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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-27008
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SCHLOTZSKY'S, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2654208
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
203 COLORADO STREET, AUSTIN, TEXAS 78701
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (512) 236-3600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
COMMON STOCK, NO PAR VALUE NASDAQ NATIONAL MARKET
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
PREFERRED STOCK PURCHASE RIGHTS
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 19, 1999 was approximately $60,849,000 based upon the
last sales price on March 19, 1999 on the NASDAQ National Market System for the
Company's common stock. For purposes of this computation, all officers,
directors and 10% beneficial owners of the registrant are deemed to be
affiliates. Such determination should not be deemed an admission that such
officers, directors or 10% beneficial owners are, in fact, affiliates of the
Registrant. Registrant had 7,401,338 shares of Common Stock outstanding on
March 19, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed with
the Securities and Exchange Commission not later than 120 days after the close
of the registrant's fiscal year are incorporated by reference into Part III of
this Form 10-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS. Reference is made to the index on page F-1 for
a list of all financial statements filed as part of this Report.
(a)(2) FINANCIAL STATEMENTS SCHEDULES. Reference is made to the index on
page F-1 for a list of all financial statement schedules filed as part of this
Report.
(a)(3) EXHIBITS
3.1 -- Articles of Incorporation of the Registrant, as amended. (1)
3.2 -- Statement of Resolutions Regarding the Designation,
Preferences and Rights of Class C Series A Junior Participating
Preferred Stock of the Registrant. (2)
3.3 -- Bylaws of the Registrant, as amended.(3)
4.1 -- Specimen stock certificate evidencing the Common Stock. (1)
4.2 -- Schlotzsky's, Inc. Employee Stock Purchase Plan. (4)
4.3 -- Rights Agreement by and between Schlotzsky's, Inc. and
Harris Trust and Savings Bank dated December 18, 1998. (2)
10.1 -- Form of Unit Franchise Agreement entered into by the
Registrant and franchisees.(1)
10.2 -- Form of Unit Development Agreement entered into by the
Registrant and franchisees.(1)
10.3 -- Form of Area Developer Agreement entered into by the
Registrant and area developers.(1)
10.4 -- Form of Master License Agreement entered into by the
Registrant and area master licensees.(1)
10.5(a) -- Form of Territorial Agreement entered into by the
Registrant and master licensees.(1)
10.5(b) -- Form of Master Development Agreement entered into by the
Registrant and master licensees.(1)
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10.6 -- Preferred Stock Repurchase Agreement, dated October 1993, among
the Company, John C. Wooley, Jeffrey J. Wooley, and the purchasers
of Class A Preferred Stock.(1)
10.7 -- Preferred Stock Purchase Agreement, dated July 20, 1994, among the
Registrant and the purchasers.(1)
10.8 -- Registration Rights Agreement, dated July 20, 1994, by and between
the Registrant and the shareholders named therein.(1)
10.9 -- Second Amended Agreement among Shareholders, dated July 20, 1994,
by and among the Registrant and the Shareholders described
therein.(1)
10.10 -- Loan/Compromise and Settlement Agreement, dated April 7, 1994,
between the Federal Deposit Insurance Corporation as Receiver of
Bank of the Hills, Austin, Texas, and the Registrant.(1)
10.11 -- Promissory Note, dated May 18, 1993, of the Registrant to First
State Bank, Austin, Texas in the original principal amount of
$381,249.99.(1)
10.12(a) -- Promissory Note, dated April 15, 1993, of the Registrant to Janet
P. Newberger and Lester Baum, as trustees of the 1992 Newberger
Family Trust, in the original principal amount of $750,000.(1)
10.12(b) -- Promissory Note, dated March 31, 1994, by and between the
Registrant and Janet P. Newberger and Lester Baum, co-trustees of
the 1992 Newberger Family Trust.(1)
10.12(c) -- Second Modification Agreement, dated effective December 31, 1994,
by and between the Registrant and Janet P. Newberger and Lester
Baum, as trustees of the 1992 Newberger Family Trust.(1)
10.12(d) -- Promissory Note, dated September 6, 1995, of the Registrant to
JanMor Corporation, in the original principal amount of
$400,000.(1)
10.13 -- Promissory Note, dated February 1, 1995, of the Registrant to
Liberty National Bank, Austin, Texas in the original principal
amount $220,000, Security Agreement, dated February 1, 1995 and
Guaranty, dated February 1, 1995, by and between John C. Wooley
and Liberty National Bank.(1)
10.14 -- Real Estate Lien Note and Deed of Trust, Security Agreement and
Financing Statement, dated March 31, 1995, of the Registrant to
Texas Bank, N.A. in the original principal amount of $500,000.(1)
10.15 -- Promissory Note, dated April 14, 1995, between the Registrant and
First State Bank in the original principal amount of
$2,000,000.(1)
10.16 -- Promissory Note and Security Agreement, dated July 15, 1993, of
the Registrant to R. M. Wilkin, Inc. in the original principal
amount of $450,000.(1)
10.17 -- Commitment Letter, dated July 7, 1995, by and between AT&T
Commercial Finance Corporation and the Registrant in an amount not
to exceed $1,100,000.(1)
10.18 -- Term Sheet, dated July 19, 1995 by and between BeneVent-Noro and
the Registrant.(1)
10.19 -- Promissory Note, dated December 1, 1994, by and between Bee
Cave/Westbank, Ltd. and Liberty National Bank in the original
principal amount of $1,150,000.(1)
10.20 -- Loan Commitment, dated July 18, 1995, by and between Manns Capital
Corporation and Bee Cave/Westbank, Ltd., and Letter Amendment to
Permanent Loan Commitment, dated July 28, 1995.(1)
10.21 -- Promissory Note, dated August 18, 1995, by and between the
Registrant and First State Bank in the original principal amount
of $850,000.(1)
10.22 -- Operating Lease for 218 South Lamar, dated May 27, 1994, by and
between William C. Pfluger, et al. and Schlotzsky's Restaurants,
Inc.(1)
10.23 -- Lease Agreement, September 8, 1995, by and between the Registrant
and Austin CBD 29, Inc.(1)
10.24 -- Deed of Trust and Real Estate Lien Note, dated December 31, 1993,
by and between Schlotzsky's Real Estate, Inc. and Austin CBD Block
29, Ltd.(1)
10.25(a) -- Franchise Financing Program Procedures for Qualified Franchisees,
dated April 15, 1994, by and between Captec Financial Group, Inc.
and the Registrant.(1)
10.25(b) -- Ultimate Net Loss Agreement, dated April 15, 1994, by and between
the Registrant and Captec Financial Group, Inc.(1)
10.25(c) -- Amendment to Ultimate Net Loss Agreement, dated March 30, 1995.(1)
10.26(a) -- Franchise finance letter of understanding, dated February 21,
1994, by and between Stephens Franchisee Finance and the
Registrant.(1)
10.26(b) -- Franchisee Financing Agreement, dated September 1, 1994, between
the Registrant and Stephens Diversified Leasing, Inc.(1)
10.27 -- Agreement, dated July 1, 1994, by and among Thomas Development
Corporation, Micardo, Inc. and the Registrant.(1)
<PAGE>
10.28 -- Earnest Money Contract, dated May 20, 1994, among Schlotzsky's
Real Estate, Inc., William C. Pfluger, et al., Schlotzsky's
Restaurants, Inc., the Registrant and John C. Wooley.(1)
10.29 -- Unsecured Promissory Note, dated June 29, 1993, from John C.
Wooley payable to the Registrant in the original principal amount
of $280,000.(1)
10.30 -- Unsecured Promissory Note, dated June 29, 1993, from Jeffrey J.
Wooley payable to the Registrant in the original principal amount
of $150,000.(1)
10.31 -- Unsecured Promissory Note, dated January 1, 1993, from John C.
Wooley payable to the Registrant in the original principal amount
of $319,712.45.(1)
10.32 -- Unsecured Promissory Note, dated January 1, 1993, from Jeffrey J.
Wooley payable to the Registrant in the original principal amount
of $76,540.93.(1)
10.33 -- Unsecured Promissory Note, dated February 6, 1995, from John C.
Wooley payable to the Registrant in the original principal amount
of $131,000.(1)
10.34 -- Unsecured Promissory Note, dated February 6, 1995, from Jeffrey J.
Wooley payable to the Registrant in the original principal amount
of $6,000.(1)
10.35(a) -- Schlotzsky's, Inc. 1993 Third Amended and Restated Stock Option
Plan of the Registrant. (5)
10.35(b) -- Amendments to 1993 Third Amended and Restated Stock Option
Plan. (4)
10.36(a) -- Employment Agreement, dated as of March 1, 1998, by and between
the Registrant and John C. Wooley. (6)
10.36(b) -- Employment Agreement, dated as of March 1, 1998, by and between
the Registrant and Jeffrey J. Wooley. (6)
10.36(c) -- Employment Agreement, dated January 1, 1994, by and between the
Registrant and Kelly R. Arnold.(1)
10.36(d) -- Employment Agreement, dated January 1, 1994, by and between the
Registrant and Karl D. Martin.(1)
10.37(a) -- Indemnity Agreement, dated June 30, 1993, by and between the
Registrant and John C. Wooley.(1)
10.37(b) -- Indemnity Agreement, dated June 30, 1993, by and between the
Registrant and Jeffrey J. Wooley.(1)
10.38 -- Form of Indemnification Agreement for Directors and Officers of
the Registrant.(1)
10.39 -- Schlotzsky's 1995 Nonemployee Directors Stock Option Plan, and
form of Stock Option Agreement.(1)
10.40 -- Warrant Certificate, dated March 31, 1994, of the Registrant to
William C. Pfluger for 75,000 warrants.(1)
10.41 -- Confidentiality Agreement, dated December 8, 1989, by and between
Bunge Foods Corporation and Schlotzsky's Franchising Limited
Partnership.(1)
10.42 -- Real Estate Lien Note dated December 31, 1993, from CBD Block 29,
Ltd. to Schlotzsky's Real Estate, Inc. in the original principal
amount of $302,209.12.(1)
10.43 -- Promissory Note, dated October 4, 1995, from the Registrant to
First State Bank, Austin, Texas in the original principal amount
of $576,000.(1)
10.44 -- Promissory Note dated October 25, 1995, from the Registrant to
United Bank & Trust in the original principal amount of
$500,000.(1)
10.45 -- Promissory Note dated November 1995 from Registrant and
Schlotzsky's Restaurants, Inc. to AT&T Commercial Finance
Corporation in the original principal amount of $1,100,000.(1)
10.46 -- Promissory Note dated November 17, 1995 from Registrant to
Comerica Bank -- Texas in the original principal amount of
$245,000.(1)
10.47 -- Form of Guaranty between Schlotzsky's, Inc. and landlord with
respect to Turnkey restaurants. (7)
10.48 -- Form of Tenant Acknowledgment with Indemnification between
Schlotzsky's Real Estate, Inc. and Franchisee concerning Turnkey
restaurants. (7)
10.49 -- Form of Promissory Note from franchisee/borrower to Schlotzsky's
Real Estate, Inc. (8)
10.50 -- Form of Loan Agreement between franchisee/borrower and
Schlotzsky's Real Estate, Inc. (8)
10.51 -- Form of Assignment of Note and Lien from Schlotzsky's Real Estate,
Inc. to mortgage lender. (8)
10.52 -- Form of Limited Guaranty between Schlotzsky's, Inc. and mortgage
lender with respect to Turnkey restaurants. (8)
<PAGE>
10.53 -- Credit Agreement, as amended, with Wells Fargo. (8)
22.1 -- List of subsidiaries of the Registrant. (8)
24.1* -- Consent of Grant Thornton LLP.
27.1* -- Financial Data Schedule - fiscal year ending 1998.
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* Filed herewith.
(1) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-1 (File No. 33-98004) filed with the Securities and Exchange
Commission on October 12, 1995, as amended, and incorporated herein by
reference.
(2) Previously filed as a Exhibit to the Registrant's Registration of certain
Classes of Securities on Form 8-A filed with the Securities and Exchange
Commission on December 18, 1998 and incorporated herein by reference.
(3) Previously filed as an Exhibit to the Registrant's Report on Form 8-K filed
December 18, 1998 and incorporated herein by reference.
(4) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-8 (File No. 333-57077) filed with the Securities and Exchange
Commission on June 17, 1998, as amended, and incorporated herein by
reference.
(5) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-1 (File No. 333-34921) filed with the Securities and Exchange
Commission on September 4, 1997, as amended, and incorporated herein by
reference.
(6) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on November 16, 1998
and incorporated herein by reference.
(7) Previously filed as an Exhibit to the Registrant's Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 14, 1998,
as amended, and incorporated herein by reference.
(8) Previously filed as an Exhibit to the Registrant's Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 31, 1999
and incorporated herein by reference.
(b) REPORTS ON FORM 8-K
The following is the date and description of the events reported on Form
8-K covering events in the fourth quarter of fiscal year 1998: On December
18, 1998 the Registrant issued a press release announcing the adoption of the
Shareholder's Rights Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934 as amended, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SCHLOTZSKY'S, INC.
By: /s/ John C. Wooley
-------------------------------------------------
John C. Wooley,
Chairman of the Board and Chief Executive Officer
Date: April 14, 1999
<PAGE>
[GRANT THORNTON LETTERHEAD]
The US Member Firm of
Grant Thornton International
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 26, 1999, accompanying the
consolidated financial statements and schedule included in the Annual Report
of Schlotzsky's, Inc. and Subsidiaries on Form 10-K for the year ended
December 31, 1998. We hereby consent to the incorporation by reference of
said reports in the Registration Statements of Schlotzsky's, Inc. on Forms S-8
(File No. 333-57077, effective June 17, 1998 and File No. 333-37785,
effective October 14, 1997 and File No. 333-03809, effective May 15, 1996).
/s/ Grant Thornton LLP
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GRANT THORNTON LLP
Dallas, Texas
March 31, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED
STATEMENTS OF INCOME ON PAGES TWO AND THREE OF THE COMPANY'S FORM 10-K
FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,824,068
<SECURITIES> 0
<RECEIVABLES> 24,066,702
<ALLOWANCES> (1,415,498)
<INVENTORY> 0
<CURRENT-ASSETS> 45,972,830
<PP&E> 20,830,592
<DEPRECIATION> (2,300,846)
<TOTAL-ASSETS> 104,228,140
<CURRENT-LIABILITIES> 19,748,547
<BONDS> 0
0
0
<COMMON> 62,877
<OTHER-SE> 73,899,715
<TOTAL-LIABILITY-AND-EQUITY> 104,228,140
<SALES> 7,720,432
<TOTAL-REVENUES> 41,847,912
<CGS> 2,513,156
<TOTAL-COSTS> 33,971,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 972,724
<INTEREST-EXPENSE> (2,058,262)
<INCOME-PRETAX> 9,935,074
<INCOME-TAX> 3,728,609
<INCOME-CONTINUING> 6,206,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,206,465
<EPS-PRIMARY> .84
<EPS-DILUTED> .82
</TABLE>
