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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended JUNE 30, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to __________________________
Commission File Number 1-11754
PICCADILLY CAFETERIAS, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-0604977
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3232 SHERWOOD FOREST BLVD., BATON ROUGE, LOUISIANA 70816
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (504) 293-9440
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing price of such stock on September 20, 1999 was
$67,587,128.
The number of shares outstanding of Common Stock, without par value, as of
September 20, 1999 was 10,528,368.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended June
30, 1999 are incorporated by reference into Part II.
Portions of the definitive proxy statement for the 1999 annual meeting of
shareholders are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Piccadilly Cafeterias, Inc. was incorporated under the laws of Louisiana
in 1965 and is the successor to various predecessor corporations and
partnerships which operated "Piccadilly" cafeterias beginning with the
acquisition of the first unit in 1944. Except where the context otherwise
indicates, the terms "Company", "Piccadilly", and "Registrant" as used herein
refer to Piccadilly Cafeterias, Inc.
On May 28, 1998, the Company completed a $5.00 per share tender offer for
all outstanding shares of Morrison Restaurants, Inc. (Morrison), acquiring
approximately 89% of the outstanding shares (the Morrison Acquisition). A
merger was then completed on July 31, 1998 in which the remaining Morrison
shares were converted into the right to receive $5.00 per share and Morrison
became a wholly-owned subsidiary of the Company. The Company believes that the
acquisition of Morrison provides broader market coverage and opportunities for
improved operating efficiencies.
As of June 30, 1999, the Company has converted 99 Morrison units into
Piccadilly units (the Morrison Conversions). The Company expects to complete
the 13 remaining scheduled Morrison Conversions by the end of the first quarter
of 2000. Eleven units will continue to operate as Morrison units for an
indefinite period.
The conversion process involves the replacement of signage and employee
uniforms. Some minor renovations may be done if necessary. The most popular
Morrison recipes are integrated with Piccadilly recipes to appease the loyal
Morrison customers.
At June 30, 1999, the Company operated 244 cafeterias in 17 states. Of
these, 121 are in suburban malls, 26 are in suburban strip centers, and 97 are
free-standing suburban locations. The Company also operates a Piccadilly
Express unit in an Associated Grocer supermarket and nine Morrison's Quick-
Serve restaurants, "QSR's", located primarily in mall food courts. Up to four
new cafeterias are expected to be opened during the year ending June 30, 2000.
The following table sets forth certain information regarding development of the
Company's cafeteria chain during the five years ended June 30, 1999:
Year Ended June 30 1999 (A) 1998 (B) 1997 1996 1995
Net sales per unit (in thousands)(C) $ 1,920 $ 2,226 $ 2,179 $ 2,058 $ 1,990
Units opened -- 4 3 1 5
Units closed 15 3 4 3 3
Units open at year-end 253 130 129 130 132
Total customer volume (in thousands) 75,653 48,786 49,483 49,629 48,098
(A) The average net sales per unit for units acquired in the Morrison
Acquisition was $1,613,000 while the net sales per unit for other
Piccadilly cafeteria units was $2,195,000.
(B) Fiscal 1998 data excludes the one month of operations of Morrison's.
(C) Excludes sales from Piccadilly Express units and QSR's. Excludes
cafeterias opened or closed during period.
On March 30, 1999, the Company completed the sale of the Ralph & Kacoo's
seafood restaurants and related commissary business (Cajun Bayou Distributors
and Management, Inc.) to Cobb Investment Company, Inc. for $21,314,000 in cash.
The Company believes that the sale will allow the Company to focus on its core
business, the operation of the company-owned cafeterias. The following table
sets forth certain information regarding the Ralph & Kacoo's seafood
restaurants in Alabama, Louisiana and Mississippi.
Year Ended June 30 1999 (A) 1998 1997 1996 1995
Net sales per unit (in thousands)(B) $2,759 $3,509 $3,428 $3,394 $3,394
Units opened 0 0 0 0 1
Units closed 1 0 1 0 0
Units open at year-end 0 7 7 8 8
(A) Includes sales through March 30, 1999.
(B) Excludes restaurants opened or closed during period.
Although the Company's operations are primarily in the southeast and
mid-Atlantic regions of the United States, the Company does not consider
its growth to be limited to such areas. Piccadilly evaluates numerous
potential expansion locations, focusing on demographic data such as
population densities, population profiles, income levels, traffic counts,
as well as the extent of competition. The number of new cafeterias and
restaurants that the Company can open depends upon its ability to secure
appropriate locations, generate necessary financial resources, and develop
personnel for expansion.
CAFETERIA OPERATIONS
The Company's traditional cafeterias, including those acquired in the
Morrison acquisition, seat from 250 to 450 customers each. During 1997, the
Company completed the design of a new cafeteria prototype. The prototype
has approximately 6,000 square feet compared to the Company's 10,000 square
feet traditional cafeteria and seats from 165 to 200 customers. This
smaller cafeteria allows the Company to access a broader range of markets
at a lower investment cost.
Each cafeteria unit offers a wide variety of food, at reasonable
prices, and with the convenience of cafeteria service, to a diverse
luncheon and dinner clientele. Cafeteria personnel cook and prepare from
scratch substantially all food served. All items are prepared from
standardized recipes. Menus are varied at the discretion of unit management
in response to local and seasonal customer preferences.
Like most industry participants, the Company purchases foodstuffs in
small quantities from local and regional suppliers in order to better
assure freshness. As a result, inventory is kept relatively low; average
food inventory at June 30, 1999 was $13,500 per cafeteria.
Each cafeteria, express unit, and QSR is operated as a separate unit
under the control of a manager and associate manager who have
responsibility for virtually all aspects of the unit's business, including
purchasing, food preparation, and employee matters. Twenty-one district
managers, under the supervision of one general manager, and the chief
executive officer oversee and regularly inspect cafeteria operations. The
Company employed approximately 13,200 persons at June 30, 1999, of whom all
but 99 corporate headquarters employees worked at Piccadilly's 255 units.
The food service industry is highly competitive. Competitive factors
include food quality and variety, price, customer service, location, the
number and proximity of competitors, decor, and public reputation. The
Company considers its principal competitors to be other cafeterias, casual
dining venues, and fast-food operations. Like other food service
operations, the Company is attuned to changes in both consumer preferences
for food and habits in patronizing eating establishments.
Customer volume at established cafeterias and sales volume at
established restaurants are generally higher in the Company's second fiscal
quarter and lower in the third quarter. These patterns reflect the general
seasonal fluctuations of the retail industry.
Cost of sales is affected by statutory minimum wage rates. The
Company's operations are subject to federal, state, and local laws and
regulations relating to environmental protection, including regulation of
discharges into the air and water, and relating to safety and labor,
including the Federal Occupational Safety and Health Act and wage and hour
laws. Additionally, the Company's operations are regulated pursuant to
state and local sanitation and public health laws. Operating units utilize
electricity and natural gas, which are subject to various federal and state
regulations concerning the allocation of energy. The Company's operating
costs have been and will continue to be affected by increases in the cost
of energy.
ITEM 2. PROPERTIES
All but 29 of the cafeterias, express and QSR units operated by the
Company at June 30, 1999, were operated on premises held under long-term
leases with differing provisions and expiration dates. The 29 cafeterias
and restaurants not operated on premises held under long-term leases are
owned. Leases provide for monthly rentals, typically computed on the basis
of a fixed amount plus a percentage of sales. Most leases contain
provisions permitting the Company to renew for one or more specified terms.
These leases are scheduled to expire, exclusive of renewal provisions, as
follows:
Five-year periods Units Units
ending June 30 Operating Closed
2004 144 13
2009 62 7
2014 14 4
2019 5 ---
Total 225 24
Reference is made to Note 6 of the Notes to Consolidated Financial
Statements for certain additional information regarding the Company's
leases.
The Company's maintenance program provides for remodels of existing
properties generally on ten-year cycles. All equipment is maintained and
modernized as necessary to maintain appearance and utility. The list below
provides a general geographic review of the locations of the Company's
operations at June 30, 1999:
Piccadilly
State Cafeterias Express & QSR's
Alabama 22
Arizona 2
Florida 64
Georgia 37 2
Kansas 1
Kentucky 5
Louisiana 31 1
Maryland 2 2
Mississippi 11 1
Missouri 3
North Carolina 6
Oklahoma 3
South Carolina 9
Tennessee 16 1
Texas 16
Virginia 15 3
West Virginia 1
The Company utilizes generally standardized building configurations
for its new cafeterias and restaurants in terms of seating, food display,
preparation areas, and other factors and attempts to build out floor space
to maximize efficient use of available space.
The Company continues to pursue strategies to increase the capacity
and utilization of its cafeterias. The Company is converting its "order
pick-up" counters to Piccadilly Express hot counters where the physical
facilities are conducive to doing so. The new counters allow customers to
view and select their choices rather than simply ordering to go items from
a menu. This delivery system increases the number of take-out orders that
can be filled at peak order times.
Piccadilly's corporate headquarters occupy approximately two-thirds
of a Company-owned 45,000 square foot office building completed in 1974 and
located on a Company-owned tract comprising approximately five acres in
Baton Rouge, Louisiana. The remainder of the building is leased to
commercial tenants.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to and does not have any property that is
the subject of any legal proceedings pending or, to the knowledge of
management, threatened, other than ordinary routine litigation incidental
to its business and proceedings which are material or as to which
management believes the Company does not have adequate insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers are elected annually by the Board of Directors and hold
office until a successor is duly elected. The names and positions of
executive officers of the Registrant, together with a brief description of
the business experience of each such person during the past five years, is
set forth below.
W. Scott Bozzell, Vice President and Controller, age 36, has held such
positions since July 1996. From May 1992 to July 1996 he was Vice
President and Assistant Controller.
Robert E. Brown, Executive Vice President and Director of Operations, age
47, has held such positions since September 1998. From March 1996 to
September 1998 he was Divisional Vice President with Morrison Restaurants,
Inc. Prior to March 1996 he served in various capacities with Morrison
predecessor companies as District Manager.
Frederick E. Fuchs Jr., Executive Vice President and Director of Real
Estate, age 52, has held such positions since June 1986.
Jere W. Goldsmith Jr., Executive Vice President and Director of Training,
age 53, has held such positions since July 1995. Mr. Goldsmith previously
served in this capacity from May 1987 to February 1992. From February 1992
to July 1995 he was Executive Vice President and Region Manager.
J. Fred Johnson, age 48, Executive Vice President, Secretary and Treasurer,
has held such positions since September 1999. From November 1995 through
September 1999, he was Executive Vice President, Treasurer and Chief
Financial Officer. From August 1985 through October 1995, he was with
Graphic Industries, Inc., a printing company, in various capacities,
including Chief Financial Officer and Treasurer.
Ronald A. LaBorde, age 43, President and Chief Executive Officer, has held
such positions since June 1995. From January 1992 to May 1995 he was
Executive Vice President, Treasurer and Chief Financial Officer.
D. Thomas Landry, Executive Vice President and Director of Maintenance,
Construction and Design, age 47, has held such positions since May 1992.
Mark L. Mestayer, Executive Vice President and Chief Financial Officer, age
41, has held such positions since September 1999. From July 1996 to
September 1999, he was Executive Vice President, Secretary and Director of
Finance. From January 1992 to July 1996, he was Executive Vice President,
Secretary and Controller.
Joseph S. Polito, Executive Vice President and General Manager, age 57, has
held such positions since July 1995. From October 1992 to July 1995, he
was Executive Vice President and Director of Training.
Patrick R. Prudhomme, Executive Vice President and Region Manager, age 49,
has held such positions since September 1998. From February 1992 to
September 1998, he was Executive Vice President and Region Manager.
C. Warriner Siddle, Executive Vice President and Director of Development,
age 48, has held such positions since July 1995. From February 1992 to
July 1995 he was Executive Vice President and Region Manager.
Donovan B. Touchet, Executive Vice President and Director of Data
Processing, age 50, has held such positions since June 1988.
Brian G. Von Gruben, Executive Vice President and Director of
Administrative Services, age 51, has held such positions since May 1987.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Information regarding Common Stock market prices and dividends, on the
inside cover of the Annual Shareholders Report for the year ended June 30,
1999, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Selected and Other Financial Data", on page 11 of the Annual Shareholders
Report for the year ended June 30, 1999, is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, on pages 12 through 15 of the Annual Shareholders Report for
the year ended June 30, 1999, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks related to interest rates as a
result of the variable interest rates on its $100,000,000 credit
arrangement, where the Company's earnings are exposed to changes in
short-term interest rates. If (i) the variable rates on the Company's
credit arrangement were to increase by 1% from the rate at June 30, 1999
and (ii) the Company borrowed the maximum amount available under its
senior credit agreement ($100.0 million) for all of 2000, solely as a
result of the increase in interest rates, then the Company's interest
expense would increase resulting in a $630,000 decrease in net income,
assuming an effective tax rate of 37%. The fair value of the Company's
credit arrangement is not affected by changes in market interest rates.
This discussion does not consider the effects of the reduced level of
overall economic activity that could exist following such changes.
Further, in the event of changes of such magnitude, management would likely
take actions to mitigate its exposure to such changes. The Company has not
used derivative instruments to engage in speculative transactions or
hedging activities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary data,
included on pages 16 through 29 of the Annual Shareholders Report for the
year ended June 30, 1999, are incorporated herein by reference:
Consolidated balance sheets as of June 30, 1999 and 1998
Consolidated statements of income for the fiscal years ended June 30,
1999, 1998 and 1997
Consolidated statements of changes in shareholders' equity for the
fiscal years ended June 30, 1999, 1998 and 1997
Consolidated statements of cash flows for the fiscal years ended June
30, 1999, 1998 and 1997
Notes to consolidated financial statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
In accordance with General Instruction G (3) to Form 10-K, Items 10, 11,
12, and 13 have been omitted since the Company will file with the
Commission a definitive proxy statement complying with Regulation 14A
relating to its 1999 annual meeting and involving the election of directors
not later than 120 days after the close of its fiscal year. The Company
incorporates by reference the information in response to such items set
forth in its definitive proxy statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) (1) Financial Statements--The following are incorporated herein by
reference in this Annual Report on Form 10-K from the indicated pages
of the Registrant's Annual Shareholders Report for the year ended
June 30, 1999:
ANNUAL SHAREHOLDERS
DESCRIPTION REPORT PAGE
Consolidated balance sheets as of June 30, 1999 and 1998 16
Consolidated statements of income for the fiscal years ended June
30, 1999, 1998 and 1997 17
Consolidated statements of changes in shareholders' equity for the
fiscal years ended June 30, 1999, 1998 and 1997 17
Consolidated statements of cash flows for the fiscal years ended
June 30, 1999, 1998 and 1997 18
Notes to consolidated financial statements 19-29
Report of independent auditors 30
(2) Schedule - The following consolidated schedule and
information is included in this annual report on Form 10-K on
the pages indicated. All other schedules for which provision is
made in the applicable accounting regulation of the Securities
and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
FORM 10-K
DESCRIPTION PAGE
Schedule II-Valuation and qualifying accounts 10
(3) Listing of Exhibits - See sub-section (c) below.
(b) Reports on Form 8-K: None.
(c) EXHIBITS
2. Plan and Agreement of Merger dated April 22, 1998,
among Piccadilly, Purchaser and Morrison. (1)
3. (a) Articles of Incorporation of the Company, restated through
March 2, 1999 (2).
(b) By-laws of the Company, as amended and restated through March
12, 1999 (2).
10. (a) Amended and Restated Piccadilly Cafeterias, Inc. 1993 Incentive
Compensation Plan (3).
(b) Form of Management Continuity Agreement, effective March 27,
1995, unless otherwise indicated, between Piccadilly
Cafeterias, Inc. and each of Messrs. LaBorde, Bozzell, Fuchs,
Goldsmith, Johnson (November 16, 1995), Landry, Listen,
Mestayer, Polito, Prudhomme, Siddle, Touchet, and Von
Gruben (4).
(c) Form of Director Indemnity Agreement, effective April 27, 1995,
unless otherwise indicated, between Piccadilly Cafeterias, Inc.
and each of Messrs. LaBorde, Francis (September 25, 1995),
Guyton (July 1, 1996), Murrill, Redman (September 25, 1995),
Simmons and Smith (4).
(d) $125,000,000 Credit Agreement dated as of June 24, 1998 and
First Amendment to Credit Agreement dated July 31, 1998 (5).
(e) Second Amendment to Credit Agreement dated October 30, 1998
filed herewith on pages 12 through 20.
(f) Third Amendment to Credit Agreement dated June 28,1999 filed
herewith on pages 20 through 28.
(g) Stock and Asset Purchase Agreement, dated as of January 15,
1999, by and among Piccadilly Cafeterias, Inc., Piccadilly
Restaurants, Inc. and Cobb Investment Company, Inc. (2)
13. Select portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended June 30, 1999, filed herewith on pages 28
through 51.
21. List of Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule.
(1) Incorporated by reference from Exhibit (c) (1) to the Company's Schedule
14D-1 dated April 29, 1998.
(2) Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
(3) Incorporated by reference from Appendix A of the Company's definitive
Proxy Statement filed with the Commission on September 23, 1998.
(4) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
(5) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1998.
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.
PICCADILLY CAFETERIAS,INC.
(Registrant)
By:/S/ RONALD A. LABORDE
Ronald A. LaBorde
President and Chief Executive
Officer
Date: SEPTEMBER 27, 1999
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 dates indicated.
/s/ Norman C. Frances 9/23/99 /s/ Dale E. Redman 9/22/99
Norman C. Frances, Director Date Dale E. Redman, Director Date
/s/ Robert P. Guyton 9/23/99 /s/ Christel C. Slaughter 9/22/99
Robert P. Guyton, Director Date Christel C. Slaughter, Director Date
/s/ Ronald A. LaBorde 9/27/99 /s/ Edward M. Simmons, Sr. 9/23/99
Ronald A. LaBorde, President, Date Edward M. Simmons, Sr., Director Date
Chief Executive Officer and Director
/s/ Paul W. Murrill 9/27/99 /s/ C. Ray Smith 9/23/99
Paul W. Murrill, Chairman of the Board Date C. Ray Smith, Director Date
/s/ Mark L. Mestayer 9/22/99
Ralph Erben, Director Date Mark L. Mestayer Date
Executive Vice President and
and Chief Financial Officer
(Principal Financial Officer)
/s/ W. Scott Bozzell 9/22/99
W. Scott Bozzell, Date
Vice President and Controller
(Principal Accounting Officer)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
Balance at (1) (2)
Beginning of Charged to costs Charged to Other Deduction-- Balance at
Description Period and expenses Accounts-Describe Describe End of Period
Reserves for Unit Closings:
Year ended June 30, 1999:
Property, plant & equipment allowance $ 1,927,511 $ $ 451,696(A) $ 1,475,815
Current liability
Long-term liability 20,104,102 1,350,000 (6,777,231)(B) 1,983,678(A) 12,693,193
------------- ------------ ------------ ------------ -------------
$ 22,031,613 $ 1,350,000 $ (6,777,231) $ 2,435,374 $ 14,169,008
============= ============ ============ ============ =============
Year ended June 30, 1998:
Property, plant & equipment allowance $ 2,046,488 $ 939,000 $ 1,057,977(A) $ 1,927,511
Current liability --- ---
Long-term liability 2,774,941 2,514,000 16,466,339(B) 1,651,178(A) 20,104,102
------------- ------------ ------------ ------------ -------------
$ 4,821,429 $ 3,453,000 $ 16,466,339 $ 2,709,155 $ 22,031,613
============= ============ ============ ============ =============
Year ended June 30, 1997:
Property, plant & equipment allowance $ 4,407,472 $ 2,360,984(A) $ 2,046,488
Current liability 347,496 347,496(A) ---
Long-term liability 5,049,509 2,274,568(A) 2,774,941
------------- ------------ -------------
$ 9,804,477 $ 4,983,048 $ 4,821,429
============= ============ =============
(A) Deductions are for the write-off of certain property, plant and equipment
relating to units closed and for the payment of other obligations (primarily
rent) for those units closed and for those units for which a provision for unit
closing was recorded during the years ended June 30, 1992, 1997 and 1999.
During 1997, the Company reduced its accrued liability for rental and other
occupancy costs associated with these properties by $600,000 as a result of a
favorable change in management's estimate of future sublease income.
(B) Represents reserves for Morrison units which were recorded as part of the
allocation of purchase price.