While this action is in the early stages and it is not possible at this time to determine the outcome of the lawsuit or the potential effect of its resolution on the Company's financial position or operating results, the Company believes its defenses have merit. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The Company commenced operations in 1978 with the opening of the first Taco Cabana restaurant in San Antonio. As of May 1, 1996, the Company had 104 Company-owned restaurants and 25 franchised restaurants. The Company's revenues are derived primarily from sales by Company-owned restaurants, with franchise fees and royalty income contributing less than 1% of total revenues for the first quarter of the 1996 fiscal year. During the second quarter of 1995, the Company recorded a reserve for notes and other receivables of $3.5 million and a special charge of $8.1 million. The charges were the result of a comprehensive review of the operations of the Company performed by management during the second quarter of 1995 and included approximately $2.6 million for market value adjustments resulting from a decision to close six Company-owned restaurants (including one mall unit). As of March 31, 1996, all of the identified restaurants had been closed. During the thirteen weeks ended March 31, 1996, the Company closed two Company-owned restaurants and a franchisee of the Company, in which the Company has a joint-venture interest, opened one restaurant. The following table sets forth for the periods indicated the percentage relationship to total revenues, unless otherwise indicated, of certain income statement data. The table also sets forth certain restaurant data for the periods indicated. Thirteen Weeks Ended -------------------- March 31, April 2, 1996 1995 --------- -------- Income Statement Data: REVENUES: Restaurant sales 99.5% 97.7% Franchise fees and royalty income .5 2.3 ----- ----- Total revenues 100.0% 100.0% ===== ===== COSTS AND EXPENSES: Restaurant cost of sales (1) 31.2 32.4 Labor (1) 26.3 26.4 Occupancy (1) 6.6 6.3 Other restaurant operating costs (1) 18.2 19.5 General and administrative costs 5.5 4.3 Depreciation and amortization 7.6 7.4 INCOME FROM OPERATIONS 5.0 5.7 INTEREST EXPENSE (1.3) (.7) ----- ----- INCOME BEFORE INCOME TAXES 3.7 5.0 PROVISION FOR INCOME TAXES (1.4) (1.8) ----- ----- NET INCOME 2.3% 3.2% ===== ===== Restaurant Data: Company-owned restaurants: Beginning of period 106 104 Opened - 5 Sold (Refranchised) - (3) Closed (2) - ----- ----- End of period 104 106 Franchised restaurants: End of period 25 26 ----- ----- Total restaurants: End of period 129 132 ===== ===== (1) Percentage is calculated based upon restaurant sales. The Thirteen Weeks Ended March 31, 1996 Compared to the Thirteen Weeks Ended April 2, 1995 Revenues. Restaurant sales decreased by $946,000, or 3.0%, to $31.1 million for the first quarter of 1996 from $32.1 million for the first quarter in 1995. Sales from restaurants opened after January 1, 1995 accounted for an increase of $1.9 million. This increase was offset by sales from restaurants which were closed after April 2, 1995 of $1.6 million, as well as a decrease in sales of approximately $1.2 million for restaurants opened or acquired prior to January 1, 1995. Management attributes much of this decline in sales to the cannibalization of revenues at existing restaurants upon the opening of newer restaurants, increased levels of competition in the Company's core markets and inclement weather during the first quarter of 1996. Franchise and royalty fees decreased by $627,000 to $145,000 for the first quarter of 1996 compared to the first quarter of 1995, due primarily to decreased revenues related to new franchise development agreements. Costs and Expenses. Restaurant cost of sales, calculated as a percentage of restaurant sales, decreased to 31.2% in the first quarter of 1996 from 32.4% for the first quarter of 1995. The decrease was due primarily to the negotiation of favorable commodity prices. Other restaurant operating costs as a percentage of restaurant sales decreased to 18.2% in the first quarter of 1996 from 19.5% for same period of 1995. This decrease is due primarily to management's increased focus on unit level operations. General and administrative expenses increased to $1.7 million from $1.4 million, and increased as a percentage of total revenues to 5.5% for the first quarter of 1996 from 4.3% for the comparable period in 1995. This increase was primarily attributable to the addition of management, as well as an increased level of expenditures to support the Company's operations. Depreciation and amortization expense consisted of the following: Thirteen Weeks Ended ---------------------- March 31, April 2, 1996 1995 --------- -------- (Unaudited) (Unaudited) Depreciation of property and equipment $ 1,647,000 $ 1,417,000 Amortization of intangible assets 404,000 417,000 Amortization of pre-opening costs 316,000 609,000 Depreciation expense increased by approximately $230,000 for the quarter ended March 31, 1996 compared to the quarter ended April 2, 1995. The increase was due to restaurant openings during 1995. Amortization of pre-opening expenses decreased by approximately $293,000 in the first quarter of 1996 compared to the first quarter of 1995, due to the decrease in the number of stores opened during the most recent twelve-month period compared to the twelve-month period ended April 2, 1995. Interest Expense, net. Interest expense, net of interest capitalized on construction costs, increased to $467,000 in the first quarter of 1996 from $306,000 in the first quarter of 1995, primarily as a result of interest expense associated with usage of the Company's line of credit. No interest was capitalized during the first quarter of 1996. The Company earned $55,000 of interest income during the first quarter of 1996, compared to $86,000 of interest income during the first quarter of 1995. Net Income and Earnings Per Share. Net income decreased to $734,000 for the first quarter of 1996 from $1,038,000 for the same period in 1995. Net income was 2.3% of total revenues for the first quarter in 1996 compared to 3.2% in the first quarter of 1995. Earnings per share was $0.05 for the first quarter of 1996 compared to $0.07 in the same period of 1995. Liquidity and Capital Resources Historically, the Company has financed business and expansion activities by using funds generated from operating activities, build-to-suit leases, equity financing, short and long-term debt and capital leases. The Company maintains two secured credit facilities totaling $20 million, including a $5 million revolving line of credit for construction or operating funds. As of May 1, 1996, $10.4 million had been used under these facilities. Net cash provided by operating activities was $1.1 million for the thirteen weeks ended March 31, 1996, and $410,000 for the thirteen weeks ended April 2, 1995. Net cash used in investing activities was $1.3 million for the thirteen weeks ended March 31, 1996, and $9.7 million for the thirteen weeks ended April 2, 1995. The special charge recorded in the second quarter of 1995 included an accrual of approximately $1.2 million to record the estimated monthly lease payments, net of expected sublease receipts, associated with certain restaurants which have been closed. Cash requirements for this accrual were approximately $29,000 in the first quarter of 1996. Several of the restaurants which have been closed, as well as the Company's previous corporate offices, are currently for sale. Although there can be no assurance of the particular price at which any of such properties will be sold, the Company will receive funds upon the actual disposition of these properties. In addition, certain acquisition and accrued liabilities related to the Two Pesos acquisition were reduced by payments of approximately $517,000 during the first quarter of 1996. The Company believes that existing cash balances, funds generated from operations, its ability to borrow, and the possible use of lease financing will be sufficient to meet the Company's capital requirements through 1996. Seasonality and Quarterly Results The Company's sales fluctuate seasonally. Historically, the Company's highest sales and earnings occur in the second and third quarters. In addition, quarterly results are affected by the timing of the opening and closing of stores. Therefore, quarterly results cannot be used to indicate the results for the entire year. Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the period covered by this report. Signature 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. Dated: May 10, 1996 Taco Cabana, Inc. /s/ David G. Lloyd ------------------------------- David G. Lloyd Vice President, Chief Financial Officer, Secretary and Treasurer Signing on behalf of the registrant and as the principal financial and accounting officer EX-27 2
5 0000891082 TACO CABANA, INC. 1 U.S. DOLLARS 3-MOS DEC-29-1996 JAN-01-1996 MAR-31-1996 1 (1,328,000) 4,168,000 1,985,000 517,000 1,762,000 11,260,000 103,640,000 16,573,000 147,441,000 12,021,000 10,288,000 0 0 157,000 112,910,000 147,441,000 31,119,000 31,264,000 9,702,000 18,252,000 1,732,000 0 412,000 1,166,000 432,000 734,000 0 0 0 734,000 0.05 0.05
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