SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 24, 2005
GRILL CONCEPTS, INC.
(Exact name of registrant as specified in Charter)
Delaware 0-23226 13-3319172
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation or Identification No.)
organization)
11661 San Vicente Blvd., Suite 404
Los Angeles, California 90049
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(Address of Principal Executive Offices)(Zip Code)
310-820-5559
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(Issuer Telephone number)
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 4.02. Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
On March 24, 2005, management of Grill Concepts, Inc. (the "Company") discussed
with the Audit Committee of the Board of Directors of the Company (the "Audit
Committee") and representatives of the Company's current independent registered
public accounting firm the views expressed by the Office of the Chief Accountant
of the Securities and Exchange Commission (the "SEC") on February 7, 2005
regarding certain operating lease accounting issues and their application under
generally accepted accounting principles ("GAAP") as they relate to the
Company's current lease accounting practices. Based on those discussions,
management of the Company and the Audit Committee made a determination that the
Company's then-current method of lease accounting, including its then-current
method of accounting for rent holidays and computation of minimum lease
payments, were not in accordance with GAAP and that the impact of this
difference was material to the company's historical financial statements. The
Company is in process of discussing the impact of the SEC guidance with respect
to lease accounting on our historical financial statements with our former
independent registered public accounting firm. At this point however, the
Company has not had adequate time to provide said firm with sufficient
information on which to base a conclusion as to the impact of this guidance, and
no conclusions have been reached.
Historically, the Company recognized straight-line rents and amortized tenant
improvement allowances using the initial non-cancelable term of the lease
commencing on the date rent payments began. Under GAAP, as highlighted in the
SEC guidance, the Company should have recognized rent expense (net of the
related tenant improvement allowances) on a straight-line basis over the initial
non-cancelable term of the lease and beginning on the later of when the Company
has access to the site or the lease is executed. Further, the Company
historically has not included consumer price index adjustments in its
computation of minimum lease payments. GAAP requires that lease escalation based
on future consumer price index adjustments be included in the computation of
minimum lease payments using the index rate at lease inception. The Company is
in the process of finalizing the calculations to quantify such adjustments.
Also at the March 24, 2005 meeting, management discussed reclassifying amounts
that had previously been recorded as restaurant sales revenue arising from
complimentary and promotional activities as the current method of recording
these transactions was not in accordance with GAAP. Historically the amounts
associated with complimentary and promotional activities have been recorded as
restaurant revenues, with the offsetting expense in restaurant operations and
corporate general and administrative expenses. As revised, the Company will
account for complimentary and promotional activities on a net basis with no
revenue or expense being recognized. The total amounts of complimentary and
promotional activities recorded as revenue were $1.9 million in 2004, $1.7
million in 2003 and $1.5 million in 2002. There will be no impact on net income
resulting from this reclassification.
As a result of the foregoing determinations we are correcting our method of
accounting for leases and our presentation of amounts resulting from
complimentary and promotional activities. Our 2004 financial statements will
reflect the lease and revenue accounting on these revised basis, and we will
restate our financial statements for 2002 and 2003 to ensure the revised
accounting is consistently applied. In light of the planned restatement, the
financial statements for the years ended December 31, 2003 and 2002 and related
interim periods contained in the Company's prior filings with the SEC should no
longer be relied upon. The Audit Committee discussed these conclusions with the
Company's current independent registered public accounting firm.
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The Company is working diligently to complete its review of its accounting for
these leases and to quantify the impact of the necessary adjustments on each of
the reporting periods. Upon completion of this process the Company will amend
the appropriate filings with the Securities and Exchange Commission ("SEC") to
include the restated financial statements.
Due to the time and effort involved in fully determining the effect of these
adjustments on the Company's previously issued financial statements, the Company
will be required to file a Form 12b-25 with the Securities and Exchange
Commission, extending for 15 days the due date of its Annual Report on Form 10-K
for the fiscal year ended December 26, 2004.
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 hereunto duly authorized.
GRILL CONCEPTS, INC.
Dated: March 29, 2005
By: /s/ Philip Gay
Philip Gay
Executive Vice President and
Chief Financial Officer
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