<PAGE> 1
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: AUGUST 10, 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: 0-6054
------
STAR BUFFET, INC.
-----------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1430786
------------------------------ ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
440 LAWNDALE DRIVE,
SALT LAKE CITY, UT 84115
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 463-5500
--------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. AS OF SEPTEMBER 18, 1998 THERE
WERE 3,450,000 SHARES OF COMMON STOCK, $ .001 PAR VALUE, OUTSTANDING.
<PAGE> 2
STAR BUFFET, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of August 10, 1998 and January 26, 1998 3
Consolidated Statements of Income for the twelve and twenty-eight weeks
ended August 10, 1998 and August 11, 1997 5
Consolidated Statements of Cash Flows for the twenty-eight weeks ended
August 10, 1998 and August 11, 1997 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 15
Item 4. Submission of Matters to a Vote of Securityholders 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE> 3
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AUGUST 10, JANUARY 26,
ASSETS 1998 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,413,000 $ 15,387,000
Current portion of notes and other receivables 3,699,000 336,000
Inventories 741,000 493,000
Deferred income taxes, net 317,000 110,000
Prepaid expenses 754,000 204,000
--------------- ---------------
Total current assets 11,924,000 16,530,000
--------------- ---------------
Property, buildings and equipment, at cost, less
accumulated depreciation 22,646,000 15,077,000
--------------- ---------------
Real property and equipment under capitalized leases,
at cost, less accumulated amortization 2,262,000 2,287,000
--------------- ---------------
Other assets:
Notes receivable, net of current portion 2,751,000 3,235,000
Deposits and other 1,209,000 2,167,000
--------------- ---------------
Total other assets 3,960,000 5,402,000
--------------- ---------------
Goodwill, less accumulated amortization 3,705,000 1,380,000
Other intangible assets, less accumulated amortization 279,000 293,000
--------------- ---------------
Total intangible assets 3,984,000 1,673,000
--------------- ---------------
Total assets $ 44,776,000 $ 40,969,000
=============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY AUGUST 10, JANUARY 26,
1998 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 3,016,000 $ 2,212,000
Payroll and related taxes 1,664,000 1,643,000
Sales and property taxes 1,609,000 1,178,000
Rent, licenses and other 427,000 822,000
Current maturities of obligations under capital leases
and long term debt 1,024,000 259,000
Other current liabilities - 209,000
--------------- ---------------
Total current liabilities 7,740,000 6,323,000
--------------- ---------------
Capitalized lease obligations, net of current maturities 2,121,000 2,109,000
--------------- ---------------
Preferred stock, $.001 par value; authorized 1,500,000
shares; none issued or outstanding - -
Common stock, $.001 par value; authorized 18,500,000
shares; issued and outstanding 5,450,000 and 5,450,000 shares 5,000 5,000
Additional paid-in capital 31,768,000 31,768,000
Retained earnings 3,142,000 764,000
--------------- ---------------
Total stockholders' equity 34,915,000 32,537,000
--------------- ---------------
Total liabilities and stockholders' equity $ 44,776,000 $ 40,969,000
=============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
------------------------------- ------------------------------
AUGUST 10, AUGUST 11, AUGUST 10, AUGUST 11,
1998 1997 1998 1997
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Total revenues $ 20,751,000 $ 12,726,000 $ 46,249,000 $ 29,306,000
Costs and expenses
Food costs 6,858,000 4,036,000 15,393,000 9,515,000
Labor costs 6,749,000 3,967,000 14,493,000 9,186,000
Occupancy and other expenses 4,194,000 2,355,000 9,244,000 5,432,000
General and administrative expenses 1,027,000 430,000 2,161,000 1,058,000
Depreciation and amortization 691,000 504,000 1,500,000 1,129,000
------------- -------------- ------------- -------------
Total costs and expenses 19,519,000 11,292,000 42,791,000 26,320,000
------------- -------------- ------------- -------------
Income from operations 1,232,000 1,434,000 3,458,000 2,986,000
Interest expense (55,000) (46,000) (121,000) (108,000)
Interest income 161,000 - 473,000 -
Other Income 75,000 - 154,000 -
------------- -------------- ------------- -------------
Income before income taxes 1,413,000 1,388,000 3,964,000 2,878,000
Income tax expense 565,000 555,000 1,585,000 1,151,000
------------- -------------- ------------- -------------
Net income $ 848,000 $ 833,000 $ 2,379,000 $ 1,727,000
============= ============== ============= =============
Net income per common share - basic $ 0.16 $ 0.32 $ 0.44 $ 0.66
============= ============== ============= =============
Weighted average shares outstanding -
basic 5,450,000 2,600,000 5,450,000 2,600,000
============= ============== ============= =============
Net income per common share - diluted $ 0.16 $ 0.32 $ 0.43 $ 0.66
============= ============== ============= =============
Weighted average shares outstanding -
diluted 5,450,000 2,600,000 5,490,000 2,600,000
============= ============== ============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-EIGHT WEEKS ENDED
---------------------------------------
AUGUST 10, 1998 AUGUST 11, 1997
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,379,000 $ 1,727,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,500,000 1,129,000
Amortization of royalty fee 222,000 -
Interest income (102,000) -
Change in operating assets and liabilities:
Receivables (766,000) 42,000
Inventories (248,000) (2,000)
Prepaid expenses (867,000) 155,000
Deposits and other (292,000) -
Deferred taxes 207,000 -
Accounts payable and other accrued liabilities 652,000 245,000
------------------ -----------------
Net cash provided by operating activities 2,685,000 3,296,000
Cash flows used in investing activities:
Increase in notes receivable -
Increase in notes receivable (2,250,000) -
Acquisition of restaurants (6,428,000) -
Acquisition of property, buildings and equipment (2,290,000) (1,609,000)
Acquisition of intangible assets - (305,000)
------------------ -----------------
Net cash used in investing activities (10,968,000) (1,914,000)
Cash flows from financing activities:
Payments to extinguish long term debt (540,000) -
Payments to parent company - (880,000)
Principal payment on capital leases (151,000) (130,000)
------------------ -----------------
Net cash used in financing activities (691,000) (1,010,000)
------------------ -----------------
Net increase (decrease) in cash and cash equivalents (8,974,000) 372,000
Cash and cash equivalents at beginning of period 15,387,000 353,000
------------------ -----------------
Cash and cash equivalents at end of period $ 6,413,000 $ 725,000
================== =================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-EIGHT WEEKS ENDED
-----------------------------------------
AUGUST 10, 1998 AUGUST 11, 1997
--------------- ---------------
<S> <C> <C>
Supplemental disclosures of cash flow
Information:
Cash paid for interest $ 146,000 $ 108,000
- ---------------------- =========== ============
Cash paid for income taxes $ 2,166,000 $ -
- -------------------------- =========== ============
Non cash investing and financing activities:
Exchange of receivables from Stacey's Buffet, Inc.
for three Stacey's Buffet Restaurants $ 1,004,000 -
Acquisition of BuddyFreddys assets with debt financing $ 1,200,000 -
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 8
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE (A) BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements include the
accounts for Star Buffet, Inc., together with its direct and indirect wholly
owned subsidiaries Summit Family Restaurants Inc. ("Summit"), HTB Restaurants,
Inc. ("HTB"), Northstar Buffet, Inc. ("NSBI") and Star Buffet Management, Inc.
("SBMI") (collectively the "Company") and have been prepared in accordance with
generally accepted accounting principles, the instructions to Form 10-Q and
Article 10 of Regulation S-X. These financial statements should be read in
conjunction with the audited combined financial statements, and the notes
thereto, included in the Company's Annual Report on Form 10-K for the fiscal
year ended January 26, 1998. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the financial position and results of operations for the interim periods
presented have been reflected herein. Results of operations for such interim
periods are not necessarily indicative of results to be expected for the full
fiscal year or for any future periods. Certain reclassifications have been made
to the fiscal 1998 consolidated financial statements to conform to the fiscal
1999 presentation. The accompanying financial statements include the results of
operations and assets and liabilities directly related to the Company's
operations. Certain estimates, assumptions and allocations were made in
preparing such financial statements.
The operating results for the 12-week period ended August 10, 1998 include 12
weeks of operations for each of the Company's 16 franchised HomeTown Buffet
restaurants, two Casa Bonita restaurants, seven JJ North's Grand Buffet
restaurants, nine JB's Restaurants, three North Star Buffet restaurants, three
Stacey's Buffet restaurants, two BuddyFreddys restaurants and two Maggie's
Buffet restaurants. In addition, the Company opened one North's Star Buffet
restaurant on August 10, 1998 and has one Stacey's Buffet restaurant closed for
remodeling. The operations for the 12-week period ended August 11, 1997 include
12 weeks of operations for each of the Company's 16 franchised HomeTown Buffet
restaurants and two Casa Bonita restaurants, but do not include the operations
for JJ North's Grand Buffet restaurants, or the operations for other restaurants
acquired by the Company in the first quarter of fiscal 1999.
The Company utilizes a 52/53 week fiscal year which ends on the last Monday in
January. The first quarter of each year contains 16 weeks while the other three
quarters each contain 12 weeks.
NOTE (B) PREVIOUSLY ANNOUNCED ACQUISITION
- -----------------------------------------
On June 5, 1998, the Company announced that it has entered into an agreement to
purchase four Holiday House Restaurants located in central Florida. The
acquisition is expected to close in October 1998.
NOTE (C) RECENT DEVELOPMENTS
- ----------------------------
On September 10, 1998, the Company entered into a stock repurchase agreement
authorized by its Board of Directors to purchase two million shares of the
Company's Common Stock held by CKE Restaurants, Inc. ("CKE") for a purchase
price of $5 million in cash and a $7.5 million 90 day promissory note secured by
treasury stock. The Company's Board of Directors also authorized the repurchase
of up to an additional 500,000 shares of the Company's Common Stock.
8
<PAGE> 9
STAR BUFFET, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
- --------
The following Management's Discussion and Analysis should be read in conjunction
with the unaudited consolidated financial statements, and the notes thereto,
presented elsewhere in this Report. The addition of seven JJ North's Grand
Buffet restaurants, 12 JB's Restaurants and seven restaurants in Florida are the
principal reasons for the differences when comparing results of operations for
the 12-week period ended August 10, 1998 with the results of operations for the
12-week period ended August 11, 1997. Comparability of future periods may also
from time to time be affected by the implementation of the Company's acquisition
and strategic alliance strategies.
Consolidated net income for the 12-week period ended August 10, 1998 increased
$15,000 or 1.8% to $848,000 or $0.16 per share on a diluted basis as compared
with net income of $833,000 for the comparable prior year period. Consolidated
net income for the 28-week period ended August 10, 1998 increased $652,000 or
37.8% to $2,379,000 or $0.43 per share on a diluted basis as compared with net
income of $1,727,000 for the comparable prior year period. The increase in net
income is primarily due to the additional operations of recently acquired
restaurants since their respective dates of acquisition.
This Quarterly Report on Form 10-Q contains forward looking statements, which
are subject to known and unknown risks, uncertainties and other factors which
may cause the actual results, performance, or achievements of 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; success
of integrating newly acquired under performing or unprofitable restaurants; the
impact of competitive products and pricing; success of operating initiatives;
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; changes in prevailing interest rates and the availability
of financing; food, labor, and employee benefits costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; implementation of the Company's acquisition and strategic alliance
strategy; the effect of the Company's accounting polices and other risks
detailed in the Company's Prospectus dated September 24, 1997 and other filings
with the Securities and Exchange Commission.
9
<PAGE> 10
COMPONENTS OF INCOME FROM OPERATIONS
- ------------------------------------
Total revenues include a combination of food and beverage sales and are net of
applicable state and city sales taxes.
Food costs primarily consist of the costs of food and beverage items. Various
factors beyond the Company's control, including adverse weather and natural
disasters, may affect food costs. Accordingly, the Company may incur periodic
fluctuations in food costs. Generally, these temporary increases are absorbed by
the Company and not passed on to customers; however, management may adjust menu
prices to compensate for increased costs of a more permanent nature.
Labor costs include restaurant management salaries, bonuses, hourly wages for
unit level employees, various health, life and dental insurance programs,
vacations and sick pay and payroll taxes.
Occupancy and other expenses are primarily fixed in nature and generally do not
vary with restaurant sales volume. Rent, insurance, property taxes, utilities,
maintenance and advertising account for the major expenditures in this category.
General and administrative expenses include all corporate and administrative
functions that serve to support the existing restaurant base and provide the
infrastructure for future growth. Management, supervisory and staff salaries,
employee benefits, data processing, training and office supplies are the major
items of expense in this category.
Other income represents management fee income resulting from the Company's
management agreement related to one JJ North's Grand Buffet restaurant.
The Company records depreciation on its property and equipment on a
straight-line basis over their estimated useful lives.
10
<PAGE> 11
RESULTS OF OPERATIONS
- ---------------------
The following table summarizes the Company's results of operations as a
percentage of total revenues for the 12 and 28 weeks ended August 10, 1998 and
August 11, 1997.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
----------------------------------- -----------------------------------
AUGUST 10, AUGUST 11, AUGUST 10, AUGUST 11,
1998 1997 1998 1997
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
----------------- ---------------- ---------------- ----------------
Costs and expenses
Food costs 33.1 31.7 33.3 32.5
Labor costs 32.5 31.1 31.3 31.3
Occupancy and other expenses 20.2 18.5 20.0 18.5
General and administrative
expenses 5.0 3.4 4.7 3.6
Depreciation and amortization 3.3 4.0 3.2 3.9
----------------- ---------------- ---------------- ----------------
Total costs and expenses 94.1 88.7 92.5 89.8
----------------- ---------------- ---------------- ----------------
Income from operations 5.9 11.3 7.5 10.2
Interest expense (0.3) (0.4) (0.2) (0.4)
Interest income 0.8 - 1.0 -
Other Income 0.4 - 0.3 -
----------------- ---------------- ---------------- ----------------
Income before income taxes 6.8 10.9 8.6 9.8
Income tax expense (2.7) (4.4) (3.5) (3.9)
----------------- ---------------- ---------------- ----------------
Net income 4.1% 6.5% 5.1% 5.9%
================= ================ ================ ================
Effective income tax rate 40.0% 40.0% 40.0% 40.0%
================= ================ ================ ================
</TABLE>
Total revenues increased $8,025,000 or 63.1% from $12.7 million in the 12 weeks
ended August 11, 1997 to $20.8 million in the 12 weeks ended August 10, 1998.
$7.8 million of such increase in revenues was attributable to the inclusion of
the results of the Company's recently acquired restaurants. $241,000 of such
increase was attributable to an increase in same-store sales in the Company's
HomeTown Buffet and Casa Bonita restaurants. Total revenues increased $16.9
million or 57.8% from $29.3 million in the 28 weeks ended August 11, 1997 to
$46.2 million in the 28 weeks ended August 10, 1998. $16.3 million of such
increase in revenues was attributable to the inclusion of the results of the
Company's recently acquired restaurants and $662,000 of the increase was
attributable to an increase in same-store sales in the Company's HomeTown Buffet
and Casa Bonita restaurants.
Food costs as a percentage of total revenues increased from 31.7% during the
12-week period ended August 11, 1997 to 33.1% during the 12 weeks ended August
10, 1998, and from 32.5% during the 28-week period ended August 11, 1997 to
33.3% during the 28 weeks ended August 10, 1998. The increase as a percentage of
total revenues was primarily attributable to the acquisition during the first
quarter of fiscal 1999 of seven restaurants located in Florida and the
conversion of three JB's Restaurants to North's Star Buffet restaurants which
operate with higher food costs as a percent of revenues than the Company's other
restaurants.
11
<PAGE> 12
Labor costs as a percentage of total revenues increased from 31.1% during the
12-week period ended August 11, 1997 to 32.5% during the 12-week period ended
August 10, 1998. The increase as a percentage of total revenues was primarily
attributable to increased labor costs in the Company's Florida division and
recently converted North's Star Buffets. Labor costs as a percentage of total
revenues stayed flat for the 28-week period ended August 10, 1998 as compared to
the same period prior year.
Occupancy and other expenses as a percentage of total revenues increased from
18.5% during the 12-week period ended August 11, 1997 to 20.2% during the
12-week period ended August 10, 1998, and from 18.5% during the 28-week period
ended August 11, 1997 to 20.0% during the 28-week period ended August 10, 1998.
The increase as a percentage of total revenues primarily reflects the impact of
acquired restaurants in Florida which operate with higher occupancy and other
expenses as a percentage of total revenues than the Company's other restaurants.
General and administrative costs as a percentage of total revenues increased
from 3.4% during the 12-week period ended August 11, 1997 to 5.0% during the
12-week period ended August 10, 1998, and from 3.6% during the 28-week period
ended August 11, 1997 to 4.7% during the 28-week period ended August 10, 1998.
The increase as a percentage of total revenues was primarily attributable to
increases in royalty payments, increases in costs specifically related to being
a public company and increases in personnel and administrative costs at the
corporate office as the Company reduces its dependence on CKE to provide certain
administrative functions.
Interest expense as a percentage of total revenues declined from 0.4% during the
12-week period ended August 11, 1997 to 0.3% during the 12-week period ended
August 10, 1998, and from 0.4% during the 28-week period ended August 11, 1997
to 0.2% during the 28-week period ended August 10, 1998. The decline as a
percentage of total revenues was primarily attributable to the increased revenue
base resulting from the Company's acquisitions.
Interest income of $161,000 and $473,000 for the 12 and 28-week periods ended
August 10, 1998 and August 11, 1997, respectively, was generated by interest
earned on the Company's cash and cash equivalents and outstanding notes
receivable balances during the period. Prior to September 30, 1997, the
Company's excess cash was used to reduce inter-company liabilities between
Summit Family Restaurants Inc. and CKE and therefore no interest income is
reflected for the 12-week period ended August 11, 1997.
IMPACT OF INFLATION
- -------------------
The impact of inflation on the cost of food, labor, equipment and construction
could affect the Company's operations. Many of the Company's employees are paid
hourly rates related to the federal and state minimum wage laws. Recent
legislation increasing the federal minimum wage has resulted in higher labor
costs to the Company. In addition, the cost of food commodities utilized by the
Company are subject to market supply and demand pressures. Shifts in these costs
may have a significant impact on the Company's food costs. The Company
anticipates that increases in these costs can be offset through pricing and
other cost control efforts; however, there is no assurance that the Company
would be able to pass such costs on to its guests or if it were able to do so,
it could do so in a short period of time.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company, historically financed operations through a combination of cash on
hand, cash provided from operations and, prior to the Company's initial public
offering in September 1997, borrowings available to its predecessor under bank
lines of credit.
12
<PAGE> 13
As of August 10, 1998, the Company had $6.4 million in cash and cash
equivalents. Cash and cash equivalents decreased by $9.0 million during the 28
weeks ended August 10, 1998. Total cash provided by operations was approximately
$2.7 million. The Company used approximately $6.4 million to fund the
acquisition of 20 restaurants, $2.3 million to fund loans related to acquired
restaurants and $2.3 million to fund capital improvements to existing and
acquired restaurants.
The Company completed one conversion of a JB's Restaurant to the small format
North's Star Buffet concept during the second quarter of fiscal 1999 at an
approximate cost of $350,000 including pre-opening costs. The Company completed
one conversion of a Stacey's Buffet to a BuddyFreddys Country Buffet during the
second quarter of fiscal 1999 at an approximate cost of $400,000 including
pre-opening costs. The Company also opened one North's Star Buffet in the second
quarter of fiscal 1999.
The Company does not currently have a bank line of credit or other working
capital facility available to it. The Company intends to obtain a bank credit
facility to pay the indebtedness in the amount of $7.5 million incurred in
connection with the repurchase of the Company's Common Stock from CKE and to
support its working capital requirements. Management anticipates that the credit
facility will contain customary affirmative and negative covenants, including
maintaining certain minimum working capital, net worth and financial ratios and
restrictions on the Company's ability to pay dividends on the Company's common
stock. There can be no assurance that the Company will be able to arrange a
credit facility when required or on terms acceptable to the Company.
The Company intends to expand its operations through the opening of new
restaurants and the acquisition of regional buffet chains. In addition, the
Company may expand through the purchase of existing restaurant sites which would
be converted to one of the Company's restaurant concepts. Management estimates
the cost of opening its prototype restaurant to be approximately $1.5 million to
$1.7 million, assuming leased real estate. In many instances, management
believes that existing restaurant locations can be acquired and converted to the
Company's prototype at a lower cost than new unit openings. These costs consist
primarily of exterior and interior appearance modifications and the addition of
certain kitchen and food service equipment. There can be no assurance that the
Company will be able to acquire additional restaurant chains or locations or, if
acquired, that these restaurants will have a positive contribution to the
Company's results of operations.
The Company believes that available cash and cash flow from operations will be
sufficient to satisfy its working capital, and capital expenditure requirements
for at least the next twelve months. The Company will require additional funds
to pay the ninety day note to CKE and to support its working capital
requirements or for other purposes, including acquisitions, and may seek to
raise such additional funds through public or private equity and/or debt
financing or from other sources. There can be no assurance, however, that
changes in the Company's operating plans, the unavailability of a credit
facility, the acceleration of the Company's expansion plans, lower than
anticipated revenues, increased expenses, potential acquisitions of other events
will not cause the Company to seek additional financing sooner than anticipated.
There can be no assurance that additional financing will be available on
acceptable terms or at all.
IMPACT OF "YEAR 2000"
- ---------------------
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. The "Year 2000" problem stems from computer
applications that were written using two digits rather than four digits to
define the applicable year. As a result, these applications may recognize "00"
as "1900" rather than "2000."
13
<PAGE> 14
The Company has investigated the impact of the Year 2000 problem on its
business, including the Company's operational, information and financial
systems. Based on this investigation, the Company does not expect the Year 2000
problem, including the cost of making the Company's computerized information
systems Year 2000 compliant, to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future periods. The
Company's mainframe computer and all significant software are Year 2000
compliant. The Company's few remaining non-compliant restaurant and home office
personal computers will be upgraded in the next 12 months.
The Company has also initiated communications with significant suppliers and
vendors on which the Company relies in an effort to determine the extent to
which the Company's business is vulnerable to the failure by these third
parties' to remediate their Year 2000 problems. While the Company has not been
informed of any material risks associated with the Year 2000 problem on these
entities, there can be no assurance that the computerized information systems of
these third parties will be Year 2000 compliant on a timely basis. The inability
of these third parties to remediate their Year 2000 problems could have a
material adverse impact on the Company.
To date, the Company has expensed incremental costs of approximately $50,000 to
assess and remediate potential Year 2000 problems. The total remaining
incremental cost is estimated to be $150,000. The Company is expensing as
incurred all costs related to the assessment and remediation of the Year 2000
issue. These costs are being funded through operating cash flows.
14
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 2. USE OF PROCEEDS OF INITIAL PUBLIC OFFERING
<TABLE>
<S> <C>
Amount of net offering proceeds used for:
Dividend to CKE $ 9,323,000
Payment to CKE for net assets of Casa Bonita 1,099,000
Loan to North's Restaurants, Inc. 3,565,000
Acquisition of restaurants 11,946,000
Loan to BuddyFreddys 2,400,000
Acquisition of furniture, fixtures and equipment 2,209,000
Remainder 231,000
------------
$30,773,000
============
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
The Annual Meeting of Stockholders of Star Buffet, Inc. was held on June 30,
1998, for the purpose of electing certain members of the board of directors.
Management's nominees for directors were elected by the following vote:
<TABLE>
<CAPTION>
Shares Voted Authority to Vote
"For" "Withheld"
------------ -----------------
<S> <C> <C>
William P. Foley, II 4,412,290 5,160
Robert E. Wheaton 4,412,290 5,160
C. Thomas Thompson 4,412,290 5,160
Stuart W. Clifton 4,412,390 5,060
Jack M. Lloyd 4,412,390 5,060
Thomas G. Schadt 4,412,390 5,060
Norman N. Habermann 4,412,390 5,060
John F. North, Jr. 4,412,390 5,060
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are attached to this report:
<TABLE>
<CAPTION>
Exhibit Description
Number of Exhibit
------ ----------
<C> <S>
10.15 Stock Repurchase Agreement between Star Buffet, Inc. and CKE Restaurants, Inc.,
dated September 10, 1998.
11 Calculation of Earnings per Share
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
(b) Current Reports on Form 8-K: None.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAR BUFFET, INC. AND SUBSIDIARIES
September 24, 1998 By: /s/ Robert E. Wheaton
-----------------------------
Robert E. Wheaton
President and
Chief Executive Officer
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
Number of Exhibit
- ------ ----------
<C> <S>
10.15 Stock Repurchase Agreement between Star Buffet, Inc. and CKE Restaurants, Inc.,
dated September 10, 1998.
11 Calculation of Earnings per Share
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
<PAGE> 1
EXHIBIT 10.15
STOCK REPURCHASE AGREEMENT
STOCK REPURCHASE AGREEMENT (the "Agreement") is entered into as of
September 10, 1998 by and among CKE RESTAURANTS, INC., a Delaware corporation
(the "Seller"), and STAR BUFFET, INC., a Delaware corporation (the "Buyer" or
the "Company").
R E C I T A L S:
A. The Seller owns 2,000,000 shares (the "Shares") of the common stock,
par value $.001 per share (the "Common Stock") of the Company, representing
approximately 36.7% of the issued and outstanding shares of Common Stock of the
Company; and
B. The Seller desires to sell and transfer to the Company, and the
Company desires to repurchase from the Seller, the Shares, for the consideration
and on the terms provided herein; and
C. The Board of Directors of the Company, in consultation with its
independent legal and financial advisors, has unanimously (with certain
directors abstaining) approved the transactions contemplated by this Agreement
and determined that the repurchase of the Shares at the negotiated Repurchase
Price is fair to and in the best interests of the Company and its stockholders.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
REPURCHASE OF SHARES
Section 1.1. Repurchase of Shares. The Company repurchases from the
Seller, and Seller hereby sells, assigns, transfers, conveys and delivers to the
Company, all of the Seller's right, title and interest in and to the Shares. As
consideration for the repurchase of the Shares, the Company shall pay to the
Seller a repurchase price of Six and 25/100 Dollars ($6.25) per Share, or an
aggregate repurchase price of Twelve Million Five Hundred Thousand Dollars
($12,500,000) (the "Repurchase Price"). The Repurchase Price shall be paid to
Seller, against delivery of the certificates representing the Shares, duly
endorsed for transfer or accompanied by appropriate stock powers, as follows:
(a) Five Million Dollars ($5,000,000) shall be paid in cash, by wire transfer of
immediately available funds, concurrently with the execution and delivery
hereof, and (b) Seven Million Five Hundred Thousand Dollars ($7,500,000) shall
be paid pursuant to the Company's Secured Promissory Note in the form attached
hereto as Exhibit A (the "Note"), which shall be secured by a pledge of the
Shares pursuant to a Pledge Agreement in the form attached hereto as Exhibit B
(the "Pledge Agreement") to be executed and delivered by the Company and Seller.
<PAGE> 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Seller as follows:
Section 2.1. Organization and Authority; No Conflicts.
(a) Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to carry on its
business as it is now being conducted, and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by the Company
and is a legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) No Conflicts. The execution, delivery and performance of this
Agreement by the Company does not, and the consummation by the Company of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or by-laws
of the Company, (ii) a breach of, or a default under, the acceleration of any
obligations or the creation of a lien, pledge, security interest or other
encumbrance on the assets of the Company (with or without notice, lapse of time
or both) pursuant to, any material contracts binding upon the Company, or (iii)
to the knowledge of the Company, a violation of any applicable Law or any
governmental or non-governmental permit or license to which the Company is
subject.
Section 2.2. SEC Documents; Financial Statements. The Company has
provided or made available to the Seller true and correct copies of all reports,
schedules, forms, statements, exhibits and other documents filed with the
Securities and Exchange Commission (the "Commission") by the Company under or
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
since January 1, 1997 (the "Company SEC Documents"), all of which were timely
filed with the Commission. As of their respective dates, or as subsequently
amended prior to the date of this Agreement, the Company SEC Documents complied
in all material respects with the requirements of the Exchange Act applicable to
such Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents comply
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto, have
been prepared in accordance with generally accepted accounting principles
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 2.3. Consents and Approvals. No notices, reports or other
filings are required to be made by the Company with, nor are any consents,
registrations or approvals required to be obtained by the Company from, any
individual, corporation, partnership, firm, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization or
governmental entity ("Person"), in connection with the execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby.
2
<PAGE> 3
Section 2.4. Disclosure. No representation or warranty of the Company
contained in this Agreement contains any untrue statement of material fact or
omits to state any material fact necessary to make the statements herein, taken
as a whole and in light of the circumstances under which they were made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Company as follows:
Section 3.1. Organization and Authority; No Conflicts.
(a) Organization and Authority. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to carry on its
business as it is now being conducted, and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by the Seller and
is a legal, valid and binding obligation of the Seller, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor's rights and to general equity principles.
(b) No Conflicts. The execution, delivery and performance of this
Agreement by the Seller does not, and the consummation by the Seller of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or by-laws
of the Seller, (ii) a breach of, or a default under, the acceleration of any
obligations or the creation of a lien, pledge, security interest or other
encumbrance on the assets of the Seller (with or without notice, lapse of time
or both) pursuant to, any material contracts binding upon the Seller, (iii) to
the knowledge of the Seller, a violation of any applicable Law or governmental
or non-governmental permit or license to which the Seller is subject, except, in
the case of clause (ii) or (iii) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to materially delay or materially impair the ability of the
Seller to consummate the transactions contemplated by this Agreement, and except
for the requirement to obtain a release from Banque Paribas, as Agent, of its
lien on the Shares granted by the Seller pursuant to the Amended and Restated
Credit Agreement, dated as of April 1, 1998, by and among the Seller, Banque
Paribas, as agent, and the Lenders party thereto.
Section 3.2. Ownership of Shares. Upon transfer and delivery of the
Shares by the Seller hereunder to the Company as provided herein, the Company
shall acquire good and marketable title to the Shares, free and clear of all
liens, claims and encumbrances.
Section 3.3. Disclosure. No representation or warranty of the Seller
contained in this Agreement contains any untrue statement of material fact or
omits to state any material fact necessary to make the statements herein, taken
as whole and in light of the circumstances under which they were made, not
misleading.
3
<PAGE> 4
ARTICLE IV
COVENANTS AND AGREEMENTS OF THE PARTIES
Section 4.1. Amendment of Certain Stock Option Agreements. The Company
shall enter into such amendments to the Stock Option Agreements between the
Company and Messrs. William P. Foley II and C. Thomas Thompson to provide that
their options to purchase shares of the Company's Common Stock shall continue in
full force and effect notwithstanding their resignations from the Board of
Directors of the Company.
Section 4.2. Financing. The Company shall use best efforts to secure
such financing as may be necessary for the Company to timely satisfy and
discharge its payment obligations under the Note.
Section 4.3. Further Assurances. At any time after the Closing Date, the
Company and the Seller shall promptly execute, acknowledge and deliver any other
assurances or documents reasonably requested by the Seller or the Company, as
the case may be, and necessary for the Seller or the Company, as the case may
be, to satisfy its obligations hereunder or obtain the benefits contemplated
hereby.
Section 4.4. Release and Waiver. Effective upon the consummation of the
transactions contemplated hereby, each of the parties hereto, for itself and its
Subsidiaries, and for each of their respective principals, partners,
fiduciaries, affiliates, managers, directors, stockholders, officers, agents and
employees and for the predecessors, successors and assigns of each of them (the
"Releasing Persons"), does hereby forever and unconditionally release, acquit
and discharge each of the other party hereto and such other party's Subsidiaries
and each of their respective principals, partners, fiduciaries, affiliates,
managers, directors, stockholders, officers, agents and employees, and the
predecessors, successors and assigns of each of them (collectively the "Released
Persons"), from and with respect to any and all claims, demands, judgments,
losses, contracts, obligations, actions, causes of action, suits or liabilities
of whatever kind or nature, whether known or unknown, whether suspected or
unsuspected, whether in law or in equity, which the Releasing Persons had or
have or may claim to have against any Released Person based upon or for any
matter, thing, event, circumstances, relationship, contract, act or omission
which occurred on or prior to the Closing Date, including, without limitation,
those which (i) arise directly or indirectly out of the ownership by the Seller
of the Shares, including without limitation claims which the Seller has or
believes it may have as a stockholder relating to fiduciary duties of directors
or officers, disclosure or similar matters, or (ii) arise directly or indirectly
out of the Business Services Agreement or the performance by the Seller or the
Company of their respective obligations thereunder (collectively, the "Claims");
provided, however, that nothing contained herein shall release any Claim with
respect to or arising out of this Agreement, Note, the Pledge Agreement, the
Contribution Agreement by and among the Company and the Seller, among others, or
the Business Services Agreement between the Company and the Seller.
It is the intent of the parties that the above release constitute a
general release of the Claims.
4
<PAGE> 5
IN AGREEING TO THE ABOVE GENERAL RELEASE OF CLAIMS, EACH OF THE COMPANY
AND THE SELLER HEREBY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS WHICH IT MAY
HAVE UNDER THE PROVISIONS OF SECTION 1542 OF THE CIVIL CODE OF THE STATE OF
CALIFORNIA, WHICH SECTION READS AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
ARTICLE V
INDEMNIFICATION
Section 5.1. Indemnification by the Company. The Company shall
indemnify, defend and hold harmless the Seller against and in respect of all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and reasonable expenses incurred in investigating, preparing or
defending any claims covered hereby) (collectively, "Losses") sustained or
incurred arising out of, based upon or otherwise in respect of (i) any breaches
of or inaccuracy in the Company's representations, warranties, covenants and
agreements set forth in this Agreement, or (ii) any action, suit, proceeding or
claim by a stockholder of the Company (in such capacity) challenging or seeking
to prevent the transactions contemplated by this Agreement.
Section 5.2. Indemnification by the Seller. The Seller shall indemnify,
defend and hold harmless the Company against and in respect of all Losses
sustained or incurred arising out of, based upon or otherwise in respect of (i)
any breaches of or inaccuracy in the Seller's representations, warranties,
covenants and agreements set forth in this Agreement, or (ii) any action, suit,
proceeding or claim by a stockholder of the Seller (in such capacity)
challenging or seeking to prevent the transactions contemplated by this
Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendment and Waiver. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company and the Seller, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
Section 6.2. Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the parties shall bear their own respective expenses incurred in
connection with this Agreement and the transactions contemplated hereby.
5
<PAGE> 6
Section 6.3. Assignment. No party to this Agreement may assign any of
its rights or obligations under this Agreement without the prior written consent
of the other party hereto.
Section 6.4. Entire Agreement. This Agreement (including all Exhibits
and Schedules hereto) contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters.
Section 6.5. Fulfillment of Obligations. Any obligation of any party to
any other party under this Agreement, which obligation is performed, satisfied
or fulfilled by an Affiliate of such party, shall be deemed to have been
performed, satisfied or fulfilled by such party.
Section 6.6. Parties in Interest; No Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this Agreement
(other than Section 5.1), express or implied, is intended to confer upon any
Person other than the Company, the Seller, or their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
Section 6.7. Counterparts. This Agreement and any amendments hereto may
be executed in one or more counterparts, each of which shall be deemed to be an
original by the parties executing such counterpart, but all of which shall be
considered one and the same instrument.
Section 6.8. Section Headings. The section and paragraph headings and
table of contents contained in this Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
Section 6.9. Notices. All notices hereunder shall be deemed given if in
writing and delivered personally or sent by facsimile or by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses as shall be specified by like notice):
(a) if to the Company, to: Star Buffet, Inc.
440 Lawndale Drive
Salt Lake City, Utah 84115-2917
Fax (801) 463-5585
Attention: Robert E. Wheaton,
Chief Executive Officer
(b) if to the Seller, to: CKE Restaurants, Inc.
3916 State Street, Suite 300
Santa Barbara, California 93105
Fax (805) 898-7149
Attention: Andrew F. Puzder,
Executive Vice President and
General Counsel
Any notice given by mail shall be effective when received.
6
<PAGE> 7
Section 6.10. Governing Law; Submission to Jurisdiction; Selection of
Forum. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California, without reference to the choice of law
principles thereof. each party hereto agrees that it shall bring any action or
proceeding in respect of any claim arising out of or related to this Agreement
or the transactions contained in or contemplated by this Agreement, whether in
tort or contract or at law or in equity, exclusively in the United States
District Court for the Central District of California or the Supreme Court of
the State of California located in the County of Orange, California (the "Chosen
Courts") and (i) irrevocably submits to the exclusive jurisdiction of the Chosen
Courts, (ii) agrees that venue is proper in the Chosen Courts, and (iii) waives
any objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any party hereto.
Section 6.11. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability.
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of
the parties hereto as of the date first written above.
STAR BUFFET, INC.
By: /s/ ROBERT E. WHEATON
-------------------------------
Name: Robert E. Wheaton
Title: Chief Executive Officer
CKE RESTAURANTS, INC.
By: /s/ ANDREW F. PUZDER
-------------------------------
Name: Andrew F. Puzder
Title: Executive Vice President
and General Counsel
7
<PAGE> 1
EXHIBIT 11
STAR BUFFET, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS
PER SHARE
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
------------------------------ -------------------------------
AUGUST 10, AUGUST 11, AUGUST 10, AUGUST 11,
1998 1997 1998 1997
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net Income $ 848,000 $ 833,000 $ 2,379,000 $ 1,727,000
-------------- -------------- --------------- --------------
Weighted average number of common shares
outstanding during the period 5,450,000 2,600,000 5,450,000 2,600,000
-------------- -------------- --------------- --------------
Basic Earnings per Share $ 0.16 $ 0.32 $ 0.44 $ 0.66
-------------- -------------- --------------- --------------
DILUTED EARNINGS PER SHARE
Net Income $ 848,000 $ 833,000 $ 2,379,000 $ 1,727,000
-------------- -------------- --------------- --------------
Weighted average number of common
shares outstanding during the period 5,450,000 2,600,000 5,450,000 2,600,000
-------------- -------------- --------------- --------------
Incremental common shares attributable
to outstanding stock options - - 40,000 -
-------------- -------------- --------------- --------------
5,450,000 2,600,000 5,490,000 2,600,000
Diluted Earnings per Share $ 0.16 $ 0.32 $ 0.43 $ 0.66
-------------- -------------- --------------- --------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's balance sheet and statements of operations as of and for the twelve
week period ended August 10, 1998 and is qualified in its entirety by reference
to such financial statements, including the notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-25-1999
<PERIOD-START> JAN-27-1998
<PERIOD-END> AUG-10-1998
<CASH> 6,413,000
<SECURITIES> 0
<RECEIVABLES> 3,699,000
<ALLOWANCES> 0
<INVENTORY> 741,000
<CURRENT-ASSETS> 11,924,000
<PP&E> 38,228,000
<DEPRECIATION> (13,320,000)
<TOTAL-ASSETS> 44,776,000
<CURRENT-LIABILITIES> 7,740,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 34,910,000
<TOTAL-LIABILITY-AND-EQUITY> 44,776,000
<SALES> 20,751,000
<TOTAL-REVENUES> 20,751,000
<CGS> 18,492,000
<TOTAL-COSTS> 19,519,000
<OTHER-EXPENSES> (236,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,000
<INCOME-PRETAX> 1,413,000
<INCOME-TAX> 565,000
<INCOME-CONTINUING> 848,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 848,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
