<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 JUNE 1, 1997
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:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
COMMON STOCK OF NO PAR VALUE AMERICAN STOCK EXCHANGE
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 19, 1997, 6,005,368 COMMON SHARES WERE OUTSTANDING, AND THE
AGGREGATE MARKET VALUE OF THE COMMON SHARES (BASED UPON THE AUGUST 19, 1997
CLOSING PRICE OF THESE SHARES ON THE AMERICAN STOCK EXCHANGE) OF FRISCH'S
RESTAURANTS, INC. HELD BY NONAFFILIATES WAS APPROXIMATELY $57.4 MILLION.
<PAGE> 2
PART I
------
(Items 1 through 4)
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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.
Operations in the food service industry are vertically integrated, and include
the manufacture and distribution of food products and supplies to the Company's
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. Operations in the lodging industry
consist of 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.
Prior to 1997, operations in the food service industry constituted a dominant
segment in accordance with Statement of Financial Accounting Standards No. 14,
"Financial Reporting Segments of a Business Enterprise." Financial information
by industry segment as of and for the three fiscal years in the period ended
June 1, 1997 appears in Note H - Information About The Company's Operations in
Different Industries - to the Consolidated Financial Statements included in Part
II, Item 8 of this Form 10-K.
The Company operates or licenses others to operate family restaurants, most of
which have "drive-thru" service, located in Ohio, Kentucky and Indiana which use
the tradename "Big Boy". The Company also has the right to operate or license
others to operate Big Boy family restaurants in Florida, 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. During the fourth quarter of fiscal year 1997, the Company decided to
close fifteen underperforming Big Boy restaurants, reducing the number currently
operating to 88. Additionally, 39 Big Boy restaurants are operated by licensees.
The following tabulation sets forth restaurant openings and closings for both
operated and licensed restaurants for the five years ended June 1, 1997:
<TABLE>
<CAPTION>
Year ended
5/30/93 5/29/94 5/28/95 6/2/96 6/1/97
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Operated Restaurants
Big Boy
Opened 13 9 9 4 3
Replaced by new units (2) - (1) (1) (2)
Closed (9) (2) (1) (3) *(16)
------ ------ ----- ----- ----
Total Big Boy 89 96 103 103 88
Hardee's
Opened - - - - -
Closed - (2) - (6) -
Total Hardee's 8 6 6 0 0
------ ------ ----- ----- ----
Total Operated Restaurants 97 102 109 103 88
====== ====== ===== ===== ====
<FN>
*15 of these restaurants were closed on June 10, 1997.
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C> <C>
Licensed Restaurants
Big Boy
Opened 1 - - - 2
Closed (11) (4) (13) (12) (5)
------ ------ ----- ----- ----
Total Licensed Big Boy 71 67 54 42 39
====== ====== ===== ===== ====
</TABLE>
The following tabulation sets forth the range and average floor space and the
range and average seating capacity for Big Boy restaurants operated by the
Company (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>
3578 6820 5598 105 200 156
</TABLE>
Big Boy restaurants are family restaurants which the Company operates under the
name of "Frisch's". Some of the licensed Big Boy restaurants do not use the name
"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, pasta, chicken and seafood dinners, desserts and other items.
In addition, a full breakfast menu is offered, and most of the restaurants also
contain breakfast bars, soup and salad bars and drive-thru service. The
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. 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 most 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. 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 restaurants, 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.
Sixteen of the licensed restaurants (41%) currently purchase items
3
<PAGE> 4
from the commissary. Big Boy restaurants licensed in northern Indiana and
northwestern Ohio 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 restaurants. Eight of the licensed restaurants (21%) 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. The Company has numerous competitors, none of which is
dominant in the family restaurant 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 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.
After closing fifteen underperforming Big Boy restaurants, the Company and its
subsidiaries employed approximately 5,400 persons, approximately 3,450 of whom
were full-time and 1,950 were part-time.
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, with
a renewal option available through December 31, 2012.
It is the Company's policy to own its restaurant locations whenever possible. Of
the 88 Big Boy restaurants currently operated by the Company in Ohio, Kentucky
and Indiana, fifty-eight (58) locations are owned and thirty (30) 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.
4
<PAGE> 5
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>
1998 3
1999 2
2000 4
2001 4
2002 2
</TABLE>
All but one of the above fifteen leases have options to renew for from 5 to 20
years, and/or favorable purchase options.
The Company has assigned or sub-let certain leases of closed restaurants with
average annual obligations approximating $260,000 over the next five years. In
the event of default by assignees or sub-lessees, the Company generally retains
the right to re-assign or sub-let the properties.
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 Company has the option to purchase this land at any
time during the current term or any renewal thereof.
The furniture, fixtures and equipment used in the operation of the business are
owned by the Company.
Mortgages totaling approximately $225,000 encumber the commissary in Cincinnati,
Ohio, one restaurant location, office equipment and commissary production
equipment.
The Company owns a one-fifteenth limited partner's interest in the Cincinnati
Reds professional baseball team. The Company has committed to actively try to
sell this asset to repay borrowings under a loan agreement dated July 9, 1997,
and has pledged the after-tax sale proceeds as collateral for the loan. See
Exhibit (10) (l) of this Form 10-K.
The fifteen Big Boy restaurants that the Company decided to close during the
fourth quarter of fiscal year 1997 are listed for sale with a broker, and are
carried at a net realizable value of approximately $12,140,000 on the Company's
balance sheet under the caption "Property held for sale." In addition,
continuing lease payments of approximately $100,000 per year must be paid on one
of the closed restaurants, a site that was never developed and office space in
Indianapolis. The Company expects to dispose of these properties and leases
within the next twelve to eighteen months. These restaurant properties have been
pledged as collateral under a loan agreement dated July 9, 1997 (see Exhibit
(10) (l) of this Form 10-K) and the Company is required to immediately apply the
after-tax sale proceeds against the outstanding indebtedness.
Certain surplus land and two older former restaurant locations are also
currently 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
Since
-----
Name Age
---- ---
<S> <C> <C> <C>
Jack C. Maier 72 Chairman of the Board 1970
Craig F. Maier 47 President and Chief Executive Officer 1989
Marvin G. Fields 62 Senior Vice President - Operations 1971
Donald H. Walker 51 Vice President - Finance, Treasurer 1996
W. Gary King 60 Secretary - Counsel 1996
</TABLE>
PART II
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(Items 5 through 9)
-------------------
Item 5. - Market for the Registrant's Common Equity and Related Stockholder
- ------- -----------------------------------------------------------------
Matters
-------
<TABLE>
<CAPTION>
Year Ended June 1, 1997 Year Ended June 2, 1996
------------------------------------ -------------------------------------
Stock Prices Stock Prices
---------------------- Dividend ------------------------ Dividend
High Low per share High Low per share
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 15 11 1/8 6(cent) 10 1/4 8 5/8 6(cent)
2nd Quarter 15 1/4 12 1/2 6(cent) 10 3/4 8 5/8 6(cent)
3rd Quarter 16 13 1/4 6(cent) 10 1/8 7 11/16 6(cent)
4th Quarter 15 1/2 13 5/8 6(cent) 11 7/8 8 1/4 6(cent)
</TABLE>
In addition to cash dividends above, a 4% stock dividend was paid in 1997 and
1996. There are approximately 3,000 shareholders of record. The Company's common
stock is traded on the American Stock Exchange under the symbol FRS.
Through July 10, 1997, the Company has paid 146 consecutive quarterly dividends
during its thirty-six year history as a public company. The Company has also
paid twenty-six stock dividends since 1970, which has resulted in increased
dividend payouts in every year since 1975.
6
<PAGE> 7
Item 6. - Selected Financial Data
- ---------------------------------
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands, except share data)
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue
Sales $ 164,521 $ 165,426 $ 161,429 $ 157,995 $ 146,732
Other 1,410 1,519 1,630 2,070 2,255
--------- --------- --------- --------- ---------
Total revenue 165,931 166,945 163,059 160,065 148,987
Costs and expenses
Cost of sales
Food and paper 52,033 53,123 52,299 51,071 46,795
Payroll and related 55,479 58,572 56,335 52,827 49,741
Other operating expenses 41,086 41,650 40,781 37,792 34,337
--------- --------- --------- --------- ---------
148,598 153,345 149,415 141,690 130,873
General and administrative 4,625 3,745 4,582 5,030 4,701
Advertising 4,007 4,026 4,008 3,873 3,632
Impairment of long-lived assets 4,600 - - - -
Interest expense 2,373 2,411 1,961 1,554 1,341
--------- --------- --------- --------- ---------
Total costs and expenses 164,203 163,527 159,966 152,147 140,547
--------- --------- --------- --------- ---------
Earnings before income taxes 1,728 3,418 3,093 7,918 8,440
Income taxes
Current 1,555 1,438 843 3,553 3,493
Deferred (1,014) (330) (108) (711) (445)
--------- --------- --------- --------- ---------
541 1,108 735 2,842 3,048
--------- --------- --------- --------- ---------
Net earnings $ 1,187 $ 2,310 $ 2,358 $ 5,076 $ 5,392
========= ========= ========= ========= =========
Primary and fully diluted net earnings
per share of common stock $ .17 $ .32 $ .33 $ .71 $ .75
========= ========= ========= ========= =========
Dividends per share
Cash $ .24 $ .24 $ .24 $ .24 $ .24
Stock 4% 4% 4% 4% 4%
Other financial statistics
Capital expenditures $ 10,221 $ 15,362 $ 23,283 $ 18,312 $ 22,823
Total assets 111,260 118,396 115,548 104,349 98,095
Long-term obligations 30,878 34,631 32,696 24,319 18,703
Shareholders' equity 64,684 65,307 64,627 63,830 60,299
Per share $ 9.05 $ 9.12 $ 9.03 $ 8.91 $ 8.42
Return on investment 1.8% 3.6% 3.7% 8.4% 9.6%
Average number of common shares outstanding 7,151 7,157 7,157 7,160 7,158
Percentage (decrease) increase in total revenue (.6%) 2.4% 1.9% 7.4% 7.7%
Earnings as a percentage of total revenue
Earnings before income taxes 1.0% 2.0% 1.9% 4.9% 5.7%
Net earnings .7% 1.4% 1.4% 3.2% 3.6%
</TABLE>
Note: Per share data, except for dividends, are based on the weighted average
number of common shares outstanding.
7
<PAGE> 8
Item 7. - Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
After achieving record revenue for four consecutive years, a slight decline of
.6% or $1,013,000 was experienced in fiscal 1997, due to comparing 52 weeks in
1997 to 53 weeks in 1996. However, on a comparable 52 week basis, total revenue
increased 1.3% to $165,931,000, as the extra week in fiscal 1996 contributed
$3,206,000 in added revenue. Revenue increases were 2.4% in 1996 (.4% without
benefit of the extra week) and 1.9% in 1995.
Big Boy same store sales increased moderately during 1997, after experiencing a
slight dip in 1996 and a moderate decline in 1995. Average annual sales volume
of a Big Boy restaurant in operation for the entire 1997 year increased 2.3% to
$1,406,000 from $1,375,000 in the comparable 52 week 1996 period. The comparable
1995 volume was $1,393,000. Mild winter weather in the Company's markets and
estimated price increases of 2% late in the third quarter and 3% early in the
second quarter contributed to the same store sales increase in 1997. Menu prices
were also increased approximately 2% and 1%, respectively, in the first and
third quarters of 1996, and 2% in the fourth quarter of 1995. Another menu price
increase is currently being planned for autumn 1997.
As the fiscal year was coming to an end, the Company decided to close fifteen
underperforming restaurants, including a total withdrawal from the Indianapolis
market. These restaurants contributed sales of $14,000,000 during 1997. Lower
revenue and sales are expected for the next few years as a result of this
decision and also because the Company does not plan to open any new Big Boy
restaurants during fiscal 1998. The Company now operates 88 Big Boy restaurants
and two Quality Hotels.
As a result of management initiatives, cost of sales decreased $4,747,000 or
3.1% during 1997, as costs fell to 89.6% of revenue from 91.9% in 1996. Cost of
sales were 91.6% of revenue in 1995. Payroll and related expenses provided the
largest component of the improvement, declining to 33.4% of revenue in 1997 from
35.1% in 1996 and 34.5% in 1995. Favorable claims experience in the Company's
self insurance programs allowed estimates to again be lowered. The favorable
adjustment in 1997 was $621,000 greater than 1996, and was $814,000 greater than
1995. In addition, the Company's withdrawal from the Ohio Workers' Compensation
system at the beginning of 1997 provided an additional savings of approximately
$1,480,000. The driving force behind these savings is the Company's long
standing emphasis on and concern for employee safety. Other enhancements to the
Company's insurance programs have resulted in additional savings. These cost
saving measures offset the effects of continuing tight labor market conditions,
particularly in Indianapolis and Columbus, which put added pressure on payroll
costs. Because of the tight labor market, the impending increase in the federal
minimum wage to $5.15 an hour on September 1, 1997 is not expected to have an
immediate material effect on payroll costs.
Due to sound menu management, food and paper costs also improved significantly
during 1997, falling to 31.4% of revenue from 31.8% in 1996 and 32.1% in 1995.
The cost reductions were achieved despite creeping commodity prices.
Improvements consisted of several adjustments to the menu mix, which were
designed to encourage customer purchases of meals with lower food cost, and well
timed menu price increases, designed to gain a fair return on the high quality
products the Company serves.
Other operating expenses decreased to 24.8% of revenue from 24.9% in 1996 and
from 25% in 1995. The savings included lower opening expenses which resulted
from a slow-down and eventual halt in new restaurant construction, lower
maintenance costs and depreciation charges, and improved restaurant operational
controls. The overall savings are more dramatic because last year included a
gain of $480,000 from the sale of the Hardee's division, while this year
includes a charge of $485,000 to write-off future occupancy costs of certain
leased property.
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<PAGE> 9
Also adding to the overall improvement in cost of sales this year was the higher
contribution to margins that resulted from same store sales increases, and the
elimination of Hardee's restaurants during 1996.
General and administrative expense increased $880,000 or 23.5% over 1996 levels,
and only 1% higher than 1995. The increase includes the cost of the Strategic
Planning Committee's initiatives, expenses due to a shareholder proxy contest,
advisory services rendered to Big Boy licensees, and a charge to lower the
carrying cost of certain property held for sale. Largely offsetting these costs
was an $880,000 gain on the sale of the farm property in the fourth quarter.
Last year's general and administrative expense included gains of $771,000 from
the sale of non-operating real estate, which accounted for the change from 1995.
Advertising expense remained steady at 2.4% of revenue in all three years,
reflecting the Company's policy of spending a constant percentage of sales
dollars. The Company's marketing efforts have been effectively carried on
television in all three years. Advertising efficiencies created in all the
Company's markets have allowed the Company to spend in excess of 50% of the
advertising budget on television in each of the last three years. The Company
believes, and research confirms, that these television spots have increased
customer awareness of the quality of the food associated with the Big Boy
tradename. This in turn has moderated the effects of any customer resistance to
recent menu price increases.
Interest expense decreased $38,000 or 1.6% below 1996, reflecting lower debt and
lower average rates on the Company's revolving credit loan. However, interest
expense in 1997 was $412,000 or 21% higher than 1995, due to higher debt levels
that were incurred in 1995 and early in 1996.
The decision to close fifteen underperforming Big Boy restaurants at the end of
1997 resulted in an impairment of long-lived assets charge of $4,600,000. Ten of
the restaurants were located in Indianapolis, four in central Ohio and one in
Louisville. The restaurants sustained pre-tax losses of approximately $2,200,000
in fiscal 1997. The impairment charge was calculated and recorded as required
under SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." All fifteen properties are now listed for
sale with a broker, and are carried at a net realizable value of $12,140,000 on
the Company's balance sheet. Without this charge, after tax earnings would have
been $3,040,000 or $.42 per share higher than reported net earnings.
The effective income tax rate was 31.3% in 1997, compared with 32.4% in 1996 and
23.8% in 1995. This year's rate benefitted from lower provisions for state
income taxes resulting from subsidiary filing efficiencies. Rates in 1997 and
1996 are generally higher than two years ago due to the lower tax credits,
principally the Targeted Jobs Tax Credit that expired at the end of calendar
1994.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $12,750,000, generated principally
from net income and the add back of depreciation and the impairment loss.
Investing activities included $10,220,000 in property additions, a reduction of
$5,140,000 from last year, and $13,060,000 lower when compared with 1995.
Capital spending consisted of $1,940,000 to complete construction of two
replacement restaurants in suburban Cincinnati, $5,460,000 to remodel Big Boy
restaurants and renovate the hotel properties, $900,000 to exercise purchase
options on existing Big Boy locations, $270,000 on the new point of sale system,
and $1,650,000 in routine equipment replacements and other capital costs.
Proceeds of $2,700,000, consisting principally from the sales of the farm
property and an underperforming Big Boy restaurant that closed in this year's
third quarter, were also included in investing activities.
9
<PAGE> 10
Financing activities included $3,000,000 borrowed on the Company's revolving
line of credit to meet seasonal borrowing needs. The Company repaid $3,500,000
on the line of credit in the fourth quarter. Scheduled long-term debt payments
of $2,660,000 were also made and the Company paid regular quarterly cash
dividends totaling $1,700,000.
Current plans do not call for any new Big Boy restaurant construction in fiscal
1998. Hotel renovations and limited Big Boy remodelings will continue as
scheduled. The cost of Big Boy remodelings will level-off in 1998, as
substantially all of the restaurants have been updated with major remodelings
during the last five years. Installation of the point of sale system is
underway, requiring a capital outlay of $40,000 to $50,000 per restaurant. These
expenditures will be funded from current cash flow.
The Strategic Planning Committee of the Board of Directors was established
during the year to develop a forward-looking strategic course of action for the
Company. Among the Committee's recommendations to the Board of Directors was a
recapitalization plan to repurchase up to 1,000,000 shares of the Company's
common stock in a tender offer. The plan was approved by the Board of Directors
on July 8, 1997. Funding for the offer will be provided under a loan agreement
that matures in two years. The Company expects to repay the loan with the after
tax proceeds from the disposition of the fifteen restaurants recently closed,
the possible sale of the Company's limited partnership interest in the
Cincinnati Reds professional baseball team and other internally generated funds.
Safe Harbor Statement
- ---------------------
Statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) that are not historical facts are
forward-looking statements as that item is defined in the Private Securities
Litigation Reform Act of 1995. Such forward looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from anticipated results. Such risks and uncertainties include, but are not
limited to, the following: estimates used in preparing financial statements;
seasonal weather conditions, particularly in the third quarter; intense
competition; changes in business strategy and development plans; consumer
perceptions of value, food quality and food safety; changing demographics and
consumer preferences; changes in the supply and cost of food and labor; the
effects of inflation and variable interest rates; legal claims; and changes in
governmental regulations regarding the environment and changes in tax laws. The
Company undertakes no obligation to update the forward-looking statements that
may be contained in this MD&A.
10
<PAGE> 11
<TABLE>
<CAPTION>
Item 8. - Financial Statements and Supplementary Data Page
- ------- ------------------------------------------- ----
<S> <C>
Index to Consolidated Financial Statements
Auditors' Report 11
Consolidated Balance Sheet - June 1, 1997 and June 2, 1996 12-13
Consolidated Statement of Earnings - Three years ended June 1, 1997 14
Consolidated Statement of Cash Flows - Three years ended June 1, 1997 15
Consolidated Statement of Shareholders' Equity - Three years ended June 1, 1997 16
Notes to Consolidated Financial Statements - Three years ended June 1, 1997 17-25
Quarterly Results (Unaudited) 25
</TABLE>
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 June 1, 1997 and
June 2, 1996 and the related consolidated statements of earnings, cash flows,
and shareholders' equity for each of the three years in the period ended June 1,
1997. 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 June 1, 1997 and June 2, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 1, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note A to the consolidated financial statements, in 1997
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of."
GRANT THORNTON LLP
Cincinnati, Ohio
July 8, 1997
11
<PAGE> 12
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 1, 1997 and June 2, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Current Assets
Cash $ 231,453 $ 134,944
Receivables
Trade 1,037,001 1,107,394
Other 190,312 963,347
Inventories 3,657,844 3,725,755
Prepaid expenses and sundry deposits 957,311 1,280,006
Prepaid and deferred income taxes 808,198 1,352,315
------------ ------------
Total current assets 6,882,119 8,563,761
Property and Equipment - At Cost
Land and improvements 19,788,269 24,712,017
Buildings 48,319,998 54,871,830
Equipment and fixtures 51,021,079 53,876,413
Leasehold improvements and buildings on leased land 24,913,657 24,640,369
Capitalized leases 9,096,008 9,632,186
Construction in progress - 2,393,653
------------ ------------
153,139,011 170,126,468
Less accumulated depreciation and amortization 72,374,953 70,886,768
------------ ------------
Net property and equipment 80,764,058 99,239,700
Other Assets
Intangible assets 756,943 761,017
Investments in land - at cost 1,953,130 2,001,135
Property held for sale 13,628,457 1,766,068
Net cash surrender value-life insurance policies 3,613,878 3,447,360
Deferred income taxes 1,530,868 551,072
Other 2,130,512 2,065,728
------------ ------------
Total other assets 23,613,788 10,592,380
------------ ------------
$111,259,965 $118,395,841
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE> 13
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 1, 1997 and June 2, 1996
LIABILITIES
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Current Liabilities
Long-term obligations due within one year
Long-term debt $ 1,723,890 $ 2,162,860
Obligations under capitalized leases 470,497 467,706
Self insurance 1,095,993 1,862,957
Accounts payable 6,357,177 8,109,024
Accrued expenses 6,051,004 5,805,262
Income taxes - 50,161
------------ ------------
Total current liabilities 15,698,561 18,457,970
Long-Term Obligations
Long-term debt 17,875,000 20,098,890
Obligations under capitalized leases 6,055,682 6,229,351
Self insurance 4,151,229 5,879,111
Other 2,795,689 2,423,485
------------ ------------
Total long-term obligations 30,877,600 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 432,732 4,860,713
------------ ------------
68,222,525 68,735,180
Less cost of treasury stock (213,945 and 197,586 shares) 3,538,721 3,428,146
------------ ------------
Total shareholders' equity 64,683,804 65,307,034
------------ ------------
$111,259,965 $118,395,841
============ ============
</TABLE>
13
<PAGE> 14
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three years ended June 1, 1997
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenue
Sales $ 164,521,025 $ 165,425,731 $ 161,429,199
Other 1,410,384 1,519,025 1,629,985
------------- ------------- -------------
Total revenue 165,931,409 166,944,756 163,059,184
Costs and expenses
Cost of sales
Food and paper 52,032,873 53,123,133 52,298,714
Payroll and related 55,478,791 58,571,618 56,334,783
Other operating costs 41,086,258 41,650,300 40,781,489
------------- ------------- -------------
148,597,922 153,345,051 149,414,986
General and administrative 4,625,243 3,745,047 4,581,541
Advertising 4,007,381 4,025,872 4,008,237
Impairment of long-lived assets 4,600,000 - -
Interest 2,373,313 2,411,313 1,961,084
------------- ------------- -------------
Total costs and expenses 164,203,859 163,527,283 159,965,848
------------- ------------- -------------
Earnings before income taxes 1,727,550 3,417,473 3,093,336
Income taxes
Current
Federal 1,732,149 1,366,294 1,169,007
Less tax credits (233,396) (290,884) (436,358)
State and municipal 56,228 362,549 110,246
Deferred (1,014,078) (330,225) (107,930)
------------- ------------- -------------
540,903 1,107,734 734,965
------------- ------------- -------------
NET EARNINGS $ 1,186,647 $ 2,309,739 $ 2,358,371
============= ============= =============
Primary and fully diluted net earnings per share $ .17 $ .32 $ .33
============= ============= =============
Weighted average number of primary and fully
diluted common shares and equivalents
assumed outstanding during the year 7,151,145 7,156,789 7,156,562
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE> 15
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three years ended June 1, 1997
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 1,186,647 $ 2,309,739 $ 2,358,371
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 10,486,163 10,350,326 9,821,080
Gain on disposition of assets (561,918) (829,854) (345,380)
Impairment of long-lived assets 4,600,000 - -
Changes in assets and liabilities:
Decrease (increase) in receivables 843,428 (524,259) 858,036
Decrease (increase) in inventories 67,911 219,905 (8,621)
Decrease in prepaid expenses and sundry deposits 322,695 425,457 83,465
Increase in prepaid and deferred income taxes (435,679) (770,221) (509,494)
(Decrease) increase in accounts payable (1,751,847) (463,142) 162,257
Increase in accrued expenses 245,742 46,606 128,095
(Decrease) increase in accrued income taxes (50,161) 50,161 (36,102)
(Increase) decrease in other assets (80,346) 111,697 321,374
(Decrease) increase in self insured obligations (2,494,846) 878,681 1,077,583
Increase in other liabilities 372,204 216,129 336,239
------------ ------------ ------------
Net cash provided by operating activities 12,749,993 12,021,225 14,246,903
Cash flows provided by (used in) investing activities:
Additions to property (10,221,353) (15,362,001) (23,283,499)
Proceeds from disposition of property 2,696,741 3,941,466 2,245,680
Increase in other assets (156,845) (104,970) (524,789)
------------ ------------ ------------
Net cash (used in) investing activities (7,681,457) (11,525,505) (21,562,608)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings 3,000,000 8,000,000 10,385,000
Payment of long-term debt and capital lease obligations (6,162,150) (6,950,329) (1,489,525)
Cash dividends paid (1,699,302) (1,630,097) (1,570,418)
Treasury share transactions (110,575) - 9,398
------------ ------------ ------------
Net cash (used in) provided by financing activities (4,972,027) (580,426) 7,334,455
------------ ------------ ------------
Net increase (decrease) in cash and equivalents 96,509 (84,706) 18,750
Cash and equivalents at beginning of year 134,944 219,650 200,900
------------ ------------ ------------
Cash and equivalents at end of year $ 231,453 $ 134,944 $ 219,650
============ ============ ============
Supplemental disclosures:
Stock dividends issued $ 3,915,326 $ 2,441,304 $ 2,706,460
Interest paid 2,474,985 2,549,352 1,872,183
Income taxes paid 1,919,485 2,319,962 1,419,798
Income tax refunds received 892,742 492,168 139,237
Lease transactions capitalized 407,247 390,000 -
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE> 16
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three years ended June 1, 1997
<TABLE>
<CAPTION>
Common stock
at $1 per share - Additional
Shares and contributed Retained Treasury
amount capital earnings shares Total
----------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at May 29, 1994 $6,548,201 $ 52,188,112 $ 8,540,882 ($3,447,154) $ 63,830,041
Net earnings for 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
Net earnings for the year - - 2,309,739 - 2,309,739
Dividends
Cash - $.24 per share - - (1,630,097) - (1,630,097)
Stock - 4% 271,256 2,170,048 (2,441,304) - -
---------- ------------ ----------- ----------- ------------
Balance at June 2, 1996 7,080,195 56,794,272 4,860,713 (3,428,146) 65,307,034
Net earnings for the year - - 1,186,647 - 1,186,647
Treasury shares acquired - - - (110,575) (110,575)
Dividends
Cash - $.24 per share - - (1,699,302) - (1,699,302)
Stock - 4% 282,084 3,633,242 (3,915,326) - -
---------- ------------ ----------- ----------- ------------
Balance at June 1, 1997 $7,362,279 $ 60,427,514 $ 432,732 ($3,538,721) $ 64,683,804
========== ============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE> 17
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended June 1, 1997
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, net
realizable value of property 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 for the years ended June 1, 1997 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.
17
<PAGE> 18
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.
Net cash surrender value of life insurance policies includes the cash values of
two policies written by a life insurance company that has been under an order of
rehabilitation since August, 1994. As had been expected, an assumption
reinsurance agreement has been reached with a creditworthy carrier that fully
preserves cash values and which contains rights and benefits comparable with the
original policies. Restraints on policy loans, surrenders and reductions in face
amounts, which were imposed by the order of rehabilitation, will remain in
effect until the agreement is closed. The closing, which is subject to court and
regulatory approval, is anticipated during the fourth quarter of calendar 1997.
Advertising Costs
- -----------------
Advertising costs are charged to expense as incurred. There are no significant
advertising costs on the balance sheet for the years ended June 1, 1997 and June
2, 1996.
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
was $584,000 in 1997, $1,271,000 in 1996, and $1,671,000 in 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 insurance coverages. Self
insurance costs are accrued based on management's estimate for future claims.
There is insurance in place which provides for catastrophic self insured 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.
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. No distributions have been received during the last three years.
18
<PAGE> 19
Fiscal Year
- -----------
The Company's fiscal year ends on the Sunday nearest to the last day of May.
Fiscal years 1997 and 1995 were comprised of 52 weeks. Fiscal 1996 was comprised
of 53 weeks.
Impairment Loss
- ---------------
Effective June 3, 1996 the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." 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 immediate effect
upon adoption was immaterial.
During the fourth quarter, the Company made a further review of operations in
those markets in which losses occurred and determined that all restaurants in
the Indianapolis market should be closed. Additionally, five other restaurants
in three other areas were identified for closing. The restaurants chosen for
closing had a combined pre-tax operating loss of approximately $2,200,000 in
fiscal 1997. A non-cash pre-tax charge of $4,600,000 was recorded as an
impairment loss to reduce the carrying costs of the properties to net realizable
value as determined by the Company's experience in disposing of other
underperforming properties and estimates provided by real estate brokers. All
fifteen properties are listed for sale with a broker, and are carried at a net
realizable value of approximately $12,140,000 on the Company's balance sheet as
a component of the caption "Property held for sale." The Company expects to
dispose of the majority of these restaurant properties within the next twelve to
eighteen months. The components of the SFAS 121 charge were as follows:
<TABLE>
<S> <C>
Reduction of carrying costs of assets
to be disposed of to net present value $3,925,000
Disposal costs, including broker commissions 675,000
----------
Total $4,600,000
==========
</TABLE>
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 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 $ - $11,000 $ - $11,500
Term loan 1,500 6,875 1,625 8,375
Other 224 - 538 224
------ ------- ------ -------
$1,724 $17,875 $2,163 $20,099
====== ======= ====== =======
</TABLE>
The portion payable after one year matures as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Period ending in 1998 $ - $ 1,724
1999 1,500 1,500
2000 12,500 13,000
2001 1,500 1,500
2002 1,500 1,500
Subsequent to 2002 875 875
------- -------
$17,875 $20,099
======= =======
</TABLE>
19
<PAGE> 20
The revolving credit loan is a $16,000,000 line of credit (see note I),
$11,000,000 of which is outstanding at June 1, 1997. This credit loan matures on
September 1, 1999, unless extended. Interest is payable quarterly determined by
various indices, currently 6.41%. 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.
The Company also has a $1,978,000 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 and bear interest at 7.4%.
Property and equipment having a book value at June 1, 1997 of $3,332,000 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 2004. The Company also
occupies office space under an operating lease which expires during 2003, with a
renewal option available through 2013.
An analysis of the leased property follows:
<TABLE>
<CAPTION>
Asset balances at
------------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 8,119 $ 8,762
Equipment 977 870
------- -------
9,096 9,632
Less accumulated amortization (4,924) (5,154)
------- -------
$ 4,172 $ 4,478
======= =======
</TABLE>
Total rental expense of operating leases was approximately $1,438,000 in 1997,
$1,575,000 in 1996 and $1,675,000 in 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
Year ending in: leases leases
--------------- ----------- ---------
(in thousands)
<S> <C> <C>
1998 $1,147 $1,243
1999 1,085 1,204
2000 1,030 1,110
2001 927 994
2002 885 754
2003 to 2020 6,279 4,090
------ ------
Total 11,353 $9,395
======
Amount representing interest (4,827)
------
Present value of obligations 6,526
Portion due within one year (470)
------
Long-term obligations $6,056
======
</TABLE>
20
<PAGE> 21
NOTE D - INCOME TAXES
The variations between the statutory Federal rate and the effective rates are
summarized as follows:
<TABLE>
<CAPTION>
Percent of pretax earnings
------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal income tax 34.0 34.0 34.0
Tax credits (13.5) (8.5) (14.1)
State and municipal income taxes
(net of Federal tax benefit) 2.1 7.0 2.4
Other 8.7 (.1) 1.5
---- ---- ----
Effective Rate 31.3 32.4 23.8
==== ==== ====
</TABLE>
The components of the deferred tax asset (liability) were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Deferred compensation $ 648 $ 623
Compensated absences 607 563
Self insurance 1,640 2,442
Impairment of assets 1,564 -
Other 290 160
------- -------
Total deferred tax assets 4,749 3,788
New store opening cost (12) (118)
Partnership interest (174) (20)
Investment in tax benefits (594) (731)
Depreciation (1,384) (1,545)
Other (561) (364)
------- -------
Total deferred tax liabilities (2,725) (2,778)
------- -------
Net deferred tax asset $ 2,024 $ 1,010
======= =======
</TABLE>
The Company is currently being examined by the Internal Revenue Service for the
year 1994. The Company believes that it will prevail on most of the issues that
have been raised and that, in any event, the ultimate liability for these issues
will have no material impact on the Company's statement of earnings.
21
<PAGE> 22
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 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 majority of which will
expire in less than one year. The exercise price is the fair market value as of
the date granted, subsequently adjusted for a 4% stock dividend in 1997 and 1996
in accordance with the anti-dilution provisions of the plan. Transactions
involving the 1984 plan are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- ------------------------- -------------------------
No. of Option No. of Option No. Of Option
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding and
exercisable at
beginning of year 259,423 $14.95 to $21.66 262,604 $15.55 to $22.53 256,933 $16.17 to $23.43
Granted during the year 0 0 0
Exercised during the year 0 0 0
Expired during the year (9,765) $16.81 to $17.48 (13,156) $18.18 (4,603) $18.18
Increase for 4% stock
dividend 10,177 $14.38 to $20.83 9,975 $14.95 to $21.66 10,274 $15.55 to $22.53
------- -------- -------
Outstanding and
exercisable at
end of year 259,835 $14.38 to $20.83 259,423 $14.95 to $21.66 262,604 $15.55 to $22.53
======= ======= =======
</TABLE>
The Company also has reserved 58,492 shares for issuance under the Frisch
Executive Savings Plan. Shares reserved under these plans have been adjusted for
stock dividends. There are no other outstanding options, warrants or rights.
Effective June 3, 1996 the Company adopted Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock Based Compensation." 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 future options granted
and stock issued will be reflected in the footnotes of the Company's
consolidated financial statements when required.
22
<PAGE> 23
NOTE F - PENSION PLANS
Net pension expense included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,128 $ 1,022 $ 1,008
Interest cost on projected benefit obligations 1,020 939 978
Investment gain on plan assets (2,736) (3,032) (2,001)
Net amortization and deferral 940 1,439 359
------- ------- -------
Net periodic pension cost $ 352 $ 368 $ 344
======= ======= =======
</TABLE>
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheet at June 1, 1997 and June 2, 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Plan assets at fair market value, primarily marketable securities and insurance funds $ 19,242 $ 18,597
-------- --------
Actuarial present value of benefit obligations:
Vested benefits 9,217 9,895
Non vested benefits 1,033 802
-------- --------
Accumulated benefit obligations 10,250 10,697
Effect of projected future salary increases 3,542 2,997
-------- --------
Projected benefit obligations 13,792 13,694
-------- --------
Plan assets in excess of projected benefit obligations (including approximately
$361 at 1997 and $369 at 1996 withdrawable by participants upon demand) 5,450 4,903
Unrecognized net gains (5,284) (4,349)
Unrecognized prior service cost 739 641
Unrecognized net transition (assets) (1,185) (1,421)
-------- --------
Net accrued pension cost included in the balance sheet $ (280) $ (226)
======== ========
</TABLE>
Assumptions used to develop net periodic pension cost and the actuarial present
value of projected benefit obligations:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<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 7.25
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 (7,151,145 in 1997, 7,156,789 in 1996 and
7,156,562 in 1995). Stock options outstanding during the three years did not
have a dilutive effect on earnings per share.
The Company is required to adopt Statement of Financial Accounting Standards No.
128 (SFAS 128), "Earnings Per Share" in fiscal year 1998. SFAS 128 simplifies
current standards by requiring a presentation of basic EPS, and if applicable,
diluted EPS, instead of primary and fully diluted EPS. There is expected to be
no material effect on restatement of prior period EPS data.
23
<PAGE> 24
NOTE H - INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT INDUSTRIES
The Company operates principally in the food service and lodging industries.
Prior to 1997, operations in the food service industry constituted a dominant
segment in accordance with Statement of Financial Accounting Standards No. 14
(SFAS 14), "Financial Reporting Segments of a Business Enterprise." Operations
in the food service industry are vertically integrated, and include the
manufacture and distribution of food products and supplies to the Company's
restaurants and to licensees for resale to the general public. Fees are charged
to licensees for use of trademarks and tradenames and for advertising services
based principally on percentage of sales. Intersegment sales are immaterial.
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenue
Food service $153,981 $155,283 $151,996
Lodging 11,950 11,662 11,063
-------- -------- --------
$165,931 $166,945 $163,059
======== ======== ========
Operating profit
Food service $ 6,848 $ 7,482 $ 7,435
Lodging 468 573 571
-------- -------- --------
$ 7,316 $ 8,055 $ 8,006
======== ======== ========
Identifiable assets
Food service $ 99,383 $108,978 $108,870
Lodging 11,877 9,418 6,678
-------- -------- --------
$111,260 $118,396 $115,548
======== ======== ========
Depreciation and amortization
Food service $ 9,301 $ 9,533 $ 8,995
Lodging 1,185 817 826
-------- -------- --------
$ 10,486 $ 10,350 $ 9,821
======== ======== ========
Capital expenditures
Food service $ 6,554 $ 11,644 $ 21,437
Lodging 3,667 3,718 1,846
-------- -------- --------
$ 10,221 $ 15,362 $ 23,283
======== ======== ========
</TABLE>
24
<PAGE> 25
NOTE I - SUBSEQUENT EVENT
On July 8, 1997, the Board of Directors approved the repurchase of up to
1,000,000 shares of the Company's common stock from existing shareholders
subject to the terms of a tender offer. The tender offer provides for the
payment of a net cash price not greater than $17.00 nor less than $15.00 per
share. The Company has arranged to borrow up to $18,000,000 under a loan
agreement maturing in two years. The loan will bear interest at the lender's
prime rate or a LIBOR-adjusted rate. As of July 8, 1997 the prime rate was 8.5%
and the LIBOR-adjusted rate was approximately 7.2%. The loan is collateralized
by the property and equipment owned by the Company at the fifteen restaurant
locations recently closed, security interests in the cash value of all life
insurance policies owned by the Company, and a security interest in the after
tax proceeds from the possible sale of the Company's limited partnership
investment in the Cincinnati Reds professional baseball team. The Company
expects to repay borrowings under the loan agreement through the sale of these
assets (excluding the life insurance policies) and other internally generated
funds, and is required by the loan agreement to immediately apply the after tax
sale proceeds against the outstanding indebtedness. As long as this credit
facility remains in place, the credit availability under the Company's existing
$20,000,000 revolving line of credit is reduced to $16,000,000.
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended June 1, 1997 Year Ended June 2, 1996
---------------------------------------------------- ----------------------------------------------------
(In Thousands) (In Thousands)
-------------------------------------- --------------------------------------
Net Earnings Net Earnings
Gross earnings (loss) Gross earnings (loss)
Revenue profit (loss) per share Revenue profit (loss) per share
------------ ----------- ----------- ------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $ 51,730 $ 5,553 $1,427 $.20 $ 52,666 $ 4,409 $ 883 $.12
2nd Quarter 39,607 4,023 937 .13 39,205 3,070 788 .11
3rd Quarter 35,927 2,682 203 .03 33,996 1,055 (444) (.06)
4th Quarter 38,667 3,665 (1,380) (.19) 41,078 3,547 1,083 .15
------------ ----------- ----------- ------------ ------------ ----------- ----------- -----------
Year's Total $165,931 $15,923 $1,187 $.17 $166,945 $12,081 $2,310 $.32
============ =========== =========== ============= ============ =========== =========== =============
</TABLE>
The first quarter of each year contained sixteen weeks. The second and third
quarters of each year contained twelve weeks. The fourth quarter of fiscal 1997
contained twelve weeks compared to thirteen weeks in fiscal 1996.
Net earnings for the first quarters of 1997 and 1996 and the fourth quarter of
1996 included favorable adjustments of $1,200,000, $220,000, and $330,000
respectively, resulting from lower than anticipated claims in the Company's self
insured casualty insurance program.
The fourth quarter of fiscal 1997 included an impairment loss of $3,040,000, net
of tax, resulting from the closing of fifteen underperforming restaurants and a
$170,000 favorable adjustment of income tax expense to reflect the actual
effective tax rate for the year.
25
<PAGE> 26
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
- -------- --------------------------------------------------
The following persons are the Directors of the registrant:
<TABLE>
<CAPTION>
Positions with the Company,
Business Experience Director
Name and Other Directorships Since
<S> <C> <C>
Daniel W. Geeding Director of the Company; Professor of management and 1992
(age 55) entrepreneurship and director of the Center for
International Business, Xavier University; Director of
Zaring Homes, Inc., Glenway Financial Corporation and
Choicecare Corporation
Malcolm M. Knapp Director of the Company; President of Malcolm M. 1997
(age 58) Knapp, Inc.
Blanche F. Maier Director of the Company 1961
(age 70)
Craig F. Maier President and Chief Executive Officer of the Company 1984
(age 47)
Jack C. Maier Chairman of the Board of the Company 1961
(age 72)
William A. Mauch Director of the Company; Administrator of the 1992
(age 76) Cincinnati office of the law firm of Thompson Hine
& Flory P. L. L.
Barry S. Nussbaum Director of the Company; President of Barry S. 1996
(age 42) Nussbaum Company; Director of PR Nutrition, Inc.
Jerry L. Ruyan Director of the Company; Partner of Redwood Venture 1996
(age 51) Group, Ltd.; Formerly CEO of Meridian Diagnostics,
Inc.; Director of Meridian Diagnostics, Inc. and
Meritage Hospitality Group, Inc.
</TABLE>
Information regarding executive officers appears at the end of Part I.
Blanche F. Maier is the wife of Jack C. Maier. Craig F. Maier is the
son of Jack C. Maier and Blanche F. Maier.
Under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Act"), the Directors, certain of the Company's officers and persons owning
more than 10% of the outstanding shares of the Company's Common Stock are
required to file reports of beneficial ownership and changes in beneficial
ownership with the Securities and Exchange Commission and the American Stock
Exchange and to furnish copies of such reports to the
26
<PAGE> 27
Company. The Company is required to set forth in this Form 10-K
the number of late reports, transactions not reported and any known failure to
file a report. Based solely on a review of the reports which were furnished to
it and certain written representations of each reporting person, the Company
believes that the aforesaid filing requirements were satisfied by the persons
subject thereto.
Item 11. - Executive Compensation
- -------- ----------------------
The following information is furnished with respect to each of the four
most highly compensated executive officers of the Company, including the Chief
Executive Officer, for the fiscal year ended June 1, 1997. These four
individuals are the only executive officers whose combined salary and bonus for
the fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
------------------- Long-term
Other Compen- All
Annual sation Other
Compen- Awards Compen-
Name and Title Year Salary Bonus sation Options sation
-------------- ---- ------ ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Craig F. Maier 1997 $137,891 $ 0 $18,515(b) 0 $1,218(c)
President and Chief 1996 138,534 0 17,973(b) 0 1,986(c)
Executive Officer 1995 133,780 0 16,039(b) 0 1,218(c)
Jack C. Maier 1997 300,000 0 (a) 0 0
Chairman of the Board 1996 305,770 0 (a) 0 0
1995 428,095 0 (a) 0 85,000(d)
Marvin G. Fields 1997 170,570 0 (a) 0 4,348(e)
Senior Vice President and 1996 173,851 0 (a) 0 4,372(e)
Chief Operations Officer 1995 170,570 0 (a) 0 4,384(e)
Donald H. Walker 1997 102,600 0 (a) 0 2,310(f)
Vice President and Chief
Financial Officer
</TABLE>
(a) In 1995, 1996, and 1997, the value of perquisites and other personal
benefits received by each of Messrs. Maier and Fields, and in 1997 by
Mr. Walker, did not exceed an amount equal to the lesser of $50,000 or
ten percent of the sum of his salary and bonus for such year.
(b) Perquisites and other personal benefits received by Mr. Maier consisted
of $4,849 in 1997, $5,315 in 1996 and $4,476 in 1995 as an auto
allowance; $5,876 in 1997, $5,208 in 1996, and $4,431 in 1995 in
premiums for medical reimbursement insurance paid by the Company; and
$7,790 in 1997, $7,450 in 1996, and $7,132 in 1995 in premiums for
supplemental long term disability insurance paid by the Company.
(c) Represents the premium paid by the Company on split dollar life
insurance policies.
(d) Represents the premium paid by the Company on a life insurance policy
which funds the retirement compensation provided for in Mr. Maier's
employment agreement.
27
<PAGE> 28
(e) Represents premiums paid by the Company on split dollar life insurance
policies of $2,216 in 1997, $2,199 in 1996 and $2,252 in 1995, and
Company matching contributions to the Frisch's Executive Savings Plan
of $2,132 in 1997, $2,173 in 1996, and $2,132 in 1995.
(f) Represents premiums paid by the Company on split dollar life insurance
policies of $1,276 in 1997 and Company matching contributions to the
Frisch's Executive Savings Plan of $1,034 in 1997.
The 1993 Stock Option Plan was adopted by the Board of Directors and
approved by the shareholders. Pursuant to the Plan, options for shares of the
Common Stock of the Company are granted to officers and key management
personnel, as determined by the Compensation Committee. Under the 1993 Plan,
options with terms not in excess of ten years from the date of grant and stock
appreciation rights may be granted until May 8, 2004. See "Employment Contracts
and Changes-in-Control Arrangements." No options or stock appreciation rights
were granted during the fiscal year ended June 1, 1997.
The following table sets forth information regarding the exercise of
stock options by each of the named executive officers during fiscal year ended
June 1, 1997 and the value of all remaining options (all of which are
exercisable) at June 1, 1997 (all such options were granted under the 1984 Stock
Option Plan, the predecessor to the 1993 Stock Option Plan):
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of unexercised
Shares unexercised in-the-money
acquired on Net value options at options at
Name exercise realized 6/1/97 6/1/97 (1)
---- -------- -------- ------ ----------
<S> <C> <C> <C> <C>
Craig F. Maier 0 - 101,891 $3,452
Jack C. Maier 0 - 85,394 0
Marvin G. Fields 0 - 14,229 0
Donald H. Walker 0 - 7,112 0
<FN>
- ----------------------------------
(1) As of June 1, 1997, options on 14,090 shares held by Craig F. Maier were
in-the-money. The exercise price of all the other listed options exceeded the
market price of the Common Stock.
</TABLE>
28
<PAGE> 29
DEFINED BENEFIT PENSION PLAN AND EXECUTIVE RETIREMENT PLAN
The Pension Plan adopted by the Board of Directors, in which each of the
executive officers of the Company participates, provides payments of annual
benefits upon the retirement of employees covered by the Plan.
Under the qualified Pension Plan, an individual's monthly Pension Plan
benefit equals 51% of his or her average monthly compensation minus 50% of
monthly Social Security benefits. The benefit of an individual who has less than
28 years of service with the Company is reduced by 1/28 for each year less than
28.
Average monthly compensation is based upon the participant's five highest
consecutive compensation periods. For years prior to 1982, the compensation
period is the month of September. For years 1982 through 1991, the compensation
period is the month of July. For years after 1991, the compensation period is
the entire calendar year, therefore, the monthly compensation for the period is
1/12 of the annual compensation.
Compensation that is taken into consideration for periods through 1991
consists of regular wages, excluding overtime, bonuses, commissions, special
pay, severance pay and expense reimbursements, but including elective
contributions to employee benefit plans. Compensation that is taken into
consideration for periods after 1991 includes all compensation reported on the
participant's W-2 and all elective contributions to a Section 125 or 401(k)
plan.
Amounts set aside under the Plan are computed on an actuarial basis using
an aggregate funding method. No contribution was made to the Plan during the
fiscal year ended June 1, 1997.
Estimated annual retirement benefits under the Pension Plan, assuming
retirement at age 65 for Messrs. Craig F. Maier, Marvin G. Fields and Donald H.
Walker, would be, respectively, $70,000, $77,000 and $40,000.
Under the Internal Revenue Code, there is an annual limitation on the
amount of compensation of each employee that may be taken into account, which is
currently set at $150,000. The annual limitation for some of the years prior to
1997 was substantially higher. The Company has adopted an unfunded Executive
Retirement Plan which provides to qualified employees whose compensation exceeds
the Internal Revenue Code limitation, a supplemental retirement benefit equal to
the reduction in their benefits under the Pension Plan. Currently, Messrs. Craig
F. Maier and Marvin G. Fields are eligible, at their normal retirement ages, to
receive supplemental annual benefits under the Executive Retirement Plan of
$42,530 and $4,704, respectively.
COMPENSATION OF DIRECTORS
The Company pays Directors who are not employees a fee of $600 for each
meeting of the Board attended. In addition, Messrs. Geeding, Knapp, Mauch,
Nussbaum, and Ruyan are each paid a fee of $12,000 annually, and are paid a fee
of $600 for each committee meeting attended.
29
<PAGE> 30
EMPLOYMENT CONTRACTS AND CHANGES-IN-CONTROL ARRANGEMENTS
Pursuant to an employment agreement between the Company and Jack C.
Maier, effective June 2, 1997, which was approved by the Board of Directors, Mr.
Maier is to be paid for the ensuing two fiscal years a base salary of $300,000
per year. In addition, the agreement provides that upon its expiration or upon
Mr. Maier's retirement, disability or death, there shall be paid to Mr. Maier or
to his survivors for each of the next ten years the sum of $214,050, adjusted
annually to reflect 50% of the annual percentage change in the Consumer Price
Index. Alternatively, the recipient may elect at any time to receive in a lump
sum the present value of all remaining payments. The agreement also provides
that upon cessation of employment, Mr. Maier will, if not prevented by
disability, provide consulting services to the Company, for which he shall be
paid a fee of $100,000 per year for a maximum of seven years.
Pursuant to an employment agreement between the Company and Craig F.
Maier, effective May 29, 1995, which was approved by the Board of Directors, Mr.
Maier is to be paid for the ensuing five fiscal years a base salary of $135,920
per year adjusted annually to reflect 50% of the annual change in the Consumer
Price Index. Further the agreement provides that upon Mr. Maier's disability,
there shall be paid each year while he is alive for up to ten years a sum equal
to 75% of his average compensation (including incentive compensation) over the
three preceding calendar years (reduced by any disability benefits received
under any disability income plan maintained by the Company), adjusted annually
after the first year to reflect 75% of the annual percentage change in the
Consumer Price Index. In addition, the agreement provides that Mr. Maier is to
be paid for each of the five ensuing fiscal years incentive compensation equal
to 3% of the Company's pre-tax consolidated earnings if in such year pre-tax
consolidated earnings exceed 5% of total revenue of the Company (adjusted to
exclude certain revenue not related to the Company's food service and lodging
operations) after giving effect to such incentive compensation payment.
Incentive compensation is to be paid 80% in cash and 20% in the Company's Common
Stock. The agreement also provides that Mr. Maier will be granted stock options
in any year in which incentive compensation is earned. The number of options
awarded is calculated by dividing the dollar amount of Mr. Maier's incentive
compensation by the average of the highest and the lowest price of the Company's
Common Stock during the year for which the incentive compensation was earned and
multiplying the result by two. The exercise price of the options shall be equal
to the fair market value of the Common Stock on the date of grant. Options may
not be exercised until six months after the date granted or such later time
period as may be required by the Company's Stock Option Committee, which period
may not exceed five years. The options will have a ten year term.
The provisions of the agreement between the Company and Craig F. Maier
with respect to compensation are identical to those in his previous agreement
except that the number of stock options which can be earned has been doubled.
The first year's base salary is the same as the last year of his previous
agreement increased by 50% of the annual percentage change in the Consumer Price
Index. The basis for the establishment of the base salary and incentive
compensation under the previous agreement was data provided by an independent
consultant that was derived from a survey of comparable restaurant companies and
data obtained from the proxy statements of publicly held restaurant companies.
The base salary was established in the bottom quartile of the base salaries paid
by such companies. The incentive compensation formula was designed to tie
performance to shareholder value by awarding no incentive compensation unless
consolidated pre-tax earnings reach at least 5% of revenue and by permitting the
aggregate of the base salary and incentive compensation to reach the top
quartile of total compensation paid by the aforesaid
30
<PAGE> 31
companies if consolidated pre-tax earnings projections were achieved. The number
of options to be awarded was doubled to increase the equity component of his
compensation.
The Company has entered into agreements with Craig F. Maier and Marvin G.
Fields which provide that if there is a change in control of the Company that
has not been approved by existing management, the Company shall either continue
their employment for up to three years with compensation and perquisites equal
to that which they would have received had there not been such a change or
terminate their employment and make lump sum payments to them equal to the
present value of such compensation and continue such perquisites until the end
of the period for which their employment would have continued. The maximum
aggregate lump sum payments which would be payable Messrs. Maier and Fields
under these agreements if they were terminated on the date of filing of this
Form 10-K, would be approximately $693,000 and $548,000, respectively. The
discount rate used for determining the amount of such payments was 2.3%, in
accordance with provisions of the agreements.
COMPENSATION COMMITTEE INTERLOCKS
The members of the Compensation Committee are Daniel W. Geeding, William
A. Mauch and Barry S. Nussbaum. During the fiscal year ended June 1, 1997, the
committee held three meetings. The Compensation Committee establishes policies
of the Company with respect to the compensation of executive officers and
determines such compensation.
Item 12. - Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The following table sets forth information, as of August 19, 1997 (unless
a different date is specified in the notes to the table), with respect to each
person known by the Board of Directors of the Company to be the beneficial owner
of more than 5% of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
Name and Address of Amount Percent
Beneficial Owner Beneficially Owned of Class
<S> <C> <C>
Blanche F. Maier 1,688,673(1)(5) 28.1%
2800 Gilbert Avenue
Cincinnati, OH 45206
Jack C. Maier 1,180,529(2)(5) 19.4%
2800 Gilbert Avenue
Cincinnati, OH 45206
Craig F. Maier 998,447(3)(5) 16.3%
2800 Gilbert Avenue
Cincinnati, OH 45206
Karen F. Maier 828,073(4)(5) 13.8%
2800 Gilbert Avenue
Cincinnati, OH 45206
William D. Witter, Inc. 674,692(6) 11.2%
153 East 53rd Street
New York, NY 10022
</TABLE>
31
<PAGE> 32
<TABLE>
<S> <C> <C>
Dimensional Fund Advisors, Inc. 407,347(7) 6.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Jerry L. Ruyan, 8730 Red Fox Lane, Cincinnati, OH 435,698(8) 7.3%
45243, and Barry S. Nussbaum, 2775 Via La Valle,
Suite 205, Del Mar, CA 92014
</TABLE>
(1) Includes 614,375 shares over which Mrs. Maier has sole voting and
investment power, 89,170 shares over which she has sole voting but
shared investment power, and 985,128 shares over which she has sole
voting power only. The amounts shown above include 1,074,298 shares
over which she has sole voting power as voting trustee pursuant to a
Voting Trust Agreement dated June 25, 1997, with the following: Jack C.
Maier and herself as Co-Trustees under the Will of Shirley Heinichen,
deceased as to 89,170 shares; Jack C. Maier, Craig F. Maier and Karen
F. Maier, as Co-Trustees under the Will of David Frisch, deceased as to
761,933 shares; and Jack C. Maier, as Trustee under agreement with
Annette Frisch as to 223,195 shares. See footnotes (2), (3), (4) and
(5). Not included in this amount are 20,837 shares owned by Jack C.
Maier as to which she disclaims beneficial ownership.
(2) Includes 20,837 shares over which Mr. Maier has sole voting and
investment power, 223,195 shares over which he has sole investment
power only, 851,103 shares over which he shares investment power only
and 85,394 shares which he has the right to acquire pursuant to the
exercise of employee stock options. The amount shown above includes
761,933 shares over which Mr. Maier, Craig F. Maier and Karen F. Maier
share investment power only as Co-Trustees under the will of David
Frisch, deceased, and 89,170 shares over which Mr. Maier and Blanche F.
Maier share investment power only as Co-Trustees under the Will of
Shirley Heinichen, deceased. See footnotes (1), (3), (4) and (5). Not
included in this amount are 8,318 shares owned by Blanche F. Maier as
to which he disclaims beneficial ownership.
(3) Includes 134,623 shares over which Mr. Maier has sole voting and
investment power, 761,933 shares over which Mr. Maier, Jack C. Maier
and Karen F. Maier share investment power only as Co-Trustees under the
will of David Frisch, deceased, and 101,891 shares which he has the
right to acquire pursuant to the exercise of employee stock options.
See footnotes (1), (2), (4) and (5).
(4) Includes 61,162 shares over which Ms. Maier has sole voting and
investment power, 761,933 shares over which Ms. Maier, Jack C. Maier
and Craig F. Maier share investment power only as Co-Trustees under the
will of David Frisch, deceased, and 4,978 shares which she has the
right to acquire pursuant to the exercise of employee stock options.
See footnotes (1), (2), (3) and (5).
(5) Blanche F. Maier is the wife of Jack C. Maier. Craig F. Maier is the
son of Jack C. Maier and Blanche F. Maier and the brother of Karen F.
Maier. Karen F. Maier is the daughter of Jack C. Maier and Blanche F.
Maier and the sister of Craig F. Maier.
32
<PAGE> 33
(6) The information given is as of February 5, 1997, as reported in an
amended Schedule 13G filed with the Securities and Exchange Commission.
The percent of class has been adjusted to reflect the reduction in the
number of outstanding shares which resulted from the Company's purchase
of shares pursuant to a self-tender offer completed August 8, 1997.
(7) The information given is as of February 7, 1997, as reported in an
amended Schedule 13G filed with the Securities and Exchange Commission.
The percent of class has been adjusted to reflect the reduction in the
number of outstanding shares which resulted from the Company's purchase
of shares pursuant to a self-tender offer completed August 8, 1997.
(8) The information given is as of August 18, 1997, as reported in an
amended Schedule 13D filed with the Securities and Exchange Commission,
in which each of the individuals indicates that he is acting together
with the other as a group.
The following table sets forth information, as of August 19, 1997, with
respect to the number of shares of Common Stock beneficially owned by (i) each
current Director of the Company,(ii) each executive officer of the Company named
in the Summary Compensation Table, and (iii) all Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Amount Percent
Name Beneficially Owned of Class
<S> <C> <C>
Jack C. Maier 1,180,529(1) 19.4%
Daniel W. Geeding 1,057 *
Malcolm M. Knapp 0 *
Blanche F. Maier 1,688,673 (1) 28.1%
Craig F. Maier 998,447 (1) 16.3%
William A. Mauch 3,740 *
Barry S. Nussbaum 435,698(2) 7.3%
Jerry L. Ruyan 435,698(2) 7.3%
Marvin G. Fields 21,727(3) *
Donald H. Walker 9,441(4) *
All Directors and executive
officers as a group (11 persons) 2,510,193 40.3%
<FN>
* Less than 1% of class
(1) See footnotes (1), (2), (3) and (5) on the preceeding page.
(2) See footnote (8) above.
(3) Includes 7,498 shares over which Mr. Fields has sole voting and
investment power and 14,229 shares which he has the right to acquire
pursuant to the exercise of employee stock options.
(4) Includes 2,329 shares over which Mr. Walker has sole voting and
investment power and 7,112 shares which he has the right to acquire
pursuant to the exercise of employee stock options.
</TABLE>
33
<PAGE> 34
Item 13. - Certain Relationships and Related Transactions
- -------- ----------------------------------------------
During the fiscal year ended June 1, 1997, a franchised restaurant owned
by children of Jack C. Maier, an officer and Director of the Company, and
Blanche F. Maier, a Director of the Company, made purchases from the Company's
commissary totaling $494,343 and paid to the Company advertising fees of
$46,911, employee leasing fees of $582,488, payroll and accounting fees of
$20,324 and franchise fees of $70,367. Other members of Mr. and Mrs. Maier's
family are the owners of a franchised restaurant which during such fiscal year
made purchases from the Company's commissary totaling $636,170 and paid to the
Company advertising fees of $62,552, employee leasing fees of $796,289, payroll
and accounting fees of $23,585 and franchise fees of $93,828.
During the fiscal year ended June 1, 1997, a franchised restaurant owned
by Craig F. Maier, an officer and Director of the Company, made purchases from
the Company's commissary totaling $307,857 and paid to the Company advertising
fees of $29,800, employee leasing fees of $416,663, payroll and accounting fees
of $17,865 and franchise fees of $44,700.
The above described transactions were effected on terms no less
favorable to the Company and no more favorable to the other parties thereto than
would have been agreed upon in transactions with persons having no relationship
with the Company.
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 Annual Report
for 1993, being The Third Amended Articles of Incorporation, is
incorporated herein by reference.
(3) (b) Exhibit (3) (a) to the Registrant's Form 10-Q Quarterly
Report for December 15, 1996, being the Code of Regulations, is
incorporated herein by reference.
(3) (c) Exhibit (3) (b) to the Registrant's Form 10-Q Quarterly
Report for December 15, 1996, being Amendments to Regulations
adopted October 1, 1996, is incorporated herein by reference.
34
<PAGE> 35
(3) (d) Exhibit (3) (c) to the Registrant's Form 10-Q Quarterly
Report for December 15, 1996, being Amendments to Regulations
adopted October 24, 1996, is incorporated herein by reference.
(10) Material Contracts
(10) (a) Employment agreement between the Registrant and Jack C.
Maier effective June 2, 1997.
(10) (b) Exhibit (10)(a) to the Registrant's Form 10-K Annual
Report for 1995, being employment contract between the Registrant
and Jack C. Maier effective May 29,1995, is incorporated herein by
reference.
(10) (c) Exhibit (10)(b) to the Registrant's Form 10-K Annual
Report for 1995, being employment contract between the Registrant
and Craig F. Maier effective May 29, 1995, is incorporated herein
by reference.
(10) (d) Exhibit 10(a) to the Registrant's Form 10-Q Quarterly
Report for September 17, 1995, being the Frisch's Executive
Savings Plan effective November 15, 1993, is incorporated herein
by reference.
(10) (e) Exhibit 10(b) to the Registrant's Form 10-Q Quarterly
Report for September 17, 1995, being the Frisch's Executive
Retirement Plan effective June 1, 1994, is incorporated herein by
reference.
(10) (f) 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) (g) 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) (h) 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) (i) 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) (j) 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. There is an identical agreement between the Registrant
and Marvin G. Fields.
(10) (k) 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.
(10) (l) Exhibit (99) (b) to the Registrant's Schedule 13E-4
Issuer Tender Offer Statement dated July 14, 1997, being loan
agreement between the Registrant and Star Bank, N. A. dated July
9, 1997, is incorporated herein by reference.
35
<PAGE> 36
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended June 1, 1997. The
Company filed Form 8-K on June 17, 1997 consisting of a copy of the Company's
press release dated June 10, 1997 pertaining to the closing of fifteen
underperforming Big Boy restaurants.
36
<PAGE> 37
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 Donald H. Walker September 2, 1997
-----------------------------------------
Donald H. Walker Date
Vice President-Finance and
Principal Financial Officer
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>
Chairman of the Board and Director
Jack C. Maier (A Principal Executive Officer) September 2, 1997
- --------------------------- ---------------------
Jack C. Maier
President and Director
Craig F. Maier (A Principal Executive Officer) September 2, 1997
- --------------------------- ---------------------
Craig F. Maier
Daniel W. Geeding Director September 2, 1997
- --------------------------- ---------------------
Daniel W. Geeding
Malcolm M. Knapp Director September 2, 1997
- --------------------------- ---------------------
Malcolm M. Knapp
Blanche F. Maier Director September 2, 1997
- --------------------------- ---------------------
Blanche F. Maier
William A. Mauch Director September 2, 1997
- --------------------------- ---------------------
William A. Mauch
Barry S. Nussbaum Director September 2, 1997
- --------------------------- ---------------------
Barry S. Nussbaum
Jerry L. Ruyan Director September 2, 1997
- --------------------------- ---------------------
Jerry L. Ruyan
</TABLE>
37
<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 April 8, 1995 which expires on June 1, 1997 (the
"1995 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 June 2, 1997.
1. PRIOR AGREEMENT. The 1995 Employment Agreement is hereby cancelled
effective as of June 1, 1997.
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 Term of this Agreement shall be for a period of three (3)
fiscal years commencing June 2, 1997 and shall continue in effect through May
28, 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 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 for a
period of ten (10) consecutive years thereafter, a sum equal to the
amount which would have been payable, under Section 5(b)(i) of the
Employment Agreement between Maier and Corporation dated July 20, 1990
(the "1990 Employment Agreement"), had Maier retired on May 26, 1995,
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
38
<PAGE> 2
EXHIBIT 10-A
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 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, for a
period of ten (10) consecutive years thereafter, 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, 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, for a period of ten (10) consecutive years, 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, 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
39
<PAGE> 3
EXHIBIT 10-A
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.
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 for a period of seven (7) years 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;
40
<PAGE> 4
EXHIBIT 10-A
(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.
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 Ronald E. Heineman, its Vice
President of Human Resources, thereunto duly authorized by its Board of
Directors, and Jack C. Maier has hereunto set his hand on the date set forth
below.
DATED: May 16, 1997 /s/ JACK C. MAIER
----------------- -----------------------------
Jack C. Maier
FRISCH'S RESTAURANTS, INC.
By /s/ RONALD E. HEINEMAN
---------------------------------
Ronald E. Heineman
Vice President of Human Resources
41
<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
</TABLE>
42
<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 QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-01-1997
<PERIOD-START> JUN-03-1996
<PERIOD-END> JUN-01-1997
<CASH> 231,453
<SECURITIES> 0
<RECEIVABLES> 1,227,313
<ALLOWANCES> 0
<INVENTORY> 3,657,844
<CURRENT-ASSETS> 6,882,119
<PP&E> 153,139,011
<DEPRECIATION> 72,374,953
<TOTAL-ASSETS> 111,259,965
<CURRENT-LIABILITIES> 15,698,561
<BONDS> 23,930,682
<COMMON> 7,362,279
0
0
<OTHER-SE> 57,321,525
<TOTAL-LIABILITY-AND-EQUITY> 111,259,965
<SALES> 164,521,025
<TOTAL-REVENUES> 165,931,409
<CGS> 148,597,922
<TOTAL-COSTS> 148,597,922
<OTHER-EXPENSES> 13,232,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,373,313
<INCOME-PRETAX> 1,727,550
<INCOME-TAX> 540,903
<INCOME-CONTINUING> 1,186,647
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,186,647
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
