(Mark One)
For the transition period from __________ to __________
Commission file number 0-22639
CHAMPPS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
04-3370491 (I.R.S. Employer Identification No.) |
10375 Park Meadows Drive, Suite 560, Littleton, Colorado (Address of principal executive offices) |
80124 (Zip Code) |
(303) 804-1333
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No __
Number of shares of Common Stock, $.01 par value, outstanding at October 23, 2003: 12,788,077 (excluding 471,588 shares held in our treasury).
CHAMPPS ENTERTAINMENT
INC.
INDEX
PART I – FINANCIAL INFORMATION
| Item 1. Financial Statements: | |||||
Consolidated Balance Sheets as of September 28, 2003 and June 29, 2003 | 1 | ||||
Consolidated Statements of Operations - Three Months Ended September 28, 2003 and | |||||
| September 29, 2002 | 2 | ||||
Consolidated Statement of Shareholders' Equity - Three Months Ended September 28, 2003 | 3 | ||||
Consolidated Statements of Cash Flows - Three Months Ended September 28, 2003 and | |||||
| September 29, 2002 | 4 | ||||
Notes to Unaudited Consolidated Financial Statements - Three Months Ended September | |||||
| 28, 2003 and September 29, 2002 | 5 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 22 |
||||
Item 4. Controls and Procedures |
22 |
||||
PART II – OTHER INFORMATION
Item 1. Financial Statements
CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
As of September 28, 2003 and June
29, 2003
(In thousands except share data)
(Unaudited)
| September 28, 2003 |
June 29, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,008 | $ | 5,055 | ||||
| Restricted cash | 742 | 741 | ||||||
| Accounts receivable | 3,767 | 2,669 | ||||||
| Inventories | 3,734 | 3,594 | ||||||
| Prepaid expenses and other current assets (Note 7) | 6,288 | 6,066 | ||||||
| Deferred tax asset | 2,000 | 2,000 | ||||||
| Total current assets | 25,539 | 20,125 | ||||||
Property and equipment, net | 85,400 | 83,613 | ||||||
| Goodwill | 5,069 | 5,069 | ||||||
| Deferred tax asset | 22,537 | 22,675 | ||||||
| Other assets, net (Note 8) | 2,378 | 2,467 | ||||||
| Total assets | $ | 140,923 | $ | 133,949 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,593 | $ | 5,403 | ||||
| Accrued expenses (Notes 4 and 9) | 11,410 | 9,750 | ||||||
| Current portion of capital lease obligations | 477 | 528 | ||||||
| Current portion of notes payable (Note 6) | 2,133 | 1,244 | ||||||
| Total current liabilities | 17,613 | 16,925 | ||||||
| Capital lease obligations, net of current portion | 511 | 635 | ||||||
| Notes payable, net of current portion (Note 6) | 29,521 | 26,143 | ||||||
| Other long-term liabilities (Notes 4 and 9) | 19,559 | 17,501 | ||||||
| Total liabilities | 67,204 | 61,204 | ||||||
| Commitments and contingencies (Note 4) | ||||||||
Shareholders' equity: | ||||||||
| Preferred stock ($.01 par value per share; | ||||||||
| authorized 5,000,000 shares; none issued) | -- | -- | ||||||
| Common stock ($.01 par value per share; authorized | ||||||||
| 30,000,000 shares; 13,249,638 and 13,235,638 | ||||||||
| shares issued at September 28, 2003 and June 29, | ||||||||
| 2003, respectively) | 132 | 132 | ||||||
| Additional paid-in capital | 90,186 | 89,816 | ||||||
| Accumulated deficit | (13,016 | ) | (13,620 | ) | ||||
| Treasury stock, at cost (471,588 shares) | (3,583 | ) | (3,583 | ) | ||||
| Total shareholders' equity | $ | 73,719 | $ | 72,745 | ||||
| Total liabilities and shareholders' equity | $ | 140,923 | $ | 133,949 | ||||
See accompanying notes to unaudited consolidated financial statements.
1
CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 28,
2003 and September 29, 2002
(In thousands except per share data)
(Unaudited)
| September 28, 2003 |
September 29, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||
| Sales | $ | 48,747 | $ | 41,332 | ||||
| Franchising and royalty, net | 138 | 148 | ||||||
| Total revenue | 48,885 | 41,480 | ||||||
| Costs and expenses | ||||||||
| Restaurant operating expenses: | ||||||||
| Product costs | 13,710 | 11,531 | ||||||
| Labor costs | 16,064 | 13,556 | ||||||
| Other operating expenses | 7,751 | 6,443 | ||||||
| Occupancy | 4,445 | 3,718 | ||||||
| Depreciation and amortization | 2,185 | 1,767 | ||||||
| Total restaurant operating expenses | 44,155 | 37,015 | ||||||
| Restaurant operating and franchise | ||||||||
| contribution | 4,730 | 4,465 | ||||||
| General and administrative expenses | 2,455 | 2,305 | ||||||
| Pre-opening expenses | 839 | 703 | ||||||
| Income from operations | 1,436 | 1,457 | ||||||
| Other (income) expense: | ||||||||
| Interest expense and income, net | 549 | 396 | ||||||
| Expenses related to predecessor | ||||||||
| companies | 39 | -- | ||||||
| Other (income) expense, net | 33 | 51 | ||||||
| Income before income taxes | 815 | 1,010 | ||||||
| Income tax expense | 211 | 38 | ||||||
| Net income | $ | 604 | $ | 972 | ||||
| Basic income per share (Note 3): | $ | 0.05 | $ | 0.08 | ||||
| Diluted income per share (Note 3): | $ | 0.05 | $ | 0.08 | ||||
| Basic weighted average shares | ||||||||
| outstanding | 12,775 | 12,201 | ||||||
| Diluted weighted average shares | ||||||||
| outstanding | 12,860 | 12,918 | ||||||
See accompanying notes to unaudited consolidated financial statements.
2
CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED
STATEMENT OF SHAREHOLDERS’ EQUITY
Three Months Ended
September 28, 2003
(In thousands except share data)
(Unaudited)
| Common Stock |
Treasury Stock |
||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares |
Amount |
Additional Paid-in Capital |
Accumulated Deficit |
Shares |
Amount |
Total Shareholders' Equity | |||||||||||||||||
| Balance, June 29, 2003 | 13,235,638 | $ | 132 | $ | 89,816 | $ | (13,620 | ) | 471,588 | $ | (3,583 | ) | $ | 72,745 | |||||||||
| Common shares issued | 14,000 | -- | 56 | -- | -- | -- | 56 | ||||||||||||||||
| Interest on loan for exercise of | |||||||||||||||||||||||
| stock options | -- | -- | (2 | ) | -- | -- | -- | (2 | ) | ||||||||||||||
| Repayment of loan for exercise of | |||||||||||||||||||||||
| stock options (Note 10) | -- | -- | 316 | -- | -- | -- | 316 | ||||||||||||||||
| Net income | -- | -- | -- | 604 | -- | -- | 604 | ||||||||||||||||
| Balance, September 28, 2003 | 13,249,638 | $ | 132 | $ | 90,186 | $ | (13,016 | ) | 471,588 | $ | (3,583 | ) | $ | 73,719 | |||||||||
See accompanying notes to unaudited consolidated financial statements.
3
CHAMPPS
ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 28, 2003 and September 29, 2002
(In thousands)
(Unaudited)
| September 28, 2003 |
September 29, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Cash flows from operating activities: | ||||||||
| Net income | $ | 604 | $ | 972 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization (Note 5) | 2,272 | 1,882 | ||||||
| Amortization of notes payable discount | 50 | -- | ||||||
| Loss on disposal of assets | 33 | 55 | ||||||
| Interest on loan for exercise of stock options | (2 | ) | (11 | ) | ||||
| Deferred income tax expense | 138 | -- | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (315 | ) | 45 | |||||
| Inventories | (140 | ) | (98 | ) | ||||
| Prepaid expenses and other current assets | (222 | ) | (1,604 | ) | ||||
| Accounts payable | (1,810 | ) | 588 | |||||
| Accrued expenses | 1,660 | 2,139 | ||||||
| Other assets | 78 | (115 | ) | |||||
| Other long-term liabilities | (142 | ) | (212 | ) | ||||
| Net cash provided by operating activities | 2,204 | 3,641 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (4,081 | ) | (4,265 | ) | ||||
| Restricted cash balances | (1 | ) | (9 | ) | ||||
| Repayment of loan for exercise of stock options (Note 10) | 316 | -- | ||||||
| Net cash used in investing activities | (3,766 | ) | (4,274 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | 56 | 2,152 | ||||||
| Repurchase of common stock | -- | (2,355 | ) | |||||
| Repayment of notes payable and capitalized lease obligations | (809 | ) | (668 | ) | ||||
| Proceeds from notes payable (Note 6) | 4,851 | -- | ||||||
| Proceeds from tenant improvement allowances | 1,417 | 285 | ||||||
| Net cash provided by (used in) financing activities | 5,515 | (586 | ) | |||||
| Net change in cash and cash equivalents | 3,953 | (1,219 | ) | |||||
| Cash and cash equivalents, beginning of period | 5,055 | 4,643 | ||||||
| Cash and cash equivalents, end of period | $ | 9,008 | $ | 3,424 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest, net of amount capitalized and | ||||||||
| interest income | $ | 239 | $ | 265 | ||||
| Income taxes, net of refunds | 69 | 169 | ||||||
| Supplemental disclosures of non-cash investing | ||||||||
| and financing activities: | ||||||||
| Tenant improvement allowances not yet received | $ | 783 | $ | 735 | ||||
See accompanying notes to unaudited consolidated financial statements.
4
CHAMPPS ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended
September 28, 2003 and September 29, 2002
(Unaudited)
Nature of Business
As of September 28, 2003, Champps Entertainment, Inc. (the “Company,” or “Champps”) owned and operated 44 full-service, casual dining restaurants under the names of “Champps Americana”, “Champps Restaurant” and “Champps Restaurant and Bar.” The Company also franchised 12 restaurants under the name “Champps Americana.” Champps operates in 19 states throughout the United States.
Basis of Presentation of Consolidated Financial Statements
The accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position as of September 28, 2003 and results of operations for the interim periods ended September 28, 2003 and September 29, 2002. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such SEC rules and regulations. Operating results for the three-month period ended September 28, 2003 are not necessarily indicative of the results that