Filed On 9/29/98 · SEC File 5-39163 · Accession Number 950135-98-5259
As Of Filer Filing On/For/As Docs:Pgs Issuer Agent
9/29/98 Uno Restaurant Corp SC 13E4 10:83 Uno Restaurant Corp 950135
Tender-Offer Statement -- Issuer Tender Offer · Schedule 13E-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13E4 Uno Restaurant Corporation 7 30K
2: EX-99.(A)(1) Form of Offer to Purchase 26 153K
3: EX-99.(A)(2) Form of Letter of Transmittal 11 60K
4: EX-99.(A)(3) Form of Notice of Guaranteed Delivery 4 17K
5: EX-99.(A)(4) Form of Lettter to Broker, Dealers 2 14K
6: EX-99.(A)(5) Form of Letter to Clients 4 20K
7: EX-99.(A)(6) Form of Letter Dated 9/29/98 to the Stockholders 2 11K
8: EX-99.(A)(7) Text of Press Release Dated 9/29/98 2± 12K
9: EX-99.(G)(1) Pages 33 Thru 52 of the Company's Annual Report 20 79K
10: EX-99.(G)(2) Pages 3 Thru 7 of the Company's Quarterly Report 5 32K
EX-99.(G)(1) · Pages 33 Thru 52 of the Company's Annual Report
| EX-99.(G)(1) | 1st Page of 20 | TOC | Top | Previous | Next | Bottom | Just 1st |
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Report of Independent Auditors
The Board of Directors
Uno Restaurant Corporation
We have audited the accompanying consolidated balance sheets of Uno Restaurant
Corporation and subsidiaries (the Company) as of September 28, 1997 and
September 29, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended September 28, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Uno Restaurant
Corporation and subsidiaries at September 28, 1997 and September 29, 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 28, 1997, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in fiscal year
1996, the Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of."
Ernst & Young LLP
Boston, Massachusetts
November 4, 1997
33
Uno Restaurant Corporation and Subsidiaries
Consolidated Balance Sheets
· Enlarge/Download Table
SEPTEMBER 28 1997 SEPTEMBER 29 1996
------------------------------------------
(In thousands)
ASSETS
Current assets:
Cash $ 1,486 $ 1,828
Royalties receivable 728 710
Consumer products receivable 844 322
Inventory 2,326 2,333
Deferred pre-opening costs 949 470
Prepaid expenses and other assets 1,959 2,387
------------------------------------------
Total current assets 8,292 8,050
Property, equipment and leasehold improvements, net 125,357 120,510
Deferred income taxes 6,599 3,613
Liquor licenses and other assets 3,484 2,892
------------------------------------------
$143,732 $135,065
==========================================
SEPTEMBER 28 1997 SEPTEMBER 29 1996
------------------------------------------
(Dollar amounts in thousands, except share
data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,966 $ 6,009
Accrued expenses 7,563 5,033
Accrued compensation and taxes 2,641 2,187
Income taxes payable 2,076 1,581
Current portions of long-term debt and capital lease
obligations 3,132 178
------------------------------------------
Total current liabilities 22,378 14,988
Long-term debt, net of current portion 42,516 37,085
Capital lease obligations, net of current portion 867 1,056
Other liabilities 7,091 4,800
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $1.00 par value, 1,000,000 shares authorized,
no shares issued or outstanding
Common Stock, $.01 par value, 25,000,000 shares authorized,
13,754,480 shares in 1997 and 13,697,526 shares in 1996 issued 138 137
Additional paid-in capital 53,803 53,509
Retained earnings 36,816 34,143
------------------------------------------
90,757 87,789
Treasury Stock (2,790,597 shares in 1997 and
1,500,000 shares in 1996, at cost) (19,877) (10,653)
------------------------------------------
Total shareholders' equity 70,880 77,136
------------------------------------------
$143,732 $135,065
==========================================
See accompanying notes.
34
Uno Restaurant Corporation and Subsidiaries
Consolidated Statements of Income
· Enlarge/Download Table
YEAR ENDED
----------------------------------------------
SEPTEMBER 28 SEPTEMBER 29 OCTOBER 1
1997 1996 1995
----------------------------------------------
(Amounts in thousands, except
per share data)
Revenues:
Restaurant sales $164,389 $159,581 $146,100
Consumer product sales 9,115 8,351 8,477
Franchise income 4,516 4,209 4,129
----------------------------------------------
178,020 172,141 158,706
Costs and expenses:
Cost of food and beverages 43,994 44,064 39,420
Labor and benefits 54,183 51,868 47,377
Occupancy costs 27,045 26,339 22,925
Other operating costs 16,067 15,890 13,583
General and administrative 13,384 12,155 11,229
Depreciation and amortization 12,469 12,964 10,795
Special charges 4,000 3,937
----------------------------------------------
171,142 167,217 145,329
----------------------------------------------
Operating income 6,878 4,924 13,377
Other expense:
Interest expense 2,695 2,358 1,924
Other expense 132 123 20
----------------------------------------------
2,827 2,481 1,944
----------------------------------------------
Income before income taxes 4,051 2,443 11,433
Provision for income taxes 1,378 757 4,230
----------------------------------------------
Net income $ 2,673 $ 1,686 $ 7,203
==============================================
Earnings per common share $ .22 $ .13 $ .58
==============================================
Weighted-average number of common shares 12,008 12,756 12,364
==============================================
See accompanying notes.
35
Uno Restaurant Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
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COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
----------------------------------------------------------------------------
(Amounts in thousands)
Balance at October 2, 1994 9,072 $ 91 $30,613 $25,254 $55,958
Net income 7,203 7,203
Five-for-four stock split 2,275 23 (23)
Sale of Common Stock, net of
offering costs 2,300 23 22,541 22,564
Exercise of stock options 35 226 226
Purchase of Treasury Stock $ (2,900) (2,900)
Tax benefit from exercise of
nonqualified stock options 76 76
-----------------------------------------------------------------------------
Balance at October 1, 1995 13,682 137 53,433 32,457 (2,900) 83,127
Net income 1,686 1,686
Exercise of stock options 16 63 63
Purchase of Treasury Stock (7,753) (7,753)
Tax benefit from exercise of
nonqualified stock options 13 13
-----------------------------------------------------------------------------
Balance at September 29, 1996 13,698 137 53,509 34,143 (10,653) 77,136
Net income 2,673 2,673
Exercise of stock options 57 1 257 258
Purchase of Treasury Stock (9,224) (9,224)
Tax benefit from exercise of
nonqualified stock options 37 37
-----------------------------------------------------------------------------
Balance at September 28, 1997 13,755 $138 $53,803 $36,816 $(19,877) $70,880
=============================================================================
See accompanying notes.
36
Uno Restaurant Corporation and Subsidiaries
Consolidated Statements of Cash Flows
· Enlarge/Download Table
YEAR ENDED
------------------------------------------------
SEPTEMBER 28 SEPTEMBER 29 OCTOBER 1
1997 1996 1995
------------------------------------------------
(In thousands)
OPERATING ACTIVITIES
Net income $ 2,673 $ 1,686 $ 7,203
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 12,573 13,064 10,896
Deferred income taxes (2,986) (2,462) 291
Provision for deferred rent 612 688 637
Loss (gain) on disposal of equipment (15) 19 (28)
Special charges 4,000 3,937
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Royalties receivable (18) 15 (172)
Inventory 7 (107) (482)
Prepaid expenses and other assets (1,888) (903) (3,736)
Accounts payable and other liabilities 4,620 1,157 2,055
Income taxes payable 495 1,455 (528)
------------------------------------------------
Net cash provided by operating activities 20,073 18,549 16,136
INVESTING ACTIVITIES
Additions to property, equipment and leasehold
improvements
(19,982) (22,909) (39,864)
Proceeds from sale of fixed assets 300 144 42
Purchase of business, net of cash acquired (316)
------------------------------------------------
Net cash used in investing activities (19,682) (22,765) (40,138)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 71,193 53,103 60,950
Principal payments on debt and capital lease
obligations
(62,997) (40,687) (56,570)
Issuance of Common Stock 22,564
Purchase of Treasury Stock (9,224) (7,753) (2,900)
Exercise of stock options 295 76 302
------------------------------------------------
Net cash (used) provided by financing activities (733) 4,739 24,346
------------------------------------------------
Increase (decrease) in cash (342) 523 344
Cash at beginning of year 1,828 1,305 961
------------------------------------------------
Cash at end of year $ 1,486 $ 1,828 $ 1,305
================================================
See accompanying notes.
37
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 28, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company owns and operates 92 "Pizzeria Uno...Chicago Bar & Grill" casual
dining, full-service restaurants primarily from New England to Virginia, as well
as Florida, Chicago and Denver, and franchises 66 units in 18 states, the
District of Columbia, Puerto Rico and Seoul, Korea. The Company also operates a
Mexican restaurant in Chicago, several take-out and quick-serve Uno units in
test, and a refrigerated and frozen consumer foods division. The consumer foods
business supplies American Airlines, movie theaters, hotels, supermarket and
wholesale club chains with both frozen and refrigerated Pizzeria Uno brand
products, as well as certain private label products.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Uno Restaurant
Corporation and its wholly-owned subsidiaries (the Company). All intercompany
accounts and transactions have been eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year ends on the close of business on the Sunday closest to
September 30 in each year.
INVENTORY
Inventory, which consists of food, beverages and store supplies, is stated at
the lower of cost (first-in, first-out method) or market.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost. The Company
provides for depreciation of buildings and equipment using the straight-line
method over 25 and 7 years, respectively. Leasehold improvements are amortized
over the shorter of their estimated useful lives or the term of the lease
(generally 20 years) using the straight-line method.
-38-
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION-FRANCHISE FEES
The Company defers franchise fees until the franchisee opens the restaurant and
all services have been substantially performed; at that time, the fee is
recorded as income. Royalty income is recorded as earned based on rates provided
by the respective franchise agreements. Expenses related to franchise activities
amounted to approximately $3,441,000, $3,409,000 and $1,889,000 in fiscal years
1997, 1996 and 1995, respectively.
A summary of full-service franchise unit activity is as follows:
YEAR ENDED
-------------------------------------
SEPTEMBER 28 SEPTEMBER 29 OCTOBER 1
1997 1996 1995
-------------------------------------
Units operating at beginning of year 63 59 59
Units opened 6 5 5
Units closed (3) (1) (5)
-------------------------------------
Units operating at end of year 66 63 59
=====================================
PRE-OPENING COSTS
Pre-opening costs consist principally of labor costs associated with the hiring
and training of operating personnel as well as initial food and beverage
purchases. These costs are deferred until the restaurants open and are amortized
over 12 months from that point using the straight-line method.
INCOME TAXES
Deferred income taxes are determined utilizing the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER COMMON SHARE
Earnings per common share amounts are calculated based upon the weighted-average
number of shares outstanding, giving effect to the dilutive effect of stock
options.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and costs
and expenses during the reporting period. Actual results could differ from those
estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
In the second quarter of fiscal 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
establishes criteria for the recognition and measurement of impairment losses
associated with long-lived assets (see Note 2).
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB No. 25) in accounting for its
stock-based compensation plans, rather than the alternative fair value
accounting method provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," as this alternative requires the use of option valuation models
that were not developed for use in valuing employee stock options. Under APB No.
25, since the exercise price of options granted under these plans equals the
market price of the underlying stock on the date of grant, no compensation
expense is required.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, "Earnings Per Share" which simplifies the calculation of earnings per
share and creates a standard of comparability to the recently issued
International Accounting Standard No. 33, "Earnings Per Share." Since early
application is not permitted, the Company will adopt this standard in the first
quarter of fiscal 1998. The Company believes the adoption of this standard will
not have a material impact on the Company's consolidated results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Both SFAS No. 130 and SFAS No. 131 are effective for fiscal years
beginning after December 15, 1997. The Company believes that the adoption of
these new accounting standards will not have a material impact on the Company's
consolidated financial statements.
RECLASSIFICATIONS
Certain amounts in the accompanying financial statements have been reclassified
to conform with the 1997 presentation.
2. SPECIAL CHARGES
During the third quarter of fiscal 1997, the Company recorded a special charge
in the amount of $4.0 million, consisting of an asset impairment charge of $3.3
million and store closing costs of $0.7 million. The $3.3 million asset
impairment charge was recorded to reduce the carrying value of equipment and
leaseholds at two full-service Uno restaurants to their fair market value and
resulted from weak operating results and continuing negative cash flow. The
store closure costs represent remaining minimum lease payments of one
full-service Uno restaurant which was closed during 1997.
As discussed in Note 1, the Company adopted SFAS No. 121 in the second quarter
of fiscal 1996, and recorded a pre-tax charge of $3.9 million to adjust the
carrying value of those assets identified as impaired. The charge consisted of
$1.0 million for three Uno
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SPECIAL CHARGES (CONTINUED)
Pizza Bakery's, $1.6 million for one full-service Uno restaurant and $1.3
million for certain assets of three Bay Street restaurants. The assets written
down include the Bay Street trademark and leasehold improvements and equipment
of the aforementioned stores. Based upon operating and cash flow results,
management believed that these units would likely continue to generate cash flow
losses and therefore reduced the carrying value of the impaired assets to fair
market value.
3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consist of the following:
· Download Table
SEPTEMBER 28 SEPTEMBER 29
1997 1996
--------------------------
(In thousands)
Land $ 15,883 $ 14,796
Buildings 25,265 22,037
Equipment 49,802 45,690
Leasehold improvements 87,047 82,013
Construction in progress 4,201 2,120
--------------------------
182,198 166,656
Less allowances for depreciation and amortization 56,841 46,146
--------------------------
$125,357 $120,510
==========================
4. RELATED-PARTY TRANSACTIONS
The Company leases three buildings from its principal shareholder for a
restaurant and corporate office space. Rent expense in the amount of
approximately $455,000 was charged to operations in each of the fiscal years
presented. The Company believes that the terms of these leases approximate fair
rental value.
The Company's President and his brother own and operate four franchised
restaurants and one of the directors of the Company has a partnership interest
in a franchised restaurant. These franchisees pay royalties to the Company under
standard franchise agreements.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. LEASES
The Company conducts the majority of its operations in leased facilities, which
are accounted for as capital or operating leases. The leases typically provide
for a base rent plus real estate taxes, insurance and other expenses, plus
additional contingent rent based upon revenues of the restaurant. Assets held
under capital leases were $2,881,000 at September 28, 1997 and September 29,
1996. Accumulated amortization amounted to $613,000 at September 28, 1997 and
$480,000 at September 29, 1996. Capital lease asset amortization is included in
depreciation and amortization. At September 28, 1997, the minimum rental
commitments under all noncancelable capital and operating leases with initial or
remaining terms of more than one year are as follows:
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
---------------------
(In thousands)
1998 $ 260 $ 9,420
1999 260 9,321
2000 223 9,236
2001 75 9,311
2002 42 9,365
Thereafter 1,209 78,331
--------------------
2,069 $124,984
Less amount representing interest 1,013 ========
------
Present value of net minimum lease payments 1,056
Less current portion of obligation under capital leases 189
======
Long-term obligation under capital leases $ 867
======
Total expenses for all operating leases were as follows:
MINIMUM CONTINGENT
FISCAL YEAR LEASE RENTALS RENTALS TOTAL
---------------------------------------
(In thousands)
1997 $12,641 $ 811 $13,452
1996 12,105 956 13,061
1995 10,492 1,017 11,509
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. LEASES (CONTINUED)
Certain operating lease agreements contain free rent inducements and scheduled
rent increases which are being amortized over the terms of the agreements,
ranging from 15 to 20 years, using the straight-line method. The deferred rent
liability, included in other liabilities, amounted to $4,596,000 at September
28, 1997 and $3,984,000 at September 29, 1996.
6. FINANCING ARRANGEMENTS
Long-term debt consists of the following:
SEPTEMBER 28 SEPTEMBER 29
1997 1996
--------------------------
(In thousands)
Revolving credit and note agreement $40,480 $37,085
8.75%, 15-year secured mortgage notes payable 4,979
--------------------------
45,459 37,085
Less current portion 2,943
--------------------------
$42,516 $37,085
==========================
On November 4, 1997, the Company entered into a new $55,000,000 credit facility,
which includes a $26.6 million unsecured revolver due in October, 2002, a $8.4
million term loan due in 20 quarterly installments of $420,000 plus interest
commencing on January 31, 1998 and a $20.0 million secured mortgage facility due
in 27 quarterly installments of $500,000 plus interest also commencing on
January 31, 1998 with a final payment due in October, 2004. The Company is
entitled to borrow, at its discretion, amounts which accrue interest at variable
rates based on either the LIBOR or prime rate. At September 28, 1997, interest
on outstanding borrowings under the previous revolving line of credit ranged
from 6.875% to 8.50%. A commitment fee of approximately .375% is accrued on
unused borrowings under the new credit agreement. The note agreements contain
certain financial and operating covenants, including maintenance of certain
levels of net worth and income. At September 28, 1997, the carrying value of the
Company's long-term debt approximated fair market value.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. FINANCING ARRANGEMENTS (CONTINUED)
Annual principal payments of debt are as follows (in thousands):
Year
----
1998 $ 2,943
1999 3,880
2000 3,898
2001 3,918
2002 3,940
Thereafter 26,880
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$45,459
=======
In October 1995, the Company entered into a five-year interest rate swap
agreement to convert a portion of its floating rate debt to a fixed-rate basis,
thereby reducing the potential impact of interest rate increases on future
income. The notional amount of this interest rate swap agreement was $20 million
and the fixed swap rate was 6.04%. The differential to be paid or received is
accrued as interest rates change and recognized as an adjustment to interest
expense related to the debt.
The Company made cash payments of interest of $3,044,000, $2,845,000 and
$2,445,000 during fiscal years 1997, 1996 and 1995, respectively. The Company
capitalized interest during the construction period of new restaurants which
amounted to $313,000 in fiscal year 1997, $290,000 in fiscal year 1996 and
$509,000 in fiscal year 1995 and included those amounts in leasehold
improvements.
The Company provides certain limited lease financing to qualified franchisees
through an agreement with an unaffiliated finance company. The Company's maximum
guarantee under the agreement was $1,000,000 at September 28, 1997. The Company
has also guaranteed up to a maximum of $400,000 of future lease payments in the
event of default by a specific franchisee.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. COMMON STOCK TRANSACTIONS
In June 1997, the Company initiated a Dutch Auction self-tender offer for up to
1,000,000 shares of the Company's common stock and in certain circumstances,
reserved the right to purchase in excess of 1,000,000 shares. Under the terms of
the offer, the Company invited stockholders to tender their shares at prices
ranging from $6.00 to $7.50 per share. In July 1997, the Company completed the
tender offer for 1,207,624 shares of its common stock at $7.00 per share.
In July 1995, the Board of Directors authorized the purchase of up to 500,000
shares of the Company's common stock, of which 358,100 shares were purchased in
fiscal 1995. In October 1995, the Board of Directors increased its authorization
to purchase up to 1.5 million shares of the Company's stock, of which the
balance of 1,141,900 shares were purchased in fiscal 1996. In January 1997, the
Board of Directors authorized the purchase of up to 500,000 additional shares of
the Company's common stock, of which 82,973 shares were purchased in fiscal
1997, prior to the Dutch Auction.
8. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other current assets consist of the following:
SEPTEMBER 28 SEPTEMBER 29
1997 1996
--------------------------
(In thousands)
Prepaid insurance $ 430 $ 422
Product rebates receivable 402 342
Prepaid rent 220 328
Prepaid operating costs 58 213
Other accounts receivable 849 1,082
--------------------------
$1,959 $2,387
==========================
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. ACCRUED EXPENSES
Accrued expenses consist of the following:
SEPTEMBER 28 SEPTEMBER 29
1997 1996
----------------------------
(In thousands)
Accrued store closure $1,618 $ 413
Accrued rent 1,334 1,379
Accrued insurance 1,103 962
Accrued utilities 760 768
Accrued vacation 632 489
Accrued advertising 561 308
Accrued professional fees 413 172
Franchise fee deposit 348 117
Other 794 425
----------------------------
$7,563 $5,033
============================
10. EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) Savings and Employee Stock Ownership Retirement
Plan (the Plan) for all of its eligible employees. The Plan is maintained in
accordance with the provisions of Section 401(k) of the Internal Revenue Code
and allows all employees with at least one year of service to make annual
tax-deferred voluntary contributions up to 15% of their salary. Under the Plan,
the Company matches a specified percentage of the employees contributions,
subject to certain limitations. Total contributions made to the plan were
$229,000, $161,000 and $153,000 in fiscal years 1997, 1996 and 1995,
respectively.
The Company sponsors a Deferred Compensation Plan which allows officers to defer
up to 20% of their annual compensation. These assets are placed in a "rabbi
trust" and are presented as assets of the Company in the accompanying balance
sheet as they are available to the general creditors of the Company in the event
of the Company's insolvency. The related liability of $727,000 at September 28,
1997 and $566,000 at September 29, 1996 is included in other liabilities in the
accompanying balance sheet. Deferred compensation expense in the amounts of
$161,000, $140,000 and $173,000 were recorded in fiscal years 1997, 1996 and
1995 respectively.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES
Deferred taxes are attributable to the following temporary differences:
SEPTEMBER 28 SEPTEMBER 29
1997 1996
----------------------------
(In thousands)
Deferred tax assets:
Deferred rent $1,842 $1,604
Accrued expenses 1,738 715
Asset impairment charge 1,630 1,123
Depreciation 1,113 123
Franchise fees 291 148
Other 309 261
-----------------------------
Total deferred tax assets 6,923 3,974
Deferred tax liabilities:
Deferred pre-opening costs 217 243
Other 107 118
-----------------------------
Total deferred tax liabilities 324 361
-----------------------------
Net deferred tax assets $6,599 $3,613
=============================
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES (CONTINUED)
The provision (credit) for income taxes consisted of the following:
· Download Table
YEAR ENDED
------------------------------------------
SEPTEMBER 28 SEPTEMBER 29 OCTOBER 1
1997 1996 1995
------------------------------------------
(In thousands)
Current:
Federal $ 3,448 $ 2,532 $3,098
State 916 687 841
------------------------------------------
4,364 3,219 3,939
Deferred:
Federal (2,435) (1,995) 228
State (551) (467) 63
------------------------------------------
(2,986) (2,462) 291
------------------------------------------
Income tax expense $ 1,378 $ 757 $4,230
==========================================
A reconciliation of the effective tax rates with the federal statutory rates is
as follows:
· Download Table
YEAR ENDED
------------------------------------------
SEPTEMBER 28 SEPTEMBER 29 OCTOBER 1
1997 1996 1995
------------------------------------------
Federal statutory rate 34.0% 34.0% 34.1%
State income taxes, net of federal
income tax benefit 4.6 5.0 4.9
Tax credits (7.1) (9.8) (2.6)
Other 2.5 1.8 .6
------------------------------------------
Effective income tax rate 34.0% 31.0% 37.0%
==========================================
The Company made income tax payments of $3,936,000, $2,416,000 and $3,667,000
during fiscal years 1997, 1996 and 1995, respectively.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. STOCK-BASED COMPENSATION
During 1997, the Company established the 1997 Employee Stock Option Plan (the
Plan) which provides for the granting of options to purchase up to 1.0 million
shares of common stock. Options may be granted at an exercise price not less
than fair market value on the date of grant. All options vest at a rate of 20%
per year beginning one year after the date of grant. All options terminate ten
years after the date of grant.
The Company's 1987 Employee Stock Option Plan which contains similar provisions
to the 1997 Plan was terminated during fiscal 1997. The 1.3 million options
granted under that plan will continue to vest at a rate of 20% per year
beginning one year after the date of grant, with the exception of 93,750 options
granted to the President of the Company, which vest immediately at the date of
grant. All options terminate ten years after the date of grant, with the
exception of the 112,500 options granted to the Chairman, which terminate five
years after the date of grant.
The 1989 and 1993 Non-Qualified Stock Option Plans for Non-Employee Directors
(the Directors' Plans) provide for up to 101,563 shares of Common Stock issuable
upon exercise of options granted under the Directors' Plans. The 1989 and 1993
Directors' Plans terminate on November 10, 1999 and August 17, 2002, but such
termination shall not affect the validity of options granted prior to the dates
of termination. Options are to be granted at an exercise price equal to the fair
market value of the shares of Common Stock at the date of grant. Options granted
under the Directors' Plans may be exercised commencing one year after the date
of grant and ending ten years from the date of grant.
In August 1997, the Company's Board of Directors authorized an executive stock
option program which allows for the granting of options to purchase up to 1.2
million shares of common stock. Options will vest upon the achievement of
certain financial targets. The plan is subject to stockholder approval.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The
Company determined that the pro forma information for fiscal 1996 and fiscal
1997 was not material to the Company's consolidated results of operations,
however, the effects of expensing the estimated fair value of stock options are
not necessarily indicative of the effects on reporting results of operations for
future years as the pro forma calculations only include one and two years,
respectively, of option grants under the Company's plans.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. STOCK-BASED COMPENSATION (CONTINUED)
The fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for fiscal 1997 and fiscal 1996: risk-free interest rates of 6.6%
and 7.0%, respectively, no dividend yield, the volatility factor of the expected
market price of the Company's common stock was 38.2% and a weighted-average
expected life of the options of five years.
Information regarding the Company's stock option plans is summarized below:
· Enlarge/Download Table
YEAR ENDED
----------------------------------------------------------------------
SEPTEMBER 28 SEPTEMBER 29 OCTOBER 1
1997 1996 1995
----------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------------------------------------------------------------------
Outstanding at
beginning of period 1,289,248 $7.28 1,200,287 $7.61 1,043,735 $7.33
Granted 211,609 6.59 295,508 6.42 277,489 8.46
Exercised (55,667) 4.44 (15,256) 4.74 (41,400) 5.43
Canceled (207,783) 7.06 (191,291) 8.21 (79,537) 8.08
----------------------------------------------------------------------
Outstanding at end
of period 1,237,407 $7.33 1,289,248 $7.28 1,200,287 $7.61
======================================================================
Options exercisable
at end of period 691,491 612,526 538,932
========= ========= =========
Options available for
grant at end of period 854,248 377,279 481,496
========= ========= =========
Exercise prices for options outstanding ranged from $4.74 to $14.50. Between
$4.74 and $7.41, 753,556 and 365,482 options were outstanding and exercisable,
respectively, and between $7.42 and $14.50, 483,851 and 326,009 were outstanding
and exercisable, respectively. The weighted-average contractual life of the
options is 7.1 years. The Company has 2.1 million shares of common stock
reserved for issuance at September 28, 1997.
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Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
· Download Table
QUARTER ENDED
---------------------------------------------------------
DECEMBER 29 MARCH 30 JUNE 29 SEPTEMBER 28
1996 1997 1997 1997
---------------------------------------------------------
(Amounts in thousands, except per share information.)
Revenues $42,164 $42,711 $45,387 $47,758
Gross profit (1) 8,345 8,618 9,604 10,545
Operating income (loss) 2,265 1,899 (908) 3,622
Income (loss) before
income taxes 1,655 1,233 (1,619) 2,782
Net income (loss) 1,092 815 (1,070) 1,836
Earnings per common share .09 .07 (.09) .16
QUARTER ENDED
---------------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER
1995 1996 1996 29 1996
---------------------------------------------------------
(Amounts in thousands, except per share information.)
Revenues $40,560 $40,287 $44,694 $46,600
Gross profit (1) 7,754 7,268 9,417 10,574
Operating income (loss) 1,472 (3,525) 2,963 4,014
Income (loss) before
income taxes 852 (4,129) 2,308 3,412
Net income (loss) 545 (2,642) 1,477 2,306
Earnings per common share .04 (.21) .12 .19
(1) Restaurant and consumer product sales, less cost of food and beverages,
labor and benefits, occupancy and other operating expenses, excluding
advertising expenses.
Dates Referenced Herein and Documents Incorporated By Reference
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