<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED SEPTEMBER 17, 1995 COMMISSION FILE NUMBER 1-7323
FRISCH'S RESTAURANTS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0523213
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 GILBERT AVENUE, CINCINNATI, OHIO 45206
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 513-961-2660
Not Applicable
- ------------------------------------------------------------------------------
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 ________
The total number of shares outstanding of the issuer's no par common stock, as
of September 29, 1995 was:
6,618,952
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF EARNINGS..................... 3
CONSOLIDATED BALANCE SHEET............................. 4 - 5
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY......... 6
CONSOLIDATED STATEMENT OF CASH FLOWS................... 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............. 8 - 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................... 13 - 14
PART II - OTHER INFORMATION 14
</TABLE>
<PAGE> 3
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
SIXTEEN WEEKS ENDED SEPTEMBER 17, 1995 AND SEPTEMBER 18, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
REVENUE
Sales $52,206,975 $50,280,408
Other 459,004 555,556
----------- -----------
Total revenue 52,665,979 50,835,964
COSTS AND EXPENSES
Cost of sales
Food and paper 16,503,309 15,966,128
Payroll and related 18,334,137 17,035,437
Other operating costs 12,961,011 12,458,840
----------- -----------
47,798,457 45,460,405
General and administrative 1,532,900 1,694,916
Advertising 1,303,635 1,243,835
Interest 733,512 505,080
----------- -----------
Total costs and expenses 51,368,504 48,904,236
----------- -----------
Earnings before income taxes 1,297,475 1,931,728
INCOME TAXES 415,000 728,000
----------- -----------
NET EARNINGS $ 882,475 $ 1,203,728
=========== ===========
Primary and fully diluted net earnings per
share of common stock $.13 $.18
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
September 17, May 28,
1995 1995
(unaudited)
------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 540,440 $ 219,650
Receivables
Trade 1,000,234 986,360
Other 531,653 560,122
Inventories 4,194,029 3,945,660
Prepaid expenses and sundry deposits 3,031,270 1,705,463
Prepaid and deferred income taxes 201,762 723,523
------------ -------------
Total current assets 9,499,388 8,140,778
PROPERTY, EQUIPMENT AND CAPITALIZED LEASES - AT COST
Land and improvements 24,391,269 23,623,581
Buildings 54,431,713 53,292,215
Equipment and fixtures 53,861,113 53,466,613
Leasehold improvements and buildings on leased land 24,955,145 24,404,208
Capitalized leases 9,640,938 9,640,938
Construction in progress 691,575 3,226,921
------------ -------------
167,971,753 167,654,476
Less accumulated depreciation and amortization 70,692,011 69,596,486
------------ -------------
97,279,742 98,057,990
OTHER ASSETS
Intangible assets 763,838 765,092
Investments in land - at cost 2,313,309 641,764
Property held for sale 1,962,654 1,966,681
Net cash surrender value-life insurance policies 3,331,482 3,162,902
Deferred income taxes 409,643 409,643
Other 2,525,302 2,403,243
------------ -------------
11,306,228 9,349,325
------------ -------------
$118,085,358 $115,548,093
============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
LIABILITIES
<TABLE>
<CAPTION>
September 17, May 28,
1995 1995
(unaudited)
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES
Long-term obligations due within one year
Long-term debt $1,841,060 $2,206,048
Obligations under capitalized leases 467,268 466,035
Self insurance 1,699,380 1,221,460
Accounts payable 9,045,751 8,572,166
Accrued expenses 5,112,271 5,758,656
Income taxes 97,952 -
------------ -------------
Total current liabilities 18,263,682 18,224,365
LONG-TERM OBLIGATIONS
Long-term debt 20,027,801 18,437,837
Obligations under capitalized leases 6,294,482 6,409,216
Self insurance 6,562,091 5,641,927
Other 2,221,709 2,207,356
------------ -------------
35,106,083 32,696,336
COMMITMENTS - -
SHAREHOLDERS' EQUITY
Capital stock
Preferred stock - authorized, 3,000,000 shares
without par value; none issued - -
Common stock - authorized, 12,000,000 shares
without par value; issued, 6,808,939 - stated value $1 6,808,939 6,808,939
Additional contributed capital 54,624,224 54,624,224
------------ -------------
61,433,163 61,433,163
Retained earnings 6,710,576 6,622,375
------------ -------------
68,143,739 68,055,538
Less cost of treasury stock (189,987 shares) 3,428,146 3,428,146
------------ -------------
64,715,593 64,627,392
------------ -------------
$118,085,358 $115,548,093
============ =============
</TABLE>
5
<PAGE> 6
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIXTEEN WEEKS ENDED SEPTEMBER 17, 1995 AND SEPTEMBER 18, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Common stock
at $1 per share - Additional
Shares and contributed Retained Treasury
amount capital earnings shares Total
----------------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at May 29, 1994 $6,548,201 $52,188,112 $8,540,882 ($3,447,154) $63,830,041
Net earnings for sixteen weeks - - 1,203,728 - 1,203,728
Treasury shares reissued - (2,232) - 7,836 5,604
Dividends
Cash - $.12 per share - - (763,821) - (763,821)
---------- ----------- ---------- ----------- -----------
Balance at September 18, 1994 6,548,201 52,185,880 8,980,789 (3,439,318) 64,275,552
Net earnings for thirty-six weeks - - 1,154,643 - 1,154,643
Treasury shares reissued - (7,378) - 15,935 8,557
Treasury shares acquired - - - (4,763) (4,763)
Dividends
Cash - $.12 per share - - (806,597) - (806,597)
Stock - 4% 260,738 2,445,722 (2,706,460) - -
---------- ----------- ---------- ----------- -----------
Balance at May 28, 1995 6,808,939 54,624,224 6,622,375 (3,428,146) 64,627,392
Net earnings for sixteen weeks - - 882,475 - 882,475
Dividends
Cash - $.12 per share - - (794,274) - (794,274)
---------- ----------- ---------- ----------- -----------
Balance at September 17, 1995 $6,808,939 $54,624,224 $6,710,576 ($3,428,146) $64,715,593
========== =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIXTEEN WEEKS ENDED SEPTEMBER 17, 1995 AND SEPTEMBER 18, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 882,475 $ 1,203,728
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 3,165,587 2,893,300
Loss (gain) on disposition of assets 137,331 (140,548)
Changes in assets and liabilities:
Decrease in receivables 14,595 875,123
(Increase) decrease in inventories (248,369) 141,065
(Increase) in prepaid expenses and sundry deposits (1,325,807) (1,277,825)
Increase in accounts payable 76,448 14,924
(Decrease) in accrued expenses (646,385) (388,937)
Increase in income taxes 619,713 165,633
Decrease in other assets 95,703 111,162
Increase in self insured obligations 1,398,084 668,004
Increase in other liabilities 14,353 265,253
------------ ------------
Net cash provided by operating activities 4,183,728 4,530,882
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to property - net (5,018,209) (6,854,857)
Proceeds from disposition of property 851,893 777,994
Increase in other assets (410,960) (185,183)
------------ ------------
Net cash (used in) investing activities (4,577,276) (6,262,046)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from borrowings 4,000,000 2,385,000
Payment of long-term obligations (2,888,525) (262,979)
Cash dividends paid (397,137) (381,911)
Treasury share transactions - 5,604
------------ ------------
Net cash provided by financing activities 714,338 1,745,714
------------ ------------
Net increase in cash and equivalents 320,790 14,550
Cash and equivalents at beginning of year 219,650 200,900
------------ ------------
Cash and equivalents at end of quarter $ 540,440 $ 215,450
============ ============
Supplemental disclosures:
Interest paid $ 886,919 $ 419,923
Income taxes paid 287,455 564,799
Income tax refunds received (492,168) (2,432)
Dividends declared but not paid 397,137 381,910
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows:
Consolidation Practices
- -----------------------
The consolidated financial statements include the accounts of Frisch's
Restaurants, Inc. and all of its subsidiaries.
Cash and Cash Equivalents
- -------------------------
Highly liquid investments with original maturities of three months or less are
considered to be cash equivalents. Outstanding checks in the amount of $690,462
at May 28, 1995 were included in accounts payable.
Receivables
- -----------
The Company values its trade notes and accounts receivable on the reserve
method. The reserve balance was $51,236 at September 17, 1995 and $56,736 at
May 28, 1995.
Inventories
- -----------
Inventories, comprised principally of food items, are valued at the lower of
cost or market. During the first quarter of fiscal 1995, the Company changed
its method of determining cost for its commissary inventories from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method. The change
to the FIFO method more appropriately reflects the Company's financial
condition, and conforms all its inventories to the same valuation method.
Due to this change, inventories were increased by approximately $365,000 and
the cumulative effect on retained earnings, net of income taxes, was
approximately $241,000. Last year's financial statements have been restated to
reflect this change in accounting principle.
Income Taxes
- ------------
Taxes are provided on all items included in the statement of earnings
regardless of when such items are reported for tax purposes.
Property and Equipment
- ----------------------
Depreciation is provided principally on the straight-line method over the
estimated service lives of the assets.
Intangible Assets and Other Assets
- ----------------------------------
The excess of cost over equity in net assets of subsidiaries acquired prior to
November 1, 1970, is not currently being amortized because, in the opinion of
management, the value has not decreased.
Net cash surrender value of life insurance policies includes the cash values of
two policies written by a life insurance company that is under regulatory
supervision pursuant to an Order of Rehabilitation on August 12, 1994. There
are restraints which restrict policy surrenders, loans and reductions in face
amount. Although adjustments may become necessary to values in existence prior
to August 12, 1994, the rehabilitator has concluded that policyholders' account
values should be fully preserved.
New Store Opening Costs
- -----------------------
New store opening costs are capitalized and amortized over a one year period
from the date each new store opened. Items capitalized include new employee
training costs, the cost of an employee team to coordinate the opening and the
cost of certain replacement items such as uniforms and china.
8
<PAGE> 9
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - ACCOUNTING POLICIES (CONTINUED)
Benefit Plans
- -------------
The Company has three defined benefit pension plans covering substantially all
of its employees. The benefits are based on years-of-service and other
factors. The Company's funding policy is to contribute annually the maximum
amount that can be deducted for federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to service-to-date, but
also for those expected to be earned in the future. The Company also has a
non-qualified supplemental retirement plan for certain key employees.
Self Insurance
- --------------
The Company self-insures its casualty and a portion of its employee medical
coverages. The amounts shown on the balance sheet represent management's
estimate for future claims. There is insurance in place which provides for
catastrophic losses.
Revenue Recognition
- -------------------
Franchise fees, based on sales of franchisees, are recorded on the accrual
method as earned. There was no significant income from initial fees.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of the Company's financial instruments approximates fair
value.
Investment in Sports Franchise
- ------------------------------
The Company's limited partnership investment in the Cincinnati Reds is carried
at cost. Income distributions are recorded in earnings when received.
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
September 17, 1995 May 28, 1995
-------------------------- --------------------------
Payable Payable Payable Payable
within after within after
one year one year one year one year
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revolving credit loan $ - $ 10,000 $ - $ 8,000
Term loan 1,500 9,500 1,625 9,875
Industrial revenue
bond financing 200 400 400 400
Other 141 128 181 163
------ --------- ------- --------
$1,841 $ 20,028 $ 2,206 $ 18,438
====== ========= ======= ========
The portion payable after one year matures as follows:
September 17, May 28,
1995 1995
------------ -----------
(in thousands)
Period ending in 1997 $ 1,828 $ 1,839
1998 11,700 1,724
1999 1,500 9,500
2000 1,500 1,500
Subsequent to 2000 3,500 3,875
--------- ---------
$ 20,028 $ 18,438
========= =========
</TABLE>
9
<PAGE> 10
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B - LONG-TERM DEBT (CONTINUED)
The revolving credit loan is a $20,000,000 line of credit, $10,000,000 of which
is outstanding at September 17, 1995. This credit loan matures on August 30,
1998, unless extended. Interest is payable quarterly determined by various
indices, currently 6.75%. The term loan, converted from a revolving credit loan
during the year ended May 28, 1995, is payable in monthly installments of
$125,000 through December 31, 2002. Interest is also payable monthly at a rate
equal to the prime rate up to a maximum of 7.5% through December 31, 1997. The
rate for the final five years shall also be equal to the prime rate, not to
exceed 8.5%.
These agreements contain covenants relating to net worth, interest expense,
debt and capitalization changes, investments, leases, and restrictions on
pledging certain restaurant operating assets. Compensating balances are not
required.
The Company also has a $2,494,000 outstanding letter of credit in support of
its self insurance.
The industrial revenue bonds, issued in 1978, are payable in annual
installments of $200,000 through 1998 and bear interest at 7.4%. Property and
equipment having a book value at September 17, 1995 of $2,906,000 is pledged as
collateral for the bonds.
NOTE C - LEASED PROPERTY
The Company has capitalized the leased property of 53% of its non-owned
restaurant locations. The majority of the leases are for fifteen or twenty
years and contain renewal options for ten to fifteen years. Delivery equipment
is held under capitalized leases expiring during periods to 2001. The Company
also occupies office space under an operating lease which expires during 2003.
An analysis of the leased property follows:
<TABLE>
<CAPTION>
Asset balances at
-------------------------
Sept. 17, May 28,
1995 1995
---------- ----------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 9,161 $ 9,161
Equipment 480 480
------- -------
9,641 9,641
Less accumulated amortization (5,188) (5,057)
-------- --------
$ 4,453 $ 4,584
======= ========
Total rental expense of operating leases for the sixteen weeks was:
1995 1995
---------- ----------
(in thousands)
Minimum rentals $ 488 $ 507
Contingent rentals
(percent of excess sales) 4 14
----- -----
$ 492 $ 521
===== =====
</TABLE>
10
<PAGE> 11
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C - LEASED PROPERTY (CONTINUED)
Future minimum lease payments under capitalized leases and operating leases
having an initial or remaining term of one year or more follow:
<TABLE>
<CAPTION>
Capitalized Operating
Period ending September 17, leases leases
--------------------------- ------------- ------------
(in thousands)
<S> <C> <C>
1996 $ 1,198 $ 1,288
1997 1,093 1,256
1998 1,007 1,157
1999 925 934
2000 870 818
2001 to 2020 7,669 4,686
-------- --------
Total 12,762 $ 10,139
========
Amount representing interest (6,000)
--------
Present value of obligations 6,762
Portion due within one year (467)
--------
Long-term obligations $ 6,295
========
</TABLE>
NOTE D - INCOME TAXES
The provision for income taxes in all periods has been computed based on
management's estimate of the tax rate for the entire fiscal year.
NOTE E - CAPITAL STOCK
Shareholders approved the 1993 Stock Option Plan on October 4, 1993. The plan
authorizes the grant of stock options for up to 520,000 shares of the Common
Stock of the Company for a ten year period beginning May 9, 1994, the day after
the expiration of the 1984 Stock Option Plan. The shares may be optioned at not
less than seventy-five percent of the fair market value on the date granted and
may include stock appreciation rights. No options have been granted under the
1993 plan.
The 1984 Stock Option Plan expired on May 8, 1994. Outstanding options are
exercisable within ten years from the date of grant. The exercise price is the
fair market value as of the date granted.
The outstanding stock options for the 1984 plan follow:
<TABLE>
<CAPTION>
Option Price
------------------------------
Shares Per Share Total
------------- --------------- -----------
<S> <C> <C> <C>
Chairman 78,952 $18.18 $1,435,347
President 94,208 $15.55-$22.53 1,957,098
Other key employees 76,288 $18.18 1,386,916
</TABLE>
The Company also has reserved 54,080 shares for issuance under the Frisch's
Executive Savings Plan.
11
<PAGE> 12
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E - CAPITAL STOCK (CONTINUED)
Shares reserved under this plan have been adjusted for stock dividends.
There are no other outstanding options, warrants or rights.
NOTE F - PENSION PLANS
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheet at May 28, 1995 and May 29, 1994 (latest
available data, in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Plan assets at fair market value, primarily marketable securities and insurance funds $ 16,451 $ 18,229
-------- ---------
Actuarial present value of benefit obligations:
Vested benefits 8,300 10,116
Non vested benefits 823 814
-------- ---------
Accumulated benefit obligations 9,123 10,930
Effect of projected future salary increases 3,201 3,388
-------- ---------
Projected benefit obligations 12,324 14,318
-------- ---------
Plan assets in excess of projected benefit obligations (including approximately
$360 at 1995 and $531 at 1994 withdrawable by participants upon demand) 4,127 3,911
Unrecognized net gains (3,259) (2,840)
Unrecognized prior service cost 599 947
Unrecognized net transition (assets) (1,658) (1,895)
-------- ---------
Net (accrued) prepaid pension cost included in the balance sheet $ (191) $ 123
======== =========
</TABLE>
Assumptions used to develop net periodic pension cost and the actuarial present
value of projected benefit obligations:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Expected long-term rate of return on plan assets 8.50% 8.50%
Weighted average discount rate 7.25 7.25
Rate of increase in compensation levels 5.50 5.50
</TABLE>
Pension expense for the sixteen weeks ended September 17, 1995 and September
18, 1994 was $110,208 and $112,012, respectively.
NOTE G - EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of common
and common equivalent shares outstanding during each period, which gives effect
to stock options.
<TABLE>
<CAPTION>
Weighted average
common shares
(Primary and
fully diluted)
---------------
<S> <C>
Quarter ending September 17,1995 6,618,952
Quarter ending September 18,1994 6,618,512
</TABLE>
NOTE H - COMPANY REPRESENTATIONS
The financial information is unaudited but in the opinion of management
includes all adjustments (all of which were normal recurring adjustments)
necessary for a fair presentation of results of operations for such periods.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Total revenue reached record levels for the first quarter of fiscal 1996,
climbing to $52,666,000, an increase of 3.6% over last year's revenue of
$50,836,000. Total revenue consists of retail sales by Company-operated
restaurants and hotels, and wholesale sales to and fees from licensed Big Boys.
Sales rose 3.8% to $52,207,000 from $50,280,000 a year ago. Most of the
increase came from seven new Big Boys opened during the last twelve months,
offset slightly by the closing of two older, lower volume units. Big Boy same
store sales are now beginning to show improvement, after experiencing a
moderate decline last year. Menu prices were increased 2.4% at the beginning
of the fourth quarter of fiscal 1995 and 2.0% late in the first quarter this
year. Sales from hotel operations were up 9.3% during the quarter,
contributing approximately $330,000 of the sales increase. The continuing
modernization program has helped to improve sales at the Big Boys and the hotel
operations.
Other income declined 17.4% during the quarter, as eleven fewer licensed units
are now in operation than a year ago.
At the end of the quarter, the Company operated 104 Big Boy restaurants, four
Hardee's and two Quality Hotels. During the quarter, three new Big Boys were
opened, one of which replaced an existing unit, completing the 1995 expansion
cycle. One Big Boy and two Hardee's were closed.
Despite the recent menu price increase, the pressure on margins continued. Cost
of sales increased $2,338,000 during the quarter while revenue was up only
$1,830,000. While food and paper cost declined from 31.4% of revenue last year
to 31.3% this year, payroll and related expense and other operating expenses
rose disproportionately to the higher revenues. Payroll and related expenses
increased from 33.5% of revenue last year to 34.8% of revenue this year.
Competition for employees due to a shortage of labor in most of the Company's
marketing areas continues to result in higher average hourly rates and higher
starting salaries for store managers. Other operating expenses have stabilized
at 24.6% of revenue this year against 24.5% of revenue last year. However,
this category of expense includes gains and losses from property dispositions.
Excluding these transactions, other operating expenses were 25.0% of revenue
this year and 24.0% of revenue last year. Higher depreciation and remodeling
expenses, both of which relate to recent expansion and modernization, along
with increased charges for utilities and maintenance were the principal causes
of the real increase in other operating expenses.
General and Administrative expense was 9.6% or $162,000 lower than last year
due primarily to lower officer compensation this year.
Interest expense rose 45.1% or $228,000 above last year due to significantly
higher debt levels that were incurred to finance new restaurant expansion.
Increases in interest expense have peaked and have started to trend downward as
debt levels were reduced toward the end of the quarter.
The estimated annual rate of income tax is 32.0% this year versus 37.7% last
year. Congress is presently considering a bill that would replace the Targeted
Jobs Tax Credit that expired at the end of 1994 with a scaled down version that
would be effective January 1, 1996. While potentially helpful to the Company
in the long run, the impact on this year's effective tax rate would be minimal.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $4,200,000, generated principally
from net income and depreciation. Additionally, $4,000,000 was borrowed during
the quarter, $2,000,000 of which has been repaid as the Company intends to
reduce newly acquired debt.
Investing activities included $5,000,000 in additions to property. This
consisted of approximately $1,900,000 to complete the 1995 expansion cycle,
$900,000 to remodel existing properties, $1,600,000 for acquisitions of future
sites and $600,000 in equipment replacements and other capital expenditures.
Financing activities included new debt of $4,000,000. Revised expansion plans
that provide for fewer new units allowed funds normally directed to capital
expenditures to be used to repay $2,000,000 of this new debt. Payments of
$900,000 were made to service existing debt and a quarterly dividend to
shareholders of approximately $400,000 was paid.
13
<PAGE> 14
The 1996 construction cycle calls for the opening of two new Big Boys in the
spring, with construction beginning this fall, introducing a new, smaller
building design. The projected cost to build and equip these units is
estimated at $1,100,000 each, a reduction of approximately $200,000 from last
year's average cost per unit. This lower cost prototype will allow the Company
to expand into more locations over the long term. Including land, the cost of
the new, smaller Big Boy will range from $1,300,000 to $1,500,000. Current
plans also include the replacement of two existing locations with new buildings
to be constructed in the spring of 1996. It remains the Company's intention to
operate within cash flow and reduce debt.
PART II - OTHER INFORMATION
- ---------------------------
Items 1, 2, 3, and 5, the answers to which are either "none" or "not
applicable", are omitted.
Item 4. Submission of matters to a vote of Security Holders.
a) The annual meeting of Shareholders was held on October 2, 1995.
c) The following matters were voted upon:
Management proposal to approve the appointment of auditors received
the following votes:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
6,029,295 55,590 14,482
</TABLE>
A Shareholder proposal to amend the Code of Regulations to
require that a majority of the Board of Directors be independent
of management received the following votes:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
1,586,661 3,094,888 193,122 1,224,696
</TABLE>
Item 6. Exhibits and reports on Form 8-K.
a) Exhibits
(10) Material Contracts
(10)(a) Frisch's Executive Savings Plan
(10)(b) Frisch's Executive Retirement Plan
(27) Financial Data Schedule
b) Reports on Form 8-K.
The Company did not file a report on Form 8-K during the sixteen
weeks ended September 17, 1995.
14
<PAGE> 15
SIGNATURE
---------
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.
FRISCH'S RESTAURANTS, INC.
--------------------------
(registrant)
DATE October 30, 1995
----------------------------
October 30, 1995
BY Louis J. Ullman
-----------------------------
Louis J. Ullman
Senior Vice President-Finance
and Principal Financial Officer
15
<PAGE> 1
EXHIBIT 10 A
FRISCH'S EXECUTIVE SAVINGS PLAN
(Effective November 15, 1993)
ARTICLE I
Establishment and Purpose
-------------------------
There is hereby established for the benefit of certain
Eligible Employees an unfunded plan of deferred compensation known as "Frisch's
Executive Savings Plan." The purpose of the Plan is to provide a means by
which key executive employees of Frisch's Restaurants, Inc. (the "Employer")
who have been designated by the Compensation Committee of the Employer may
elect to defer receipt of a portion of their compensation.
ARTICLE II
Definitions
-----------
Except where the context plainly indicates otherwise, the
following words and phrases, when they appear as capitalized terms in the Plan,
have the following meanings:
2.1 "ACCOUNT" means the bookkeeping account maintained in the name
of each Participant, which shall reflect the value of the deferred amount
payable to such Participant under the Plan.
2.2 "BENEFICIARY" means the person or persons (including a
contingent beneficiary) designated by a Participant pursuant to Section 9.1
hereof to receive death benefits under the Plan.
2.3 "BOARD OF DIRECTORS" or "BOARD" means the board of directors
of the Employer.
2.4 "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
2.5 "COMMON STOCK OPTION" means a fund consisting of shares of
Frisch's Restaurants, Inc. common stock.
2.6 "COMMITTEE" means the Compensation Committee of the Employer.
2.7 "COMPENSATION" means an employee's compensation as determined
under Section 1.10 of the Savings Plan (or any successor to such provision).
2.8 "ELIGIBLE EMPLOYEE" means a key executive employee of the
Employer who is designated by the Committee to be eligible to participate in
the Plan.
2.9 "EMPLOYER" means Frisch's Restaurants, Inc.
2.10 "EMPLOYER MATCH" means the amount accrued in accordance with
Section 4.4 hereof with respect to amounts deferred by a Participant hereunder.
2.11 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
2.12 "LIFE INSURANCE OPTION" means one or more life insurance
policies designated by the Committee. The initial life insurance policies
offered under the Life Insurance Option will be issued by Northwestern Mutual
Life Insurance Company.
16
<PAGE> 2
EXHIBIT 10A
2.13 "MUTUAL FUND OPTION" means such related mutual funds as may be
designated by the Committee. The initial funds from which a Participant may
choose are those offered by Twentieth Century Services, Inc., including the
Balanced Investors Fund, the Growth Investors Fund, the Select Investors Fund,
the U.S. Governments Fund, the Premium Capital Reserve Fund, and any other fund
that is designated by the Committee as part of the Mutual Fund Option under the
Plan.
2.14 "PARTICIPANT" means an Eligible Employee who becomes a
participant in the Plan in accordance with Section 3.1 hereof and whose Account
hereunder has a positive balance.
2.15 "PLAN" means "Frisch's Executive Savings Plan," as set forth
herein and as amended from time to time.
2.16 "PLAN YEAR" means the fiscal year of the Plan, an
approximately 12-consecutive-month period ending each year on May 31, except
that the initial Plan Year shall begin on November 15, 1993, and end on May 31,
1994.
2.17 "RELATED EMPLOYERS" means related employers as defined in
Section 1.27 of the Savings Plan (or any successor to such provision).
2.18 "SAVINGS PLAN" means the Frisch's Section 401(k) Savings Plan,
as amended from time to time.
ARTICLE III
Participation
-------------
3.1 ELECTION. An Eligible Employee may become a Participant by
electing to defer receipt of part of the Compensation to be paid to him by the
Employer. Except as otherwise provided in Section 3.3 hereof, an Eligible
Employee may elect to participate in the Plan only if, before the beginning of
the first Plan Year in which he participates in the Plan, he files an election
with the Committee, in a form satisfactory to the Committee, irrevocably
deferring receipt of an amount that shall be designated as a percentage of his
Compensation and specifying the investment option or options selected by the
Participant for purposes of measuring the amount of deferred compensation
payable to him hereunder. The portion of a Participant's Compensation that may
be deferred hereunder for any Plan Year shall not exceed ten percent of his
Compensation for the entire Plan Year. A Participant's election to defer a
designated percentage of Compensation shall be irrevocable with respect to the
Plan Year to which it initially applies. Such election also shall
automatically apply to each subsequent Plan Year unless the Participant, before
the beginning of a Plan Year, revokes his prior election. In that event, the
Participant may file a new election with the Committee before the beginning of
the Plan Year in accordance with the preceding provisions of this Section 3.1.
If an Eligible Employee does not elect to become a Participant before the first
Plan Year (or partial Plan Year, if applicable) in which he is eligible to
participate in the Plan, he may, if he remains an Eligible Employee, elect to
participate in the Plan before the beginning of any subsequent Plan Year.
3.2 ADVANCE ELECTION. An election to defer the receipt of
Compensation hereunder shall apply only to Compensation earned after the date
the Participant's election is filed with the Committee.
17
<PAGE> 3
EXHIBIT 10A
3.3 FILING DEADLINE. An election to defer Compensation earned in
a Plan Year shall be filed with the Committee before the Plan Year begins.
Notwithstanding the foregoing sentence, a newly hired key executive employee
who is designated by the Committee as eligible to participate in the Plan may
file an election to defer Compensation earned thereafter before the expiration
of 30 days from his initial date of employment.
3.4 FORM OF ELECTION. An election to defer Compensation hereunder
shall be in writing, in a form acceptable to the Committee, and shall specify
the portion of the Participant's Compensation to be deferred. Subject to
Section 5.3 hereof, any election regarding the payment of deferred compensation
shall be irrevocable and shall remain in effect until the end of the Plan Year
to which it pertains.
ARTICLE IV
Accounts and Investment Options
-------------------------------
4.1 HYPOTHETICAL NATURE OF INVESTMENT OPTIONS. Each investment
option established under this Article IV shall be hypothetical in nature and
shall be maintained solely for the purpose of measuring the balances in the
Participants' Accounts. In accordance with Article VI hereof, neither the Plan
nor the Accounts established hereunder shall actually hold any funds or assets.
4.2 INVESTMENT OPTIONS. The Committee shall have the authority to
maintain more than one investment option under the Plan, so as to provide
alternative hypothetical investment vehicles for purposes of measuring the
amount of the Participant's deferred compensation hereunder. Such separate
investment options may include, but are not limited to, the Common Stock
Option, the Mutual Fund Option, and the Life Insurance Option. Notwithstanding
the foregoing, additional investment options may be established by the
Committee, which shall have sole discretion to determine the number and
character of such additional investment options. The Committee shall have the
authority, in its sole discretion, to limit or eliminate the availability of
any investment option established pursuant to this Article IV.
4.3 ELECTION OF INVESTMENTS. Prior to becoming a Participant,
each Eligible Employee shall specify in writing, in a form acceptable to the
Committee, how the amount the Participant defers hereunder shall be allocated
among the investment options specified pursuant to Section 4.2 hereof. After a
Participant makes such an election, he may not change his election with respect
to Compensation earned and deferred in the Plan Year (or partial Plan Year, if
applicable) to which the election initially applies. Such election shall
automatically be deemed to apply to each subsequent Plan Year unless the
Participant, before the beginning of the Plan Year, revokes his prior election.
In that event, he may file a new election with the Committee before the
beginning of the Plan Year in accordance with the preceding provisions of this
Section 4.3.
Notwithstanding the foregoing, a Participant who allocates all
or part of the amount deferred hereunder to the Mutual Fund Option shall be
permitted, with respect to the amount that is so allocated, to allocate and
reallocate the amount so deferred among the mutual funds that are a part of the
18
<PAGE> 4
EXHIBIT 10A
Mutual Fund Option, subject to such conditions and such limitations as the
Committee may prescribe. Any such allocation or reallocation shall be made in a
manner acceptable to the Committee.
The Committee may require that any election under this Section
4.3 apply to the entire amount to which it pertains (e.g., 100% of the
Participant's future deferrals) or to such whole percentage of that amount as
the Committee may specify (e.g., increments of 25%).
4.4 EMPLOYER MATCH. At the beginning of each four-week period, the
Committee shall credit an Employer Match to the Account of each Participant who
has deferred an amount hereunder during that four-week period. The Employer
Match shall be equal to ten percent of the Participant's deferral hereunder
during the four-week period, except that the Employer Match shall be equal to
fifteen percent of the Participant's deferral if the Participant's deferral is
allocated to the Common Stock Option. The Employer Match shall be allocated
among the then-available investment options in the same proportions as a
Participant has allocated the amounts deferred hereunder pursuant to Section
4.3 hereof.
4.5 VESTING. A Participant shall be fully vested in his Account
at all time.
4.6 ESTABLISHMENT OF ACCOUNT. A separate Account shall be
maintained for each Participant who makes a deferral election pursuant to
Section 3.1 hereof. The Account shall be (1) credited with the amounts
deferred by the Participant pursuant to Section 3.1 hereof and with the
Employer Match credited pursuant to Section 4.4 hereof, (2) credited (or
charged, as the case may be) with the investment results that the Account would
have realized if the Account had actually been invested in the investment
options elected by the Participant in accordance with Sections 4.3 and 4.4
hereof (determined as if any income produced by each investment option had been
promptly reinvested in that investment option), and (3) charged with the
amounts paid by the Plan to or on behalf of the Participant pursuant to Article
V hereof. Any shares of Frisch's Restaurants, Inc. common stock that are
distributed shall be registered pursuant to the Securities Act of 1933.
ARTICLE V
Distributions
-------------
5.1 PAYMENT. The Employer shall pay to the Participant the
balance in the Participant's Account in a single sum as soon as practicable
after the later of the date on which the Participant's employment by the
Employer is terminated or the Participant's 65th birthday.
5.2 DEATH BENEFITS. If a Participant dies before the balance in
his Account has been distributed in full, the Participant's Beneficiary shall
be entitled to receive the balance in the Participant's Account. The Employer
shall pay the Beneficiary the balance in the Participant's Account in a single
sum as soon as practicable after the Participant's death.
5.3 COMMITTEE DISCRETION TO ACCELERATE CERTAIN PAYMENTS. At any
time after a Participant's termination of employment with the Employer, the
Committee, in its sole discretion, may accelerate and pay in a lump sum to the
Participant (or, where applicable, to his Beneficiary) all or part of the
then-current balance in his Account.
19
<PAGE> 5
EXHIBIT 10A
5.4 PAYMENT MEDIUM. The Committee shall make any distributions
hereunder in cash or in kind, in its sole discretion. An in-kind distribution
may be made, in the Committee's sole discretion, in the form of an interest or
interests in the hypothetical investment option or options to which the
Participant's Account is allocated in accordance with Sections 4.3 and 4.4
hereof.
ARTICLE VI
Nature of Interest of Participant
---------------------------------
Participation in the Plan shall not create, in favor of any
Participant or Beneficiary, any interest in or lien against any of the assets
of the Employer. A Participant's or Beneficiary's rights to benefits payable
under the Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, or encumbrance. All payments hereunder shall be
paid in cash from the general funds of the Employer, and no special or separate
fund shall be established and no other segregation of assets shall be made to
assure the payment of benefits hereunder. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Employer
and a Participant or any other person, and the promise of the Employer to pay
benefits hereunder shall at all times remain unfunded as to the Participant or
Beneficiary, whose rights hereunder shall be limited to those of a general and
unsecured creditor of the Employer.
ARTICLE VII
Administration
--------------
7.1 COMMITTEE. The Plan shall be administered by the Committee.
The Committee may allocate its responsibilities for the administration of the
Plan among its members or among any subcommittee(s) it may appoint and may
designate persons other than its members to carry out its responsibilities
under the Plan.
7.2 MEETINGS. The Committee shall hold meetings upon such notice,
at such place or places, and at such intervals as are required to carry out its
functions.
7.3 QUORUM. A majority of the members of the Committee at any
time in office shall constitute a quorum for the transaction of business. All
resolutions or other actions taken by the Committee shall be by vote of a
majority of those present at a meeting of the Committee, or without a meeting
by an instrument in writing signed by all the members of the Committee at such
time in office.
7.4 EXPENSES. The expenses incident to the operation of the Plan,
including the compensation of attorneys, advisers, actuaries, and such other
persons providing technical and clerical assistance as may be required, shall
be paid directly by the Employer.
7.5 POWERS OF THE COMMITTEE. In addition to any implied powers
and duties that may be needed to carry out the provisions of the Plan, the
Committee shall have the following specific powers and duties which it shall
exercise in its discretion:
(a) To make and enforce such rules and regulations as it
shall deem necessary or proper for the efficient
administration of the Plan;
20
<PAGE> 6
EXHIBIT 10A
(b) To interpret the Plan and to decide any and all
matters arising hereunder, including the right to
remedy possible ambiguities, inconsistencies, or
omissions;
(c) To compute the amount of benefits that shall be
payable to any Participant or Beneficiary in
accordance with the provisions of the Plan, and in
the event that the Committee determines that
excessive benefits have been paid to any person, the
Committee may suspend payment of future benefits to
such person or his Beneficiary or reduce the amount
of such future benefits until the excessive benefits
and any interest thereon determined by the Committee
have been recovered;
(d) To appoint other persons to carry out such
ministerial responsibilities under the Plan as it
may determine; and
(e) To employ one or more persons to render advice with
respect to any of its responsibilities under the Plan.
7.6 FINALITY. Subject to the provisions of Section 7.8 hereof,
determinations by the Committee and any interpretation, rule, or decision
adopted by the Committee under the Plan or in carrying out or administering the
Plan shall be final and binding for all purposes and upon all interested
persons, their heirs, and their personal representatives.
7.7 BENEFIT CLAIMS PROCEDURE. A claim for a benefit under the
Plan by any person shall be filed in the manner and governed by the procedures
set forth in Section 8.09 of the Savings Plan (or any successor to such
provision).
7.8 ARBITRATION OF DENIED CLAIMS. After review pursuant to the
procedures set forth in Section 8.09 of the Savings Plan (or any successor to
such provision), any controversy or claim arising out of or relating to a final
decision that denies a claim for benefits under the Plan shall be settled by
arbitration before three arbitrators in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Any such arbitration shall be subject to the statute of
limitations that would apply if the claim on which the arbitration is based
were brought as a suit in a United States district court under ERISA. The site
of any such arbitration shall be Cincinnati, Ohio.
ARTICLE VIII
Amendment, Suspension and Termination
-------------------------------------
The Board of Directors may modify, amend, suspend, or
terminate the Plan at any time; provided that no such modification, amendment,
suspension, or termination shall reduce a Participant's accrued benefit under
the Plan as of the date of such modification, amendment, suspension, or
termination.
ARTICLE IX
Miscellaneous
-------------
9.1 DESIGNATION OF BENEFICIARY. Each Participant may designate a
Beneficiary hereunder. Such designation shall be in writing, shall be made in
the form and manner prescribed by the Committee,
21
<PAGE> 7
EXHIBIT 10A
and shall be effective only if filed with the Committee before the
Participant's death. A Participant may revoke a designation of a Beneficiary
at any time, but only if a written notice of revocation is filed with the
Committee before the Participant's death. If a Participant fails to name a
Beneficiary, or if the Beneficiary named by a Participant predeceases him, the
Committee shall pay the balance in the Participant's Account to the
Participant's estate.
If the Beneficiary does not predecease the Participant, but
dies before complete distribution of the balance in the Participant's Account,
the Committee shall pay such balance to the Beneficiary's estate unless the
Participant's Beneficiary designation provides otherwise.
9.2 INCAPACITY. If the Committee determines that any person
entitled to benefits hereunder is unable to care for his affairs because of
illness or accident, any payment due may be paid for the benefit of such person
to his spouse, parent, brother, sister, or other party deemed by the Committee
to have incurred expenses for such person (unless a duly qualified guardian or
other legal representative has been appointed).
9.3 REQUIRED INFORMATION. Any person eligible to receive benefits
hereunder shall furnish to the Committee any information or proof requested by
the Committee and reasonably required for the proper administration of the
Plan. Failure on the part of any person to comply with any such request within
a reasonable period of time shall be sufficient grounds for delay in the
payment of any benefits that may be due under the Plan until such information
or proof is received by the Committee. If any person claiming benefits under
the Plan makes a false statement that is material to such person's claim for
benefits, the Committee may offset against future payments any amount paid to
such person to which such person was not entitled under the provisions of the
Plan.
9.4 INABILITY TO LOCATE PARTICIPANTS. Each Participant and each
Beneficiary entitled to receive a benefit under the Plan shall keep the
Committee advised of his current address. If the Committee is unable to locate
a Participant or Beneficiary to whom a benefit is payable under the Plan for a
period of 36 months, commencing with the first day of the month as of which
such benefit becomes payable, the total amount payable to such Participant or
Beneficiary shall be forfeited.
9.5 NO RIGHT TO EMPLOYMENT. Nothing herein contained shall be
deemed to give any person the right to be retained in the service of the
Employer or to interfere with the right of the Employer to discharge any
employee at any time without regard to the effect that such discharge may have
upon the employee under the Plan.
9.6 WITHHOLDING TAXES. The Employer may make any appropriate
arrangements that are approved by the Committee to deduct from all amounts paid
under the Plan any taxes that it reasonably determines to be required to be
withheld by any government or government agency. If the Committee decides to
make, in its sole discretion, an in-kind distribution of shares of Frisch's
Restaurants, Inc. common stock, the Employer may withhold certain of those
shares to satisfy the withholding obligation. The Participant and/or his
Beneficiary shall bear all taxes on amounts paid under the Plan to the extent
that no taxes are withheld, irrespective of whether withholding is required.
22
<PAGE> 8
EXHIBIT 10A
9.7 GENDER AND NUMBER. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of
such phrases as "his or her" and "Employee or Employees," any masculine
terminology herein shall also include the feminine and neuter, and the
definition of any term herein in the singular shall also include the plural,
except when otherwise indicated by the context.
9.8 HEADING. Any headings used in this instrument are for
convenience of reference only and are to be ignored in the construction of any
provision hereof.
9.9 SEVERABILITY. If any provision of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if such illegal or invalid provision had never been inserted
herein.
9.10 GOVERNING LAW. The Plan shall be construed, administered, and
regulated in accordance with the laws of the State of Ohio, except to the
extent that such laws are preempted by Federal law.
9.11 EFFECTIVE DATE. The Plan shall be effective as of November
15, 1993. It shall not apply to any employee who terminated employment with
the Employer before that date.
FRISCH'S RESTAURANTS, INC.
Date: October 12, 1993 By: Louis J. Ullman
------------------------- -----------------------
October 12, 1993 Louis J. Ullman
ATTEST:
Dawn Langford
- -------------------------------
Dawn Langford
23
<PAGE> 1
EXHIBIT 10B
FRISCH'S EXECUTIVE
RETIREMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I TITLE AND EFFECTIVE DATE 1
------------------------
ARTICLE II DEFINITIONS 2
-----------
ARTICLE III MEMBERSHIP IN THE PLAN 4
----------------------
ARTICLE IV EXCESS RETIREMENT BENEFITS 5
--------------------------
ARTICLE V EARLY RETIREMENT BENEFITS 6
-------------------------
ARTICLE VI DEATH BENEFITS 7
--------------
ARTICLE VII TERMINATION BENEFITS 8
--------------------
ARTICLE VIII PLAN ADMINISTRATION 9
-------------------
ARTICLE IX AMENDMENT OR TERMINATION 10
------------------------
ARTICLE X MISCELLANEOUS 11
-------------
</TABLE>
24
<PAGE> 2
EXHIBIT 10B
FRISCH'S EXECUTIVE
RETIREMENT PLAN
Effective June 1, 1994, Frisch's Restaurants, Inc. (hereinafter referred to as
the "Employer"), hereby adopts the Frisch's Executive Retirement Plan
(hereinafter referred to as the "Plan") as set forth herein.
This plan is completely separate from the Frisch's Restaurants, Inc. Defined
Benefit Pension Plan for Managers and Office Employees (hereinafter referred to
as the "Qualified Plan") and is not funded or qualified for special tax
treatment under the Internal Revenue Code.
The purpose of this Plan is to restore retirement benefit payments to those
eligible employees who retire under the Qualified Plan and whose retirement
benefits under said Qualified Plan will be reduced by the limitations imposed
by Section 401(a)(17) of the Internal Revenue Code of 1986, as amended.
The Plan is maintained by the Employer for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
and is intended to qualify for exemption from the reporting, disclosure,
participation, vesting, funding, and fiduciary responsibility requirements of
ERISA.
ARTICLE I
TITLE AND EFFECTIVE DATE
SECTION 1.01. This Plan shall be known as the Frisch's Executive
Retirement Plan (hereinafter referred to as the "Plan").
SECTION 1.02. The Effective Date of this Plan shall be June 1,
1994.
25
<PAGE> 3
EXHIBIT 10B
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the meanings
specified below unless a different meaning is clearly required by the context:
SECTION 2.01. The term "Accrued Excess Benefit" shall mean the
Participant's Accrued Benefit as defined in the Qualified Plan computed without
regard to limits imposed on Monthly Plan Compensation as a result of IRC
Section 401(a)(17), but with regard to limits imposed by IRC Section 415,
reduced by the maximum amount of accrued retirement benefit that can be
provided under the Qualified Plan in accordance with the limitations imposed by
the Code as of the date of determination.
SECTION 2.02. The term "Actuarially Equal" shall mean a benefit of
equal value based on the actuarial assumptions used for this purpose in the
Qualified Plan.
SECTION 2.03. The term "Beneficiary" shall mean any designated
person, persons, trust or the estate of a Participant entitled to receive any
benefits under this Plan. The term shall also include any contingent
Beneficiary who shall be entitled to receive benefits under this Plan in the
event the designated Beneficiary does not survive the Participant.
SECTION 2.04. The term "Board of Directors" shall mean the Board of
Directors of the Employer.
SECTION 2.05. The term "Chief Financial Officer" shall mean the
Chief Financial Officer of the Employer.
SECTION 2.06. The term "Code" shall mean the Internal Revenue Code
of 1986, as amended.
SECTION 2.07. The term "Committee" shall mean the Compensation
Committee of the Board of Directors.
SECTION 2.08. The term "Death Benefit" shall mean any benefit paid
to a Beneficiary upon the death of a Participant as provided under the terms of
this Plan.
SECTION 2.09. The term "Early Retirement Date" shall mean the first
day of the month subsequent to the day a Participant terminates employment with
the Employer through an election to exercise the option of early retirement
pursuant to Section 5.01 hereof.
SECTION 2.10. The term "Effective Date" shall mean June 1, 1994.
SECTION 2.11. The term "Employee" shall mean any person employed by
the Employer, as an office employee, restaurant manager, supervisor, supervisor
of commissary employee, or officer who is covered by the Qualified Plan.
SECTION 2.12. The term "Employer" shall mean Frisch's Restaurants,
Inc., its successors and assigns, any subsidiary or affiliated organizations
authorized by the Committee to participate in this Plan with respect to their
Employees, and any organization or person into which the Employer may be merged
or consolidated or to which all or substantially all of its assets may be
transferred which is required to assume the obligations of the Employer under
Section 10.07 hereof.
26
<PAGE> 4
EXHIBIT 10B
SECTION 2.13. The term "Excess Benefit" shall mean the retirement
benefit produced for a Participant by applying the benefit formula provided in
the Qualified Plan (including the vesting requirements) to the Participant's
Monthly Plan Compensation and Years of Service without regard to any
limitations imposed by Section 401(a)(17) of the Code, but with regard to
limits imposed by IRC Section 415, less the maximum amount of retirement
benefit that can be provided under the Qualified Plan in accordance with the
limitations imposed by the Code.
SECTION 2.14. The term "Monthly Plan Compensation" shall mean the
Participant's Monthly Plan Compensation as defined in the Qualified Plan,
without regard to any limitation or restriction imposed by Section 401(a)(17)
of the Code.
SECTION 2.15. The term "Monthly Retirement Income" shall mean a
monthly income due a Retired Participant which shall commence as of his
Retirement Date and which shall continue for the period provided herein.
SECTION 2.16. The term "Normal Retirement Date" shall mean the
Participant's Normal Retirement Date as defined in the Qualified Plan.
SECTION 2.17. The term "Participant" shall mean any Employee of the
Employer who has become a Participant as provided in Article III hereof.
SECTION 2.18. The term "Plan" shall mean the Frisch's Executive
Retirement Plan.
SECTION 2.19. The term "Plan Administrator" shall mean the Chief
Financial Officer.
SECTION 2.20. The term "Qualified Plan" shall mean the Frisch's
Restaurants, Inc. Defined Benefit Plan for Managers and Office Employees.
SECTION 2.21. The term "Retired Participant" shall mean any
Participant of the Plan who has qualified for retirement and has retired, and
who is eligible to receive a Monthly Retirement Income by direction of the
Committee.
SECTION 2.22. The term "Year of Service" shall mean the
Participant's Year of Service as defined in Section 1.23 of the Qualified Plan.
SECTION 2.23. Any words used herein in the masculine shall be read
and construed in the feminine where they would so apply. Words in the singular
shall be read and construed as though used in the plural in all cases where
they would so apply.
27
<PAGE> 5
EXHIBIT 10B
ARTICLE III
MEMBERSHIP IN THE PLAN
SECTION 3.01. Each Employee of the Employer who is covered by the
Qualified Plan, whose benefits thereunder are limited by reason of the
application of Section 401(a)(17) of the Code, as amended, shall be a
Participant under this Plan, except for any Employee whose Normal Retirement
Date was on or before June 1, 1994.
SECTION 3.02. The payment of benefits to the Participant or his
Beneficiary under this Plan is conditioned upon the continuous employment of
the Participant by the Employer (including periods of disability and authorized
leaves of absence) from the date of the Participant's initial participation in
the Plan until the Participant's Normal Retirement Date, Early Retirement Date,
Death or termination of employment in accordance with Article VII hereof,
whichever first occurs.
SECTION 3.03. The Committee retains the right to remove a
Participant, a Retired Participant, or a Beneficiary from participation in the
Plan if such person (i) engages in any manner in any business which is
competitive with the Employer; or (ii) becomes financially interested in any
such competitive business or service, directly or indirectly, as an individual,
partner, shareholder, director, officer, principal, agent, employee, consultant
or in any other relationship or capacity; provided that the purchase of a
publicly traded security in such business or service shall not in itself be
cause for removing a Participant, a Retired Participant, or Beneficiary from
participation in the Plan.
SECTION 3.04. In the event a person is removed from the Plan, the
Employer shall have no further liability for benefits otherwise payable under
the Plan effective as of the date of such removal.
28
<PAGE> 6
EXHIBIT 10B
ARTICLE IV
EXCESS RETIREMENT BENEFITS
SECTION 4.01. When a Participant lives to his Normal Retirement
Date and retires, he may be entitled to an Excess Benefit under this Plan.
Such Excess Benefit, if any, shall be the full amount of retirement benefit
produced for the Participant by the Qualified Plan's formula applied to the
Participant's Monthly Plan Compensation and Years of Service, less the maximum
amount of retirement benefit that can be provided by the Qualified Plan in
accordance with the limitations imposed by the Code.
SECTION 4.02. Prior to a Participant's actual date of retirement,
the Participant may elect in a written application provided by the Plan
Administrator to receive his Excess Benefit in one of the following optional
forms:
(a) an annuity payable for the Participant's life.
(b) a modified annuity payable during the Participant's life, and
after his death payable at 50%, 66 2/3%, 75%, or 100% of
the Participant's modified annuity.
(c) a lump sum payment.
(d) such other form of benefit as shall be elected by the
Participant.
Each of the alternative forms shall be Actuarially Equal. An election under
this section may be revoked and a new election may be made at any time prior to
the commencement of benefits. Once benefits have commenced, no revocation or
change shall be permitted.
Notwithstanding the preceding, the Plan Administrator reserves the right to
require a single sum distribution of any benefit if the lump sum equivalent of
that benefit under Section 4.02(c) is less than five thousand dollars ($5,000).
SECTION 4.03. Excess Benefits payable under this Plan to a Member
or his spouse or other Beneficiary shall be paid directly by the Employer. The
Employer shall not be required to sequester any assets to be applied for the
payment of benefits under this Plan.
29
<PAGE> 7
EXHIBIT 10B
ARTICLE V
EARLY RETIREMENT BENEFITS
SECTION 5.01. A Participant who is eligible for Early Retirement
under the Qualified Plan shall be eligible for Early Retirement under this
Plan.
SECTION 5.02. The Excess Benefit payable to a Member upon his Early
Retirement Date shall be equal to his Accrued Excess Benefit reduced in the
same manner as the Qualified Plan. Such benefit shall be paid on the same
manner as provided in Section 4.02.
30
<PAGE> 8
EXHIBIT 10B
ARTICLE VI
DEATH BENEFITS
SECTION 6.01. In the event of the death of an active Participant
prior to his Early or Normal Retirement Date, his Beneficiary shall be entitled
to a Death Benefit.
SECTION 6.02. The Death Benefit payable to the Beneficiary of an
active Participant or a Disabled Participant shall be calculated in the same
manner as the Qualified Plan (without regard to any limitations provided by the
Code), less the value of any Death Benefit payable by the Qualified Plan.
SECTION 6.03. Upon becoming a Participant, an Employee shall elect
a form of distribution for any Death Benefits payable under this Article. The
optional forms of distribution are:
(a) an annuity for the life of the Beneficiary,
(b) a single distribution.
Any election made by the Participant shall be revocable at any time prior to
his death. Such election shall not be changed by the Beneficiary.
31
<PAGE> 9
EXHIBIT 10B
ARTICLE VII
TERMINATION BENEFITS
SECTION 7.01. If a Participant is terminated prior to his Early
Retirement Date and after earning five Years of Service, such Participant shall
be entitled to receive a termination benefit from the Plan.
SECTION 7.02. The Participant's termination benefit shall be equal
to his Accrued Excess Benefit as of the Participant's date of termination.
The termination benefit determined above shall be payable at the Participant's
Normal Retirement Date, as provided in Section 4.02. However, if the
Participant is otherwise eligible for an early retirement benefit under the
Qualified Plan, the Participant may elect to receive an Early Retirement
Benefit as provided in Article V.
32
<PAGE> 10
EXHIBIT 10B
ARTICLE VIII
PLAN ADMINISTRATION
SECTION 8.01. The Chief Financial Officer shall be the Plan
Administrator.
SECTION 8.02. The Plan Administrator shall have the following
duties, powers, and responsibilities.
(a) The Plan Administrator shall have the authority to interpret
the Plan, to adopt and review rules relating to the Plan and
to make any other determinations for the administration of the
Plan. However, the Committee shall approve any decisions of
the Plan Administrator pertaining to his specific benefits
under the Plan unless such matter applies to the benefits of
all Members.
(b) The Plan Administrator may employ such counsel, accountants,
actuaries, and other agents as he shall deem advisable. The
Employer shall pay the compensation of such counsel,
accountants, actuaries, and other agents and any other
expenses incurred by the Plan Administrator in the
administration of the Plan.
SECTION 8.03. Benefits shall be paid in accordance with the
provisions of this Plan. Claims for benefits, and appeals from a denial of a
claim, shall be made pursuant to the claims procedure provided in the Qualified
Plan.
33
<PAGE> 11
EXHIBIT 10B
ARTICLE IX
AMENDMENT OR TERMINATION
SECTION 9.01. The Employer, by action of its Board of Directors,
reserves the right at any time and from time to time, to terminate, modify or
amend, in whole or in part, any or all provisions of the Plan, including
specifically the right to make any such amendment effective retroactively.
SECTION 9.02. Notwithstanding Section 9.01, no amendment may reduce
the benefits of any Retired or Disabled Member without consent of the Member.
No amendment may reduce the benefits payable to the Beneficiary of a deceased
Member without the consent of the Beneficiary.
34
<PAGE> 12
EXHIBIT 10B
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Nothing contained in this Plan shall be deemed to
give any Participant or Employee the right to be retained in the Service of the
Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of the Plan.
SECTION 10.02. The rights to the Participant, the Beneficiary of the
Participant, or any other person claiming through the Participant under this
Plan, shall be solely those of an unsecured general creditor of the Employer.
SECTION 10.03. This Plan does not involve a reduction in salary for
the Participants or a foregoing of an increase in future salary by the
Participant.
SECTION 10.04. If no Beneficiary has been designated, or the
designated Beneficiary does not survive the Participant, any amounts to be paid
to the Participant's Beneficiary shall be paid to the Participant's surviving
spouse. If the Participant is not survived by a spouse, then such amounts
shall be paid to the estate of the Participant.
SECTION 10.05. In making any distribution to or for the benefit of
any minor or incompetent Beneficiary, the Plan Administrator, in his sole,
absolute and uncontrolled discretion, may, but need not, make such distribution
to a legal or natural guardian or other relative of such minor or court
appointed committee of such incompetent, or to any adult with whom such minor
or incompetent temporarily or permanently resides, and any such authority and
discretion to expend such distribution for the use and benefit of such minor or
incompetent. The receipt of such guardian, committee, relative or other person
shall be a complete discharge to the Employer, without any responsibility on
its part or on the part of the Plan Administrator to see to the application
thereof.
SECTION 10.06. Except insofar as this provision may be contrary to
the applicable law, no sale, transfer, alienation, assignment, pledge,
collateralization, or attachment of any benefits under this Plan shall be valid
or recognized by the Plan Administrator.
SECTION 10.07. In the event the Employer shall merge into, be
acquired by, or consolidate with any other entity this Plan shall terminate and
accrued benefits shall be distributed to Participants. However, the preceding
sentence shall not apply if such other entity agrees to assume all rights and
obligations set forth in the Plan.
SECTION 10.08. A Participant shall have the right to change his
designated Beneficiary by notifying the Plan Administrator of such in writing.
Such change shall become effective upon written acknowledgment of same by the
Plan Administrator. Any payments made by the Employer to a Beneficiary in good
faith and under the terms of the Plan shall fully discharge the Employer from
all further obligations with respect to such payments.
SECTION 10.09. This Plan shall be binding upon and inure to the
benefit of the Employer, its successors and assigns and each Participant and
his heirs, executors, administrators and legal representatives.
SECTION 10.10. This Plan shall be governed by the laws of Ohio.
This Plan is solely between the Employer and the Participant. The Participant,
his Beneficiary or other persons claiming through the Participant shall only
have recourse against the Employer for enforcement of the Plan.
35
<PAGE> 13
EXHIBIT 10B
IN WITNESS WHEREOF, the Employer has caused the Plan to be executed on this
12th day of April, 1994 and to be effective as of June 1, 1994.
FRISCH'S RESTAURANTS, INC.
ATTEST: (Seal) BY: Louis J. Ullman
----------------------------
Louis J. Ullman
Chief Financial Officer
W. Gary King
- ------------------------------
W. Gary King
Assistant Secretary
36
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and statement of earnings of Frisch's Restaurants, Inc. and subsidiaries
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-02-1996
<PERIOD-START> MAY-29-1995
<PERIOD-END> SEP-17-1995
<CASH> 540,440
<SECURITIES> 0
<RECEIVABLES> 1,531,887
<ALLOWANCES> 0
<INVENTORY> 4,194,029
<CURRENT-ASSETS> 9,499,388
<PP&E> 167,971,753
<DEPRECIATION> 70,692,011
<TOTAL-ASSETS> 118,085,358
<CURRENT-LIABILITIES> 18,263,682
<BONDS> 26,322,283
<COMMON> 6,808,939
0
0
<OTHER-SE> 57,906,654
<TOTAL-LIABILITY-AND-EQUITY> 118,085,358
<SALES> 52,206,975
<TOTAL-REVENUES> 52,665,979
<CGS> 47,798,457
<TOTAL-COSTS> 47,798,457
<OTHER-EXPENSES> 2,836,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 733,512
<INCOME-PRETAX> 1,297,475
<INCOME-TAX> 415,000
<INCOME-CONTINUING> 882,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 882,475
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
