** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC  20549**

** **

**FORM 10-Q**

 

 

 

**ý****Quarterly Report Pursuant to Section 13 or 15(d) of theSecurities and Exchange Act of 1934**

 

 

**For the Quarterly Period Ended    July 3, 2002**

 

 

**Commission File Number   333-62775**

****

 

 

**BERTUCCI’S CORPORATION**

 (Exact name of registrant as specified in itscharter)

 

 

| **Delaware**                                                     |   | **06-1311266**                           |
|------------------------------------------------------------------|--------|------------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) |   | (I.R.S.  Employer Identification Number) |
|                                                             |   |                                     |
| **155 Otis Street, Northborough, Massachusetts**                 |   | **01532-2414**                           |
| (Address  of principal executive offices)                        |   | (Zip  Code)                              |

 

 

Registrant’stelephone number, including area code:  **(508) 351-2500**

 

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filled by Section 13 or 15(d) of theSecurities Exchange Act of the 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to the filing requirements for the past 90 days.

 

 

Yes  ý                   No  o

 

2,978,955 shares of the registrant’s CommonStock were outstanding on August 16, 2002.

 

 

 

 

 

----

 

 

 

BERTUCCI’S CORPORATION

 

FORM 10-Q

 

TABLE OF CONTENTS

 
|       |                  |                                                                                         |                                                                                                                               |
|------------|-----------------------|----------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|
| PART I:    | FINANCIAL INFORMATION |
|       |                  |                                                                                         |                                                                                                                               |
|       | Item 1.               | Financial Statements:                                                                        |
|       |                  | 1)                                                                                           | Consolidated  Balance Sheets July 3, 2002 (Unaudited)  and January 2, 2002                                                         |
|       |                  |                                                                                         |                                                                                                                               |
|       |                  | 2)                                                                                           | Consolidated  Statements of Operations  For the 13 Weeks and 26 Weeks Ended July 3, 2002  (Unaudited) and July 4, 2001 (Unaudited) |
|       |                  |                                                                                         |                                                                                                                               |
|       |                  | 3)                                                                                           | Consolidated  Statement of Changes in Stockholders’  Equity for the 26 Weeks Ended July 3, 2002 (Unaudited)                   |
|       |                  |                                                                                         |                                                                                                                               |
|       |                  | 4)                                                                                           | Consolidated  Statements of Cash Flow for the 26 Weeks  Ended July 3, 2002 (Unaudited) and July 4, 2001 (Unaudited)                |
|       |                  |                                                                                         |                                                                                                                               |
|       |                  | 5)                                                                                           | Notes to  Consolidated Financial Statements (Unaudited)                                                                            |
|       |                  |                                                                                         |                                                                                                                               |
|       | Item  2.              | Management’s  Discussion and Analysis of Results  of Operations and Financial Condition |
|       |                  |                                                                                         |                                                                                                                               |
|       | Item  3.              | Quantitative  and Qualitative Disclosures about  Market Risk                                 |
|       |                  |                                                                                         |                                                                                                                               |
| PART II:   | OTHER INFORMATION     |
|       | Item 1.               |                                                                                         | Legal Proceedings                                                                                                                  |
|       | Item  2.              |                                                                                         | Changes  in Securities and Use of Proceeds                                                                                         |
|       | Item 3.               |                                                                                         | Defaults upon  Senior Securities                                                                                                   |
|       | Item  4.              |                                                                                         | Submission  of Matters to a Vote of Security Holders                                                                               |
|       | Item 5.               |                                                                                         | Other Information                                                                                                                  |
|       | Item 6.               |                                                                                         | Exhibits and  Reports on Form 8-K                                                                                                  |
|       |                  |                                                                                         |                                                                                                                               |
| SIGNATURES |                  |                                                                                         |

 

 

 

 

2

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PART  I: FINANCIALINFORMATION

Item 1.  Financial Statements

 

**BERTUCCI’SCORPORATION**

**CONSOLIDATED BALANCE SHEETS**

(In thousands, exceptshare data)

 
|                                                          |   | **(Unaudited)**   |    |                 |   |
|---------------------------------------------------------------|--------|-------------------|---------|----------------------|--------|
|                                                          |   | **July 3,  2002** |    | **January 2,  2002** |   |
| **ASSETS**                                                    |   |              |    |                 |   |
| Current Assets:                                               |   |              |    |                 |   |
| Cash                                                          |   | $                 | 11,475  |                 | $      | 23,235 |   |
| Restricted cash                                               |   | 1,908             |    | 1,013                |   |
| Accounts  receivable                                          |   | 880               |    | 1,033                |   |
| Income taxes  refund receivable                               |   | 3,510             |    | —               |   |
| Inventories                                                   |   | 876               |    | 805                  |   |
| Prepaid expenses  and other current assets                    |   | 1,109             |    | 1,554                |   |
| Total current  assets                                         |   | 19,758            |    | 27,640               |   |
|                                                          |   |              |    |                 |   |
| Property and  equipment, at cost:                             |   |              |    |                 |   |
| Land                                                          |   | 2,469             |    | 2,647                |   |
| Buildings                                                     |   | 6,625             |    | 6,624                |   |
| Leasehold  improvements                                       |   | 52,180            |    | 49,654               |   |
| Furniture and  equipment                                      |   | 32,308            |    | 29,058               |   |
|                                                          |   | 93,582            |    | 87,983               |   |
| Less —  Accumulated depreciation                         |   | (27,205           | )       | (23,081              | )      |
|                                                          |   | 66,377            |    | 64,902               |   |
| Construction  work in process                                 |   | 2,371             |    | 139                  |   |
| Net property and  equipment                                   |   | 68,748            |    | 65,041               |   |
|                                                          |   |              |    |                 |   |
| Goodwill, net                                                 |   | 26,127            |    | 26,127               |   |
| Deferred taxes,  noncurrent                                   |   | 4,992             |    | 7,697                |   |
| Deferred finance  costs, net                                  |   | 4,048             |    | 4,384                |   |
| Liquor licenses                                               |   | 1,806             |    | 1,806                |   |
| Other assets,  net                                            |   | 377               |    | 102                  |   |
| Total Assets                                                  |   | $                 | 125,856 |                 | $      | 132,797 |   |
|                                                          |   |              |    |                 |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                     |   |              |    |                 |   |
| Current  Liabilities:                                         |   |              |    |                 |   |
| Accounts payable                                              |   | 6,625             |    | 8,808                |   |
| Accrued expenses                                              |   | 10,817            |    | 13,263               |   |
| Income taxes  payable                                         |   | 999               |    | 1,196                |   |
| Total current  liabiliites                                    |   | 18,441            |    | 23,267               |   |
|                                                          |   |              |    |                 |   |
| Senior Notes                                                  |   | 85,310            |    | 85,310               |   |
| Restaurant  closing reserve — noncurrent                 |   | 2,005             |    | 2,685                |   |
| Deferred rent  and other long-term liabilites                 |   | 2,569             |    | 2,509                |   |
| Total  liabilities                                            |   | 108,325           |    | 113,771              |   |
| Commitments and  contingencies                                |   |              |    |                 |   |
| Stockholders’  equity:                                   |   |              |    |                 |   |
| Common stock,  $.01 par value                                 |   | 37                |    | 37                   |   |
| Authorized —  8,000,000 shares                           |   |              |    |                 |   |
| Issued —  3,666,370 shares, outstanding 2,978,955 shares |   |              |    |                 |   |
| Less treasury  stock — 687,415 shares at cost            |   | (8,088            | )       | (8,088               | )      |
| Additional  paid-in capital                                   |   | 29,004            |    | 29,004               |   |
| Accumulated  deficit                                          |   | (3,422            | )       | (1,927               | )      |
| Total stockholders’  equity                              |   | 17,531            |    | 19,026               |   |
| Total Liabilites  and Stockholders’ Equity               |   | $                 | 125,856 |                 | $      | 132,797 |   |

 

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

 

3

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**BERTUCCI’S CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

(In thousands, exceptshare and per share data)

(Unaudited)

 

 
|                                                |   | **Thirteen  weeks ended** |         | **Twenty-six  weeks ended** |   |
|-----------------------------------------------------|--------|---------------------------|--------------|-----------------------------|--------|
|                                                |   | **July 3,  2001**         |         | **July 4,  2002**           |   | **July 3,  2002** |   | **July 4,  2001** |   |
|                                                |   |                      |         |                        |   |
| Net sales                                           |   | $                         |  41,307 |                        | $      |  41,013 |   | $ |  77,990 |   | $ |  110,827 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Cost of sales  and expenses:                        |   |                      |         |                        |   |   |   |   |   |
| Cost of sales                                       |   | 9,351                     |         | 9,801                       |   | 17,674 |   | 27,871 |   |
| Operating  expenses                                 |   | 25,268                    |         | 25,225                      |   | 46,713 |   | 65,692 |   |
| General and  administrative expenses                |   | 3,049                     |         | 2,831                       |   | 6,042 |   | 6,640 |   |
| Closed  restaurant expenses                         |   | 175                       |         | 250                         |   | 175 |   | 250 |   |
| Deferred rent                                       |   | 74                        |         | 151                         |   | 145 |   | 323 |   |
| Depreciation,  amortization and preopening expenses |   | 2,687                     |         | 3,231                       |   | 5,088 |   | 7,535 |   |
| Total cost of  sales and expenses                   |   | 40,604                    |         | 41,489                      |   | 75,837 |   | 108,311 |   |
| Income (loss)  from operations                      |   | 703                       |         | (476                        | )      | 2,153 |   | 2,516 |   |
| Other income  (expense):                            |   |                      |         |                        |   |   |   |   |   |
| Gain on Brinker  Sale                               |   | —                    |         | 37,432                      |   | — |   | 37,432 |   |
| Interest  expense, net                              |   | (2,224                    | )            | (2,512                      | )      | (4,453 | ) | (6,293 | ) |
| Other income  (expense)                             |   | (2,224                    | )            | 34,920                      |   | (4,453 | ) | 31,139 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| (Loss) income  before income tax benefit (expense)  |   | (1,521                    | )            | 34,444                      |   | (2,300 | ) | 33,655 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Income tax  benefit (expense)                       |   | 532                       |         | (14,068                     | )      | 805 |   | (13,936 | ) |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Net (loss)  income                                  |   | $                         |  (989   | )                           | $      |  20,376 |   | $ |  (1,495 | ) | $ |  19,719 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Basic (loss)  income per share                      |   | $                         |  (0.33  | )                           | $      |  6.84 |   | $ |  (0.50 | ) | $ |  6.62 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Weighted average  shares outstanding — basic   |   | 2,978,955                 |         | 2,978,955                   |   | 2,978,955 |   | 2,978,955 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Diluted (loss)  income per share                    |   | $                         |  (0.33  | )                           | $      |  6.09 |   | $ |  (0.50 | ) | $ |  5.90 |   |
|                                                |   |                      |         |                        |   |   |   |   |   |
| Weighted average  shares outstanding — diluted |   | 2,978,955                 |         | 3,344,658                   |   | 2,978,955 |   | 3,344,658 |   |

 

 

 

The accompanyingnotes are an integral part of these consolidated financial statements.

 

 

 

4

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**BERTUCCI’S CORPORATION**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

(Inthousands, except share data)

(Unaudited)

 
|                     |   | **Common  Stock**     |   | **Treasury  Stock** |   |                  |   |       |   |                            |   |
|--------------------------|--------|-----------------------|--------|---------------------|--------|-----------------------|--------|------------|--------|---------------------------------|--------|
|                     |   | **Number of  Shares** |   | **$.01 per  Share** |   | **Number of  Shares** |   | **Amount** |   | **Additional  Paid-In Capital** |   | **Accumulated  Deficit** |   | **Total  Stockholders' Equity** |   |
| Balance January  2, 2002 |   | 3,666,370             |   | $37                 |   | (687,415              | )      | $(8,088    | )      | $29,004                         |   | $(1,927 | ) | $19,026 |   |
| Net Loss                 |   |                  |   |                |   |                  |   |       |   |                            |   | (1,495 | ) | (1,495 | ) |
| Balance July 3,  2002    |   | 3,666,370             |   | $37                 |   | (687,415              | )      | $(8,088    | )      | $29,004                         |   | $(3,422 | ) | $17,531 |   |

 

 

The accompanying notesare an integral part of these consolidated financial statements.

 

 

 

5

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**BERTUCCI’S CORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOW**

(In thousands)

(Unaudited)

 
|                                                                         |   | **Twenty Six  Weeks Ended** |       |
|------------------------------------------------------------------------------|--------|-----------------------------|------------|
|                                                                         |   | **July 3,  2002**           |       | **July 4,  2001** |   |
|                                                                         |   |                        | ** ** |   | ** ** |
| Cash flows of  operating activities                                          |   |                        |       |   |   |
| Net loss  (income)                                                           |   | $                           | (1,495     | ) | $ | 19,719 |   |
| Less gain on  Brinker Sale                                                   |   | —                      |       | (37,432 | ) |
| Income taxes on  Brinker Sale                                                |   | —                      |       | 14,982 |   |
|                                                                         |   |                        |       |   |   |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |                        |       |   |   |
| Deferred rent                                                                |   | 145                         |       | 323 |   |
| Depreciation and  amortization                                               |   | 4,792                       |       | 6,571 |   |
| Change in  deferred taxes                                                    |   | 2,705                       |       | — |   |
| Closed  restaurant charge                                                    |   | 175                         |       | 250 |   |
| Gain on sale of  property                                                    |   | (235                        | )          | — |   |
| Changes in  operating assets and liabilities                                 |   |                        |       |   |   |
| Inventories                                                                  |   | (71                         | )          | 129 |   |
| Prepaid expenses  and accounts receivable                                    |   | 612                         |       | 1,056 |   |
| Accrued expenses                                                             |   | (3,652                      | )          | (3,242 | ) |
| Income taxes  refundable / payable                                           |   | (3,707                      | )          | (718 | ) |
| Accounts payable                                                             |   | (2,182                      | )          | (3,628 | ) |
| Other                                                                        |   | 42                          |       | (24 | ) |
| Total  adjustments                                                           |   | (1,376                      | )          | 717 |   |
| Net cash used in  operating activities                                       |   | (2,871                      | )          | (2,014 | ) |
|                                                                         |   |                        |       |   |   |
| Cash flows of  investing activities                                          |   |                        |       |   |   |
| Additions to  property and equipment                                         |   | (8,407                      | )          | (8,791 | ) |
| Proceeds from  sale of restaurant properties                                 |   | 413                         |       | 200 |   |
| Net proceeds  from Brinker Sale                                              |   | —                      |       | 47,587 |   |
| Net cash (used  in) provided by investing activities                         |   | (7,994                      | )          | 38,996 |   |
|                                                                         |   |                        |       |   |   |
| Cash flows of  financing activities                                          |   |                        |       |   |   |
| Increase in  restricted cash                                                 |   | (895                        | )          | — |   |
| Payments of  mortgage loans and capital lease obligations                    |   | —                      |       | (421 | ) |
| Net cash used in  financing activities                                       |   | (895                        | )          | (421 | ) |
|                                                                         |   |                        |       |   |   |
| Net (decrease)  increase in cash                                             |   | (11,760                     | )          | 36,561 |   |
| Cash, beginning  of period                                                   |   | 23,235                      |       | 7,602 |   |
| Cash, end of  period                                                         |   | $                           | 11,475     |   | $ | 44,163 |   |
|                                                                         |   |                        |       |   |   |
| Supplemental  Disclosure of Cash Flow Information:                           |   |                        |       |   |   |
| Cash paid for  interest, net of interest income                              |   | $                           | 4,528      |   | $ | 6,375 |   |
| Cash paid  (refunds received) for income taxes                               |   | $                           | 196        |   | $ | (328 | ) |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

 

 

6

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** **

**BERTUCCI’SCORPORATION**

**Notes To Consolidated Financial Statements**

July 3, 2002

(Unaudited)

 

*1.    Basis ofPresentation*

 

Theunaudited consolidated financial statements (the “Unaudited FinancialStatements”) presented herein have been prepared by Bertucci’s Corporation andinclude all of its subsidiaries (collectively, the “Company”) after eliminationof inter-company accounts and transactions, without audit, and, in the opinionof management, reflect all adjustments (consisting of normal recurringadjustments) necessary for a fair statement of the interim periods presented.  The accompanying unaudited interimconsolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the United States for interimfinancial information and pursuant to the rules and regulations of theSecurities and Exchange Commission for reporting on Form 10-Q.  Accordingly, certain information andfootnote disclosures required for complete financial statements are notincluded herein.  It is suggested theUnaudited Financial Statements be read in conjunction with the consolidatedfinancial statements and notes included in the Company’s 2001 Form 10-K.  The operating results for the six monthsended July 3, 2002 may not be indicative of the results expected for anysucceeding quarter or for the entire year ending January 1, 2003.

 

Certain reclassifications have been made toprior year financial statements to make them consistent with the current year’spresentation and to conform with the presentation utilized in the Company’s2001 Form 10-K.

 

*2.**              **NewAccounting Pronouncements*

 

                       On January 3, 2002, theCompany adopted the provisions of Statement of Financial Accounting Standard(SFAS) No.  142, *Goodwill and Other Intangible Assets.*  SFAS No. 142 superseded APB Opinion No. 17, *Intangible Assets,*and requires thatgoodwill and other intangible assets with indefinite lives no longer beamortized, but reviewed for impairment at least annually.  Accordingly, the Company ceased amortizinggoodwill on January 3, 2002. Amortization expense totaling $569,000 and $1,138,800 is recorded in theConsolidated Statement of Operations for the thirteen and twenty-six weeksended July 4, 2001, respectively.

 

In accordance with SFAS No. 142, the effectof this accounting change is reflected prospectively. Had the Company accountedfor goodwill in accordance with SFAS No. 142 in 2001, net loss and loss pershare for the periods presented would have been as follows (in thousands,except per share amounts):

 

 

 

7

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|                                      |   | **Thirteen  weeks ended** |        | **Twenty six  weeks ended** |
|-------------------------------------------|--------|---------------------------|-------------|-----------------------------|
|                                      |   | **July 3,****2002**       |        | **July 4,  2001**           |   | **July 3,  2002** |   | **July 4,  2001** |
|                                      |   |                      |        |                        |
| Net (loss)  income:                       |   |                      |        |                        |   |   |   |   |
| Reported net  (loss) income               |   | $                         | (989        | )                           | $ | 20,376 |   | $ | (1,495 | ) | $ | 19,719 |
| Goodwill  amortization                    |   | —                    |        | 569                         |   | — |   | 1,139 |
| Adjusted net  (loss) income               |   | $                         |  (989  | )                           | $ |  20,945 |   | $ |  (1,495 | ) | $ |  20,858 |
|                                      |   |                      |        |                        |   |   |   |   |
| Basic (loss)  income per share:           |   |                      |        |                        |   |   |   |   |
| Reported (loss)  income per share         |   | $                         | (0.33       | )                           | $ | 6.84 |   | $ | (0.50 | ) | $ | 6.62 |
| Goodwill  amortization                    |   | —                    |        | 0.19                        |   | — |   | 0.38 |
| Adjusted basic  (loss) income per share   |   | $                         |  (0.33 | )                           | $ |  7.03 |   | $ |  (0.50 | ) | $ |  7.00 |
|                                      |   |                      |        |                        |   |   |   |   |
| Diluted (loss)  income per share:         |   |                      |        |                        |   |   |   |   |
| Reported (loss)  income per share         |   | $                         | (0.33       | )                           | $ | 6.09 |   | $ | (0.50 | ) | $ | 5.90 |
| Goodwill  amortization                    |   | —                    |        | 0.17                        |   | — |   | 0.34 |
| Adjusted diluted  (loss) income per share |   | $                         | (0.33       | )                           | $ | 6.26 |   | $ | (0.50 | ) | $ | 6.24 |

 

 

TheCompany completed the  transitionalgoodwill impairment test as required by SFAS No. 142 during the second quarterof 2002 and determined no goodwill impairment charge was necessary.

 

InAugust, 2001, the FASB issued SFAS No. 144, *Accountingfor Impairment or Disposal of Long-lived Assets.*  SFAS No. 144 establishes a single accountingmodel for the impairment or disposal of long-lived assets and new standards forreporting discontinued operations.  TheCompany adopted SFAS No. 144 on January 3, 2002.  The adoption of SFAS No. 144 had no impact on the condensedconsolidated financial statements.

 

InJune 2002, the FASB issues SFAS No. 146, *Accounting for Costs Associated with Exit or DisposalActivities. *This statement supersedes Emerging IssuesTask Force (EITF) No. 94-3, *Liability Recognition for Certain EmployeeTermination Benefits and Other Costs to Exit an Activity. *Under this statement, a liability for a cost associated with a disposalor exit activity is recognized at fair value when the liability is incurredrather than at the date of an entity’s commitment to an exit plan as requiredunder EITF 94-3.  The provisions of thisstatement are effective for exit or disposal activities that are initiatedafter December 31, 2002, with early adoption permitted.  The Company is currently evaluating theimpact of SFAS No. 146 on the Company’s consolidated financial position andresults of operations.

 

*3.**              **BrinkerSale*

 

OnApril 12, 2001, the Company completed its sale of 40 Chili’s and seven On TheBorder restaurants to the chains’ franchisor, Brinker International, Inc. ofDallas, Texas (“Brinker”) (“the Brinker Sale”).  Total considerationafter  closing adjustments was $92.2 million.Brinker acquired the inventory, facilities, equipment, and management teamsassociated with these restaurants, as well as four Chili’s restaurants underdevelopment by the Company. Further, Brinker assumed the mortgage debt on theCompany’s Chili’s and On The Border restaurants.  The net cash proceeds from the sale was approximately $43million.

 

The unaudited pro forma ConsolidatedStatements of Operations presented below reflect the recognition of the BrinkerSale as if the disposition occurred on January 2, 2001.

 

 

8

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**BERTUCCI’SCORPORATION**

**PRO FORMACONSOLIDATED STATEMENT OF OPERATIONS**

(In thousands, except share and per share data)

(Unaudited)

 
|                                                |   | **13 Weeks  Ended July 4, 2001** |         |
|-----------------------------------------------------|--------|----------------------------------|--------------|
|                                                |   | **As  Reported**                 |         | **Brinker  Sale** |   | **Pro Forma** |   |
|                                                |   |                             |         |   |
|                                                |   |                             |         |   |   |   |   |
| Net sales                                           |   | $                                |  41,013 |   | $ |  2,700 |   | $ |  38,313 |   |
|                                                |   |                             |         |   |   |   |   |
| Cost of sales  and expenses:                        |   |                             |         |   |   |   |   |
| Cost of sales                                       |   | 9,801                            |         | 835 |   | 8,966 |   |
| Operating  expenses                                 |   | 25,225                           |         | 2,453 |   | 22,772 |   |
| General and  administrative expenses                |   | 2,831                            |         | 271 |   | 2,560 |   |
| Closed  restaurant expenses                         |   | 250                              |         | — |   | 250 |   |
| Deferred rent                                       |   | 151                              |         | 3 |   | 148 |   |
| Depreciation,  amortization and preopening expenses |   | 3,231                            |         | 93 |   | 3,138 |   |
| Total cost of  sales and expenses                   |   | 41,489                           |         | 3,655 |   | 37,834 |   |
| (Loss) income  from operations                      |   | (476                             | )            | (955 | ) | 479 |   |
|                                                |   |                             |         |   |   |   |   |
| Other income  (expense):                            |   |                             |         |   |   |   |   |
| Gain on Brinker  Sale                               |   | 37,432                           |         | 37,432 |   | — |   |
| Interest  expense, net                              |   | (2,512                           | )            | (199 | ) | (2,313 | ) |
| Other income  (expense)                             |   | 34,920                           |         | 37,233 |   | (2,313 | ) |
|                                                |   |                             |         |   |   |   |   |
| Income (loss)  before income tax (expense) benefit  |   | 34,444                           |         | 36,278 |   | (1,834 | ) |
|                                                |   |                             |         |   |   |   |   |
| Income tax  (expense) benefit                       |   | (14,068                          | )            | (14,520 | ) | 452 |   |
|                                                |   |                             |         |   |   |   |   |
| Net income  (loss)                                  |   | $                                |  20,376 |   | $ |  21,758 |   | $ |  (1,382 | ) |
|                                                |   |                             |         |   |   |   |   |
| Basic income  (loss) per share                      |   | $                                |  6.84   |   | $ |  7.30 |   | $ |  (0.46 | ) |
|                                                |   |                             |         |   |   |   |   |
| Weighted average  shares outstanding — basic   |   | 2,978,955                        |         | 2,978,955 |   | 2,978,955 |   |
|                                                |   |                             |         |   |   |   |   |
| Diluted income  (loss) per share                    |   | $                                |  6.09   |   | $ |  6.51 |   | $ |  (0.46 | ) |
|                                                |   |                             |         |   |   |   |   |
| Weighted average  shares outstanding — diluted |   | 3,344,658                        |         | 3,344,658 |   | 2,978,955 |   |

 

 

 

9

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**BERTUCCI’S CORPORATION**

**PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS**

(In thousands, exceptshare and per share data)

(Unaudited

 
|                                                |   | **26 Weeks  Ended July 4, 2001** |          |
|-----------------------------------------------------|--------|----------------------------------|---------------|
|                                                |   | **As  Reported**                 |          | **Brinker  Sale** |   | **Pro Forma** |   |
|                                                |   |                             |          |   |
|                                                |   |                             |          |   |   |   |   |
| Net sales                                           |   | $                                |  110,827 |   | $ |  36,527 |   | $ |  74,300 |   |
|                                                |   |                             |          |   |   |   |   |
| Cost of sales  and expenses:                        |   |                             |          |   |   |   |   |
| Cost of sales                                       |   | 27,871                           |          | 10,329 |   | 17,542 |   |
| Operating  expenses                                 |   | 65,692                           |          | 21,644 |   | 44,048 |   |
| General and  administrative expenses                |   | 6,640                            |          | 1,222 |   | 5,418 |   |
| Closed  restaurant expenses                         |   | 250                              |          | — |   | 250 |   |
| Deferred rent                                       |   | 323                              |          | 57 |   | 266 |   |
| Depreciation,  amortization and preopening expenses |   | 7,535                            |          | 1,323 |   | 6,212 |   |
| Total cost of  sales and expenses                   |   | 108,311                          |          | 34,575 |   | 73,736 |   |
| Income from  operations                             |   | 2,516                            |          | 1,952 |   | 564 |   |
|                                                |   |                             |          |   |   |   |   |
| Other income  (expense):                            |   |                             |          |   |   |   |   |
| Gain on Brinker  Sale                               |   | 37,432                           |          | 37,432 |   | — |   |
| Interest  expense, net                              |   | (6,293                           | )             | (1,871 | ) | (4,422 | ) |
| Other income  (expense)                             |   | 31,139                           |          | 35,561 |   | (4,422 | ) |
|                                                |   |                             |          |   |   |   |   |
| Income (loss)  before income tax (expense) benefit  |   | 33,655                           |          | 37,513 |   | (3,858 | ) |
|                                                |   |                             |          |   |   |   |   |
| Income tax  (expense) benefit                       |   | (13,936                          | )             | (15,015 | ) | 1,079 |   |
|                                                |   |                             |          |   |   |   |   |
| Net income  (loss)                                  |   | $                                |  19,719  |   | $ |  22,498 |   | $ |  (2,779 | ) |
|                                                |   |                             |          |   |   |   |   |
| Basic income  (loss) per share                      |   | $                                |  6.62    |   | $ |  7.55 |   | $ |  (0.93 | ) |
|                                                |   |                             |          |   |   |   |   |
| Weighted average  shares outstanding — basic   |   | 2,978,955                        |          | 2,978,955 |   | 2,978,955 |   |
|                                                |   |                             |          |   |   |   |   |
| Diluted income  (loss) per share                    |   | $                                |  5.90    |   | $ |  6.73 |   | $ |  (0.93 | ) |
|                                                |   |                             |          |   |   |   |   |
| Weighted average  shares outstanding — diluted |   | 3,344,658                        |          | 3,344,658 |   | 2,978,955 |   |

 

 

 

 

10

----

 

 

 

*4.     Restaurant Closing Reserves*

 

Restaurantclosing reserves were established as part of the Acquisition ofBertucci’s.  These reserves were relatedto estimated future lease commitments and exit costs to close 18 Bertucci’slocations.  During the second and thirdquarters of 2001, the Company accrued an additional $200,000 and $4.0 million,respectively, related to selected locations (all of which had been closed),consisting of estimated lease commitments and certain exit costs.  It was originally expected the Company wouldbe able to exit these locations, sublease the locations or otherwise bereleased from the related leases. However, due to market conditions, theCompany has been unable to sell, sublease or exit certain of these leases.  Additionally, at the end of the secondquarter of 2002 the Company closed one restaurant and recorded a charge of$175,000 primarily related to estimated lease termination costs.

 

Activity withinthe reserve in 2002 was as follows:

 
|                                            |   | **Twenty six  weeks ended July 3,  2002** |        |
|-------------------------------------------------|--------|-------------------------------------------|-------------|
|                                            |   |                                      |        |
| Balance at  begnning of the year                |   | $                                         | 3,352       |   |
| Costs associated  with restaurant closing       |   | 175                                       |        |
| Lease costs  charged to reserve                 |   | (620                                      | )           |
| Balance at end  of period                       |   | $                                         | 2,907       |   |
|                                            |   |                                      |        |
| Current portion  (included in Accrued expenses) |   | $                                         | 902         |   |
| Noncurrent  portion                             |   | 2,005                                     |        |
|                                            |   | $                                         |  2,907 |   |

* *

*5.     Loss per Share*

* *

The number of shares used to calculate diluted loss per share for thethirteen and twenty-six weeks ended July 3, 2002 exclude the effect of 740,473outstanding stock options as the options are anti-dilutive.

 

*6.     Income Taxes*

 

The Company provides forincome taxes at the end of each interim period based on the estimated effectivetax rate for the full fiscal year. Cummulative adjustments to the Company’s estimate are recorded in theinterim period in which a change to the estimated annual effective rate isdetermined.

 

*7.**              **Sale of Land*

 

During the first quarter of2002, the Company sold a parcel of land adjacent to a restaurant included inthe Brinker Sale.  The property had acarrying value of approximately $179,000 and sold for $413,000.  The gain is included in operating expensesin the consolidated statement of operations for the twenty-six weeks ended July3, 2002.

 

 

 

11

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### ** **

### **Item2.  Management’s Discussion and Analysisof Results of Operations and Financial Condition**

 

                The following discussion should be read inconjunction with the consolidated financial statements of Bertucci’sCorporation, (the “Company”) and the notes thereto included herein.

 

### **General**

 

                The Company isan operator of full-service, casual dining restaurants in the northeasternUnited States.  The Company’s whollyowned subsidiary, Bertucci’s Restaurant Corp. owns and operates a restaurantconcept under the name Bertucci’s Brick Oven Pizzeria®.  Prior to April 11, 2001, the Company operated 40Chili’s and seven On The Border restaurants in five New England states.  On April 12, 2001, the Company completed thesale of the Brinker Concept Restaurants to Brinker (the “Brinker Sale”). Total consideration after closing adjustments was $92.2 million.  Brinker acquired the inventory, facilities,equipment and management teams associated with these restaurants, as well asfour Chili’s restaurants under development by the Company. Further, Brinkerassumed the mortgage debt on the Company’s Chili’s and On The Borderrestaurants.

                InJuly 1998, the Company completed its acquisition of Bertucci’s RestaurantCorp.’s parent entity, Bertucci’s, Inc., a publicly-owned restaurant companyfor a purchase price, net of cash received, of approximately $89.4 million (the“Acquisition”).   The Company financedthe Acquisition primarily through the issuance of $100 million of 10 3/4%senior notes due 2008 (the “Senior Notes”). The Acquisition included 90 Bertucci’s restaurants and one Sal &Vinnie’s restaurant.  Since 1999, theCompany closed the Bertucci’s test kitchen restaurant in Wakefield,Massachusetts and closed seventeen under performing Bertucci’s restaurants.  In December of 2000, the Company also closedthe Sal and Vinnie’s restaurant located in Massachusetts.

                Asof July 4, 2002 the Company owned and operated 74 full-service, casualdining, Italian-style restaurants under the name Bertucci’s Brick Oven Pizzeria®located primarily in New England and Mid-Atlantic United States.

### ** **

### **Significant Accounting Policies**

 

                The Company’s Form10-K for the year ended January 2, 2002 outlines the Company’s significantaccounting policies.  The Companyreviewed those policies and determined they remain the most significantaccounting policies for the thirteen and twenty-six weeks ended July 3,2002.  No changes to those polices weremade during the period with the exception of the adoption of SFAS Nos. 142 and144 during the period as described in Note 2 to the July 3, 2002 consolidatedfinancial statements.

 

12

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### **Results of Operations**

 

                The following table sets forth the percentagerelationship to net sales, unless otherwise indicated, of certain itemsincluded in the Company’s statement of operations, as well as certain operatingdata, for the periods indicated:

** **

**BERTUCCI’S CORPORATION**

**PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS**

(Unaudited)

** **
|                                                   |   | **Thirteen  weeks ended** |        | **Twenty six  weeks ended** |   |
|--------------------------------------------------------|--------|---------------------------|-------------|-----------------------------|--------|
|                                                   |   |                      |        |                        |   | ***Pro Forma  Bertucci’s Only (b)*** |   |   |   |   |   | ***Pro Forma  Bertucci’s Only (b)*** |   |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
|                                                   |   | **July 3,  2002**         |        | **July 4,  2001**           |   | **July 4,  2001** |   | **July 3,  2002** |   | **July 4,  2001** |   | **July 4,  2001** |   |
| Net Sales                                              |   | 100.0                     | %           | 100.0                       | %      | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Cost of sales  and expenses:                           |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Cost of sales                                          |   | 22.6                      | %           | 23.9                        | %      | 23.4 | % | 22.7 | % | 25.1 | % | 23.6 | % |
| Operating  expenses                                    |   | 61.2                      | %           | 61.5                        | %      | 59.4 | % | 60.5 | % | 59.3 | % | 59.3 | % |
| General and  administrative expenses                   |   | 7.4                       | %           | 6.9                         | %      | 6.7 | % | 7.7 | % | 6.0 | % | 7.3 | % |
| Closed  restaurant expenses                            |   | 0.4                       | %           | 0.6                         | %      | 0.7 | % | 0.2 | % | 0.2 | % | 0.3 | % |
| Deferred rent                                          |   | 0.2                       | %           | 0.4                         | %      | 0.4 | % | 0.2 | % | 0.3 | % | 0.4 | % |
| Depreciation,  amortization and preopening expenses    |   | 6.5                       | %           | 7.9                         | %      | 8.2 | % | 6.5 | % | 6.8 | % | 8.4 | % |
| Total cost of  sales and expenses                      |   | 98.3                      | %           | 101.2                       | %      | 98.8 | % | 97.2 | % | 97.7 | % | 99.3 | % |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations                         |   | 1.7                       | %           | (1.2                        | )%     | 1.2 | % | 2.8 | % | 2.3 | % | 0.7 | % |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Other income  (expense):                               |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Gain on Brinker  Sale                                  |   | —                    |        | 91.3                        | %      | — |   | — |   | 33.8 | % | — |   |
| Interest  expense, net                                 |   | (5.4                      | )%          | (6.1                        | )%     | (6.0 | )% | (5.7 | )% | (5.7 | )% | (6.0 | )% |
| Other income  (expense)                                |   | (5.4                      | )%          | 85.2                        | %      | (6.0 | )% | (5.7 | )% | 28.1 | % | (6.0 | )% |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| (Loss) income  before income tax benefit (expense)     |   | (3.7                      | )%          | 84.0                        | %      | (4.8 | )% | (2.9 | )% | 30.4 | % | (5.3 | )% |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Income tax  benefit (expense)                          |   | 1.3                       | %           | (34.3                       | )%     | 1.2 | % | 1.0 | % | (12.6 | )% | 1.5 | % |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Net (loss)  income                                     |   | (2.4                      | )%          | 49.7                        | %      | (3.6 | )% | (1.9 | )% | 17.8 | % | (3.8 | )% |
|                                                   |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| **Restaurant  Operating Data (Dollars in Thousands):** |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| EBITDA (a)                                             |   | $                         |  3,639 |                        |   |   | $ |  4,014 |   | $ |  7,325 |   |   |   | $ |  7,291 |   |
| Comparable restaurant sales (c)                        |   | 7.1                       | %           |                        |   | 3.9 |   | 3.8 | % |   |   | 4.3 | % |
| Number of Bertucci’s restaurants:                 |   |                      |        |                        |   |   |   |   |   |   |   |   |   |
| Restaurants open at beginning of period                |   | 74                        |        |                        |   | 73 |   | 74 |   |   |   | 72 |   |
| Restaurants opened                                     |   | 1                         |        |                        |   | 2 |   | 1 |   |   |   | 3 |   |
| Restaurant closed                                      |   | (1                        | )           |                        |   | — |   | (1 | ) |   |   | — |   |
| Total restaurants open at end of period                |   | 74                        |        |                        |   | 75 |   | 74 |   |   |   | 75 |   |
|                                                        |        |                           |             |                             |        |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

**(a)**                      ‘‘EBITDA’’is defined as income from operations before deferred rent, depreciation,amortization, preopening costs and property disposal gains and losses.  EBITDA is not a measure of performancedefined by Generally Accepted Accounting Principles (“GAAP”). EBITDA should notbe considered in isolation or as a substitute for net income or the statementof cash flows, which have been prepared in accordance with GAAP. The Companybelieves EBITDA provides useful information regarding the Company’s ability toservice its debt and the Company understands that such information isconsidered by certain investors to be an additional basis for evaluating acompany’s ability to pay.

 

(b)                     Reflects the impact of theBrinker Sale, see Note 3 to the July 3, 2002 consolidated financial statements.

 

(c)                     The Company defines comparable restaurant sales as net sales from restaurants that have been open for at least one full fiscal year.

13

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**Thirteen Weeks Ended July 3,2002 Compared to Thirteen Weeks Ended July 4, 2001**

 

*Net Sales*.  Total company net sales increased by$294,000, or 0.7%, to $41.3 million during the second quarter 2002 from $41.0million during the second quarter 2001. The nominal increase was primarily due to the impact of new restaurantsand a comparable net sales increase at the Bertucci’s restaurants partiallyoffset by nine days of sales ($2.7 million) from the Brinker ConceptRestaurants being included in the second quarter of 2001 prior to the BrinkerSale.  Net sales for Bertucci’srestaurants increased by 7.8% for the quarter or $3.0 million, as compared to2001 due to a $2.6 million (7.1%) increase in comparable restaurant sales and a$1.3 million increase in new restaurant sales, partially offset by a $900,000decrease from two restaurant closings. Comparable Bertucci’s restaurant dine-in guest counts increased for eachof the three months of the quarter and 4.3% in aggregate for the quarter ascompared to the second quarter of 2001. Bertucci’s comparable restaurant dine-in sales increased 8.0% for thequarter as compared to the second quarter of 2001. Comparable Bertucci’srestaurant carry-out and delivery sales increased 3.5% for the quarter ascompared to the same period in the prior year. The Company believes that the majority of the comparable sales increaseshave been a result of increased guest visits combined with a shift in menu mixand an approximate 1.0% price increase in April 2002.

 

*Cost ofSales*.  Cost of sales decreased byapproximately $450,000, or 4.6%, to $9.4 million during the second quarter 2002from $9.8 million during the second quarter 2001.  The dollar decrease was due to the Brinker Sale and favorableingredient costs.  Expressed as apercentage of net sales, overall cost of sales decreased to 22.6% during thesecond quarter 2002 from 23.9% during the second quarter 2001.  The percent change was primarily due to theBrinker Sale as Brinker Concept Restaurants ran a higher cost of sales thanBertucci’s restaurants.  Cost of salesfor just the Bertucci’s restaurants increased by $384,000, or 4.3%, to $9.4 millionduring the second quarter 2002 from $9.0 million during the second quarter2001.  Expressed as a percentage of netsales, Bertucci’s cost of sales decreased to 22.6% during the second quarter2002 from the pro forma cost of sales of 23.4% during the second quarter2001.  The Company believes thatmanagement efficiency, sound purchasing practices and lower cost of ingredientscombined to effectuate the favorable change in Bertucci’s cost of salespercentage.

 

*OperatingExpenses.*  Operatingexpenses increased by $43,000, or 0.2%, to $25.3 million during the secondquarter 2002 from $25.2 million during the second quarter 2001.  The nominal dollar increase was primarilydue to higher advertising and labor costs at Bertucci’s as a result of highersales partially offset by the Brinker Sale. Expressed as a percentage of net sales, operating expenses decreased to61.2% in the second quarter 2002 from 61.5% during the second quarter2001.  The percentage decrease is aresult of relative decreases as a percentage of sales in labor and occupancycosts in Bertucci’s restaurants and lower costs as a result of the Brinker Salepartially offset by higher advertising and insurance costs at Bertucci’s.  Pro Forma operating expenses at Bertucci’srestaurants increased by $2.5 million, or 11.0%, to $25.3 million during thesecond quarter 2002 from $22.8 million during the second quarter 2001.  Expressed as a percentage of net sales, proforma operating expenses for Bertucci’s increased to 61.2% in the secondquarter 2002 compared to 59.4% in the second quarter 2001.  The dollar and percent increases areprimarily due to higher advertising expenses and insurance costs whilefavorable leverage on sales in labor and occupancy costs partially offset thepercent increases.

 

* General and Administrative Expenses.* General andadministrative expenses increased by approximately $218,000, or 7.7%, to $3.0million during the second quarter 2002 from $2.8 million during the secondquarter 2001.  Expressed as a percentageof net sales, general and administrative expenses increased to 7.4% in thesecond quarter 2002 from 6.9% during the second quarter 2001.  The dollar increase was primarily due tohigher labor costs associated with management recruiting and training partiallyoffset by lower occupancy costs. The percentage increase resulted primarilyfrom the unfavorable leverage of the sales reduction due to the Brinker Sale.

 

*DeferredRent,**Depreciation, Amortization andPreopening Expenses*. Deferred rent, depreciation, amortization and preopening 

 

 

14

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expenses decreased by approximately $544,000or 16.8%, to $2.7 million during the second quarter 2002 from $3.2 millionduring the second quarter of 2001. Expressed as a percentage of net sales, deferred rent, depreciation, amortizationand preopening expenses decreased to 6.5% in the second quarter 2002 from 7.9%during the second quarter 2001.  Thedollar decrease was primarily due to the elimination of goodwill amortizationresulting from the Company’s adoption of SFAS No. 142 as discussed in Note 2 tothe Consolidated Financial Statements. The percentage decrease was a result of the elimination of goodwillamortization combined with favorable leverage from higher sales volume.

 

*InterestExpense.*  Interestexpense decreased by approximately $289,000 to $2.2 million during the secondquarter of 2002 from $2.5 million during the second quarter 2001.  The decrease was due to:  a) the retirement of $14.7 million of SeniorNotes in July 2001, b) The Brinker Sale as $40.9 million of mortgageindebtedness was assumed by Brinker; partially offset by c) a reduction ininterest income as a result of reduced available cash combined with lowermarket interest rates.

 

*IncomeTaxes.*  The effective income taxbenefit rate was 35.0% during the second quarter 2002 versus a 40.8% income taxexpense rate for the prior year period.

** **

**Twenty-Six Weeks Ended July3, 2002 Compared to Twenty-Six Weeks Ended July 4, 2001**

 

*Net Sales*.  Total company net sales decreased by $32.8million, or 29.6%, to $78.0 million during the first half of 2002 from $110.8million during the first half of 2001. The decrease was entirely due to the Brinker Sale.  After removing the impact of the BrinkerSale, net sales for Bertucci’s for the first half of 2002 increased by 5.0% or$3.7 million as compared to 2001 due to five new restaurants (a total of 24incremental operating weeks), plus a 3.7% increase in comparable restaurantsales partially offset by the closing of two restaurants.  Comparable Bertucci’s restaurant dine-inguest counts increased over the same period 2001 for each of the first sixmonths of 2002 and, in aggregate, increased for the first half of the year by3.0%.  Bertucci’s comparable restaurantdine-in sales increased 4.7% while comparable Bertucci’s restaurant carry-outand delivery sales increased 1.2% for the first half of 2002 as compared to thesame period in the prior year.  TheCompany believes that the majority of the comparable sales increases have beena result of increased guest visits combined with a shift in menu mix and anapproximate 1.0% price increase in April 2002.

 

*Cost ofSales*.  Cost of sales decreased byapproximately $10.2 million, or 36.6%, to $17.7 million during the first halfof 2002 from $27.9 million during the first half of 2001.  The decrease was primarily due to theBrinker Sale.  Expressed as a percentageof net sales, overall cost of sales decreased to 22.7% during the first half of2002 from 25.1% during the first half of 2001. The change was primarily due to the Brinker Sale as Brinker ConceptRestaurants ran a higher cost of sales than Bertucci’s restaurants.  After removing the impact of the BrinkerSale, cost of sales for the Bertucci’s restaurants increased by $200,000, or0.8%, to $17.7 million during the first half of 2002 from $17.5 million duringthe first half of 2001.  Expressed as apercentage of net sales, Bertucci’s cost of sales decreased to 22.7% during thefirst half of 2002 from the pro forma cost of sales rate of 23.6% during thefirst half of 2001.   The Companybelieves that management efficiency, sound purchasing practices and lower costof ingredients combined to effectuate the favorable change in Bertucci’s costof sales percentage.

* *

* *

 

15

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* *

*OperatingExpenses.* Operating expenses decreased by $19.0 million, or28.9%, to $46.7 million during the first half of 2002 from $65.7 million duringthe first half of 2001.  The dollardecrease was primarily due to the Brinker Sale. Expressed as a percentage ofnet sales, operating expenses increased to 59.9% in the first half of 2002 from59.3% during the first half of 2001. The percent increase was primarily a result of reduced leverage due toBrinker Sale.  After eliminating theimpact of the Brinker Sale, operating expenses increased by $2.7 million, or6.1%, to $46.7 million during the first half of 2002 from $44.0 million duringthe first half of 2001.  Expressed as apercentage of net sales, operating expenses for Bertucci’s increased by 0.6%from the pro forma operating expense rate of 59.3% in the first half of 2002compared to the first half of 2001.  Thedollar increases are primarily due to higher advertising expenses, increasedexpenses from new restaurants and higher insurance costs partially offset by reducedutility expenses.  The pro forma percentincrease is primarily due to increased advertising and insurance expensespartially offset by favorable changes in labor, supplies and occupancy costs.

 

* General and Administrative Expenses.* General andadministrative expenses decreased by approximately $598,000, or 9.0% to $6.0million during the first half of 2002 from $6.6 million during the first halfof 2001.  Expressed as a percentage ofnet sales, general and administrative expenses increased to 7.7% in the firsthalf of 2002 from 6.0% during the first half of 2001.  The dollar decrease was primarily due to staff reduction as aresult of the Brinker Sale and, to a lesser degree, reduced corporate officerent due to the Company’s move in August 2001 partially offset by higherrecruiting and training costs. The percentage increase resulted from theunfavorable leverage of the sales reduction due to the Brinker Sale combinedwith higher recruiting and training costs.

 

*DeferredRent,**Depreciation, Amortization andPreopening Expenses*. Deferred rent, depreciation, amortization and preopening expensesdecreased by approximately $2.4 million or 32.4%, to $5.1 million during thefirst half of 2002 from $7.5 million during the first half of 2001.  Expressed as a percentage of net sales,deferred rent, depreciation, amortization and preopening expenses decreased to6.5% in the first half of 2002 from 6.8% during the first half of 2001.  The dollar decrease was primarily due to theBrinker Sale and the elimination of goodwill amortization resulting from theCompany’s adoption of SFAS No. 142 as discussed in Note 2 to the ConsolidatedFinancial Statements.  The percentagedecrease resulted from the elimination of goodwill amortization partiallyoffset by unfavorable leverage of the sales reduction due to the Brinker Sale.

 

*InterestExpense.*  Interestexpense decreased by approximately $1.8 million to $4.5 million during thefirst half of 2002 from $6.3 million during the first half of 2001.  The decrease was due to:  a) The Brinker Sale as $40.9 million ofmortgage indebtedness was assumed by Brinker; b) $14.7 million of Senior Noteswere retired in July 2001, by using a portion of the proceeds of the BrinkerSale partially offset by c) a reduction in interest income as a result ofreduced investments combined with lower market interest rates.

 

# ***Income Taxes.***  The effective income tax benefit rate was35.0% during the first half of 2002 versus a 41.4% income tax expense rate forthe prior year period.

 

 

16

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# **Liquidity And CapitalResources**

 

Net cash flows used by operating activities were$2.8 million for the first half of 2002, $857,000 more than the $2.0 millionused during the first half of 2001.  Theprimary reason for the decrease is acceleration of payments to vendors toachieve reduced costs and/or purchase discounts.  As of July 3, 2002, the cash and cash equivalents of $13.3million consisted of $11.3 million of short-term investments ($1.9 million ofwhich is restricted, see below) and the remainder in operating cash accounts.

The Company’s 2002 capital expenditures were $8.4million through July 3, 2002 compared to $8.8 million for the comparable prioryear period.  The capital expenditures for 2002 were primarily comprisedof $3.5 million for new Bertucci’s restaurants and $4.9 million for remodelsand maintenance capital.

On July 21, 2001, the Company’s Senior Bank Facilityexpired and was not replaced; the Company is currently operating without a lineof credit and is funding all of its growth, debt reductions and operating needsfrom cash on hand combined with cash generated by operations.

The Indenture governing the Senior Notes defines theuse of net proceeds from an asset sale (the Brinker Sale) and the types of usesof proceeds, namely, repurchase of debt or investments in assets.  TheIndenture requires use of the proceeds within one year of the asset sale (April12, 2002 for the Brinker Sale).  The Company believes it has met the termsof the indenture for use of Brinker Sale proceeds.  Furthermore, theCompany believes that the cash flow generated from its operations with thecurrent cash on hand should be sufficient to fund its debt servicerequirements, lease obligations, current expected capital expenditures andother operating expenses.  While the Company expects to be able to serviceits debt, the lack of short term borrowing availability may impede growth.

As of July 3, 2002, the Company had $85.3 million inconsolidated indebtedness, all pursuant to the Senior Notes.  During July2001, the Company established a $2.0 million (maximum) Letter of CreditFacility.  As of July 3, 2002, this facility is collateralized with $1.9million of cash restricted from general use.

The Company’s future operating performance andability to service or refinance the Senior Notes will be subject to futureeconomic conditions and to financial, business and other factors, many of whichare beyond the Company’s control.  Significant liquidity demands willarise from debt service on the Senior Notes.

As of January 2, 2002, the Company had contractualobligations as follows: 
|                                |   | **Future  payments due by year (in thousands):** |   |
|-------------------------------------|--------|--------------------------------------------------|--------|
| **Contractual  obligations**        |   | **2002**                                         |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   | **Thereafter** |   |
|                                |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Operating leases                    |   | 10,661                                           |   | 9,471 |   | 8,442 |   | 7,731 |   | 7,449 |   | 28,970 |   |
| Senior Notes                        |   | —                                           |   | — |   | — |   | — |   | — |   | 85,310 |   |
| Total  contractual cash obligations |   | 10,661                                           |   | 9,471 |   | 8,442 |   | 7,731 |   | 7,449 |   | 114,280 |   |

 

 

Subsequent to January 2, 2002 the Company executed twelve leases forfuture restaurant openings, all classified as operating leases, increasing thecontractual obligations of the Company as follows:

 
|       |   | **Future  payments due by year (in thousands):** |   |
|------------|--------|--------------------------------------------------|--------|
|       |   | **2002**                                         |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   | **Thereafter** |   |
|       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| New leases |   | 398                                              |   | 1,825 |   | 2,093 |   | 2,093 |   | 2,093 |   | 22,500 |   |

 

 

 

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**Seasonality**

 

                            The Company’s quarterly results of operations havefluctuated and are expected to continue to fluctuate depending on a variety offactors, including the timing of new restaurant openings and related preopeningand other startup expenses, net sales contributed by new restaurants, increasesor decreases in comparable restaurant sales, competition and overall economicconditions.  The Company’s business isalso subject to seasonal influences of consumer spending, dining out patternsand weather.  As is the case with manyrestaurant companies, the Company typically experiences lower net sales and netincome during the first and fourth quarters. Because of these fluctuations in net sales and net loss, the results ofoperations of any quarter are not necessarily indicative of the results thatmay be achieved for a full year or any future quarter.

 

**Forward-Looking Statements**

 

                            All statements other than statementsof historical facts included in this Quarterly Report on Form 10-Q, including,without limitation, statements set forth under “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” regarding theCompany’s future financial position, business strategy, budgets, projectedcosts and plans and objectives of management for future operations, areforward-looking statements.  Inaddition, forward-looking statements generally can be identified by the use offorward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate” or “believe” or thenegative thereof or variations thereon or similar terminology.  Although the Company believes that theexpectations reflected in such forward-looking statements will prove to havebeen correct, it can give no assurance that such expectations will prove tohave been correct. Factors including those set forth herein, as well as thoseset forth in the Company’s Form 10-K filed with the Securities and ExchangeCommission (“SEC”) on April 1, 2002 and other filings with the SEC may affectsuch expectations.  Investors arecautioned not to place undue reliance on these forward-looking statements,which speak only as of the date hereof. The Company undertakes no obligation to publicly release any revisionsto these forward-looking statements to reflect events or circumstances afterthe date hereof or to reflect the occurrence of unanticipated events.

 

 

# **Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS**

TheCompany has market risk associated with interest rate risk.  The Company manages its exposure through itsregular financing activities.  Interestrate changes would result in a change in the fair value of the Company’s debtfacilities due to the difference between the market interest rate and the rateat the date of issuance of the debt facilities.  Furthermore, the Company has no exposure to specific risksrelated to derivatives or other “hedging” types of financial instruments.

 

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PART II: OTHER INFORMATION

 

Item 1.  LEGAL PROCEEDINGS

                The Company is involved in various legal proceedingsfrom time to time incidental to the conduct of its business. In the opinion ofmanagement, any ultimate liability arising out of such proceedings will nothave a material adverse effect on the financial condition or results ofoperations of the Company.

 

                Management is not aware of any litigation to whichthe Company is a party that is likely to have a material adverse effect on theCompany.

 

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

                None

 

Item 3.  DEFAULTS UPON SENIOR SECURITIES

                None

 

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

                None

 

Item 5.  OTHER INFORMATION

None

 

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

TheCompany filed a Form 8-K on May 2, 2002 announcing Deloitte & Touche LLP asthe Company’s independent public accountants for the 2002 fiscal year,replacing Arthur Andersen LLP.

 

 

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SIGNATURES

 

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 
|                                    |   | BERTUCCI’S  CORPORATION               |
|-----------------------------------------|--------|--------------------------------------------|
|                                    |   | (Registrant)                               |
|                                    |   |                                       |
| Date:    August 16, 2002 |   | By:  /s/ Benjamin R. Jacobson              |
|                                    |   | Chairman  of the Board of Directors,       |
|                                    |   | Chief  Executive Officer, Treasurer        |
|                                    |   | (Principal  Executive Officer)             |
|                                    |   |                                       |
| Date:    August 16, 2002 |   | By:  /s/ Kurt J. Schnaubelt                |
|                                    |   | Chief  Financial Officer,                  |
|                                    |   | Senior  Vice President — Finance and  |
|                                    |   | Administration  (Chief Accounting Officer) |

 

 

CERTIFICATIONS

 

In connection with theQuarterly Report of Bertucci’s Corporation (“the Company”) on Form 10-Q for theperiod ending July 3, 2002 as filed with the Securities and ExchangeCommission on the date hereof (“the Report”), we certify, pursuant to 18 U.S.C.SECTION 1350, as adopted pursuant to SECTION 906 of the SARBANES-OXLEY ACT of2002, that:

 

(1)          The Report fully complies with the requirements ofsection 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          The information contained in the Report fairlyrepresents, in all material respects, the financial condition and result ofoperations of the Company.

 

 
| By: /s/ Benjamin R.  Jacobson           |   | By: /s/ Kurt J. Schnaubelt                 |
|-----------------------------------------|--------|--------------------------------------------|
| Chairman of the Board of  Directors,    |   | Chief Financial Officer,  Senior Vice      |
| Chief Executive Officer,  Treasurer     |   | President — Finance and               |
| (Principal Executive  Officer)          |   | Administration (Chief  Accounting Officer) |
|                                    |   |                                       |
| Date:    August 16, 2002 |   | Date:    August 16, 2002    |

 

 

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