<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 December 15, 1996 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 December 31, 1996 was:
7,148,334
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <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 - 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ......................14
PART II - OTHER INFORMATION ..................................................15
</TABLE>
<PAGE> 3
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended Twelve Weeks Ended
------------------------ ------------------
December 15, December 10, December 15, December 10,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Sales $90,507,996 $91,084,119 $39,223,735 $38,877,144
Other 829,059 787,226 383,542 328,222
----------- ----------- ----------- -----------
Total revenue 91,337,055 91,871,345 39,607,277 39,205,366
COSTS AND EXPENSES
Cost of sales
Food and paper 28,767,053 28,863,530 12,548,375 12,360,221
Payroll and related 30,091,303 31,997,368 13,236,974 13,663,231
Other operating costs 22,073,692 22,744,615 9,415,607 9,783,604
----------- ----------- ----------- -----------
80,932,048 83,605,513 35,200,956 35,807,056
General and administrative 3,269,233 2,246,841 1,433,895 713,941
Advertising 2,207,621 2,267,764 956,593 964,129
Interest 1,263,686 1,293,394 564,165 559,882
----------- ----------- ----------- -----------
Total costs and expenses 87,672,588 89,413,512 38,155,609 38,045,008
----------- ----------- ----------- -----------
Earnings before income taxes 3,664,467 2,457,833 1,451,668 1,160,358
INCOME TAXES 1,301,000 787,000 515,000 372,000
----------- ----------- ----------- -----------
NET EARNINGS $ 2,363,467 $ 1,670,833 $ 936,668 $ 788,358
=========== =========== =========== ===========
Primary and fully diluted
net earnings per share of
common stock $ .33 $ .23 $ .13 $ .11
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE> 4
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
December 15, June 2,
1996 1996
(unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 420,594 $ 134,944
Receivables
Trade 1,360,489 1,107,394
Other 391,043 963,347
Inventories 4,299,462 3,725,755
Prepaid expenses and sundry deposits 1,391,414 1,280,006
Prepaid and deferred income taxes 766,043 1,352,315
------------ ------------
Total current assets 8,629,045 8,563,761
PROPERTY AND EQUIPMENT - AT COST
Land and improvements 26,145,737 24,712,017
Buildings 58,311,110 54,871,830
Equipment and fixtures 56,072,338 53,876,413
Leasehold improvements and buildings on leased land 24,981,860 24,640,369
Capitalized leases 8,974,614 9,632,186
Construction in progress -- 2,393,653
------------ ------------
174,485,659 170,126,468
Less accumulated depreciation and amortization 74,627,598 70,886,768
------------ ------------
Net property and equipment 99,858,061 99,239,700
OTHER ASSETS
Intangible assets 758,823 761,017
Investments in land - at cost 2,009,406 2,001,135
Property held for sale 1,386,936 1,766,068
Net cash surrender value-life insurance policies 3,577,966 3,447,360
Deferred income taxes 551,072 551,072
Other 2,008,135 2,065,728
------------ ------------
Total other assets 10,292,338 10,592,380
------------ ------------
$118,779,444 $118,395,841
============ ============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
LIABILITIES
December 15, June 2,
1996 1996
(unaudited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Long-term obligations due within one year
Long-term debt $ 1,793,684 $ 2,162,860
Obligations under capitalized leases 441,171 467,706
Self insurance 1,769,766 1,862,957
Accounts payable 8,696,630 8,109,024
Accrued expenses 5,337,352 5,805,262
Income Taxes 315,183 50,161
------------ ------------
Total current liabilities 18,353,786 18,457,970
LONG-TERM OBLIGATIONS
Long-term debt 20,825,000 20,098,890
Obligations under capitalized leases 5,935,488 6,229,351
Self insurance 4,693,445 5,879,111
Other 2,682,201 2,423,485
------------ ------------
Total long term obligations 34,136,134 34,630,837
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 7,362,279 and, 7,080,195 shares - stated value $1 7,362,279 7,080,195
Additional contributed capital 60,427,514 56,794,272
------------ ------------
67,789,793 63,874,467
Retained earnings 2,038,452 4,860,713
------------ ------------
69,828,245 68,735,180
Less cost of treasury stock (213,945 and 197,586 shares) 3,538,721 3,428,146
------------ ------------
Total shareholders' equity 66,289,524 65,307,034
------------ ------------
$118,779,444 $118,395,841
============ ============
</TABLE>
5
<PAGE> 6
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
TWENTY-EIGHT WEEKS ENDED DECEMBER 15, 1996 AND DECEMBER 10, 1995
(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 28, 1995 $ 6,808,939 $ 54,624,224 $ 6,622,375 ($ 3,428,146) $ 64,627,392
Net earnings for twenty-eight weeks -- -- 1,670,833 -- 1,670,833
Dividends
Cash-$.18 per share -- -- (1,217,142) -- (1,217,142)
Stock-4% 271,256 2,170,048 (2,441,304) -- --
------------ ------------ ------------ ------------ ------------
Balance at December 10, 1995 7,080,195 56,794,272 4,634,762 (3,428,146) 65,081,083
Net earnings for twenty-five weeks -- -- 638,906 -- 638,906
Dividends
Cash-$.06 per share -- -- (412,955) -- (412,955)
------------ ------------ ------------ ------------ ------------
Balance at June 2, 1996 7,080,195 56,794,272 4,860,713 (3,428,146) 65,307,034
Net earnings for twenty-eight weeks -- -- 2,363,467 -- 2,363,467
Treasury shares acquired -- -- -- (110,575) (110,575)
Dividends
Cash - $.18 per share -- -- (1,270,402) -- (1,270,402)
Stock - 4% 282,084 3,633,242 (3,915,326) -- --
------------ ------------ ------------ ------------ ------------
Balance at December 15, 1996 $ 7,362,279 $ 60,427,514 $ 2,038,452 ($3,538,721) $ 66,289,524
============ ============ ============ =========== ============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
6
<PAGE> 7
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
TWENTY-EIGHT WEEKS ENDED DECEMBER 15, 1996 AND DECEMBER 10, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 2,363,467 $ 1,670,833
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 5,604,474 5,591,874
Loss (gain) on disposition of assets 332,363 (221,032)
Changes in assets and liabilities:
Decrease in receivables 319,209 57,390
Increase in inventories (573,707) (255,194)
Increase in prepaid expenses and sundry deposits (111,408) (291,681)
Decrease in prepaid and deferred income taxes 586,272 187,297
Increase (decrease) in accounts payable 143,117 (570,056)
Decrease in accrued expenses (467,910) (224,109)
Increase in accrued income taxes 265,022 --
Decrease in other assets 8,934 120,631
(Decrease) increase in self insured obligations (1,278,857) 1,617,855
Increase in other liabilities 258,716 69,867
----------- -----------
Net cash provided by operating activities 7,449,692 7,753,675
CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES:
Additions to property (6,570,992) (7,376,055)
Proceeds from disposition of property 313,185 2,221,411
Increase in other assets (85,118) (482,060)
----------- -----------
Net cash (used in) investing activities (6,342,925) (5,636,704)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from borrowings 1,500,000 4,000,000
Payment of long-term obligations (1,384,629) (4,439,821)
Cash dividends paid (825,913) (794,275)
Treasury share transactions (110,575) --
----------- -----------
Net cash (used in) financing activities (821,117) (1,234,096)
----------- -----------
Net increase in cash and equivalents 285,650 882,875
Cash and equivalents at beginning of year 134,944 219,650
----------- -----------
Cash and equivalents at end of second quarter $ 420,594 $ 1,102,525
=========== ===========
Supplemental disclosures:
Stock dividends issued $ 3,915,326 $ 2,441,304
Interest paid 1,326,217 1,445,262
Income taxes paid 1,086,251 1,091,871
Income tax refunds received 636,545 492,168
Dividends declared but not paid 444,489 422,867
Lease transaction capitalized -- 390,000
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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:
Description of the Business
- ---------------------------
Frisch's Restaurants, Inc., operates and licenses family restaurants with
drive-thru service under the name Frisch's Big Boy. These operations are located
in Ohio, Indiana and Kentucky. Additionally, the Company operates two hotels
with restaurants in metropolitan Cincinnati, where it is headquartered.
Trademarks which the Company has the right to use include "Frisch's," "Big Boy,"
and "Quality Hotel."
Consolidation Practices
- -----------------------
The consolidated financial statements include the accounts of Frisch's
Restaurants, Inc. and all of its subsidiaries. Significant inter-company
accounts and transactions are eliminated in consolidation.
Use of Estimates
- ----------------
The preparation of financial statements requires management to use estimates and
assumptions in certain areas that affect the amounts reported. These judgments
are based on knowledge and experience about past and current events, and
assumptions about future events. Although management believes its estimates are
reasonable and adequate, future events affecting them may differ markedly from
current judgment.
Some of the more significant areas requiring the use of estimates include self
insurance liabilities, deferred store closing costs, value of goodwill, real
estate held for sale, and deferred executive compensation.
Cash and Cash Equivalents
- -------------------------
Highly liquid investments with original maturities of three months or less are
considered to be cash equivalents.
Receivables
- -----------
The Company values its trade notes and accounts receivable on the reserve
method. The reserve balance was immaterial at December 15, 1996 and June 2,
1996.
Inventories
- -----------
Inventories, comprised principally of food items, are valued at the lower of
cost, determined by the first-in, first-out method, or market.
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.
8
<PAGE> 9
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - ACCOUNTING POLICIES (CONTINUED)
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, it is expected that assumption reinsurance transactions will
provide replacement policies with a creditworthy carrier that fully preserve
cash values and which contain rights and benefits comparable to the rights and
benefits under the original policies.
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. Opening expense
for the twenty-eight weeks was approximately $338,000 at December 15, 1996 and
$782,000 at December 10, 1995.
Benefit Plans
- -------------
The Company has two 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 portions of its casualty and employee medical
coverages. Self insurance costs are accrued based on 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.
Business Segments
- -----------------
Restaurant operations constitute a dominant segment in accordance with SFAS
statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
9
<PAGE> 10
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - ACCOUNTING POLICIES (CONTINUED)
New Accounting Standards
- ------------------------
Effective June 3, 1996, the Company adopted Financial Accounting Standard Number
121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long
Lived Assets to be Disposed of" and SFAS 123 "Accounting for Stock Based
Compensation."
SFAS 121 requires impairment losses to be recognized on long-lived assets,
whether used in the operation of the business or held for disposal, when events
or changes in circumstances indicate that the assets' carrying amount may not be
fully recoverable. The Company considers a history of cash flow losses in
established areas to be its primary indicator of potential impairment. The
effect upon adoption was immaterial.
SFAS 123 establishes new accounting and reporting standards for stock based
compensation plans. Companies may elect to adopt this standard using a
fair-value based method or continue using the intrinsic value method of
measuring compensation expense prescribed under the current guidance of
Accounting Principles Board Opinion Number 25 (APB 25).
Since the Company elected to continue using the intrinsic value method, SFAS 123
has not affected the Company's statement of earnings or financial position. SFAS
123 requires companies electing to continue using the rules of APB 25 to make
pro forma disclosures of net income and earnings per share as though the fair
value method had been elected. Pro forma disclosures of options granted and
stock issued will be reflected in the footnotes of the Company's consolidated
financial statements when required.
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
December 15, 1996 June 2, 1996
---------------------- ---------------------
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 $ - $ 13,000 $ - $ 11,500
Term loan 1,500 7,625 1,625 8,375
Other 294 200 538 224
------- --------- --------- ---------
$ 1,794 $ 20,825 $ 2,163 $ 20,099
======= ========= ========= =========
</TABLE>
The portion payable after one year matures as follows:
<TABLE>
<CAPTION>
December 15, June 2,
1996 1996
--------- ---------
(in thousands)
<S> <C> <C>
Period ending in 1998 $ 1,700 $ 1,724
1999 14,500 1,500
2000 1,500 13,000
2001 1,500 1,500
Subsequent to 2001 1,625 2,375
--------- ---------
$ 20,825 $ 20,099
========= =========
</TABLE>
The revolving credit loan is a $20,000,000 line of credit, $13,000,000 of which
is outstanding at December 15, 1996. This credit loan matures on September 1,
1999, unless extended. Interest is payable quarterly determined by various
indices, currently 6.63%. The term loan 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, asset dispositions, investments, leases, and
restrictions on pledging certain restaurant operating assets.
10
<PAGE> 11
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B - LONG TERM DEBT (CONTINUED)
The Company also has a $2,233,000 outstanding letter of credit in support of its
self insurance.
Other debt includes industrial revenue bonds that were issued in 1978, payable
in annual installments of $200,000 through 1998 which bear interest at 7.4%.
Property and equipment having a book value at December 15, 1996 of $3,257,000 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
-------------------------
Dec. 15, June 2,
1996 1996
-------- -------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 8,405 $ 8,762
Equipment 570 870
-------- --------
8,975 9,632
Less accumulated amortization (4,907) (5,154)
-------- --------
$ 4,068 $ 4,478
========= ========
</TABLE>
Total rental expense of operating leases for the twenty-eight weeks was
approximately $835,000 at December 15, 1996 and $867,000 at December 10, 1995.
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 December 15, leases leases
-------------------------- ----------- ----------
(in thousands)
<S> <C> <C>
1997 $1,113 $ 1,287
1998 1,051 1,234
1999 993 1,114
2000 906 976
2001 832 824
2002 to 2020 6,532 3,501
------ -------
Total 11,427 $ 8,936
=======
Amount representing interest (5,051)
------
Present value of obligations 6,376
Portion due within one year (441)
------
Long-term obligations $5,935
======
</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.
11
<PAGE> 12
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 562,432 shares of the Common
Stock of the Company for a ten year period beginning May 9, 1994. 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 85,394 $16.81 $1,435,473
President 101,891 $14.38-$20.83 1,957,073
Other key employees 77,528 $16.81 1,303,246
</TABLE>
The Company also has reserved 58,492 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.
NOTE F - PENSION PLANS
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheet at June 2, 1996 and May 2, 1995 (latest available
data, in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Plan assets at fair market value, primarily marketable securities and insurance funds $ 18,597 $ 16,451
Actuarial present value of benefit obligations:
Vested benefits 9,895 8,300
Non vested benefits 802 823
-------- --------
Accumulated benefit obligations 10,697 9,123
Effect of projected future salary increases 2,997 3,201
-------- --------
Projected benefit obligations 13,694 12,324
-------- --------
Plan assets in excess of projected benefit obligations (including approximately
$369 at 1996 and $360 at 1995 withdrawable by participants upon demand) 4,903 4,127
Unrecognized net gains (4,349) (3,259)
Unrecognized prior service cost 641 599
Unrecognized net transition (assets) (1,421) (1,658)
-------- --------
Net accrued pension cost included in the balance sheet $ (226) $ (191)
======== ========
</TABLE>
Assumptions used to develop net periodic pension cost and the actuarial present
value of projected benefit obligations:
<TABLE>
<CAPTION>
1996 1995
--------- -------
<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 twenty-eight weeks ended December 15, 1996 and
December 10, 1995 was $143,927 and $191,298, respectively.
12
<PAGE> 13
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 December 15, 1996 7,149,240
Year-to date at December 15, 1996 7,153,554
Quarter ending December 10, 1995 7,156,789
Year-to date at December 10, 1995 7,156,789
</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.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Total revenue decreased $534,000 or .6% during the twenty-eight weeks ended
December 15, 1996. However, record revenue of $39,607,000 was posted for the
second quarter, rising $402,000 or 1.0% over last year. Last year's revenue
included sales from the Company's former Hardee's operation for the twenty-eight
week period and the second quarter of $2,160,000 and $824,000, respectively.
Big Boy same-store sales showed a modest increase in both the quarter and
year-to-date results. Menu prices were increased approximately 2% and 1%,
respectively, in the first and third quarters of fiscal 1996. An increase of
roughly 3% was implemented early in the second quarter this year and a small
increase is being planned for February 1997.
Other income increased 5.3% for the first half of the year, primarily due to an
increase in franchise fee income.
At the end of the quarter, the Company operated 104 Big Boy restaurants and two
Quality Hotels. The Company did not open or close any restaurants during the
quarter.
For the first half of the year, cost of sales decreased $2,673,000 or 3.2%, as
costs fell to 88.6% of revenue from 91% last year. Payroll and related expenses
were favorably impacted in the first quarter as improved claims experience in
the Company's self insurance programs allowed estimates for future obligations
to be significantly lowered. The Company's withdrawal from the Ohio Workers'
Compensation system at the beginning of the year also allowed the downward trend
in payroll and related costs to continue in the second quarter. Other cost
reductions reflected in both the year-to-date and second quarter include lower
opening expenses, lower maintenance charges, and the savings from eliminating
underperforming Big Boy and Hardee's restaurants. However, higher payroll
expenses due to tight labor markets, particularly in Indianapolis and Columbus,
continue to pressure restaurant margins. In addition, commodity prices continue
to creep upward.
General and administrative expense for the twenty-eight week period was
$1,022,000 or 45.5% higher than last year. Components of the increase include
the cost of this year's proxy fight, advisory services to Big Boy licensees, a
charge to lower the carrying cost of property held for sale, and gains recorded
last year from the sale of real estate.
Interest expense decreased $30,000 or 2.3% year-to-date as borrowing has
leveled-off and average interest rates on the revolving credit loan were
slightly lower than last year.
The estimated annual income tax rate is 35.5% this year versus 32% last year, as
this year's projected tax credits represent a lower percentage of pre-tax
earnings.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $7,450,000, generated principally from
net income and depreciation.
Investing activities included $6,570,000 in property additions, a reduction of
approximately $810,000 from last year. Capital spending consisted of $1,940,000
to complete the 1996 construction cycle, $2,880,000 to remodel existing
operations, $900,000 to exercise purchase options on existing Big Boy
restaurants, and $850,000 in routine equipment replacements and other capital
costs. Proceeds of $310,000, principally from the sale of land, were also
included in investing activities.
Financing activities included $1,500,000 of new debt. Scheduled long-term debt
payments of $1,380,000 were made and the Company paid regular quarterly
dividends to shareholders of over $825,000.
Because the Company intends to operate within cash flow and prepay long-term
debt when cash flow permits, current plans do not call for any new Big Boy
restaurant construction in fiscal 1997. Hotel renovations and Big Boy
remodelings will continue as scheduled. Installation of the Company's point of
sale system is expected to begin before the end of fiscal 1997, requiring a
capital outlay of $30,000 to $35,000 per restaurant.
14
<PAGE> 15
PART II - OTHER INFORMATION
- ---------------------------
Items 1, 2, 3, 4, and 5, the answers to which are either "none" or "not
applicable", are omitted.
Item 6. Exhibits and reports on Form 8-K.
a) Exhibits
(3)(a) Code of Regulations
(3)(b) Amendments to Regulations adopted October 1, 1984
(3)(c) Amendments to Regulations adopted October 24, 1996
(27) Financial Data Schedule
b) Reports on Form 8-K.
The Company did not file a report on Form 8-K during the
twenty-eight weeks ended December 15, 1996.
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 January 29, 1996
----------------
January 29, 1996
BY Donald H. Walker
-----------------------------
Donald H. Walker
Vice President - Finance and
Principal Financial Officer
15
<PAGE> 1
EXHIBIT (3)(a)
CODE OF REGULATIONS
OF
FRISCH'S RESTAURANTS, INC.
ARTICLE I
SECTION 1. The principal officers of the corporation shall be a President, an
Executive Vice President and one or more Vice Presidents, a Secretary, and a
Treasurer, and, if the Board of Directors so determine, a Chairman of the Board
of Directors. The President and the Chairman of the Board of Directors shall be
members of the Board of Directors. Any two of the offices may be held by the
same person (except that the same person shall not be both President and Vice
President).
SECTION 2. All principal officers shall be elected, and all vacancies in such
offices be filled by the Board of Directors. The terms of office of said
officers shall extend from their respective elections to the next organization
meeting of the Board of Directors, and until their respective successors are
elected, but the Board of Directors may, at any time, remove any officer, with
or without cause.
SECTION 3. The board of directors may, from time to time, in its discretion,
create, and fill by the election, or cause to be filled by appointment by one of
the principal officers, one or more assistant secretaryships, one or more
assistant treasurerships, and such other offices, assistant or subordinate to
any of the principal offices above named, as it shall deem necessary to the
proper conduct of the business of the corporation, any may prescribe the terms
of office, qualifications, authorities and duties of the holders of such
offices. The board of directors may, at any time, in its discretion, abolish any
such office created by it, and the term of office of any holder of such office
shall thereupon terminate, anything in these regulations contained to the
contrary notwithstanding. In case of the absence or disability of any officer of
the corporation, the board of directors may, unless otherwise provided herein,
delegate to any other officer, or to any director, of the corporation, all, or
any part, of the authority and duties of such absent or disabled officer.
SECTION 4. The compensation of the officers of the corporation shall be such as
shall from time to time be fixed by the board of directors, and the fixing of
the salaries of the principal officers shall not be delegated to a committee.
The board of directors may, in its discretion, at any time, require any officer
of the corporation to give, for the faithful performance of his duties, bond, in
form and amount, and with surety, satisfactory to the board of directors.
SECTION 5. (a) If there be a chairman of the board of directors, he shall
preside at all meetings of said board, and of the shareholders, and shall
perform such other duties, and have such authority, not inconsistent with law
and these regulations, as shall be imposed or conferred upon him by the board of
directors.
(b) The president shall (unless the chairman of the board of
directors, if any, be present), preside at all meetings of the shareholders and
board of directors of the corporation; shall, subject to the direction and
control of the board of directors, be the chief executive office of the
corporation, and have general supervision and direction of all other officers of
the corporation, and general charge of its business and property; and shall be
ex officio a member of all standing committees of the board of directors, except
the executive committee, if there be one; shall, unless otherwise ordered by the
board of directors, or provided herein, sign all instruments of writing to which
it is customary to affix the seal of the corporation (provided however, that
certificates for shares may be signed by the chairman of the board or any
vice-president of the corporation); shall keep the board of directors and the
executive committee, if there be one, fully informed about the affairs of the
corporation; and shall make to the annual meeting of the shareholders a full and
true statement of the corporate affairs.
(c) The vice-presidents shall be designated, "Executive
Vice-President," "First Vice-President," "Second Vice-President," etc. and
shall, in the order of such designation (unless another order be specified by
the board of directors), in case of the absence or disability of the president,
exercise his authority and perform his duties, and shall respectively perform
such other duties, and have such other authority, not inconsistent with these
16
<PAGE> 2
EXHIBIT (3)(a)
regulations, as shall be imposed or conferred upon them by the board of
directors; but a vice-president who is not a director may not succeed to the
office of president.
(d) The secretary, in addition to all authority and duties provided
by law, shall attend, as hereinbefore, or by law, provided, to the giving of
notices of shareholders' meetings; shall give notice of directors' meetings,
when required by the by-laws or resolutions of the board of directors so to do;
shall keep and sign the minutes of all meetings of the shareholders, the board
of directors, and the committees thereof; shall keep such other records as the
board of directors or any committee thereof shall require; shall have charge of
the corporate seal, and (subject to the rules and regulations of the board of
directors and the transfer agents and registrars, if any, of the shares of the
corporation) shall have custody of the share certificate books and share
records, and attend to the issuance of certificates for shares, of the
corporation; and shall sign all instruments to which the seal of the corporation
shall be authorized to be affixed (provided, however, that certificates for
shares of the corporation may be signed by the treasurer or by any assistant
treasurer or assistant secretary of the corporation); but, subject to the
general control and direction of the secretary, any of his authorities or duties
may be delegated by him, or by the board of directors, to any assistant
secretary of the corporation.
(e) The treasurer, in addition to all authority and duties provided
by law, shall, subject to the direction of the board of directors of the
corporation, have custody of the corporate funds and securities; shall keep full
and accurate accounts of all receipts and disbursements thereof; shall deposit
all moneys and other funds of the corporation in such depositories as shall from
time to time be designated by the board of directors, the same to be withdrawn
as the board of directors shall from time to time direct; shall render, at
meetings of shareholders, such financial statements of the corporation as shall
be required by law, and from time to time, as requested by the president or
board of directors of the corporation, shall render statements of his
transactions and accounts, and of the financial condition of the corporation;
shall, unless otherwise ordered by the board of directors, sign all commercial
paper of the corporation and shall, upon the expiration of his term of office,
account for and deliver to the corporation all books, vouchers, papers, moneys
and other property of whatever kind, of the corporation, in his possession or
under his control; but, subject to the general control and direction of the
treasurer, any of his authorities or duties may be delegated by him, or by the
board of directors, to any assistant treasurer of the corporation.
(f) In addition to the authorities and duties hereinabove provided,
the principal officers of the corporation shall have such other authorities and
duties as are usually incident to such offices in corporations engaged in
business similar to that of this corporation, and such other authorities and
duties as shall from time to time be conferred upon, or required of, them,
respectively, by the board of directors. Anything in these regulations to the
contrary notwithstanding, the board of directors may at any time provide, either
for specific cases, or generally, that any written instrument to be executed,
signed or delivered, or any other thing to be done, in the name or upon behalf
of the corporation, may be so signed, executed, delivered or done, by any one or
more of the principal officers, or by any other officer, agent or attorney, of
the corporation, designated for such purpose by the board of directors;
provided, however, that certificates for shares of the corporation shall be
signed as provided in Section 1 of Article I of these regulations.
ARTICLE II
SECTION 1. The Board of Directors of the corporation shall consist of not less
than three (3) nor more than nine (9), as shall have been fixed by the
shareholders at a meeting called to elect Directors.
SECTION 2. The board of directors shall be elected at the annual meeting of the
shareholders, or, if not then elected, or if such meeting be not held at the
time fixed therefor, then at a special meeting held for the purpose of electing
directors. The board of directors elected at any annual, or any such special,
meeting, shall serve until the time fixed for the next annual meeting of the
shareholders, and until their successors are chosen and qualified. The election
of directors shall, if the number of persons nominated be greater than the
number of directorships to be filled, be by ballot. At all elections of
directors the candidates receiving the greatest number of votes shall be
elected.
17
<PAGE> 3
EXHIBIT (3)(a)
SECTION 3. Any director may, at any time, resign, by the written resignation
delivered to the secretary, or an assistant secretary, of the corporation, and
such resignation shall, unless otherwise specified therein, be effective upon
such delivery. The board of directors or the shareholders may, in any case
provided by law, declare vacant the office of a director. The remaining director
or directors, may, by a vote of a majority of their original number, fill any
vacancy in the board for the unexpired term, except that any vacancy created by
removal by shareholders shall be filled only by the shareholders by unanimous
consent or at a meeting called for that purpose; and where the remaining
directors are less than a majority of the full board elected at the last annual
meeting, the vacancies may be filled only by the shareholders. Any director so
chosen shall serve only until the next shareholders' meeting called to elect
directors, unless the shareholders shall not, at such meeting, elect his
successor, in which event, he shall serve until his successor shall be elected
by the shareholders.
SECTION 4. For their attendance at meetings of the board of directors or of any
committee of the board, directors who do not receive regular compensation from
the corporation in any other capacity may be paid such compensation as the board
of directors shall from time to time fix, and there shall be paid to all
directors their reasonable expenses incurred in attending meetings of the board
of directors or of any committee thereof.
SECTION 5. The board of directors shall have all authority, in the conduct,
control and management of the business and property of the corporation, which
shall be consistent with law, the articles and these regulations, including (but
not hereby limiting the generality of the foregoing grant of authority)
authority to adopt and alter the corporate seal; to fix the fiscal year of the
corporation; to fix, within the limits prescribed in the articles, the place of
its principal office; to establish and discontinue, at such times and places as
the board of directors shall deem proper, offices of the corporation, in
addition to its principal office; and to appoint, from the board's own number,
change the membership of, and remove, an executive committee, and other
committees, with such authority (including the authority to act by writing,
signed by all members of the committee, without a meeting) and duties, not
inconsistent with the law, the articles and these regulations, as the board of
directors shall from time to time provide; and, unless otherwise provided in
these regulations, any authority herein or by law conferred upon the board of
directors, may, in the interval between meetings of the board of directors, be
exercised by any committee of the board to whom the board shall delegate the
same.
ARTICLE III
SECTION 1. The Annual Meeting of the Stockholders shall be held at Cincinnati,
Ohio, on the third Monday in September, at which meeting the Board of Directors
shall be chosen. If for any reason it be impractical to hold the meeting at such
time, the President shall call a meeting as soon thereafter as is practical.
SECTION 2. Upon the election of the Directors, the Secretary shall notify the
several Directors of their election, and they shall within five days after their
election meet for the purpose of organization and transaction of business.
SECTION 3. Stockholders shall be entitled to one vote for each share of stock
held by them.
SECTION 4. Special meetings of shareholders may be called at any time by the
President, and must be called by the President upon written request of the
holders of 25% of the outstanding shares entitled to vote at such special
meeting. Written notice of such meetings stating the place, date and hour of the
meeting, the purpose or purposes for which it is called, shall be given not less
than 7 nor more than 60 days before the date set for the meeting by directing
said notice to each stockholder at his last known place of residence. No
business other than that specified in the notice of meeting shall be transacted
at any such special meeting.
ARTICLE IV
SECTION 1. The annual meeting of the Board of Directors shall he held on the
third Monday in August commencing with the calendar year 1961, and for every
year thereafter.
18
<PAGE> 4
EXHIBIT (3)(a)
SECTION 2. The Board of Directors shall have the right to designate at which
times and places it shall hold other meetings.
SECTION 3. Special meetings of the Board of Directors may be called by any two
of the Directors by written notice of the time and place and object of such
meeting, which notice shall be mailed to or personally served on all the
Directors at least two days before the time fixed for said meeting. If notice be
sent by mail, said notice shall be directed to the last known place of residence
of each said Directors.
ARTICLE V
Any meeting of stockholders or of the Board of Directors may be held within or
without the State of Ohio.
ARTICLE VI
It shall be the duty of the Board of Directors to exercise general supervision
over the affairs of the Company, advise with its officers, fix their
compensation, and cause to be prepared a report of the business setting forth
the assets and liabilities and submit the same for the consideration of the
stockholders at the annual meetings, to declare dividends and order the same
paid at such times as they may determine upon and as the net earnings and
conditions of the business warrant. Said Board of Directors shall also have
power to authorize any one of said Board of Directors, or any officer thereof,
to commence, prosecute or enforce or to defend, answer or oppose all actions or
other legal proceedings touching any of the matters concerning said corporation,
or to compromise, require an arbitration or submit a judgment in any action or
proceeding brought against said company.
ARTICLE VII
SECTION 1. Each shareholder of the corporation shall be entitled to a
certificate, certifying (or certificates, certifying in the aggregate), the
number and class of paid-up shares of the corporation held by him, but no
certificates shall be issued for a share until it is fully paid. Such
certificates shall be of such form and content, not inconsistent with law and
the articles, as shall be determined by the board of directors, shall be
consecutively numbered in each class of shares, shall be signed by the chairman
of the board of directors or the president or any vice-president and by the
secretary, or, any assistant secretary, or the treasurer, or any assistant
treasurer, (and shall bear an impression of the seal, of the corporation or a
facsimile thereof); provided, however, that when any such certificate is
countersigned by a transfer agent, who is not an employee of the corporation, or
by a transfer clerk or by a registrar, the signatures of any such chairman,
president, vice-president, secretary, assistant secretary, treasurer or
assistant treasurer (and the seal of the corporation), upon such certificate may
be facsimiles, engraved, stamped or printed. A full record of each certificate
so issued shall be kept by the secretary, or by a transfer agent of the shares,
of the corporation. Such record shall show the number of the certificate, the
number and class of shares represented thereby, the date of issuance, the name
of the shareholder, his address, as furnished by him to the corporation, and, if
the certificate be issued upon a transfer of shares, from whom transferred, and
the number of the certificate surrendered for transfer. Certificates may, if
authorized by the board of directors, be issued for fractions of shares.
SECTION 2. Subject to any applicable provisions of law or of the articles,
transfers of shares of the corporation shall be made only upon its books, upon
surrender and cancellation of a certificate or certificates for the shares so
transferred, and upon compliance with such reasonable requirements as shall be
prescribed by the board of directors, or by the respective transfer agents and
registrars, if any, of the shares of the corporation. Any certificate so
presented for transfer shall be endorsed, or shall be accompanied by a separate
written assignment or a power of attorney to sell, assign and transfer such
certificate and the shares represented thereby, signed, by the person appearing
by the certificate to be the owner of the shares represented thereby, or by a
duly appointed guardian, or executor or administrator, of the estate of such
person.
19
<PAGE> 5
EXHIBIT (3)(a)
SECTION 3. The board of directors, may from time to time, appoint and remove one
or more agents, to keep the records of the corporation's shares, and to transfer
or register (or both) such shares, in such places, and with such powers, not
inconsistent with law and these regulations, as the board of directors shall
deem proper.
SECTION 4. No certificate of stock shall be transferred so long as the holder
thereof, whether legally or equitably, shall be indebted to the company, and the
company shall have a first and paramount lien upon all stock of any holder who
may be indebted to the company.
ARTICLE VIII
Unless changed by a majority vote, at all stockholder's meetings the order of
business shall be as follows:
1. Reading of the Minutes,
2. Reading of Reports and Statements,
3. Unfinished Business,
4. Election of Directors,
5. New or Miscellaneous Business.
ARTICLE IX
Each present and future director and officer shall be indemnified by the company
against expenses reasonably incurred by him (including, but not limited to,
counsel fees, and settlements out of court in amounts approved by the board of
directors but not including any case where in the opinion of disinterested
reputable counsel selected by the company the directors and officers affected
are guilty of negligence or misconduct) and against judgments against him in
favor of the company or other persons in connection with any action, suit or
proceeding to which he may be made a part by reason of his being or having been
a director or officer of the company (whether or not he continues to be a
director or officer at the time of incurring such expenses), except in relation
to matters as to which he shall be adjudged in such action, suit or proceeding
to be liable because of negligence or misconduct. The foregoing right of
indemnification shall not be exclusive of other rights to which any director or
officer may be entitled as a matter of law.
ARTICLE X
These Regulations or any of them may be altered, amended, repealed or suspended
at any special meeting of the stockholders, provided that notice of the proposed
alteration, amendment or repeal shall be filed with the Secretary of the company
not less than two (2) weeks before the time of such special meeting and its
purpose shall be given to each stockholder at least seven (7) days prior to the
date thereof, at his last known place of residence. Action at such meeting may
be taken by a majority vote of stockholders represented thereat. These
Regulations or any of them may be altered, amended, repealed or suspended at any
annual meeting of the stockholders by a majority vote of stockholders
represented at such meeting, and in such event no previous advice to
stockholders shall be required.
20
<PAGE> 1
EXHIBIT (3)(b)
FRISCH'S RESTAURANTS, INC.
AMENDMENTS TO REGULATIONS
Adopted: October 1, 1984
ARTICLE II
Section 1. The business of the corporation shall be managed and
conducted by a Board of Directors consisting of not less than five (5) nor more
than nine (9) members, one of whom shall be designated Chairman and none of whom
need be shareholders of the corporation.
Section 2. The Board of Directors shall be elected at the annual
meeting of the shareholders, or, if not then elected, or if such meeting be not
held at the time fixed therefor, then at a special meeting held for the purpose
of electing directors. The Board of Directors shall be divided into two classes
consisting of not less than three Directors each. Directors elected at the first
election of the first class shall hold office for a term of one year. Directors
elected at the first election of the second class shall hold office for a term
of two years. In each instance, such Directors shall hold office until their
successors are elected and qualified. Upon expiration of the terms of office of
the Directors as set forth above, their successors shall be elected for a term
of two years and until their successors are elected and qualified. The election
of directors shall, if the number of persons nominated be greater than the
number of directorships to be filled, be by ballot. At all elections of
directors the candidates receiving the greatest number of votes shall be
elected. In the event that less than nine (9) be elected at any annual meeting
of shareholders any vacancy or vacancies left open may be filled at anytime by
the Board.
Section 3. Any director may, at any time, resign, by the written
resignation delivered to the secretary, or an assistant secretary, of the
corporation, and such resignation shall, unless otherwise specified therein, be
effective upon such delivery. Vacancies in the Board of Directors may be filled
by a majority vote of the remaining directors until the next annual meeting.
Shareholders entitled to elect Directors shall have the right to fill any
vacancy in the Board (whether the same has been temporarily filled by the
remaining directors or not, and notwithstanding the provisions of Section 2
above) at any meeting of the shareholders attended by a quorum thereof, held for
any purpose during the interim, and any directors elected at such meeting of the
shareholders shall serve until the next annual election of directors, and until
their successors are elected and qualified. If the office of the Chairman of the
Board becomes vacant between annual meetings, it may likewise be filled at any
subsequent or interim meeting of the shareholders.
Section 4. For their attendance at meetings of the Board of Directors
or of any committee of the Board, directors who do not receive regular
compensation from the corporation in any other capacity may be paid such
compensation as the Board of Directors shall from time to time fix, and there
shall be paid to all directors their reasonable expenses incurred in attending
meetings of the Board of Directors or of any committee thereof.
Section 5. The board of directors shall have all authority, in the
conduct, control and management of the business and property of the corporation,
which shall be consistent with law, the articles and these regulations,
including (but not hereby limiting the generality of the foregoing grant of
authority) authority to adopt and alter the corporate seal; to fix the fiscal
year the corporation; to fix, within the limits prescribed in the articles, the
place of its principal office; to establish and discontinue, at such times and
places as the board of directors shall deem proper, offices of the corporation,
in addition to its principal office; and to appoint, from the board's own
number, change the membership of, and remove, an executive committee, and other
committees, with such authority (including the authority to act by writing,
signed by all members of the committee, without a meeting) and duties, not
inconsistent with the law, the articles and these regulations, as the board of
directors shall from time to time provide; and, unless otherwise provided in
these regulations, any authority herein or by law conferred upon the board of
directors, may, in the interval between meetings of the board of directors, be
exercised by any committee of the board to whom the board shall delegate the
same.
21
<PAGE> 2
EXHIBIT (3)(b)
ARTICLE III
Section 1. The Annual Meeting of the Stockholders shall be held at
Cincinnati, Ohio on the first Monday in October, at which meeting the Board of
Directors shall be chosen. If for any reason it be impractical to hold the
meeting at such time, the President shall call a meeting as soon thereafter as
is practical.
Section 2. Upon the election of the Directors, the Secretary shall
notify the several Directors of their election, and they shall within five days
after their election meet for the purpose of organization and transaction of
business.
Section 3. Stockholders shall be entitled to one vote for each share of
stock held by them.
Section 4. Special meetings of shareholders may be called at any time
by the President, and must be called by the President upon written request of
the holders of 50% of the outstanding shares entitled to vote at such special
meeting. Written notice of such meetings stating the place, date and hour of the
meeting, the purpose or purposes for which it is called, shall be given not less
than 7 nor more than 60 days before the date set for the meeting by directing
said notice to each stockholder at his last known place of residence. No
business other than that specified in the notice of meeting shall be transacted
at any such special meeting.
ARTICLE IX
The corporation shall indemnify any person who was or is a party to any
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, or who is threatened to be made a party to any such action, suit or
proceeding whether threatened, pending or completed, by reason of the fact that
the person is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director, officer, partner or
trustee of another corporation, partnership, joint venture trust or other
enterprise, against all expenses actually and reasonably incurred by the person
in connection with such action, suit, or proceeding, including but not limited
to judgments, fines and amounts paid in settlement, if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation or, with respect to any
criminal action or proceeding that the person had reasonable cause to believe
that the person's conduct was unlawful.
Further, the corporation shall indemnify any person who was or is a
party to any pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, or who is threatened to be made
a party to any such action, suit or proceeding, whether threatened, pending or
completed, by reason of the fact that the person is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director, officer partner or trustee of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit, but not including judgments or amounts paid in settlement, if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation; provided,
however, that no indemnification shall be made in respect of any claim, issue,
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of the person's duty to the
corporation unless, and only to the extent that the court of common pleas or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court of common pleas or such other court
shall deem proper.
Any indemnification, unless ordered by a court, shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, partner or trustee is proper in the
circumstances because such person has met the applicable standard of conduct set
forth above. Such determination shall be made by a majority vote of a quorum
consisting of directors of the corporation who were not and are not
22
<PAGE> 3
EXHIBIT (3)(b)
parties to or threatened with such action, suit or proceeding, or if such a
quorum is not obtainable or if a majority vote of a quorum of disinterested
directors so directs, in a written opinion by independent legal counsel other
than an attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation or any person to
be indemnified within the past five years. Any determination made by the
disinterested directors or by independent legal counsel shall be promptly
communicated to any person who threatened or brought an action or suit by or in
the right of the corporation.
The foregoing notwithstanding, to the extent that such a director,
officer, partner of trustee has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to above or in defense of
any claim, issue, or matter therein such person shall be entitled to
indemnification against all expenses actually and reasonably incurred by such
person in connection therewith as a matter of right, without the necessity of a
determination that indemnification is proper.
Expenses incurred in defending any action, suit or proceeding, may be
paid by the corporation in advance of the final disposition of the same as
authorized by the directors in the specific case upon receipt of an undertaking
by or on behalf of the director, officer, partner or trustee to repay such
amount if it is ultimately determined that such person is not entitled to
indemnification under this article.
The rights of indemnification granted by this article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under the Ohio General Corporation Law, the Articles of
Incorporation or Code of Regulations of this corporation or any agreement, vote
of shareholders or disinterested directors, or otherwise, both as to actions in
such person's official capacity and as to actions in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, partner or trustee and shall inure to the benefit of the
heirs, executors, and administrators of such person.
The corporation may purchase and maintain insurance on behalf of any
person required or authorized to be indemnified under this article against any
liability asserted against or incurred by such person in or arising out of such
person's status as a director, officer, partner or trustee as specified in this
article, whether or not the corporation would have the power to indemnify such
person under this article.
As used in this article, references to "the corporation" include all
constituent corporations and the new or surviving corporation in a consolidation
or merger so that any person who is or was a director or officer of such a
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, partner or trustee of another corporation,
partnership, joint venture, trust, or other enterprise shall stand in the same
position under this article with respect to the new or surviving corporation as
the person would if the person had served the new or surviving corporation or at
the request of the new or surviving corporation in the same capacity.
In the discretion of the board of directors of the corporation, any
person who is or was serving as an employee or agent of the corporation or, at
the request of the corporation, as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, may be indemnified by the
corporation under the circumstances and to the extent that indemnification would
be required or authorized for a person acting as a director or officer of the
corporation or director, officer, partner or trustee of another corporation,
partnership, joint venture, trust or other enterprise under this article.
23
<PAGE> 1
EXHIBIT (3)(c)
FRISCH'S RESTAURANTS, INC.
AMENDMENTS TO REGULATIONS
Adopted: October 24, 1996
RESOLVED, that Article II, Section 1 of the Code of Regulations of the
Corporation be amended by adding a new sentence to read as follows: "A majority
of the Directors and of each committee of the Directors of the Corporation shall
be persons who are not, and have not been within three years of the date of
their selection, an officer or employee of the Corporation or a relative of any
such person or a person having a material relationship with the Corporation as
an advisor or consultant."
<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>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-01-1997
<PERIOD-START> JUN-03-1996
<PERIOD-END> DEC-15-1996
<CASH> 420,594
<SECURITIES> 0
<RECEIVABLES> 1,751,532
<ALLOWANCES> 0
<INVENTORY> 4,299,462
<CURRENT-ASSETS> 8,629,045
<PP&E> 174,485,659
<DEPRECIATION> 74,627,598
<TOTAL-ASSETS> 118,779,444
<CURRENT-LIABILITIES> 18,353,786
<BONDS> 26,760,488
<COMMON> 7,362,279
0
0
<OTHER-SE> 58,927,245
<TOTAL-LIABILITY-AND-EQUITY> 118,779,444
<SALES> 90,507,996
<TOTAL-REVENUES> 91,337,055
<CGS> 80,932,048
<TOTAL-COSTS> 80,932,048
<OTHER-EXPENSES> 5,476,854
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,263,686
<INCOME-PRETAX> 3,664,467
<INCOME-TAX> 1,301,000
<INCOME-CONTINUING> 2,363,467
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,363,467
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
