Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 2, 1997, or
[ ] Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ___________
to ___________
Commission file number 333-07601
FRD Acquisition Co.
(Exact name of registrant as specified in its charter)
Delaware 57-1040952
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3355 Michelson Dr., Suite 350
Irvine, California 92612
(Address of principal executive offices)
(Zip Code)
(864) 597-8000
(Registrant's telephone number, including area code)
18831 Von Karman Avenue
Irvine, California 92612
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of May 9, 1997, 1000 shares of the registrant's Common Stock, par value $0.10
per share, were outstanding, all of which were owned by the registrant's parent,
Flagstar Corporation.
1
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRD Acquisition Co.
Condensed Statements of Consolidated and Combined Operations
(Unaudited)
<TABLE>
<CAPTION>
FRD FRD
Successor Predecessor
Quarter Quarter
Ended Ended
April 2, 1997 March 31, 1996
------------- --------------
<S> <C> <C>
(In thousands)
Operating revenue $ 127,035 $ 119,840
------------ ------------
Operating expenses:
Product cost 34,113 33,090
Payroll and benefits 46,365 45,271
Depreciation and amortization 7,579 6,926
Management fees to Flagstar 1,270 ---
Other 31,914 29,499
-------------- --------------
121,241 114,786
------------- -------------
Operating income 5,794 5,054
--------------- ---------------
Other charges:
Interest and debt expense - net 7,503 3,931
Other - net (134) 329
--------------- ----------------
7,369 4,260
--------------- ---------------
(Loss) income before income taxes (1,575) 794
Provision for income taxes 53 846
--------------- ----------------
Net loss $ (1,628) $ (52)
============== ================
</TABLE>
See accompanying notes
2
<PAGE>
Form 10-Q
FRD Acquisition Co.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
April 2, 1997 December 26, 1996
------------- -----------------
<S> <C> <C>
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 10,360 $ 14,300
Receivables 2,142 5,988
Merchandise and supply inventories 3,462 5,039
Net assets held for sale --- 5,065
Other 6,041 4,468
--------------- ---------------
22,005 34,860
-------------- --------------
Property and equipment 150,680 149,587
Accumulated depreciation (20,217) (14,611)
-------------- --------------
130,463 134,976
------------- -------------
Other Assets:
Goodwill, net 204,153 205,389
Other 12,428 12,821
-------------- --------------
216,581 218,210
------------- -------------
Total Assets $ 369,049 $ 388,046
============ ============
</TABLE>
See accompanying notes
3
<PAGE>
Form 10-Q
FRD Acquisition Co.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
April 2, 1997 December 26, 1996
------------- -----------------
<S> <C> <C>
(In thousands)
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt $ 14,557 $ 19,578
Accounts payable 16,049 16,897
Accrued payroll and related 15,478 14,189
Accrued insurance 8,097 6,832
Accrued interest 4,156 9,261
Payable to Flagstar 4,846 2,950
Other 15,562 20,512
-------------- --------------
78,745 90,219
-------------- --------------
Long-term Liabilities:
Debt, less current maturities 213,150 218,497
Liability for self-insured claims 8,979 10,142
Other non-current liabilities 992 377
---------------- ----------------
223,121 229,016
------------- -------------
Total Liabilities 301,866 319,235
------------- -------------
Shareholder's Equity:
Common stock: par value $0.10; 1000 shares
authorized, issued and outstanding --- ---
Paid in-capital 75,000 75,000
Deficit (7,817) (6,189)
--------------- ---------------
Total Shareholder's Equity 67,183 68,811
-------------- --------------
Total Liabilities and Equity $ 369,049 $ 388,046
============= ============
</TABLE>
See accompanying notes
4
<PAGE>
Form 10-Q
FRD Acquisition Co.
Statements of Consolidated and Combined Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
FRD Successor FRD Predecessor
Quarter Ended Quarter Ended
April 2, 1997 March 31, 1996
----------------------------- --------------------
<S> <C> <C>
(In thousands)
Cash Flows From Operating Activities:
Net loss $ (1,628) $ (52)
Adjustments to reconcile loss
to cash flows from operating activities:
Depreciation and amortization of property and
intangibles 7,579 6,926
Amortization of deferred financing costs 339 738
Loss on disposition of assets --- 120
Decrease (increase) in assets:
Receivables 3,446 (1,519)
Merchandise and supply inventories 1,577 104
Other current assets (1,682) (1,083)
Other assets (61) ---
Increase (decrease) in liabilities:
Accounts payable (845) (1,393)
Accrued payroll and related 1,289 ---
Payable to Flagstar 1,895 ---
Other accrued liabilities (9,476) (5,034)
Self insurance reserves 102 1,223
Other non-current liabilities 249 ---
--------------- ---------------
Net cash flows provided by operating activities 2,784 30
-------------- --------------
Cash Flows From Investing Activities:
Purchase of property (1,430) (1,335)
Proceeds from disposition of property 5,309 11,649
Other --- (26)
----------------- --------------
Net cash flows provided by investing activities 3,879 10,288
-------------- -----------
</TABLE>
See accompanying notes
5
<PAGE>
Form 10-Q
FRD Acquisition Co.
Statements of Consolidated and Combined Cash Flows
(unaudited)
<TABLE>
<CAPTION>
FRD Successor FRD Predecessor
Quarter Ended Quarter Ended
April 2, 1997 March 31, 1996
------------- ---------------
<S> <C> <C>
(In thousands)
Cash Flows From Financing Activities:
Net intercompany and equity activity --- (20,350)
Principal debt payments, net (10,603) 9,945
------------- --------------
Net cash flows used in financing activities (10,603) (10,405)
------------- -------------
Decrease in cash and cash equivalents (3,940) (87)
Cash and Cash Equivalents at:
Beginning of period 14,300 5,497
------------- --------------
End of period $ 10,360 $ 5,410
============ =============
</TABLE>
See accompanying notes
6
<PAGE>
Form 10-Q
FRD Acquisition Co.
Notes to Consolidated And Combined Financial Statements
April 2, 1997
(Unaudited)
Note 1. Basis of Presentation
FRD Acquisition Co. ("FRD" or, together with its subsidiaries, "the Company")
was incorporated in February 1996 as a wholly-owned subsidiary of Flagstar
Corporation ("Flagstar"), which is a wholly-owned subsidiary of Flagstar
Companies, Inc. ("FCI"). On May 23, 1996, FRD consummated the acquisition of the
Coco's and Carrows restaurant chains consisting of 347 company-owned units
within the mid-scale family-style dining category. The acquisition price of
$313.4 million was paid in exchange for all of the outstanding stock of FRI-M
Corporation ("FRI-M"), the subsidiary of Family Restaurants, Inc. ("FRI"), which
owns the Coco's and Carrows chains. The acquisition was accounted for using the
purchase method of accounting.
In the financial statements included herein, "FRD Predecessor" refers to the
period of ownership of FRI-M by FRI through May 23, 1996. The FRD Predecessor
Combined financial statements combine the financial position and operations of
FRI-M Corporation and certain subsidiaries including those restaurants that made
up the Family Restaurant Division as well as the FRD Commissary, a former
division of FRI. The Family Restaurant Division primarily represented the
restaurants operating as Coco's and Carrows. The "FRD Successor" refers to the
period of ownership of FRI-M by FRD subsequent to May 23, 1996.
The consolidated and combined financial statements of the Company and its
predecessor for the quarters ended April 2, 1997 and March 31, 1996,
respectively, are unaudited and include all adjustments management believes are
necessary for a fair presentation of the results of operations for such interim
periods. All such adjustments are of a normal and recurring nature. The interim
consolidated financial statements should be read in conjunction with the
Consolidated and Combined Financial Statements and notes thereto for the year
ended December 26, 1996 and the related Management's Discussion and Analysis of
Financial Condition and Results of Operations, both of which are contained in
the FRD Acquisition Co. 1996 Annual Report on Form 10-K (the "FRD 10-K"). The
results of operations for the quarter ended April 2, 1997 are not necessarily
indicative of the results for the entire fiscal year ending December 31, 1997.
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
Note 2. Change in Fiscal Year
Effective December 27, 1996, the Company changed its fiscal year end from the
last Thursday of the calendar year to the last Wednesday of the calendar year.
Due to the timing of this change, the Company's first fiscal quarter includes an
extra six days in comparison to the prior year quarter.
7
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Form 10-Q
Note 3. Property Disposition
On February 26, 1997, the Company sold certain land and building for cash
proceeds of $4.9 million. Because the assets were restated to fair value in
accordance with purchase acounting at the time of the acquisition, no gain or
loss was recorded relative to this transaction. In conjunction with the sale,
the Company entered into a three year supply agreement under which the buyer
will continue to supply certain products to the Company. There are no volume
requirements relative to this agreement; however, the products named therein
must be purchased exclusively from the buyer.
Note 4. Term Loan Prepayments
As a result of the asset disposition on February 26, 1997, the Company was
required by the FRI-M Credit Facility to make a mandatory $3.4 million partial
prepayment on February 27, 1997 of the $4.0 million FRI-M term loan payment due
on February 28, 1997. Additionally, during March 1997, the Company sold a
restaurant unit for cash proceeds of $0.4 million. In accordance with the FRI-M
Credit Facility such proceeds were also used to prepay the term loan.
The FRI-M Credit Facility requires the Company to make mandatory prepayments
equal to 75% of Consolidated Excess Cash Flow (as defined in the FRI-M Credit
Facility agreement) measured on an annual basis. Based on Consolidated Excess
Cash Flow for the year ended December 26, 1996, the Company was required to make
a $5.2 million partial prepayment of its term loan in March 1997, prepaying the
$4.0 million May 28, 1997 payment and a portion of the $4.0 million payment due
on August 28, 1997.
Note 5. Related Party Transactions
Certain adminstrative functions are provided for the Company by Flagstar.
Beginning in 1997, the Company is allocated a portion of these expenses based
upon services received. These allocations are included in operating expenses and
totaled $0.6 million for the quarter ended April 2, 1997. Payment of the fees to
Flagstar cannot occur unless certain financial targets are met as described in
the Senior Note indenture and the Credit Agreement. Because the Company has not
met the financial targets, no payment has been made relative to these
allocations and the related amounts are included in the payable to Flagstar in
the Condensed Consolidated Balance Sheets. Flagstar's method of allocating these
expenses is not the only reasonable method and other reasonable methods of
allocation might produce different results.
Note 6. FCI Financial Restructuring
On March 17, 1997, FCI announced that it had reached an agreement in principle
on the terms of a financial restructuring plan with an ad hoc committee
representing holders of both its 11 3/8% Senior Subordinated Debentures due 2003
and its 11.25% Senior Subordinated Debentures due 2004. In conjunction with such
plan, FCI has decided to pursue a restructuring of its debt and preferred stock
through "prepackaged" bankruptcy filings to be made under Chapter 11 of Title 11
of the United States Code ("the Bankruptcy Code") by FCI and Flagstar. FCI's
operating subsidiaries, including the Company, would not be a party to any such
filings under the Bankruptcy Code.
In addition, on March 6, 1997, FCI's Credit Agreement was amended to provide for
less restrictive financial covenants for measurement periods ending on April 2,
1997 and July 2, 1997, as well as to provide FCI flexibility to forego scheduled
interest payments due in March, May, and June 1997 under the 10 3/4% Senior
Notes, the 10 7/8% Senior Notes, the 11 3/8% Senior Subordinated Debentures, the
11.25% Senior Subordinated Debentures, and the 10% Junior Subordinated
Debentures without triggering a default under the agreement, unless any such
debt
8
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Form 10-Q
is declared to be due and payable as a result of the failure to pay any such
interest.
On March 17, 1997, in connection with the financial restructuring plan
discussed above, Flagstar elected not to make the $7.1 million interest
payment due and payable as of that date to holders of its 11 3/8% Senior
Subordinated Debentures. As a result, and as a result of continuation of such
nonpayment for 30 days past the due date, Flagstar is in default under the terms
of the indenture governing such debentures, and the holders of 25% of such
debentures or the trustees therefor may declare such debt to be due and payable.
If such debt is declared to be due and payable, this will create an event of
default relative to certain other indebtedness of Flagstar, entitling 30% of the
holders of such indebtedness or the trustee therefore to declare such
indebtedness also to be due and payable. See Note 8.
Note 7. Earnings (Loss) Per Common Share
As described in Note 1, FRD is a wholly-owned subsidiary of Flagstar.
Accordingly, per share data is not meaningful and has been omitted for all
periods.
Note 8. Subsequent Event
On May 1, 1997, in connection with the financial restructuring plan discussed
in Note 6, Flagstar elected not to make the $40.6 million and $5.0 million
interest payments due and payable as of that date to holders of its 11.25%
Senior Subordinated Debentures and its 10% Convertible Junior Subordinated
Debentures, respectively. If Flagstar does not make such payments within 30 days
following the due date, Flagstar will be in default under the indentures
governing such debentures and, in either case, the holders of 25% of such
debentures or the trustee therefor may declare such debt to be due and payable.
If such debt is declared to be due and payable, this will create an event of
default relative to the 10 3/4% Senior Notes and the 10 7/8% Senior Notes
entitling 30% of the holders of such indebtedness or the trustee therefor to
declare such indebtedness also to be due and payable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is intended to highlight significant changes in
financial position as of April 2, 1997 and the results of operations for the
quarter ended April 2, 1997 as compared to the quarter ended March 31, 1996.
The forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, which reflect management's
best judgment based on factors currently known, involve risks, uncertainties,
and other factors which may cause the actual performance of FRD, its subsidiary,
and underlying concepts to be materially different from the performance
indicated or implied by such statements. Such factors include, among others:
competitive pressures from within the restaurant industry; the level of success
of the Company's operating initiatives and advertising and promotional efforts,
including the initiatives and efforts specifically mentioned herein; adverse
publicity; changes in business strategy or development plans; terms and
availability of capital; regional weather conditions; overall changes in the
general economy, particularly at the retail level; and other factors included in
the discussion below, or in the Management's Discussion and Analysis and in
Exhibit 99 to the Company's Annual Report on Form 10-K for the period ended
December 26, 1996.
9
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Form 10-Q
Results of Operations
Quarter Ended April 2, 1997 Compared to Quarter Ended March 31, 1996
The table below summarizes restaurant activity for the quarter ended April 2,
1997.
<TABLE>
<CAPTION>
Ending Units Units Units Ending Units Ending Units
12/26/96 Opened Closed 4/02/97 3/31/96
<S> <C> <C> <C> <C> <C>
Coco's
Company owned 183 1 -- 184 186
Franchised units 5 -- -- 5 6
International licenses 278 4 (1) 281 255
---- ----- ---- ---- ---
466 5 (1) 470 447
---- ----- ----- --- ---
Carrows
Company owned 160 --- (2) 158 162
Franchised units --- 1 -- 1 --
------ ----- ----- ------ -----
160 1 (2) 159 162
---- ----- ---- ---- ---
626 6 (3) 629 609
==== ===== ==== ==== ===
</TABLE>
COCO'S
<TABLE>
<CAPTION>
Quarter Quarter %
($ in millions, except average unit and Ended Ended Increase/
comp. store data) April 2, 1997 March 31, 1996 (Decrease)
----------------- -------------- ----------
<S> <C> <C> <C>
Net company sales $ 70.8 $ 66.8 6.0
Franchise and foreign licensing revenue 0.7 0.8 (12.5)
------------- -------------
Total revenue 71.5 67.6 5.8
Operating expenses 67.9 64.5 5.3
------------ ------------
Operating income $ 3.6 $ 3.1 16.1
------------ ============
Average unit sales
Company operated $385,600 $357,200 7.9
Franchise $441,700 $409,600 7.8
COMPARABLE STORE DATA (COMPANY-OPERATED):
Comparable store sales decrease (0.8%) (0.5%)
Average guest check (a) $6.60 $6.76 (2.4)
</TABLE>
(a) The method for determining weekly customer traffic and average guest check
was changed in September 1996 in order to better conform to Flagstar's
methodology. Amounts for periods prior to September 1996 have not been restated.
Relative to Coco's, the new method will generally result in higher weekly
traffic counts and lower average guest checks than calculated under the previous
method.
Coco's NET COMPANY SALES for the first quarter ended April 2, 1997 increased
$4.0 million (6.0%) as compared to the prior year comparable quarter. This
increase reflects an estimated $4.8 million impact due to the additional six
days in the first quarter of 1997 in comparison to the prior year quarter,
somewhat offset by a decrease in comparable store sales. The decrease in
comparable store sales was driven by a decrease in average check, slightly
offset by an increase in customer counts. In addition, the Company experienced a
two-unit decrease in the number of Company-
10
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Form 10-Q
operated restaurants.
FRANCHISE AND FOREIGN LICENSING REVENUE decreased by $0.1 million (12.5%) for
the first quarter of 1997 as compared to the first quarter of 1996. The decrease
is the result of a stronger dollar versus the yen in 1997 as compared to 1996
and is partially offset by an increase in the number of franchisees and foreign
licensees from 261 at March 31, 1996 to 286 at April 2, 1997.
Coco's OPERATING EXPENSES for the first quarter of 1997 increased by $3.4
million (5.3%), as compared to the prior year quarter. This increase is
primarily due to the additional six days in the first quarter of 1997 as
compared to the prior year quarter, somewhat offset by a decrease in product
cost and labor of approximately $1.4 million due to an increased operations
focus on cost controls, waste reduction and labor initiatives. Such cost savings
were achieved despite a general increase in commodity prices and the impact of
the Federal and state minimum wage increases.
OPERATING INCOME for Coco's for the first quarter ended April 2, 1997 as
compared to the first quarter ended March 31, 1996, increased $0.5 million
(16.1%) due to the factors noted above.
<TABLE>
<CAPTION>
CARROWS
Quarter Quarter %
($ in millions, except average unit and Ended Ended Increase/
comp. store data) April 2, 1997 March 31, 1996 (Decrease)
------------- -------------- ------------
<S> <C> <C> <C>
Net company sales $ 55.6 $ 52.2 6.5
Franchise revenue --- --- ---
------------- --------------
Total revenue 55.6 52.2 6.5
Operating expenses 53.4 50.2 6.4
------------ ------------
Operating income $ 2.2 $ 2.0 10.0
============ ============
Average unit sales
Company operated $ 349,300 $ 323,600 7.9
Franchise NM --- ---
COMPARABLE STORE DATA: (COMPANY-OPERATED)
Comparable store sales increase (decrease) (0.8%) 2.0%
Average guest check (a) $6.37 $6.13 3.9
</TABLE>
NM = Not Meaningful
(a) The method for determining weekly customer traffic and average guest check
was changed in September 1996 in order to better conform to Flagstar's
methodology. Amounts for periods prior to September 1996 have not been restated.
Relative to Carrows, the new method will generally result in lower weekly
traffic counts and higher average guest checks than calculated under the
previous method.
Carrows' NET COMPANY SALES for the first quarter ended April 2, 1997 increased
$3.4 million (6.5%) as compared to the prior year comparable quarter. This
increase reflects an estimated $3.8 million impact due to the additional six
days in the first quarter of 1997 in comparison to the prior year quarter,
somewhat offset by a decrease in comparable store sales. The decrease in
comparable store sales was driven by a decrease in customer counts, slightly
offset by an increase in average guest check. In addition, the Company
experienced a four-unit decrease in the number of Company-operated restaurants.
11
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Form 10-Q
Carrows opened its first domestic franchise location in the first quarter of
1997, recording $16,000 in franchise revenue.
Carrows' OPERATING EXPENSES for the first quarter of 1997 increased by $3.2
million (6.4%), as compared to the prior year quarter. This increase is
primarily due to the additional six days in the first quarter of 1997 as
compared to the prior year quarter, somewhat offset by a decrease in product
cost and labor of approximately $1.2 million due to an increased operations
focus on cost controls, waste reduction and labor initiatives. Such cost
savings were achieved despite a general increase in commodity prices and
the impact of the Federal and state minimum wage increases.
OPERATING INCOME for Carrows for the first quarter ended April 2, 1997 as
compared to the first quarter ended March 31, 1996, increased $0.2 million
(10.0%) due to the factors noted above.
FRD CONSOLIDATED
CONSOLIDATED INTEREST AND DEBT EXPENSE increased $3.6 million (90.9%) during the
first quarter of 1997 compared to the same quarter last year. This increase is
attributable to the change in the Company's debt structure related to its
acquisition in May 1996. As a result of the acquisition, the Company obtained a
$56.0 million bank term loan and issued $156.9 million in senior notes.
The increase in CONSOLIDATED NET LOSS of $1.6 million in comparison to the prior
year quarter is due to a combination of the above described items.
Liquidity and Capital Resources
At April 2, 1997 and December 26, 1996 the Company had working capital deficits
of $56.7 million and $55.4 million, respectively. The Company is able to operate
with a substantial working capital deficiency because: (i) restaurant operations
are conducted primarily on a cash (and cash equivalent) basis with a low level
of accounts receivable, (ii) rapid turnover allows a limited investment in
inventories and (iii) accounts payable for food, beverages, and supplies usually
become due after the receipt of cash from related sales. The Company intends to
continue to operate with working capital deficiencies and to rely upon
internally generated funds and borrowings under its credit facility to finance
its daily restaurant operations.
12
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Form 10-Q
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Certain of the exhibits to this report, indicated by asterisk, are
hereby incorporated by reference to other documents physically on
file with the Commission, to be a part hereof as of their respective
dates.
Exhibit
No. Description
3.2.1 Amendment to the Bylaws of FRD, dated May 24, 1996.
*10.1.3 Third Amendment, dated March 7, 1997, to the Credit Agreement dated
as of May 23, 1996 by and among FRD, as Guarantor, FRI-M as Borrower,
the Financial Institutions listed therein, as lenders, Bankers Trust
Company, Chemical Bank and Citicorp USA, Inc., as co-syndication
agents, and Credit Lyonnais New York Branch, as administrative agent
(incorporated by reference to Exhibit 4.2 to FCI's quarterly report
on Form 10-Q for the period ending April 2, 1997, File No. 0-18051).
27 Financial Data Schedule
- ---------------------
*Certain of the exhibits to this Quarterly Report on Form 10-Q, indicated by an
asterisk, are hereby incorporated by reference to other documents physically on
file with the Commission.
(b) No reports on Form 8-K were filed during the quarter ended April 2,
1997.
13
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Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRD ACQUISITION CO.
Date: May 19, 1997 By: /s/ C. Robert Campbell
C. Robert Campbell
Executive Vice President
(Duly authorized officer of
registrant/principal financial
officer)
14
<PAGE>
Exhibit 3.2.1
CONSENT OF SOLE SHAREHOLDER
OF
FRD ACQUISITION CO.
The undersigned, being the sole shareholder of FRD Acquisition
Co., a Delaware corporation (the "Corporation"), does hereby consent, in lieu of
a meeting of the Corporation's stockholders, to the actions hereinafter set
forth, taken or to be taken by the Corporation, and does hereby direct the
Secretary to file this Consent with the minutes of the Corporation.
1. Amendments to Bylaws:
RESOLVED, that Article III, Section 1(a) of the Bylaws of the
Corporation shall be, and it hereby is, amended in its
entirety, so that, as amended, said Article III, Section 1(a)
shall be and read as follows:
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall not
be less than one and no more than seven, within the limits
above specified, the number of directors shall be determined
from time to time by the stockholders or the Board of
Directors at any meeting thereof. The number of directors
shall not be less than three, unless all of the outstanding
shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not
be less than the number of shareholders permitted by statute.
FURTHER RESOLVED, that Article III, Section 8 of the Bylaws of
the Corporation shall be, and it hereby is, amended in its
entirety, so that, as amended, said Article III, Section 8
shall be and read as follows:
Section 8 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of
an increase in the number of directors, or by reason of the
death, resignation, disqualification, removal (unless a
vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the
meeting at which the removal was effected) or inability to act
of any director, or otherwise, shall be filled for the
unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular
meeting or special meeting of the Board of Directors called
for that purpose or by the shareholders at any meeting
thereof.
FLAGSTAR CORPORATION,
A DELAWARE CORPORATION
Dated: May 24, 1996 By:_________________________________
Rhonda J. Parish
Senior Vice President, General Counsel
and Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of FRD Acquisition Co., as contained in its Form 10-Q for
the quarterly period ended April 2, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> APR-02-1997
<CASH> 10,360
<SECURITIES> 0
<RECEIVABLES> 2,142
<ALLOWANCES> 0
<INVENTORY> 3,462
<CURRENT-ASSETS> 22,005
<PP&E> 150,680
<DEPRECIATION> (20,217)
<TOTAL-ASSETS> 369,049
<CURRENT-LIABILITIES> 78,745
<BONDS> 213,150
0
0
<COMMON> 0
<OTHER-SE> 67,183
<TOTAL-LIABILITY-AND-EQUITY> 369,049
<SALES> 0
<TOTAL-REVENUES> 127,035
<CGS> 0
<TOTAL-COSTS> 121,241
<OTHER-EXPENSES> (134)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,503
<INCOME-PRETAX> (1,575)
<INCOME-TAX> 53
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