| 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) |
|
ITEM 1. ITEM 2. ITEM 3. ITEM 4. |
Financial Statements: Consolidated Balance Sheets as of October 3, 2004 and June 27, 2004 Consolidated Statements of Operations - Quarters Ended October 3, 2004 and September 28, 2003 Consolidated Statement of Shareholders' Equity - Quarter Ended October 3, 2004 Consolidated Statements of Cash Flows – Quarters Ended October 3, 2004 and September 28, 2003 Notes to Unaudited Consolidated Financial Statements – Quarters Ended October 3, 2004 and September 28, 2003 Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures about Market Risk Controls and Procedures |
1 2 3 4 5 12 23 24 |
|
ITEM 1. ITEM 2. ITEM 3. ITEM 4. ITEM 5. ITEM 6. |
Legal Proceedings Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities Defaults upon Senior Securities Submission of Matters to a Vote of Security Holders Other Information Exhibits and Reports on Form 8-K |
24 24 24 24 24 24 |
PART I –
FINANCIAL INFORMATION
ITEM 1. Financial Statements
CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
As of October 3, 2004 and June 27,
2004
(In thousands except share data)
(Unaudited)
| October 3, 2004 |
June 27, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | -- | $ | 1,449 | ||||
| Restricted cash | -- | 101 | ||||||
| Accounts receivable | 3,272 | 3,046 | ||||||
| Inventories | 4,206 | 4,394 | ||||||
| Prepaid expenses and other current assets (Note 7) | 3,371 | 1,782 | ||||||
| Deferred tax assets | 2,825 | 2,825 | ||||||
| Total current assets | 13,674 | 13,597 | ||||||
| Property and equipment, net | 90,983 | 89,153 | ||||||
| Goodwill | 5,069 | 5,069 | ||||||
| Deferred tax assets | 20,828 | 21,093 | ||||||
| Other assets, net (Note 8) | 2,764 | 2,581 | ||||||
| Total assets | $ | 133,318 | $ | 131,493 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Cash overdraft | $ | 1,753 | $ | -- | ||||
| Accounts payable | 4,055 | 4,315 | ||||||
| Accrued expenses (Notes 4 and 9) | 8,840 | 9,178 | ||||||
| Current portion of long-term debt (Note 6) | 955 | 942 | ||||||
| Total current liabilities | 15,603 | 14,435 | ||||||
| Long-term debt, net of current portion (Note 6) | 16,903 | 17,621 | ||||||
| Other long-term liabilities (Notes 4 and 9) | 20,904 | 20,897 | ||||||
| Total liabilities | 53,410 | 52,953 | ||||||
| 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; 13,319,777 and 13,285,253 shares issued at October 3, 2004 | ||||||||
| and June 27, 2004, respectively) | 133 | 133 | ||||||
| Additional paid-in capital | 90,591 | 90,393 | ||||||
| Accumulated deficit | (7,233 | ) | (8,627 | ) | ||||
| Accumulated other comprehensive income | -- | 224 | ||||||
| Treasury stock, at cost (471,588 shares) | (3,583 | ) | (3,583 | ) | ||||
| Total shareholders' equity | 79,908 | 78,540 | ||||||
| Total liabilities and shareholders' equity | $ | 133,318 | $ | 131,493 | ||||
See accompanying notes to unaudited consolidated financial statements.
1
CHAMPPS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarters Ended October 3, 2004 and September 28, 2003
(In thousands except per share data)
(Unaudited)
| Quarters Ended |
||||||||
|---|---|---|---|---|---|---|---|---|
| October 3, 2004 |
September 28, 2003 | |||||||
| Revenue | ||||||||
| Sales | $ | 55,344 | $ | 48,747 | ||||
| Franchising and royalty, net | 153 | 138 | ||||||
| Total revenue | 55,497 | 48,885 | ||||||
| Costs and expenses | ||||||||
| Restaurant operating expenses: | ||||||||
| Product costs | 15,366 | 13,710 | ||||||
| Labor costs | 17,619 | 15,985 | ||||||
| Other operating expenses | 9,199 | 7,737 | ||||||
| Occupancy | 4,967 | 4,445 | ||||||
| Depreciation and amortization | 2,616 | 2,185 | ||||||
| Total restaurant operating expenses | 49,767 | 44,062 | ||||||
| Restaurant operating and franchise contribution | 5,730 | 4,823 | ||||||
| General and administrative expenses | 3,091 | 2,548 | ||||||
| Pre-opening expenses | 213 | 839 | ||||||
| Other (income) expense | (142 | ) | 33 | |||||
| Income from operations | 2,568 | 1,403 | ||||||
| Other (income) expense: | ||||||||
| Interest expense and income, net | 374 | 549 | ||||||
| Expenses related to predecessor companies | 310 | 39 | ||||||
| Income before income taxes | 1,884 | 815 | ||||||
| Income tax expense | 490 | 211 | ||||||
| Net income | $ | 1,394 | $ | 604 | ||||
| Basic income per share (Note 3): | $ | 0.11 | $ | 0.05 | ||||
| Diluted income per share (Note 3): | $ | 0.11 | $ | 0.05 | ||||
| Basic weighted average shares outstanding | 12,822 | 12,775 | ||||||
| Diluted weighted average shares outstanding | 13,079 | 12,860 | ||||||
See accompanying notes to unaudited consolidated financial statements.
2
CHAMPPS ENTERTAINMENT,
INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
Quarter Ended
October 3, 2004
(In thousands except share data)
(Unaudited)
| Common Stock |
Treasury Stocholders' |
||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares |
Amount |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income |
Shares |
Amount |
Total Share holders' Equity |
||||||||||||||||||||||
| Balance as of June 27, 2004 | 13,285,253 | 133 | 90,393 | (8,627 | ) | 224 | 471,588 | (3,583 | ) | 78,540 | |||||||||||||||||||
| Net income | -- | -- | -- | 1,394 | -- | -- | -- | 1,394 | |||||||||||||||||||||
| Reclassification adjustment for the | |||||||||||||||||||||||||||||
| gain on sale of securities realized | |||||||||||||||||||||||||||||
| in net income | -- | -- | -- | -- | (224 | ) | -- | -- | (224 | ) | |||||||||||||||||||
| Common shares issued | 34,524 | -- | 198 | -- | -- | -- | -- | 198 | |||||||||||||||||||||
| Balance as of October 3, 2004 | 13,319,777 | $ | 133 | $ | 90,591 | $ | (7,233 | ) | $ | -- | 471,588 | $ | (3,583 | ) | $ | 79,908 | |||||||||||||
See accompanying notes to unaudited consolidated financial statements.
3
CHAMPPS ENTERTAINMENT,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarters Ended October 3, 2004 and September 28, 2003
(In
thousands)
(Unaudited)
| October 3, 2004 |
September 28, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,394 | $ | 604 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization (Note 5) | 2,725 | 2,272 | ||||||
| Amortization of notes payable discount | 50 | 50 | ||||||
| Loss on disposal of assets | 51 | 33 | ||||||
| Interest on loan for exercise of stock options | -- | (2 | ) | |||||
| Deferred income tax expense | 320 | 138 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (226 | ) | (315 | ) | ||||
| Inventories | 188 | (140 | ) | |||||
| Prepaid expenses and other current assets | (1,589 | ) | (222 | ) | ||||
| Accounts payable | (260 | ) | (1,810 | ) | ||||
| Accrued expenses | (338 | ) | 1,660 | |||||
| Other assets | (474 | ) | 78 | |||||
| Other long-term liabilities | 7 | (142 | ) | |||||
| Net cash provided by operating activities | 1,848 | 2,204 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (4,633 | ) | (4,081 | ) | ||||
| Proceeds from disposal of assets | 39 | -- | ||||||
| Restricted cash balances | 101 | (1 | ) | |||||
| Repayment of loan for exercise of stock options | -- | 316 | ||||||
| Net cash used in investing activities | (4,493 | ) | (3,766 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from cash overdraft | 1,753 | -- | ||||||
| Proceeds from issuance of common stock | 198 | 56 | ||||||
| Repayment of long-term debt and capitalized lease obligations | (755 | ) | (809 | ) | ||||
| Proceeds from long-term debt | -- | 4,851 | ||||||
| Proceeds from capital lease transactions | -- | -- | ||||||
| Proceeds from tenant improvement allowances | -- | 1,417 | ||||||
| Net cash provided by (used in) financing activities | 1,196 | 5,515 | ||||||
| Net change in cash and cash equivalents | (1,449 | ) | 3,953 | |||||
| Cash and cash equivalents, beginning of period | 1,449 | 5,055 | ||||||
| Cash and cash equivalents, end of period | $ | -- | $ | 9,008 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest, net of amount capitalized | $ | 46 | $ | 239 | ||||
| Income taxes, net of refunds | 184 | 69 | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Tenant improvement allowances not yet received | $ | 425 | $ | 783 | ||||
See accompanying notes to unaudited consolidated financial statements.
4
CHAMPPS ENTERTAINMENT,
INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Quarters Ended
October 3, 2004 and September 28, 2003
(Unaudited)
Nature of Business
As of October 3, 2004, Champps Entertainment, Inc. (the “Company,” or “Champps”) owned and operated 48 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 22 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 October 3, 2004 and results of operations for the interim periods ended October 3, 2004 and September 28, 2003. 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 quarter ended October 3, 2004 are not necessarily indicative of the results that may be expected for the year ending July 3, 2005.
The balance sheet at October 3, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended June 27, 2004 included in our Annual Report on Form 10-K.
These statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended June 27, 2004. The accounting policies used in preparing these consolidated financial statements are consistent with those described in our Annual Report on Form 10-K.
Fourteen operating weeks in first quarter fiscal 2005
Champps utilizes a 52/53 week fiscal year ending on the Sunday closest to June 30th for financial reporting purposes. As a result, fiscal 2004 consisted of a 52 week year divided into four quarters of 13 weeks each. However, fiscal 2005 consists of 53 weeks. Therefore, our first quarter of fiscal 2005 contains 14 weeks while the remaining quarter in the fiscal year will contain 13 weeks each. The extra week in fiscal 2005 will impact revenues compared to the prior year period, as well as, expenses as a percent of revenue for fixed expenses such as occupancy and depreciation and amortization.
Use of Estimates
The preparation of financial statements in conformity with U.S.generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
5
Reclassifications
Certain reclassifications were made to the consolidated financial statements for prior periods to conform to the October 3, 2004 presentation.
Accounting for Stock-Based Compensation
The Company maintains stock option plans under which the Company may grant incentive stock options and non-qualified stock options to associates, consultants and non-employee directors. Stock options have been granted with exercise prices at or above the fair value on the date of grant. Options vest and expire according to the terms established at the grant date. The Company issued 420,700 options to purchase common stock at an exercise price of $7.85 in August of fiscal 2005.
Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans based on the fair value of options granted. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, because the grant price equals or is above the market price on the date of grant for options issued by the Company, no compensation expense is generally recognized for stock options initially issued to employees.
On December 31, 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure,” which amends SFAS No. 123. SFAS No. 148 requires more prominent and frequent disclosures about the effects of stock-based compensation. The Company intends to continue to account for its stock-based compensation according to the provisions of APB Opinion No. 25 until more definitive pronouncements are issued requiring companies to record compensation costs upon issuance of options.
Had compensation cost for our stock options been recognized based upon the estimated fair value on the grant date under the fair value methodology prescribed by SFAS No. 123, as amended by SFAS No. 148, our net income and income per share would have been as follows:
| Quarters Ended |
||||||||
|---|---|---|---|---|---|---|---|---|
| October 3, 2004 |
September 28, 2003 | |||||||
| Net income, as reported | $ | 1,394,000 | $ | 604,000 | ||||
Add: Stock-based employee compensation | ||||||||
| expense included in net income, net of | ||||||||
| related tax effects | ||||||||