We currently own and operate 111 and franchise 66 casual dining,
full-service restaurants operating primarily under the name Pizzeria
Uno...Chicago Bar & Grill. Our restaurants offer a diverse, high quality menu at
moderate prices in a casual, friendly atmosphere. The restaurants feature our
signature Chicago-style, deep-dish pizza and a selection of baked, grilled and
sauteed entrees, including gourmet thin crust pizza, pasta, fajitas, ribs, steak
and chicken, as well as a variety of appetizers, salads, sandwiches and
desserts. Company-owned restaurants are located primarily in major metropolitan
markets from New England to Virginia, as well as Florida, Chicago and Denver,
and franchised restaurants are located throughout the United States and Puerto
Rico as well as Seoul, South Korea, Lahore, Pakistan and Dubai, United Arab
Emirates.
The original "Pizzeria Uno" restaurant was founded in 1943 by the late Ike
Sewell at the corner of Ohio and Wabash Avenues in Chicago, Illinois.
Mr. Sewell is considered the originator of Chicago-style, deep-dish pizza. In
1979, we acquired the rights to the names "Uno," "Pizzeria Uno" and "Pizzeria
Due" from Mr. Sewell and opened our first Pizzeria Uno restaurant.
In response to changing customer demands and preferences, our concept has
evolved over the years as we have strengthened our brand loyalty and leveraged
the appeal of our Chicago-style, deep-dish pizza. Beginning in 1994, we began
the process of repositioning our concept from Pizzeria Uno, primarily a
Chicago-style, deep-dish pizza concept, to Pizzeria Uno...Chicago Bar & Grill, a
full-service, casual dining restaurant which offers a diverse, high quality menu
at moderate prices with full bar service. The evolution of our concept,
substantially completed in fiscal 1998, has involved the successful
implementation of the following initiatives:
- expanding our kitchen capabilities to improve the quality, breadth and
appeal of our non-pizza menu items;
- redesigning our restaurants to replicate the look and feel of an old
Chicago warehouse to provide a more casual and relaxed dining environment;
- changing the name of our restaurants from Pizzeria Uno to Pizzeria
Uno...Chicago Bar & Grill to emphasize our positioning as a casual dining,
full-service restaurant;
- offering our guests an improved dining value by providing larger portions
of higher quality food at moderate prices; and
- expanding our target market to include both urban and suburban locations
and middle to upper-middle income individuals and families.
During the fiscal year ended October 1, 2000, we opened 12 full-service
Chicago Bar & Grill restaurants. Nine full-service Chicago Bar & Grill
franchised restaurants opened during the fiscal year and seven full-service
franchised restaurants closed. Of the seven franchised restaurants which were
closed, six were Pizzeria Uno restaurants which had not been repositioned as
Chicago Bar & Grill restaurants. During the fiscal year ending September 30,
2001, we anticipate opening seven to nine company-owned and 10 to 12 franchised
full-service Chicago Bar & Grill restaurants. The timing of these planned
openings is subject to various factors, including locating satisfactory sites
and negotiating leases and franchise agreements.
On November 30, 1999, our board of directors declared a 10% stock dividend
on the outstanding shares of our common stock. The stock dividend was paid on
December 23, 1999 to shareholders of record as of December 13, 1999. All share,
per share and share price data included in this report have been adjusted for
the 10% stock dividend.
2
On February 25, 2000, our board of directors amended its prior authorization
regarding the repurchase of our common stock. Under this amendment, we are
currently authorized to repurchase up to 1,500,000 shares of our common stock at
such times and at such prices as we deem appropriate. To date under this
authorization, we have repurchased 1,392,775 shares, of which 688,505 were
purchased during fiscal 2000.
On June 14, 2000, we amended our $55 million credit facility to increase the
revolver component from $26.6 million to $36.6 million, leaving the remaining
original principal amounts of the term loans of the facility unchanged. The
maturity of the revolver has been extended to June 2005.
In September 2000, we recorded a pre-tax charge of $8.6 million related to
asset impairment and store closing costs. This non-cash charge adjusted the
carrying value of eight full-service restaurants to their net realizable value
as required by Statement of Financial Accounting Standards 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
On October 25, 2000, we announced that Aaron Spencer, chairman and principal
stockholder, and certain members of senior management submitted a proposal to
our board of directors to acquire all of the outstanding shares of common stock
not currently owned by them for a price of $8.75 per share. The offer will be
subject to a number of conditions, including receipt of financing on
satisfactory terms and ownership by the offerors of at least 90% of the
outstanding shares of common stock at the conclusion of the tender offer. A
special committee of outside directors, appointed by our board of directors, is
conducting a review of the proposal.
PIZZERIA UNO EVOLUTION AND CONCEPT
Pizzeria Uno...Chicago Bar & Grill restaurants are full-service, casual
dining restaurants, featuring our signature Chicago-style deep-dish pizza and a
diverse menu of high quality, moderately-priced menu items. Our target market is
middle to upper-middle income individuals and families in the 17 to 49 year-old
age group and the restaurants are generally open from 11:00 a.m. to midnight,
seven days per week.
In response to changing customer demands and preferences, our concept has
evolved over the years as we have strengthened our brand loyalty and leveraged
the appeal of our Chicago-style, deep-dish pizza. Beginning in 1994, we began
the process of repositioning our concept from Pizzeria Uno, primarily a
Chicago-style, deep-dish pizza concept to Pizzeria Uno...Chicago Bar & Grill, a
full-service, casual dining restaurant which offers a diverse, high quality menu
at moderate prices with full bar service. With this repositioning substantially
complete, the primary features of our concept are as follows:
DISTINCTIVE BRAND. We believe that our long-standing name, Pizzeria Uno,
and our signature Chicago-style, deep-dish pizza, give us a brand awareness that
distinguishes our restaurants from other casual dining concepts and generate
frequent customer visits and customer loyalty.
CASUAL, FUN DINING ATMOSPHERE. Our restaurants are designed and decorated
to create the comfortable and fun atmosphere guests expect of full-service,
casual dining restaurants, as distinguished from typical pizza restaurants. Our
latest prototype restaurants, which average 5,300 to 5,800 square feet, are
designed to replicate the look and feel of an old Chicago warehouse with exposed
ceilings, industrial lighting, cement floors, painted murals, crates of
beverages, vintage photographs of Chicago and similar artifacts.
DIVERSE, HIGH QUALITY MENU. We differentiate ourselves from quick service
pizza, pasta and full-service Italian restaurants by offering a diverse, high
quality menu, including some of the most popular casual dining appetizers,
entrees and desserts, which we believe are given a distinctive appeal
3
through our proprietary recipes. Non-pizza menu items represent approximately
68% of total food sales for company-owned restaurants.
ENHANCED DINING VALUE. Our new menu initiative provides our guests with
enhanced value through larger portions of higher quality, moderately-priced
food. Our menu entrees range in price from $7.89 to $15.99, which is comparable
to other casual dining restaurants, and, together with our larger portions, are
designed to enhance the value received by our guests.
OUR BUSINESS STRATEGY
Our objective is to promote and develop the Pizzeria Uno brand in each of
our markets. We will strive to achieve this by offering our guests a distinctive
dining experience and a diverse, high quality menu at moderate prices. We have
developed the following strategies:
ENSURE HIGH QUALITY GUEST EXPERIENCE. We seek to provide a consistent, high
quality guest experience in order to generate frequent customer visits and
enhance customer loyalty. Through extensive training, experienced
restaurant-level management and rigorous operational and quality controls, we
seek to provide high quality menu items and to ensure prompt, friendly and high
energy service to our guests. We believe that by regularly testing new products
at our research and development center and adding new items to our menu, we are
able to offer our guests new reasons to dine at our restaurants. We believe our
restaurants are attractive for a wide variety of dining occasions, including
weekday and weekend lunches and dinners for a broad range of guests.
ACHIEVE ATTRACTIVE RESTAURANT-LEVEL ECONOMICS. The repositioning of our
concept has generated increased restaurant sales and improved profitability. We
believe that we have been and will continue to be able to improve operating
results from the broad appeal of our concept, careful site selection and
cost-effective development, consistent application of our management and
training programs, and strict cost and product quality controls. For the
12-month period ending October 1, 2000, our 12 current prototype restaurants,
which have been open for at least one year, have generated an average cash
return on investment of 25.7%.
DEVELOPMENT OF COMPANY-OWNED RESTAURANTS. We believe that we have
significant opportunities to open additional company-owned restaurants and,
accordingly, are implementing a controlled expansion strategy. In fiscal 2000,
we opened 12 restaurants for the year. We intend to continue opening
company-owned restaurants in three of our primary metropolitan markets, Boston,
New York and Baltimore/Washington, D.C. We also intend to expand in other
existing markets. In fiscal 2001, we expect to open approximately seven to nine
restaurants.
CONTINUED FRANCHISE DEVELOPMENT. In fiscal 2000, our franchisees opened
nine full-service restaurants in both existing and new markets. Reflecting our
continuing growth strategy, in fiscal 2001 we expect franchisees to open
approximately 10 to 12 restaurants. We plan to focus our franchise development
on an area development basis rather than on a single unit basis. In fiscal 2000,
we signed international development agreements for three units in Venezuela and
a two-unit agreement for Panama. Domestically we signed two area development
agreements totaling six units in Pennsylvania, an agreement for three to five
units in the Richmond, Virginia area and an agreement for an additional three
restaurants in Puerto Rico. We also completed two-unit agreements in
Saratoga/Glens Falls, New York and Scottsdale, Arizona. The terms for these new
agreements vary in length from two and one-half years to five years. We also
intend to pursue selected expansion opportunities worldwide, including Latin
America, the Caribbean, Mexico and Canada.
ATTRACT AND RETAIN HIGH QUALITY RESTAURANT MANAGEMENT. We believe we are
able to attract and retain high quality restaurant management because we offer a
competitive compensation and benefits program. In addition to salary and bonus,
our general managers are eligible for additional benefits,
4
which include vacation travel expense reimbursement, automobile lease payments
and longevity awards. To promote assistant manager retention, we have
implemented a work schedule providing assistant managers three days off every
other week. We believe this schedule allows our assistant managers to enjoy a
better quality of life than is typical in the restaurant industry.
UTILIZE MANAGEMENT INFORMATION SYSTEMS EFFECTIVELY. We believe that our
current management information systems have the features and capacity to support
our growth plan and to achieve attractive restaurant level economics. All of our
company-owned restaurants have personal computer and point-of-sale systems
integrated with our centralized management information and accounting systems.
We are able to monitor and control labor, food and other direct operating
expenses, and maintain efficient and quality restaurant service with hourly
guest traffic and sales volume forecasts for each restaurant. Our systems permit
restaurant and company management to manage sales, cost of sales and product mix
on a daily basis.
EXPAND OUR CONSUMER PRODUCTS BUSINESS. We plan to continue to expand our
consumer products business principally through the distribution of our branded
(Pizzeria Uno) and non-branded, Chicago-style deep-dish pizza, calzones, and
other pizza products in hotels, movie theater chains, supermarkets, food courts
and airports. We have established relationships with hotel chains to distribute
products in more than 450 hotel locations and movie theater chains representing
over 100 theaters. In addition, we have supplied American Airlines with our
pizza for service on selected domestic and international flights since fiscal
1993 and began serving three other major airlines in fiscal 2000. Our consumer
products operation, which historically has represented approximately 5% of our
sales, complements our restaurant business, increases our brand awareness and
enables people to enjoy Pizzeria Uno products in a wide variety of locations and
settings.
RESTAURANT DESIGN
Our restaurants are designed and decorated to create the comfortable and fun
atmosphere guests expect of full-service, casual dining restaurants, as
distinguished from typical pizza restaurants. We upgraded the design and decor
of our restaurants which are now consistent with our theme as Pizzeria
Uno...Chicago Bar & Grill. The decor of most of our restaurants includes
different variations of wood, brick and brass, and warehouse related design
elements such as painted murals, crates of beverages, vintage photographs of
Chicago and similar artifacts. Our latest prototype restaurants are designed to
replicate the look and feel of an old Chicago warehouse with exposed ceilings,
industrial lighting and cement floors. This prototype occupies a range of
approximately 5,300 to 5,800 square feet, with seating capacity ranging from 180
to 210 guests. We have also developed several variations of our prototype to
allow for adaptations to specific new site locations. To date, we have opened 24
of these prototypes and franchisees have opened 10. We review all preliminary
exterior, interior and kitchen design for all company-owned and franchised
restaurants to ensure quality and compliance with our standards.
RESTAURANT EXPANSION AND SITE SELECTION
COMPANY-OWNED RESTAURANT EXPANSION. We believe that we have significant
opportunities to expand our company-owned restaurants and, accordingly, are
implementing a controlled expansion strategy. In fiscal 2000, we opened 12
restaurants for the year. We intend to continue opening company-owned
restaurants in three of our primary metropolitan markets, Boston, New York and
Baltimore/Washington, D.C. We also intend to expand in other existing markets.
In fiscal 2001, we expect to open approximately seven to nine restaurants.
FRANCHISE RESTAURANT EXPANSION. Reflecting our continuing growth strategy,
in fiscal 2001 we expect franchisees to open approximately 10 to 12 restaurants.
We plan to focus our franchise development on an area development basis rather
than by single unit development. In fiscal 2000, our franchisees opened nine
full-service restaurants in both existing and new markets. In fiscal 2000, we
5
signed international development agreements for three units in Venezuela and a
two-unit agreement for Panama. Domestically we signed two area development
agreements totaling six units in Pennsylvania, an agreement for three to five
units in the Richmond, Virginia area and an agreement for an additional three
restaurants in Puerto Rico. We also completed two-unit agreements in
Saratoga/Glens Falls, New York and Scottsdale, Arizona. The terms for these new
agreements vary in length from two and one-half years to five years. We also
intend to pursue selected expansion opportunities worldwide, including Latin
America, the Caribbean, Mexico and Canada.
FACTORS WE CONSIDER IN SITE SELECTION. We devote significant resources to
our investigation and evaluation of potential sites for our restaurants because
we believe that the specific location of a restaurant is critical to its
long-term success. One or more of our executive officers inspect and approve the
site for each company-owned and franchised restaurant. Within each target market
area, we evaluate population density and demographics, major retail and office
concentration and traffic patterns. In addition, we evaluate visibility,
accessibility, proximity to direct competition, proximity of shopping,
entertainment activities, office parks and tourist attractions, availability of
suitable parking and of restaurant level employees, and various other site
specific factors. Pizzeria Uno...Chicago Bar & Grill restaurants are located in
both urban and suburban markets, in free-standing buildings, strip centers and
malls. Restaurant development is currently targeted at high traffic,
free-standing locations.
Generally, we lease most of our restaurants to minimize investment costs.
However, we have been selectively purchasing real estate to develop new
restaurants when the expected long-term cost of owning the real estate is less
than the cost of leasing. Of the 111 company-owned restaurants open as of
December 1, 2000, 88 are located in leased facilities and 23 are located on
properties we own.
6
RESTAURANT LOCATIONS
The following tables provide the locations for Company-owned and franchised
restaurants as of December 1, 2000.
COMPANY-OWNED RESTAURANTS (111)
COLORADO (3)
Aurora
Greenwood (a)
Westminster
CONNECTICUT (5)
Danbury
Fairfield
Manchester
Milford
West Hartford
FLORIDA (7)
Altamonte Springs
Daytona Beach
Kissimmee
Lake Mary (a)
Orlando (3)(a)
ILLINOIS (9)
Aurora
Chicago (3)(a)(b)
Crestwood
Gurnee Mills (a)
Lombard
Schaumburg
Vernon Hills (a)
MAINE (2)
Bangor
Portland (a)
MARYLAND (8)
Baltimore
Bel Air
Bethesda
Ellicott City (a)
Frederick (a)
Hagerstown
St. Charles
Towson
MASSACHUSETTS (26)
Bellingham
Boston (5)
Braintree
Brockton
Burlington
Cambridge (2)
Danvers
Dedham
Framingham
Hanover
Haverhill
Hyannis (a)
Kingston
Leominster
Newton
Revere
Springfield
Sturbridge
Waltham
Westborough
Woburn
MISSOURI (2)
St. Louis (2)
NEW HAMPSHIRE (4)
Concord
Keene
Manchester
Nashua
NEW JERSEY (2)
Paramus
Woodbridge
NEW YORK (19)
Albany
Amherst (a)
Greece (a)
Henrietta
Latham
Lynbrook
Massapequa
New York City
Bayside
Bay Ridge
Forest Hills
Manhattan (5)
Syracuse
Vestal
Victor
Yonkers
OHIO (4)
Columbus (4)(a)
PENNSYLVANIA (4)
Philadelphia (2)(a)
Pittsburgh (2)(a)
RHODE ISLAND (2)
Providence
Warwick
TENNESSEE (1)
Maryville (a)
VERMONT (1)
Burlington (a)
VIRGINIA (10)
Ballston
Dulles
Fairfax
Falls Church
Merrifield
Newport News
Norfolk (a)
Potomac Mills (a)
Reston
Williamsburg (a)
WASHINGTON, DC (2)
Cleveland Park
Union Station
See footnotes on next page
7
FRANCHISED RESTAURANTS (71)
DOMESTIC (65)
ARIZONA (3)
Mesa
Phoenix
Tempe
CALIFORNIA (9)
Chula Vista
Cupertino
Fremont
San Diego (2)
San Francisco (3)
Santa Clara
DELAWARE (1)
Dover
FLORIDA (1)
Orlando
ILLINOIS (1)
CHICAGO (C)
INDIANA (2)
Indianapolis
Merrillville
KANSAS (1)
Lawrence
KENTUCKY (1)
Louisville
MARYLAND (1)
Deep Creek
MASSACHUSETTS (3)
Holyoke
Springfield (2)(c)
MICHIGAN (2)
Birch Run
Bloomfield
MINNESOTA (1)
Edina
MISSOURI (1)
Kansas City
NEW JERSEY (4)
Cherry Hill
Secaucus
South Plainfield
Wayne
NEW MEXICO (1)
Las Cruces
NEW YORK (2)
Poughkeepsie
White Plains
NORTH CAROLINA (4)
Charlotte
Concord Mills
Greensboro
High Point
OHIO (6)
Cincinnati (4)
Dayton (2)
OKLAHOMA (1)
Tulsa
PENNSYLVANIA (6)
Doylestown
King of Prussia
Langhorne
Philadelphia (2)
Plymouth Meeting
PUERTO RICO (7)
Bayamon
Carolina
Mayaguez
San Juan (4)(c)
TEXAS (2)
Dallas
Ft. Worth
VIRGINA (1)
Richmond
WASHINGTON, DC (1)
Georgetown
WISCONSIN (3)
Madison (2)
Milwaukee
INTERNATIONAL (6)
SOUTH KOREA (3)
Seoul (3)(d)
PAKISTAN (1)
Lahore
UNITED ARAB EMIRATES (2)
Dubai (2)
(a) Owned property
(b) Includes one Mexican restaurant.
(c) Includes one limited seating, take-out restaurant.
(d) Includes two limited seating, take-out restaurants.
8
UNIT ECONOMICS
For the 12 month period ended October 1, 2000, the 96 company-owned
restaurants open for the entire period generated average restaurant sales of
approximately $2,034,000 and average restaurant operating cash flow of
approximately $400,000, or 19.7% of sales. Our current prototype restaurant
occupies a range of approximately 5,300 to 5,800 square feet, with a seating
capacity ranging from 180 to 210 guests. For the 12 month period ending
October 1, 2000, our 12 current prototype restaurants, which have been open for
at least one year, have generated average restaurant sales of approximately
$1,973,000 and average restaurant operating cash flow of approximately $436,000,
or 22.1% of sales. Based on an average investment of approximately
$1.7 million, excluding average land costs of approximately $819,000 and average
pre-opening costs of $131,000, these restaurants have generated an average cash
return on investment of 25.7% for the 12 month period ended October 1, 2000.
RESTAURANT OPERATIONS
RESTAURANT MANAGEMENT. The staff for a typical Pizzeria Uno...Chicago
Bar & Grill restaurant consists of one general manager, an assistant general
manager, two managers and approximately 50 to 70 hourly employees, many of whom
are part-time personnel. Managers of company-owned restaurants are compensated
with a salary plus a performance bonus based on several factors, including
restaurant sales and profits. To promote manager retention, we have implemented
a work schedule in which a manager is given three days off every other week. We
also offer our general managers vacation travel expense reimbursement,
automobile lease payments and longevity awards.
Each company-owned restaurant manager and franchisee is required to comply
with an operations manual that contains detailed standards and specifications
for all elements of operations. Our management makes regular visits to our
restaurants to monitor system-wide compliance. We employ four divisional vice
presidents of operations and 19 regional operations directors. The regional
operations directors provide field supervision to both company-owned and
franchised restaurants. Their duties include regular visits and detailed
inspections of quality, service and sanitation. As additional restaurants are
opened, we intend to add qualified regional operations directors.
Our restaurant management conducts quality control inspections twice a day.
Our food ingredients are tested for quality, freshness, age and temperature.
Menu items are also inspected for quality and presentation and we maintain a
toll-free telephone number for customer feedback. We conduct quarterly guest
surveys to monitor the level of guest satisfaction. Our divisional vice
presidents of operations are directly responsible for ensuring that all customer
comments are addressed.
TRAINING. We conduct an initial 10-week training program for all of our
restaurant managers that focuses on restaurant operations. We continuously train
company-owned restaurant managers through specialized training programs and
regular meetings that emphasize the areas of leadership, quality of food
preparation and service. These training programs are also offered to our
franchisees. We require our restaurant managers to participate in an
independent, nationally recognized training program to ensure the sanitary
preparation and service of food and require all alcohol-serving employees to
participate in an independent, nationally recognized program that provides
training in the responsible service of alcohol. In addition, all food-handling
personnel are required to undergo comprehensive internal training in the
preparation and service of food. We also conduct quarterly regional meetings and
an annual national meeting of franchisees and company restaurant managers that
focuses on continued training in marketing, new products, operating systems,
site selection and other aspects of business management.
FRANCHISE PROGRAM
GENERAL. As of December 1, 2000, we had 66 franchised restaurants operating
primarily as Pizzeria Uno...Chicago Bar & Grill and five Uno Pizza take-out
units operated by 35 franchisees
9
located in 23 states, the District of Columbia, Puerto Rico, South Korea,
Pakistan and the United Arab Emirates. We have dedicated significant resources
to our franchise program and plan to continue to pursue domestic as well as
selective international expansion opportunities. We expect to grant additional
domestic and international franchises to qualified applicants with restaurant
related operating experience and requisite financial resources. Historically, we
granted franchises on a single unit basis. As part of our growth strategy, we
are currently pursuing area development agreements with franchisees for the
construction of multiple restaurants over time within specified geographic
areas.
SIGNIFICANT FRANCHISE DEVELOPMENTS. In fiscal 1999, we signed area
development agreements for the development of 10 restaurants in North Carolina
and South Carolina over the next six and one-half years and 10 restaurants in
southern New Jersey and Philadelphia over the next seven years. In fiscal 2000,
we signed international development agreements for three units in Venezuela and
a two-unit agreement for Panama. Domestically we signed two area development
agreements totaling six units in Pennsylvania, an agreement for three to five
units in the Richmond, Virginia area and an agreement for an additional three
restaurants in Puerto Rico. We also completed two-unit agreements in Saratoga/
Glens Falls, New York and Scottsdale, Arizona. The terms for these new
agreements vary in length from two and one-half years to five years.
As we transitioned our company-owned restaurants into our new Pizzeria
Uno...Chicago Bar & Grill concept, some of our franchisees have upgraded and
redesigned their restaurants to be consistent with our new concept, but a number
of our franchisees have not and are not achieving satisfactory operating
results. Since the beginning of fiscal 1998, 26 of these franchised restaurants
have closed. As of December 1, 2000, seven full-service, non-Chicago Bar & Grill
restaurants remained in the franchise system.
DEVELOPMENT AND FRANCHISE AGREEMENTS. We require new domestic franchisees
to pay a non-refundable fee of $22,500 for each restaurant that the franchisee
commits to develop at the time a development agreement is signed. Of this
amount, $17,500 is applied to the initial franchise fee for each restaurant
committed to be developed. Our current franchise agreement also requires
franchisees to pay an initial franchise fee of $35,000 per restaurant when the
franchise agreement is signed and a continuing monthly royalty of 5% of adjusted
gross restaurant sales, which does not include certain items such as tips,
complimentary meals and employee discounts, but not less than $1,000 per month.
Royalties and franchise fees for international franchises are negotiated on an
individual basis. The royalties we received during fiscal 2000 averaged 4.4% of
franchised restaurant sales. For certain existing franchisees we have a variable
royalty plan that allows royalty rate reductions from contractual rates for
those franchised restaurants meeting certain criteria. This variable royalty
plan is available only to those franchised restaurants that do not achieve
minimum sales levels during their first five years of operation in relation to
their overall capital investment, including capitalized lease obligations. The
minimum royalty rate under the variable royalty plan is 3% and ranges up to 5%.
Seven franchised restaurants currently qualify for some degree of royalty rate
reduction under the variable royalty plan. This will be reduced to four units on
January 1, 2001. The variable royalty plan is not currently offered to new
franchisees.
Our current franchise agreements have an initial term of 15 years with one
10-year renewal period at the option of the franchisee, provided that the
agreement has not previously been terminated by either party. As a condition of
each renewal, we may require a franchisee to sign a revised franchise agreement
and to make capital expenditures to renovate the restaurant.
We retain the right to terminate a franchise agreement for a variety of
reasons, including significant and willful understatement of gross receipts,
failure to pay fees, material misrepresentation on an application for a
franchise, or material breach or default under the franchise agreement,
including failure to maintain our operating standards. Many state franchise laws
limit the ability of a franchisor to terminate or refuse to renew a franchise.
We have the right to audit and receive certain
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monthly and annual financial and other information from franchisees. The
franchise agreements generally prohibit us from granting competing franchises or
opening competing restaurants within three miles of a franchised restaurant.
TRAINING AND OVERSIGHT OF FRANCHISEES. Our initial training program for
franchisees is similar to our training program for management trainees and
employees in company-owned restaurants. In order to ensure uniform quality
standards, we require franchisees to comply with our specifications as to space,
design and decor, menu items, principal food ingredients and day-to-day
operations, as set forth in our operations manual. Our executives or
field-service personnel visit each franchised location, on average, at least
four times per year. We receive weekly and monthly sales reports from our
franchisees. In addition, we conduct random sales audits of all our franchisees
on an ongoing basis.
OUR LIMITED GUARANTEE OF EQUIPMENT AND LEASEHOLD FINANCING. We guarantee
certain limited equipment and leasehold improvement financing to qualified
franchisees through an agreement with an unaffiliated finance company. This
program provides an aggregate of $25 million to our franchise system. Under this
agreement, we guarantee financing provided by the finance company up to the
greater of $2.5 million or 10% of the aggregate amount funded to qualified
franchisees. At October 1, 2000, there were approximately $564,000 of loans
outstanding to franchisees. We have also guaranteed up to a maximum of $400,000
of future lease payments in the event of default by a specific franchisee.
CONSUMER PRODUCTS
We plan to continue to expand our consumer products business principally
through the distribution of our Pizzeria Uno brand, Chicago-style deep-dish
pizza, calzones, and other pizza products in hotels, movie theater chains,
supermarkets, food courts and airports.
We have established relationships with hotel chains for distribution of
Pizzeria Uno brand pizzas and calzones to more than 450 hotel locations. We also
provide our Pizzeria Uno brand pizza products at the concession areas in over
100 movie theaters, representing six movie theater chains, and distribute fresh,
refrigerated pizzas to supermarket chains with more than 750 locations in the
Northeast. During fiscal 2000, we began providing Pizzeria Uno brand,
Chicago-style, deep-dish pizza for sale by a concession at the T. D. Waterhouse
Center in Orlando.
Since fiscal 1993, we have been supplying frozen Pizzeria Uno brand,
Chicago-style, deep-dish pizza to American Airlines for service on its domestic
and international flights. In fiscal 2000 we expanded our presence in the
airline segment by supplying pizzas to three other major airlines. We continue
to expand this business by introducing new products on domestic and
international flights. In fiscal 2000 we sold three million pizzas to the
airline industry.
Several branded tests are underway with additional hotel chains and major
food service providers as well as several retail grocers and club stores across
the country. We expect to continue to test other traditional and non-traditional
distribution channels for our consumer products. Our consumer products
operation, which represented approximately 5% of our sales during fiscal 2000,
complements our restaurant business, increases our brand awareness and enables
people to enjoy Pizzeria Uno products in a wide variety of locations and
settings.
PURCHASING
We negotiate directly with suppliers for all primary food ingredients and
beverage products to ensure adequate supplies and to obtain competitive prices.
We seek competitive bids from suppliers on most of our primary food ingredients
on a periodic basis. We approve suppliers of these ingredients and products and
require our suppliers to adhere to our product specifications. Several of our
key ingredients are proprietary. They are manufactured for us under private
label and sold to authorized distributors for resale to company-owned
restaurants and franchisees. All essential food and beverage
11
products are available, or upon short notice can be made available, from
alternative qualified suppliers. In January 2000, we entered into a fixed price
contract with our supplier of mozzarella cheese, which has since been extended
through August 2001, to help minimize our exposure to the volatility in the
block cheese market.
The manager of each company-owned restaurant determines the quantities of
food and beverage products required. We, along with our franchisees, purchase
substantially all food and beverage products from authorized local or national
distributors. In most cases, franchisees find it more economical to purchase
these products from the same distributors servicing the company-owned
restaurants in order to take advantage of volume discounts. In each of our
markets, franchisees pay distributors the same price as we do for our
company-owned restaurants. We do not derive any income from suppliers or
distributors on sales to franchisees.
MANAGEMENT INFORMATION SYSTEMS
We believe that our current management information systems infrastructure
has the features and capacity to support our growth plan. All of our
company-owned restaurants have personal computer and point-of-sale systems
integrated with our centralized management information and accounting systems.
We are able to monitor and control labor, food and other direct operating
expenses, and maintain efficient and quality restaurant service with hourly
guest traffic and sales volume forecasts for each restaurant. Our systems permit
restaurant and company management to manage sales, cost of sales and product mix
on a daily basis. We also have access to daily financial and operating data for
every company-owned restaurant, which is an important tool in achieving
attractive restaurant level economics.
Financial controls are maintained through a centralized accounting system,
which includes a sophisticated theoretical food cost program and a labor
scheduling and tracking program. This system enables us to schedule appropriate
wait staff and kitchen personnel for our restaurant guests. Physical inventories
of food and beverage items are taken on a weekly basis.
MARKETING AND ADVERTISING
Our advertising is intended to increase our brand awareness, attract new
guests and build customer loyalty. We rely primarily on radio, direct mail and
print advertising. Our advertising strategy is designed to promote the quality
and variety of our menu items.
Through an advertising cooperative fund, we prepare regional and local
advertising materials and also produce menus and promotional programs for both
franchised and company-owned restaurants. Franchisees are required to contribute
a fee of up to 1.0% of franchised restaurant sales to the advertising
cooperative fund. One-half of this fee is credited to the franchisee for local
marketing and advertising conducted by the franchisee. We contribute an equal
percentage of sales of each company-owned restaurant to the advertising
cooperative fund. Except for the materials we prepare and distribute through the
advertising cooperative fund, franchisees, with our support, are responsible for
the implementation of advertising and marketing for their respective
restaurants, subject to adherence to our established guidelines. In addition,
our franchise agreements require franchisees to spend at least 2% of franchised
restaurant sales each year on local advertising and public relations.
For fiscal 2000, we spent approximately $5.2 million or 2.3% of restaurant
and consumer product sales on advertising and marketing, which includes the 1.0%
fee we contribute to the advertising cooperative fund for company-owned
restaurants.
12
COMPETITION
The restaurant business is highly competitive with respect to price,
service, food quality, ambiance, and overall dining experience. Our competitive
position is often affected by changes in consumer tastes, preferences and
discretionary spending patterns, economic conditions and population and traffic
patterns. There is also intense competition for real estate sites, personnel and
qualified franchisees. We compete within each market with full-service casual
dining restaurants, which may be locally-owned, as well as with national and
regional restaurant chains. Some of our competitors operate more restaurants and
have greater financial resources and longer operating histories.
EMPLOYEES
As of October 1, 2000, we had approximately 7,644 employees, 115 of whom
were corporate personnel and 416 of whom were field service or restaurant
managers and trainees. The remaining employees were restaurant personnel, many
of whom were part-time. Of the 115 corporate employees, 38 were in management
positions and 77 were general office employees.
We consider our relations with our employees to be good. Generally, our
employees are not covered by collective bargaining agreements except for those
employees working in three of our restaurants in urban Chicago who are members
of the Hotel Employees and Restaurant Employees International Union of the
AFL-CIO, and with whom we are subject to a collective bargaining agreement
through November 30, 2004.
TRADEMARKS
We regard our trademarks and service marks as having significant value and
as being an important factor in the marketing of our products. Our most
significant marks include "Uno," "Pizzeria Uno," "Pizzeria Due," and "Pizzeria
Uno...Chicago Bar & Grill." The registrations of our significant marks are
subject to renewal at various times from 2000 to 2008. We intend to renew our
registration of our marks prior to their expiration. Our policy is to pursue
registration of our marks whenever possible and to oppose strenuously any
infringement of our marks. We have also initiated efforts toward international
trademark registration in support of our plan to expand into international
markets. We have received one trademark registration in South Korea, where we
have a development agreement with an existing area licensee, and have received
several other international trademark registrations. In South Korea, Pakistan,
Indonesia, the United Arab Emirates and other countries in the Middle East, and
other countries, we have sought registration of a variety of marks, including
"Pizzeria Uno" and "Pizzeria Uno...Chicago Bar & Grill."
GOVERNMENT REGULATION
GENERAL. Various federal, state and local laws affect our business. Each of
our restaurants is subject to licensing and regulation by a number of
governmental authorities, which may include health, sanitation, building,
zoning, safety, fire, and alcoholic beverage control agencies in the state or
municipality in which the restaurant is located. These licensing and regulation
matters relate to environmental, building, construction and zoning requirements,
and the preparation and sale of food and alcoholic beverages. Difficulties or
failures in obtaining the required licenses or approvals and compliance with
application regulations could delay or prevent the development of a new
restaurant at a particular location.
Our operations are also subject to federal and state laws governing such
matters as wages, working conditions, citizenship requirements and overtime.
Some states have set minimum wage requirements higher than the federal level.
Significant numbers of hourly personnel at our restaurants are paid at rates
related to the federal minimum wage and, accordingly, increases in the minimum
wage will increase labor costs. Other governmental initiatives such as mandated
health insurance, if implemented,
13
could adversely affect us as well as the restaurant industry in general. We are
subject to the Americans With Disabilities Act of 1990, which, among other
things, requires our restaurants to meet federally mandated requirements for the
disabled. In addition, our employment practices are subject to the requirements
of the Immigration and Naturalization Service relating to citizenship and
residency.
ALCOHOLIC BEVERAGE CONTROL REGULATIONS. Alcoholic beverage control
regulations require each of our restaurants to apply to a state authority and,
in certain locations, county and municipal authorities for a license or permit
to sell alcoholic beverages on the premises. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the daily operations
of our restaurants, including minimum age of patrons and employees, hours of
operation, advertising, wholesale purchasing, inventory control, and handling,
storage and dispensing of alcoholic beverages.
DRAM SHOP STATUTES. We may be subject in certain states to "dram-shop"
statutes, which generally provide a person injured by an intoxicated person the
right to recover damages from an establishment which wrongfully served alcoholic
beverages to such person. We carry liquor liability coverage as part of our
existing comprehensive general liability insurance.
FRANCHISING LAWS. We are also subject to federal and a substantial number
of state laws regulating the offer and sale of franchises. These laws impose
registration and disclosure requirements on franchisors in the offer and sale of
franchises. These laws often also apply substantive standards to the
relationship between franchisor and franchisee and limit the ability of a
franchisor to terminate or refuse to renew a franchise.
HEALTH AND SAFETY LAWS. We are subject to the rules and regulations of
various federal, state and local health agencies, including the United States
Food and Drug Administration and the United States Department of Agriculture.
The FDA specifies standards for nutritional content claims and health claims
made in connection with food items offered in our restaurants. The FDA also
prescribes the format and content of nutritional information required to appear
on labels of certain products, including our line of fresh and frozen items sold
through supermarkets.
14
EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers and their ages are as follows:
NAME AGE POSITION DIRECTOR SINCE
---- -------- ------------------------------------ --------------
Aaron D. Spencer.................... 69 Chairman and Director 1979
Craig S. Miller..................... 51 President, Chief Executive Officer 1985
and Director
Paul W. MacPhail.................... 37 Executive Vice President, Chief --
Operating Officer
Robert M. Brown..................... 53 Executive Vice President --
Alan M. Fox......................... 53 Executive Vice President, --
President--Uno Foods Inc.
Robert M. Vincent................... 48 Executive Vice President--Finance, --
Chief Financial Officer
Mark A. Jones....................... 48 Senior Vice President--Development --
George W. Herz II................... 45 Senior Vice President, General --
Counsel, and Secretary
M. Heyward Whetsell, Jr............. 53 Senior Vice President--Marketing --
The following is additional information regarding each of our executive
officers:
Aaron D. Spencer, our founder, has been Chairman of the Board since 1986 and
previously served as our President until 1986 and as our Chief Executive Officer
until September 29, 1996. Mr. Spencer has 34 years of experience in the
restaurant industry. He was the founder and owner of our predecessor, which
operated a chain of 24 Kentucky Fried Chicken franchised restaurants at the time
the restaurants were sold.
Craig S. Miller has been our President since 1986 and was appointed Chief
Executive Officer on September 30, 1996. From 1986 to December 1998, he also
served as our Chief Operating Officer. From 1984 to 1986, Mr. Miller served as
one of our Vice Presidents and then as Executive Vice President. Prior to 1984,
he spent 11 years with the General Mills, Inc. restaurant subsidiary, including
four years in various executive capacities with Casa Gallardo Mexican
restaurants and six years with the Red Lobster restaurant chain. Mr. Miller has
a total of 32 years of experience in the restaurant industry.
Paul W. MacPhail was appointed Executive Vice President and Chief Operating
Officer on October 23, 2000. Previously Mr. MacPhail served as Executive Vice
President and Chief Operating Officer from December 1998 to April 2000 and was
our Senior Vice President-Operations from January 1997 to November 1998. From
October 1994 to January 1997, he served as Divisional Vice President-Operations
and from November 1992 to October 1994, he served as a Regional Director of
Operations. From 1990 to 1992, Mr. MacPhail served as a General Manager and
Senior Operations Manager. Prior to joining us, Mr. MacPhail served for eight
years as a general manager with Ground Round, Inc. Mr. MacPhail has a total of
16 years of experience in the restaurant industry.
Robert M. Brown was appointed Executive Vice President on November 30, 1999
and was our Senior Vice President-Administration from 1997 to 1999. He was
Senior Vice President-Finance from 1988 until 1997 and served as our Chief
Financial Officer and Treasurer from 1987 to 1997. From 1987 to 1988, he was our
Vice President-Finance. Prior to joining us, from 1984 to 1987, he served as
vice president, treasurer and chief financial officer of the waste management
subsidiary of Genstar Corporation and was employed by SCA Services, Inc. from
1980 to 1984, most recently as assistant controller. He is a certified public
accountant and has worked in accounting and finance, since 1969.
15
Alan M. Fox was appointed Executive Vice President on November 30, 1999 and
has been President of Uno Foods Inc., our subsidiary responsible for consumer
products distribution, since 1990. From 1990 to 1999, Mr. Fox was our Senior
Vice President-Purchasing. Mr. Fox served as Senior Vice President-Purchasing
and Development from 1989 to 1990, and served as Vice President of Purchasing
from 1988 to 1989. Prior to joining us, from 1971 to 1988, Mr. Fox served as
Vice President-Purchasing at Worcester Quality Foods, Inc., a wholesale food
service distributor. Mr. Fox has a total of 29 years of experience in the
restaurant and food service industries.
Robert M. Vincent was appointed Executive Vice President, Chief Financial
Officer and Treasurer in April 2000 and was our Senior Vice President-Finance,
Chief Financial Officer and Treasurer from July 1997 to March 2000. Prior to
that, he served as Vice President-Finance and Controller from November 1992 to
June 1997 and was our Controller from April 1992 to October 1992. Prior to
joining us, Mr. Vincent served as chief financial officer and vice
president-finance at Omega Corporation from 1988 to 1992, and vice
president-finance at Boston Restaurant Associates from 1985 to 1988. From 1976
to 1985, Mr. Vincent worked at Ogden Corporation in a variety of finance
positions. Mr. Vincent has 24 years experience in accounting and finance.
Mark A. Jones was appointed Senior Vice President-Development in
November 1999. Prior to joining us, Mr. Jones served for 20 years for Darden
Restaurants in a variety of positions. From 1992 to 1998 he was the vice
president of market development and real estate and from 1987 to 1992 he was the
vice president of construction and facilities. Mr. Jones served as the director
of construction from 1986 to 1987 and as the national manager of new designs and
remodels from 1982 to 1986. Prior to that he was the manager of expansion and
remodeling from 1979 to 1982. Mr. Jones has a total of 21 years of experience in
the restaurant industry.
George W. Herz II was appointed Senior Vice President, General Counsel and
Secretary in February 2000. He served as Vice President, General Counsel and
Secretary from November 1999 to February 2000. Prior to joining us, Mr. Herz
served as vice president and general counsel for Sbarro, Inc. from
November 1995 to November 1999. From 1993 to 1995 Mr. Herz was general counsel
for Minuteman Press International, and from 1983 to 1993 he served as corporate
counsel for that company.
M. Heyward Whetsell, Jr. was appointed Senior Vice President-Marketing in
June 2000. Before joining us, Mr. Whetsell was senior vice president-marketing
for TCBY Systems from March 1998 to June 2000. From 1996 to 1997 he was vice
president-advertising for Extended Stay America, Inc., and from 1995 to 1996 he
served as director-marketing for the Shoney's Division of TPI Restaurants, Inc.
Prior to that, Mr. Whetsell worked in the advertising industry for 22 years,
serving in a variety of positions.
See also "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,"
"ITEM 11. EXECUTIVE COMPENSATION," "ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT," and "ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."
ITEM 2. PROPERTIES
RESTAURANT LOCATIONS. As of December 1, 2000, we leased 88 and owned 23 of
our restaurant locations. The leases for company-owned restaurants typically
have initial terms of 20 years with certain renewal options and provide for a
base rent plus real estate taxes, insurance and other expenses, plus additional
percentage rents based on revenues of the restaurant. One of our company-owned
restaurants in Boston, Massachusetts is located on the first floor of a
six-story office building owned by Aaron D. Spencer, our Chairman. All of our
franchised restaurants are in space leased from parties unaffiliated with us.
Franchised restaurant leases typically have lease terms through the initial term
of the franchise agreements.
16
PRODUCTION PLANT. We own an approximately 38,000 square foot production
plant in Brockton, Massachusetts. The plant produces frozen products for service
aboard airline flights and at concession areas in theaters and hotels, as well
as fresh, refrigerated pizzas that are sold in more than 750 supermarkets
throughout the Northeast. This facility provides sufficient capacity to support
significant growth in our business in the years ahead.
EXECUTIVE OFFICES. Our executive offices are located in two adjacent
buildings in West Roxbury, Massachusetts. The first, a three-story building
owned by Charles Park Road, LLC, a Massachusetts limited liability company owned
by Aaron D. Spencer, our Chairman, and his two adult children, is leased to us
pursuant to a 10-year lease, commencing on March 30, 1987, with an option to
renew for an additional five-year term. Currently we are in the five-year option
term. We also lease the adjacent facility, a two-story building owned by Charles
Park Road, LLC, pursuant to a 15-year lease with the option to renew for three
additional five-year periods. This lease commenced on February 1, 1990. The two
buildings consist of approximately 25,000 square feet and house our executive,
administrative and clerical offices.
We also own a 12,000 square foot facility in Norwood, Massachusetts which
houses the company's test kitchen, Research & Development offices and training
center. The facility also provides warehouse space.
ITEM 3. LEGAL PROCEEDINGS
On October 25, 2000, a class action complaint (the "Complaint") was filed in
the Court of Chancery of the State of Delaware for New Castle County by Bruce
Cox against the Company, Aaron D. Spencer and each of the current directors and
an officer who is a former director of the Company. The Complaint alleges that
Mr. Spencer and certain members of senior management of the Company timed a
proposed acquisition of the outstanding shares of the Company not currently
owned by them to freeze out the Company's public shareholders in order to
capture for themselves the Company's future potential without paying an adequate
or fair price to the Company's public shareholders and that, through their
proposal, the defendants have breached their fiduciary duties to the plaintiff.
The plaintiff seeks to have the action maintained as a class action, seeks to
have the defendants enjoined from proceeding with or closing the proposed
transaction and further seeks to recover unspecified costs of the action. The
class is alleged to include all public shareholders of the Company, excluding
the defendants and their affiliates. The Company has filed a motion to dismiss
on the basis of ripeness and intends to defend vigorously against the Complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock, $.01 par value, is listed on the New York Stock
Exchange under the symbol "UNO." The table below sets forth the range of high
and low sales prices on the New York Stock Exchange for the period from
September 28, 1998 to October 1, 2000, adjusted for the 10% stock dividend
declared on November 30, 1999 and paid on December 23, 1999 to shareholders of
record on December 13, 1999:
COMMON STOCK
PRICE
-------------------
HIGH LOW
-------- --------
FISCAL YEAR ENDED OCTOBER 3, 1999
First Quarter............................................... $ 6.648 $5.284
Second Quarter.............................................. $ 7.614 $6.136
Third Quarter............................................... $ 7.955 $6.250
Fourth Quarter.............................................. $13.466 $8.011
FISCAL YEAR ENDED OCTOBER 1, 2000
First Quarter............................................... $11.125 $9.602
Second Quarter.............................................. $12.563 $9.563
Third Quarter............................................... $12.438 $9.875
Fourth Quarter.............................................. $12.625 $6.625
NUMBER OF STOCKHOLDERS
As of October 1, 2000, there were approximately 2,200 beneficial owners of
the Company's Common Stock.
DIVIDENDS
We have never paid cash dividends on our common stock, and we do not
anticipate paying cash dividends in the foreseeable future. Our current policy
is to retain all of our earnings to finance our future development and growth.
We may reconsider this policy from time to time in light of conditions then
existing, including our earnings performance, financial condition and capital
requirements. We are subject to various financial and operating covenants,
including limitations on the payment of cash dividends under our $55 million
credit facility.
On November 30, 1999 our board of directors declared a 10% stock dividend on
the outstanding shares of our common stock. The stock dividend was paid on
December 23, 1999 to shareholders of record as of December 13, 1999.
18
ITEM 6. SELECTED FINANCIAL DATA
FISCAL YEAR ENDED
-----------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
OCT. 1 OCT. 3 SEPT. 27 SEPT. 28 SEPT. 29
2000 1999 1998 1997 1996
-------- ---------- -------- -------- --------
(53 WEEKS)
INCOME STATEMENT DATA:
REVENUES
Restaurant sales........................ $213,715 $198,560 $177,343 $164,389 $159,581
Consumer product sales.................. 11,772 10,568 9,384 9,115 8,351
Franchise income........................ 5,683 5,105 4,549 4,516 4,209
-------- -------- -------- -------- --------
231,170 214,233 191,276 178,020 172,141
COSTS AND EXPENSES
Cost of food and beverages.............. 57,679 54,683 48,567 43,994 44,064
Labor and benefits...................... 70,922 64,700 58,139 54,183 51,868
Occupancy costs......................... 30,974 29,199 27,988 27,045 26,339
Other operating costs................... 19,468 17,739 17,148 15,244 14,323
General and administrative.............. 19,521 16,629 13,661 13,384 12,155
Depreciation and amortization........... 13,098 12,702 12,183 12,469 12,964
Pre-opening costs....................... 2,137 594 938 823 1,567
Special charges......................... 8,588 4,000 3,937
-------- -------- -------- -------- --------
222,387 196,246 178,624 171,142 167,217
-------- -------- -------- -------- --------
OPERATING INCOME.......................... 8,783 17,987 12,652 6,878 4,924
INTEREST AND OTHER EXPENSE................ 3,019 3,139 3,661 2,827 2,481
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES................ 5,764 14,848 8,991 4,051 2,443
Provision for income taxes................ 1,729 5,048 2,968 1,378 757
-------- -------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE................. 4,035 9,800 6,023 2,673 1,686
Cumulative effect of change in accounting
principle for pre-opening costs, net of
income tax benefit of $313.............. 636
-------- -------- -------- -------- --------
NET INCOME................................ $ 4,035 $ 9,800 $ 5,387 $ 2,673 $ 1,686
======== ======== ======== ======== ========
NET INCOME PER COMMON SHARE:
Income before cumulative effect of
change in accounting principle........ $ 0.36 $ 0.87 $ 0.50 $ 0.20 $ 0.12
Cumulative effect of change in
accounting principle.................. (0.05)
-------- -------- -------- -------- --------
Basic net income per common share......... $ 0.36 $ 0.87 $ 0.45 $ 0.20 $ 0.12
======== ======== ======== ======== ========
Diluted net income per common share....... $ 0.34 $ 0.84 $ 0.45 $ 0.20 $ 0.12
======== ======== ======== ======== ========
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic................................... 11,162 11,313 11,960 13,146 13,963
======== ======== ======== ======== ========
Diluted................................. 11,844 11,610 12,025 13,209 14,032
======== ======== ======== ======== ========
Certain amounts in prior fiscal years have been reclassified to permit
comparison.
19
Franchised restaurants which have been upgraded and redesigned to conform
with, or opened as, our Pizzeria Uno...Chicago Bar & Grill concept are included
in the table below for all periods presented. Franchised restaurants which have
not been upgraded and redesigned are included under the caption "Other" for all
periods presented. The information under Average Annual Restaurant Sales and
Comparable Restaurant Sales Change, under the caption "Other", only includes
those franchised restaurants which have not been upgraded and redesigned. The
table does not include quick-service units, our SuCasa Mexican restaurant in
Chicago or our former Bay Street Grill restaurants.
FISCAL YEAR ENDED
-----------------
(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF RESTAURANTS)
OCT. 1 OCT. 3 SEPT. 27 SEPT. 28 SEPT. 29
2000 1999 1998 1997 1996
-------- ---------- -------- -------- --------
(53 WEEKS)
OPERATING DATA:
NUMBER OF RESTAURANTS
FULL-SERVICE PIZZERIA UNO...CHICAGO BAR &
GRILL
Company-owned............................. 110 98 94 92 86
Franchised................................ 55 47 42 39 35
OTHER
Company-owned............................. 1 1 3 5 6
Franchised................................ 13 18 24 30 32
-------- -------- -------- -------- --------
TOTAL AT YEAR END......................... 179 164 163 166 159
======== ======== ======== ======== ========
SYSTEM-WIDE RESTAURANT SALES
FULL-SERVICE PIZZERIA UNO...CHICAGO BAR &
GRILL
Company-owned............................. $211,626 $196,353 $174,716 $160,045 $151,178
Franchised................................ 104,564 92,447 75,338 68,861 60,816
OTHER
Company-owned............................. 1,723 2,207 2,627 4,344 8,403
Franchised................................ 16,648 25,687 30,212 33,986 35,273
-------- -------- -------- -------- --------
TOTAL..................................... $334,561 $316,694 $282,893 $267,236 $255,670
======== ======== ======== ======== ========
AVERAGE ANNUAL RESTAURANT SALES
FULL-SERVICE PIZZERIA UNO...CHICAGO BAR &
GRILL
Company-owned............................. $ 2,052 $ 1,972 $ 1,854 $ 1,818 $ 1,846
Franchised................................ 2,071 2,002 1,881 1,858 1,819
OTHER
Franchised................................ 1,297 1,132 1,207 1,199 1,223
COMPARABLE RESTAURANT SALES CHANGE
FULL-SERVICE PIZZERIA UNO...CHICAGO BAR &
GRILL
Company-owned............................. 3.0% 6.1% 1.3% (1.7)% (1.3)%
Franchised................................ 1.9% 5.0% 1.8% 0.7% (1.1)%
OTHER
Franchised................................ (1.8)% (5.5)% (5.1)% (2.9)% (1.0)%
BALANCE SHEET DATA:
Total assets.............................. $168,476 $149,612 $143,195 $143,732 $135,065
Long-term debt, net of current portion.... 50,900 31,612 38,676 42,516 37,085
Capital lease obligations, net of current
portion................................. 453 489 666 867 1,056
Treasury stock............................ 33,237 26,826 22,616 19,877 10,653
Total shareholders' equity................ 81,714 80,979 73,669 70,880 77,136
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total
revenues, unless otherwise indicated, of certain items included in the Company's
income statements and operating data for the periods indicated:
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
10/01/00 10/03/99 9/27/98
-------- -------- --------
REVENUES:
Restaurant sales.......................................... 92.4% 92.7% 92.7%
Consumer product sales.................................... 5.1 4.9 4.9
Franchise income.......................................... 2.5 2.4 2.4
----- ----- -----
Total................................................... 100.0 100.0 100.0
COSTS AND EXPENSES:
Cost of food and beverages (1)............................ 25.6 26.1 26.0
Labor and benefits (1).................................... 31.5 30.9 31.1
Occupancy costs (1)....................................... 13.7 14.0 15.0
Other operating costs (1)................................. 8.6 8.5 9.2
General and administrative................................ 8.4 7.8 7.1
Depreciation and amortization (1)......................... 5.8 6.1 6.5
Pre-opening costs (2)..................................... 1.0 0.3 0.5
Special charges (2)....................................... 4.0
OPERATING INCOME............................................ 3.8 8.4 6.6
INTEREST AND OTHER EXPENSE.................................. (1.3) (1.5) (1.9)
----- ----- -----
INCOME BEFORE INCOME TAXES.................................. 2.5 6.9 4.7
Provision for income taxes................................ 0.8 2.3 1.6
----- ----- -----
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................................. 1.7 4.6 3.1
Cumulative effect of change in accounting principle for
pre-opening costs, net of income tax benefit............ .3
----- ----- -----
NET INCOME.................................................. 1.7% 4.6% 2.8%
===== ===== =====
(1) Percentage of restaurant and consumer product sales
(2) Percentage of restaurant sales
21
FISCAL YEAR ENDED OCTOBER 1, 2000 (52 WEEKS) COMPARED TO FISCAL YEAR ENDED
OCTOBER 3, 1999 (53 WEEKS)
TOTAL REVENUES. Total revenues increased 7.9% to $231.2 million in fiscal
2000 from $214.2 million in fiscal 1999.
RESTAURANT SALES. Company-owned restaurant sales for the period rose 7.6%
to $213.7 million from $198.6 million in fiscal 1999 due in part to a 3.0%
increase in comparable store sales. Average weekly sales, which includes sales
at comparable stores as well as new restaurants, increased 4.1% over the prior
year, as the 12 company-operated restaurants opened in fiscal 2000 generated
sales volumes approximately 25% higher than our comparable restaurant average.
Operating weeks of full-service Pizzeria Uno...Chicago Bar & Grill restaurants
increased 3.6% in fiscal 2000.
CONSUMER PRODUCT SALES. Consumer product sales increased 11.4% to
$11.8 million in fiscal 2000 from $10.6 million in fiscal 1999. Sales in the
contract food service category grew 15.1%, primarily as a result of increased
shipments to airline and hotel accounts. Sales in the supermarket category
increased 0.8% over the same period last year as a 7.4% increase in Pizzeria Uno
branded sales to retail grocers offset a reduction in private label and
wholesale club store sales.
FRANCHISE INCOME. Franchise income, which includes royalty income and
initial franchise fees, increased 11.3% to $5.7 million in fiscal 2000 from
$5.1 million in fiscal 1999. Royalty income increased 6.0% to $5.2 million in
fiscal 2000 from $4.9 million in fiscal 1999. The growth in royalty income was
primarily due to a 9.5% increase in average weekly sales for full-service
franchised restaurants. Franchise fees of $442,000 were recorded in fiscal 2000,
including approximately $180,000 from a non-refundable deposit forfeiture,
compared to $160,000 in fiscal 1999. Nine full-service franchised restaurants
opened and seven full-service franchised restaurants closed during fiscal 2000,
including six non-Chicago Bar & Grill restaurants.
COST OF FOOD AND BEVERAGES. Cost of food and beverage as a percentage of
restaurant and consumer product sales decreased to 25.6% in fiscal 2000 from
26.1% last year. The decrease reflects the impact of cost savings from lower
contract prices on commodities along with modest menu price increases during the
year.
LABOR AND BENEFITS. Labor costs as a percentage of restaurant and consumer
product sales rose to 31.5% in fiscal 2000 from 30.9% in fiscal 1999. The growth
in restaurant labor costs reflects an increase in the average wage rate,
slightly lower direct labor productivity and higher management staffing levels
while consumer product labor expense rose due to higher wage rates and increased
benefits costs.
OCCUPANCY COSTS. Occupancy costs as a percentage of restaurant and consumer
product sales declined to 13.7% in fiscal 2000 from 14.0% in fiscal 1999 due to
sales leverage gains.
OTHER OPERATING COSTS. Other operating costs as a percentage of restaurant
and consumer product sales increased slightly to 8.6% in fiscal 2000 from 8.5%
in fiscal 1999 due to higher bank processing fees.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of total revenues increased to 8.4% in fiscal 2000 from 7.8% in
fiscal 1999. The increase primarily reflects growth in salaries, recruitment and
trainee labor costs, and legal and professional fees.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of restaurant and consumer product sales declined to
5.8% in fiscal 2000 from 6.1% in fiscal 1999 due to sales leverage gains.
PRE-OPENING COSTS. Pre-opening costs as a percentage of restaurant sales
increased to 1.0% in fiscal 2000 from 0.3% in fiscal 1999, reflecting the
opening of 12 new restaurants in fiscal 2000
22
compared with five new restaurants in fiscal 1999. Pre-opening costs for two
existing company restaurants that underwent major facilities upgrades in fiscal
2000 also contributed to the increase.
SPECIAL CHARGES. With a chain of 111 full-service Company-owned
restaurants, the Company periodically reviews the carrying value of its
long-lived assets (primarily property, equipment and leasehold improvements) to
assess the recoverability of these assets. The Company records impairment losses
on long-lived assets used in operations when events and circumstances indicate
that the assets might be impaired and the undiscounted cash flows estimated to
be generated by those assets are less than the carrying amount of those assets.
During the fourth quarter of fiscal 2000, the Company recorded a charge in
the amount of $8.6 million, consisting of an asset impairment charge of
$8.1 million and store closing costs of $.5 million. The $8.1 million asset
impairment charge was recorded to reduce the carrying value of equipment and
leaseholds at eight full-service Uno restaurants to their fair market value.
Based upon current operating and cash flow results, management believed that
these units would likely continue to generate operating and cash flow losses
over the related remaining lease terms and therefore reduced the carrying value
of the impaired assets to fair market value. The store closure costs represent
estimated settlement costs associated with two full-service units, which the
Company decided to close in the fourth quarter of fiscal 2000. The Company has
already closed one of the two units and expects to close the other in fiscal
2001.
The Company has not accrued any potential lease settlement costs for the
remaining six impaired units since no decision has been made as to closing the
sites. The decision to continue to operate or close the units will depend on
events during the next 12 months. Any store closure costs will be recognized
only upon a decision, if any, to close the units.
OPERATING INCOME. Operating income for fiscal 2000 was $8.8 million, which
represents an operating margin of 3.8%. Operating income for fiscal 1999 was
$18.0 million, which represents an operating margin of 8.4%. Operating income,
exclusive of the special charges, was $17.4 million in fiscal 2000, representing
an operating margin of 7.5%. The decline in operating income and operating
margin in fiscal 2000 was primarily due to increased labor, general and
administrative, and pre-opening costs.
INTEREST AND OTHER EXPENSE. Interest and other expense decreased to
$3.0 million, or 1.3% of total revenues in fiscal 2000 from $3.1 million, or
1.5% of total revenues in fiscal 1999. The reduction is attributable to
increased other income and higher interest capitalization, partially offset by
higher debt levels and a small increase in borrowing rates.
PROVISION FOR INCOME TAXES. The effective tax rate in fiscal 2000 was 30%,
down from 34% in fiscal 1999 due to the impact of tax credits, which remained
consistent with fiscal 1999, being applied against a lower pre-tax income.
NET INCOME. Net income decreased to $4.0 million in fiscal 2000 from
$9.8 million in fiscal 1999 based on the factors noted above.
FISCAL YEAR ENDED OCTOBER 3, 1999 (53 WEEKS) COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 27, 1998 (52 WEEKS)
TOTAL REVENUES. Total revenues increased 12.0% to $214.2 million in fiscal
1999 from $191.3 million in fiscal 1998.
RESTAURANT SALES. Company-owned restaurant sales for the period rose 12.0%
to $198.6 million from $177.3 million in fiscal 1998 due primarily to a 6.1%
increase in comparable store sales. Average weekly sales, which includes sales
at comparable stores as well as new restaurants, increased 6.4% over
23
the prior year, as the latest variation of our new prototype restaurants (P5)
generated sales volumes approximately 10% higher than our non-prototype
restaurant average. Growth in operating weeks of full-service Pizzeria
Uno...Chicago Bar & Grill restaurants increased by 5.7% resulting from the
addition of five restaurants during fiscal 1999.
CONSUMER PRODUCT SALES. Consumer product sales increased 12.6% to
$10.6 million in fiscal 1999 from $9.4 million in fiscal 1998. Sales in the
contract food service category grew 38.0%, primarily as a result of increased
shipments to American Airlines, including initial shipments for new service on
American Airlines international flights, and hotel accounts. Sales in the
supermarket category decreased 18.8% over the same period last year as a 7.5%
increase in Pizzeria Uno branded sales to retail grocers was offset by the
elimination of a large international account and a reduction in wholesale club
store sales.
FRANCHISE INCOME. Franchise income, which includes royalty income and
initial franchise fees, increased 12.2% to $5.1 million from $4.5 million in
fiscal 1998. Royalty income increased 12.0% to $4.9 million in fiscal 1999 from
$4.4 million in fiscal 1998. The increase in royalty income was primarily due to
an 8.1% increase in average weekly sales for full-service franchised
restaurants. Franchise fees of $160,000 were recorded for fiscal 1999 compared
to $133,000 for fiscal 1998. Eight full-service franchised restaurants opened
and 11 full-service franchised restaurants closed during fiscal 1999, including
10 non-Chicago Bar & Grill restaurants.
COST OF FOOD AND BEVERAGES. Cost of food and beverage as a percentage of
restaurant and consumer product sales increased to 26.1% for fiscal 1999
compared to 26.0% for the same period last year. This increase was due in part
to cost increases associated with the company-wide rollout of the new menu
initiative and slightly higher cheese costs, which were partially offset by
modest menu price increases during the year. In March 1999 we entered into a
fixed price cheese contract with our cheese supplier for our mozzarella cheese
to help minimize our exposure from the volatility in the block cheese market
which reached record heights during the summer months.
LABOR AND BENEFITS. Labor costs as a percentage of restaurant and consumer
product sales were down slightly to 30.9% in fiscal 1999 from 31.1% in fiscal
1998 as an increase in the average wage rate was absorbed by a higher check
average and lower consumer product labor expense.
OCCUPANCY COSTS. Occupancy costs as a percentage of restaurant and consumer
product sales declined to 14.0% in fiscal 1999 from 15.0% in fiscal 1998 due to
sales leverage gains.
OTHER OPERATING COSTS. Other operating costs as a percentage of restaurant
and consumer product sales declined to 8.5% in fiscal 1999 from 9.2% in fiscal
1998 due to lower advertising expense.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of total revenues increased to 7.8% in fiscal 1999 from 7.1% in
fiscal 1998. This increase was primarily due to higher incentive compensation
expense as a result of the company's strong performance, and increased legal and
professional expense.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of restaurant and consumer product sales was down to
6.1% in fiscal 1999 compared to 6.5% in fiscal 1998 due to sales leverage gains.
PRE-OPENING COSTS. Pre-opening costs as a percentage of restaurant sales
declined to 0.3% in fiscal 1999 from 0.5% in fiscal 1998, primarily due to sales
leverage gains.
OPERATING INCOME. Operating income for fiscal 1999 was $18.0 million, which
represents an operating margin of 8.4%. Operating income for fiscal 1998 was
$12.7 million, which represents an operating margin of 6.6%.
24
INTEREST AND OTHER EXPENSE. Interest and other expense decreased to
$3.1 million, or 1.5% of total revenues in fiscal 1999 from $3.7 million, or
1.9% of total revenues in fiscal 1998. Interest expense decreased to
$3.2 million in fiscal 1999 from $3.5 million in fiscal 1998 due to a slightly
lower borrowing rate and a lower debt level.
PROVISION FOR INCOME TAXES. The effective tax rate increased in fiscal 1999
to 34% from 33% in fiscal 1998 due to higher pre-tax profits that shifted us
into a higher tax bracket and the diminished impact of tax credits, which
remained relatively consistent from fiscal 1998, being applied against a higher
pre-tax income amount.
NET INCOME. Net income increased to $9.8 million in fiscal 1999 from
$5.4 million in fiscal 1998 based on the factors noted above, as 1998 results
reflect the adoption of SOP 98-5 "Reporting on the Costs of Start-up
Activities." The cumulative effect of this change in accounting principle was
$636,000, net of income taxes.
LIQUIDITY AND SOURCES OF CAPITAL
Historically, we have leased most of our restaurant locations and pursued a
strategy of controlled growth, financing our expansion principally from
operating cash flow, public equity offerings, the sale of senior, unsecured
notes, and revolving lines of credit. The following table presents a summary of
our cash flows for the 52 weeks ended October 1, 2000 (in thousands).
Net cash provided by operating activities................... $ 20,825
Net cash used in investing activities....................... (36,382)
Net cash provided by financing activities................... 15,593
--------
Increase in cash............................................ $ 36
========
Cash increased from $752,000 at October 3, 1999 to $788,000 at October 1,
2000. Net cash provided by operations of $20.8 million for fiscal 2000 resulted
primarily from $4.0 million of net income plus $13.2 million in depreciation and
amortization, along with $8.6 million of non-cash special charges, including
$8.1 million of asset impairment charges for eight units and $.5 million of
estimated lease settlement costs for two units the Company has decided to close.
This was partially offset by an increase in deferred income taxes in the amount
of $4.2 million and an increase in accounts receivable in the amount of
$1.5 million.
The Company's investing activities utilized $36.4 million of net cash during
fiscal 2000 primarily for purchases of property and equipment for existing units
and for the addition of 12 new units.
The Company's financing activities generated $15.6 million in net cash
during fiscal 2000 due to proceeds from the Company's revolving line of credit
of $19.1 million and exercise of stock options of $2.5 million, offset by the
purchase of treasury stock of $6.0 million.
In fiscal 2000, we opened 12 new restaurants. In fiscal 2001, we currently
expect to open approximately seven to nine restaurants. We project that the
average cash investment required in fiscal 2001 to open a full-service Pizzeria
Uno...Chicago Bar and Grill restaurant, excluding land and pre-opening costs,
will be approximately $1.7 million. The expected capital expenditures for fiscal
2001 are estimated to be approximately $23.0 million, of which approximately
$15.0 million is expected to be expended for the opening of new restaurants.
As of October 1, 2000, we had outstanding indebtedness of $50.4 million
under our $55 million credit facility, $488,000 in capital lease obligations and
$4.4 million under our mortgage financing. Advances under the revolving credit
facility will accrue interest at the lender's prime rate plus 0-50 basis points,
or alternatively, 75-175 basis points above LIBOR, depending upon our level of
indebtedness. In June 2000, we amended our $55 million credit facility to
increase the revolver
25
component from $26.6 million to $36.6 million, leaving the remaining original
principal amounts of the term loans of the facility unchanged. The maturity of
the revolver is now June 2005. We anticipate using the revolving credit facility
in the future for the development of additional restaurants and for working
capital.
On November 30, 1999 our board of directors declared a 10% stock dividend on
the outstanding shares of our common stock. The stock dividend was paid on
December 23, 1999 to shareholders of record as of December 13, 1999. All share,
per share and share price data included in this report have been adjusted for
the 10% stock dividend.
On February 25, 2000, our board of directors amended its prior authorization
regarding the repurchase of our common stock. Under this amendment, we are
currently authorized to repurchase up to 1,500,000 shares of our common stock at
such times and at such prices as we deem appropriate. To date under this
authorization, we have repurchased 1,392,775 shares, of which 688,505 were
purchased during fiscal 2000.
We believe that existing cash balances, cash generated from operations and
borrowings under our revolving line of credit will be sufficient to fund our
capital requirements for the foreseeable future.
We are currently obligated under 105 leases, including 101 leases for
company-owned restaurants, two leases for our executive offices, one lease for
an office building containing one of our restaurants and one lease for a mill
shop.
YEAR 2000 COMPLIANCE
The Year 2000 problem is a result of computer programs being written using
two digits rather than four to define the applicable year. Any of our programs
that have time sensitive software may recognize the date using "00" as the year
1900 rather than the year 2000, which could result in system failures or
miscalculations using existing software. We did not experience any significant
disruptions of business as a result of the Year 2000 problem. Business affairs
with our major vendors and food distributors, our credit card processor and our
franchisees continued without any critical interruptions. However, if
unanticipated problems arise from systems or equipment in the future, there
could be material adverse effects on our consolidated financial position,
results of operations and cash flows.
We expensed all maintenance and modification costs as we incurred them. We
capitalized and depreciated the cost of new software, if material, over its
expected useful life. We incurred costs of approximately $150,000 in testing and
remediation of all our systems and applications. Approximately $60,000 of the
total cost of testing and remediation relates to repair issues and the remainder
to replacement of equipment. All costs were budgeted and funded by cash flows
from operations. No information technology projects were deferred due to Year
2000 compliance efforts. We did not pursue independent verification of our
systems because we believe that any effort would have been as costly as the
remediation effort and was not warranted. The costs related to the Year 2000
compliance project were not material to our financial position or results of
operations.
IMPACT OF INFLATION
Inflation has not been a major factor in our business for the last several
years. We believe we have historically been able to pass on increased costs
through menu price increases, but there can be no assurance that we will be able
to do so in the future. Future increases in local area construction costs could
adversely affect our ability to expand.
26
SEASONALITY
Our business is seasonal in nature, with revenues and, to a greater degree,
operating income being lower in the first and second fiscal quarters than in
other quarters. Our seasonal business pattern is due to our concentration of
restaurants in the Northeast, and the resulting lower winter volumes.
FORWARD-LOOKING INFORMATION
Certain information in this Annual Report on Form 10-K including, but not
limited to, statements found in this "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," may be
forward-looking statements. Actual results might differ materially from those
projected in such forward-looking statements. Among the factors that could cause
actual results to differ materially are: the Company's ability to open new
restaurants and operate new and existing restaurants profitably, which will
depend upon a number of factors including the availability of suitable sites,
the negotiation of acceptable lease or purchase terms, the securing of required
governmental permits and approvals, the hiring, training and retaining of
skilled management, and the availability of adequate financing; changes in
local, regional and national economic conditions, especially economic conditions
in the areas in which the Company's restaurants are concentrated; increasingly
intense competition in the restaurant industry; changes in consumer tastes and
eating habits; increases in food, labor, employee benefits and similar costs;
and other risks identified from time to time in the Company's periodic reports
and the more detailed factors discussed in the Company's Registration Statement
on Form S-2 (Reg. No. 333-86765), each as filed with the Securities and Exchange
Commission.
27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We have market risk exposure to interest rates on our fixed and variable
rate debt obligations and manage this exposure through the use of interest rate
swaps. We do not enter into contracts for trading purposes. The information
below summarizes our market risk associated with debt obligations and derivative
financial instruments as of October 1, 2000. For debt obligations, the table
presents principal cash flows and related average interest rates by expected
fiscal year of maturity. For variable rate debt obligations, the average
variable rates are based on implied forward rates as derived from appropriate
quarterly spot rate observations as of the fiscal year end. For interest rate
swaps, the table presents the notional amounts and related weighted average
interest rates by fiscal year of maturity. The average variable rates are the
implied forward rates as derived from appropriate quarterly spot rate
observations as of the fiscal year end.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Part IV,
Item 14 in this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is hereby incorporated by reference
to the text appearing under Part I, Item 1--Business, under the caption
"Executive Officers of the Registrant" at page 14 of this Report, and by
reference to the Company's definitive Proxy Statement which is expected to be
filed by the Company within 120 days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by reference
to the Company's definitive Proxy Statement which is expected to be filed by the
Company within 120 days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is hereby incorporated by reference
to the Company's definitive Proxy Statement which is expected to be filed by the
Company within 120 days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is hereby incorporated by reference
to the Company's definitive Proxy Statement which is expected to be filed by the
Company within 120 days after the close of its fiscal year.
29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. INDEX TO FINANCIAL STATEMENTS
PAGE
--------
Report of Independent Auditors.............................. 34
Consolidated Balance Sheets--October 1, 2000 and October 3,
1999...................................................... 36
Consolidated Statements of Income--Years ended October 1,
2000, October 3, 1999, and September 27, 1998............. 37
Consolidated Statements of Shareholders' Equity--Years ended
October 1, 2000,
October 3, 1999, and September 27, 1998................... 38
Consolidated Statements of Cash Flows--Years ended October
1, 2000, October 3, 1999, and September 27, 1998.......... 39
Notes to Consolidated Financial Statements.................. 40
2. FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
3. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
3.1 Restated Certificate of Incorporation, as amended, filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 2, 1995 (the "April 2,
1995 Form 10-Q").*
3.2 Amended and Restated By-laws filed as Exhibit 3.2 to the
April 2, 1995 Form 10-Q.*
4.1 Specimen Certificate of Common Stock, filed as Exhibit 4.1
to the Company's Registration Statement on Form S-2
(Registration No. 333-86765) ("1999 Registration
Statement").*
10.1 Lease between Uno Restaurants, Inc. and Aaron D. Spencer
dated March 30, 1987 for premises in Boston, Massachusetts,
filed as Exhibit 10.3 to the Company's Registration
Statement on Form S-1 (Registration No. 33-13100) ("1987
Registration Statement").*
10.2 Lease between Uno Restaurants, Inc. and Aaron D. Spencer
dated March 30, 1987 for premises in West Roxbury,
Massachusetts, filed as Exhibit 10.2 to the 1987
Registration Statement.*
10.3 Amendment to Lease dated November 17, 1992 for premises in
West Roxbury, Massachusetts, filed as Exhibit 10.3 to the
1999 Registration Statement.*
10.4 Lease Between Uno Restaurants, Inc. and Lisa S. Cohen and
Mark N. Spencer dated February 1, 1990 for premises in West
Roxbury, Massachusetts, filed as Exhibit 10.4 to the 1999
Registration Statement.*
10.5 Quitclaim Deed between Aaron D. Spencer, Lisa S. Cohen and
Mark N. Spencer and Charles Park Road, LLC dated August 10,
1998, filed as Exhibit 10.5 to the 1999 Registration
Statement.*
10.6 Form of Franchise Agreement and Area Franchise Agreement,
filed as Exhibit 10(d) to the Company's Annual Report on
Form 10-K for fiscal year ended September 29, 1996 (the
"1996 Annual Report on Form 10-K").*
30
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
10.7 1999 Uniform Franchisee Offering Circular, including Current
Form of Franchise Agreement, filed as Exhibit 10(d) on the
Company's Annual Report on Form 10-Q for the fiscal quarter
ended June 27, 1999 (the "June 27, 1999 Form 10-Q").*
10.8 Uno Restaurant Corporation 1987 Employee Stock Option Plan,
as amended, filed as Exhibit 10.8 to the 1999 Registration
Statement.* **
10.9 Uno Restaurant Corporation 1989 Non-Qualified Stock Option
Plan for Non-Employee Directors, filed as Exhibit A to the
Company's Proxy Statement for the Annual Meeting of
Stockholders held on February 8, 1995.* **
10.10 Uno Restaurant Corporation 1993 Non-Qualified Stock Option
Plan for Non-Employee Directors, as amended, filed as
Exhibit 10(g) to the Company's Annual Report on Form 10-K
for the fiscal year ended September 28, 1997 (the "1997
Annual Report on Form 10-K").* **
10.11 Uno Restaurant Corporation 1997 Employee Stock Option Plan,
filed as Exhibit A to the Company's Proxy Statement for the
Annual Meeting of Stockholders held on February 26,
1997.* **
10.12 Uno Restaurant Corporation 1997 Key Officer Stock Option
Plan, filed as Exhibit A to the Company's Proxy Statement
for the Annual Meeting of Stockholders held on February 26,
1998.* **
10.13 Uno Restaurant Corporation 1997 Non-Qualified Stock Option
Plan for Non-Employee Directors, filed as Exhibit B to the
Company's Proxy Statement for the Annual Meeting of
Stockholders held on February 26, 1998.* **
10.14 Form of Indemnification Agreement between the Company and
its Officers, filed as Exhibit 10.6 to the 1987 Registration
Statement.* **
10.15 Interest Rate Swap Agreement between Fleet Bank of
Massachusetts, N.A. and Uno Restaurants, Inc. dated
October 25, 1995, filed as Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 1, 1995 (the "1995 Annual Report on Form 10-K").*
10.16 Interest Rate Swap Agreement between Fleet Bank of
Massachusetts, N.A. and Uno Restaurants, Inc. dated
July 21, 1998, filed as Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 27, 1998 (the "1998 Annual Report on Form 10-K).*
10.17 Note between the Company and Craig S. Miller dated April 1,
1997, filed as Exhibit 10(r) to the Company's 1997 Annual
Report on Form 10-K.* **
10.18 Amendment to Promissory Note and Revised Debt Agreement
dated April 7, 1998, and Second Amendment to Promissory Note
and Revised Debt Agreement dated September 27, 1998, each
between the Company and Craig S. Miller, filed as
Exhibit 10(p) to the 1998 Annual Report on Form 10- K.* **
10.19 Third Amendment to Promissory Note and Revised Debt
Agreement dated August 3, 1999, each between the Company and
Craig S. Miller, filed as Exhibit 10(p) to the June 27, 1999
Form 10-Q.* **
10.20 Form of Change in Control Protection Agreements between Uno
Restaurant Corporation and Mr. Spencer and Mr. Miller, filed
as Exhibit 10(m) to the 1997 Annual Report on
Form 10-K.* **
10.21 Form of Change in Control Protection Agreements between Uno
Restaurant Corporation and Senior Vice Presidents, filed as
Exhibit 10(n) to the 1997 Annual Report on Form 10-K.* **
10.22 Form of Change in Control Protection Agreements between Uno
Restaurant Corporation and its other officers, filed as
Exhibit 10(o) to the 1997 Annual Report on Form 10-K.* **
31
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
10.23 Master Lease-Purchase Agreement between ORIX Credit
Alliance, Inc., as Lessor, and Massachusetts Industrial
Finance Agency, as Lessee, dated April 19, 1994, and Master
Sublease-Purchase Agreement between Massachusetts Industrial
Finance Agency, as Sublessor, and Uno Foods, Inc. as
Sublessee, dated April 19, 1994, filed as Exhibit 10(s) to
the Company's Annual Report on Form 10-K for the fiscal year
ended October 2, 1994.*
10.24 MetLife Capital Financial Corporation Mortgage Notes:
$1,875,000 8.75% Note dated December 23, 1996 of 8250
International Drive Corporation, $825,000 8.75% Note dated
December 23, 1996 of Saxet Corporation, $900,000 8.75% Note
dated December 23, 1996 of Saxet Corporation, $675,000 8.75%
Note dated January 30, 1997 of Saxet Corporation, $825,000
8.75% Note dated February 27, 1997 of Saxet Corporation,
each payable to the order of MetLife Capital Financial
Corporation, filed as Exhibit 10(q) to the 1997 Annual
Report on Form 10-K.*
10.25 $55,000,000 Amended and Restated Revolving Credit and Term
Loan Agreement ("Revolving Credit and Term Loan Agreement")
dated as of November 4, 1997 by and among Uno
Restaurants, Inc. and Saxet Corp., as Borrowers, Uno
Foods, Inc., Pizzeria Uno Corporation, URC Holding
Company, Inc. and Uno Restaurant Corporation, as Guarantors,
and Fleet National Bank, as Agent and BankBoston, N.A. as
Co-Agent (without exhibits), filed as Exhibit 10(s) to the
1997 Annual Report on Form 10-K.*
10.26 Amendment to Revolving Credit and Loan Agreement dated
September 28, 1998, filed as Exhibit 10.26 to the 1999
Registration Statement.*
10.27 Executive Employment Agreement dated October 1, 1997, as
amended, by and between the Company and Paul MacPhail, filed
as Exhibit 10.27 to the 1999 Registration Statement.* **
10.28 Executive Employment Agreement dated October 1, 1997, as
amended, by and between the Company and Robert Brown, filed
as Exhibit 10.28 to the 1999 Registration Statement.* **
10.29 Executive Employment Agreement dated October 1, 1997, as
amended, by and between the Company and Robert Vincent,
filed as Exhibit 10.29 to the 1999 Registration
Statement.* **
10.30 Executive Employment Agreement dated October 1, 1997, as
amended, by and between the Company and Alan Fox, filed as
Exhibit 10.30 to the 1999 Registration Statement.* **
10.31 Contract with Beatrice Cheese, Inc. dated March 18, 1999,
filed as Exhibit 10.31 to the 1999 Registration Statement.*
10.32 Promissory Note between the Company and Aaron D. Spencer
dated August 26, 1999, filed as Exhibit 10.32 to the 1999
Registration Statement.* **
10.33 Form of Indemnification Agreement between the Company and
its Directors as of October 2000.**
10.34 First Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement dated June 14, 2000 with Fleet National
Bank and SunTrust Bank.
10.35 Contract with Beatrice Cheese, Inc. dated September 29,
2000.
21.1 Subsidiaries of the Registrant.
23.2 Consent of Ernst & Young LLP.
27.1 Financial Data Schedule.
* In accordance with Rule 12b-23 and Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, reference is made to the documents previously filed
with the Securities and Exchange Commission, which documents are
incorporated by reference.
** Management Contract.
(b) Reports on Form 8-K
During the fiscal quarter ended October 1, 2000, we did not file any Current
Reports on Form 8-K.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
UNO RESTAURANT CORPORATION
BY: /S/ ROBERT M. VINCENT
-----------------------------------------
Robert M. Vincent,
EXECUTIVE VICE PRESIDENT
Date: December 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
NAME TITLE DATE
---- ----- ----
/s/ AARON D. SPENCER Chairman and Director
-------------------------------------- December 22, 2000
Aaron D. Spencer
/s/ CRAIG S. MILLER President, Chief Executive
-------------------------------------- Officer and Director December 22, 2000
Craig S. Miller (Principal Executive Officer)
/s/ ROBERT M. VINCENT Executive Vice President-Finance
-------------------------------------- and Chief Financial Officer December 22, 2000
Robert M. Vincent (Principal Financial Officer)
/s/ JOHN T. GERLACH Director
-------------------------------------- December 22, 2000
John T. Gerlach
/s/ JAMES F. CARLIN Director
-------------------------------------- December 22, 2000
James F. Carlin
/s/ TAMARA P. DAVIS Director
-------------------------------------- December 22, 2000
Tamara P. Davis
/s/ JAMES J. KERASIOTES Director
-------------------------------------- December 22, 2000
James J. Kerasiotes
/s/ KENNETH D. HILL Director
-------------------------------------- December 22, 2000
Kenneth D. Hill
33
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 as of October 1, 2000 and October 3,
1999, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended October 1, 2000.
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 auditing standards generally
accepted in the United States. 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 October 1, 2000 and October 3, 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 1, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 3, 2000
34
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 1, 2000, OCTOBER 3, 1999
AND SEPTEMBER 27, 1998
CONTENTS
Report of Independent Auditors.............................. 34
Audited Consolidated Financial Statements
Consolidated Balance Sheets................................. 36
Consolidated Statements of Income........................... 37
Consolidated Statements of Shareholders' Equity............. 38
Consolidated Statements of Cash Flows....................... 39
Notes to Consolidated Financial Statements.................. 40
35
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1 OCTOBER 3
2000 1999
------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
ASSETS
Current assets:
Cash...................................................... $ 788 $ 752
Accounts receivable, net.................................. 3,530 2,398
Inventories............................................... 2,497 2,436
Prepaid expenses.......................................... 1,999 1,757
-------- --------
Total current assets........................................ 8,814 7,343
Property, equipment and leasehold improvements, net......... 141,992 128,746
Deferred income taxes....................................... 14,132 10,020
Liquor licenses and other assets............................ 3,538 3,503
-------- --------
$168,476 $149,612
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 9,851 $ 7,798
Accrued expenses.......................................... 8,459 8,668
Accrued compensation and taxes............................ 2,889 3,369
Income taxes payable...................................... 558 2,914
Current portions of long-term debt and capital lease
obligations............................................. 3,953 4,075
-------- --------
Total current liabilities................................... 25,710 26,824
Long-term debt, net of current portion...................... 50,900 31,612
Capital lease obligations, net of current portion........... 453 489
Other liabilities........................................... 9,699 9,708
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $1.00 par value; 1,000 shares authorized;
no shares issued or outstanding
Common Stock, $.01 par value, 25,000 shares authorized;
15,744 shares in 2000 and 15,375 shares in 1999
issued.................................................. 158 154
Additional paid-in capital................................ 58,755 55,648
Retained earnings......................................... 56,038 52,003
-------- --------
114,951 107,805
Treasury Stock (4,784 shares in 2000
and 4,100 shares in 1999) at cost....................... (33,237) (26,826)
-------- --------
Total shareholders' equity.................................. 81,714 80,979
-------- --------
$168,476 $149,612
======== ========
See accompanying notes.
36
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED
---------------------------------------
OCTOBER 1 OCTOBER 3 SEPTEMBER 27
2000 1999 1998
---------- ---------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
(53 WEEKS)
Revenues:
Restaurant sales.......................................... $213,715 $198,560 $177,343
Consumer product sales.................................... 11,772 10,568 9,384
Franchise income.......................................... 5,683 5,105 4,549
-------- -------- --------
231,170 214,233 191,276
Costs and expenses:
Cost of food and beverages................................ 57,679 54,683 48,567
Labor and benefits........................................ 70,922 64,700 58,139
Occupancy costs........................................... 30,974 29,199 27,988
Other operating costs..................................... 19,468 17,739 17,148
General and administrative................................ 19,521 16,629 13,661
Depreciation and amortization............................. 13,098 12,702 12,183
Pre-opening costs......................................... 2,137 594 938
Special charges........................................... 8,588
-------- -------- --------
222,387 196,246 178,624
-------- -------- --------
Operating income............................................ 8,783 17,987 12,652
Other expense (income):
Interest expense.......................................... 3,189 3,160 3,527
Other expense (income).................................... (170) (21) 134
-------- -------- --------
3,019 3,139 3,661
-------- -------- --------
Income before income taxes.................................. 5,764 14,848 8,991
Provision for income taxes.................................. 1,729 5,048 2,968
-------- -------- --------
Income before cumulative effect of change in accounting
principle................................................. 4,035 9,800 6,023
Cumulative effect of change in accounting principle for
pre-opening costs, net of income tax benefit of $313...... 636
-------- -------- --------
Net income.................................................. $ 4,035 $ 9,800 $ 5,387
======== ======== ========
Basic earnings per share:
Earnings before cumulative effect of change in accounting
principle............................................... $ .36 $ .87 $ .50
Cumulative effect of change in accounting principle....... (.05)
-------- -------- --------
$ .36 $ .87 $ .45
======== ======== ========
Diluted earnings per share:
Earnings before cumulative effect of change in accounting
principle............................................... $ .34 $ .84 $ .50
Cumulative effect of change in accounting principle....... (.05)
-------- -------- --------
$ .34 $ .84 $ .45
======== ======== ========
Basic weighted average shares outstanding................... 11,162 11,313 11,960
======== ======== ========
Diluted weighted average shares outstanding................. 11,844 11,610 12,025
======== ======== ========
See accompanying notes.
37
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
-------- -------- ---------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
Balance at September 28, 1997............. 15,130 $152 $53,789 $36,816 $(19,877) $70,880
Net income.............................. 5,387 5,387
Exercise of stock options............... 23 127 127
Purchase of Treasury Stock.............. (2,791) (2,791)
Contribution of Treasury Stock to 401(k)
Savings and Employee Stock Ownership
Retirement Plan....................... 2 52 54
Tax benefit from exercise of
nonqualified stock options............ 12 12
------ ---- ------- ------- -------- -------
Balance at September 27, 1998............. 15,153 152 53,930 42,203 (22,616) 73,669
Net income (53 weeks)................... 9,800 9,800
Exercise of stock options............... 222 2 1,515 1,517
Purchase of Treasury Stock.............. (4,382) (4,382)
Contribution of Treasury Stock to 401(k)
Savings and Employee Stock Ownership
Retirement Plan....................... 3 172 175
Tax benefit from exercise of
nonqualified stock options............ 200 200
------ ---- ------- ------- -------- -------
Balance at October 3, 1999................ 15,375 154 55,648 52,003 (26,826) 80,979
Net income.............................. 4,035 4,035
Exercise of stock options............... 369 4 2,519 2,523
Purchase of Treasury Stock.............. (6,445) (6,445)
Contribution of Treasury Stock to 401(k)
Savings and Employee Stock Ownership
Retirement Plan....................... 21 34 55
Tax benefit from exercise of
nonqualified stock options............ 567 567
------ ---- ------- ------- -------- -------
Balance at October 1, 2000................ 15,744 $158 $58,755 $56,038 $(33,237) $81,714
====== ==== ======= ======= ======== =======
See accompanying notes.
38
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
------------------------------------
OCTOBER 1 OCTOBER 3 SEPTEMBER 27
2000 1999 1998
--------- --------- ------------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income.................................................. $ 4,035 $ 9,800 $ 5,387
Adjustments to reconcile net income to net cash provided by
operating activities:
Cumulative effect of change in accounting principle....... 636
Depreciation and amortization............................. 13,233 12,823 12,292
Deferred income taxes..................................... (4,112) (2,570) (851)
Tax benefit from exercise of non-qualified stock
options................................................. 567 200 12
Contribution to employee benefit programs................. 55 175 54
Provision for deferred rent............................... 335 184 147
Loss (gain) on disposal of equipment...................... 428 (62) (26)
Special charges........................................... 8,588
Changes in operating assets and liabilities:
Accounts receivable..................................... (1,517) (614) 1,039
Inventories............................................. (61) (140) 30
Prepaid expenses and other assets....................... (390) (1,071) (237)
Accounts payable and other liabilities.................. 2,020 4,320 700
Income taxes payable.................................... (2,356) 1,919 (768)
-------- -------- --------
Net cash provided by operating activities................... 20,825 24,964 18,415
INVESTING ACTIVITIES
Additions to property, equipment and leasehold
improvements.............................................. (36,430) (18,860) (12,141)
Proceeds from sale of fixed assets.......................... 48 2,730 26
-------- -------- --------
Net cash used in investing activities....................... (36,382) (16,130) (12,115)
FINANCING ACTIVITIES
Proceeds from revolving line of credit...................... 83,123 72,243 50,790
Principal payments on debt and capital lease obligations.... (63,993) (79,490) (53,882)
Purchase of Treasury Stock.................................. (6,060) (4,421) (2,791)
Exercise of stock options................................... 2,523 1,556 127
-------- -------- --------
Net cash provided by (used in) financing activities......... 15,593 (10,112) (5,756)
-------- -------- --------
Increase (decrease) in cash................................. 36 (1,278) 544
Cash at beginning of year................................... 752 2,030 1,486
-------- -------- --------
Cash at end of year......................................... $ 788 $ 752 $ 2,030
======== ======== ========
See accompanying notes.
39
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company owns and operates 110 "Pizzeria Uno...Chicago Bar & Grill"
casual dining, full-service restaurants primarily from New England to Virginia,
as well as Florida, Chicago and Denver, and operates a Mexican restaurant in
Chicago. The company also franchises 55 "Pizzeria Uno...Chicago Bar & Grill" and
7 Pizzeria Uno Restaurant & Bar restaurants in 30 states, the District of
Columbia, Puerto Rico, Seoul, South Korea, and Dubai, U.A.E. The Company under
its Uno Foods subsidiary operates a consumer foods business, which supplies
airlines, movie theaters, hotel restaurants and supermarkets with both frozen
and refrigerated branded and non branded 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. The fiscal year ended October 3, 1999
consisted of 53 weeks.
INVENTORIES
Inventory, which consists of food, beverages and 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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically reviews the carrying value of its long-lived assets
(primarily property, equipment and leasehold improvements) to assess the
recoverability of these assets. The Company records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of those assets.
REVENUE RECOGNITION
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, included in general and administrative expense in the accompanying
statements of income,
40
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amounted to approximately $4,302,000, $3,895,000 and $3,280,000 in fiscal years
2000, 1999 and 1998, respectively.
A summary of full-service franchise unit activity is as follows:
YEAR ENDED
---------------------------------------
OCTOBER 1 OCTOBER 3 SEPTEMBER 27
2000 1999 1998
---------- ---------- -------------
Units operating at beginning of year......... 60 63 66
Units opened................................. 9 8 5
Units closed................................. (7) (11) (8)
-- --- --
Units operating at end of year............... 62 60 63
== === ==
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.
ADVERTISING
The Company records advertising expense as incurred. Advertising expense was
$5,189,000, $5,054,000 and $5,257,000 for fiscal years 2000, 1999 and 1998,
respectively.
EARNINGS PER SHARE
Basic earnings per share represents net income divided by the weighted
average shares of common stock outstanding during the period. Weighted average
shares used in diluted earnings per share include 682,000, 297,000 and 65,000
for fiscal years 2000, 1999 and 1998, respectively, of common stock equivalents
arising from stock options using the treasury stock method.
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.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees" in accounting for its
stock-based compensation plans, rather than the alternative fair value
accounting method provided for under Statement of Financial Accounting Standard
(SFAS) No. 123, "Accounting for Stock-Based Compensation," as this alternative
41
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 recognized.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
is effective for fiscal year 2001. This statement requires all derivatives to be
carried on the balance sheet as assets or liabilities at fair value. The
accounting for changes in the fair value of the derivatives would depend on the
hedging relationship and would be reported in the income statement, or as a
component of comprehensive income. The Company believes that the adoption of
this new accounting standard will not have a material impact on the Company's
consolidated financial statements.
In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING FOR CERTAIN
TRANSACTIONS INVOLVING STOCK COMPENSATION (the Interpretation). This
Interpretation clarifies how companies should apply the Accounting Principles
Board's Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The
Interpretation will be applied prospectively to new awards, modifications to
outstanding awards, and changes in employee status on or after July 1, 2000,
except as follows: the definition of an employee applies to awards granted after
December 15, 1998; the Interpretation applies to modifications that reduce the
exercise price of an award after December 15, 1998; and the Interpretation
applies to modifications that add a reload feature to an award made after
January 12, 2000. There were no awards granted by the Company, which resulted in
an adjustment as a result of this Interpretation.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB
101 clarifies the SEC staff's views on applying generally accepted accounting
principles to revenue recognition in financial statements. The Company is
required to adopt SAB 101 in the fourth quarter of fiscal 2001, and believes
that the adoption of this pronouncement will not have an impact on the Company's
consolidated financial statements.
RECLASSIFICATIONS
Certain amounts in the accompanying financial statements have been
reclassified to conform with the 2000 presentation.
PRE-OPENING COSTS
In the third quarter of fiscal 1998, the Company adopted Statement of
Position (SOP) 98-5 "Reporting the Costs of Start-up Activities" which requires
that pre-opening costs be expensed as incurred. In accordance with SOP 98-5, the
adoption is reported as a cumulative effect of a change in accounting principle
and has been recognized retroactively to the first quarter of fiscal 1998. The
cumulative effect of the change in accounting principle was $636,000, net of the
income tax benefit of $313,000.
42
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
2. SPECIAL CHARGES
During the fourth quarter of fiscal 2000, the Company recorded a pre-tax
charge in the amount of $8.6 million, consisting of an asset impairment charge
of $8.1 million and store closing costs of $.5 million. The $8.1 million asset
impairment charge was recorded to reduce the carrying value of equipment and
leaseholds at eight full-service Uno restaurants to their fair market value.
Based upon current operating and cash flow results, management believed that
these units would likely continue to generate operating and cash flow losses and
therefore reduced the carrying value of the impaired assets to fair market
value. The store closure costs represent estimated settlement costs associated
with two full-service units, which the Company decided to close in the fourth
quarter of fiscal 2000. The Company expects to close the units in fiscal 2001.
3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consist of the following:
OCTOBER 1 OCTOBER 3
2000 1999
---------- ----------
(IN THOUSANDS)
Land.................................................... $ 19,640 $ 17,143
Buildings............................................... 35,215 28,920
Equipment............................................... 64,385 58,576
Leasehold improvements.................................. 106,342 101,326
Construction in progress................................ 3,029 2,930
-------- --------
228,611 208,895
Less allowances for depreciation and amortization....... 86,619 80,149
-------- --------
$141,992 $128,746
======== ========
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 $535,000, $515,000, and $505,000 was charged to operations in
fiscal year 2000, 1999, and 1998 respectively. The Company believes that the
terms of these leases approximate fair rental value. Additionally, the Company's
Chief Executive Officer and his brother own and operate three franchised
restaurants and pay royalties to the Company under standard franchise
agreements.
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 $2,439,000 at October 1, 2000 and $2,881,000 at
October 3, 1999. Accumulated amortization amounted to $767,000 at October 1,
2000 and $880,000 at October 3, 1999. Capital lease asset amortization is
included in depreciation and amortization. At October 1, 2000, the
43
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
5. LEASES (CONTINUED)
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)
2001...................................................... $ 74 $ 10,967
2002...................................................... 42 11,026
2003...................................................... 42 10,680
2004...................................................... 42 10,565
2005...................................................... 42 9,881
Thereafter................................................ 1,084 80,887
------ --------
1,326 $134,006
========
Less amount representing interest......................... 838
------
Present value of net minimum lease payments............... 488
Less current portion of obligation under capital leases... 35
------
Long-term obligation under capital leases................. $ 453
======
Total expenses, including real estate taxes, for all operating leases were
as follows:
MINIMUM CONTINGENT
FISCAL YEAR LEASE RENTALS RENTALS TOTAL
----------- ------------- ---------- --------
(IN THOUSANDS)
2000......................................... $13,858 $676 $14,534
1999......................................... 13,542 607 14,149
1998......................................... 13,010 689 13,699
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 $5,262,000
at October 1, 2000 and $4,927,000 at October 3, 1999.
6. FINANCING ARRANGEMENTS
Long-term debt consists of the following:
OCTOBER 1 OCTOBER 3
2000 1999
--------- ---------
(IN THOUSANDS)
Revolving credit and note agreement...................... $50,440 $30,915
8.75%, 15-year secured mortgage notes payable............ 4,378 4,595
------- -------
54,818 35,510
Less current portion..................................... 3,918 3,898
------- -------
$50,900 $31,612
======= =======
44
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
6. FINANCING ARRANGEMENTS (CONTINUED)
In June 2000, the Company amended its $55 million credit facility to expand
the revolver component from $26.6 million to $36.6 million, leaving the
remaining term loans of the facility unchanged, except for the maturity of the
revolver, which was extended to June 2005. The Company is entitled to borrow, at
its discretion, amounts, which accrue interest at variable rates based on either
the LIBOR or prime rate. Amounts borrowed under the credit facility are secured
by certain real properties owned by the Company. At October 1, 2000, interest
rates on outstanding borrowings under the revolving line of credit ranged from
7.87% to 9.50%. A commitment fee of approximately 0.38% 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. The Company did not meet its profitability covenant due to
the special charges recorded in fiscal 2000, and therefore, was not in
compliance at October 1, 2000. The Company has obtained an appropriate waiver
from its lending institution for the period under violation. At October 1, 2000,
the carrying value of the Company's long-term debt approximated fair market
value.
Annual principal payments of debt are as follows (in thousands):
The Company has two interest rate swap agreements which 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 amounts and
fair market value under the swap agreements amount to $30 million and $76,000,
respectively, at October 1, 2000. The original terms range from three to five
years with fixed interest rates ranging from 5.80% to 6.04% and the agreements
expire in October 2000 and July 2001. The differentials to be paid or received
are accrued as interest rates change and are recognized as an adjustment to
interest expense related to the debt.
The Company made interest payments of $3,637,000, $3,540,000 and $3,598,000
during fiscal years 2000, 1999 and 1998, respectively. The Company capitalized
interest during the construction period of new restaurants which amounted to
$411,000 in fiscal year 2000, $157,000 in fiscal year 1999 and $127,000 in
fiscal year 1998 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 $564,000 at October 1, 2000.
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.
45
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
7. CONTINGENCIES
The Company is subject to legal proceedings and claims, which arise in the
ordinary course of its business. The Company believes that although there can be
no assurance as to the disposition of these proceedings, based upon information
available at this time, the expected outcome of these matters will not have a
material adverse effect on the Company's results of operations and financial
condition of the Company.
8. PREPAID EXPENSES
Prepaid expenses consist of the following:
OCTOBER 1 OCTOBER 3
2000 1999
--------- ---------
(IN THOUSANDS)
Prepaid rent............................................. $1,500 $1,430
Prepaid operating costs.................................. 445 269
Prepaid insurance........................................ 54 58
------ ------
$1,999 $1,757
====== ======
9. ACCRUED EXPENSES
Accrued expenses consist of the following:
OCTOBER 1 OCTOBER 3
2000 1999
--------- ---------
(IN THOUSANDS)
Accrued insurance........................................ $1,672 $1,627
Accrued rent............................................. 1,194 1,483
Accrued store closure.................................... 1,186 2,197
Accrued utilities........................................ 632 653
Accrued vacation......................................... 799 737
Accrued advertising...................................... 640 482
Franchise fee and other deposits......................... 1,011 531
Other.................................................... 1,325 958
------ ------
$8,459 $8,668
====== ======
10. SHAREHOLDERS' EQUITY
On November 30, 1999, the Company declared a 10% Common Stock dividend
payable on December 23, 1999 to stockholders of record as of December 13, 1999.
All share and per share data in the accompanying financial statements have been
retroactively adjusted to reflect the stock dividend.
11. 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
46
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
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 $282,000, $225,000 and $214,000 in fiscal
years 2000, 1999 and 1998, respectively. In fiscal years 2000, 1999 and 1998
respectively, contributions included $55,000, $175,000 and $54,000 of the
Company's common stock previously held in Treasury.
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 $1,111,000 at
October 1, 2000 and $1,308,000 at October 3, 1999 is included in other
liabilities in the accompanying balance sheet. Total contributions to this plan
were $182,000, $211,000 and $170,000 in fiscal years 2000, 1999 and 1998,
respectively.
12. INCOME TAXES
Deferred taxes are attributable to the following temporary differences:
OCTOBER 1 OCTOBER 3
2000 1999
--------- ---------
(IN THOUSANDS)
Deferred tax assets:
Excess book over tax depreciation...................... $ 5,021 $ 4,035
Deferred rent.......................................... 2,010 1,914
Accrued expenses....................................... 2,280 1,910
Asset impairment charge................................ 3,861 1,043
Franchise fees......................................... 898 900
Other.................................................. 420 769
------- -------
Total deferred tax assets................................ 14,490 10,571
Deferred tax liabilities:
Other.................................................. 358 551
------- -------
Total deferred tax liabilities........................... 358 551
------- -------
Net deferred tax assets.................................. $14,132 $10,020
======= =======
47
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
12. INCOME TAXES (CONTINUED)
The provision (credit) for income taxes consisted of the following:
A reconciliation of the effective tax rates with the federal statutory rates
is as follows:
YEAR ENDED
------------------------------------
OCTOBER 1 OCTOBER 3 SEPTEMBER 27
2000 1999 1998
--------- --------- ------------
Federal statutory rate...................... 34.0% 34.3% 34.0%
State income taxes, net of federal income
tax benefit............................... 5.6 4.6 4.6
Tax credits................................. (14.4) (5.1) (6.5)
Other....................................... 4.8 .2 .9
----- ---- ----
Effective income tax rate................... 30.0% 34.0% 33.0%
===== ==== ====
The Company made income tax payments of $7,686,000, $5,598,000 and
$4,545,000 during fiscal years 2000, 1999 and 1998, respectively.
13. STOCK-BASED COMPENSATION
During 1998, the Company's shareholders ratified the 1997 Key Officer Stock
Option Plan (the Key Officer Plan) under which options were granted for
1.1 million shares of Common Stock at an exercise price of $6.82 per share,
which are fully vested at October 3, 1999. The Key Officer Plan will terminate
on August 25, 2007.
During 1998, the Company also established the 1997 Non Qualified Stock
Option Plan for Non-Employee Directors (the 1997 Directors' Plan) which provides
for the granting of options to purchase up to 82,500 shares of Common Stock.
Options are to be granted at an exercise price equal
48
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
13. STOCK-BASED COMPENSATION (CONTINUED)
to the fair market value of the shares of Common Stock at the date of grant and
vest one year after date of grant. The 1997 Directors' Plan will terminate on
February 26, 2008.
The Company also has the 1997 Employee Stock Option Plan (the Employee Plan)
which provides for the granting of options to purchase up to 1.1 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 1.4 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 103,125
options granted to the President of the Company, which vested immediately at the
date of grant. All options terminate ten 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 111,719 shares of Common
Stock issuable upon exercise of options granted under the Directors' Plans. The
1989 and 1993 Directors' Plans terminate(d) 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 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.
Information regarding the Company's stock option plans is summarized below:
YEAR ENDED
---------------------------------------------------------------------
OCTOBER 1 OCTOBER 3 SEPTEMBER 27
2000 1999 1998
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- --------- --------- --------- ---------
Outstanding at Beginning of
Period......................... 2,450,631 $ 7.17 2,748,410 $ 6.70 1,361,146 $6.66
Granted.......................... 244,004 10.64 281,416 11.09 1,519,908 6.69
Exercised........................ (350,810) 6.77 (221,444) 6.85 (20,255) 6.83
Canceled......................... (193,819) 8.28 (357,751) 6.85 (112,389) 6.21
--------- ------ --------- ------ --------- -----
Outstanding at End of period..... 2,150,006 $ 7.53 2,450,631 $ 7.17 2,748,410 $6.70
========= ====== ========= ====== ========= =====
Options exercisable at end
of period...................... 1,548,824 1,725,237 1,032,061
========= ========= =========
Options available for grant at
end of period.................. 462,174 728,309 651,974
========= ========= =========
The weighted-average fair value of options granted during fiscal years 2000,
1999 and 1998, were $4.53, $4.54 and $2.74, respectively. The Company has
2.6 million shares of common stock reserved at October 1, 2000 for the exercise
of stock options.
49
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
13. STOCK-BASED COMPENSATION (CONTINUED)
The following table presents information about significant option groups
outstanding at October 1, 2000:
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
OPTIONS REMAINING OPTIONS EXERCISABLE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE PRICE
-------------- ----------- ---------------- ----------- -----------
$5.27 - $ 6.59................ 688,304 6.0 years 447,756 $5.95
$6.82 - $12.13................ 1,461,702 7.1 years 1,101,068 $7.34
Pursuant to the requirements of SFAS No. 123, the following are the pro
forma net income and earnings per share for fiscal year 2000, 1999 and 1998 as
if the compensation cost for the stock option plans had been determined based on
the fair value at the grant date for grants in fiscal year 2000, 1999 and 1998:
YEAR ENDED
------------------------------------
OCTOBER 1 OCTOBER 3 SEPTEMBER 27
2000 1999 1998
--------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE
INFORMATION)
Net income--as reported...................... $4,035 $9,800 $5,387
Basic earnings per share--as Reported........ $ .36 $ .87 $ .45
Diluted earnings per share--as Reported...... $ .34 $ .84 $ .45
Net income--pro forma........................ $3,407 $9,331 $4,934
Basic earnings per share--pro Forma.......... $ .31 $ .82 $ .41
Diluted earnings per share--pro Forma........ $ .29 $ .80 $ .41
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 years 2000, 1999 and 1998, respectively: risk-free
interest rates of 6.6%, 6.3% and 5.0%; no dividend yield; the volatility factors
of the expected market price of the Company's common stock was 36%, 34% and 37%;
and a weighted-average expected life of the options of five years.
The effects on fiscal year 2000, 1999 and 1998 pro forma net income and
earnings per share of expensing the fair value of stock options are not
necessarily representative of the effects on reported results of operations for
future years as the periods presented include only three, two and one years,
respectively, of option grants under the Company's plans.
50
UNO RESTAURANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED
-------------------------------------------
JANUARY 2 APRIL 2 JULY 2 OCTOBER 1
2000 2000 2000 2000
--------- -------- -------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
INFORMATION.)
Revenues............................... $53,146 $54,661 $59,194 $64,169
Gross profit(1)........................ 11,147 11,345 13,308 13,696
Operating income (loss)(2)............. 3,934 3,844 4,875 (3,870)
Income (loss) before income taxes...... 3,294 3,102 4,069 (4,701)
Net income (loss)...................... 2,174 2,047 2,686 (2,872)
Basic earnings (loss) per common
share................................ .19 .18 .24 (.26)
Diluted earnings (loss) per common
share................................ .18 .17 .23 (.26)
QUARTER ENDED
---------------------------------------------
DECEMBER 27 MARCH 28 JUNE 27 OCTOBER 3
1998 1999 1999 1999(3)
----------- -------- -------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
INFORMATION.)
Revenues............................. $48,747 $50,251 $53,548 $61,687
Gross profit(1)...................... 9,237 10,037 12,163 15,830
Operating income..................... 3,001 3,082 4,576 7,328
Income before taxes.................. 2,154 2,229 3,715 6,750
Net income........................... 1,443 1,494 2,488 4,375
Basic earnings per common share:..... .13 .13 .22 .39
Diluted earnings per common share.... .13 .13 .22 .36
(1) Restaurant and consumer product sales, less cost of food and beverages,
labor and benefits, occupancy and other operating expenses, excluding
advertising expenses.
(2) Includes special charges in the amount of $8,588 in the fourth quarter of
fiscal 2000
(3) The quarter ended October 3, 1999 consisted of 14 weeks compared with 13
weeks
for the other quarters presented.
51
Exhibit 10.33
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of October , 2000, between UNO RESTAURANT
CORPORATION, a Delaware corporation (the "Company"), and [ ] (the "Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director or officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors and officers of
public companies in today's environment;
WHEREAS, basic protection against undue risk of personal liability of
directors and officers heretofore has been provided through insurance coverage
providing reasonable protection at reasonable cost, and Indemnitee has relied on
the availability of such coverage, but as a result of substantial changes in the
marketplace for such insurance it has become increasingly more difficult to
obtain such insurance on terms providing reasonable protection at reasonable
cost,
WHEREAS, the By-laws of the Company permit the Company to indemnify and
advance expenses to its directors and officers to the full extent permitted by
law and the Indemnitee has been serving and continues to serve as a director or
officer of the Company in part in reliance on such By-laws;
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Company in an effective manner, the increasing difficultly in obtaining
satisfactory director and officer liability insurance coverage, and Indemnitee's
reliance on the aforesaid By-laws, and in part to provide Indemnitee with
specific contractual assurance that the protection promised by such By-laws will
be available to Indemnitee (regardless of, among other things, any amendment to
or revocation of such By-laws or any change in the composition of the Company's
Board of Directors or acquisition transaction relating to the Company), the
Company wishes to provide in this Agreement for the indemnification of and the
advancing of expenses to Indemnitee to the fullest extent (whether partial or
complete) permitted by law and as set forth in this Agreement, and, to the
extent insurance is maintained, for the continued coverage of Indemnitee under
the Company's directors' and officers' liability insurance policies,
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve the Company directly or, at its request, another enterprise,
and intending to be legally bound hereby, the parties hereto agree as follows:
1
1. CERTAIN DEFINITIONS:
(a) CHANGE IN CONTROL: shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the
Company representing 20% or more of the total voting power
represented by the Company's then outstanding Voting Securities,
or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of (in
one transaction or a series of transactions) all or substantially
all the Company's assets.
(b) CLAIM: any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether instituted
by the Company or any other party, that Indemnitee in good faith
believes might lead to the institution of any such action, suit
or proceeding, whether civil, criminal, administrative,
investigative or other.
(c) EXPENSES: include attorneys' fees and all other costs, expenses
and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, be a witness in or
participate in, any Claim relating to any Indemnifiable Event.
(d) INDEMNIFIABLE EVENT: any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of
the Company as a director, officer, employee, trustee, agent or
fiduciary of another corporation,
2
partnership, joint venture, employee benefit plan, trust or other
enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity.
(e) INDEPENDENT LEGAL COUNSEL: an attorney or firm of attorneys,
selected in accordance with the provisions of Section 3, who
shall not have otherwise performed services for the Company or
Indemnitee within the last five years (other than with respect to
matters concerning the rights of Indemnitee under this Agreement,
or of other Indemnitee under similar indemnity agreements).
(f) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control; (ii)
any person (including the Company) publicly announces an
intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any
person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their
ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of
the Company's then outstanding Voting Securities, increases his
beneficial ownership of such securities by five percentage points
(5%) or more over the percentage so owned by such person; or (iv)
the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
(g) REVIEWING PARTY: any appropriate person or body consisting of a
member or members of the Company's Board of Directors or any
other person or body appointed by the Board who is not a party to
the particular Claim for which Indemnitee is seeking
indemnification, or Independent Legal Counsel.
(h) VOTING SECURITIES: any securities of the Company which vote
generally in the election of directors.
2. BASIC INDEMNIFICATION ARRANGEMENT. (a) In the event Indemnitee
was, is or becomes a party to or witness or other participant in,
or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of)
an Indemnifiable Event, the Company shall indemnify Indemnitee to
the fullest extent permitted by law as soon as practicable but in
any event no later than thirty days after written demand is
presented to the Company, against any and all Expenses,
judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses,
judgments, fines, penalties or amounts paid in settlement) of
such Claim. If so requested by Indemnitee, the Company shall
advance (within two business days of such request) any and all
Expenses to Indemnitee (an "Expense Advance").
3
(b) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 2(a) shall be subject to the condition that the
Reviewing Party shall not have determined (in a written opinion,
in any case which the Independent Legal Counsel referred to in
Section 3 hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the
obligation of the Company to make an Expense Advance pursuant to
Section 2(a) shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that Indemnitee
would not be permitted to be so indemnified under applicable law,
the Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, any determination
made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). If
there has not been a Change in Control, the Reviewing Party shall
be selected by the Board of Directors, and if there has been such
a Change in Control (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors
who were directors immediately prior to such Change in Control),
the Reviewing Party shall be the Independent Legal Counsel
referred to in Section 3 hereof. If there has been no
determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted
to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any
court in the State of Delaware having subject matter jurisdiction
thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination
by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to
service of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
3. CHANGE IN CONTROL. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which
has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in
Control) then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and
Expense Advances under this Agreement or any other agreement or
4
Company By-law now or hereafter in effect relating to Claims for
Indemnifiable Events, the Company shall seek legal advice only
from Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and
to what extent the Indemnitee would be permitted to be
indemnified under applicable law. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to
above and to indemnify fully such counsel against any and all
expenses (including attorneys' fees), claims, liabilities and
damages arising out of or relating to this Agreement or its
engagement pursuant hereto.
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall
indemnify Indemnitee against any and all expenses (including
attorneys' fees) and, if requested by Indemnitee, shall (within
two business days of such request) advance such expenses to
Indemnitee, which are incurred by Indemnitee in connection with
any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement
or any other agreement or Company By-law now or hereafter in
effect relating to Claims for Indemnifiable Events and/or (ii)
recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery,
as the case may be.
5. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for
some or a portion of the Expenses, judgments, fines, penalties
and amounts paid in settlement of a Claim but not, however, for
all of the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Moreover, notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise in defense of any or all Claims
relating in whole or in part to an Indemnifiable Event or in
defense of any issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
6. BURDEN OF PROOF. In connection with any determination by
Reviewing Party or otherwise as to whether Indemnitee is entitled
to be indemnified hereunder the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
7. NO PRESUMPTIONS. For purposes of this Agreement, the termination
of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or
conviction, or upon a plea of nolo
5
contender, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that
indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual
determination by the Reviewing Party that Indemnitee has not met
such standard of conduct or did not have such belief, prior to
the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified
under applicable law shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief,
8. NONEXCLUSIVITY, ETC. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may have under the
Company's By-laws or the Delaware General Corporation Law or
otherwise. To the extent that a change in the Delaware General
Corporation Law (whether by statute or judicial decision) permits
greater indemnification by agreement than would be afforded
currently under the Company's By-laws and this Agreement, it is
the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so afforded by such change.
9. LIABILITY INSURANCE. To the extent the Company maintains an
insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by such policy
or policies, in accordance with its or their terms, to the
maximum extent of the coverage available for any Company director
or officer.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the
Company against Indemnitee, Indemnitee's spouse, heirs, executors
or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any
claim or cause of action of the Company shall be extinguished and
deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if
any shorter period of limitations is otherwise applicable to any
such cause of action such shorter period shall govern.
11. AMENDMENTS, ETC. No supplement modification or amendment of this
Agreement shall be binding unless executed in writing by both of
the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
6
12. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all
of the rights of recovery of Indemnitee, who shall execute all
papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents
necessary to enable the Company effectively to bring suit to
enforce such right.
13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim
made against Indemnitee to the extent Indemnitee has otherwise
actually received payment (under any insurance policy, By-law or
otherwise) of the amounts otherwise Indemnifiable hereunder.
14. BINDING EFFECT, ETC. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto
and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or
assets of the Company, spouses, heirs, executors and personal and
legal representatives. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as an officer
or director of the Company or of any other enterprise at the
Company's request.
15. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are
held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable in any respect, and the validity and
enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way
impaired and shall remain enforceable to the fullest extent
permitted by law.
16. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state
without giving effect to the principles of Conflicts of laws.
ATTEST: Uno Restaurant Corporation
By: _________________________ By: ________________________
George W. Herz II, Secretary Craig S. Miller, President
7
Exhibit 10.34
FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Dated as of June 14, 2000
By and Among
UNO RESTAURANTS, INC.
and
SAXET CORPORATION,
as Borrowers
UNO FOODS INC.
PIZZERIA UNO CORPORATION
URC HOLDING COMPANY, INC.
and
UNO RESTAURANT CORPORATION,
as Loan Parties
and
FLEET NATIONAL BANK, as Administrative Agent and Arranger
and
SUNTRUST BANK, as Co-Agent and Syndication Agent
and
FLEET NATIONAL BANK
and
SUNTRUST BANK,
as Banks
FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM
LOAN AGREEMENT ("First Amendment") is entered into as of June 14, 2000 by and
among UNO RESTAURANTS, INC., a Massachusetts corporation ("URI"), SAXET
CORPORATION, a Delaware corporation ("Saxet", and together with URI, each a
"Borrower" and collectively, the "Borrowers"), UNO FOODS INC., a Massachusetts
corporation ("UFI"), PIZZERIA UNO CORPORATION, a Delaware corporation ("PUC"),
UNO RESTAURANT CORPORATION, a Delaware corporation ("URC"), URC HOLDING COMPANY,
INC., a Delaware corporation ("UHC" and together with UFI, PUC, URC and the
Borrowers, hereinafter referred to collectively as the "Loan Parties"), FLEET
NATIONAL BANK, a national banking association ("Fleet"), SUNTRUST BANK, a
Georgia banking corporation ("SunTrust"), FLEET NATIONAL BANK, as Administrative
Agent for the Banks (the "Agent") and Arranger and SUNTRUST BANK, as Co-Agent
for the Banks (the "Co-Agent") and Syndication Agent.
RECITALS
The Loan Parties, the Banks, the Agent and the Co-Agent are parties to
an Amended and Restated Revolving Credit and Term Loan Agreement dated as of
November 4, 1997 (as amended, the "Credit Agreement") and desire to amend the
Credit Agreement in certain respects. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
Section 1. AMENDMENT OF DEFINITIONS.
(a) Section 1.1 of the Credit Agreement is hereby amended by
deleting the definitions of "APPLICABLE COMMITMENT FEE PERCENTAGE",
"BANKS", "CHANGE OF CONTROL", "COMMITMENT PERCENTAGE", "COMPLIANCE
CERTIFICATE", "FEE LETTER", "MAXIMUM CREDIT AMOUNT", "PERMITTED STOCK
REPURCHASE", "REVOLVING CREDIT NOTES", "REVOLVING CREDIT TERMINATION
DATE", "SAXET TERM NOTES" and "URI TERM NOTES" in their entirety and
substituting therefor the following:
"APPLICABLE COMMITMENT FEE PERCENTAGE" shall mean
during each fiscal quarter of URI, the percentage set forth
below opposite the Consolidated Leverage Ratio in effect as of
the end of the immediately preceding fiscal quarter:
1
-----------------------------------------------------------------------------
Consolidated Leverage Ratio
as of the End of the
Immediately Preceding Applicable Commitment
Fiscal Quarter Fee Percentage
-----------------------------------------------------------------------------
Equal to or Greater than .50%
2.0:1.0
-----------------------------------------------------------------------------
Equal to or Greater than .375%
1.7:1.0 and Less than
2.0:1.0
-----------------------------------------------------------------------------
Equal to or Greater than .33%
1.35:1.0 and Less than
1.7:1.0
-----------------------------------------------------------------------------
Equal to or Greater than .3125%
1.0:1.0 and Less than
1.35:1.0
-----------------------------------------------------------------------------
Less than 1.0:1.0 .25%
-----------------------------------------------------------------------------
"BANKS" shall mean Fleet, SunTrust and their
successors and assigns.
"CHANGE OF CONTROL" shall be deemed to have occurred
when (a) the individuals who at the Closing Date constituted
the Board of Directors of URC (together with any new directors
whose election by such Board of Directors or whose nomination
for election by the stockholders of URC was approved by a vote
of a majority of the directors then still in office who were
directors on the Closing Date or whose election or nomination
for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors of URC then
still in office, (b) neither Aaron D. Spencer ("Spencer") nor
Craig Miller shall serve as chief executive officer of URC,
whether by reason of death, disability, resignation, action by
the Board of Directors, or otherwise or (c) more than
twenty-five percent (25%) of the outstanding shares of common
stock of URC is owned of record or beneficially by any Person
or group of Persons within the meaning of Sections 13 or 14 of
the Securities Exchange Act of 1934, as amended, other than
Spencer, the executors of his estate, the trustees of any
trust established under his will or the family member
beneficiaries of his estate.
"COMMITMENT PERCENTAGE" shall mean as to each Bank
the percentage figure set forth on SCHEDULE I to the First
Amendment as such Bank's Commitment Percentage, as the same
may be adjusted from time to time in connection with any
assignment under Section 12.2 of the Credit Agreement.
"COMPLIANCE CERTIFICATE" shall mean a certificate in
the form of EXHIBIT B to the First Amendment and executed by
the chief executive officer or chief financial officer of URC.
2
"FEE LETTER" shall mean that certain letter dated as
of June 14, 2000 among URI, Saxet and the Agent describing the
agency fee to be paid to the Agent by URI and Saxet, on
November 1, 2000 and each anniversary thereof.
"MAXIMUM CREDIT AMOUNT" shall mean, as of any date of
determination, the lesser of (a) $36,600,000 or (b) the amount
to which the Maximum Credit Amount may have been reduced
pursuant to Section 2.10; provided that if the obligation of
the Banks to make further Revolving Credit Advances is
terminated pursuant to Article 10, the Maximum Credit Amount
as of any date of determination thereafter shall be deemed to
be $0.
"PERMITTED STOCK REPURCHASE" shall mean the purchase
by URC of shares of its common stock from time to time (a)
from the proceeds of Revolving Credit Advances up to a maximum
aggregate amount after June 14, 2000 not to exceed $10,000,000
(not including any amounts used for such purpose prior to such
date) or (b) as otherwise approved by the Required Banks.
"REVOLVING CREDIT NOTES" shall mean the Amended and
Restated URI Revolving Credit Notes executed by URI in favor
of each Bank substantially in the form of EXHIBIT A-1 to the
First Amendment to evidence the Revolving Credit Advances.
"REVOLVING CREDIT TERMINATION DATE" shall mean June
14, 2005.
"SAXET TERM NOTES" shall mean the Amended and
Restated Saxet Term Notes executed by Saxet in favor of each
Bank in the form of EXHIBIT A-3 to the First Amendment to
evidence the Saxet Term Loan.
"URI TERM NOTES" shall mean the Amended and Restated
URI Term Notes executed by URI in favor of each Bank
substantially in the form of EXHIBIT A-2 to the First
Amendment to evidence the URI Term Loan.
(b) Section 1.1 of the Credit Agreement is hereby further
amended by adding the following definitions in alphabetical order:
"APPLICABLE URI MARGIN - PRIME RATE (REVOLVER)" and
"APPLICABLE URI MARGIN - LIBOR RATE (REVOLVER)" shall mean
during each fiscal quarter of URI, the percentage set forth
opposite the Consolidated Leverage Ratio in effect as of the
end of the immediately preceding fiscal quarter:
3
--------------------------------------------------------------------------------
Consolidated Leverage Ratio
as of the End of the
Immediately Preceding Applicable Margin
Fiscal Quarter -Prime Rate -Libor Rate
--------------------------------------------------------------------------------
Equal to or Greater than .50% 1.75%
2.0:1.0
--------------------------------------------------------------------------------
Equal to or Greater than .25% 1.50%
1.7:1.0 and Less than 2.0:1.0
--------------------------------------------------------------------------------
Equal to or Greater than .00% 1.25%
1.35:1.0 and Less than 1.7:1.0
--------------------------------------------------------------------------------
Equal to or Greater than .00% 1.00%
1.0:1.0 and Less than 1.35:1.0
--------------------------------------------------------------------------------
Less than 1.0:1.0 .00% .75%
--------------------------------------------------------------------------------
"CONSOLIDATED ADJUSTED EBITDAR" shall mean the sum of
Consolidated Adjusted EBITDA plus, to the extent deducted as
an expense in calculating Consolidated EBIT, all lease
payments of URC and its Subsidiaries, including but not
limited to any and all payments made under operating leases
and in connection with any Permitted Financing Transactions.
"CONSOLIDATED SAME STORE CAPITAL EXPENDITURES" shall
mean Capital Expenditures of URC and its Subsidiaries in
connection with the maintenance and rehabilitation of, and all
other Capital Expenditures made with respect to, all Company
Restaurants that have been owned or leased and operated by URC
or any of its Subsidiaries for a minimum of twelve (12)
months.
"FIRST AMENDMENT" shall mean the First Amendment to
Amended and Restated Revolving Credit and Term Loan Agreement
dated as of June 14, 2000 by and among the Loan Parties, the
Banks, the Agent and Arranger and the Co-Agent and Syndication
Agent.
"1999 FINANCIAL STATEMENTS" shall mean the
Consolidated Balance Sheet of URC and its Subsidiaries as of
October 3, 1999 and the related Consolidated Statements of
Income, Shareholders' Equity and Cash Flow for the year then
ended and notes to such financial statements.
"PERMITTED FINANCING TRANSACTIONS" shall mean, with
respect to any Loan Party or its Subsidiaries, so long as no
Default is outstanding, any mortgage loan, synthetic lease or
sale and leaseback transactions, upon terms and conditions
reasonably satisfactory to the Banks, including without
limitation, execution of an intercreditor agreement solely
granting the Banks a right to receive notice of and cure any
defaults under agreements related to such transaction,
providing that a payment or other default permitting the
acceleration of Indebtedness under such documents shall
constitute a Default, providing that URC and its Subsidiaries
will not be subject to covenants under such agreements that
are more restrictive than
4
the covenants to which URC and its Subsidiaries are subject
hereunder, and providing that the obligations under such
mortgage loan, synthetic lease or sale and leaseback
transaction will have recourse only to the assets
subject to such transaction and an unsecured guaranty
of URC, (a) involving any existing Company Restaurants owned
by such Loan Party or any of its Subsidiaries on June 14, 2000
which financing transactions are consummated on or before
December 31, 2000, provided that the aggregate amounts
involved in all such financing transactions permitted pursuant
to this paragraph (a) and consummated during such period does
not exceed $10,000,000 and provided further that any and all
proceeds received from any such financing transactions shall
be applied on the date of receipt to the repayment of the
Revolving Credit Advances or (b) involving any new Company
Restaurant acquired by such Loan Party after June 14, 2000
which financing transactions are consummated after December
31, 2000, provided that the aggregate amounts involved in all
such financing transactions permitted pursuant to this
paragraph (b) does not exceed $5,000,000 during any fiscal
year.
Section 2. AMENDMENT OF INTEREST RATES. Article 2 of the Credit
Agreement is hereby amended by deleting Section 2.3 thereof in its entirety and
substituting therefor the following:
"Section 2.3 INTEREST ON REVOLVING CREDIT ADVANCES.
Subject to the provisions of Section 2.6, URI shall pay
interest on the unpaid balance of each Revolving Credit
Advance which is a Prime Rate Loan from time to time
outstanding at a per annum rate equal to the sum of (a) the
Prime Rate PLUS (b) the Applicable URI Margin - Prime Rate
(Revolver), as each is in effect from time to time, and shall
pay interest on each Revolving Credit Advance which is a LIBOR
Rate Loan at a rate per annum equal to the sum of (a) the
LIBOR Rate, PLUS (b) the Applicable URI Margin - LIBOR Rate
(Revolver), as each is in effect from time to time. Interest
on Revolving Credit Advances which are Prime Rate Loans shall
be payable in arrears on the last day of each January, April,
July and October, commencing January 31, 1998, and continuing
until all of the Indebtedness of URI to the Banks hereunder
shall have been fully paid. Interest on Revolving Credit
Advances which are LIBOR Rate Loans shall be paid for the
applicable Interest Period on the last day thereof and when
such LIBOR Rate Loan is due (whether at maturity, by reason of
acceleration or otherwise) and, if such Interest Period is
longer than three months, at intervals of three months after
the first day thereof."
Section 3. AMENDMENT OF MANDATORY PAYMENTS. Article 4 of the Credit
Agreement is hereby amended by adding the following new paragraph (c) to the end
of Section 4.1 thereof:
"(c) The Borrowers shall apply, on the date of
receipt, any and all proceeds received by any Loan Party or
its Subsidiaries, in connection with Permitted Financing
Transactions consummated in accordance with paragraph (b) of
the definition thereof to the repayment of the Revolving
Credit Advances."
5
Section 4. AMENDMENT OF FINANCIAL COVENANTS. Article 7 of the Credit
Agreement is hereby amended by deleting Sections 7.1 through 7.7 thereof in
their entirety and substituting therefor the following:
"Section 7.1. CONSOLIDATED TANGIBLE NET WORTH. URC
will at all times maintain Consolidated Tangible Net Worth in
an amount not less than the sum of (i) $69,083,000, PLUS (ii)
50% of the sum of Consolidated Net Income (without deduction
for any loss or deficit) for each fiscal quarter ending after
April 2, 2000, PLUS (iii) 100% of the net proceeds received by
URC in connection with any offering of its capital stock LESS
(iv) the amounts expended by URC on Permitted Stock
Repurchases."
"Section 7.2. CASH FLOW COVERAGE RATIO. URC and its
Subsidiaries shall maintain a ratio of Consolidated Adjusted
EBITDAR to the sum of (i) Consolidated Total Debt Service
(excluding, however, for purposes of this calculation, the
$6,000,000 balloon payment to be made by Saxet with respect to
the Saxet Term Loan in the event such loan is not refinanced),
PLUS (ii) Consolidated Same Store Capital Expenditures, PLUS
(iii) all cash dividends paid by URC on its capital stock,
PLUS (iv) all taxes paid by URC and its Subsidiaries in cash,
PLUS (v) without duplication, all lease payments of URC and
its Subsidiaries, including but not limited to any and all
payments made under operating leases and in connection with
Permitted Financing Transactions to the extent deducted in
calculating Consolidated EBIT, for each period of four fiscal
quarters ending on the dates indicated below, of not less than
the ratio set forth opposite each such date:
--------------------------------------------------------------
Quarter End Ratio
--------------------------------------------------------------
Each Fiscal Quarter End 1.0:1.0
In Fiscal Years 2000 and 2001
--------------------------------------------------------------
Each Fiscal Quarter End 1.25:1.0"
After Fiscal Year End 2001
--------------------------------------------------------------
"Section 7.3. PROFITABILITY. URC shall earn
Consolidated Net Income in each fiscal quarter of not less than $1."
"Section 7.4. CONSOLIDATED LEVERAGE RATIO. URC and
its Subsidiaries shall, for each period of four fiscal
quarters ending during the periods set forth below, maintain a
Consolidated Leverage Ratio of not more than the ratio set
forth opposite each such period:
6
--------------------------------------------------------------
Period Ratio
--------------------------------------------------------------
July 2, 2000 through 2.0:1.0
Fiscal Year End 2001
--------------------------------------------------------------
Fiscal Year 2002 1.75:1.0
through Fiscal Year End 2003
--------------------------------------------------------------
Fiscal Year 2004 1.5:1.0"
and thereafter
--------------------------------------------------------------
"Section 7.5. CONSOLIDATED ADJUSTED EBITDA. URC and
its Subsidiaries' Consolidated Adjusted EBITDA for each four
fiscal quarter period shall not be less than (a) $30,000,000
for the four-quarter period ending July 2, 2000 and (b) for
each subsequent four-quarter period, the greater of (i)
$30,000,000 or (ii) 85% of actual Consolidated Adjusted EBITDA
as of the end of the previous four-quarter period."
Section 5. AMENDMENT OF NEGATIVE COVENANTS.
(a) Section 9.1 of the Credit Agreement is hereby amended
by adding the following new paragraph (h) to the end thereof:
"(h) Indebtedness in respect of Permitted Financing
Transactions."
(b) Section 9.2 of the Credit Agreement is hereby amended by
deleting paragraph (h) thereof in its entirety and substituting
therefor the following:
"(h) Mortgage liens on real property owned by the
Loan Parties or any Subsidiary securing
Indebtedness permitted under Section 9.1
(g)."
(c) Section 9.2 of the Credit Agreement is hereby further
amended by adding the following new paragraph (i) to the end thereof:
"(i) Liens created in connection with and on the
assets subject to Permitted Financing
Transactions."
(d) Article 9 of the Credit Agreement is hereby amended by
deleting Section 9.4 thereof in its entirety and substituting therefor
the following:
"Section 9.4. DISPOSITIONS OF ASSETS. Sell, lease or
otherwise dispose of any assets except for (a) the sale, lease
or other disposition of inventory or other property (not
including receivables) in the ordinary course of business, (b)
so long as no Default exists or would result on an actual or
pro forma basis after giving effect thereto, other sales of
assets so long as the earnings before interest, taxes,
depreciation and amortization attributable to the assets to be
sold, together with the earnings before interest, taxes,
depreciation and amortization attributable to all other assets
sold, leased, contributed or conveyed in the ordinary course
of
7
business pursuant to Section 9.4(a) during the then current
fiscal year does not exceed 10% of Consolidated Adjusted
EBITDA for the fiscal year immediately preceding the then
current fiscal year or (c) Permitted Financing Transactions
consummated pursuant to the terms set forth in paragraph (a)
of the definition thereof."
(e) Article 9 of the Credit Agreement is hereby further
amended by deleting Section 9.9 thereof in its entirety and
substituting therefor the following:
"Section 9.9. SALE AND LEASEBACK. Sell or transfer
any of its properties with the intention of taking back a
lease of the same property or leasing other property for
substantially the same use as the property being sold or
transferred, except for Permitted Financing Transactions."
Section 6. REVISED REVOLVING CREDIT AND TERM NOTES. The Banks and the
Borrowers hereby agree that, in connection with the execution and delivery
hereof, the Borrowers shall execute and deliver to the Banks the following
revised notes (collectively, the "Revised Notes"): a) the Amended and Restated
URI Revolving Credit Notes, executed by URI in the form of EXHIBIT A-1 to the
First Amendment to evidence the Revolving Credit Advances, b) the Amended and
Restated URI Term Notes, executed by URI in the form of EXHIBIT A-2 to the First
Amendment to evidence the URI Term Loan and c) the Amended and Restated Saxet
Term Notes, executed by Saxet in the form of EXHIBIT A-3 to the First Amendment.
The Revised Notes shall, from and after the date hereof, be deemed to be the
"Revolving Credit Notes", "URI Term Notes" and "Saxet Term Notes", respectively,
under the Credit Agreement. Accrued interest on the URI Revolving Credit Notes,
the URI Term Notes and the Saxet Term Notes, each dated November 4, 1997
(collectively, the "Original Notes"), through the date hereof which has not been
paid shall be paid to the holder of such Original Notes in accordance with the
terms of the Credit Agreement prior to amendment hereby. Upon execution and
delivery to the Banks of the Revised Notes, the holder of the Original Notes
shall return such Original Notes to the Borrowers for cancellation.
Section 7. RELEASE OF REAL ESTATE COLLATERAL. At the request of the
Borrowers or URC in connection with any proposed Permitted Financing
Transactions involving the properties described below and provided that no
Default is outstanding under the Credit Agreement, the Banks hereby agree to the
discharge from time to time by the Agent, on behalf of the Banks, of the
mortgages in favor of the Agent on, and a concomitant release of the Assignment
of Leases and Rents executed with respect to, the properties described on
SCHEDULE II hereto, PROVIDED THAT the Banks shall have received any and all
documentation prepared in connection with any such proposed Permitted Financing
Transactions, including but not limited to an intercreditor agreement on terms
reasonably acceptable to the Banks, and shall have approved the terms and
conditions of such proposed Permitted Financing Transactions; PROVIDED FURTHER
THAT, in exchange for the discharge and release by the Agent of its security
interest in any of the properties described on SCHEDULE II, the applicable Loan
Party will grant to the Agent a mortgage of and security interest in (a) the
facility located at 545 Lakeview Parkway, Vernon Hills, Illinois (the "Vernon
Hills Facility") and (b) the facility located at 11633 University Boulevard,
Orlando, Florida (the "University Boulevard Facility", and together with the
Vernon Hills Facility, each a "Facility" and collectively, the "Facilities") to
secure the Bank Obligations, by execution and
8
delivery of a Mortgage and Security Agreement or other similar instrument with
respect to each Facility, in form and substance reasonably satisfactory to the
Agent, and PROVIDED FURTHER THAT in connection therewith, the Agent shall have
received the following documents with respect to each Facility, all on terms and
conditions and in form and substance reasonably satisfactory to the Agent: a) an
executed Assignment of Leases and Rents from the applicable Loan Party to the
Agent; b) a title insurance policy in favor of the Agent, insuring a first
mortgage title with only exceptions reasonably satisfactory to the Agent; c) to
the extent currently on file with any of the Loan Parties, surveys or plot
plans; d) an opinion of counsel for the Loan Parties with respect to, among
other things, the validity and enforceability of the Agent's mortgages on and
security interests in the Facilities; and e) all such other documents,
certificates and instruments as the Agent may reasonably request with respect to
each Facility.
Section 8. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Loan Parties
hereby (a) amend Schedules 5.4, 5.11, 5.13(a), 5.13(c), 5.14, 5.16, 5.21, 8.4
and 9.10 to the Credit Agreement by substituting the corresponding Schedules
attached hereto and (b) confirm to the Banks the representations and warranties
of the Loan Parties set forth in Article 5 of the Credit Agreement (as amended
hereby, including by substitution of Schedules 5.4, 5.11, 5.13(a), 5.13(c),
5.14, 5.16, 5.21, 8.4 and 9.10) as of the date hereof, as if set forth herein in
full (except for (a) changes contemplated by the Credit Agreement, (b) such
representations and warranties that refer to a specific date, (c) references to
the 1996 Financial Statements shall be deemed to refer to the 1999 Financial
Statements and (d) references to the URC Annual Report on Form 10-K and the
subsequent Quarterly Reports on Form 10-Q shall be deemed to refer to the URC
Annual Report on Form 10-K for the fiscal year ended October 3, 1999 and each of
the two subsequent Quarterly Reports on Form 10-Q filed thereafter). The Loan
Parties certify that no Default exists under the Credit Agreement.
Section 9. EFFECTIVENESS; CONDITIONS TO EFFECTIVENESS. This First
Amendment shall become effective upon execution hereof by the Loan Parties, the
Banks, the Agent and Arranger and the Co-Agent and Syndication Agent and upon
satisfaction of the following conditions:
(a) REVISED NOTES. The Borrowers shall have executed and
delivered to the Banks the Revised Notes pursuant to Section 6 hereof.
(b) BOARD RESOLUTIONS. The Banks shall have received copies of
the resolutions of the Board of Directors of each Loan Party
authorizing the execution, delivery and performance of this First
Amendment, the Revised Notes and the other Bank Agreements to which
each such corporation is a party and which are executed in connection
therewith, certified by the Secretary or an Assistant Secretary (or
Clerk or Assistant Clerk) of each such corporation (which certificate
shall state that such resolutions are in full force and effect).
(c) SECRETARY'S CERTIFICATES. The Banks shall have received a
certificate of the Secretary or an Assistant Secretary (or Clerk or
Assistant Clerk) of each Loan Party certifying the names and signatures
of the officers of each such corporation authorized to sign this First
Amendment, the Revised Notes and the other Bank Agreements to which
each such corporation is a party and which are executed in connection
therewith.
9
(d) CERTIFICATES OF LEGAL EXISTENCE AND GOOD STANDING. The
Banks shall have received certificates of recent date issued by the
Secretary of State of the State of Delaware and The Commonwealth of
Massachusetts certifying as to the legal existence and good standing of
each of the Loan Parties.
(e) OPINION OF COUNSEL. The Banks shall have received an
opinion of Brown, Rudnick, Freed and Gesmer, counsel to the Loan
Parties, in form and substance satisfactory to the Banks and their
counsel.
(f) CLOSING FEES. The Borrowers shall have paid to the Banks
the amendment fees described in the term sheet dated as of April 24,
2000, which shall be earned in full upon the Banks' execution and
delivery hereof.
Section 10. DESIGNATION OF ADMINISTRATIVE AGENT, ARRANGER, CO-AGENT AND
SYNDICATION AGENT. The parties hereto hereby agree that Fleet shall be, and
hereby is, designated as an Administrative Agent and Arranger under the Credit
Agreement and that SunTrust shall be, and hereby is, designated as a Co-Agent
and Syndication Agent under the Credit Agreement, each having such duties as may
be agreed from time to time among the Agent, Co-Agent and the Borrowers. Any and
all references in the Credit Agreement to the "Agent" shall refer to Fleet in
its capacity as Administrative Agent. The provisions of Article 13 set forth in
the Credit Agreement shall apply equally to the Administrative Agent and
Arranger and to the Co-Agent and Syndication Agent.
Section 11. MISCELLANEOUS. The Loan Parties agree, jointly and
severally, to pay on demand all the Agent's reasonable expenses in preparing,
executing and delivering this First Amendment, whether or not this First
Amendment shall be consummated, and all related instruments and documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
the Agent's special counsel, Goodwin, Procter & Hoar LLP. This First Amendment
shall be a Bank Agreement and shall be governed and construed and enforced under
the laws of The Commonwealth of Massachusetts.
[End of Page]
10
IN WITNESS WHEREOF, the Loan Parties, the Agent and Arranger, the
Co-Agent and Syndication Agent and the Banks have caused this First Amendment to
Amended and Restated Revolving Credit and Term Loan Agreement to be executed by
their duly authorized officers as of the date first set forth above.
UNO RESTAURANT CORPORATION
By:
Name:
Title:
URC HOLDING COMPANY, INC.
By:
Name:
Title:
UNO RESTAURANTS, INC.
By:
Name:
Title:
UNO FOODS INC.
By:
Name:
Title:
PIZZERIA UNO CORPORATION
By:
Name:
Title:
11
SAXET CORPORATION
By:
Name:
Title:
FLEET NATIONAL BANK, as Agent and Arranger
By:
Name:
Title:
FLEET NATIONAL BANK
By:
Name:
Title:
SUNTRUST BANK, as Co-Agent and Syndication Agent
By:
Name:
Title:
SUNTRUST BANK
By:
Name:
Title:
12
SCHEDULE I
BANKS' COMMITMENT PERCENTAGES
Commitment
Loan Bank Percentage
---- ---- ----------
1) Revolving Credit Advances
Fleet National Bank 50%
SunTrust Bank 50%
---------
Total: 100%
2) URI Term Loan
Fleet National Bank 50%
SunTrust Bank 50%
---------
Total: 100%
3) Saxet Term Loan
Fleet National Bank 50%
SunTrust Bank 50%
--------
Total: 100%
13
SCHEDULE II
PROPERTIES
1) Property located at 574 Iyanough Road, Hyannis, Massachusetts.
2) Property located at Ellicott City, Long Gate Center, Howard County, Maryland.
3) Property located at 1330 Shelburne Road, South Burlington, Vermont.
4) Property located at 901 Currency Circle, Lake Mary, Florida.
14
Exhibit 10.35
AGREEMENT FOR FLAT PRICE SALE
DATE: September 29, 2000 (supercedes Agreement of December 17, 1999, amendment
of May 4, 2000, and amendment of July 19, 2000).
SELLER: BUYER:
Beatrice Cheese, Uno Restaurant Corp.
An Operating Unit of 100 Charles Park Road
Beatrice Group, Inc. West Roxbury, MA
770 North Springdale Road 02132
Waukesha, WI 53186
FINISHED GOODS PRICE: $1.34/LB. A $.0125/lb. accrual will be established and
paid to buyer quarterly.
QUANTITY: 7,412,000 lbs. (approximately 154,417 cases) October 23, 2000 through
August 31, 2001.
SHIPMENT: Monthly volumes as follows: August 800,000 lbs. (approx. 16,667
cases); September 480,000 lbs. (approx. 10,000 cases); October 600,000 lbs.
(approx. 12,500 cases); November 760,000 lbs. (approx. 15,833 cases); December
520,000 lbs. (approx. 10,833 cases); January 690,000 lbs. (approx. 14,375
cases); February 874,000 lbs. (approx. 18,208 cases); March 552,000 lbs.
(approx. 11,500 cases); April 644,000 lbs. (approx. 13,417 cases); May 966,000
lbs. (approx. 20,125 cases); June 690,000 lbs. (approx. 14,375 cases), July
836,000 lbs. (approx. 17,417 cases); August 880,000 lbs. (approx. 18,333 cases).
F.O.B.: From the plant shipping the final finished product.
ADDITIONAL
CONDITIONS:
1. Buyer is permitted a 15% volume tolerance plus or minus the monthly
contracted pounds.
2. Any open monthly order shortfalls/excesses from the original monthly
shipment quantity after the monthly tolerances are calculated will be
settled against the BFP/Class III milk settlement price for that particular
month. Fixed BFP/Class III milk prices for purposes of setting the flat
price of this Agreement are shown immediately below:
BASE BFP/Class III MILK PRICES
The following are the base prices of determining the price of the
Agreement. They are the closing BFP/Class III milk futures prices of
December 16, 1999. January 2001-April 2001 Class III milk futures
prices are closing prices from May 4, 2000. May-June 2001 Class III
milk futures are closing prices from July 19, 2000. July-August 2001
Class III milk futures prices are closing prices from September 29,
2000.
August 2000 $12.80/cwt. February 2001 $10.65/cwt.
September 2000 $12.99/cwt. March 2001 $10.71/cwt.
October 2000 $12.87/cwt. April 2001 $10.71/cwt.
November 2000 $12.80/cwt. May 2001 $10.60/cwt.
December 2000 $12.80/cwt. June 2001 $10.90/cwt.
January 2001 $10.85/cwt. July 2001 $10.89/cwt.
August 2001 $10.92/cwt.
1
3. Calculation of the settlement is the difference between the contract base
price listed in the above table and the specified monthly BFP/Class III
settlement price multiplied by the short/excess milk pounds required for
manufacturing the cheese shipped in that particular month. The conversion
factor shall be 10 pounds of milk to 1 pound of cheese.
4. The Seller and the Buyer also may agree mutually to reschedule shipment.
BEATRICE GROUP, INC.
By: David Nusbaum
Its: Vice President of Sales
------------------------------------------
Date: October 11, 2000
-----------------------------------------
UNO RESTAURANT CORP.
By: Alan Fox
Its: Executive Vice President
------------------------------------------
Date: October 31, 2000
-----------------------------------------
2
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries Jurisdiction of Incorporation
------------ -----------------------------
URC Holding Company, Inc. Delaware
Subsidiaries of URC Holding Company, Inc.
-----------------------------------------
B.S. Acquisition Corp. New Jersey
Pizzeria Uno Corporation Delaware
Uno Restaurants, Inc. Massachusetts
Uno Foods Inc. Massachusetts
Subsidiaries of B.S. Acquisition Corp.
-------------------------------------
B.S. of Woodbridge, Inc. New Jersey
Uno Bay, Inc. Pennsylvania
Subsidiaries of Uno Restaurants, Inc.
-------------------------------------
8250 International Drive Corporation Florida
Aurora Uno, Inc. Colorado
Fairfax Uno, Inc. Virginia
Franklin Mills Pizzeria, Inc. Pennsylvania
Grayborn Buena Vista, Inc. Florida
Herald Center Uno Rest. Inc. New York
Kissimmee Uno, Inc. Florida
Marketing Services Group, Inc. Massachusetts
Newington Uno, Inc. Connecticut
Newport News Uno, Inc. Virginia
Newton Takery, Inc. Massachusetts
Paramus Uno, Inc. New Jersey
Pizzeria Due, Inc. Illinois
Pizzeria Uno, Inc. Illinois
Pizzeria Uno of Albany Inc. New York
Pizzeria Uno of Altamonte Springs, Inc. Florida
Pizzeria Uno of Annapolis, Inc. Maryland
Pizzeria Uno of Ballston, Inc. Virginia
Pizzeria Uno of Bay Ridge, Inc. New York
Pizzeria Uno of Bayside, Inc. New York
Pizzeria Uno of Bethesda, Inc. Maryland
Pizzeria Uno of Brockton, Inc. Massachusetts
Pizzeria Uno of Buena Vista, Inc. Florida
Pizzeria Uno of Buffalo, Inc. New York
Pizzeria Uno of Columbus Avenue, Inc. New York
Pizzeria Uno of Dock Square, Inc. Massachusetts
Pizzeria Uno of East Village Inc. New York
Pizzeria Uno of 86th Street, Inc. New York
Pizzeria Uno of Fair Oaks, Inc. Virginia
Pizzeria Uno of Fairfield, Inc. Missouri
Pizzeria Uno of Forest Hills, Inc. New York
Pizzeria Uno of Harbor Place, Inc. Maryland
Pizzeria Uno of Kingston, Inc. Massachusetts
Pizzeria Uno of Lynbrook Inc. New York
Pizzeria Uno of Norfolk, Inc. Virginia
Pizzeria Uno of Paramus, Inc. New Jersey
Pizzeria Uno of Penn Center, Inc. Pennsylvania
Pizzeria Uno of Reston, Inc. Virginia
Pizzeria Uno of South Street Seaport, Inc. New York
Pizzeria Uno of Springfield, Inc. Massachusetts
1
Pizzeria Uno of Syracuse, Inc. New York
Pizzeria Uno of Union Station, Inc. District of Columbia
Pizzeria Uno of Washington, DC, Inc. District of Columbia
Pizzeria Uno of Westfarms, Inc. Connecticut
Plizzettas of Burlington, Inc. Vermont
Plizzettas of Concord, Inc. New Hampshire
Plizzettas of North Attleboro, Inc. Massachusetts
Plizzettas of Paoli, Inc. Pennsylvania
Sewell Corporation Illinois
Spinoccoli of Keene, Inc. New Hampshire
Su Casa, Inc. Illinois
Uno of Astoria, Inc. New York
Uno of Auburn, Inc. Massachusetts
Uno of Aurora, Inc. Illinois
Uno of Bangor, Inc. Maine
Uno of Crestwood, Inc. Illinois
Uno of Daytona, Inc. Florida
Uno of Dulles, Inc. Virginia
Uno of Falls Church, Inc. Virginia
Uno of Georgesville, Inc. Ohio
Uno of Greenwood, Inc. Colorado
Uno of Gurnee Mills, Inc. Illinois
Uno of Hagerstown, Inc. Maryland
Uno of Haverhill, Inc. Massachusetts
Uno of Henrietta, Inc. New York
Uno of Highlands Ranch, Inc. Colorado
Uno of Indiana, Inc. Indiana
Uno of Kingstowne, Inc. Virginia
Uno of Kirkwood, Inc. Missouri
Uno of Lombard, Inc. Illinois
Uno of Manassas, Inc. Virginia
Uno of Manchester, Inc. Connecticut
Uno of Massachusetts, Inc. Massachusetts
Uno of New Jersey, Inc. New Jersey
Uno of Providence, Inc. Rhode Island
Uno of Schaumburg, Inc. Illinois
Uno of Smithtown, Inc. New York
Uno of Smoketown, Inc. Virginia
Uno of Tennessee, Inc. Tennessee
Uno of Victor, Inc. New York
Uno Restaurant of Columbus, Inc. Ohio
Uno Restaurant of Great Neck, Inc. New York
Uno Restaurant of St. Charles, Inc. Maryland
Uno Restaurant of Woburn, Inc. Massachusetts
Uno Restaurants of New York Inc. New York
Waltham Uno, Inc. Massachusetts
Westminster Uno, Inc. Colorado
Subsidiary of Uno Restaurants of New York Inc.
----------------------------------------------
Pizzeria Uno Massachusetts Business Trust Massachusetts
Subsidiary of Sewell Corporation
--------------------------------
Saxet Corporation Delaware
2
EXHIBIT 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-80584 and Post-Effective Amendment No. 2 to Form S-8
No. 33-22875) pertaining to the Uno Restaurant Corporation 1987 Employee
Stock Option Plan, (Form S-8 No. 33-80586) pertaining to the Uno Restaurant
Corporation 1989 Non-Qualified Stock Option Plan for Non-Employee Directors,
(Form S-8 No. 33-80664) pertaining to the Uno Restaurant Corporation 1993
Non-Qualified Stock Option Plan for Non-Employee Directors, (Form S-8
No. 333-23101) pertaining to the Uno Restaurant Corporation 1997 Employee
Stock Option Plan, (Form S-8 No. 333-23103) pertaining to the Uno Restaurant
Corporation Restricted Stock Program, and (Form S-8 No. 333-49627) pertaining
to the Uno Restaurant Corporation 1997 Key Officer Stock Option Plan and the
Uno Restaurant Corporation 1997 Non-Qualified Stock Option Plan for
Non-Employee Directors of our report dated November 3, 2000, with respect to
the consolidated financial statements of Uno Restaurant Corporation included
in the Annual Report (Form 10-K) for the year ended October 1, 2000.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 20, 2000
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