-----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, Kodhr/7L/ddKE+G2JDjuE4Cezr6TNR1t0s1oBZiVNc+a1bNmsQxn5RVB481d/Nc5 4V+AMbi+MLTLZMZP2475Gg== 0000891082-99-000010.txt : 19990519 0000891082-99-000010.hdr.sgml : 19990519 ACCESSION NUMBER: 0000891082-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990404 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TACO CABANA INC CENTRAL INDEX KEY: 0000891082 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 742201241 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20716 FILM NUMBER: 99629760 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: 3309 SAN PEDRO AVE STREET 2: SUITE 200 CITY: SAN ANTONIO STATE: TX ZIP: 78212 10-Q 1 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 April 4, 1999 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 3, 1999 Common Stock 13,384,450 shares 1 TACO CABANA, INC. INDEX Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at 3 April 4, 1999 and January 3, 1999 Condensed Consolidated Statements of Income for 4 the Thirteen Weeks Ended April 4, 1999 and March 29, 1998 Condensed Consolidated Statements of Cash Flows 5 for the Thirteen Weeks Ended April 4, 1999 and March 29, 1998 Notes to Condensed Consolidated Financial 6 Statements Item 2. Management's Discussion and Analysis of 8 Financial 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 15 Signature 16 2 TACO CABANA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) January 3, April 4, 1999 1999 ---------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents................. $ 719,000 $ 897,000 Receivables, net.......................... 438,000 337,000 Inventory................................. 2,273,000 2,311,000 Prepaid expenses.......................... 3,128,000 3,286,000 Federal income taxes receivable........... 200,000 200,000 ---------- ----------- Total current assets...................... 6,758,000 7,031,000 PROPERTY AND EQUIPMENT, net............... 72,250,000 75,963,000 NOTES RECEIVABLE.......................... 258,000 297,000 INTANGIBLE ASSETS, net.................... 10,724,000 10,578,000 OTHER ASSETS.............................. 212,000 235,000 ----------- ----------- TOTAL..................................... $90,202,000 $94,104,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.......................... $5,362,000 $4,692,000 Accrued liabilities....................... 5,265,000 5,629,000 Current maturities of long-term debt and capital leases........................ 5,704,000 3,238,000 Line of credit............................ 3,550,000 1,540,000 ----------- ----------- Total current liabilities................. 19,881,000 15,099,000 LONG-TERM OBLIGATIONS, net of current maturities: Capital leases............................ 2,140,000 2,082,000 Long-term debt............................ 18,930,000 24,905,000 ----------- ----------- Total long-term obligations............... 21,070,000 26,987,000 ACQUISITION AND CLOSED RESTAURANT LIABILITIES............................... 7,713,000 7,556,000 DEFERRED LEASE PAYMENTS................... 761,000 725,000 STOCKHOLDERS' EQUITY: Common stock.............................. 159,000 134,000 Additional paid-in capital................ 98,056,000 84,383,000 Retained deficit.......................... (43,544,000)(40,780,000) Treasury stock, at cost (2,576,937 shares at January 3, 1999)................ (13,894,000) - ------------ ----------- Total stockholders' equity.............. 40,777,000 43,737,000 ------------ ----------- TOTAL.....................................$ 90,202,000 $94,104,000 ============ =========== See Notes to Condensed Consolidated Financial Statements. 3 TACO CABANA, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Thirteen Weeks Ended ---------------------------- March 29, April 4, 1998 1999 -------------- ------------ REVENUES: Restaurant sales..........................$32,322,000 $36,836,000 Franchise fees and royalty income......... 85,000 74,000 ----------- ----------- Total revenues.......................... 32,407,000 36,910,000 ----------- ----------- COSTS AND EXPENSES: Restaurant cost of sales.................. 9,792,000 10,927,000 Labor..................................... 8,672,000 10,127,000 Occupancy................................. 1,907,000 2,010,000 Other restaurant operating costs.......... 6,002,000 6,251,000 General and administrative................ 1,912,000 2,050,000 Depreciation, amortization and restaurant opening costs.................. 1,868,000 2,229,000 ----------- ----------- Total costs and expenses................ 30,153,000 33,594,000 ----------- ----------- INCOME FROM OPERATIONS.................... 2,254,000 3,316,000 ----------- ----------- INTEREST EXPENSE, NET..................... (397,000) (552,000) ----------- ----------- INCOME BEFORE INCOME TAXES................ 1,857,000 2,764,000 INCOME TAX EXPENSE........................ - - ----------- ----------- NET INCOME................................ $1,857,000 $2,764,000 =========== =========== BASIC EARNINGS PER SHARE.................. $ 0.13 $ 0.21 =========== =========== BASIC WEIGHTED SHARES OUTSTANDING......... 14,826,138 13,350,840 =========== =========== DILUTED EARNINGS PER SHARE................ $ 0.12 $ 0.20 =========== =========== DILUTED WEIGHTED SHARES OUTSTANDING....... 15,028,731 13,714,176 =========== =========== See Notes to Condensed Consolidated Financial Statements. 4 TACO CABANA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Thirteen Weeks Ended ---------------------------- March 29, April 4, 1998 1999 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income...............................$ 1,857,000 $2,764,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......... 1,668,000 2,057,000 Capitalized interest.................. (52,000) (62,000) Changes in operating working capital items....................... (1,666,000) (693,000) ----------- ---------- Net cash provided by operating activities 1,807,000 4,066,000 ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment........ (5,075,000) (5,984,000) Proceeds from sales of property and equipment............................... 1,251,000 459,000 ----------- ---------- Net cash used for investing activities.... (3,824,000) (5,525,000) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes payable and draws on line of credit............. 2,611,000 8,404,000 Principal payments under long-term debt... (639,000) (6,911,000) Principal payments under capital leases... (44,000) (52,000) Purchase of treasury stock................ (44,000) - Exercise of stock options................. 153,000 196,000 ----------- ---------- Net cash provided by financing activities 2,037,000 1,637,000 ----------- ---------- NET INCREASE IN CASH...................... 20,000 178,000 CASH AND CASH EQUIVALENTS, beginning of period............................... 339,000 719,000 ----------- ---------- CASH AND CASH EQUIVALENTS, end of period.. $ 359,000 $897,000 =========== ========== See Notes to Condensed Consolidated Financial Statements. 5 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 January 3, 1999. 2. Stockholders' Equity The Company's Board of Directors previously approved plans to repurchase up to a total of 4,000,000 shares of the Company's Common Stock. Since the inception of the stock purchase program, the Company has repurchased a total of 2,585,000 shares at an aggregate cost of $13.9 million. During the first quarter of 1999, the Company retired all of the common shares held in treasury. The cost of the reacquired shares in excess of par value has been charged to additional paid in capital. The timing, price, quantity and manner of any future purchases will be made at the discretion of management and will depend upon market conditions. 3. Earnings per Share Basic earnings per share was computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares. 6 The following table sets forth the computation of basic and diluted earnings per share: Thirteen Weeks Ended ------------------------------ March 29, 1998 April 4, 1999 --------------- ------------- (Unaudited) (Unaudited) Numerator for basic and diluted earnings per share - net income $1,857,000 $2,764,000 Denominator: Denominator for basic earnings - per share weighted- average shares 14,826,138 13,350,840 Effect of dilutive securities - Employee stock options 202,593 363,336 ----------- ----------- Denominator for diluted earnings per share - adjusted weighted- average and assumed conversions 15,028,731 13,714,176 =========== =========== Basic earnings per share $ 0.13 $ 0.21 =========== =========== Diluted earnings per share $ 0.12 $ 0.20 =========== =========== 4. Supplemental Disclosure of Cash Flow Information Thirteen Weeks Ended --------------------- March 29, 1998 April 4, 1999 ------------- ------------ (Unaudited) (Unaudited) Cash paid for interest ........... $ 385,000 $ 562,000 Interest capitalized on construction costs ............... 52,000 62,000 7 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, Texas. As of May 3, 1999, the Company had 106 Company-owned restaurants and 10 franchised restaurants. The Company's revenues are derived primarily from sales by Company-owned restaurants, with franchise fees and royalty income currently contributing less than 1% of total revenues. The Company opened two and closed one Company-owned restaurants during the first quarter of 1999 for a total of 103 company-owned and 10 franchised restaurants. Subsequent to April 4, 1999, three Company-owned restaurants were opened for a current systemwide total of 116 restaurants. 8 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 29, April 4, 1998 1999 --------- --------- Income Statement Data: REVENUES: Restaurant sales 99.7% 99.8% Franchise fees and royalty income 0.3 0.2 ----- ----- Total revenues 100.0% 100.0% ===== ===== COSTS AND EXPENSES: Restaurant cost of sales (1) 30.3 29.7 Labor (1) 26.8 27.5 Occupancy (1) 5.9 5.5 Other restaurant operating costs (1) 18.6 17.0 General and administrative costs 5.9 5.6 Depreciation, amortization and restaurant opening costs 5.8 6.0 ----- ----- INCOME FROM OPERATIONS 7.0 9.0 INTEREST EXPENSE (1.2) (1.5) ----- ----- INCOME BEFORE INCOME TAXES 5.7 7.5 INCOME TAX EXPENSE - - ----- ----- NET INCOME 5.7% 7.5% ===== ===== Restaurant Data: COMPANY OWNED RESTAURANTS: Beginning of period 98 102 Opened 3 2 Closed (2) (1) ---- ---- End of period 99 103 FRANCHISED RESTAURANTS (2): 11 10 ---- ---- TOTAL RESTAURANTS: 110 113 ==== ==== (1) Percentage is calculated based upon restaurant sales. (2) Excludes Two Pesos licensed restaurants. 9 The Thirteen Weeks Ended April 4, 1999 Compared to the Thirteen Weeks Ended March 29, 1998 Restaurant Sales. Restaurant sales increased by $4.5 million, or 14%, to $36.8 million for the first quarter of 1999 from $32.3 million for the first quarter in 1998. The increase is due primarily to an increase in sales at existing restaurants. Comparable store sales, defined as Taco Cabana restaurants that have been open 18 months or more at the beginning of the quarter, increased 6.5%. Management attributes the increase to several factors including a more consistent marketing program, increased media expenditures, a commitment to increased staffing levels at existing restaurants, the ongoing reimage program and the continued opening of higher than average volume restaurants. Sales from restaurants opened after March 29, 1998 accounted for an increase of $2.5 million. This increase was offset by sales from restaurants which were closed after March 29, 1998 of $626,000. Restaurant Cost of Sales. Restaurant cost of sales, calculated as a percentage of restaurant sales, decreased to 29.7% in the first quarter of 1999 from 30.3% for the first quarter of 1998. The decrease was due primarily to a price increase of approximately 2% taken in December 1998 and continued improvements in the management of food costs through utilizing increased controls and improved purchasing programs. The Company recently completed negotiation of favorable fajita meat and cheese purchase contracts. Management expects the favorable cost of sales trends to continue during 1999. Labor. Labor costs calculated as a percentage of restaurant sales increased to 27.5% during the first quarter of 1999 from 26.8% for the same period in 1998. The increase in labor costs is due to management's continued commitment to increase staffing levels at the restaurant level in order to provide a consistent guest experience as well as higher than normal labor costs at newer restaurants. New restaurants generally have higher than normal labor costs for the first four to six months of operations. Management expects labor costs as a percentage of sales to be flat to slightly up during all of 1999. Occupancy. Occupancy costs increased by $103,000 during the first quarter of 1999 compared to the first quarter of 1998. The increase is primarily due to the opening of new restaurants. As a percentage of restaurant sales, occupancy costs decreased to 5.5% in the first quarter of 1999 compared to 5.9% in the first quarter of 1998. Management expects the dollar amount to increase in 1999 due to new openings, although it should continue to show improvement as a percentage of sales. Other Restaurant Operating Costs. Other restaurant operating costs increased to $6.3 million in the first quarter of 1999 compared to $6.0 million in the first quarter of 1998. As a percentage of restaurant sales, other restaurant operating costs decreased to 17.0% for the first quarter of 1999 compared to 18.6% for the first quarter of 1998. The decrease is due to the leverage from higher average sales as the dollar amount of other operating costs per store open remained relatively flat. Management expects this amount, as a percentage of sales, to be slightly lower during the remainder of 1999. 10 General and Administrative. General and administrative expenses increased to $2.1 million for the first quarter of 1999 from $1.9 million in the comparable period of 1998. As a percentage of sales, general and administrative expenses decreased to 5.6% for the first quarter of 1999 compared to 5.9% for the comparable period in 1998. Management expects this amount to be flat or increase slightly, as a dollar amount, but continue to decrease as a percentage of sales during 1999. Depreciation, Amortization and Restaurant Opening Costs. Depreciation, amortization and restaurant opening costs consisted of the following: Thirteen Weeks Ended ---------------------- March 29, 1998 April 4, 1999 -------------- ------------- (Unaudited) (Unaudited) Depreciation of property and equipment .......................$ 1,531,000 $ 1,911,000 Amortization of intangible assets .......................... 137,000 146,000 Restaurant opening costs ........ 200,000 172,000 Depreciation expense increased by approximately $380,000 for the quarter ended April 4, 1999 compared to the quarter ended March 29, 1998. The increase was due to the addition of new restaurants since March 28, 1999, which accounted for $125,000 of the increase, as well as continued capital improvements to existing restaurants. Interest Expense, net. Interest expense, net of interest capitalized on construction costs, increased to $552,000 in the first quarter of 1999 from $397,000 in the first quarter of 1998, primarily as a result of additional borrowings under the Company's debt facilities, offset by a lower borrowing rate. In addition, the Company capitalized $62,000 of interest related to new restaurant construction in the most recent quarter compared to $52,000 during the first quarter of 1998. Income Taxes. Income tax expense was zero for the first quarter of 1999 and 1998 due to the recognition of previously reserved deferred tax assets. Net Income and Earnings Per Share. Net income increased to $2,764,000 for the first quarter of 1999 from $1,857,000 for the same period in 1998. Net income was 7.5% of total revenues for the first quarter in 1999 compared to 5.7% in the first quarter of 1998. Diluted earnings per share was $0.20 for the first quarter of 1999 compared to $0.12 in the same period of 1998. The increase in net income recorded during the first quarter of fiscal 1999 compared to the same quarter last year is due to higher sales at existing restaurants, the opening of nine new restaurants during 1998 and continued strong cost controls. Year 2000 Issue Description. The Company relies to a large extent on computer technology to carry out its day-to-day operations. Many software products in the marketplace are only able to recognize a two digit year date and therefore will recognize a date using "00" as the year 1900 instead of the year 2000 (the "Year 2000 Issue"). This problem could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in similar normal business activities. 11 State Of Readiness. The Company has established a plan to prepare its systems for the Year 2000 Issue as well as to reasonably assure that its critical business partners are prepared. To date, the Company has completed its assessment of all internal systems that could be significantly affected by the Year 2000 Issue. Based upon its assessment, the Company determined that it was required to modify or replace portions of its software supporting Human Resources, Payroll, Accounting, Labor Analysis and the Point of Sale. The Company believes that with modifications or replacements of the identified software programs, the Year 2000 Issue can be mitigated. However, if all additional phases of the Year 2000 plan are not completed on time, the Year 2000 Issue could have a material impact on the operations of the Company. As of May 3, 1999, the Company has substantially completed the remediation of the identified systems and expects to complete software reprogramming and replacement no later than October 1, 1999. Systems continue to be tested for integration with all significant systems scheduled to be completed by June 30, 1999. Many hardware upgrades were made as part of the Company's continued efforts to upgrade its technology, but no further hardware replacement has been identified as a result of the Year 2000 Issue. As such, the Company is not currently remediating additional hardware. However, the existence of embedded technology is by nature more difficult to identify. While the Company believes that all significant systems are Year 2000 compliant, the Company plans to continue testing its operating equipment. The Company has deferred other information technology projects due to the Year 2000 Issue. The deferral of these projects is not expected to have a material effect on the Company's financial position or results of operations. Significant Third Parties. The Company's significant third party business partners consist of suppliers, banks, and service providers. The Company has significant system interfaces with banks, credit card processors and tax filing services. An initial inventory of significant third party business partners has been completed and letters mailed requesting information regarding each parties' Year 2000 compliance status. Additionally, the Company has identified key suppliers and distributors which it intends to meet with and discuss their Year 2000 readiness. The Company is currently developing contingency plans for third party business partners that appear to have substantial Year 2000 operational risks, which may include the change of some suppliers to minimize such risks. 12 Costs. The Company will use both internal and external resources to reprogram, or replace, and test software for Year 2000 Issue modifications. The total cost of the Year 2000 Issue project is estimated to be approximately $600,000, of which the Company has incurred $500,000 relating to the purchase of new software. The costs relating to the Year 2000 Issue are being financed through operating cash flows and borrowings from the Company's available credit facilities. Of the total project cost, the majority is attributable to the purchase of new software, which will be capitalized. The remaining amount, which will be expensed as incurred over the next year, is not expected to have a material effect on the results of operations. To date, the costs the Company has incurred and expensed relating to the assessment of, and preliminary efforts in connection with, its Year 2000 Issue and the development of a remediation plan have not had a material effect on the results of operations. Risks And Contingency Plans. Management believes it has an effective plan in place to resolve the Year 2000 Issue in a timely manner. However, due to the forward-looking nature and lack of historical experience with Year 2000 Issues, it is difficult to predict with certainty what will happen after December 31, 1999. Despite the Year 2000 remediation efforts being made, it is likely that there will be disruptions and unexpected business problems during the early months of 2000. The Company plans to make diligent efforts to assess the Year 2000 readiness of its significant business partners and will develop contingency plans for all critical systems where it believes its exposure to Year 2000 risk is the greatest. However, despite the Company's efforts, it may encounter unanticipated third party failures, public infrastructure failures or a failure to successfully conclude its remediation efforts as planned. If the remaining Year 2000 plan is not completed timely, in addition to the implications noted above, the Company may be required to utilize manual processing of certain otherwise automated processes. Any one of these unforeseen events could have a material adverse impact on the Company's results of operations, financial condition, or cash flows in 1999 and beyond. 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 credit facilities totaling $40.0 million, including a $5.0 million unsecured revolving line of credit. As of May 3, 1999, $32.4 million had been used under these commitments. Net cash provided by operating activities was $4.1 million for the thirteen weeks ended April 4, 1999, and $1.8 million for the thirteen weeks ended March 29, 1998. Management attributes much of the increase to higher net income and less cash being utilized in the reduction of accrued, acquisition and store closure liabilities. Net cash used in investing activities was $5.5 million for the thirteen weeks ended April 4, 1999, representing primarily capital expenditures of $6.0 million for the construction of new restaurants and improvements to existing restaurants. This was offset by the sale of assets generating $459,000 in proceeds. This compares to $3.8 million in net cash used in investing activities for the thirteen weeks ended March 29, 1998, representing primarily capital expenditures for the construction of new restaurants and improvements to existing restaurants, offset by the sale of assets generating $1.3 million in proceeds. 13 Net cash provided by financing activities was $1.6 million for the thirteen weeks ended April 4, 1999, and $2.0 million for the thirteen weeks ended March 29, 1998, representing primarily net borrowings under the Company's debt facilities. The special charges recorded in 1997 and 1995 included accruals of approximately $10.2 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 $182,000 during the first quarter of 1999. During the first quarter of 1999, the Company sold one property relating to the special charges which resulted in proceeds of $459,000, and approximated the carrying value of the assets sold. The Company currently has two closed restaurant properties for sale which were covered by the special charges. Although there can be no assurance of the particular price at which such properties will be sold, the Company expects to receive funds equal to or in excess of the carrying value 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 $72,000 during the first quarter of 1999. 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 1999, including the planned opening of ten restaurants and the reimaging of 30 to 35 restaurants. Total capital expenditures related to new restaurants are estimated to be $12.0 to $15.0 million. The total for other capital expenditures, including the cost of the reimagings, is estimated to be $6.0 to $8.0 million. Total capital expenditures for 1999 are expected to approximate $18.0 to $23.0 million. Impact of Inflation Although increases in labor, food or other operating costs could adversely affect the Company's operations, management does not believe that inflation has had a material adverse effect on the Company's operations to date. 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. 14 Forward-Looking Statements Statements in this quarterly report, including those contained in the foregoing discussion and other items herein concerning the Company which are (a) projections of revenues, costs, capital expenditures or other financial items, (b) statements of plans and objectives for future operations, (c) statements of future economic performance, or (d) statements of assumptions or estimates underlying or supporting the foregoing are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. The ultimate accuracy of forward-looking statements is subject to a wide range of business risks and changes in circumstances, and actual results and outcomes often differ from expectations. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements herein, including the following: the timing and extent of changes in prices; actions of our customers and competitors; state and federal environmental, economic, safety and other policies and regulations, any changes therein, and any legal or regulatory delays or other factors beyond the Company's control; execution of planned capital projects; weather conditions affecting the Company's operations or the areas in which the Company's products are marketed; natural disasters affecting operations; and adverse rulings, judgments, or settlements in litigations or other legal matters. The Company undertakes no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The Company has filed the following exhibits with this report: 27. Financial Data Schedules No reports on Form 8-K were filed during the period covered by this report. 15 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 18, 1999 Taco Cabana, Inc. /s/David G. Lloyd David G. Lloyd Senior Vice President, Chief Financial Officer, Secretary and Treasurer Signing on behalf of the registrant and as the principal financial and accounting officer 16 EX-27 2
5 3-MOS JAN-2-2000 APR-4-1999 897,000 0 739,000 105,000 2,311,000 7,031,000 110,439,000 34,476,000 94,104,000 15,099,000 0 0 0 134,000 43,603,000 94,104,000 36,836,000 36,910,000 10,927,000 27,305,000 6,289,000 0 552,000 2,764,000 0 0 0 0 0 2,764,000 .21 .20
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