<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-7323
____________________
FRISCH'S RESTAURANTS, INC.
INCORPORATED IN THE IRS EMPLOYER IDENTIFICATION NUMBER
STATE OF OHIO 31-0523213
2800 GILBERT AVENUE
CINCINNATI, OHIO 45206
513/961-2660
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
COMMON STOCK OF NO PAR VALUE AMERICAN STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [ X ] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K [ X ].
AS OF AUGUST 1, 1995, 6,618,952 COMMON SHARES WERE OUTSTANDING, AND THE
AGGREGATE MARKET VALUE OF THE COMMON SHARES (BASED UPON THE AUGUST 1, 1995
CLOSING PRICE OF THESE SHARES ON THE AMERICAN STOCK EXCHANGE) OF FRISCH'S
RESTAURANTS, INC. HELD BY NONAFFILIATES WAS APPROXIMATELY $47.7 MILLION.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT DATED AUGUST 22, 1995 ARE
INCORPORATED BY REFERENCE INTO PART III.
<PAGE> 2
PART I
------
(Items 1 through 4)
-------------------
Item 1. - Business
------------------
Frisch's Restaurants, Inc. ("Company") was incorporated in 1947. The Company
and its subsidiaries are engaged in the food service business, including the
operation of and licensing of others to operate restaurants, and in the lodging
business.
The food service industry is the Company's dominant industry segment.
Operations in this industry are vertically integrated, and include the
manufacture and distribution of food products and supplies to its restaurants
and to licensees for resale to the general public. Fees are charged to
licensees for use of trademarks and trade names and for advertising services
based principally on percentages of sales.
The Company also operates two high-rise hotels located in greater Cincinnati,
under the name "Quality Hotel"; one containing 147 guest rooms, banquet
facilities for 400, a restaurant and cocktail lounge; the other having 236
guest rooms, banquet facilities for 700, and two restaurants with cocktail
lounges.
The Company operates or licenses others to operate family restaurants, most of
which have "drive-thru" service, located in Ohio, Kentucky, Indiana and Florida
which use the tradename "Big Boy". The Company also has the right to operate
or license others to operate Big Boy family restaurants in Texas, Oklahoma,
portions of Kansas, the unfranchised areas of Tennessee and Georgia and, under
certain circumstances, in prescribed areas of states adjacent to Tennessee and
Georgia. The Company licenses six restaurants from Hardee's Food Systems, Inc.
which it operates in southwestern Ohio and northern Kentucky. As of May 28,
1995, there were 109 restaurants operated by the Company and 54 operated by
licensees. The following tabulation sets forth restaurant openings and
closings for both operated and licensed restaurants for the five years ended
May 28, 1995:
<TABLE>
<CAPTION>
Year ended
6/2/91 5/31/92 5/30/93 5/29/94 5/28/95
------ ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Operated Restaurants
--------------------
Big Boy
Opened 6 1 13 9 9
Replaced by new units - - (2) - (1)
Closed (5) (3) (9) (2) (1)
Sold to licensees - (12) - - -
Total Big Boy 101 87 89 96 103
Roy Rogers
Closed (4) - (1) - -
Converted to Hardee's (6) - - - -
Total Roy Rogers 1 1 0 0 0
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C> <C>
Hardee's
Opened - 1 - - -
Closed - - - (2) -
Acquired 1 - - - -
Converted from Roy Rogers 6 - - - -
Total Hardee's 7 8 8 6 6
--- -- -- --- ---
Total Operated Restaurants 109 96 97 102 109
=== == == === ===
Licensed Restaurants
--------------------
Big Boy
Opened 2 2 1 - -
Closed (2) (2) (11) (4) (13)
Acquired from licensor - 12 - - -
--- -- -- --- ---
Total Licensed Big Boy 69 81 71 67 54
== == == == ==
</TABLE>
The following tabulation sets forth the range and average floor space and the
range and average seating capacity by type of restaurant for operated
restaurants (similar information for licensed restaurants is not available):
<TABLE>
<CAPTION>
Floor space - Sq. Ft. Seating capacity
------------------------------------ ------------------------------------
Range Range
---------------------- ----------------------
Smallest Largest Average Smallest Largest Average
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Type of Restaurant
Big Boy 3578 6820 5632 118 200 157
Hardee's 2350 4100 2959 60 150 101
</TABLE>
The "Big Boy" restaurants are family restaurants operating under the name of
"Frisch's". Menus are generally standardized with a wide variety of items at
moderate prices, featuring the "Big Boy" double-deck hamburger sandwich and
other sandwiches, steak, pasta, chicken and seafood dinners, pies and other
items. Most "Big Boy" restaurants also contain breakfast bars, soup and salad
bars and drive-thru service. The "Hardee's" restaurants are fast food
restaurants specializing in breakfasts, hamburgers, chicken items, salads and
variety sandwiches. All Hardee's also have drive-thru service. Older
restaurants are located in suburban or urban neighborhoods which cater to local
trade rather than highway travel. Restaurants opened in recent years have
generally been located near expressways.
The agreements with licensees are not uniform, but substantially all of the
licenses for individual restaurants are covered by agreements containing the
following provisions:
1. The Licensor grants to the Licensee the right to use the name "Frisch"
and/or "Frisch's" and related trademarks and names in connection with the
operation of a food and restaurant business, in return for which the Licensee
pays a license fee equal to three and three-quarters percent (3-3/4%) of its
gross sales.
2. The Licensor provides local and regional advertising through publications,
radio, television, etc., in return for which the Licensee pays an amount equal
to two and one-half percent (2-1/2%) of its gross sales.
3
<PAGE> 4
3. The Licensee agrees to conduct its business on a high scale, in an efficient
manner, with cleanliness and good service, all to the complete satisfaction of
the Licensor, and to comply with all food, sanitary and other regulations, and
to serve only quality foods.
4. The term of the license is for a period of five (5) years. The license can
be renewed for two further periods of five (5) years each provided the terms
are similar to those contained in license agreements given by the Licensor at
such time.
To service its owned and certain licensed units in Ohio, Kentucky and Indiana,
the Company operates a commissary at Cincinnati, Ohio, where it prepares foods,
and stocks foods, forms, paper products and other supplies. Certain companies
in the foodservice industry operate commissaries, while others purchase from
outside sources. Eighteen of the licensed units (33%) currently purchase items
from the commissary. Big Boy units licensed in northern Indiana, northwestern
Ohio and Florida do not buy food and supplies from the Company.
The Company also provides bookkeeping and payroll services to its owned and
some of its licensed units. Ten of the licensed units (19%) currently purchase
these services from the Company.
Pursuant to an agreement with Elias Brothers Restaurants, Inc., the Company has
the right to use and sub-license others to use the registered trademark and
tradename "Big Boy" for a perpetually renewable term at no license fee in Ohio,
Kentucky, Indiana, Florida, Texas, Oklahoma, parts of Kansas, the unfranchised
areas of Tennessee and Georgia and, under certain circumstances, prescribed
areas of states adjacent to Tennessee and Georgia.
Seasonal weather conditions can have a marked effect upon revenues and
earnings. Due to this seasonality, the first and fourth quarters of the
Company's fiscal year normally account for a disproportionate share of annual
revenues and earnings.
The business in which the Company is engaged is highly competitive and many of
its competitors are substantially larger and possess greater financial
resources than does the Company. Most of the Company's operations are in the
family restaurant portion of the foodservice industry and are located in the
states of Ohio, Kentucky and Indiana. The Company has numerous competitors,
none of which is dominant in this sector of the foodservice industry. The
principal methods of competition in the foodservice industry are service, food
quality, cleanliness, customer perception of value and advertising.
Raw materials used in the Company's business (which consist principally of food
items) are generally plentiful and may be obtained from any number of
suppliers. Quality and price are the principal determinants of source.
The Company's working capital practices are incorporated herein by reference to
Management's Discussion and Analysis in Part II, item 7, page 9 of this Form
10-K, under the caption "Liquidity and Capital Resources."
The Company does not believe that various federal, state and local
environmental regulations will have any material impact upon its capital
expenditures, earnings or competitive position.
As of May 28, 1995, the Company and its subsidiaries employed approximately
6,700 persons, approximately 4,700 of whom were full-time and 2,000 were
part-time.
4
<PAGE> 5
Item 2. - Properties
--------------------
The Company owns the building which houses its commissary in Cincinnati, Ohio.
The area of this building is approximately 79,000 square feet. The facility
operates one shift daily so that additional productive capacity is available
when needed. It is suitable and adequate to supply Company restaurants and
franchise needs in all of the Company's market areas for the forseeable future.
The Company also maintains administrative office space in Cincinnati,
approximating 49,000 square feet, under a lease expiring December 31, 2002.
As of May 28, 1995, the Company and its subsidiaries operated 109 restaurants,
most of which are family restaurants in Ohio, Kentucky and Indiana. It is the
Company's policy to own its restaurant locations whenever possible. Seventy
(70) locations are owned and thirty-nine (39) locations are leased. The leases
generally provide for prime terms of fifteen (15) or twenty (20) years with
options aggregating ten (10) or fifteen (15) years.
During the next five years, leases for restaurant facilities will expire as
follows:
<TABLE>
<CAPTION>
Fiscal year ending in Number of leases expiring
--------------------- -------------------------
<S> <C>
1996 6
1997 5
1998 5
1999 4
2000 4
</TABLE>
All but one of the above twenty-four leases have options to renew for from 5 to
20 years, and/or favorable purchase options.
The Company owns and operates two hotels in greater Cincinnati, one of which is
located on land that is leased through April 30, 2020, with renewal options
aggregating 50 years.
The furniture, fixtures and equipment used in the operation of the business are
owned by the Company.
Mortgages totaling approximately $1,140,000 encumber the commissary in
Cincinnati, Ohio, one restaurant location and various equipment.
The Company owns a one-fifteenth limited partner's interest in the Cincinnati
Reds professional baseball team.
The Company owns farm property in Warren County, Ohio, approximating 167 acres,
which is held for investment and which is operated profitably as a thoroughbred
horse boarding, breeding and training facility. Related parties do not use
this facility.
The Company owns a former commissary and office building in Dallas, Texas,
consisting of approximately 42,000 square feet. This building was primarily
used as a warehouse and is currently for sale. Surplus land and six former
restaurant locations are also held for sale.
Item 3. - Legal Proceedings
---------------------------
From time to time, the Company is subject to various claims and suits in the
ordinary course of its business. The Company does not believe that any
ultimate liability for these claims will have a material impact on its earnings
or financial condition.
5
<PAGE> 6
Item 4 . Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
Not applicable.
Executive Officers of the Registrant
------------------------------------
The executive officers are chosen at the annual meeting of the Board of
Directors for a term of one year and until their successors are chosen and
qualified. Each of the executive officers listed below has been continuously
employed by the Company for at least the past five years:
<TABLE>
<CAPTION>
Present
Office
Held
Name Age Since
---- --- ----
<S> <C> <C> <C>
Jack C. Maier 70 Chairman of the Board 1970
Craig F. Maier 45 President and Chief Executive Officer 1989
Marvin G. Fields 60 Senior Vice President - Operations 1971
Louis J. Ullman 63 Senior Vice President - Finance 1971
Donald H. Walker 49 Treasurer 1982
W. Gary King 58 Assistant Secretary 1972
</TABLE>
<TABLE>
PART II
-------
(Items 5 through 9)
-------------------
Item 5. - Market for the Registrant's Common Equity and Related Stockholder Matters
-----------------------------------------------------------------------------------
<CAPTION>
Year Ended May 28, 1995 Year Ended May 29, 1994
------------------------------ --------------------------------
Stock Prices Stock Prices
----------------- Dividend ------------------- Dividend
High Low per share High Low per share
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 14 7/8 11 3/4 6 cents 18 13 5/8 6 cents
2nd Quarter 13 1/4 9 7/8 6 cents 16 14 6 cents
3rd Quarter 10 5/8 8 7/8 6 cents 15 3/4 12 5/8 6 cents
4th Quarter 9 5/8 8 1/4 6 cents 15 3/8 12 1/2 6 cents
</TABLE>
In addition to cash dividends above, a 4% stock dividend was paid in 1995 and
1994. There are approximately 3,200 shareholders of record. The Company's common
stock is traded on the American Stock Exchange under the symbol FRS.
Through July 10, 1995, the Company has paid 138 consecutive quarterly dividends
during its thirty-four year histroy as a public company. The Company has also
paid twenty-four stock dividends since 1970, which has resulted in increased
dividend payouts in every year since 1975.
6
<PAGE> 7
Item 6. - Selected Financial Data
---------------------------------
<TABLE>
<CAPTION>
(In Thousands)
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue
Sales $161,429 $157,995 $146,732 $135,412 $142,416
Other 1,630 2,070 2,255 2,918 2,085
-------- -------- -------- -------- --------
Total revenue 163,059 160,065 148,987 138,330 144,501
Costs and expenses
Cost of sales
Food and paper 52,299 51,071 46,795 42,794 46,282
Payroll and related 56,335 52,827 49,741 46,337 49,976
Other operating expenses 40,781 37,792 34,337 31,481 34,790
-------- -------- -------- -------- --------
149,415 141,690 130,873 120,612 131,048
General and administrative 4,582 5,030 4,701 4,819 3,511
Advertising 4,008 3,873 3,632 3,367 3,509
Interest expense 1,961 1,554 1,341 1,389 1,756
-------- -------- -------- -------- --------
Total costs and expenses 159,966 152,147 140,547 130,187 139,824
-------- -------- -------- -------- --------
Earnings before income taxes 3,093 7,918 8,440 8,143 4,677
Income taxes
Current 843 3,553 3,493 3,451 2,440
Deferred (108) (711) (445) (604) (1,010)
-------- -------- -------- -------- --------
735 2,842 3,048 2,847 1,430
-------- -------- -------- -------- --------
Net earnings $2,358 $5,076 $5,392 $5,296 $3,247
======== ======== ======== ======== ========
Primary and fully diluted net earnings
per share of common stock $.36 $.77 $.81 $.81 $.50
======== ======== ======== ======== ========
Dividends Per Share
Cash $.24 $.24 $.24 $.24 $.24
Stock 4% 4% 4% 4% 4%
Other Financial Statistics
Capital expenditures $23,283 $18,312 $22,823 $7,860 $11,468
Total assets 115,548 104,349 98,095 86,990 87,564
Long-term obligations 32,696 24,319 18,703 14,583 19,730
Shareholders' equity 64,627 63,830 60,299 56,381 52,279
Per share $9.76 $9.64 $9.11 $8.59 $8.01
Return on investment 3.7% 8.4% 9.6% 10.1% 6.4%
Average number of common shares outstanding 6,619 6,622 6,621 6,560 6,529
Percentage increase (decrease) in total revenue 1.9% 7.4% 7.7% (4.3%) (1.6%)
Earnings as a percentage of total revenue
Earnings before income taxes 1.9% 4.9% 5.7% 5.9% 3.2%
Net earnings 1.4% 3.2% 3.6% 3.8% 2.2%
<FN>
Note: Per share data, except for dividends, are based on the weighted average number of common shares outstanding.
</TABLE>
7
<PAGE> 8
Item 7. - Management's Discussion and Analysis of Financial Condition and
------- ---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
---------------------
Total revenue reached record levels for the third year in a row, rising 1.9% to
$163,059,000, after rising 7.4% and 7.7% in 1994 and 1993, respectively. The
increases in revenue came primarily from 31 new Big Boy restaurants built in
the past three years. Initial sales volume at the new units has been
encouraging, however, sales have tended to level off below expectation in many
of these units. Same store sales declined moderately this year after showing
modest gains in each of the two previous fiscal years. Prices were increased
2.4% in the fourth quarter of fiscal 1995. Menu prices were also raised 2.3%
late in fiscal 1994 and 2% late in 1993 and 1992. The modernization of
nineteen Big Boy restaurants in fiscal 1995 also helped the sales improvement.
At the end of the fiscal year, the Company operated 109 restaurants--seven more
than the year before. During the year, nine new Big Boy restaurants were
opened--eight at new sites and one replacement--while two were closed.
Other income has declined over the last several years primarily due to lower
distributions from the Company's investment in the Cincinnati Reds and lower
franchise income. In 1995, no distribution was received from the Reds.
Cost of sales as a percentage of total revenue rose disproportionately in 1995
after experiencing a modest increase in 1994. The food and paper cost
percentage has remained relatively stable the past two years. However, the
other two components of cost of sales--payroll and related expenses and other
operating expenses--rose significantly in 1995 after being fairly constant in
1994 and 1993. Payroll and related expenses increased from 33.0% of revenue in
1994 to 34.5% of revenue in 1995. Other operating expenses also increased
considerably from 23.6% of revenue in 1994 to 25% of revenue this year. The
overall impact was an increase in cost of sales from 88.5% to 91.6% of revenue.
Payroll and related expense rose 6.6% as a result of a general rise in average
hourly rates and higher starting salaries for management. A shortage of labor
in a number of the Company's market areas was the main cause of the higher
rates. Hours worked were scaled back in an effort to control these costs, as
the higher hourly rates caused payroll expense to exceed acceptable payroll
levels. Currently, there is an effort to raise the Federal minimum wage. A
moderate increase in the Federal minimum wage should not have an immediate
effect on earnings because of current labor market conditions, although the
long-term effects would clearly create additional cost pressures.
The other component of cost of sales that rose disproportionately to revenue
was other operating expenses. Higher manager training costs and depreciation,
both of which relate to the expansion of new Big Boy restaurants, were the
principal causes of the 7.9% increase in other operating expenses.
The strength of the Company's operation has always been its Greater Cincinnati
market. As the Company strives to achieve greater market penetration in such
areas as Indianapolis and Columbus, it has become necessary to incur some
higher operating costs to gain market share.
While food service is the Company's dominant industry segment, two hotels are
also operated. Due to the abnormally low food service operating earnings, the
hotels contributed approximately 18% of pretax earnings this year.
There are other factors over which the Company has little control that will
impact future earnings. The restaurant industry in general, and the family
restaurant segment in particular, has found it difficult to increase customer
counts. Increased competition and market saturation have contributed to a
shortage of labor with an accompanying rise in average hourly rates. Customer
resistance to menu price increases may be felt if the higher labor cost is
passed along too swiftly. The
8
<PAGE> 9
Company's customers have not shown any significant preference for highly
nutritional, low-fat foods, although such items are available on the menu and
salad bars. The Company has positioned itself to meet these and other
challenges by continuing to provide its customers with quality products of real
value, with the service they expect, in clean, pleasant surroundings.
General and administrative expenses declined from 1994 to 1995 because the
Company wrote off the remaining goodwill associated with licensing rights in
the state of Texas in 1994.
Interest expense rose this year due to significantly higher debt levels that
were incurred to finance new restaurant construction. Interest expense should
rise less rapidly in the coming year because new restaurant construction is
being scaled back.
Income tax expense as a percentage of pre-tax earnings was only 23.8% versus
35.9% last year because of the significant drop in earnings this year. The
effective tax rate should be higher next year if earnings return to normal
levels and because the Targeted Jobs Tax Credit which expired at the end of
1994 does not appear to be favored for reinstatement by the Congress.
Liquidity and Capital Resources
-------------------------------
During the year, cash provided by operating activities totaled $14,200,000 and
an additional $10,400,000 was borrowed. Most of these funds were invested in
new Big Boy restaurant construction, new restaurant sites, and the remodeling
of existing facilities.
The Company has a $20,000,000 revolving line of credit, $8,000,000 of which has
been borrowed as of the end of the year. The Company also has a term loan
agreement in place that provided $12,000,000 to finance restaurant construction
with repayment provisions to December 31, 2002. The principal sources of cash
from operating activities were net income and depreciation.
Cash used in investing activities included $12,600,000 for new restaurant
construction and equipment, $4,500,000 in remodeling existing properties,
$3,800,000 in normal replacement of equipment and $2,400,000 in acquisition of
sites for future restaurants.
Cash flows from financing activities included $10,400,000 borrowed under the
Company's loan agreements. Long-term debt payments of $1,500,000 and dividends
of $1,600,000 reduced cash flows from financing activities.
Current restaurant expansion plans call for the opening of five new Big Boy
restaurants (one of which is a replacement unit) in fiscal 1996. Three of
these units were under construction at the end of fiscal 1995 with capital
expenditures of $1,400,000 remaining to be made. Cash flow from operating
activities plus funds available from credit lines are more than adequate to
complete the current construction cycle. The cost of a new Big Boy, including
land, building and equipment, ranges from $1,500,000 to $1,700,000. The
Company plans to fund fiscal 1996 construction with cash from operating
activities. It is the Company's intention to operate within cash flow, reduce
newly acquired debt and avoid additional borrowing upon completion of the
current construction cycle.
9
<PAGE> 10
Item 8. - Financial Statements and Supplementary Data
------- -------------------------------------------
<TABLE>
<S> <C>
Index to Consolidated Financial Statements Page
----
Auditors' Report 11
Consolidated Balance Sheet - May 28, 1995 and May 29, 1994 12-13
Consolidated Statement of Earnings - Three years ended May 28, 1995 14
Consolidated Statement of Cash Flows - Three years ended May 28, 1995 15
Consolidated Statement of Shareholders' Equity - Three years ended May 28, 1995 16
Notes to Consolidated Financial Statements - Three years ended May 28, 1995 17-22
Quarterly Results (Unaudited) 23
</TABLE>
10
<PAGE> 11
AUDITORS' REPORT
----------------
Shareholders
Frisch's Restaurants, Inc.
We have audited the accompanying consolidated balance sheet of Frisch's
Restaurants, Inc. (an Ohio corporation) and Subsidiaries as of May 28, 1995 and
May 29, 1994 and the related consolidated statements of earnings, cash flows,
and shareholders' equity for each of the three years in the period ended May
28, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Frisch's
Restaurants, Inc. and Subsidiaries as of May 28, 1995 and May 29, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 28, 1995, in conformity with generally
accepted accounting principles.
As discussed in note A, the Company changed its method of valuing
inventories.
GRANT THORNTON LLP
Cincinnati, Ohio
June 30, 1995
11
<PAGE> 12
<TABLE>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
May 28, 1995 and May 29, 1994
ASSETS
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current Assets
Cash $ 219,650 $ 200,900
Receivables
Trade 986,360 1,194,231
Other 560,122 1,210,287
Inventories 3,945,660 3,937,039
Prepaid expenses and sundry deposits 1,705,463 1,788,928
Prepaid and deferred income taxes 723,523 465,181
------------ ------------
Total current assets 8,140,778 8,796,566
Property, Equipment and Capitalized Leases - At Cost
Land and improvements 23,623,581 20,297,436
Buildings 53,292,215 47,006,784
Equipment and fixtures 53,466,613 49,265,878
Leasehold improvements and buildings on leased land 24,404,208 22,658,295
Capitalized leases 9,640,938 10,775,208
Construction in progress 3,226,921 2,471,385
------------ ------------
167,654,476 152,474,986
Less accumulated depreciation and amortization 69,596,486 66,225,550
------------ ------------
98,057,990 86,249,436
Other Assets
Intangible assets 765,092 769,167
Investments in land - at cost 641,764 665,074
Property held for sale 1,966,681 2,329,004
Net cash surrender value-life insurance policies 3,162,902 2,849,223
Deferred income taxes 409,643 158,491
Other 2,403,243 2,532,324
------------ ------------
9,349,325 9,303,283
------------ ------------
$115,548,093 $104,349,285
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE> 13
<TABLE>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
May 28, 1995 and May 29, 1994
LIABILITIES
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current Liabilities
Long-term obligations due within one year
Long-term debt $ 2,206,048 $ 337,045
Obligations under capitalized leases 466,035 546,951
Self insurance 1,221,460 1,239,652
Accounts payable 8,572,166 8,409,909
Accrued expenses 5,758,656 5,630,561
Income taxes - 36,102
------------ ------------
Total current liabilities 18,224,365 16,200,220
Long-Term Obligations
Long-term debt 18,437,837 10,717,691
Obligations under capitalized leases 6,409,216 7,021,974
Self insurance 5,641,927 4,546,152
Other 2,207,356 2,033,207
------------ ------------
32,696,336 24,319,024
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 and 6,548,201
shares - stated value - $1 6,808,939 6,548,201
Additional contributed capital 54,624,224 52,188,112
------------ ------------
61,433,163 58,736,313
Retained earnings 6,622,375 8,540,882
------------ ------------
68,055,538 67,277,195
Less cost of treasury stock (189,987 and 183,457 shares) 3,428,146 3,447,154
------------ ------------
64,627,392 63,830,041
------------ ------------
$115,548,093 $104,349,285
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE> 14
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three years ended May 28, 1995
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenue
Sales $161,429,199 $157,995,557 $146,732,182
Other 1,629,985 2,069,787 2,254,648
------------ ------------ ------------
Total revenue 163,059,184 160,065,344 148,986,830
Costs and expenses
Cost of sales
Food and paper 52,298,714 51,070,559 46,795,133
Payroll and related 56,334,783 52,827,393 49,741,182
Other operating costs 40,781,489 37,792,524 34,336,165
------------ ------------ ------------
149,414,986 141,690,476 130,872,480
------------ ------------ ------------
General and administrative 4,581,541 5,030,018 4,701,235
Advertising 4,008,237 3,872,710 3,632,233
Interest 1,961,084 1,554,168 1,340,819
------------ ------------ ------------
Total costs and expenses 159,965,848 152,147,372 140,546,767
------------ ------------ ------------
Earnings before income taxes 3,093,336 7,917,972 8,440,063
Income taxes
Current
Federal 1,169,007 3,403,354 3,126,616
Less tax credits (436,358) (551,624) (177,745)
State and municipal 110,246 701,878 544,408
Deferred (107,930) (711,210) (444,838)
------------ ------------ ------------
734,965 2,842,398 3,048,441
------------ ------------ ------------
NET EARNINGS $2,358,371 $5,075,574 $5,391,622
============ ============ ============
Primary and fully diluted net earnings per share $.36 $.77 $.81
============ ============ ============
Weighted average number of primary and fully
diluted common shares and equivalents
assumed outstanding during the year 6,618,742 6,622,206 6,620,502
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE> 15
<TABLE>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three years ended May 28, 1995
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $2,358,371 $5,075,574 $5,391,622
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 9,821,080 9,289,290 8,361,892
(Gain) Loss on disposition of assets (345,380) 30,044 497,202
Write off Texas goodwill - 886,447 -
Changes in assets and liabilities:
Decrease (increase) in receivables 858,036 (282,222) 290,820
Increase in inventories (8,621) (348,890) (36,652)
Decrease (increase) in prepaid expenses and sundry deposits 83,465 462,468 (1,415,485)
(Increase) decrease in prepaid and deferred income taxes (509,494) (1,001,096) 329,117
Increase (decrease) in accounts payable 162,257 (119,749) 2,590,843
Increase (decrease) in accrued expenses 128,095 165,976 (838,790)
Decrease in accrued income taxes (36,102) (68,819) (333,857)
Decrease (increase) in other assets 321,374 (14,041) 283,874
Increase in self insured obligations 1,077,583 314,735 1,188,714
Increase (decrease) in other liabilities 336,239 (84,221) 731,907
---------- ---------- ----------
Net cash provided by operating activities 14,246,903 14,305,496 17,041,207
Cash flows provided by (used in) investing activities:
Additions to property (23,283,499) (18,312,487) (22,822,691)
Proceeds from disposition of property 2,245,680 2,654,072 1,207,119
Increase in other assets (524,789) (486,200) (1,080,699)
---------- ---------- ----------
Net cash (used in) investing activities (21,562,608) (16,144,615) (22,696,271)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings 10,385,000 4,000,000 6,000,000
Payment of long-term obligations (1,489,525) (961,863) (1,277,711)
Cash dividends paid (1,570,418) (1,518,263) (1,467,265)
Treasury share transactions 9,398 (26,532) (6,581)
---------- ---------- ----------
Net cash provided by financing activities 7,334,455 1,493,342 3,248,443
---------- ---------- ----------
Net increase (decrease) in cash and equivalents 18,750 (345,777) (2,406,621)
Cash and equivalents at beginning of year 200,900 546,677 2,953,298
---------- ---------- ----------
Cash and equivalents at end of year $ 219,650 $ 200,900 $ 546,677
========== ========== ==========
Supplemental disclosures:
Stock dividends issued $2,706,460 $3,855,228 $4,972,057
Interest paid 1,872,183 1,548,826 1,272,330
Income taxes paid 1,419,798 3,914,978 3,700,644
Income tax refunds received 139,237 2,665 647,463
Lease transactions capitalized - 179,640 -
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
15
<PAGE> 16
<TABLE>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three years ended May 28, 1995
<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 31, 1992,
as originally reported $6,056,525 $43,865,000 $9,645,346 ($3,426,538) $56,140,333
Adjustment for change in
accounting principle (Note A) - - 241,153 - 241,153
---------- ----------- ---------- ---------- -----------
Balance at May 31, 1992,
as restated 6,056,525 43,865,000 9,886,499 (3,426,538) 56,381,486
Net earnings for the year - - 5,391,622 - 5,391,622
Treasury shares reissued - (4,084) - 52,443 48,359
Treasury shares acquired - - - (54,940) (54,940)
Dividends
Cash - $.24 per share - - (1,467,265) - (1,467,265)
Stock - 4% 241,011 4,731,046 (4,972,057) - -
---------- ----------- ---------- ---------- -----------
Balance at May 30, 1993 6,297,536 48,591,962 8,838,799 (3,429,035) 60,299,262
Net earnings for the year - - 5,075,574 - 5,075,574
Treasury shares reissued - (8,413) - 52,973 44,560
Treasury shares acquired - - - (71,092) (71,092)
Dividends
Cash - $.24 per share - - (1,518,263) - (1,518,263)
Stock - 4% 250,665 3,604,563 (3,855,228) - -
---------- ----------- ---------- ---------- -----------
Balance at May 29, 1994 6,548,201 52,188,112 8,540,882 (3,447,154) 63,830,041
Net earnings for the year - - 2,358,371 - 2,358,371
Treasury shares reissued - (9,610) - 23,771 14,161
Treasury shares acquired - - - (4,763) (4,763)
Dividends
Cash - $.24 per share - - (1,570,418) - (1,570,418)
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
========== =========== ========== ========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
16
<PAGE> 17
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended May 28, 1995
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
and $888,109 were included in accounts payable at May 28, 1995 and May 29,
1994, respectively.
Receivables
-----------
The Company values its trade notes and accounts receivable on the reserve
method. The reserve balance was $56,736 at May 28, 1995 and $36,349 at May 29,
1994.
Inventories
-----------
Inventories, comprised principally of food items, are valued at the lower of
cost or market. Effective in 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.
This change has been applied retroactively and comparative amounts for prior
years have been restated. Inventories were increased by approximately $365,000
for fiscal years 1994 and 1993. The cumulative effect on retained earnings,
net of income taxes, was approximately $241,000. There was no material impact
on the Company's statement of earnings for fiscal years 1994 and 1993.
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 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.
Due to changed business conditions, plans for the development of Company
operated or franchised Big Boy restaurants in the state of Texas ceased during
the year ended May 29, 1994. Accordingly, the remaining goodwill of $886,447
ascribed to the acquisition of Big Boy licensing rights for Texas was charged
against
17
<PAGE> 18
earnings during the year ended May 29, 1994. The amortization of Texas
goodwill was $57,619 for the year ended May 30, 1993.
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.
Advertising Costs
-----------------
Advertising costs are charged to expense as incurred. There are no significant
advertising costs on the balance sheet for the years ended May 28, 1995 and May
29, 1994.
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.
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.
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 during the
last three years.
Investment in Sports Franchise
------------------------------
The Company's limited partnership investment in the Cincinnati Reds is carried
at cost. Income distributions of $254,500 in 1994 and $333,333 in 1993 were
recorded in earnings as received. No distribution was received in 1995.
Reclassification and Segment Reporting
--------------------------------------
Prior years' financial statements have been reclassified to conform to the 1995
presentation and to reflect the change in accounting principle as described
under "Inventories" above.
The Company operates principally in the food service industry and additionally
operates two hotels. Under generally accepted accounting principles, financial
information for a particular industry segment is to be disclosed whenever that
segment's revenue, operating profit or identifiable assets exceed 10% of
consolidated totals. Hotel operations contributed approximately 18% of
consolidated pre-tax earnings for fiscal 1995. However, in the opinion of
management, food service earnings were abnormally low, and therefore, it would
be inappropriate to regard hotel operations as a reportable segment this year.
18
<PAGE> 19
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
---------------------- -------------------
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 $ - $ 8,000 $ - $10,000
Term loan 1,625 9,875 - -
Industrial revenue
bond financing 400 400 200 600
Other 181 163 137 118
----- ------ ----- -------
$2,206 $18,438 $ 337 $10,718
====== ======= ===== =======
</TABLE>
The portion payable after one year matures as follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Period ending in 1996 $ - $ 275
1997 1,839 10,224
1998 1,724 219
1999 9,500 -
2000 1,500 -
Subsequent to 2000 3,875 -
------- -------
$18,438 $10,718
======= =======
</TABLE>
The revolving credit loan is a $20,000,000 line of credit, $8,000,000 of which
is outstanding at May 28, 1995. This credit loan matures on August 30, 1998,
unless extended. Interest is payable quarterly determined by various indices,
currently 7.1125%. 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 $2,544,000 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 7.35% to 7.4%.
Property and equipment having a book value at May 28, 1995 of $2,960,000 is
pledged as collateral for the bonds.
NOTE C - LEASED PROPERTY
The Company has capitalized the leased property of 51% 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.
19
<PAGE> 20
An analysis of the leased property follows:
<TABLE>
<CAPTION>
Asset balances at
------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 9,161 $ 9,715
Equipment 480 1,060
-------- --------
9,641 10,775
Less accumulated amortization (5,057) (5,511)
-------- --------
$ 4,584 $ 5,264
======== ========
</TABLE>
Total rental expense of operating leases for the years was:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -----
(in thousands)
<S> <C>
Minimum rentals $1,643 $1,729 1,755
Contingent rentals
(percent of excess sales) 32 99 134
------ ------ -----
$1,675 $1,828 $1,889
====== ====== ======
</TABLE>
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
Year ending in: leases leases
--------------- ----------- ---------
(in thousands)
<S> <C> <C>
1996 $ 1,209 $ 1,282
1997 1,117 1,202
1998 1,024 1,131
1999 946 911
2000 886 802
2001 to 2020 7,884 4,500
------- -------
Total 13,066 $ 9,828
=======
Amount representing interest (6,191)
-------
Present value of obligations 6,875
Portion due within one year (466)
-------
Long-term obligations $ 6,409
=======
</TABLE>
<TABLE>
NOTE D - INCOME TAXES
The variations between the statutory Federal rate and the effective rates are summarized as follows:
<CAPTION>
Percent of pretax earnings
----------------------------------
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal income tax 34.0 34.0 34.0
Tax credits (14.1) (7.0) (2.1)
State and municipal income taxes
(net of Federal tax benefit) 2 .4 5.8 4.2
Non-deductible write off of goodwill - 3.9 -
Other 1.5 (.8) -
----- ---- ----
Effective Rate 23.8 35.9 36.1
===== ==== ====
</TABLE>
20
<PAGE> 21
<TABLE>
The components of the deferred tax asset (liability) were as follows (in thousands):
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred compensation $ 593 $ 526
Partnership interest 266 536
Compensated absences 546 546
Self insurance 2,231 1,849
Other 131 291
-------- -------
Total deferred tax assets 3,767 3,748
New store opening cost (275) (307)
Investment in tax benefits (846) (941)
Depreciation (1,481) (1,499)
Other (554) (373)
-------- -------
Total deferred tax liabilities (3,156) (3,120)
-------- -------
Net deferred tax asset $ 611 $ 628
======== =======
</TABLE>
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 89,444 $18.18 1,626,092
</TABLE>
The Company also has reserved 54,080 shares for issuance under the Frisch's
Executive Savings Plan.
Shares reserved under these plans have been adjusted for stock dividends.
There are no other outstanding options, warrants or rights.
21
<PAGE> 22
NOTE F - PENSION PLANS
Net pension expense included the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,008 $ 1,039 $ 981
Interest cost on projected benefit obligations 978 988 950
Investment gain on plan assets (2,001) (1,288) (1,953)
Net amortization and deferral 359 (418) 371
--------- -------- ---------
Net periodic pension cost $ 344 $ 321 $ 349
========= ========= =========
</TABLE>
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 (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 1993
---- ---- ----
<S> <C> <C> <C>
Expected long-term rate of return on plan assets 8.50% 8.50% 8.50%
Weighted average discount rate 7.25 7.25 7.50
Rate of increase in compensation levels 5.50 5.50 5.50
</TABLE>
NOTE G - EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of common
shares outstanding during the year (6,618,742 in 1995, 6,622,206 in 1994 and
6,620,502 in 1993). Stock options outstanding during the three years did not
have a material dilutive effect on earnings per share.
22
<PAGE> 23
<TABLE>
QUARTERLY RESULTS (UNAUDITED)
<CAPTION>
Year Ended May 28, 1995 Year Ended May 29, 1994
----------------------------------------------------- -----------------------------------------------------
(In Thousands) (In Thousands)
--------------------------------------- -------------------------------------
Net Earnings
Operating earnings (loss) Operating Net Earnings
Revenue profit (loss) per share Revenue profit earnings per share
-------- ------- ------ --------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $ 50,836 $ 4,820 $1,203 $.18 $ 50,414 $ 6,779 $2,186 $.33
2nd Quarter 38,873 3,626 1,108 .17 38,255 3,703 1,098 .17
3rd Quarter 34,670 791 (752) (.11) 34,085 2,185 331 .05
4th Quarter 38,680 2,777 799 .12 37,311 3,638 1,461 .22
-------- ------- ------ ----- -------- ------- ------ -----
Year's Total $163,059 $12,014 $2,358 $.36 $160,065 $16,305 $5,076 $.77
======== ======= ====== ===== ======== ======= ====== =====
<FN>
The first quarter of each year contains sixteen weeks, while the last three
quarters each contain twelve weeks.
The first quarter of 1995 has been restated to retroactively apply the change
in accounting principle as described under "Inventories" in Note A.
The fourth quarter of 1995 included a $160,000 adjustment of income tax
expense to reflect the actual effective rate for the year.
</TABLE>
23
<PAGE> 24
Item 9. - Disagreements on Accounting and Financial Disclosure
------- ----------------------------------------------------
Not applicable
PART III
--------
(Items 10 through 13)
Item 10. - Directors and Executive Officers of the Registrant
-------- --------------------------------------------------
Information regarding directors is incorporated by reference to the
Registrant's proxy statement dated August 22, 1995.
Information regarding executive officers appears at the end of Part I.
Item 11. - Executive Compensation
-------- ----------------------
Incorporated by reference to the Registrant's proxy statement dated August 22,
1995.
Item 12. - Security Ownership of Certain Beneficial Owners and Management
-------- --------------------------------------------------------------
Incorporated by reference to the Registrant's proxy statement dated August 22,
1995.
Item 13. - Certain Relationships and Related Transactions
-------- ----------------------------------------------
Incorporated by reference to the Registrant's proxy statement dated August 22,
1995.
PART IV
-------
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------- ----------------------------------------------------------------
a). List of documents filed as part of this report
1. Financial Statements
All financial statements of the Registrant as set forth under Part
II, Item 8
2. Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are not applicable
and, therefore, have been omitted.
3. Exhibits
(3) Articles of Incorporation and By-Laws
(3)(a) Exhibit (3)(a) to the Registrant's Form 10-K for 1993,
being The Third Amended Articles of Incorporation is incorporated
herein by reference.
(3)(b) A portion of Exhibit 3 to the Registrant's Form 10-K
Annual Report for 1985, being the Code of Regulations is
incorporated herein by reference.
24
<PAGE> 25
(10) Material Contracts
(10)(a) Employment contract between the Registrant and Jack C.
Maier effective May 29,1995.
(10)(b) Employment contract between the Registrant and Craig F.
Maier effective May 29, 1995.
(10)(c) Exhibit (10)(a) to the Registrant's Form 10-K Annual
Report for 1994, being the 1993 Stock Option Plan (Appendix A to
the Registrant's Proxy Statement dated August 24, 1993), is
incorporated herein by reference.
(10)(d) Exhibit 10(a) to the Registrant's Form 10-K Annual Report
for 1991, being employment contract between the Registrant and
Craig F. Maier dated December 27, 1990 is incorporated herein by
reference.
(10)(e) Exhibit (10)(a) to the Registrant's Form 10-K Annual
Report for 1990, being employment contract between the Registrant
and Jack C. Maier dated July 20, 1990, is incorporated herein by
reference.
(10)(f) Exhibit (10)(e) to the Registrant's Form 10-K Annual
Report for 1985 being the 1984 Stock Option Plan is incorporated
herein by reference.
(10)(g) Exhibit (10)(f) to the Registrant's Form 10-K Annual
Report for 1990, being First Amendment to the 1984 Stock Option
Plan is incorporated herein by reference.
(10)(h) Exhibit (10)(g) to the Registrant's Form 10-K Annual
Report for 1990, being Agreement between the Registrant and Craig
F. Maier dated November 21, 1989 is incorporated herein by
reference.
(10)(i) Exhibit (10)(d) to the Registrant's Form 10-K Annual
Report for 1984, being agreement between the Registrant and Jack C.
Maier dated August 3, 1984 is incorporated herein by reference.
There are identical agreements dated August 3, 1984 between the
Registrant and Louis J. Ullman and Marvin G. Fields.
(10)(j) Exhibit (10)(f) to the Registrant's amended Form 10-K
Annual Report for 1988 being the Restated and Amended Area
Franchise Agreement between Elias Brothers Restaurants, Inc. and
the Registrant is incorporated herein by reference.
(11) Statement re: computation of per share earnings.
(18) Letter re: change in accounting principle
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended May 28, 1995.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FRISCH'S RESTAURANTS, INC.
(Registrant)
By Louis J. Ullman August 11, 1995
--------------------- ---------------
Louis J. Ullman Date
Senior Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Jack C. Maier Chairman of the Board and Director August 11, 1995
----------------------- (A Principal Executive Officer) ---------------
Jack C. Maier
Craig F. Maier President and Director August 10, 1995
----------------------- (A Principal Executive Officer) ---------------
Craig F. Maier
Louis J. Ullman Senior Vice President-Finance and Director August 11, 1995
----------------------- (Principal Financial and Accounting Officer) ---------------
Louis J. Ullman
Marvin G. Fields Director August 10, 1995
----------------------- ---------------
Marvin G. Fields
Blanche F. Maier Director August 10, 1995
----------------------- ---------------
Blanche F. Maier
Alfred M. Cohen Director August 10, 1995
----------------------- ---------------
Alfred M. Cohen
Daniel W. Geeding Director August 10, 1995
----------------------- ---------------
Daniel W. Geeding
Willaim A. Mauch Director August 10, 1995
----------------------- ---------------
William A. Mauch
</TABLE>
26
<PAGE> 1
EXHIBIT 10-A
EMPLOYMENT AGREEMENT
This Agreement made by and between Frisch's Restaurants, Inc., an Ohio
corporation, hereinafter referred to as "Corporation", and Jack C. Maier,
hereinafter referred to as "Maier", WITNESSETH:
WHEREAS, Maier has been employed by the Corporation pursuant to an
employment agreement dated July 20, 1990 which expires on June 3, 1995 (the
"1990 Employment Agreement");
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties do hereby agree upon the terms and conditions of this
Employment Agreement which shall become effective as of May 29, 1995.
1. PRIOR AGREEMENT. The 1990 Employment Agreement is hereby
cancelled effective as of May 28, 1995.
2. EMPLOYMENT. The Corporation agrees to employ Maier and Maier
agrees to serve the Corporation upon the terms and conditions hereinafter set
forth.
3. TERM. The employment of Maier hereunder shall be for a period
of two (2) fiscal years commencing May 29, 1995 and ending June 1, 1997.
4. DUTIES. Maier agrees to serve the Corporation and any and all
of its subsidiaries and divisions faithfully and to the best of his ability
under the direction of the Board of Directors, devoting (except as provided in
paragraphs 8 and 9) his entire business time, energy and skill to such
employment and to perform from time to time such services and to act in such
office or capacity as the Board of Directors shall request or direct.
5. COMPENSATION.
(a) BASE SALARY. The Corporation agrees to pay Maier during
each year of his employment hereunder as base salary for his full-time active
services and as an officer, the sum of Three Hundred Thousand Dollars
($300,000.00) per annum payable in equal monthly or other installments in
accordance with the general practice of the Corporation. There shall be no
changes in the base salary to reflect annual changes in the Consumer Price
Index.
(b) DEFERRED COMPENSATION. In addition to the compensation provided
in the foregoing subparagraph (a), the Corporation shall pay Maier, if living
or to his widow or his estate, as the case may be, the following sums and upon
the terms and conditions and for the period hereinafter set forth.
(i) In the event of the retirement of Maier under the
provisions of Paragraph 6, the Corporation shall pay to Maier a sum equal to
the amount which would have been payable under Section 5(b)(i) of the 1990
Employment Agreement had Maier retired on May 26, 1995, for a period of ten
(10) consecutive years thereafter, payable on a monthly basis, and if he shall
die during said period, it shall make said monthly payments for the remainder
of said period to his widow, if there be one, and if there be none, it shall
make any remaining payments to such person or persons as Maier shall designate
in writing delivered to the Corporation, and if he shall fail to make such
designation, to his estate. If payments are made to Maier's widow and she
should die during said period the Corporation shall make any remaining payments
to her estate. The monthly payments provided for under this subparagraph shall
be adjusted on the first anniversary date of the commencement of such payments
and on each anniversary date thereafter to reflect fifty percent
27
<PAGE> 2
EXHIBIT 10-A
(50%) of the latest annual change in the Consumer Price Index for All Urban
Consumers ("CPI-U") published by the U.S. Department of Labor, Bureau of Labor
Statistics.
(ii) In the event of the death or disability of Maier prior to
retirement as afore provided, or on or before the expiration of this Agreement
(and if renewed, the expiration date of the last renewal), while in the employ
of the Corporation, the Corporation, unless Maier shall have theretofore
willfully violated any of the provisions of this agreement or any renewal
agreement, shall pay to him, if living, or to his widow, if there be one, in
the event of his death, a sum equal to the amount which would have been payable
under Section 5(b)(i) of the 1990 Employment Agreement had Maier retired on May
26, 1995, for a period of ten (10) consecutive years thereafter, payable on a
monthly basis, such payments to be made to Maier as long as he is living and to
his widow after his death until her death or the expiration of said period, and
if there be no widow, such payments or the remainder thereof shall be made to
such person or persons as Maier shall designate in writing to the Corporation,
and if he fails to make such designation, to his estate. If payments are made
to Maier's widow and she should die during said period the Corporation shall
make any remaining payments to her estate. The monthly payments provided for
under this subparagraph shall be adjusted on the first anniversary date of the
commencement of such payments and on each anniversary date thereafter to
reflect fifty percent (50%) of the latest annual change in the CPI-U as
described in subparagraph (b)(i).
(iii) If prior to the expiration of this Agreement (and if renewed,
the expiration of the last renewal agreement) none of the events set forth in
subparagraphs (i) and (ii) above have occurred, giving rise to the payments
therein provided for, and Maier has not willfully violated any of the
provisions of this Agreement (or any renewal agreement), then the Corporation,
upon such expiration, shall pay to Maier, if living, or to his widow, if there
be one, in the event of his death, or if there be no widow, to the person or
persons designated in writing by Maier to the Corporation, or in default of
such designation, to Maier's estate, a sum equal to the amount which would have
been payable under Section 5(b)(i) of the 1990 Employment Agreement had Maier
retired on May 26, 1995, for a period of ten (10) consecutive years, payable on
a monthly basis, commencing with the month following the expiration of this
agreement, or the last renewal agreement, if renewed. If payments are made to
Maier's widow and she should die during said period the Corporation shall make
any remaining payments to her estate. The monthly payments provided for under
this subparagraph shall be adjusted on the first anniversary date of the
commencement of such payments and on each anniversary date thereafter to
reflect fifty percent (50%) of the latest annual change in the CPI-U as
described in subparagraph (b)(i). It is understood and agreed that this
provision may be modified in any renewal agreement subject to the agreement
thereon of both of the parties.
At any time during the payment of the deferred compensation described
in paragraph 5(b)(i), (ii) or (iii), the person then entitled to receive
monthly payments shall have the right to convert such monthly payments to a
single lump sum payment. Such right shall be exercised by notice in writing
delivered to the Corporation. The amount of such single lump sum shall be the
then present value of all remaining payments determined without regard to any
future cost of living adjustments, discounted using the "Applicable Federal
Rate" which is appropriate for the remaining term of the deferred compensation,
as determined by the Internal Revenue Service pursuant to Section 1274 of the
Internal Revenue Code. Payment of the single lump sum to the person then
entitled to receive monthly payments and such person's receipt therefore, shall
extinguish all further obligations of the Corporation to pay deferred
compensation under this Agreement as well as the rights of all vested and
contingent successor beneficiaries of such deferred compensation provisions.
6. RETIREMENT. Maier may elect to retire at any time.
28
<PAGE> 3
EXHIBIT 10-A
7. DISABILITY. For the purposes of subparagraph (b)(ii) of Paragraph
5 above, the obligations of the Corporation to make the payments upon the
disability of Maier shall not become effective unless and until all the
following conditions are met:
(a) Maier shall become physically or mentally incapable (excluding
temporary absences due to ordinary illnesses) of properly performing the
services required of him in accordance with his obligations under Paragraph 4
hereof or similar provisions of any renewal agreement.
(b) Such incapacity shall exist or be reasonably expected to exist
for more than ninety (90) days in the aggregate during any period of twelve
(12) consecutive months.
(c) Either Maier or the Corporation shall have given the other thirty
(30) days' written notice of his or its intention to terminate the active
employment of Maier because of such disability.
8. PART TIME EMPLOYMENT. Maier may reduce the scope of his employment
from full time to "part time" upon written notice to the Corporation. Part
time shall mean three days or less per week devoted to the business of the
Corporation. Maier's compensation during any period of part time employment
shall be fifty percent (50%) of the base salary to which he would otherwise be
entitled.
9. CESSATION OF EMPLOYMENT. Maier agrees that upon cessation of his
employment by reason of the expiration of this Agreement (and if renewed, of
the last renewal agreement), or his retirement as herein provided, or because
of his mental or physical disability, and during the period for which monthly
payments are provided in Paragraph 5, he will, while not prevented from so
doing because of such disability, serve the Corporation in an advisory and
consultative capacity and in the performance of special, important assignments
relating to the business, and that he will be available for such purposes at
such times and places as shall be reasonable, and the Corporation agrees to pay
Maier for such services a consultant's fee of One Hundred Thousand Dollars
($100,000.00) per annum, payable in equal monthly or other installments, in
accordance with the general practice of the Corporation. Maier further agrees
to act as a Director and/or Officer of the Corporation, as the Corporation may,
from time to time, request, all without further compensation, except that
Maier, while serving as a member of the Board of Directors, shall be paid fees
and shall be reimbursed for his expenses as in the case of other Directors who
are not full time active employees of the Corporation.
10. RESTRICTIVE COVENANTS. Maier agrees that during the term of this
Agreement, or of any renewal thereof, and during the further period for which
monthly payments to him are provided for herein, he will not, directly or
indirectly, render any services of an advisory nature or otherwise to, or
become employed by or participate in, any business competitive with any of the
business of the Corporation or of its subsidiaries or its divisions, without
the prior written consent of the Corporation; provided, however, that nothing
herein shall prohibit Maier from:
(i) Rendering services or otherwise becoming employed or
participating or engaging in any business which shall be related in any way to
the Corporation, such as, but not limited to, a franchisee;
(ii) Owning stock or other securities or being a director or officer
of a corporation conducting a business referred to in subparagraph (i) and
subject to the limitations set forth therein;
(iii) Owning stock or other securities of competitors which are
relatively insubstantial to the total outstanding stock of such corporation.
29
<PAGE> 4
EXHIBIT 10-A
11. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of any successor of the Corporation and any such successor shall
be deemed substituted for the Corporation under the terms of this Agreement.
As used in this Agreement, the term "successor" shall include any person, firm,
corporation or other business entity which at any time, whether by merger,
purchase or otherwise, acquires all or substantially all of the capital stock,
assets or business of the Corporation.
IN WITNESS WHEREOF, Frisch's Restaurants, Inc. has caused this
Agreement to be executed in its corporate name by Louis J. Ullman, its Senior
Vice President, thereunto duly authorized by its Board of Directors, and Jack
C. Maier has hereunto set his hand on the date set forth below.
DATED: April 8, 1995 /s/ Jack C. Maier
------------- -----------------
Jack C. Maier
FRISCH'S RESTAURANTS, INC.
By /s/ Louis J. Ullman
---------------------
Louis J. Ullman
Senior Vice President
30
<PAGE> 1
EXHIBIT 10-B
EMPLOYMENT AGREEMENT
This Agreement made by and between Frisch's Restaurants, Inc., an Ohio
corporation, hereinafter to as "Corporation", and Craig F. Maier, hereinafter
referred to as "Maier", WITNESSETH:
WHEREAS, Maier is the President and Chief Executive Officer of the
Corporation; and
WHEREAS, the Corporation and Maier agree that Maier's compensation
should be highly variable based upon the Corporation's performance, so that
Maier's compensation will be substantial if the Corporation attains its
performance goals but if the Corporation fails to reach its performance goals,
his compensation will be significantly below what the chief executive officer
of a comparable company would receive;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties do hereby agree upon the terms and conditions of this
Employment Agreement.
1. PREVIOUS AGREEMENT. Maier's Employment Agreement dated June 4,
1990 ("1990 Agreement") is hereby canceled as of the close of business on May
28, 1995.
2. EMPLOYMENT. The Corporation agrees to employ Maier and Maier
agrees to serve the Corporation upon the terms and conditions hereinafter set
forth.
3. TERM. The employment of Maier hereunder shall be for a period of
five (5) fiscal years commencing May 29, 1995 and ending June 3, 2000.
4. DUTIES. Maier agrees to serve the Corporation and any and all of
its subsidiaries and divisions faithfully and to the best of his ability as its
President and Chief Executive Officer under the direction of the Board of
Directors, devoting (except as provided in paragraph 6) his entire business
time, energy and skill to such employment and to perform from time to time such
services and to act in such office or capacity as the Board of Directors shall
request or direct.
5. COMPENSATION.
(a) BASE SALARY. The Corporation agrees to pay Maier during
the first fiscal year of his employment hereunder, as base salary for his
full-time active services as an officer, a sum equal to the amount payable
under the last year of the 1990 Agreement, adjusted to reflect Fifty Percent
(50%) of the latest annual change in the Consumer Price Index for All Urban
Consumers (CPI-U) published by the U.S. Department of Labor; Bureau of Labor
Statistics. The same adjustment shall be made to Maier's base salary at the
beginning of each successive fiscal year of this agreement.
(b) INCENTIVE COMPENSATION. In addition to the compensation
provided in the foregoing subparagraph (a), the Corporation shall pay Maier
incentive compensation for each year in which the pre-tax earnings of the
Corporation equal or exceed five percent (5%) of the Corporation's sales for
such year. Pre-tax earnings and sales shall be the amounts reported to
shareholders in the Corporation's annual report (exclusive of any amounts
included in sales and/or earnings arising out of the Corporation's investment
in the Cincinnati Reds), but pre-tax earnings shall be computed without taking
this Incentive Compensation into consideration. The amount of the Incentive
Compensation shall be three percent (3%) of the Corporation's pre-tax earnings
(as determined above) provided however that the amount of incentive
compensation shall be reduced if necessary so that the Corporation's pre-tax
earnings, after reduction for Incentive Compensation shall not be less than
five percent (5%) of the Corporation's sales for such year. Eighty percent
31
<PAGE> 2
EXHIBIT 10-B
(80%) of such Incentive Compensation shall be paid in cash and twenty percent
(20%) shall be paid in shares of the Corporation's common stock. The number of
shares allocated to Maier shall be determined by dividing the amount of
Incentive Compensation to be paid in shares by the "Average Value" of the
Corporation's common shares during the year for which the Incentive
Compensation has been earned. The "Average Value" of the Corporation's shares
for any year shall be the mean between the highest price at which shares were
traded during such year and the lowest price. Example: In the fiscal year
beginning May 29, 1995, the Corporation has sales of $160,000,000 and pre-tax
earnings (before calculation of Maier's Incentive Compensation) of $8,200,000.
Since earnings exceed five percent (5%) of sales, Maier has earned incentive
compensation. Three percent (3%) of pre-tax earnings equals $246,000. However,
if Maier is paid $246,000 it will reduce pre-tax earnings below five percent
(5%) of sales. Maier's Incentive Compensation is limited to $200,000. Eighty
percent (80%) or $160,000 is payable in cash. Twenty percent (20%) or $40,000
is payable in the Corporation's shares. During the fiscal year beginning May
29, 1995 the Corporation's shares traded at a high price of $20 and a low price
of $10. The mean price is $15 per share. Maier therefore receives an award of
2,666 shares ($40,000 divided by $15 per share = 2,666 shares).
The shares granted as Incentive Compensation will not be registered
under the Securities Act of 1933, as amended, and each stock certificate will
bear the following legend or one similar thereto: "The shares represented by
this certificate have been acquired for investment and have not been registered
under the Securities Act of 1933. The shares may not be sold or transferred in
the absence of such registration of an exemption therefrom under said Act."
(c) STOCK OPTIONS. In any year in which Maier earns Incentive
Compensation, the Corporation shall also grant stock options to him. The number
of options awarded shall be calculated as the total amount of Maier's Incentive
Compensation divided by the "Average Value" of the Corporation's shares as
determined in paragraph 5.(b), multiplied by two. The exercise price of the
options shall be the market price of the Corporation's shares on the date the
options are granted. The options shall expire ten (10) years from the date of
grant. All options shall be granted under the Frisch's Restaurants, Inc. 1993
Stock Option Plan or any successor plan and shall be subject to all terms and
conditions contained therein. In the event that in any year the Corporation
does not have a stock option plan in force, no grant of options shall be made
under this provision. If in any year there are insufficient authorized
ungranted options under the then existing stock option plan, the grant to Maier
shall not exceed the number of available ungranted options. Example: using the
same facts as contained in paragraph 5.(b), the Corporation would grant Maier
options to purchase 26,666 shares (200,000 divided by $15 = 13,333 x 2 =
26,666). The exercise price would be the market price of the Corporation's
stock on the date of grant.
(d) DISABILITY COMPENSATION. If Maier becomes disabled during the term
of this Agreement, including any renewal terms, and is then employed by the
Corporation, the Corporation shall pay disability compensation to Maier. The
annual amount of the disability compensation shall be Seventy-Five percent
(75%) of Maier's "average compensation" at the time he incurs the disability,
reduced by any disability benefits to which Maier is entitled under disability
income plans (including insurance funded plans) maintained by the Corporation.
"Average compensation" means the total compensation, including Incentive
Compensation earned by Maier in the three calendar years preceding the
disability; divided by 3. The disability compensation shall be paid to Maier
monthly while he is alive, for a period of 120 months provided that Maier has
not willfully violated any of the provisions of this Agreement. Maier's
disability compensation shall be adjusted on each anniversary of the
commencement of payments to reflect Seventy-Five Percent (75%) of the latest
annual change in Consumer Price Index for All Urban Consumers. For purposes of
this paragraph 4.(d), disability shall mean a condition which entitles Maier to
receive benefits under the Corporation's long term disability plan as it exists
at the time the determination of Maier's disability is made.
32
<PAGE> 3
EXHIBIT 10-B
6. RESTRICTIVE COVENANTS. Maier agrees that during the term of this
Agreement, or of any renewal thereof, he will not, directly or indirectly,
render any services of an advisory nature or otherwise to, or become employed
by or participate in, any business competitive with any of the business of the
Corporation or of its subsidiaries or its divisions, without the prior written
consent of the Corporation; provided, however, that nothing herein shall
prohibit Maier from:
(i) Rendering services or otherwise becoming employed or
participating or engaging in any business which shall be related in any way to
the Corporation, such as, but not limited to, a franchisee and specifically
owning and operating the franchisee known as Frisch New Richmond Big Boy, Inc.;
(ii) Owning stock or other securities or being a director or
officer of a corporation conducting a business referred to in subparagraph (i)
and subject to the limitations set forth therein;
(iii) Owning stock or other securities of competitors which are
relatively insubstantial to the total outstanding stock of such corporation.
7. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of any successor of the Corporation and any such successor shall be
deemed substituted for the Corporation under the terms of this Agreement. As
used in this Agreement, the term "successor" shall include any person, firm,
corporation or other business entity which at any time, whether by merger,
purchase or otherwise, acquires all or substantially all of the capital stock,
assets or business of the Corporation.
IN WITNESS WHEREOF, Frisch's Restaurants, Inc. has caused this
Agreement to be executed in its corporate name by Louis J. Ullman, its Senior
Vice President, thereunto duly authorized by its Board of Dierctors, and Craig
F. Maier has hereunto set his hand on the date set forth below.
DATED: May 8, 1995 Craig F. Maier
------------------ ----------------------
Craig F. Maier
FRISCH'S RESTAURANTS, INC.
By Louis J. Ullman
---------------------
Louis J. Ullman
Senior Vice President
33
<PAGE> 1
EXHIBIT 11
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY NET INCOME PER COMMON SHARE
Three years ended May 28, 1995
<TABLE>
<CAPTION>
May 28, May 29, May 30,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net Income $2,358,371 $5,075,574 $5,391,622
========== ========== ==========
Weighted average number of shares
outstanding 6,618,742 6,622,206 (a) 6,620,502 (a)
Shares issuable on exercise of dilutive
stock options 0 0 8,005 (a)
---------- ---------- ---------
Number of shares used for computation
of primary earnings per share 6,618,742 6,622,206 6,628,507
========== ========== ==========
Primary net income per share $0.36 $0.77 $0.81
========== ========== ==========
<FN>
This calculation is submitted pursuant to SEC Reg. S-K 229.601 (11) although not required by APB Opinion No. 15 because
dilution is less than 3%.
(a) Adjusted retroactively to reflect 4% stock dividends issued December 28, 1993 and December 27, 1994.
</TABLE>
34
<PAGE> 2
EXHIBIT 11
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE ASSUMING FULL DILUTION
Three years ended May 28, 1995
<TABLE>
<CAPTION>
May 28, May 29, May 30,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net Income $2,358,371 $5,075,574 $5,391,622
========== ========== ==========
Weighted average number of shares
outstanding 6,618,742 6,622,206 (a) 6,620,502 (a)
Shares issuable on exercise of dilutive
stock options 0 0 12,487 (a)
--------- --------- ---------
Number of shares used for computation
of fully diluted earnings per share 6,618,742 6,622,206 6,632,989
========= ========= =========
Fully diluted net income per share $0.36 $0.77 $0.81
========= ========= =========
<FN>
This calculation is submitted pursuant to SEC Reg. S-K 229.601 (11) although not required by APB Opinion No. 15 because
dilution is less than 3%.
(a) Adjusted retroactively to reflect 4% stock dividends issued December 28, 1993 and December 27, 1994.
</TABLE>
35
<PAGE> 1
EXHIBIT 18
Board of Directors
Frisch's Restaurants, Inc. and Subsidiaries
As stated in note A to the consolidated financial statements of Frisch's
Restaurants, Inc. and Subsidiaries (the "Company") for the year ended May 28,
1995, the Company changed its accounting policy for commissary inventory.
Management believes the newly adopted accounting principle is preferable in the
circumstances because the first-in, first-out (FIFO) method more appropriately
reflects the Company's financial condition and conforms all of its inventories
to the same method of determining cost. At your request, we have reviewed and
discussed with management the circumstances, business judgment, and planning
that formed the basis for making this change in accounting principle.
It should be recognized that professional standards have not been established
for selecting among alternative principles that exist in this area or for
evaluating the preferability of alternative accounting principles.
Accordingly, we are furnishing this letter solely for purposes of the Company's
compliance with the requirements of the Securities and Exchange Commission, and
it should not be used or relied on for any other purpose.
Based on our review and discussion, we concur with management's judgment that
the newly adopted accounting principle is preferable in the circumstances. In
formulating this position, we are relying on management's business planning and
judgment, which we do not find unreasonable.
Very truly yours,
GRANT THORNTON LLP
June 30, 1995
36
<PAGE> 1
EXHIBIT 21
Subsidiaries
------------
<TABLE>
<CAPTION>
State of
Corporate Name Incorporation
-------------- -------------
<S> <C>
Subsidiaries of Registrant:
Frisch Kentucky, Inc. Kentucky
Frisch Indiana, Inc. Indiana
Frisch Germantown Road, Inc. Ohio
Frisch Florida, Inc. Florida
Kip's of Oklahoma, Inc. Oklahoma
Frisch Ohio, Inc. Ohio
37
</TABLE>
<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> YEAR
<FISCAL-YEAR-END> MAY-28-1995
<PERIOD-START> MAY-30-1994
<PERIOD-END> MAY-28-1995
<CASH> 219,650
<SECURITIES> 0
<RECEIVABLES> 1,546,482
<ALLOWANCES> 0
<INVENTORY> 3,945,660
<CURRENT-ASSETS> 8,140,778
<PP&E> 167,654,476
<DEPRECIATION> 69,596,486
<TOTAL-ASSETS> 115,548,093
<CURRENT-LIABILITIES> 18,224,365
<BONDS> 24,847,053
<COMMON> 6,808,939
0
0
<OTHER-SE> 57,818,453
<TOTAL-LIABILITY-AND-EQUITY> 115,548,093
<SALES> 161,429,199
<TOTAL-REVENUES> 163,059,184
<CGS> 149,414,986
<TOTAL-COSTS> 149,414,986
<OTHER-EXPENSES> 8,589,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,961,084
<INCOME-PRETAX> 3,093,336
<INCOME-TAX> 734,965
<INCOME-CONTINUING> 2,358,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,358,371
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
