ITEM 1. BUSINESS - -----------------
GENERAL AND DEVELOPMENTS DURING FISCAL YEAR 1996
The Company owns and operates or franchises a total of 159 restaurants, including 86 owned and 63 franchised casual dining, full-service restaurants under the name "Pizzeria Uno...Chicago Bar & Grill." The Pizzeria Uno restaurants offer a diverse, high-quality menu at moderate prices in a casual, friendly atmosphere. The restaurants feature the Company's signature Chicago-style deep-dish pizza and a selection of entrees, including thin crust pizza, pasta, fajitas, ribs, steak and chicken, as well as a variety of appetizers, salads, sandwiches and desserts. The Company's restaurants average approximately 6,200 square feet with seating for an average of approximately 180 guests. For the fiscal year ended September 29, 1996, Company-owned restaurants averaged $1,846,000 in sales. Company-owned restaurants are located primarily in major markets from New England to Virginia, as well as, Florida, Chicago and Denver, and franchised restaurants are located throughout the United States.
The Company acquired the rights to the name "Pizzeria Uno" from the late Ike Sewell, who opened the original Pizzeria Uno restaurant in Chicago, Illinois in 1943 and is considered the originator of Chicago-style deep-dish pizza. The Company opened its first Pizzeria Uno restaurant in 1979.
During the fiscal year ended September 29, 1996, the Company opened seven full-service Company-owned restaurants. The Company has decreased the level of new unit expansion from fiscal 1995, when it opened 16 new full-service units. This slower growth rate allowed the Company to complete a new building design, roll-out several new menu initiatives and to focus on operational execution. Five full-service and one quick-service franchised restaurants opened during the fiscal year and one full-service restaurant closed. During the fiscal year ending September 28, 1997, the Company anticipates opening up to eight Company-owned full-service restaurants and up to eight franchised restaurants. The timing of these planned openings is subject to various factors, including locating satisfactory sites and negotiating leases and franchise agreements.
During the past three years, the Company has implemented several strategic initiatives intended to strengthen its position in casual dining and to distinguish its restaurants from quick service pizza, pizza and pasta, and full-service Italian restaurants. As part of this strategy, the Company enhanced its kitchen capabilities, to include saute stations, grills and fryers, enabling the Company to enhance the quality, breadth and appeal of its non-pizza menu items. The Company also refined the name of its restaurants to "Pizzeria Uno ...Chicago Bar & Grill" to communicate its concept and broadened menu to consumers, and upgraded the design and decor of its restaurants to be consistent with its casual dining theme. Finally, the Company has been very aggressive in its approach to product development, as the Company believes that by keeping its menu offerings current, guest satisfaction and frequency will be enhanced.
The Company continues to expand its channels of distribution to capitalize on the Pizzeria Uno brand name and the appeal of its signature Chicago-style deep-dish pizza. Currently, the Company is distributing refrigerated and frozen Chicago-style deep-dish pizza to approximately 1,000 supermarkets and wholesale price club stores,
primarily in New England, for sale in their fresh deli counters and frozen food sections. For the past several years, the Company has also been supplying frozen Pizzeria Uno brand, Chicago-style deep-dish pizza to American Airlines for service on its flights. The Company has rolled out a similar pizza product at Pizzeria Uno kiosks in 33 General Cinema theaters and is in different phases of development with several nationally recognized hotel chains.
On October 26, 1995, the Company entered into a five year interest rate swap agreement with Fleet Bank involving the exchange of floating rate interest payment obligations for fixed rate interest payment obligations. The notional amount of this interest rate swap agreement was $20 million. The Company entered into this agreement in order to manage interest costs and risks associated with fluctuating interest rates.
In October 1995, the Board of Directors of the Company authorized the repurchase of up to a total of 1.5 million shares of the Company's Common Stock in the market from time to time during the subsequent six months. This superseded the Board of Directors' previous authorization in July 1995 for the repurchase of up to a total of 500,000 shares of the Company's Common Stock. As of September 29, 1996, the Company had completed its repurchase of 1.5 million shares of its Common Stock at an average price of $7.05.
In February 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (FAS 121). A pre-tax charge of $3.9 million was recorded to adjust the carrying value of those assets identified as impaired. The charge consisted of $1 million for three Uno Pizza Takery's, $1.6 million for one full-service Uno Restaurant, and $1.3 million for certain assets of three Bay Street restaurants. The assets written down include the Bay Street trademark and leasehold improvements and equipment of the aforementioned stores. The Company believed that these units would likely continue to generate cash flow losses and therefore reduced the carrying value of the impaired assets to fair market value. As of November 29, 1996, the Company had closed the full-service Uno restaurant and one Bay Street restaurant.
In March 1996, the Company amended certain provisions of its $50.0 million unsecured revolving credit facility. This amendment revised the definition of "Consolidated EBIT" to exclude any charges against earnings relating to the Company's adoption of Statement of Financial Accounting Standards No. 121 during the second fiscal quarter of 1996. The amendment also modified certain financial covenants including cash flow coverage ratio, consolidated leverage ratio and maximum consolidated capital expenditures.
In June 1996, the Company signed its first major international franchise agreement. This agreement stipulates that the Kolon Group, headquartered in Seoul, Korea, will open a minimum of ten full-service Pizzeria Uno restaurants in Korea within ten years. The agreement also grants Kolon certain rights for possible future development in Japan, Singapore and Indonesia. The Company has also hired a senior executive who will be responsible for worldwide franchise development, including continuation of the Company's domestic franchising effort and aggressive pursuit of international expansion opportunities.
In August 1996, the Company's Chairman and Chief Executive Officer, Aaron D. Spencer, announced that Craig S. Miller, President and Chief Operating Officer, would assume additional responsibilities as Chief Executive Officer of the Company effective September 30, 1996. Mr. Spencer, the Company's founder and majority shareholder, will continue to serve as Chairman of the Board. The Board of Directors also announced the formation of an Executive Committee of the Board composed of Mr. John T. Gerlach, committee chairman and a director since 1987, and Mr. Spencer and Mr. Miller.
RESTAURANT CONCEPT AND MENU
Pizzeria Uno restaurants are full-service, casual dining restaurants, featuring the Company's signature Chicago-style deep-dish pizza and a diverse menu of high quality, moderately-priced menu items. The Company's target market is middle to upper-middle income individuals in the 17 to 49 year-old age group. The restaurants are generally open from 11:00 a.m. to midnight, seven days per week.
The restaurants feature the Company's signature Chicago-style deep-dish pizzas and a selection of entrees, including thin crust pizza, pastas, fajitas, ribs, steak and chicken, as well as a variety of appetizers, salads, sandwiches and desserts. The Company's signature product, its Chicago-style, deep-dish pizza, filled with ingredients such as fresh meats, spices, vegetables and real cheeses, is baked according to proprietary recipes. The Company believes that its proprietary recipes produce a superior pizza that is difficult to duplicate. In fiscal 1994, the Company invested approximately $2.5 million in new kitchen capabilities, including saute stations, grills and fryers, for its Company-owned restaurants enabling the Company to enhance the quality, breadth and appeal of its non-pizza items. At the end of fiscal 1996, the Company's average check per guest for full service Company-owned restaurants was approximately $9.70. For fiscal 1996, sales of alcoholic beverages accounted for approximately 18% of total restaurant sales.
RESTAURANT DESIGN AND SITE SELECTION
The Company has continually upgraded the design and decor of its restaurants to be consistent with its theme as "Pizzeria Uno...Chicago Bar & Grill." Pizzeria Uno restaurants are designed and decorated to provide a friendly and comfortable atmosphere expected of full-service, casual dining restaurants and distinguished from typical pizza restaurants. The decor elements of most restaurants include different variations of wood, brick and brass. During fiscal 1996, the Company re-designed its prototype to replicate the look of an old Chicago warehouse. This prototype was designed as a less serious, more fun experience for our guests. This new prototype was used in six of our seven new restaurant openings during the fiscal year. To ensure quality and compliance with Company standards, preliminary exterior design and complete interior and kitchen design for all Company-owned and franchised restaurants are prepared by the Company. The Company's current prototypes for free-standing restaurants occupy a range of approximately 5,400 to 6,400 square feet, with a seating capacity ranging from 170 to 210 customers.
The Company considers the specific location of a restaurant to be critical to its long-term success and devotes significant effort to the investigation and evaluation of potential sites. One or more of the Company's executive officers inspect and approve the site for each Company-owned and franchised restaurant. Within each target market area, the Company evaluates population density and demographics, major retail and office concentration and traffic patterns. In addition, the Company evaluates visibility, accessibility, proximity to direct competition and various other site specific factors. Pizzeria Uno restaurants are located in both urban and suburban markets, in free-standing buildings, strip centers and malls. Restaurant development is currently targeted at high profile, free-standing locations.
Historically, the Company has leased most of its restaurants to minimize investment costs. Since fiscal 1992, however, the Company began selectively purchasing real estate to develop new restaurants where available and when the expected long-term cost of owning the real estate is less than the cost of leasing. Of the 92 Company-owned restaurants open as of November 29, 1996, 76 are located in leased facilities and 16 are fee owned properties. See "Item 2.
ITEM 2. PROPERTIES - -------------------
The Company owns a 30,000 square foot production plant in Brockton, Massachusetts. The production plant produces frozen product for service aboard American Airlines flights, at Pizzeria Uno kiosks in General Cinema theaters, as well as fresh, refrigerated pizzas that are sold at deli counters in approximately 1,000 supermarkets and wholesale price club stores through out New England. This facility provides sufficient capacity to support double the level of sales achieved in fiscal 1996. See "ITEM 1. Other Business Development."
As of September 29, 1996, the Company leased 76 and owned 16 of the locations for its restaurants. Since fiscal 1992, the Company began selectively purchasing real estate to develop new restaurants where available and when the expected long-term cost of owning the real estate is less than the cost of leasing. A list of Company-owned properties is presented in "ITEM 1. Restaurants Locations". During fiscal 1996, the Company purchased properties in Burlington, VT, Gurnee Mills, IL, and Arvada, CO for which restaurant operations will begin during fiscal 1997. The Company intends to purchase approximately three additional restaurant properties in fiscal 1997.
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. All of the Company's franchised restaurants are in space leased from parties unaffiliated with the Company, with the exception of one franchised restaurant which is subleased from the Company. Franchised restaurant leases typically have lease terms through the initial term of the franchise agreements.
One of the Company-owned restaurants in Boston, Massachusetts is located on the first floor of a six-story office building owned by Aaron D. Spencer, Chairman of the Company. Mr. Spencer has leased the entire building to the Company pursuant to a five-year lease, ending on March 29, 1997, at a rent of $162,000 per year. The Company is currently negotiating a renewal of this lease. The rent will be increased by 12% of the cost of any improvements to the building made by Mr. Spencer. The Company is responsible for all taxes, utilities, insurance, maintenance and repairs. The lease may be terminated by either the Company or Mr. Spencer upon six months prior notice. If Mr. Spencer or the Company terminates the lease, a new lease between the Company and Mr. Spencer relating only to the restaurant space of the building will become effective immediately. The new lease will have a five-year term with two five-year renewal options. Rent under the new lease will be 6.5% of total restaurant revenues but with a minimum rent, determined by independent appraisal, equal to the fair market rent at the time the new lease becomes effective. The Company currently sublets all but the restaurant space at rents which approximate the $162,000 annual rent that it is obligated to pay Mr. Spencer. Management believes that the terms of both the existing lease and the new lease which will become effective upon termination of the existing lease are comparable to those otherwise available in the real estate market.
The Company's executive offices are located in two adjacent buildings in West Roxbury, Massachusetts. The first, a three-story building owned by Mr. Spencer, is leased to the Company pursuant to a five-year lease, commencing on March 30, 1987, with options to renew for two additional five-year periods. Rent during the initial term of the lease was $30,000 per year. Currently, the first of the two five-year options has been exercised at a rate of $36,000 per year. During the final option period, rent will be equal to fair market rent, but may not be less than the rent under the lease during the immediately preceding term. The value of any leasehold improvements made by the Company will not be considered in determining fair market value rent. The Company added the third floor to the building. The Company is responsible for all taxes, utilities, insurance, maintenance and repairs. The
adjacent facility, a two-story building owned by Mr. Spencer's children, is also leased to the Company pursuant to a 15 year lease commencing on February 1, 1990, with options to renew for three additional five-year periods. Rent during the first five years of the initial term of the lease was $106,800 per year, increasing to $128,160 per year for the next five years, and to $153,792 for the final five years of the initial term of the lease. The Company is responsible for all taxes, utilities, insurance, maintenance and repairs. Rent during any option period will be 120% of the rent for the prior term of the lease. Management believes that the terms of the leases for the two offices are as favorable as otherwise available in the real estate market. With the two buildings, the executive offices currently consist of approximately 25,000 square feet and house the Company's executive, administrative and clerical offices.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS - --------------------------
As of November 29, 1996, the Company was not a party to any material pending legal proceedings other than ordinary routine litigation incidental to the Company's business.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------
None.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------
MARKET INFORMATION
NUMBER OF STOCKHOLDERS
As of September 29, 1996, there were approximately 4,300 beneficial owners of the Company's Common Stock.
DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and for the foreseeable future intends to continue its policy of retaining earnings to finance the development and growth of the Company. The Board of Directors may reconsider this policy from time to time in light of conditions then existing, including the Company's earnings performance, financial condition and capital requirements. Pursuant to the Company's $50 million unsecured revolving and term credit agreement entered into December 1994, the Company is subject to various financial and operating covenants, including limitations on the payment of cash dividends. The most restrictive limitations, in general, preclude the Company from paying cash dividends, if such payment, when aggregated with certain other payments, would exceed 35% of net income for the then most recent four-quarter period or would cause certain net tangible asset and debt ratios to be exceeded.
On November 15, 1994, the Board of Directors declared a five-for-four stock split effected in the form of a stock dividend paid in shares of the Company's Common Stock on February 28, 1995 to stockholders of record on February 8, 1995.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------------------------------------------------------------------------ RESULTS OF OPERATIONS ---------------------
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Total revenues increased 8% to $172.1 million in fiscal 1996 from $158.7 million in the prior year. Company-owned restaurant sales increased 9.2% to $159.6 million due primarily to a 15.4% increase in operating weeks of full-service Pizzeria Uno restaurants resulting from the addition of seven restaurants during the past four quarters. Comparable store sales for the 52 weeks ended September 29, 1996, declined by 1.3%, while average weekly sales, which includes sales at comparable stores as well as new units, were 4.1% below last year.
Consumer product sales declined slightly to $8.4 million from $8.5 million in fiscal 1995. Sales to American Airlines declined by approximately 25% during fiscal 1996, due probably to a reduction of the number of flights on which food service is offered. This sales decline was mostly offset by new business within the frozen products and contract food service categories, and modest growth in sales volumes for existing customers in the fresh refrigerated segment.
Franchise income increased 1.9% to $4.2 million in fiscal 1996 from $4.1 million the prior year. Royalty income increased 1% in fiscal 1996, as average weekly sales increased by .2% and operating weeks increased by 3.4%, resulting from five new full-service restaurants opened during the past twelve months. Initial franchise fees totaled $162,500 for fiscal 1996 compared to $125,000 in fiscal 1995.
Cost of food and beverages as a percentage of restaurant and consumer product sales increased to 26.2% for fiscal 1996 from 25.5% the prior year. This percentage cost increase primarily reflects substantially higher cheese costs, but also reflects changes in menu products and menu pricing intended to enhance customers' value perception.
Labor and benefits as a percentage of restaurant and consumer product sales increased slightly to 30.9% for fiscal 1996 from 30.6% the prior year, principally due to additional training costs associated with the introduction of a revised menu during the first half of the fiscal year. Labor costs as a percentage of restaurant and consumer product sales for the last six months of fiscal year 1996 were virtually flat compared to the last half of fiscal year 1995.
Occupancy costs as a percentage of restaurant and consumer product sales increased to 15.7% for fiscal 1996 from 14.8% the prior year, primarily due to lower sales levels at comparable stores and new units.
Other operating costs increased as a percentage of restaurant and consumer product sales to 9.5% for fiscal 1996 from 8.8% the prior year, due to higher advertising expenditures and the effect of lower sales levels at comparable stores and new units.
General and administrative expenses as a percentage of total revenues for fiscal year 1996 remained unchanged from fiscal 1995 at 7.1%.
Depreciation and amortization expense as a percentage of restaurant and consumer product sales increased to 7.7% for fiscal 1996 from 7% the prior year, due to increased capital expenditures for facility renovations and the effect of lower sales levels at comparable stores and new units.
The Company's operating income of $4.9 million includes a charge for asset impairment of $3.9 million in connection with the adoption of SFAS 121 during the second fiscal quarter in 1996. The Company recorded this write-down for three Uno Pizza Takery's, one full-service Pizzeria Uno unit and a partial write-down of its investment in three Bay Street Grill units. The write-down represents non-cash adjustments made to reduce assets to net realizable value for each of these restaurants. Operating income, exclusive of the asset impairment charge, was $8.8 million which represents an operating margin of 5.3% for fiscal year 1996. Fiscal year 1995 operating income was $13.4 million, which represents an operating margin of 8.4%. The decline in operating income and operating margin in fiscal 1996, is due to lower sales levels at comparable stores and new units, as well as the cost factors mentioned above.
Other expense increased to $2,481,000 or 1.5% as a percentage of total revenues in fiscal 1996 from $1,944,000 or 1.2% of total revenues in the prior year. This increase was principally due to higher interest expense associated with the increased level of debt used to fund the Company's expansion plan and its ownership of an increasing number of restaurant properties.
The effective income tax rate declined to 31% for fiscal 1996 from 37% in fiscal 1995, primarily due to the impact of tax credits, which remained stable from fiscal 1995, being applied against a lower pre-tax base.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Total revenues increased 28% to $158.7 million in fiscal 1995 from $124.1 million the prior year. Company-owned restaurant sales increased 29.7% to $146.1 million due primarily to a 21.4% increase in operating weeks of full-service Pizzeria Uno restaurants resulting from the addition of 16 restaurants during the fiscal year, as well as the purchase of three Bay Street Grill restaurants in December 1994. The increase in restaurant sales was also due to a 3.3% increase in comparable store sales for the 52 weeks ended October 1, 1995.
Consumer product sales increased 14.3% to $8.5 million from $7.4 million in fiscal 1994 due to higher sales of Pizzeria Uno brand and private label refrigerated pizza, as well as increased shipments of frozen pizza for tests by customers outside New England.
Franchise income increased 3.9% to $4.1 million in fiscal 1995 from $4.0 million the prior year. Royalty income increased 4.7% to $4.0 million principally due to an increase in comparable store sales of 2.4% for the year. Initial franchise fees totaled $125,000 for fiscal 1995 compared to $150,000 in fiscal 1994.
Cost of food and beverages as a percentage of restaurant and consumer product sales increased to 25.5% for fiscal 1995 from 25.1% the prior year. This percentage cost increase primarily reflected changes in sales mix toward a larger percentage of higher-cost non-pizza menu items.
Labor and benefits as a percentage of restaurant and consumer product sales decreased slightly to 30.6% for fiscal 1995 from 30.8% the prior year, principally due to the leverage of higher comparable store sales.
Occupancy costs as a percentage of restaurant and consumer product sales declined to 14.8% for fiscal 1995 from 15.8% the prior year, primarily due to an increased number of owned restaurant properties and the operating leverage provided by the increase in comparable store sales noted above.
Other operating costs declined as a percentage of restaurant and consumer product sales to 8.8% for fiscal 1995 from 9.0% the prior year, principally due to the operating leverage provided by the increase in comparable store sales.
General and administrative expenses decreased as a percentage of total revenues to 7.1% for fiscal 1995 from 7.5% the prior year as a result of allocating certain fixed expenses over a larger revenue base.
Depreciation and amortization expenses as a percentage of restaurant and consumer product sales increased to 7.0% for fiscal 1995 from 6.4% the prior year, principally due to increased amortization of pre-opening costs associated with the higher rate of unit growth.
Operating income increased 30.0% to $13.4 million for fiscal 1995 compared to $10.3 million in fiscal 1994. The operating profit margin improved slightly to 8.4% from 8.3%, primarily as a result of the increase in Company-owned restaurants and comparable store sales.
Other expense increased to $1,944,000 or 1.2% as a percentage of total revenues in fiscal 1995 from $845,000 or .7% of total revenues the prior year. This increase was due to higher interest expense associated with the increased level of debt used to fund the Company's accelerated expansion plan and its ownership of an increasing number of restaurant properties. In addition, other expense in the comparable period in 1994 was favorably affected by a $312,000 gain on the sale of a restaurant to a franchisee.
The effective income tax rate declined to 37% for fiscal 1995 from 39.1% in fiscal 1994, primarily due to the effect of the FICA tip tax credit, which became effective on January 1, 1994 and generally lower state income taxes.
LIQUIDITY AND SOURCES OF CAPITAL
Historically, the Company has leased most of its restaurant locations and pursued a strategy of controlled growth, financing its expansion principally from operating cash flow, equity offerings and from the issuance of senior, unsecured notes and short-term borrowing under revolving lines of credit. During fiscal 1996, the Company's investment in property, equipment and leasehold improvements was $22.9 million.
The Company opened seven restaurants during fiscal 1996 and currently plans to open up to eight restaurants in fiscal 1997. The Company expects that the average cash investment required to open a full-service Pizzeria Uno restaurant, excluding land and pre-opening costs, will be approximately $1.6 million.
As of September 29, 1996, the Company had outstanding indebtedness of $37.1 million under its $50 million unsecured revolving credit facility and $1.2 million in capital lease obligations. The current revolving credit facility will convert to a three year term loan in December 1997. Advances under the revolving credit facility will accrue interest at either the bank's prime rate plus .25%, or alternatively, at 100-175 basis points above LIBOR. The Company anticipates using the revolving credit facility in the future for the development of additional restaurants, and for working capital needs. During fiscal 1996, the Company made its final payment on its $10 million senior unsecured notes.
The Company is currently negotiating a mortgage commitment for four of its Company-owned restaurant properties. This commitment is for $5,000,000, at a fixed interest factor of 8.75% for a 15 year term. The Company anticipates this transaction to close in late December or early January 1997.
On October 26, 1995, the Company entered into a five year interest rate swap agreement involving the exchange of floating rate interest payment obligations for fixed rate interest payment obligations. The notional amount of this interest rate swap agreement was $20 million. The Company entered into this agreement in order to manage interest costs and risks associated with fluctuating interest rates.
In October 1995, the Board of Directors of the Company authorized the repurchase of up to a total of 1.5 million shares of the Company's Common stock in the market from time to time during the subsequent six months. This superseded the Board of Directors' previous authorization in July 1995 for the repurchase of up to a total of 500,000 shares of the Company's Common Stock. As of November 29, 1996, the Company had repurchased the total of 1.5 million shares of Common Stock at an average price of $7.05 per share.
The Company believes that existing cash balances, cash generated from operations and borrowings under its revolving line of credit will be sufficient to satisfy the Company's working capital and capital expenditure requirements through fiscal 1997.
IMPACT OF INFLATION
Inflation has not been a major factor in the Company's business for the last several years. The Company believes it has historically been able to pass on increased costs through menu price increases, but there can be no assurance that it will be able to do so in the future. Future increases in local area construction costs could adversely affect the Company's ability to expand.
SEASONALITY
The Company's business is seasonal in nature, with revenues and, to a greater degree, operating income being lower in its first and second quarters than its other quarters due to reduced 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," maybe 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 detailed from time to time in the Company's periodic earnings releases and reports filed with the Securities and Exchange Commission and the more detailed factors discussed in the Company's Registration Statement on Form S-2 (Reg. No. 33-59193).
ITEM 8.
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------------------------------------------------------------------------ FINANCIAL DISCLOSURE - --------------------
None.
PART III --------
ITEM 10.
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 13 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.
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.
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.
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.
PART IV -------
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - --------------------------------------------------------------------------
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 --------
(3) Articles of Incorporation and By-laws. -------------------------------------
(a) 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").*
(b) By-laws filed as Exhibit 3.2 to the April 2, 1995 Form 10-Q.*
(4) Instruments Defining the Rights of Security Holders, including -------------------------------------------------------------- Indentures. ----------
(a) Specimen Certificate of Common Stock filed as Exhibit 4(a) to the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1991 (the "1991 Annual Report on Form 10-K").*
(b) Note Purchase Agreement dated as of June 1, 1990 between the Company, Uno Restaurants, Inc., Connecticut General Life Insurance Company, CIGNA Property and Casualty Insurance Company on behalf of one or more separate accounts, Insurance Company of North America and Life Insurance Company of North America, filed as Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 1990,* and First Amendment to Note Purchase Agreement dated as of July 31, 1991, filed as Exhibit 4(b) to the 1991 Annual Report on Form 10-K,* and Second Amendment to Note Purchase Agreement dated as of April 30, 1992, filed
as Exhibit 4(b) to the 1992 Annual Report on Form 10-K,* and Third Amendment to Note Purchase Agreement dated as of February 15, 1993, filed as Exhibit 4(b) to the 1993 Annual Report on Form 10-K.*
(10) Material Contracts. ------------------
(a) Lease between the Company and Aaron D. Spencer dated March 30, 1987 for premises in West Roxbury, Massachusetts, filed as Exhibit 10.2 to the Registration Statement on Form S-1 (Registration No.33-13100)(the "1987 Registration Statement").*
(b) Lease between the Company and Aaron D. Spencer dated March 30, 1987 for premises in Boston, Massachusetts, filed as Exhibit 10.3 to the 1987 Registration Statement.*
(c) 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(d) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1990 (the "1990 Annual Report on Form 10- K").*
(d) Form of Franchise Agreement and Area Franchise Agreement.
(e) Uno Restaurant Corporation 1987 Employee Stock Option Plan, as amended, filed as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on February 22, 1994.* **
(f) 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.* **
(g) Uno Restaurant Corporation 1993 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 March 2, 1993.* **
(h) Form of Indemnification Agreement between the Company and its Directors filed as Exhibit 10.6 to the 1987 Registration Statement.* **
(I) Variable Royalty Plan for Franchises, filed as Exhibit 10(l) to the 1991 Annual Report on Form 10-K.*
(j) $50,000,000 Revolving Credit and Term Loan Agreement dated as of December 9, 1994 by and among Uno Restaurants, Inc., as Borrower, Uno Foods Inc., Pizzeria Uno Corporation, URC Holding Company, Inc. and Uno Restaurant Corporation, as Guarantors, and Fleet Bank of Massachusetts, N.A. as Agent (without exhibits) filed as Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended October 2, 1994 (the "1994 Annual Report on Form 10-K"),* and First Amendment to Revolving Credit and Term Loan Agreement dated as of January 30, 1995, and Second Amendment to Revolving Credit and Term Loan Agreement dated as of November 7, 1995 filed as Exhibit 10(j) 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"),* and the Third Amendment to Revolving Credit and Term Loan Agreement dated as of March 29, 1996.
(k) 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 1995 Annual Report on Form 10-K.*
(l) Note between the Company and Craig S. Miller dated January 23, 1996. **
(m) Change in Control Protection Agreements dated January 6, 1994 between Uno Restaurant Corporation and each of its named executive officers, Mr. Spencer, Mr. Miller, Mr. Brown, Mr. Fox and Mr. Gallucci filed as Exhibit 10(r) to the 1994 Annual Report on Form 10-K.* **
(n) 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 1994 Annual Report on Form 10-K.*.
(11) Statement Re: Computation of Per Share Earnings
(21) Subsidiaries of the Registrant
(23) Consent of Ernst & Young LLP, Independent Auditors
(27) Financial Data Schedule
[FN] - --------------- * 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 hereby incorporated by reference.
** Management Contract
(b) REPORTS ON FORM 8-K -------------------
During the fiscal quarter ended September 29, 1996, the Company did not file any Current Reports on Form 8-K.
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.
(Registrant) Uno Restaurant Corporation --------------------------------------
By (Signature and Title) /s/ Robert M. Brown -------------------------------------- Robert M. Brown, Senior Vice President
Date December 20, 1995 -----------------
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.
By (Signature and Title) /s/ Aaron D. Spencer ------------------------------------------ Aaron D. Spencer, Chairman and Director Date December 20, 1996 -----------------
By (Signature and Title) /s/ Craig S. Miller ------------------------------------------ Craig S. Miller, President, Chief Executive Officer, Chief Operating Officer and Director Date December 20, 1996 -----------------
By (Signature and Title) /s/ Robert M. Brown ------------------------------------------ Robert M. Brown, Treasurer, Senior Vice President-Finance, Chief Financial Officer and Director Date December 20, 1996 -----------------
By (Signature and Title) /s/ John T. Gerlach ------------------------------------------ John T. Gerlach, Director Date December 20, 1996 -----------------
By (Signature and Title) /s/ S. James Coppersmith ------------------------------------------ S. James Coppersmith, Director Date December 20, 1996 -----------------
By (Signature and Title) /s/ Stephen J. Sweeney ------------------------------------------ Stephen J. Sweeney, Director Date December 20, 1996 -----------------
By (Signature and Title) /s/ James F. Carlin ------------------------------------------ James F. Carlin, Director Date December 20, 1996 -----------------
Report of Independent Auditors
The Board of Directors Uno Restaurant Corporation
We have audited the accompanying consolidated balance sheets of Uno Restaurant Corporation and subsidiaries (the Company) as of September 29, 1996 and October 1, 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended September 29, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Uno Restaurant Corporation and subsidiaries at September 29, 1996 and October 1, 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 29, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in fiscal year 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
November 1, 1996
Uno Restaurant Corporation and Subsidiaries
See accompanying notes.
Uno Restaurant Corporation and Subsidiaries
See accompanying notes.
Uno Restaurant Corporation and Subsidiaries
See accompanying notes.
Uno Restaurant Corporation and Subsidiaries
See accompanying notes.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 29, 1996, October 1, 1995 and October 2, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company owns and operates 86 Pizzeria Uno casual dining, full-service restaurants primarily from New England to Virginia, as well as, Florida, Chicago and Denver, and franchises 63 units in 19 states, the District of Columbia, Puerto Rico and Canada. The Company also operates two Bay Street seafood restaurants, a Mexican restaurant in Chicago, several take-out and quick-serve Uno units in test, and a refrigerated and frozen consumer foods division. The consumer foods business supplies American Airlines, movie theaters and supermarket and wholesale club chains in the Northeast with both frozen and refrigerated Pizzeria Uno brand products, as well as certain private label products.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Uno Restaurant Corporation and its wholly-owned subsidiaries (the Company). All intercompany accounts and transactions have been eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year ends on the close of business on the Sunday closest to September 30 in each year.
INVENTORY
Inventory, which consists of food, beverages and store supplies, is stated at the lower of cost (first-in, first-out method) or market.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost. The Company provides for depreciation of buildings and equipment over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the lease using the straight-line method.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION--FRANCHISE FEES
The Company defers franchise fees until the franchisee opens the restaurant and all services have been substantially performed; at that time, the entire amount of the fee is recorded as income. Royalty income is recorded as earned based on rates provided by the respective franchise agreements. Expenses related to franchise activities amounted to approximately $3,409,000, $1,889,000 and $1,427,000 in fiscal years 1996, 1995 and 1994, respectively.
PRE-OPENING COSTS
Pre-opening costs consist principally of labor costs associated with the hiring and training of operating personnel and food and beverage costs. These costs are deferred until the restaurants open and are amortized over 12 months from that point using the straight-line method.
INCOME TAXES
Deferred income taxes are determined utilizing the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER COMMON SHARE
Earnings per common share amounts are calculated based upon the weighted-average number of shares outstanding, giving effect to the dilutive effect of stock options. Average shares outstanding and all per share amounts included in the accompanying consolidated financial statements and notes thereto are based on the increased number of shares, giving retroactive effect to the five-for-four stock split in fiscal year 1995.
STOCK-BASED EMPLOYEE COMPENSATION
During October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123). FAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. FAS 123 defines a fair value-based method of accounting for an employee stock option or similar equity instrument. FAS 123 allows an entity to continue to measure compensation cost for those plans using the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." The Company intends to continue to measure compensation cost following the principals of APB Opinion No. 25 and will therefore be required to present pro forma disclosures of net income and earnings per share as if the fair value-based method has been applied beginning in fiscal 1997.
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.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (FAS 121), in the second quarter of fiscal 1996. A pre-tax charge of $3.9 million was recorded to adjust the carrying value of those assets identified as impaired. The charge consisted of $1 million for three Uno Pizza Takerys, $1.6 million for one full-service Uno restaurant and $1.3 million for certain assets of three Bay Street restaurants. The assets written down include the Bay Street trademark and leasehold improvements and equipment of the aforementioned stores. Based upon first quarter operating and cash flow results, management believed that these units would likely continue to generate cash flow losses and therefore reduced the carrying value of the impaired assets to fair market value.
3. BUSINESS ACQUISITIONS AND DISPOSITIONS
In December 1994, the Company completed an agreement with Bay Street Restaurants, Inc. to purchase the net assets of three restaurants located in Illinois, New Jersey and Pennsylvania. This acquisition was accounted for under the purchase method of accounting. The results of operations of the acquired company prior to the dates of acquisition would not have a material impact on the consolidated results of operations in fiscal years 1995 and 1994.
During 1995, the Company assigned its leasehold interest in its Fairview Heights, Illinois restaurant to an unaffiliated party in exchange for the leasehold interest in that unaffiliated party's restaurant located in Orlando, Florida. The Company recorded the transaction at fair market value and wrote off the net book value of equipment no longer usable.
On November 8, 1993, the Company sold to a franchisee for $2,500,000 a Pizzeria Uno restaurant in Lake Buena Vista, Florida and recorded a gain of $312,000, which was included in other income in fiscal year 1994.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
5. RELATED-PARTY TRANSACTIONS
The Company leases three buildings from its principal shareholder for a restaurant and for corporate office space. Rent expense in the amount of approximately $446,000 was charged to operations in each of the fiscal years presented. The Company believes that the terms of these leases approximate fair rental value.
The Company's President and his brother own and operate three franchised restaurants. Additionally, the Chairman of the Company owns a 50% interest in a franchised pizza takery, and one of the directors of the Company has a partnership interest in a franchised restaurant. These franchisees pay royalties to the Company under standard franchise agreements, with the exception of the pizza takery, which is being operated as a test concept and, as a result, is not currently being charged royalties.
6. 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. Contingent rent amounted to $956,000, $1,017,000 and
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. LEASES (CONTINUED)
Certain operating lease agreements contain free rent inducements and scheduled rent increases which are being amortized over the terms of the agreements, ranging from 15 to 20 years, using the straight-line method. The deferred rent liability, included in other liabilities, amounted to $3,984,000 at September 29, 1996 and $3,296,000 at October 1, 1995.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. FINANCING ARRANGEMENTS
The Company has a $50,000,000 unsecured revolving line of credit which converts to a three-year term loan in December 1997. The Company is entitled to borrow, at its discretion, amounts which accrue interest at variable rates based on either the LIBOR or prime rate. At September 29, 1996, interest on outstanding borrowings ranged from 6.95% to 8.50%. A commitment fee of approximately .36% is accrued on unused borrowings under the credit agreement. The note agreements contain certain financial and operating covenants, including maintenance of certain levels of net worth and income.
In October 1995, the Company entered into a five-year interest rate swap agreement to convert a portion of its floating rate debt to a fixed-rate basis, thereby reducing the potential impact of interest rate increases on future income. The notional amount of this interest rate swap agreement was $20 million and the fixed swap rate was 6.04%. The differential to be paid or received is accrued as interest rates change and recognized as an adjustment to interest expense related to the debt. The Company estimates that the fair market value of its interest rate swap at September 29, 1996 is $286,000 based upon information provided by the other party to the swap.
The Company made cash payments of interest of $2,845,000, $2,445,000 and $1,465,000 during fiscal years 1996, 1995 and 1994, respectively. The Company capitalized interest during the construction period of newly constructed restaurants amounting to $290,000 in fiscal year 1996, $509,000 in fiscal year 1995 and $228,000 in fiscal year 1994 and included those amounts in leasehold improvements.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. FINANCING ARRANGEMENTS (CONTINUED)
The Company has an outstanding letter of credit in the amount of $137,500 at September 29, 1996, which expires in December 1996. The Company provides certain limited lease financing to qualified franchisees through an agreement with an unaffiliated finance company. The Company's maximum guarantee under the agreement was $1,196,000 at September 29, 1996. The Company has also guaranteed up to a maximum of $412,000 of future lease payments in the event of default by specific franchisees.
8. COMMON STOCK TRANSACTIONS
On November 15, 1994, the Board of Directors of the Company declared a five-for-four stock split payable to shareholders on February 28, 1995. In the third quarter of fiscal 1995, the Company issued 2.3 million shares of common stock in exchange for $22.6 million raised through a secondary common stock offering.
In July 1995, the Board of Directors authorized the purchase of up to 500,000 shares of the Company's common stock, of which 358,100 shares were purchased in fiscal 1995. In October 1995, the Board of Directors increased its authorization to purchase up to 1.5 million shares of the Company's stock, of which the balance of 1,141,900 shares were purchased in fiscal 1996.
9. PREPAID EXPENSES AND OTHER ASSETS
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. ACCRUED EXPENSES
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 Section 401(k) of the Internal Revenue Code and allows all employees with at least six months 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, and makes annual discretionary contributions of the Company's Common Stock. Total contributions made to the plans were $161,000, $153,000 and $110,000 in fiscal years 1996, 1995 and 1994, respectively.
The Company sponsors a Deferred Compensation Plan which allows officers to defer up to 20% of their annual compensation. These assets are placed in a "rabbi trust" and are presented as assets of the Company in the accompanying balance sheet as they are available to the general creditors of the Company in the event of the Company's insolvency. The related liability of $566,000 at September 29, 1996 and $426,000 at October 1, 1995 is included in other liabilities in the accompanying balance sheet. Deferred compensation expense in the amounts of $140,000 and $173,000 were recorded in fiscal years 1996 and 1995, respectively.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. INCOME TAXES
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. INCOME TAXES (CONTINUED)
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. INCOME TAXES (CONTINUED)
The Company made income tax payments of $2,416,000, $3,667,000 and $3,779,000 during fiscal years 1996, 1995 and 1994, respectively.
13. STOCK OPTION PLANS
The 1987 Employee Stock Option Plan (the Plan) provides for up to 1,875,000 shares of common stock issuable upon exercise of options granted under the Plan. 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, with the exception of 93,750 and 62,500 options granted to the President and Chairman of the Company, respectively, which vest immediately at the date of grant. All options terminate ten years after the date of grant, with the exception of the 175,000 options granted to the Chairman, which terminate five years after the date of grant. Options outstanding at October 1, 1995 are nonqualified stock options.
The 1989 and 1993 Non-Qualified Stock Option Plans for Non-Employee Directors (the Directors' Plans) provide for up to 101,563 shares of Common Stock issuable upon exercise of options granted under the Directors' Plans. The 1989 and 1993 Directors' Plans terminate on November 10, 1999 and August 17, 2002, respectively, but such termination shall not affect the validity of options granted prior to the dates of termination. Options are to be granted at an exercise price equal to the fair market value of the shares of Common Stock at the date of grant. Options granted under the Directors' Plans may be exercised commencing one year after the date of grant and ending ten years from the date of grant.
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. STOCK OPTION PLANS (CONTINUED)
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)