<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
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 28, 1998
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 (I.R.S employer
of incorporation or organization) identification no.)
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:
<TABLE>
<CAPTION>
Title
of
each Name of each exchange on
class which registered
----- ------------------------
<S> <C>
</TABLE>
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 24, 1999 was approximately
$47,454.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 24, 1999 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.
<TABLE>
<CAPTION>
Part of Form 10-K
Document Where Incorporated
-------- ------------------
<S> <C>
AmeriKing, Inc. Part IV
Registration Statement
(Reg. No. 333-04261)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 9
Item 3. Legal Proceedings.............................................. 9
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 7a. Quantitative and Qualitative Disclosures About Market Risk..... 19
Item 8. Financial Statements and Supplementary Data.................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................. 36
PART III
Item 10. Directors and Executive Officers of the Registrant............. 36
Item 11. Executive Compensation......................................... 39
Item 12. Security Ownership of Certain Beneficial Owners and
Management....................................................... 42
Item 13. Certain Relationships and Related Transactions................. 43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-
K................................................................ 44
</TABLE>
<PAGE>
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 16, 1999, the Company purchased 30 restaurants in Wisconsin and
the Upper Peninsula of Michigan for approximately $24.3 million including
transaction fees and acquisition related expenditures.
On February 1, 1999, the Company purchased two restaurants in Illinois for
approximately $1.0 million including transaction fees and acquisition related
expenditures.
On December 31, 1998, the Company purchased 13 restaurants in Ohio for
approximately $11.1 million including transaction fees and acquisition related
expenditures.
General
AmeriKing is the second largest independent Burger King franchisee in the
United States with 286 restaurants, as of December 28, 1998, located primarily
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 268 Burger King restaurants, developed 35 new
restaurants, sold 10 restaurants, and closed 7 restaurants.
AmeriKing, Inc. and its wholly owned subsidiary, National Restaurant
Enterprises, Inc., which has three subsidiaries, 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 $10.3
billion for its fiscal year ended September 30, 1998. There are more than
10,100 Burger King restaurants worldwide, of which over 92% are operated by
approximately 1,500 independent franchisee groups. 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(R)" service, flame-broiling, generous portions and
competitive prices. Each of the Company's 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,
1
<PAGE>
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 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 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 March 1998, BKC implemented
the "Great Taste(R)" menu. The menu consists of discounted food items designed
to give the consumer greater value while increasing customer traffic and
profitability. These items include the Whopper Jr.(R), medium french fries,
medium onion rings, small shakes and Chicken Tenders(R). In addition, in 1997,
BKC introduced a new flagship sandwich, the Big King(R) sandwich and new
french fries, its biggest new product launch ever.
Restaurant Configurations. The Company's 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 that 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,
approximately 50% 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 $400 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. These 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. In addition, the Company
supplements BKC's current annual advertising budget and promotional activities
by contributing approximately 1% of its gross sales.
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 nine regions (Chicago,
Virginia, Colorado, Texas, Tennessee, Cincinnati, North Carolina, Wisconsin
and Springfield), the Company has a regional managing director who is
responsible for all of the operations of the Company's restaurants within
his/her assigned region. Each of these managing directors must be approved by
BKC. Supporting the managing directors are the directors of operations who, in
turn, supervise several district managers (who directly supervise six to eight
restaurants each). The district managers are responsible for direct oversight
of the day-to-day operations of the Company's 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.
2
<PAGE>
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 BKC'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 BKC 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
Each of the Company's Burger King restaurants is a party to the 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 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
3
<PAGE>
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 28, 1998, 45 of the
Company's current 286 franchise agreements with BKC, which contributed $52.7
million in restaurant sales in fiscal 1998, 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 1998,
the Company paid BKC an aggregate of $10.5 million in royalty fees and $11.9
million in advertising contributions.
BKC is the lessor on approximately 36.7% 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
4
<PAGE>
of the obligations of its subsidiaries under these leases. Under certain lease
agreements with BKC affiliates, the Company's subsidiaries made rent payments
aggregating $11.4 million during fiscal 1998. 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.
Advertising and Promotion
The Company supplements BKC's current annual advertising budget and
promotional activities by contributing approximately 1% of its gross sales to
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 1998, the Company spent
approximately $3.9 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 AmeriServe
Food Distribution, Inc. ("AmeriServe").
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, 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 AmeriServe or any other existing supplier or distributor
change.
5
<PAGE>
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
The Company'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 but one of its properties, minimizing
its cost to develop new restaurants.
To date, the Company has developed 35 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.
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
268 restaurant acquisitions for an aggregate purchase price of approximately
$213.3 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
6
<PAGE>
acquisitions that provide the critical mass necessary to realize operating
efficiencies. Of the Company's 20 franchisee acquisitions through December 28,
1998, 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
December 1998 of 5 additional restaurants in Wisconsin. An example of a larger
fill-in acquisition is the Company's acquisition in September 1997 of 30
additional restaurants in the North Carolina market.
The table below summarizes each of the Company's acquisitions, representing
268 restaurants, since its inception.
<TABLE>
<CAPTION>
Number of
Acquisition Restaurants Type of
Date State Acquired Seller
-------------- ----------------------- ----------- ----------
<S> <C> <C> <C>
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
February 1998 Illinois 2 Franchisee
April 1998 Ohio 3 Franchisee
June 1998 Tennessee 3 Franchisee
October 1998 Illinois 9 Franchisee
December 1998 Wisconsin 3 Franchisee
December 1998 Kentucky/Ohio 5 Franchisee
December 1998 Wisconsin 5 Franchisee
</TABLE>
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.
7
<PAGE>
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 $400 million annual
advertising and promotional budget; and (iv) the expected continued growth of
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 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, 1998, the McDonald's
system was comprised of more than 24,500 restaurants, that generated total
system-wide sales of approximately $36.0 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.
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
8
<PAGE>
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 28, 1998, the Company employed 983 full-time salaried
employees and approximately 11,976 full-time and part-time hourly employees.
Of the Company's full-time employees, 68 are involved in overseeing restaurant
operations, 837 are involved in the management of individual restaurants, and
the remainder is 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 but one of its restaurants on locations
where it leases the facility or the land and the building. BKC is the lessor
on approximately 36.7% 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.
The Company's headquarters are located in an approximately 37,900 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.
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.
9
<PAGE>
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 28, 1998.
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, 1997 and 1998 fiscal
years are derived from the Company's audited financial statements. 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
------------- --------------------------------------------------------
Jan. 1, 1994 Sept. 2, 1994
through through Fiscal Fiscal Fiscal Fiscal
Sept. 1, 1994 Dec. 31, 1994(3) 1995 1996(9) 1997(9) 1998
------------- ---------------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Restaurant sales........ $56,720 $33,931 $139,572 $203,753 $234,546 $307,488
Restaurant operating
expenses:
Cost of sales.......... 18,602 10,807 44,798 66,071 76,119 95,920
Restaurant labor and
related costs......... 15,529 8,647 34,526 50,874 60,278 78,326
Depreciation and
amortization.......... 1,366 1,193 4,927 7,386 8,760 11,568
Occupancy and other
restaurant operating
expenses.............. 17,854 9,229 38,930 55,836 65,420 83,188
------- ------- -------- -------- -------- --------
Total restaurant
operating expenses.. 53,351 29,876 123,181 180,167 210,577 269,002
-------
Restaurant
contribution........... $ 3,369
=======
General and
administrative
expenses............... 1,227 5,176 7,370 9,497 13,886
Other operating
expenses............... 147 863 3,679 2,292 3,063
------- -------- -------- -------- --------
Operating income........ 2,681 10,352 12,537 12,180 21,537
Other expense:
Interest expense....... (1,925) (8,323) (11,983) (13,320) (16,275)
Other expense, net..... (324) (302) (5,052) (1,259) (1,505)
------- -------- -------- -------- --------
Total other expense.. (2,249) (8,625) (17,035) (14,579) (17,780)
------- -------- -------- -------- --------
Income (loss) before
extraordinary item and
provision (benefit) for
income taxes........... 432 1,727 (4,498) (2,399) 3,757
Provision (benefit) for
income taxes........... 191 825 (1,556) (365) 1,944
------- -------- -------- -------- --------
Income (loss) before
extraordinary item..... 241 902 (2,942) (2,034) 1,813
Extraordinary item--loss
from early
extinguishment of
debt................... (5,055)
------- -------- -------- -------- --------
Net income (loss)....... $ 241 $ 902 $ (7,997) $ (2,034) $ 1,813
======= ======== ======== ======== ========
Preferred stock
dividends(4)........... $ 122 $ 450 $ 450 $ 450 $ 558
Senior preferred stock
dividends(4)........... 303 4,112 4,678
Amortization of senior
preferred stock
issuance costs......... 10 129 110
------- -------- -------- -------- --------
Income (loss) available
to common
stockholders........... $ 119 $ 452 $ (8,760) $ (6,725) $ (3,533)
======= ======== ======== ======== ========
Weighted average number
of common shares
outstanding (in
thousands)--basic...... 863 863 866 900 903
Weighted average number
of common shares
outstanding (in
thousands)--diluted.... 970 970 866 900 903
Net income (loss) per
common share--basic.... $ 0.14 $ 0.52 $ (10.12) $ (7.47) $ (3.91)
======= ======== ======== ======== ========
Net income (loss) per
common share--diluted.. $ 0.12 $ 0.47 $ (10.12) $ (7.47) $ (3.91)
======= ======== ======== ======== ========
Other Data:
EBITDA(5)............... $ 4,021 $ 16,142 $ 23,602 $ 23,232 $ 36,168
======= ======== ======== ======== ========
Capital expenditures:
Existing restaurants... $ 239 $ 1,416 $ 2,424 $ 3,913 $ 2,380
New restaurant
development........... 696 3,219 6,066 7,900
Other.................. 358 1,609 2,655 2,528 548
------- -------- -------- -------- --------
Total capital
expenditures........ $ 597 $ 3,721 $ 8,298 $ 12,507 $ 10,828
======= ======== ======== ======== ========
Selected Operating Data:
Ratio of earnings to
fixed charges(6)....... 1.1x 1.2x
Ratio of earnings to
fixed charges and
preferred stock
dividends(6)........... 1.1x 1.2x
Restaurants open at end
of period.............. N/A 140 184 242 286
Comparable restaurant
sales percentage....... N/A 2.0% 2.0% (1.0)% 4.5%
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
The Initial Acquisitions
------------------------
January 1, 1994 through
September 1, 1994
------------------------
(Dollars in thousands)
<S> <C>
Supplemental Operating Data(7)(8)
Restaurant sales:
BKC Restaurants........................................ $47,762
Management Restaurants:
Jaro restaurants...................................... 7,400
Osborn restaurants.................................... 1,558
-------
Total for Initial Acquisitions...................... $56,720
=======
Restaurant operating expenses:
BKC Restaurants........................................ $45,257
Management Restaurants:
Jaro restaurants...................................... 6,718
Osborn restaurants.................................... 1,376
-------
Total for Initial Acquisitions...................... $53,351
=======
Restaurant contribution:
BKC Restaurants........................................ $ 2,505
Management Restaurants:
Jaro restaurants...................................... 682
Osborn restaurants.................................... 182
-------
Total for Initial Acquisitions...................... $ 3,369
=======
</TABLE>
<TABLE>
<CAPTION>
The Company
-------------------------
December 29, December 29,
1997 1998
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................. $ 7,532 $ 10,591
Total assets.......................................... 213,087 238,719
Total debt and capitalized leases..................... 163,449 176,589
Senior Preferred Stock................................ 34,415 39,093
Total stockholders' equity (deficit).................. (5,841) (8,816)
</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 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 28, 1998, no dividends have been declared by the Company on
its Class A1 Preferred Stock, Class A2 Preferred Stock or Class B
Preferred Stock (collectively the "Preferred Stock"). During fiscal 1998,
the Company declared stock dividends of 187,120 shares of its 13% Senior
Exchangeable
12
<PAGE>
Preferred Stock, due 2008 (the "Senior Preferred Stock"). In addition, no
cash dividends have been declared by the Company on its Common Stock.
(5) EBITDA (as defined) represents operating income plus depreciation and
amortization of goodwill and franchise agreements and 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.
(9) Certain information in the consolidated financial statements for fiscal
1997 and 1996 have been reclassified to conform with the current reporting
format.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
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 and other operating expenses. 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 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
twelve 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.
The discussion below of the Company's operating performance for the fiscal
years 1998, 1997, and 1996 should be read in conjunction with Item 6--Selected
Financial Data contained herein.
13
<PAGE>
Fiscal 1998 Compared to Fiscal 1997
Restaurant Sales. Total sales increased $73.0 million or 31.1% during fiscal
1998 to $307.5 million from $234.5 million during fiscal 1997, due primarily
to the inclusion of the 30 and 63 restaurants purchased in 1998 and 1997,
respectively. In addition, the Company developed 17 restaurants and closed 3
restaurants in 1998. Newly acquired restaurants accounted for $55.7 million of
the total increase in restaurant sales, while new restaurant development
accounted for $4.9 million of the increase in sales. Total sales were reduced
by $2.3 million due to the restaurants closed during 1998. Sales at the 239
comparable restaurants owned by the Company at the end of fiscal 1998
increased 4.5% primarily due to an increase in customer traffic and an
increase in customer check average. Burger King's domestic system sales were
also increased by the rebound from the Hudson Beef recall during the third
quarter of fiscal 1997.
Restaurant Operating Expenses. Total restaurant operating expenses increased
$58.4 million, or 27.7% during fiscal 1998, to $269.0 million from $210.6
million during during fiscal 1997, due primarily to the inclusion of the 30
and 63 restaurants purchased in 1998 and 1997, respectively. In addition, the
Company developed 17 restaurants and closed 3 restaurants in 1998. As a
percentage of sales, restaurant operating expenses decreased 2.3%, to 87.5%
during fiscal 1998 from 89.8% during fiscal 1997.
Cost of sales increased $19.8 million during fiscal 1998, but decreased as a
percent of sales to 31.2% in fiscal 1998 compared to 32.4% in 1997. Cost of
food sales increased $18.4 million during fiscal 1998, but decreased 1.0% as a
percentage of sales to 28.6% during fiscal 1998 from 29.6% during fiscal 1997.
The percentage decrease in cost of food sales is primarily the result of a
strong focus on controlling costs as well as a lower level of discounting food
items. Cost of non-food sales increased $1.4 million during fiscal 1998, and
decreased 0.2% as a percentage of sales to 2.6% during fiscal 1998 from 2.8%
during fiscal 1997. The percentage decrease in cost of non-food sales is due
to improved margins at the convenience stores.
Restaurant labor and related costs increased $18.0 million during fiscal
1998, and decreased 0.2% as a percentage of sales to 25.5% during fiscal 1998
from 25.7% during fiscal 1997. The increase in restaurant labor and related
costs was primarily due to an increase in the number of stores as well as an
increase in the Federal minimum wage and group health insurance costs. The
percentage decrease is the result of controlling staffing levels during peak
and non-peak operating times to obtain the most efficient schedules, as well
as leveraging fixed costs off of a higher sales base.
Depreciation and amortization increased $2.8 million during fiscal 1998, to
$11.6 million from $8.8 million during fiscal 1997. As a percentage of sales,
depreciation and amortization expense increased 0.1% to 3.8% during fiscal
1998 from 3.7% during fiscal 1997. The increase was due primarily to the
increase in goodwill amortization related to the newly acquired restaurants.
Occupancy and other restaurant operating expenses increased $17.8 million
during fiscal 1998 and decreased 1.0% as a percentage of sales to 27.0% during
fiscal 1998 from 28.0% during fiscal 1997. Occupancy expense increased $7.1
million during fiscal 1998 but decreased 0.1% as a percentage of sales to
10.3% in 1998 from 10.4% in 1997. The dollar increase in occupancy expense is
due to the inclusion of newly acquired and developed restaurants. Other
restaurant operating expenses including advertising and royalties increased
$10.7 million during fiscal 1998 and decreased 0.9% as a percentage of sales
to 16.7% during fiscal 1998 from 17.6% during fiscal 1997. The percentage
decrease is primarily due to a litigation recovery coupled with lower
utilities expenses.
General and Administrative Expenses. General and administrative expenses
increased $4.4 million during fiscal 1998 and increased 0.5% as a percent of
sales to 4.5% during fiscal 1998 from 4.0% during fiscal 1997. The increase in
general and administrative expenses is due to staff increases and related
costs associated with the newly acquired and developed restaurants and higher
incentive compensation costs.
Other Operating Expenses. Other Operating expenses increased $0.8 million
during fiscal 1998 to $3.1 million from $2.3 million in 1997.The increase in
other operating expenses is due to higher depreciation expense as well as the
fact that 1997 was offset by a $1.8 million gain on the sale of restaurants.
14
<PAGE>
Operating Income. Operating income increased $9.3 million during fiscal
1998, to $21.5 million from $12.2 million during fiscal 1997. As a percentage
of sales, operating income increased 1.8%, to 7.0% during fiscal 1998 from
5.2% during fiscal 1997. This increase is primarily a result of higher sales
volume as well as increased efficiency and a focus on reducing restaurant
operating expenses.
Other Expense. Other Expense increased $3.2 million during fiscal 1998 to
$17.8 million from $14.6 million in 1997. The increase in other expense is due
to higher interest expense related to the increase in the line of credit due
to the 1998 acquisitions. In addition, the Company recorded preopening costs
relative to new restaurant developments in other expense which was $0.6
million and $0.5 million for 1998 and 1997, respectively.
EBITDA. Earnings before interest, taxes, depreciation, and amortization
increased $13.0 million or 55.7% to $36.2 million for fiscal 1998 from $23.2
million for fiscal 1997. As a percentage of restaurant sales, EBITDA increased
1.9%, to 11.8% for fiscal 1998 from 9.9% for fiscal 1997.
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 170
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
$30.4 million, or 16.9% during fiscal 1997, to $210.6 million from $180.2
million during 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 1.4%, to 89.8%
during fiscal 1997 from 88.4% 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 costs increased $9.4 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 costs 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 related to newly acquired
restaurants.
15
<PAGE>
Occupancy and other restaurant operating expenses increased $9.6 million
during fiscal 1997 and increased 0.6% as a percentage of sales to 28.0% during
fiscal 1997 from 27.4% during fiscal 1996. Occupancy expense 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 $6.4 million
during fiscal 1997 and increased 0.6% as a percentage of sales to 17.6% during
fiscal 1997 from 17.0% 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.
Other Operating Expenses. Other Operating expenses decreased $1.4 million
during fiscal 1997 to $2.3 million from $3.7 million in 1996.The decrease in
other operating expenses is due to the gain on sale of assets related to the
10 restaurants the Company sold, partially offset by higher depreciation
expense.
Operating Income. Operating income decreased $0.3 million during fiscal
1997, to $12.2 million during fiscal 1997 from $12.5 million during fiscal
1996. As a percentage of sales, operating income decreased 1.0%, to 5.2%
during fiscal 1997 from 6.2% 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.
Other Expense. Other Expense decreased $2.4 million during fiscal 1997 to
$14.6 million from $17.0 million in 1996. The decrease in other expense is due
to a non-recurring write-off of certain transaction expenses pertaining to the
attempted initial public offering in 1996, partially offset by higher interest
expense related to the increase in the line of credit due to the 1997
acquisitions.
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.
Liquidity and Capital Resources
Net cash flows provided by operating activities increased $15.9 million
during the fiscal year ended December 28, 1998, to $27.0 million, from $11.1
million during the fiscal year ended December 29, 1997. The increase is
primarily due to an increase in net income excluding non-cash charges, as well
as improved working capital management.
Net cash flows used for investing activities for the fiscal year ended were
$38.9 million, which included $27.6 million for the acquisition of 30
restaurants in Illinois, Ohio, Tennessee, Wisconsin and Kentucky. New
restaurant development accounted for $7.9 million, with the remainder related
to existing restaurants and corporate infrastructure additions.
As discussed in Note 5 to the consolidated financial statements, on December
24, 1998, 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 $75 million to $80 million. The Amended and Restated Revolving Credit
Agreement calls for no principal amortization and matures in June 2002. In
addition, the
16
<PAGE>
Company entered into a new Credit Agreement (the "Acquisition Credit
Agreement") with BBNA and other lenders for $45.0 million. During the fiscal
year ended December 28, 1998, borrowings of $15.0 million were drawn on the
Revolver to fund the acquisitions of 30 restaurants in Illinois, Ohio,
Tennessee, Wisconsin and Kentucky and for working capital purposes. During the
fiscal year ended December 28, 1998, $3.0 million was repaid on the Revolver,
leaving an outstanding balance of $67.6 million at December 28, 1998.
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 $6.0 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.
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, the Company's Amended and
Restated Credit Agreement (as defined) and Acquisition Credit Agreement (as
defined) with BBNA and other lenders thereto contain other and more restrictive
covenants and prohibit the Company's subsidiaries from declaring dividends or
making other intercompany transfers to the Company in certain circumstances.
The Company believes that available cash on hand together with its available
credit of $57.4 million under its Amended and Restated Credit Agreement, will
be sufficient to cover its working capital needs, capital expenditures, planned
development and debt service requirements for fiscal 1999.
Income Taxes
The Company completed fiscal 1998 with a net operating loss carry-forward for
tax purposes of approximately $38.3 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.
17
<PAGE>
Year 2000
The Year 2000 ("Y2K") problem is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's programs that have time-sensitive software may recognize a date
using "00" as the year 1900, rather than the year 2000. This could result in a
major system failure or miscalculations.
As part of the first phase of the Company's Y2K compliance program, the
Company conducted an internal review of its computer systems to identify the
systems that could be affected by the Y2K problem, including both "information
technology" systems (such as software that processes daily sales and other
information) and non-informational technology. The Company is in the process of
completing the second phase of its Y2K compliance program, which involves: (1)
the implementation of its existing remediation plan to resolve the Company's
internal Y2K issues, (2) the identification of any potential Y2K issues with
the Company's significant vendors and suppliers and (3) the evaluation of a
contingency plan in the event that the Company or its significant vendors and
suppliers are unable to adequately address Y2K issues on time. The Company has
a September 1999 target date to complete its implementation efforts.
Based on assessment efforts to date, the Company presently does not believe
that the Year 2000 issue will have a material adverse effect on its financial
condition or results of operations. The Company has received assurances from
its major suppliers (including vendors and partners) that they are addressing
the Year 2000 issue, and that products purchased by the Company from such
suppliers will function properly in year 2000 and thereafter. However, it is
impossible to assess the potential consequences in the event of service
interruptions from suppliers, or in the event that there are disruptions in
such infrastructure areas as utilities, communications, transportation, banking
or government. In the unlikely event that the Company would lose vital
utilities such as electricity, gas, water or communications, the business or
operations could be adversely affected. However, if the point of sale terminals
were to fail, the Company could place a manual check out procedure into place
until the terminals could be brought back on-line with minimal disruption to
its customers. Or, if vital suppliers could not deliver the necessary goods
(such as meat and produce) the Company has enough resources available to obtain
goods from other suppliers until such time as the original supplier would be
Y2K compliant. The Company operates a large number of geographically dispersed
stores and has a large supplier base, which should mitigate any adverse impact.
The Company estimates it will incur less than $1.0 million in expenses to
ensure that all systems will function properly with respect to dates in the
year 2000. These expenses include the replacement of the Company's I.B.M. point
of sale terminals as well as minor modifications to the REMACS system. These
expenses are not expected to have a material impact on the financial position,
results of operations or liquidity of the Company.
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 Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components (net income with non-owner sources of
other comprehensive income) in a full set of financial statements. SFAS No. 130
did not have an effect on the Company's financial statements because it has no
items of "other comprehensive income."
18
<PAGE>
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which changes the way public companies
report information about operating segments. This statement, which is based on
the management approach to segment reporting, establishes requirements to
report selected segment information. Management of the Company considers it to
have one reportable segment, the operation of franchised restaurants in the
United States, and assumes performance on a single segment basis; therefore,
the adoption of this new standard did not have an effect on the content of the
Company's disclosures.
In February 1998, the FASB issued SFAS No. 132, "Employees' Disclosures
About Pensions and Other Postretirement Benefits." This Statement revises
employers' disclosures about pension and other postretirement benefit plans.
It does not change the measurement or recognition of those plans. The adoption
of this new standard did not have an effect on the Company's financial
statements because it has no such benefit plans.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The
Statement will require the Company to recognize all derivatives as either
assets or liabilities in the balance sheet and measure those derivative
instruments at fair value. This Statement will be effective for the Company in
the third quarter of 1999. At December 28, 1998, the Company has no derivative
instruments or hedging activities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risk associated with fluctuations in
interest rates. Interest rate risk is primarily limited to the Company's
variable rate debt obligations, which totaled $70.9 million at December 28,
1998. Of this balance, the BankBoston revolver comprised $67.6 million bearing
an interest rate calculated as the lesser of BankBoston's base rate or the
Eurodollar rate plus 2.5%, the 1995 Franchise Acceptance Corporation ("FAC")
Note comprised $1.5 million bearing an interest rate of 2.75% above FAC's
program rate, and the 1998 FAC Note comprised $1.8 million bearing an interest
rate of 2.5% above FAC's program rate. Assuming a 20% increase in interest
rates, the Company would experience an increase in interest expense of
approximately $1.2 million. The Company does not hold any market risk
sensitive financial instruments for trading purposes.
19
<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............................................. 21
Consolidated Balance Sheets as of December 28, 1998 and December 29,
1997.................................................................... 22
Consolidated Statements of Operations for the fiscal years ended December
28, 1998, December 29, 1997 and December 30, 1996....................... 23
Consolidated Statements of Stockholders' Equity (Deficit) for the fiscal
years ended December 28, 1998, December 29, 1997 and December 30, 1996.. 24
Consolidated Statements of Cash Flows for the fiscal years ended December
28, 1998, December 29, 1997 and December 30, 1996....................... 25
Notes to Consolidated Financial Statements............................... 26
</TABLE>
20
<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 28, 1998 and December 29, 1997, 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
28, 1998. 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 28, 1998 and December 29, 1997, and the results of
their operations and their cash flows for each of the three fiscal years in
the period ended December 28, 1998 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Chicago, Illinois
March 12, 1999
21
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 28, 1998 and December 29, 1997
<TABLE>
<CAPTION>
December 28, December 29,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 10,591,000 $ 7,532,000
Accounts receivable.............................. 2,512,000 1,723,000
Inventories...................................... 2,546,000 2,470,000
Prepaid expenses................................. 465,000 1,592,000
Current portion of deferred income taxes (Note
9).............................................. 123,000 30,000
------------ ------------
Total current assets........................... 16,237,000 13,347,000
PROPERTY AND EQUIPMENT (Note 4).................... 62,974,000 52,924,000
GOODWILL........................................... 145,327,000 131,135,000
DEFERRED INCOME TAXES (Note 9)..................... 1,448,000 3,434,000
OTHER ASSETS:
Deferred financing costs......................... 6,597,000 6,680,000
Deferred organization costs...................... 2,000 95,000
Franchise agreements............................. 6,134,000 5,472,000
------------ ------------
Total other assets............................. 12,733,000 12,247,000
------------ ------------
TOTAL.............................................. $238,719,000 $213,087,000
============ ============
LIABILITIES, SENIOR PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other accrued expenses...... $ 15,931,000 $ 11,937,000
Accrued payroll and related expenses............. 8,459,000 5,514,000
Accrued taxes payable............................ 3,998,000 2,590,000
Note payable..................................... 2,657,000 --
Current portion of long-term debt (Note 5)....... 753,000 577,000
Current portion of capital leases (Note 7)....... -- 74,000
------------ ------------
Total current liabilities...................... 31,798,000 20,692,000
------------ ------------
LONG-TERM DEBT--Less current portion (Note 5)...... 175,836,000 162,798,000
OTHER LONG-TERM LIABILITIES........................ 808,000 1,023,000
------------ ------------
Total liabilities.............................. 208,442,000 184,513,000
------------ ------------
SENIOR PREFERRED STOCK (Note 6).................... 39,093,000 34,415,000
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock.................................. 75 75
Common stock..................................... 9,030 9,030
Additional paid-in capital....................... -- 3,037,895
Accumulated deficit.............................. (8,825,105) (8,888,000)
------------ ------------
Total stockholders' equity (deficit)........... (8,816,000) (5,841,000)
------------ ------------
TOTAL.............................................. $238,719,000 $213,087,000
============ ============
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Years Ended December 28, 1998, December 29, 1997, and December
30, 1996
<TABLE>
<CAPTION>
Fiscal % of % of % of
1998 Sales Fiscal 1997 Sales Fiscal 1996 Sales
------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
SALES
Restaurant food sales.. $297,989,000 96.9% $226,908,000 96.7% $197,931,000 97.1%
Non-food sales......... 9,499,000 3.1 7,638,000 3.3 5,822,000 2.9
------------ ----- ------------ ----- ------------ -----
Total sales............ 307,488,000 100.0 234,546,000 100.0 203,753,000 100.0
RESTAURANT OPERATING
EXPENSES:
Cost of food sales..... 87,942,000 28.6 69,546,000 29.6 60,576,000 29.7
Cost of non-food
sales................. 7,978,000 2.6 6,573,000 2.8 5,495,000 2.7
Restaurant labor and
related costs......... 78,326,000 25.5 60,278,000 25.7 50,874,000 25.0
Occupancy.............. 31,538,000 10.3 24,384,000 10.4 21,189,000 10.4
Depreciation and
amortization of
goodwill and franchise
agreements............ 11,568,000 3.8 8,760,000 3.7 7,386,000 3.6
Advertising............ 15,858,000 5.2 12,388,000 5.3 10,072,000 4.9
Royalties.............. 10,463,000 3.4 7,949,000 3.4 6,943,000 3.4
Other restaurant
operating expenses.... 25,329,000 8.1 20,699,000 8.9 17,632,000 8.7
------------ ----- ------------ ----- ------------ -----
Total restaurant
operating expenses.... 269,002,000 87.5 210,577,000 89.8 180,167,000 88.4
GENERAL AND
ADMINISTRATIVE
EXPENSES............... 13,886,000 4.5 9,497,000 4.0 7,370,000 3.6
OTHER OPERATING
EXPENSES:
Depreciation expense--
office................ 842,000 0.3 698,000 0.3 444,000 0.2
(Gain) on sale of
restaurants........... (1,798,000) (0.8)
Provision for
disposition of long-
lived assets (Note
12)................... 1,177,000 0.4 2,275,000 1.0 2,230,000 1.1
Loss on disposal of
equipment............. 394,000 0.1 467,000 0.2 341,000 0.2
Management and
directors' fees....... 650,000 0.2 650,000 0.3 664,000 0.3
------------ ----- ------------ ----- ------------ -----
Total other operating
expenses.............. 3,063,000 1.0 2,292,000 1.0 3,679,000 1.8
------------ ----- ------------ ----- ------------ -----
OPERATING INCOME........ 21,537,000 7.0 12,180,000 5.2 12,537,000 6.2
OTHER EXPENSE:
Interest expense....... (16,275,000) (5.3) (13,320,000) (5.7) (10,175,000) (5.0)
Interest expense--
related party......... (1,808,000) (0.9)
Amortization of
deferred costs........ (963,000) (0.3) (691,000) (0.3) (943,000) (0.5)
Other expense--net
(Note 12)............. (542,000) (0.2) (568,000) (0.2) (4,109,000) (2.0)
------------ ----- ------------ ----- ------------ -----
Total other expense.... (17,780,000) (5.8) (14,579,000) (6.2) (17,035,000) (8.4)
------------ ----- ------------ ----- ------------ -----
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM AND
PROVISION (BENEFIT) FOR
INCOME TAXES........... 3,757,000 1.2 (2,399,000) (1.0) (4,498,000) (2.2)
PROVISION (BENEFIT) FOR
INCOME TAXES........... 1,944,000 0.6 (365,000) (0.1) (1,556,000) (0.8)
------------ ----- ------------ ----- ------------ -----
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... 1,813,000 0.6 (2,034,000) (0.9) (2,942,000) (1.4)
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)....... 1,813,000 0.6 (2,034,000) (0.9) (7,997,000) (3.9)%
PREFERRED STOCK
DIVIDENDS (cumulative,
undeclared)............ (558,000) (450,000) (450,000)
SENIOR PREFERRED STOCK
DIVIDENDS.............. (4,678,000) (4,112,000) (303,000)
AMORTIZATION OF SENIOR
PREFERRED STOCK
ISSUANCE COSTS......... (110,000) (129,000) (10,000)
------------ ------------ ------------
LOSS AVAILABLE TO COMMON
STOCKHOLDERS........... $ (3,533,000) $ (6,725,000) $ (8,760,000)
============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING--BASIC AND
DILUTED................ 902,992 900,167 865,515
============ ============ ============
NET LOSS PER COMMON
SHARE BEFORE
EXTRAORDINARY ITEM--
BASIC AND DILUTED...... $ (3.91) $ (7.47) $ (4.28)
EXTRAORDINARY ITEM--
BASIC AND DILUTED...... (5.84)
------------ ------------ ------------
NET LOSS PER COMMON
SHARE--BASIC AND
DILUTED................ $ (3.91) $ (7.47) $ (10.12)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Fiscal Years Ended December 28, 1998, December 29, 1997, and December
30, 1996
<TABLE>
<CAPTION>
Additional Retained
Preferred Common Paid-In Earnings
Stock Stock Capital (Deficit) Total
--------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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)
Dividends on senior
preferred stock...... (2,927,895) (1,750,105) (4,678,000)
Amortization of senior
preferred stock
issuance costs....... (110,000) (110,000)
Net Income............ 1,813,000 1,813,000
--- ------ ----------- ----------- -----------
BALANCE--December 28,
1998................... $75 $9,030 $ -- $(8,825,105) $(8,816,000)
=== ====== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Years Ended December 28, 1998, December 29, 1997, and December
30, 1996
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997 Fiscal 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................... $ 1,813,000 $ (2,034,000) $ (7,997,000)
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities:
Depreciation and amortization....... 13,373,000 10,149,000 8,773,000
Deferred income taxes............... 1,893,000 (735,000) (4,653,000)
Gain on sale of restaurants......... (1,798,000)
Provision for disposition of long-
lived assets....................... 1,177,000 2,275,000 2,230,000
Loss on disposition of equipment.... 394,000 467,000 341,000
Extraordinary loss on early
extinguishment of debt............. 8,356,000
Changes in:
Accounts receivable................. (789,000) (895,000) 290,000
Inventories......................... (76,000) (803,000) (658,000)
Prepaid expenses.................... 1,127,000 (254,000) (120,000)
Accounts payable, accrued expenses
and other long-term liabilities.... 8,132,000 4,743,000 8,241,000
------------ ------------ ------------
Net cash flows provided by
operating activities............. 27,044,000 11,115,000 14,803,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restaurant franchise
agreements, equipment and
goodwill........................... (27,591,000) (60,141,000) (39,245,000)
Proceeds from sale of restaurants... 8,158,000
Proceeds from sale of property...... 1,945,000 817,000
Cash paid for franchise agreements.. (440,000) (434,000) (330,000)
Cash paid for property and
equipment.......................... (10,828,000) (12,507,000) (8,298,000)
------------ ------------ ------------
Net cash flows used for investing
activities....................... (38,859,000) (62,979,000) (47,056,000)
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....... 2,657,000
Proceeds from long-term debt........ 1,800,000 26,300,000
Proceeds from subordinated debt--
related party...................... 15,000,000
Cash paid for financing costs....... (923,000) (848,000) (9,280,000)
Cash paid for penalties related to
early extinguishment of debt....... (3,450,000)
Advances under line of credit....... 15,000,000 57,608,000 5,800,000
Payments on line of credit.......... (3,000,000) (2,000,000) (5,800,000)
Payments on long-term debt.......... (586,000) (525,000) (122,843,000)
Payments on capital leases.......... (74,000) (99,000) (102,000)
------------ ------------ ------------
Net cash flows provided by
financing activities............. 14,874,000 54,137,000 35,625,000
------------ ------------ ------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS......................... 3,059,000 2,273,000 3,372,000
CASH AND CASH EQUIVALENTS--Beginning
of period........................... 7,532,000 5,259,000 1,887,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS--End of
period.............................. $ 10,591,000 $ 7,532,000 $ 5,259,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest........................... $ 16,125,000 $ 12,470,000 $ 9,283,000
Cash paid during the year for
interest-related party............. 2,135,000
------------ ------------ ------------
Total cash paid during the year for
interest........................... $ 16,125,000 $ 12,470,000 $ 11,418,000
============ ============ ============
Cash paid during the year for income
taxes.............................. $ 90,000 $ $
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Senior preferred stock dividends.... $ 4,678,000 $ 4,112,000 $ 303,000
Amortization of senior preferred
stock issuance costs............... 110,000 129,000 10,000
------------ ------------ ------------
TOTAL............................. $ 4,788,000 $ 4,241,000 $ 313,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements
25
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended December 28, 1998, December 29, 1997, and December
30, 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 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.
During fiscal 1998, the Company, in a series of transactions, acquired 30
Burger King restaurants in Illinois, Ohio, Tennessee, Wisconsin, and Kentucky
(the "1998 Acquisitions") for $23.8 million in cash, excluding transaction
fees and expenses. In addition, the Company closed three restaurants, one in
Illinois, one in Virginia and one in Ohio. Also, the Company developed 17
Burger King restaurants in Texas, North Carolina, Ohio, Virginia, Kentucky,
Illinois and Tennessee.
The Company is one of the largest independent Burger King franchisees in the
United States, operating 286 Burger King restaurants as of December 28, 1998.
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 1998 fiscal year ended December 28,
1998, included 365 days of operating activity, and the 1997 and 1996 fiscal
years ended December 29, 1997 and December 30, 1996, respectively, included
364 days of operating activity. The last day of the year is determined to be
the last Monday of the calendar year.
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.
26
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
28, 1998 and December 29, 1997 was approximately $1,475,000 and $991,000,
respectively.
Goodwill--Goodwill represents the excess of cost over fair value of net
assets acquired in connection with the Company's acquisitions. Goodwill is
amortized over 35 years using the straight-line method. Accumulated
amortization of goodwill as of December 28, 1998 and December 29, 1997 was
approximately $11,715,000 and $7,781,000, respectively.
Deferred Costs--Costs associated with the organization of the Company are
being amortized on a straight-line basis over five years and are substantially
fully amortized at December 28, 1998. 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 28, 1998 and December 29, 1997 was approximately
$308,000 and $211,000, respectively, for deferred organization costs and
approximately $1,838,000 and $829,000, respectively, for deferred financing
costs.
Start Up Costs--Effective at the beginning of fiscal 1998, the Company
adopted AICPA Statement of Position No. 98-5 "Start-up Activities" (SOP 98-5).
SOP 98-5 requires companies to expense, as incurred, costs associated with
start-up activities. Previously, the Company amortized such costs over a
twelve month period when a restaurant was brought into service. The effect of
such adoption was to charge to expense $299,000 of such costs in the first
quarter of fiscal 1998.
Reclassifications--Certain information in the consolidated financial
statements for fiscal 1996 and 1997 have been reclassified to conform to 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.
Diluted earnings per share was the same as basic earnings per share during
fiscal 1998, 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 SFAS
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
27
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components (net income with non-owner
sources of other comprehensive income) in a full set of financial statements.
SFAS No. 130 did not have an effect on the Company's financial statements
because it has no items of "other comprehensive income."
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information," which changes the way public companies
report information about operating segments. This statement, which is based on
the management approach to segment reporting, establishes requirements to
report selected segment information. Management of the Company considers it to
have one reportable segment, the operation of franchised restaurants in the
United States, and assesses performance on a single segment basis; therefore,
the adoption of this new standard did not have an effect on the content of the
Company's disclosures.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits." This Statement revises
employers' disclosures about pension and other postretirement benefit plans.
It does not change the measurement or recognition of those plans. The adoption
of this new standard did not have an effect on the Company's financial
statements because it has no such benefit plans.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The
Statement will require the Company to recognize all derivatives as either
assets or liabilities in the balance sheet and measure those derivative
instruments at fair value. This Statement will be effective for the Company in
the third quarter of 1999. At December 28, 1998, the Company had no derivative
instruments or hedging activities.
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
28, 29,
1998 1997
----------- -----------
<S> <C> <C>
Restaurant equipment and furnishings............. $60,568,000 $52,009,000
Office furniture and equipment................... 4,300,000 3,634,000
Leasehold improvements........................... 11,628,000 6,116,000
New restaurant development....................... 3,058,000 2,194,000
Buildings........................................ 3,806,000 2,197,000
----------- -----------
Total........................................ 83,360,000 66,150,000
Less accumulated depreciation.................... 20,386,000 13,226,000
----------- -----------
Property and equipment--net.................. $62,974,000 $52,924,000
=========== ===========
</TABLE>
28
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Long-Term Debt
Debt consists of the following:
<TABLE>
<CAPTION>
December 28, 1998 December 29, 1997
--------------------- ---------------------
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, 8.17% at
December 28, 1998, due 2002....... 67,608,000 55,608,000
Franchise Acceptance Corporation
Limited Note, 9.86%, due 2006..... $478,000 4,635,000 $433,000 5,122,000
Franchise Acceptance Corporation
Limited Note, 7.40%, due 2008..... 117,000 1,683,000
Franchise Acceptance Corporation
Limited Note, at a variable
interest rate, 7.65% at December
28, 1998, due 2005................ 158,000 1,310,000 144,000 1,468,000
Junior Subordinated Notes, 6.00%,
due 2005.......................... 600,000 600,000
-------- ------------ -------- ------------
Total.......................... $753,000 $175,836,000 $577,000 $162,798,000
======== ============ ======== ============
</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"). The Notes bear interest at 6.00%,
with the entire principal amount due March 2005.
On July 21, 1995, the Company issued a $6.9 million note to BKC (the "BKC
Note"). On July 18, 1996, the BKC Note was replaced with a $6.1 million note
issued to Franchise Acceptance Corporation Limited ("FAC")(the "1996 FAC
Note"). The 1996 FAC Note bears interest at a rate of 9.86% per annum, has
mandatory principal payments and matures July 2006. In connection with the
1996 FAC Note, FAC committed to lend the Company $900,000 under a separate
credit facility (the "FAC Credit Facility") for capital expenditures.
Borrowings under the FAC Credit Facility bear interest at a variable rate with
principal payments due monthly. No amounts were outstanding under the FAC
Credit Facility at December 28, 1998.
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
29
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 28, 1998, 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.
On July 22, 1998, the Company issued a $1.8 million note (the "1998 FAC
Note") to FAC. The FAC Note bears interest at 2.5% above FAC's program rate,
has mandatory monthly principal payments and matures November 2008.
On December 24, 1998, BBNA and the other lenders thereto committed to
increase the borrowing capacity of the Revolver from $75 million to $80
million as permitted under the Amended and Restated Revolving Credit
Agreement.
On December 24, 1998, the Company entered into a new Credit Agreement (the
"Acquisition Credit Agreement") with BBNA and other lenders for $45.0 million.
Interest is calculated as the lesser of the base rate or the Eurodollar rate
and is payable, at a minimum, quarterly. The Acquisition Credit Agreement
calls for no principal amortization and matures in June 2002. No amounts were
outstanding under the agreement at December 28, 1998.
At December 28, 1998 and December 29, 1997, the Senior Notes had a fair
value of 104.0% and 106.7%, respectively, of their carrying value based on
quoted market prices. The carrying value of the Revolver, the 1998 FAC Note
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 28, 1998 and December 29, 1997, the 1996 FAC Note had a fair value of
115.3% and 114.1%, respectively, and the Junior Subordinated Notes had a fair
value of 88.9% and 85.1%, respectively, of their carrying values. 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
28, 1998 and December 29, 1997.
30
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Aggregate maturities of the Company's long-term debt as of December 28, 1998
are as follows:
<TABLE>
<S> <C>
1999......................................................... $ 753,000
2000......................................................... 828,000
2001......................................................... 911,000
2002......................................................... 68,610,000
2003......................................................... 1,101,000
Thereafter................................................... 104,386,000
------------
Total.................................................... $176,589,000
============
</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, the Acquisition 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 1998, the Company declared stock dividends of 187,120 shares
of its 13% Senior Preferred Stock, aggregating $4,678,000. As of December
28,1998, the Company has accrued senior preferred stock dividends of
approximately $372,000 or 14,894 shares that will be distributed on March 1,
1999.
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>
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.
31
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 28, 1998 and December 29, 1997, the Senior Preferred Stock had a
fair value of approximately $40.6 million and $36.8 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 1998 Fiscal 1997 Fiscal 1996
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rentals under operating
leases............................ $24,222,000 $18,929,000 $15,647,000
Contingent rentals................. 3,714,000 2,221,000 2,083,000
----------- ----------- -----------
Total............................ $27,936,000 $21,150,000 $17,730,000
=========== =========== ===========
</TABLE>
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------------
<S> <C>
1999......................................................... $ 29,621,000
2000......................................................... 27,827,000
2001......................................................... 26,383,000
2002......................................................... 25,473,000
2003......................................................... 24,373,000
Thereafter................................................... 220,471,000
------------
Total...................................................... $354,148,000
============
</TABLE>
8. Capital Stock
At December 28, 1998, the Company's authorized capital stock was as follows:
<TABLE>
<CAPTION>
Number of Number of Voting
Par Value Shares Shares Issued Rights
Per Share Authorized and 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 1,563,757 0
========= =========
</TABLE>
32
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
28, 1998.
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 Fiscal
1998 1997 Fiscal 1996
---------- --------- -----------
<S> <C> <C> <C>
Federal:
Current............................ $(3,357,000)
Deferred........................... $1,490,000 $(920,000) 1,512,000
State:
Current............................ 51,000 370,000
Deferred........................... 403,000 185,000 289,000
---------- --------- -----------
Net provision (benefit) for
income taxes.................... $1,944,000 $(365,000) $(1,556,000)
========== ========= ===========
</TABLE>
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 Fiscal
1998 1997 Fiscal 1996
---------- --------- -----------
<S> <C> <C> <C>
Computed federal income tax provision
(benefit) at statutory rate........... $1,277,000 $(816,000) $(1,460,000)
State income taxes (net of federal
income tax effect).................... 300,000 244,000 (188,000)
Non-deductible expenses................ 117,000 20,000 29,000
Goodwill amortization.................. 250,000 162,000 63,000
Other.................................. 25,000
---------- --------- -----------
Net provision (benefit) for income
taxes............................... $1,944,000 $(365,000) $(1,556,000)
========== ========= ===========
</TABLE>
As of December 28, 1998, the Company had a net operating loss carry-forward
for income tax purposes of approximately $38.3 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.
33
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Total deferred tax liabilities and deferred tax assets as of December 28,
1998 and December 29, 1997, 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>
December December
28, 1998 29, 1997
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation................................... $14,814,000 $11,421,000
Purchase accounting adjustments................ 1,005,000 1,135,000
Other.......................................... 245,000 451,000
----------- -----------
16,064,000 13,007,000
Deferred tax assets:
Operating loss carry-forwards.................. 15,653,000 13,946,000
Fixed asset reserves........................... 1,655,000 2,450,000
Other.......................................... 327,000 75,000
----------- -----------
17,635,000 16,471,000
----------- -----------
Total........................................ $ 1,571,000 $ 3,464,000
=========== ===========
</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 1998, 1997 and 1996, the Company contributed approximately $75,000,
$66,000 and $23,000, respectively, to the Plan.
11. Related Parties
During fiscal 1996, the Company recorded interest expense on the related
party debt totaling $1,808,000.
The Company leased two restaurants under noncancelable operating leases from
an entity that is owned by a member of the Company's management. The leases
required total monthly rental payments of $20,600. During fiscal 1997 and
1996, the Company recorded rent expense of $247,000 in each year, under these
leases. There were no related party leases in 1998.
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. In 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 1998, 1997 and 1996,
the Company recorded expenses of $600,000 under the amended TJC Consulting
Agreement.
In connection with the 1998, 1997 and 1996 acquisitions, the Company paid an
affiliate of The Jordan Company investment banking fees of $578,500,
$1,000,000 and $1,000,000, respectively. In 1996, the Company paid fees
totaling $300,000 to certain members of the Company's senior management.
Concurrent with the Offerings and related financing consummated by the Company
in fiscal 1996, the Company paid to the affiliate
34
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 1998, 1997 and 1996, the Company recorded a loss of approximately
$1.2 million, $2.3 million and $2.2 million, respectively, for the disposal of
long-lived assets. The fiscal 1998 loss is the write-down to estimated fair
market value of two Company-owned restaurants due to a decrease in the cash
flow of these restaurants. 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
remodeling.
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 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.
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 16, 1999, the Company purchased 30 restaurants in Wisconsin and
the Upper Peninsula of Michigan for approximately $24.3 million including
transaction fees and acquisition related expenditures.
On February 1, 1999, the Company purchased two restaurants in Illinois for
approximately $1.0 million including transaction fees and acquisition related
expenditures.
On December 31, 1998, the Company purchased 13 restaurants in Ohio for
approximately $11.1 million including transaction fees and acquisition related
expenditures.
35
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in accountants during fiscal 1998 or 1997, 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 Officers 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 28, 1998:
<TABLE>
<CAPTION>
Name Age Position with Company
- ---- --- ---------------------
<S> <C> <C>
Lawrence E. Jaro........ 55 Managing Owner, Chairman and Chief Executive Officer
William C. Osborn....... 50 Vice Chairman and Director
Gary W. Hubert.......... 46 Chief Operating Officer and Director
Joel D. Aaseby.......... 40 Chief Financial Officer and Corporate Secretary
Scott E. Vasatka........ 45 Executive Vice President-Human Resources
Augustus F. Hothorn..... 46 Senior Vice President-Development
Stewart G. Baily........ 41 Vice President-Chicago Operations
A. Richard Caputo, Jr... 32 Vice President and Director
Kenneth J. Stanecki..... 37 Vice President-Finance and Corporate Treasurer
James C. Hoar........... 39 Vice President-General Counsel
Thomas H. Quinn......... 51 Director
John W. Jordan, II...... 50 Director
David W. Zalaznick...... 44 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 Chief Executive Officer and as a Director since
the Company's inception, and currently serves as its Chairman. Mr. Jaro has
over 18 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 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 13 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 23 years of experience with the Burger
King system 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 23 years of experience with the
Burger King system in various finance, accounting and operations positions,
including Midwest Sector Controller from 1989 to 1994.
36
<PAGE>
Mr. Vasatka has served as the Company's Executive Vice President--Human
Resources since the Company's inception. Mr. Vasatka has over 29 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.
Mr. Hothorn has served as the Company's Executive Vice President--
Development since May 1997. Mr. Hothorn has over 16 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 23 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. Stanecki has served as the Company's Vice President--Finance and
Corporate Treasurer since June 1998. Mr. Stanecki has been with the Company
since October 1997 and has over 10 years of experience with the Burger King
system in various financial and operational positions.
Mr. Hoar has served as the Company's Vice President--General Counsel since
June 1998. Mr. Hoar has over 9 years of experience with the Burger King
system.
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 Archibald
Candy 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 that he founded in 1982. Mr. Jordan is also a director of Jordan
Industries, Inc., Archibald Candy 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., Archibald Candy 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
37
<PAGE>
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 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.
38
<PAGE>
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 four most highly
compensated 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
---------------------------------
Other
Name and Principal Fiscal Annual All Other
Position Year Salary Bonus(1) Compensation(2) Compensation
- ------------------ ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence E. Jaro......... 1998 $259,000 $ 75,000 --
Managing Owner and 1997 245,000 235,000
Chief Executive Officer 1996 215,000 64,500
William C. Osborn........ 1998 $225,000 $10,000(3)
Vice Chairman 1997 221,000 10,000(3)
1996 215,000 $ 64,500 10,000(3)
Gary W. Hubert........... 1998 $238,000 $ 8,000 --
Chief Operating Officer
and 1997 226,000 60,000
Senior Vice President 1996 215,000 64,500
Joel D. Aaseby........... 1998 $165,000 $ 8,000 --
Chief Financial Officer
and 1997 157,000 80,000
Corporate Secretary 1996 110,000 30,000
Scott E. Vasatka......... 1998 $134,000 $ 8,000 --
Executive Vice
President-- 1997 128,000 25,000
Human Resources 1996 105,000 21,000
Augustus F. Hothorn...... 1998 $207,330 $ 8,000 --
Executive Vice
President-- 1997 119,000 25,000
Development
Stewart G. Baily......... 1998 $139,000 $ 18,000 --
Vice President-- 1997 131,000 30,000
Chicago Operations 1996 120,000 15,000
</TABLE>
- --------
(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 $50,000 or 10% of salary and
bonus reported for him in the two preceding columns.
(3) Represents the amount of life insurance premiums paid by the Company on the
life of Mr. Osborn with death benefits designated by Mr. Osborn.
Option Exercises in Fiscal 1997 and Fiscal Year-end Values
The following table shows stock options exercised by each of the Named
Executives during fiscal 1997, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares covered
by both exercisable and non-exercisable stock options as of fiscal year-end,
and the values for unexercised options. Except as listed in the table, no other
Named Executive exercised any Company stock options or beneficially owned
unexercised Company stock options.
39
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Underlying Value of Unexercised
Shares Unexercised Options In-The-Money Options
Acquired Value at December 29, 1997 at December 29, 1997
on Exercise Realized ------------------------- -------------------------
Name (#) ($) 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.
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
40
<PAGE>
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 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.
41
<PAGE>
Hothorn agreed to serve as Executive 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth as of December 28, 1998, 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
42
<PAGE>
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.
(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 not to exceed $600,000 (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 1998, 1997 and 1996,
the Company paid consulting fees to the affiliate of The Jordan Company of
approximately $600,000 pursuant to the terms of the TJC Consulting Agreement.
In connection with the 1998 Acquisition Credit Agreement, the Company incurred
a $578,500 refinancing fee for The Jordan Company. In connection with the
acquisitions on June 26, 1997 and September 30, 1997 by the Company of an
aggregate of 56 Burger King restaurant franchises located in the State of
North Carolina, the Company paid to the affiliate of The Jordan Company an
investment banking fee of $1.0. 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.
43
<PAGE>
Members of the Board of Directors. The Company leased the land and buildings
for two Burger King restaurants under noncancelable operating leases from an
entity that is owned by Mr. Jaro. The leases required 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 believed that the terms of these leases were comparable to the
terms it would have obtained 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.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Westchester, State of Illinois, on March xx, 1999.
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 xx day of March, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Managing Owner, Chairman and Chief
___________________________________________ Executive Officer (Principal Executive
Lawrence E. Jaro Officer)
* Vice Chairman
___________________________________________
William C. Osborn
* Director and Chief Operating Officer
___________________________________________
Gary W. Hubert
* Chief Financial Officer and Corporate
___________________________________________ Secretary (Principal Financial and
Joel D. Aaseby Accounting Officer)
* Director and Vice President
___________________________________________
A. Richard Caputo, Jr.
* Director
___________________________________________
Thomas H. Quinn
* Director
___________________________________________
John W. Jordan II
* Director
___________________________________________
David W. Zalaznick
</TABLE>
/s/ A. Richard Caputo, Jr.
By: _________________________________
A. Richard Caputo, Jr.
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.
45
<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>
AmeriKing, Inc.
Calculation of Earnings per Common Share
<TABLE>
<CAPTION>
Fiscal Year Ended
December 28, December 29, December 30,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) before extraordinary item $ 1,813,000 $(2,034,000) $(2,942,000)
Earnings available to stockholders
Dividends
Preferred Stock (558,000) (450,000) (450,000)
Senior Preferred Stock (4,678,000) (4,112,000) (303,000)
Amortization of issuance costs (110,000) (129,000) (10,000)
----------- ----------- -----------
Income (loss) before extraordinary item
available to common stockholders (3,533,000) (6,725,000) (3,705,000)
Extraordinary item - loss from early
extinguishment of debt (net of taxes) (5,055,000)
----------- ----------- -----------
Income (loss) available to common stockholders $(3,533,000) $(6,725,000) $(8,760,000)
=========== =========== ===========
Weighted average number of common shares
outstanding - basic 902,992 900,167 865,515
----------- ----------- -----------
Dilutive effect of options and warrants
Weighted average number of common shares
outstanding - diluted 902,992 900,167 865,515
Net income (loss) per common share before
extraordinary item - basic $ (3.91) $ (7.47) $ (4.28)
Extraordinary item - basic (5.84)
----------- ----------- -----------
Net income (loss) per common share - basic $ (3.91) $ (7.47) $ (10.12)
=========== =========== ===========
Net income (loss) per common share before
extraordinary item - diluted $ (3.91) $ (7.47) $ (4.28)
Extraordinary item - diluted (5.84)
----------- ----------- -----------
Net income (loss) per common share - diluted $ (3.91) $ (7.47) $ (10.12)
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total
Shares
------
<S> <C> <C> <C>
Weighted average number of common shares-
basic:
Original shares 863,290 863,290 863,290
Option shares 9,702 6,877
Warrant shares
Common stock units 30,000 30,000 2,225
------- ------- -------
Total 902,992 900,167 865,515
======= ======= =======
Weighted average number of common shares-
diluted:
Original shares 863,290 863,290 863,290
Option shares 9,702 6,877
Warrant shares
Common stock units 30,000 30,000 2,225
------- ------- -------
Total 902,992 900,167 865,515
======= ======= =======
</TABLE>
<PAGE>
AmeriKing, Inc.
Calculation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
December 28, 1998 December 29, 1997
------------------------- ---------------------------
W/O PIK With PIK W/O PIK With PIK
Dividends Dividends Dividends Dividends
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EARNINGS
Income (Loss) before income taxes benefit $3,757,000 $3,757,000 $(2,399,000) $(2,399,000)
Interest expense 16,275,000 16,275,000 13,320,000 13,320,000
Amortization of deferred financing costs 896,000 896,000 616,000 616,000
Portion of rents representative of interest 7,046,000 7,046,000 5,556,000 5,556,000
Preferred stock PIK dividends 559,000 450,000
----------- ----------- ----------- -----------
Total Earnings $27,974,000 $28,533,000 $17,093,000 $17,543,000
----------- ----------- ----------- -----------
FIXED CHARGES
Interest expense $16,275,000 $16,275,000 $13,320,000 $13,320,000
Amortization of deferred financing costs 896,000 896,000 616,000 616,000
Portion of rents representative of interest 7,046,000 7,046,000 5,556,000 5,556,000
Preferred stock PIK dividends 559,000 450,000
----------- ----------- ----------- -----------
Total Fixed Charges $24,217,000 $24,776,000 $19,492,000 $19,942,000
----------- ----------- ----------- -----------
RATIO OF EARNINGS TO FIXED CHARGES 1.16 1.15 0.88 0.88
=========== =========== =========== ===========
INSUFFICIENT EARNINGS TO COVER FIXED CHARGES N/A N/A $ 2,399,000 $ 2,399,000
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from *
fiscal 1998 consolidated financial statements of Ameriking, Inc. and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> DEC-28-1998
<CASH> 10,591
<SECURITIES> 0
<RECEIVABLES> 2,512
<ALLOWANCES> 0
<INVENTORY> 2,546
<CURRENT-ASSETS> 16,237
<PP&E> 83,360
<DEPRECIATION> 20,386
<TOTAL-ASSETS> 238,719
<CURRENT-LIABILITIES> 31,798
<BONDS> 175,836
39,093
0
<COMMON> 9
<OTHER-SE> (8,825)
<TOTAL-LIABILITY-AND-EQUITY> 238,719
<SALES> 307,488
<TOTAL-REVENUES> 307,488
<CGS> 95,920
<TOTAL-COSTS> 269,002
<OTHER-EXPENSES> 16,883
<LOSS-PROVISION> 1,571
<INTEREST-EXPENSE> 16,275
<INCOME-PRETAX> 3,757
<INCOME-TAX> 1,944
<INCOME-CONTINUING> 1,813
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,813
<EPS-PRIMARY> (3.91)
<EPS-DILUTED> (3.91)
</TABLE>
