As filed
with the Securities and Exchange Commission on September 3,
2010
Registration
No. 333-167951
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
Amendment No. 2
to
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Bravo Brio Restaurant Group,
Inc.
(Exact name of registrant as
specified in its charter)
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Ohio
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5812
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34-1566328
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(State or Other Jurisdiction
of Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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777 Goodale Boulevard, Suite 100
Columbus, Ohio 43212
(614) 326-7944
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Saed Mohseni
President and Chief Executive Officer
777 Goodale Boulevard, Suite 100
Columbus, Ohio 43212
(614) 326-7944
(Name, address including zip
code, and telephone number, including area code, of agent for
service)
With copies to:
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Carmen J. Romano, Esq.
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Marc D. Jaffe, Esq.
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James A. Lebovitz, Esq.
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Ian D. Schuman, Esq.
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Dechert LLP
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Latham & Watkins LLP
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Cira Centre
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885 Third Avenue
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2929 Arch Street
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New York, New York 10022
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Philadelphia, Pennsylvania 19104
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(212) 906-1200
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(215) 994-4000
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the
effective date of this Registration Statement.
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box:
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2
of the
Exchange Act. (Check one):
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Large
accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
þ
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Smaller reporting
company
o
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(Do not check if a smaller reporting company)
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and
may be changed. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold until the
registration statement is effective. This preliminary prospectus
is not an offer to sell nor does it seek an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION DATED SEPTEMBER 3, 2010
Preliminary
Prospectus
Shares
Bravo
Brio Restaurant Group, Inc.
Common
Stock
We are
offering shares
of our common stock and the selling shareholders identified in
this prospectus are
offering shares
of our common stock. We will not receive any proceeds from the
sale of shares by the selling shareholders. This is our initial
public offering, and no public market currently exists for our
common stock. We expect the initial public offering price to be
between $ and
$ per share of our common stock.
We intend to apply to have our common stock approved for listing
on the Nasdaq Global Market under the symbol BBRG.
Investing in our common stock involves a high degree of risk.
Please read Risk Factors beginning on
page 13.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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PER SHARE
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TOTAL
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Public Offering Price
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$
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$
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Underwriting Discounts and Commissions
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$
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$
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Proceeds to Bravo Brio Restaurant Group, Inc. (Before Expenses)
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$
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$
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Proceeds to Selling Shareholders (Before Expenses)
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$
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$
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Delivery of the shares of common stock is expected to be made on
or
about ,
2010. The selling shareholders have granted the underwriters an
option for a period of 30 days to purchase up to an
additional shares of our
common stock to cover overallotments. If the underwriters
exercise the option in full, the total underwriting discounts
and commissions payable by the selling shareholders will be
$ and the total proceeds to the
selling shareholders, before expenses, will be
$ .
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Jefferies & Company
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Piper Jaffray
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Wells Fargo Securities
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KeyBanc
Capital Markets
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Morgan Keegan & Company,
Inc.
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Prospectus
dated ,
2010
BRAVO is a fun, white tablecloth restaurant offering classic Italian food in a
Roman-ruin decor. BRAVO! is inspired by the traditional Italian ristorante where fresh,
made-to-order food is prepared in our open Italian kitchens in full view of our Guests, creating
the energy of live theater.
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The posh décor and upscale
vibe of BRAVO! lends itself to a
very comfortable dining
experience.
Metromix Orlando
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2010 Readers Poll
Choice for BEST ITALIAN
1st Place BRAVO! Cucina
Italiana
Pittsburgh Magazine
Little Rock, AR (1) Naples, FL (1) Orlando, FL (1) West Des Moines, IA (1) Chicago, IL (2)
Indianapolis, IN (3) Leawood, KS (1) Louisville, KY (1) Baton Rouge, LA (1) New Orleans, LA (1)
Detroit, MI (3) Lansing, MI (1) Kansas City, MO (1) St Louis, MO (1) Greensboro, NC (1) Charlotte,
NC (1) Albuquerque, NM (1) Bu3alo, NY (1) West Nyack, NY (1) Akron, OH (1) Canton, OH (1)
Cincinnati, OH (2) Cleveland, OH (2) Columbus, OH (2) Dayton, OH (1) Toledo, OH (1) Oklahoma City,
OK (1) Allentown, PA (1) Pittsburgh, PA (5) Knoxville, TN (1) San Antonio, TX (1) Fredericksburg,
VA (1) Virginia Beach, VA (1) Milwaukee, WI (2)
BravoItalian.com
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Table of
Contents
Until ,
2010 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the common stock, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
We have not authorized anyone to give any information or to make
any representations other than those contained in this
prospectus. Do not rely upon any information or representations
made outside of this prospectus. This prospectus is not an offer
to sell, and it is not soliciting an offer to buy, (1) any
securities other than shares of our common stock or
(2) shares of our common stock in any circumstances in
which our offer or solicitation is unlawful. The information
contained in this prospectus may change after the date of this
prospectus. Do not assume after the date of this prospectus that
the information contained in this prospectus is still correct.
The menus included in this prospectus are sample menus only.
Actual menus vary by location and certain locations may carry
alternate menu items or have additional menu items.
i
Basis of
Presentation
We utilize a typical restaurant 52- or 53-week fiscal year
ending on the Sunday closest to December 31. Fiscal years
are identified in this prospectus according to the calendar year
in which the fiscal years end. For example, references to
2009, fiscal 2009, fiscal year
2009 or similar references refer to the fiscal year ended
December 27, 2009.
Industry and
Market Data
This prospectus includes industry and market data that we
derived from internal company records, publicly available
information and industry publications and surveys. Industry
publications and surveys generally state that the information
contained therein has been obtained from sources believed to be
reliable. We believe this data is accurate in all material
respects as of the date of this prospectus. You should carefully
consider the inherent risks and uncertainties associated with
the industry and market data contained in this prospectus.
Trademarks and
Trade Names
In this prospectus, we refer (without the ownership notation) to
several registered and common law trademarks that we own,
including
BRAVO!
®
,
BRAVO! Cucina
Italiana
®
,
Cucina BRAVO!
Italiana
®
,
BRAVO! Italian
Kitchen
®
,
Brio
®
,
Brio Tuscan
Grille
tm
and Bon
Vie
®
.
All brand names or other trademarks appearing in this prospectus
are the property of their respective owners.
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Prospectus
Summary
The following summary highlights information contained
elsewhere in this prospectus and is qualified in its entirety by
the more detailed information and the consolidated financial
statements and the related notes to those statements included
elsewhere in this prospectus. Because it is a summary, it does
not contain all of the information that you should consider
before investing in our common stock. You should read this
prospectus carefully, including the section entitled Risk
Factors and the consolidated financial statements and the
related notes to those statements included elsewhere in this
prospectus.
As used in this prospectus, unless the context otherwise
indicates, the references to Holdings refer to Bravo
Development Holdings LLC, our majority shareholder before taking
into account the reorganization transactions (as described
herein), and the references to our company,
the Company, us, we and
our refer to Bravo Brio Restaurant Group, Inc.
together with its subsidiaries.
Unless otherwise indicated or the context otherwise requires,
financial and operating data in this prospectus reflects the
consolidated business and operations of Bravo Brio Restaurant
Group, Inc. and its wholly-owned subsidiaries. Except where
otherwise indicated, $ indicates
U.S. dollars.
Our
Business
We are a leading owner and operator of two distinct Italian
restaurant brands, BRAVO! Cucina Italiana (BRAVO!)
and BRIO Tuscan Grille (BRIO). We have positioned
our brands as multifaceted culinary destinations that deliver
the ambiance, design elements and food quality reminiscent of
fine dining restaurants at a value typically offered by casual
dining establishments, a combination known as the upscale
affordable dining segment. Each of our brands provides its
guests with a fine dining experience and value by serving
affordable cuisine prepared using fresh flavorful ingredients
and authentic Italian cooking methods, combined with attentive
service in an attractive, lively atmosphere. We strive to be the
best Italian restaurant company in America and are focused on
providing our guests an excellent dining experience through
consistency of execution. We believe that both of our brands
appeal to a broad base of consumers, especially to women whom we
believe currently account for approximately 62% and 65% of our
guest traffic at BRAVO! and BRIO, respectively.
While our brands share certain corporate support functions to
maximize efficiencies across our company, each brand maintains
its own identity, therefore allowing both brands to be located
in common markets. We have demonstrated our growth and the
viability of our brands in a wide variety of markets across the
U.S., growing from 49 restaurants in 19 states at the end
of 2005 to 85 restaurants in 28 states as of June 27,
2010.
BRAVO! Cucina
Italiana
BRAVO! Cucina Italiana is a full-service, upscale affordable
Italian restaurant offering a broad menu of freshly-prepared
classic Italian food served in a lively, high-energy environment
with attentive service. The subtitle Cucina
Italiana, meaning Italian Kitchen, is
appropriate since all cooking is done in full view of our
guests, creating the energy of live theater. As of June 27,
2010, we owned and operated 47 BRAVO! restaurants in
20 states.
BRAVO! offers a wide variety of pasta dishes, steaks, chicken,
seafood and pizzas, emphasizing fresh,
made-to-order
cuisine and authentic recipes that delivers an excellent value
to guests. BRAVO! also offers creative seasonal specials, an
extensive wine list, carry-out and catering. We believe that our
menu offerings and generous portions of flavorful food, combined
with our ambiance and friendly, attentive service, offer our
guests an attractive price-value proposition. The average check
for BRAVO! during the first twenty-six weeks of 2010 was $19.28
per guest.
The breadth of menu offerings at BRAVO! helps generate
significant guest traffic at both lunch and dinner. Lunch
entrées range in price from $8 to $18, while appetizers,
pizzas, flatbreads and entrée salads range from $6 to $14.
During the first twenty-six weeks of 2010, the average lunch
check for BRAVO! was $14.79 per guest. Dinner entrées range
in price from $12 to $29 and include a broad selection of fresh
pastas, steaks, chicken and seafood. Dinner appetizers, pizzas,
flatbreads and entrée salads range from $6 to $15. During
the first twenty-six weeks of 2010, the average dinner check for
BRAVO! was $22.05 per guest. At BRAVO!, lunch and dinner
represented 29.2% and 70.8% of revenues, respectively. Our
average annual sales per comparable BRAVO! restaurant were
$3.5 million in 2009.
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BRAVO!s architectural design incorporates interior
features such as arched colonnades, broken columns, hand-crafted
Italian reliefs, Arabescato marble and sizable wrought-iron
chandeliers. We locate our BRAVO! restaurants in high-activity
areas such as retail and lifestyle centers that are situated
near commercial office space and high-density residential
housing.
BRIO Tuscan
Grille
BRIO Tuscan Grille is an upscale affordable Italian chophouse
restaurant serving freshly-prepared, authentic northern Italian
food in a Tuscan Villa atmosphere. BRIO means lively
or full of life in Italian and draws its inspiration
from the cherished Tuscan philosophy of to eat well is to
live well. As of June 27, 2010, we owned and operated
38 BRIO restaurants in 17 states.
The cuisine at BRIO is prepared using fresh ingredients and a
high standard for quality execution with an emphasis on steaks,
chops, fresh seafood and
made-to-order
pastas. BRIO also offers creative seasonal specials, an
extensive wine list, carry-out and banquet facilities at select
locations. We believe that our passion for excellence in service
and culinary expertise, along with our generous portions,
contemporary dining elements and ambiance, offers our guests an
attractive price-value proposition. The average check for BRIO
during the first twenty-six weeks of 2010 was $25.14 per guest.
BRIO offers lunch entrées that range in price from $10 to
$18 and appetizers, sandwiches, flatbreads and entrée
salads ranging from $8 to $15. During the first twenty-six weeks
of 2010, the average lunch check for BRIO was $17.94 per guest.
Dinner entrées range in price from $14 to $30, while
appetizers, sandwiches, flatbreads, bruschettas and entrée
salads range from $8 to $15. During the first twenty-six weeks
of 2010, the average dinner check for BRIO was $30.51 per guest.
At BRIO, lunch and dinner represented 30.5% and 69.5% of
revenues, respectively. Our average annual sales per comparable
BRIO restaurant were $4.8 million in 2009.
The design and architectural elements of BRIO restaurants are
important to the guest experience. The goal is to bring the
pleasures of the Tuscan country villa to our restaurant guests.
The warm, inviting ambiance of BRIO incorporates interior
features such as antique hardwood Cypress flooring, arched
colonnades, hand-crafted Italian mosaics, hand-crafted walls
covered in an antique Venetian plaster, Arabescato marble and
sizable wrought-iron chandeliers. BRIO is typically located in
high-traffic, high-visibility locations in affluent suburban and
urban markets.
We also operate one full-service upscale affordable
American-French bistro restaurant in Columbus, Ohio under the
brand Bon Vie. Our Bon Vie restaurant is included in
the BRIO operating and financial data set forth in this
prospectus.
Our Business
Strengths
Our mission statement
is to be the best Italian restaurant
company in America by delivering the highest quality food and
service to each guest...at each meal...each and every day
.
The following strengths help us achieve these objectives:
Two Differentiated yet Complementary
Brands.
We have developed two premier upscale
affordable Italian restaurant brands that are highly
complementary and can be located in common markets. Our brands
are designed to have broad guest appeal at two different price
points. Both BRAVO! and BRIO have their own Corporate Executive
Chef who develops recipes and menu items with differentiated
flavor profiles and price points. Entry level pricing for both
lunch and dinner entrees at BRAVO! is approximately $2 below
BRIO, providing more alternatives for guests at a lower price
point. The guests of BRIO, which offers a greater selection of
protein dishes, tend to purchase more steaks, chops, chicken and
seafood items while guests of BRAVO! select a higher mix of
pasta dishes. In addition, sales of alcoholic beverages at
BRAVO! represent approximately 16.4% of restaurant sales
compared to approximately 22.5% of restaurant sales at BRIO,
primarily due to BRIOs slightly more extensive wine list
and more favorable bar business.
Each brand features unique design elements and atmospheres that
attract a diverse guest base as well as common guests who visit
both BRAVO! and BRIO for different dining experiences. The
differentiated qualities of our brands allow us to operate in
significantly more locations than would be possible with one
brand, including high-density residential areas, shopping malls,
lifestyle centers and other high-traffic locations. Based on
demographics, co-tenants and net investment requirements, we can
choose between our two brands to determine which is optimal
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for a location and thereby generate highly attractive returns on
our investment. We focus on choosing the right brand for a
specific site based on population density and demographics.
Management targets markets with $65,000 minimum annual household
income and a population density of 125,000 residents within a
particular trade area for BRAVO! and $70,000 minimum annual
household income and a population density of 150,000 residents
within a particular trade area for BRIO. We have a business
model that maintains quality and consistency on a national basis
while also having the flexibility to cater to the specific
characteristics of a particular market. We have a proven track
record of successfully opening new restaurants in a number of
diverse real estate locations, including both freestanding and
in-line with other national retailers. In addition, we believe
the flexibility of our restaurant design is a competitive
advantage that allows us to open new restaurants in attractive
markets without being limited to a standard prototype.
Our brands maintain several common qualities, including certain
design elements such as chandeliers and marble and granite
counter tops, that help reduce building and construction costs
and create consistency for our guests. We share best practices
in service, preparation and food quality across both brands. In
addition, we share services such as real estate development,
purchasing, human resources, marketing and advertising,
information technology, finance and accounting, allowing us to
maximize efficiencies across our company as we continue our
growth.
Broad Appeal with Attractive Guest Base.
We
provide an upscale, yet inviting, atmosphere attracting guests
from a variety of age groups and economic backgrounds. We
provide our guests an upscale affordable dining experience at
both lunch and dinner, which attracts guests from both the
casual dining and fine dining segments. We locate our
restaurants in high-traffic suburban and urban locations to
attract primarily local patrons with limited reliance on
business travelers. Our blend of location, menu offerings and
ambiance is designed to appeal to women, a key decision-maker
when deciding where to dine and shop. We believe that women
currently account for approximately 62% and 65% of our guest
traffic at BRAVO! and BRIO, respectively. This positioning helps
make our restaurants attractive for developers and landlords. We
have also cultivated a loyal guest base, with a majority of our
guests dining with us at least once a month.
Superior Dining Experience and Value.
The
strength of our value proposition lies in our ability to provide
freshly-prepared Italian cuisine in a lively restaurant
atmosphere with highly attentive guest service at an attractive
price point. We believe that the dining experiences we offer,
coupled with an attractive price-value relationship, helps us
create long-term, loyal and highly satisfied guests.
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The Food.
We offer
made-to-order
menu items prepared using traditional Italian culinary
techniques with an emphasis on fresh ingredients and authentic
recipes. Our food menu is complemented by a wine list that
offers both familiar varieties as well as wines exclusive to our
restaurants. An attention to detail, culinary expertise and
focused execution reflects our chef-driven culture.
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The Service.
We are committed to delivering
superior service to each guest, at each meal, each and every
day. We place significant emphasis on maintaining high
waitstaff-to-table
ratios, thoroughly training all service personnel on the details
of each menu item and staffing each restaurant with experienced
management teams to ensure consistent and attentive guest
service.
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The Experience.
Lively, high-energy
environments blending dramatic design elements with a warm and
inviting atmosphere create a memorable guest experience.
Signature architectural and décor elements include the
lively theatre of exhibition kitchens, high ceilings, white
tablecloths, a centerpiece bar and relaxing patio areas. These
elements, along with our superior service and value, help form a
bond between our guests and our restaurants, encouraging guest
loyalty and more frequent visits.
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Nationally Recognized Restaurant Anchor.
We
believe that our differentiated brands, the attractive
demographics of our guests and the high number of weekly guest
visits to our restaurants have positioned us as a preferred
tenant and the multi-location Italian restaurant company of
choice for national and regional real estate developers.
Landlords and developers seek out our concepts to be restaurant
anchors for their developments as they are highly complementary
to national retailers, having attracted on average between
3,000-5,000 guests per restaurant each week in 2009. As a result
of the importance of our brands to the retail centers in which
we are located, we are often able to negotiate the prime
location within a center and favorable real estate terms, which
helps to drive strong returns on capital for our shareholders.
3
Compelling Unit Economics.
We have
successfully opened and operated both of our brands in multiple
geographic regions and achieved attractive average annual
revenues per comparable restaurant of $3.5 million and $4.8
million at our BRAVO! and BRIO restaurants, respectively, in
2009. Our ability to grow rapidly and efficiently in all market
conditions is evidenced through our strong track record of new
restaurant openings, including our 2009 openings which generated
above average year one revenues and operating margins. Under our
current investment model, BRAVO! restaurant openings require a
net cash investment of approximately $1.8 million and BRIO
restaurant openings require a net cash investment of
approximately $2.2 million. We target a
cash-on-cash
return beginning in the third operating year for both of our
restaurants of between 30% and 40%.
Management Team with Proven Track Record.
We
have assembled a tested and proven management team with
significant experience operating public companies. Our
management team is led by our CEO and President, Saed Mohseni,
former CEO of McCormick & Schmicks Seafood
Restaurants, Inc., who joined the company in February 2007.
Since Mr. Mohsenis arrival, we have continued to open
new restaurants despite the economic recession. These new
restaurant openings have been a key driver of our growth in
revenue and Adjusted EBITDA, which have increased 29.1% and
89.0%, respectively, between the years ended 2006 and 2009. In
addition to new restaurant growth, we have also implemented a
number of revenue and margin enhancing initiatives such as our
wine by the glass offerings, wine flights, dessert trays and a
new bar menu. These programs were strategically implemented to
improve our guest experience and maintain our brand image, as
opposed to discounting programs designed to increase traffic and
revenue at the expense of operating margins. In addition, we
have improved our labor efficiencies and food cost management,
which helped to drive our margin increases and improved our
restaurant-level profitability. These changes resulted in an
increase in our restaurant-level operating margin from 16.0% in
2006 to 17.4% in 2009, a 140 basis point improvement.
Restaurant-level operating margin represents our revenues less
total restaurant operating costs, as a percentage of our
revenues.
Our Growth
Strategies
Our growth model is comprised of the following three primary
drivers:
Pursue Disciplined Restaurant Growth.
We
believe that there are significant opportunities to grow our
brands on a nationwide basis in both existing and new markets
where we believe we can generate attractive unit level
economics. We are pursuing a disciplined growth strategy for
both of our brands. We believe that each brand is at an early
stage of its expansion.
We have built a scalable infrastructure and have successfully
grown our restaurant base through a challenging market
environment. Despite difficult economic conditions, we opened
seven new restaurants in 2009. We continue to grow in 2010,
having opened two new restaurants in each of the first and
second quarters of 2010, with one additional restaurant planned
to be opened later this year. We plan to open five to six new
restaurants in 2011 and aim to open between 45 and 50 new
restaurants over the next five years.
Grow Existing Restaurant Sales.
We will
continue to pursue targeted local marketing efforts and evaluate
operational initiatives designed to increase unit volumes
without relying on margin-eroding discounting programs.
Initiatives at BRAVO! include increasing online ordering, which
generates a higher average per person check compared to our
current carry-out business, expanding local restaurant marketing
and promoting our patio business. Other initiatives include
promoting our bar program through martini night and happy hour
programs and expanding our feature cards to include appetizers
and desserts.
At BRIO, we are promoting our bar programs, implementing wine
flights and dessert trays, introducing a new bar menu and
expanding the selection of wines by the glass. In addition, we
believe there is an opportunity to expand our banquet and
special events catering business. Our banquet and special events
catering business typically
4
generates a higher average per person check than our dining
rooms and, as a result of reduced labor costs relative to
revenue, allows us to achieve higher margins on those revenues.
We believe our existing restaurants will benefit from increasing
brand awareness as we continue to enter new markets. In
addition, we may selectively remodel existing units to include
additional seating capacity to increase revenue.
Maintain Margins Throughout Our Growth.
We
will continue to aggressively protect our margins using
economies of scale, including marketing and purchasing synergies
between our brands and leveraging our corporate infrastructure
as we continue to open new restaurants. Additional margin
enhancement opportunities include increasing labor efficiency
through the use of scheduling tools, menu engineering and other
operating cost reduction programs.
Our
History
We were incorporated as an Ohio corporation under the name
Belden Village Venture, Inc. in July 1987. Our name was changed
to Bravo Cucina of Dayton, Inc. in September 1995, to Bravo
Development, Inc. in December 1998 and to Bravo Brio Restaurant
Group, Inc. in June 2010. We opened our first BRAVO! Cucina
Italiana in 1992 in Columbus, Ohio. In 1999, we opened our first
BRIO Tuscan Grille in Columbus, Ohio. In June 2006, we entered
into a recapitalization transaction with Bravo Development
Holdings LLC, an entity controlled by two private equity firms,
Bruckmann, Rosser, Sherrill & Co. Management, L.P. and
Castle Harlan, Inc. As a result of the recapitalization
transaction, Bravo Development Holdings LLC, or Holdings, became
our majority shareholder.
Reorganization
Transactions
It is anticipated that Holdings and each of our other current
shareholders will enter into an exchange agreement with us
pursuant to which, immediately prior to the consummation of this
offering, Holdings and each such other shareholder will exchange
all outstanding shares of our Series A preferred stock and
common stock for shares of our new common stock. Following these
exchanges and immediately prior to the consummation of this
offering, Holdings will in turn distribute the shares of new
common stock it receives in the exchanges to its members on a
pro rata basis in accordance with such members ownership
interests in the units of Holdings. Holdings will then be
dissolved. See Reorganization Transactions for more
information.
Our
Sponsors
Bruckmann,
Rosser, Sherrill & Co. Management, L.P.
Bruckmann, Rosser, Sherrill & Co. Management, L.P.,
which we refer to as BRS, is a New York based private equity
firm with previous investments and remaining committed capital
totaling $1.4 billion. BRS partners with management teams
to create financial and operational value over the long-term for
the benefit of its investors, focusing on investments in middle
market consumer goods and services businesses. Companies that
possess existing or emerging strong market positions and are
well-positioned for accelerated long-term growth are best
positioned to benefit from the firms support and
expertise. BRS and its principals have extensive experience in
the restaurant industry, having completed 16 restaurant
investments to date, including add-on acquisitions. Since 1996,
BRS has purchased over 40 portfolio companies for aggregate
consideration of over $6.4 billion.
Castle Harlan,
Inc.
Castle Harlan was founded in 1987 by John K. Castle, former
president and chief executive officer of Donaldson,
Lufkin & Jenrette, an investment banking firm, and
Leonard M. Harlan, founder and former chairman of The Harlan
Company. Castle Harlan invests in controlling interests in the
buyout and development of middle-market companies principally in
North America and Europe. Its team of 20 investment
professionals has completed 52 acquisitions since its inception
with a total value in excess of $9.0 billion. Castle Harlan
currently manages investment funds globally with equity
commitments of $2.5 billion. Castle Harlans current
and former investments in the restaurant industry include
investments in McCormick & Schmicks Seafood
Restaurants, Inc., Charlie Browns, Inc., Caribbean
Restaurants, LLC and Mortons Restaurant Group, Inc.
5
Risk
Factors
Before you invest in our shares, you should carefully consider
all of the information in this prospectus, including matters set
forth under the heading Risk Factors. Risks relating
to our business include, among others:
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our financial results depend significantly upon the success of
our existing and new restaurants;
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|
our long-term success is highly dependent on our ability to
successfully develop and expand our operations;
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|
changes in economic conditions, including continued effects from
the recent recession, could materially affect our business,
financial condition and results of operations;
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|
we have had net losses in the past, in part due to a 3.8%
decrease in sales per comparable restaurant in 2008 as compared
to 2007 and a 7.4% decrease in sales per comparable restaurant
in 2009 as compared to 2008, and our future profitability is
uncertain;
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damage to our reputation or lack of acceptance of our brands in
existing and new markets could negatively affect our business,
financial condition and results of operations;
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|
because many of our restaurants are concentrated in local or
regional areas, we are susceptible to economic and other trends
and developments, including adverse weather conditions, in these
areas;
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changes in food availability and costs could adversely affect
our operating results;
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increases in our labor costs, including as a result of changes
in government regulation, could slow our growth or harm our
business; and
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guest traffic at our restaurants could be significantly affected
by competition in the restaurant industry in general and, in
particular, within the dining segments of the restaurant
industry in which we compete.
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Company
Information
Our principal executive office is located at 777 Goodale
Boulevard, Suite 100, Columbus, Ohio 43212 and our
telephone number is
(614) 326-7944.
Our website address is www.bbrg.com. Our website and the
information contained therein or connected thereto shall not be
deemed to be incorporated into this prospectus or the
registration statement of which it forms a part.
6
The
Offering
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Shares of common stock offered by us
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shares.
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Shares of common stock offered by the selling shareholders
|
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shares,
or shares
if the underwriters exercise their over-allotment option in
full.
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Over-allotment option
|
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The selling shareholders have granted the underwriters an
option for a period of 30 days to purchase up
to additional
shares of our common stock to cover overallotments.
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Ownership after offering
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Upon completion of this offering, our executive officers,
directors and affiliated entities will own
approximately % of our outstanding
common stock, or % if the
underwriters exercise their over-allotment option in full, and
will as a result have significant control over our affairs.
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Common stock to be outstanding after this offering
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shares.
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Use of proceeds
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We estimate that we will receive net proceeds from the sale
of shares of our common stock in this offering of
$ million, after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us. We intend to use the net
proceeds of this offering, together with
$ million in borrowings under
our new senior credit facilities, to:
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repay all loans outstanding under our existing
senior credit facilities, and any accrued and unpaid interest
and related LIBOR breakage costs and other fees; and
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repay all of our outstanding 13.25% senior
subordinated secured notes, and any accrued and unpaid
interest.
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As of June 27, 2010, approximately $79.4 million
principal amount of loans were outstanding under our existing
senior credit facilities and approximately $32.4 million
aggregate principal amount of our 13.25% senior
subordinated secured notes were outstanding.
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Any remaining net proceeds will be used for general corporate
purposes. Affiliates of Wells Fargo Securities, LLC and
Jefferies & Company, Inc., underwriters in this
offering, are parties to our existing senior credit facilities
and will receive approximately
$ million and
$ million, respectively, of
the proceeds used to repay the loans outstanding under our
existing senior credit facilities.
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We will not receive any of the proceeds from the sale of
shares of common stock by the selling shareholders. See
Use of Proceeds, Principal and Selling
Shareholders and Underwriting Conflicts
of Interest.
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Dividend policy
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We do not currently pay cash dividends on our stock and do
not anticipate paying any dividends on our common stock in the
foreseeable future. Any future determination relating to our
dividend policy will be made at the discretion of our board of
directors and will depend on then existing conditions, including
our
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7
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financial condition, results of operations, contractual
restrictions, capital requirements, business prospects and other
factors our board of directors may deem relevant. In addition,
we anticipate that our ability to declare and pay dividends will
also be restricted by covenants in our new senior credit
facilities. See Description of Indebtedness
New Senior Credit Facilities and Risk
Factors Our substantial indebtedness may limit our
ability to invest in the ongoing needs of our business.
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Proposed Nasdaq Global Market symbol
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BBRG.
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Risk factors
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Investment in our common stock involves substantial risks.
You should read this prospectus carefully, including the section
entitled Risk Factors and the consolidated financial
statements and the related notes to those statements included
elsewhere in this prospectus before investing in our common
stock.
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Conflicts of interest
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As described in Use of Proceeds, we intend to use
a portion of the net proceeds from this offering to repay all
loans outstanding under our existing senior credit facilities.
Because an affiliate of Wells Fargo Securities, LLC will receive
more than 5.0% of the net proceeds of this offering, the
offering will be conducted in accordance with Rule 2720 of
the Conduct Rules of the National Association of Securities
Dealers, as administered by the Financial Industry Regulatory
Authority. This rule requires, among other things, that the
initial public offering price can be no higher than that
recommended by a qualified independent underwriter
and that a qualified independent underwriter has participated in
the preparation of, and has exercised the usual standards of
due diligence with respect to, the registration
statement and this prospectus. Jefferies & Company,
Inc. has agreed to act as qualified independent underwriter for
the offering and to undertake the legal responsibilities and
liabilities of an underwriter under the Securities Act of 1933,
or the Securities Act, specifically including those inherent in
Section 11 of the Securities Act.
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Unless otherwise noted, all information in this prospectus:
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assumes that the underwriters do not exercise their
over-allotment option; and
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other than historical financial information, reflects
(1) the exchange of all shares of our issued and
outstanding common stock
for shares
of new common stock at an exchange ratio of
1: and (2) the exchange of
all shares of our issued and outstanding Series A preferred
stock
for shares
of new common stock at an exchange ratio of
1: immediately prior to the
consummation of this offering, based upon an initial public
offering price of $ per share, the
midpoint of the price range set forth on the cover of this
prospectus. See Reorganization Transactions.
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Without giving effect to the reorganization transactions (as
defined in Reorganization Transactions) expected to
occur prior to the consummation of this offering, the number of
shares of our common stock to be outstanding after this offering
is based on 1,050,000 shares of common stock outstanding as
of June 27, 2010 and excludes 257,875 shares of our
common stock issuable upon exercise of outstanding options under
the Bravo Development, Inc. Option Plan as of June 27, 2010
at a weighted average exercise price of $9.92 per share. See
Compensation Discussion and Analysis Bravo
Development, Inc. Option Plan.
Optionholders do not have the right to exercise their vested
options unless and until the Companys private equity
sponsors attain designated returns on their investment, measured
based on the sponsors receipt of net proceeds and
8
internal rate of return from an approved sale or public
offering. The Companys board of directors has determined,
pursuant to the exercise of its discretion in accordance with
the 2006 Bravo Development Inc. Option Plan, that a certain
percentage of each outstanding option award may be deemed vested
and exercisable in connection with this offering, dependent upon
achievement of designated performance thresholds. See
Compensation Discussion and Analysis Equity
Compensation.
Based upon an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus, options
to
purchase shares
of our common stock will be fully vested and exercisable
following the consummation of this offering.
9
Summary
Historical Consolidated Financial and Operating Data
The following table sets forth, for the periods and dates
indicated, our summary historical consolidated financial and
operating data. We have derived the statement of operations data
for the fiscal years ended December 30, 2007,
December 28, 2008 and December 27, 2009 and the
balance sheet data as of December 28, 2008 and
December 27, 2009 from our audited consolidated financial
statements appearing elsewhere in this prospectus. We have
derived the balance sheet data as of December 30, 2007 from
our audited consolidated financial statements not included
elsewhere in this prospectus. We have derived the statement of
operations data for the
twenty-six
weeks ended June 28, 2009 and June 27, 2010 and
balance sheet data as of June 27, 2010 from our unaudited
interim consolidated financial statements appearing elsewhere in
this prospectus. We have derived the balance sheet data as of
June 28, 2009 from our unaudited interim consolidated
financial statements not included elsewhere in this prospectus.
You should read this information in conjunction with Use
of Proceeds, Capitalization, Selected
Historical Consolidated Financial and Operating Data,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements and the related notes to those statements
included elsewhere in this prospectus.
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Twenty-Six
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Year Ended(1)
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Weeks Ended
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December 30,
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December 28,
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December 27,
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June 28,
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June 27,
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2007
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2008
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2009
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2009
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2010
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(Dollars in thousands, except per share data)
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Statement of Operations Data:
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|
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|
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|
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|
|
|
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Revenues
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$
|
265,374
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|
|
$
|
300,783
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|
$
|
311,709
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|
$
|
153,514
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|
|
$
|
170,996
|
|
Cost of Sales
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|
|
75,340
|
|
|
|
84,618
|
|
|
|
82,609
|
|
|
|
40,765
|
|
|
|
44,389
|
|
Labor
|
|
|
89,663
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|
|
|
102,323
|
|
|
|
106,330
|
|
|
|
53,733
|
|
|
|
58,100
|
|
Operating
|
|
|
41,567
|
|
|
|
47,690
|
|
|
|
48,917
|
|
|
|
25,265
|
|
|
|
26,560
|
|
Occupancy
|
|
|
16,054
|
|
|
|
18,736
|
|
|
|
19,636
|
|
|
|
10,435
|
|
|
|
11,310
|
|
General and administrative expenses
|
|
|
16,768
|
|
|
|
15,042
|
|
|
|
17,123
|
|
|
|
8,898
|
|
|
|
8,936
|
|
Restaurant pre-opening costs
|
|
|
5,647
|
|
|
|
5,434
|
|
|
|
3,758
|
|
|
|
2,060
|
|
|
|
1,685
|
|
Depreciation and amortization
|
|
|
12,309
|
|
|
|
14,651
|
|
|
|
16,088
|
|
|
|
7,889
|
|
|
|
8,335
|
|
Asset impairment charges
|
|
|
|
|
|
|
8,506
|
|
|
|
6,436
|
|
|
|
|
|
|
|
|
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Other expenses, net
|
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|
462
|
|
|
|
229
|
|
|
|
157
|
|
|
|
153
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Total costs and expenses
|
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|
257,810
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|
|
|
297,229
|
|
|
|
301,054
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|
|
|
149,198
|
|
|
|
159,366
|
|
Income (loss) from operations
|
|
|
7,564
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|
|
|
3,554
|
|
|
|
10,655
|
|
|
|
4,316
|
|
|
|
11,630
|
|
Net interest expense
|
|
|
11,853
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|
|
|
9,892
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|
|
|
7,119
|
|
|
|
3,693
|
|
|
|
3,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income (loss) from continuing operations before income taxes
|
|
|
(4,289
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)
|
|
|
(6,338
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)
|
|
|
3,536
|
|
|
|
623
|
|
|
|
8,087
|
|
Income tax provision (benefit)
|
|
|
(3,503
|
)
|
|
|
55,061
|
|
|
|
135
|
|
|
|
120
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss)
|
|
$
|
(786
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)
|
|
$
|
(61,399
|
)
|
|
$
|
3,401
|
|
|
$
|
503
|
|
|
$
|
7,983
|
|
Undeclared preferred dividend
|
|
|
(8,920
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)
|
|
|
(10,175
|
)
|
|
|
(11,599
|
)
|
|
|
(5,420
|
)
|
|
|
(6,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
(9,706
|
)
|
|
$
|
(71,574
|
)
|
|
$
|
(8,198
|
)
|
|
$
|
(4,917
|
)
|
|
$
|
1,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted Per Share Data:
(2)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
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|
Other Financial Data:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided from operating activities
|
|
$
|
31,291
|
|
|
$
|
32,501
|
|
|
$
|
33,782
|
|
|
$
|
10,829
|
|
|
$
|
14,943
|
|
Net cash provided from (used for) investing activities
|
|
$
|
(35,536
|
)
|
|
$
|
(43,088
|
)
|
|
$
|
(24,957
|
)
|
|
$
|
(12,627
|
)
|
|
$
|
(8,568
|
)
|
Net cash (used in) provided by financing activities
|
|
$
|
4,156
|
|
|
$
|
10,529
|
|
|
$
|
(9,258
|
)
|
|
$
|
1,362
|
|
|
$
|
(6,356
|
)
|
Capital expenditures
|
|
$
|
28,782
|
|
|
$
|
24,578
|
|
|
$
|
14,121
|
|
|
$
|
6,292
|
|
|
$
|
3,110
|
|
Adjusted EBITDA(3)
|
|
$
|
20,260
|
|
|
$
|
27,218
|
|
|
$
|
34,790
|
|
|
$
|
13,020
|
|
|
$
|
20,770
|
|
Adjusted EBITDA margin
|
|
|
7.6
|
%
|
|
|
9.0
|
%
|
|
|
11.2
|
%
|
|
|
8.5
|
%
|
|
|
12.1
|
%
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restaurants (at end of period)
|
|
|
63
|
|
|
|
75
|
|
|
|
81
|
|
|
|
79
|
|
|
|
85
|
|
Total comparable restaurants (at end of period)
|
|
|
49
|
|
|
|
54
|
|
|
|
61
|
|
|
|
62
|
|
|
|
74
|
|
Change in comparable restaurant sales
|
|
|
0.6
|
%
|
|
|
(3.8
|
)%
|
|
|
(7.4
|
)%
|
|
|
(9.1
|
)%
|
|
|
1.1
|
%
|
BRAVO!:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurants (at end of period)
|
|
|
38
|
|
|
|
44
|
|
|
|
45
|
|
|
|
45
|
|
|
|
47
|
|
Total comparable restaurants (at end of period)
|
|
|
31
|
|
|
|
33
|
|
|
|
36
|
|
|
|
37
|
|
|
|
43
|
|
Average sales per comparable restaurant
|
|
$
|
3,890
|
|
|
$
|
3,715
|
|
|
$
|
3,457
|
|
|
$
|
1,713
|
|
|
$
|
1,679
|
|
Change in comparable restaurant sales
|
|
|
0.9
|
%
|
|
|
(4.1
|
)%
|
|
|
(7.1
|
)%
|
|
|
(9.2
|
)%
|
|
|
(0.3
|
)%
|
BRIO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurants (at end of period)
|
|
|
25
|
|
|
|
31
|
|
|
|
36
|
|
|
|
34
|
|
|
|
38
|
|
Total comparable restaurants (at end of period)
|
|
|
18
|
|
|
|
21
|
|
|
|
25
|
|
|
|
25
|
|
|
|
31
|
|
Average sales per comparable restaurant
|
|
$
|
5,308
|
|
|
$
|
5,401
|
|
|
$
|
4,812
|
|
|
$
|
2,433
|
|
|
$
|
2,506
|
|
Change in comparable restaurant sales
|
|
|
0.2
|
%
|
|
|
(3.6
|
)%
|
|
|
(7.8
|
)%
|
|
|
(9.1
|
)%
|
|
|
2.4
|
%
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six
|
|
|
|
Year Ended(1)
|
|
|
Weeks Ended
|
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
740
|
|
|
$
|
682
|
|
|
$
|
249
|
|
|
$
|
246
|
|
|
$
|
268
|
|
Working capital (deficit)
|
|
$
|
(33,110
|
)
|
|
$
|
(34,320
|
)
|
|
$
|
(36,156
|
)
|
|
$
|
(33,797
|
)
|
|
$
|
(32,614
|
)
|
Total assets
|
|
$
|
195,048
|
|
|
$
|
157,764
|
|
|
$
|
160,842
|
|
|
$
|
160,401
|
|
|
$
|
159,144
|
|
Total debt
|
|
$
|
114,136
|
|
|
$
|
125,950
|
|
|
$
|
118,031
|
|
|
$
|
127,975
|
|
|
$
|
111,790
|
|
Total stockholders equity (deficiency in assets)
|
|
$
|
(14,692
|
)
|
|
$
|
(76,091
|
)
|
|
$
|
(72,690
|
)
|
|
$
|
(75,590
|
)
|
|
$
|
(64,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
As Adjusted(2)
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 27,
|
|
|
June 27,
|
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
268
|
|
|
|
|
|
Working capital (deficit)
|
|
$
|
(32,614
|
)
|
|
|
|
|
Total assets
|
|
$
|
159,144
|
|
|
|
|
|
Total debt
|
|
$
|
111,790
|
|
|
|
|
|
Total stockholders equity (deficiency in assets)
|
|
$
|
(64,707
|
)
|
|
|
|
|
|
|
|
|
(1)
|
|
We utilize a 52- or 53-week accounting period which ends on the
Sunday closest to December 31. The fiscal years ended
December 27, 2009, December 28, 2008 and
December 30, 2007 each have 52 weeks.
|
|
(2)
|
|
Gives effect to (i) the reorganization transactions
expected to occur prior to the consummation of this offering,
(ii) this offering and (iii) the application of the
net proceeds of this offering and of borrowings under our new
senior credit facilities as described under Use of
Proceeds.
|
|
(3)
|
|
Adjusted EBITDA represents earnings before interest, taxes,
depreciation and amortization plus the sum of asset impairment
charges and management fees and expenses. We are presenting
Adjusted EBITDA, which is not required by U.S. generally
accepted accounting principles, or GAAP, because it provides an
additional measure to view our operations, when considered with
both our GAAP results and the reconciliation to net income
(loss) which we believe provides a more complete understanding
of our business than could be obtained absent this disclosure.
We use Adjusted EBITDA, together with financial measures
prepared in accordance with GAAP, such as revenue and cash flows
from operations, to assess our historical and prospective
operating performance and to enhance our understanding of our
core operating performance. Adjusted EBITDA is presented
because: (i) we believe it is a useful measure for
investors to assess the operating performance of our business
without the effect of non-cash depreciation and amortization
expenses and asset impairment charges; (ii) we believe that
investors will find it useful in assessing our ability to
service or incur indebtedness; and (iii) we use Adjusted
EBITDA internally as a benchmark to evaluate our operating
performance or compare our performance to that of our
competitors. The use of Adjusted EBITDA as a performance measure
permits a comparative assessment of our operating performance
relative to our performance based on our GAAP results, while
isolating the effects of some items that vary from period to
period without any correlation to core operating performance or
that vary widely among similar companies. Companies within our
industry exhibit significant variations with respect to capital
structures and cost of capital (which affect interest expense
and tax rates) and differences in book depreciation of
facilities and equipment (which affect relative depreciation
expense), including significant differences in the depreciable
lives of similar assets among various companies. Our management
believes that Adjusted EBITDA facilitates
company-to-company
comparisons within our industry by eliminating some of the
foregoing variations.
|
|
|
|
Adjusted EBITDA is not a measurement determined in accordance
with GAAP and should not be considered in isolation or as an
alternative to net income, net cash provided by operating,
investing or financing activities or other financial statement
data presented as indicators of financial performance or
liquidity, each as presented in accordance with GAAP. Adjusted
EBITDA should not be considered as a measure of discretionary
cash available to us to invest in the growth of our business.
Adjusted EBITDA as presented may not be comparable to other
similarly titled measures of other companies and our
presentation of Adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by unusual
items.
|
11
|
|
|
|
|
Our management recognizes that Adjusted EBITDA has limitations
as an analytical financial measure, including the following:
|
|
|
|
|
|
Adjusted EBITDA does not reflect our capital expenditures or
future requirements for capital expenditures;
|
|
|
|
Adjusted EBITDA does not reflect the interest expense, or the
cash requirements necessary to service interest or principal
payments, associated with our indebtedness;
|
|
|
|
Adjusted EBITDA does not reflect depreciation and amortization,
which are non-cash charges, although the assets being
depreciated and amortized will likely have to be replaced in the
future, nor does Adjusted EBITDA reflect any cash requirements
for such replacements; and
|
|
|
|
Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs.
|
|
|
|
|
|
This prospectus also includes information concerning Adjusted
EBITDA margin, which is defined as the ratio of Adjusted EBITDA
to revenues. We present Adjusted EBITDA margin because it is
used by management as a performance measurement to judge the
level of Adjusted EBITDA generated from revenues and we believe
its inclusion is appropriate to provide additional information
to investors.
|
|
|
|
A reconciliation of Adjusted EBITDA and EBITDA to net income is
provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six
|
|
|
|
Year Ended
|
|
|
Weeks Ended
|
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
Net income (loss)
|
|
$
|
(786
|
)
|
|
$
|
(61,399
|
)
|
|
$
|
3,401
|
|
|
$
|
503
|
|
|
$
|
7,983
|
|
Income tax expense (benefit)
|
|
|
(3,503
|
)
|
|
|
55,061
|
|
|
|
135
|
|
|
|
120
|
|
|
|
104
|
|
Interest expense
|
|
|
11,853
|
|
|
|
9,892
|
|
|
|
7,119
|
|
|
|
3,693
|
|
|
|
3,543
|
|
Depreciation and amortization
|
|
|
12,309
|
|
|
|
14,651
|
|
|
|
16,088
|
|
|
|
7,889
|
|
|
|
8,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
19,873
|
|
|
$
|
18,205
|
|
|
$
|
26,743
|
|
|
$
|
12,205
|
|
|
$
|
19,965
|
|
Asset impairment charges
|
|
|
|
|
|
|
8,506
|
|
|
|
6,436
|
|
|
|
|
|
|
|
|
|
Management fees and expenses
|
|
|
387
|
|
|
|
507
|
|
|
|
1,611
|
|
|
|
815
|
|
|
|
805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
20,260
|
|
|
$
|
27,218
|
|
|
$
|
34,790
|
|
|
$
|
13,020
|
|
|
$
|
20,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Risk
Factors
Investing in our common stock involves a high degree of risk.
You should consider carefully the following risk factors and the
other information in this prospectus, including our consolidated
financial statements and related notes to those statements,
before you decide to invest in our common stock. If any of the
following risks actually occur, our business, financial
condition and operating results could be adversely affected. As
a result, the trading price of our common stock could decline
and you could lose part or all of your investment.
Risks Relating to
Our Business and Industry
Our
financial results depend significantly upon the success of our
existing and new restaurants.
Future growth in revenues and profits will depend on our ability
to grow sales and efficiently manage costs in our existing and
new restaurants. As of June 27, 2010, we operated 47 BRAVO!
restaurants and 38 BRIO restaurants, of which three BRAVO!
restaurants and four BRIO restaurants have opened within the
preceding twelve months. The results achieved by these
restaurants may not be indicative of longer-term performance or
the potential market acceptance of restaurants in other
locations.
In particular, the success of our restaurants revolves
principally around guest traffic and average check per guest.
Significant factors that might adversely impact our guest
traffic levels and average guest check include, without
limitation:
|
|
|
|
|
declining economic conditions, including housing market
downturns, rising unemployment rates, lower disposable income
and consumer confidence and other events or factors that
adversely affect consumer spending in the markets we serve;
|
|
|
|
|
|
increased competition (both in the upscale affordable dining
segment and in other segments of the restaurant industry);
|
|
|
|
|
|
changes in consumer preferences;
|
|
|
|
guests budgeting constraints and choosing not to order
certain high-margin items such as desserts and beverages (both
alcoholic and non-alcoholic);
|
|
|
|
guests failure to accept menu price increases that we may
make to offset increases in key operating costs;
|
|
|
|
our reputation and consumer perception of our concepts
offerings in terms of quality, price, value and service; and
|
|
|
|
guest experiences from dining in our restaurants.
|
Our restaurants are also susceptible to increases in certain key
operating expenses that are either wholly or partially beyond
our control, including, without limitation:
|
|
|
|
|
food and other raw materials costs, many of which we do not or
cannot effectively hedge;
|
|
|
|
labor costs, including wage, workers compensation, health
care and other benefits expenses;
|
|
|
|
rent expenses and other costs under leases for our new and
existing restaurants;
|
|
|
|
energy, water and other utility costs;
|
|
|
|
costs for insurance (including health, liability and
workers compensation);
|
|
|
|
information technology and other logistical costs; and
|
|
|
|
expenses due to litigation against us.
|
The failure of our existing or new restaurants to perform as
expected could have a significant negative impact on our
financial condition and results of operations.
Our
long-term success is highly dependent on our ability to
successfully develop and expand our operations.
We intend to develop new restaurants in our existing markets,
and selectively enter into new markets. Since the end of 2005,
we have expanded from 30 BRAVO! restaurants and 19 BRIO
restaurants to 47 and 38 BRAVO!
13
and BRIO restaurants, respectively, as of June 27, 2010. We
also expect to open one additional BRIO restaurant prior to the
end of 2010. There can be no assurance that any new restaurant
that we open will have similar operating results to those of
existing restaurants. The number and timing of new restaurants
actually opened during any given period, and their associated
contribution to operating growth, may be negatively impacted by
a number of factors including, without limitation:
|
|
|
|
|
our inability to generate sufficient funds from operations or to
obtain favorable financing to support our development;
|
|
|
|
identification and availability of, and competition for, high
quality locations that will continue to drive high levels of
sales per unit;
|
|
|
|
acceptable lease arrangements, including sufficient levels of
tenant allowances and construction contributions;
|
|
|
|
the financial viability of our landlords, including the
availability of financing for our landlords;
|
|
|
|
construction and development cost management;
|
|
|
|
timely delivery of the leased premises to us from our landlords
and punctual commencement of build-out construction activities;
|
|
|
|
delays due to the highly customized nature of our restaurant
concepts and the complex design, construction and pre-opening
processes for each new location;
|
|
|
|
obtaining all necessary governmental licenses and permits on a
timely basis to construct and operate our restaurants;
|
|
|
|
competition in new markets, including competition for restaurant
sites;
|
|
|
|
unforeseen engineering or environmental problems with the leased
premises;
|
|
|
|
adverse weather during the construction period;
|
|
|
|
anticipated commercial, residential and infrastructure
development near our new restaurants;
|
|
|
|
recruitment of qualified managers, chefs and other key operating
personnel; and
|
|
|
|
other unanticipated increases in costs, any of which could give
rise to delays or cost overruns.
|
We may not be able to open our planned new restaurants on a
timely basis, if at all, and, if opened, these restaurants may
not be operated profitably. We have experienced, and expect to
continue to experience, delays in restaurant openings from time
to time. Such actions may limit our growth opportunities. We
cannot assure you that we will be able to successfully expand or
acquire critical market presence for our brands in new
geographical markets, as we may encounter well-established
competitors with substantially greater financial resources. We
may be unable to find attractive locations, acquire name
recognition, successfully market our brands or attract new
guests. Competitive circumstances and consumer characteristics
in new market segments and new geographical markets may differ
substantially from those in the market segments and geographical
markets in which we have substantial experience. If we are
unable to expand in existing markets or penetrate new markets,
our ability to increase our revenues and profitability may be
harmed.
Changes
in economic conditions, including continuing effects from the
recent recession, could materially affect our business,
financial condition and results of operations.
We, together with the rest of the restaurant industry, depend
upon consumer discretionary spending. The recent recession,
coupled with high unemployment rates, reduced home values,
increases in home foreclosures, investment losses, personal
bankruptcies and reduced access to credit and reduced consumer
confidence, has impacted consumers ability and willingness
to spend discretionary dollars. Economic conditions may remain
volatile and may continue to repress consumer confidence and
discretionary spending for the near term. If the weak economy
continues for a prolonged period of time or worsens, guest
traffic could be adversely impacted if our guests choose to dine
out less frequently or reduce the amount they spend on meals
while dining out. We believe that if the current negative
economic conditions persist for a long period of time or become
more pervasive, consumers might make long- lasting changes to
their discretionary spending behavior, including dining out less
frequently on a
14
permanent basis. Additionally, a decline in corporate travel and
entertainment spending could result in a decrease in the traffic
of business travelers at our restaurants. If restaurant sales
decrease, our profitability could decline as we spread fixed
costs across a lower level of sales. Reductions in staff levels,
asset impairment charges and potential restaurant closures have
resulted and could result from prolonged negative restaurant
sales.
We have
had net losses in the past, in part due to a 3.8% decrease in
sales per comparable restaurant in 2008 as compared to 2007 and
a 7.4% decrease in sales per comparable restaurant in 2009 as
compared to 2008, and our future profitability is
uncertain.
During the years ended December 30, 2007 and
December 28, 2008, we had a net loss of approximately
$0.8 million and $61.4 million, respectively. The net
losses during these periods were due to a number of factors,
including the impact of the recent recession and weak economic
conditions in the markets in which our restaurants are located.
During the year ended December 28, 2008, we also incurred
an income tax expense of $55.0 million due primarily to a
valuation allowance of $59.4 million against the total net
deferred tax asset as well as a non-cash impairment charge of
$8.5 million. See Managements Discussion and
Analysis of Financial Condition and Results of
Operations.Although we had net income of $3.4 million
and $8.0 million for the year ended December 27, 2009 and
the twenty-six weeks ended June 27, 2010, respectively, we
can make no assurances that we will continue to be profitable in
future periods. In addition, we had a 3.8% decrease in sales
from our comparables restaurants in 2008 as compared to 2007 and
a 7.4% decrease in 2009 as compared to 2008. Future net losses
and declines in average sales per comparable restaurant may
limit our ability to fund our operations, pursue our growth
strategy and service our indebtedness.
Damage to
our reputation or lack of acceptance of our brands in existing
and new markets could negatively impact our business, financial
condition and results of operations.
We believe we have built a strong reputation for the quality and
breadth of our menu and our restaurants, and we must protect and
grow the value of our BRAVO! and BRIO brands to continue to be
successful in the future. Any incident that erodes consumer
affinity for our brands could significantly reduce their
respective values and damage our business. If guests perceive or
experience a reduction in food quality, service or ambiance, or
in any way believe we failed to deliver a consistently positive
experience, our brand value could suffer and our business may be
adversely affected.
A multi-location restaurant business such as ours can be
adversely affected by negative publicity or news reports,
whether or not accurate, regarding food quality issues, public
health concerns, illness, safety, injury or government or
industry findings concerning our restaurants, restaurants
operated by other foodservice providers or others across the
food industry supply chain. While we have taken steps to
mitigate food quality, public health and other
foodservice-related risks, these types of health concerns or
negative publicity cannot be completely eliminated or mitigated
and may materially harm our results of operations and result in
damage to our brands. For example, in May 2006, a food virus
outbreak in Michigan affected area restaurants, including one of
our BRAVO! restaurants. As a result, this restaurant was closed
for four days. While the effect of the outbreak was immaterial
to our business, food quality issues or other public health
concerns could have an adverse impact on our profitability.
In addition, our ability to successfully develop new restaurants
in new markets may be adversely affected by a lack of awareness
or acceptance of our brands in these new markets. To the extent
that we are unable to foster name recognition and affinity for
our brands in new markets, our new restaurants may not perform
as expected and our growth may be significantly delayed or
impaired.
Because
many of our restaurants are concentrated in local or regional
areas, we are susceptible to economic and other trends and
developments, including adverse weather conditions, in these
areas.
Our financial performance is highly dependent on restaurants
located in Ohio, Florida, Michigan and Pennsylvania
,
which comprise approximately 45% of our total restaurants.
As a result, adverse economic conditions in any of these areas
could have a material adverse effect on our overall results of
operations. In recent years, certain of these states have been
more negatively impacted by the housing decline, high
unemployment rates and the overall economic crisis than other
geographic areas. In addition, given our geographic
concentrations, negative
15
publicity regarding any of our restaurants in these areas could
have a material adverse effect on our business and operations,
as could other regional occurrences such as local strikes,
terrorist attacks, increases in energy prices, adverse weather
conditions, hurricanes, droughts or other natural or man-made
disasters.
In particular, adverse weather conditions can impact guest
traffic at our restaurants, cause the temporary underutilization
of outdoor patio seating, and, in more severe cases, cause
temporary restaurant closures, sometimes for prolonged periods.
Approximately 34% of our total restaurants are located in Ohio,
Michigan and Pennsylvania, which are particularly susceptible to
snowfall, and 13% of our total restaurants are located in
Florida and Louisiana, which are particularly susceptible to
hurricanes. Our business is subject to seasonal fluctuations,
with restaurant sales typically higher during certain months,
such as December. Adverse weather conditions during our most
favorable months or periods may exacerbate the effect of adverse
weather on guest traffic and may cause fluctuations in our
operating results from
quarter-to-quarter
within a fiscal year. For example, the significant snowfall in
the Northeast United States in February 2010 led to reduced
guest traffic at several of our restaurants. In addition,
outdoor patio seating is available at most of our restaurants
and may be impacted by a number of weather-related factors. Our
inability to fully utilize our restaurants seating
capacity as planned may negatively impact our revenues and
results of operations.
The
impact of negative economic factors, including the availability
of credit, on our landlords and other retail center tenants
could negatively affect our financial results.
Negative effects on our existing and potential landlords due to
the inaccessibility of credit and other unfavorable economic
factors may, in turn, adversely affect our business and results
of operations. If our landlords are unable to obtain financing
or remain in good standing under their existing financing
arrangements, they may be unable to provide construction
contributions or satisfy other lease covenants to us.
Approximately 6% of our restaurants are in locations that are
owned, managed or controlled by a landlord that has filed for
bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code in the last 12 months. This landlord may be
able to reject our leases in the bankruptcy proceedings. As of
June 27, 2010, none of our leases have been rejected, but
we cannot assure you that any landlord that has filed, or may in
the future file, for bankruptcy protection may not attempt to
reject leases with us. In addition, if our landlords are unable
to obtain sufficient credit to continue to properly manage their
retail sites, we may experience a drop in the level of quality
of such retail centers. Our development of new restaurants may
also be adversely affected by the negative financial situations
of developers and potential landlords. Many landlords have
delayed or cancelled recent development projects (as well as
renovations of existing projects) due to the instability in the
credit markets and recent declines in consumer spending, which
has reduced the number of high-quality locations available that
we would consider for our new restaurants.
In addition, several other tenants at retail centers in which we
are located or where we have executed leases have ceased
operations or, in some cases, have deferred openings or failed
to open after committing to do so. These failures may lead to
reduced guest traffic at retail centers in which our restaurants
are located and may contribute to lower guest traffic at our
restaurants.
Changes
in food availability and costs could adversely affect our
operating results.
Our profitability and operating margins are dependent in part on
our ability to anticipate and react to changes in food costs. We
rely on local, regional and national distributors and suppliers
to provide our produce, beef, poultry, seafood and other
ingredients. We contract with Distribution Market Advantage, or
DMA, a cooperative of multiple food distributors located
throughout the nation, and US Foodservice for the broadline
distribution of most of our food products. Other than for a
portion of our commodities, which are purchased locally by each
restaurant, we rely on Gordon Food Service, or GFS, as the
primary distributor of a majority of our ingredients. Through
our agreement with DMA, we have a non-exclusive arrangement with
GFS on terms and conditions that we believe are consistent with
those made available to similarly situated restaurant companies.
Although we believe that alternative distribution sources are
available, any increase in distribution prices or failure to
perform by GFS could cause our food costs to increase.
Additionally, we currently rely on sole suppliers for certain of
our food products, including substantially all of our soups and
the majority of our sauces. Failure to identify an alternate
source of supply for these items may result in significant cost
increases. Increases in distribution costs or sale prices could
also cause our food costs to increase. In addition, any material
interruptions in our supply chain, such as a
16
material interruption of ingredient supply due to the failures
of third-party distributors or suppliers, or interruptions in
service by common carriers that ship goods within our
distribution channels, may result in significant cost increases
and reduce sales. Changes in the price or availability of
certain food products could affect our ability to offer a broad
menu and price offering to guests and could materially adversely
affect our profitability and reputation.
The type, variety, quality and price of produce, beef, poultry
and seafood are more volatile than other types of food and are
subject to factors beyond our control, including weather,
governmental regulation, availability and seasonality, each of
which may affect our food costs or cause a disruption in our
supply. For example, weather patterns in recent years have
resulted in lower than normal levels of rainfall in key
agricultural states such as California, impacting the price of
water and the corresponding prices of food commodities grown in
states facing drought conditions. Our food distributors or
suppliers also may be affected by higher costs to produce and
transport commodities used in our restaurants, higher minimum
wage and benefit costs and other expenses that they pass through
to their customers, which could result in higher costs for goods
and services supplied to us. Although we are able to contract
for the majority of the food commodities used in our restaurants
for periods of up to one year, the pricing and availability of
some of the commodities used in our operations cannot be locked
in for periods of longer than one week or at all. Currently, we
have pricing understandings of varying lengths with several of
our distributors and suppliers, including our distributors and
suppliers of poultry, seafood, dairy products, soups and sauces,
bakery items and certain meat products. We do not use financial
instruments to hedge our risk to market fluctuations in the
price of beef, seafood, produce and other food products at this
time. We may not be able to anticipate and react to changing
food costs through our purchasing practices and menu price
adjustments in the future, and failure to do so could negatively
impact our revenues and results of operations.
Increases
in our labor costs, including as a result of changes in
government regulation, could slow our growth or harm our
business.
We are subject to a wide range of labor costs. Because our labor
costs are, as a percentage of revenues, higher than other
industries, we may be significantly harmed by labor cost
increases.
We retain the financial responsibility for up to $250,000 of
risks and associated liabilities with respect to workers
compensation, general liability, employment practices and other
insurable risks through our self insurance programs. Unfavorable
fluctuations in market conditions, availability of such
insurance or changes in state
and/or
federal regulations could significantly increase our self
insurance costs and insurance premiums. In addition, we are
subject to the risk of employment-related litigation at both the
state and federal levels, including claims styled as class
action lawsuits which are more costly to defend. Also, some
employment related claims in the area of wage and hour disputes
are not insurable risks.
Despite our efforts to control costs while still providing
competitive health care benefits to our staff members,
significant increases in health care costs continue to occur,
and we can provide no assurance that our cost containment
efforts in this area will be effective. Further, we are
continuing to assess the impact of recently-adopted federal
health care legislation on our health care benefit costs, and
significant increases in such costs could adversely impact our
operating results. There is no assurance that we will be able to
pass through the costs of such legislation in a manner that will
not adversely impact our operating results.
In addition, many of our restaurant personnel are hourly workers
subject to various minimum wage requirements or changes to tip
credits. Mandated increases in minimum wage levels and changes
to the tip credit, which are the amounts an employer is
permitted to assume an employee receives in tips when
calculating the employees hourly wage for minimum wage
compliance purposes, have recently been and continue to be
proposed and implemented at both federal and state government
levels. Minimum wage increases or changes to allowable tip
credits may increase our labor costs or effective tax rate.
Additionally, potential changes in labor legislation, including
the Employee Free Choice Act (EFCA), could result in portions of
our workforce being subjected to greater organized labor
influence. The EFCA could impact the nature of labor relations
in the United States and how union elections and contract
negotiations are conducted. The EFCA aims to facilitate
unionization, and employers of unionized employees may face
mandatory, binding arbitration of labor scheduling, costs and
standards, which could increase the costs of doing business.
Although we do not currently
17
have any unionized employees, EFCA or similar labor legislation
could have an adverse effect on our business and financial
results by imposing requirements that could potentially increase
costs and reduce our operating flexibility.
Labor
shortages could increase our labor costs significantly or
restrict our growth plans.
Our restaurants are highly dependent on qualified management and
operating personnel, including regional management, general
managers and executive chefs. Qualified individuals have
historically been in short supply and an inability to attract
and retain them would limit the success of our existing
restaurants as well as our development of new restaurants. We
can make no assurances that we will be able to attract and
retain qualified individuals in the future. Additionally, the
cost of attracting and retaining qualified individuals may be
higher than we anticipate, and as a result, our profitability
could decline.
Guest
traffic at our restaurants could be significantly affected by
competition in the restaurant industry in general and, in
particular, within the dining segments of the restaurant
industry in which we compete.
The restaurant industry is highly competitive with respect to
food quality, ambiance, service, price and value and location,
and a substantial number of restaurant operations compete with
us for guest traffic. The main competitors for our brands are
other operators of mid-priced, full service concepts in the
multi-location upscale affordable dining segment in which we
compete most directly for real estate locations and guests,
including Maggianos, Cheesecake Factory, P.F. Changs
and BJs Restaurants. We also compete to a lesser extent
with nationally recognized casual dining Italian restaurants
such as Romanos Macaroni Grill, Carrabbas Italian
Grill and Olive Garden, as well as high quality, locally-owned
and operated Italian restaurants. Some of our competitors have
significantly greater financial, marketing, personnel and other
resources than we do, and many of our competitors are well
established in markets in which we have existing restaurants or
intend to locate new restaurants. Any inability to successfully
compete with the other restaurants in our markets will place
downward pressure on our guest traffic and may prevent us from
increasing or sustaining our revenues and profitability. We may
also need to evolve our concepts in order to compete with
popular new restaurant formats or concepts that develop from
time to time, and we cannot offer any assurance that we will be
successful in doing so or that modifications to our concepts
will not reduce our profitability. In addition, with improving
product offerings at fast casual restaurants, quick-service
restaurants and grocery stores and the influence of negative
economic conditions and other factors, consumers may choose less
expensive alternatives, which could also negatively affect guest
traffic at our restaurants.
New
information or attitudes regarding diet and health or adverse
opinions about the health effects of consuming our menu
offerings could result in adverse changes in regulations and
consumer eating habits.
Government regulation and consumer eating habits may impact our
business as a result of changes in attitudes regarding diet and
health or new information regarding the health effects of
consuming our menu offerings. These changes may result in the
enactment of laws and regulations that impact the ingredients
and nutritional content of our menu offerings, or laws and
regulations requiring us to disclose the nutritional content of
our food offerings. For example, a number of states, counties
and cities have enacted menu labeling laws requiring
multi-unit
restaurant operators to disclose certain nutritional information
available to guests, or have enacted legislation restricting the
use of certain types of ingredients in restaurants. Furthermore,
the federal Patient Protection and Affordable Care Act, or
PPACA, which was enacted on March 23, 2010, establishes a
uniform, federal requirement for certain restaurants to post
nutritional information on their menus. Specifically, the law
requires chain restaurants with 20 or more locations operating
under the same trade name and offering substantially the same
menus to publish the total number of calories of standard menu
items on menus and menu boards, along with a succinct statement
regarding the suggested daily caloric intake, to enable
consumers to understand the number of calories in the menu item
in the context of a total daily diet. The law also requires such
restaurants to provide to consumers, upon request, a written
summary of detailed nutritional information, including total
calories and calories from fat, total fat, saturated fat,
cholesterol, sodium, total carbohydrates, complex carbohydrates,
sugars, dietary fiber, and total protein in each serving size or
other unit of measure, for each standard menu item. The menu
must include a prominent, clear and conspicuous statement about
the availability of this information upon request. The United
States Food and Drug Administration, or FDA, is also permitted
to require additional nutrient disclosures, such as trans fat
content. An unfavorable report on our menu ingredients, the size
of our portions or the nutritional content of our menu items
could negatively influence the demand for our offerings.
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The federal nutrition labeling law under the PPACA became
effective upon enactment, on March 23, 2010. However, the
FDA, is required to issue proposed regulations by March 23,
2011 to establish the methods by which restaurants should
measure the nutrient content of their standard menu items to
arrive at the declared value, and the format and manner of the
nutrient content disclosures required under the law. Thus, it is
expected that the FDA will not enforce the requirements until
these regulations are finalized. The new law specifically
preempts conflicting state and local laws, and instead provides
a single, national standard for nutrition labeling of restaurant
menu items. In the meantime, we will be subject to a patchwork
of state and local laws and regulations regarding nutritional
content disclosure requirements. Many of these requirements are
inconsistent or are interpreted differently from one
jurisdiction to another.
Compliance with these laws and regulations, as well as others
regarding the ingredients and nutritional content of our menu
items, may be costly and time-consuming. Additionally, if
consumer health regulations or consumer eating habits change
significantly, we may be required to modify or discontinue
certain menu items, and we may experience higher costs
associated with the implementation of those changes. We cannot
predict the impact of the new nutrition labeling requirements
under the PPACA, once they are issued and implemented.
Additionally, we cannot make any assurances regarding our
ability to effectively respond to changes in consumer health
perceptions or our ability to successfully implement the
nutrient content disclosure requirements and to adapt our menu
offerings to trends in eating habits.
Our
marketing programs may not be successful.
We expend significant resources in our marketing efforts, using
a variety of media, including social media venues. We expect to
continue to conduct brand awareness programs and guest
initiatives to attract and retain guests. These initiatives may
not be successful, resulting in expenses incurred without the
benefit of higher revenues. Additionally, some of our
competitors have greater financial resources, which enable them
to purchase significantly more television and radio advertising
than we are able to purchase. Should our competitors increase
spending on advertising and promotions or our advertising funds
decrease for any reason, or should our advertising and
promotions be less effective than our competitors, there could
be a material adverse effect on our results of operations and
financial condition.
The
impact of new restaurant openings could result in fluctuations
in our financial performance.
Quarterly results have been, and in the future may continue to
be, significantly impacted by the timing of new restaurant
openings (often dictated by factors outside of our control),
including associated pre-opening costs and operating
inefficiencies, as well as changes in our geographic
concentration due to the opening of new restaurants. We
typically incur the most significant portion of pre-opening
expenses associated with a given restaurant within the two
months immediately preceding and the month of the opening of the
restaurant. Our experience has been that labor and operating
costs associated with a newly opened restaurant for the first
several months of operation are materially greater than what can
be expected after that time, both in aggregate dollars and as a
percentage of revenues. Our new restaurants commonly take
several months to reach planned operating levels due to
inefficiencies typically associated with new restaurants,
including the training of new personnel, lack of market
awareness, inability to hire sufficient qualified staff and
other factors. Accordingly, the volume and timing of new
restaurant openings has had, and may continue to have, a
meaningful impact on our profitability. Due to the foregoing
factors, results for any one quarter are not necessarily
indicative of results to be expected for any other quarter or
for a full fiscal year, and these fluctuations may cause our
operating results to be below expectations of public market
analysts and investors.
Opening
new restaurants in existing markets may negatively effect sales
at our existing restaurants.
The consumer target area of our restaurants varies by location,
depending on a number of factors such as population density,
local retail and business attractions, area demographics and
geography. As a result, the opening of a new restaurant, whether
using the same brand or a different brand, in or near markets in
which we already have existing restaurants could adversely
impact the sales of new or existing restaurants. We do not
intend to open new restaurants that materially impact the
existing sales of our existing restaurants. However, there can
be no
19
assurance that sales cannibalization between our restaurants
will not occur or become more significant in the future as we
continue to expand our operations.
Our
business operations and future development could be
significantly disrupted if we lose key members of our management
team.
The success of our business continues to depend to a significant
degree upon the continued contributions of our senior officers
and key employees, both individually and as a group. Our future
performance will be substantially dependent in particular on our
ability to retain and motivate Saed Mohseni, our President and
Chief Executive Officer, and certain of our other senior
executive officers. We currently have an employment agreement in
place with Mr. Mohseni. The loss of the services of our
CEO, senior officers or other key employees could have a
material adverse effect on our business and plans for future
development. We have no reason to believe that we will lose the
services of any of these individuals in the foreseeable future;
however, we currently have no effective replacement for any of
these individuals due to their experience, reputation in the
industry and special role in our operations. We also do not
maintain any key man life insurance policies for any of our
employees.
Our
growth may strain our infrastructure and resources, which could
slow our development of new restaurants and adversely affect our
ability to manage our existing restaurants.
We opened two BRAVO! and five BRIO restaurants in 2009, and in
2008 we opened seven BRAVO! and six BRIO restaurants. We have
opened two BRAVO! and two BRIO restaurants during 2010 and
expect to open one additional BRIO restaurant before fiscal year
end. Our recent and future growth may strain our restaurant
management systems and resources, financial controls and
information systems. Those demands on our infrastructure and
resources may also adversely affect our ability to manage our
existing restaurants. If we fail to continue to improve our
infrastructure or to manage other factors necessary for us to
meet our expansion objectives, our operating results could be
materially and adversely affected. Likewise, if sales decline,
we may be unable to reduce our infrastructure quickly enough to
prevent sales deleveraging, which would adversely affect our
profitability.
Changes
in, or any failure to comply with, applicable laws or
regulations may adversely affect our business and our growth
strategy.
Our operations are subject to regulation by federal agencies and
to licensing and regulation by state and local health,
sanitation, building, zoning, safety, fire and other
departments. The regulations cover matters relating to building
construction (including environmental impact), zoning
requirements, employment, nutritional information disclosure and
the preparation and sale of food and alcoholic beverages. The
impact of compliance with the laws and regulations of certain
states, including states in which we are not currently located
but may open restaurants in the future, may be more costly than
compliance in other states.
Various state and local health, sanitation, fire and safety
codes govern our existing restaurants. In addition, the
development of additional restaurants will be subject to
compliance with applicable construction, zoning, land use and
environmental regulations. Difficulties in obtaining or
renewing, or failures to obtain or renew, the required licenses
or approvals on a cost-effective and timely basis could delay or
prevent the development and openings of new restaurants, or
could disrupt the operations of existing restaurants. As is the
case with any operator of real property, we are subject to a
variety of federal, state and local governmental regulations
relating to the use, storage, discharge, emission and disposal
of hazardous materials. Failure to comply with environmental
laws could result in the imposition of severe penalties or
restrictions on operations by governmental agencies or courts of
law, which could adversely affect operations. We are unaware of
any significant hazards on properties we operate or have
operated, the remediation of which would result in material
liability. We do not have separate environmental liability
insurance nor do we maintain a reserve to cover such events. In
the event of the determination of contamination on such
properties, the Company, as operator, could be held liable for
severe penalties and costs of remediation.
Our relationships with employees are governed by various federal
and state labor laws and regulations, including minimum wage
requirements, breaks, overtime pay, fringe benefits, safety,
working conditions, unemployment tax
20
rates, workers compensation rates and citizenship or work
authorization requirements. We are also subject to the
regulations of the U.S. Citizenship and Immigration
Services and U.S. Customs and Immigration Enforcement. Our
failure to comply with federal and state labor laws and
regulations, or our staff members failure to meet federal
citizenship or residency requirements, could result in a
disruption in our work force, sanctions or fines against us and
adverse publicity. We may be unable to increase our prices in
order to pass increased labor costs on to our guests, in which
case our margins would be negatively affected. Significant
government-imposed increases in minimum wages, paid or unpaid
leaves of absence, sick leave, and mandated health benefits, or
increased tax reporting, assessment or payment requirements
related to our staff members who receive gratuities, could be
detrimental to the profitability of our restaurants operations.
In addition, while we carry employment practices insurance
covering a variety of labor-related liability claims, a
settlement or judgment against us that is uninsured or in excess
of our coverage limitations could have a material adverse effect
on our results of operations, liquidity, financial position or
business.
Our business is subject to extensive state and local government
regulation relating to alcoholic beverage control, public health
and food safety and labeling. For example, alcoholic beverage
control regulations require each of our restaurants to obtain
licenses and permits to sell alcoholic beverages on the
premises, and each restaurant must obtain a food service license
from local health authorities. In fiscal 2009, approximately
16.4% of our gross revenues at BRAVO! and 22.5% of our gross
revenues at BRIO were attributable to the sale of alcoholic
beverages. Typically, licenses must be renewed annually and may
be revoked or suspended for cause at any time. The failure of a
restaurant to obtain or retain its licenses, permits or other
approvals, or any suspension of such licenses, permits or other
approvals, would adversely affect that restaurants
operations and profitability and could adversely affect our
ability to obtain these licenses elsewhere. We may also be
subject to dram shop statutes in certain states,
which generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person.
Even though we are covered by general liability insurance, a
settlement or judgment against us under a dram shop
statute in excess of liability coverage could adversely affect
our financial condition and results of operations.
Recent legislation enacted in March 2010 will require chain
restaurants with 20 or more locations in the United States to
comply with federal nutritional disclosure requirements, making
applicable to restaurants certain nutrition labeling
requirements from which restaurants have historically been
exempt. Additionally, the United States Congress is currently
considering food safety legislation that is expected to greatly
expand the FDAs authority over food safety. If this
legislation is enacted, we cannot assure you that it will not
impact our industry. The costs associated with such compliance
may increase over time, and while our ability to adapt to
consumer preferences is a strength of our concepts, the effect
of such labeling requirements on consumer choices, if any, is
unclear at this time.
In addition, our facilities must comply with the applicable
requirements of the Americans with Disabilities Act of 1990
(ADA) and related federal and state statutes that
prohibit discrimination on the basis of disability in public
accommodations and employment. Although our restaurants are
designed to be accessible to the disabled, we could be required
to make modifications to our restaurants to provide service to,
or make reasonable accommodations for, disabled persons.
Restaurant
companies have been the target of
class-actions
and other litigation alleging, among other things, violations of
federal and state law.
We are subject to a variety of lawsuits, administrative
proceedings and claims that arise in the ordinary course of our
business. In recent years, a number of restaurant companies have
been subject to claims by guests, employees and others regarding
issues such as food safety, personal injury and premises
liability, employment-related claims, harassment,
discrimination, disability and other operational issues common
to the foodservice industry. A number of these lawsuits have
resulted in the payment of substantial damages by the
defendants. Similar lawsuits have been instituted against us
from time to time, including a 2004 class action lawsuit
initiated by servers at a BRIO location in Newport, Kentucky. In
this lawsuit, certain of our servers alleged that they were
required to remit back to the restaurant a percentage of their
tips in violation of Kentucky law. While we settled this lawsuit
for an immaterial amount and no other such lawsuits have had a
material impact historically
,
an adverse judgment
or settlement that is not insured or is in excess of insurance
coverage could have an adverse impact on our
21
profitability and could cause variability in our results
compared to expectations. We are self-insured, or carry
insurance programs with specific retention levels, for a
significant portion of our risks and associated liabilities with
respect to workers compensation, general liability,
employers liability, health benefits and other insurable
risks. Regardless of whether any claims against us are valid or
whether we are ultimately determined to be liable, we could also
be adversely affected by negative publicity, litigation costs
resulting from the defense of these claims and the diversion of
time and resources from our operations.
Our
insurance policies may not provide adequate levels of coverage
against all claims, and fluctuating insurance requirements and
costs could negatively impact our profitability.
We believe our insurance coverage is customary for businesses of
our size and type. However, there are types of losses we may
incur that cannot be insured against or that we believe are not
commercially reasonable to insure. These losses, if they occur,
could have a material and adverse effect on our business and
results of operations. In addition, the cost of workers
compensation insurance, general liability insurance and
directors and officers liability insurance fluctuates
based on our historical trends, market conditions and
availability. Additionally, health insurance costs in general
have risen significantly over the past few years and are
expected to continue to increase in 2010. These increases, as
well as recently-enacted federal legislation requiring employers
to provide specified levels of health insurance to all
employees, could have a negative impact on our profitability,
and there can be no assurance that we will be able to
successfully offset the effect of such increases with plan
modifications and cost control measures, additional operating
efficiencies or the pass-through of such increased costs to our
guests.
Our
substantial indebtedness may limit our ability to invest in the
ongoing needs of our business.
We have a substantial amount of indebtedness. On an as adjusted
basis giving effect to this offering and the use of the offering
proceeds, as well as entry into our new senior credit
facilities, as of June 27, 2010 we had approximately
$ million of total
indebtedness. In particular, we expect to have approximately
$ and
$ of outstanding indebtedness
under our new term loan facility and new revolving credit
facility, respectively, and
$ million of revolving loan
availability under our new revolving credit facility. For the
year ended December 27, 2009 and the twenty-six week period
ended June 27, 2010, our principal repayments/(borrowings)
on indebtedness (including net repayments under our existing
revolving credit facility) were $9.3 million and
$6.4 million, respectively, and cash interest expenses for
such periods were $7.0 million and $3.4 million,
respectively.
Our indebtedness could have important consequences to you. For
example, it:
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requires us to utilize a substantial portion of our cash flow
from operations to payments on our indebtedness, reducing the
availability of our cash flow to fund working capital, capital
expenditures, development activity and other general corporate
purposes;
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increases our vulnerability to adverse general economic or
industry conditions;
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limits our flexibility in planning for, or reacting to, changes
in our business or the industries in which we operate;
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makes us more vulnerable to increases in interest rates, as
borrowings under our new senior credit facilities are expected
to be at variable rates;
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limits our ability to obtain additional financing in the future
for working capital or other purposes; and
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places us at a competitive disadvantage compared to our
competitors that have less indebtedness.
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Although our new senior credit facilities will contain
restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of qualifications and
exceptions, and the indebtedness incurred in compliance with
these restrictions could be substantial. Also, these
restrictions do not prevent us from incurring obligations that
do not constitute indebtedness.
Our new senior credit facilities to be put in place with the
consummation of this offering are expected to require us to
maintain certain interest expense coverage ratios and leverage
ratios which become more restrictive over time. While we have
never defaulted on compliance with any financial covenants under
the terms of our indebtedness,
22
our ability to comply with these ratios in the future may be
affected by events beyond our control, and an inability to
comply with the required financial ratios could result in a
default under our new senior credit facilities. In the event of
any default, the lenders under our new senior credit facilities
could elect to terminate lending commitments and declare all
borrowings outstanding, together with accrued and unpaid
interest and other fees, to be immediately due and payable.
See Description of Indebtedness,
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity
and Managements Discussion and Analysis of Financial
Condition and Results of Operations Capital
Resources.
We may be
unable to obtain debt or other financing on favorable terms or
at all.
There are inherent risks in our ability to borrow. Our lenders,
including the lenders participating in our new senior credit
facilities, may have suffered losses related to their lending
and other financial relationships, especially because of the
general weakening of the national economy, increased financial
instability of many borrowers and the declining value of their
assets. As a result, lenders may become insolvent or tighten
their lending standards, which could make it more difficult for
us to borrow under our new senior credit facilities, refinance
our existing indebtedness or to obtain other financing on
favorable terms or at all. Our access to funds under our new
senior credit facilities is dependent upon the ability of our
lenders to meet their funding commitments. Our financial
condition and results of operations would be adversely affected
if we were unable to draw funds under our new senior credit
facilities because of a lender default or to obtain other
cost-effective financing.
Longer term disruptions in the capital and credit markets as a
result of uncertainty, changing or increased regulation, reduced
alternatives or failures of significant financial institutions
could adversely affect our access to liquidity needed for our
business. Any disruption could require us to take measures to
conserve cash until the markets stabilize or until alternative
credit arrangements or other funding for our business can be
arranged. Such measures could include deferring capital
expenditures (including the opening of new restaurants) and
reducing or eliminating other discretionary uses of cash.
We may be
required to record additional asset impairment charges in the
future.
In accordance with accounting guidance as it relates to the
impairment of long-lived assets, we review long-lived assets,
such as property and equipment and intangibles, subject to
amortization, for impairment when events or circumstances
indicate the carrying value of the assets may not be
recoverable. In determining the recoverability of the asset
value, an analysis is performed at the individual restaurant
level and primarily includes an assessment of historical cash
flows and other relevant factors and circumstances. Negative
restaurant-level cash flow over the previous
12-month
period is considered a potential impairment indicator. In such
situations, we evaluate future cash flow projections in
conjunction with qualitative factors and future operating plans.
Based on this analysis, if we believe that the carrying amount
of the assets are not recoverable, an impairment charge is
recognized based upon the amount by which the assets carrying
value exceeds fair value as measured by undiscounted future cash
flows expected to be generated by these assets. We recognized
asset impairment charges of approximately $6.4 million and
$8.5 million in fiscal 2009 and 2008, respectively, related
to three and five restaurants, respectively.
The estimates of fair value used in these analyses requires the
use of estimates and assumptions regarding future cash flows and
operating outcomes, which are based upon a significant degree of
managements judgment. If actual results differ from our
estimates or assumptions, additional impairment charges may be
required in the future. Changes in the economic environment,
real estate markets, capital spending, and overall operating
performance could impact these estimates and result in future
impairment charges. There can be no assurance that future
impairment tests will not result in additional charges to
earnings.
Security
breaches of confidential guest information in connection with
our electronic processing of credit and debit card transactions
may adversely affect our business.
The majority of our restaurant sales are by credit or debit
cards. Other restaurants and retailers have experienced security
breaches in which credit and debit card information of their
customers has been stolen. We may in the
23
future become subject to lawsuits or other proceedings for
purportedly fraudulent transactions arising out of the actual or
alleged theft of our guests credit or debit card
information. Any such claim or proceeding, or any adverse
publicity resulting from these allegations, may have a material
adverse effect on us and our restaurants.
We may
not be able to adequately protect our intellectual property,
which, in turn, could harm the value of our brands and adversely
affect our business.
Our ability to implement our business plan successfully depends
in part on our ability to further build brand recognition using
our trademarks, service marks and other proprietary intellectual
property, including our names and logos and the unique ambiance
of our restaurants. We have registered or applied to register a
number of our trademarks. We cannot assure you that our
trademark applications will be approved. Third parties may also
oppose our trademark applications, or otherwise challenge our
use of the trademarks. In the event that our trademarks are
successfully challenged, we could be forced to rebrand our goods
and services, which could result in loss of brand recognition,
and could require us to devote resources to advertising and
marketing new brands.
If our efforts to register, maintain and protect our
intellectual property are inadequate, or if any third party
misappropriates, dilutes or infringes on our intellectual
property, the value of our brands may be harmed, which could
have a material adverse effect on our business and might prevent
our brands from achieving or maintaining market acceptance. We
may also face the risk of claims that we have infringed third
parties intellectual property rights. If third parties
claim that we infringe upon their intellectual property rights,
our operating profits could be adversely affected. Any claims of
intellectual property infringement, even those without merit,
could be expensive and time consuming to defend, require us to
rebrand our services, if feasible, divert managements
attention and resources or require us to enter into royalty or
licensing agreements in order to obtain the right to use a third
partys intellectual property.
Any royalty or licensing agreements, if required, may not be
available to us on acceptable terms or at all. A successful
claim of infringement against us could result in our being
required to pay significant damages, enter into costly license
or royalty agreements, or stop the sale of certain products or
services, any of which could have a negative impact on our
operating profits and harm our future prospects.
Information
technology system failures or breaches of our network security
could interrupt our operations and adversely affect our
business.
We rely on our computer systems and network infrastructure
across our operations, including
point-of-sale
processing at our restaurants. Our operations depend upon our
ability to protect our computer equipment and systems against
damage from physical theft, fire, power loss, telecommunications
failure or other catastrophic events, as well as from internal
and external security breaches, viruses, worms and other
disruptive problems. Any damage or failure of our computer
systems or network infrastructure that causes an interruption in
our operations could have a material adverse effect on our
business and subject us to litigation or actions by regulatory
authorities. Although we employ both internal resources and
external consultants to conduct auditing and testing for
weaknesses in our systems, controls, firewalls and encryption
and intend to maintain and upgrade our security technology and
operational procedures to prevent such damage, breaches or other
disruptive problems, there can be no assurance that these
security measures will be successful.
A major
natural or man-made disaster at our corporate facility could
have a material adverse effect on our business.
Most of our corporate systems, processes and corporate support
for our restaurant operations are centralized at one Ohio
location, with the exception of
back-up
data
tapes that are sent off-site on a weekly basis. We are currently
implementing a new disaster recovery plan, including the
establishment of a datacenter/co-location facility. If we are
unable to fully develop a new disaster recovery plan, we may
experience failures or delays in recovery of data, delayed
reporting and compliance, inability to perform necessary
corporate functions and other breakdowns in normal operating
procedures that could have a material adverse effect on our
business and create exposure to administrative and other legal
claims against us.
24
We will
incur increased costs and obligations as a result of being a
public company.
As a privately held company, we have not been responsible for
certain corporate governance and financial reporting practices
and policies required of a publicly traded company. Following
this offering, we will be a publicly traded company and will
incur significant legal, accounting and other expenses that we
were not required to incur in the recent past. In addition, the
Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley
Act), as well as rules implemented by the
U.S. Securities and Exchange Commission (the
SEC) and the Nasdaq Global Market, require changes
in corporate governance practices of public companies. We expect
these rules and regulations to increase our legal and financial
compliance costs and to make some activities more time consuming
and costly. We estimate that we will incur approximately $1.0 to
$1.5 million of incremental costs per year associated with
being a publicly-traded company; however, it is possible that
our actual incremental costs of being a publicly-traded company
will be higher than we currently estimate. In estimating these
costs, we took into account expenses related to insurance,
legal, accounting and compliance activities.
Furthermore, the need to establish the corporate infrastructure
demanded of a public company may divert managements
attention from implementing our growth strategy, which could
prevent us from improving our business, results of operations
and financial condition. We have made, and will continue to
make, changes to our internal controls and procedures for
financial reporting and accounting systems to meet our reporting
obligations as a publicly traded company. However, the measures
we take may not be sufficient to satisfy our obligations as a
publicly traded company.
Section 404 of the Sarbanes-Oxley Act requires annual
management assessments of the effectiveness of our internal
control over financial reporting, starting with the second
annual report that we file with the SEC after the consummation
of this offering, and will likely require in the same report a
report by our independent registered public accounting firm on
the effectiveness of our internal control over financial
reporting. In connection with the implementation of the
necessary procedures and practices related to internal control
over financial reporting, we may identify deficiencies that we
may not be able to remediate in time to meet the deadline
imposed by the Sarbanes-Oxley Act for compliance with the
requirements of Section 404. We will be unable to issue
securities in the public markets through the use of a shelf
registration statement if we are not in compliance with
Section 404. In addition, failure to achieve and maintain
an effective internal control environment could have a material
adverse effect on our business and stock price.
Federal,
state and local tax rules may adversely impact our results of
operations and financial position.
We are subject to federal, state and local taxes in the
U.S. Although we believe our tax estimates are reasonable,
if the Internal Revenue Service (IRS) or other
taxing authority disagrees with the positions we have taken on
our tax returns, we could face additional tax liability,
including interest and penalties. If material, payment of such
additional amounts upon final adjudication of any disputes could
have a material impact on our results of operations and
financial position. In addition, complying with new tax rules,
laws or regulations could impact our financial condition, and
increases to federal or state statutory tax rates and other
changes in tax laws, rules or regulations may increase our
effective tax rate. Any increase in our effective tax rate could
have a material impact on our financial results.
Risks Relating to
this Offering
The price
of our common stock may be volatile and you could lose all or
part of your investment.
Volatility in the market price of our common stock may prevent
you from being able to sell your shares at or above the price
you paid for your shares. The market price of our common stock
could fluctuate significantly for various reasons, which include:
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our quarterly or annual earnings or those of other companies in
our industry;
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changes in laws or regulations, or new interpretations or
applications of laws and regulations, that are applicable to our
business;
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the publics reaction to our press releases, our other
public announcements and our filings with the SEC;
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changes in accounting standards, policies, guidance,
interpretations or principles;
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additions or departures of our senior management personnel;
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sales of common stock by our directors and executive officers;
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sales or distributions of common stock by our sponsors;
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adverse market reaction to any indebtedness we may incur or
securities we may issue in the future;
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actions by shareholders;
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the level and quality of research analyst coverage for our
common stock, changes in financial estimates or investment
recommendations by securities analysts following our business or
failure to meet such estimates;
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the financial disclosure we may provide to the public, any
changes in such disclosure or our failure to meet such
disclosure;
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various market factors or perceived market factors, including
rumors, whether or not correct, involving us, our distributors
or suppliers or our competitors;
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introductions of new offerings or new pricing policies by us or
by our competitors;
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acquisitions or strategic alliances by us or our competitors;
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short sales, hedging and other derivative transactions in the
shares of our common stock;
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the operating and stock price performance of other companies
that investors may deem comparable to us; and
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other events or factors, including changes in general conditions
in the United States and global economies or financial markets
(including those resulting from Acts of God, war, incidents of
terrorism or responses to such events).
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In addition, in recent years, the stock market has experienced
extreme price and volume fluctuations. This volatility has had a
significant impact on the market price of securities issued by
many companies, including companies in our industry. The price
of our common stock could fluctuate based upon factors that have
little or nothing to do with our company, and these fluctuations
could materially reduce our stock price.
In the past, following periods of market volatility in the price
of a companys securities, security holders have often
instituted class action litigation. If the market value of our
common stock experiences adverse fluctuations and we become
involved in this type of litigation, regardless of the outcome,
we could incur substantial legal costs and our managements
attention could be diverted from the operation of our business,
causing our business to suffer.
There is
no existing market for our common stock and we do not know if
one will develop to provide you with adequate
liquidity.
Prior to this offering, there has not been a public market for
our common stock. An active market for our common stock may not
develop following the completion of this offering, or if it does
develop, may not be maintained. If an active trading market does
not develop, you may have difficulty selling any of our common
stock that you buy. The initial public offering price for the
shares of our common stock will be determined by negotiations
between us, the selling shareholders and the representatives of
the underwriters and may not be indicative of prices that will
prevail in the open market following this offering.
Consequently, you may not be able to sell shares of our common
stock at prices equal to or greater than the price paid by you
in this offering.
Future
sales of our common stock, including shares purchased in this
offering, in the public market could lower our stock
price.
Sales of substantial amounts of our common stock in the public
market following this offering by our existing shareholders,
upon the exercise of outstanding stock options or by persons who
acquire shares in this offering may adversely affect the market
price of our common stock. Such sales could also create public
perception of difficulties or problems with our business. These
sales might also make it more difficult for us to sell
securities in the future at a time and price that we deem
appropriate.
26
Upon the completion of this offering, we will have
outstanding shares
of common stock, of which:
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shares
are shares that we and the selling shareholders are selling in
this offering and, unless purchased by affiliates, may be resold
in the public market immediately after this offering; and
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shares
will be restricted securities, as defined in
Rule 144 under the Securities Act, and eligible for sale in
the public market pursuant to the provisions of Rule 144,
of
which shares
are subject to
lock-up
agreements and will become available for resale in the public
market beginning 180 days after the date of this prospectus.
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With limited exceptions, as described under the caption
Underwriting, these
lock-up
agreements prohibit a shareholder from selling, contracting to
sell or otherwise disposing of any common stock or securities
that are convertible or exchangeable for common stock or
entering into any arrangement that transfers the economic
consequences of ownership of our common stock for at least
180 days from the date of this prospectus, although the
lead underwriters may, in their sole discretion and at any time
without notice, release all or any portion of the securities
subject to these
lock-up
agreements. The lead underwriters have advised us that they have
no present intent or arrangement to release any shares subject
to a
lock-up
and will consider the release of any
lock-up
on a
case-by-case
basis. Upon a request to release any shares subject to a
lock-up,
the
lead underwriters would consider the particular circumstances
surrounding the request including, but not limited to, the
length of time before the
lock-up
expires, the number of shares requested to be released, reasons
for the request, the possible impact on the market for our
common stock and whether the holder of our shares requesting the
release is an officer, director or other affiliate of ours. As a
result of these
lock-up
agreements, notwithstanding earlier eligibility for sale under
the provisions of Rule 144, none of these shares may be
sold until at least 180 days after the date of this
prospectus.
As restrictions on resale end, our stock price could drop
significantly if the holders of these restricted shares sell
them or are perceived by the market as intending to sell them.
These sales might also make it more difficult for us to sell
securities in the future at a time and at a price that we deem
appropriate.
You will
suffer immediate and substantial dilution.
The initial public offering price per share is substantially
higher than the pro forma net tangible book value per share
immediately after this offering. As a result, you will pay a
price per share that substantially exceeds the book value of our
assets after subtracting our liabilities. Assuming an offering
price of $ per share, you will
incur immediate and substantial dilution in the amount of
$ per share. If outstanding
options to purchase our common stock are exercised, you will
experience additional dilution. Any future equity issuances will
result in even further dilution to holders of our common stock.
If
securities analysts or industry analysts downgrade our stock,
publish negative research or reports, or do not publish reports
about our business, our stock price and trading volume could
decline.
The trading market for our common stock will be influenced by
the research and reports that industry or securities analysts
publish about us, our business and our industry. If one or more
analysts adversely change their recommendation regarding our
stock or our competitors stock, our stock price would
likely decline. If one or more analysts cease coverage of us or
fail to regularly publish reports on us, we could lose
visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
Certain
provisions of Ohio law and our articles of incorporation and
regulations that will be in effect after this offering may deter
takeover attempts, which may limit the opportunity of our
shareholders to sell their shares at a favorable price, and may
make it more difficult for our shareholders to remove our board
of directors and management.
Provisions in our articles of incorporation and regulations, as
they will be in effect upon the closing of this offering, may
have the effect of delaying or preventing a change of control or
changes in our management. These provisions include the
following:
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advance notice requirements for shareholders proposals and
nominations;
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availability of blank check preferred stock;
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establish a classified board of directors so that not all
members of our board of directors are elected at one time;
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the right of the board of directors to elect a director to fill
a vacancy created by the expansion of the board of directors or
due to the resignation or departure of an existing board member;
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the prohibition of cumulative voting in the election of
directors, which would otherwise allow less than a majority of
shareholders to elect director candidates; and
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limitations on the removal of directors.
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In addition, because we are incorporated in Ohio, we are
governed by the provisions of Section 1704 of the Ohio
Revised Code. These provisions may prohibit large shareholders,
particularly those owning 10% or more of our outstanding voting
stock, from merging or combining with us. These provisions in
our articles of incorporation and regulations and under Ohio law
could discourage potential takeover attempts, could reduce the
price that investors are willing to pay for shares of our common
stock in the future and could potentially result in the market
price being lower than they would without these provisions.
Although no shares of preferred stock will be outstanding upon
the completion of this offering and although we have no present
plans to issue any preferred stock, our articles of
incorporation authorize the board of directors to issue up
to shares
of preferred stock. The preferred stock may be issued in one or
more series, the terms of which will be determined at the time
of issuance by our board of directors without further action by
the shareholders. These terms may include voting rights,
including the right to vote as a series on particular matters,
preferences as to dividends and liquidation, conversion rights,
redemption rights and sinking fund provisions. The issuance of
any preferred stock could diminish the rights of holders of our
common stock and, therefore, could reduce the value of our
common stock. In addition, specific rights granted to future
holders of preferred stock could be used to restrict our ability
to merge with, or sell assets to, a third party. The ability of
our board of directors to issue preferred stock and the
foregoing anti-takeover provisions may prevent or frustrate
attempts by a third party to acquire control of our company,
even if some of our shareholders consider such change of control
to be beneficial. See Description of Capital Stock.
Since we
do not expect to pay any dividends for the foreseeable future,
investors in this offering may be forced to sell their stock in
order to realize a return on their investment.
We have not declared or paid any dividends on our common stock.
We do not anticipate that we will pay any dividends to holders
of our common stock for the foreseeable future. Any payment of
cash dividends will be at the discretion of our board of
directors and will depend on our financial condition, capital
requirements, legal requirements, earnings and other factors. We
anticipate that our ability to pay dividends will be restricted
by the terms of our new senior credit facilities and might be
restricted by the terms of any indebtedness that we incur in the
future. Consequently, you should not rely on dividends in order
to receive a return on your investment. See Dividend
Policy.
Upon the
completion of this offering, the concentration of our capital
stock ownership with our sponsors and other insiders will likely
limit an investors ability to influence corporate
matters.
Upon completion of this offering, our private equity sponsors,
Castle Harlan and BRS, will each own
approximately % of our outstanding
common stock, and our sponsors, executive officers, directors
and affiliated entities controlled by us, these entities or
these individuals will together beneficially own or control
approximately % of our outstanding
common stock, or % if the
underwriters exercise their over-allotment option in full. As a
result, these shareholders, acting individually or together,
will have substantial influence and control over management and
matters that require approval by our shareholders, including
amendments to our articles of incorporation and regulations and
approval of significant corporate transactions, including
mergers and sales of substantially all of our assets. This
concentration of ownership may delay or prevent a change in
control of our company and make the execution of some
transactions more difficult or impossible without the support of
these shareholders. It is possible that the interests of our
sponsors and other insider shareholders may in some
circumstances conflict with our interests, the interests of the
other sponsors or insiders or the interests of our other
shareholders, including you.
28
Certain of our directors are also officers or control persons of
our sponsors
and/or
their
affiliates. Although these directors owe a fiduciary duty to
manage us in a manner beneficial to us and our shareholders,
these individuals also owe fiduciary duties to these other
entities and their shareholders, members and limited partners.
Because our sponsors and their affiliates have such interests in
other companies and engage in other business activities, certain
of our directors may experience conflicts of interest in
allocating their time and resources among our business and these
other activities. Furthermore, these individuals could make
substantial profits as a result of investment opportunities
allocated to entities other than us. As a result, these
individuals could pursue transactions that may not be in our
best interest, which could have a material adverse effect on our
operations and your investment.
Our
reported financial results may be adversely affected by changes
in accounting principles applicable to us.
Generally accepted accounting principles in the U.S. are
subject to interpretation by the Financial Accounting Standards
Board, or FASB, the American Institute of Certified Public
Accountants, the SEC and various bodies formed to promulgate and
interpret appropriate accounting principles. A change in these
principles or interpretations could have a significant effect on
our reported financial results, and could affect the reporting
of transactions completed before the announcement of a change.
In addition, the SEC has announced a multi-year plan that could
ultimately lead to the use of International Financial Reporting
Standards by U.S. issuers in their SEC filings. Any such
change could have a significant effect on our reported financial
results.
Our
ability to raise capital in the future may be limited.
Our business and operations may consume resources faster than we
anticipate. In the future, we may need to raise additional funds
through the issuance of new equity securities, debt or a
combination of both. Additional financing may not be available
on favorable terms, or at all. If adequate funds are not
available on acceptable terms, we may be unable to fund our
capital requirements. If we issue new debt securities, the debt
holders would have rights senior to common shareholders to make
claims on our assets, and the terms of any debt could restrict
our operations, including our ability to pay dividends on our
common stock. If we issue additional equity securities, existing
shareholders will experience dilution, and the new equity
securities could have rights senior to those of our common
stock. Because our decision to issue securities in any future
offering will depend on market conditions and other factors
beyond our control, we cannot predict or estimate the amount,
timing or nature of our future offerings. Thus, our shareholders
bear the risk of our future securities offerings reducing the
market price of our common stock and diluting their interest.
29
Reorganization
Transactions
The diagram below illustrates our ownership structure prior to
the reorganization transactions described below. The ownership
percentages presented in the charts below exclude all
outstanding options.
Structure
Prior to IPO Reorganization
It is anticipated that our majority shareholder, Bravo
Development Holdings LLC, or Holdings, and each of our other
current shareholders will enter into an exchange agreement with
us pursuant to which, immediately prior to the consummation of
this offering, Holdings and each such other shareholder will
exchange all outstanding shares of our Series A preferred
stock and common stock for shares of our new common stock.
An aggregate
of shares
of our new common stock will be issued by us in exchange for all
shares of our outstanding Series A preferred stock and our
outstanding common stock, which shares of new common stock will
constitute all of our issued and outstanding capital stock
immediately prior to the consummation of this offering. The
number of shares of new common stock issued pursuant to such
exchanges will be fixed
at shares,
although the allocation of such shares among the holders of our
outstanding Series A preferred stock and the holders of our
outstanding common stock will be based upon the initial public
offering price in this offering. Under the terms of the exchange
agreement, each outstanding share of Series A preferred
stock will be exchanged for that number of shares of new common
stock which have an aggregate fair value, based upon the initial
public offering price in this offering, equal to the liquidation
preference for such share of Series A preferred stock. The
liquidation preference, as defined in our amended
and restated articles of incorporation, for each share of
Series A preferred stock equals $1,000 plus all accumulated
but unpaid dividends that have accrued on such share. As of
June 27, 2010, the liquidation preference was equal to
$1,691.24 per share of Series A preferred stock. The
holders of our outstanding common stock will receive that number
of shares of new common stock which is equal to the aggregate
number of shares of new common stock issued in the exchanges
less the number of shares of new common stock issued in exchange
for shares of our outstanding Series A preferred stock.
Based upon an assumed initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus,
approximately
shares of our new common stock, representing a beneficial
ownership interest of % of our
company, would be exchanged for shares of our outstanding Series
A preferred stock and
approximately shares
of our new common stock, representing a beneficial ownership
interest of % of our company, would
be exchanged for shares of our outstanding common stock. A $1.00
increase (decrease) in such assumed initial public offering
price of $ per share would
decrease (increase) the beneficial ownership
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interest of our company represented by the shares of our new
common stock issued in exchange for shares of our outstanding
Series A preferred stock
by %.
After determining the allocation of the shares of our new common
stock as described above, prior to the consummation of this
offering, (i) all outstanding shares of our common stock
will be exchanged for shares of our new common stock and (ii)
all outstanding shares of our Series A preferred stock will
be exchanged for shares of our new common stock as described
above. Following these transactions and immediately prior to the
consummation of this offering, Holdings will in turn distribute
the shares of new common stock it received as part of the
exchanges detailed above to its members on a pro rata basis in
accordance with such members ownership interest in the
units of Holdings. Holdings will then be dissolved. The
reorganization transactions will have no effect on our total
stockholders equity.
In this prospectus, we collectively refer to the transactions
described above as the reorganization transactions.
Upon the consummation of this offering and the reorganization
transactions, there will be no shares of Series A preferred
stock outstanding.
Based upon an assumed initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus, as a
result of the reorganization transactions and immediately
following the consummation of this offering, BRS and its
affiliates will beneficially own
approximately % of our common
stock, Castle Harlan and its affiliates will beneficially own
approximately % of our common stock
and our executive officers, directors and principal shareholders
will collectively beneficially own
approximately % of our common
stock. A $1.00 increase (decrease) in such assumed initial
public offering price of $ per
share would decrease (increase) the beneficial ownership of our
common stock by BRS and its affiliates
by %, Castle Harlan and its
affiliates by % and our executive
officers, directors and principal shareholders
by %. The diagram below illustrates
our ownership structure following the reorganization
transactions and the sale of common stock by us and the selling
shareholders in this offering.
Structure
Following IPO Reorganization
31
Cautionary
Statement Regarding Forward-Looking Statements
This prospectus contains forward-looking statements. These
statements relate to future events or our future financial
performance. We have attempted to identify forward-looking
statements by terminology including anticipates,
believes, can, continue,
could, estimates, expects,
intends, may, plans,
potential, predicts, should
or will or the negative of these terms or other
comparable terminology. These statements are only predictions
and involve known and unknown risks, uncertainties, and other
factors, including those discussed under Risk
Factors. The following factors, among others, could cause
our actual results and performance to differ materially from the
results and performance projected in, or implied by, the
forward-looking statements:
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the success of our existing and new restaurants;
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our ability to successfully develop and expand our operations;
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changes in economic conditions, including continuing effects
from the recent recession;
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our history of net losses;
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damage to our reputation or lack of acceptance of our brands;
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economic and other trends and developments, including adverse
weather conditions, in those local or regional areas in which
our restaurants are concentrated;
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the impact of economic factors, including the availability of
credit, on our landlords and other retail center tenants;
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changes in availability or cost of our principal food products;
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increases in our labor costs, including as a result of changes
in government regulation;
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labor shortages or increased labor costs;
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increasing competition in the restaurant industry in general as
well as in the dining segments of the restaurant industry in
which we compete;
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changes in attitudes or negative publicity regarding food safety
and health concerns;
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the success of our marketing programs;
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potential fluctuations in our quarterly operating results due to
new restaurant openings and other factors;
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the effect on existing restaurants of opening new restaurants in
the same markets;
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the loss of key members of our management team;
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strain on our infrastructure and resources caused by our growth;
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the impact of federal, state or local government regulations
relating to building construction and the opening of new
restaurants, our existing restaurants, our employees, the sale
of alcoholic beverages and the sale or preparation of food;
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the impact of litigation;
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our inability to obtain adequate levels of insurance coverage;
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the impact of our substantial indebtedness;
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future asset impairment charges;
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security breaches of confidential guest information;
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inadequate protection of our intellectual property;
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our ability to raise capital in the future;
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the failure or breach of our information technology systems;
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a major natural or man-made disaster at our corporate facility;
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increased costs and obligations as a result of being a public
company;
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the impact of federal, state and local tax rules;
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concentration of ownership among our existing executives,
directors and principal shareholders may prevent new investors
from influencing significant corporate decisions; and
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other factors discussed under the headings Risk
Factors, Managements Discussion and Analysis
of Financial Condition and Results of Operations and
Business.
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Although we believe that the expectations reflected in the
forward-looking statements are reasonable based on our current
knowledge of our business and operations, we cannot guarantee
future results, levels of activity, performance or achievements.
You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus.
We assume no obligation to provide revisions to any
forward-looking statements should circumstances change.
33
Use of
Proceeds
We estimate that the net proceeds to us from this offering will
be approximately $ million,
assuming an initial public offering price of
$ per share, which is the midpoint
of the range set forth on the cover of this prospectus, and
after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us. Each $1.00
increase or decrease in the assumed initial public offering
price of $ per share would
increase or decrease, as applicable, the net proceeds to us by
approximately $ , assuming the
number of shares offered by us, as set forth on the cover of
this prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
The selling shareholders will receive
$ million in proceeds from
their sale
of shares
of common stock in this offering, or approximately
$ million if the underwriters
exercise in full their option to purchase additional shares of
common stock to cover over-allotments. We will not receive any
proceeds from the sale of shares by the selling shareholders.
See Reorganization Transactions, Principal and
Selling Shareholders and Underwriting.
In connection with this offering, we intend to enter into new
senior credit facilities, consisting of a
$ million term loan facility
and a $ million revolving
credit facility. We intend to use the net proceeds of this
offering, together with
$ million of borrowings under
our new senior credit facilities, as follows:
|
|
|
|
|
To repay all our loans outstanding under our existing senior
credit facilities, and any accrued and unpaid interest and
related LIBOR breakage costs and other fees. As of June 27,
2010, approximately $79.4 million principal amount of loans
were outstanding under our existing senior credit facilities.
The weighted-average interest rate for the year ended
December 27, 2009 of our indebtedness under our existing
senior credit facilities was 3.47%. Our existing senior credit
facilities can be prepaid without premium or penalty, other than
any related LIBOR breakage costs and other fees. Our existing
senior credit facilities mature on June 29, 2012.
Affiliates of Wells Fargo Securities, LLC will receive more than
5% of the proceeds from this offering (after taking into account
underwriters discounts and commissions and offering
expenses payable by us) as lenders under our existing senior
credit facilities. An affiliate of Jefferies &
Company, Inc. is also a lender under our existing senior credit
facilities, although it will receive less than 5% of the
proceeds from this offering (after taking into account
underwriters discounts and commissions and offering
expenses payable by us).
|
|
|
|
To repay all of our 13.25% senior subordinated secured
notes, and any accrued and unpaid interest. As of June 27,
2010, approximately $32.4 million aggregate principal
amount of our 13.25% senior subordinated secured notes were
outstanding. Interest on our 13.25% senior subordinated
secured notes is payable monthly at an annual interest rate of
13.25%, with the principal due on December 29, 2012.
Pursuant to the note purchase agreement governing the
13.25% senior subordinated secured notes, we were entitled
to elect monthly during the first year to accrue interest at the
rate of 14.25% per annum with no payments. Commencing in the
second year of the note purchase agreement through the maturity
date, we have the option to accrue interest at an annual rate of
13.25%, consisting of cash interest equal to 9% and
paid-in-kind
interest of 4.25%. Interest accrued but unpaid during the term
of the notes is capitalized into the principal balance. Our
13.25% senior subordinated secured notes can be prepaid
without premium or penalty.
|
Any remaining net proceeds will be used for general corporate
purposes.
34
Dividend
Policy
We do not currently pay cash dividends on our common stock and
do not anticipate paying any dividends on our common stock in
the foreseeable future. We currently intend to retain any future
earnings to fund the operation, development and expansion of our
business. Any future determinations relating to our dividend
policies will be made at the discretion of our board of
directors and will depend on existing conditions, including our
financial condition, results of operations, contractual
restrictions, capital requirements, business prospects and other
factors our board of directors may deem relevant. In addition,
we anticipate that our ability to declare and pay dividends will
be restricted by covenants in our new senior credit facilities.
35
Capitalization
The following table sets forth our capitalization as of
June 27, 2010:
|
|
|
|
|
on an actual basis; and
|
|
|
|
|
|
on an as adjusted basis to give effect to (1) the sale of
shares of common stock in this offering at an assumed initial
public offering price of $ per
share, which is the midpoint of the range set forth on the cover
of this prospectus, and after deducting underwriting discounts
and commissions and estimated fees and expenses payable by us,
(2) the reorganization transactions and (3) the
application of the net proceeds of this offering and borrowings
under our new senior credit facilities as described under
Use of Proceeds, as if the events had occurred on
June 27, 2010.
|
You should read this information in conjunction with
Reorganization Transactions, Use of
Proceeds, Selected Historical Consolidated Financial
and Operating Data, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Description of Indebtedness and our consolidated
financial statements and related notes included elsewhere in
this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 27, 2010
|
|
(In thousands)
|
|
Actual
|
|
|
As Adjusted
|
|
|
Cash and cash equivalents
|
|
$
|
268
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Existing revolving credit facility(1)
|
|
$
|
|
|
|
$
|
|
|
Existing term loan facility(2)
|
|
|
79,406
|
|
|
|
|
|
13.25% senior subordinated secured notes(3)
|
|
|
32,384
|
|
|
|
|
|
New revolving credit facility
|
|
|
|
|
|
|
|
|
New term loan facility
|
|
|
|
|
|
|
|
|
Other debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
111,790
|
|
|
|
|
|
Series A preferred stock(4)
|
|
|
100,629
|
|
|
|
|
|
Total stockholders equity (deficiency in assets)
|
|
|
(64,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization(5)
|
|
$
|
147,712
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The existing revolving credit facility is a part of our existing
senior credit facilities and provides for borrowings of up to
$30.0 million, of which $26.1 million was available as
of June 27, 2010 for working capital and general corporate
purposes (after giving effect to $3.9 million of
outstanding letters of credit at June 27, 2010).
|
|
(2)
|
|
We borrowed $82.5 million in term loans under our existing
senior credit facilities. Between June 29, 2006 and
June 27, 2010, we repaid approximately $3.1 million of
our outstanding term loans.
|
|
(3)
|
|
Reflects the balance sheet liability of our 13.25% senior
subordinated secured notes calculated in accordance with GAAP.
From November 2006 through January 2010, the Company elected to
capitalize accrued but unpaid interest on the senior
subordinated secured notes as permitted under the related note
purchase agreement. Total unpaid interest capitalized into the
balance of the senior subordinated secured notes since the
issuance of the senior subordinated secured notes amounted to
approximately $6.7 million.
|
|
(4)
|
|
Reflects the current liquidation preference for our
Series A preferred stock, including undeclared preferred
dividends of $41.1 million as of June 27, 2010.
|
|
|
|
(5)
|
|
A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share,
which is the midpoint of the range set forth on the cover of
this prospectus, would increase (decrease) each of total
stockholders equity (deficiency in assets) and total
capitalization by $ million,
assuming the number of shares offered by us, as set forth on the
cover of this prospectus, remains the same and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
|
36
Dilution
Purchasers of shares of common stock in this offering will
experience immediate and substantial dilution in the net
tangible book value of the common stock from the initial public
offering price. Net tangible book value per share represents the
amount of our total tangible assets less our total liabilities,
divided by the number of shares of our common stock outstanding.
Dilution in net tangible book value per share represents the
difference between the amount per share that you pay in this
offering and the net tangible book value per share immediately
after this offering. Our net tangible book value (deficit) as of
June 27, 2010 was approximately $(64.7) million, or
$ per share.
After giving effect to (i) the sale
of shares
of our common stock in this offering at an assumed initial
public offering price of $ per
share, which is the midpoint of the range set forth on the cover
of this prospectus, (ii) the reorganization transactions
and (iii) the deduction of estimated underwriting discounts
and commissions and estimated fees and expenses payable by us,
our pro forma net tangible book value at June 27, 2010
would have been approximately
$ million, or
$ per share. This represents an
immediate increase in net tangible book value of
$ per share to existing
shareholders and an immediate and substantial dilution of
$ per share to new investors. This
calculation does not give effect to our use of proceeds from
this offering or any borrowings under our new senior credit
facilities. The following table illustrates this per share
dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
Assumed initial public offering price per share (the midpoint of
the range set forth on the cover of this prospectus)
|
|
|
|
|
|
$
|
|
|
Actual net tangible book value per share as of June 27, 2010
|
|
$
|
|
|
|
|
|
|
Increase per share attributable to new investors
|
|
$
|
|
|
|
|
|
|
Pro forma net tangible book value per share after this offering
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of shares
of common stock by the selling shareholders in this offering
will reduce the number of shares of common stock held by
existing shareholders
to ,
or approximately % of the total
shares of common stock outstanding after this offering, and will
increase the number of shares held by new investors
to ,
or approximately % of the total
shares of common stock outstanding after this offering.
If the underwriters exercise in full their over-allotment option
to purchase additional shares of our common stock in this
offering at the assumed initial public offering price of
$ per share, which is the midpoint
of the range set forth on the cover of this prospectus, the
number of shares of common stock held by existing shareholders
will be reduced
to ,
or % of the aggregate number of
shares of common stock outstanding after this offering, the
number of shares of common stock held by new investors will be
increased
to ,
or % of the aggregate number of
shares of common stock outstanding after this offering, the
increase per share attributable to new investors would be
$ , the pro forma net tangible
book value per share after this offering would be
$ , and the dilution per share to
new investors would be $ .
A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share,
which is the midpoint of the range set forth on the cover of
this prospectus, would increase (decrease) our pro forma net
tangible book value by
$ million, the pro forma net
tangible book value per share after this offering by
$ per share, and the dilution per
share to new investors by $ per
share, assuming the number of shares offered by us, as set forth
on the cover of this prospectus, remains the same and after
deducting the underwriting discounts and commissions and
estimated offering expenses payable by us.
The following table summarizes, on the pro forma basis described
above as of June 27, 2010, after giving effect to the
reorganization transactions, the total number of shares of
common stock purchased from us and the selling shareholders and
the total consideration and the average price per share paid by
existing shareholders and by investors participating in this
offering. The calculation below is based on the assumed initial
public offering price
37
of $ per share, which is the
midpoint of the range set forth on the cover of this prospectus,
before deducting estimated underwriting discounts and
commissions and estimated fees and expenses payable by us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
per Share
|
|
Existing shareholders
|
|
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
New investors
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
100
|
%
|
|
$
|
|
|
|
|
100
|
%
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase (decrease) in the assumed offering price of
$ per share, which is the midpoint
of the range set forth on the cover of this prospectus, would
increase (decrease) total consideration paid by new investors
and total consideration paid by all shareholders by
$ million, assuming the
number of shares offered by us, as set forth on the cover of
this prospectus, remains the same, and before deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us.
The pro forma dilution information above is for illustration
purposes only. Our net tangible book value following the
completion of this offering is subject to adjustment based on
the actual initial public offering price of our shares and other
terms of this offering determined at pricing.
The number of shares of our common stock outstanding after this
offering as shown above is based on the number of shares
outstanding as of June 27, 2010. As of June 27, 2010,
without giving effect to the reorganization transactions
expected to occur prior to the consummation of this offering,
there were options outstanding to purchase 257,875 shares
of our common stock, with exercise prices of either $5.00 or
$10.00 per share and a weighted average exercise price of $9.92
per share. Optionholders do not have the right to exercise their
vested options unless and until the Companys private
equity sponsors attain designated returns on their investment,
measured based on the sponsors receipt of net proceeds and
internal rate of return from an approved sale or public
offering. The Companys board of directors has determined,
pursuant to the exercise of its discretion in accordance with
the 2006 Bravo Development, Inc. Option Plan, that a certain
percentage of each outstanding option award may be deemed vested
and exercisable in connection with this offering, dependent upon
achievement of designated performance thresholds. See
Compensation Discussion and Analysis Equity
Compensation.
Based upon an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus, options
to
purchase shares
of our common stock will be fully vested and exercisable
following the consummation of this offering. The tables and
calculations above assume that no options have been exercised.
To the extent outstanding options are exercised, you would
experience further dilution if the exercise price is less than
our net tangible book value per share. In addition, if we grant
options, warrants, or other convertible securities or rights to
purchase our common stock in the future with exercise prices
below the initial public offering price, new investors will
incur additional dilution upon exercise of such securities or
rights.
38
Selected
Historical Consolidated Financial and Operating Data
You should read the following selected historical consolidated
financial and operating data in conjunction with our
consolidated financial statements and the related notes to those
statements included elsewhere in this prospectus. You should
also read Managements Discussion and Analysis of
Financial Condition and Results of Operations. All of
these materials are contained elsewhere in this prospectus. The
selected historical consolidated financial data as of
December 28, 2008 and December 27, 2009 and for the
three years in the period ended December 27, 2009 have been
derived from consolidated financial statements audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, included elsewhere in this prospectus.
The selected historical consolidated financial data as of
December 25, 2005, December 31, 2006 and
December 30, 2007 and for the two years in the period ended
December 31, 2006 have been derived from our audited
consolidated financial statements not included elsewhere in this
prospectus. We derived the historical financial data as of
June 27, 2010 and for the twenty-six weeks ended
June 28, 2009 and June 27, 2010 from our unaudited
interim consolidated financial statements, which are included
elsewhere in this prospectus. We have derived the balance sheet
data as of June 28, 2009 from our unaudited interim
consolidated financial statements not included elsewhere in this
prospectus.
Basic and diluted net income (loss) per share and basic and
diluted weighted average shares outstanding for the years ended
December 31, 2006, December 30, 2007,
December 28, 2008 and December 27, 2009 and for the
twenty-six weeks ended June 28, 2009 and June 27, 2010
are presented on a historical basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended(1)
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
December 25,
|
|
|
December 31,
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
198,787
|
|
|
$
|
241,369
|
|
|
$
|
265,374
|
|
|
$
|
300,783
|
|
|
$
|
311,709
|
|
|
$
|
153,514
|
|
|
$
|
170,996
|
|
Cost of sales
|
|
|
59,050
|
|
|
|
70,632
|
|
|
|
75,340
|
|
|
|
84,618
|
|
|
|
82,609
|
|
|
|
40,765
|
|
|
|
44,389
|
|
Labor
|
|
|
66,565
|
|
|
|
81,054
|
|
|
|
89,663
|
|
|
|
102,323
|
|
|
|
106,330
|
|
|
|
53,733
|
|
|
|
58,100
|
|
Operating
|
|
|
31,710
|
|
|
|
36,966
|
|
|
|
41,567
|
|
|
|
47,690
|
|
|
|
48,917
|
|
|
|
25,265
|
|
|
|
26,560
|
|
Occupancy
|
|
|
10,491
|
|
|
|
14,072
|
|
|
|
16,054
|
|
|
|
18,736
|
|
|
|
19,636
|
|
|
|
10,435
|
|
|
|
11,310
|
|
General and administrative expenses
|
|
|
13,098
|
|
|
|
15,401
|
|
|
|
16,768
|
|
|
|
15,042
|
|
|
|
17,123
|
|
|
|
8,898
|
|
|
|
8,936
|
|
Restaurant pre-opening costs
|
|
|
4,072
|
|
|
|
4,658
|
|
|
|
5,647
|
|
|
|
5,434
|
|
|
|
3,758
|
|
|
|
2,060
|
|
|
|
1,685
|
|
Depreciation and amortization
|
|
|
7,179
|
|
|
|
9,414
|
|
|
|
12,309
|
|
|
|
14,651
|
|
|
|
16,088
|
|
|
|
7,889
|
|
|
|
8,335
|
|
Asset impairment charges
|
|
|
475
|
|
|
|
3,266
|
|
|
|
|
|
|
|
8,506
|
|
|
|
6,436
|
|
|
|
|
|
|
|
|
|
Other expenses net
|
|
|
428
|
|
|
|
359
|
|
|
|
462
|
|
|
|
229
|
|
|
|
157
|
|
|
|
153
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
193,068
|
|
|
|
235,822
|
|
|
|
257,810
|
|
|
|
297,229
|
|
|
|
301,054
|
|
|
|
149,198
|
|
|
|
159,366
|
|
Income from operations
|
|
|
5,719
|
|
|
|
5,547
|
|
|
|
7,564
|
|
|
|
3,554
|
|
|
|
10,655
|
|
|
|
4,316
|
|
|
|
11,630
|
|
Net interest expense
|
|
|
258
|
|
|
|
5,643
|
|
|
|
11,853
|
|
|
|
9,892
|
|
|
|
7,119
|
|
|
|
3,693
|
|
|
|
3,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
5,461
|
|
|
|
(96
|
)
|
|
|
(4,289
|
)
|
|
|
(6,338
|
)
|
|
|
3,536
|
|
|
|
623
|
|
|
|
8,087
|
|
Income tax provision (benefit)(2)
|
|
|
39
|
|
|
|
613
|
|
|
|
(3,503
|
)
|
|
|
55,061
|
|
|
|
135
|
|
|
|
120
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
5,422
|
|
|
$
|
(709
|
)
|
|
$
|
(786
|
)
|
|
$
|
(61,399
|
)
|
|
$
|
3,401
|
|
|
$
|
503
|
|
|
$
|
7,983
|
|
Undeclared preferred dividend
|
|
|
|
|
|
|
(4,257
|
)
|
|
|
(8,920
|
)
|
|
|
(10,175
|
)
|
|
|
(11,599
|
)
|
|
|
(5,420
|
)
|
|
|
(6,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
5,422
|
|
|
$
|
(4,966
|
)
|
|
$
|
(9,706
|
)
|
|
$
|
(71,574
|
)
|
|
$
|
(8,198
|
)
|
|
$
|
(4,917
|
)
|
|
$
|
1,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
NM
|
|
|
|
NM
|
|
|
$
|
(9.24
|
)
|
|
$
|
(68.17
|
)
|
|
$
|
(7.81
|
)
|
|
$
|
(4.68
|
)
|
|
$
|
1.72
|
|
Weighted average common shares outstanding basic and
diluted
|
|
|
NM
|
|
|
|
NM
|
|
|
|
1,050
|
|
|
|
1,050
|
|
|
|
1,050
|
|
|
|
1,050
|
|
|
|
1,050
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended(1)
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
December 25,
|
|
|
December 31,
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided from operating activities
|
|
$
|
23,015
|
|
|
$
|
23,397
|
|
|
$
|
31,291
|
|
|
$
|
32,501
|
|
|
$
|
33,782
|
|
|
$
|
10,829
|
|
|
$
|
14,943
|
|
Net cash used for investing activities
|
|
$
|
(27,976
|
)
|
|
$
|
(27,077
|
)
|
|
$
|
(35,536
|
)
|
|
$
|
(43,088
|
)
|
|
$
|
(24,957
|
)
|
|
$
|
(12,627
|
)
|
|
$
|
(8,568
|
)
|
Net cash (used in) provided by financing activities
|
|
$
|
4,931
|
|
|
$
|
3,855
|
|
|
$
|
4,156
|
|
|
$
|
10,529
|
|
|
$
|
(9,258
|
)
|
|
$
|
1,362
|
|
|
$
|
(6,356
|
)
|
Capital expenditures
|
|
$
|
21,477
|
|
|
$
|
21,079
|
|
|
$
|
28,782
|
|
|
$
|
24,578
|
|
|
$
|
14,121
|
|
|
$
|
6,292
|
|
|
$
|
3,110
|
|
Adjusted EBITDA(4)
|
|
$
|
13,373
|
|
|
$
|
18,407
|
|
|
$
|
20,260
|
|
|
$
|
27,218
|
|
|
$
|
34,790
|
|
|
$
|
13,020
|
|
|
$
|
20,770
|
|
Adjusted EBITDA margin
|
|
|
6.7
|
%
|
|
|
7.6
|
%
|
|
|
7.6
|
%
|
|
|
9.0
|
%
|
|
|
11.2
|
%
|
|
|
8.5
|
%
|
|
|
12.1
|
%
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restaurants (at end of period)
|
|
|
49
|
|
|
|
57
|
|
|
|
63
|
|
|
|
75
|
|
|
|
81
|
|
|
|
79
|
|
|
|
85
|
|
Total comparable restaurants (at end of period)
|
|
|
35
|
|
|
|
44
|
|
|
|
49
|
|
|
|
54
|
|
|
|
61
|
|
|
|
62
|
|
|
|
74
|
|
Change in comparable restaurant sales
|
|
|
1.1
|
%
|
|
|
(0.1
|
)%
|
|
|
0.6
|
%
|
|
|
(3.8
|
)%
|
|
|
(7.4
|
)%
|
|
|
(9.1
|
)%
|
|
|
1.1
|
%
|
BRAVO!:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurants (at end of period)
|
|
|
30
|
|
|
|
34
|
|
|
|
38
|
|
|
|
44
|
|
|
|
45
|
|
|
|
45
|
|
|
|
47
|
|
Total comparable restaurants (at end of period)
|
|
|
21
|
|
|
|
28
|
|
|
|
31
|
|
|
|
33
|
|
|
|
36
|
|
|
|
37
|
|
|
|
43
|
|
Average sales per comparable restaurant
|
|
$
|
4,002
|
|
|
$
|
3,919
|
|
|
$
|
3,890
|
|
|
$
|
3,715
|
|
|
$
|
3,457
|
|
|
$
|
1,713
|
|
|
$
|
1,679
|
|
Change in comparable restaurant sales
|
|
|
0.2
|
%
|
|
|
(0.1
|
)%
|
|
|
0.9
|
%
|
|
|
(4.1
|
)%
|
|
|
(7.1
|
)%
|
|
|
(9.2
|
)%
|
|
|
(0.3
|
)%
|
BRIO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurants (at end of period)
|
|
|
19
|
|
|
|
23
|
|
|
|
25
|
|
|
|
31
|
|
|
|
36
|
|
|
|
34
|
|
|
|
38
|
|
Total comparable restaurants (at end of period)
|
|
|
14
|
|
|
|
16
|
|
|
|
18
|
|
|
|
21
|
|
|
|
25
|
|
|
|
25
|
|
|
|
31
|
|
Average sales per comparable restaurant
|
|
$
|
5,320
|
|
|
$
|
5,479
|
|
|
$
|
5,308
|
|
|
$
|
5,401
|
|
|
$
|
4,812
|
|
|
$
|
2,433
|
|
|
$
|
2,506
|
|
Change in comparable restaurant sales
|
|
|
2.1
|
%
|
|
|
(0.1
|
)%
|
|
|
0.2
|
%
|
|
|
(3.6
|
)%
|
|
|
(7.8
|
)%
|
|
|
(9.1
|
)%
|
|
|
2.4
|
%
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
654
|
|
|
$
|
829
|
|
|
$
|
740
|
|
|
$
|
682
|
|
|
$
|
249
|
|
|
$
|
246
|
|
|
$
|
268
|
|
Working capital (deficit)
|
|
$
|
(30,518
|
)
|
|
$
|
(18,334
|
)
|
|
$
|
(33,110
|
)
|
|
$
|
(34,320
|
)
|
|
$
|
(36,156
|
)
|
|
$
|
(33,797
|
)
|
|
$
|
(32,614
|
)
|
Total assets
|
|
$
|
95,992
|
|
|
$
|
180,132
|
|
|
$
|
195,048
|
|
|
$
|
157,764
|
|
|
$
|
160,842
|
|
|
$
|
160,401
|
|
|
$
|
159,144
|
|
Total debt
|
|
$
|
9,607
|
|
|
$
|
112,056
|
|
|
$
|
114,136
|
|
|
$
|
125,950
|
|
|
$
|
118,031
|
|
|
$
|
127,975
|
|
|
$
|
111,790
|
|
Total stockholders equity (deficiency in assets)
|
|
$
|
22,814
|
|
|
$
|
(13,906
|
)
|
|
$
|
(14,692
|
)
|
|
$
|
(76,091
|
)
|
|
$
|
(72,690
|
)
|
|
$
|
(75,590
|
)
|
|
$
|
(64,707
|
)
|
|
|
|
|
(1)
|
|
We utilize a 52- or 53-week accounting period which ends on the
Sunday closest to December 31. The fiscal years ended
December 27, 2009, December 28, 2008,
December 30, 2007 and December 25, 2005, each have
52 weeks, while the fiscal year ended December 31,
2006 had 53 weeks. Average sales per comparable restaurant
have been adjusted to reflect 52 weeks.
|
|
(2)
|
|
The Company was structured as a Subchapter S corporation
for the year ended December 25, 2005 and was changed to a C
corporation effective June 29, 2006 as part of the 2006
recapitalization. As a result, corporate income taxes and per
share data for 2005 and 2006 is not meaningful and therefore not
shown in the table above. If the Company had been a C
corporation during 2005 and the pre-recapitalization period of
2006, the income tax expense would have been $1.9 million
and $0.5 million, respectively, higher than the amounts
presented in the table above.
|
|
(3)
|
|
Does not give effect to the reorganization transactions expected
to occur prior to the consummation of this offering. See
Reorganization Transactions.
|
|
(4)
|
|
Adjusted EBITDA represents earnings before interest, taxes,
depreciation and amortization plus the sum of asset impairment
charges and management fees and expenses. We are presenting
Adjusted EBITDA, which is
|
40
|
|
|
|
|
not required by U.S. generally accepted accounting principles,
or GAAP, because it provides an additional measure to view our
operations, when considered with both our GAAP results and the
reconciliation to net income (loss) which we believe provides a
more complete understanding of our business than could be
obtained absent this disclosure. We use Adjusted EBITDA,
together with financial measures prepared in accordance with
GAAP, such as revenue and cash flows from operations, to assess
our historical and prospective operating performance and to
enhance our understanding of our core operating performance.
Adjusted EBITDA is presented because: (i) we believe it is
a useful measure for investors to assess the operating
performance of our business without the effect of non-cash
depreciation and amortization expenses and asset impairment
charges; (ii) we believe that investors will find it useful
in assessing our ability to service or incur indebtedness; and
(iii) we use Adjusted EBITDA internally as a benchmark to
evaluate our operating performance or compare our performance to
that of our competitors. The use of Adjusted EBITDA as a
performance measure permits a comparative assessment of our
operating performance relative to our performance based on our
GAAP results, while isolating the effects of some items that
vary from period to period without any correlation to core
operating performance or that vary widely among similar
companies. Companies within our industry exhibit significant
variations with respect to capital structures and cost of
capital (which affect interest expense and tax rates) and
differences in book depreciation of facilities and equipment
(which affect relative depreciation expense), including
significant differences in the depreciable lives of similar
assets among various companies. Our management believes that
Adjusted EBITDA facilitates company-to-company comparisons
within our industry by eliminating some of the foregoing
variations.
|
Adjusted EBITDA is not a measurement determined in accordance
with GAAP and should not be considered in isolation or as an
alternative to net income, net cash provided by operating,
investing or financing activities or other financial statement
data presented as indicators of financial performance or
liquidity, each as presented in accordance with GAAP. Adjusted
EBITDA should not be considered as a measure of discretionary
cash available to us to invest in the growth of our business.
Adjusted EBITDA as presented may not be comparable to other
similarly titled measures of other companies and our
presentation of Adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by unusual
items.
Our management recognizes that Adjusted EBITDA has limitations
as an analytical financial measure, including the following:
|
|
|
|
|
Adjusted EBITDA does not reflect our capital expenditures or
future requirements for capital expenditures;
|
|
|
|
Adjusted EBITDA does not reflect the interest expense, or the
cash requirements necessary to service interest or principal
payments, associated with our indebtedness;
|
|
|
|
Adjusted EBITDA does not reflect depreciation and amortization,
which are non-cash charges, although the assets being
depreciated and amortized will likely have to be replaced in the
future, nor does Adjusted EBITDA reflect any cash requirements
for such replacements; and
|
|
|
|
Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs.
|
This prospectus also includes information concerning Adjusted
EBITDA margin, which is defined as the ratio of Adjusted EBITDA
to revenues. We present Adjusted EBITDA margin because it is
used by management as a performance measurement to judge the
level of Adjusted EBITDA generated from revenues and we believe
its inclusion is appropriate to provide additional information
to investors.
41
A reconciliation of Adjusted EBITDA and EBITDA to net income is
provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
December 25,
|
|
|
December 31,
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
5,422
|
|
|
$
|
(709
|
)
|
|
$
|
(786
|
)
|
|
$
|
(61,399
|
)
|
|
$
|
3,401
|
|
|
$
|
503
|
|
|
$
|
7,983
|
|
Income tax expense (benefit)
|
|
|
39
|
|
|
|
613
|
|
|
|
(3,503
|
)
|
|
|
55,061
|
|
|
|
135
|
|
|
|
120
|
|
|
|
104
|
|
Interest expense
|
|
|
258
|
|
|
|
5,643
|
|
|
|
11,853
|
|
|
|
9,892
|
|
|
|
7,119
|
|
|
|
3,693
|
|
|
|
3,543
|
|
Depreciation and amortization
|
|
|
7,179
|
|
|
|
9,414
|
|
|
|
12,309
|
|
|
|
14,651
|
|
|
|
16,088
|
|
|
|
7,889
|
|
|
|
8,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
12,898
|
|
|
$
|
14,961
|
|
|
$
|
19,873
|
|
|
$
|
18,205
|
|
|
$
|
26,743
|
|
|
$
|
12,205
|
|
|
$
|
19,965
|
|
Asset impairment charges
|
|
|
475
|
|
|
|
3,266
|
|
|
|
|
|
|
|
8,506
|
|
|
|
6,436
|
|
|
|
|
|
|
|
|
|
Management fees and expenses
|
|
|
|
|
|
|
180
|
|
|
|
387
|
|
|
|
507
|
|
|
|
1,611
|
|
|
|
815
|
|
|
|
805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
13,373
|
|
|
$
|
18,407
|
|
|
$
|
20,260
|
|
|
$
|
27,218
|
|
|
$
|
34,790
|
|
|
$
|
13,020
|
|
|
$
|
20,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Managements
Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with
Selected Historical Consolidated Financial and Operating
Data and our consolidated financial statements and the
related notes to those statements included elsewhere in this
prospectus. The following discussion contains, in addition to
historical information, forward-looking statements that include
risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set
forth under the heading Risk Factors and elsewhere
in this prospectus.
Overview
We are a leading owner and operator of two distinct Italian
restaurant brands, BRAVO! Cucina Italiana (BRAVO!)
and BRIO Tuscan Grille (BRIO). We have positioned
our brands as multifaceted culinary destinations that deliver
the ambiance, design elements and food quality reminiscent of
fine dining restaurants at a value typically offered by casual
dining establishments, a combination known as the upscale
affordable dining segment. Each of our brands provides its
guests with a fine dining experience and value by serving
affordable cuisine prepared using fresh flavorful ingredients
and authentic Italian cooking methods, combined with attentive
service in an attractive, lively atmosphere. We strive to be the
best Italian restaurant company in America and are focused on
providing our guests an excellent dining experience through
consistency of execution. We believe that both of our brands
appeal to a broad base of consumers, especially to women whom we
believe currently account for approximately 62% and 65% of our
guest traffic at BRAVO! and BRIO, respectively.
Our business is highly sensitive to changes in guest traffic.
Increases and decreases in guest traffic can have a significant
impact on our financial results. In recent years, we have faced
and we continue to face uncertain economic conditions, which
have resulted in changes to our guests discretionary
spending. Consistent with many other companies in the restaurant
industry, we have seen a decrease in sales from our comparable
restaurants as well as our guest counts. To adjust to this
decrease in guest spending, we have focused on controlling
product margins and costs while maintaining our high standards
for food quality and service and enhancing our guests
dining experience. We have worked with our distributors and
suppliers to lower commodity costs, become more efficient with
the use of our employee base and found new ways to improve
efficiencies across our company. We have implemented limited
incremental discounting as we have opted to focus on improving
our menu items as opposed to discounting them. While we knew
that limited incremental discounting might impact our guest
counts and sales, we directed our efforts to improve our
operating margins and Adjusted EBITDA. Additionally, we have
focused resources on highlighting our menu items and promoting
our non-entrée selections such as appetizers, desserts and
beverages. These efforts have resulted in an increase in the
average guest check, which partially offset a decline in guest
counts.
Our Growth
Strategies and Outlook
Our growth model is comprised of the following three primary
drivers:
|
|
|
|
|
Pursue Disciplined Restaurant Growth.
We
believe that there are significant opportunities to grow our
brands on a nationwide basis in both existing and new markets
where we believe we can generate attractive unit level
economics. We are presented with many opportunities to grow our
restaurant base, and we carefully evaluate each opportunity to
determine that each site selected for development has a high
probability of meeting our return of investment targets. Our
disciplined growth strategy includes accepting only those sites
that we believe present attractive rent and tenant allowance
structures as well as reasonable construction costs given the
sales potential of the site. We believe that each brand is at an
early stage of its expansion.
|
|
|
|
Grow Existing Restaurant Sales.
We will
continue to pursue targeted local marketing efforts and evaluate
operational initiatives designed to increase unit volumes
without relying on discounting programs.
|
43
|
|
|
|
|
Maintain Margins Throughout Our Growth.
We
will continue to aggressively protect our margins using
economies of scale, including marketing and purchasing synergies
between our brands and leveraging our corporate infrastructure
as we continue to open new restaurants.
|
We opened two new restaurants in the first quarter of 2010 and
two in the second quarter of 2010, with one additional
restaurant to be opened later this year. We plan to open five to
six new restaurants in 2011 and aim to open between 45 and 50
new restaurants over the next five years. Based on our current
real estate development plans, we believe our combined, expected
cash flows from operations, available borrowings under our new
senior credit facilities and expected landlord construction
contributions should be sufficient to finance our planned
capital expenditures and other operating activities for the next
twelve months. In 2009, our capital expenditure outlays equaled
approximately $14.1 million, and we currently estimate 2010
capital expenditure outlays to range between $10 million
and $12 million, net of agreed upon landlord construction
contributions and excluding approximately $1.4 million to
$2.0 million of pre-opening costs for new restaurants that
are not capitalized.
Performance
Indicators
We use the following key performance indicators in evaluating
the performance of our restaurants:
|
|
|
|
|
Comparable Restaurants and Comparable Restaurant
Sales
. We consider a restaurant to be comparable
after it has been opened for the entire previous fiscal year.
Changes in comparable restaurant sales reflect changes in sales
for the comparable group of restaurants over a specified period
of time. Changes in comparable sales reflect changes in guest
count trends as well as changes in average check. Our comparable
restaurant base consisted of 62 and 74 restaurants at
June 28, 2009 and June 27, 2010, respectively, and 49,
54 and 61 restaurants at December 30, 2007,
December 28, 2008 and December 27, 2009, respectively.
|
|
|
|
Average Check.
Average check is calculated by
dividing revenues by guest counts for a given time period.
Average check reflects menu price influences as well as changes
in menu mix. Management uses this indicator to analyze trends in
guests preferences, effectiveness of menu changes and price
increases and per guest expenditures.
|
|
|
|
Average Unit Volume.
Average unit volume
consists of the average sales of our restaurants over a certain
period of time. This measure is calculated by dividing total
restaurant sales within a period by the relevant period. This
indicator assists management in measuring changes in guest
traffic, pricing and development of our brands.
|
|
|
|
Operating Margin.
Operating margin represents
income from operations before interest and taxes as a percentage
of our revenues. By monitoring and controlling our operating
margins, we can gauge the overall profitability of our company.
|
Key Financial
Definitions
Revenues.
Revenues primarily consist of food
and beverage sales, net of any discounts, such as management
meals, employee meals and coupons, associated with each sale.
Revenues in a given period are directly influenced by the number
of operating weeks in such period and comparable restaurant
sales growth.
Cost of Sales.
Cost of sales consist primarily
of food and beverage related costs. The components of cost of
sales are variable in nature, change with sales volume and are
subject to increases or decreases based on fluctuations in
commodity costs. Our cost of sales depends in part on the
success of controls we have in place to manage our food and
beverage costs.
Labor Costs.
Labor costs include restaurant
management salaries, front and back of house hourly wages and
restaurant-level manager bonus expense, employee benefits and
payroll taxes.
Operating Costs.
Operating costs consist
primarily of restaurant-related operating expenses, such as
supplies, utilities, repairs and maintenance, credit card fees,
marketing costs, training, recruiting, travel and general
liability insurance costs.
44
Occupancy Costs.
Occupancy costs include rent
charges, both fixed and variable, as well as common area
maintenance costs, property insurance and taxes, the
amortization of tenant allowances and the adjustment to
straight-line rent.
General and Administrative.
General and
administrative costs include costs associated with corporate and
administrative functions that support our operations, including
management and staff compensation and benefits, travel, legal
and professional fees, corporate office rent and other related
corporate costs. We expect to incur a compensation charge
related to options to purchase our common stock that will become
fully vested and exercisable upon the consummation of this
offering. See Dilution and Compensation
Discussion and Analysis Equity Compensation.
Based upon an initial public offering price of
$
per share, the midpoint of the price range set forth on the
cover of this prospectus, we expect this compensation expense
will be approximately
$ .
Restaurant Pre-opening Costs.
Restaurant
pre-opening expenses consist of costs incurred prior to opening
a restaurant, including executive chef and manager salaries,
relocation costs, recruiting expenses, employee payroll and
related training costs for new employees, including rehearsal of
service activities. Pre-opening costs also include an accrual
for straight-line rent recorded during the period between date
of possession and the restaurant opening date for our leased
restaurant locations.
Impairment.
We review long-lived assets, such
as property and equipment and intangibles, for impairment when
events or circumstances indicate the carrying value of the
assets may not be recoverable. In determining the recoverability
of the asset value, an analysis is performed at the individual
restaurant level and primarily includes an assessment of
historical cash flows and other relevant factors and
circumstances. Factors considered include, but are not limited
to, significant underperformance relative to expected historical
or projected future operating results, significant changes in
the use of assets, changes in our overall business strategy and
significant negative industry or economic trends. See
Significant Accounting
Policies Impairment of Long-Lived Assets for
further detail.
Net interest expense.
Net interest expense
consists primarily of interest on our outstanding indebtedness,
net of payments and
mark-to-market
adjustments on an interest rate swap agreement that expired in
2009.
45
Results of
Operations
The following table presents the combined consolidated statement
of operations for the years ended December 30, 2007,
December 28, 2008 and December 27, 2009, and the
twenty-six weeks ended June 28, 2009 and June 27,
2010, as well as, for the periods indicated, selected operating
data as a percentage of revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
December 30,
|
|
|
% of
|
|
|
December 28,
|
|
|
% of
|
|
|
December 27,
|
|
|
% of
|
|
|
June 28,
|
|
|
% of
|
|
|
June 27,
|
|
|
% of
|
|
|
|
2007
|
|
|
Revenue
|
|
|
2008
|
|
|
Revenue
|
|
|
2009
|
|
|
Revenue
|
|
|
2009
|
|
|
Revenue
|
|
|
2010
|
|
|
Revenue
|
|
|
|
(Dollars in thousands, unless percentage)
|
|
REVENUES
|
|
$
|
265,374
|
|
|
|
|
|
|
$
|
300,783
|
|
|
|
|
|
|
$
|
311,709
|
|
|
|
|
|
|
$
|
153,514
|
|
|
|
|
|
|
$
|
170,996
|
|
|
|
|
|
RESTAURANT OPERATING COSTS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
75,340
|
|
|
|
28.4
|
%
|
|
|
84,618
|
|
|
|
28.1
|
%
|
|
|
82,609
|
|
|
|
26.5
|
%
|
|
|
40,765
|
|
|
|
26.6
|
%
|
|
|
44,389
|
|
|
|
26.0
|
%
|
Labor
|
|
|
89,663
|
|
|
|
33.8
|
%
|
|
|
102,323
|
|
|
|
34.0
|
%
|
|
|
106,330
|
|
|
|
34.1
|
%
|
|
|
53,733
|
|
|
|
35.0
|
%
|
|
|
58,100
|
|
|
|
34.0
|
%
|
Operating
|
|
|
41,567
|
|
|
|
15.7
|
%
|
|
|
47,690
|
|
|
|
15.9
|
%
|
|
|
48,917
|
|
|
|
15.7
|
%
|
|
|
25,265
|
|
|
|
16.5
|
%
|
|
|
26,560
|
|
|
|
15.5
|
%
|
Occupancy
|
|
|
16,054
|
|
|
|
6.0
|
%
|
|
|
18,736
|
|
|
|
6.2
|
%
|
|
|
19,636
|
|
|
|
6.3
|
%
|
|
|
10,435
|
|
|
|
6.8
|
%
|
|
|
11,310
|
|
|
|
6.6
|
%
|
General and administrative expenses
|
|
|
16,768
|
|
|
|
6.3
|
%
|
|
|
15,042
|
|
|
|
5.0
|
%
|
|
|
17,123
|
|
|
|
5.5
|
%
|
|
|
8,898
|
|
|
|
5.8
|
%
|
|
|
8,936
|
|
|
|
5.2
|
%
|
Restaurant pre-opening costs
|
|
|
5,647
|
|
|
|
2.1
|
%
|
|
|
5,434
|
|
|
|
1.8
|
%
|
|
|
3,758
|
|
|
|
1.2
|
%
|
|
|
2,060
|
|
|
|
1.3
|
%
|
|
|
1,685
|
|
|
|
1.0
|
%
|
Depreciation and amortization
|
|
|
12,309
|
|
|
|
4.6
|
%
|
|
|
14,651
|
|
|
|
4.9
|
%
|
|
|
16,088
|
|
|
|
5.2
|
%
|
|
|
7,889
|
|
|
|
5.1
|
%
|
|
|
8,335
|
|
|
|
4.9
|
%
|
Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
8,506
|
|
|
|
2.8
|
%
|
|
|
6,436
|
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses net
|
|
|
462
|
|
|
|
0.2
|
%
|
|
|
229
|
|
|
|
0.1
|
%
|
|
|
157
|
|
|
|
0.1
|
%
|
|
|
153
|
|
|
|
0.1
|
%
|
|
|
51
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
257,810
|
|
|
|
97.1
|
%
|
|
|
297,229
|
|
|
|
98.8
|
%
|
|
|
301,054
|
|
|
|
96.6
|
%
|
|
|
149,198
|
|
|
|
97.2
|
%
|
|
|
159,366
|
|
|
|
93.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
|
7,564
|
|
|
|
2.9
|
%
|
|
|
3,554
|
|
|
|
1.2
|
%
|
|
|
10,655
|
|
|
|
3.4
|
%
|
|
|
4,316
|
|
|
|
2.8
|
%
|
|
|
11,630
|
|
|
|
6.8
|
%
|
NET INTEREST EXPENSE
|
|
|
11,853
|
|
|
|
4.5
|
%
|
|
|
9,892
|
|
|
|
3.3
|
%
|
|
|
7,119
|
|
|
|
2.3
|
%
|
|
|
3,693
|
|
|
|
2.4
|
%
|
|
|
3,543
|
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(4,289
|
)
|
|
|
(1.6
|
)%
|
|
|
(6,338
|
)
|
|
|
(2.1
|
)%
|
|
|
3,536
|
|
|
|
1.1
|
%
|
|
|
623
|
|
|
|
0.4
|
%
|
|
|
8,087
|
|
|
|
4.7
|
%
|
INCOME TAX EXPENSE (BENEFIT)
|
|
|
(3,503
|
)
|
|
|
(1.3
|
)%
|
|
|
55,061
|
|
|
|
18.3
|
%
|
|
|
135
|
|
|
|
0.0
|
%
|
|
|
120
|
|
|
|
0.1
|
%
|
|
|
104
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(786
|
)
|
|
|
(0.3
|
)%
|
|
$
|
(61,399
|
)
|
|
|
(20.4
|
)%
|
|
$
|
3,401
|
|
|
|
1.1
|
%
|
|
$
|
503
|
|
|
|
0.3
|
%
|
|
$
|
7,983
|
|
|
|
4.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks
Ended June 27, 2010 Compared to Twenty-Six Weeks Ended
June 28, 2009
Revenues.
Revenues increased
$17.5 million, or 11.4%, to $171.0 million for the
twenty-six weeks ended June 27, 2010, as compared to
$153.5 million for the twenty-six weeks ended June 28,
2009. A majority of this increase, $16.0 million, was due
to an additional 157 operating weeks provided by four new
restaurants opened in 2010, and seven new restaurants opened in
2009. Also contributing to the overall increase in revenues was
an increase in comparable restaurant sales of $1.5 million,
or 1.1%, which was driven by an increase in average check and
resulted in additional revenues of $4.2 million. This was
partially offset by a 1.8% decline in guest count that resulted
in a $2.7 million decrease in revenues.
Cost of Sales.
Cost of sales increased
$3.6 million, or 8.9%, to $44.4 million for the
twenty-six weeks ended June 27, 2010, as compared to
$40.8 million for the twenty-six weeks ended June 28,
2009. As a percentage of revenues, cost of sales declined to
26.0% in the first twenty-six weeks of 2010, from 26.6% in the
same period in 2009. As a percentage of revenues, food costs
decreased 0.5% but increased in total dollars by
$2.9 million for 2009 as compared to 2008. During that same
period, beverage costs decreased 0.1% as a percentage of
revenues but increased in total dollars by $0.7 million.
This improvement in food cost, as a percentage of revenue, was
primarily a result of lower commodity costs, improvements in
food cost from menu management and operating efficiencies.
Labor Costs.
Labor costs increased
$4.4 million, or 8.1%, to $58.1 million for the
twenty-six weeks ended June 27, 2010, as compared to
$53.7 million for the twenty-six weeks ended June 28,
2009. This increase was a result of an additional
$5.1 million of labor incurred from new restaurants opened
during 2009 and 2010. This impact was partially offset by a
decrease of $0.7 million relating to a reduction in average
management headcount per restaurant. As a percentage of
revenues, labor costs decreased to 34.0% in the first twenty-six
weeks of 2010,
46
from 35.0% in the same period in 2009, primarily as a result of
cost reductions in management headcount and positive leverage
related to an increase in comparable restaurants.
Operating Costs.
Operating costs increased
$1.3 million, or 5.1%, to $26.6 million for the
twenty-six weeks ended June 27, 2010, as compared to
$25.3 million for the twenty-six weeks ended June 28,
2009. As a percentage of revenues, operating costs decreased to
15.5% in the first twenty-six weeks of 2010, compared to 16.5%
in the same period in 2009. Lower restaurant supplies, insurance
and utility costs as a percentage of revenues were the main
drivers of the decrease in operating costs relative to revenues.
Occupancy Costs.
Occupancy costs increased
$0.9 million, or 8.4%, to $11.3 million for the
twenty-six weeks ended June 27, 2010, as compared to
$10.4 million for the twenty-six weeks ended June 28,
2009. As a percentage of revenues, occupancy costs decreased to
6.6% in the first twenty-six weeks of 2010, from 6.8% in the
same period in 2009. The modest change in occupancy costs as a
percentage of revenues was a result of leverage from positive
comparable restaurant sales.
General and Administrative.
General and
administrative costs were $8.9 million for each of the
twenty-six weeks ended June 27, 2010 and June 28,
2009. As a percentage of revenues, general and administrative
expenses decreased to 5.2% for the second quarter of 2010, as
compared to 5.8% for the same period in 2009. This change
relative to revenues was primarily attributable to a decrease in
professional fees and travel costs as a percentage of revenues.
Restaurant Pre-opening Costs.
Pre-opening
costs decreased by $0.4 million, or 18.2%, to $1.7 for the
twenty-six weeks ended June 27, 2010, as compared to
$2.1 million for the twenty-six weeks ended June 28,
2009. This was due to the timing of restaurant openings during
2010 and 2009, as well as efficiencies that were achieved as we
continue to open more restaurants. Four restaurants were opened
during each of the twenty-six weeks ended June 27, 2010 and
June 28, 2009.
Depreciation and Amortization.
As a percentage
of revenues, depreciation and amortization expenses decreased to
4.9% for the twenty-six weeks ended June 27, 2010, from
5.1% for the twenty-six weeks ended June 28, 2009. This
change was primarily the result of leverage from positive
comparable restaurant sales and was partially attributable to
the impact resulting from restaurants considered impaired at the
end of 2009.
Net Interest Expense.
Net interest expense
decreased $0.2 million, or 4.1%, to $3.5 million for
the twenty-six weeks ended June 27, 2010, as compared to
$3.7 million for the twenty-six weeks ended June 28,
2009. This decrease was due to lower overall average interest
rates during the first twenty-six weeks of 2010 as compared to
interest rates in the first twenty-six weeks of 2009.
Income Taxes.
Income tax expense was
$0.1 million for each of the first twenty-six weeks of 2010
and 2009. This represents liabilities related to taxable income
at the state and local levels.
Year Ended
December 27, 2009 Compared to Year Ended December 28,
2008
Revenues.
Revenues increased
$10.9 million, or 3.6%, to $311.7 million in fiscal
2009, from $300.8 million in fiscal 2008. This increase was
driven by $31.6 million in additional revenues related to
an additional 494 operating weeks provided primarily by new
restaurants opened in 2009 and 2008. This increase was partially
offset by a $19.7 million, or 7.4%, decrease in sales from
our comparable restaurants. Lower comparable restaurant sales
were due to a 8.3% decline in guest counts that resulted in a
$22.1 million decrease in revenues. This was partially
offset by an increase in average check during fiscal 2009, which
resulted in additional revenues of $2.4 million.
Cost of Sales.
Cost of sales decreased
$2.0 million, or 2.4%, to $82.6 million in fiscal
2009, from $84.6 million in 2008. As a percent of revenues,
cost of sales declined to 26.5% in 2009, from 28.1% in 2008.
Food costs decreased 1.5% as a percentage of revenues and a
total of $2.0 million for 2009 as compared to 2008.
Beverage costs remained flat as a percentage of revenues and
dollars in 2009 as compared to 2008. The improvement in food
costs, as a percentage of revenues, was a result of lower
commodity costs, improvements in food cost from menu management
and operating efficiencies.
47
Labor Costs.
Labor costs increased
$4.0 million, or 3.9%, to $106.3 million in the year
ended December 27, 2009, from $102.3 million in fiscal
2008. This increase was a result of an additional
$11.1 million of labor costs incurred from new restaurants
opened during 2008 and 2009. This impact was partially offset by
reductions in our more established restaurants of
$3.6 million due to improved hourly labor efficiency,
$1.1 million relating to a reduction in average management
headcount per restaurant and $2.1 million of lower employee
benefits, including payroll taxes and workers compensation
costs due to better than forecasted claim experience. As a
percent of revenues, labor costs increased slightly to 34.1% in
2009, from 34.0% in 2008. This increase of labor costs as a
percentage of revenues was primarily due to decreased leverage
from lower comparable restaurant sales.
Operating Costs.
Operating costs increased
$1.2 million, or 2.6%, to $48.9 million in 2009, from
$47.7 million in 2008. As a percent of revenues, operating
costs decreased to 15.7% in 2009, compared to 15.9% in 2008.
Lower restaurant supplies and utility costs as a percentage of
revenues were the primary drivers of the decrease relative to
revenues, partially offset by higher repair and maintenance
expense and advertising costs as a percentage of revenues as
well as the decrease in sales leverage from lower comparable
restaurant sales.
Occupancy Costs.
Occupancy costs increased
$0.9 million, or 4.8%, to $19.6 million in fiscal
2009, from $18.7 million in fiscal 2008. As a percentage of
revenues, occupancy costs increased to 6.3% in 2009, from 6.2%
in 2008. The increase in occupancy costs as a percentage of
revenues was primarily due to the recognition of deferred lease
incentives of $1.2 million associated with the assignment
of a lease related to the sale of a restaurant, which was
largely offset by the impact of decreased leverage from lower
comparable restaurant sales.
General and Administrative.
As a percent of
revenues, general and administrative expenses increased to 5.5%
in 2009, from 5.0% in 2008. This change was primarily
attributable to an increase in management fees paid to our
private equity sponsors.
Restaurant Pre-opening Costs.
Pre-opening
costs decreased by $1.6 million, or 30.8%, to
$3.8 million in 2009, from $5.4 million in 2008. The
decrease in pre-opening costs was due to the impact of opening
seven new restaurants in 2009 compared to thirteen new
restaurants opened in 2008.
Depreciation and Amortization.
As a percent of
revenues, depreciation and amortization expenses increased to
5.2% in 2009 from 4.9% in 2008. This increase was partially
offset by the $1.1 million decrease in depreciation and
amortization expense associated with restaurants considered
impaired in 2008.
Impairment.
We review long-lived assets, such
as property and equipment and intangibles, subject to
amortization, for impairment when events or circumstances
indicate the carrying value of the assets may not be
recoverable. Factors considered include, but are not limited to,
significant underperformance relative to expected historical or
projected future operating results, significant changes in the
use of assets, changes in our overall business strategy and
significant negative industry or economic trends. Based upon our
analysis, we incurred a non-cash impairment charge of
$6.4 million in 2009 compared to $8.5 million in 2008.
The $2.1 million decrease in impairment on property and
equipment was related to the impairment of three restaurants in
2009 compared to five restaurants in 2008. This charge was
expected to reduce depreciation and amortization expense for
fiscal 2010 by $0.7 million.
Net Interest Expense.
Net interest expense
decreased $2.8 million, or 28%, to $7.1 million in
2009, from $9.9 million in 2008. The decrease was due to
lower average interest rates during fiscal 2009. We had a
three-year interest rate swap agreement which expired during
fiscal 2009. Changes in the market value of the interest rate
swap are recorded as an adjustment to interest expense. Such
adjustments reduced interest expense by $0.8 million in
fiscal 2009.
Income Taxes.
Income taxes decreased
$55.0 million to $0.1 million in 2009, from
$55.1 million in 2008. In 2008, we provided a valuation
allowance of $59.4 million against the total net deferred
tax asset. Net deferred tax assets consists primarily of
temporary differences and net operating loss and credit
carry-forwards. The valuation allowance was established as
management believed that it is more likely than not that these
deferred tax assets would not be realized. The tax benefits
relating to any reversal of the valuation allowance will be
recognized as a reduction of income tax expense.
48
Year Ended
December 28, 2008 Compared to Year Ended December 30,
2007
Revenues.
Revenues increased
$35.4 million, or 13.3%, to $300.8 million in 2008
from $265.4 million in 2007. This increase was driven by
$44.4 million in additional revenues related to an additional
509 operating weeks provided primarily by new restaurants opened
in 2008 and 2007. This increase was partially offset by a
$9.3 million, or 3.8%, decrease in sales from our
comparable restaurants. Lower comparable restaurant sales were
due to a 5.2% decline in guest counts and resulted in a
$12.6 million decrease in revenues. This was partially
offset by an increase in average check during fiscal 2008 and
resulted in additional revenues of $3.3 million.
Cost of Sales.
Cost of sales increased
$9.3 million, or 12.3%, to $84.6 million in fiscal
2008, from $75.3 million in fiscal 2007. As a percent of
revenues, cost of sales declined to 28.1% in 2008 compared to
28.4% in 2007. Food costs decreased 0.2% as a percentage of
revenues but increased in total dollars by $7.7 million for
2008 as compared to 2007. During that same period beverage costs
decreased 0.1% as a percentage of revenues but increased in
total dollars by $1.6 million. The improvement in food
costs as a percentage of revenues was a result of lower
commodity costs, improvements in food cost from menu management
and operating efficiencies.
Labor Costs.
Labor costs increased
$12.6 million, or 14.1%, to $102.3 million in 2008,
from $89.7 million in fiscal 2007. This increase was a
result of an additional $16.5 million of labor costs
incurred from new restaurants opened during 2007 and 2008. This
impact was partially offset by reductions in our more
established restaurants of $2.2 million relating to a
reduction in restaurant management bonuses and a reduction of
$1.9 million in improved hourly labor efficiency. As a
percent of revenues, labor costs increased slightly to 34.0% in
2008 from 33.8% in 2007. This increase in labor costs relative
to revenues was primarily due to decreased leverage from lower
comparable restaurant sales.
Operating Costs.
Operating costs increased
$6.1 million, or 14.7%, to $47.7 million in fiscal
2008, from $41.6 million in fiscal 2007. As a percent of
revenues, operating costs increased to 15.9% in 2008 compared to
15.7% in 2007. Operating costs as a percentage of revenues were
impacted by lower restaurant insurance costs relative to
revenues, which were offset by higher utility and advertising
costs relative to revenues as well as the decrease in sales
leverage from lower comparable restaurant sales.
Occupancy Costs.
Occupancy costs increased
$2.6 million, or 16.7%, to $18.7 million in the year
ended December 28, 2008, from $16.1 million in fiscal
2007. As a percentage of revenues, occupancy costs increased to
6.2% in 2008 from 6.0% in 2007. This change in occupancy costs
as a percentage of revenues was primarily the result of the
decrease in sales leverage from lower comparable restaurant
sales.
General and Administrative.
As a percent of
revenues, general and administrative expenses decreased to 5.0%
in 2008 from 6.3% in 2007. This change was primarily
attributable to costs associated with a decrease relative to
revenues in labor related costs such as reductions in bonus
payments and appreciation rights as well as a decrease relative
to revenues in professional fees, training and travel.
Restaurant Pre-opening Costs.
Pre-opening
costs decreased by $0.2 million, or 3.8%, to
$5.4 million in 2008 from $5.6 million in 2007. The
decrease in pre-opening costs was due to the timing of openings
throughout the respective periods.
Depreciation and Amortization.
As a percent of
revenues, depreciation and amortization expenses increased to
4.9% in 2008 from 4.6% in 2007. This change was primarily the
result of the decrease in sales leverage from lower comparable
restaurant sales.
Impairment.
Based upon our analysis, we
incurred a non-cash impairment charge of $8.5 million in
2008 compared to $0.0 in 2007. The $8.5 million increase in
impairment on property and equipment was related to the
impairment of five restaurants in 2008 compared to no
restaurants in 2007.
Net Interest Expense.
Interest expense
decreased $2.0 million, or 16.5%, to $9.9 million in
2008 from $11.9 million in 2007. The decrease was due to
lower average interest rates during fiscal 2008. We had a three
year interest rate swap agreement in place. Changes in the
market value of the interest rate swap are recorded as an
adjustment to interest expense. Such adjustments increased
interest expenses by $0.1 million in fiscal 2008.
49
Income Taxes.
Income taxes increased
$58.6 million to $55.1 million in 2008 from a
$3.5 million benefit in 2007. In 2008, we provided a
valuation allowance of $59.4 million against total net
deferred tax assets. Net deferred tax assets consists primarily
of temporary differences and net operating loss and credit
carry-forwards. The valuation allowance was established as
management believed that it was more likely than not that these
deferred tax assets would not be realized. The tax benefits
relating to any reversal of the valuation allowance will be
recognized as a reduction of income tax expense.
Liquidity
Our principal sources of cash have been net cash provided by
operating activities and borrowings under our existing senior
credit facilities. As of June 27, 2010, we had
approximately $0.3 million in cash and cash equivalents and
approximately $26.1 million of availability under our
existing senior credit facilities (after giving effect to
$3.9 million of outstanding letters of credit at
June 27, 2010). Our need for capital resources is driven by
our restaurant expansion plans, on-going maintenance of our
restaurants and investment in our corporate and information
technology infrastructures. Based on our current real estate
development plans, we believe our combined expected cash flows
from operations, available borrowings under our new senior
credit facilities and expected landlord construction
contributions will be sufficient to finance our planned capital
expenditures and other operating activities for the next twelve
months.
Consistent with many other restaurant and retail chain store
operations, we use operating lease arrangements for the majority
of our restaurant locations. We believe that these operating
lease arrangements provide appropriate leverage of our capital
structure in a financially efficient manner. Currently,
operating lease obligations are not reflected as indebtedness on
our consolidated balance sheet. The use of operating lease
arrangements will impact our capacity to borrow money under our
new senior credit facilities. However, we expect that restaurant
real estate operating leases will be expressly excluded from the
restrictions under our new senior credit facilities related to
the incurrence of funded indebtedness.
Our liquidity may be adversely affected by a number of factors,
including a decrease in guest traffic or average check per guest
due to changes in economic conditions, as described elsewhere in
this prospectus under the heading Risk Factors.
Twenty-Six Weeks
Ended June 28, 2009 and June 27, 2010
The following table summarizes the statement of cash flows for
the twenty-six weeks ended June 28, 2009 and June 27,
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended,
|
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Cash flows provided by operating activities
|
|
$
|
10,829
|
|
|
$
|
14,943
|
|
Cash flows used in investing activities
|
|
|
(12,627
|
)
|
|
|
(8,568
|
)
|
Cash flows provided by financing activities
|
|
|
1,362
|
|
|
|
(6,356
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(436
|
)
|
|
|
19
|
|
Cash and cash equivalents at beginning of period
|
|
|
682
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
246
|
|
|
$
|
268
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities.
Net cash provided by
operating activities was $14.9 million for the twenty-six
weeks ended June 27, 2010, compared to $10.8 million
for the twenty-six weeks ended June 28, 2009. Our business
is almost exclusively a cash business. Almost all of our
receipts come in the form of cash and cash equivalents and a
large majority of our expenditures are paid within a 30 day
period. The increase in net cash provided by operating
activities in the first twenty-six weeks of 2010 compared to the
same period in 2009 was primarily due to an increase in cash
receipts collected in excess of cash payments made for the
period ending June 28, 2009 as compared to June 27,
2010. Cash receipts for the twenty-six weeks ended June 28,
2009 and June 27, 2010 were
50
$153.2 million and $171.9 million, respectively. Cash
expenditures for the twenty-six weeks ended June 28, 2009
and June 27, 2010 were $141.5 million and
$155.6 million, respectively.
Investing Activities.
Net cash used in
investing activities was $8.6 million for the twenty-six
weeks ended June 27, 2010, compared to $12.6 million
for the twenty-six weeks ended June 28, 2009. We used cash
primarily to purchase property and equipment related to our
restaurant expansion plans. This decrease in spending is related
to the timing of restaurant openings as well as the number of
restaurants that were open during 2009 versus 2010. During the
first twenty-six weeks of 2010, we opened four restaurants and
began construction on one new restaurant, while in the first
twenty-six weeks of 2009 we opened four restaurants and had
three under construction.
Financing Activities.
Net cash used by
financing activities was $6.4 million for the first
twenty-six weeks of 2010, compared to $1.4 million of cash
provided in the first twenty-six weeks of 2009. Net cash used in
financing activities in 2010 was primarily the pay down of our
line of credit as well other debt payments. Net cash provided by
financing activities in 2009 was primarily due to borrowings on
our line of credit offset by scheduled debt payments.
As of June 27, 2010, we had no financing transactions,
arrangements or other relationships with any unconsolidated
entities or related parties. Additionally, we had no financing
arrangements involving synthetic leases or trading activities
involving commodity contracts.
Year Ended
December 27, 2009, Year Ended December 28, 2008 and
Year Ended December 30, 2007
The following table summarizes the statement of cash flows for
the years ended December 27, 2009, December 28, 2008
and December 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Cash flows provided by operating activities
|
|
$
|
31,291
|
|
|
$
|
32,501
|
|
|
$
|
33,782
|
|
Cash flows used in investing activities
|
|
|
(35,536
|
)
|
|
|
(43,088
|
)
|
|
|
(24,957
|
)
|
Cash flows provided by (used in) financing activities
|
|
|
4,156
|
|
|
|
10,529
|
|
|
|
(9,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(89
|
)
|
|
|
(58
|
)
|
|
|
(433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
829
|
|
|
|
740
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
740
|
|
|
$
|
682
|
|
|
$
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities.
Net cash provided by
operating activities was $33.8 million in 2009, compared to
$32.5 million in 2008 and $31.3 million in 2007. Our
business is almost exclusively a cash business. Almost all of
our receipts come in the form of cash and cash equivalents and a
large majority of our expenditures are paid within a 30 day
period. The increase in net cash provided by operating
activities in 2009 compared to 2008 was primarily due to an
increase in cash receipts in excess of cash expenditures from
the prior year. Cash receipts in 2009 and 2008 were
$310.1 million and $301.3 million, respectively. Cash
expenditures during 2009 and 2008 were $280.9 million and
$277.2 million, respectively. This increase of receipts in
excess of expenditures was partially offset by lower non-cash
costs, such as depreciation and amortization and asset
impairment charges of $17.5 million in 2009 as compared to
$20.0 million in 2008.
The increase in net cash provided by operating activities in
2008 compared to 2007 was primarily due to non-cash costs, such
as depreciation and amortization and asset impairment charges of
$20.0 million in 2008 as compared to $10.1 million in
2007. Partially offsetting this increase in non-cash costs was a
decrease of cash receipts in excess of cash expenditures for
2008 as compared to 2007. Cash receipts in 2008 and 2007 totaled
$301.3 million and $265.6 million, respectively. Cash
expenditures paid during 2008 and 2007 were $277.2 million
and $231.1 million, respectively.
51
Investing Activities.
Net cash used in
investing activities was $25.0 million in 2009,
$43.1 million in 2008 and $35.5 million in 2007. We
used cash primarily to purchase property and equipment related
to our restaurant expansion plans. The fluctuations in net cash
used in investing activities for the periods presented is
directly related to the number of new restaurants opened during
each period. In fiscal 2009, we opened seven new restaurants
and, in fiscal years 2008 and 2007, opened thirteen and six
restaurants, respectively.
Financing Activities.
Net cash used in
financing activities was $9.3 million in 2009, net cash
provided by financing activities was $10.5 million in 2008
and $4.2 million in 2007. Net cash used in financing
activities in 2009 was primarily the result of payments, net of
borrowings, of $8.2 million under our existing senior
revolving credit facility. Net cash provided by financing
activities in 2008 was primarily the result of borrowings, net
of payments, of $11.6 million under our existing senior
revolving credit facility. Net cash provided by financing
activities in 2007 was primarily the result of borrowings, net
of payments, of $2.2 million under our existing senior
revolving credit facility.
Capital
Resources
Future Capital Requirements.
Our capital
requirements are primarily dependent upon the pace of our real
estate development program and resulting new restaurants. Our
real estate development program is dependent upon many factors,
including economic conditions, real estate markets, site
locations and nature of lease agreements. Our capital
expenditure outlays are also dependent on costs for maintenance
and capacity addition in our existing restaurants as well as
information technology and other general corporate capital
expenditures.
We anticipate that each new BRAVO! restaurant will, on average,
require a total cash investment of $1.5 million to
$2.0 million (net of estimated tenant incentives). We
expect that each new BRIO restaurant will require an estimated
cash investment of $2.0 million to $2.5 million (net
of estimated tenant incentives). We expect to spend
approximately $350,000 to $400,000 per restaurant for cash
pre-opening costs. The projected cash investment per restaurant
is based on historical averages.
We currently estimate 2010 capital expenditure outlays to range
between $10.0 million and $12.0 million, net of agreed
upon landlord construction contributions and excluding
approximately $1.4 million to $2.0 million of
pre-opening costs for new restaurants that are not capitalized.
These capital expenditure projections are primarily related to
$8.0 million for the opening of new restaurants and
$3.0 million for capacity addition expenditures and
improvements to our existing restaurants and general corporate
capital expenditures. Based on our current real estate
development plans, we believe our combined expected cash flows
from operations, available borrowings under our new senior
credit facilities and expected landlord construction
contributions will be sufficient to finance our planned capital
expenditures and other operating activities in fiscal 2010.
We currently estimate 2011 capital expenditure outlays to range
between $16.0 million and $17.5 million, net of agreed
upon landlord construction contributions and excluding
approximately $2.1 million to $2.7 million of
pre-opening costs for new restaurants that are not capitalized.
These capital expenditure projections are primarily related to
$12.5 million for the opening of new restaurants and
$4.0 million for capacity addition expenditures and
improvements to our existing restaurants and general corporate
capital expenditures. Based on our current real estate
development plans, we believe our combined expected cash flows
from operations, available borrowings under our new senior
credit facilities and expected landlord construction
contributions will be sufficient to finance our planned capital
expenditures and other operating activities in fiscal 2011.
Current Resources.
Our operations have not
required significant working capital and, like many restaurant
companies, we have been able to operate with negative working
capital. Restaurant sales are primarily paid for in cash or by
credit card, and restaurant operations do not require
significant inventories or receivables. In addition, we receive
trade credit for the purchase of food, beverage and supplies,
therefore reducing the need for incremental working capital to
support growth. We had net working capital of
$(32.6) million at June 27, 2010, compared to net
working capital of $(36.2) million at December 27,
2009.
In connection with this offering, we plan to enter into new
senior credit facilities. We expect that the new senior credit
facilities will provide for (i) a
$ million term loan facility,
maturing
in ,
and (ii) a revolving credit facility under which we may
borrow up to $ million
(including a sublimit cap of up to
$ million
52
for letters of credit and up to
$ million for swing-line
loans), maturing
in .
We expect that our new senior credit facilities will contain
customary affirmative and negative covenants and require us to
meet certain financial ratios. We anticipate that the new senior
credit facilities will be secured by substantially all of our
assets. See Risk Factors Our substantial
indebtedness may limit our ability to invest in the ongoing
needs of our business and Description of
Indebtedness.
In connection with our 2006 recapitalization, we entered into
our existing $112.5 million senior credit facilities with a
syndicate of lenders. The existing senior credit facilities
provide for (i) an $82.5 million term loan facility
and (ii) a revolving credit facility under which we may
borrow up to $30.0 million (including a sublimit cap of up
to $7.0 million for letters of credit and up to
$5.0 million for swing-line loans). Borrowings under the
term loan facility and the revolving credit facility bear
interest at a rate per annum based on the prime rate, plus a
margin of up to 2%, or the London Interbank Offered Rate
(LIBOR), plus a margin up to 3%, with margins determined by
certain financial ratios. In addition to the interest on our
borrowings, we must pay an annual commitment fee of 0.5% on the
unused portion of the revolving credit facility. The
weighted-average interest rate on the borrowings at
June 27, 2010 and December 27, 2009 was 3.33% and
3.47%, respectively.
Our existing senior credit facilities require us to maintain
certain financial ratios, including a consolidated total
leverage ratio, a consolidated senior leverage ratio,
consolidated fixed-charge coverage ratio and consolidated
capital expenditures limitations (each as defined under our
existing senior credit facilities). We have maintained
compliance with our financial covenants for each reporting
period since we entered into our existing senior credit
facilities.
In connection with our 2006 recapitalization, we also issued
$27.5 million of our 13.25% senior subordinated
secured notes. Interest is payable monthly at an annual interest
rate of 13.25%, with the principal due on December 29,
2012. Pursuant to the note purchase agreement, we were entitled
to elect monthly during the first year to accrue interest at the
rate of 14.25% per annum with no payments. Commencing in the
second year of the note purchase agreement through the maturity
date, we have the option to accrue interest at an annual rate of
13.25%, consisting of cash interest equal to 9% and paid-in-kind
interest of 4.25%. Interest accrued but unpaid during the term
of the notes is capitalized into the principal balance.
We expect to use net proceeds from this offering, together with
borrowings under our new senior credit facilities, to repay all
loans outstanding under our existing senior credit facilities,
and any accrued and unpaid interest and related LIBOR breakage
costs and other fees. As of June 27, 2010, approximately
$79.4 million principal amount of loans were outstanding
under our existing senior credit facilities. Our existing senior
credit facilities can be prepaid without premium or penalty
other than any related LIBOR breakage costs and other fees. We
also expect to use net proceeds from this offering, together
with borrowings under our new senior credit facilities, to repay
all of our 13.25% senior subordinated secured notes, and
any accrued and unpaid interest. As of June 27, 2010,
approximately $32.4 million aggregate principal amount of
our 13.25% senior subordinated secured notes were
outstanding. Our 13.25% senior subordinated secured notes
can be prepaid without premium or penalty.
On an as adjusted basis giving effect to this offering and the
use of proceeds therefrom, as of June 27, 2010, we had
$ million of revolving loan
availability under our new senior credit facilities (after
giving effect to $ million of
outstanding letters of credit) based upon an assumed public
offering price of $ per share, the
midpoint of the range set forth on the cover of this prospectus.
A $1.00 increase (decrease) in such assumed initial public
offering price of $ per share
would increase (decrease) the revolving loan availability under
our new senior credit facilities (after giving effect to
$ million of outstanding
letters of credit) by %.
As of June 27, 2010 we had no mortgage notes outstanding.
As of December 27, 2009, we had approximately
$0.4 million of mortgage notes outstanding, which were
secured by mortgages on individual real estate assets. The
weighted average interest rate on the mortgage notes was 4.61%
for the year ended December 27, 2009. The indebtedness
underlying the mortgage notes was paid in full in May 2010.
In August 2006, we entered into a three-year interest swap
agreement fixing the interest rate on $27.0 million
principal amount of our term loan. Under this swap agreement, we
settled with our counterparty quarterly for the
53
difference between 5.24% and the
90-day
LIBOR
then in effect. This swap agreement terminated in August 2009.
We had no derivative instruments outstanding as of
December 27, 2009 or June 27, 2010.
As of June 27, 2010, we had no financing transactions,
arrangements or other relationships with any unconsolidated
entities or related parties. Additionally, we had no financing
arrangements involving synthetic leases or trading activities
involving commodity contracts.
In the longer term, we will explore other options to raise
capital, including but not limited to, renegotiating our senior
credit facilities, public or private equity or other debt
financing. We cannot assure you that such capital will be
available on favorable terms, if at all.
We currently have separate management agreements with our
private equity sponsors, Bruckmann, Rosser, Sherrill & Co.,
Inc. and Castle Harlan, Inc. We expect that the management
agreements will be terminated as of the closing of this offering
in exchange for a payment estimated to be $525,000 for each
sponsor. This amount is subject to adjustment based on the level
of EBITDA, as defined in each management agreement, for the
twelve months preceding the closing of this offering.
Off-Balance Sheet
Arrangements
As part of our on-going business, we do not participate in
transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities referred to
as structured finance or variable interest entities
(VIEs), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As of June 27,
2010, we are not involved in any VIE transactions and do not
otherwise have any off-balance sheet arrangements.
Significant
Accounting Policies
Pre-opening Costs.
Restaurant pre-opening
costs consist primarily of wages and salaries, recruiting,
meals, training, travel and lodging. Pre-opening costs include
an accrual for straight-line rent recorded during the period
between date of possession and the restaurant opening date for
the Companys leased restaurant locations. We expense all
such costs as incurred. These costs will vary depending on the
number of restaurants under development in a reporting period.
Property and Equipment.
Property and equipment
are recorded at cost. Equipment consists primarily of restaurant
equipment, furniture, fixtures and small wares. Depreciation is
calculated using the straight-line method over the estimated
useful life of the related asset. Leasehold improvements are
amortized using the straight-line method over the shorter of the
lease term, including option periods, which are reasonably
assured of renewal or the estimated useful life of the asset.
The useful life of property and equipment involves judgment by
management, which may produce materially different amounts of
depreciation expense than if different assumptions were used.
Property and equipment costs may fluctuate based on the number
of new restaurants under development or opened, as well as any
additional capital projects that are completed in a given period.
Leases.
We currently lease all but four of our
restaurant locations. We evaluate each lease to determine its
appropriate classification as an operating or capital lease for
financial reporting purposes. All of our leases are classified
as operating leases. We record the minimum lease payments for
our operating leases on a straight-line basis over the lease
term, including option periods which in the judgement of
management are reasonably assured of renewal. The lease term
commences on the date that the lessee obtains control of the
property, which is normally when the property is ready for
tenant improvements. Contingent rent expense is recognized as
incurred and is usually based on either a percentage of
restaurant sales or as a percentage of restaurant sales in
excess of a defined amount. Our lease costs will change based on
the lease terms of our lease renewals as well as leases that we
enter into with respect to our new restaurants.
Leasehold improvements financed by the landlord through tenant
improvement allowances are capitalized as leasehold improvements
with the tenant improvement allowances recorded as deferred
lease incentives. Deferred lease incentives are amortized on a
straight-line basis over the lesser of the life of the asset or
the lease term, including option periods which in the judgement
of management are reasonably assured of renewal (same term
54
that is used for related leasehold improvements) and are
recorded as a reduction of occupancy expense. As part of the
initial lease terms, we negotiate with our landlords to secure
these tenant improvement allowances. There is no guarantee that
we will receive tenant improvement allowances for any of our
future locations, which would result in additional occupancy
expenses.
Impairment of Long-Lived Assets.
We review
long-lived assets, such as property and equipment and
intangibles, subject to amortization, for impairment when events
or circumstances indicate the carrying value of the assets may
not be recoverable. In determining the recoverability of the
asset value, an analysis is performed at the individual
restaurant level and primarily includes an assessment of
historical cash flows and other relevant factors and
circumstances. Negative restaurant-level cash flow over the
previous
12-month
period is considered a potential impairment indicator. In such
situations, we evaluate future cash flow projections in
conjunction with qualitative factors and future operating plans.
Our impairment assessment process requires the use of estimates
and assumptions regarding future cash flows and operating
outcomes, which are based upon a significant degree of
managements judgment. We continue to assess the
performance of our restaurants and monitor the need for future
impairment. Our estimates used in calculating the need for asset
impairment include evaluating changes in the economic
environment, identifying adverse changes in the manner in which
assets are used, unfavorable changes in legal factors or
business climate, incurring excess costs in construction of the
asset, overall restaurant operating performance and projections
for future performance. These estimates result in a wide range
of variability on a year to year basis due to the nature of the
criteria. Continued economic deterioration within respective
markets may adversely impact consumer discretionary spending and
may result in lower restaurant sales. Unfavorable fluctuations
in our commodity costs, supply costs and labor rates, which may
or may not be within our control, may impact our operating
margins. Both of these could also affect our estimates of
profitability and require future impairment analysis and charges
to earnings. Based on this analysis, if we believe that the
carrying amount of the assets are not recoverable, an impairment
charge is recognized based upon the amount by which the assets
carrying value exceeds fair value as measured by undiscounted
future cash flows expected to be generated by these assets.
Changes in the economic environment, real estate markets,
capital spending and overall operating performance could impact
these estimates and result in future impairment charges. There
can be no assurance that future impairment tests will not result
in additional charges to earnings.
Self-Insurance Reserves.
We maintain various
policies, including workers compensation and general
liability. As outlined in these policies, we are responsible for
losses up to certain limits. We record a liability for the
estimated exposure for aggregate losses below those limits. This
liability is based on estimates of the ultimate costs to be
incurred to settle known claims and claims not reported as of
the balance sheet date. The estimated liability is not
discounted and is based on a number of assumptions, including
actuarial assumptions, historical trends and economic
conditions. If actual claims trends, including the severity or
frequency of claims, differ from our estimates and historical
trends, our financial results could be impacted.
Income Taxes.
Income tax provisions consist of
federal and state taxes currently due, plus deferred taxes.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Recognition of deferred tax assets is limited to amounts
considered by management to be more likely than not of
realization in future periods. Future taxable income,
adjustments in temporary difference, available carry forward
periods and changes in tax laws could affect these estimates.
We recognize a tax position in the financial statements when it
is more likely than not that the position will be sustained upon
examination by tax authorities that have full knowledge of all
relevant information.
Stock-Based Compensation.
Subsequent to our
2006 recapitalization, we adopted the 2006 Bravo Development,
Inc. Option Plan (the 2006 Plan). Under the 2006
Plan, we are authorized to issue up to, without giving effect to
the reorganization transactions expected to occur prior to the
consummation of this offering, 262,500 shares of our common
stock. The options expire 10 years after the date of grant
and vest ratably over a four year period.
The options, to the extent vested, become exercisable based upon
our private equity sponsors achieving certain performance
targets. As the likelihood of achieving these performance
targets is not probable, no compensation
55
expense has been reflected in our financial statements
subsequent to the adoption of the 2006 Plan. Compensation
expense will not be recorded unless a public offering or
approved sale occurs. If such a transaction occurs, we will
record the applicable compensation expense as a one-time charge
in the period in which the transaction occurs.
In the event we undergo a public offering in which we and any
participating selling shareholders receive aggregate net
proceeds of at least $50.0 million or the majority of our
stock or assets are sold in a transaction approved by Holdings,
the options held by current employees are subject to accelerated
vesting in the discretion of our board of directors upon the
achievement of certain net proceeds and internal rate of return
thresholds.
Additionally, to the extent the sponsors sell their securities
in connection with an approved sale or public offering, any
vested options only become exercisable in the amounts set forth
below in the event that (i) net proceeds equal or are in
excess of the multiple (set forth in the table below) of the
sponsors initial investment and (ii) the sponsors
achieve an internal rate of return equal to or in excess of the
target set forth in the table below (unless the board of
directors exercises its discretion under the 2006 Plan to permit
further exercisability upon such an event):
|
|
|
|
|
|
|
|
|
|
Percentage of Option Exercisable
|
|
Net Proceeds Multiple
|
|
IRR Target
|
|
25%
|
|
|
2
|
|
|
|
10
|
%
|
50%
|
|
|
2
|
|
|
|
20
|
%
|
75%
|
|
|
2
|
|
|
|
30
|
%
|
100%
|
|
|
3
|
|
|
|
40
|
%
|
|
For purposes of determining the exercisable portion of an
option, net proceeds generally means the amount
received by the sponsors less their selling or transaction
expenses and includes the majority of the fees they receive
pursuant to the management agreement between each sponsor and
us. Internal rate of return means the rate of return
the sponsors receive on their investment in our company from
such net proceeds as a result of a public offering or approved
sale and the net proceeds therefrom.
The board of directors has determined, in its discretion, that
in the event the public offering price of this offering results
in the achievement of an internal rate of return to
our private equity sponsors of at least 30% upon the
consummation of this offering, (i) each outstanding option
award shall be deemed to have vested in a percentage equal to
the greater of 75% or the percentage of the option award already
vested as of that date, (ii) each outstanding option award
shall be deemed 75% exercisable; and (iii) for each
additional percentage point of internal rate of
return achieved by our private equity sponsors above 30%,
an additional 2.5% of each outstanding option award shall be
deemed vested and exercisable, up to an aggregate of the stated
number of shares of common stock subject to the option award
upon achievement of an internal rate of return by
our private equity sponsors of 40%.
Commitments and
Contingencies
The following table summarizes contractual obligations at
December 27, 2009 on an actual basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Year
|
|
Contractual Obligations
|
|
Total
|
|
|
2010
|
|
|
2011-2012
|
|
|
2013-2014
|
|
|
After 2014
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Existing senior secured term loan(1)
|
|
$
|
79,818
|
|
|
$
|
825
|
|
|
$
|
78,993
|
|
|
$
|
|
|
|
$
|
|
|
Existing senior secured revolving credit facility(1)
|
|
|
5,550
|
|
|
|
|
|
|
|
5,550
|
|
|
|
|
|
|
|
|
|
13.25% Senior subordinated secured notes(1)
|
|
|
32,270
|
|
|
|
|
|
|
|
32,270
|
|
|
|
|
|
|
|
|
|
Mortgage notes(2)
|
|
|
393
|
|
|
|
214
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
118,031
|
|
|
|
1,039
|
|
|
|
116,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest(3)
|
|
|
504
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
268,142
|
|
|
|
18,398
|
|
|
|
38,121
|
|
|
|
38,992
|
|
|
|
172,631
|
|
Standby letters of credit(4)
|
|
|
3,650
|
|
|
|
3,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction purchase obligations
|
|
|
944
|
|
|
|
944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
391,271
|
|
|
$
|
24,535
|
|
|
$
|
155,113
|
|
|
$
|
38,992
|
|
|
$
|
172,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
(1)
|
|
In connection with this offering, we intend to enter into new
senior credit facilities, consisting of a
$ million
term loan facility and a
$ million
revolving credit facility. We intend to use the net proceeds of
this offering, together with
$ million
of borrowings under our new senior credit facilities, to repay
all our loans outstanding under our existing senior credit
facilities, and any accrued and unpaid interest and related
LIBOR breakage costs and other fees, and all of our
13.25% senior subordinated secured notes, and any accrued
and unpaid interest. See Description of Indebtedness.
|
|
(2)
|
|
The indebtedness underlying the mortgage notes was paid in full
in May 2010.
|
|
(3)
|
|
The interest obligation was calculated using the average
interest rate at December 27, 2009 of 3.47% for our
existing senior secured credit facilities, the stated interest
rate for the 13.25% senior subordinated secured notes and
the average interest rate at December 27, 2009 of 4.61% for
the mortgage notes.
|
|
(4)
|
|
In connection with this offering, we intend to replace our
existing standby letters of credit with standby letters of
credit under our new senior credit facilities.
|
Inflation
Our profitability is dependent, among other things, on our
ability to anticipate and react to changes in the costs of key
operating resources, including food and other raw materials,
labor, energy and other supplies and services. Substantial
increases in costs and expenses could impact our operating
results to the extent that such increases cannot be passed along
to our restaurant guests. The impact of inflation on food,
labor, energy and occupancy costs can significantly affect the
profitability of our restaurant operations.
Many of our restaurant staff members are paid hourly rates
related to the federal minimum wage. In fiscal 2007, Congress
enacted an increase in the federal minimum wage implemented in
two phases, beginning in fiscal 2007 and concluding in fiscal
2008. In addition, numerous state and local governments
increased the minimum wage within their jurisdictions, with
further state minimum wage increases going into effect in fiscal
2009. Certain operating costs, such as taxes, insurance and
other outside services continue to increase with the general
level of inflation or higher and may also be subject to other
cost and supply fluctuations outside of our control.
While we have been able to partially offset inflation and other
changes in the costs of key operating resources by gradually
increasing prices for our menu items, coupled with more
efficient purchasing practices, productivity improvements and
greater economies of scale, there can be no assurance that we
will be able to continue to do so in the future. From time to
time, competitive conditions could limit our menu pricing
flexibility. In addition, macroeconomic conditions could make
additional menu price increases imprudent. There can be no
assurance that all future cost increases can be offset by
increased menu prices or that increased menu prices will be
fully absorbed by our restaurant guests without any resulting
changes in their visit frequencies or purchasing patterns.
Substantially all of the leases for our restaurants provide for
contingent rent obligations based on a percentage of revenues.
As a result, rent expense will absorb a proportionate share of
any menu price increases in our restaurants. There can be no
assurance that we will continue to generate increases in
comparable restaurant sales in amounts sufficient to offset
inflationary or other cost pressures.
Segment
Reporting
We operate upscale affordable dining restaurants under two
brands that have similar economic characteristics, nature of
products and services, class of customer and distribution
methods. Therefore, we report our results of operations as one
reporting segment in accordance with applicable accounting
guidance.
Recent Accounting
Pronouncements
The Financial Accounting Standards Board (FASB)
updated Accounting Standards Codification (ASC)
Topic 810,
Consolidation
, with amendments to improve
financial reporting by enterprises involved with variable
interest entities (formerly FASB Statement No. 167,
Amendments to FASB Interpretation No. 46(R)
). These
amendments require an enterprise to perform an analysis to
determine whether the enterprises variable interest(s)
give it a controlling financial interest in a variable interest
entity. This guidance was effective for the annual reporting
period beginning after November 15, 2009, for interim
periods within that first annual reporting period and for
57
interim and annual reporting periods thereafter. We adopted this
guidance and it had no material effect on our consolidated
financial statements.
The FASB also updated ASC Topic 855
, Subsequent Events
,
to establish general standards of accounting for and disclosing
of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued
(formerly FASB Statement No. 165,
Subsequent
Events
). This guidance was effective for interim and annual
financial periods ending after June 15, 2009. Adoption of
this guidance did not have a material effect on our consolidated
financial statements. Our management has performed an evaluation
of subsequent events through July 1, 2010, which is the
date the consolidated financial statements were issued. There
were no subsequent events noted as of the filing date of the
registration statement of which this prospectus is a part.
Quantitative and
Qualitative Disclosures about Market Risk
Interest Rate
Risk
We are subject to interest rate risk in connection with our long
term indebtedness. Our principal interest rate exposure relates
to the loans outstanding under our new senior credit facilities,
which we anticipate will be payable at variable rates. Assuming
entry into our new senior credit facilities and the incurrence
of approximately $ million of
borrowings thereunder, each eighth point change in interest
rates on the variable rate portion of indebtedness under our new
senior credit facilities would result in a
$ million annual change in
our interest expense.
Commodity
Price Risk
We are exposed to market price fluctuation in beef, seafood,
produce and other food product prices. Given the historical
volatility of beef, seafood, produce and other food product
prices, these fluctuations can materially impact our food and
beverage costs. While we have taken steps to qualify multiple
suppliers and enter into agreements for some of the commodities
used in our restaurant operations, there can be no assurance
that future supplies and costs for such commodities will not
fluctuate due to weather and other market conditions outside of
our control. We are currently unable to contract for some of our
commodities such as fresh seafood and certain produce for
periods longer than one week. Consequently, such commodities can
be subject to unforeseen supply and cost fluctuations. Dairy
costs can also fluctuate due to government regulation. Because
we typically set our menu prices in advance of our food product
prices, we cannot immediately take into account changing costs
of food items. To the extent that we are unable to pass the
increased costs on to our guests through price increases, our
results of operations would be adversely affected. We do not use
financial instruments to hedge our risk to market price
fluctuations in beef, seafood, produce and other food product
prices at this time.
58
Business
Our
Business
We are a leading owner and operator of two distinct Italian
restaurant brands, BRAVO! Cucina Italiana (BRAVO!)
and BRIO Tuscan Grille (BRIO). We have positioned
our brands as multifaceted culinary destinations that deliver
the ambiance, design elements and food quality reminiscent of
fine dining restaurants at a value typically offered by casual
dining establishments, a combination known as the upscale
affordable dining segment. Each of our brands provides its
guests with a fine dining experience and value by serving
affordable cuisine prepared using fresh flavorful ingredients
and authentic Italian cooking methods, combined with attentive
service in an attractive, lively atmosphere. We strive to be the
best Italian restaurant company in America and are focused on
providing our guests an excellent dining experience through
consistency of execution. We believe that both of our brands
appeal to a broad base of consumers, especially to women whom we
believe currently account for approximately 62% and 65% of our
guest traffic at BRAVO! and BRIO, respectively.
While our brands share certain corporate support functions to
maximize efficiencies across our company, each brand maintains
its own identity, therefore allowing both brands to be located
in common markets. We have demonstrated our growth and the
viability of our brands in a wide variety of markets across the
U.S., growing from 49 restaurants in 19 states at the end
of 2005 to 85 restaurants in 28 states as of June 27,
2010.
BRAVO! Cucina
Italiana
BRAVO! Cucina Italiana is a full-service, upscale affordable
Italian restaurant offering a broad menu of freshly-prepared
classic Italian food served in a lively, high-energy environment
with attentive service. The subtitle Cucina
Italiana, meaning Italian Kitchen, is
appropriate since all cooking is done in full view of our
guests, creating the energy of live theater. As of June 27,
2010, we owned and operated 47 BRAVO! restaurants in
20 states.
BRAVO! offers a wide variety of pasta dishes, steaks, chicken,
seafood and pizzas, emphasizing fresh,
made-to-order
cuisine and authentic recipes that delivers an excellent value
to guests. BRAVO! also offers creative seasonal specials, an
extensive wine list, carry-out and catering. We believe that our
menu offerings and generous portions of flavorful food, combined
with our ambiance and friendly, attentive service, offer our
guests an attractive price-value proposition. The average check
for BRAVO! during the first twenty-six weeks of 2010 was $19.28
per guest.
The breadth of menu offerings at BRAVO! helps generate
significant guest traffic at both lunch and dinner. Lunch
entrées range in price from $8 to $18, while appetizers,
pizzas, flatbreads and entrée salads range from $6 to $14.
During the first twenty-six weeks of 2010, the average lunch
check for BRAVO! was $14.79 per guest. Dinner entrées range
in price from $12 to $29 and include a broad selection of fresh
pastas, steaks, chicken and seafood. Dinner appetizers, pizzas,
flatbreads and entrée salads range from $6 to $15. During
the first twenty-six weeks of 2010, the average dinner check for
BRAVO! was $22.05 per guest. At BRAVO!, lunch and dinner
represented 29.2% and 70.8% of revenues, respectively. Our
average annual sales per comparable BRAVO! restaurant were
$3.5 million in 2009.
BRAVO!s architectural design incorporates interior
features such as arched colonnades, broken columns, hand-crafted
Italian reliefs, Arabescato marble and sizable wrought-iron
chandeliers. We locate our BRAVO! restaurants in high-activity
areas such as retail and lifestyle centers that are situated
near commercial office space and high-density residential
housing.
BRIO Tuscan
Grille
BRIO Tuscan Grille is an upscale affordable Italian chophouse
restaurant serving freshly-prepared, authentic northern Italian
food in a Tuscan Villa atmosphere. BRIO means lively
or full of life in Italian and draws its inspiration
from the cherished Tuscan philosophy of to eat well is to
live well. As of June 27, 2010, we owned and operated
38 BRIO restaurants in 17 states.
The cuisine at BRIO is prepared using fresh ingredients and a
high standard for quality execution with an emphasis on steaks,
chops, fresh seafood and
made-to-order
pastas. BRIO also offers creative seasonal specials, an
59
extensive wine list, carry-out and banquet facilities at select
locations. We believe that our passion for excellence in service
and culinary expertise, along with our generous portions,
contemporary dining elements and ambiance, offers our guests an
attractive price-value proposition. The average check for BRIO
during the first twenty-six weeks of 2010 was $25.14 per guest.
BRIO offers lunch entrées that range in price from $10 to
$18 and appetizers, sandwiches, flatbreads and entrée
salads ranging from $8 to $15. During the first twenty-six weeks
of 2010, the average lunch check for BRIO was $17.94 per guest.
Dinner entrées range in price from $14 to $30, while
appetizers, sandwiches, flatbreads, bruschettas and entrée
salads range from $8 to $15. During the first twenty-six weeks
of 2010, the average dinner check for BRIO was $30.51 per guest.
At BRIO, lunch and dinner represented 30.5% and 69.5% of
revenues, respectively. Our average annual revenues per
comparable BRIO restaurant were $4.8 million in 2009.
The design and architectural elements of BRIO restaurants are
important to the guest experience. The goal is to bring the
pleasures of the Tuscan country villa to our restaurant guests.
The warm, inviting ambiance of BRIO incorporates interior
features such as antique hardwood Cypress flooring, arched
colonnades, hand-crafted Italian mosaics, hand-crafted walls
covered in an antique Venetian plaster, Arabescato marble and
sizable wrought-iron chandeliers. BRIO is typically located in
high-traffic, high-visibility locations in affluent suburban and
urban markets.
We also operate one full-service upscale affordable
American-French bistro restaurant in Columbus, Ohio under the
brand Bon Vie. Our Bon Vie restaurant is included in
the BRIO operating and financial data set forth in this
prospectus.
Our Business
Strengths
Our mission statement
is to be the best Italian restaurant
company in America by delivering the highest quality food and
service to each guest...at each meal...each and every day
.
The following strengths help us achieve these objectives:
Two Differentiated yet Complementary
Brands.
We have developed two premier upscale
affordable Italian restaurant brands that are highly
complementary and can be located in common markets. Our brands
are designed to have broad guest appeal at two different price
points. Both BRAVO! and BRIO have their own Corporate Executive
Chef who develops recipes and menu items with differentiated
flavor profiles and price points. Entry level pricing for both
lunch and dinner entrees at BRAVO! is approximately $2 below
BRIO, providing more alternatives for guests at a lower price
point. The guests of BRIO, which offers a greater selection of
protein dishes, tend to purchase more steaks, chops, chicken and
seafood items while guests of BRAVO! select a higher mix of
pasta dishes. In addition, sales of alcoholic beverages at
BRAVO! represent approximately 16.4% of restaurant sales
compared to approximately 22.5% of restaurant sales at BRIO,
primarily due to BRIOs slightly more extensive wine list
and more favorable bar business.
Each brand features unique design elements and atmospheres that
attract a diverse guest base as well as common guests who visit
both BRAVO! and BRIO for different dining experiences. The
differentiated qualities of our brands allow us to operate in
significantly more locations than would be possible with one
brand, including high-density residential areas, shopping malls,
lifestyle centers and other high-traffic locations. Based on
demographics, co-tenants and net investment requirements, we can
choose between our two brands to determine which is optimal for
a location and thereby generate highly attractive returns on our
investment. We focus on choosing the right brand for a specific
site based on population density and demographics. Management
targets markets with $65,000 minimum annual household income and
a population density of 125,000 residents within a particular
trade area for BRAVO! and $70,000 minimum annual household
income and a population density of 150,000 residents within a
particular trade area for BRIO. We have a business model that
maintains quality and consistency on a national basis while also
having the flexibility to cater to the specific characteristics
of a particular market. We have a proven track record of
successfully opening new restaurants in a number of diverse real
estate locations, including both freestanding and in-line with
other national retailers. In addition, we believe the
flexibility of our restaurant design is a competitive advantage
that allows us to open new restaurants in attractive markets
without being limited to a standard prototype.
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Our brands maintain several common qualities, including certain
design elements such as chandeliers and marble and granite
counter tops, that help reduce building and construction costs
and create consistency for our guests. We share best practices
in service, preparation and food quality across both brands. In
addition, we share services such as real estate development,
purchasing, human resources, marketing and advertising,
information technology, finance and accounting, allowing us to
maximize efficiencies across our company as we continue our
growth.
Broad Appeal with Attractive Guest Base.
We
provide an upscale, yet inviting, atmosphere attracting guests
from a variety of age groups and economic backgrounds. We
provide our guests an upscale affordable dining experience at
both lunch and dinner, which attracts guests from both the
casual dining and fine dining segments. We locate our
restaurants in high-traffic suburban and urban locations to
attract primarily local patrons with limited reliance on
business travelers. Our blend of location, menu offerings and
ambiance is designed to appeal to women, a key decision-maker
when deciding where to dine and shop. We believe that women
currently account for approximately 62% and 65% of our guest
traffic at BRAVO! and BRIO, respectively. This positioning helps
make our restaurants attractive for developers and landlords. We
have also cultivated a loyal guest base, with a majority of our
guests dining with us at least once a month.
Superior Dining Experience and Value.
The
strength of our value proposition lies in our ability to provide
freshly-prepared Italian cuisine in a lively restaurant
atmosphere with highly attentive guest service at an attractive
price point. We believe that the dining experiences we offer,
coupled with an attractive price-value relationship, helps us
create long-term, loyal and highly satisfied guests.
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The Food.
We offer
made-to-order
menu items prepared using traditional Italian culinary
techniques with an emphasis on fresh ingredients and authentic
recipes. Our food menu is complemented by a wine list that
offers both familiar varieties as well as wines exclusive to our
restaurants. An attention to detail, culinary expertise and
focused execution reflects our chef-driven culture. Each
brands menu has its own distinctive flavor profile, with
BRAVO! favoring the more classic Italian cuisine that includes a
variety of pasta dishes and pizzas and BRIO favoring a broader
selection of premium steaks, chops, seafood, flatbreads,
bruschettas and pastas. All of our new menu items are developed
by our Corporate Executive Chefs through a six month ideation
process designed to meet our high standards of quality and
exceed our guests expectations.
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The Service.
We are committed to delivering
superior service to each guest, at each meal, each and every
day. We place significant emphasis on maintaining high
waitstaff-to-table
ratios, thoroughly training all service personnel on the details
of each menu item and staffing each restaurant with experienced
management teams to ensure consistent and attentive guest
service. An attention to detail, culinary expertise and focused
execution underscores our chef-driven culture. Only trained,
experienced chefs and culinary staff are hired and allowed to
operate in the kitchen.
Best-in-class
service standards are designed to ensure satisfied guests and
attract both new and repeat guest traffic.
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The Experience.
Lively, high-energy
environments blending dramatic design elements with a warm and
inviting atmosphere create a memorable guest experience.
Signature architectural and décor elements include the
lively theatre of exhibition kitchens, high ceilings, white
tablecloths, a centerpiece bar and relaxing patio areas. In
addition, the majority of our restaurants include attractive
outdoor patios with full bar and dining areas at the front of
our restaurants that create an exciting and inviting atmosphere
for our guests. These elements, along with our superior service
and value, help form a bond between our guests and our
restaurants, encouraging guest loyalty and more frequent visits.
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Nationally Recognized Restaurant Anchor.
We
believe that our differentiated brands, the attractive
demographics of our guests and the high number of weekly guest
visits to our restaurants have positioned us as a preferred
tenant and the multi-location Italian restaurant company of
choice for national and regional real estate developers.
Landlords and developers seek out our concepts to be restaurant
anchors for their developments as they are highly complementary
to national retailers, having attracted on average between
3,000-5,000 guests per restaurant each week in 2009. As a result
of the importance of our brands to the retail centers in which
we are located, we are often able to negotiate the prime
location within a center and favorable real estate terms, which
helps to drive strong returns on capital for our shareholders.
Compelling Unit Economics.
We have
successfully opened and operated both of our brands in multiple
geographic regions and achieved attractive average annual
revenues per comparable restaurant of $3.5 million and $4.8
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million at our BRAVO! and BRIO restaurants, respectively, in
2009. Our ability to grow rapidly and efficiently in all market
conditions is evidenced through our strong track record of new
restaurant openings, including our 2009 openings which generated
above average year one revenues and operating margins. Under our
current investment model, BRAVO! restaurant openings require a
net cash investment of approximately $1.8 million and BRIO
restaurant openings require a net cash investment of
approximately $2.2 million. We target a
cash-on-cash
return beginning in the third operating year for both of our
restaurants of between 30% and 40%.
Management Team with Proven Track Record.
We
have assembled a tested and proven management team with
significant experience operating public companies. Our
management team is led by our CEO and President, Saed Mohseni,
former CEO of McCormick & Schmicks Seafood
Restaurants, Inc., who joined the company in February 2007.
Since Mr. Mohsenis arrival, we have continued to open
new restaurants despite the economic recession. These new
restaurant openings have been a key driver of our growth in
revenue and Adjusted EBITDA, which have increased 29.1% and
89.0%, respectively, between the years ended 2006 and 2009. In
addition to new restaurant growth, we have also implemented a
number of revenue and margin enhancing initiatives such as our
wine by the glass offerings, wine flights, dessert trays and a
new bar menu. These programs were strategically implemented to
improve our guest experience and maintain our brand image, as
opposed to discounting programs designed to increase traffic and
revenue at the expense of operating margins. In addition, we
have improved our labor efficiencies and food cost management,
which helped to drive our margin increases and improved our
restaurant-level profitability. These changes resulted in an
increase in our restaurant-level operating margin from
16.0% in 2006 to 17.4% in 2009, a 140 basis point improvement.
Restaurant-level operating margin represents our revenues less
total restaurant operating costs, as a percentage of our
revenues.
Our Growth
Strategies
Our growth model is comprised of the following three primary
drivers:
Pursue Disciplined Restaurant Growth.
We
believe that there are significant opportunities to grow our
brands on a nationwide basis in both existing and new markets
where we believe we can generate attractive unit level
economics. We are pursuing a disciplined growth strategy for
both of our brands. We believe that each brand is at an early
stage of its expansion.
We have built a scalable infrastructure and have successfully
grown our restaurant base through a challenging market
environment. Despite difficult economic conditions, we opened
seven new restaurants in 2009. We continue to grow in 2010,
having opened two new restaurants in each of the first and
second quarters of 2010, with one additional restaurant planned
to be opened later this year. We plan to open five to six new
restaurants in 2011 and aim to open between 45 and 50 new
restaurants over the next five years.
Grow Existing Restaurant Sales.
We will
continue to pursue targeted local marketing efforts and evaluate
operational initiatives designed to increase unit volumes
without relying on margin-eroding discounting programs.
Initiatives at BRAVO! include increasing online ordering, which
generates a higher average per person check compared to our
current carry-out business, expanding local restaurant marketing
and promoting our patio business. Other initiatives include
promoting our bar program through martini night and happy hour
programs and expanding our feature cards to include appetizers
and desserts.
At BRIO, we are promoting our bar programs, implementing wine
flights and dessert trays introducing a new bar menu and
expanding the selection of wines by the glass. In addition, we
believe there is an opportunity to expand our banquet and
special events catering business. Our banquet and special events
catering business typically generates a higher average per
person check than our dining rooms and, as a result of reduced
labor costs relative to revenue, allows us to achieve higher
margins on those revenues.
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We believe our existing restaurants will benefit from increasing
brand awareness as we continue to enter new markets. In
addition, we may selectively remodel existing units to include
additional seating capacity to increase revenue.
Maintain Margins Throughout Our Growth.
We
will continue to aggressively protect our margins using
economies of scale, including marketing and purchasing synergies
between our brands and leveraging our corporate infrastructure
as we continue to open new restaurants. Additional margin
enhancement opportunities include increasing labor efficiency
through the use of scheduling tools, menu engineering and other
operating cost reduction programs.
Real
Estate
As of June 27, 2010, we leased 81 and owned four restaurant
sites, of which 75 are located adjacent to or in lifestyle
centers
and/or
shopping malls and ten are free-standing units strategically
positioned in high-traffic areas. In addition, at June 27,
2010, we were contractually committed to lease one restaurant
that had not yet opened. On average, our restaurants range in
size from 6,000 to 9,000 square feet. Since the end of
2005, we have opened 40 new locations and converted, relocated
or closed 4 locations. We consider our ability to locate and
secure attractive real estate locations for new restaurants a
key differentiator and long-term success factor. The majority of
our leases provide for minimum annual rentals and contain
percentage-of-sales
rent provisions against which the minimum rent is applied. A
significant percentage of our leases also provide for periodic
escalation of minimum annual rent based upon increases in the
Consumer Price Index. Typically, our leases are ten or
15 years in length with two, five-year extension options.
Site Selection
Process
Part of our growth strategy is to develop a nationwide system of
restaurants. We have developed a disciplined site acquisition
and qualification process incorporating managements
experience as well as extensive data collection, analysis and
interpretation. We are actively developing BRAVO! and BRIO
restaurants in both new and existing markets, and we will
continue to expand in major metropolitan areas throughout the
U.S. Management closely analyzes traffic patterns,
demographic characteristics, population density, level of
affluence and consumer attitudes or preferences. In addition,
management carefully evaluates the current or expected co-retail
and restaurant tenants in order to accurately assess the
attractiveness of the identified area.
BRAVO! and BRIO are highly sought after by the owners and
developers of upscale shopping centers and mixed use projects.
We are therefore typically made aware of new developments and
opportunities very early on in their selection process. In
addition to our real estate personnel and broker network
actively seeking locations, we do site screening on projects
that are brought to our attention in the planning phases.
Design
BRAVO! and BRIO restaurants integrate critical design elements
of each brand while making each restaurant unique. Consideration
is taken with each design to incorporate the centers
architecture and other regional design elements while still
maintaining certain critical features that help identify our
brands. Our interiors, while timeless and inviting, incorporate
current trends that give our restaurants a sophisticated yet
classic feel. This flexibility of design allows us to build one
and two story restaurants and to place restaurants in a variety
of locales, including ground up locations, in-line locations and
conversions of office, retail and restaurant space.
The flexibility of our concepts has enabled us to open
restaurants in a wide variety of locations, including
high-density residential areas, shopping malls, lifestyle
centers and other high-traffic locations. On average, it takes
us approximately 12 to 18 months from identification of the
specific site to opening the doors for business. In order to
maintain consistency of food, guest service and atmosphere at
our restaurants, we have set processes and timelines to follow
for all restaurant openings to ensure they stay on schedule.
The identification of new sites along with their development and
construction are the responsibilities of the Companys Real
Estate Development Group. Several project managers are
responsible for building the restaurants, and several staff
members deal with purchasing, project management, budgeting,
scheduling and other
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administrative functions. Senior management reviews the
comprehensive studies provided by the Real Estate Development
Group to determine which regions to pursue prior to any new
restaurant development.
New Restaurant
Development
We have successfully opened 40 new locations and converted,
relocated or closed 4 locations since the end of 2005.
Management believes it is well-positioned to continue its trend
of disciplined unit expansion through its new restaurant
pipeline. We maintain a commitment to strengthening our core
markets while also pursuing attractive locations in a wide
variety of new markets. We aim to open between 45 and 50 new
restaurants over the next five years. New restaurants will
typically range in size from 7,000 to 9,000 square feet and
are expected to generate a first year average unit volume of
approximately $3.5 million and $4.8 million for BRAVO!
and BRIO, respectively.
Restaurant
Operations
We currently have 14 district managers that report directly to
one of our two Senior Vice Presidents of Operations for our
brands, who in turn each report to our Chief Executive Officer.
Each restaurant district manager supervises the operations of
five to eight restaurants in their respective geographic areas,
and is in frequent contact with each location. The staffing at
our restaurants typically consists of a general manager, two to
four assistant managers, an executive chef and one to
three sous chefs. In addition, our restaurants typically
employ 60 to 200 hourly employees. Our operational
philosophy is as follows:
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Offer Italian Food and Wines.
We seek to
differentiate ourself from other multi-location restaurants by
offering affordable cuisine prepared using fresh ingredients and
authentic Italian cooking methods. To ensure that the menu is
consistently prepared to our high standards, we have developed a
comprehensive ten week management training program. As part of
their skill preparation, all of our executive chefs perform a
cooking demonstration. This enables our Corporate Executive
Chefs to evaluate a candidates skill set. All executive
chefs are required to complete ten weeks of kitchen training,
including mastering all stations, ordering, receiving and
inventory control. Due to our high average unit volumes, the
executive chefs are trained throughout the ten weeks to ensure
that their food is consistently prepared on a timely basis. In
addition, all executive chefs are trained on product and labor
management programs to achieve maximum efficiencies. Both of
these tools reinforce our commitment to training our employees
to run their business from a profit and loss perspective, as
well as the culinary side.
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Deliver Superior Guest Service.
Significant
time and resources are spent in the development and
implementation of our training programs, resulting in a
comprehensive service system for both hourly service people and
management. We offer guests prompt, friendly and efficient
service, keeping
waitstaff-to-table
ratios high, and staffing each restaurant with experienced
on the floor management teams to ensure consistent
and attentive guest service. We employ food runners to ensure
prompt delivery of fresh dishes at the appropriate temperature,
thus allowing the waitstaff to focus on overall guest
satisfaction. All service personnel are thoroughly trained in
the specific flavors of each dish. Using a thorough
understanding of our menu, the servers assist guests in
selecting menu items complementing individual preferences.
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Leverage Our Partnership Management
Philosophy.
A key element to our current
expansion and success has been the development of our
partnership management philosophy, which is based on the premise
that active and ongoing economic participation (via a bonus
plan) by each restaurants general manager, executive chef,
assistant managers and sous chefs is essential to long-term
success. The purpose of this structure is to attract and retain
an experienced management team, incentivize the team to execute
our strategy and objectives and provide stability to the
operating management team. This program is offered to all
restaurant management. This provides our management team with
the financial incentive to develop people, build lifelong guests
and operate their restaurants in accordance with our standards.
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Sourcing and
Supply
To ensure the highest quality menu ingredients, raw materials
and other supplies, we continually research and evaluate
products. We contract with Distribution Market Advantage, or
DMA, a cooperative of multiple food
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distributors located throughout the nation, and US Foodservice
for the broadline distribution of most of our food products. DMA
is a broker with whom we negotiate and gain access to third
party food distributors and suppliers. In 2009, distributions
through our DMA arrangement supplied us with approximately 73%
of our food supplies. We utilize a primary distributor, GFS, for
the majority of our food distribution under the DMA arrangement.
In 2009, GFS distributed approximately 88% of the food supplies
distributed through our DMA arrangement. In 2009, US Foodservice
supplied us with approximately 3% of our food supplies. We
negotiate pricing and volume terms directly with certain of our
distributors and suppliers through DMA and US Foodservice.
Currently, we have pricing understandings of varying lengths
with several of our distributors and suppliers, including our
distributors and suppliers of poultry, certain seafood products,
dairy products, soups and sauces, bakery items and certain meat
products. Our restaurants place orders directly with GFS, other
distributors under our DMA arrangement or US Foodservice and
maintain regular distribution schedules.
In addition to our broadline distribution arrangements, we
utilize direct distribution for several products, including a
majority of our meat deliveries, produce and non-alcoholic
beverages. Our purchasing contracts are generally negotiated
annually and cover substantially all of our requirements for a
specific product. Our contracts typically provide either for
fixed or variable pricing based on an agreed upon cost-plus
formula and require that our suppliers deliver directly to our
distributors. We are currently under a fixed-price contract
through March 2011 with our direct meat distributor that covers
a large portion of our meat requirements and a mixed fixed-price
and market-based contract with our poultry supplier that covers
substantially all of our poultry requirements through December
2010. Produce is supplied to our restaurants by a cooperative of
local suppliers. We are currently under a mixed fixed price and
market-based contract with our national produce management
companies that continues through October 2010. We are currently
under contract with our principal non-alcoholic beverage
provider through the later of 2013 or when certain minimum
purchasing thresholds are satisfied. Our ability to arrange
national distribution of alcoholic beverages is restricted by
state law; however, where possible, we negotiate directly with
spirit companies
and/or
national distributors. We also contract with a third party
provider to source, maintain and remove our cooking shortening
and oil systems.
We have a procurement strategy for all of our product categories
that includes contingency plans for key products, ingredients
and supplies. These plans include selecting suppliers that
maintain alternate production facilities capable of satisfying
our requirements, or in certain instances, the approval of
secondary suppliers or alternative products. We believe our
procurement strategy will allow us to obtain sufficient product
quantities from other sources at competitive prices.
Food
Safety
Providing a safe and clean dining experience for our guests is
essential to our mission statement. We have taken steps to
mitigate food quality and safety risks, including designing and
implementing a training program for our chefs, hourly service
people and managers focusing on food safety and quality
assurance. In addition, we include food safety standards and
proceeds in every recipe for our cooks. We also consider food
safety and quality assurance when selecting our distributors and
suppliers. Our suppliers are inspected by federal, state and
local regulators or other reputable, qualified inspection
services, which helps ensure their compliance will all federal
food safety and quality guidelines.
Marketing and
Advertising
Our restaurants have generated broad appeal due to their
flavorful food, friendly, attentive service and ambiance. The
target audience for BRAVO! and BRIO is college-educated
professionals,
ages 35-65,
and their families that dine out frequently for social or
special occasions. Our marketing strategy is designed to promote
and build brand awareness while retaining local neighborhood
relationships by focusing on driving comparable restaurant sales
growth by increasing frequency of visits by our current guests
as well as attracting new guests. Our marketing strategy also
focuses on generating brand awareness at new store openings.
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Local
Restaurant Marketing
A significant portion of our marketing budget is spent on
point-of-sale
materials to communicate and promote key brand initiatives to
our guests while they are dining in our restaurants. We believe
that our initiatives, such as seasonal menu changes, holiday
promotions, bar promotions, private party and banquet offerings,
contribute to repeat guest visits for multiple occasions and
drive brand awareness and loyalty.
A key aspect of our local store marketing strategy is developing
community relationships with local schools, churches, hotels,
chambers of commerce and residents. We place advertisements with
junior high and high school athletic programs, school newspapers
and special event programs as well as weekly bulletins for
churches. We believe courting and catering to local hotel
concierges or hosting annual receptions drives traveler
recommendations for BRAVO! and BRIO. Participating in off-site
food and charity fairs and events allows us to make contact with
local families. Hosting chamber of commerce meetings and mixers,
advertising in newsletters and sending out
e-blasts
have also been successful in reaching the business community.
Our restaurant managers are closely involved in developing and
implementing the majority of the local store marketing programs.
Advertising
We spend a limited amount of our marketing budget on various
advertising outlets, including print, radio, direct mail and
outdoor, to build brand awareness. These advertisements are
designed to emphasize the quality and consistency of BRAVO! and
BRIOs food and service and the superior guest experience
we offer in a warm and inviting atmosphere. Direct mail is
primarily used for new store openings but has also been employed
to promote special holiday offers and events.
New Restaurant
Openings
We use the openings of new restaurants as opportunities to reach
out to various media outlets as well as the local community.
Local public relations firms are retained to assist BRAVO! and
BRIO with obtaining appearances on radio and television cooking
shows, establishing relationships with local charities and
gaining coverage in local newspapers and magazines. We employ a
variety of marketing techniques to promote new openings along
with press releases, direct mail,
e-marketing
and other local restaurant marketing activities, which include
concierge parties, training lunches and dinners with local
residents, media, community leaders and businesses. In addition,
we typically partner with a local charity and host an event in
connection with our grand openings.
E-Marketing &
Social Media
We have increased our use of
e-marketing
tools, which enables us to reach a significant number of people
in a timely and targeted fashion at a fraction of the cost of
traditional media. We believe that BRAVO! and BRIO guests are
frequent Internet users and will explore
e-applications
to make dining decisions or to share dining experiences. We have
set up Facebook and Twitter pages and developed mobile
applications for BRAVO! and BRIO, along with advertising on
weather.com, citysearch.com, yelp.com and urbanspoon.com. We
anticipate allocating an increasing amount of marketing budget
toward this rapidly growing area.
Training and
Employee Programs
We conduct comprehensive training programs for our management,
hourly employees and corporate personnel. Our training
department provides a series of formulated training modules that
are used throughout our company, including leadership training,
team building, food safety certification, alcohol safety
programs, guest service philosophy training, sexual harassment
training and others. All training materials are kept
up-to-date
and stored on our corporate PASTAnet internal web
site for individual restaurants to access as needed.
E-learning
is utilized for several management training modules as trainees
progress through our ten week management training program. Once
management training is completed in the respective restaurants,
all management trainees are brought to our corporate offices for
three days of classroom certification and testing.
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Team member selection has been developed to include
pre-employment assessment at all levels, from hourly through
multi-restaurant management candidates. These selection reports
help to bring objectivity to the selection process. Customized
standards have been created for the company that utilize our
strongest performers as the behavioral model for future new
hires.
Our training process in connection with opening new restaurants
has been refined over the course of our experience. Regional
trainers oversee and conduct both service and kitchen training
and are on site through the first two weeks of opening. The
regional trainers lend support and introduce our standards and
culture to the new team. We believe that hiring the best
available team members and committing to their training helps
keep retention high during the restaurant opening process.
Several development programs have been instrumental to our long
term success. The Rising Star program was created as
part of our Bravo Brio Restaurant Group University (BBRGU) to
develop aspiring hourly team members into assistant managers and
chefs. The key element of the Rising Star program is to provide
upward mobility within the organization, utilizing existing
labor hours in the restaurants for focused training for the most
promising employees. Many of our general managers and executive
chefs have gained their positions through internal promotions as
a result of this program. Once an employee is identified as a
potential leader through observation and assessment, a
customized development program is designed that incorporates
mentoring, coaching and training. Business classes for
additional restaurant management skill and leadership traits are
also offered through BBRGU at our corporate office.
Management
Information Systems
Restaurant level financial and accounting controls are handled
through a sophisticated
point-of-sale
(POS) cash register system and computer network in
each restaurant that communicates with our corporate
headquarters. The POS system is also used to authorize and
transmit credit card sales transactions. All of our restaurants
use MICROS RES 3700 software with
state-of-the-art
equipment. Our restaurant communications are comprised of cable,
DSL, Fractional T1 and T1 lines. Our restaurants use MICROS
back-office applications to manage the business and control
costs. The applications that are part of the back-office tools
are Product Management, Financial Management and Labor
Management. These systems integrate with the MICROS RES 3700
software. Product Management helps drive food and beverage costs
down by identifying kitchen or bar inefficiencies and, through
the menu engineering capabilities, it aides in enhancing
profitability. Labor Management provides the ability to schedule
labor and manage labor costs, including time clock governance
that does not allow an employee to clock in more
than a designated amount of time before a scheduled shift.
In 2008, we implemented the Lawson 9.0 software platform as our
ERP system. Its core subsystems include GL, AP, construction
accounting, Payroll and Human Resources. The data pulled from
the restaurants is integrated into the Lawson system and a data
warehouse. This data provides visibility to allow us to better
analyze the business. In 2009, we focused on re-designing our
guest facing websites to provide a distinct brand image on each
website, as well as allowing us to elevate our message to our
guests. As part of the redesign, we included search engine
optimization into the websites (www.bbrg.com,
www.bravoitalian.com, www.brioitalian.com, www.bon-vie.com). We
are currently focusing on providing Online Ordering for BRAVO!
via our website. Also in 2009, we implemented an internal
website called PASTAnet. This intranet site utilizing Microsoft
Sharepoint provides us with the ability to collaborate,
communicate, train and share information between the restaurants
and our corporate office.
Government
Regulation
We are subject to numerous federal, state and local laws
affecting our business. Each of our restaurants is subject to
licensing and regulation by a number of government authorities,
which may include alcoholic beverage control, nutritional
information disclosure, health, sanitation, environmental,
zoning and public safety agencies in the state or municipality
in which the restaurant is located.
During 2009, approximately 19.5% of our restaurant sales were
attributable to alcoholic beverages. Alcoholic beverage control
regulations require each of our restaurants to apply to a state
authority and, in certain locations,
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county and municipal authorities, for licenses and permits to
sell alcoholic beverages on the premises. Typically, licenses
must be renewed annually and may be subject to penalties,
temporary suspension or revocation for cause at any time.
Alcoholic beverage control regulations impact many aspects of
the daily operations of our restaurants, including the minimum
ages of patrons and staff members consuming or serving these
beverages, respectively; staff member alcoholic beverage
training and certification requirements; hours of operation;
advertising; wholesale purchasing and inventory control of these
beverages; the seating of minors and the servicing of food
within our bar areas; special menus and events, such as happy
hours; and the storage and dispensing of alcoholic beverages.
State and local authorities in many jurisdictions routinely
monitor compliance with alcoholic beverage laws.
We are subject to dram shop statutes in most of the states in
which we operate, which generally provide a person injured by an
intoxicated person the right to recover damages from an
establishment that wrongfully served alcoholic beverages to the
intoxicated person.
Various federal and state labor laws govern our operations and
our relationships with our staff members, including such matters
as minimum wages, breaks, overtime, fringe benefits, safety,
working conditions and citizenship or work authorization
requirements. We are also subject to the regulations of the
U.S. Citizenship and Immigration Services and
U.S. Customs and Immigration Enforcement. In addition, some
states in which we operate have adopted immigration employment
laws which impose additional conditions on employers. Even if we
operate our restaurants in strict compliance with the laws,
rules and regulations of these federal and state agencies, some
of our staff members may not meet federal citizenship or
residency requirements or lack appropriate work authorizations,
which could lead to a disruption in our work force. Significant
government-imposed increases in minimum wages, paid or unpaid
leaves of absence, sick leave, and mandated health benefits, or
increased tax reporting, assessment or payment requirements
related to our staff members who receive gratuities, could be
detrimental to the profitability of our restaurants operations.
Further, we are continuing to assess the impact of
recently-adopted federal health care legislation on our health
care benefit costs. The imposition of any requirement that we
provide health insurance benefits to staff members that are more
extensive than the health insurance benefits we currently
provide, or the imposition of additional employer paid
employment taxes on income earned by our employees, could have
an adverse effect on our results of operations and financial
position. Our distributors and suppliers also may be affected by
higher minimum wage and benefit standards, which could result in
higher costs for goods and services supplied to us. In addition,
while we carry employment practices insurance covering a variety
of labor-related liability claims, a settlement or judgment
against us that is uninsured or in excess of our coverage
limitations could have a material adverse effect on our results
of operations, liquidity, financial position or business.
Recent federal legislation enacted in March 2010 will require
chain restaurants with 20 or more locations in the United States
to comply with federal nutritional disclosure requirements. A
number of states, counties and cities have also enacted menu
labeling laws requiring
multi-unit
restaurant operators to disclose certain nutritional information
available to guests, or have enacted legislation restricting the
use of certain types of ingredients in restaurants. Although the
federal legislation is intended to preempt conflicting state or
local laws on nutrition labeling, until we are required to
comply with the federal law we will be subject to a patchwork of
state and local laws and regulations regarding nutritional
content disclosure requirements. Many of these requirements are
inconsistent or are interpreted differently from one
jurisdiction to another. While our ability to adapt to consumer
preferences is a strength of our concepts, the effect of such
labeling requirements on consumer choices, if any, is unclear at
this time.
There is also a potential for increased regulation of food in
the United States. For example, the United States Congress is
currently considering food safety legislation that is expected
to greatly expand the FDAs authority over food safety. If
this legislation is enacted, we cannot assure you that it will
not impact our industry. Additional requirements may also be
imposed by state and local authorities. Additionally, our
suppliers may initiate or otherwise be subject to food recalls
that may impact the availability of certain products, result in
adverse publicity or require us to take other actions that could
be costly for us or otherwise harm our business.
We are subject to a variety of federal and state environmental
regulations concerning the handling, storage and disposal of
hazardous materials, such as cleaning solvents, and the
operation of restaurants in environmentally sensitive locations
may impact aspects of our operations. During fiscal 2009, there
were no material capital expenditures for environmental control
facilities, and no such expenditures are anticipated.
68
Our facilities must comply with the applicable requirements of
the Americans with Disabilities Act of 1990 (ADA)
and related federal and state statutes. The ADA prohibits
discrimination on the basis of disability with respect to public
accommodations and employment. Under the ADA and related federal
and state laws, we must make access to our new or significantly
remodeled restaurants readily accessible to disabled persons. We
must also make reasonable accommodations for the employment of
disabled persons.
We have a significant number of hourly restaurant staff members
who receive income from gratuities. We have elected to
voluntarily participate in a Tip Reporting Alternative
Commitment (TRAC) agreement with the IRS. By
complying with the educational and other requirements of the
TRAC agreement, we reduce the likelihood of potential
employer-only FICA tax assessments for unreported or
underreported tips. However, we rely on our staff members to
accurately disclose the full amount of their tip income and our
reporting on the disclosures provided to us by such tipped
employees.
Intellectual
Property
We currently own six separate registrations in connection with
restaurant service from the United States Patent and Trademark
Office for the following trademarks:
BRAVO!
®
,
BRAVO! Cucina
Italiana
®
,
Cucina BRAVO!
Italiana
®
,
BRAVO! Italian
Kitchen
®
,
Brio
®
,
Brio Tuscan
Grille
tm
and Bon
Vie
®
.
Our registrations confer a federally recognized exclusive right
for us to use these trademarks throughout the United States, and
we can prevent the adoption of confusingly similar trademarks by
other restaurants that do not possess superior common law rights
in particular markets. An important part of our intellectual
property strategy is the monitoring and enforcement of our
rights in markets in which our restaurants currently exist or
markets which we intend to enter in the future. We also monitor
trademark registers to oppose the registration of confusingly
similar trademarks or to limit the expansion of existing
trademarks with superior common law rights.
We enforce our rights through a number of methods, including the
issuance of
cease-and-desist
letters or making infringement claims in federal court. If our
efforts to protect our intellectual property are inadequate, or
if any third party misappropriates or infringes on our
intellectual property, the value of our brands may be harmed,
which could have a material adverse effect on our business and
might prevent our brands from achieving or maintaining market
acceptance.
Restaurant
Industry Overview
According to the National Restaurant Association (the
NRA), U.S. restaurant industry sales in 2009
were $566 billion and projected to grow 2.5% to
$580 billion in 2010, representing approximately 3.9% of
the U.S. gross domestic product. According to the NRA, the
U.S. restaurant industry has grown at a compound annual
growth rate of 6.7% since 1970. Technomic, Inc., a national
consulting market research firm, reported that the
U.S. full-service Italian segment had $15 billion of
sales in 2009 and the top 100 restaurants within this segment
have had a compounded annual growth rate of 11.8% since 1989.
The NRA projects that 49% of total U.S. food expenditures
will be spent at restaurants in 2010, up from 25% in 1955. Real
disposable personal income, a key indicator of restaurant
industry sales, is projected to increase 1.5% in 2010, following
an increase of 1.3% in 2009. We believe that the increase in
purchases of food-away-from-home is attributable to
demographic, economic and lifestyle trends, including the
following factors:
|
|
|
|
|
the rise in the number of women in the market place;
|
|
|
|
increase in average household income;
|
|
|
|
an aging U.S. population; and
|
|
|
|
an increased willingness by consumers to pay for the convenience
of meals prepared outside of their homes.
|
The restaurant industry is comprised of multiple segments,
including casual dining. The casual dining segment can be
further
sub-divided
into representative casual and upscale casual dining. The
upscale casual dining segment is differentiated by freshly
prepared and innovative food, flavorful recipes with creative
presentations and decor. Upscale casual dining is positioned
differently than representative casual dining, with standards
that are much closer to fine dining. Technomic, Inc., predicts
that the most successful operators will be those which can
target
69
customers for diverse occasions and needs, as well as cater for
new daypart and menu opportunities to reflect changing attitudes
and behaviors.
Competition
The restaurant business is intensely competitive with respect to
food quality, price-value relationships, ambiance, service and
location, and is affected by many factors, including changes in
consumer tastes and discretionary spending patterns,
macroeconomic conditions, demographic trends, weather
conditions, the cost and availability of raw materials, labor
and energy and government regulations. Any change in these or
other related factors could adversely affect our restaurant
operations. The main competitors for our brands are other
operators of mid-priced, full service concepts in the
multi-location, upscale affordable dining segment in which we
compete most directly for real estate locations and guests,
including Maggianos, Cheesecake Factory, P.F. Changs
and BJs Restaurants. We also compete to a lesser extent
with nationally recognized casual dining Italian restaurants
such as Romanos Macaroni Grill, Carrabbas Italian
Grill and Olive Garden, as well as high quality, locally-owned
and operated Italian restaurants.
There are a number of well-established competitors with
substantially greater financial, marketing, personnel and other
resources than ours. In addition, many of our competitors are
well established in the markets where our operations are, or in
which they may be, located. While we believe that our
restaurants are distinctive in design and operating concept,
other companies may develop restaurants that operate with
similar concepts. In addition, with improving product offerings
at fast casual restaurants, quick-service restaurants and
grocery stores, consumers may choose to trade down to these
alternatives, which could also negatively affect our financial
results.
Employees
As of June 27, 2010, we had approximately
8,000 employees of whom approximately 80 were corporate
management and staff personnel, approximately 500 were
restaurant managers or trainees, and approximately 7,400 were
employees in non-management restaurant positions. None of our
employees are unionized or covered by a collective bargaining
agreement. We believe that we have good relations with our
employees.
70
Properties
The following table sets forth our restaurant locations as of
June 27, 2010.
|
|
|
|
|
|
|
|
|
Number of
|
|
Location
|
|
Restaurants
|
|
|
Alabama
|
|
|
1
|
|
Arkansas
|
|
|
1
|
|
Arizona
|
|
|
2
|
|
Connecticut
|
|
|
1
|
|
Colorado
|
|
|
2
|
|
Florida
|
|
|
9
|
|
Georgia
|
|
|
2
|
|
Illinois
|
|
|
3
|
|
Indiana
|
|
|
3
|
|
Iowa
|
|
|
1
|
|
Kansas
|
|
|
1
|
|
Kentucky
|
|
|
2
|
|
Louisiana
|
|
|
2
|
|
Michigan
|
|
|
6
|
|
Missouri
|
|
|
4
|
|
Maryland
|
|
|
1
|
|
Nevada
|
|
|
1
|
|
New Jersey
|
|
|
1
|
|
New Mexico
|
|
|
1
|
|
New York
|
|
|
2
|
|
North Carolina
|
|
|
4
|
|
Ohio
|
|
|
16
|
|
Oklahoma
|
|
|
1
|
|
Pennsylvania
|
|
|
6
|
|
Tennessee
|
|
|
1
|
|
Texas
|
|
|
5
|
|
Virginia
|
|
|
4
|
|
Wisconsin
|
|
|
2
|
|
|
|
|
|
|
Total
|
|
|
85
|
|
|
In addition to the restaurant locations set forth above, we also
have one restaurant currently in development in Delaware that we
expect to open in the fourth quarter of 2010.
We own four properties, two in Ohio and one in each of Indiana
and Pennsylvania, and operate restaurants on each of these
sites. We lease the remaining land and buildings used in our
restaurant operations under various long-term operating lease
agreements. The initial lease terms range from ten to
20 years. The leases include renewal options for two to 20
additional years. Our leases currently expire between 2011 and
2028. The majority of our leases provide for base (fixed) rent,
plus additional rent based on gross sales (as defined in each
lease agreement) in excess of a stipulated amount, multiplied by
a stated percentage. We are also generally obligated to pay
certain real estate taxes, insurances, common area maintenance
charges and various other expenses related to the properties.
The term of one lease relating to the restaurant locations set
forth above is set to expire in 2011 but
71
may be renewed at our option for an additional five year term
expiring in 2015. Our main office is also leased and is located
at 777 Goodale Boulevard, Suite 100, Columbus, Ohio 43212.
Legal
Proceedings
Occasionally we are a party to various legal actions arising in
the ordinary course of our business including claims resulting
from slip and fall accidents, employment related
claims and claims from guests or employees alleging illness,
injury or other food quality, health or operational concerns.
None of these types of litigation, most of which are covered by
insurance, has had a material effect on us, and as of the date
of this prospectus, we are not a party to any material pending
legal proceedings and are not aware of any claims that could
have a materially adverse effect on our financial position,
results of operations, or cash flows.
72
Management
Executive
Officers and Directors
The following table sets forth certain information with respect
to our executive officers and directors as of June 27, 2010.
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Alton F. Doody, III
|
|
|
52
|
|
|
Founder, Director and Chairman
|
Saed Mohseni
|
|
|
48
|
|
|
Director, President and Chief Executive Officer
|
James J. OConnor
|
|
|
48
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
Brian OMalley
|
|
|
42
|
|
|
Senior Vice President of Operations, BRIO
|
Michael Moser
|
|
|
54
|
|
|
Senior Vice President of Operations, BRAVO!
|
Ronald F. Dee
|
|
|
45
|
|
|
Senior Vice President, Development
|
Allen J. Bernstein
|
|
|
64
|
|
|
Director
|
Michael J. Hislop
|
|
|
55
|
|
|
Director
|
David B. Pittaway
|
|
|
58
|
|
|
Director
|
Harold O. Rosser II
|
|
|
61
|
|
|
Director
|
|
The board of directors believes that each of the directors set
forth above has the necessary qualifications to be a member of
the board of directors. Each of the directors has exhibited
during his prior service as a director the ability to operate
cohesively with the other members of the board of directors.
Moreover, the board of directors believes that each director
brings a strong background and skill set to the board of
directors, giving the board of directors as a whole competence
and experience in diverse areas, including corporate governance
and board service, finance, management and restaurant industry
experience.
Set forth below is a brief description of the business
experience of each of our directors and executive officers, as
well as certain specific experiences, qualifications and skills
that led to the board of directors conclusion that each of
the directors set forth below is qualified to serve as a
director:
Alton F. (Rick) Doody, III
has been
Chairman of the board of directors of the Company since its
inception in 1987. Mr. Doody was our Chief Executive
Officer from 1992 until February 2007 and our President from
June 2006 until September 2009. Mr. Doody continues to
remain employed in a non-executive officer capacity by the
Company, primarily focusing on the development of our new
restaurants. Mr. Doody also founded Lindeys German
Village, and was responsible for all facets of its management.
Mr. Doody received a Bachelor of Sciences degree in
Economics from Ohio Wesleyan University and has completed all
the necessary coursework for a Masters Degree from Cornell
University in Restaurant/Hotel Management. Mr. Doody is a
member of the Young Presidents Organization and the
International Council of Shopping Center Owners and is a Board
Member for the Cleveland Restaurant Association.
Mr. Doodys qualifications to serve on our board of
directors include his knowledge of our company and the
restaurant industry and his years of leadership at our company.
Saed Mohseni
joined the Company as Chief Executive
Officer in February 2007 and assumed the additional role of
President in September 2009. Mr. Mohseni has also served as
a director of the Company since June 2006. Prior to joining us,
Mr. Mohseni was the Chief Executive Officer (January
2000-February 2007) and a director
(2004-2007)
of McCormick & Schmicks Seafood Restaurants,
Inc. Mr. Mohseni joined McCormick &
Schmicks in 1986 as a General Manager. During his time at
McCormick & Schmicks, he also held the positions
of Senior Manager
(1988-1993),
Vice President of Operations-California
(1993-1997),
and Senior Vice President of Operations
(1997-1999).
Mr. Mohseni attended Portland State University and Oregon
State University. Mr. Mohsenis qualifications to
serve on our board of directors include his knowledge of our
company and the restaurant industry and his years of leadership
at our company.
James J. OConnor
joined the Company as Chief
Financial Officer, Treasurer and Secretary in February 2007. For
the six years prior to joining us, Mr. OConnor held
various senior level financial positions, including Chief
Financial Officer of the Wendys Brand, at Wendys
International, Inc. From 1999 to 2000, Mr. OConnor
served
73
as Senior Manager of Financial Reporting for Tween Brands.
Mr. OConnor previously served as a Senior Manager for
PricewaterhouseCoopers LLP from 1985 until 1998.
Mr. OConnor is a CPA and earned a Bachelor of
Sciences degree in Accounting and Finance from the Ohio State
University.
Brian OMalley
has served as Senior Vice President
of Operations, BRIO, since 2006. Mr. OMalley joined
the Company in 1996 as the General Manager of BRAVO! Dayton.
Mr. OMalley was promoted to District Partner in 1999,
Director of Operations in 2000 and to Vice President of
Operations in 2004. Prior to joining us, Mr. OMalley
was employed with Sante Fe Steakhouse, where he held positions
as a General Manager, Director of Training and Regional Manager.
Mr. OMalley earned a Bachelor of Sciences degree in
Speech Communications and Hospitality Management from the
University of Wisconsin-Stout.
Michael Moser
has served as Senior Vice President of
Operations, BRAVO!, since 2006. Mr. Moser is a classically
trained chef who has over thirty years of experience in the
restaurant industry. Mr. Moser joined the Company as a Vice
President of Operations in August of 2004. Prior to joining us,
Mr. Moser served as the Chief Operating Officer of the
Texas Land and Cattle Steak House, a privately held 24 unit
restaurant company. From 1996 to 2001, Mr. Moser was Chief
Operating Officer of Romanos Macaroni Grill. Prior to
becoming Chief Operating Officer, Mr. Moser served as
Director of Operations and founding Concept Chef for creator
Phillip Romano. Mr. Moser attended Wayne State University.
Ronald F. Dee
has served as our Senior Vice President of
Development since May 2007. For the year prior to assuming his
current position, Mr. Dee served as our Director of Real
Estate. Mr. Dee joined the Company in July of 2003. Prior
to joining us, Mr. Dee was Vice President, Development with
Darden Restaurants overseeing all Red Lobster brand development.
Mr. Dee has over twenty years of real estate development
experience in the restaurant/hospitality industry having also
held senior management positions with Marriott International and
Taco Bell Corp. Mr. Dee is an active member of the
International Counsel of Shopping Center Owners. Mr. Dee
attended the State University of New York at Buffalo.
Allen J. Bernstein
has been a director of the Company
since June 2006. Mr. Bernstein is the President of Endeavor
Restaurant Group, Inc. He founded and served as Chairman and
Chief Executive Officer of Mortons Restaurant Group, Inc.
from 1989 through 2005. He currently serves on the boards of
directors of a number of public and privately held companies,
including The Cheesecake Factory Incorporated, Caribbean
Restaurants, LLC and as non-executive Chairman of the board of
directors of Perkins & Marie Callenders, Inc.
Previously, Mr. Bernstein served as a director on the
boards of Charlie Browns Steakhouse, McCormick &
Schmicks Seafood Restaurants, Inc. and Dave &
Busters, Inc. He also serves on the board of trustees of the
American Film Institute. Mr. Bernstein brings over
20 years of restaurant industry experience to the board of
directors, and among other skills and qualifications, his
significant knowledge and understanding of the industry,
specifically the upscale affordable segment. Additionally,
Mr. Bernstein brings the knowledge and skills that come
from significant experience in the restaurant industry,
including at the senior executive and board level of a number of
other publicly traded companies. Mr. Bernstein earned a
Bachelor of Business Administration degree in Marketing from the
University of Miami.
Michael J. Hislop
has been a director of the Company
since August 2006. Mr. Hislop has served as the President
and Chief Executive Officer of Il Fornaio since 1998. From April
1991 to May 1995, Mr. Hislop served as Chairman and Chief
Executive Officer of Chevys Mexican Restaurants which,
under his direction, grew from 17 locations to 63 locations
nationwide. From 1982 to 1991, Mr. Hislop was employed by
El Torito Mexican Restaurants, Inc., serving first as Regional
Operator, then as Executive Vice President of Operations and for
the last three years as Chief Operating Officer. From 1979 to
1982, Mr. Hislop was employed by T.G.I. Fridays
Restaurants, Inc. as a Regional Manager. Mr. Hislop brings
to the board of directors the knowledge, qualifications and
leadership skills that come from 30 years of experience in
the restaurant industry, including significant experience at the
senior executive and board level in both casual dining and
Italian segments. Mr. Hislop earned a Bachelor of Sciences
degree in Hotel and Restaurant Management from the University of
Massachusetts.
David B. Pittaway
has been a director of the Company
since June 2006. Mr. Pittaway is Senior Managing Director,
Senior Vice President and Secretary of Castle Harlan, Inc., a
private equity firm. He has been with Castle Harlan since 1987.
Mr. Pittaway also has been Vice President and Secretary of
Branford Castle, Inc., an investment company, since October,
1986. From 1987 to 1998, Mr. Pittaway was Vice President,
Chief Financial Officer and
74
a director of Branford Chain, Inc., a marine wholesale company,
where he is now a director and Vice Chairman. Previously,
Mr. Pittaway was Vice President of Strategic Planning and
Assistant to the President of Donaldson, Lufkin &
Jenrette, Inc., an investment banking firm. Mr. Pittaway is
also a member of the boards of directors of The Cheesecake
Factory Incorporated, Mortons Restaurant Group, Inc.,
McCormick & Schmicks Seafood Restaurants, Inc.,
Perkins & Marie Callenders Inc., Caribbean
Restaurants, LLC and the Dystrophic Epidermolysis Bullosa
Research Association of America. In addition, he is a director
and co-founder of the Armed Forces Reserve Family Assistance
Fund. Mr. Pittaway possesses in-depth knowledge and
experience in finance and strategic planning based on his more
than 20 years of experience as an investment banker and
manager of Castle Harlans investing activities.
Mr. Pittaway brings significant restaurant industry
experience to the board of directors, and among other skills and
qualifications, his significant knowledge and understanding of
the industry, and his experience serving as a director of a
number of publicly traded companies in the restaurant industry.
Mr. Pittaway received a Bachelor of Arts degree from the
University of Kansas, a JD from Harvard Law School and a MBA
from Harvard Business School.
Harold O. Rosser II
has served as a member of our
board of directors since June 2006. Mr. Rosser is a
Managing Director and founder of Bruckmann, Rosser, Sherrill and
Co., Management, L.P., a New York-based private equity firm
where he has worked since 1995. From 1987 through 1995
Mr. Rosser was an officer at Citicorp Venture Capital.
Prior to joining CVC, he spent 12 years with
Citicorp/Citibank in various management and corporate finance
positions. Mr. Rosser currently serves on the Board of
Directors of Ruths Hospitality Group, Inc., Il Fornaio
(America) Corporation, Logans Roadhouse, Inc. and Wilson
Farms, Inc. Mr. Rosser is also a member of the Boards of
Trustees of the Culinary Institute of America and Wake Forest
University. Mr. Rosser formerly served as a director of
several private and public companies and through BRS has
invested in more than 16 restaurant companies since 1989. As a
result of these and other professional experiences,
Mr. Rosser possesses in-depth knowledge and experience in
the restaurant industry, corporate finance; strategic planning
and leadership of complex organizations; and board practices of
private and public companies and other entities that strengthen
the boards collective qualifications, skills and
experience. Mr. Rosser earned his B.S. from Clarkson
University and attended Management Development Programs at
Carnegie-Mellon University and the Stanford University Business
School.
Director
Independence
Our board of directors currently consists of 6 directors.
Our board of directors has undertaken a review of the
independence of our directors and considered whether any
director has a material relationship with us that could
compromise his ability to exercise independent judgment in
carrying out his responsibilities. We believe
that
of our directors currently meet these independence standards.
Board
Committees
Our board of directors will establish various committees to
assist it with its responsibilities. Those committees are
described below.
Audit
Committee
The current audit committee members are Harold O.
Rosser, II and David B. Pittaway. Upon the date our common
stock is listed on the Nasdaq Global Market, the committee
members will
be .
The composition of the audit committee will satisfy the
independence and financial literacy requirements of the Nasdaq
Global Market and the SEC. The independence standards require
that the audit committee have at least one independent director
on the date of listing, a majority of independent directors
within 90 days after the date our registration statement is
declared effective and fully independent audit committee within
one year after that date. The financial literacy standards
require that each member of our audit committee be able to read
and understand fundamental financial statements. In addition, at
least one member of our audit committee must qualify as a
financial expert, as defined by Item 407(d)(5) of
Regulation S-K
promulgated by the SEC, and have financial sophistication in
accordance with Nasdaq Global Market rules. Our board of
directors has determined
that
qualifies as an audit committee financial expert.
75
The primary function of the audit committee is to assist the
board of directors in the oversight of the integrity of our
financial statements, our compliance with legal and regulatory
requirements, our independent registered public
accountants qualifications and independence and the
performance of our internal audit function and independent
registered public accountants. The audit committee also prepares
an audit committee report required by the SEC to be included in
our proxy statements.
The audit committee fulfills its oversight responsibilities by
reviewing the following: (1) the financial reports and
other financial information provided by us to our shareholders
and others; (2) our systems of internal controls regarding
finance, accounting, legal and regulatory compliance and
business conduct established by management and the board; and
(3) our auditing, accounting and financial processes
generally. The audit committees primary duties and
responsibilities are to:
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serve as an independent and objective party to monitor our
financial reporting process and internal control systems;
|
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|
|
review and appraise the audit efforts of our independent
registered public accountants and exercise ultimate authority
over the relationship between us and our independent registered
public accountants; and
|
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|
provide an open avenue of communication among the independent
registered public accountants, financial and senior management
and the board of directors.
|
To fulfill these duties and responsibilities, the audit
committee will:
Documents/Reports
Review
|
|
|
|
|
discuss with management and the independent registered public
accountants our annual and interim financial statements,
earnings press releases, earnings guidance and any reports or
other financial information submitted to the shareholders, the
SEC, analysts, rating agencies and others, including any
certification, report, opinion or review rendered by the
independent registered public accountants;
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|
review the regular internal reports to management prepared by
the internal auditors and managements response;
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|
discuss with management and the independent registered public
accountants the Quarterly Reports on
Form 10-Q,
the Annual Reports on
Form 10-K,
including our disclosures under Managements
Discussion and Analysis of Financial Conditions and Results of
Operations, and any related public disclosure prior to its
filing;
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Independent
Registered Public Accountants
|
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|
|
have sole authority for the appointment, compensation,
retention, oversight, termination and replacement of our
independent registered public accountants (subject, if
applicable, to shareholder ratification) and the independent
registered public accountants will report directly to the audit
committee;
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pre-approve all auditing services and all non-audit services to
be provided by the independent registered public accountants;
|
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|
review the performance of the independent registered public
accountants with both management and the independent registered
public accountants;
|
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periodically meet with the independent registered public
accountants separately and privately to hear their views on the
adequacy of our internal controls, any special audit steps
adopted in light of material control deficiencies and the
qualitative aspects of our financial reporting, including the
quality and consistency of both accounting policies and the
underlying judgments, or any other matters raised by them;
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obtain and review a report from the independent registered
public accountants at least annually regarding (1) the
independent registered public accountants internal
quality-control procedures, (2) any material issues raised
by the most recent quality-control review, or peer review, of
the firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years
respecting one or more independent audits carried out by the
firm, (3) any steps taken to deal with any such issues, and
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76
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(4) all relationships between the independent registered
public accountants and their related entities and us and our
related entities;
|
Financial
Reporting Processes
|
|
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|
|
review with financial management and the independent registered
public accountants the quality and consistency, not just the
acceptability, of the judgments and appropriateness of the
accounting principles and financial disclosure practices used by
us, including an analysis of the effects of any alternative GAAP
methods on the financial statements;
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approve any significant changes to our auditing and accounting
principles and practices after considering the advice of the
independent registered public accountants and management;
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focus on the reasonableness of control processes for identifying
and managing key business, financial and regulatory reporting
risks;
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discuss with management our major financial risk exposures and
the steps management has taken to monitor and control such
exposures, including our risk assessment and risk management
policies;
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periodically meet with appropriate representatives of management
and the internal auditors separately and privately to consider
any matters raised by each of them, including any audit problems
or difficulties and managements response;
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periodically review the effect of regulatory and accounting
initiatives, as well as any off-balance sheet structures, on our
financial statements;
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Process
Improvement
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following the completion of the annual audit, review separately
with management and the independent registered public
accountants any difficulties encountered during the course of
the audit, including any restrictions on the scope of work or
access to required information;
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periodically review any processes and policies for communicating
with investors and analysts;
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review and resolve any disagreement between management and the
independent registered public accountants in connection with the
annual audit or the preparation of the financial statements;
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review with the independent registered public accountants and
management the extent to which changes or improvements in
financial or accounting practices, as approved by the audit
committee, have been implemented;
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Business
Conduct and Legal Compliance
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review our code of conduct and review managements
processes for communicating and enforcing this code of conduct;
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review managements monitoring of our compliance with our
code of conduct and ensure that management has the proper review
system in place to ensure that our financial statements,
reports, and other financial information disseminated to
governmental organizations and the public satisfy legal
requirements;
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review, with our counsel, any legal matter that could have a
significant impact on our financial statements and any legal
compliance matters;
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review and approve all related-party transactions;
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Other
Responsibilities
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establish and periodically review procedures for (1) the
receipt, retention and treatment of complaints received by us
regarding accounting, internal accounting controls or auditing
matters and (2) the confidential, anonymous submission by
our employees of concerns regarding questionable accounting or
auditing matters;
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77
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review and reassess the audit committees charter at least
annually and submit any recommended changes to the board of
directors for its consideration;
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provide the report required by Item 306 of
Regulation S-K
promulgated by the SEC for inclusion in our annual proxy
statement;
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report periodically, as deemed necessary or desirable by the
audit committee, but at least annually, to the full board of
directors regarding the audit committees actions and
recommendations, if any;
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establish policies for our hiring of employees or former
employees of the independent registered public accountants who
were engaged on our account;
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perform any other activities consistent with the audit
committees charter, our regulations and governing law, as
the audit committee or the board of directors deems necessary or
appropriate; and
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annually evaluate the audit committees performance and
report the results of such evaluation to the board of directors.
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The audit committee will hold regular meetings at least four
times each year. The audit committee will report the significant
results of its activities to the board of directors at each
regularly scheduled meeting of the board of directors.
In connection with this offering, our board of directors intends
to adopt a charter for the audit committee that complies with
current federal and Nasdaq Global Market rules relating to
corporate governance matters. Deloitte & Touche LLP is
presently our independent registered accounting firm.
Nominating and
Corporate Governance Committee
Upon the listing of our common stock on the Nasdaq Global
Market, our board of directors will designate a nominating and
corporate governance committee that will consist of at least
three directors. The committee members will
be .
The composition of the nominating and corporate governance
committee will satisfy the independence requirements of the
Nasdaq Global Market that it have at least one independent
director on the listing date, a majority of independent
directors within 90 days after that date and full
compliance within one year after that date. The nominating and
corporate governance committee will:
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identify individuals qualified to serve as our directors;
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nominate qualified individuals for election to our board of
directors at annual meetings of shareholders;
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establish a policy for considering shareholder nominees for
election to our board of directors; and
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recommend to our board the directors to serve on each of our
board committees.
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To fulfill these responsibilities, the nominating and governance
committee will:
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review periodically the composition of our board;
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identify and recommend director candidates for our board;
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recommend nominees for election as directors to our board;
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recommend the composition of the committees of the board to our
board;
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review periodically our code of conduct and obtain confirmation
from management that the policies included in the code of
conduct are understood and implemented;
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evaluate periodically the adequacy of our conflicts of interest
policy;
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consider with management public policy issues that may affect us;
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review periodically our committee structure and operations and
the working relationship between each committee and the
board; and
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consider, discuss and recommend ways to improve our boards
effectiveness.
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78
In connection with this offering, our board of directors intends
to adopt a charter for the nominating and corporate governance
committee that complies with current federal and Nasdaq Global
Market rules relating to corporate governance matters.
Compensation
Committee
The current compensation committee members are Messrs. Rosser,
Pittaway and Bernstein. Upon the listing of our common stock on
the Nasdaq Global Market, the committee members will
be .
The composition of the compensation committee will satisfy the
independence requirements of the Nasdaq Global Market. These
requirements require that we have at least one independent
director on the listing date, a majority of independent
directors within 90 days after that date and full
compliance within one year after that date. The primary
responsibility of the compensation committee is to develop and
oversee the implementation of our philosophy with respect to the
compensation of our executive officers and directors. In that
regard, the compensation committee will:
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have the sole authority to retain and terminate any compensation
consultant used to assist us, the board of directors or the
compensation committee in the evaluation of the compensation of
our executive officers and directors;
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to the extent necessary or appropriate to carry-out its
responsibilities, have the authority to retain special legal,
accounting, actuarial or other advisors;
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annually review and approve corporate goals and objectives to
serve as the basis for the compensation of our executive
officers, evaluate the performance of our executive officers in
light of such goals and objectives and determine and approve the
compensation level of our executive officers based on such
evaluation;
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interpret, implement, administer, review and approve all aspects
of remuneration to our executive officers and other key
officers, including their participation in
incentive-compensation plans and equity-based compensation plans;
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review and approve all employment agreements, consulting
agreements, severance arrangements and change in control
agreements for our executive officers;
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develop, approve, administer and recommend to the board of
directors and our shareholders for their approval (to the extent
such approval is required by any applicable law, regulation or
Nasdaq Global Market rules) all of our stock ownership, stock
option and other equity-based compensation plans and all related
policies and programs;
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make individual determinations and grant any shares, stock
options, or other equity-based awards under all equity-based
compensation plans, and exercise such other power and authority
as may be required or permitted under such plans, other than
with respect to non-employee directors, which determinations are
subject to the approval of our board of directors;
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have the authority to form and delegate authority to
subcommittees;
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report regularly, but not less frequently than annually, to our
board of directors;
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annually review and reassess the adequacy of its charter and
recommend any proposed changes to our board of directors for its
approval; and
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annually review its own performance, and report the results of
such review to our board of directors.
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The compensation committee has the same authority with regard to
all aspects of director compensation as it has been granted with
regard to executive compensation, except that any ultimate
decision regarding the compensation of any director is subject
to the approval of our board of directors. The compensation
committee will hold regular meetings at least two times each
year.
In connection with this offering, our board of directors intends
to adopt a charter for the compensation committee that complies
with current federal and Nasdaq Global Market rules relating to
corporate governance matters.
79
Compensation
Committee Interlocks and Insider Participation
None of the members of the compensation committee who will
continue to serve on the compensation committee after our common
stock has been listed on the Nasdaq Global Market currently or
has been at any time one of our officers or employees. None of
our executive officers currently serves, or has served during
the last completed fiscal year, as a member of the board of
directors or compensation committee of any entity that has one
or more executive officers serving as a member of our board of
directors or compensation committee. None of our executive
officers was a director of another entity where one of that
entitys executive officers served on our compensation
committee, and none of our executive officers served on the
compensation committee or the entire board of directors of
another entity where one of that entitys executive
officers served as a director on our board of directors.
Risk
Oversight
We face a number of risks, including market price risks in beef,
seafood, produce and other food product prices, liquidity risk,
reputational risk, operational risk and risks from adverse
fluctuations in interest rates and inflation
and/or
deflation. Management is responsible for the
day-to-day
management of risks faced by our company, while the board of
directors currently has responsibility for the oversight of risk
management. In its risk oversight role, the board of directors
seeks to ensure that the risk management processes designed and
implemented by management are adequate. The board of directors
also reviews with management our strategic objectives which may
be affected by identified risks, our plans for monitoring and
controlling risk, the effectiveness of such plans, appropriate
risk tolerance and our disclosure of risk. Following the
consummation of this offering, our audit committee will be
responsible for periodically reviewing with management, internal
audit and independent auditors the adequacy and effectiveness of
our policies for assessing and managing risk. The other
committees of the board of directors will also monitor certain
risks related to their respective committee responsibilities.
All committees will report to the full board as appropriate,
including when a matter rises to the level of a material or
enterprise level risk.
Code of
Ethics
In connection with the consummation of this offering, we plan to
adopt an amended written code of business conduct and ethics, to
be known as our code of conduct, which will apply to our chief
executive officer, our chief financial officer, our chief
accounting officer and all persons providing similar functions.
Our code of conduct will be available on our Internet website,
www.bbrg.com. Our code of conduct may also be obtained by
contacting investor relations at
(614) 326-7944.
Any amendments to our code of conduct or waivers from the
provisions of the code for our chief executive officer, our
chief financial officer and our chief accounting officer will be
disclosed on our Internet website promptly following the date of
such amendment or waiver. The inclusion of our web address in
this prospectus does not include or incorporate by reference the
information on our web site into this prospectus.
80
Compensation
Discussion and Analysis
Introduction
This Compensation Discussion and Analysis
(CD&A) provides an overview of our executive
compensation program, together with a description of the
material factors underlying the decisions that resulted in the
compensation provided to our Chief Executive Officer, Chief
Financial Officer and the other executive officers who were the
highest paid during the fiscal year ended December 27, 2009
(collectively, the named executive officers), as
presented in the tables which follow this CD&A. This
CD&A contains statements regarding our performance targets
and goals. These targets and goals are disclosed in the limited
context of our compensation program and should not be understood
to be statements of managements expectations or estimates
of financial results or other guidance. We specifically caution
investors not to apply these statements to other contexts.
Objective of
Compensation Policy
The objective of the Companys compensation policy is to
provide a total compensation package to each named executive
officer that will enable us to:
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attract, motivate and retain outstanding individual named
executive officers;
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reward named executive officers for attaining desired levels of
profit and shareholder value; and
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align the financial interests of each named executive officer
with the interests of our shareholders to encourage each named
executive officer to contribute to our long-term performance and
success.
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Overall, our compensation program is designed to reward
individual and Company performance. As discussed further below a
significant portion of named executive officer compensation is
comprised of a combination of annual cash bonuses, which reward
annual Company and executive performance, and equity
compensation, which rewards long-term Company and executive
performance. We believe that by weighting total compensation in
favor of the bonus and long-term incentive components of our
total compensation program, we appropriately reward individual
achievement while at the same time providing incentives to
promote Company performance. We also believe that salary levels
should be reflective of individual performance and therefore
factor this into the adjustment of base salary levels each year.
Process for
Setting Total Compensation
Generally, our overall compensation package for named executive
officers is administered and determined by our Compensation
Committee, comprised of three current non-employee directors. To
the extent required following the consummation of our initial
public offering, the members of our Compensation Committee may
change in order to ensure compliance with stock exchange
requirements and securities laws and regulations.
The Company sets annual base salaries, cash bonuses, and
equity-based awards for each named executive officer at levels
it believes are appropriate considering each named executive
officers annual review, the awards and compensation paid
to the named executive officer in past years, and progress
toward or attainment of previously set personal and corporate
goals and objectives, including attainment of financial
performance goals and such other factors as the Compensation
Committee deems appropriate and in our best interests and the
best interests of our shareholders. These goals and objectives
are discussed more fully below under the headings Annual
Bonus Compensation and Equity Compensation.
The Compensation Committee may also, from time to time, consider
recommendations from the Chief Executive Officer regarding total
compensation for named executive officers, however no such
recommendations were made for fiscal year 2009. The Compensation
Committee does not rely on predetermined formulas or a limited
set of criteria when it evaluates the performance of the Chief
Executive Officer and our other named executive officers. The
Committee may accord different weight at different times to
different factors for each named executive officer.
81
Elements of
Compensation
Our compensation program for named executive officers consists
of the following elements of compensation, each described in
greater depth below:
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Base salaries.
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Annual cash bonuses.
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Equity-based incentive compensation.
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Severance and
change-in-control
benefits.
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Perquisites.
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General benefits.
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The Company provides few personal benefits to named executive
officers, and what personal benefits are provided are generally
considered related to each named executive officers
performance of his duties with the Company. The Company may also
enter into employment agreements with named executive officers
to provide severance benefits as a recruitment and retention
mechanism. Currently, the Company is a party to an employment
agreement with Mr. Mohseni, entered into at the time of his
hire in 2007, and expects to enter into an employment agreement
with Mr. OConnor prior to the consummation of this
offering, which provide for severance benefits as described more
fully under the heading Potential Payments upon
Termination or Change in Control, below. Finally, named
executive officers participate in the Companys health and
benefit plans, and are entitled to vacation and paid time off
based on the Companys general vacation policies.
Employment
Agreement
The Company does not have any general policies regarding the use
of employment agreements, but may, from time to time, enter into
such a written agreement to reflect the terms and conditions of
employment of a particular named executive officer, whether at
the time of hire or thereafter. For example, the Company entered
into an employment agreement with Mr. Mohseni at the time
of his hire in order to attract Mr. Mohseni to transition
from his role as a non-employee board member to a full time
chief executive officer. The Company viewed such a negotiated
arrangement as a meaningful recruitment and retention mechanism
for Mr. Mohseni. In addition, the Company expects to enter
into a written employment agreement with Mr. OConnor
prior to the consummation of this offering in order to continue
to retain Mr. OConnor as a member of the
Companys senior management team.
Base
Salary
We pay base salaries because salaries are essential to
recruiting and retaining qualified employees. Base salaries also
create a performance incentive in the form of potential salary
increases. Except with respect to Mr. Mohseni, whose base
salary is set pursuant to his employment agreement, and
Mr. OConnor, whose future base salary is expected to
be set by his employment agreement to be entered into prior to
the consummation of this offering, base salaries are initially
set by the Compensation Committee. These salary levels are set
based on the named executive officers experience and
performance with previous employers and negotiations with
individual named executive officers. Thereafter, the
Compensation Committee may increase base salaries each year
based on its subjective assessment of the Companys and the
individual executive officers performance and his or her
experience, length of service and changes in responsibilities.
Included in this subjective determination is Compensation
Committees evaluation of the development and execution of
strategic plans, the exercise of leadership, and involvement in
industry groups. The weight given such factors by the
Compensation Committee may vary from one named executive officer
to another.
Mr. Mohsenis employment agreement provides him with
an annual base salary of $518,000. Mr. Mohsenis base
salary has not been modified since his hire in 2007. The Company
determined, at the time of Mr. Mohsenis hire, that a
commitment to pay base salary to him at this level was necessary
to recruit him to join the Company.
Mr. OConnors base salary for 2009 was $206,000,
Mr. Doodys base salary for 2009 was $100,000, each of
Mr. OMalley and Mr. Moser had base salaries in
2009 of $185,000 and Mr. Dees base salary was
$165,000 in
82
2009. Mr. Doodys base salary for 2009 was decreased
from $225,000 in 2008 to $100,000 in connection with his
transition from President of the Company to Chairman of the
Board.
It is expected that Mr. OConnors employment
agreement will provide him with an annual base salary of
$206,000. The board of directors may adjust
Mr. OConnors base salary as the board of
directors deems appropriate.
In lieu of providing small
cost-of-living
base salary increases for 2010 for the named executive officers
other than Mr. Mohseni, the Compensation Committee elected
to pay the amount of such
cost-of-living
increases to the named executive officers in the form of a lump
sum discretionary bonus in 2009. Such bonuses are reported in
the Bonus column of the Summary Compensation Table,
below.
Annual Bonus
Compensation
In line with our strategy of rewarding performance, a
significant part of the Companys executive compensation
philosophy is the payment of cash bonuses to named executive
officers based on an annual evaluation of individual and Company
performance, considering several factors as discussed below.
Except with respect to Mr. Mohseni, whose target bonus is
set at 30% of his base salary pursuant to his employment
agreement, the Compensation Committee establishes target bonuses
(the amount each named executive officer may receive if
performance goals and objectives are met) for each named
executive officer at the beginning of the fiscal year. The
target bonuses are set at levels the Compensation Committee
believes will provide a meaningful incentive to named executive
officers to contribute to the Companys financial
performance.
In 2009, the board of directors determined that each named
executive officers bonus would be determined based
primarily on the achievement of Company earnings before
interest, taxes, depreciation and amortization plus the sum of
asset impairment charges, pre-opening costs, management and
board of director fees and expenses as well as certain non-cash
adjustments, as defined in the credit agreement governing our
existing senior credit facilities (Company EBITDA). For 2009,
the Compensation Committee determined to pay bonuses at the
target levels if Company EBITDA met or exceeded
$30.4 million.
We use Company EBITDA, together with financial measures prepared
in accordance with GAAP, such as revenue and cash flows from
operations, to assess our historical and prospective operating
performance and to enhance our understanding of our core
operating performance. Additionally, we use Company EBITDA to
measure our compliance with various financial covenants pursuant
to our credit agreement. We also use Company EBITDA internally
to evaluate the performance of our personnel and also as a
benchmark to evaluate our operating performance or compare our
performance to that of our competitors. The use of Company
EBITDA as a performance measure permits a comparative assessment
of our operating performance relative to our performance based
on our GAAP results, while isolating the effects of some items
that vary from period to period without any correlation to core
operating performance or that vary widely among similar
companies.
Target and actual bonuses for 2009 paid to each of the named
executive officers are shown in the table below. The actual
bonus amounts are also included in the Non-Equity
Incentive Plan Compensation column of the Summary
Compensation Table, below.
Annual Cash
Bonuses
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Target
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Award
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Actual Award
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Name
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($)
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($)
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Saed Mohseni
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155,400
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62,160
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James J. OConnor
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75,000
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30,000
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Brian OMalley
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70,000
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28,000
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Michael Moser
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70,000
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28,000
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Ronald F. Dee
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35,000
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14,000
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Alton F. Doody, III
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100,000
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40,000
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83
Although the Company exceeded its designated EBITDA target for
2009 by approximately $8.4 million, the Company exercised
its discretion to pay bonuses at below 100% of target in
recognition of the challenges of the macroeconomic environment,
the need to maintain adequate cash reserves and to avoid large
cash outlays that may not reflect the Companys long-term
incentive goals.
In addition, as noted above, in lieu of small
cost-of-living
base salary increases in 2010 for the named executive officers
other than Mr. Mohseni, the Compensation Committee elected
to pay the amount of such
cost-of-living
increases to the named executive officers in the form of a lump
sum discretionary bonus in late 2009. The amount of such
discretionary bonuses paid to the named executive officers is as
follows: $9,270 for Mr. OConnor, $9,250 for
Mr. OMalley, $6,475 for Mr. Moser, $4,950 for
Mr. Dee and $0 for Mr. Doody.
Equity
Compensation
We pay equity-based compensation to our named executive officers
because it provides a vital link between the long-term results
achieved for our shareholders and the rewards provided to named
executive officers, thereby ensuring that such officers have a
continuing stake in our long-term success. Equity-based
compensation is paid in the form of stock options.
The Company adopted the 2006 Plan in order to provide an
incentive to employees selected by the board of directors for
participation. Pursuant to the 2006 Plan, we have 257,875 stock
options outstanding that were granted between 2006 and 2009,
including 146,575 options that have been granted to the named
executive officers.
In 2009, the Company decided to make grants of options under the
2006 Plan to the majority of the Companys existing
optionholders because it believed that the Company had performed
well during a challenging economic environment and that the
granting of such options should provide its employees holding
options an opportunity to share in the Companys success
provided they continue to contribute to such success. The
Company determined that each of the named executive officers,
other than Mr. Mohseni and Mr. Doody, would receive a
small grant of options under the 2006 Plan. The Company
determined that no additional grant of options should be made
for Mr. Mohseni and Mr. Doody in 2009 because it
believed each of them had sufficient equity holdings (including
existing options) to align their interests with those of our
other shareholders.
Options held by each of the named executive officers (and
certain of the Companys other salaried employees)
ordinarily vest over a period of four years, subject to the
applicable named executive officer remaining employed through
each vesting date. However, in the event the Company completes a
public offering in which the Company and any participating
selling shareholders receive aggregate net proceeds of at least
$50.0 million or the majority of the Companys stock
or assets are sold in a transaction approved by Holdings, the
options held by the named executive officers while employed are
subject to accelerated vesting in the discretion of the board of
directors upon the achievement of certain net proceeds and
internal rate of return thresholds.
However, as a retention method and in order to ensure each named
executive officers and the Companys other
optionholders interests are aligned with those of the
sponsors, optionholders do not have the right to exercise their
vested options unless and until the sponsors attain designated
returns on their investment, measured based on the
sponsors net proceeds and internal rate of return.
Accordingly, to the extent the sponsors sell their securities in
connection with an approved sale or public offering, any vested
options become exercisable in the amounts set forth below in the
event that (i) net proceeds equal or are in excess of the
multiple (set forth in the table below) of the sponsors
initial investment and (ii) the sponsors achieve an
internal rate of return equal to or in excess of the target set
forth in the table below (unless the board of directors
exercises its discretion under the plan to permit further
exercisability upon such an event):
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Percentage of Option Exercisable
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Net Proceeds Multiple
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IRR Target
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25%
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2
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10
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%
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50%
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2
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20
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%
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75%
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2
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30
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%
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100%
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3
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40
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%
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84
For purposes of determining the exercisable portion of an
option, net proceeds generally means the amount
received by the sponsors, including the majority of the fees
they received pursuant to the management agreements between each
sponsor and the Company, less their selling or transaction
expenses. Internal rate of return means the rate of
return the sponsors receive on their investment in the Company
from such net proceeds as a result of a public offering or
approved sale and the net proceeds therefrom.
The board of directors has determined, pursuant to the exercise
of its discretion in accordance with the 2006 Plan, that in
the event the public offering price of this offering results in
the achievement (assuming solely for such purposes the sale of
all of our private equity sponsors shares of common stock
at a price equal to the public offering price) of an
internal rate of return to our sponsors of at least
30% upon the consummation of this offering, (i) each
outstanding option award shall be deemed to have vested in a
percentage equal to the greater of 75% or the percentage of the
option award already vested as of that date, (ii) each
outstanding option award shall be deemed 75% exercisable; and
(iii) for each additional percentage point of
internal rate of return achieved by our private
equity sponsors above 30%, an additional 2.5% of each
outstanding option award shall be deemed vested and exercisable,
up to an aggregate of the stated number of shares of common
stock subject to the option award upon achievement of an
internal rate of return by our private equity
sponsors of 40%.
For purposes of the discussion and information set forth in this
Compensation Discussion and Analysis, the Company
has assumed achievement of an internal rate of
return by our sponsors of 40% and full vesting and
exercisability of the outstanding stock options. Accordingly, as
reported below under the heading Potential Payments upon
Termination or Change in Control, the amount each named
executive officer would be entitled to receive with respect to
his options, assumes that full vesting and exercisability
occurred on the last day of our fiscal year, December 27,
2009, with the value computed based on our expected offering
price.
Because our offering price may fluctuate, the table below
provides an overview of the potential values that could be
received by our named executive officers with respect to their
options based on a range of share prices and assuming full
vesting and exercisability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Price 1
|
|
|
Price 2
|
|
|
Price 3
|
|
Saed Mohseni
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. OConnor
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian OMalley
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Moser
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald F. Dee
|
|
|
|
|
|
|
|
|
|
|
|
|
Alton F. Doody, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
Transaction-Based Benefits
Except with respect to Mr. Mohseni and
Mr. OConnor, the Company does not have, and does not
expect to enter into prior to the consummation of this offering,
any agreements, plans or programs for the payment of severance
to any named executive officers. As a recruitment incentive for
Mr. Mohseni, in negotiating his employment agreement in
2007, the Company agreed to pay two years of severance to
Mr. Mohseni in the event of his termination of employment
in limited circumstances. In addition, the Company expects that
Mr. OConnors employment agreement will provide
for the payment of two years of severance to
Mr. OConnor upon his termination of employment in
limited circumstances. The Company believes this level of
severance benefit provides each of Mr. Mohseni and
Mr. OConnor with the assurance of security if his
employment is terminated for reasons beyond his control or the
material terms of his employment are changed by the Company
without his consent.
In addition, pursuant to Mr. Mohsenis employment
agreement upon an approved sale or other transaction in which
the sponsors sell 50% or more of their Company securities while
Mr. Mohseni is employed by the Company, Mr. Mohseni is
entitled to a payment to the extent the amount he has then
received or is entitled to receive with respect to his options
does not exceed $3.0 million. Such payment is generally
calculated as the lesser of (a) $3.0 million over the
amounts Mr. Mohseni receives or is entitled to receive with
respect to his options or
85
(b) the excess of the net proceeds received by the sponsors
over the amount necessary for them to receive a 5% internal rate
of return.
Finally, as described above, outstanding options for the named
executive officers may accelerate vesting upon the occurrence of
an approved sale or public offering. The amount each named
executive would be entitled to receive in such event is reported
below under the heading Potential Payments upon
Termination or Change in Control.
Perquisites
In 2009, we provided certain personal-benefit perquisites to
named executive officers as summarized below. The aggregate
incremental cost to the Company of the perquisites received by
each of the named executive officers in 2009 did not exceed
$10,000 and accordingly, such benefits are not included in the
Summary Compensation Table below.
Car Allowance.
The Company provided car
allowances of $4,800 for Messrs. OMalley and Moser
and $4,200 for Mr. Doody in 2009. The Company views car
allowances as a meaningful benefit to our named executive
officers who are required to travel by car in the performance of
their duties for the Company.
Complimentary Dining.
The Company provides the
named executive officers with complimentary dining privileges at
any of our restaurants. The Company views complimentary dining
privileges as a meaningful benefit to our named executive
officers as it is important for named executive officers to
experience our product in order to better perform their duties
for the Company.
General
Benefits
The following are standard benefits offered to all eligible
Company employees, including named executive officers.
Retirement Benefits.
The Company maintains a
tax-qualified 401(k) savings plan. However, our named executive
officers do not participate in our 401(k) savings plan.
Medical, Dental, Life Insurance and Disability
Coverage.
Active employee benefits such as
medical, dental, life insurance and disability coverage are
available to all eligible employees, including our named
executive officers.
Other Paid Time-Off Benefits.
We also provide
vacation and other paid holidays to all employees, including the
named executive officers, which our Compensation Committee has
determined to be appropriate for a Company of our size and in
our industry.
Tax and
Accounting Considerations
U.S. federal income tax generally limits the tax
deductibility of compensation we pay to our Chief Executive
Officer and certain other highly compensated executive officers
to $1.0 million in the year the compensation becomes
taxable to the executive officers. There is an exception to the
limit on deductibility for performance-based compensation that
meets certain requirements. Although deductibility of
compensation is preferred, tax deductibility is not a primary
objective of our compensation programs. Rather, we seek to
maintain flexibility in how we compensate our executive officers
so as to meet a broader set of corporate and strategic goals and
the needs of shareholders, and as such, we may be limited in our
ability to deduct amounts of compensation from time to time.
Accounting rules require us to expense the cost of our stock
option grants. Because of option expensing and the impact of
dilution on our shareholders, we pay close attention to, among
other factors, the type of equity awards we grant and the number
and value of the shares underlying such awards.
86
Summary
Compensation Table
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
Total
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
Name & Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)(3)
|
|
|
($)
|
|
Saed Mohseni
|
|
|
2009
|
|
|
|
518,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,160
|
|
|
|
|
|
|
|
580,160
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. OConnor
|
|
|
2009
|
|
|
|
206,000
|
|
|
|
9,270
|
|
|
|
|
|
|
|
2,526
|
|
|
|
30,000
|
|
|
|
|
|
|
|
247,796
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian OMalley
|
|
|
2009
|
|
|
|
185,000
|
|
|
|
9,250
|
|
|
|
|
|
|
|
2,526
|
|
|
|
28,000
|
|
|
|
|
|
|
|
224,776
|
|
Senior Vice President of Operations, BRIO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Moser
|
|
|
2009
|
|
|
|
185,000
|
|
|
|
6,475
|
|
|
|
|
|
|
|
2,526
|
|
|
|
28,000
|
|
|
|
|
|
|
|
222,001
|
|
Senior Vice President of Operations, BRAVO!
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald F. Dee
|
|
|
2009
|
|
|
|
165,000
|
|
|
|
4,950
|
|
|
|
|
|
|
|
1,684
|
|
|
|
14,000
|
|
|
|
|
|
|
|
185,634
|
|
Senior Vice President Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alton F. Doody, III(4)
|
|
|
2009
|
|
|
|
186,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
226,500
|
|
Chairman, Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amounts reported in this column represent discretionary
bonuses paid to certain named executive officers in 2009 in lieu
of
cost-of-living
increases in base salaries for 2010.
|
|
(2)
|
|
Amounts in this column represent the grant date fair value,
calculated pursuant to ASC 718, of stock options granted in
2009. See Note 11 to our audited consolidated financial
statements for a discussion of the calculation of grant date
fair value.
|
|
(3)
|
|
Certain personal benefits provided to certain of our named
executive officers, including car allowances and complimentary
dining, are not required to be disclosed in the table because
the amount of such benefits do not exceed the applicable
disclosure thresholds. See Perquisites.
|
|
(4)
|
|
Pursuant to SEC regulations, Mr. Doody is included in the
Summary Compensation Table because he served as an executive
officer of the Company during 2009 and his total compensation
exceed that of one of the other named executive officers.
|
Grants of
Plan-Based Awards Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
|
|
|
|
|
or Base
|
|
Fair Value
|
|
|
|
|
Non-Equity Incentive Plan
|
|
Estimated Future Payouts Under
|
|
Price of
|
|
of Stock and
|
|
|
|
|
Awards(1)
|
|
Equity Incentive Plan Awards(2)(3)
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/SH)(3)
|
|
($)
|
|
Saed Mohseni
|
|
|
|
|
|
|
|
|
|
|
155,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. OConnor
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/9/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
|
|
|
|
10.00
|
|
|
|
2,526
|
|
Brian OMalley
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/9/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
|
|
|
|
10.00
|
|
|
|
2,526
|
|
Michael Moser
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/9/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
|
|
|
|
10.00
|
|
|
|
2,526
|
|
Ronald F. Dee
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/9/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
|
|
|
|
10.00
|
|
|
|
1,684
|
|
Alton F. Doody, III
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
(1)
|
|
Amounts reported in this column represent the target
performance-based bonus of each named executive office, as
described in Compensation Discussion and Analysis.
|
|
(2)
|
|
Options reported in this column generally vest over a period of
four years of continued employment, but are only exercisable by
named executive officers if financial performance goals are met
or exceeded in connection with a public offering or a sale of a
majority of the stock or assets of the Company, as described in
the Compensation Discussion and Analysis section, above. The
number of shares reported as target are the total
number of shares granted to named executive officers in 2009.
|
|
|
|
(3)
|
|
Does not give effect to the reorganization transactions expected
to occur prior to the consummation of this offering. See
Reorganization Transactions.
|
Outstanding
Equity Awards at Fiscal Year End Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of
|
|
Number of
|
|
Equity Incentive
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
Plan Awards
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Number of
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Securities
|
|
|
|
|
|
|
Options
|
|
Options
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
(#)
|
|
(#)(1)(2)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options(#)(1)(2)
|
|
Price($)(1)(2)
|
|
Date
|
Saed Mohseni
|
|
|
|
|
|
|
32,812.50
|
|
|
|
32,812.50
|
|
|
|
10.00
|
|
|
|
2/13/17
|
|
James J. OConnor
|
|
|
|
|
|
|
6,562.50
|
|
|
|
6,562.50
|
|
|
|
10.00
|
|
|
|
2/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
600.00
|
|
|
|
10.00
|
|
|
|
9/9/19
|
|
Brian OMalley
|
|
|
|
|
|
|
12,304.69
|
|
|
|
4,101.56
|
|
|
|
10.00
|
|
|
|
6/29/16
|
|
|
|
|
|
|
|
|
|
|
|
|
600.00
|
|
|
|
10.00
|
|
|
|
9/9/19
|
|
Michael Moser
|
|
|
|
|
|
|
12,304.69
|
|
|
|
4,101.56
|
|
|
|
10.00
|
|
|
|
6/29/16
|
|
|
|
|
|
|
|
|
|
|
|
|
600.00
|
|
|
|
10.00
|
|
|
|
9/9/19
|
|
Ronald F. Dee
|
|
|
|
|
|
|
12,304.69
|
|
|
|
4,101.56
|
|
|
|
10.00
|
|
|
|
6/29/16
|
|
|
|
|
|
|
|
|
|
|
|
|
400.00
|
|
|
|
10.00
|
|
|
|
9/9/19
|
|
Alton F. Doody, III
|
|
|
|
|
|
|
12,304.69
|
|
|
|
4,101.56
|
|
|
|
10.00
|
|
|
|
6/29/16
|
|
|
|
|
|
(1)
|
|
Does not give effect to the reorganization transactions expected
to occur prior to the consummation of this offering. See
Reorganization Transactions.
|
|
|
|
(2)
|
|
The named executive officers do not have the right to exercise
their vested options unless and until the Companys private
equity sponsors attain designated returns on their investment,
measured based on the sponsors receipt of net proceeds and
internal rate of return from an approved sale or public
offering. The board of directors has determined, in the exercise
of its discretion, that a certain percentage of each outstanding
option award may be deemed vested and exercisable in connection
with this offering, dependent upon achievement of designated
performance thresholds. See Equity
Compensation.
|
Potential
Payments upon Termination or Change in Control
Termination of
Employment
With the exception of Mr. Mohseni and
Mr. OConnor, the Company does not have any agreements
with the named executive officers that would entitle them to
severance payments upon termination of employment.
Mr. Mohsenis employment agreement provides him with
two years of continued base salary following his termination of
employment by the Company without cause or by him for good
reason. For purposes of Mr. Mohsenis employment
agreement, cause generally means
Mr. Mohsenis fraud or dishonesty in connection with
his duties to the Company, his failure to perform the lawful
duties of his position, his conviction of a felony or plea of
guilty or no contest to a charge or commission of a felony, or
his commission of any act or violation of law that could
reasonably be expected to bring the Company into material
disrepute, and good reason generally means the
Companys reduction in Mr. Mohsenis base salary,
the failure of the Company to pay base salary or
88
benefits under Mr. Mohsenis employment agreement, the
Companys material reduction in Mr. Mohsenis
overall benefits (other than pursuant to a general reduction in
benefits for the Companys workforce) or a requirement that
Mr. Mohseni relocate his principal place of employment more
than 50 miles from Columbus, Ohio.
Mr. Mohsenis right to severance is conditioned upon
his refraining from competing with the Company for the two years
following his termination of employment and compliance with
confidentiality and nonsolicitation obligations under his
employment agreement.
Assuming Mr. Mohsenis employment was terminated by
the Company without cause or by Mr. Mohseni for good reason
on December 27, 2009, he would receive a total of
approximately $1.0 million in severance under his
employment agreement.
The Company also expects that Mr. OConnors
employment agreement, which is anticipated to be entered into
prior to the consummation of this offering, will provide
Mr. OConnor with two years of continued base salary
following his termination of employment by the Company without
cause or by him with good reason. For purposes of
Mr. OConnors employment agreement,
cause generally means Mr. OConnors
fraud or dishonesty in connection with his duties to the
Company, his failure to perform the lawful duties of his
position, his conviction of a felony or plea of guilty or no
contest to a charge or commission of a felony, or his commission
of any act or violation of law that could reasonably be expected
to bring the Company into material disrepute, and good
reason generally means, without the consent of
Mr. OConnor, a material diminution in
Mr. OConnors base salary, a material diminution
in Mr. OConnors authority, duties, or
responsibilities, a material change in the geographic location
at which Mr. OConnor must perform the services, or
any other action or inaction that constitutes a material breach
by the Company of the employment agreement.
Mr. OConnors right to severance is expected to
be conditioned upon his refraining from competing with the
Company for the two years following his termination of
employment and compliance with confidentiality and
nonsolicitation obligations under his employment agreements.
Change-in-Control
In the event the Company completes a public offering in which
the selling shareholders receive aggregate net proceeds of at
least $50.0 million or the majority of the Companys
stock or assets are sold in a transaction approved by Holdings,
the stock options held by the named executive officers while
employed are subject to accelerated vesting in the discretion of
the board of directors upon the achievement of certain
performance thresholds. In addition, pursuant to
Mr. Mohsenis employment agreement, upon an approved
sale or other transaction in which the sponsors sell 50% or more
of their Company securities while Mr. Mohseni is employed
by the Company, Mr. Mohseni is entitled to a payment to the
extent the amount he has then received or is entitled to receive
with respect to his options does not exceed $3.0 million.
Such payment is generally calculated as the lesser of
(a) $3.0 million less the amounts Mr. Mohseni
receives or is entitled to receive with respect to his options
or (b) the excess of the net proceeds received by the
sponsors over the amount necessary for them to receive a 5%
internal rate of return.
Assuming a public offering or approved sale occurred on
December 27, 2009 that resulted in the full vesting and
exercisability of each of the named executive officers
stock options and based on an initial offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus, each
named executive officers increased option vesting value
and, with respect to Mr. Mohseni, additional payment in
respect of options, would be as follows:
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|
|
|
|
|
|
|
Value of Enhanced
|
|
|
Additional Payment in
|
|
|
|
|
Name
|
|
Option Vesting
|
|
|
Respect of Options
|
|
|
Total
|
|
Saed Mohseni
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. OConnor
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian OMalley
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Moser
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald F. Dee
|
|
|
|
|
|
|
|
|
|
|
|
|
Alton F. Doody, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
Director
Compensation
During 2009, directors who were not employees of us, our
subsidiaries or our private equity sponsors received an annual
fee of $25,000, payable in August. Directors do not receive any
other fees for participating in meetings or otherwise providing
services as non-employee directors.
Following the consummation of this offering, each independent
director will be paid a base annual retainer of $20,000.
Independent directors will also receive an annual retainer of
$5,000 for each committee on which they sit, and the chair of
the Audit Committee will receive an additional annual retainer
of $20,000.
The Company reimburses directors for their expenses involved in
attending board of directors and committee meetings. The Company
provides the non-employee directors with complimentary dining
privileges at any of its restaurants. The Company views
complimentary dining privileges as a meaningful benefit to its
non-employee directors as it is important for non-employee
directors to experience its product in order to better perform
their duties for the Company.
Director compensation for the year ended December 27, 2009
for our non-employee directors is set forth in the following
table.
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|
|
|
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|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
Fees Earned
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
or Paid in
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name(3)
|
|
Cash ($)
|
|
($)
|
|
(#)
|
|
($)
|
|
($)(1)
|
|
($)
|
Harold O. Rosser, II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David B. Pittaway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hislop(2)
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
Allen J. Bernstein(2)
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
(1)
|
|
Certain personal benefits provided to our directors, including
complimentary dining, are not required to be disclosed in the
table because the amount of such benefits do not exceed the
applicable disclosure thresholds.
|
|
(2)
|
|
At December 27, 2009, each of Messrs. Hislop and
Bernstein held unexercised options to purchase an aggregate of,
without giving effect to the reorganization transactions
expected to occur prior to the consummation of this offering,
3,281.25 shares of our common stock.
|
|
|
|
(3)
|
|
Alton F. Doody, III, our Chairman, is not included in the above
table as he was a named executive officer during the year ended
December 27, 2009 and thus received no compensation for his
services as a director. Mr. Doodys compensation as a
named executive officer is set forth in the Summary Compensation
Table.
|
Bravo
Development, Inc. Option Plan
The Bravo Development, Inc. Option Plan was adopted by the board
of directors on February 13, 2007. Pursuant to the terms of
the 2006 Plan, we intend to seek shareholder approval of the
2006 Plan prior to the consummation of this offering. Without
giving effect to the reorganization transactions expected to
occur prior to the consummation of this offering, an aggregate
of 262,500 shares of common stock have been authorized for
issuance under the 2006 Plan. As of June 27, 2010, without
giving effect to the reorganization transactions expected to
occur prior to the consummation of this offering, stock options
to purchase an aggregate of 257,875 shares of our common
stock were outstanding under the 2006 Plan, and
4,625 shares of our common stock remained available for
future grant under the terms of the 2006 Plan. In the event that
any shares subject to an option granted under the Option Plan
are forfeited or the option terminates, then such forfeited or
unexercised shares subject to such option become available for
grant under the 2006 Plan again. Options granted under the 2006
Plan expire ten years after the date of grant.
Eligibility
Any employee or non-employee director of the Company or its
subsidiaries is eligible to receive an award of options under
the 2006 Plan, if selected to receive such award by the board of
directors. However, only employees
90
of the Company or its subsidiaries are eligible to be granted
options intended to qualify as incentive stock options, which
are eligible for special tax treatment under the Internal
Revenue Code.
Administration
Our board of directors administers the 2006 Plan. The board of
directors has the full authority to act in selecting recipients
of options, determining whether any options may be transferable
in accordance with our new investors securities holders
agreement, determining the amount of options to be granted to
any individual and in determining the terms and conditions of
options granted under the 2006 Plan.
Options
Options granted under the 2006 Plan are either incentive
stock options, which are intended to qualify for certain
U.S. federal income tax benefits under Section 422 of
the Internal Revenue Code, or non-qualified stock
options. The per share exercise price of the options
granted under the 2006 Plan must be at least equal to the fair
market value of a share of our common stock on the date of
grant. In addition, in the event of an incentive stock option
granted to a 10% Owner, the per share exercise price must be no
less than 110% of the fair market value of a share of our common
stock on the grant date. The holder of an option granted under
the 2006 Plan will be entitled to exercise such option and
purchase a number of shares of our common stock at the per share
exercise price set forth in such option holders option
agreement, to the extent such option is vested and exercisable
under the terms and conditions of that option agreement. The
2006 Plan permits the option holder to pay the exercise price
for an option in cash or a certified check, or, with the
approval of the board of directors, in shares of our common
stock with a fair market value equal to the exercise price, by
delivery of an assignment of a sufficient amount of the proceeds
from the sale of shares of common stock to be acquired pursuant
to such exercise and an instruction to a broker or selling agent
to pay such amount to the Company, or any combination of the
foregoing.
Certain
Transactions
In the event of a sale of a majority of the assets or securities
of the Company approved by Holdings, a public offering in which
the aggregate net proceeds received by the Company and any
participating selling shareholders is no less than
$50.0 million, a consolidation, combination or merger of
the Company with any other entity, a sale of all or
substantially all of the assets of the Company or a divisive
reorganization, liquidation or partial liquidation of the
Company, the board of directors may take any of the following
actions:
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|
|
Accelerate the exercisability of all or a portion of the options,
|
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|
|
Cancel outstanding options in exchange for a cash payment in an
amount equal to the excess, if any, of the fair market value of
the common stock underlying the unexercised portion of the
option over the exercise price of such portion,
|
|
|
|
Terminate all options immediately prior to such transaction,
provided the option holders are given an opportunity to exercise
the option within a specified period following their receipt of
written notice of the transaction and the intention to terminate
the options prior to such transaction, or
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|
|
Require the successor corporation, if the Company does not
survive such transaction, to assume outstanding options or
provide awards involving the common stock of such successor on
terms and conditions that preserve the rights of the option
holders prior to such transaction.
|
Options are also subject to adjustments, as necessary to
preserve the rights of option holders, in the event of a change
in the Companys capitalization such as a stock split,
spin-off, stock dividend, merger or reorganization.
Transferability
Unless the board of directors determines otherwise, options
granted under the 2006 Plan are nontransferable, except by the
laws of descent and distribution.
91
Repurchase
Option shares are subject to repurchase at fair market value in
the event of the holders termination of employment
pursuant to the provisions of the new investors securities
holders agreement.
Amendment and
Termination
The board may amend or modify the 2006 Plan at any time,
provided that such amendment may not amend the plan in any way
that would adversely affect outstanding awards without the
applicable holders consent. The 2006 Plan will terminate
on December 20, 2016 unless earlier terminated by the board
of directors.
Bravo Brio
Restaurant Group, Inc. 2010 Option Plan
Prior to the consummation of this offering, we expect to adopt a
new stock incentive plan. Under the stock incentive plan, we may
offer restricted shares of our common stock and grant options to
purchase shares of our common stock. The purpose of the stock
incentive plan will be to promote our long-term financial
success by attracting, retaining and rewarding eligible
participants.
92
Principal and
Selling Shareholders
The following table sets forth information regarding the
beneficial ownership of our Series A preferred stock and
our common stock as of June 27, 2010 by:
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|
|
|
|
each person known to us to beneficially own more than 5% of the
outstanding shares of common stock;
|
|
|
|
each of our named executive officers;
|
|
|
|
each of our directors;
|
|
|
|
all directors and executive officers as a group; and
|
|
|
|
each selling shareholder.
|
The table also sets forth such persons beneficial
ownership of common stock immediately after this offering.
We have determined beneficial ownership in accordance with the
rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the
persons and entities named in the tables below have sole voting
and investment power with respect to all shares of common stock
that they beneficially own, subject to applicable community
property laws. We have based our calculation of the percentage
of beneficial ownership on, without giving effect to the
reorganization transactions expected to occur prior to the
consummation of this offering, 1,050,000 shares of common
stock and 59,500 shares of Series A preferred stock
outstanding on June 27, 2010 and, after giving effect to
the reorganization
transactions, shares
of common stock and no shares of Series A preferred stock
outstanding upon completion of this offering.
In computing the number of shares of common stock beneficially
owned by a person or group and the percentage ownership of that
person or group, we deemed to be outstanding any shares of
common stock subject to options held by that person or group
that are currently exercisable or exercisable within
60 days after June 27, 2010. We did not deem these
shares outstanding, however, for the purpose of computing the
percentage ownership of any other person.
Unless otherwise noted below, the address of each beneficial
owner set forth in the table is
c/o Bravo
Brio Restaurant Group, Inc., 777 Goodale Boulevard,
Suite 100, Columbus, Ohio 43212 and our telephone number is
(614) 326-7944.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Offering and
|
|
|
|
|
|
After Offering and
|
|
|
|
Reorganization Transactions
|
|
|
|
|
|
Reorganization Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
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|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Shares of
|
|
|
Number of
|
|
|
|
|
|
|
Series A
|
|
|
Percent of
|
|
|
Shares of
|
|
|
Percent of
|
|
|
Shares of
|
|
|
Common
|
|
|
Shares of
|
|
|
Percent of
|
|
|
|
Preferred
|
|
|
Series A
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
Stock to be
|
|
|
Common
|
|
|
Common
|
|
|
|
Stock
|
|
|
Preferred
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock to be
|
|
|
Sold at
|
|
|
Stock
|
|
|
Stock
|
|
|
|
Beneficially
|
|
|
Stock
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Sold in this
|
|
|
Underwriters
|
|
|
Beneficially
|
|
|
Beneficially
|
|
Name of Beneficial Owner(1)
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned(1)
|
|
|
Offering
|
|
|
Option
|
|
|
Owned
|
|
|
Owned
|
|
|
Bravo Development Holdings LLC(1)
|
|
|
47,659.500
|
|
|
|
80.1
|
%
|
|
|
841,050.0
|
|
|
|
80.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruckmann, Rosser, Sherrill & Co. II L.P.(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
CHBravo Holding I LLC(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golub Capital Partners IV, L.P.(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golub Capital Coinvestment L.P.(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alton F. Doody, III
|
|
|
5,503.750
|
|
|
|
9.3
|
|
|
|
97,125.0
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saed Mohseni
|
|
|
349.500
|
|
|
|
|
*
|
|
|
6,100.0
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold O. Rosser II(5)(6)
|
|
|
47,659.500
|
|
|
|
80.1
|
|
|
|
841,050.0
|
|
|
|
80.1
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
David B. Pittaway(5)(6)
|
|
|
47,659.500
|
|
|
|
80.1
|
|
|
|
841,050.0
|
|
|
|
80.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hislop
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allen J. Bernstein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. OConnor
|
|
|
120.325
|
|
|
|
|
*
|
|
|
1,847.5
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian OMalley
|
|
|
367.450
|
|
|
|
|
*
|
|
|
6,235.0
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Moser
|
|
|
260.750
|
|
|
|
|
*
|
|
|
5,925.0
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald F. Dee
|
|
|
187.000
|
|
|
|
|
*
|
|
|
3,300.0
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julie Frist(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (10 persons)
|
|
|
54,448.275
|
|
|
|
91.5
|
%
|
|
|
961,582.5
|
|
|
|
91.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
(1)
|
|
The address of Bravo Development Holdings LLC
(Holdings) and Bruckmann, Rosser,
Sherrill & Co. II L.P. (BRS II) is
c/o Bruckmann,
Rosser, Sherrill & Co., Inc., 126 East 56th Street,
New York, New York 10022. BRS II is a member of Holdings. As
part of the reorganization transactions, BRS II will receive
shares of our common stock in exchange for its units of
Holdings. See Reorganization Transactions.
|
|
|
|
(2)
|
|
BRSE, L.L.C. is the general partner of BRS II and as such may be
deemed to have indirect beneficial ownership of the shares of
common stock held by BRS II. Mr. Rosser is a manager of
BRSE, L.L.C. and a partner of BRS II and as such may be deemed
to have indirect beneficial ownership of the shares of common
stock held by BRS II. Mr. Rosser expressly disclaims
beneficial ownership of the shares of common stock held by BRS
II except to the extent of his pecuniary interest in such shares.
|
|
|
|
(3)
|
|
The address of CHBravo Holding I LLC (CHBravo) is
c/o Castle
Harlan, Inc., 150 East
58
th
Street, New York, New York 10155. CHBravo is a member of
Holdings. As part of the reorganization transactions, CHBravo
will receive shares of our common stock in exchange for its
units of Holdings. See Reorganization Transactions.
|
|
|
|
(4)
|
|
Current member of Holdings. The address of Golub Capital
Partners IV, L.P. (GCP) and Golub Capital
Coinvestment L.P. (GCC) is
c/o Golub
Capital, 551 Madison Avenue,
6
th
Floor, New York, New York 10022. As part of the reorganization
transactions, each of GCP and GCC will receive shares of our
common stock in exchange for its units of Holdings. See
Reorganization Transactions.
|
|
|
|
(5)
|
|
Includes 47,659.50 shares of Series A preferred stock
and 841,050 shares of common stock owned by Holdings.
|
|
(6)
|
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Messrs. Rosser and Pittaway may be deemed to share
beneficial ownership of the shares held by Holdings by virtue of
their status as members of the advisory board of Holdings. Each
of Messrs. Rosser and Pittaway expressly disclaims
beneficial ownership of any shares held by Holdings that exceed
his pecuniary interest therein. The members of the advisory
board of Holdings share investment and voting power with respect
to securities owned by Holdings, but no individual controls such
investment or voting power.
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(7)
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Current member of Holdings. The address of Ms. Frist is
c/o Bruckmann,
Rosser, Sherrill & Co., Inc., 126 East
56
th
Street, New York, New York 10022. As part of the reorganization
transactions, Ms. Frist will receive shares of our common
stock in exchange for her units of Holdings. See
Reorganization Transactions.
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Certain
Relationships and Related Party Transactions
The following sets forth certain transactions involving us and
our directors, executive officers and affiliates.
We do not have a formal written policy for review and approval
of transactions required to be disclosed pursuant to
Item 404(a) of
Regulation S-K.
Following the consummation of this offering, we expect that our
audit committee will be responsible for review, approval and
ratification of related-person transactions between
us and any related person. Under SEC rules, a related person is
an officer, director, nominee for director or beneficial holder
of more than 5.0% of any class of our voting securities since
the beginning of the last fiscal year or an immediate family
member of any of the foregoing. Any member of the audit
committee who is a related person with respect to a transaction
under review will not be able to participate in the
deliberations or vote on the approval or ratification of the
transaction. However, such a director may be counted in
determining the presence of a quorum at a meeting of the
committee that considers the transaction.
Other than the transactions described below and the arrangements
described under Compensation Discussion and
Analysis, since December 31, 2006, there has not
been, and there is not currently proposed, any transaction or
series of similar transactions to which we were or will be a
party in which the amount involved exceeded or will exceed
$120,000 and in which any related person had or will have a
direct or indirect material interest.
Reorganization
Transactions
It is anticipated that Holdings and each of our other current
shareholders will enter into an exchange agreement with us
pursuant to which, immediately prior to the consummation of this
offering, Holdings and each such other shareholder will exchange
all outstanding shares of our Series A preferred stock and
common stock for shares of our new common stock. Following these
exchanges and immediately prior to the consummation of this
offering, Holdings will in turn distribute the shares of new
common stock it receives in the exchanges to its members on a
pro rata basis in accordance with such members ownership
interests in the units of Holdings. Holdings will then be
dissolved. See Reorganization Transactions.
2006
Recapitalization
On June 2, 2006, we entered into an Agreement and Plan of
Merger, referred to herein as the merger agreement, with
Holdings and BDI Acquisition Corp., a wholly owned subsidiary of
Holdings, to consummate our recapitalization. Under the terms of
the merger agreement, BDI Acquisition Corp. merged with and into
us with our company as the surviving entity. The transactions
contemplated under the merger agreement were effected on
June 29, 2006, or the Effective Date. As a result of these
transactions, Holdings, an entity controlled by affiliates of
BRS and Castle Harlan, became our majority shareholder.
In addition to the consideration paid on the Effective Date,
under the terms of the merger agreement, our equity holders and
option holders prior to the Effective Date had the opportunity
to earn additional consideration in the event we were able to
achieve certain performance criteria. As a result of our
performance during the measurement period, additional
consideration in the aggregate amount of $7.9 million, plus
accrued interest, was paid to our former equity holders and
option holders in September 2007, including $2,708,732 to
Mr. Doody, $115,524 to Mr. OMalley, $79,216 to
Mr. Moser and $66,013 to Mr. Dee.
BRS Management
Agreement
On the Effective Date, we entered into a management agreement
with Bruckmann, Rosser, Sherrill & Co., Inc., or BRS
Inc., with a term of up to ten years, pursuant to which BRS Inc.
has agreed to provide us certain advisory and consulting
services relating to business and organizational strategy,
financial and investment management and merchant and investment
banking. Under the terms of the management agreement, we agreed
to pay BRS Inc. (i) in each of 2007 and 2008, an annual fee
equal to the greater of $175,000 and 0.75% of EBITDA, as defined
in the management agreement, (ii) in 2009 and each
following year, an annual fee equal to $784,000 and (iii) a
transaction fee in connection with each acquisition, divesture
and public offering of equity securities in which we engage
(including this offering), the amount of which varies depending
on the size and type of transaction, plus, in
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each case, reimbursement for all reasonable
out-of-pocket
expenses incurred by BRS Inc. We have also agreed to indemnify
BRS Inc. for any losses and liabilities arising out of its
provision of services to us or otherwise related to its
performance under the management agreement. For our fiscal years
ended December 27, 2009, December 28, 2008 and
December 30, 2007, we paid BRS Inc. or otherwise accrued
$800,000, $255,000 and $192,000, respectively, in management
fees and expenses. We expect that the management agreement will
be terminated as of the closing of this offering in exchange for
a payment estimated to be $525,000 to BRS Inc. This amount is
subject to adjustment based on the level of EBITDA, as defined
in the management agreement, for the twelve months preceding the
closing of this offering.
Castle Harlan
Management Agreement
On the Effective Date, we also entered into a management
agreement with Castle Harlan, with a term of up to ten years,
pursuant to which Castle Harlan has agreed to provide us certain
advisory and consulting services relating to business and
organizational strategy, financial and investment management and
merchant and investment banking. Under the terms of the
management agreement, we agreed to pay Castle Harlan (i) in
each of 2007 and 2008, an annual fee equal to the greater of
$175,000 and 0.75% of EBITDA, as defined in the management
agreement, (ii) in 2009 and each following year, an annual
fee equal to $784,000 and (iii) a transaction fee in
connection with each acquisition, divesture and public offering
of equity securities in which we engage (including this
offering), the amount of which varies depending on the size and
type of transaction, plus in each case reimbursement for all
reasonable
out-of-pocket
expenses incurred by Castle Harlan. We have also agreed to
indemnify Castle Harlan for any losses and liabilities arising
out of its provision of services to us or otherwise related to
its performance under the management agreement. For our fiscal
years ended December 27, 2009, December 28, 2008 and
December 30, 2007, we paid Castle Harlan or otherwise
accrued $811,000, $252,000 and $195,000, respectively, in
management fees and expenses. We expect that the management
agreement will be terminated as of the closing of this offering
in exchange for a payment estimated to be $525,000 to Castle
Harlan. This amount is subject to adjustment based on the level
of EBITDA, as defined in the management agreement, for the
twelve months preceding the closing of this offering.
Securities
Holders Agreement
On the Effective Date, we entered into a securities holders
agreement among us, Holdings, Alton Doody and certain of our
other shareholders. The securities holders agreement, among
other things: (i) restricts the transfer of our equity
securities and (ii) grants preemptive rights on issuances
of our equity securities, subject to certain exceptions,
including issuances pursuant to certain public equity offerings.
The securities holders agreement will be terminated upon the
consummation of this offering pursuant to the terms of the
exchange agreement entered into in connection with the
Reorganization Transactions.
New Investors
Securities Holders Agreement
On the Effective Date, we entered into a new investors
securities holders agreement among us, Holdings, certain of our
named executive officers and certain of our other shareholders.
The new investors securities holders agreement, among other
things: (i) restricts the transfer of our equity
securities, (ii) grants us a purchase option on our equity
securities held by employee shareholders upon certain
termination events, (iii) requires each shareholder who is
a party to the agreement to consent to a sale of our company if
such sale is approved by Holdings, (iv) grants tag-along
rights on certain transfers of our equity securities by any
shareholder who is a party to the agreement and (v) grants
preemptive rights on issuances of our equity securities, subject
to certain exceptions, including issuances pursuant to certain
public equity offerings. The new investors securities holders
agreement will be terminated upon the consummation of this
offering pursuant to the terms of the exchange agreement entered
into in connection with the Reorganization Transactions.
Registration
Rights Agreement
On the Effective Date, we entered into a registration rights
agreement with substantially all of our current shareholders,
other than those who purchase shares in this offering, entitling
them to certain rights with respect to
96
the registration of their shares of common stock under the
Securities Act. Under the registration rights agreement, certain
holders of shares of our common stock may demand that we file a
registration statement under the Securities Act covering some or
all of such holders shares. The registration rights
agreement limits the number of demand registration requests the
holders may require us to file to six; however, holders of at
least a majority of the shares of our common stock issued to
Holdings may require us to file an unlimited number of
registration statements on
Form S-3.
In addition, the holders of our common stock have certain
piggyback registration rights. If we propose to
register any of our equity securities under the Securities Act
other than pursuant to a demand registration or specified
excluded registrations, holders may require us to include all or
a portion of their common stock in the registration. Each
shareholder party to the registration rights agreement has
agreed not to effect any public sale or distribution of our
securities for its own account during the ten day period prior
to and during the 180 day period (in the case of our
initial public offering) or 90 day period (in the case of
an offering after our initial public offering) beginning on the
effective date of a registration statement filed with the SEC.
We have agreed not to effect any public sale or distribution of
our securities (subject to certain exceptions) during the ten
day period prior to and during the 180 day period (in the
case of our initial public offering) or 90 day period (in
the case of an offering after our initial public offering)
beginning on the effective date of a registration statement
filed with the SEC. All fees, costs and expenses of any
registration effected pursuant to the registration rights
agreement including all registration and filing fees, printing
expenses, legal expenses will be paid by us. We expect that
prior to the consummation of this offering substantially all of
the holders of registration rights will have waived those rights
with respect to this offering.
Employment
Agreements
Currently, the Company is a party to an employment agreement
with Saed Mohseni, our President and Chief Executive Officer,
entered into at the time of his hire in February 2007. In
addition, we expect to enter into a written employment agreement
with Mr. OConnor prior to the consummation of this
offering. These agreements are described in more detail in
Compensation Discussion and Analysis
Employment Agreements.
We are not party to any effective employment agreements with any
other executive officer.
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Description of
Capital Stock
Upon completion of this offering, our authorized capital stock
will consist
of shares
of common stock, par value $0.001 per share
and shares
of preferred stock, par value $0.001 per share, the rights and
preferences of which may be established from time to time by our
board of directors. As of June 27, 2010, without giving
effect to the reorganization transactions, there were
1,050,000 shares of common stock issued and outstanding
held by 29 holders of record and 59,500 shares of
Series A preferred stock issued and outstanding held by
five holders of record.
The following descriptions are summaries of the material terms
of our capital stock. Because it is only a summary, it does not
contain all the information that may be important to you. For a
more thorough understanding of the terms of our capital stock,
you should refer to our Second Amended and Restated Articles of
Incorporation and Second Amended and Restated Regulations, which
are included as exhibits to the registration statement of which
this prospectus forms a part.
General
It is anticipated that our majority shareholder, Bravo
Development Holdings LLC, or Holdings, and each of our other
current shareholders will enter into an exchange agreement with
us pursuant to which, immediately prior to the consummation of
this offering, Holdings and each such other shareholder will
exchange all outstanding shares of our Series A preferred
stock and common stock for shares of our new common stock.
An aggregate
of shares
of our new common stock will be issued by us in exchange for all
shares of our outstanding Series A preferred stock and our
outstanding common stock, which shares of new common stock will
constitute all of our issued and outstanding capital stock
immediately prior to the consummation of this offering. The
number of shares of new common stock issued pursuant to such
exchanges will be fixed
at shares,
although the allocation of such shares among the holders of our
outstanding Series A preferred stock and the holders of our
outstanding common stock will be based upon the initial public
offering price in this offering. Under the terms of the exchange
agreement, each outstanding share of Series A preferred
stock will be exchanged for that number of shares of new common
stock which have an aggregate fair value, based upon the initial
public offering price in this offering, equal to the liquidation
preference for such share of Series A preferred stock. The
liquidation preference, as defined in our amended
and restated articles of incorporation, for each share of
Series A preferred stock equals $1,000 plus all accumulated
but unpaid dividends that have accrued on such share. As of
June 27, 2010, the liquidation preference was equal to
$1,691.24 per share of Series A preferred stock. The
holders of our outstanding common stock will receive that number
of shares of new common stock which is equal to the aggregate
number of shares of new common stock issued in the exchanges
less the number of shares of new common stock issued in exchange
for shares of our outstanding Series A preferred stock.
Based upon an assumed initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus,
approximately
shares of our new common stock, representing a beneficial
ownership interest of % of our
company, would be exchanged for shares of our outstanding Series
A preferred stock and
approximately shares
of our new common stock, representing a beneficial ownership
interest of % of our company, would
be exchanged for shares of our outstanding common stock. A $1.00
increase (decrease) in such assumed initial public offering
price of $ per share would
decrease (increase) the beneficial ownership interest of our
company represented by the shares of our new common stock issued
in exchange for shares of our Series A preferred stock
by %.
Following these exchanges and immediately prior to the
consummation of this offering, Holdings will in turn distribute
the shares of new common stock it receives in the exchanges to
its members on a pro rata basis in accordance with such
members respective ownership interests in the units of
Holdings. Holdings will then be dissolved. See
Reorganization Transactions.
Common
Stock
The holders of shares of our new common stock are entitled to
dividends as our board of directors may declare, from time to
time, from funds legally available therefor, subject to the
preferential rights of the holders of our preferred stock, if
any, and any contractual limitations on our ability to declare
and pay dividends. The holders of
98
our common stock are entitled to one vote per share on any
matter to be voted upon by shareholders, subject to certain
exceptions relating, among other matters, to our preferred
stock, if any. Our articles of incorporation do not provide for
cumulative voting in connection with the election of directors,
and accordingly, holders of more than 50% of the shares voting
will be able to elect all of the directors elected each year,
subject to the voting rights of our preferred stock, if any.
Except as otherwise provided by law, the holders of a majority
in voting power of the shares issued and outstanding and
entitled to vote at such meeting of shareholders will constitute
a quorum at such meeting of the shareholders for the transaction
of business subject to the voting rights of our preferred stock,
if any. Upon the consummation of this offering, no holder of our
common stock will have any preemptive right to subscribe for any
shares of our capital stock issued in the future.
Upon any voluntary or involuntary liquidation, dissolution, or
winding up of our affairs, the holders of our common stock are
entitled to share ratably in all assets available for
distribution after payment of creditors and subject to prior
distribution rights of our preferred stock, if any.
Preferred
Stock
Following the consummation of this offering, no shares of our
preferred stock will be outstanding. Our Second Amended and
Restated Articles of Incorporation will provide that our board
of directors may, by resolution, establish one or more classes
or series of preferred stock having the number of shares and
relative voting rights, designations, dividend rates,
liquidation, and other rights, preferences, and limitations as
may be fixed by them without further shareholder approval. The
holders of our preferred stock may be entitled to preferences
over common shareholders with respect to dividends, liquidation,
dissolution, or our winding up in such amounts as are
established by the resolutions of our board of directors
approving the issuance of such shares.
The issuance of our preferred stock may have the effect of
delaying, deferring or preventing a change in control of us
without further action by the holders and may adversely affect
voting and other rights of holders of our common stock. In
addition, issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other
corporate purposes, could make it more difficult for a third
party to acquire a majority of the outstanding shares of voting
stock. At present, we have no plans to issue any shares of
preferred stock.
Registration
Rights
Under the terms of the registration rights agreement, if we
propose to register any of our shares of common stock under the
Securities Act following this offering, whether for our own
account or otherwise, certain holders of our common stock are
entitled to notice of such registration and are entitled to
include their shares therein, subject to certain conditions and
limitations, including, without limitation, pro rata reductions
in the number of shares to be sold in an offering. Such holders
also may require us to effect the registration of their shares
of common stock for sale to the public, subject to certain
conditions and limitations. We would be responsible for certain
expenses of any such registration. See Certain
Relationships and Related Party Transactions
Registration Rights Agreement.
Anti-Takeover
Effects of Our Second Amended and Restated Articles of
Incorporation and Second Amended and Restated Regulations and
Ohio Law
Articles of Incorporation and
Regulations.
Certain provisions of our Second
Amended and Restated Articles of Incorporation and Second
Amended and Restated Regulations could have anti-takeover
effects. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of our corporate
policies formulated by our board of directors. In addition,
these provisions also are intended to ensure that our board of
directors will have sufficient time to act in what our board of
directors believes to be in the best interests of us and our
shareholders. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for our takeover that
does not contemplate the acquisition of all of our outstanding
shares or an unsolicited proposal for the restructuring or sale
of all or part of us. These provisions are also intended to
discourage certain tactics that may be used in proxy fights.
99
However, these provisions could delay or frustrate the removal
of incumbent directors or the assumption of control of us by the
holder of a large block of common stock, and could also
discourage or make more difficult a merger, tender offer, or
proxy contest, even if such event would be favorable to the
interest of our shareholders.
Classified Board of Directors.
Our Second
Amended and Restated Articles of Incorporation will provide for
our board of directors to be divided into two classes of
directors, with each class as nearly equal in number as
possible, serving staggered two year terms. As a result,
approximately one half of our board of directors will be elected
each year. The classified board provision will help to assure
the continuity and stability of our board of directors and our
business strategies and policies as determined by our board of
directors. The classified board provision could have the effect
of discouraging a third party from making an unsolicited tender
offer or otherwise attempting to obtain control of us without
the approval of our board of directors. In addition, the
classified board provision could delay shareholders who do not
like the policies of our board of directors from electing a
majority of our board of directors for two years.
Special Meetings.
Our Second Amended and
Restated Regulations will provide that special meetings of the
shareholders may be called only upon the written request of not
less than a majority of the combined voting power of the voting
stock, upon the request of a majority of the board of directors
or upon the request of the chief executive officer. Our Second
Amended and Restated Regulations will prohibit the conduct of
any business at a special meeting other than as specified in the
notice for such meeting. These provisions may have the effect of
deferring, delaying or discouraging hostile takeovers or changes
in control or management of our company.
Advance Notice Requirements for Shareholder Proposals and
Director Nominees.
Our Second Amended and
Restated Regulations will establish an advance notice procedure
for our shareholders to make nominations of candidates for
election as directors or to bring other business before an
annual meeting of our shareholders. The shareholder notice
procedure will provide that only persons who are nominated by,
or at the direction of, our board of directors or its Chairman,
or by a shareholder who has given timely written notice to our
Secretary prior to the meeting at which directors are to be
elected, will be eligible for election as our directors. The
shareholder notice procedure will also provide that at an annual
meeting of our shareholders, only such business may be conducted
as has been brought before the meeting by, or at the direction
of, our board of directors or its Chairman or by a shareholder
who has given timely written notice to our Secretary of such
shareholders intention to bring such business before such
meeting. Under the shareholder notice procedure, if a
shareholder desires to submit a proposal or nominate persons for
election as directors at an annual meeting, the shareholder must
submit written notice to us in accordance with the guidelines
set forth in our Second Amended and Restated Regulations. This
provision may have the effect of precluding the conduct of
certain business at a meeting if the proper notice is not
provided and may also discourage or deter a potential acquirer
from conducting a solicitation of proxies to elect the
acquirers own slate of directors or otherwise attempting
to obtain control of us.
Removal; Filling Vacancies.
Our Second Amended
and Restated Regulations will authorize our board of directors
to fill any vacancies that occur in our board of directors by
reason of death, resignation, removal or otherwise. A director
so elected by our board of directors to fill a vacancy or a
newly created directorship holds office until the next election
of the class for which such director has been chosen and until
his successor is elected and qualified or until the
directors earlier death, resignation or removal. Our
Second Amended and Restated Regulations will also provide that
directors may be removed only for cause and only by the
affirmative vote of holders of a majority of the combined voting
power of our then outstanding stock. Cause is defined to exist
only if the director whose removal is proposed has been
convicted of a felony by a court of competent jurisdiction and
such conviction is no longer subject to direct appeal, has
failed to attend 12 consecutive meetings of the board of
directors or has been adjudged by a court of competent
jurisdiction to be liable for negligence or misconduct in the
performance of his duty to us in a matter of substantial
importance to us, and such adjudication is no longer subject to
direct appeal. The effect of these provisions is to preclude a
shareholder from removing incumbent directors without cause, as
so defined, and simultaneously gaining control of our board of
directors by filling the vacancies created by such removal with
its own nominees.
Authorized but Unissued Shares.
Our authorized
but unissued shares of common stock and preferred stock will be
available for future issuance without shareholder approval. We
may use additional shares for a variety of corporate purposes,
including future public offerings to raise additional capital,
corporate acquisitions and employee benefit
100
plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of us by means of a
proxy context, tender offer, merger or otherwise.
Indemnification.
We will include in our Second
Amended and Restated Articles of Incorporation and Second
Amended and Restated Regulations provisions to
(1) eliminate the personal liability of our directors for
monetary damages resulting from breaches of their fiduciary duty
to the fullest extent permitted by the Ohio Revised Code and
(2) indemnify our directors and officers to the fullest
extent permitted by the Ohio Revised Code. We believe that these
provisions are necessary to attract and retain qualified persons
as directors and officers. We have obtained insurance that
insures our directors and officers against certain losses and
which insures us against our obligations to indemnify the
directors and officers.
Control Share Acquisitions.
After the
completion of this offering, we will be an issuing public
corporation subject to Section 1701.831 of the Ohio Revised
Code, known as the Ohio Control Share Acquisition
Statute. This statute provides that certain notice and
informational filings and special shareholder meeting and voting
procedures must be followed prior to any persons
acquisition of the corporations shares that would entitle
the acquirer, directly or indirectly, alone or acting with
others, to exercise or direct the voting power of the
corporation in the election of directors within any of the
following ranges: (i) one-fifth or more but less than
one-third of that voting power, (ii) one-third or more but
less than a majority of that voting power or (iii) a
majority or more of that voting power. Under the statute, a
control share acquisition must be approved at a special meeting
of the shareholders, at which a quorum is present, by at least a
majority of the voting power of the corporation in the election
of directors represented at the meeting and by the holders of at
least a majority of the portion of the voting power excluding
the voting power of certain interested shares.
Interested shares include shares owned by the acquirer, by
officers elected or appointed by the directors of the
corporation and by directors of the corporation who also are
employees of the corporation.
Merger Moratorium Statute.
As an issuing
public corporation, we also will be subject to Chapter 1704
of the Ohio Revised Code, known as the Merger Moratorium
Statute. This statute prohibits certain transactions if
they involve both the corporation and a person that is an
interested shareholder (or anyone affiliated or
associated with an interested shareholder), unless
the board of directors has approved, prior to the person
becoming an interested shareholder, either the transaction or
the acquisition of shares pursuant to which the person became an
interested shareholder. An interested shareholder is any person
who is the beneficial owner of a sufficient number of shares to
allow such person, directly or indirectly, alone or acting with
others, to exercise or direct the exercise of 10% of the voting
power of the corporation in the election of directors. The
prohibition imposed on a person by Chapter 1704 is absolute
for at least three years from the interested shareholders
acquisition date and continues indefinitely thereafter unless
(i) the acquisition of shares pursuant to which the person
became an interested shareholder received the prior approval of
the corporations board of directors, (ii) the
Chapter 1704 transaction is approved by the holders of
shares entitled to exercise at least two-thirds of the voting
power of the corporation (which our Second Amended and Restated
Articles of Incorporation have reduced to a majority of our
voting power) in the election of directors, including shares
representing at least a majority of voting shares that are not
beneficially owned by an interested shareholder or an affiliate
or associate of an interested shareholder or (iii) the
Chapter 1704 transaction satisfies statutory conditions
relating to the fairness of the consideration to be received by
the shareholders of the corporation.
Nasdaq Global
Market Listing Trading
We intend to apply to have our common stock approved for listing
on the Nasdaq Global Market under the symbol BBRG.
Transfer Agent
and Registrar
We intend to appoint a transfer agent and registrar for our
common stock prior to the completion of this offering.
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Description of
Indebtedness
New Senior Credit
Facilities
In connection with this offering, we plan to enter into new
senior credit facilities. We expect that the new senior credit
facilities will provide for (i) a
$ million term loan facility,
maturing
in ,
and (ii) a revolving credit facility under which we may
borrow up to $ million
(including a sublimit cap of up to
$ million for letters of
credit and up to $ million
for swing-line loans), maturing
in .
We expect that our new senior credit facilities will contain
customary affirmative and negative covenants and require us to
meet certain financial ratios. We anticipate that the new senior
credit facilities will be secured by substantially all of our
assets.
Existing Senior
Credit Facilities
In connection with our 2006 recapitalization, we entered into
our existing $112.5 million senior credit facilities with a
syndicate of lenders. The existing senior credit facilities
provide for (i) an $82.5 million term loan facility
and (ii) a revolving credit facility under which we may
borrow up to $30.0 million (including a sublimit cap of up
to $7.0 million for letters of credit and up to
$5.0 million for swing-line loans). Payment of all
obligations under the existing senior credit facilities are
collateralized by a first priority security interest in
substantially all of our assets and those of our material
subsidiaries. Borrowings under the term loan facility and the
revolving credit facility bear interest at a rate per annum
based on the prime rate, plus a margin of up to 2%, or the
London Interbank Offered Rate (LIBOR), plus a margin up to 3%,
with margins determined by certain financial ratios. In addition
to the interest on our borrowings, we must pay an annual
commitment fee of 0.5% on the unused portion of the revolving
credit facility. The weighted-average interest rate on the
borrowings at June 27, 2010 and December 27, 2009 was
3.33% and 3.47%, respectively. Our existing senior credit
facilities mature on June 29, 2012.
We expect to use net proceeds from this offering, together with
borrowings under our new senior credit facilities, to repay all
loans outstanding under our existing senior credit facilities,
any accrued and unpaid interest and related LIBOR breakage costs
and other fees. As of June 27, 2010, approximately
$79.4 million principal amount of loans were outstanding
under our existing senior credit facilities. Our existing senior
credit facilities can be prepaid without premium or penalty,
other than any related LIBOR breakage costs and other fees.
The existing senior credit facilities contain certain customary
events of default, including, without limitation, upon the
occurrence of certain change of control transactions that
include the consummation of this offering.
13.25% Senior
Subordinated Secured Notes
In connection with our 2006 recapitalization, we also issued
$27.5 million of our 13.25% senior subordinated
secured notes. The note purchase agreement is collateralized by
a second priority interest in substantially all of our assets
and those of our material subsidiaries. Interest is payable
monthly at an annual interest rate of 13.25%, with the principal
due on December 29, 2012. Pursuant to the note purchase
agreement, we were entitled to elect monthly during the first
year to accrue interest at the rate of 14.25% per annum with no
payments. Commencing in the second year of the note purchase
agreement through the maturity date, we have the option to
accrue interest at an annual rate of 13.25%, consisting of cash
interest equal to 9% and paid-in-kind interest of 4.25%.
Interest accrued but unpaid during the term of the notes is
capitalized into the principal balance.
We expect to use net proceeds from this offering, together with
borrowings under our new senior credit facilities, to repay all
of our 13.25% senior subordinated secured notes, and any
accrued and unpaid interest. As of June 27, 2010,
approximately $32.4 million aggregate principal amount of
our 13.25% senior subordinated secured notes were
outstanding. Our 13.25% senior subordinated secured notes
can be prepaid without premium or penalty.
The senior subordinated secured notes contain certain customary
events of default, including, without limitation, upon the
occurrence of certain change of control transactions that
include the consummation of this offering.
102
Shares Eligible
For Future Sale
Prior to this offering, there has been no market for shares of
our common stock. We cannot predict the effect, if any, future
sales of shares of our common stock, or the availability for
future sale of shares of our common stock, will have on the
market price of shares of our common stock prevailing from time
to time. The sale of substantial amounts of shares of our common
stock in the market, or the perception that such sales could
occur, could harm the prevailing market price of shares of our
common stock.
Sale of
Restricted Shares
Upon completion of this offering and the reorganization
transactions, we will
have shares
of common stock outstanding, based on, without giving effect to
the reorganization transactions, 1,050,000 shares of common
stock and 59,500 shares of Series A preferred stock
outstanding as of June 27, 2010. Of these shares, the
shares sold in this offering, plus any shares sold upon exercise
of the underwriters over-allotment option, will be freely
tradable without restriction under the Securities Act, except
for any shares purchased by our affiliates as that
term is defined in Rule 144 promulgated under the
Securities Act. In general, affiliates include our executive
officers, directors, and 10% shareholders. Shares purchased by
affiliates will remain subject to the resale limitations of
Rule 144.
Upon completion of this
offering, shares
of our common stock will be restricted securities,
as that term is defined in Rule 144 promulgated under the
Securities Act. These restricted securities are eligible for
public sale only if they are registered under the Securities Act
or if they qualify for an exemption from registration under
Rules 144 or 701 promulgated under the Securities Act,
which are summarized below.
As a result of the
lock-up
agreements described below and the provisions of Rule 144
and Rule 701 promulgated under the Securities Act, the
shares of our common stock (excluding the shares sold in this
offering) will be available for sale in the public market as
follows:
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no shares will be eligible for sale on the date of this
prospectus;
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shares
will be eligible for sale upon the expiration of the
lock-up
agreements, as more particularly described below, beginning
180 days after the date of this prospectus; and
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shares
will be eligible for sale, upon the exercise of vested options,
upon the expiration of the
lock-up
agreements, as more particularly described below, beginning
180 days after the date of this prospectus.
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Lock-Up
Agreements
Our directors, executive officers, the selling shareholders and
substantially all of our other shareholders have entered into
lock-up
agreements in connection with this offering, generally providing
that they will not offer, sell, contract to sell, or grant any
option to purchase or otherwise dispose of our common stock or
any securities exercisable for or convertible into our common
stock owned by them for a period of at least 180 days after
the date of this prospectus without the prior written consent of
the underwriters. Despite possible earlier eligibility for sale
under the provisions of Rules 144 and 701, shares subject
to
lock-up
agreements will not be salable until these agreements expire or
are waived by the underwriters.
Approximately % of our outstanding
shares of common stock, will be subject to such
lock-up
agreements. These agreements are more fully described in
Underwriting Lock-Up Agreements.
We have been advised by the underwriters that they may at their
discretion waive the
lock-up
agreements; however, they have no current intention of releasing
any shares subject to a
lock-up
agreement. The release of any
lock-up
would be considered on a
case-by-case
basis. In considering any request to release shares covered by a
lock-up
agreement, the representatives would consider circumstances of
emergency and hardship. No agreement has been made between the
underwriters and us or any of our shareholders pursuant to which
the underwriters will waive the
lock-up
restrictions.
103
Rule 144
Generally, Rule 144 provides that an affiliate who has
beneficially owned restricted shares of our common
stock for at least six months will be entitled to sell on the
open market in brokers transactions, within any
three-month period, a number of shares that does not exceed the
greater of:
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1% of the number of shares of our common stock then outstanding,
which will
equal shares
immediately after this offering; or
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the average weekly trading volume of the common stock during the
four calendar weeks preceding the filing of a notice on
Form 144 with respect to such sale.
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In addition, sales under Rule 144 are subject to
requirements with respect to manner of sale, notice, and the
availability of current public information about us.
In the event that any person who is deemed to be our affiliate
purchases shares of our common stock in this offering or
acquires shares of our common stock pursuant to one of our
employee benefits plans, sales under Rule 144 of the shares
held by that person will be subject to the volume limitations
and other restrictions described in the preceding two paragraphs.
The volume limitation, manner of sale and notice provisions
described above will not apply to sales by non-affiliates. For
purposes of Rule 144, a non-affiliate is any person or
entity who is not our affiliate at the time of sale and has not
been our affiliate during the preceding three months. Once we
have been a reporting company for 90 days, a non-affiliate
who has beneficially owned restricted shares of our common stock
for six months may rely on Rule 144 provided that certain
public information regarding us is available. The six month
holding period increases to one year in the event we have not
been a reporting company for at least 90 days. However, a
non-affiliate who has beneficially owned the restricted shares
proposed to be sold for at least one year will not be subject to
any restrictions under Rule 144 regardless of how long we
have been a reporting company.
Rule 701
Under Rule 701, each of our employees, officers, directors,
and consultants who purchased shares pursuant to a written
compensatory plan or contract is eligible to resell these shares
90 days after the effective date of this offering in
reliance upon Rule 144, but without compliance with
specific restrictions. Rule 701 provides that affiliates
may sell their Rule 701 shares under Rule 144
without complying with the holding period requirement and that
non-affiliates may sell their shares in reliance on
Rule 144 without complying with the holding period, public
information, volume limitation, or notice provisions of
Rule 144.
Form S-8
Registration Statements
We intend to file one or more registration statements on
Form S-8
under the Securities Act as soon as practicable after the
completion of this offering for shares issued upon the exercise
of options and shares to be issued under our employee benefit
plans. As a result, any such options or shares will be freely
tradable in the public market. We have granted options to
purchase, without giving effect to the reorganization
transactions expected to occur prior to the consummation of this
offering, 257,875 shares of our common
stock, of
which have vested and will be exercisable upon the consummation
of this offering based upon an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover of this prospectus. However,
such shares held by affiliates will still be subject to the
volume limitation, manner of sale, notice, and public
information requirements of Rule 144 unless otherwise
resalable under Rule 701.
104
Material U.S.
Federal Tax Considerations For
Non-United
States Holders
The following discussion is a general summary of the material
U.S. federal tax consequences of the purchase, ownership
and disposition of our common stock applicable to
non-U.S. holders.
As used herein, a
non-U.S. holder
means a beneficial owner of our common stock that is not a
U.S. person (as defined below) or a partnership for
U.S. federal income tax purposes, and that will hold shares
of our common stock as capital assets (i.e., generally, for
investment). For U.S. federal income tax purposes, a
U.S. person includes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other business entity treated as a corporation
for U.S. federal income tax purposes) created or organized
in the United States or under the laws of the United States, any
state thereof or the District of Columbia;
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an estate the income of which is subject to United States
federal income taxation; or
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a trust that (1) is subject to the primary supervision of a
court within the United States and the control of one or more
U.S. persons, or (2) was in existence on
August 20, 1996, was treated as a U.S. domestic trust
immediately prior to that date, and has validly elected to
continue to be treated as a U.S. domestic trust.
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This summary does not consider specific facts and circumstances
that may be relevant to a particular
non-U.S. holders
tax position and does not consider state and local or
non-U.S. tax
consequences. It also does not consider
non-U.S. holders
subject to special tax treatment under the U.S. federal
income tax laws (including partnerships or other pass-through
entities, banks and insurance companies, regulated investment
companies, real estate investment trusts, dealers in securities,
holders of our common stock held as part of a
straddle, hedge, conversion
transaction or other risk-reduction transaction,
controlled foreign corporations, passive foreign investment
companies, companies that accumulate earnings to avoid
U.S. federal income tax, foreign tax-exempt organizations,
former U.S. citizens or residents and persons who hold or
receive common stock as compensation). This summary is based on
provisions of the U.S. Internal Revenue Code of 1986, as
amended, or the Code, applicable Treasury
regulations, administrative pronouncements of the
U.S. Internal Revenue Service, or IRS, and
judicial decisions, all as in effect on the date hereof, and all
of which are subject to change, possibly on a retroactive basis,
and different interpretations.
Each prospective
non-U.S. holder
is encouraged to consult its own tax advisor with respect to the
U.S. federal, state, local and
non-U.S. income,
estate and other tax consequences of purchasers holding and
disposing of our common stock
.
U.S. Trade or
Business Income
For purposes of this discussion, dividend income, and gain on
the sale or other taxable disposition of our common stock, will
be considered to be U.S. trade or business
income if such dividend income or gain is
(1) effectively connected with the conduct by a
non-U.S. holder
of a trade or business within the United States and (2) in
the case of a
non-U.S. holder
that is eligible for the benefits of an income tax treaty with
the United States, attributable to a permanent
establishment (or, for an individual, a fixed
base) maintained by the
non-U.S. holder
in the United States. Generally, U.S. trade or business
income is not subject to U.S. federal withholding tax
(provided the
non-U.S. holder
complies with applicable certification and disclosure
requirements); instead, U.S. trade or business income is
subject to U.S. federal income tax on a net income basis at
regular U.S. federal income tax rates in the same manner as
a U.S. person. Any U.S. trade or business income
received by a
non-U.S. holder
that is a corporation also may be subject to a branch
profits tax at a 30% rate, or at a lower rate prescribed
by an applicable income tax treaty, under specific circumstances.
Dividends
Distributions of cash or property (other than certain stock
distributions) that we pay on our common stock (or certain
redemptions that are treated as distributions on our common
stock) will be taxable as dividends for U.S. federal income
tax purposes to the extent paid from our current or accumulated
earnings and profits (as determined under U.S. federal
income tax principles). Subject to our discussion in
Recently-Enacted Federal Tax
105
Legislation below, a
non-U.S. holder
generally will be subject to U.S. federal withholding tax
at a 30% rate, or at a reduced rate prescribed by an applicable
income tax treaty, on any dividends received in respect of our
common stock. If the amount of a distribution exceeds our
current and accumulated earnings and profits, such excess first
will be treated as a tax-free return of capital to the extent of
the
non-U.S. holders
adjusted tax basis in our common stock, and thereafter will be
treated as capital gain. See Dispositions of
Our Common Stock below. In order to obtain a reduced rate
of U.S. federal withholding tax under an applicable income
tax treaty, a
non-U.S. holder
will be required to provide a properly executed IRS
Form W-8BEN
(or appropriate substitute or successor form) certifying its
entitlement to benefits under the treaty. A
non-U.S. holder
of our common stock that is eligible for a reduced rate of
U.S. federal withholding tax under an income tax treaty may
obtain a refund or credit of any excess amounts withheld by
filing an appropriate claim for a refund with the IRS. A
non-U.S. holder
is encouraged to consult its own tax advisor regarding its
possible entitlement to benefits under an income tax treaty.
The U.S. federal withholding tax does not apply to
dividends that are U.S. trade or business income, as
described above, of a
non-U.S. holder
who provides a properly executed IRS
Form W-8ECI
(or appropriate substitute or successor form), certifying that
the dividends are effectively connected with the
non-U.S. holders
conduct of a trade or business within the United States.
Dispositions of
Our Common Stock
Subject to our discussion in Recently-Enacted
Federal Tax Legislation below, a
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax in respect of any gain on a sale or other
disposition of our common stock unless:
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the gain is U.S. trade or business income, as described
above;
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the
non-U.S. holder
is an individual who is present in the United States for 183 or
more days in the taxable year of the disposition and meets other
conditions; or
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we are or have been a U.S. real property holding
corporation, which we refer to as USRPHC,
under section 897 of the Code at any time during the
shorter of the five year period ending on the date of
disposition and the
non-U.S. holders
holding period for our common stock.
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In general, a corporation is a USRPHC if the fair market value
of its U.S. real property interests equals or
exceeds 50% of the sum of the fair market value of its worldwide
(domestic and foreign) real property interests and its other
assets used or held for use in a trade or business. For this
purpose, real property interests include land, improvements, and
associated personal property. We believe that we currently are
not a USRPHC. In addition, based on our financial statements and
current expectations regarding the value and nature of our
assets and other relevant data, we do not anticipate becoming a
USRPHC, although there can be no assurance these conclusions are
correct or might not change in the future based on changed
circumstances. If we are found to be a USRPHC, a
non-U.S. holder,
nevertheless, will not be subject to U.S. federal income or
withholding tax in respect of any gain on a sale or other
disposition of our common stock so long as our common stock is
regularly traded on an established securities market
as defined under applicable Treasury regulations and a
non-U.S. holder
owns, actually and constructively, 5% or less of our common
stock during the shorter of the five year period ending on the
date of disposition and such
non-U.S. holders
holding period for our common stock. Prospective investors
should be aware that no assurance can be given that our common
stock will be so regularly traded when a
non-U.S. holder
sells its shares of our common stock.
Information
Reporting and Backup Withholding Requirements
We must annually report to the IRS and to each
non-U.S. holder
any dividend income that is subject to U.S. federal
withholding tax, or that is exempt from such withholding tax
pursuant to an income tax treaty. Copies of these information
returns also may be made available under the provisions of a
specific treaty or agreement to the tax authorities of the
country in which the
non-U.S. holder
resides. Under certain circumstances, the Code imposes a backup
withholding obligation (currently at a rate of 28% and scheduled
to increase to 31% for taxable years 2011 and thereafter) on
certain reportable payments. Dividends paid to a
non-U.S. holder
of our common stock generally will be exempt from backup
withholding if the
non-U.S. holder
provides a properly executed IRS
Form W-8BEN
(or appropriate substitute or successor form) or otherwise
establishes an exemption.
106
The payment of the proceeds from the disposition of our common
stock to or through the U.S. office of any broker,
U.S. or foreign, will be subject to information reporting
and possible backup withholding unless the owner certifies
(usually on IRS
Form W-8BEN)
as to its
non-U.S. status
under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual
knowledge or reason to know that the holder is a
U.S. person or that the conditions of any other exemption
are not, in fact, satisfied. The payment of the proceeds from
the disposition of common stock to or through a
non-U.S. office
of a
non-U.S. broker
will not be subject to information reporting or backup
withholding unless the
non-U.S. broker
has certain types of relationships with the United States, or a
U.S. related person as defined under applicable
Treasury regulations. In the case of the payment of the proceeds
from the disposition of our common stock to or through a
non-U.S. office
of a broker that is either a U.S. person or a
U.S. related person, the Treasury regulations
require information reporting (but not the backup withholding
tax) on the payment unless the broker has documentary evidence
in its files that the owner is a
non-U.S. holder
and the broker has no knowledge to the contrary.
Non-U.S. holders
are encouraged to consult their own tax advisors on the
application of information reporting and backup withholding to
them in their particular circumstances (including upon their
disposition of our common stock).
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a
non-U.S. holder
will be refunded or credited against the
non-U.S. holders
U.S. federal income tax liability, if any, if the
non-U.S. holder
provides the required information to the IRS.
Recently-Enacted
Federal Tax Legislation
On March 18, 2010, President Obama signed the Hiring
Incentives to Restore Employment (HIRE) Act, or the HIRE
Act. The HIRE Act includes a revised version of a bill
introduced in late October 2009 in both the House and the
Senate, the Foreign Account Tax Compliance Act of
2009 or the FATCA bill.
Under the FATCA provisions of the HIRE Act, foreign financial
institutions (which include hedge funds, private equity funds,
mutual funds, securitization vehicles and any other investment
vehicles regardless of their size) and other foreign entities
must comply with new information reporting rules with respect to
their U.S. account holders and investors or confront a new
withholding tax on
U.S.-source
payments made to them. Specifically, FATCA requires that foreign
financial institutions enter into an agreement with the United
States government to collect and provide the U.S. tax
authorities substantial information regarding U.S. account
holders of such foreign financial institution. Additionally,
FATCA requires all other foreign entities that are not financial
institutions to provide the withholding agent with a
certification identifying the substantial U.S. owners of
such foreign entity. A foreign financial institution or other
foreign entity that does not comply with the FATCA reporting
requirements generally will be subject to a new 30% withholding
tax with respect to any withholdable payments made
after December 31, 2012, other than such payments that are
made on obligations that are outstanding on
March 18, 2012. For this purpose, withholdable payments are
U.S.-source
payments, such as dividends, otherwise subject to nonresident
withholding tax and also include the entire gross proceeds from
the sale of any equity or debt instruments of U.S. issuers.
The new FATCA withholding tax will apply regardless of whether
the payment would otherwise be exempt from U.S. nonresident
withholding tax (e.g., capital gain from the sale of our stock).
The Treasury is authorized to provide rules for implementing the
FATCA withholding regime with the existing nonresident
withholding tax rules. FATCA withholding under the HIRE Act will
not apply to withholdable payments made directly to foreign
governments, international organizations, foreign central banks
of issue and individuals, and the Treasury is authorized to
provide additional exceptions.
As noted above, the new FATCA withholding and information
reporting requirements generally will apply to withholdable
payments made after December 31, 2012. Prospective
non-U.S. holders
are encouraged to consult with their own tax advisors regarding
these new provisions.
Federal Estate
Tax
Individual
Non-U.S. holders
and entities the property of which is potentially includible in
such an individuals gross estate for U.S. federal
estate tax purposes (for example, a trust funded by such an
individual and with respect to which the individual has retained
certain interests or powers), should note that, absent an
applicable treaty benefit, the common stock will be treated as
U.S. situs property subject to U.S. federal estate tax.
107
Underwriting
We plan to enter into an underwriting agreement with the
underwriters named below. Jefferies & Company, Inc.,
Piper Jaffray & Co. and Wells Fargo Securities, LLC
are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a
specific number of shares of common stock by each of the
underwriters. The underwriters obligations are several,
which means that each underwriter is required to purchase a
specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject
to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of
shares of common stock set forth opposite its name.
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Number of
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Underwriters
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Shares
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Jefferies & Company, Inc.
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Piper Jaffray & Co.
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Wells Fargo Securities, LLC
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KeyBanc Capital Markets Inc.
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Morgan Keegan & Company, Inc.
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Total
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Of
the shares
to be purchased by the underwriters, shares
will be purchased from us and shares will be
purchased from the selling shareholders.
The underwriters have agreed to purchase all of the shares
offered by this prospectus (other than those covered by the
over-allotment option described below) if any are purchased. The
shares of our common stock should be ready for delivery on or
about
, 2010 against payment in immediately available funds. The
underwriters are offering the shares subject to various
conditions and may reject all or part of any order.
Under the underwriting agreement, if an underwriter defaults in
its commitment to purchase shares, the commitments of
non-defaulting underwriters may be increased or the underwriting
agreement may be terminated, depending on the circumstances.
Over-Allotment
Option
The selling shareholders have granted the underwriters an
over-allotment option. This option, which is exercisable for up
to 30 days after the date of this prospectus, permits the
underwriters to purchase a maximum
of
additional shares from the selling shareholders solely to cover
over-allotments. If the underwriters exercise all or part of
this option, they will purchase shares covered by the option at
the initial public offering price that appears on the cover of
this prospectus, less the underwriting discount. If this option
is exercised in full, the total price to the public will be
$ and, before expenses, the total
proceeds to the selling shareholders will be
$ . The underwriters have severally
agreed that, to the extent the over-allotment option is
exercised, they will each purchase a number of additional shares
proportionate to the underwriters initial amount reflected
in the foregoing table.
Commission and
Expenses
The representatives have advised us that the underwriters
propose to offer the shares directly to the public at the public
offering price that appears on the cover of this prospectus. In
addition, the representatives may offer some of the shares to
other securities dealers at such price less a concession of
$ per share. After the shares are
released for sale to the public, the representatives may change
the offering price and other selling terms at various times.
108
The following table provides information regarding the amount of
the discount to be paid to the underwriters by us and the
selling shareholders:
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Total With Full
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Total Without
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Exercise of
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Exercise of Over-
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Over-Allotment
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Per Share
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Allotment Option
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Option
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Public offering price
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$
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$
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$
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Underwriting discounts and commissions to be paid by us
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$
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$
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$
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Underwriting discounts and commissions to be paid by the selling
shareholders
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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Proceeds, before expenses, to selling shareholders
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$
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$
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$
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We estimate that the total expenses of this offering, excluding
underwriting discounts, will be approximately
$ million. We are paying all
of the expenses of this offering. The selling shareholders will
not pay any expenses of this offering, other than the
underwriting discounts and commissions.
Indemnification
We and the selling shareholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of those
liabilities.
Lock-Up
Agreements
We, our officers and directors, all of the selling shareholders
and substantially all other shareholders have agreed to a
180-day
lock-up
with
respect to shares of our common stock and other of our
securities that they beneficially own, including securities that
are convertible into shares of common stock and securities that
are exchangeable or exercisable for shares of common stock. This
means that, without the prior written consent of the
representatives, for a period of 180 days following the
date of this prospectus, we and such persons may not, subject to
certain exceptions, directly or indirectly (1) sell, offer,
contract or grant any option to sell (including without
limitation any short sale), pledge, transfer, establish an open
put equivalent position within the meaning of
Rule 16a-1(h)
under the Exchange Act or otherwise dispose of any shares of
common stock, options or warrants to acquire shares of common
stock, or securities exchangeable or exercisable for or
convertible into shares of common stock currently or hereafter
owned either of record or beneficially or (2) publicly
announce an intention to do any of the foregoing. In addition,
the
lock-up
period may be extended in the event that we issue an earnings
release or announce certain material news or a material event
with respect to us occurs during the last 17 days of the
lock-up
period, or prior to the expiration of the
lock-up
period, we announce that we will release earnings results during
the
16-day
period beginning on the last day of the
lock-up
period.
The restrictions in these
lock-up
agreements will not apply, subject to certain conditions, to
transactions relating to (1) shares of common stock or
other securities acquired in open market transactions after
completion of this offering (2) a bona fide gift or gifts,
(3) the transfer of any or all of the shares of common
stock or securities convertible into or exchangeable or
exercisable for shares of common stock owned by a shareholder,
either during such shareholders lifetime or on death, by
gift, will or interstate succession to an immediate family of
the shareholder or to a trust the beneficiaries of which are
exclusively the shareholder
and/or
a
member or members of the shareholders immediate family, or
(4) a distribution to limited partners or shareholders of
the restricted party, provided, however, that the recipient in
(2), (3) or (4) agrees to be bound by such
restrictions.
Discretionary
Sales
The representatives have informed us that they do not expect
discretionary sales by the underwriters to exceed five percent
of the shares offered by this prospectus.
109
No Public
Market
While we intend to apply to list our common stock on the Nasdaq
Global Market under the symbol BBRG, there has been
no public market for the shares prior to this offering. The
offering price for the shares will be determined by us and the
representatives, based on the following factors:
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the history and prospects for the industry in which we compete;
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our past and present operations;
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our historical results of operations;
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|
our prospects for future business and earning potential;
|
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|
our management;
|
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|
the general condition of the securities markets at the time of
this offering;
|
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|
the recent market prices of securities of generally comparable
companies;
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|
the market capitalization and stages of development of other
companies which we and the representatives believe to be
comparable to us; and
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|
other factors deemed to be relevant.
|
We cannot assure you that the initial public offering price will
correspond to the price at which the common stock will trade in
the public market after this offering or that an active trading
market for the common stock will develop and continue after this
offering.
Price
Stabilization, Short Positions and Penalty Bids
SEC rules may limit the ability of the underwriters to bid for
or purchase shares of our common stock before distribution of
the shares is completed. However, the underwriters may engage in
the following activities in accordance with the rules:
Stabilizing Transactions.
The representatives
may make bids or purchases for the purpose of pegging, fixing or
maintaining the market price of our common stock, so long as
stabilizing bids do not exceed a specified maximum.
Over-allotments and Syndicate Covering
Transactions.
The underwriters may sell more
shares of our common stock in connection with this offering than
the number of shares than they have committed to purchase. This
over-allotment creates a short position for the underwriters. A
bid for or purchase of shares of common stock on behalf of the
underwriters to reduce a short position incurred by the
underwriters is a syndicate covering transaction.
Establishing short sales positions may involve either
covered short sales or naked short
sales. Covered short sales are short sales made in an amount not
greater than the underwriters over-allotment option
described above. The underwriters may close out any covered
short position either by exercising their over-allotment option
or by purchasing shares in the open market. To determine how
they will close the covered short position, the underwriters
will consider, among other things, the price of shares available
for purchase in the open market, as compared to the price at
which they may purchase shares through the over-allotment
option. Naked short sales are short sales in excess of the
over-allotment option. The underwriters must close out any naked
short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters
are concerned that, in the open market after the pricing of this
offering, there may be downward pressure on the price of the
shares that could adversely affect investors who purchase shares
in this offering.
Penalty Bids.
If the representatives purchase
shares in the open market in a stabilizing transaction or
syndicate covering transaction, it may reclaim a selling
concession from the underwriters and selling group members who
sold those shares as part of this offering.
Passive Market Making.
Market makers in the
shares who are underwriters or prospective underwriters may make
bids for or purchases of shares, subject to limitations, until
the time, if ever, at which a stabilizing bid is made.
110
Similar to other purchase transactions, the underwriters
purchases to cover the syndicate short sales or to stabilize the
market price of our common stock may have the effect of raising
or maintaining the market price of our common stock or
preventing or mitigating a decline in the market price of our
common stock. As a result, the price of the shares of our common
stock may be higher than the price that might otherwise exist in
the open market if such purchases by the underwriters were not
occurring. The imposition of a penalty bid might also have an
effect on the price of our common stock if it discourages
resales of the shares.
Neither we nor the underwriters make any representation or
prediction as to the effect that the transactions described
above may have on the price of our common stock. These
transactions may occur on the Nasdaq Global Market or otherwise.
If such transactions are commenced, they may be discontinued
without notice at any time.
Electronic
Distribution
A prospectus in electronic format may be made available on the
Internet sites or through other online services maintained by
one or more of the underwriters or by their affiliates. In those
cases, prospective investors may view offering terms online and,
depending upon the particular underwriter, prospective investors
may be allowed to place orders online. The underwriters may
agree with us to allocate a specific number of shares for sale
to online brokerage account holders. Any such allocation for
online distributions will be made by the representatives on the
same basis as other allocations.
Other than the prospectus in electronic format, the information
on any underwriters website and any information contained
in any other website maintained by an underwriter is not part of
the prospectus or the registration statement of which this
prospectus forms a part, has not been approved
and/or
endorsed by us or any underwriter in its capacity as underwriter
and should not be relied upon by investors.
Upon receipt of a request by an investor or its representative
who has received an electronic prospectus from an underwriter
within the period during which there is an obligation to deliver
a prospectus, we will promptly transmit, or cause to be
transmitted, without charge, a paper copy of the prospectus.
Selling
Restrictions
European
Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State) an offer to the public of any
shares which are the subject of this offering contemplated by
this prospectus may not be made in that Relevant Member State
except that an offer to the public in that Relevant Member State
of any shares may be made at any time under the following
exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State:
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1.
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to legal entities which are authorised or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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2.
|
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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3.
|
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to
obtaining the prior consent of the representatives for any such
offer; or
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4.
|
in any other circumstances falling within Article 3(2) of
the Prospectus Directive, provided that no such offer of the
shares shall result in a requirement for the publication by us
or any underwriter of a prospectus pursuant to Article 3 of
the Prospectus Directive.
|
111
Each person in a Relevant Member State who receives any
communication in respect of, or who acquires any shares under,
the offers contemplated in this prospectus will be deemed to
have represented, warranted and agreed to and with each
underwriter and us that:
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1.
|
it is a qualified investor within the meaning of the law in that
Relevant Member State implementing Article 2(1)(e) of the
Prospectus Directive; and
|
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|
2.
|
in the case of any shares acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the shares acquired by it in the
offer have not been acquired on behalf of, nor have they been
acquired with a view to their offer or resale to, persons in any
Relevant Member State, other than qualified investors, as that
term is defined in the Prospectus Directive, or in circumstances
in which the prior consent of the representatives has been given
to the offer or resale; or (ii) where shares have been
acquired by it on behalf of persons in any Relevant Member State
other than qualified investors, the offer of those shares to it
is not treated under the Prospectus Directive as having been
made to such persons.
|
For the purposes of this provision, the expression an
offer to the public in relation to any shares in any
Relevant Member State means the communication in any form and by
any means of sufficient information on the terms of the offer
and any shares to be offered so as to enable an investor to
decide to purchase any shares, as the same may be varied in that
Member State by any measure implementing the Prospectus
Directive in that Member State and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant
Member State.
Each underwriter has represented, warranted and agreed that:
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1.
|
it has only communicated or caused to be communicated and will
only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the Financial Services and Markets Act
2000 (the FSMA)) to persons who are investment
professionals falling within Article 19(5) of the FSMA
(Financial Promotion) Order 2005 or in circumstances in which
Section 21(1) of the FSMA does not apply to us; and
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2.
|
it has complied with and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
|
Other
Relationships
The underwriters and their respective affiliates are full
service financial institutions engaged in various activities,
which may include securities trading, commercial and investment
banking, financial advisory, investment management, principal
investment, hedging, financing and brokerage activities. Certain
of the underwriters and their respective affiliates have, from
time to time, performed, and may in the future perform, various
financial advisory and investment banking services for the
company, for which they received or will receive customary fees
and expenses. In particular, affiliates of Wells Fargo
Securities, LLC are agents and lenders under the companys
existing senior credit facilities and an affiliate of
Jefferies & Company, Inc. is a lender under the
companys existing senior credit facilities. As described
in Use of Proceeds, we intend to use a portion of
the net proceeds from this offering to repay all loans
outstanding under our existing senior credit facilities.
In the ordinary course of their various business activities, the
underwriters and their respective affiliates may make or hold a
broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for
the accounts of their customers and may at any time hold long
and short positions in such securities and instruments. Such
investment and securities activities may involve securities and
instruments of the company.
112
Conflicts of
Interest
As described in Use of Proceeds, we intend to use a
portion of the net proceeds from this offering to repay all
loans outstanding under our existing senior credit facilities.
Because an affiliate of Wells Fargo Securities, LLC will receive
more than 5.0% of the net proceeds of this offering, the
offering will be conducted in accordance with Rule 2720 of
the Conduct Rules of the National Association of Securities
Dealers, as administered by the Financial Industry Regulatory
Authority. This rule requires, among other things, that the
initial public offering price can be no higher than that
recommended by a qualified independent underwriter
and that a qualified independent underwriter has participated in
the preparation of, and has exercised the usual standards of
due diligence with respect to, the registration
statement and this prospectus. Jefferies & Company,
Inc. has agreed to act as qualified independent underwriter for
the offering and to undertake the legal responsibilities and
liabilities of an underwriter under the Securities Act,
specifically including those inherent in Section 11 of the
Securities Act.
Legal
Matters
The validity of the shares offered hereby will be passed upon
for us by Dechert LLP, Philadelphia, Pennsylvania. Certain legal
matters in connection with this offering will be passed upon for
the underwriters by Latham & Watkins LLP, New York,
New York.
Experts
The consolidated annual financial statements included in this
prospectus have been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, as stated in
their report appearing herein and elsewhere in the registration
statement of which this prospectus forms a part. Such financial
statements are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
Where You Can
Find More Information
This prospectus is part of a registration statement on
Form S-1
that we have filed with the Securities and Exchange Commission
under the Securities Act of 1933 covering the common stock we
are offering. As permitted by the rules and regulations of the
SEC, this prospectus omits certain information contained in the
registration statement. For further information with respect to
us and our common stock, you should refer to the registration
statement and to its exhibits and schedules. We make reference
in this prospectus to certain of our contracts, agreements and
other documents that are filed as exhibits to the registration
statement. For additional information regarding those contracts,
agreements and other documents, please see the exhibits attached
to this registration statement.
You can read the registration statement and the exhibits and
schedules filed with the registration statement or any reports,
statements or other information we have filed or file, at the
public reference facilities maintained by the SEC at the public
reference room (Room 1580), 100 F Street, N.E.,
Washington, D.C. 20549. You may also obtain copies of the
documents from such offices upon payment of the prescribed fees.
You may call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. You may also request copies of the documents upon payment
of a duplicating fee, by writing to the SEC. In addition, the
SEC maintains a web site that contains reports and other
information regarding registrants (including us) that file
electronically with the SEC, which you can access at
http://www.sec.gov.
In addition, you may request copies of this filing and such
other reports as we may determine or as the law requires at no
cost, by telephone at
(614) 326-7944,
or by mail to Bravo Brio Restaurant Group, Inc.,
777 Goodale Boulevard, Suite 100, Columbus, Ohio
43212, Attention: Investor Relations.
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Exchange
Act, and, in accordance with such requirements, will file
periodic reports, proxy statements and other information with
the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the
public reference facilities and website of the SEC referred to
above.
113
Index to
Financial Statements
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Page
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F-2
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Consolidated Financial StatementsDecember 27, 2009,
December 28, 2008 and December 30, 2007
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F-3
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F-4
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F-5
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F-6
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F-7
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Unaudited Interim Consolidated Financial
StatementsJune 27, 2010 and June 28, 2009
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F-19
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F-20
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F-21
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F-22
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F-1
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Bravo Brio Restaurant Group, Inc.:
We have audited the accompanying consolidated balance sheets of
Bravo Brio Restaurant Group, Inc. (formerly, Bravo Development,
Inc. and Subsidiaries) (a majority-owned subsidiary of Bravo
Development Holdings, LLC) (the Company), as of
December 27, 2009 and December 28, 2008, and the
related consolidated statements of operations,
stockholders equity, and cash flows for each of the three
years in the period ended December 27, 2009. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, 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, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 27, 2009 and December 28, 2008,
and the results of their operations and their cash flows for
each of the three years in the period ended December 27,
2009 in conformity with accounting principles generally accepted
in the United States of America.
/s/ Deloitte &
Touche LLP
Columbus, Ohio
April 30, 2010 (June 28, 2010 as to the Company name
change in Note 1 and July 1, 2010 as to the subsequent
event update in Note 1)
F-2
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars in thousands, except par
values)
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Pro Forma
|
|
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|
December 28,
|
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|
December 27,
|
|
|
Stockholders
|
|
|
|
2008
|
|
|
2009
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
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|
Cash and cash equivalents
|
|
$
|
682
|
|
|
$
|
249
|
|
|
|
|
|
Restricted cash
|
|
|
251
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,968
|
|
|
|
5,534
|
|
|
|
|
|
Tenant improvement allowance receivable
|
|
|
3,549
|
|
|
|
2,435
|
|
|
|
|
|
Inventories
|
|
|
1,990
|
|
|
|
2,203
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
2,058
|
|
|
|
2,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
12,498
|
|
|
|
12,470
|
|
|
|
|
|
PROPERTY AND EQUIPMENTNet
|
|
|
141,040
|
|
|
|
144,880
|
|
|
|
|
|
OTHER ASSETSNet
|
|
|
4,226
|
|
|
|
3,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
157,764
|
|
|
$
|
160,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY IN
ASSETS)
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and construction payables
|
|
$
|
14,315
|
|
|
$
|
12,675
|
|
|
|
|
|
Accrued expenses
|
|
|
19,259
|
|
|
|
21,658
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
1,049
|
|
|
|
1,039
|
|
|
|
|
|
Deferred lease incentives
|
|
|
3,656
|
|
|
|
4,284
|
|
|
|
|
|
Deferred gift card revenue
|
|
|
8,539
|
|
|
|
8,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
46,818
|
|
|
|
48,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
DEFERRED LEASE INCENTIVES
|
|
|
48,324
|
|
|
|
53,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
124,901
|
|
|
|
116,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
13,812
|
|
|
|
14,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 13)
|
|
|
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|
|
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STOCKHOLDERS EQUITY (DEFICIENCY IN ASSETS):
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par valueauthorized,
3,000,000 shares; issued and outstanding,
1,050,000 shares
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
14% cumulative compounding preferred stock, $0.001 par
valueauthorized, 100,000 shares; issued and
outstanding, 59,500 shares
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
Additional paid-in capital
|
|
|
110,972
|
|
|
|
110,972
|
|
|
|
110,973
|
|
Retained deficit
|
|
|
(187,065
|
)
|
|
|
(183,664
|
)
|
|
|
(183,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficiency in assets)
|
|
|
(76,091
|
)
|
|
|
(72,690
|
)
|
|
|
(72,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
157,764
|
|
|
$
|
160,842
|
|
|
$
|
160,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-3
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars and shares in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
REVENUES
|
|
$
|
265,374
|
|
|
$
|
300,783
|
|
|
$
|
311,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
75,340
|
|
|
|
84,618
|
|
|
|
82,609
|
|
Labor
|
|
|
89,663
|
|
|
|
102,323
|
|
|
|
106,330
|
|
Operating
|
|
|
41,567
|
|
|
|
47,690
|
|
|
|
48,917
|
|
Occupancy
|
|
|
16,054
|
|
|
|
18,736
|
|
|
|
19,636
|
|
General and administrative expenses
|
|
|
16,768
|
|
|
|
15,042
|
|
|
|
17,123
|
|
Restaurant pre-opening costs
|
|
|
5,647
|
|
|
|
5,434
|
|
|
|
3,758
|
|
Depreciation and amortization
|
|
|
12,309
|
|
|
|
14,651
|
|
|
|
16,088
|
|
Asset impairment charges
|
|
|
|
|
|
|
8,506
|
|
|
|
6,436
|
|
Other expensesnet
|
|
|
462
|
|
|
|
229
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
257,810
|
|
|
|
297,229
|
|
|
|
301,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
|
7,564
|
|
|
|
3,554
|
|
|
|
10,655
|
|
NET INTEREST EXPENSE
|
|
|
11,853
|
|
|
|
9,892
|
|
|
|
7,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(4,289
|
)
|
|
|
(6,338
|
)
|
|
|
3,536
|
|
INCOME TAX EXPENSE (BENEFIT)
|
|
|
(3,503
|
)
|
|
|
55,061
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(786
|
)
|
|
$
|
(61,339
|
)
|
|
$
|
3,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNDECLARED PREFERRED DIVIDENDS
|
|
|
(8,920
|
)
|
|
|
(10,175
|
)
|
|
|
(11,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
|
|
|
(9,706
|
)
|
|
|
(71,574
|
)
|
|
|
(8,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHAREBASIC AND DILUTED
|
|
$
|
(9.24
|
)
|
|
$
|
(68.17
|
)
|
|
$
|
(7.81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDINGBASIC AND DILUTED
|
|
|
1,050
|
|
|
|
1,050
|
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Treasury Stock
|
|
|
(Deficiency in
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Shares
|
|
|
Amount
|
|
|
Assets)
|
|
|
BALANCEDecember 31, 2006
|
|
|
1,050,000
|
|
|
$
|
1
|
|
|
|
59,500
|
|
|
$
|
1
|
|
|
$
|
110,972
|
|
|
$
|
(124,880
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
(13,906
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(786
|
)
|
|
|
|
|
|
|
|
|
|
|
(786
|
)
|
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,701
|
)
|
|
|
(928
|
)
|
|
|
(928
|
)
|
Sale of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,701
|
|
|
|
928
|
|
|
|
928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEDecember 30, 2007
|
|
|
1,050,000
|
|
|
|
1
|
|
|
|
59,500
|
|
|
|
1
|
|
|
|
110,972
|
|
|
|
(125,666
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,692
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,399
|
)
|
|
|
|
|
|
|
|
|
|
|
(61,399
|
)
|
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,585
|
)
|
|
|
(100
|
)
|
|
|
(100
|
)
|
Sale of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,585
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEDecember 28, 2008
|
|
|
1,050,000
|
|
|
|
1
|
|
|
|
59,500
|
|
|
|
1
|
|
|
|
110,972
|
|
|
|
(187,065
|
)
|
|
|
|
|
|
|
|
|
|
|
(76,091
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,401
|
|
|
|
|
|
|
|
|
|
|
|
3,401
|
|
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,217
|
)
|
|
|
(184
|
)
|
|
|
(184
|
)
|
Sale of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,217
|
|
|
|
184
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEDecember 27, 2009
|
|
|
1,050,000
|
|
|
$
|
1
|
|
|
|
59,500
|
|
|
$
|
1
|
|
|
$
|
110,972
|
|
|
$
|
(183,664
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
(72,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
December 30,
|
|
|
December 28,
|
|
|
December 27,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(786
|
)
|
|
$
|
(61,399
|
)
|
|
$
|
3,401
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (excluding deferred lease
incentives)
|
|
|
12,309
|
|
|
|
14,651
|
|
|
|
16,088
|
|
(Gain) loss on disposals of property and equipment
|
|
|
620
|
|
|
|
114
|
|
|
|
(236
|
)
|
Impairment of assets
|
|
|
|
|
|
|
8,506
|
|
|
|
6,436
|
|
Amortization of deferred lease incentives
|
|
|
(2,258
|
)
|
|
|
(3,139
|
)
|
|
|
(5,016
|
)
|
Interest incurred and capitalized but not yet paid
|
|
|
2,758
|
|
|
|
1,285
|
|
|
|
1,340
|
|
Deferred income taxes
|
|
|
(3,557
|
)
|
|
|
54,895
|
|
|
|
|
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and tenant improvement receivables
|
|
|
(1,699
|
)
|
|
|
446
|
|
|
|
(452
|
)
|
Inventories
|
|
|
(149
|
)
|
|
|
24
|
|
|
|
(213
|
)
|
Prepaid expenses and other current assets
|
|
|
2,343
|
|
|
|
(882
|
)
|
|
|
9
|
|
Trade and construction payables
|
|
|
6,012
|
|
|
|
1,596
|
|
|
|
(1,805
|
)
|
Deferred lease incentives
|
|
|
9,399
|
|
|
|
15,205
|
|
|
|
10,771
|
|
Deferred gift card revenue
|
|
|
933
|
|
|
|
(587
|
)
|
|
|
431
|
|
Other accrued liabilities
|
|
|
1,915
|
|
|
|
(1,153
|
)
|
|
|
(545
|
)
|
Othernet
|
|
|
3,451
|
|
|
|
2,939
|
|
|
|
3,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
31,291
|
|
|
|
32,501
|
|
|
|
33,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(35,274
|
)
|
|
|
(42,496
|
)
|
|
|
(25,708
|
)
|
Proceeds from sale of property and equipment
|
|
|
|
|
|
|
|
|
|
|
500
|
|
Restricted cash
|
|
|
|
|
|
|
(251
|
)
|
|
|
251
|
|
Intangibles acquired
|
|
|
(262
|
)
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(35,536
|
)
|
|
|
(43,088
|
)
|
|
|
(24,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
33,250
|
|
|
|
104,450
|
|
|
|
103,450
|
|
Funds in escrow
|
|
|
12,762
|
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(33,927
|
)
|
|
|
(93,921
|
)
|
|
|
(112,708
|
)
|
Proceeds from sale of stock
|
|
|
928
|
|
|
|
100
|
|
|
|
184
|
|
Repurchase of stock
|
|
|
(928
|
)
|
|
|
(100
|
)
|
|
|
(184
|
)
|
Distribution to previous shareholders
|
|
|
(6,570
|
)
|
|
|
|
|
|
|
|
|
Payment for cancellation of options to option holders
|
|
|
(1,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
4,156
|
|
|
|
10,529
|
|
|
|
(9,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(89
|
)
|
|
|
(58
|
)
|
|
|
(433
|
)
|
CASH AND CASH EQUIVALENTSBeginning of year
|
|
|
829
|
|
|
|
740
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTSEnd of year
|
|
$
|
740
|
|
|
$
|
682
|
|
|
$
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paidnet of $434, $950 and $454 capitalized in
2007, 2008 and 2009, respectively
|
|
$
|
11,275
|
|
|
$
|
8,840
|
|
|
$
|
7,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid (refunded)
|
|
$
|
336
|
|
|
$
|
(83
|
)
|
|
$
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property additions financed by accounts payable
|
|
$
|
3,706
|
|
|
$
|
963
|
|
|
$
|
994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
|
|
1.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
|
Description of Business
Bravo Brio Restaurant Group,
Inc. (BBRG or the Company) (formerly,
Bravo Development, Inc. and Subsidiaries) owns and operates
restaurants under the trade names
BRAVO!
®
,
BRAVO! Cucina
Italiana
®
,
Cucina BRAVO!
Italiana
®
,
BRAVO! Italian
Kitchen
®
,
Brio
®
,
Brio Tuscan
Grille
tm
,
and Bon
Vie
®
.
At December 27, 2009, there were 45 BRAVO! Cucina Italiana
restaurants (44 at December 28, 2008), 35 BRIO Tuscan
Grille restaurants (30 at December 28, 2008), and one Bon
Vie (one at December 28, 2008) restaurants in
operation in 27 states throughout the United States of
America. On June 28, 2010, the name of the Company was
changed from Bravo Development, Inc. to Bravo Brio Restaurant
Group, Inc.
At December 27, 2009, the Company was contractually
committed to lease four restaurants that had not yet opened. The
estimated cost to complete the construction of these restaurants
is approximately $7.2 million.
Consolidation
The consolidated financial statements
include the results of operations and account balances of BDI (a
majority-owned subsidiary of Bravo Development Holdings, LLC
(Parent)) (see Note 2) and subsidiaries.
All intercompany accounts and transactions have been eliminated
in consolidation.
Fiscal Year End
The Company utilizes a 52- or
53-week accounting period which ends on the Sunday closest to
December 31. The fiscal years ended December 30, 2007,
December 28, 2008, and December 27, 2009, each have
52 weeks.
Accounting Estimates
The preparation of the
consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. The
Company bases its estimates on historical experience and on
various assumptions that are believed to be reasonable under the
circumstances at the time. Actual amounts may differ from those
estimates.
Cash and Cash Equivalents
The Company considers all
cash and short-term investments with original maturities of
three months or less as cash equivalents. All cash is
principally deposited in one bank.
Inventories
Inventories are valued at the lower of
cost or market, using the
first-in,
first-out method and consist principally of food and beverage
items.
Pre-opening Costs
Restaurant pre-opening costs
consist primarily of wages and salaries, recruiting, training,
travel, and lodging and meals. The Company expenses such costs
as incurred. Pre-opening costs also includes an accrual for
straight-line rent recorded during the period between date of
possession and the restaurant opening date for the
Companys leased restaurant locations.
Property and Equipment
Property and equipment are
recorded at cost, less accumulated depreciation. Equipment
consists primarily of restaurant equipment, furniture, fixtures,
and smallwares. Depreciation is calculated using the
straight-line method over the estimated useful life of the
related asset. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term,
including option periods, which are reasonably assured of
renewal or the estimated useful life of the asset. Estimated
useful lives of assets are as follows: buildings15 to
39 years, leasehold improvements10 to 20 years,
and equipment and fixtures3 to 10 years.
Leases
The Company records the minimum lease
payments for its operating leases on a straight-line basis over
the lease term, including option periods which are reasonably
assured of renewal. The lease term commences on the date that
the lessee obtains control of the property, which is normally
when the property is ready for tenant improvements. Contingent
rent expense is recognized as incurred and is usually based on
either a percentage of restaurant sales or as a percentage of
restaurant sales in excess of a defined amount.
F-7
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
Leasehold improvements financed by the landlord through tenant
improvement allowances are capitalized as leasehold improvements
with the tenant improvement allowances recorded as deferred
lease incentives. Deferred lease incentives are amortized on a
straight-line basis over the lesser of the life of the asset or
the lease term, including option periods which are reasonably
assured of renewal (same term that is used for related leasehold
improvements) and are recorded as a reduction of occupancy
expense.
Other Assets
Other assets include liquor licenses,
trademarks, and loan costs and are stated at cost, less
amortization, if any. The trademarks are used in the advertising
and marketing of the restaurants and are widely recognized and
accepted by consumers.
Impairment of Long-Lived Assets
The Company reviews
long-lived assets, such as property and equipment and
intangibles, subject to amortization, for impairment when events
or circumstances indicate the carrying value of the assets may
not be recoverable. In determining the recoverability of the
asset value, an analysis is performed at the individual
restaurant level and primarily includes an assessment of
historical cash flows and other relevant factors and
circumstances. Negative restaurant-level cash flow over the
previous
12-month
period is considered a potential impairment indicator. In such
situations, the Company evaluates future cash flow projections
in conjunction with qualitative factors and future operating
plans. Based on this analysis, if the Company believes that the
carrying amount of the assets are not recoverable, an impairment
charge is recognized based upon the amount by which the assets
carrying value exceeds fair value as measured by undiscounted
future cash flows expected to be generated by these assets.
The Company recognized asset impairment charges of approximately
$8.5 million and $6.4 million in fiscal 2008 and 2009,
respectively, related to leasehold improvements, fixtures and
equipment for the impacted sites. No impairment charge was
recorded in fiscal 2007.
The Companys impairment assessment process requires the
use of estimates and assumptions regarding future cash flows and
operating outcomes, which are based upon a significant degree of
managements judgment. The Company continues to assess the
performance of restaurants and monitors the need for future
impairment. Changes in the economic environment, real estate
markets, capital spending, and overall operating performance
could impact these estimates and result in future impairment
charges. There can be no assurance that future impairment tests
will not result in additional charges to earnings.
Estimated Fair Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, receivables,
trade and construction payables, and accrued liabilities at
December 28, 2008 and December 27, 2009, approximate
their fair value due to the short-term maturities of these
financial instruments. The fair values of the Companys
long-term debt is determined using quoted market prices for the
same or similar issues or based on the current rates offered to
the Company for debt of the same remaining maturities. The
carrying amount of the long-term debt under the revolving credit
facility and variable rate notes and loan agreements approximate
the fair values at December 28, 2008 and December 27,
2009. The estimated fair value of the fixed long-term debt is
$31,500,000 at December 27, 2009. The fair value of the
Companys fixed long-term debt is estimated based on quoted
market values offered for the same or similar agreements for
which the lowest level of observable input significant to the
established fair value measurement hierarchy is Level 2.
Revenue Recognition
Revenue from restaurant
operations is recognized upon payment by the customer at the
time of sale. Revenues are reflected net of sales tax and
certain discounts and allowances.
The Company records a liability upon the sale of gift cards and
recognizes revenue upon redemption by the customer. Revenue is
recognized on unredeemed gift cards (breakage) based upon
historical redemption patterns when the Company determines the
likelihood of redemption of the gift card by the customer is
remote and there is no legal obligation to remit the value of
unredeemed gift cards to the relevant jurisdiction. Gift card
breakage income was not significant in any fiscal year and is
reported within revenues in the consolidated statements of
operations.
F-8
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
Advertising
The Company expenses the cost of
advertising (including production costs) the first time the
advertising takes place. Advertising expense was $1,918,000,
$2,451,000, and $2,809,000 for 2007, 2008, and 2009,
respectively.
Self-Insurance Reserves
The Company maintains
various policies, including workers compensation and
general liability. As outlined in these policies, the Company is
responsible for losses up to certain limits. The Company records
a liability for the estimated exposure for aggregate losses
below those limits. This liability is based on estimates of the
ultimate costs to be incurred to settle known claims and claims
not reported as of the balance sheet date. The estimated
liability is not discounted and is based on a number of
assumptions, including actuarial assumptions, historical trends,
and economic conditions.
Derivative Instruments
The Company accounts for all
derivative instruments on the balance sheet at fair value.
Changes in the fair value (i.e., gains or losses) of the
Companys interest rate swap derivative are recorded each
period in the consolidated statement of operations as a
component of interest expense.
Income Taxes
Income tax provisions are comprised of
federal and state taxes currently due, plus deferred taxes.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Recognition of deferred tax assets is limited to amounts
considered by management to be more likely than not of
realization in future periods.
Stock-Based Compensation
The Company maintains
performance incentive plans including incentive stock options
and nonqualified stock options. Options are granted with
exercise prices equal to the fair value of the Companys
common shares at the date of grant. The cost of employee service
is recognized as a compensation expense over the period that an
employee provides service in exchange for the award, typically
the vesting period, and are exercisable if certain performance
targets are achieved. The Company has not recorded any
compensation expense related to these stock options since
certain performance clauses have not been satisfied according to
the 2006 Option Plan (see Note 11).
Net Income (loss) Per Share
Net income (loss) per
share is computed by dividing consolidated net income (loss)
available to common shareholders by the weighted average number
of common shares outstanding during the reporting period.
Diluted net income (loss) per share amounts reflect the
potential dilution that could occur if securities, options or
other contracts to issue common stock were exercised or
converted into common stock. At December 30, 2007,
December 28, 2008 and December 27, 2009, there were
256,702, 245,874 and 257,875, respectively, of stock options
which were not considered dilutive due to performance conditions
not being met.
Pro forma Information (unaudited)
Pro forma
stockholders equity (deficiency in assets) is based upon
the Companys historical stockholders equity
(deficiency in assets) as of December 27, 2009, and has
been computed to give effect to the pro forma adjustment to
reflect an exchange of the shares of Series A preferred
stock for shares of common stock in connection with the proposed
reorganization transactions. Each share of Series A
preferred stock will be exchanged for that number of shares of
common stock having an aggregate fair value, based upon the
initial public offering price to the public of shares of our
common stock in the proposed public offering, equal to the
liquidation preference of each share of Series A preferred
stock.
Segment Reporting
The Company operates upscale
affordable Italian dining restaurants under two brands,
exclusively in the United States, that have similar economic
characteristics, nature of products and service, class of
customer and distribution methods. The Company believes it meets
the criteria for aggregating its operating segments, into a
single reporting segment in accordance with applicable
accounting guidance.
Recent Accounting Pronouncements
The Financial
Accounting Standards Board (FASB) updated Accounting Standards
Codification (ASC) Topic 810,
Consolidation
, with
amendments to improve financial reporting by
F-9
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
enterprises involved with variable interest entities (formerly
FASB Statement No. 167,
Amendments to FASB
Interpretation No. 46(R)
). These amendments require an
enterprise to perform an analysis to determine whether the
enterprises variable interest(s) give it a controlling
financial interest in a variable interest entity. The effective
date for this guidance is the beginning of a reporting
entitys first annual reporting period that begins after
November 15, 2009, for interim periods within that first
annual reporting period, and for interim and annual reporting
periods thereafter. The Company adopted this guidance and it had
no effect on its consolidated financial statements.
The FASB also updated ASC Topic 855
, Subsequent Events
,
to establish general standards of accounting for and disclosing
of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued
(formerly FASB Statement No. 165,
Subsequent
Events
). This guidance was effective for interim and annual
financial periods ending after June 15, 2009. Adoption of
this guidance did not have a material effect on the
Companys consolidated financial statements. The
Companys management has performed an evaluation of
subsequent events through July 1, 2010, which is the date
the consolidated financial statements were issued. There were no
subsequent events noted.
On June 2, 2006, the Company entered into an Agreement and
Plan of Merger (the Agreement) with Parent and BDI
Acquisition Corp. (Merger Sub), a wholly owned
subsidiary of Parent with $56.1 million of capitalization,
to consummate a recapitalization of the Company. Under the terms
of the Agreement, Merger Sub, an entity formed by Parent, merged
with and into the Company with the Company as the surviving
entity. Merger and the recapitalization were effected on
June 29, 2006 (the Effective Time).
In connection with this transaction, the Company issued a new
series of nonvoting 14% Cumulative Compounding Preferred Stock.
Upon the liquidation, dissolution, or
winding-up
of the Company, before any distribution of proceeds to the
holders of common stock, the holders of preferred stock are
entitled to a preferential distribution in cash in an amount
equal to $1,000 (original liquidation preference of $59,500,000)
for each preferred share, plus the accumulated dividends with
respect to such share. The preferred stock is not subject to
call or mandatory redemption rights and cannot be converted into
common shares. Total liquidation preference including
undeclared/unpaid dividends amounted to $72.6 million,
$82.7 million, and $94.3 million for the fiscal years
ended 2007, 2008, and 2009, respectively.
In addition to the consideration paid at the Effective Time, the
equity holders and the option holders earned additional
consideration of $7.9 million (the Earn-Out
Payment), plus accrued interest, paid in September 2007.
Following the recapitalization, Parent owns 80.1% of the
Companys common stock and management shareholders own
19.9% of the Companys common stock.
As part of the Agreement, the shareholders and Parent made an
election under Section 338(h)(10) of the Internal Revenue
Code of 1986, as amended, to treat the recapitalization as an
asset purchase for tax purposes. The tax benefit of this
election was recorded as an equity transaction. For all periods
prior to the recapitalization, the Company operated as an
S corporation for federal and state income tax purposes.
However, following the recapitalization, the Company no longer
qualified as an S corporation and became subject to
U.S. Federal and certain state and local income taxes
applicable to C corporations. The transaction was accounted for
as a leveraged recapitalization with no change in the book basis
of assets and liabilities. All taxes resulting from the
Section 338(h)(10) election were paid by the selling
shareholders and option holders.
F-10
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
|
|
3.
|
PROPERTY AND
EQUIPMENT
|
The major classes of property and equipment at December 28,
2008 and December 27, 2009, are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Land and buildings
|
|
$
|
5,252
|
|
|
$
|
5,402
|
|
Leasehold improvements
|
|
|
112,573
|
|
|
|
124,331
|
|
Equipment and fixtures
|
|
|
70,733
|
|
|
|
76,714
|
|
Construction in progress
|
|
|
4,587
|
|
|
|
4,255
|
|
Deposits on equipment orders
|
|
|
139
|
|
|
|
501
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
193,284
|
|
|
|
211,203
|
|
Less accumulated depreciation
|
|
|
(52,244
|
)
|
|
|
(66,323
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
141,040
|
|
|
$
|
144,880
|
|
|
|
|
|
|
|
|
|
|
The major classes of other assets and related amortization at
December 28, 2008 and December 27, 2009, are
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Loan origination fees
|
|
$
|
4,512
|
|
|
$
|
4,512
|
|
Liquor licenses
|
|
|
1,397
|
|
|
|
1,393
|
|
Trademarks
|
|
|
117
|
|
|
|
117
|
|
Deposits
|
|
|
127
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
Other assetsat cost
|
|
|
6,153
|
|
|
|
6,172
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
Loan origination fees
|
|
|
(1,873
|
)
|
|
|
(2,606
|
)
|
Liquor licenses
|
|
|
(38
|
)
|
|
|
(58
|
)
|
Trademarks
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
Total accumulated amortization
|
|
|
(1,927
|
)
|
|
|
(2,680
|
)
|
|
|
|
|
|
|
|
|
|
Other assetsnet
|
|
$
|
4,226
|
|
|
$
|
3,492
|
|
|
|
|
|
|
|
|
|
|
F-11
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
Long-term debt at December 28, 2008 and December 27,
2009, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Term loan
|
|
$
|
80,644
|
|
|
$
|
79,818
|
|
Note agreement
|
|
|
30,930
|
|
|
|
32,270
|
|
Revolving credit facility
|
|
|
13,750
|
|
|
|
5,550
|
|
Mortgage notes with payments of principal and interest due
through July 2012
|
|
|
626
|
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
125,950
|
|
|
|
118,031
|
|
Less current maturities
|
|
|
(1,049
|
)
|
|
|
(1,039
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
124,901
|
|
|
$
|
116,992
|
|
|
|
|
|
|
|
|
|
|
As part of the recapitalization of the Company in 2006, as more
fully described in Note 2, the Company entered into a
$112.5-million Credit Agreement (the Credit
Agreement) composed of a $82.5-million Term Loan (the
Term Loan) and a $30-million Revolving Credit
Facility (the Revolver).
The interest rate on the Term Loan and Revolver is based on
prime rate, plus a margin of up to 2% or the London Interbank
Offered Rate (LIBOR), plus a margin up to 3%, with margins
determined by certain financial ratios. The weighted-average
interest rate on the borrowings at December 27, 2009, was
3.47% (7.1% at December 28, 2008). In addition, the Company
must pay an annual commitment fee of 0.5% on the unused portion
of the Revolver. Borrowings under the Credit Agreement are
collateralized by a first priority security interest in all of
the assets of the Company, except property collateralized by
mortgage notes and mature based upon the nature of the borrowing
in either 2011 or 2012.
Pursuant to the terms of the Revolver, the Company is subject to
certain financial and nonfinancial covenants, including a
consolidated total leverage ratio, a consolidated senior
leverage ratio, consolidated fixed-charge coverage ratio, and
consolidated capital expenditures limitations. The Company was
in compliance with these covenants as of December 27, 2009.
The Revolver also provides for bank guarantee under standby
letter of credit arrangements in the normal course of business
operations. The Companys commercial bank issues standby
letters of credit to secure its obligations to pay or perform
when required to do so pursuant to the requirements of an
underlying agreement or the provision of goods and services. The
standby letters of credit are cancelable only at the option of
the beneficiary who is authorized to draw drafts on the issuing
bank up to the face amount of the standby letter of credit in
accordance with its terms. As of December 27, 2009, the
maximum exposure under these standby letters of credit was
$3.65 million. At December 27, 2009, the Company had
$20.8 million available under its Revolver.
In addition to the Credit Agreement, the Company entered into a
$27.5 million Note Purchase Agreement (the Note
Agreement). Under the Note Agreement, interest is payable
monthly at an annual interest rate of 13.25%. The Company may
elect monthly during the first year of the Note Agreement to
accrue interest at the rate of 14.25% per annum with no
payments. Commencing the second year of the Note Agreement
through the maturity date, the Company may elect to accrue
interest at 13.25% and pay interest equal to 9% monthly.
Interest accrued, but unpaid during the term of the Note
Agreement is capitalized into the principal balance. The Note
Agreement is collateralized by a second priority interest in all
assets of the Company except property and matures on
December 29, 2012. Since November 2006, the Company has
elected to capitalize accrued, but unpaid interest in accordance
with the terms of the Note Agreement.
Beginning with the fiscal year ended December 28, 2008, the
Company is required to make excess cash flow payments to reduce
the outstanding principal balances under the Credit Agreement
provided the Company meets
F-12
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
certain leverage ratio requirements. No excess cash flow
payments were made in fiscal year 2008 and no excess cash flow
payments will be required in fiscal year 2009 based on the
fiscal year 2008 results.
In connection with settlement of the Earn-Out Payment as
described in Note 2, the Company recovered
$4.6 million of funds previously held in escrow. These
funds were applied to the outstanding borrowings in accordance
with the Credit and Note Agreements.
On August 14, 2006, the Company entered into a three-year
interest rate swap agreement fixing the interest rate on
$27 million of its Term Loan debt. The Company settles with
the bank quarterly for the difference between the 5.24% and the
90-day
LIBOR
in effect at the beginning of the quarter. Changes in the market
value of the interest rate swap are recorded each period as an
adjustment to interest expense. Such adjustments were net
increases to interest expense of $782,000 and $120,000 in fiscal
2007 and 2008, respectively, and a reduction of interest expense
of $755,000 in fiscal 2009. There were no derivative instruments
outstanding at December 27, 2009.
Mortgage notes are collateralized by first mortgages on
individual restaurant real estate assets. The weighted-average
variable interest rate on the mortgage notes is 6.83% and 4.61%
for fiscal years 2008 and 2009, respectively.
Future maturities of debt as of December 27, 2009, are as
follows (in thousands):
|
|
|
|
|
|
|
2010
|
|
$
|
1,039
|
|
2011
|
|
|
6,470
|
|
2012
|
|
|
110,522
|
|
|
|
|
|
|
Total
|
|
$
|
118,031
|
|
|
|
|
|
|
The major classes of accrued expenses at December 28, 2008
and December 27, 2009, are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Compensation and related benefits
|
|
$
|
9,210
|
|
|
$
|
10,268
|
|
Accrued self-insurance claims liability
|
|
|
4,279
|
|
|
|
4,853
|
|
Other taxes payable
|
|
|
2,234
|
|
|
|
3,546
|
|
Other accrued liabilities
|
|
|
3,536
|
|
|
|
2,991
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses
|
|
$
|
19,259
|
|
|
$
|
21,658
|
|
|
|
|
|
|
|
|
|
|
F-13
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
|
|
7.
|
OTHER LONG-TERM
LIABILITIES
|
Other long-term liabilities at December 28, 2008 and
December 27, 2009, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Deferred rent
|
|
$
|
12,201
|
|
|
$
|
13,975
|
|
Deferred compensation (Note 9)
|
|
|
407
|
|
|
|
166
|
|
Partner surety (Note 9)
|
|
|
370
|
|
|
|
200
|
|
Other long-term liability
|
|
|
79
|
|
|
|
122
|
|
Interest rate swap
|
|
|
755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
$
|
13,812
|
|
|
$
|
14,463
|
|
|
|
|
|
|
|
|
|
|
The Company leases certain land and buildings used in its
restaurant operations under various long-term operating lease
agreements. The initial lease terms range from 10 to
20 years. The leases include renewal options for 2 to 20
additional years. Our leases expire between 2011 and 2028. The
majority of leases provide for base (fixed) rent, plus
additional rent based on gross sales, as defined in each lease
agreement, in excess of a stipulated amount, multiplied by a
stated percentage. The Company is also generally obligated to
pay certain real estate taxes, insurances, common area
maintenance (CAM) charges, and various other expenses related to
the properties.
At December 27, 2009, the future minimum rental commitments
under noncancellable operating leases, including option periods
which are reasonably assured of renewal, are as follows (in
thousands):
|
|
|
|
|
|
|
2010
|
|
$
|
18,398
|
|
2011
|
|
|
18,933
|
|
2012
|
|
|
19,188
|
|
2013
|
|
|
19,378
|
|
2014
|
|
|
19,614
|
|
Thereafter
|
|
|
172,631
|
|
|
|
|
|
|
Total
|
|
$
|
268,142
|
|
|
|
|
|
|
The above future minimum rental amounts exclude amortization of
deferred lease incentives, renewal options which are not
reasonably assured of renewal and additional rent based on sales
or increases in the United States Consumer Price Index. The
Company generally has escalating rents over the term of the
leases and records rent expense on a straight-line basis for
operating leases.
Rent expense, excluding real estate taxes, CAM charges,
insurance, and other expenses related to operating leases, in
2007, 2008, and 2009, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Minimum rent
|
|
$
|
9,229
|
|
|
$
|
10,618
|
|
|
$
|
11,391
|
|
Contingent rent
|
|
|
1,090
|
|
|
|
933
|
|
|
|
705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,319
|
|
|
$
|
11,551
|
|
|
$
|
12,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
In 2003, the Strategic Partner Plan (SPP) was created to reward
and retain top general managers and executive chefs by providing
them with a significantly greater Quarterly Performance Bonus
payout potential, in addition to sharing in the appreciation of
the Company (Deferred Compensation), which is based
on a quarterly targeted sales value times an earnings factor
based on same store sales performance. The Deferred Compensation
vests ratably over the initial term of the agreement and is
payable at the termination of the contract (generally five
years). The SPP is separate from the Companys ongoing
bonus plan for each restaurants general manager, executive
chef, assistant managers and sous chefs.
To participate in the SPP, the invitee (partner) signs an
agreement to continue their employment with the Company for the
term of the initial agreement (five years) and places a deposit
(Partner Surety) with the Company, which is
reflected in other long-term liabilities. The Partner Surety, as
well as any Deferred Compensation that may be credited to the
partners account, is forfeited if the partner breaches the
requirements of the SPP agreement. The Company pays interest on
the Partner Surety each quarter based on the three-month
Certificate of Deposit rate, as published in the Wall Street
Journal on the first business day of each calendar quarter and
also provides each partner with a $2,500 sign-on bonus when
their Partner Surety is received. Total expenses related to the
SPP, net of Partner Surety forfeitures, amounted to $3,542,000,
$1,227,000, and $771,000, for fiscal years 2007, 2008, and 2009,
respectively. Effective the beginning of fiscal year 2008, the
SPP plan is no longer being offered to additional partners
although existing partners will continue to participate in the
plan until their respective agreements expire at the end of the
initial five-year term.
|
|
10.
|
EMPLOYEE BENEFIT
PLAN
|
The Company has a 401(k) defined contribution plan (the
401(k) Plan) covering all eligible full-time
employees. The 401(k) Plan provides for employee salary deferral
contributions up to a maximum of 15% of the participants
eligible compensation, as well as discretionary Company matching
contributions. Discretionary Company contributions relating to
the 401(k) Plan for the years ended 2007, 2008, and 2009, were
$179,000, $222,000, and $180,000, respectively.
Stock option activity for 2007, 2008, and 2009, is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Outstandingbeginning of year
|
|
|
|
|
|
|
256,702
|
|
|
|
245,874
|
|
Weighted-average exercise price
|
|
$
|
|
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
Granted
|
|
|
265,890
|
|
|
|
|
|
|
|
18,500
|
|
Weighted-average exercise price
|
|
$
|
10.00
|
|
|
$
|
|
|
|
$
|
8.92
|
|
Forfeited
|
|
|
(9,188
|
)
|
|
|
(10,828
|
)
|
|
|
(6,499
|
)
|
Weighted-average exercise price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstandingend of year
|
|
|
256,702
|
|
|
|
245,874
|
|
|
|
257,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average exercise price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
|
$
|
9.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisableend of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average exercise price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average remaining contractual term of options
outstanding at December 27, 2009, was 7 years (no
options were exercisable).
F-15
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
The total weighted-average fair value of options granted in 2007
and 2009 was $3.61, and was estimated at the date of grant using
the Black-Scholes option-pricing model. The following
assumptions were used for these options: weighted-average
risk-free interest rate of 4.49%, no expected dividend yield,
weighted-average volatility of 32.2%, based upon competitors
within the industry, and an expected option life of five years.
A summary of the status of, and changes to, unvested options
during the year ended December 27, 2009, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
Number of
|
|
|
Average Grant
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
Unvestedbeginning of year
|
|
|
144,293
|
|
|
$
|
3.60
|
|
Granted
|
|
|
18,500
|
|
|
|
3.25
|
|
Vested
|
|
|
(59,844
|
)
|
|
|
3.61
|
|
Forfeited
|
|
|
(527
|
)
|
|
|
3.61
|
|
|
|
|
|
|
|
|
|
|
Unvestedend of year
|
|
|
102,422
|
|
|
$
|
3.61
|
|
|
|
|
|
|
|
|
|
|
Vested options (155,453) are not exercisable, as the specified
performance conditions have not been met. These options will
become exercisable upon a Public Offering or Approved Sale, as
those terms are defined in the 2006 Option Plan, and the
achievement of certain performance milestones based on internal
rates of return and multiples of net proceeds for our private
equity sponsors. As a Public Offering or Approved Sale has not
been consummated, it is deemed not probable that the options
will become exercisable. As of December 27, 2009, there was
$930,000 of total unrecognized compensation cost related to
vested and nonvested options granted under the Plan. The cost
will begin to be recognized upon the satisfaction of certain
performance conditions as specified within the option agreements.
12. INCOME TAXES
The provision for income taxes consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Current income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
State and local
|
|
|
54
|
|
|
|
166
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax expense
|
|
|
54
|
|
|
|
166
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(3,298
|
)
|
|
|
50,107
|
|
|
|
|
|
State and local
|
|
|
(259
|
)
|
|
|
4,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax expense (benefit)
|
|
|
(3,557
|
)
|
|
|
54,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
(3,503
|
)
|
|
$
|
55,061
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
Deferred income taxes as of December 28, 2008 and
December 27, 2009, consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Goodwill for tax reporting purposes
|
|
$
|
41,446
|
|
|
$
|
38,127
|
|
Self-insurance reserves
|
|
|
2,989
|
|
|
|
2,819
|
|
Depreciation and amortization
|
|
|
2,292
|
|
|
|
4,918
|
|
Federal and state net operating losses
|
|
|
4,619
|
|
|
|
4,425
|
|
FICA tip credit carryforward
|
|
|
6,819
|
|
|
|
9,893
|
|
Other
|
|
|
1,076
|
|
|
|
809
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets
|
|
|
59,241
|
|
|
|
60,991
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Prepaid assets
|
|
|
(361
|
)
|
|
|
(305
|
)
|
Deferred rent
|
|
|
610
|
|
|
|
(638
|
)
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax liabilities
|
|
|
249
|
|
|
|
(943
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(59,490
|
)
|
|
|
(60,048
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill for tax reporting purposes is amortized over
15 years. At December 27, 2009, the Company has net
operating loss carryforwards for federal and state income tax
purposes of $10,928,000 and $8,233,000 and Federal Insurance
Contributions Act (FICA) tip credit carryforwards of $9,893,000,
which will expire at various dates from 2026 through 2028.
Deferred tax assets are reduced by a valuation allowance if,
based on the weight of the available evidence, it is more likely
than not that some or all of the deferred tax assets will not be
realized. Both positive and negative evidence are considered in
forming managements judgment as to whether a valuation
allowance is appropriate, and more weight is given to evidence
that can be objectively verified. The valuation allowance
relates to net operating loss and credit carryforwards and
temporary differences for which management believes that
realization is uncertain. The tax benefits relating to any
reversal of the valuation allowance on the net deferred tax
assets will be recognized as a reduction of future income tax
expense.
The effective income tax expense differs from the federal
statutory tax expense for the years ended December 30,
2007, December 28, 2008, and December 27, 2009, as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Provision at statutory rate
|
|
$
|
(1,501
|
)
|
|
$
|
(2,218
|
)
|
|
$
|
1,238
|
|
FICA tip credit
|
|
|
(2,706
|
)
|
|
|
(2,890
|
)
|
|
|
(3,073
|
)
|
State income taxesnet of federal benefit
|
|
|
(377
|
)
|
|
|
(389
|
)
|
|
|
292
|
|
Othernet
|
|
|
1,081
|
|
|
|
1,068
|
|
|
|
1,120
|
|
Deferred tax asset valuation allowance
|
|
|
|
|
|
|
59,490
|
|
|
|
558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
(3,503
|
)
|
|
$
|
55,061
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company adopted the authoritative guidance in regard to
uncertain tax positions during 2007. The standards require that
a position taken or expected to be taken in a tax return be
recognized in the financial statements when
F-17
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements(Continued)
it is more likely than not (i.e. a likelihood of more than 50%)
that the position would be sustained upon examination by tax
authorities. A recognized tax position is measured at the
largest amount of benefit that is greater than 50% likely of
being realized upon settlement. Upon adoption, the Company
determined that these new standards did not have a material
effect on prior consolidated financial statements and therefore
no change was made to the opening balance of retained earnings.
The standards also require that changes in judgment that result
in subsequent recognition, derecognition, or change in a
measurement of a tax position taken in a prior annual period
(including any related interest and penalties) be recognized as
a discrete item in the interim period in which the change
occurs. As of December 30, 2007, December 28, 2008 and
December 27, 2009, the Company recognized no liability for
uncertain tax positions.
It is the Companys policy to include any penalties and
interest related to income taxes in its income tax provision,
however, the Company currently has no penalties or interest
related to income taxes. The Company is currently open to audit
under the statute of limitations by the Internal Revenue Service
for the years ended December 31, 2006 through 2009. The
Companys state income tax returns are open to audit under
certain states for the years ended December 31, 2006
through 2009.
|
|
13.
|
COMMITMENTS AND
CONTINGENCIES
|
The Company is subject to various claims, possible legal
actions, and other matters arising out of the normal course of
business. While it is not possible to predict the outcome of
these issues, management is of the opinion that adequate
provision for potential losses has been made in the accompanying
consolidated financial statements and that the ultimate
resolution of these matters will not have a material adverse
effect on the Companys financial position, results of
operations, or cash flows.
|
|
14.
|
RELATED-PARTY
TRANSACTIONS
|
Approximately 80% of the common shares of the Company are owned
by affiliates of Castle Harlan, Inc. (Castle
Harlan), Bruckmann, Rosser, Sherrill and Co., Inc. (BRS),
and Golub Capital Incorporated. Management fees are determined
pursuant to the Management Agreement between the Company and
Castle Harlan and BRS. Prior to fiscal 2009, management fees
were based upon a percentage of Earnings Before Interest, Taxes
and, Depreciation and Amortization (Defined EBITDA)
as defined in the Management Agreement. Starting in fiscal 2009
and for all subsequent years, such fees are based upon
predetermined amounts as outlined in the Management Agreement.
Management fees paid to Castle Harlan and BRS amounted to
approximately $379,000, $427,000, and $1,677,000 for fiscal
years 2007, 2008, and 2009, respectively.
* * * * * *
F-18
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars in thousands, except par
values)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27,
|
|
|
June 27,
|
|
|
Pro Forma
|
|
|
|
2009
|
|
|
2010
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
249
|
|
|
$
|
268
|
|
|
|
|
|
Accounts receivable
|
|
|
5,534
|
|
|
|
4,638
|
|
|
|
|
|
Tenant improvement allowance receivable
|
|
|
2,435
|
|
|
|
875
|
|
|
|
|
|
Inventories
|
|
|
2,203
|
|
|
|
2,213
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
2,049
|
|
|
|
2,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
12,470
|
|
|
|
10,341
|
|
|
|
|
|
PROPERTY AND EQUIPMENTNet
|
|
|
144,880
|
|
|
|
145,662
|
|
|
|
|
|
OTHER ASSETSNet
|
|
|
3,492
|
|
|
|
3,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
160,842
|
|
|
$
|
159,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY IN
ASSETS)
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and construction payables
|
|
$
|
12,675
|
|
|
$
|
8,599
|
|
|
|
|
|
Accrued expenses
|
|
|
21,658
|
|
|
|
23,086
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
1,039
|
|
|
|
825
|
|
|
|
|
|
Deferred lease incentives
|
|
|
4,284
|
|
|
|
4,827
|
|
|
|
|
|
Deferred gift card revenue
|
|
|
8,970
|
|
|
|
5,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
48,626
|
|
|
|
42,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED LEASE INCENTIVES
|
|
|
53,451
|
|
|
|
54,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
116,992
|
|
|
|
110,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
14,463
|
|
|
|
15,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (DEFICIENCY IN ASSETS):
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par valueauthorized,
3,000,000 shares; issued and outstanding,
1,050,000 shares
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
14% cumulative compounding preferred stock, $0.001 par
valueauthorized, 100,000 shares; issued and
outstanding, 59,500 shares
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
Additional paid-in capital
|
|
|
110,972
|
|
|
|
110,972
|
|
|
|
110,973
|
|
Retained deficit
|
|
|
(183,664
|
)
|
|
|
(175,681
|
)
|
|
|
(175,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficiency in assets)
|
|
|
(72,690
|
)
|
|
|
(64,707
|
)
|
|
|
(64,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
160,842
|
|
|
$
|
159,144
|
|
|
$
|
159,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-19
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars and shares in thousands,
except par values and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
June 28,
|
|
|
June 27,
|
|
|
|
2009
|
|
|
2010
|
|
|
REVENUES
|
|
$
|
153,514
|
|
|
$
|
170,996
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
40,765
|
|
|
|
44,389
|
|
Labor
|
|
|
53,733
|
|
|
|
58,100
|
|
Operating
|
|
|
25,265
|
|
|
|
26,560
|
|
Occupancy
|
|
|
10,435
|
|
|
|
11,310
|
|
General and administrative expenses
|
|
|
8,898
|
|
|
|
8,936
|
|
Restaurant preopening costs
|
|
|
2,060
|
|
|
|
1,685
|
|
Depreciation and amortization
|
|
|
7,889
|
|
|
|
8,335
|
|
Other expensesnet
|
|
|
153
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
149,198
|
|
|
|
159,366
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
|
4,316
|
|
|
|
11,630
|
|
NET INTEREST EXPENSE
|
|
|
3,693
|
|
|
|
3,543
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
623
|
|
|
|
8,087
|
|
INCOME TAX EXPENSE
|
|
|
120
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
503
|
|
|
$
|
7,983
|
|
|
|
|
|
|
|
|
|
|
UNDECLARED PREFERRED DIVIDENDS
|
|
$
|
(5,420
|
)
|
|
$
|
(6,179
|
)
|
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDER
|
|
$
|
(4,917
|
)
|
|
$
|
1,804
|
|
NET (LOSS) INCOME PER SHAREBASIC AND DILUTED
|
|
$
|
(4.68
|
)
|
|
$
|
1.72
|
|
WEIGHTED AVERAGE SHARES OUTSTANDINGBASIC AND DILUTED
|
|
|
1,050
|
|
|
|
1,050
|
|
See notes to consolidated financial statements.
F-20
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
(Dollars in thousands, except par
values)
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
June 28, 2009
|
|
|
June 27, 2010
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
503
|
|
|
$
|
7,983
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization (excluding deferred lease
incentives)
|
|
|
7,896
|
|
|
|
8,334
|
|
Loss on disposals of property and equipment
|
|
|
58
|
|
|
|
78
|
|
Amortization of deferred lease incentives
|
|
|
(1,857
|
)
|
|
|
(2,267
|
)
|
Interest incurred and capitalized but not yet paid
|
|
|
663
|
|
|
|
114
|
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts and tenant improvement receivables
|
|
|
1,431
|
|
|
|
2,456
|
|
Inventories
|
|
|
93
|
|
|
|
(10
|
)
|
Prepaid expenses and other current assets
|
|
|
677
|
|
|
|
363
|
|
Trade and construction payables
|
|
|
(4,071
|
)
|
|
|
(4,305
|
)
|
Deferred lease incentives
|
|
|
5,268
|
|
|
|
4,158
|
|
Deferred gift card revenue
|
|
|
(3,452
|
)
|
|
|
(3,352
|
)
|
Other accrued liabilities
|
|
|
3,249
|
|
|
|
767
|
|
Othernet
|
|
|
371
|
|
|
|
624
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
10,829
|
|
|
|
14,943
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(12,878
|
)
|
|
|
(8,568
|
)
|
Restricted cash
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(12,627
|
)
|
|
|
(8,568
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
62,350
|
|
|
|
35,550
|
|
Payments on long-term debt
|
|
|
(60,988
|
)
|
|
|
(41,906
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,362
|
|
|
|
(6,356
|
)
|
|
|
|
|
|
|
|
|
|
NET (DECREASE)/INCREASE IN CASH AND EQUIVALENTS
|
|
|
(436
|
)
|
|
|
19
|
|
CASH AND EQUIVALENTSBeginning of year
|
|
|
682
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
CASH AND EQUIVALENTSEnd of period
|
|
$
|
246
|
|
|
$
|
268
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Interest paid, net of capitalized interest of $70 and $267 for
the twenty-six weeks ended June 28, 2009 and June 27,
2010, respectively
|
|
|
3,998
|
|
|
|
3,373
|
|
Net income taxes paid (refunded)
|
|
|
192
|
|
|
|
149
|
|
Property additions financed by accounts payable
|
|
|
570
|
|
|
|
229
|
|
Accruals and deferrals relating to BBRGs initial public
offering
|
|
|
|
|
|
|
661
|
|
See notes to consolidated financial statements.
F-21
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Description of
Business
As of June 27, 2010, Bravo Brio Restaurant Group, Inc.
owned and operated 85 restaurants under the names of BRAVO!
Cucina Italiana and BRIO Tuscan Grille.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with U.S. generally
accepted accounting principles (GAAP) for interim
financial information. Accordingly, they do not include all the
information and footnotes required by GAAP for complete
financial statements. Operating results for the twenty six weeks
ended June 27, 2010 are not necessarily indicative of the
results that may be expected for the year ending
December 26, 2010.
Certain information and footnote disclosure normally included in
the financial statements prepared in accordance with GAAP have
been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission (SEC). In the
opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair
presentation. These unaudited consolidated financial statements
and related notes should be read in conjunction with the
consolidated financial statements and notes for the fiscal year
ended December 27, 2009.
Use of
Estimates
The preparation of the consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that may affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Estimated Fair Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, receivables,
trade and construction payables, and accrued liabilities at
December 27, 2009 and June 27, 2010 approximate their
fair value due to the short-term maturities of these financial
instruments. The fair values of the Companys long-term
debt is determined using quoted market prices for the same or
similar issues or based on the current rates offered to the
Company for debt of the same remaining maturities. The carrying
amount of the long-term debt under the revolving credit facility
and variable rate notes and loan agreements approximate the fair
values at December 27, 2009 and June 27, 2010. The
estimated fair value of the fixed long-term debt is $31,500,000
at June 27, 2010. The fair value of the Companys
fixed long-term debt is estimated based on quoted market values
offered for the same or similar agreements for which the lowest
level of observable input significant to the established fair
value measurement hierarchy is Level 2.
Net Income
(loss) Per Share
Basic earnings per share amounts are computed by dividing
consolidated net income (loss) by the weighted average number of
common shares outstanding during the reporting period. Diluted
per share amounts reflect, the potential dilution that could
occur if securities, options or other contracts to issue common
stock were exercised or converted into common stock. At
June 28, 2009 and June 27, 2010, there were 243,375
and 257,875, respectively, stock options which were not
considered dilutive due to performance conditions not being met.
Pro Forma
Information
Pro forma stockholders equity (deficiency in assets) is
based upon the Companys historical stockholders
equity (deficiency in assets) as of June 27, 2010, and has
been computed to give effect to the pro forma adjustment to
reflect an exchange of the shares of Series A preferred
stock for shares of common stock in connection with the proposed
reorganization transactions. Each share of Series A
preferred stock will be exchanged for that number of shares
common stock having an aggregate fair value, based upon the
initial public offering price to the public of
F-22
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Unaudited Consolidated Financial
Statements(Continued)
shares of our common stock in the proposed public offering,
equal to the liquidation preference of each share of
Series A preferred stock.
Recent
Accounting Literature
Improving disclosures about Fair Value Measurements (ASU
No. 2010-06)
(Included in ASC 820 Fair Value Measurements and
Disclosures)
Accounting Standards Update (ASU)
No. 2010-06
requires new disclosures regarding recurring or nonrecurring
fair value measurements. Entities will be required to separately
disclose significant transfers into and out of Level 1 and
Level 2 measurements in the fair value hierarchy and
describe the reasons for the transfers. Entities will also be
required to provide information on purchases, sales, issuances
and settlements on a gross basis in the reconciliation of
Level 3 fair value measurements. In addition, entities must
provide fair value measurement disclosures for each class of
assets and liabilities, and disclosures about the valuation
techniques used in determining fair value for Level 2 or
Level 3 measurements. ASU
2010-06
is
effective for interim and annual reporting periods beginning
after December 15, 2009, except for the gross basis
reconciliations for the Level 3 measurements which is
effective for fiscal years beginning after December, 15, 2010.
The Financial Accounting Standards Board (FASB) updated
Accounting Standards Codification (ASC) Topic 810,
Consolidation
, with amendments to improve financial
reporting by enterprises involved with variable interest
entities (formerly FASB Statement No. 167,
Amendments to
FASB Interpretation No. 46(R)
). These amendments
require an enterprise to perform an analysis to determine
whether the enterprises variable interest(s) give it a
controlling financial interest in a variable interest entity.
The effective date for this guidance is the beginning of a
reporting entitys first annual reporting period that
begins after November 15, 2009, for interim periods within
that first annual reporting period, and for interim and annual
reporting periods thereafter. The Company adopted this guidance
and it had no material effect on its consolidated financial
statements.
As part of the recapitalization of the Company in 2006, the
Company entered into a $112.5-million Credit Agreement (the
Credit Agreement) composed of a $82.5-million Term
Loan (the Term Loan) and a
$30-million
Revolving Credit Facility (the Revolver). Borrowings
under the Credit Agreement are collateralized by a first
priority security interest in all of the assets of the Company,
except property collateralized by mortgage notes and mature
based upon the nature of the borrowing in either 2011 or 2012.
The Revolver also provides for bank guarantee under standby
letter of credit arrangements in the normal course of business
operations. The interest rate on the Term Loan and Revolver is
based on prime rate, plus a margin of up to 2% or the London
Interbank Offered Rate (LIBOR), plus a margin up to 3%, with
margins determined by certain financial ratios. In addition, the
Company must pay an annual commitment fee of 0.5% on the unused
portion of the Revolver.
As of June 27, 2010, the Company had no outstanding
borrowings under the Revolver. Availability under the Revolver
is reduced by outstanding letters of credit totaling
$3.86 million as of June 27, 2010, thereby leaving the
Company with $26.14 million available under its Revolver.
Pursuant to the terms of the Credit Agreement, the Company is
subject to certain financial and nonfinancial covenants,
including a consolidated total leverage ratio, a consolidated
senior leverage ratio, consolidated fixed-charge coverage ratio,
and consolidated capital expenditures limitations. The Company
was in compliance with these covenants as of June 27, 2010.
In addition to the Credit Agreement, the Company entered into a
$27.5 million Note Purchase Agreement (the Note
Agreement). Under the Note Agreement, interest is payable
monthly at an annual interest rate of 13.25%. The Company may
elect monthly during the first year of the Note Agreement to
accrue interest at the rate of 14.25% per annum with no
payments. Commencing the second year of the Note Agreement
through the maturity
F-23
BRAVO BRIO
RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to
Unaudited Consolidated Financial
Statements(Continued)
date, the Company may elect to accrue interest at 13.25% and pay
interest equal to 9% monthly. Interest accrued, but unpaid
during the term of the Note Agreement is capitalized into the
principal balance. The Note Agreement is collateralized by a
second priority interest in all assets of the Company except
property and matures on December 29, 2012. From November
2006 through January of 2010, the Company elected to capitalize
accrued, but unpaid interest in accordance with the terms of the
Note Agreement.
Beginning with the fiscal year ended December 28, 2008, the
Company is required to make excess cash flow payments to reduce
the outstanding principal balances under the Credit Agreement
provided the Company meets certain leverage ratio requirements.
No excess cash flow payments will be required for the twenty six
weeks ended June 27, 2010 and no excess cash flow payments
were required in fiscal year 2009 based on the fiscal year 2008
results.
|
|
3.
|
COMMITMENTS AND
CONTINGENCIES
|
The Company is subject to various claims, possible legal
actions, and other matters arising out of the normal course of
business. While it is not possible to predict the outcome of
these issues, management is of the opinion that adequate
provision for potential losses has been made in the accompanying
consolidated financial statements and that the ultimate
resolution of these matters will not have a material adverse
effect on the Companys financial position, results of
operations, or cash flows.
In accordance with ASC 855, the Company initially evaluated
its consolidated financial statements as of and for the twenty
six weeks ended June 27, 2010 for subsequent events,
through August 12, 2010, the date the financial statements
were available to be issued. The Company has evaluated
nonrecognized subsequent events through September 3, 2010
and is not aware of any subsequent events which would require
disclosure in the consolidated financial statements.
* * * * * *
F-24
The restaurant presents a
winning combination: It manages
to be a place that people want to
go to and a place they want to go
back to.
The Capital Annapolis, MD
|
Tuscan Tuscan
Culina Culinary
creations creations
are are mastered
mastered at BR at
BRIO.
Collumbu Columbus s D Dispatch
Birmingham, AL (1) Phoenix, AZ (2) Denver, CO (2) Farmington, CT (1) Washington DC (1) Ft.
Lauderdale, FL (2) Naples, FL (1) Orlando, FL (2) Palm Beach, FL (1) Tampa, FL (1) Atlanta, GA (2)
Chicago, IL (1) Newport, KY (1) Annapolis, MD (1) Detroit, MI (2) Kansas City, MO (1) St. Louis, MO
(1) Charlotte, NC (1) Raleigh, NC (1) Cherry Hill, NJ (1) Las Vegas, NV (1) Cleveland, OH (2)
Columbus, OH (2) Dayton, OH (1) Dallas, TX (2) Houston, TX (2) Richmond, VA (1)
BrioItalian.com
|
BRIO, meaning lively or full of life, brings the pleasure of the Tuscan country villa to the
American city. The food, staying true to the Tuscan philosophy of to eat well is to live well, is
simply prepared using the finest and freshest ingredients. Escape to BRIO and experience the
flavors of Tuscany. Buon Appetito!
|
Bravo
Brio Restaurant Group, Inc.
Shares
Preliminary
Prospectus
Jefferies &
Company
Piper
Jaffray
Wells
Fargo Securities
KeyBanc
Capital Markets
Morgan
Keegan & Company, Inc.
Part II
Information Not
Required In Prospectus
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other
than the underwriting discount, payable by the registrant in
connection with the sale of the common stock being registered.
All amounts shown are estimates, other than the SEC registration
fee, the FINRA filing fee and the Nasdaq Global Market listing
fee.
|
|
|
|
|
|
|
SEC registration fee
|
|
$
|
12,300
|
|
FINRA filing fee
|
|
|
17,750
|
|
Nasdaq Global Market listing fee
|
|
|
25,000
|
|
Accounting fees and expenses
|
|
|
*
|
|
Legal fees and expenses
|
|
|
*
|
|
Printing and engraving expenses
|
|
|
*
|
|
Registration and transfer agent fees
|
|
|
*
|
|
Blue sky fees and expenses
|
|
|
*
|
|
Miscellaneous
|
|
|
*
|
|
|
|
|
|
|
Total
|
|
|
*
|
|
|
|
|
|
|
|
|
|
*
|
|
To be completed by amendment.
|
Item 14.
Indemnification of Directors and Officers.
Ohios Revised Code expressly authorizes and our Second
Amended and Restated Regulations will provide for
indemnification by us of any person who, because such person is
or was a director, officer or employee of the Company was or is
a party; or is threatened to be made a party to:
|
|
|
|
|
any threatened, pending or completed civil action, suit or
proceeding;
|
|
|
|
any threatened, pending or completed criminal action, suit or
proceeding;
|
|
|
|
any threatened, pending or completed administrative action or
proceeding;
|
|
|
|
any threatened, pending or completed investigative action or
proceeding.
|
The indemnification will be for actual and reasonable expenses,
including attorneys fees, judgments, fines and amounts
paid in settlement by such person in connection with such
action, suit or proceeding, to the extent and under the
circumstances permitted by the Ohio Revised Code.
Section 1701.13(E)(7) of the Ohio Revised Code authorizes a
corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against and
incurred by such person in any such capacity, or arising out of
such persons status as such. We have obtained liability
insurance covering our directors and officers for claims
asserted against them or incurred by them in such capacity,
including claims brought under the Securities Act.
Reference is made to the Form of Underwriting Agreement filed as
Exhibit 1.1 hereto for provisions providing that the
underwriters are obligated under certain circumstances, to
indemnify our directors, officers and controlling persons
against certain liabilities under the Securities Act of 1933.
Reference is made to Item 17 for our undertakings with
respect to indemnification for liabilities arising under the
Securities Act.
II-1
Item 15.
Recent Sales of Unregistered Securities.
Except as set forth below, in the three years preceding the
filing of this registration statement, we have not issued any
securities that were not registered under the Securities Act.
During August 2007, we sold 38.25 shares of our
Series A 14.0% Cumulative Compounding Preferred Stock for
an aggregate offering price of $38,250 and 675 shares of
our common stock for an aggregate offering price of $6,750 to
certain of our employees, officers, directors and consultants.
The sale and issuance was deemed exempt from registration under
the Securities Act by virtue of Rule 701 promulgated
thereunder. In accordance with Rule 701, the shares were
issued pursuant to a written compensatory benefit plan and the
issuance did not, during any consecutive twelve month period,
exceed 15% of the outstanding shares of our common stock,
calculated in accordance with its provisions.
During November 2007, we sold 21.25 shares of our
Series A 14.0% Cumulative Compounding Preferred Stock for
an aggregate offering price of $21,250 and 375 shares of
our common stock for an aggregate offering price of $3,750 to
certain of our employees, officers, directors and consultants.
The sale and issuance was deemed exempt from registration under
the Securities Act by virtue of Rule 701 promulgated
thereunder. In accordance with Rule 701, the shares were
issued pursuant to a written compensatory benefit plan and the
issuance did not, during any consecutive twelve month period,
exceed 15% of the outstanding shares of our common stock,
calculated in accordance with its provisions.
During July 2008, we sold 85 shares of our Series A
14.0% Cumulative Compounding Preferred Stock for an aggregate
offering price of $85,000 and 1,500 shares of our common
stock for an aggregate offering price of $15,000 to certain of
our employees, officers, directors and consultants. The sale and
issuance was deemed exempt from registration under the
Securities Act by virtue of Rule 701 promulgated
thereunder. In accordance with Rule 701, the shares were
issued pursuant to a written compensatory benefit plan and the
issuance did not, during any consecutive twelve month period,
exceed 15% of the outstanding shares of our common stock,
calculated in accordance with its provisions.
During April 2009, we sold 111.125 shares of our
Series A 14.0% Cumulative Compounding Preferred Stock for
an aggregate offering price of $111,125 and 637.5 shares of
our common stock for an aggregate offering price of $3,187.50 to
certain of our employees, officers, directors and consultants.
The sale and issuance was deemed exempt from registration under
the Securities Act by virtue of Rule 701 promulgated
thereunder. In accordance with Rule 701, the shares were
issued pursuant to a written compensatory benefit plan and the
issuance did not, during any consecutive twelve month period,
exceed 15% of the outstanding shares of our common stock,
calculated in accordance with its provisions.
During May 2009, we sold 38 shares of our Series A
14.0% Cumulative Compounding Preferred Stock for an aggregate
offering price of $38,000 and 400 shares of our common
stock for an aggregate offering price of $2,000 to certain of
our employees, officers, directors and consultants. The sale and
issuance was deemed exempt from registration under the
Securities Act by virtue of Rule 701 promulgated
thereunder. In accordance with Rule 701, the shares were
issued pursuant to a written compensatory benefit plan and the
issuance did not, during any consecutive twelve month period,
exceed 15% of the outstanding shares of our common stock,
calculated in accordance with its provisions.
During September 2009, we sold 30 shares of our
Series A 14.0% Cumulative Compounding Preferred Stock for
an aggregate offering price of $30,000 to certain of our
employees, officers, directors and consultants. The sale and
issuance was deemed exempt from registration under the
Securities Act by virtue of Rule 701 promulgated
thereunder. In accordance with Rule 701, the shares were
issued pursuant to a written compensatory benefit plan and the
issuance did not, during any consecutive twelve month period,
exceed 15.0% of the outstanding shares of our common stock,
calculated in accordance with its provisions.
None of the foregoing transactions involved any underwriters,
underwriting discounts or commissions or any public offering.
The recipients of securities in such transactions represented
their intentions to acquire the securities for investment only
and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to
the share certificates and instruments issued in such
transactions. All recipients either received adequate
information about us or had adequate access, through their
relationship with us, to such information.
II-2
Item 16.
Exhibits and Financial Statement Schedules.
(a) Exhibits
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Exhibit
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Number
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Document
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1
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.1*
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Form of Underwriting Agreement.
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3
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.1
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Form of Second Amended and Restated Articles of Incorporation of
Bravo Brio Restaurant Group, Inc.
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3
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.2
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Form of Second Amended and Restated Regulations of Bravo Brio
Restaurant Group, Inc.
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4
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.1*
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Form of Common Stock Certificate.
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5
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.1*
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Opinion of Dechert LLP.
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10
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.1**
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Note Purchase Agreement, dated as of June 29, 2006, by and
among Bravo Development, Inc., as borrower, Bravo Development
Holdings, LLC and the domestic subsidiaries of the borrower from
time to time parties thereto, as guarantors, the Purchasers
Party thereto, as purchasers, and Golub Capital Incorporated, as
administrative agent.
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10
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.2**
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First Amendment to Note Purchase Agreement, dated as of
March 17, 2008, by and among Bravo Development, Inc.,
Bravo Development Holdings, LLC, the Guarantors, the Purchasers
and Golub Capital Incorporated, as administrative agent.
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10
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.3**
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New Investors Securities Holders Agreement, dated as of
June 29, 2006, by and among Bravo Development, Inc.,
Bravo Development Holding LLC, and the other investors and
parties named therein.
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10
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.4**
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Securities Holders Agreement, dated as of June 29, 2006, by
and among Bravo Development, Inc., Bravo Development
Holdings LLC, Alton F. Doody, III, John C. Doody, and the
other investors and parties named therein.
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10
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.5**
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Registration Rights Agreement, dated as of June 29, 2006,
by and among Bravo Development, Inc., Bravo Development Holdings
LLC and the other investors named therein.
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10
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.6**
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Management Agreement, dated as of June 29, 2006, by and
among Bruckmann Rosser, Sherrill & Co., Inc., Castle
Harlan, Inc. and Bravo Development, Inc.
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10
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.7**
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Management Agreement, dated as of June 29, 2006, by and
among Castle Harlan, Inc., Bruckmann Rosser,
Sherrill & Co., Inc. and Bravo Development, Inc.
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10
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.8**
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Employment Agreement, effective January 12, 2007, by and
between Bravo Development, Inc. and Saed Mohseni.
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10
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.9*
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Form of Employment Agreement by and between Bravo Brio
Restaurant Group, Inc. and James J. OConnor.
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10
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.10**
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Bravo Development, Inc. 2006 Stock Option Plan.
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10
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.11**
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Form of Option Award Letter under the Bravo Development, Inc.
2006 Stock Option Plan.
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10
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.12*
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Form of Bravo Brio Restaurant Group, Inc. Stock Incentive Plan.
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10
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.13
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Form of Exchange Agreement by and among Bravo Brio Restaurant
Group, Inc., Bravo Development Holdings LLC and the individual
shareholders of Bravo Brio Restaurant Group, Inc. listed on the
signature pages thereto.
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10
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.14
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Form of Plan of Reorganization by and between Bravo Brio
Restaurant Group, Inc. and Bravo Development Holdings LLC.
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10
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.15**
***
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Bravo! Development, Inc. Foodservice Distribution Agreement,
dated as of June 18, 2006, by and between Bravo
Development, Inc. and Distribution Market Advantage, Inc.
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21
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.1**
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Subsidiaries of Bravo Brio Restaurant Group, Inc.
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23
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.1
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Consent of Deloitte & Touche LLP.
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23
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.2*
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Consent of Dechert LLP (included in Exhibit 5.1).
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24
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.1**
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Powers of Attorney.
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99
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.1**
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Consent of Technomic, Inc.
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*
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To be filed by amendment.
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**
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Previously filed.
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II-3
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***
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Certain information in this exhibit has been omitted and filed
separately with the SEC. Confidential treatment has been
requested with respect to the omitted portions.
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(b) Financial Statement Schedule
See the Index to Financial Statements included on
page F-1
for a list of the financial statements included in this
registration statement.
All schedules not identified above have been omitted because
they are not required, are not applicable or the information is
included in the selected consolidated financial data or notes
contained in this registration statement.
Item 17.
Undertakings.
a. The undersigned registrant hereby undertakes to provide
to the underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
b. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
c. The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
2. For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial
bona fide
offering thereof.
II-4
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Columbus, State of Ohio, on
September 3, 2010.
Bravo Brio Restaurant Group, Inc.
Saed Mohseni
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities indicated on the 3rd day of September, 2010.
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Signature
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Title
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/s/ Saed
Mohseni
Saed
Mohseni
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President, Chief Executive Officer and Director (Principal
Executive Officer)
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/s/ James
J. OConnor
James
J. OConnor
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Chief Financial Officer, Treasurer and Secretary (Principal
Financial and
Accounting Officer)
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*
Alton
F. Doody, III
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Director
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*
Harold
O. Rosser II
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Director
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*
David
B. Pittaway
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Director
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*
Michael
J. Hislop
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Director
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*
Allen
J. Bernstein
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Director
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*By
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/s/ James
J. OConnor
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Name: James J. OConnor
Title: Attorney-in-fact
II-5
Exhibit Index
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|
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Exhibit
|
|
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Number
|
|
Document
|
|
|
1
|
.1*
|
|
Form of Underwriting Agreement.
|
|
3
|
.1
|
|
Form of Second Amended and Restated Articles of Incorporation of
Bravo Brio Restaurant Group, Inc.
|
|
3
|
.2
|
|
Form of Second Amended and Restated Regulations of Bravo Brio
Restaurant Group, Inc.
|
|
4
|
.1*
|
|
Form of Common Stock Certificate.
|
|
5
|
.1*
|
|
Opinion of Dechert LLP.
|
|
10
|
.1**
|
|
Note Purchase Agreement, dated as of June 29, 2006, by and
among Bravo Development, Inc., as borrower, Bravo Development
Holdings, LLC and the domestic subsidiaries of the borrower from
time to time parties thereto, as guarantors, the Purchasers
Party thereto, as purchasers, and Golub Capital Incorporated, as
administrative agent.
|
|
10
|
.2**
|
|
First Amendment to Note Purchase Agreement, dated as of
March 17, 2008, by and among Bravo Development, Inc., Bravo
Development Holdings, LLC, the Guarantors, the Purchasers and
Golub Capital Incorporated, as administrative agent.
|
|
10
|
.3**
|
|
New Investors Securities Holders Agreement, dated as of
June 29, 2006, by and among Bravo Development, Inc., Bravo
Development Holding LLC, and the other investors and parties
named therein.
|
|
10
|
.4**
|
|
Securities Holders Agreement, dated as of June 29, 2006, by
and among Bravo Development, Inc., Bravo Development
Holdings LLC, Alton F. Doody, III, John C. Doody, and the
other investors and parties named therein.
|
|
10
|
.5**
|
|
Registration Rights Agreement, dated as of June 29, 2006,
by and among Bravo Development, Inc., Bravo Development Holdings
LLC and the other investors named therein.
|
|
10
|
.6**
|
|
Management Agreement, dated as of June 29, 2006, by and
among Bruckmann Rosser, Sherrill & Co., Inc., Castle
Harlan, Inc. and Bravo Development, Inc.
|
|
10
|
.7**
|
|
Management Agreement, dated as of June 29, 2006, by and
among Castle Harlan, Inc., Bruckmann Rosser,
Sherrill & Co., Inc. and Bravo Development, Inc.
|
|
10
|
.8**
|
|
Employment Agreement, effective January 12, 2007, by and
between Bravo Development, Inc. and Saed Mohseni.
|
|
10
|
.9*
|
|
Form of Employment Agreement by and between Bravo Brio
Restaurant Group, Inc. and James J. OConnor.
|
|
10
|
.10**
|
|
Bravo Development, Inc. 2006 Stock Option Plan.
|
|
10
|
.11**
|
|
Form of Option Award Letter under the Bravo Development, Inc.
2006 Stock Option Plan.
|
|
10
|
.12*
|
|
Form of Bravo Brio Restaurant Group, Inc. Stock Incentive Plan.
|
|
10
|
.13
|
|
Form of Exchange Agreement by and among Bravo Brio Restaurant
Group, Inc., Bravo Development Holdings LLC and the individual
shareholders of Bravo Brio Restaurant Group, Inc. listed on the
signature pages thereto.
|
|
10
|
.14
|
|
Form of Plan of Reorganization by and between Bravo Brio
Restaurant Group, Inc. and Bravo Development Holdings LLC.
|
|
10
|
.15**
***
|
|
Bravo! Development, Inc. Foodservice Distribution Agreement,
dated as of June 18, 2006, by and between Bravo
Development, Inc. and Distribution Market Advantage, Inc.
|
|
21
|
.1**
|
|
Subsidiaries of Bravo Brio Restaurant Group, Inc.
|
|
23
|
.1
|
|
Consent of Deloitte & Touche LLP.
|
|
23
|
.2*
|
|
Consent of Dechert LLP (included in Exhibit 5.1).
|
|
24
|
.1**
|
|
Powers of Attorney.
|
|
99
|
.1**
|
|
Consent of Technomic, Inc.
|
|
|
|
*
|
|
To be filed by amendment.
|
**
|
|
Previously filed.
|
***
|
|
Certain information in this exhibit has been omitted and filed
separately with the SEC. Confidential treatment has been
requested with respect to the omitted portions.
|
II-6