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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1997
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 333-04261
AMERIKING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3970707
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2215 ENTERPRISE DRIVE, SUITE 1502 60154
WESTCHESTER, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 708-947-2150
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE
OF
EACH NAME OF EACH EXCHANGE ON
CLASS WHICH REGISTERED
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
(TITLE OF CLASS)
(TITLE OF CLASS)
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
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: [X]
The aggregate market value of the voting stock held by non-affiliates (as
defined in Rule 405) of the registrant as of March 20, 1998 was approximately
$47,454.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 20, 1998 was 902,992 of common stock, $.01 par value
per Share (the "Common Stock").
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference into
this Annual Report on Form 10-K.
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PART OF FORM 10-K
DOCUMENT WHERE INCORPORATED
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AmeriKing, Inc. Part IV
Registration Statement (Reg. No. 333-04261)
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS....................................................... 1
ITEM 2. PROPERTIES..................................................... 9
ITEM 3. LEGAL PROCEEDINGS.............................................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.............................................. 10
ITEM 6. SELECTED FINANCIAL DATA........................................ 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................ 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................... 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................. 35
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............. 35
ITEM 11. EXECUTIVE COMPENSATION......................................... 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT....................................................... 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES........................ 43
Financial Statements Included in Item 8............................... 43
Schedules Omitted as Not Required and Inapplicable.................... 43
Exhibits.............................................................. 43
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PART I
Certain statements in this Form 10-K may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of AmeriKing, Inc. ("AmeriKing" or the "Company")
to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; competition; success of operating initiatives; development and
operating costs; advertising and promotional efforts; brand awareness; adverse
publicity; acceptance of new product offerings; availability, locations, and
terms of sites for store development; changes in business strategy or
development plans; quality of management; availability, terms, and deployment
of capital; business abilities and judgment of personnel; availability of
qualified personnel; food, labor, and employee benefit costs; changes in, or
the failure to comply with, governmental regulations; regional weather
conditions; construction schedules; and other factors referenced in this Form
10-K.
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
On February 12, 1998, the Company purchased two restaurants in the Chicago
metropolitan area from a third party franchisee for approximately $1.6
million. Subsequent to the end of fiscal 1997, the Company entered into
contracts to purchase nine restaurants in existing markets from third party
franchisees for approximately $6.4 million. The closing of these purchases is
expected to occur by the end of fiscal 1998.
GENERAL
AmeriKing is the second largest independent Burger King franchisee in the
United States with 242 restaurants located in eleven Midwestern and Southern
states. The Company was formed in 1994 by a group consisting of independent
Burger King franchisees, former Burger King Corporation ("BKC") executives and
The Jordan Company. Since inception, the Company has acquired 238 Burger King
restaurants, developed 18 new restaurants, sold 10 restaurants, and closed 4
restaurants.
AmeriKing, Inc. and its wholly owned subsidiary, National Restaurant
Enterprises, Inc. were organized as Delaware corporations and incorporated on
August 17, 1994. AmeriKing's principal executive offices are located at 2215
Enterprise Drive, Suite 1502, Westchester, Illinois, 60154. Its telephone
number is (708) 947-2150.
BURGER KING CORPORATION
Overview. According to information publicly filed by Diagio PLC, the parent
corporation of BKC, BKC is the second largest quick-service hamburger
restaurant franchisor in the world, with system-wide restaurant sales of $9.8
billion for its fiscal year ended September 30, 1997. There are more than
9,400 Burger King restaurants worldwide, of which over 91% are operated by
approximately 1,500 independent franchise groups. According to the most recent
publicly available information, Burger King's share of the quick-service
hamburger restaurant market grew from 18.0% in 1995 to 19.2% in 1996. As is
the case for all Burger King franchisees, the Company is required to comply
with BKC guidelines as to menu and operations, restaurant configurations and
marketing and promotion.
Menu and Operations. The Burger King system philosophy is characterized by
its "Have It Your Way" service, flame-broiling, generous portions and
competitive prices. Each of the Company's Burger King restaurants offers a
standard menu containing a variety of traditional and innovative food items.
Burger King restaurants feature flame-broiled hamburgers, the most popular of
which is The Whopper(R) sandwich. The Whopper(R) is a large, flame-broiled
hamburger on a toasted bun garnished with combinations of lettuce, onions,
pickles, tomatoes, ketchup and mayonnaise. At present, the standard menu of
all Burger King restaurants consists
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primarily of hamburgers, cheeseburgers, chicken sandwiches, fish sandwiches,
breakfast items, french fried potatoes, salads, shakes, desserts, soft drinks,
milk and coffee. In addition, promotional menu items are introduced
periodically for limited times.
The Company's Burger King restaurants are typically open seven days per week
with minimum operating hours from 7:00 AM to 11:00 PM. Burger King restaurants
are of distinctive design and are generally located in high-traffic areas
throughout the United States. The Company believes that convenience of
location, speed of service, quality of food and price/value of food served are
the primary competitive advantages of Burger King restaurants. The Company
believes that it will continue to realize significant benefits from its
affiliation with BKC as a result of the widespread recognition of the Burger
King brand, the effectiveness of BKC's national marketing programs and the
overall management of the Burger King system, including product development,
quality assurance and strategic planning.
The Company participates in a variety of Burger King programs designed to
increase restaurant revenues and profitability. In October 1993, BKC
implemented the first stages of a nationwide Value Menu Program. The program
consisted of discounted combination meals and menu items designed to give the
consumer greater value while increasing customer traffic and profitability.
BKC has also focused its efforts on a back-to-basics marketing strategy by
eliminating over 30 items from its menu and emphasizing its core hamburgers,
french fries and soft drinks. In addition, as part of its "Bigger, Better
Burgers" campaign, BKC increased its standard hamburger patty size to 2.8
ounces, which is 75% larger than McDonald's current standard size of 1.6
ounces. In 1997, BKC introduced a new flagship sandwich, the Big King(R), and
new french fries, its biggest new product launch ever.
Restaurant Configurations. The Company's Burger King restaurants consist of
one of several building types with various layouts, seating capacities and
engineering specifications. BKC's traditional restaurant contains
approximately 2,500 square feet, seats 86 customers and offers interior design
flexibility. BKC also features alternative restaurant formats ranging in size
from 500 to 4,000 square feet and seating capacities ranging up to over 100
customers. BKC has developed a number of standard and non-traditional
restaurant formats which enable maximum seating capacities from available
square footage in such facilities as airports, hospitals, college campuses,
gas stations and retail shopping centers. Substantially all of the Company's
restaurants are traditional free-standing restaurants with seating capacities
of at least 50 and which contain drive-thru windows. According to BKC, over
60% of all restaurant sales in the Burger King system are generated from
drive-thru windows.
National Marketing and Promotion. The Burger King brand has been in
existence for over 40 years. BKC currently has an annual advertising and
promotional budget of over $375 million to heighten brand awareness. BKC's
advertising campaigns are generally carried on television, radio and in mass
circulation print media (national and regional newspapers and magazines). BKC
franchisees are required to contribute 4.0% of monthly gross sales from
restaurant operations to a BKC advertising fund, which contributions are
generally utilized by BKC for its advertising and promotional programs and
public relations activities. BKC has also entered into selective partnership
arrangements to help promote its products.
COMPANY OPERATIONS
Management Structure. All executive management, finance, marketing and
operations support functions are conducted centrally at the Company's
Westchester, Illinois headquarters. In each of its eight regions (Chicago,
Virginia, Colorado, Texas, Tennessee, Cincinnati, North Carolina, and
Wisconsin), the Company has a regional managing director who is responsible
for the operations of all Company Burger King restaurants within the assigned
region. Each of these managing directors must be approved by BKC. Supporting
the managing director in Chicago are two directors of operations (who each
oversee an average of 54 restaurants), who supervise 16 district managers (who
directly supervise six to eight restaurants each). Supporting the managing
director in North Carolina is a director of operations who supervises 5
district managers (who directly supervise six to seven restaurants each). The
six other managing directors are also supported by district managers. The
district managers
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are responsible for direct oversight of the day-to-day operations of the
Company's Burger King restaurants. Typically, district managers have
previously served as restaurant managers within the Burger King system. A
typical Company restaurant is staffed with a full-time manager, one to three
assistant managers and full-and part-time hourly employees.
Management Incentives and Retention. Managing directors, directors of
operations, district managers and most restaurant managers are compensated
with a fixed salary plus a bonus based upon the performance of the restaurants
under their supervision. Evaluation criteria include compliance with Burger
King's restaurant operating guidelines and restaurant profitability. Senior
management believes that the Company's larger size and regional focus provide
significant professional development opportunities for the Company's
management and operating personnel not available to smaller franchisees. The
Company believes that its compensation structure and professional development
opportunities are significant advantages in attracting and retaining qualified
management personnel.
Training. The Company maintains a comprehensive training and development
program for all of its personnel. This program emphasizes the Burger King
system-wide operating procedures, food preparation methods and customer
service standards. The management training program features an intensive five
week hands-on restaurant training period, followed by two weeks of classroom
instruction (one week of simulated restaurant management activities and one
week of food sanitation). Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction. Upon
certification, new managers work closely with experienced managers to solidify
their skills and expertise. The Company's existing restaurant managers
regularly participate in the Company's ongoing training efforts, including
classroom programs and in-restaurant programs. In addition, BKC's training and
development programs are also available to the Company.
Management Information System. The Company's customized management
information system, REMACs, provides daily tracking and reporting of customer
traffic counts, sales, average check values, menu item sales, inventory
variances, key labor measures and other detailed information in comparative
form, by individual restaurant and for the Company as a whole. The Company's
integrated management information system, typically installed in its
restaurants within 60 to 90 days of acquisition, transmits data on a daily
basis to Company headquarters. This information is available by 6:00 AM the
following day and can be accessed by district managers on a remote basis using
a laptop computer. The Company's sophisticated management information system,
typically not affordable by smaller Burger King franchisees and other smaller
quick-service restaurant chains, provides management with the ability to
identify and quickly capitalize on restaurant sales enhancement and profit
opportunities. The Company utilizes its management information system to: (i)
minimize shrinkage and control labor costs; (ii) monitor point-of-sale order
taking; (iii) effectively manage inventory; and (iv) quickly integrate
accounting systems following acquisitions. Customized exception reporting is
used to focus operations on high priority issues and opportunities. The
Company also utilizes the system to increase sales revenues by assisting
restaurant managers in optimally scheduling the restaurant work force during
any particular shift at the restaurant work stations for which they are best
qualified. In addition, the system enables the Company to analyze various
promotional programs using product mix information.
FRANCHISE AGREEMENTS
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to BKC franchise agreements. The BKC
franchise agreements do not grant any franchisee exclusive rights to a defined
territory; however, the Company, based upon its review of BKC's Uniform
Franchise Offering Circular and its experience with BKC, believes that BKC
generally seeks to ensure that newly granted franchises do not materially
affect the operations of existing Burger King restaurants. Acceptance as a
franchisee is based upon several factors, including management experience,
qualifications, financial status and net worth. The franchise agreements
require, among other things, that all restaurants be of standardized design
and operated in a prescribed manner, including utilization of the standard
Burger King menu. Most franchise agreements provide for a term of 20 years,
and, at the option of the franchisee and BKC, a renewal (successor) franchise
agreement may be granted by BKC provided that the restaurant meets BKC's
operating standards applicable at that time
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and the franchisee is not in default under the relevant franchise agreement.
The BKC franchise agreements are noncancelable except for failure to abide by
the terms thereof and in certain other limited circumstances.
BKC franchise agreements generally are renewable for an additional term
based upon the form of franchise agreement applicable at that time, provided
that the franchisee (i) pays a successor franchise fee equal to the franchise
fee applicable at that time, (ii) has demonstrated an ability to operate the
business consistent with the standards set forth in the franchise agreement,
(iii) agrees to make capital improvements to the subject restaurant to bring
the restaurant up to BKC's image standards applicable at that time and (iv) is
not then currently in default with respect to any other obligations to BKC,
including pursuant to other franchise agreements. The Company, through its
district managers, closely supervises the operation of all of its restaurants
to ensure that operating policies are followed and that the requirements of
the franchise agreements are met. The amount of capital expenditures that may
be required to bring a restaurant up to BKC's current standards at any given
time varies widely depending upon the magnitude of the required changes and
the degree to which the franchisee has made interim changes to the restaurant.
Within five years of December 29, 1997, 38 of the Company's subsidiaries'
current 242 franchise agreements with BKC, which contributed $35.5 million in
restaurant sales in fiscal 1997, are scheduled to expire.
The Company intends to expand its operations of Burger King restaurants
through both new restaurant development and acquisitions. Pursuant to current
BKC policies and procedures applicable to the Company, BKC's approval is
required for the development of new Burger King restaurants by the Company and
the acquisition of Burger King restaurants by the Company from other Burger
King franchisees. BKC's consent to such renewals, acquisitions or development
may be withheld in BKC's sole discretion.
Current BKC policies and procedures also place certain restrictions on the
management structure of the Company and its subsidiary franchisees. For
example, a managing owner and an owner must be named in each franchise
agreement. The managing owner has the authority to bind the franchisee in its
dealings with BKC and to direct any action necessary to ensure compliance with
the franchise agreements and related documents, including leases with BKC. In
addition, the managing owner is personally liable to BKC for the franchisee's
obligations under such agreements. Also, each franchise agreement requires
that a managing director be designated to ensure that the day-to-day operation
of the relevant franchised restaurant complies with BKC's standards. BKC has
the right to terminate its franchise agreement with a franchisee if (i) the
franchisee or the managing owner is convicted of a crime punishable by a term
of imprisonment in excess of one year or (ii) the franchisee, the managing
owner or a managing director engages in conduct which reflects unfavorably on
the franchisee or Burger King system generally. Managing owners cannot be
replaced without receiving the consent of BKC. In addition, absent BKC's prior
written consent, managing owners are required to hold a 5% voting interest in
a corporate franchise and to personally guarantee the franchisee's obligations
to BKC. Furthermore, no managing owner or owner may sell, encumber or
otherwise transfer any portion of his equity interest in the Company without
first obtaining the consent of BKC. After the transfer of its equity interest,
managing owners remain personally obligated to BKC under the franchise
agreements and any other agreements between the franchisee and BKC, unless
such obligation has been fully satisfied or waived by BKC.
Pursuant to the BKC franchise agreements, BKC may terminate all the
franchise agreements with the Company's subsidiary franchisees or the
applicable subsidiary franchisee if, as applicable, any person serving on the
board of directors of the Company or the applicable subsidiary franchisee is
(i) an employee of BKC, (ii) an owner (subject to certain exceptions), board
member or principal or employee of any business that is then approved by BKC
as a supplier to the Burger King system or (iii) an owner (subject to certain
exceptions), board member or principal or employee of any hamburger restaurant
business other than the Burger King restaurant business.
OBLIGATIONS TO BURGER KING CORPORATION
BKC franchise agreements provide for a one-time franchise fee (currently
$40,000), a monthly royalty fee of 3.5% of each restaurant's gross sales and a
monthly advertising contribution of 4.0% of gross sales. During fiscal 1997,
the Company paid BKC an aggregate of $7.9 million in royalty fees and $9.1
million in advertising contributions.
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BKC is the lessor on approximately 42% of the Company's currently leased
properties, primarily as a result of the Company's initial acquisition of
Burger King restaurants from BKC. The Company guarantees all of the
obligations of its subsidiaries under these leases. Under certain lease
agreements with BKC affiliates, the Company's subsidiaries made rent payments
aggregating $10.0 million during fiscal 1997. In connection with the execution
of the lease agreements, the Company guaranteed the payment and performance
obligations of each of its subsidiaries. In addition, the Company has agreed
to guarantee the payment and performance obligations under each of the
franchise agreements between BKC and its subsidiary franchisees.
As required by BKC regulations, the Company's obligations under the Senior
Notes (as defined), the Senior Preferred Stock (as defined) and, if issued,
the Exchange Debentures (as defined) will be subject to an intercreditor
agreement pursuant to which the Company's obligations in respect of such
securities are subject to the prior payment in full of all indebtedness,
liabilities and other obligations of the Company and its subsidiaries to BKC
under the BKC franchise agreements, BKC leases and any other indebtedness of
the Company and its subsidiaries to BKC.
The Company has committed to BKC that, without BKC's prior written consent,
(i) it will not pay cash dividends on the Senior Preferred Stock on or prior
to December 1, 2001 and (ii) it will not pay cash dividends to holders of
Common Stock until the Senior Notes are repaid in full and the Senior
Preferred Stock is redeemed or otherwise retired. The Company has also
committed to BKC that for the foreseeable future (i) it will make capital
expenditures on its existing restaurants equal to 1% of its gross sales and
(ii) it will spend an amount equal to 1% of its gross sales on local
advertising.
ADVERTISING AND PROMOTION
The Company supplements BKC's current annual advertising budget and
promotional activities with local advertising and promotions, including
purchasing additional television, radio and print advertising and running
promotional programs that support national programs with local tie-ins to
other consumer brands. These local tie-ins have included cross promotions with
the various professional sports teams and athletes, Nickelodeon, NASCAR, and
several colleges and universities, among others. Other promotional programs
include coupons and price discounts, which are tailored by the Company to
appeal to its customer base depending on demographics and other factors,
thereby creating flexible and directed marketing programs. For fiscal 1997,
the Company spent approximately $3.3 million on supplemental local advertising
and promotions, and plans to continue its local advertising and promotional
programs at comparable levels in the future.
SUPPLIES AND DISTRIBUTION
The Company is a member of a national purchasing cooperative created by and
for the Burger King system known as Restaurant Services, Inc. ("RSI"). RSI is
an independent, member-owned, non-profit cooperative which provides services
on behalf of, and for the benefit of, Burger King restaurant operators. RSI
negotiates the lowest cost for the Burger King system while improving quality,
enhancing competitiveness and ensuring the best possible value. RSI has the
sole and exclusive responsibility for negotiating purchasing arrangements for
the Burger King system with respect to certain paper goods, restaurant
supplies, food and drink products, certain equipment and many other items
mutually agreed to by Burger King franchisees for use in the Burger King
system. The Company uses its purchasing power to negotiate directly with
certain other vendors, as well as each of its distributors, to obtain
favorable pricing and terms for the distribution of its products. Currently,
the Company's primary distributor of foodstuffs and supplies is ProSource
Distribution Services, Inc. ("ProSource").
All BKC-approved suppliers are required by BKC to purchase all foodstuffs
and supplies from BKC-approved manufacturers and purveyors. BKC is responsible
for quality control and supervision of these manufacturers and purveyors, and
BKC monitors all BKC-approved manufacturers and purveyors of its foodstuffs.
BKC regularly visits these manufacturers and purveyors to observe the
preparation of the foodstuffs and conducts various tests to ensure that only
high quality foodstuffs are sold to BKC-approved suppliers,
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distributors and franchisees. In addition, BKC coordinates and supervises
audits of approved suppliers and distributors to determine continuing product
specification compliance and to ensure that manufacturing plant and
distribution center standards are met.
The Company believes that reliable alternative sources for virtually all
restaurant supplies are readily available at competitive prices should the
arrangements with ProSource or any other existing supplier or distributor
change.
QUALITY ASSURANCE
The Company's operations are focused on achieving a high level of customer
satisfaction, with speed, accuracy and quality of service closely monitored.
The Company's senior management and restaurant management staff are
principally responsible for ensuring compliance with the Company's and BKC's
operating procedures. The Company and BKC have uniform operating standards and
specifications relating to the quality, preparation and selection of menu
items, maintenance and cleanliness of the premises and employee conduct.
Detailed reports from the Company's own management information system and
surveys conducted by the Company or BKC are tabulated and distributed to
management on a regular basis to help maintain compliance. In addition to
customer satisfaction, these reports track comparable sales and customer
counts, labor and food costs, inventory levels, waste losses and cash
balances.
All Burger King franchisees operate subject to a comprehensive regimen of
quality assurance standards set by BKC, as well as standards set by Federal,
state and local governmental laws and regulations. These standards include
food preparation rules regarding, among other things, minimum cooking times
and temperatures, sanitation and cleanliness. In addition, BKC has set maximum
time standards for holding unsold prepared food. For example, sandwiches and
french fries are required to be discarded after ten minutes and seven minutes
following preparation, respectively. The "conveyor belt" cooking system
utilized in all Burger King restaurants, which is calibrated to carry
hamburgers through the flame broiler at regulated speeds, is one of the safest
cooking systems among major quick-service restaurants and helps to ensure that
the standardized minimum times and temperatures for cooking are met.
The Company closely supervises the operation of all of its restaurants to
help ensure that standards and policies are followed and that product quality,
customer service and cleanliness of the restaurants are maintained. In
addition, BKC may conduct unscheduled inspections of Burger King restaurants
throughout the nationwide system.
BUSINESS STRATEGY
AmeriKing's business strategy is to continue to increase revenues,
restaurant contribution and earnings before interest, taxes, depreciation and
amortization. The Company's strategy is based on the following elements:
Develop New Burger King Restaurants in Existing Markets. The Company seeks
to develop new Burger King restaurants in existing markets where it has
established a significant presence, enabling the Company to enhance its
operating leverage and increase overall margins and profitability. Management
believes that the underpenetration of the Burger King system relative to other
quick-service hamburger concepts provides the Company with significant new
development opportunities. Furthermore, management believes the Company's new
restaurant development risk is substantially reduced due to: (i) the proven
success of the Burger King concept; (ii) the predictability of development
costs and restaurant profitability compared to that of newer restaurant
concepts; and (iii) management's extensive experience within the Burger King
system. The Company currently leases all of its properties, minimizing its
cost to develop new restaurants.
To date, the Company has developed 18 new restaurants. Prior to developing a
new restaurant, the Company's senior management conducts an extensive site
selection process with significant input from BKC's development field
personnel, including an analysis of projected development costs and
anticipated profitability on a per location basis. The Company's primary
resource is its internal development department, comprised of professionals
with extensive site selection and development experience.
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Pursue Strategic Acquisitions of Burger King Restaurants. The Company
intends to selectively pursue strategic acquisitions in the highly fragmented,
growing Burger King system. Since 1994, the Company has successfully completed
238 restaurant acquisitions for an aggregate purchase price of approximately
$188.9 million. The Company evaluates each prospective acquisition using a set
of stringent criteria, including the potential for future fill-in acquisitions
and new restaurant development in targeted markets and the overall
attractiveness of market demographics. The Company seeks to enter new
geographic markets through acquisitions that provide the critical mass
necessary to realize operating efficiencies. Of the Company's 13 acquisitions
to date, 8 have been of large, regional operations, each consisting of more
than ten restaurants. AmeriKing seeks to augment new market acquisitions with
fill-in acquisitions, which enable the Company to: (i) achieve greater
restaurant penetration within existing markets; (ii) capitalize on its
significant operating leverage; and (iii) increase operating margins and
profitability. The Company continually engages in discussions with Burger King
franchisees, including with respect to the potential acquisition of the
business or assets of such franchisees.
The Company's key criteria when evaluating new market acquisitions are the
future opportunities for fill-in acquisitions, potential for new restaurant
development in the area, the overall attractiveness of the market from a
demographic perspective and the acquisition price relative to historical and
expected financial performance of these restaurants. Typically, key operating
personnel of acquired restaurants are retained to oversee the operation with
the added benefit of the Company's sophisticated management information
systems and other corporate resources.
The Company's fill-in acquisitions typically involve smaller, local
operations in areas in, or contiguous to, the Company's existing operations.
An example of a typical fill-in acquisition is the Company's acquisition in
September 1995 of 5 additional restaurants in Denver, Colorado. An example of
a larger fill-in acquisition is the Company's acquisition in November 1994 of
39 additional restaurants in the Chicago market.
The table below summarizes each of the Company's acquisitions, representing
238 restaurants, since its inception.
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ACQUISITION RESTAURANTS
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September 1994 Illinois/Indiana 68 BKC
September 1994 Texas/Colorado 11 Management
September 1994 Colorado 3 Management
November 1994 Illinois/Wisconsin 39 Franchisee
September 1995 Colorado 5 Franchisee
October 1995 Illinois 2 BKC
November 1995 Tennessee/Georgia 11 Franchisee
February 1996 Virginia/North Carolina 24 Franchisee
February 1996 Kentucky/Ohio/Indiana 12 Franchisee
June 1997 North Carolina 26 Franchisee
August 1997 Illinois 2 Franchisee
September 1997 North Carolina 30 Franchisee
October 1997 Wisconsin 5 Franchisee
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Achieve Operating Efficiencies. The Company's large number of restaurants,
centralized management structure and advanced management information systems
enable the Company to: (i) tightly control restaurant and corporate level
costs; (ii) capture economies of scale by leveraging its existing corporate
overhead structure; and (iii) continuously monitor point-of-sale data to more
efficiently manage its restaurant operations. The Company has experienced both
restaurant-level and corporate-level savings as a result of its size and
related bargaining power, particularly with respect to food and paper
purchasing and distribution, restaurant maintenance services and general
liability insurance.
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Capitalize on Strong Support from Burger King Corporation. The Company
believes that it realizes significant benefits from its affiliation with BKC
as a result of: (i) the widespread recognition of the Burger King name and
products; (ii) BKC's management of the proven, successful Burger King concept,
including new product development, quality assurance and strategic planning;
(iii) the size and market penetration of BKC's approximate $375 million annual
advertising and promotional budget; and (iv) the expected continued growth of
the Burger King system. During BKC's fiscal year ended September 30, 1997, a
record number of 866 new restaurants were added to the Burger King system.
Leverage Sophisticated Management Information System. The Company's
customized integrated management information system, REMACs, typically not
affordable by smaller Burger King franchisees and other smaller quick-service
restaurant chains, provides management with the ability to identify and
quickly capitalize on restaurant sales enhancement and profit opportunities.
The Company utilizes its management information system to: (i) minimize
shrinkage and control labor costs; (ii) efficiently schedule labor; (iii)
effectively manage inventory; (iv) analyze product mix and various promotional
programs using point-of-sale information; and (v) quickly integrate accounting
systems following acquisitions.
Consistently Provide High Quality Products and Superior Customer Service. As
the number of restaurants that the Company owns in a particular market
increases, the Company has a greater ability to (i) ensure overall customer
satisfaction in that market through consistency in food quality, service and
restaurant appearance and (ii) coordinate and influence local Burger King
advertising and promotional programs and pricing policies. In addition, the
large number of restaurants that the Company owns and the corresponding
professional development opportunities permit the Company to attract and
retain strong regional, district and individual restaurant management. Most of
these managers receive significant incentive compensation based on compliance
with Burger King's restaurant operating guidelines and restaurant
profitability.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location and food quality. The industry is mature and competition can
be expected to increase. The Company's Burger King restaurants compete with a
large number of national and regional restaurant chains, as well as locally-
owned restaurants offering low-priced and medium-priced food. Convenience
stores, grocery stores, delicatessens, food counters, cafeterias and other
purveyors of moderately priced and quickly prepared foods also compete with
the Company. In the Company's markets, McDonald's, Wendy's and Hardees provide
the most significant competition.
McDonald's operates more restaurants than the Company in all of the
Company's current markets and is the Company's largest competitor. According
to publicly available information, as of December 31, 1997, the McDonald's
system comprised 23,132 restaurants and total system-wide sales for McDonald's
for the year ended December 31, 1997 were $34.0 billion. The Company believes
that product quality and taste, name recognition, convenience of location,
speed of service, menu variety, price, and ambiance are the most important
competitive factors in the quick-service restaurant industry and that its
Burger King restaurants effectively compete in each category.
The Company faces competition in its expansion plans. Potential Burger King
development and acquisition competitors include BKC, which has exercised its
right of first refusal with respect to previously proposed restaurant sales,
controls the areas in which new Burger King restaurant sites can be developed
and may impose, as a condition to its consent to any proposed acquisition or
development opportunity, conditions, limitations or other restrictions on the
Company and its activities. Other potential competitors in acquiring and
developing Burger King restaurants include other investors and existing Burger
King franchisees. The Company also competes with other quick-service
restaurant operators and developers for the most desirable site locations.
8
<PAGE>
GOVERNMENT REGULATION
The Company is subject to various Federal, state and local laws affecting
its business, including various health, sanitation, fire and safety standards.
Newly constructed or remodeled restaurants are subject to state and local
building code and zoning requirements. In connection with the remodeling and
alteration of the Company's Burger King restaurants, the Company may be
required to expend funds to meet certain Federal, state and local regulations,
including regulations requiring that remodeled or altered restaurants be
accessible to persons with disabilities. The Company is also subject to
Federal and state environmental regulations, although such regulations have
not had a material effect on the Company's operations taken as a whole.
Difficulties or failures in obtaining the required licenses or approvals could
delay or prevent the opening of a new restaurant in a particular area.
The Company is also subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. A significant number of
the Company's food service personnel are paid at rates related to the Federal
minimum wage and increases in the minimum wage, including those recently
enacted by the U.S. Government, would increase the Company's labor costs.
The Company is also subject to various local, state and Federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. In an effort to prevent and, if
necessary, to correct environment problems, the Company conducts environmental
audits of proposed restaurant sites in order to determine whether there is any
evidence of contamination prior to purchasing or entering into a lease with
respect to such restaurant.
The Company believes that it conducts its operations in substantial
compliance with applicable laws and regulations governing its operations.
EMPLOYEES
As of December 29, 1997, the Company employed 881 full-time salaried
employees and approximately 7,100 full-time and part-time hourly employees. Of
the Company's full-time employees, 50 are involved in overseeing restaurant
operations, 771 are involved in the management of individual restaurants, and
the remainder are responsible for corporate administration. None of the
Company's employees are covered by a collective bargaining agreement. The
Company believes that the dedication of its employees is critical to its
success, and that its relations with its employees are good.
ITEM 2. PROPERTIES
The Company currently operates all of its restaurants on locations where it
leases the facility or the land and the building. BKC is the lessor on
approximately 42% of such properties, primarily as a result of the Company's
initial acquisition of Burger King restaurants from BKC. Most of the Company's
leases are coterminous with the related franchise agreements and require the
Company to pay property taxes, insurance, maintenance and other operating
costs of the properties. Generally, the terms of the leases require lease
payments equal to the greater of a fixed minimum annual rent or an annual
percentage rent based on gross sales.
Within five years of December 29, 1997, 31 of the Company's 242 current
restaurant leases are due to expire. The Company believes that it will
generally be able to renew leases at commercially reasonable rates as they
expire. During fiscal 1997, the Company renewed one of its leases expiring
during such fiscal year on terms generally consistent with those of the
expiring lease.
The Company's headquarters are located in an approximately 22,000 square
foot leased office space in Westchester, Illinois. The term of the present
lease expires on April 30, 2003. The Company believes that its existing
central office provides sufficient space to support its expected expansion
over the next several years.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding the resolution of
which, the management of the Company believes, would have a material adverse
effect on the Company's results of operations or financial condition, nor to
any other pending legal proceedings other than ordinary, routine litigation
incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fiscal year ended December 29, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for the Company's common equity.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain historical financial and operating
data for the Company and restaurants formerly owned and operated by BKC (the
"BKC Restaurants") and entities controlled by certain members of the Company's
current management (the "Management Restaurants") (collectively, the "Initial
Acquisitions"). Prior to their acquisition by the Company on September 2,
1994, the BKC Restaurants and the Management Restaurants were not under common
control or management. In addition, restaurant contribution for the BKC
Restaurants and the Management Restaurants, which reflects restaurant sales
net of restaurant operating expenses, does not reflect all costs of operating
the BKC Restaurants and Management Restaurants. Accordingly, restaurant sales,
restaurant operating expenses and restaurant contribution may not be
comparable to or indicative of post-acquisition results. The data presented
for the Company as of December 31, 1994 and for the period from September 2,
1994 through December 31, 1994, and for the 1995, 1996 and 1997 fiscal years
are derived from the Company's audited financial statements appearing
elsewhere herein. The Selected Consolidated Financial Information should be
read in conjunction with (i) Item 7--Management's Discussion and Analysis of
Financial Condition and Results of Operations and (ii) Item 8--the audited
Consolidated Financial Statements of the Company and the notes thereto.
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
----------------------- -----------------------------------------
JANUARY 1, 1994 SEPTEMBER 2,
THROUGH 1994 THROUGH
FISCAL SEPTEMBER 1, DECEMBER 31, FISCAL FISCAL FISCAL
1993 1994 1994(3) 1995 1996 1997
------- --------------- ------------ -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Restaurant sales........ $82,895 $56,720 $33,931 $139,572 $203,753 $234,546
Restaurant operating
expenses:
Cost of sales.......... 25,832 18,602 10,807 44,798 66,071 76,119
Restaurant labor and
related costs......... 21,998 15,529 8,647 34,526 50,838 60,253
Depreciation and
amortization.......... 2,062 1,366 1,193 4,927 7,386 8,760
Occupancy and other
restaurant operating
expenses.............. 26,405 17,854 9,229 38,930 56,068 66,062
------- ------- ------- -------- -------- --------
Total restaurant
operating expenses.. 76,297 53,351 29,876 123,181 180,363 211,194
------- -------
Restaurant
contribution........... $ 6,598 $ 3,369
======= =======
General and
administrative and
other operating
expenses............... 1,374 6,039 11,010 11,703
------- -------- -------- --------
Operating income........ 2,681 10,352 12,380 11,649
Other income (expense):
Interest expense....... (1,925) (8,323) (11,983) (13,320)
Other income
(expense), net........ (324) (302) (4,895) (728)
------- -------- -------- --------
Total other income
(expense)........... (2,249) (8,625) (16,878) (14,048)
------- -------- -------- --------
Income (loss) before
extraordinary item and
provision (benefit) for
income taxes........... 432 1,727 (4,498) (2,399)
Provision (benefit) for
income taxes........... 191 825 (1,556) (365)
------- -------- -------- --------
Income (loss) before
extraordinary item..... 241 902 (2,942) (2,034)
Extraordinary item--loss
from early
extinguishment of
debt................... (5,055)
------- -------- -------- --------
Net income (loss)....... 241 902 (7,997) (2,034)
Preferred stock
dividends(4)........... (122) (450) (450) (450)
Senior preferred stock
dividends(4)........... (303) (4,112)
Amortization of senior
preferred stock
issuance costs......... (10) (129)
------- -------- -------- --------
Income (loss) available
to common
stockholders........... $ 119 $ 452 $ (8,760) $ (6,725)
======= ======== ======== ========
Weighted average number
of common shares
outstanding (in
thousands)--basic...... 863 863 866 900
Weighted average number
of common shares
outstanding (in
thousands)--diluted.... 970 970 866 900
Net income (loss) per
common share--basic.... $ 0.14 $ 0.52 $ (10.12) $ (7.47)
======= ======== ======== ========
Net income (loss) per
common share--diluted.. $ 0.12 $ 0.47 $ (10.12) $ (7.47)
======= ======== ======== ========
OTHER DATA:
EBITDA(5)............... $ 4,021 $ 16,142 $ 23,602 $ 23,232
======= ======== ======== ========
Capital expenditures:
Existing restaurants... $ 239 $ 1,416 $ 2,424 $ 3,913
New restaurant
development........... 696 3,219 6,066
Other.................. 358 1,609 2,655 2,528
------- -------- -------- --------
Total capital
expenditures........ $ 597 $ 3,721 $ 8,298 $ 12,507
======= ======== ======== ========
SELECTED OPERATING DATA:
Ratio of earnings to
fixed charges(6)....... 1.1x
Ratio of earnings to
fixed charges and
preferred stock
dividends(6)........... 1.1
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
THE INITIAL ACQUISITIONS
----------------------------
JANUARY 1, 1994
THROUGH
FISCAL SEPTEMBER 1,
1993 1994
------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SUPPLEMENTAL OPERATING DATA(7)(8)
RESTAURANT SALES:
BKC Restaurants.................................... $ 70,667 $ 47,762
Management Restaurants:
Jaro restaurants.................................. 10,115 7,400
Osborn restaurants................................ 2,113 1,558
-------- --------
Total for Initial Acquisitions.................. $ 82,895 $ 56,720
======== ========
RESTAURANT OPERATING EXPENSES:
BKC Restaurants.................................... $ 65,263 $ 45,257
Management Restaurants:
Jaro restaurants.................................. 9,166 6,718
Osborn restaurants................................ 1,868 1,376
-------- --------
Total for Initial Acquisitions.................. $ 76,297 $ 53,351
======== ========
RESTAURANT CONTRIBUTION:
BKC Restaurants.................................... $ 5,404 $ 2,505
Management Restaurants:
Jaro restaurants.................................. 949 682
Osborn restaurants................................ 245 182
-------- --------
Total for Initial Acquisitions.................. $ 6,598 $ 3,369
======== ========
<CAPTION>
DECEMBER 30, DECEMBER 29,
1996 1997
------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 5,259 $ 7,532
Total assets....................................... 155,037 213,087
Total debt and capitalized leases.................. 108,465 163,449
Senior Preferred Stock............................. 30,303 34,415
Total stockholders' equity (deficit)............... 433 (5,841)
</TABLE>
- --------
(1) The Initial Acquisitions consist of the 68 BKC Restaurants and the 14
Management Restaurants acquired by the Company on September 2, 1994 from
BKC and from entities formerly controlled by certain members of the
Company's current management. The information set forth under "Initial
Acquisitions" reflects the combined historical financial results of the
BKC Restaurants and Management Restaurants for the indicated period during
which time the restaurants were owned and operated by BKC and management-
controlled entities. The results of the Initial Acquisitions for fiscal
1993 and the period from January 1, 1994 through September 1, 1994 may not
be reflective of the ongoing operations of the Company under its current
ownership structure.
(2) Due to the inability of the Company to determine certain expenses for the
Initial Acquisitions prior to their acquisition by the Company on a
meaningful and consistent basis, net income is not comparable and is not
presented for the Initial Acquisitions.
(3) Reflects the historical results of the Company, including the Initial
Acquisitions subsequent to their acquisition by the Company on September
2, 1994. Also includes limited expenses of the Company during the period
August 17, 1994 (date of incorporation) to September 2, 1994, during which
period the Company had no operations.
(4) As of December 29, 1997, no dividends have been declared by the Company on
either its Class A1 Preferred Stock, Class A2 Preferred Stock or Class B
Preferred Stock (collectively the "Preferred Stock"). During fiscal 1997,
the Company declared stock dividends of 162,816 shares of its 13% Senior
Exchangeable Preferred Stock, due 2008 (the "Senior Preferred Stock"). In
addition, no cash dividends have been declared by the Company on its
Common Stock.
12
<PAGE>
(5) EBITDA (as defined) represents operating income plus depreciation and
amortization of goodwill and franchise agreements, other operating
expenses, and pre-opening cost amortization. For fiscal 1997 and 1996,
$531,000 and $157,000, respectively, of amortization relative to new
restaurant development pre-opening costs was included in other operating
expenses. EBITDA is included because the Cash Flow Coverage Ratio (each as
defined in the Indenture and the Exchange Debenture Indenture), is
calculated on a similar basis. See the Consolidated Statements of
Operations of the Company and the related notes to the Consolidated
Financial Statements thereto included herein.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges.
Fixed charges consist of interest expense on all indebtedness and
capitalized interest, amortization of deferred financing costs and rental
expense on operating leases, representing that portion of rental expense
deemed by the Company to be attributable to interest. For fiscal 1997 and
1996, earnings were insufficient to cover fixed charges by approximately
$2.4 million and $4.5 million, respectively. For fiscal 1997 and 1996,
earnings were insufficient to cover fixed charges and preferred stock
dividends by approximately $2.4 million and $4.5 million, respectively.
(7) Sets forth for the Initial Acquisitions the components constituting
aggregate restaurant sales, restaurant operating expenses and restaurant
contributions for the indicated periods.
(8) Jaro restaurants consist of the 11 Management Restaurants acquired from
entities owned or controlled by Lawrence Jaro, the Company's current Chief
Executive Officer and Chairman of the Company's Board of Directors. Osborn
restaurants consist of the three Management Restaurants acquired from
entities owned or controlled by William Osborn, the current Vice Chairman
of the Company's Board of Directors.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to BKC franchise agreements. BKC
franchise agreements require a one-time franchise fee (currently $40,000), a
monthly royalty fee of 3.5% of each restaurant's gross sales and a monthly
advertising contribution of 4.0% of gross sales. Most franchise agreements
provide for a term of 20 years, and, at the option of the franchise and BKC, a
renewal franchise agreement may be granted by BKC upon payment of the then
current franchise fee provided that the restaurant meets BKC's operating
standards applicable at that time and the franchisee is not in default under
the relevant franchise agreement. In addition, the Company has reached a
separate agreement with BKC in which the Company has committed to spend 1% of
gross sales on local advertising to supplement BKC's national advertising
activities.
As the Company acquires additional Burger King restaurants, it capitalizes
the value of franchise agreements based on the number of years remaining on
the terms of the agreement and the franchise fee in effect at the time of
acquisition. Excess cost over fair value of the other net assets acquired is
capitalized as goodwill and amortized to expense over a 35-year period for
financial reporting purposes. The Company generally purchases assets and is
able to deduct goodwill amortization expense for tax purposes over a 15-year
period.
Restaurant sales include food sales and merchandise sales. Merchandise sales
include convenience store sales at the Company's dual-use facilities (of which
the Company currently has ten), as well as sales of promotional products at
the Company's restaurants. Historically, merchandise sales have contributed
less than 3.3% to restaurant sales. Promotional products, which account for
the majority of merchandise sales, are generally sold at or near the Company's
costs.
EBITDA represents operating income plus depreciation and amortization of
goodwill and franchise agreements, other operating expenses, and pre-opening
cost amortization. While EBITDA should not be construed as a substitute for
operating income or a better indicator of liquidity than cash flow from
operating activities, which are determined in accordance with generally
accepted accounting principles, EBITDA is included to provide additional
information with respect to the ability of the Company to meet its future debt
service, capital expenditure and working capital requirements. In addition,
management believes that certain
13
<PAGE>
investors find EBITDA to be a useful tool for measuring the ability of the
Company to service its debt. EBITDA is not necessarily a measure of the
Company's ability to fund its cash needs. See the Consolidated Statements of
Cash Flows of the Company and the related notes to the Consolidated Financial
Statements included herein.
The Company includes in the comparable restaurant sales analysis discussed
below only those restaurants that have been in operation for a minimum of
thirteen months. For a restaurant not operating for the entire prior annual
period, the sales for the interim period in the prior year are compared to
that for the comparable interim period in the indicated year.
On August 1, 1995, the Company converted its fiscal year to a 52/53 week
fiscal year. Due to the conversion, the 1997, 1996, and 1995 fiscal years
included 364, 364, and 366 days of operating activity, respectively.
The discussion below of the Company's operating performance for the fiscal
years 1997, 1996, and 1995 should be read in conjunction with Item 6--Selected
Financial Data contained herein.
FISCAL 1997 COMPARED TO FISCAL 1996
Restaurant Sales. Total sales increased $30.7 million or 15.1% during fiscal
1997 to $234.5 million from $203.8 million during fiscal 1996, due primarily
to the inclusion of the 63 restaurants purchased in 1997. In addition, the
Company developed 9 restaurants, sold 10 restaurants, and closed 4 restaurants
in 1997. Newly acquired restaurants accounted for $32.7 million of the total
increase in restaurant sales, while new restaurant development accounted for
$9.3 million of the increase in sales. Total sales were reduced by $9.8
million due to the restaurants sold/closed during 1997. Sales at the 227
comparable restaurants owned by the Company at the end of fiscal 1997
decreased 1.0% primarily due to a decrease in customer traffic which was
partially offset by an increase in customer check average. Burger King
domestic system sales were significantly impacted by the beef recall at Hudson
Beef and the extensive media coverage of the tainted beef at one of Hudson
Beef's processing plants during the third quarter of fiscal 1997.
Restaurant Operating Expenses. Total restaurant operating expenses increased
$30.8 million, or 17.1% during fiscal 1997, to $211.2 million from $180.4
million during fiscal 1996, due primarily to the inclusion of the 63
restaurants purchased in 1997. In addition, the company developed 9
restaurants, sold 10 restaurants and closed 4 restaurants in 1997. As a
percentage of sales, restaurant operating expenses increased 1.5%, to 90.0%
during fiscal 1997 from 88.5% during fiscal 1996.
Cost of sales increased $10.0 million during fiscal 1997, but remained
constant as a percent of sales at 32.4% in fiscal 1997 and 1996. Cost of food
sales increased $8.9 million during fiscal 1997, but decreased 0.1% as a
percentage of sales to 29.6% during fiscal 1997 from 29.7% during fiscal 1996.
The slight percentage decrease in cost of food sales is primarily the result
of the stability of commodity prices during 1997. Cost of non-food sales
increased $1.1 million during fiscal 1997, and increased 0.1% as a percentage
of sales to 2.8% during fiscal 1997 from 2.7% during fiscal 1996. The
percentage increase in cost of non-food sales is due to an increase in the
number of convenience stores the Company operated during fiscal 1997.
Restaurant labor and related expenses increased $9.5 million during fiscal
1997, and increased 0.7% as a percentage of restaurant sales to 25.7% during
fiscal 1997 from 25.0% during fiscal 1996. The increase in restaurant labor
and related expenses was primarily due to an increase in the federal minimum
wage and fixed salaries against a lower same-store sales base.
Depreciation and amortization increased $1.4 million during fiscal 1997, to
$8.8 million during fiscal 1997 from $7.4 million during fiscal 1996. As a
percentage of sales, depreciation and amortization expense increased 0.1% to
3.7% during fiscal 1997 from 3.6% during fiscal 1996. The increase was due
primarily to the increase in goodwill amortization resulting from the purchase
method of accounting for the newly acquired restaurants.
Occupancy and other restaurant operating expenses increased $10.0 million
during fiscal 1997 and increased 0.7% as a percentage of sales to 28.2% during
fiscal 1997 from 27.5% during fiscal 1996. Occupancy expense
14
<PAGE>
increased $3.2 million during fiscal 1997 but remained constant as a
percentage of sales. The dollar increase in occupancy expense is due to the
inclusion of newly acquired and developed restaurants which was partially
offset by the savings associated with the restaurants that the Company sold or
closed in 1997. Other restaurant operating expenses including advertising and
royalties increased $6.8 million during fiscal 1997 and increased 0.7% as a
percentage of sales to 17.8% during fiscal 1997 from 17.1% during fiscal 1996.
This increase is primarily the result of a 0.5% increase in local advertising
pursuant to the BKC Agreement and amortization of start-up costs related to
new restaurant development.
General and Administrative Expenses. General and administrative expenses
increased $2.1 million during fiscal 1997 and increased 0.4% as a percent of
sales to 4.0% during fiscal 1997 from 3.6% during fiscal 1996. The increase in
general and administrative expenses is due to staff increases and related
costs associated with the newly acquired and developed restaurants.
EBITDA. Earnings before interest, taxes, depreciation, and amortization
decreased $0.4 million or 1.6% to $23.2 million for fiscal 1997 from $23.6
million for fiscal 1996. As a percentage of restaurant sales, EBITDA decreased
1.7%, to 9.9% for fiscal 1997 from 11.6% for fiscal 1996.
Operating Income. Operating income decreased $0.8 million during fiscal
1997, to $11.6 million during fiscal 1997 from $12.4 million during fiscal
1996. As a percentage of sales, operating income decreased 1.1%, to 5.0%
during fiscal 1997 from 6.1% during fiscal 1996. This decrease is a primarily
a result of an increase in restaurant operating expenses which was partially
offset by the $1.8 million gain realized upon the sale of the 10 stores.
FISCAL 1996 COMPARED TO FISCAL 1995
Restaurant Sales. Total sales increased $64.2 million or 46.0% during fiscal
1996, to $203.8 million from $139.6 million in fiscal 1995, due primarily to
the inclusion of the 18 restaurants acquired in 1995 and the 36 restaurants
acquired in 1996. In addition, the Company developed 1 new restaurant in 1995
and 8 new restaurants in 1996. In fiscal 1996, newly acquired and newly
developed restaurants accounted for $55.3 million and $6.1 million,
respectively, of the total increase in restaurant sales. Sales at the 121
comparable restaurants owned by the Company at the end of the fiscal 1996
increased 2.0% primarily due to increases in customer traffic. Restaurant menu
prices remained stable during the period.
Restaurant Operating Expenses. Total restaurant operating expenses increased
$57.2 million, or 46.4% during fiscal 1996, to $180.4 million from $123.2
million in fiscal 1995, due primarily to the inclusion of newly acquired
restaurants. As a percentage of sales, restaurant operating expenses increased
0.2% to 88.5% in fiscal 1996 from 88.3% in fiscal 1995 due to increases in
lower margin non-food sales, labor costs and local advertising costs.
Cost of sales increased $21.3 million during fiscal 1996, and increased 0.3%
as a percentage of sales to 32.4% in fiscal 1996 from 32.1% in fiscal 1995.
The percentage increase in cost of sales was due to a 0.5% increase in the
cost of non-food sales offset by a 0.2% decrease on the cost of food sales.
Several restaurants acquired in 1996 included co-branded units that included
significant non-food sales.
Restaurant labor and related expenses increased $16.3 million during fiscal
1996, and increased 0.3% as a percentage of restaurant sales to 25.0% in
fiscal 1996 from 24.7% in fiscal 1995. The percentage increase in restaurant
labor was due to an increase in the federal minimum wage, effective October 1,
1996.
Depreciation and amortization increased $2.5 million during fiscal 1996, to
$7.4 million in fiscal 1996 from $4.9 million in fiscal 1995. As a percentage
of sales, depreciation and amortization expense remained constant at 3.6% for
fiscal 1996 and fiscal 1995. The $2.5 million increase was due primarily to
the increase in goodwill amortization resulting from the purchase method of
accounting for the newly acquired restaurants.
15
<PAGE>
Occupancy and other restaurant operating expenses increased $17.1 million
during fiscal 1996, but decreased 0.4% as a percentage of sales to 27.5% in
fiscal 1996 from 27.9% in fiscal 1995. Occupancy expense increased $5.8
million, but decreased 0.6% as a percentage of sales to 10.4% in fiscal 1996
from 11.0% in fiscal 1995, due primarily to lower effective rental rates and
lower property taxes as a percentage of sales at the Company's newly acquired
restaurants. Rental rates, as a percentage of sales, declined due to higher
customer traffic at the Company's restaurants in fiscal 1996. Other restaurant
operating expenses increased $11.3 million during fiscal 1996, and increased
0.2% as a percentage of sales to 17.1% in fiscal 1996 from 16.9% for fiscal
1995. This increase is primarily due to a 0.4% increase in local advertising
expense which was offset by a percentage decrease in royalties and other
restaurant operating expenses.
EBITDA. Earnings before interest, taxes, depreciation, and amortization
("EBITDA") increased $7.5 million or 46.2% to $23.6 million for fiscal 1996
from $16.1 million for fiscal 1995. As a percentage of restaurant sales,
EBITDA remained constant at 11.6% in fiscal 1996 and in fiscal 1995.
Operating Income. Operating income increased $2.0 million or 19.6% to $12.4
million for fiscal 1996 from $10.4 million for fiscal 1995. As a percentage of
sales, operating income decreased 1.3%, to 6.1% in fiscal 1996 from 7.4% for
fiscal 1995. This decrease was primarily due to the accrual for the
disposition of long-lived assets.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows from operating activities decreased $3.7 million during the
fiscal year ended December 29, 1997, to $11.1 million, from $14.8 million
during the fiscal year ended December 30, 1996. The decrease is primarily due
to a decrease in the change in accounts payable, accrued expenses and other
long-term liabilities due to the timing of cash expenditures.
Net cash flows from investing activities for the fiscal year ended were
$63.0 million. Capital spending for fiscal 1997 was $73.1 million which
included $60.1 million for the acquisition of 63 restaurants in North
Carolina, Illinois, and Wisconsin and $13.0 million for other capital
expenditures. On April 21, 1997, the Company sold 10 restaurants resulting in
cash proceeds of $8.2 million. During the fourth quarter of fiscal 1997, the
company sold 2 real properties in a sale-leaseback transaction, resulting in
cash proceeds of $1.9 million.
As discussed in Note 5, on June 17, 1997, the Company amended and restated
its Credit Agreement (the "Amended and Restated Revolving Credit Agreement")
to provide for an increased commitment under its revolving credit facility
(the "Revolver"). Under the Amended and Restated Revolving Credit Agreement,
BankBoston, N.A. ("BBNA") and the other lenders committed to increase the
borrowing capacity of the Revolver from $15 million to $50 million. Pursuant
to the terms of the Amended and Restated Revolving Credit Agreement, the
interest rate, amortization schedule, and maturity of the Revolver are
revised. Interest is calculated at the lesser of the base rate or the
Eurodollar rate and is payable, at a minimum, quarterly. The Amended and
Restated Revolving Credit Agreement calls for no principal amortization and
matures in June 2002. On September 23, 1997, the Company increased the
borrowing capacity under its revolving credit facility from $50 million to $75
million as permitted under the Amended and Restated Revolving Credit
Agreement. During the fiscal year ended December 29, 1997, borrowings of $57.6
million were drawn on the revolving credit facility to the fund the
acquisitions of 63 restaurants in North Carolina, Illinois, and Wisconsin and
for working capital purposes. During the fiscal year ended December 29, 1997,
$2.0 million was repaid on the revolving credit facility.
The Company has budgeted approximately $400,000 for the development of each
of its new restaurants. The Company anticipates it will spend approximately an
additional $3.0 to $5.0 million annually for other capital expenditures. The
Company has committed to BKC that for the foreseeable future (i) it will make
capital expenditures on its existing restaurants equal to 1% of its gross
sales and (ii) it will spend an amount equal to 1% of its gross sales on local
advertising. The actual amount of the Company's cash requirements for capital
expenditures depends on, among other things, the number of new restaurants
opened or acquired and the costs associated with such restaurants and the
number of franchises subject to renewal and the costs associated with bringing
the related restaurants up to BKC's then current design specifications in
connection with these franchise renewals.
16
<PAGE>
The Company is structured as a holding company with no independent
operations, as the Company's operations are conducted exclusively through its
wholly owned subsidiaries. The Company's only significant assets are the
capital stock of its subsidiaries. As a holding company, the Company's cash
flow, its ability to meet its debt service requirements and its ability to pay
cash dividends on the Senior Preferred Stock are dependent upon the earnings
of its subsidiaries and their ability to declare dividends or make other
intercompany transfers to the Company. Under the terms of the indenture
pursuant to which the Senior Notes were offered (the "Indenture"), the
Company's subsidiaries may incur certain indebtedness pursuant to agreements
that may restrict the ability of such subsidiaries to make such dividends or
other intercompany transfers necessary to service the Company's obligations,
including its obligations under the Senior Notes, the Senior Preferred Stock
and any 13% Subordinated Exchange Debentures due 2008 (the "Exchange
Debentures") the Company may exchange pursuant to the Indenture. The Indenture
restricts, among other things, the Company's and its Restricted Subsidiaries'
(as defined in the Indenture) ability to pay dividends or make certain other
restricted payments, including the payment of cash dividends on or the
redemption of the Senior Preferred Stock, to incur additional indebtedness, to
encumber or sell assets, to enter into transactions with affiliates, to enter
into certain guarantees of indebtedness, to make restricted investments, to
merge or consolidate with any other entity and to transfer or lease all or
substantially all of their assets. In addition, (i) the Company's Amended and
Restated Credit Agreement (as defined) with BBNA and other lenders thereto
contains other and more restrictive covenants and prohibits the Company's
subsidiaries from declaring dividends or making other intercompany transfers
to the Company in certain circumstances and (ii) agreements reached with BKC
contain restrictions with respect to dividend payments and intercompany loans.
The Company believes that available cash on hand together with its available
credit of $19.4 million under its Amended and Restated Credit Agreement, will
be sufficient to cover its working capital, capital expenditures, planned
development and debt service requirements for fiscal 1998. The Company expects
that additional financing will be required in connection with any significant
acquisitions in the future.
INCOME TAXES
The Company completed fiscal 1997 with a net operating loss carry-forward
for tax purposes of approximately $34.4 million. Substantially all of the
Company's acquisitions completed to date have been structured as asset
purchases. As a result, the Company is able to deduct goodwill amortization
expense for income tax purposes over a 15 year period.
EXTRAORDINARY LOSS
In fiscal 1996, in connection with the prepayment of its subordinated debt
and repayment of borrowings under its credit agreement, the Company recorded
an extraordinary loss of approximately $5.1 million, net of taxes, reflecting
a prepayment penalty, as well as the write-off of deferred financing costs.
YEAR 2000
The Company recognizes that the Year 2000 poses a unique worldwide challenge
to the ability of systems to recognize the date change from December 31, 1999
to January 1, 2000 and, like other companies, has assessed and is updating its
computer applications and business procedures to provide for their continued
functionality. An assessment of the readiness of external entities which it
interfaces with, such as vendors and others, is ongoing.
The principal costs will be those associated with the remediation and
testing of its computer applications. This effort is under way across the
Company, and is following a process of inventory, scoping and analysis,
modification, testing and certification, and implementation.
The total cost to the Company of the Year 2000 compliance activities has not
been and is not anticipated to be material to its financial position or
results of operations in any given year. For applications requiring
remediation, the Company expects to begin this process in the fourth quarter
of fiscal 1998 with completion expected in the first quarter of fiscal 1999.
17
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128")
and Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" ("SFAS 129"). SFAS 128 specifies the
computation, presentation and disclosure requirements for earnings per share
and is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 129 specifies the presentation and disclosure
requirements concerning information about securities, liquidation preference
of preferred stock, and exchangeable preferred stock and is effective for
financial statements issued for periods ending after December 15, 1997. The
Company adopted both of these standards in fiscal 1997.
In June 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130") and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components. SFAS 131 establishes standards for
reporting information about operating segments, and related disclosures about
products and major customers. These statements are effective for fiscal years
beginning after December 15, 1997. These statements expand or modify
disclosures and, accordingly, will have no impact on the Company's reported
financial position, results of operations and cash flows.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERIKING, INC. AND
SUBSIDIARY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. 20
Consolidated Balance Sheets as of December 29, 1997 and December 30,
1996.................................................................... 21
Consolidated Statements of Operations for the fiscal years ended December
29, 1997, December 30, 1996 and January 1, 1996......................... 22
Consolidated Statements of Stockholders' Equity (Deficit) for the fiscal
years ended December 29, 1997, December 30, 1996 and January 1, 1996.... 23
Consolidated Statements of Cash Flows for the fiscal years ended December
29, 1997, December 30, 1996 and January 1, 1996......................... 24
Notes to Consolidated Financial Statements............................... 25
</TABLE>
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
AmeriKing, Inc.
Westchester, Illinois
We have audited the accompanying consolidated balance sheets of AmeriKing,
Inc. and subsidiary as of December 29, 1997 and December 30, 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three fiscal years in the period ended December
29, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AmeriKing, Inc. and
subsidiary as of December 29, 1997 and December 30, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in
the period ended December 29, 1997 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Chicago, Illinois
March 12, 1998
20
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 1997 AND DECEMBER 30, 1996
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 7,532,000 $ 5,259,000
Accounts receivable.............................. 1,723,000 828,000
Inventories...................................... 2,470,000 1,667,000
Prepaid expenses................................. 1,592,000 1,338,000
Current portion of deferred income taxes (Note
9).............................................. 30,000 438,000
------------ ------------
Total current assets........................... 13,347,000 9,530,000
PROPERTY AND EQUIPMENT (Note 4).................... 52,924,000 36,765,000
GOODWILL........................................... 131,135,000 94,324,000
DEFERRED INCOME TAXES (Note 9)..................... 3,434,000 3,426,000
OTHER ASSETS:
Deferred financing costs......................... 6,680,000 6,577,000
Deferred organization costs...................... 95,000 170,000
Franchise agreements............................. 5,472,000 4,245,000
------------ ------------
Total other assets............................. 12,247,000 10,992,000
------------ ------------
TOTAL.............................................. $212,087,000 $155,037,000
============ ============
LIABILITIES, SENIOR PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other accrued expenses...... $ 12,738,000 $ 10,333,000
Accrued payroll.................................. 4,348,000 3,571,000
Accrued sales tax payable........................ 1,306,000 1,021,000
Accrued interest payable......................... 1,649,000 835,000
Current portion of long-term debt (Note 5)....... 577,000 525,000
Current portion of capital leases (Note 7)....... 74,000 110,000
------------ ------------
Total current liabilities...................... 20,692,000 16,395,000
LONG-TERM DEBT--Less current portion (Note 5)...... 162,798,000 107,767,000
OTHER LONG-TERM LIABILITIES........................ 1,023,000 139,000
------------ ------------
Total liabilities.............................. 184,513,000 124,301,000
COMMITMENTS AND CONTINGENCIES (Note 7).............
SENIOR PREFERRED STOCK (Note 6).................... 34,415,000 30,303,000
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock.................................. 75 75
Common stock..................................... 9,030 8,933
Additional paid-in capital....................... 3,037,895 7,277,992
Retained earnings (deficit)...................... (8,888,000) (6,854,000)
------------ ------------
Total stockholders' equity (deficit)........... (5,841,000) 433,000
------------ ------------
TOTAL.............................................. $212,087,000 $155,037,000
============ ============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED DECEMBER 29, 1997, DECEMBER 30, 1996, AND JANUARY 1,
1996
<TABLE>
<CAPTION>
FISCAL % OF FISCAL % OF FISCAL % OF
1997 SALES 1996 SALES 1995 SALES
------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
SALES
Restaurant food sales
...................... $226,908,000 96.7% $197,931,000 97.1% $136,461,000 97.8%
Non-food sales......... 7,638,000 3.3 5,822,000 2.9 3,111,000 2.2
------------ ----- ------------ ----- ------------ -----
Total sales............ 234,546,000 100.0 203,753,000 100.0 139,572,000 100.0
RESTAURANT OPERATING
EXPENSES:
Cost of food sales..... 69,546,000 29.6 60,576,000 29.7 41,671,000 29.9
Cost of non-food
sales................. 6,573,000 2.8 5,495,000 2.7 3,127,000 2.2
Restaurant labor and
related costs......... 60,253,000 25.7 50,838,000 25.0 34,526,000 24.7
Occupancy.............. 24,384,000 10.4 21,189,000 10.4 15,384,000 11.0
Depreciation and
amortization of
goodwill and franchise
agreements............ 8,760,000 3.7 7,386,000 3.6 4,927,000 3.6
Advertising............ 12,388,000 5.3 10,072,000 4.9 6,330,000 4.5
Royalties.............. 7,949,000 3.4 6,943,000 3.4 4,788,000 3.5
Other restaurant
operating expenses ... 21,341,000 9.1 17,864,000 8.8 12,428,000 8.9
------------ ----- ------------ ----- ------------ -----
Total restaurant
operating expenses ... 211,194,000 90.0 180,363,000 88.5 123,181,000 88.3
GENERAL AND
ADMINISTRATIVE EXPENSES
....................... 9,411,000 4.0 7,331,000 3.6 5,176,000 3.7
OTHER OPERATING
EXPENSES:
Depreciation expense--
office................ 698,000 0.3 444,000 0.2 199,000 0.1
Gain on sale of
restaurants........... (1,798,000) (0.8)
Provision for
disposition of long-
lived assets (Note
12)................... 2,275,000 1.0 2,230,000 1.1 135,000 0.1
Loss on disposal of
equipment............. 467,000 0.2 341,000 0.2
Management and
directors' fees....... 650,000 0.3 664,000 0.3 529,000 0.4
------------ ----- ------------ ----- ------------ -----
Total other operating
expenses.............. 2,292,000 1.0 3,679,000 1.8 863,000 0.6
OPERATING INCOME........ 11,649,000 5.0 12,380,000 6.1 10,352,000 7.4
OTHER INCOME (EXPENSE):
Interest expense....... (13,320,000) (5.7) (10,175,000) (5.0) (6,332,000) (4.5)
Interest expense--
related party......... (1,808,000) (0.9) (1,991,000) (1.4)
Amortization of
deferred costs ....... (691,000) (0.3) (943,000) (0.5) (511,000) (0.4)
Other income
(expense)--net (Note
12) .................. (37,000) (3,952,000) (1.9) 209,000 0.1
------------ ----- ------------ ----- ------------ -----
Total other expense ... (14,048,000) (6.0) (16,878,000) (8.3) (8,625,000) (6.2)
------------ ----- ------------ ----- ------------ -----
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM AND
PROVISION (BENEFIT) FOR
INCOME TAXES........... (2,399,000) (1.0) (4,498,000) (2.2) 1,727,000 1.2
PROVISION (BENEFIT) FOR
INCOME TAXES .......... (365,000) (0.1) (1,556,000) (0.8) 825,000 0.6
------------ ----- ------------ ----- ------------ -----
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... (2,034,000) (0.9) (2,942,000) (1.4) 902,000 0.6
EXTRAORDINARY ITEM--LOSS
FROM EARLY
EXTINGUISHMENT OF DEBT
(Net of taxes of
$3,301,000) (Note 13)
....................... (5,055,000) (2.5)
------------ ----- ------------ ----- ------------ -----
NET INCOME (LOSS) ...... (2,034,000) (0.9)% (7,997,000) (3.9)% 902,000 0.6%
PREFERRED STOCK
DIVIDENDS (cumulative,
undeclared)............ (450,000) (450,000) (450,000)
SENIOR PREFERRED STOCK
DIVIDENDS ............. (4,112,000) (303,000)
AMORTIZATION OF SENIOR
PREFERRED STOCK
ISSUANCE COSTS......... (129,000) (10,000)
------------ ------------ ------------
INCOME (LOSS) AVAILABLE
TO COMMON
STOCKHOLDERS........... $ (6,725,000) $ (8,760,000) $ 452,000
============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING--BASIC .... 900,167 865,515 863,290
DILUTIVE EFFECT OF
OPTIONS AND WARRANTS... 106,700
------------ ------------ ------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING--DILUTED .. 900,167 865,515 969,990
============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE BEFORE
EXTRAORDINARY ITEM--
BASIC.................. $ (7.47) $(4.28) $ 0.52
EXTRAORDINARY ITEM--
BASIC.................. (5.84)
------------ ------------ ------------
NET INCOME (LOSS) PER
COMMON SHARE--BASIC.... $ (7.47) $ (10.12) $ 0.52
============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE BEFORE
EXTRAORDINARY ITEM--
DILUTED................ $ (7.47) $ (4.28) $ 0.47
EXTRAORDINARY ITEM--
DILUTED................ (5.84)
------------ ------------ ------------
NET INCOME (LOSS) PER
COMMON SHARE--DILUTED.. $ (7.47) $ (10.12) $ 0.47
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE FISCAL YEARS ENDED DECEMBER 29, 1997, DECEMBER 30, 1996, AND JANUARY 1,
1996
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
--------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE--December 31,
1994................... $75 $ 10 $ 7,599,915 $ 241,000 $ 7,841,000
Net income............ 902,000 902,000
--- ------ ----------- ----------- -----------
BALANCE--January 1,
1996................... 75 10 7,599,915 1,143,000 8,743,000
Dividends on senior
preferred stock...... (303,000) (303,000)
Amortization of senior
preferred stock
issuance costs ...... (10,000) (10,000)
Recapitalization of
common stock......... 8,923 (8,923)
Net loss.............. (7,997,000) (7,997,000)
--- ------ ----------- ----------- -----------
BALANCE--December 30,
1996................... 75 8,933 7,277,992 (6,854,000) 433,000
Dividends on senior
preferred stock...... (4,112,000) (4,112,000)
Amortization of senior
preferred stock
issuance costs....... (129,000) (129,000)
Exercise of stock
options.............. 97 903 1,000
Net loss.............. (2,034,000) (2,034,000)
--- ------ ----------- ----------- -----------
BALANCE--December 29,
1997................... $75 $9,030 $ 3,037,895 $(8,888,000) $(5,841,000)
=== ====== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 29, 1997, DECEMBER 30, 1996, AND JANUARY 1,
1996
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)................... $ (2,034,000) $ (7,997,000) $ 902,000
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities:
Depreciation and amortization...... 10,149,000 8,773,000 5,637,000
Deferred income taxes.............. (735,000) (4,653,000) 535,000
Gain on sale of restaurants........ (1,798,000)
Provision for disposition of long-
lived assets...................... 2,275,000 2,230,000 135,000
Loss on disposition of equipment... 467,000 341,000
Extraordinary loss on early
extinguishment of debt............ 8,356,000
Changes in:
Accounts receivable................ (895,000) 290,000 (984,000)
Inventories........................ (803,000) (658,000) (8,000)
Prepaid expenses................... (254,000) (120,000) (443,000)
Accounts payable, accrued expenses
and other long-term liabilities... 4,743,000 8,241,000 (1,601,000)
------------ ------------- ------------
Net cash flows from operating
activities...................... 11,115,000 14,803,000 4,173,000
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of restaurant franchise
agreements, equipment and
goodwill.......................... (60,141,000) (39,245,000) (11,305,000)
Proceeds from sale of restaurants.. 8,158,000
Proceeds from sale of property..... 1,945,000 817,000
Cash paid for organization costs... (6,000)
Cash paid for franchise
agreements........................ (434,000) (330,000) (60,000)
Cash paid for property and
equipment......................... (12,507,000) (8,298,000) (3,721,000)
------------ ------------- ------------
Net cash flows from investing
activities...................... (62,979,000) (47,056,000) (15,092,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of senior preferred
stock............................. 30,000,000
Issuance of senior subordinated
notes............................. 100,000,000
Proceeds from exercise of common
stock options..................... 1,000
Proceeds from short-term debt...... 6,920,000
Proceeds from long-term debt....... 26,300,000 1,865,000
Proceeds from subordinated debt--
related party..................... 15,000,000
Cash paid for financing costs...... (848,000) (9,280,000) (135,000)
Cash paid for penalties related to
early extinguishment of debt...... (3,450,000)
Advances under line of credit...... 57,608,000 5,800,000 2,000,000
Payments on line of credit......... (2,000,000) (5,800,000) (2,000,000)
Payments on long-term debt......... (525,000) (122,843,000) (3,450,000)
Payments on capital leases......... (99,000) (102,000) (44,000)
------------ ------------- ------------
Net cash flows from financing
activities...................... 54,137,000 35,625,000 5,156,000
------------ ------------- ------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS........................ 2,273,000 3,372,000 (5,763,000)
CASH AND CASH EQUIVALENTS--Beginning
of year............................ 5,259,000 1,887,000 7,650,000
------------ ------------- ------------
CASH AND CASH EQUIVALENTS--End of
year............................... $ 7,532,000 $ 5,259,000 $ 1,887,000
============ ============= ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for
interest.......................... $ 12,470,000 $ 9,283,000 $ 6,671,000
Cash paid during the year for
interest-related party............ 2,135,000 2,347,000
------------ ------------- ------------
Total cash paid during the year for
interest.......................... $ 12,470,000 $ 11,418,000 $ 9,018,000
============ ============= ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Senior preferred stock dividends.... $ 4,112,000 $ 303,000
Amortization of senior preferred
stock issuance costs............... 129,000 10,000
New capital leases.................. $ 319,000
------------ ------------- ------------
TOTAL............................ $ 4,241,000 $ 313,000 $ 319,000
============ ============= ============
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED DECEMBER 29, 1997, DECEMBER 30, 1996, AND JANUARY
1, 1996
1. DESCRIPTION OF BUSINESS
AmeriKing, Inc., and its wholly owned subsidiary, National Restaurant
Enterprises, Inc. d/b/a AmeriKing Corporation (the "Company"), owns and
operates Burger King restaurants in eleven states.
During fiscal 1995, the Company, in a series of transactions, acquired 18
Burger King restaurants in Colorado, Texas, Tennessee and Georgia (the "1995
Acquisitions") for $10.8 million in cash and developed one Burger King
restaurant in Texas.
During fiscal 1996, the Company, in a series of transactions, acquired 36
Burger King restaurants in Virginia, North Carolina and the Cincinnati
metropolitan area (the "1996 Acquisitions") for $36.9 million in cash,
excluding transaction fees and expenses. In addition, the Company developed
eight Burger King restaurants in fiscal 1996, primarily in the Chicago
metropolitan area.
During fiscal 1997, the Company, in a series of transactions, acquired 63
Burger King restaurants in North Carolina, Illinois, and Wisconsin (the "1997
Acquisitions") for $55.4 million in cash, excluding transaction fees and
expenses. In addition, the Company sold ten restaurants to a third party
franchisee for $8.2 million and closed four restaurants. Also, the Company
developed nine Burger King restaurants in fiscal 1997, primarily in the
Chicago and Chattanooga metropolitan areas.
The Company is one of the largest independent Burger King franchisees in the
United States, operating 242 Burger King restaurants as of December 29, 1997.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR--In 1995, the Company converted its fiscal year to a 52/53-week
fiscal year. Due to this conversion, the 1997 and 1996 fiscal years ended
December 29, 1997 and December 30, 1996, respectively, included 364 days of
operating activity. The 1995 fiscal year ended January 1, 1996 included 366
days of operating activity.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of AmeriKing, Inc. and its wholly owned
subsidiary. All significant intercompany accounts and transactions have been
eliminated in consolidation.
CASH EQUIVALENTS--The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value due to the
short maturity of these instruments.
INVENTORIES--Inventories consist primarily of restaurant food and supplies
and are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.
25
<PAGE>
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost. Normal
repairs and maintenance costs are charged to expense as incurred. Depreciation
is being recorded using the straight-line method over the following estimated
useful lives:
<TABLE>
<S> <C>
Restaurant equipment and furnishings.......... 5-15 years
Office furniture and equipment................ 5-9 years
Buildings..................................... 40 years
Leasehold improvement......................... Life of lease
</TABLE>
FRANCHISE AGREEMENTS--The franchise agreements with BKC require the Company
to pay a franchise fee for each new restaurant developed and for the renewal
of franchises that have expired. Franchisee fees are capitalized and amortized
using the straight-line method over the terms of the related franchise
agreements. The franchise agreements generally provide for a term of 20 years
with renewal options upon expiration. Accumulated amortization as of December
29, 1997 and December 30, 1996 was approximately $991,000 and $663,000,
respectively.
GOODWILL--Goodwill represents the excess of cost over fair value of net
assets acquired in connection with the Company's acquisitions described in
Note 1. Goodwill is amortized over 35 years using the straight-line method.
Accumulated amortization of goodwill as of December 29, 1997 and December 30,
1996 was approximately $7,781,000 and $4,978,000, respectively.
DEFERRED COSTS--Costs associated with the organization of the Company are
being amortized on a straight-line basis over five years. Costs incurred by
the Company in obtaining its financing for its acquisitions are being
amortized on a straight-line basis over the term of the related financing.
Accumulated amortization as of December 29, 1997 and December 30, 1996 was
approximately $211,000 and $136,000, respectively, for deferred organization
costs and approximately $829,000 and $58,000, respectively, for deferred
financing costs.
PRE-OPENING COSTS--Pre-opening costs associated with newly developed
restaurants are being amortized on a straight-line basis over the first twelve
months of the restaurant's operations. Pre-opening costs as of December 29,
1997 and December 30, 1996 were approximately $299,000 and $263,000,
respectively, and are included in prepaid expenses.
RECLASSIFICATIONS--Certain information in the consolidated financial
statements for fiscal 1996 and 1995 have been reclassified to conform with the
current reporting format.
NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS--In February 1997, the
Financial Accounting Standards Board issued Statement of Accounting Standards
No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share. It is
effective for financial statements issued for periods ending after December
15, 1997 and requires retroactive application to all prior periods presented.
In calculating earnings per share, earnings available to common stockholders
is the same for both the basic and diluted calculations. Shares increased for
diluted earnings per share by 106,700 for 1995 due to the effect of stock
options and warrants. Diluted earnings per share was the same as basic
earnings per share during fiscal 1997 and 1996 due to the antidilutive effect
of the stock options and warrants in the respective years. The Company adopted
SFAS 128 in fiscal 1997.
Also in February 1997, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" ("SFAS 129"). SFAS 129 specifies the
presentation and disclosure requirements concerning information about
securities, liquidation preference of preferred stock, and exchangeable
preferred stock and is effective for financial statements issued for periods
ending after December 15, 1997. The Company adopted SFAS 129 in fiscal 1997.
In June 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130") and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 130
26
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
establishes standards for reporting and display of comprehensive income and
its components. SFAS 131 establishes standards for reporting information about
operating segments, and related disclosures about products and major
customers. These statements are effective for fiscal years beginning after
December 15, 1997. These statements expand or modify disclosures and,
accordingly, will have no impact on the Company's reported financial position,
results of operations and cash flows.
3. FRANCHISE AGREEMENTS
In connection with the acquisition and development of Burger King
restaurants, the Company is obligated to enter into franchise agreements with
BKC. The franchise agreements set forth the terms under which the Company is
to operate its Burger King restaurants and obligates the Company to pay
monthly royalty and advertising fees equal to 3.5% and 4.0%, respectively, of
restaurant sales.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER DECEMBER
29, 1997 30, 1996
----------- -----------
<S> <C> <C>
Restaurant equipment and furnishings............. $52,009,000 $39,261,000
Office furniture and equipment................... 3,634,000 2,945,000
Leasehold improvements........................... 6,116,000 2,861,000
New restaurant development....................... 2,194,000 335,000
Land............................................. 330,000
Buildings........................................ 2,197,000 756,000
----------- -----------
Total........................................ 66,150,000 46,488,000
Less accumulated depreciation.................... 13,226,000 9,723,000
----------- -----------
Property and equipment--net.................. $52,924,000 $36,765,000
=========== ===========
</TABLE>
5. LONG-TERM DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 29, 1997 DECEMBER 30, 1996
--------------------- ---------------------
CURRENT LONG-TERM CURRENT LONG-TERM
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Senior Notes, 10.75%, due 2006..... $100,000,000 $100,000,000
Revolving Credit Facility, at a
variable interest rate, 8.19% at
December 29, 1997, due 2002....... 55,608,000
Franchise Acceptance Corporation
Limited Note, 9.86%, due 2006..... $433,000 5,122,000 $393,000 5,554,000
Franchise Acceptance Corporation
Limited Note, at a variable
interest rate, 8.45% at December
29, 1997, due 2005................ 144,000 1,468,000 132,000 1,613,000
Junior Subordinated Notes, 6.00%,
due 2005.......................... 600,000 600,000
-------- ------------ -------- ------------
Total............................ $577,000 $162,798,000 $525,000 $107,767,000
======== ============ ======== ============
</TABLE>
On November 30, 1994, the Company issued junior subordinated notes (the
"Junior Subordinated Notes") in the aggregate principal amount of $600,000 to
an affiliate of BankBoston, N.A. ("BBNA").
27
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On November 21, 1995, the Company issued a $6.9 million note to BKC (the
"BKC Note"). In July 1996, the BKC Note was refinanced on a long-term basis by
Franchise Acceptance Corporation Limited ("FAC")(the "1996 FAC Note"), an
affiliate of BKC. The 1996 FAC Note bears interest at a rate of 9.86% per
annum, has mandatory monthly principal payments and matures July 2006.
On November 29, 1995, the Company issued a $1.9 million note (the "1995 FAC
Note") to FAC. The FAC Note bears interest at 2.75% above FAC's program rate,
has mandatory monthly principal payments and matures December 2005.
On December 3, 1996, the Company issued 10 3/4% senior notes (the "Senior
Notes") due 2006 in the aggregate principal amount of $100.0 million to the
investing public. Interest on the Senior Notes is payable semi-annually in
cash in arrears on June 1 and December 1, commencing June 1, 1997. The Senior
Notes mature on December 1, 2006 and are redeemable, in whole or in part, at
the option of the Company at any time on or after December 1, 2001 at the
redemption prices listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 106.500%
2002........................................................... 104.333
2003........................................................... 102.167
2004 and thereafter............................................ 100.000
</TABLE>
At any time prior to December 1, 1999, the Company may redeem up to 35% of
the original aggregate principal amount of the Senior Notes with the net
proceeds of one or more equity offerings at a redemption price equal to 110%
of the principal amount plus any accrued and unpaid interest to the date of
redemption. Upon the occurrence of a change of control, the Company will be
required, subject to certain conditions, to make an offer to purchase the
Senior Notes at a price equal to 101% of the principal amount plus accrued and
unpaid interest to the date of purchase.
The Senior Notes are senior unsecured obligations of the Company and
pursuant to the terms of the Senior Notes indenture rank pari passu in right
of payment with other senior indebtedness of the Company and senior to
subordinated indebtedness of the Company, and effectively rank junior to
secured indebtedness of the Company and to indebtedness of the Company's
subsidiaries, including borrowings under the Amended and Restated Credit
Agreement.
The Senior Notes Indenture includes covenants that, among other things,
limit payments of dividends and other restricted payments and the incurrence
of additional indebtedness. As of December 29, 1997, the Company was in
compliance with all such covenants.
On June 17, 1997, the Company amended and restated its Credit Agreement (the
"Amended and Restated Revolving Credit Agreement") to provide for an increased
commitment under its revolving credit facility (the "Revolver"). Under the
Amended and Restated Revolving Credit Agreement, BBNA and the other lenders
thereto committed to increase the borrowing capacity of the Revolver from $15
million to $50 million. Pursuant to the terms of the Amended and Restated
Revolving Credit Agreement, the interest rate, amortization schedule and
maturity of the Revolver were revised. Interest is calculated as the lesser of
the base rate or the Eurodollar rate and is payable, at a minimum, quarterly.
The Amended and Restated Revolving Credit Agreement calls for no principal
amortization and matures in June 2002.
On September 23, 1997, BBNA and the other lenders thereto committed to
increase the borrowing capacity of the Revolver from $50 million to $75
million as permitted under the Amended and Restated Revolving Credit
Agreement.
28
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 29, 1997 and December 30, 1996, the Senior Notes had a fair
value of $106.7 million and $100.0 million, respectively, based on quoted
market prices. The carrying value of the Revolver and the 1995 FAC Note
approximates the fair value as the interest rates on these notes are variable
and are adjusted, at a minimum, quarterly. At December 29, 1997 and December
30, 1996, the 1996 FAC Note had a fair value of $6,337,000 and $6,966,000,
respectively, and the Junior Subordinated Notes had a fair value of $510,000
and $505,000, respectively. The fair value of the 1996 FAC Note and the Junior
Subordinated Notes was calculated using borrowing rates available to the
Company under the Revolver at December 29, 1997 and December 30, 1996.
Aggregate maturities of the Company's long-term debt as of December 29, 1997
are as follows:
<TABLE>
<S> <C>
1998......................................................... $ 577,000
1999......................................................... 636,000
2000......................................................... 700,000
2001......................................................... 770,000
2002......................................................... 56,456,000
Thereafter................................................... 104,236,000
------------
Total.................................................... $163,375,000
============
</TABLE>
6. SENIOR PREFERRED STOCK
Concurrent with the Senior Notes offering, the Company offered $30.0 million
of units (the "Units"), consisting of 1.2 million shares of Senior Preferred
Stock and 30,000 shares of Common Stock. The Senior Preferred Stock is
exchangeable, at the option of the Company, into the Company's 13%
Subordinated Exchange Debentures due 2008, subject to the ability of the
Company to incur such indebtedness under the Amended and Restated Credit
Agreement and the Indenture. The Company incurred issuance costs in the amount
of $1.2 million related to the issuance of the Senior Preferred Stock.
Each share of Senior Preferred Stock has a liquidation preference of $25 per
share. Unless declared, dividends on the Senior Preferred Stock will accrue in
each period ending on March 1, June 1, September 1 and December 1 of each year
at a rate of 13% per annum of the liquidation preference. On or before
December 1, 2001, the Company may, at its option, pay dividends in cash or in
additional fully paid and nonassessable shares of Senior Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends, subject to certain restrictions under its existing credit agreement
and the Indenture. Thereafter, dividends may be paid in cash only.
During fiscal 1997, the Company declared stock dividends earned through
December 1, 1997 of 162,816 shares of its 13% Senior Preferred Stock,
aggregating $4,070,000. As of December 29, 1997, the Company has accrued
senior preferred stock dividends of approximately $345,000 or 13,780 shares
that will be distributed on March 1, 1998.
The Senior Preferred Stock may be redeemed at any time on or after December
1, 2001, in whole or in part, at the option of the Company, at the redemption
prices set forth below plus an amount in cash equal to all accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend for
the period from the dividend payment date immediately prior to the redemption
date to the redemption date), if redeemed during the 12-month period beginning
December 1 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 106.500%
2002........................................................... 104.333%
2003........................................................... 102.167%
2004 and thereafter............................................ 100.000%
</TABLE>
29
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On December 1, 2008, the Company will be required to redeem, subject to
contractual and other restrictions and to the legal availability of funds, all
outstanding shares of Senior Preferred Stock at a price equal to the then
effective liquidation preference, plus an amount in cash equal to all
accumulated and unpaid dividends, including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date.
At December 29, 1997 and December 30, 1996, the Senior Preferred Stock had a
fair value of $36.8 million and $30.3 million, respectively, based on recent
trading activity.
7. LEASES
The Company leases restaurant space under noncancelable operating leases
with remaining lease terms of one to twenty years. In many cases, the leases
provide for rent escalations and for one or more five-year renewal options.
The leases generally require the Company to pay property taxes, insurance,
maintenance and other operating costs of the properties, as well as contingent
rentals based upon a percentage (generally 8.5%) of net sales. In addition,
the Company leases office space, office equipment, restaurant equipment and
vehicles under noncancelable operating leases.
Rent expense amounted to:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rentals under operating
leases............................... $18,929,000 $15,647,000 $11,072,000
Contingent rentals.................... 2,221,000 2,083,000 958,000
----------- ----------- -----------
Total............................... $21,150,000 $17,730,000 $12,030,000
=========== =========== ===========
</TABLE>
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------------
<S> <C>
1998......................................................... $ 23,178,000
1999......................................................... 22,775,000
2000......................................................... 21,925,000
2001......................................................... 20,511,000
2002......................................................... 19,761,000
Thereafter................................................... 184,485,000
------------
Total...................................................... $292,635,000
============
</TABLE>
Future minimum lease payments under noncancelable capital leases are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- -------
<S> <C>
1998.............................................................. $77,000
-------
Total minimum lease payments.................................... 77,000
Less amount representing interest................................. 3,000
-------
Present value of the minimum lease obligation................... $74,000
=======
</TABLE>
Payments on capital leases for fiscal 1997 and 1996 were $99,000 and
$129,000, respectively.
30
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL STOCK
At December 29, 1997, the Company's authorized capital stock was as follows:
<TABLE>
<CAPTION>
NUMBER
NUMBER OF OF SHARES VOTING
PAR VALUE SHARES ISSUED AND RIGHTS
PER SHARE AUTHORIZED OUTSTANDING PER SHARE
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Common Stock.................. $0.01 4,000,000 902,992 1
Non-Voting Common Stock....... 0.01 300,000 0 0
--------- ---------
Total common stock.......... 4,300,000 902,992
========= =========
Class A1 Preferred Stock ..... 0.01 4,425 4,425 0
Class A2 Preferred Stock ..... 0.01 1,200 1,200 0
Class B Preferred Stock ...... 0.01 1,875 1,875 0
--------- ---------
Total preferred stock ...... 7,500 7,500
========= =========
Senior Preferred Stock ....... 0.01 2,500,000 1,362,816 0
========= =========
</TABLE>
Class A1, Class A2 and Class B preferred stock pay dividends at 6% per
annum, payable quarterly. To the extent not declared and paid, such dividends
accumulate. Class A1 preferred stock dividends are payable in cash or
additional shares of Class A1 Preferred Stock; Class A2 and Class B Preferred
Stock dividends are payable in cash only.
In 1994, the Company issued warrants to an affiliate of BBNA to purchase
96,998 shares of a separate class of non-voting Common Stock (the "Non-Voting
Common Stock") at an exercise price of $0.01 per share. The warrants are
exercisable at any time and expire the earlier of the date such warrants are
exercised in full or November 30, 2002.
During 1994, the Company granted stock options to purchase 9,702 shares of
Common Stock at $.12 per share in connection with employment agreements with
certain members of the Company's management. All of these options vested
ratably over a two-year period ending September 1, 1996 at which time all
became fully exercisable. The options were exercised in fiscal 1997. The
Company has not issued any additional stock options or warrants as of December
29, 1997.
9. INCOME TAXES
The provision (benefit) for income taxes, exclusive of amounts related to
the extraordinary item in 1996, was comprised of the following:
<TABLE>
<CAPTION>
FISCAL
1997 FISCAL 1996 FISCAL 1995
--------- ----------- -----------
<S> <C> <C> <C>
Federal:
Current........................... $(3,357,000)
Deferred.......................... $(920,000) 1,512,000 $535,000
State:
Current........................... 370,000
Deferred.......................... 185,000 289,000 290,000
--------- ----------- --------
Net provision (benefit) for
income taxes................... $(365,000) $(1,556,000) $825,000
========= =========== ========
</TABLE>
31
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The difference between the recorded income tax provision (benefit) and the
"expected" tax provision (benefit) based on the statutory federal income tax
rate is as follows:
<TABLE>
<CAPTION>
FISCAL
1997 FISCAL 1996 FISCAL 1995
--------- ----------- -----------
<S> <C> <C> <C>
Computed federal income tax provision
(benefit) at statutory rate.......... $(816,000) $(1,460,000) $605,000
State income taxes (net of federal
income tax effect)................... 244,000 (188,000) 78,000
Non-deductible expenses............... 20,000 29,000
Goodwill amortization................. 162,000 63,000 16,000
Rate change........................... 126,000
Other................................. 25,000
--------- ----------- --------
Net provision (benefit) for income
taxes.............................. $(365,000) $(1,556,000) $825,000
========= =========== ========
</TABLE>
As of December 29, 1997, the Company had a net operating loss carry-forward
for income tax purposes of approximately $34.4 million to offset against
future taxable income. The net operating loss is expected to be utilized
beginning in fiscal 1999 and will begin to expire in 2009.
Total deferred tax liabilities and deferred tax assets as of December 29,
1997 and December 30, 1996, and the sources of the differences between
financial accounting and tax bases of the Company's assets and liabilities
which give rise to the deferred tax liabilities and deferred tax assets and
the effects of each, are as follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation...................................... $11,421,000 $ 7,558,000
Purchase accounting adjustments................... 1,135,000
Other............................................. 451,000 161,000
----------- -----------
13,007,000 7,719,000
Deferred tax assets:
Operating loss carry-forwards..................... 13,946,000 10,198,000
Fixed asset reserves.............................. 2,450,000 934,000
Other............................................. 75,000 451,000
----------- -----------
16,471,000 11,583,000
----------- -----------
Total........................................... $ 3,464,000 $ 3,864,000
=========== ===========
</TABLE>
10. EMPLOYEE BENEFIT PLANS
During fiscal 1996, the Company offered all of its employees the option to
participate in a 401(k) plan, upon fulfillment of certain requirements. The
Company has the option, but not the obligation, to match contributions made by
its employees under the 401(k) plan (the "Plan"). In addition, the Company
provides disability insurance to certain key executives. The insurance covers
all salary payments to the executives during the period of disability. For
fiscal 1997 and 1996, the Company contributed approximately $66,000 and
$23,000, respectively, to the Plan.
11. RELATED PARTIES
During fiscal 1996 and 1995, the Company recorded interest expense on the
related party debt totaling $1,808,000 and $1,991,000, respectively.
32
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company leases two restaurants under noncancelable operating leases from
an entity which is owned by a member of the Company's management. The leases
expire in March 2006 and January 2007, respectively, and require total monthly
rental payments of $20,600. During fiscal 1997, 1996, and 1995, the Company
recorded rent expense of $247,000, $247,000, and $248,000, respectively, under
these leases.
The Company has entered into a management consulting agreement (the "TJC
Consulting Agreement") with an affiliate of The Jordan Company. Under the
terms of the TJC Consulting Agreement, the Company was required to pay the
affiliate an annual management fee equal to the higher of (i) $300,000, or
(ii) 0.35% of food sales. During fiscal 1995, the Company recorded expenses of
$479,000 under the TJC Consulting Agreement. On February 7, 1996, the Company
amended the TJC Consulting Agreement to provide for, among other things, an
annual management fee equal to the higher of (i) $600,000 or (ii) 2.5% of the
Company's cash flow, as determined in the TJC Consulting Agreement. During
fiscal 1997 and 1996, the Company recorded expenses of $600,000 under the
amended TJC Consulting Agreement.
In connection with the 1997 Acquisitions, the Company paid to an affiliate
of The Jordan Company an investment banking fee of $1.0 million. In connection
with the 1996 Acquisitions, the Company paid to an affiliate of The Jordan
Company an investment banking fee of $1.0 million and paid fees totaling
$300,000 to certain members of the Company's senior management. Concurrent
with the Offerings and related financings consummated by the Company in fiscal
1996, the Company paid to the affiliate of The Jordan Company an investment
banking fee of $1.3 million pursuant to the terms of the TJC Consulting
Agreement.
12. NONRECURRING ITEMS
In fiscal 1997 and 1996, the Company recorded a loss of approximately $2.3
million and $2.2 million, respectively, for the disposal of long-lived assets.
Included in the fiscal 1997 loss is the write-down to estimated fair market
value of four Company-owned restaurants due to a decrease in the cash flow of
these restaurants. Also included in the fiscal 1997 loss are the planned
dispositions of two Company-owned restaurants and the disposal of property and
equipment at several restaurants undergoing major remodelings. Included in the
fiscal 1996 loss are the dispositions of five Company-owned restaurants and
the write-off of and equipment no longer serviced by a vendor.
The Company recorded in fiscal 1997 an approximate $1.8 million gain on the
sale of 10 restaurants in the south Chicago suburban area to a third party
franchisee.
During fiscal 1996, the Company included in other income (expense)--net
certain transaction expenses approximating $2.4 million associated with its
attempted initial public offering.
13. EXTRAORDINARY ITEM
In 1996, the Company recognized an extraordinary loss in the amount of
$8,356,000 ($5,055,000 on an after-tax basis) consisting of a write-off of
$4,906,000 ($2,968,000 on an after-tax basis) of deferred financing costs and
interest rate protection related to the repayment of Subordinated Debt and
indebtedness under the Credit Agreement and a prepayment penalty of $3,450,000
($2,087,000 on an after-tax basis) incurred in connection with the prepayment
of the Senior Subordinated Notes (See Note 5).
14. LEGAL PROCEEDINGS
Various legal proceedings are pending against the Company, many involving
routine litigation incidental to the businesses.
33
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The consequences of these matters are not presently determinable but, in the
opinion of the management of the Company after consulting with legal counsel,
the ultimate liability is not expected to have a material effect on the
results of operations, financial position, liquidity or capital resources of
the Company.
15. SUBSEQUENT EVENT
On February 12, 1998, the Company purchased two restaurants in the Chicago
metropolitan area from a third party franchisee for approximately $1.6
million. Subsequent to the end of fiscal 1997, the Company entered into
contracts to purchase nine restaurants in existing markets from third party
franchisees for approximately $6.4 million. The closing of these purchases is
expected to occur by the end of fiscal 1998.
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants during fiscal 1997 or 1996, nor
has there been any disagreement on any matter of accounting principles or
practices or financial disclosure which in either case is required to be
reported pursuant to this Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICES OF THE REGISTRANT
The following sets forth the names and ages of the Company's directors and
executive officers and the positions they held at December 29, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
Lawrence E. Jaro........ 54 Managing Owner, Chairman and Chief Executive Officer
William C. Osborn....... 49 Vice Chairman and Director
Gary W. Hubert.......... 45 Chief Operating Officer and Director
Joel D. Aaseby.......... 39 Chief Financial Officer and Corporate Secretary
Scott E. Vasatka........ 44 Executive Vice President--Human Resources
Augustus F. Hothorn..... 45 Senior Vice President--Development
Stewart G. Baily........ 40 Vice President--Chicago Operations
A. Richard Caputo, Jr... 31 Vice President and Director
Thomas H. Quinn......... 50 Director
John W. Jordan, II...... 49 Director
David W. Zalaznick...... 43 Director
</TABLE>
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
MR. JARO has served as the Company's Managing Owner, Chief Executive Officer
and as a Director since the Company's inception, and currently serves as its
Chairman. Mr. Jaro has over 17 years of experience as a Burger King restaurant
franchisee. Prior to joining the Company, Mr. Jaro was the President and Chief
Executive Officer of Jaro Enterprises, Inc., an operator of 12 Burger King
restaurants in Colorado and Texas.
MR. OSBORN has previously served as one of the Company's Managing Owners and
currently serves as a Director. Mr. Osborn also served as the Company's
President until May 10, 1996 at which time he was appointed the Company's Vice
Chairman. Mr. Osborn has over 12 years of experience as a Burger King
restaurant franchisee as well as a franchisee of other restaurant concepts.
Prior to joining the Company, Mr. Osborn owned and operated three Burger King
restaurants in Colorado.
MR. HUBERT has served as the Company's Executive Vice President and as a
Director since the Company's inception, and currently serves as Chief
Operating Officer. Mr. Hubert has over 22 years of experience with BKC in
restaurant operations and franchise management. Prior to joining the Company,
Mr. Hubert was a Vice President with BKC in both the Franchise and Corporate
Operations divisions and served as the Area Operations Manager for BKC's
Chicago region from 1985 to 1989.
MR. AASEBY has served as the Company's Executive Vice President--Finance and
Corporate Secretary since the Company's inception, and currently serves as
Chief Financial Officer. Mr. Aaseby has over 22 years of experience with BKC
in various finance, accounting and operations positions, including Midwest
Sector Controller from 1989 to 1994.
MR. VASATKA has served as the Company's Executive Vice President--Human
Resources since the Company's inception. Mr. Vasatka has over 28 years of
experience in the restaurant industry. Prior to joining the Company, Mr.
Vasatka was employed by Davgar Restaurants from 1969 until 1994, and held
various senior management positions including District Manager, Director of
Training and Division President.
35
<PAGE>
MR. HOTHORN has served as the Company's Senior Vice President--Development
since May 1997. Mr. Hothorn has over 15 years of Burger King/Grand
Metropolitan PLC experience. Prior to joining the Company, Mr. Hothorn was
Managing Director, Europe, Middle East, Africa (EMA) with Burger King
Corporation. From January 1991 through August 1994, Mr. Hothorn served as
Senior Vice President Franchising and Real Estate for Pearle Vision (a Grand
Met subsidiary). Prior to that, Mr. Hothorn held a variety of positions with
BKC including Vice President of Asset Management, Vice President of Corporate
Real Estate, Director of Development--San Francisco Region, Real Estate
Manager, and Site Development Engineer.
MR. BAILY has served as the Company's Vice President--Chicago Operations
since February 1997. Mr. Baily has been with the Company since its inception
and has over 22 years of experience as both an employee of Burger King
Corporation and also as a franchisee.
MR. CAPUTO has served as a Vice President and Director of the Company since
its inception. Mr. Caputo is a partner of The Jordan Company, which he has
been associated with since 1990. Mr. Caputo is also a director of GFSI, Inc.,
Jackson Products, Inc. as well as other privately held companies.
MR. QUINN has served as a Director of the Company since its inception. Since
1988, Mr. Quinn has been President, Chief Operating Officer and a director of
Jordan Industries, Inc., a diversified industrial holding company. Mr. Quinn
is also the Chairman of the Board and Chief Executive Officer of American
Safety Razor Company and Welcome Home, Inc. as well as other privately held
companies.
MR. JORDAN has served as a Director of the Company since its inception. Mr.
Jordan is a managing partner of The Jordan Company, a private merchant banking
firm which he founded in 1982. Mr. Jordan is also a director of Jordan
Industries, Inc., American Safety Razor Company, GFSI, Inc., Jackson Products,
Inc., Carmike Cinemas, Inc., Welcome Home, Inc. and Apparel Ventures, Inc. as
well as other privately held companies.
MR. ZALAZNICK has served as a Director of the Company since its inception.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan Company.
Mr. Zalaznick is also a director of Jordan Industries, Inc., Carmike Cinemas,
Inc., American Safety Razor Company, GFSI, Inc., Jackson Products, Inc.,
Marisa Christina, Inc. and Apparel Ventures, Inc. as well as other privately
held companies.
Each of the Company's directors was nominated to the Board of Directors
pursuant to the Stockholders Agreement, which required the stockholders named
therein to vote for such nominees.
BOARD OF DIRECTORS
Liability Limitation. The Company's Certificate of Incorporation (the
"Certificate of Incorporation") provides that a director of the Company shall
not be personally liable to it or its stockholders for monetary damages to the
fullest extent permitted by Delaware Corporation Law. In accordance with
Delaware Corporation Law, the Certificate of Incorporation does not eliminate
or limit the liability of a director for acts or omissions that involve
intentional misconduct by a director or a knowing violation of law by a
director for voting or assenting to an unlawful distribution, or for any
transaction from which the director will personally receive a benefit in
money, property, or services to which the director is not legally entitled.
Delaware Corporation Law does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. Any amendment to these provisions of the Delaware
Corporation Law will automatically be incorporated by reference into the
Certificate of Incorporation and the Company's Bylaws, without any vote on the
part of its stockholders, unless otherwise required.
Indemnification Agreements. Simultaneously with the consummation of the
Offerings, the Company and each of its directors entered into indemnification
agreements. The indemnification agreements provide that the Company will
indemnify the directors against certain liabilities (including settlements)
and expenses actually and reasonably incurred by them in connection with any
threatened or pending legal action, proceeding or investigation (other than
actions brought by or in the right of the Company) to which any of them is, or
is threatened to be, made a party by reason of their status as a director,
officer or agent of the Company, or serving
36
<PAGE>
at the request of the Company in any other capacity for or on behalf of the
Company; provided that (i) such director acted in good faith and in a manner
not opposed to the best interest of the Company, (ii) with respect to any
criminal proceedings, such director had no reasonable cause to believe his or
her conduct was unlawful, (iii) such director is not finally adjudged to be
liable for negligence or misconduct in the performance of his or her duty to
the Company, unless the court views in light of the circumstances the director
is nevertheless entitled to indemnification, and (iv) the indemnification does
not relate to any liability arising under Section 16(b) of the Securities
Exchange Act of 1934 or the rules or regulations promulgated thereunder. With
respect to any action brought by or in the right of the Company, directors may
also be indemnified, to the extent not prohibited by applicable laws or as
determined by a court of competent jurisdiction, against costs and expenses
actually and reasonably incurred by them in connection with such action if
they acted in good faith and in the best interests of the Company.
Director Compensation. Directors who are not employees of the Company
receive $12,500 per year for serving as a director of the Company. In
addition, the Company reimburses directors for their travel and other expenses
incurred in connection with attending meetings of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors does not maintain a Compensation Committee. During
fiscal 1997, however, Messrs. Caputo, Jaro, Jordan and Quinn participated in
deliberations of the Board of Directors concerning executive officer
compensation.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information regarding
compensation paid or accrued by the Company during the last three fiscal years
to each of the Company's chief executive officer and other executive officers
whose total annual salary and bonus exceeded $100,000 during such period
(collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION
- ------------------ ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence E. Jaro......... 1997 $245,000 $235,000
Managing Owner and 1996 215,000 64,500
Chief Executive Officer 1995 215,000 64,500
William C. Osborn........ 1997 $221,000 $10,000(3)
Vice Chairman 1996 215,000 $ 64,500 10,000(3)
1995 215,000 64,500 10,000(3)
Gary W. Hubert........... 1997 $226,000 $ 60,000 --
Chief Operating Officer
and 1996 215,000 64,500
Senior Vice President 1995 215,000 64,500
Joel D. Aaseby........... 1997 $157,000 $ 80,000 --
Chief Financial Officer
and 1996 110,000 30,000
Corporate Secretary 1995 110,000 32,000
Scott E. Vasatka......... 1997 $128,000 $ 25,000 --
Executive Vice
President-- 1996 105,000 21,000
Human Resources 1995 105,000 31,000
Stewart G. Baily......... 1997 $131,000 $ 30,000 --
Vice President-- 1996 120,000 15,000
Chicago Operations 1995 104,000 10,000
</TABLE>
37
<PAGE>
- --------
(1) The Company provides bonus compensation based on an individual's
achievement of certain specified objectives, including achieving the
Company's stated EBITDA target. Employees are eligible to receive from 10%
to 60% of their annual compensation as a bonus or an amount set forth by
the Company's Board of Directors.
(2) No executive named in the table above received any Other Annual
Compensation in an amount in excess of either $50,000 or 10% of salary and
bonus reported for him in the two preceding columns.
(3) Represents the amount of life insurance premiums paid by the Company on
the life of Mr. Osborn with death benefits designated by Mr. Osborn.
Option Exercises in Fiscal 1997 and Fiscal Year-end Values
The following table shows stock options exercised by each of the Named
Executives during fiscal 1997, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of fiscal
year-end, and the values for unexercised options. Except as listed in the
table, no other Named Executive exercised any Company stock options or
beneficially owned unexercised Company stock options.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON DECEMBER 29, 1997 AT DECEMBER 29, 1997
EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott E. Vasatka........ 4,851 $ 0 0 $ 0
</TABLE>
RETIREMENT AND 401(K) PLANS
The Company offers all of its employees the option to participate in a
401(k) plan, upon fulfillment of certain requirements. The Company has the
option, but not the obligation, to match contributions made by its employees
under the 401(k) plan. In addition, the Company provides disability insurance
to certain key executives. The insurance covers all salary payments to the
executives during the entire period of disability.
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, the Company entered into an employment
agreement with Lawrence E. Jaro (the "Jaro Employment Agreement"). Pursuant to
the terms of the Jaro Employment Agreement, Mr. Jaro agreed to serve as Chief
Executive Officer and Co-Managing Owner of the Company for a five-year period
ending on August 31, 1999 with automatic one-year renewals thereafter,
provided that neither Mr. Jaro nor the Company has provided the other with a
notice of termination 120 days prior to the expiration date of the Jaro
Employment Agreement. Mr. Jaro also agreed not to compete against the Company
throughout the term of his employment and for one year thereafter, and not to
disclose any confidential information during and after the term of his
employment. In exchange for his services and covenants, the Company agreed to
compensate Mr. Jaro with a base salary of $215,000 per annum (subject to an
annual cost of living adjustment), an automobile allowance of $800 per month
and reimbursement of up to $6,000 per annum for automobile-related costs. In
the event Mr. Jaro no longer provides services to the Company due to (i) his
death or physical or mental disability or (ii) his dismissal without Cause (as
defined in the Jaro Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Jaro is entitled to receive his base
compensation from the date of his termination through the first anniversary of
such termination or through the remaining term of his employment agreement,
respectively.
38
<PAGE>
Effective September 1, 1994, the Company entered into an employment
agreement with William C. Osborn (the "Osborn Employment Agreement"). Pursuant
to the terms of the Osborn Employment Agreement, Mr. Osborn agreed to serve as
President and Co-Managing Owner of the Company for a five-year period ending
on August 31, 1999. Mr. Osborn also agreed not to compete against the Company
throughout the term of his employment and for one year thereafter, and not to
disclose any confidential information during and after the term of his
employment. In exchange for his services and covenants, the Company agreed to
compensate Mr. Osborn with a base salary of $215,000 per annum (subject to an
annual cost of living adjustment), an automobile allowance of $800 per month
and reimbursement of up to $6,000 per annum for automobile-related costs. In
the event Mr. Osborn no longer provides services to the Company due to (i) his
death or physical or mental disability or (ii) his dismissal without Cause (as
defined in the Osborn Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Osborn is entitled to receive his base
compensation from the date of his termination through the first anniversary of
such termination or through the remaining term of his employment agreement,
respectively. Effective May 10, 1996, the Company and Mr. Osborn agreed that
Mr. Osborn would resign as President to become Vice Chairman of the Company.
Effective September 1, 1994, the Company entered into an employment
agreement with Gary W. Hubert (the "Hubert Employment Agreement"). Pursuant to
the terms of the Hubert Employment Agreement, Mr. Hubert agreed to serve as
Senior Vice President and Managing Director of the Company for a five-year
period ending on August 31, 1999 with automatic one-year renewals thereafter,
provided that neither Mr. Hubert nor the Company has provided the other with
notice of termination 120 days prior to the expiration of the Hubert
Employment Agreement. Mr. Hubert also agreed not to compete against the
Company throughout the term of his employment and for one year thereafter, and
not to disclose any confidential information during and after the term of his
employment. In exchange for his services and covenants, the Company agreed to
compensate Mr. Hubert with a base salary of $215,000 per annum (subject to an
annual cost of living adjustment), an automobile allowance of $800 per month
and reimbursement of up to $6,000 per annum for automobile-related costs. In
the event Mr. Hubert no longer provides services to the Company due to (i) his
death or physical or mental disability or (ii) his dismissal without Cause (as
defined in the Hubert Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Hubert is entitled to receive his base
compensation from the date of his termination through the first anniversary of
such termination or through the remaining term of his employment agreement,
respectively.
Effective September 1, 1994, the Company entered into an employment
agreement with Joel D. Aaseby (the "Aaseby Employment Agreement"). Pursuant to
the terms of the Aaseby Employment Agreement, Mr. Aaseby agreed to serve as
Vice President--Finance of the Company for a five-year period ending on August
31, 1999 with automatic one-year renewals thereafter, provided that neither
Mr. Aaseby nor the Company has provided the other with notice of termination
120 days prior to the expiration of the Aaseby Employment Agreement. Mr.
Aaseby also agreed not to compete with the Company throughout the term of his
employment and for one year thereafter, and not to disclose any confidential
information during and after the term of his employment. In exchange for his
services and covenants, the Company agreed to compensate Mr. Aaseby with a
base salary of $110,000 per annum (subject to an annual cost of living
adjustment), an automobile allowance of $500 per month and reimbursement of up
to $6,000 per annum for automobile-related costs. In the event Mr. Aaseby no
longer provides services to the Company due to (i) his death or physical or
mental disability or (ii) his dismissal without Cause (as defined in the
Aaseby Employment Agreement) or as a result of a material reduction in his
authority, then Mr. Aaseby is entitled to receive his base compensation from
the date of his termination through the first anniversary of such termination
or through the remaining term of his employment agreement, respectively.
Effective September 1, 1994, the Company entered into an employment
agreement with Scott E. Vasatka (the "Vasatka Employment Agreement"). Pursuant
to the terms of the Vasatka Employment Agreement, Mr. Vasatka agreed to serve
as Vice President--Human Resources of the Company for a five-year period
ending on August 31, 1999 with automatic one-year renewals thereafter,
provided that neither Mr. Vasatka nor the Company has provided the other with
notice of termination 120 days prior to the expiration of the Vasatka
Employment Agreement. Mr. Vasatka also agreed not to compete against the
Company throughout the term of
39
<PAGE>
his employment and for one year thereafter, and not to disclose any
confidential information during and after the term of his employment. In
exchange for his services and covenants, the Company agreed to compensate Mr.
Vasatka with a base salary of $105,000 per annum (subject to an annual cost of
living adjustment), an automobile allowance of $500 per month and
reimbursement of up to $6,000 per annum for automobile-related costs. In the
event Mr. Vasatka no longer provides services to the Company due to (i) his
death or physical or mental disability or (ii) his dismissal without Cause (as
defined in the Vasatka Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Vasatka is entitled to receive his base
compensation from the date of his termination through the first anniversary of
such termination or through the remaining term of his employment agreement,
respectively.
Effective simultaneously with the closing of the Offerings, the Company
entered into a new employment agreement with Mr. Osborn (the "New Osborn
Employment Agreement"). Pursuant to the terms of the New Osborn Employment
Agreement, Mr. Osborn will (i) continue to serve as Vice Chairman of the
Company, (ii) be entitled to annual compensation of $225,000 and (iii) be
subject to non-competition and confidentiality provisions similar to Mr.
Osborn's existing employment agreement. The term of the New Osborn Employment
Agreement will expire on September 1, 1999.
Effective May 19, 1997, the Company entered into an employment agreement
with Augustus F. Hothorn (the "Hothorn Employment Agreement"). Pursuant to the
terms of the Hothorn Employment Agreement, Mr. Hothorn agreed to serve as
Senior Vice President--Development of the Company for a three-year period
ending on May 18, 2000 with automatic one-year renewals thereafter, provided
that neither Mr. Hothorn nor the Company has provided the other with notice of
termination 120 days prior to the expiration of the Hothorn Employment
Agreement. Mr. Hothorn also agreed not to compete against the Company
throughout the term of his employment and for one year thereafter, and not to
disclose any confidential information during and after the term of his
employment. In exchange for his services and covenants, the Company agreed to
compensate Mr. Hothorn with a base salary of $200,000 per annum (subject to an
annual cost of living adjustment), an automobile allowance of $800 per month
and reimbursement of up to $6,000 per annum for automobile-related costs. In
the event Mr. Hothorn no longer provides services to the Company due to (i)
his death or physical or mental disability or (ii) his dismissal without Cause
(as defined in the Hothorn Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Hothorn is entitled to receive his base
compensation from the date of his termination through the first anniversary of
such termination or through the remaining term of his employment agreement,
respectively.
40
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth as of December 29, 1997, certain information
regarding beneficial ownership of Common Stock held by (i) each director and
each of the Named Executives who own shares of the Company's equity
securities, (ii) all directors and executive officers of the Company as a
group, and (iii) each person known by the Company to own beneficially more
than 5% of the Company's Common Stock. Each individual or entity named has
sole investment and voting power with respect to shares of Common Stock
indicated as beneficially owned by them, except where otherwise noted.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
(1)
------------------
NUMBER PERCENTAGE
------- ----------
<S> <C> <C>
Executive Officers and Directors:
Lawrence E. Jaro(2)....................................... 196,051 21.9%
William C. Osborn(3)...................................... 81,105 9.1
Gary W. Hubert............................................ 29,101 3.3
Joel D. Aaseby............................................ 9,703 1.1
Thomas H. Quinn(4)........................................ 29,096 3.3
John W. Jordan, II(5)..................................... 38,285 4.3
A. Richard Caputo, Jr.(6)................................. 12,609 1.4
David W. Zalaznick(7)..................................... 38,285 4.3
Scott E. Vasatka.......................................... 4,851 0.5
All executive officers and directors as a group (9
persons)(8).............................................. 439,086 48.9
Other Principal Stockholders:
MCIT PLC ("MCIT")(9)...................................... 246,302 27.6%
Leucadia Investors, Inc.(10).............................. 61,575 6.9
BankBoston Investments Inc. ("BankBoston")(11)............ 96,998 9.8
</TABLE>
- --------
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed. As of
December 29, 1997, the Company had 902,992 shares of Common Stock issued
and outstanding.
(2) Includes 166,950 shares of Common Stock beneficially owned by various
affiliates of Mr. Jaro. Mr. Jaro and his affiliates also own 915 shares
of Class A2 Preferred Stock and 305 shares of Class B Preferred Stock.
Mr. Jaro's address is c/o the Company, 2215 Enterprise Drive, Suite 1502,
Westchester, Illinois 60154.
(3) Includes 52,004 shares of Common Stock beneficially owned by various
affiliates of Mr. Osborn. Mr. Osborn and his affiliates also own 285
shares of Class A2 Preferred Stock and 95 shares of Class B Preferred
Stock. Mr. Osborn's address is c/o the Company, 2215 Enterprise Drive,
Suite 1502, Westchester, Illinois 60154.
(4) Mr. Quinn is President and Chief Operating Officer of Jordan Industries,
Inc., a company affiliated with The Jordan Company, an entity with which
Messrs. Caputo, Jordan and Zalaznick are also affiliated.
(5) Includes 38,285 shares of Common Stock held by John W. Jordan II
Revocable Trust, of which Mr. Jordan is trustee. Mr. Jordan also owns
96.25 shares of Class B Preferred Stock. Mr. Jordan's address is c/o The
Jordan Company, 9 West 57th Street, New York, New York 10019.
(6) Mr. Caputo is a partner of The Jordan Company, an entity with which
Messrs. Jordan and Zalaznick are also affiliated.
(7) Mr. Zalaznick also owns 96.25 shares of Class B Preferred Stock. Mr.
Zalaznick's address is c/o The Jordan Company, 9 West 57th Street, New
York, New York 10019.
(8) Includes all shares owned directly or beneficially by directors and
executive officers, including shares beneficially owned by affiliates of
Messrs. Jaro and Osborn.
41
<PAGE>
(9) MCIT also owns 3,000 shares of Class A1 Preferred Stock and 500 shares of
Class B Preferred Stock. The principal address of MCIT is c/o The Jordan
Company, 9 West 57th Street, New York, New York 10019.
(10) Leucadia also owns 125 shares of Class B Preferred Stock. The principal
address of Leucadia is 315 Park Avenue South, New York, New York 10010.
See "Description of Capital Stock--Preferred Stock."
(11) Represents immediately exercisable warrants to purchase 96,998 shares of
Non-Voting Common Stock. BankBoston also owns 1,425 shares of Class A1
Preferred Stock and 475 shares of Class B Preferred Stock. The principal
address of BankBoston is 100 Federal Street, Boston, Massachusetts 02110.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Jordan Company. On September 1, 1994, the Company entered into the TJC
Consulting Agreement with an affiliate of The Jordan Company. The TJC
Consulting Agreement was subsequently amended on February 7, 1996. Under the
TJC Consulting Agreement, the Company retained an affiliate of The Jordan
Company to render consulting services to it regarding the Company and its
subsidiaries, their financial and business affairs and their relationships
with their lenders and stockholders, and the operation and expansion of their
business. The TJC Consulting Agreement expires on September 1, 2004, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled renewal
date. The TJC Consulting Agreement provides for an annual consulting fee
payable on a quarterly basis equal to the higher of (i) $600,000 or (ii) 2.5%
of the Company's cash flow (as determined in the TJC Consulting Agreement). In
addition, the TJC Consulting Agreement provides for payment to the affiliate
of The Jordan Company of (i) an investment banking and sponsorship fee of up
to 2% of the purchase price of certain acquisitions or sales involving the
Company or any of its subsidiaries and (ii) a financial consulting fee of up
to 1.0% of any debt, equity or other financing arranged by the Company with
the assistance of TJC. During fiscal 1997 and 1996, the Company paid
consulting fees to an affiliate of The Jordan Company of approximately
$600,000 pursuant to the terms of the TJC Consulting Agreement. In connection
with the 1997 Acquisitions, the Company paid to an affiliate of The Jordan
Company an investment banking fee of $1.0 million. In connection with the 1996
Acquisitions, the Company paid to an affiliate of The Jordan Company an
investment banking fee of $1.0 million and paid fees totaling $300,000 to
certain members of the Company's senior management. Concurrent with the
Offerings and related financings consummated by the Company in fiscal 1996,
the Company paid an affiliate of The Jordan Company an investment banking fee
of $1.3 million pursuant to the terms of the TJC Consulting Agreement. The
Company believes that the terms of the TJC Consulting Agreement are comparable
to the terms that it would obtain from disinterested third parties for
comparable services. Messrs. Jordan, Zalaznick and Caputo are partners of The
Jordan Company.
Burger King Corporation. In connection with the Offerings, the Company has
committed to BKC that, without BKC's prior written consent, (i) it will not
pay cash dividends on the Senior Preferred Stock on or prior to December 1,
2001 and (ii) it will not pay cash dividends to holders of Common Stock until
the Senior Notes are repaid in full and the Senior Preferred Stock is redeemed
or otherwise retired. The Company has committed to BKC that for the
foreseeable future (i) it will make capital expenditures on its existing
restaurants equal to 1% of its gross sales and (ii) it will spend an amount
equal to 1% of its gross sales on local advertising.
Members of the Board of Directors. The Company leases the land and buildings
for two Burger King restaurants under noncancelable operating leases from an
entity which is owned by Mr. Jaro. The leases expire in March 2006 and January
2007, respectively, and require total monthly rental payments of $20,600. For
the fiscal years ended December 29, 1997 and December 30, 1996, the Company
recorded rent expense of $247,000 under these leases. The Company believes
that the terms of these leases are comparable to the terms it would obtain
from disinterested third parties for comparable sites.
Pursuant to the provisions of BKC's franchise agreements, Messrs. Jaro,
Osborn and Hubert, as managing owners and owners, have guaranteed the
obligations of the Company and its subsidiaries under each franchise agreement
and each lease agreement in which BKC is the lessor.
The Company has adopted a policy to provide that future transactions between
the Company and its officers, directors and other affiliates must (i) be
approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors and (ii) be on
terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS INCLUDED IN ITEM 8
See "Index to Financial Statements of AmeriKing, Inc. and Subsidiary" set
forth in Item 8, "Financial Statements and Supplementary Data."
SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE
Schedule I--Condensed financial information of registrant
Schedule II--Valuation and qualifying accounts
Schedule III--Real estate and accumulated depreciation
Schedule IV--Mortgage loans on real estate
Schedule V--Supplemental Information Concerning Property--Casualty
Insurance Operations
EXHIBITS
A list of exhibits included as part of this Form 10-K or incorporated by
reference is set forth in the Index to Exhibits. Included in the Index to
Exhibits are the following exhibits which constitute management contracts or
compensatory plans or arrangements.
1. TJC Consulting Agreement
2. Jaro Employment Agreement
3. Osborn Employment Agreement
4. Hubert Employment Agreement
5. Aaseby Employment Agreement
6. Vasatka Employment Agreement
7. New Osborn Employment Agreement
8. Hothorn Employment Agreement
REPORTS ON FORM 8-K
1. On July 14, 1997, the Company filed a Current Report on Form 8-K,
announcing under Item 2 the consummation of the purchase of 26 restaurants in
the Fayetteville and Raleigh/Durham, North Carolina areas.
2. On September 30, 1997, the Company filed a Current Report on Form 8-K,
announcing under Item 2 the consummation of the purchase of 30 restaurants in
the Charlotte, North Carolina area.
43
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
WESTCHESTER, STATE OF ILLINOIS, ON MARCH , 1998.
Ameriking, Inc.
*
By: _________________________________
LAWRENCE E. JARO MANAGING OWNER,
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON THE DAY OF MARCH, 1998.
SIGNATURE TITLE
* Managing Owner, Chairman and
- ------------------------------------- Chief Executive Officer
LAWRENCE E. JARO (Principal Executive Officer)
* Vice Chairman
- -------------------------------------
WILLIAM C. OSBORN
* Director and Chief Operating
- ------------------------------------- Officer
GARY W. HUBERT
* Chief Financial Officer and
- ------------------------------------- Corporate Secretary (Principal
JOEL ASAEBY Financial and Accounting
Officer)
* Director and Vice President
- -------------------------------------
A. RICHARD CAPUTO, JR.
* Director
- -------------------------------------
THOMAS H. QUINN
* Director
- -------------------------------------
JOHN W. JORDAN II
* Director
- -------------------------------------
DAVID W. ZALANICK
/s/ A. Richard Caputo, Jr.
By: _________________________________
As Attorney-in-Fact
No copies of any annual report or proxy with respect to any meeting of
security-holders have been sent to the Company's security-holders.
1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 FORM OF UNDERWRITING AGREEMENT FOR NOTES OFFERING... *
1.2 FORM OF UNDERWRITING AGREEMENT FOR UNITS OFFERING... *
2.1++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN BURGER KING CORPORATION ("BKC") AND
NATIONAL RESTAURANT ENTERPRISES, INC. ("ENTER-
PRISES") (Filed as exhibit 2.1 to AmeriKing's Regis-
tration Statement (No. 333-04261) and incorporated
herein by reference)................................ *
2.2++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN JARO ENTERPRISES, INC. AND AMERIKING,
INC. (FORMERLY KNOWN AS NRE HOLDINGS, INC.)
("AMERIKING") (Filed as exhibit 2.2 to AmeriKing's
Registration Statement (No. 333-04261) and incorpo-
rated herein by reference).......................... *
2.3++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN JARO RESTAURANTS, INC. AND AMERIKING
(Filed as exhibit 2.3 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
2.4++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN TABOR RESTAURANTS ASSOCIATES, INC. AND
AMERIKING (Filed as exhibit 2.4 to AmeriKing's Reg-
istration Statement (No. 333-04261) and incorporated
herein by reference)................................ *
2.5++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN JB RESTAURANTS, INC. AND AMERIKING
(Filed as exhibit 2.5 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
2.6++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN CASTLEKING, INC. AND AMERIKING (Filed
as exhibit 2.6 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
2.7++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN OSBURGER, INC. AND AMERIKING (Filed as
exhibit 2.7 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
2.8++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1,
1994, BETWEEN WHITE-OSBORN RESTAURANTS, INC. AND
AMERIKING (Filed as exhibit 2.8 to AmeriKing's Reg-
istration Statement (No. 333-04261) and incorporated
herein by reference)................................ *
2.9++ PURCHASE AND SALE AGREEMENT, DATED NOVEMBER 30,
1994, BY AND AMONG SHELDON T. FRIEDMAN, BNB LAND
VENTURE, INC. AND ENTERPRISES (Filed as exhibit 2.9
to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
2.10++ ASSET PURCHASE AGREEMENT, DATED JULY 5, 1995, BY AND
AMONG DMW, INC., DANIEL L. WHITE AND AMERIKING COLO-
RADO CORPORATION I (Filed as exhibit 2.10 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
2.11++ ASSET PURCHASE AGREEMENT, DATED JULY 5, 1995, BY AND
AMONG WSG, INC., DANIEL L. WHITE, SUSAN J. WAKEMAN,
GEORGE ALAIZ, JR. AND AMERIKING COLORADO CORPORATION
I (Filed as exhibit 2.11 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.12++ PURCHASE AGREEMENT, DATED NOVEMBER 21, 1995, BY AND
AMONG QSC, INC., THE SHAREHOLDERS OF QSC, INC. AND
AMERIKING TENNESSEE CORPORATION I (Filed as exhibit
2.12 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
2.13++ PURCHASE AGREEMENT, DATED NOVEMBER 21, 1995, BY AND
AMONG RO- LANK, INC., THE SHAREHOLDERS OF RO-LANK,
INC. AND AMERIKING TENNESSEE CORPORATION I (Filed as
exhibit 2.13 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
2.14++ PURCHASE AND SALE AGREEMENT, DATED NOVEMBER 30,
1995, BY AND AMONG C&N DINING, INC. AND AFFILIATES
AND AMERIKING VIRGINIA CORPORATION I (Filed as ex-
hibit 2.14 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
2.15++ AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT,
DATED FEBRUARY 7, 1996, BY AND AMONG C&N DINING,
INC. AND AFFILIATES AND AMERIKING VIRGINIA CORPORA-
TION I (Filed as exhibit 2.15 to AmeriKing's Regis-
tration Statement (No. 333-04261) and incorporated
herein by reference)................................ *
2.16++ ASSET PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN THIRTY-FORTY, INC. AND AMERIKING CINCINNATI
CORPORATION I (Filed as exhibit 2.16 to AmeriKing's
Registration Statement (No. 333-04261) and incorpo-
rated herein by reference).......................... *
2.17++ ASSET PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN HOUSTON, INC. AND AMERIKING CINCINNATI COR-
PORATION I (Filed as exhibit 2.17 to AmeriKing's
Registration Statement (No. 333-04261) and incorpo-
rated herein by reference).......................... *
2.18++ ^ASSET PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN FIFTH & RACE, INC. AND AMERIKING CINCINNATI
CORPORATION I (Filed as exhibit 2.18 to AmeriKing's
Registration Statement (No. 333-04261) and incorpo-
rated herein by reference........................... *
2.19 ASSET PURCHASE AGREEMENT among F&P ENTERPRISES,
INC., THE SHAREHOLDERS OF F&P ENTERPRISES, INC. and
NATIONAL RESTAURANT ENTERPRISES, INC. (Filed as ex-
hibit 2.19 to AmeriKing's Form 10-Q for the quarter
ended March 31, 1997 and incorporated herein by ref-
erence.............................................. *
2.20 AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT
among F&P ENTERPRISES, INC., THE SHAREHOLDERS OF F&P
ENTERPRISES, INC. and NATIONAL RESTAURANT ENTER-
PRISES, INC. (Filed as exhibit 2.20 to AmeriKing's
Form 10-Q for the quarter ended March 31, 1997 and
incorporated herein by reference.................... *
2.21 ASSET PURCHASE AGREEMENT among NORTH FOODS, INC.,
THE SHAREHOLDERS OF NORTH FOODS, INC. and NATIONAL
RESTAURANT ENTERPRISES, INC. (Filed as exhibit 2.21
to AmeriKing's Form 10-Q for the quarter ended March
31, 1997 and incorporated herein by reference....... *
2.22 ASSET PURCHASE AGREEMENT among NORTH FOODS, INC.,
THE SHAREHOLDERS OF NORTH FOODS, INC. and NATIONAL
RESTAURANT ENTERPRISES, INC. (Filed as exhibit 2.22
to AmeriKing's Form 10-Q for the quarter ended March
31, 1997 and incorporated herein by reference....... *
2.23 AMENDMENT NO. 2 TO THE ASSET PURCHASE AGREEMENT
dated June 16, 1997 among F&P ENTERPRISES, INC., THE
SHAREHOLDERS OF F&P ENTERPRISES, INC. AND NATIONAL
RESTAURANT ENTERPRISES, INC. (Filed as exhibit 2.23
to AmeriKing's Current Report on Form 8-K filed on
July 14, 1997 and incorporated herein by refer-
ence)............................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.24 AMENDMENT NO. 3 TO THE ASSET PURCHASE AGREEMENT
dated June 16, 1997 among F&P ENTERPRISES, INC., THE
SHAREHOLDERS OF F&P ENTERPRISES, INC. AND NATIONAL
RESTAURANT ENTERPRISES, INC. (Filed as exhibit 2.24
to AmeriKing's Current Report on Form 8-K filed on
July 14, 1997 and incorporated herein by refer-
ence)............................................... *
2.25 AMENDMENT NO. 2 TO THE ASSET PURCHASE AGREEMENT
dated June 16, 1997 among NORTH FOODS, INC., THE
SHAREHOLDERS OF NORTH FOODS, INC. AND NATIONAL RES-
TAURANT ENTERPRISES, INC. (Filed as exhibit 2.25 to
AmeriKing's Current Report on Form 8-K filed on July
14, 1997 and incorporated herein by reference)...... *
2.26 AMENDMENT NO. 3 TO THE ASSET PURCHASE AGREEMENT
dated June 16, 1997 among NORTH FOODS, INC., THE
SHAREHOLDERS OF NORTH FOODS, INC. AND NATIONAL RES-
TAURANT ENTERPRISES, INC. (Filed as exhibit 2.26 to
AmeriKing's Current Report on Form 8-K filed on July
14, 1997 and incorporated herein by reference)...... *
2.27 REAL ESTATE PURCHASE AGREEMENT dated March 7, 1997
among T&B LEASING, THOMAS FICKLING AND WILLIAM PREN-
TICE (the "PARTNERS"), AND CASTLE PROPERTIES, LLC.
(Filed as exhibit 2.27 to AmeriKing's Current Report
on Form 8-K filed on July 14, 1997 and incorporated
herein by reference)................................ *
2.28 AMENDMENT NO. 1 TO THE REAL ESTATE PURCHASE AGREE-
MENT dated April 8, 1997 among T&B LEASING, THOMAS
FICKLING AND WILLIAM PRENTICE (the "PARTNERS") AND
CASTLE PROPERTIES, LLC. (Filed as exhibit 2.28 to
AmeriKing's Current Report on Form 8-K filed on July
14, 1997 and incorporated herein by reference)...... *
2.29 AMENDMENT NO. 2 TO THE REAL ESTATE PURCHASE AGREE-
MENT dated June 16, 1997 among T&B LEASING, THOMAS
FICKLING AND WILLIAM PRENTICE (the "PARTNERS"), CAS-
TLE PROPERTIES, LLC AND NATIONAL RESTAURANT ENTER-
PRISES, INC. (Filed as exhibit 2.29 to AmeriKing's
Current Report on Form 8-K filed on July 14, 1997
and incorporated herein by reference)............... *
2.30 AMENDMENT NO. 3 TO THE REAL ESTATE PURCHASE AGREE-
MENT dated June 16, 1997 among T&B LEASING, THOMAS
FICKLING AND WILLIAM PRENTICE, INVESTORS TITLE EX-
CHANGE CORPORATION, AND NATIONAL RESTAURANT ENTER-
PRISES, INC. (Filed as exhibit 2.30 to AmeriKing's
Current Report on Form 8-K filed on July 14, 1997
and incorporated herein by reference)............... *
2.31 REAL ESTATE PURCHASE AGREEMENT dated March 7, 1997
among W&W INVESTMENTS LIMITED PARTNERSHIP, THOMAS
FICKLING AND WILLIAM PRENTICE (the "GENERAL PART-
NERS"), AND CASTLE PROPERTIES, LLC. (Filed as ex-
hibit 2.31 to AmeriKing's Current Report on Form 8-K
filed on July 14, 1997 and incorporated herein by
reference).......................................... *
2.32 AMENDMENT NO. 1 TO THE REAL ESTATE PURCHASE AGREE-
MENT dated April 8, 1997 among W&W INVESTMENTS LIM-
ITED PARTNERSHIP, THOMAS FICKLING AND WILLIAM PREN-
TICE (the "PARTNERS") AND CASTLE PROPERTIES, LLC.
(Filed as exhibit 2.32 to AmeriKing's Current Report
on Form 8-K filed on July 14, 1997 and incorporated
herein by reference)................................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.33 AMENDMENT NO. 2 TO THE REAL ESTATE PURCHASE AGREE-
MENT dated June 16, 1997 among W&W INVESTMENT LIM-
ITED PARTNERSHIP, THOMAS FICKLING AND WILLIAM PREN-
TICE (the "GENERAL PARTNERS"), CASTLE PROPERTIES,
LLC AND NATIONAL RESTAURANT ENTERPRISES, INC. (Filed
as exhibit 2.33 to AmeriKing's Current Report on
Form 8-K filed on July 14, 1997 and incorporated
herein by reference)................................ *
2.34 STOCK PURCHASE AGREEMENT DATED JULY 22, 1997 among
THE SHAREHOLDERS OF B&J RESTAURANTS, INC., and NA-
TIONAL RESTAURANT ENTERPRISES, INC. (Filed as ex-
hibit 2.34 to AmeriKing's Form 10-Q for the quarter
ended June 30, 1997)................................ *
3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AMERIKING (Filed as exhibit 3.1 to AmeriKing's Reg-
istration Statement (No. 333-04261) and incorporated
herein by reference)................................ *
3.2 AMENDED AND RESTATED BYLAWS OF AMERIKING (Filed as
exhibit 3.2 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
4.1 STOCKHOLDERS AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG AMERIKING AND THE STOCKHOLDERS APPEARING
ON THE SIGNATURE PAGES THERETO (Filed as exhibit 4.1
to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
4.2 CONSENT AND AMENDMENT NO. 1 TO STOCKHOLDERS AGREE-
MENT, DATED NOVEMBER 30, 1994, BY AND AMONG
AMERIKING AND THE STOCKHOLDERS APPEARING ON THE SIG-
NATURE PAGES THERETO (Filed as exhibit 4.2 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
4.3 CONSENT AND AMENDMENT NO. 2 TO STOCKHOLDERS AGREE-
MENT, DATED FEBRUARY 7, 1996, BY AND AMONG AMERIKING
AND THE STOCKHOLDERS APPEARING ON THE SIGNATURE
PAGES THERETO (Filed as exhibit 4.3 to AmeriKing's
Registration Statement (No. 333-04261) and incorpo-
rated herein by reference).......................... *
4.4 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT BY AND
AMONG AMERIKING AND THE STOCKHOLDERS APPEARING ON
THE SIGNATURE PAGES THERETO (Filed as exhibit 4.4 to
AmeriKing's Form 10-K for the year ended December
30, 1996 and incorporated herein by reference)...... *
4.5 MANAGEMENT SUBSCRIPTION AGREEMENT, DATED SEPTEMBER
1, 1994, BY AND AMONG AMERIKING, TABOR RESTAURANT
ASSOCIATES, INC., JARO ENTERPRISES, INC., JARO RES-
TAURANTS, INC., JB RESTAURANTS, INC., CASTLEKING,
INC., WHITE-OSBORN RESTAURANTS, INC., OSBURGER,
INC., LAWRENCE JARO, WILLIAM OSBORN, GARY HUBERT,
JOEL AASEBY, DONALD STAHURSKI AND SCOTT VASATKA
(Filed as exhibit 4.5 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
4.6 STOCK OPTION AGREEMENT, DATED SEPTEMBER 1, 1994, BE-
TWEEN AMERIKING AND SCOTT VASATKA (Filed as exhibit
4.6 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.7 STOCK OPTION AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN AMERIKING AND DONALD STAHURSKI (Filed as
exhibit 4.7 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.8 WARRANT AGREEMENT, DATED SEPTEMBER 1, 1994, BETWEEN
AMERIKING AND THE FIRST NATIONAL BANK OF BOSTON
(Filed as exhibit 4.8 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
4.9 COMMON STOCK PURCHASE WARRANT, DATED SEPTEMBER 1,
1994, BETWEEN AMERIKING AND BANCBOSTON INVESTMENTS
INC. (Filed as exhibit 4.9 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
4.10 FIRST AMENDMENT TO COMMON STOCK PURCHASE WARRANT,
DATED NOVEMBER 30, 1994 (Filed as exhibit 4.10 to
AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.11 SECOND AMENDMENT TO COMMON STOCK PURCHASE WARRANT,
DATED FEBRUARY 7, 1996 (Filed as exhibit 4.11 to
AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.12 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO MCIT PLC IN THE AGGREGATE
PRINCIPAL AMOUNT OF $11,000,000 (Filed as exhibit
4.12 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.13 AMENDED AND RESTATED DEFERRED LIMITED INTEREST
GUARANTY, DATED FEBRUARY 7, 1996, FROM ENTERPRISES
TO MCIT PLC (Filed as exhibit 4.13 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
4.14 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO JARO ENTERPRISES, INC. IN THE
AGGREGATE PRINCIPAL AMOUNT OF $1,224,000 (Filed as
exhibit 4.14 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.15 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO JARO RESTAURANTS, INC. IN THE
AGGREGATE PRINCIPAL AMOUNT OF $112,000 (Filed as
exhibit 4.15 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.16 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO JB RESTAURANTS, INC. IN THE
AGGREGATE PRINCIPAL AMOUNT OF $2,019,000 (Filed as
exhibit 4.16 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
4.17 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO CASTLEKING, INC. IN THE AGGREGATE
PRINCIPAL AMOUNT OF $385,769 (Filed as exhibit 4.17
to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
4.18 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO WHITE-OSBORN RESTAURANTS, INC. IN
THE AGGREGATE PRINCIPAL AMOUNT OF $659,231 (Filed as
exhibit 4.18 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.19 SECURITIES PURCHASE AGREEMENT, DATED NOVEMBER 30,
1994, BETWEEN AMERIKING AND BANCBOSTON INVESTMENTS,
INC. (Filed as exhibit 4.19 to AmeriKing's Registra-
tion Statement (No. 333-04261) and incorporated
herein by reference)................................ *
4.20 COMMON STOCK PURCHASE WARRANT, DATED NOVEMBER 30,
1994, BETWEEN AMERIKING AND BANCBOSTON INVESTMENTS,
INC. (Filed as exhibit 4.20 to AmeriKing's Registra-
tion Statement (No. 333-04261) and incorporated
herein by reference)................................ *
4.21 JUNIOR SUBORDINATED NOTE, DATED NOVEMBER 30, 1994,
FROM AMERIKING TO BANCBOSTON INVESTMENTS, INC. IN
THE AGGREGATE PRINCIPAL AMOUNT OF $600,000 (Filed as
exhibit 4.21 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
4.22 SECURED PROMISSORY NOTE, DATED NOVEMBER 21, 1995,
FROM AMERIKING TENNESSEE CORPORATION I TO BKC IN THE
AGGREGATE PRINCIPAL AMOUNT OF $6,920,700 (Filed as
exhibit 4.22 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
4.23 AMENDMENT TO SECURED PROMISSORY NOTE, DATED MAY 21,
1996, FROM AMERIKING TENNESSEE CORPORATION I TO BKC
IN THE AGGREGATE PRINCIPAL AMOUNT OF $6,093,067
(Filed as exhibit 4.23 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
4.24 GUARANTY, DATED NOVEMBER 21, 1995, FROM LAWRENCE
JARO AND WILLIAM OSBORN TO BKC (Filed as exhibit
4.24 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
4.25 RATIFICATION OF GUARANTY, MAY 21, 1996, FROM LAW-
RENCE JARO AND WILLIAM OSBORN TO BKC (Filed as ex-
hibit 4.25 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
4.26 PROMISSORY NOTE, DATED NOVEMBER 29, 1995, FROM
AMERIKING COLORADO CORPORATION I TO FRANCHISE AC-
CEPTANCE CORPORATION LIMITED IN THE AGGREGATE PRIN-
CIPAL AMOUNT OF $1,865,000 (Filed as exhibit 4.26 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
4.27 AMENDMENT TO PROMISSORY NOTE, DATED DECEMBER 14,
1995, FROM AMERIKING COLORADO CORPORATION I TO FRAN-
CHISE ACCEPTANCE CORPORATION LIMITED (Filed as ex-
hibit 4.27 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
4.28 COMMON STOCK PURCHASE WARRANT, DATED FEBRUARY 7,
1996, FROM AMERIKING TO PMI MEZZANINE FUND, L.P.
(Filed as exhibit 4.28 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
4.29 SENIOR SUBORDINATED NOTE, DATED FEBRUARY 7, 1996,
FROM ENTERPRISES TO PMI MEZZANINE FUND, L.P IN THE
AGGREGATE PRINCIPAL AMOUNT OF $15,000,000. (Filed as
exhibit 4.29 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by refer-
ence)............................................... *
4.30 SUBORDINATED GUARANTY, DATED FEBRUARY 7, 1996, FROM
AMERIKING VIRGINIA CORPORATION I AND AMERIKING CIN-
CINNATI CORPORATION I TO PMI MEZZANINE FUND, L.P.
(Filed as exhibit 4.30 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.31 SECOND AMENDED AND RESTATED REVOLVING CREDIT NOTE,
DATED FEBRUARY 7, 1996, FROM ENTERPRISES TO THE FIRST
NATIONAL BANK OF BOSTON, THE OTHER LENDING INSTITU-
TIONS LISTED ON SCHEDULE 1 THERETO, AND THE FIRST NA-
TIONAL BANK OF BOSTON, AS AGENT (Filed as exhibit
4.31 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)......... *
4.32 SECOND AMENDED AND RESTATED TERM LOAN A NOTE, DATED
FEBRUARY 7, 1996, FROM ENTERPRISES TO THE FIRST NA-
TIONAL BANK OF BOSTON, THE OTHER LENDING INSTITUTIONS
LISTED ON SCHEDULE 1 THERETO, AND THE FIRST NATIONAL
BANK OF BOSTON, AS AGENT (Filed as exhibit 4.32 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
4.33 SECOND AMENDED AND RESTATED TERM LOAN B NOTE, DATED
FEBRUARY 7, 1996, FROM ENTERPRISES TO THE FIRST NA-
TIONAL BANK OF BOSTON, THE OTHER LENDING INSTITUTIONS
LISTED ON SCHEDULE 1 THERETO, AND THE FIRST NATIONAL
BANK OF BOSTON, AS (Filed as exhibit 4.33 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
4.34 LIMITED GUARANTY, DATED SEPTEMBER 1, 1994, FROM
AMERIKING TO THE FIRST NATIONAL BANK OF BOSTON, THE
OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1
THERETO, AND THE FIRST NATIONAL BANK OF BOSTON, AS
AGENT (Filed as exhibit 4.34 to AmeriKing's Registra-
tion Statement (No. 333-04261) and incorporated
herein by reference)................................. *
4.35 GUARANTY, DATED FEBRUARY 7, 1996, FROM AMERIKING VIR-
GINIA CORPORATION I AND AMERIKING CINCINNATI CORPORA-
TION I TO THE FIRST NATIONAL BANK OF BOSTON, THE
OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1
THERETO, AND THE FIRST NATIONAL BANK OF BOSTON, AS
AGENT (Filed as exhibit 4.35 to AmeriKing's Registra-
tion Statement (No. 333-04261) and incorporated
herein by reference)................................. *
4.36 UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE,
DATED FEBRUARY 7, 1996, FROM ENTERPRISES TO FFCA AC-
QUISITION CORPORATION (Filed as exhibit 4.36 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
4.37 FORM OF AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WAR-
RANT FROM AMERIKING TO PMI MEZZANINE FUND, L.P....... *
4.38 INDENTURE BETWEEN AMERIKING AND TRUSTEE WITH RESPECT
TO SENIOR NOTES (Filed as exhibit 4.38 to AmeriKing's
Registration Statement (No. 333-04261) and incorpo-
rated herein by reference)........................... *
4.39 FORM OF SENIOR NOTES (ATTACHED TO EXHIBIT 4.38)...... *
4.40 INDENTURE BETWEEN AMERIKING AND TRUSTEE WITH RESPECT
TO EXCHANGE DEBENTURES (Filed as exhibit 4.40 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
4.41 INTENTIONALLY OMITTED................................ *
4.42 FORM OF EXCHANGE DEBENTURES (ATTACHED TO EXHIBIT
4.40)................................................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.43 PROMISSORY NOTE, DATED JULY 18, 1996, FROM AMERIKING
TENNESSEE CORPORATION I TO FRANCHISE ACCEPTANCE
CORPORATION LIMITED IN THE AGGREGATE PRINCIPAL
AMOUNT OF $6,100,000 (Filed as exhibit 4.43 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
4.44 CERTIFICATE OF DESIGNATION RELATING TO THE SENIOR
PREFERRED STOCK (Filed as exhibit 4.44 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
4.45 PROMISSORY NOTE, DATED JULY 18, 1996, FROM AMERIKING
TENNESSEE CORPORATION I TO FRANCHISE ACCEPTANCE
CORPORATION LIMITED IN THE AGGREGATE PRINCIPAL
AMOUNT OF $900,000 (Filed as exhibit 4.45 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
4.46 AMENDMENT NO. 1 TO STOCK OPTION AGREEMENT BY AND
AMONG AMERIKING, SCOTT VASATKA AND DONALD STAHURSKI
(Filed as exhibit 4.46 to AmeriKing's Form 10-K for
the year ended December 30, 1996 and incorporated
herein by reference)................................ *
4.47 AMENDMENT NO.1 TO MANAGEMENT SUBSCRIPTION AGREEMENT
(Filed as exhibit 4.47 to AmeriKing's Form 10-K for
the year ended December 30, 1996 and incorporated
herein by reference)................................ *
9.1 JARO PROXY AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG LAWRENCE JARO, TABOR RESTAURANT
ASSOCIATES, INC., JARO ENTERPRISES, INC., JARO
RESTAURANTS, INC. AND JB RESTAURANTS, INC. (Filed as
exhibit 9.1 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
9.2 OSBORN PROXY AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG WILLIAM OSBORN, CASTLEKING, INC.,
OSBURGER, INC. AND WHITE-OSBORN, INC. (Filed as
exhibit 9.2 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.1 SECOND AMENDED AND RESTATED REVOLVING CREDIT AND
TERM LOAN AGREEMENT, DATED FEBRUARY 7, 1996, BY AND
AMONG AMERIKING, ENTERPRISES, THE FIRST NATIONAL
BANK OF BOSTON, THE OTHER LENDING INSTITUTIONS
LISTED ON SCHEDULE 1 THERETO, AND THE FIRST NATIONAL
BANK OF BOSTON, AS AGENT (Filed as exhibit 10.1 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.2 SECURITY AGREEMENT, DATED SEPTEMBER 1, 1994, BY AND
AMONG ENTERPRISES AND THE FIRST NATIONAL BANK OF
BOSTON, THE OTHER LENDING INSTITUTIONS LISTED ON
SCHEDULE 1 THERETO, AND THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT (Filed as exhibit 10.2 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.3 AMENDMENT TO SECURITY AGREEMENT, DATED FEBRUARY 7,
1996, BY AND AMONG ENTERPRISES AND THE FIRST
NATIONAL BANK OF BOSTON, THE OTHER LENDING
INSTITUTIONS LISTED ON SCHEDULE 1 THERETO, AND THE
FIRST NATIONAL BANK OF BOSTON, AS AGENT (Filed as
exhibit 10.3 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.4 STOCK PLEDGE AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG AMERIKING AND THE FIRST NATIONAL BANK OF
BOSTON, THE OTHER LENDING INSTITUTIONS LISTED ON
SCHEDULE 1 THERETO, AND THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT (Filed as exhibit 10.4 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.5 AMENDMENT TO STOCK PLEDGE AGREEMENT, DATED FEBRUARY
7, 1996, BY AND AMONG AMERIKING AND THE FIRST
NATIONAL BANK OF BOSTON, THE OTHER LENDING
INSTITUTIONS LISTED ON SCHEDULE 1 THERETO, AND THE
FIRST NATIONAL BANK OF BOSTON AS AGENT (Filed as
exhibit 10.5 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.6 SECURITY AGREEMENT, DATED FEBRUARY 7, 1996, BY AND
AMONG AMERIKING VIRGINIA CORPORATION I, AMERIKING
CINCINNATI CORPORATION I AND THE FIRST NATIONAL BANK
OF BOSTON (Filed as exhibit 10.6 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.7 STOCK PLEDGE AGREEMENT, DATED FEBRUARY 7, 1996, BY
AND AMONG ENTERPRISES, AMERIKING VIRGINIA
CORPORATION I, AMERIKING CINCINNATI CORPORATION I
AND THE FIRST NATIONAL BANK OF BOSTON (Filed as
exhibit 10.7 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.8 AMENDED AND RESTATED PURCHASE AGREEMENT, DATED
FEBRUARY 7, 1996, BETWEEN AMERIKING AND MCIT PLC
(Filed as exhibit 10.8 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
10.9 PLEDGE AGREEMENT, DATED SEPTEMBER 1, 1994, BETWEEN
AMERIKING AND MCIT PLC (Filed as exhibit 10.9 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.10 SUBORDINATION AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG BKC, MCIT PLC AND AMERIKING (Filed as
exhibit 10.10 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.11 AMENDMENT AND CONSENT NO. 1 TO SECURITIES PURCHASE
AGREEMENT, DATED FEBRUARY 7, 1996, BETWEEN AMERIKING
AND BANCBOSTON INVESTMENTS, INC. (Filed as exhibit
10.11 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference).... *
10.12 INTERCREDITOR AGREEMENT, DATED FEBRUARY 7, 1996, BY
AND AMONG BKC, AMERIKING VIRGINIA CORPORATION I,
AMERIKING CINCINNATI CORPORATION I, LAWRENCE JARO,
WILLIAM OSBORN, GARY HUBERT, ENTERPRISES, AMERIKING
AND THE FIRST NATIONAL BANK OF BOSTON (Filed as
exhibit 10.12 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.13 STOCK PLEDGE AGREEMENT, DATED NOVEMBER 21, 1995,
BETWEEN ENTERPRISES AND BKC (Filed as exhibit 10.13
to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
10.14 RATIFICATION OF STOCK PLEDGE AGREEMENT, DATED MAY
21, 1996, BETWEEN ENTERPRISES AND BKC (Filed as
exhibit 10.14 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.15 STOCK PLEDGE AGREEMENT, DATED NOVEMBER 21, 1995,
BETWEEN ENTERPRISES AND THE FIRST NATIONAL BANK OF
BOSTON, THE OTHER LENDING INSTITUTIONS LISTED ON
SCHEDULE 1 THERETO, AND THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT (Filed as exhibit 10.15 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.16 NOTE PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996, BY
AND AMONG AMERIKING, ENTERPRISES AND PMI MEZZANINE
FUND, L.P. (Filed as exhibit 10.16 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.17 FORM OF AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT,
BY AND AMONG AMERIKING, ENTERPRISES AND PMI
MEZZANINE FUND, L.P................................. *
10.18 SUBORDINATION AGREEMENT, DATED FEBRUARY 7, 1996, BY
AND AMONG AMERIKING, ENTERPRISES, AMERIKING VIRGINIA
CORPORATION I, AMERIKING CINCINNATI CORPORATION I,
AMERIKING TENNESSEE CORPORATION I, AMERIKING
COLORADO CORPORATION I, LAWRENCE JARO, WILLIAM
OSBORN, GARY HUBERT AND BKC (Filed as exhibit 10.18
to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
10.19 SALE-LEASEBACK AGREEMENT, DATED FEBRUARY 7, 1996, BY
AND AMONG AMERIKING VIRGINIA CORPORATION I,
AMERIKING TENNESSEE CORPORATION I AND FFCA
ACQUISITION CORPORATION (Filed as exhibit 10.19 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.20 LEASE, DATED FEBRUARY 7, 1996, BY AND AMONG
AMERIKING VIRGINIA CORPORATION I, AMERIKING
TENNESSEE CORPORATION I AND FFCA ACQUISITION
CORPORATION (Filed as exhibit 10.20 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.21 FORM OF FRANCHISE AGREEMENT BETWEEN BKC AND
FRANCHISEE (Filed as exhibit 10.21 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.22 SCHEDULE OF AMERIKING FRANCHISE AGREEMENTS (Filed as
exhibit 10.22 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.23 FORM OF LEASE AGREEMENT BETWEEN BKC AND LESSEE
(Filed as exhibit 10.23 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference).......................................... *
10.24 SCHEDULE OF AMERIKING LEASE AGREEMENTS (Filed as
exhibit 10.24 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.25 FORM OF GUARANTEE, INDEMNIFICATION AND
ACKNOWLEDGEMENT OF BKC FRANCHISE AGREEMENT (Filed as
exhibit 10.25 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.26 FORM OF GUARANTEE, INDEMNIFICATION AND
ACKNOWLEDGMENT OF BKC LEASE AGREEMENT (Filed as
exhibit 10.26 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.27 CAPITAL EXPENDITURE AGREEMENT, DATED SEPTEMBER 1,
1994, BY AND AMONG AMERIKING, ENTERPRISES AND BKC
(Filed as exhibit 10.27 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)........................................... *
10.28 CAPITAL EXPENDITURE AGREEMENT, DATED NOVEMBER 21,
1995, BY AND AMONG ENTERPRISES, AMERIKING TENNESSEE
CORPORATION I AND BKC (Filed as exhibit 10.28 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
10.29 LETTER AGREEMENT, DATED FEBRUARY 7, 1996, BETWEEN
ENTERPRISES AND BKC (Filed as exhibit 10.29 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
10.30 NAPARLO DEVELOPMENT AGREEMENT, DATED FEBRUARY 7,
1996, BETWEEN AMERIKING VIRGINIA CORPORATION I AND
JOSEPH J. NAPARLO (Filed as exhibit 10.30 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
10.31 MANAGEMENT CONSULTING AGREEMENT, DATED SEPTEMBER 1,
1994, BY AND AMONG TJC MANAGEMENT CORPORATION,
AMERIKING AND ENTERPRISES (Filed as exhibit 10.31 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
10.32 INTENTIONALLY OMITTED................................ *
10.33 INTERCOMPANY MANAGEMENT CONSULTING AGREEMENT, DATED
SEPTEMBER 1, 1994 BETWEEN ENTERPRISES AND AMERIKING
(Filed as exhibit 10.33 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)........................................... *
10.34 AMENDED AND RESTATED TAX SHARING AGREEMENT, DATED
FEBRUARY 7, 1996, BETWEEN ENTERPRISES AND AMERIKING
(Filed as exhibit 10.34 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)........................................... *
10.35 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN LAWRENCE JARO AND
ENTERPRISES (Filed as exhibit 10.35 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference).................... *
10.36 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN WILLIAM OSBORN AND
ENTERPRISES (Filed as exhibit 10.36 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference).................... *
10.37 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN GARY HUBERT AND
ENTERPRISES (Filed as exhibit 10.37 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference).................... *
10.38 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN JOEL AASEBY AND
ENTERPRISES (Filed as exhibit 10.38 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference).................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.39 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN SCOTT VASATKA AND
ENTERPRISES (Filed as exhibit 10.39 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.40 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED MAY
1, 1997, BETWEEN AUGUSTUS F. HOTHORN AND NATIONAL
RESTAURANT ENTERPRISES, INC.........................
10.41 FORM OF INDEMNIFICATION AGREEMENT BY AND AMONG
AMERIKING AND EACH OF THE SIGNATORIES TO THIS
REGISTRATION STATEMENT (Filed as exhibit 10.41 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.42 INTENTIONALLY OMITTED...............................
10.43 INTENTIONALLY OMITTED...............................
10.44 LEASE AGREEMENT FOR WESTCHESTER, ILLINOIS
HEADQUARTERS (Filed as exhibit 10.44 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.45 LOAN AND SECURITY AGREEMENT, DATED NOVEMBER 29,
1995, BETWEEN AMERIKING COLORADO CORPORATION I AND
FRANCHISE ACCEPTANCE CORPORATION LIMITED (Filed as
exhibit 10.45 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.46 LOAN AND SECURITY AGREEMENT, DATED JULY 21, 1996,
BETWEEN AMERIKING TENNESSEE CORPORATION I AND
FRANCHISE ACCEPTANCE CORPORATION LIMITED (Filed as
exhibit 10.46 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.47 FORM OF INTERCREDITOR AGREEMENT BY AND AMONG BKC,
AMERIKING, AND THE TRUSTEE AS REPRESENTATIVE OF THE
HOLDERS OF SENIOR NOTES UNDER THE INDENTURE
(ATTACHED TO EXHIBIT 4.38).......................... *
10.48 RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
BETWEEN WILLIAM OSBORN AND ENTERPRISES (Filed as
exhibit 10.48 to AmeriKing's Form10-K for the year
ended December 30, 1996 and incorporated herein by
reference).......................................... *
10.49 RECAPITALIZATION AGREEMENT AMONG AMERIKING AND THE
STOCKHOLDERS APPEARING ON THE SIGNATURE PAGES
THERETO (Filed as exhibit 10.49 to AmeriKing's Form
10-K for the year ended December 30, 1996 and
incorporated herein by reference)................... *
10.50 MEMORANDUM OF UNDERSTANDING BETWEEN BKC AND THE
COMPANY (Filed as exhibit 10.50 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.51 AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND LOAN AGREEMENT, DATED MAY 14, 1996, BY
AND AMONG AMERIKING, ENTERPRISES, THE FIRST NATIONAL
BANK OF BOSTON, THE OTHER LENDING INSTITUTIONS
LISTED ON SCHEDULE I THERETO AND THE FIRST NATIONAL
BANK OF BOSTON, AS AGENT (Filed as exhibit 10.51 to
AmeriKing's Form 10-K for the year ended December
30, 1996 and incorporated herein by reference)...... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.52 ASSIGNMENT AND ACCEPTANCE DATED MAY 14, 1996, BY AND
AMONG AMERIKING, ENTERPRISES, THE FIRST NATIONAL
BANK OF BOSTON AND THE OTHER LENDING INSTITUTIONS,
LISTED THERETO AND THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT (Filed as exhibit 10.52 to
AmeriKing's Form 10-K for the year ended December
30, 1996 and incorporated herein by reference)...... *
10.53 FORM OF OPERATING AGREEMENT BY AND AMONG BKC,
AMERIKING ENTERPRISES, AMERIKING COLORADO
CORPORATION I, AMERIKING ILLINOIS CORPORATION I,
AMERIKING TENNESSEE CORPORATION I, AMERIKING
VIRGINIA CORPORATION I AND AMERIKING CINCINNATI
CORPORATION I (Filed as exhibit 10.53 to AmeriKing's
Form 10-K for the year ended December 30, 1996 and
incorporated herein by reference)................... *
10.54 THIRD AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT dated as of June 17, 1997 among NATIONAL
RESTAURANT ENTERPRISES, INC., AMERIKING INC. and
BANKBOSTON, N.A..................................... *
11++++ STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE.....
12++++ STATEMENTS RE: COMPUTATION OF RATIOS................
21 SUBSIDIARIES OF AMERIKING (Filed as exhibit 10.21 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
23.1 CONSENT OF MAYER, BROWN & PLATT (Filed as exhibit
23.1 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
23.2 CONSENT OF DELOITTE & TOUCHE (Filed as exhibit 23.2
to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........ *
24 POWER OF ATTORNEY...................................
25 T-1 FOR EXCHANGE DEBENTURE INDENTURE................ *
26 T-1 FOR SENIOR NOTE INDENTURE....................... *
27++++ FINANCIAL DATA SCHEDULE.............................
</TABLE>
- --------
* Previously filed.
++ The schedules and exhibits to these agreements have not been filed
pursuant to Item 601(b)(2) of Regulation S-K. Such schedules and exhibits
will be filed supplementally upon the request of the Securities and
Exchange Commission.
++++Superseding exhibit.
<PAGE>
<TABLE>
<CAPTION>
Exhibit #11
- ------------------------------------------------------------------------------------------
AmeriKing, Inc.
Calculation of Earnings per Common Share
- ------------------------------------------------------------------------------------------
Fiscal Year Ended
- ------------------------------------------------------------------------------------------
December 29, December 30, January 1,
1997 1996 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) before extraordinary item $(2,034,000) $(2,942,000) $ 902,000
- ------------------------------------------------------------------------------------------
Earnings available to stockholders
- ------------------------------------------------------------------------------------------
Dividends
- ------------------------------------------------------------------------------------------
Preferred Stock (450,000) (450,000) (450,000)
- ------------------------------------------------------------------------------------------
Senior Preferred Stock (4,112,000) (303,000)
- ------------------------------------------------------------------------------------------
Amortization of issuance costs (129,000) (10,000)
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Income (loss) before extraordinary item
available to common stockholders (6,725,000) (3,705,000) 452,000
- ------------------------------------------------------------------------------------------
Extraordinary item - loss from early
extinguishment of debt (net of taxes) (5,055,000)
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Income (loss) available to common stockholders $(6,725,000) $(8,760,000) $ 452,000
=========== =========== =========
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding - basic 900,167 865,515 863,290
- ------------------------------------------------------------------------------------------
Dilutive effect of options and warrants 106,700
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding - diluted 900,167 865,515 969,990
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Net income (loss) per common share before
extraordinary item - basic $ (7.47) $ (4.28) $ 0.52
- ------------------------------------------------------------------------------------------
Extraordinary item - basic (5.84)
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Net income (loss) per common share - basic $ (7.47) $ (10.12) $ 0.52
=========== =========== =========
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Net income (loss) per common share before
extraordinary item - diluted $ (7.47) $ (4.28) $ 0.47
- ------------------------------------------------------------------------------------------
Extraordinary item - diluted (5.84)
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Net income (loss) per common share - diluted $ (7.47) $ (10.12) $ 0.47
=========== =========== =========
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Total
-----
Shares
------
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit #11 (cont'd)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average number of common shares -
basic:
- ------------------------------------------------------------------------------------------
Original shares 863,290 863,290 863,290
- ------------------------------------------------------------------------------------------
Option shares 6,877
- ------------------------------------------------------------------------------------------
Warrant shares
- ------------------------------------------------------------------------------------------
Common stock units 30,000 2,225
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Total 900,167 865,515 863,290
=========== =========== =========
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Weighted average number of common shares -
diluted:
- ------------------------------------------------------------------------------------------
Original shares 863,290 863,290 863,290
- ------------------------------------------------------------------------------------------
Option shares 6,877 9,702
- ------------------------------------------------------------------------------------------
Warrant shares 96,998
- ------------------------------------------------------------------------------------------
Common stock units 30,000 2,225
----------- ----------- ---------
- ------------------------------------------------------------------------------------------
Total 900,167 865,515 969,990
=========== =========== =========
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
AmeriKing, Inc.
Calculation of Ratio of Earnings to Fixed Charges
- -----------------------------------------------------------------------------------------------------------
Fiscal Year Ended Fiscal Year Ended
December 29, 1997 December 30, 1996
- -----------------------------------------------------------------------------------------------------------
W/O PIK With PIK W/O PIK With PIK
Dividends Dividends Dividends Dividends
--------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS
- -----------------------------------------------------------------------------------------------------------
Loss before income taxes benefit $(2,399,000) $(2,399,000) $(4,498,000) $(4,498,000)
- -----------------------------------------------------------------------------------------------------------
Interest expense 13,320,000 13,320,000 11,983,000 11,983,000
- -----------------------------------------------------------------------------------------------------------
Amortization of deferred financing costs 616,000 616,000 883,000 883,000
- -----------------------------------------------------------------------------------------------------------
Portion of rents representative of interest 5,556,000 5,556,000 4,690,000 4,690,000
- -----------------------------------------------------------------------------------------------------------
Preferred stock PIK dividends 450,000 450,000
----------- ----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Total Earnings $17,093,000 $17,543,000 $13,058,000 $13,508,000
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
FIXED CHARGES
- -----------------------------------------------------------------------------------------------------------
Interest expense $13,320,000 $13,320,000 $11,983,000 $11,983,000
- -----------------------------------------------------------------------------------------------------------
Amortization of deferred financing costs 616,000 616,000 883,000 883,000
- -----------------------------------------------------------------------------------------------------------
Portion of rents representative of interest 5,556,000 5,556,000 4,690,000 4,690,000
- -----------------------------------------------------------------------------------------------------------
Preferred stock PIK dividends 450,000 450,000
----------- ----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Total Fixed Charges $19,492,000 $19,942,000 $17,556,000 $18,006,000
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 0.88 0.88 0.74 0.75
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
INSUFFICIENT EARNINGS TO COVER FIXED
CHARGES $ 2,399,000 $ 2,399,000 $ 4,498,000 $ 4,498,000
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the fiscal
1997 Consolidated Fiancial Statements of Ameriking, Inc. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1997
<PERIOD-END> DEC-29-1997
<CASH> 7,532
<SECURITIES> 0
<RECEIVABLES> 1,723
<ALLOWANCES> 0
<INVENTORY> 2,470
<CURRENT-ASSETS> 13,347
<PP&E> 66,150
<DEPRECIATION> 13,226
<TOTAL-ASSETS> 212,087
<CURRENT-LIABILITIES> 20,692
<BONDS> 162,798
34,415
0
<COMMON> 9
<OTHER-SE> (5,850)
<TOTAL-LIABILITY-AND-EQUITY> 212,087
<SALES> 234,546
<TOTAL-REVENUES> 234,546
<CGS> 76,119
<TOTAL-COSTS> 211,194
<OTHER-EXPENSES> 11,487
<LOSS-PROVISION> 944
<INTEREST-EXPENSE> 13,320
<INCOME-PRETAX> (2,399)
<INCOME-TAX> (365)
<INCOME-CONTINUING> (2,034)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,034)
<EPS-PRIMARY> (7.47)
<EPS-DILUTED> (7.47)
</TABLE>
