10-Q 1 a2049372z10-q.txt 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended APRIL 1, 2001 ----------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ --------------- Commission file number 1-9573 -------------------------------- UNO RESTAURANT CORPORATION -------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 04-2953702 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 CHARLES PARK ROAD, WEST ROXBURY, MASSACHUSETTS 02132 -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617) 323-9200 -------------------------------------------------------------- (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of May 1, 2001, 11,000,302 shares of the registrant's Common Stock, $.01 par value, were outstanding. UNO RESTAURANT CORPORATION INDEX PAGE PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS.............................3 Consolidated Balance Sheets -- April 1, 2001 and October 1, 2000 ...............3 Consolidated Statements of Income -- Thirteen and twenty-six weeks ended April 1, 2001 and April 2, 2000..................4 Consolidated Statements of Cash Flows -- Twenty-six weeks ended April 1, 2001 and April 2, 2000....................................5 Notes to Consolidated Financial Statements.......................................6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS...................13 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION...............................14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................14 2 CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data)

~~PAGE~~April 1, October 1, 2001 2000 ----------- ~~PART~~---------- I.(Unaudited) ~~FINANCIAL~~ASSETS ~~INFORMATION~~CURRENT ~~ITEM~~ASSETS Cash $ 1.,272 ~~FINANCIAL~~$ ~~STATEMENTS............................~~788 Accounts receivable, net 2,832 3,530 ~~Consolidated~~Inventory ~~Balance~~2,515 ~~Sheets~~2,497 Prepaid expenses and other assets 2,346 1,999 --------- ~~December~~--------- 31TOTAL CURRENT ASSETS 8,965 ~~2000~~8,814 ~~and~~PROPERTY ~~October~~AND 1EQUIPMENT Land 20,126 ~~2000...........~~19,640 Buildings 38,317 35,215 Leasehold improvements 110,008 106,342 Equipment 68,199 64,385 Construction in progress 2,488 3,029 ~~Consolidated~~--------- ~~Statements~~--------- of239,138 ~~Income~~228,611 Allowance for depreciation and amortization 93,492 86,619 --------- ~~Thirteen~~--------- ~~weeks~~145,646 ~~ended~~141,992 ~~December~~OTHER 31ASSETS Deferred income taxes 14,089 ~~2000~~14,132 Liquor licenses and ~~January~~other assets 3,691 3,538 --------- --------- $172,391 $168,476 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,951 $ 9,851 Accrued expenses 9,470 8,459 Accrued compensation and taxes 3,751 2,889 ~~2000.................................4~~Income ~~Consolidated~~taxes ~~Statements~~payable 565 558 Current portion of ~~Cash~~long-term ~~Flows~~debt and capital lease obligations 3,932 3,953 --------- ~~Thirteen~~--------- ~~weeks~~TOTAL ~~ended~~CURRENT ~~December~~LIABILITIES 3125,669 ~~2000~~25,710 ~~and~~Long-term ~~January~~debt, 2net of current portion 51,773 ~~2000.................................5~~50,900 ~~Notes~~Capital tolease ~~Consolidated~~obligations, ~~Financial~~net ~~Statements......................................6~~of ~~ITEM~~current 2.portion ~~MANAGEMENT'S~~451 ~~DISCUSSION~~453 ~~AND~~Other ~~ANALYSIS~~liabilities OF9,350 ~~FINANCIAL~~9,699 ~~CONDITION~~SHAREHOLDERS' ~~AND~~EQUITY ~~RESULTS~~Preferred OFStock, ~~OPERATIONS~~$1.~~......................8~~00 ~~ITEM~~par 3.value, ~~QUANTITATIVE~~1,000 ~~AND~~shares ~~QUALITATIVE~~authorized, ~~DISCLOSURE~~none ~~ABOUT~~issued ~~MARKET~~Common ~~RISKS~~Stock, $.~~.................12~~01 ~~PART~~par ~~II.~~value, ~~OTHER~~25,000 ~~INFORMATION~~shares ~~ITEM~~authorized, 6.15,779 ~~EXHIBITS~~and ~~AND~~15,744 ~~REPORTS~~shares ONissued ~~FORM~~and 8out-~~K...............13~~ standing in fiscal years 2001 and 2000, respectively 158 158 Additional paid-in capital 58,974 58,755 Retained earnings 59,253 56,038 --------- --------- 118,385 114,951 Treasury Stock (4,784 shares in fiscal years 2001 and 2000) at cost (33,237) (33,237) --------- --------- TOTAL SHAREHOLDERS' EQUITY 85,148 81,714 --------- --------- $172,391 $168,476 ========= =========

3 CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data)

~~DECEMBER~~Thirteen ~~31,~~Weeks ~~OCTOBER~~Ended 1,Twenty-six ~~2000~~Weeks ~~2000~~Ended ------------------------- ------------------------- ~~(UNAUDITED)~~April ~~ASSETS~~1, ~~CURRENT~~April ~~ASSETS Cash $ 757 $ 788 Accounts receivable~~2, ~~net~~April 31,~~735~~ ~~3,530~~April ~~Inventory~~ 2,~~631~~ ~~2,497~~2001 ~~Prepaid~~2000 ~~expenses~~2001 ~~and~~2000 ~~other~~-------- ~~assets 2,164 1,999~~ -------- -------- --------- ~~TOTAL~~REVENUES ~~CURRENT~~Restaurant ~~ASSETS~~sales 9$58,~~287~~252 8$50,~~814~~501 ~~PROPERTY AND EQUIPMENT Land 20~~$113,~~126~~711 ~~19,640~~$ ~~Buildings 37~~99,~~218~~529 ~~35,215~~Consumer ~~Leasehold~~product ~~improvements~~sales ~~106~~2,~~980~~753 ~~106~~2,~~342~~819 ~~Equipment 66~~6,~~059~~086 645,~~385~~630 ~~Construction~~Franchise inincome ~~progress~~1,410 31,~~982~~341 32,~~029~~907 2,648 --------- --------- ~~234,365 228,611 Allowance for depreciation and amortization 90,075 86,619~~ --------- --------- ~~144~~62,~~290~~415 ~~141~~54,~~992~~661 ~~OTHER~~122,704 ~~ASSETS~~107,807 ~~Deferred~~COSTS ~~income~~AND ~~taxes~~EXPENSES ~~14,493~~Cost ~~14,132~~of ~~Liquor~~food ~~licenses~~ and ~~other~~beverages ~~assets 3~~15,~~192~~877 313,~~538~~608 ~~--------- --------- $171~~31,~~262~~004 ~~$168~~26,~~476~~971 ~~=========~~Labor ~~=========~~and ~~LIABILITIES~~benefits ~~AND~~20,179 ~~SHAREHOLDERS'~~17,093 ~~EQUITY~~39,363 ~~CURRENT~~33,296 ~~LIABILITIES~~Occupancy ~~Accounts~~costs ~~payable~~9,136 $ 7,~~761~~616 $17,484 914,~~851~~962 ~~Accrued~~Other ~~expenses~~operating 9costs 5,~~316~~209 84,~~459~~530 ~~Accrued~~10,408 ~~compensation~~8,928 General and ~~taxes~~administrative 25,~~898~~173 24,~~889~~307 ~~Income~~9,983 ~~taxes~~8,510 ~~payable~~Depreciation ~~1,558~~and ~~558~~amortization ~~Current~~3,450 ~~portion~~3,270 of6,888 ~~long~~6,494 Pre-~~term~~opening ~~debt~~costs ~~and~~346 ~~capital~~393 ~~lease~~587 ~~obligations~~868 ~~3,927~~-------- ~~3,953~~-------- --------- --------- ~~TOTAL CURRENT LIABILITIES 25~~59,~~460~~370 ~~25,710 Long-term debt, net of current portion 52,257~~ 50,~~900~~817 ~~Capital lease obligations~~115,717 ~~net of current portion 452 453 Other liabilities 9~~100,~~355~~029 ~~9,699~~OPERATING ~~SHAREHOLDERS'~~INCOME ~~EQUITY Preferred Stock~~3,045 ~~$1.00 par value~~3,844 16,~~000~~987 ~~shares authorized~~7,778 ~~none~~INTEREST ~~issued~~AND ~~Common~~OTHER ~~Stock,~~EXPENSE ~~$.01~~958 ~~par~~742 ~~value~~2,097 251,~~000~~382 ~~shares~~-------- ~~authorized, 15,774 and 15,744 shares issued and outstanding in fiscal years 2001 and 2000, respectively 158 158 Additional paid~~-in------- ~~capital 58,943 58,755 Retained earnings 57,874 56,038~~ --------- --------- ~~116,975~~INCOME ~~114,951~~BEFORE ~~Treasury~~INCOME ~~Stock~~TAXES (42,~~784~~087 ~~shares~~3,102 in4,890 ~~fiscal~~6,396 ~~years~~PROVISION ~~2001~~FOR ~~and~~INCOME ~~2000)~~TAXES at708 ~~cost~~1,055 ~~(33~~1,~~237)~~675 ~~(33~~2,~~237)~~175 --------- --------- ~~TOTAL SHAREHOLDERS' EQUITY 83,738 81,714~~ --------- --------- NET INCOME $~~171~~ 1,~~262~~379 $~~168~~ 2,~~476~~047 $ 3,215 $ 4,221 ======== ======== ========= ========= Earnings per Share: Basic $ .13 $ .18 $ .29 $ .37 Diluted $ .12 $ .17 $ .28 $ .35 Weighted average shares outstanding: Basic 10,992 11,302 10,987 11,303 Diluted 11,375 12,077 11,286 12,077

4 CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)

~~THIRTEEN~~Twenty-Six ~~WEEKS~~Weeks ~~ENDED~~Ended ---------------------------~~-----~~ ~~December~~April 311, ~~January~~April 2, ~~2000~~2001 2000 --------~~---~~ --------- ~~REVENUES~~OPERATING ~~Restaurant~~ACTIVITIES ~~sales~~Net income $55 3,~~459~~215 $49 4,~~028~~221 ~~Consumer~~Adjustments ~~product~~to ~~sales~~reconcile 3net income to net cash provided by operating activities: Depreciation and amortization 6,~~333~~973 26,~~811~~566 ~~Franchise~~Deferred income 1taxes 43 (938) Provision for deferred rent 152 151 Gain on disposal of equipment (3) (38) Contribution to employee benefit program 0 55 Changes in operating assets and liabilities,~~497~~ net of effects from business acquisitions: Accounts receivable 698 (510) Inventory (18) (210) Prepaid expenses and other assets (520) (703) Accounts payable and other liabilities (451) 10 Income taxes payable 7 (1,~~307~~917) -------- --------- 60NET CASH PROVIDED BY OPERATING ACTIVITIES 10,~~289~~096 536,~~146~~687 ~~COSTS~~INVESTMENT ~~AND~~ACTIVITIES ~~EXPENSES~~Additions ~~Cost~~to ofproperty, ~~food~~equipment and ~~beverages~~leasehold 15improvements (10,~~127~~684) 13(14,~~363~~623) ~~Labor~~Proceeds ~~and~~from ~~benefits~~sale ~~19,184~~of ~~16,203~~fixed ~~Occupancy~~assets ~~costs~~3 838 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (10,~~348~~681) 7(14,~~346~~585) ~~Other~~FINANCING ~~operating~~ACTIVITIES ~~costs~~Proceeds 5from revolving credit agreement 24,~~199~~928 444,~~398~~561 ~~General~~Principal payments on revolving credit agreement and ~~administrative~~capital 4lease obligations (24,~~810~~078) 4(34,~~203~~495) ~~Depreciation~~Purchase ~~and~~of ~~amortization~~Treasury ~~3,438~~Stock 0 (3,~~224~~825) ~~Pre-opening~~Exercise ~~costs~~of ~~241~~stock ~~475~~options 219 1,741 -------- -------- ~~56,347~~NET ~~49,212~~CASH ~~OPERATING~~PROVIDED ~~INCOME~~BY ~~3,942~~FINANCING ~~3,934~~ACTIVITIES ~~INTEREST AND OTHER EXPENSE~~ 1,~~139~~069 ~~640~~7,982 -------- -------- ~~INCOME~~INCREASE ~~BEFORE~~IN ~~INCOME~~CASH ~~TAXES~~484 ~~2,803~~84 ~~3,294~~CASH ~~PROVISION~~AT ~~FOR~~BEGINNING ~~INCOME~~OF ~~TAXES~~YEAR ~~967~~788 ~~1,120~~752 -------- -------- ~~NET~~CASH ~~INCOME~~AT END OF PERIOD $ 1,~~836~~272 $ ~~2,174~~836 ======== ======== ~~Earnings per Share: Basic $ .17 $ .19 Diluted $ .16 $ .18 Weighted average shares outstanding: Basic 10,981 11,303 Diluted 11,198 12,077~~

Certain amounts in fiscal 2000 have been reclassified to permit comparison. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in financial statements prepared in conformity with generally accepted accounting principles. They should be read in conjunction with our financial statements for the fiscal year ended October 1, 2000. The accompanying financial statements include all adjustments (consisting only of normal recurring accruals) that management considers necessary for a fair presentation of its financial position and results of operations for the interim periods presented. NOTE B - EARNINGS PER SHARE Basic earnings per share represents net income divided by the weighted average shares of common stock outstanding during the period. Weighted average shares used in diluted earnings per share include common stock equivalents arising from stock options using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share.

~~THIRTEEN~~Thirteen ~~WEEKS~~Weeks ~~ENDED~~Ended Twenty-six Weeks Ended April 1, April 2, April 1, April 2, 2001 2000 2001 2000 ---------- ---------- ~~December 31, January 2, 2000 2000~~ ----------- ---------- ~~OPERATING~~Denominator ~~ACTIVITIES~~for ~~Net~~Basic ~~income~~Earnings $per ~~1,836~~Share: $Weighted ~~2,174~~average ~~Adjustments~~shares tooutstanding ~~reconcile~~10,991,914 ~~net income to net cash provided by operating activities: Depreciation and amortization 3~~11,~~466~~302,038 310,~~258~~986,596 ~~Deferred income taxes (361) (520) Provision for deferred rent 69 73 Gain on disposal of equipment (3) (23) Contribution to employee benefit program 0 55 Changes in operating assets and liabilities~~11,302,728 ~~net~~Common ofStock ~~effects from business acquisitions~~equivalents: ~~Accounts~~Stock ~~receivable~~options ~~(205)~~382,616 ~~(955)~~774,800 ~~Inventory (134) (208) Prepaid expenses and other assets 171 (658) Accounts payable and other liabilities (1~~299,~~637)~~515 ~~(175) Income taxes payable 1~~774,~~000~~331 ~~(337)~~ ---------- ---------- ~~NET CASH PROVIDED BY OPERATING ACTIVITIES 4,202 2,684 INVESTMENT ACTIVITIES Additions to property, equipment and leasehold improvements (5,754) (6,923) Proceeds from sale of fixed assets 3 23~~ ---------- ---------- ~~NET~~Denominator ~~CASH~~for ~~USED~~Diluted ~~FOR~~Earnings ~~INVESTING~~per ~~ACTIVITIES~~Share: ~~(5,751)~~Weighted ~~(6,900)~~average ~~FINANCING~~shares ~~ACTIVITIES~~outstanding ~~Proceeds~~including ~~from~~common ~~revolving~~stock ~~credit~~equivalents ~~agreement~~11,374,530 1412,~~976~~076,838 2111,~~647~~286,111 ~~Principal~~12,077,059 ~~payments~~========== on========== ~~revolving~~========== ~~credit~~========== ~~agreement~~Net ~~and~~income ~~capital~~$1,379,000 ~~lease~~$2,047,000 ~~obligations (13~~$3,~~646)~~215,000 ~~(17~~$4,~~404)~~221,000 ~~Exercise~~========== of========== ~~stock~~========== ~~options~~========== ~~188~~Basic ~~293~~and ~~--------~~Diluted ~~--------~~Earnings ~~NET~~per ~~CASH~~Share: ~~PROVIDED~~Basic BY$ ~~FINANCING~~.13 ~~ACTIVITIES~~$ ~~1,518~~.18 ~~4,536~~$ ~~--------~~.29 ~~--------~~$ ~~INCREASE~~.37 ~~(DECREASE)~~=========== IN========== ~~CASH~~========== ~~(31)~~========== ~~320~~Diluted ~~CASH~~$ AT.12 ~~BEGINNING~~$ OF.17 ~~PERIOD~~$ ~~788~~.28 ~~752 -------- -------- CASH AT END OF PERIOD~~ $ ~~757~~.35 $=========== ~~1,072~~========== ========== ==========

NOTE C - NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal year 2001. This statement requires all derivatives to be carried on the balance sheet as assets or liabilities at fair value. The accounting for changes in the fair value of the derivatives would depend on the hedging relationship and would be reported in the income statement, or as a component of comprehensive income. We adopted this new accounting standard during the first quarter of fiscal 2001. The adoption of SFAS No. 133 did not have a material impact on the consolidated financial statements. 6 In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB 101 clarifies the SEC staff's views on applying generally accepted accounting principles to revenue recognition in financial statements. We are required to adopt SAB 101 in the fourth quarter of fiscal 2001, and we believe that the adoption of this pronouncement will not have an impact on the consolidated financial statements. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR CAUTIONARY STATEMENT From time to time, information and statements provided by our filings with the Securities and Exchange Commission, shareholder reports, press releases and oral statements may include forward-looking statements which reflect our current view with respect to future events and financial performance. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from historical results or those anticipated. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Risks and uncertainties include, without limitation, the ability to open new restaurants and operate new and existing restaurants profitably, changes in local, regional and national economic conditions, especially economic conditions in the areas in which our restaurants are concentrated, increasingly intense competition in the restaurant industry, increases in food, labor, employee benefits and similar costs, and other risks detailed from time to time in our news releases, reports to shareholders and periodic reports filed with the Securities and Exchange Commission. The following tables set forth the percentage relationship to total revenues, unless otherwise indicated, of certain items included in our income statements and operating data for the periods indicated: THIRTEEN WEEKS ENDED APRIL 1, 2001 COMPARED TO THIRTEEN WEEKS ENDED APRIL 2, 2000

~~THIRTEEN~~13 ~~WEEKS~~Weeks ~~ENDED~~Ended -------------- 4/1/01 4/2/00 ------ -------- ~~DECEMBER~~REVENUES: ~~31,~~Restaurant ~~JANUARY~~sales 93.3% 92.4% Consumer product sales 4.4 5.2, ~~2000~~Franchise ~~2000~~income 2.3 2.4 ------ ------ Total 100.0% 100.0% ------ ------ ~~Numerator~~COSTS ~~for~~AND ~~Basic~~EXPENSES: ~~Earnings~~Cost ~~per~~of ~~Share:~~food ~~Weighted~~and ~~average~~beverages ~~shares~~(1) ~~outstanding~~26.0% ~~10,981,278~~25.5% ~~11,303,383~~Labor ~~Common~~and ~~Stock~~benefits ~~equivalents:~~(1) ~~Stock~~33.1 ~~options~~32.1 ~~216,464~~Occupancy ~~773,862~~costs (1) 15.0 14.3 Other operating costs (1) 8.5 8.5 General and administrative 8.3 7.9 Depreciation and amortization (1) 5.7 6.1 Pre-opening costs (2) .6 .8 ------~~----~~ ------~~-----~~ ~~Numerator~~Operating ~~for~~income ~~Diluted~~4.9 ~~Earnings~~7.0 ~~per~~Interest ~~Share:~~and ~~Weighted~~other ~~average~~expense ~~shares~~1.6 ~~outstanding~~1.3 ~~including~~------ ~~common~~------ ~~stock~~Income ~~equivalents~~before ~~11,197,742 12,077,245 =========== =========== Net~~ income ~~$1,836,000~~taxes ~~$2,174,000~~3.3 ~~===========~~5.7 ~~===========~~Provision ~~Basic~~for ~~and~~income ~~Diluted~~taxes ~~Earnings per Share: Basic $~~ 1.171 $ 1.199 ~~===========~~------ ~~===========~~------ ~~Diluted~~Net $income 2.162% $ 3.188% ======~~=====~~ ======~~=====~~

(1) Percentage of restaurant and consumer product sales (2) Percentage of restaurant sales NUMBER OF RESTAURANTS AT END OF QUARTER: Company-owned Uno's - full service 112 103 Franchised Uno's - full service 68 62 8 TOTAL REVENUES. Total revenues increased 14.2% to $62.4 million from $54.7 million last year. RESTAURANT SALES. Company-owned restaurant sales rose 15.3% in the second quarter of fiscal 2001 to $58.3 million from $50.5 million last year, due primarily to the net addition of nine restaurants during the past four quarters. This new unit growth led to a 9.2% increase in operating weeks for the quarter versus the same period last year. Comparable store sales rose 3.8% for the quarter, also contributing to the sales growth. Average weekly sales, which includes sales at comparable stores as well as new units, increased 6.0% during the second quarter, reflecting higher-than-average sales levels for our newest prototype units. Four company-owned restaurants opened during the quarter (including one acquired from a franchisee) and two were closed. CONSUMER PRODUCT SALES. Consumer product sales decreased 2.3% during the second quarter of fiscal 2001 to $2.75 million from $2.82 million last year. Sales in the contract food service category grew 7.8% over last year, primarily reflecting increased shipments to airlines. Sales of fresh product to retail grocers in the Northeast were down 21.4%, due in part to lower levels of promotional activity during the second quarter of fiscal 2001. FRANCHISE INCOME. Franchise income, which includes royalty income and initial franchise fees, increased to $1.4 million from $1.3 million last year. Royalty income rose 7.5% to $1.4 million this year compared to $1.3 million last year, reflecting a 10.1% increase in total operating weeks and a 4.1% gain in average weekly sales for full-service franchised restaurants. Franchise fees of $50,000 were recorded during the second quarter of fiscal 2001 compared to $75,000 last year. Two full-service franchised restaurants opened during the quarter, while one was sold to the company. COST OF FOOD AND BEVERAGES. Cost of food and beverages as a percentage of restaurant and consumer product sales increased to 26.0% from 25.5% last year, primarily reflecting the impact of a shift in menu mix to higher cost specialty items. LABOR AND BENEFITS. Labor costs as a percentage of restaurant and consumer product sales rose to 33.1% from 32.1%, primarily due to an increase in the average wage rate, higher insurance costs, slightly lower direct labor productivity and increased management staffing levels. OCCUPANCY COSTS. Occupancy costs increased as a percentage of restaurant and consumer product sales to 15.0% from 14.3% due primarily to higher utility costs. OTHER OPERATING COSTS. Other operating costs at 8.5% as a percentage of restaurant and consumer product sales remained stable compared to last year. GENERAL AND ADMINISTRATIVE. General and administrative expense as a percentage of total revenues increased to 8.3% from 7.9% last year, primarily reflecting growth in salary and wage costs. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a percentage of restaurant and consumer product sales declined to 5.7% from 6.1% last year due to sales leverage gains. PRE-OPENING COSTS. Pre-opening costs as a percentage of restaurant sales decreased to 0.6% from 0.8% on a slightly slower pace of new store openings. OPERATING INCOME. Operating income was $3,045,000, which represents an operating margin of 4.9%. Operating income for last year was $3,844,000, which represents an operating margin of 7.0%. INTEREST AND OTHER EXPENSE. Interest and other expense of $958,000 is up from $742,000 last year, primarily reflecting the impact of a $12.6 million increase in the average bank debt outstanding. PROVISION FOR INCOME TAXES. The effective tax rate for the quarter was 34.0% versus an effective tax rate of 34.0% for the same quarter last year. NET INCOME. Net income decreased to $1.4 million from $2.0 million last year based on the factors noted above. 9 TWENTY-SIX WEEKS ENDED APRIL 1, 2001 COMPARED TO TWENTY-SIX WEEKS ENDED APRIL 2, 2000

1326 ~~WEEKS~~Weeks ~~ENDED~~Ended --------------~~-----------------~~ 124/311/0001 14/022/00 -------- ------- REVENUES: Restaurant sales 92.07% 92.3% Consumer product sales 5.50 5.32 Franchise income 2.53 2.45 ------ ------ Total 100.0% 100.0% ------ ------ COSTS AND EXPENSES: Cost of food and beverages (1) 25.79% 25.86% Labor and benefits (1) 32.69 31.37 Occupancy costs (1) 14.26 14.2 Other operating costs (1) 8.87 8.5 General and administrative 8.01 7.9 Depreciation and amortization (1) 5.87 6.2 Pre-opening costs (2) 0.45 1.09 ------ ------ Operating income 6.5.7 7.42 Interest and other expense 1.97 1.23 ------ ------ Income before ~~income~~ taxes 4.60 65.29 Provision for income taxes 1.64 2.10 ------ ------ Net income 32.06% 43.19% ====== ======

(1) Percentage of restaurant and consumer product sales (2) Percentage of restaurant sales TOTAL REVENUES. Total revenues increased 13.8% to $122.7 million from $107.8 million last year. RESTAURANT SALES. Company-owned restaurant sales rose 14.2% to $113.7 million from $99.5 million last year. The gain reflects a 10.1% increase in operating weeks for the first half of fiscal 2001 versus the same period last year. Higher comparable store sales also contributed to the revenue growth, up 2.1% for the twenty-six week period. Average weekly sales, which includes sales at comparable stores as well as new units, increased 3.9% during the first six months of the fiscal year. Five company-owned restaurants opened during the first half of fiscal 2001 (including one acquired from a franchisee) and three were closed. CONSUMER PRODUCT SALES. Consumer product sales increased 8.1% for the first six months of fiscal 2001 to $6.1 million from $5.6 million last year. Sales in the contract food service category grew 21.8% over last year, primarily reflecting increased shipments to airlines. Sales of fresh product to retail grocers in the Northeast were down 21.0%, the result of lower levels of promotional activity this fiscal year. FRANCHISE INCOME. Franchise income, which includes royalty income and initial franchise fees, increased to $2.9 million from $2.6 million last year. Royalty income rose 8.7% to $2.7 million this year compared to $2.5 million last year, reflecting a 9.5% increase in total operating weeks and a 3.5% gain in average weekly sales for full-service franchised restaurants. Franchise fees of $195,000 were recorded during the twenty-six week period compared to $153,300 last year. Seven full-service franchised restaurants opened during the first six months of fiscal 2001 while one was sold to the company. COST OF FOOD AND BEVERAGES. Cost of food and beverages as a percentage of restaurant and consumer product sales increased to 25.9% from 25.6% last year, primarily reflecting a shift in menu mix to higher cost specialty items. LABOR AND BENEFITS. Labor costs as a percentage of restaurant and consumer product sales rose to 32.9% from 31.7% last year, reflecting the impact of higher wages, 10 increased insurance costs, slightly lower direct labor productivity and higher management staffing levels. OCCUPANCY COSTS. Occupancy costs increased as a percentage of restaurant and consumer product sales to 14.6% from 14.2% due primarily to higher utility costs. OTHER OPERATING COSTS. Other operating costs were 8.7% of restaurant and consumer product sales, up slightly from 8.5% last year on higher advertising and promotion expense. GENERAL AND ADMINISTRATIVE. General and administrative expense as a percentage of total revenues increased to 8.1% from 7.9% last year, reflecting higher salary and wage costs. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a percentage of restaurant and consumer product sales declined to 5.7% from 6.2% last year due to sales leverage gains. PRE-OPENING COSTS. Pre-opening costs as a percentage of restaurant sales decreased to 0.5% from 0.9%, reflecting fewer new store openings during the first half of fiscal 2001 than in the same period last year. OPERATING INCOME. Operating income was $7.0 million, which represents an operating margin of 5.7%. Operating income for last year was $7.8 million, which represents an operating margin of 7.2%. INTEREST AND OTHER EXPENSE. Interest and other expense of $2,097,000 is up from $1,382,000 last year due primarily to a $15.6 million increase in the average bank debt outstanding. PROVISION FOR INCOME TAXES. The effective tax rate for the first six months of fiscal 2001 was 34.3% versus an effective tax rate of 34.0% for the same period last year. NET INCOME. Net income decreased to $3.2 million from $4.2 million last year based on the factors noted above. LIQUIDITY AND SOURCES OF CAPITAL The following table presents a summary of our cash flows for the twenty-six weeks ended April 1, 2001.

~~FAIR~~(In ~~VALUE~~Thousands) ~~2001 2002 2003 2004 2005 THEREAFTER 12/31/00~~ ---- ---- ---- ---- ~~----~~Net ~~----------~~cash ~~--------~~provided ~~Liabilities:~~by ~~Fixed~~operating ~~Rate~~activities $~~0.18~~ ~~$0.26~~10,096 ~~$0.28~~Net ~~$0.31~~cash $used ~~0.34~~in $investing ~~2.95~~activities $ 4.32 Average Interest Rate 8.75% 8.75% 8.75% 8.75% 8.75% Variable rate $2.76 $3.68 $2.42 $2.00 $41.00 -- $51.86 Average Interest Rate 6.78% 6.98% 7.34% 7.54% 7.73% Interest Rate Swaps: Receive Variable/ Pay Fixed $(10.0,681) $Net ~~0.01~~cash ~~Weighted~~provided ~~Average~~by ~~Pay~~financing ~~Rate~~activities ~~5.80%~~1,069 -- -- -- -- --Increase ~~Average~~in ~~Receive~~cash ~~Rate~~$ ~~5.33%~~484 ~~-- -- -- -- --~~=======

Historically, we have leased most of our restaurant locations and pursued a strategy of controlled growth, financing our expansion principally from operating cash flow, public equity offerings, the sale of senior, unsecured notes, and revolving lines of credit. During the first six months of fiscal 2001, our investment in property, equipment and leasehold improvements was $10.7 million. We currently plan to open approximately six to eight restaurants in fiscal 2001, four of which were opened in the first six months of the fiscal year. The average cash investment required to open a full service Pizzeria Uno restaurant, excluding land and pre-opening costs, is approximately $1.7 million. As of April 1, 2001, we had outstanding indebtedness of $51.4 million under our $55 million credit facility, $455,000 in capital lease obligations and $4.3 million under our mortgage financing. Advances under the revolving credit facility will accrue interest at the lender's prime rate plus 0-50 basis points, or alternatively, at 75-175 basis points above LIBOR. In June 2000, we amended our $55 million credit facility to increase the revolver component from $26.6 million to $36.6 million, leaving the remaining original principal amounts of the term loans of the facility unchanged. The maturity of the revolver is now June 2005. We anticipate using the revolving credit 11 facility in the future for the development of additional restaurants, and for working capital. On February 25, 2000, the board of directors amended its authorization regarding the repurchase of the company's common stock. Under this amendment, the company has approval to repurchase up to 1,500,000 shares of its common stock at such time and at such prices as the company deems appropriate. To date under this authorization, we have repurchased 1,392,775 shares, with no share repurchases occurring during the first six months of fiscal 2001. On May 11, 2001, we completed a sale-leaseback transaction involving 12 of our company-owned restaurants. Under the transaction, the land, buildings and improvements at the locations were sold for consideration of $25,140,000 and have been leased back for an initial term of 20 years. Net proceeds from the sale were used to reduce outstanding borrowings under the Company's revolving credit facility. The leases have certain financial covenants related to fixed charge coverage for the leased units. The estimated effect of the transaction on our results from operations would be to increase occupancy costs by the net effect of increased lease expense partially offset by lower depreciation, and to reduce, by a lesser amount based on present interest rates, interest expense. We believe that existing cash balances, cash generated from operations and borrowing under our revolving line of credit will be sufficient to fund our capital requirements for the foreseeable future. We are currently obligated under 114 leases, including 110 leases for Company-owned restaurants, two leases for our executive offices, one lease for an office building containing one of our restaurants and one lease for a mill shop. IMPACT OF INFLATION Inflation has not been a major factor in our business for the last several years. We believe we have historically been able to pass on increased costs through menu price increases, but there can be no assurance that we will be able to do so in the future. Future increases in local area construction costs could adversely affect our ability to expand. SEASONALITY Our business is seasonal in nature, with revenues and, to a greater degree, operating income being lower in the first and second fiscal quarters than in other quarters. Our seasonal business pattern is due to our concentration of units in the Northeast, and the resulting lower winter volumes. 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS We have market risk exposure to interest rates on our fixed and variable rate debt obligations and we manage this exposure through the use of interest rate swaps. We do not enter into contracts for trading purposes. The information below summarizes our market risk associated with debt obligations and derivative financial instruments as of April 1, 2001. For debt obligations, the table presents principal cash flows and related average interest rates by expected fiscal year of maturity. For variable rate debt obligations, the average variable rates are based on implied forward rates as derived from appropriate quarterly spot rate observations as of the fiscal quarter end. For interest rate swaps, the table presents the notional amounts and related weighted average interest rates by fiscal year of maturity. The average variable rates are the implied forward rates as derived from appropriate quarterly spot rate observations as of the fiscal quarter end.

13 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company has entered into an Agreement and Plan of Merger, dated as of April 19, 2001, with Uno Restaurant Holdings Corporation (the "Parent"), a corporation formed by Aaron D. Spencer, the Company's chairman and majority stockholder and four key executive officers, and a wholly-owned subsidiary of Parent, Uno Acquisition Corp. Under the Merger Agreement, Uno Acquisition Corp. will be merged with and into the Company, with the Company as the surviving corporation. Upon completion of the merger, each issued and outstanding share of the Company's common stock not owned by Parent will be entitled to receive $9.75 per share in cash, without interest. After the merger, the Company will continue its operations as a privately held company. Completion of the merger is subject to a number of conditions, including receipt of financing, approval by the holders of a majority of the Company's shares not owned or controlled by Mr. Spencer and four key executive officers, holders who seek to exercise their appraisal rights under Delaware law not owning more than five percent of the Company's outstanding shares, receipt of a further fairness opinion from the financial advisor to the Special Committee of the Company's Board of Directors who negotiated the transaction, and absence of a material adverse change or the institution of certain litigation. On April 27, 2001 the Company filed its preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission relating to the merger and the Merger Agreement. Details of the merger and the Merger Agreement are discussed in the proxy statement. INFORMATION CONCERNING THE IDENTITY OF THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK BY EACH OF THESE INDIVIDUALS AND THEIR OTHER POTENTIAL INTERESTS IN THE TRANSACTION CONTEMPLATED BY THIS ITEM 5 MAY BE FOUND IN THE COMPANY'S PRELIMINARY PROXY STATEMENT FILED WITH THE SEC UNDER SCHEDULE 14A ON APRIL 27, 2001 AND IN THE MANAGEMENT GROUP'S SCHEDULE 13D FILED WITH THE SEC. IN CONNECTION WITH THE PROPOSED MERGER, THE COMPANY HAS FILED A PRELIMINARY PROXY STATEMENT AND WILL FILE A DEFINITIVE PROXY STATEMENT ON SCHEDULE 14A WITH THE SEC. SHAREHOLDERS OF THE COMPANY AND OTHER INVESTORS ARE ENCOURAGED TO READ THE PROXY STATEMENT BECAUSE IT CONTAINS AND WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. ALL OF THESE DOCUMENTS THAT HAVE BEEN, OR MAY BE, FILED WITH THE SEC ARE AVAILABLE FREE OF CHARGE ON THE SEC'S WEB SITE (HTTP://WWW.SEC.GOV/). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NO. 2 Agreement and Plan of Merger dated as of April 19, 2001 among Uno Restaurant Corporation, Uno Restaurant Holdings Corporation and Uno Acquisition Corp.* * In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as amended, reference is made to the Company's preliminary proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April 27, 2001, Appendix A of which is hereby incorporated by reference. (b) Reports on Form 8-K Uno Restaurant Corporation did not file any Reports on Form 8-K during the quarter ended April 1, 2001. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNO RESTAURANT CORPORATION -------------------------- (Registrant) Date: May 14, 2001 By: /s/ Craig S. Miller ---------------- ---------------------------------- Craig S. Miller Chief Executive Officer (Principal Executive Officer) Date: May 14, 2001 By: /s/ Robert M. Vincent ---------------- ---------------------------------- Robert M. Vincent Executive Vice President and Chief Financial Officer (Principal Financial Officer) 15

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