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Taco Cabana Reports 2nd Quarter Results and Settlement of Lawsuit.

SAN ANTONIO--(BUSINESS WIRE)--July 25, 1996--Taco Cabana Inc. (NASDAQ:TACO) reported its financial results for the second quarter ended June 30, 1996, as well as a preliminary settlement of its shareholder class action lawsuit.

Restaurant sales for the second quarter of fiscal 1996 compared to the same quarter last year decreased 4% to $35,174,000 from $36,755,000, while total revenues decreased 4% to $35,308,000 from $36,935,000. Comparable store sales, defined as Taco Cabana restaurants that have been open 18 months or more at the beginning of the quarter, decreased 1.2% during the current quarter.

The company recorded a net loss of $553,000 in the current quarter compared to a net loss of $6,028,000 in the same quarter last year. Loss per share was 4 cents for the second quarter of fiscal 1996, compared to a loss per share of 39 cents in the second quarter of fiscal 1995.

The loss recorded in the second quarter of 1996 includes a charge for the settlement of a shareholder class action lawsuit of $3.4 million pretax ($2.2 million after tax or 14 cents per share). The loss in the second quarter of fiscal 1995 included reserves for notes and other receivables and a special charge totaling $11.6 million pretax ($7.3 million after tax or 47 cents per share).

Excluding the charge for the settlement of the above mentioned lawsuit in 1996, and the reserves and special charge in 1995, the company would have reported net income of 11 cents per share in the second quarter of 1996, and 8 cents per share in the second quarter of 1995.

The increase in operating results during the second quarter of fiscal 1996, compared to the same quarter last year, exclusive of the charge for the settlement of the class action lawsuit, reserves for receivables and special charge mentioned above, is due primarily to improvements in controllable operating margins (i.e., cost of sales, labor, and restaurant operating costs as a percentage of restaurant sales) as well as a decrease in depreciation and amortization which is primarily attributable to a decrease in preopening amortization.

Partially offsetting these improvements is a slight increase in general and administrative expenses which is reflective of the additions to management during the past 12 months.

For the 26 weeks ended June 30, 1996, compared to the same period in 1995, restaurant sales decreased 4% to $66,293,000 from $68,820,000, while total revenues decreased 5% to $66,573,000 from $69,772,000.

Comparable store sales decreased 1.8% during the 26-week period. Net income was $181,000 for the 26 weeks in 1996, compared to a net loss of $4,990,000 for the same period in 1995.

Earnings per share was 1 cent for the 26 weeks in fiscal 1996, compared to a loss per share of 32 cents for the same period in 1995. The earnings in 1996 included a charge related to the settlement of a class action lawsuit against the company of $3.4 million pretax ($2.2 million after tax or 14 cents per share).

The loss in 1995 included reserves for notes and other receivables and a special charge totaling $11.6 million pretax ($7.3 million after tax or 47 cents per share). Excluding the reserves and charges, the company would have reported net income of 15 cents per share for each of the 26-week periods ended June 30, 1996 and July 2, 1995.

Under terms of the proposed settlement of its shareholder class action lawsuit, the plaintiffs will receive a total of $6 million. Taco Cabana's insurance carrier will pay $3 million in cash, while Taco Cabana will pay $2.95 million consisting of, at the company's option, cash or shares of Taco Cabana's common stock.

Additionally, the company will reserve $450,000 for the payment of legal and related expenses incurred and anticipated to be incurred in connection with the settlement. The settlement is contingent upon execution of a definitive settlement agreement, U.S. District Court approval and certain other conditions.

The settlement and related reserves resulted in a charge to second quarter earnings of approximately $2.2 million after-tax, or $.14 per share.

Stephen V. Clark, President and Chief Operating Officer said, "We continue to be encouraged by the improvements we have shown in our profitability in 1996, compared to 1995. We are aggressively attempting new methods of reaching both our current and potential customers in order to find the combination of marketing activities that will bring the most effective results."

Additionally, Clark noted, "We continue to believe that the allegations in the lawsuit are without merit. We agreed to this settlement because the lawsuit had become a significant distraction and was likely to consume an increasing level of management's time and attention in the future.

"We have many positive initiatives going on in our business currently and do not believe it is in the best of interest of the current shareholders to continue to spend the company's resources battling this lawsuit."

At June 30, 1996, the systemwide total of 126 restaurants included 104 company-owned, three joint venture owned and 19 franchised restaurants. -0-

 Taco Cabana, Inc.
 Condensed Consolidated Statements of Operations
 (Unaudited)


 For the Thirteen Weeks Ended
 June 30, July 2,
 1996 1995


Revenues:
Restaurant sales $ 35,174,000 $ 36,755,000
Franchise fees and royalty income 134,000 180,000
Total revenues 35,308,000 36,935,000


Costs and expenses:
Restaurant cost of sales 11,074,000 11,822,000
Labor 9,064,000 9,514,000
Occupancy 2,045,000 2,063,000
Other restaurant operating costs 6,284,000 6,977,000
General and administrative 1,585,000 1,503,000
Depreciation and amortization 2,216,000 2,634,000
Lawsuit settlement 3,400,000 --
Special charge -- 8,100,000
Reserve for notes and other
 receivables -- 3,500,000
Total costs and expenses 35,668,000 46,113,000


Loss from operations (360,000) (9,178,000)
Interest expense, net (356,000) (389,000)
Loss before provision for income
 taxes (716,000) (9,567,000)
Benefit for income taxes 163,000 3,539,000
Net loss $ (553,000) $ (6,028,000)
Net loss per share $ (0.04) $ (0.39)
Weighted average shares outstanding 15,692,000 15,564,000


 Taco Cabana, Inc.
 Condensed Consolidated Statements of Operations
 (Unaudited)


 For the Twenty-Six Weeks Ended
 June 30, July 2,
 1996 1995


Revenues:
Restaurant sales $ 66,293,000 $ 68,820,000
Franchise fees and royalty income 280,000 952,000
Total revenues 66,573,000 69,772,000


Costs and expenses:
Restaurant cost of sales 20,777,000 22,195,000
Labor 17,239,000 17,992,000
Occupancy 4,096,000 4,087,000
Other restaurant operating costs 11,942,000 13,231,000
General and administrative 3,317,000 2,901,000
Depreciation and amortization 4,584,000 5,077,000
Lawsuit settlement 3,400,000 --
Special charge -- 8,100,000
Reserve for notes and other
 receivables -- 3,500,000
Total costs and expenses 65,355,000 77,083,000


Income (loss) from operations 1,218,000 (7,311,000)
Interest expense, net (768,000) (609,000)
Income (loss) before provision for
 income taxes 450,000 (7,920,000)
Benefit (provision) for income
 taxes (269,000) 2,930,000
Net income (loss) $ 181,000 $ (4,990,000)
Net income (loss) per share $ 0.01 $ (0.32)
Weighted average shares
 outstanding 15,952,000 15,564,000




CONTACT: Taco Cabana, San Antonio

David G. Lloyd, 210/804-0990
COPYRIGHT 1996 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Business Wire
Date:Jul 25, 1996
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