<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 28, 2000
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 10, 2000, 5,191,214 COMMON SHARES WERE OUTSTANDING, AND THE
AGGREGATE MARKET VALUE OF THE COMMON SHARES (BASED UPON THE AUGUST 10, 2000
CLOSING PRICE OF THESE SHARES ON THE AMERICAN STOCK EXCHANGE) OF FRISCH'S
RESTAURANTS, INC. HELD BY NONAFFILIATES WAS APPROXIMATELY $36.5 MILLION.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS AFTER MAY 28, 2000 ARE
INCORPORATED BY REFERENCE INTO PART III.
<PAGE> 2
PART I
------
(Items 1 through 4)
-------------------
Item 1. - Business
------- --------
Frisch's Restaurants, Inc. (together with its wholly owned subsidiaries, the
"Company") is an Ohio Corporation that was incorporated in 1947. The Company is
headquartered in Cincinnati, Ohio and its stock has been publicly traded since
1960.
The Company's operations include two (2) concepts within the mid-scale family
sector of the restaurant industry. As of May 28, 2000, the Company operated
eighty-eight (88) family restaurants using the "Big Boy" trade name and five (5)
"Golden Corral" grill-buffet style family restaurants. Additionally, the Company
had sub-licensed thirty-seven (37) "Big Boy" restaurants to other operators. All
of these restaurants are located in various markets of Ohio, Kentucky and
Indiana. Both the "Big Boy" and "Golden Corral" concepts are considered
reportable operating segments for purposes of compliance with Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information." Financial information by operating segment
as of and for the three fiscal years in the period ended May 28, 2000 appears in
Note I - Segment Information - to the Consolidated Financial Statements included
in Part II, Item 8 of this Form 10-K. Prior to 1996, the Company also operated
"Hardee's" restaurants pursuant to a license from Hardee's Food Systems, Inc. of
Rocky Mount, North Carolina.
The Company also has operations in the lodging business. In March 2000, the
Company's Board of Directors authorized management to divest lodging operations,
which consist of two (2) high-rise hotels located in the greater Cincinnati area
that are licensed through Choice Hotels International of Silver Spring,
Maryland. One of the hotels uses the trade name "Quality Hotel"; the other uses
the upscale "Clarion Hotel" brand. Prior to July 1999, the "Clarion" was also a
"Quality Hotel". Extensive renovations from 1995 through 1999 qualified it for
the change to "Clarion". The Company plans to operate both hotels until buyers
are found, which is expected to take up to one year from the date of the
decision by the Board of Directors.
"BIG BOY" RESTAURANTS
Big Boy restaurants are full service family restaurants offering quick,
efficient service, which the Company operates under the name "Frisch's". Most of
the restaurants also have "drive-thru" service to support and enhance non-dining
room carryout trade. The restaurants are open seven (7) days a week, typically
from 7:00 a.m. to 11:00 p. m. with extended weekend evening hours. Menus are
generally standardized with a wide variety of items at moderate prices,
featuring well-known signature items such as the original "Big Boy" double-deck
hamburger sandwich, freshly made onion rings and hot fudge cake. Menu selections
also include many other sandwiches, pasta, roast beef, chicken and seafood
dinners, desserts and other items. In addition, a full breakfast menu is
offered, and most of the restaurants contain breakfast bars, and soup and salad
bars. Drive-thru and carryout menus emphasize combo meals that consist of a
popular sandwich packaged with french fries and a beverage and sold at a lower
price than if purchased separately. Although customers have not shown any
significant preference for highly nutritional, low fat foods, such items are
available on the menu and salad bars.
Operations in the Big Boy operating segment are vertically integrated and
include the manufacture and distribution of food products and supplies to the
Company's Big Boy restaurants and to certain Big Boy sub-licensees for resale to
the general public. Franchise fees are charged to sub-licensees for use of
trademarks and trade names and sub-licensees are required to make contributions
to the Company's general advertising account. These fees and contributions are
calculated principally on percentages of sales.
The Company has the right to use, and sub-license others to use, the registered
trademark and trade name "Big Boy" pursuant to a license agreement with Elias
Brothers Restaurants, Inc. of Warren, Michigan. Under this agreement, the
Company has been granted the exclusive right to use, and sub-license others to
use, the "Big Boy" trademark in the states of Ohio, Kentucky, Indiana, Florida,
Oklahoma, Texas, parts of Kansas, the unfranchised areas of Tennessee and, under
certain circumstances, in prescribed areas of certain states adjacent to
Tennessee. The agreement provides for unlimited renewal rights and has no
provision for license fees. System-wide Big Boy restaurant sales, which include
sales made by restaurants sub-licensed to others, were approximately $187
million in fiscal 2000, $178 million in fiscal 1999 and $172 million in fiscal
1998.
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<PAGE> 3
The Company is currently in the process of redesigning its Big Boy restaurant
building concept, a strategic move to strengthen the Company's position in the
ever-changing market place. The redesign focuses on the shifts in customer
expectations to differentiate the Big Boy concept from that of its competitors.
Consumer research was used to identify the strengths of the existing concept,
which became the cornerstone for the next generation of Frisch's Big Boy
restaurant buildings. New architecture will signal to the customers that
something new and exciting has taken place in the dining room. Construction
using the new prototype is currently scheduled to begin in Autumn 2000.
The Big Boy marketing strategy in place since Spring 1999 continues to emphasize
the use of radio and cable TV to reach more consumers more cost effectively than
commercials on network television had previously done.
In 1997, the Company completed a restructuring of its Big Boy operations by
closing fifteen (15) unprofitable restaurants, including all restaurants in the
Indianapolis, Indiana area. Four of the closed restaurants were sold in 1999 to
a Big Boy franchise operator, providing new revenue streams for the Company. The
last new Big Boy restaurant to open was in 1997. This has allowed management to
focus principally on building same store sales and margins in the eighty-eight
(88) existing restaurants. The following tabulation sets forth Big Boy
restaurant openings and closings for restaurants both operated by the Company
and sub-licensed to others for the five years ended May 28, 2000:
<TABLE>
<CAPTION>
Year ended
6/2/96 6/1/97 5/31/98 5/30/99 5/28/00
-------- -------- ------- ------- -------
Big Boy Restaurants Operated by the Company
-------------------------------------------
<S> <C> <C> <C> <C> <C>
Opened 4 3 - - -
Replaced by new buildings (1) (2) - - -
Closed (3) (16) - - -
-------- -------- ------- ------- -------
Total Operated Big Boy Restaurants 103 88 88 88 88
Big Boy Restaurants Sub-Licensed to Others
------------------------------------------
Opened - 2 - 3 1
Closed (12) (5) (5) - (1)
-------- -------- ------ ------ ---
Total Sub-Licensed Big Boy Restaurants 42 39 34 37 37
</TABLE>
The sub-license agreements with sub-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. In addition, an initial fee of $30,000 is
generally required.
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 (21/2%) 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.
3
<PAGE> 4
Total franchise and other service fees earned by the Company from sub-licensees
in fiscal 2000 were substantially less than 1% of consolidated revenue. In
addition, four (4) of the Big Boy restaurants sub-licensed to others (11%) also
purchase accounting and payroll services from the Company.
To service its owned Big Boy restaurants and certain of the Big Boy restaurants
sub-licensed to others, the Company operates a commissary at Cincinnati, Ohio,
where it prepares foods, and stocks foods and beverages, forms, paper products
and other supplies. Some companies in the restaurant industry operate
commissaries, while others purchase from outside sources. Raw materials,
principally consisting of food items, are generally plentiful and may be
obtained from any number of reliable suppliers. Quality and price are the
principal determinants of source. The Company believes that centralized
purchasing and food preparation through the commissary operation ensures uniform
product quality, timeliness of distribution (two to three deliveries per week)
to restaurants and ultimately results in lower food and supply costs.
Revenue from the sale of commissary products to Big Boy restaurants sub-licensed
to others were 3.7% of consolidated revenue in fiscal 2000, as only eighteen
(18) of the Big Boy restaurants sub-licensed to others (49%) currently purchase
items from the commissary. Big Boy restaurants sub-licensed to other operators
in northern Indiana and northwestern Ohio do not buy food and supplies from the
commissary. The commissary does not supply the Company's Golden Corral
restaurants.
"GOLDEN CORRAL" RESTAURANTS
In 1998 the Company entered into an area development agreement with Golden
Corral Franchising Systems, Inc. of Raleigh, North Carolina ("Franchisor"),
under which development rights were granted to the Company to establish and
operate twenty-five (25) Golden Corral restaurants in certain markets in Ohio,
Kentucky and Indiana, principally the greater metropolitan areas of Cincinnati
and Dayton, Ohio and Louisville, Kentucky. The development schedule calls for
the restaurants to be opened over a seven-year period. The Company opened its
first Golden Corral restaurant in 1999. Five (5) Golden Corral restaurants were
operating as of May 28,2000 with four (4) more to be open by February 2001. On
average, the approximate cost to build and equip each Golden Corral restaurant
is $2,500,000, including land. The Company is in compliance with the development
schedule as required by its agreement with the Franchisor. The Company does not
have the right to sub-license others to use the Golden Corral system or
proprietary marks. In July 2000, the Company entered into a second area
development agreement with the Franchisor, which grants development rights to
the Company to establish and operate fifteen (15) additional Golden Corral
restaurants in certain defined markets in the Cleveland and Toledo, Ohio
Designated Market Areas. The development schedule calls for two (2) restaurants
to be open by December 31, 2001, with all fifteen (15) restaurants to be open
and in operation by December 31, 2007.
Golden Corral is a grill-buffet style family restaurant concept featuring
grilled to order steaks and a wide variety of buffet items including seafood,
chicken, other buffet foods, salad bars, in-store display bakery and beverage
items. The restaurants have distinctive exteriors and interior designs and trade
dress, and are open seven (7) days a week for lunch and dinner, providing
prompt, courteous service in a clean and wholesome family atmosphere. Typical
operating hours are 11:00 a.m. to 10:00 p.m. Additionally, the restaurants open
earlier on weekends to provide a breakfast buffet. The Company has sole
discretion as to the prices charged to its customers.
The Company may only sell such products, food, beverages and other menu items
that meet the Franchisor's standards of quality and quantity, as expressly
approved and have been prepared in accordance with the Franchisor's
specifications. The Company currently purchases substantially all such menu
items from the same vendor that the Franchisor uses for its operations.
Deliveries are made two to three times per week. Other vendors are available to
provide products meeting the Franchisor's specifications should the Company wish
or need to make a change.
Under the terms of the area development agreement, each Golden Corral restaurant
operated by the Company is governed by an individual franchise agreement. The
term of each franchise granted is for fifteen (15) years from the date the
restaurant opens for business. Renewal privileges include two (2) additional
consecutive five (5) year terms provided that the terms are the same as the
then-current form of renewal required by the Franchisor.
In consideration of the granting of each individual franchise agreement, an
initial franchise fee of $40,000 is required. Additionally, a royalty fee is
required in an amount equal to four percent (4%) of the restaurant's gross
4
<PAGE> 5
sales, and the Company is required to expend or contribute on advertising an
amount not less than two percent (2%) of its gross sales up to a maximum of six
percent (6%) of its gross sales.
Other Developments
------------------
Each of the Company's restaurants is managed through standardized operating and
control systems. To enhance these controls, the installation of a point-of-sale
(POS) system was completed in all Big Boy restaurants in February 1999. The
system has eliminated many cumbersome tasks such as manual order entry and the
errors associated with it. It has provided cost savings and administrative
advantages allowing management to instantly accumulate and utilize data for more
effective decision making, while allowing managers to spend more time in the
dining room focusing on customer needs. The total investment exceeded $4.8
million.
At the beginning of fiscal 1999, the Company initiated a new incentive-based
compensation program for Big Boy restaurant managers. It replaced a bonus
program that was paid on the basis of increases in sales and profit over the
previous year, which sometimes had the adverse effect of penalizing better
managers. The new program ties restaurant managers' compensation more directly
to the cash flow of their restaurant, allowing bonus to be earned on a more
consistent basis. In addition, the maximum amount that managers can earn was
also increased to well above the average for competing concepts. As had been
expected, a reduction in executive store management turnover was achieved. The
Company believes the program has helped to build a strong management team that
has focused on building same store sales and margins.
The Company has comprehensive recruiting and training programs designed to
maintain the food and service quality necessary to achieve its goals for
operating results. The Company considers its investment in its people to be a
strategic advantage. The Company maintains a management recruiting staff at its
headquarters. Corporate training centers are operated in Cincinnati, Ohio and
Covington, Kentucky for the purpose of conducting training programs for new
managers. The training includes both classroom instruction and on-the-job
training. For hourly employees, innovative software products were introduced in
1998 and 1999 such as the STAR employee selection program which helps lower
turnover rates by ensuring a proper hiring selection; the GROW interactive
employee training system; and CREWS, a telephone processed program that provides
information to restaurant managers on employee job satisfaction. Additionally,
all of the Company's training videos and quizzes were converted to CD ROM
formats in 1998. Updates of these videos along with information on new products
and training procedures are downloaded to each restaurant through the POS
system. Information of test results is uploaded to the PC's of operations
supervision and the human resources department.
Trademarks and Service Marks
----------------------------
The Company has registered certain trade names and service marks on the
Principal Register of the United States Patent and Trademark office, including
"Frisch's", "Brawny Lad" and "Buddie Boy". These registrations are considered
important to the Company's Big Boy operations, especially the trade name
"Frisch's". The duration of each registration varies. The Company intends to
renew all of its trade names and service marks when each comes up for renewal.
The "Big Boy" trade name and service marks are registered trademarks of Elias
Brothers, Inc. The "Golden Corral" trade name and service marks are registered
trademarks of Golden Corral Corporation. The "Quality Hotel" and "Clarion Hotel"
trade names and service marks are registered trademarks of Choice Hotels
International. The Company is not aware of any infringements on its registered
trade names and service marks, nor is the Company aware of any infringement on
any of its territorial rights to use the proprietary marks licensed to the
Company.
Seasonality
-----------
The Company's business is moderately seasonal, with the third quarter of the
fiscal year (December through February) normally accounting for a smaller share
of annual revenues. Additionally, severe winter weather can have a marked
negative impact upon revenue during the third quarter. Occupancy and other fixed
operating costs have a greater negative impact on operating results during any
quarter that may experience lower sales.
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<PAGE> 6
Working Capital
---------------
The Company has historically maintained a strategic negative working capital
position, which is not uncommon in the restaurant industry. The deficit is often
substantial, but management believes that such position does not hinder the
Company's ability to satisfactorily retire its obligations when due, as
substantially all the Company's retail sales are cash or credit card sales, and
the Company's revolving credit lines are readily available when needed. A
positive working capital position had been established as of May 28, 2000,
reflecting the classification of the assets of the Company's discontinued hotel
operations as current assets, in anticipation of their sale.
Customers, Backlog and Government Contracts
-------------------------------------------
Since most of the Company's revenue is derived from food sales to the general
public, there is not any material dependence upon a single customer or any group
of a few customers. No backlog of orders exists and no material portion of the
Company's business is subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the government.
Competition
-----------
The restaurant business is highly competitive and many of the Company's
competitors are substantially larger and possess greater financial resources
than does the Company. The Company has numerous competitors, including national
chains, regional and local chains, as well as independent operators, none of
which, in the opinion of the Company, is dominant in the mid-scale family sector
of the restaurant industry. Competition continues to increase from supermarkets
and other non-traditional competitors, as home meal replacement continues to
grow in popularity. The principal methods of competition in the restaurant
industry are brand name recognition and advertising, menu selection and prices,
food quality and customer perception of value, speed and quality of service,
cleanliness and fresh, attractive facilities in convenient locations. Proper
staffing levels and employee training have also become competitive factors in
recent years. In addition to competition for customers, sharp competition exists
for qualified restaurant managers and for hourly restaurant workers, and for
quality sites on which to build new restaurants.
Research and Development
------------------------
The Company's corporate staff includes a manager of research and development for
its Big Boy restaurants whose responsibilities entail development of new menu
selections and enhancing existing products. While these activities are important
to the Company, these expenditures have not been and are not expected to be
material to the Company's results.
Government Regulation
---------------------
The Company is subject to licensing and regulation by various federal, state and
local agencies, including vendors' licenses, health, sanitation, safety, hiring
and employment practices. All operations are believed to be in material
compliance with all applicable laws and regulations. The Company's restaurants
are constructed to meet local and state building and fire codes, and to meet the
requirements of the Americans with Disabilities Act. All older restaurants have
been remodeled or updated to also meet the requirements of the Americans with
Disabilities Act. Although the Company has not experienced any significant
obstacles to obtaining building permits, licenses or approvals from governmental
bodies, increasingly rigorous requirements on the part of state, and in
particular, local governments could delay or possibly prevent expansion in
desired markets.
Environmental Matters
---------------------
The Company does not believe that various federal, state or local environmental
regulations will have any material impact upon its capital expenditures,
earnings or competitive position. However, the Company can not predict the
effect of any future environmental legislation or regulations.
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<PAGE> 7
Employees
---------
As of May 28, 2000, the Company and its subsidiaries employed approximately
5,800 persons, of whom 2,400 were part-time (those working less than 24 hours
per week). Although there is no significant seasonal fluctuation in employment
levels, hours worked may vary according to restaurant sales levels. None of the
Company's employees is represented by a collective bargaining agreement, and
management considers employee relations to be excellent.
Item 2. - Properties
------- ----------
Substantially all of the Company's restaurants are free standing facilities that
are well maintained. Most of the Big Boy restaurants have a "drive-thru" window.
The following tabulation sets forth the range and average floor space and the
range and average seating capacity by operating segment (similar information for
Big Boy restaurants sub-licensed to others is not available):
<TABLE>
<CAPTION>
Floor space - Sq. Ft. Seating capacity
----------------------------------- ----------------------------------
Range Range
--------------------- --------------------
Smallest Largest Average Smallest Largest Average
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Big Boy 3,578 6,820 5,598 105 200 155
Golden Corral 9,952 9,952 9,952 348 348 348
</TABLE>
Sites acquired for development of new Company operated restaurants are
identified and evaluated for potential long-term sales and profits. A variety of
factors are analyzed including demographics, traffic patterns, competition and
other relevant information. Older Big Boy restaurants are generally located in
urban or heavily populated suburban neighborhoods that cater to local trade
rather than highway travel. Restaurants opened since the middle part of the
1980's have generally been located near interstate highways. The following table
sets forth certain operating segment information with respect to the number and
location of all restaurants as of May 28, 2000:
Big Boy
-------
Company Sub-
Operated Licensed Golden Corral
-------- -------- -------------
Ohio 65 26 3
Kentucky 19 3 2
Indiana 4 8 -
---- ---- --
Total 88 37 5
As control of property rights is important to the Company, it is the Company's
policy to own its restaurant locations whenever possible. Many of the
restaurants operated by the Company that opened prior to 1990 were financed with
sale/leaseback transactions. The following table sets forth certain operating
segment information regarding occupancy of Company-operated restaurants (similar
information for Big Boy restaurants licensed to others is not available):
Big Boy Golden Corral
------- -------------
Land and building owned 57 5
Land or land & building leased 31 -
---- --
Total 88 5
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<PAGE> 8
The thirty-one (31) leases in the above table generally require the Company to
pay property taxes, insurance and maintenance, and provide for prime terms of
fifteen (15) or twenty (20) years with options aggregating ten (10) or fifteen
(15) years. Certain of these leases, all but two of which have options to renew
for from five (5) to twenty-five (25) years and/or favorable purchase options,
will expire during the next five (5) years as follows:
Fiscal year ending in Number of leases expiring
--------------------- -------------------------
2001 4
2002 3
2003 3
2004 3
2005 5
As of May 28, 2000, the Company had two (2) Golden Corral restaurants under
construction, one (1) of which is being built in Ohio on land owned by the
Company, the other in Kentucky on leased land. An additional site in Ohio is
owned by the Company on which a Big Boy restaurant will be constructed.
The Company owns two hotels in greater Cincinnati, both of which are currently
listed for sale with a broker. The "Quality Hotel" located in Norwood, Ohio
contains 148 guest rooms, banquet facilities for 400 persons, a restaurant and a
cocktail lounge. The "Clarion Hotel" in Covington, Kentucky contains 236 guest
rooms, banquet facilities for 700, and two full-service restaurants with
cocktail lounges. The Clarion Hotel is built on land leased through April 30,
2020, with assignable renewal options aggregating fifty (50) years. The lease
contains an option to purchase this land for $1,000,000 at any time during the
current term or any renewal thereof.
None of the Company's property is currently encumbered by mortgages or otherwise
pledged as collateral. With the exception of certain delivery equipment utilized
under capital leases expiring during periods to 2004, the Company owns
substantially all of the furnishings, fixtures and equipment used in the
operation of the business.
The Company owns the building that houses its commissary in Cincinnati, Ohio.
The area of this building is approximately 79,000 square feet. The facility
normally operates one shift daily so that additional productive capacity is
available when needed. It is suitable and adequate to supply Company operated
Big Boy restaurants and the needs of Big Boy restaurants licensed to others in
all the Company's market areas for the foreseeable future. The Company maintains
its headquarters in Cincinnati on a well-traveled street in a mid-town business
district. This administrative office space approximates 49,000 square feet and
is occupied under an operating lease expiring December 31, 2002, with a renewal
option through December 31, 2012.
The Company has assigned or sub-let certain leases of closed restaurants with
average annual obligations approximating $169,000 over the next five (5) years,
for which the Company remains contingently liable. In the event of default by
the assignees or sub-lessees, the Company generally retains the right to
re-assign or sub-let the properties.
Three (3) former Big Boy restaurants (remaining of fifteen (15) closed at the
end of fiscal 1997) were listed for sale with a broker as of May 28, 2000. Two
(2) of the properties are located in Ohio and are owned by the Company. The
third property is located on leased land in Indiana. Two (2) of these properties
are currently under contract for disposal.
Six (6) other surplus land locations were also held for sale as of May 28, 2000
and are listed with brokers. Three (3) of these sites are located in Ohio, with
one (1) each being located in Kentucky, Indiana and Texas. Additionally, the
Company owns three (3) other sites for which no specific plans have been made.
Two (2) of these sites are located in Kentucky, the third is located in Ohio.
During fiscal 1999, the Company disposed of its one-fifteenth (1/15) limited
partner's interest in the Cincinnati Reds major league baseball team. The highly
unusual and infrequent transaction was recorded as an extraordinary gain and is
more fully described in Note J to the Consolidated Financial Statements included
in Part II, Item 8 of this Form 10-K.
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<PAGE> 9
Item 3. - Legal Proceedings
------- -----------------
From time to time, the Company is subject to various claims and suits in the
ordinary course of business. The Company does not believe that any ultimate
liability for such claims will have a material impact on its earnings or
financial condition.
Item 4. - Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
During the fourth quarter of fiscal 2000, no matters were submitted to a vote of
security holders.
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. With the exception of Paul F. McFarland, each of the executive
officers listed below has been continuously employed by the Company for at least
the past five years:
<TABLE>
<CAPTION>
Present
Office
Held
Name Age Office Since
---- --- ------ -----
<S> <C> <C> <C>
Jack C. Maier 75 Chairman of the Board 1970
Craig F. Maier 50 President and Chief Executive Officer 1989
Paul F. McFarland 54 Vice President - Chief Operating Officer 1998
Donald H. Walker 54 Vice President, Treasurer - Chief Financial Officer 1996
W. Gary King 63 Secretary - Counsel 1996
</TABLE>
Prior to joining the Company in September 1998, Mr. McFarland was Executive Vice
President of Operations and Chief Operating Officer for Long John Silvers from
1992 to 1997.
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PART II
-------
(Items 5 through 9)
-------------------
Item 5. - Market for the Registrant's Common Equity and Related Stockholder
------- -----------------------------------------------------------------
Matters
-------
The Company's common stock is traded on the American Stock Exchange under the
symbol "FRS". The following table sets forth the high and low sales prices for
the common stock for each quarter within the Company's two most recent fiscal
years:
<TABLE>
<CAPTION>
Year Ended May 28, 2000 Year Ended May 30, 1999
----------------------------------------- ----------------------------------------
Stock Prices Stock Prices
-------------------------- Dividend -------------------------- Dividend
High Low per share High Low per share
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 10 15/16 9 5/8 7 cents 12 8 11/16 7 cents
2nd Quarter 10 1/2 9 3/8 8 cents 11 3/8 8 1/4 7 cents
3rd Quarter 10 8 1/4 8 cents 11 1/4 10 1/4 7 cents
4th Quarter 9 3/4 8 1/2 8 cents 10 5/8 9 1/8 7 cents
</TABLE>
Through July 10, 2000, the Company has paid 158 consecutive quarterly cash
dividends during its forty year history as a public company. The closing price
of the Company's common stock as reported by the American Stock Exchange on May
26, 2000 was $9.38. There were approximately 2,700 shareholders of record as of
June 26, 2000.
10
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Item 6. - Selected Financial Data
------- -----------------------
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands, except per share data)
--------------------------------------------------------------
REVENUE 2000 1999 1998 1997 1996*
----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales $ 165,847 $ 146,671 $ 139,474 $ 152,582 $ 153,779
Other 1,353 1,346 1,213 1,399 1,504
----------- ------------ ----------- ----------- ------------
Total revenue 167,200 148,017 140,687 153,981 155,283
COSTS AND EXPENSES
Cost of sales
Food and paper 54,621 47,029 45,277 50,186 51,142
Payroll and related 57,287 50,559 46,895 51,493 54,516
Other operating costs 34,230 30,724 30,526 35,782 36,936
----------- ------------ ----------- ----------- ------------
146,138 128,312 122,698 137,461 142,594
Administrative and advertising 9,225 8,963 7,553 8,286 7,433
Impairment of long-lived assets - 1,125 375 4,600 -
Interest 2,411 2,437 3,076 2,373 2,411
----------- ------------ ----------- ----------- ------------
Total costs and expenses 157,774 140,837 133,702 152,720 152,438
----------- ------------ ----------- ----------- ------------
Earnings from continuing operations
before income tax and extraordinary item 9,426 7,180 6,985 1,261 2,845
INCOME TAXES
Current 3,533 2,887 1,928 1,409 1,252
Deferred (182) (267) 397 (1,014) (330)
----------- ------------ ----------- ----------- ------------
3,351 2,620 2,325 395 922
----------- ------------ ----------- ----------- ------------
EARNINGS FROM CONTINUING OPERATIONS 6,075 4,560 4,660 866 1,923
Income (loss) from discontinued
operations (net of applicable tax) 70 (142) (115) 321 387
Extraordinary item (net of applicable tax) - 3,712 - - -
----------- ------------ ----------- ----------- ------------
NET EARNINGS $ 6,145 $ 8,130 $ 4,545 $ 1,187 $ 2,310
=========== ============ =========== =========== ============
BASIC AND DILUTED NET EARNINGS PER SHARE OF COMMON STOCK
Continuing operations $1.08 $ .76 $ .75 $ .12 $ .27
Discontinued operations .01 (.02) (.02) .05 .05
Extraordinary item - .62 - - -
----------- ------------ ----------- ----------- ------------
$1.09 $1.36 $ .73 $ .17 $ .32
=========== ============ =========== =========== ============
DIVIDENDS PER SHARE
Cash $ .31 $ .28 $ .26 $ .24 $ .24
Stock - - - 4% 4%
OTHER FINANCIAL STATISTICS
Working capital (deficit) $ 3,056 $ (9,610) $ (8,450) $ (8,816) $ (9,894)
Capital expenditures 13,837 12,709 11,235 10,221 15,362
Total assets 107,779 103,426 106,724 111,260 118,396
Long-term obligations 35,891 31,605 41,855 30,878 34,631
Repurchase of common stock $5,503 $1,067 $17,690 $111 -
Shareholders' equity 54,167 55,288 49,910 64,684 65,307
Book value per share at year end $ 10.13 $ 9.37 $ 8.31 $ 9.05 $ 9.49
Return on average equity 11.2% 15.5% 7.9% 1.8% 3.6%
Weighted average number of diluted
shares outstanding 5,658 5,968 6,238 7,151 7,157
Number of shares outstanding at year end 5,345 5,901 6,005 7,148 6,883
Percentage increase (decrease) in total revenue 13.0% 5.2% (8.6%) (.8%) 2.2%
Earnings as a percentage of total revenue
Earnings from continuing operations
before income tax and extraordinary item 5.6% 4.9% 5.0% .8% 1.8%
Net earnings 3.7% 5.5% 3.2% .8% 1.5%
</TABLE>
* Indicates 53 week period
11
<PAGE> 12
Item 7. - Management's Discussion and Analysis of Financial Condition and
------- ---------------------------------------------------------------
Results of Operations
---------------------
OVERVIEW
In March 2000, the Board of Directors authorized management to develop a plan to
divest the Company's hotel operations. Proceeds from the sale are expected to
result in a gain on disposal sufficient to cover any operating losses that may
be incurred during the phase-out period. The Company's net earnings for the year
ended May 28, 2000 included hotel earnings of $70,000 or $.01 per share, while
net earnings for the years ended May 30, 1999 and May 31, 1998 included net
losses from hotel operations of $142,000 or ($.02) per share and $115,000 or
($.02) per share, respectively. In the accompanying financial statements,
results from hotel operations have been accounted for as discontinued
operations. Therefore, provisions for depreciation were permanently stopped
beginning in the fourth quarter of fiscal 2000. Total depreciation charged
against discontinued hotel operations was $1,358,000, $1,761,000 and $1,428,000,
respectively, in fiscal years 2000, 1999 and 1998. The discussion of results of
operations has been adjusted to exclude comparisons of the hotel summary
information shown in the table below:
<TABLE>
<CAPTION>
May 28, 2000 May 30, 1999 May 31, 1998
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total revenue $11,594 $11,534 $11,535
Cost of sales $11,186 $11,425 $11,373
Administrative and advertising 299 333 334
-------- -------- --------
Total costs and expenses 11,485 11,758 11,707
-------- -------- --------
Earnings (Loss) before income tax 109 (224) (172)
Income tax (benefit) 39 (82) (57)
-------- -------- --------
Earnings (Loss) from disc. operations $ 70 $ (142) $ (115)
======== ======== ========
</TABLE>
For continuing operations, TOTAL REVENUE for fiscal 2000 was $167,200,000, an
increase of $19,183,000 or 13 percent from the comparable period last year, and
an increase of $26,513,000 or 18.8 percent when compared to two years ago.
Earnings from continuing operations for fiscal 2000 were $6,075,000, or $1.08
per share, compared to $4,560,000 or $.76 per share in fiscal 1999, and
$4,660,000 or $.75 per share two years ago. Excluding pretax impairment of
assets charges of $1,125,000 and $375,000 taken respectively in fiscal 1999 and
fiscal 1998, earnings from continuing operations would have been $.88 per share
in fiscal 1999 and $.79 per share in fiscal 1998.
An extraordinary gain of $3,712,000 or $.62 per share was also recorded in
fiscal 1999 from the sale of the Company's limited partnership interest in the
Cincinnati Reds major league baseball team.
RESULTS OF OPERATIONS
Same store sales in Big Boy restaurants improved by 5 percent during fiscal
2000, including more than a 7 percent gain for the twelve-week fourth quarter,
marking the eleventh consecutive quarter that Big Boy same store sales gains
have been achieved. Big Boy same store sales gains of more than 4 percent were
posted in fiscal 1999 on top of a moderate gain in fiscal 1998. Strong sales
from carryout and drive-thru trade, driven by a marketing emphasis on combo
meals, produced the majority of the sales increases in all three years. In
addition, the introduction of new menu items with higher price points helped to
produce higher dining room sales in fiscal 2000. Menu prices were increased
approximately 2 percent in the first and third quarters of fiscal 1998, 2
percent in the first and third quarters of fiscal 1999, 1.5 percent at the end
of the first quarter and just under 2 percent near the end of the third quarter
of fiscal 2000. Another menu price increase is currently being planned for
autumn 2000. The Company has not opened or closed any Big Boy restaurants during
the last three years as management's focus has been on building same store sales
and margins in the 88 existing Big Boy restaurants. Average annual sales volume
of a Big Boy restaurant reached $1,656,000 in fiscal 2000, up from $1,577,000 in
fiscal 1999 and $1,512,000 in fiscal 1998.
Sales volume of Golden Corral restaurants accounted for well over half of the
total 13 percent increase in consolidated revenue during fiscal 2000. Only one
Golden Corral restaurant was in operation for all of fiscal 2000, having opened
in January 1999. Two more were opened during the first quarter of fiscal 2000, a
fourth one opened near the end of the second quarter and a fifth one opened in
the third quarter, during January 2000. The sixth one opened in July of 2000.
The Company plans to build a total of 40 Golden Corrals through 2007.
12
<PAGE> 13
OTHER REVENUE in fiscal 2000 was comparable with fiscal 1999, both of which were
approximately 10 percent higher when compared to fiscal 1998. There have not
been any significant changes in revenue from fees earned from Big Boy
restaurants sub-licensed to others. At the end of fiscal 2000, 37 sub-licensed
restaurants were in operation compared with 39 such restaurants at the beginning
of the three-year period. Fiscal 1999 included a final partnership distribution
from the Company's investment in the Cincinnati Reds professional baseball team.
Fiscal 2000 includes revenue from the Company's efforts to market its innovative
employee training and selection software products.
COST OF SALES increased $17,826,000 or 13.9 percent during fiscal 2000 as
compared with fiscal 1999, roughly proportionate to the 13 percent revenue
increase. As a percentage of revenue, cost of sales was 87.4 percent, 86.7
percent, and 87.2 percent, respectively, in fiscal years 2000, 1999 and 1998. An
analysis of the components of cost of sales follows.
As a percentage of Big Boy sales, FOOD AND PAPER COSTS in Big Boy restaurants
were 31.6 percent, 31.5 percent and 32 percent of revenue, respectively, during
fiscal years 2000, 1999 and 1998. Increased sales of carryout and drive-thru
meals, which usually have lower food cost than typical dining room meals,
resulted in food cost reductions in all three years. However, this decrease was
offset in fiscal 2000 by higher prices paid for pork, beef and fish. On a
consolidated basis, food and paper costs were 32.7 percent, 31.8 percent and
32.2 percent of revenue, respectively, in fiscal years 2000, 1999 and 1998. The
higher percentage in fiscal 2000 reflects the impact of food cost in Golden
Corral restaurants, which as a percentage of sales, is much higher than in Big
Boy restaurants.
PAYROLL AND RELATED EXPENSES were 34.3 percent, 34.2 percent and 33.3 percent of
revenue, respectively, in fiscal years 2000, 1999 and 1998. Higher pay rates
driven by tight labor conditions were experienced in all three years. To improve
service quality, the allowance of a small increase in the number of hours worked
added to the higher costs in fiscal 2000. A variable compensation program for
restaurant management, based on cash flows generated at individual restaurants,
was introduced in fiscal 1999. Restaurant managers earned higher variable
compensation during fiscal 2000 than was earned in fiscal 1999. However, two
factors kept the fiscal 2000 payroll percentage from rising more dramatically
above the fiscal 1999 percentage. First, the costs of certain employee benefits
are fixed and do not rise with higher levels of pay or higher sales levels.
Second, the typical payroll and related expense percentage for a Golden Corral
restaurant is slightly lower than for a Big Boy restaurant. Payroll and related
expenses also benefited from favorable claims experience in the Company's
self-insurance programs, as reserve estimates were lowered in the first quarters
of all three fiscal years. Without these adjustments, payroll and related
expenses would have been 34.5 percent, 34.5 percent and 33.7 percent of revenue,
respectively, in fiscal years 2000, 1999 and 1998.
It has become increasingly likely that the federal minimum wage will soon be
increased by a dollar per hour to be phased in over a two to three year period.
Based on current labor conditions, such an increase would not be expected to
have an immediate material effect on the Company's payroll costs, especially if
the final legislation does not change the cash wage for tipped employees.
OTHER OPERATING EXPENSES decreased to 20.5 percent of revenue during fiscal 2000
from 20.8 percent in fiscal 1999 and 21.7 percent in fiscal 1998. As these
expenses tend to be more fixed in nature, the sales increases cause these costs
to be a lower percentage of revenue. In addition, the percentage for fiscal 2000
benefited from a gain from the sale of an older Big Boy restaurant. Offsetting
the fiscal 2000 improvement were opening costs of approximately $984,000, for
the Company's Golden Corral restaurants, compared with $404,000 in fiscal 1999.
These opening costs, including $195,000 this year and $145,000 last year for
Golden Corral restaurants not yet in operation, resulted in the Golden Corrals
having a negative impact on the Company's earnings during fiscal years 2000 and
1999. Excluding all opening expenses, pretax operating earnings for Golden
Corral restaurants would have been $669,000 in fiscal 2000 compared with
approximately $85,000 in fiscal 1999, which included only eighteen weeks of
results for the first restaurant that opened in January 1999.
ADMINISTRATIVE AND ADVERTISING EXPENSE in fiscal 2000 increased $262,000 or 3
percent higher than fiscal 1999, and was $1,672,000 or 22.1 percent more than
fiscal 1998. The fiscal 2000 increase over fiscal 1999 is principally due to
higher spending for Big Boy advertising proportionate with the higher sales
levels, reflecting the Company's policy of spending a constant percentage of
sales dollars, and higher bonus accruals commensurate with the earnings
improvement. Fiscal 1998 included costs associated with rolling out the
point-of-sale systems in Big Boy
13
<PAGE> 14
restaurants. Administrative and advertising costs for fiscal 1998 included gains
from dispositions of certain property.
Results for fiscal years 1999 and 1998 were adversely affected by impairment of
assets charges of $1,125,000 and $375,000, respectively, to lower the carrying
value of certain property held for sale relating to fifteen Big Boy restaurants
that closed at the end of fiscal 1997. The fiscal 1999 charge of $1,125,000 was
necessitated when it became apparent that the seven remaining restaurants then
to be sold would have to be disposed of for values significantly below the
initial estimates that were used when the restaurants closed.
INTEREST EXPENSE during fiscal 2000 decreased $27,000 or 1.1 percent lower than
the comparable period a year ago, and was $665,000 or 21.6 percent lower than
two years ago. Interest attributable to the tender offer loan (see notes D and G
to the consolidated financial statements) was $38,000 during fiscal 2000,
compared with $462,000 during fiscal 1999 and $794,000 in fiscal 1998. Borrowing
in fiscal 2000 to construct Golden Corral restaurants and to finance repurchases
of the Company's common stock tempered the savings from the reduction in tender
offer interest. Expected proceeds in fiscal year 2001 from the sale of the hotel
properties will be used to repay debt, resulting in substantial interest
savings. However, the savings will likely be offset by continued borrowing for
construction of Golden Corral restaurants during the next three fiscal years.
Provision for INCOME TAX EXPENSE as a percentage of pre-tax earnings was 35.5
percent in fiscal 2000, compared with 36.3 percent in fiscal 1999 and 33.3
percent in fiscal 1998. Fiscal 1999's 36.3 percent tax rate reflected higher
state income taxes associated with the extraordinary gain from the sale of the
Company's limited partnership interest in the Cincinnati Reds major league
baseball team. The tax rate for fiscal 2000 is higher than 1998's tax rate due
to much higher earnings in 2000, which causes federal tax credits to be a lower
percentage of pretax earnings which in turn results in a higher effective tax
rate. The tax rate for fiscal 2000 also contains much higher provisions for
state and local taxes than fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically maintained a strategic negative working capital
position, which is not uncommon in the restaurant industry. The deficit is often
substantial, but management believes that such position does not hinder the
Company's ability to satisfactorily retire its obligations when due, as
substantially all the Company's retail sales are cash or credit card sales, and
the Company's revolving credit lines are readily available when needed. A
positive working capital position has been established as of May 28, 2000,
reflecting the classification of the assets of the Company's discontinued hotel
operations as current assets, in anticipation of their sale.
CASH PROVIDED BY OPERATING ACTIVITIES in fiscal 2000 was $15,507,000, an
increase of $2,567,000 over last year and $3,043,000 higher than two years ago.
These cash flows were generated principally from net income and depreciation.
Together with funds from external borrowing, fiscal 2000's cash flows were
utilized for discretionary capital projects (principally Golden Corral
expansion), dividends, repurchases of the Company's common stock, and to service
debt.
INVESTING ACTIVITIES in fiscal 2000 included $13,837,000 in capital costs, an
increase of $1,128,000 from the prior year and $2,602,000 higher than two years
ago. Fiscal 2000's capital spending included $9,810,000 for Golden Corral,
$1,070,000 to remodel Big Boy restaurants, $540,000 for improvements to the
hotel properties, and $2,417,000 in routine equipment replacements and other
capital outlays. Proceeds from property sales in fiscal 2000 were $1,072,000, a
decrease of $3,781,000 and $5,727,000, respectively, from fiscal 1999 and fiscal
1998, both of which included property sales from certain of the fifteen Big Boy
restaurants that closed at the end of fiscal 1997. The Company expects to
receive at least $14,000,000, net of expenses, from the sale of its hotel
properties. The sale proceeds will be used in the short term to repay debt and
ultimately will be reinvested in Big Boy and Golden Corral restaurant expansion.
The Company is also expecting sale proceeds of approximately $2,000,000 from
closed restaurants and certain excess property in the first quarter of fiscal
2001.
FINANCING ACTIVITIES in fiscal 2000 included $6,000,000 of new debt borrowed
against the Golden Corral credit facility. In addition, $5,000,000 of new debt
was borrowed on the $20,000,000 revolving line of credit, of which $1,720,000
was used to retire the tender offer loan, and $1,500,000 was repaid during the
year. Scheduled long-term debt payments of $2,677,000 were also made. Regular
quarterly cash dividends to shareholders totaling $1,753,000 were paid during
the year ended May 28, 2000. In December 1999 and in early June 2000, the Board
of Directors
14
<PAGE> 15
authorized additional repurchases of up to 200,000 shares and 300,000 shares,
respectively, of the Company's common stock. These approvals supplemented the
Board's authorization in October 1998 to purchase up to 500,000 shares.
Purchases are being made from time to time on the open market or through block
trades during a two-year time frame that expires October 5, 2000. During the
year ended May 28, 2000 the Company repurchased 559,508 shares at a cost of
$5,503,000, bringing the total repurchases since the inception of the program to
664,306 shares at a cost of $6,567,000.
The Company expects funds from operations to be sufficient to cover near term
capital spending on Big Boy facilities, scheduled debt service, stock
repurchases and regular quarterly cash dividends. If needed, the Company's
revolving credit loan is available to meet additional borrowing requirements.
Plans to build new Big Boys have been delayed while the design of the new
building prototype is reworked. Construction of the first Big Boy to be built
using the reworked prototype should begin by autumn 2000. Costs to remodel
eighteen Big Boy restaurants scheduled for fiscal 2001 are expected to be
approximately $1,050,000.
The terms of the Company's original development agreement with Golden Corral
Franchising Systems, Inc. call for the Company to open 25 Golden Corral
restaurants through 2005. Five restaurants were in operation as of May 28, 2000.
In addition, four more Golden Corrals are scheduled to be open by February 2001,
including one that opened July 31, 2000. In July 2000, the Company entered into
a second area development agreement to establish and operate fifteen additional
Golden Corral restaurants in northern Ohio. The development schedule calls for
two restaurants to be open by December 31, 2001, with all fifteen restaurants to
be open by December 31, 2007. Costs are being funded through cash flow and a
credit facility under which the Company may borrow up to $20,000,000 through
September 1, 2001, of which $11,000,000 remains currently available. On average,
the approximate cost to build and equip each Golden Corral restaurant is
$2,500,000, including land.
YEAR 2000 IMPACT
The Company successfully completed its plan to insure that its information
systems are fully Year 2000 compliant, as no significant problems were
encountered during the rollover from 1999 to 2000. The Company utilized internal
resources to convert and test its custom written headquarters software without
material incremental cost. Point-of-sale systems required upgrade, the cost of
which had no material adverse effect on the Company's financial position,
results of operations or cash flows. Certain other systems that have embedded
chip technology did not affect the Company's operations. The Company's plan also
addressed the readiness of mission critical third party suppliers and service
providers. The Company did not experience any significant interruption of food
or other product delivery resulting from third-party non-compliance. All of the
Company's information systems have continued to operate properly.
SAFE HARBOR STATEMENT
Statements included 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 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.
15
<PAGE> 16
Item 7A. - Quantitative and Qualitative Disclosures About Market Risk
-------- ----------------------------------------------------------
The Company has market risk exposure to interest rate changes primarily relating
to the $20,000,000 revolving credit loan, the outstanding balance of which was
$17,000,000 as of May 28, 2000. Interest rates are determined by various indices
for periods of one, two or three months as selected by the Company. The indices
include the London Interbank Offered Rate (LIBOR) and the average rate being
offered by top quality banks in the national secondary market for certificates
of deposit (CD), plus the then applicable LIBOR/CD spread as periodically
adjusted, ranging from a minimum of 87.5 basis points to a maximum of 150 basis
points. Any portion of the note with respect to which a LIBOR or CD based rate
is not in effect bears interest equal to the prime rate. The Company does not
currently use derivative financial instruments to manage its exposure to changes
in interest rates.
Food supplies for Big Boy restaurants are generally plentiful and may be
obtained from any number of suppliers. Quality and price are the principal
determinants of source. Centralized purchasing and food preparation through the
Company's commissary ensures uniform product quality and safety, timeliness of
distribution to restaurants and results in lower food and supply costs. Certain
commodities, principally beef, chicken, pork, dairy products, fish, french fries
and coffee, are generally purchased based upon market prices established with
vendors. Purchase contracts for some of these items may contain contractual
provisions that limit the price to be paid. The Company does not use financial
instruments as a hedge against changes in commodity pricing.
<TABLE>
<CAPTION>
Item 8. - Financial Statements and Supplementary Data Page
------- ------------------------------------------- ----
Index to Consolidated Financial Statements
<S> <C>
Auditors' Report 17
Consolidated Balance Sheet - May 28, 2000 and May 30, 1999 18-19
Consolidated Statement of Earnings - Three years ended May 28, 2000 20
Consolidated Statement of Cash Flows - Three years ended May 28, 2000 21
Consolidated Statement of Shareholders' Equity - Three years ended May 28, 2000 22
Notes to Consolidated Financial Statements - Three years ended May 28, 2000 23-33
Quarterly Results (Unaudited) 33
</TABLE>
16
<PAGE> 17
AUDITORS' REPORT
Shareholders
Frisch's Restaurants, Inc.
We have audited the accompanying consolidated balance sheets of Frisch's
Restaurants, Inc. (an Ohio corporation) and Subsidiaries as of May 28, 2000 and
May 30, 1999 and the related consolidated statements of earnings, cash flows,
and shareholders' equity for each of the three years in the period ended May 28,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Frisch's
Restaurants, Inc. and Subsidiaries as of May 28, 2000 and May 30, 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 28, 2000, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Cincinnati, Ohio
July 6, 2000
17
<PAGE> 18
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
May 28, 2000 and May 30, 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 565,089 $ 200,200
Receivables
Trade 1,051,129 1,117,431
Other 183,053 219,299
Inventories 3,736,857 3,732,458
Prepaid expenses and sundry deposits 818,591 910,193
Hotel assets held for sale - net 13,737,251 -
Prepaid and deferred income taxes 686,371 744,097
------------ ------------
Total current assets 20,778,341 6,923,678
PROPERTY AND EQUIPMENT
Land and improvements 24,058,978 21,089,875
Buildings 49,249,644 51,362,095
Equipment and fixtures 53,198,304 57,947,430
Leasehold improvements and buildings on leased land 14,885,289 28,449,043
Capitalized leases 7,282,687 8,224,712
Construction in progress 1,472,138 2,305,822
------------ ------------
150,147,040 169,378,977
Less accumulated depreciation and amortization 76,246,478 85,010,213
------------ ------------
Net property and equipment 73,900,562 84,368,764
OTHER ASSETS
Intangible assets 744,719 748,794
Investments in land 1,268,912 1,960,781
Property held for sale 2,823,309 2,076,484
Net cash surrender value-life insurance policies 4,210,900 4,045,080
Deferred income taxes 1,536,701 1,272,286
Other 2,515,884 2,030,296
------------ ------------
Total other assets 13,100,425 12,133,721
------------ ------------
$107,779,328 $103,426,163
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
18
<PAGE> 19
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
May 28, 2000 and May 30, 1999
LIABILITIES
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Long-term obligations due within one year
Long-term debt $ 2,424,211 $ 1,730,964
Obligations under capitalized leases 354,755 451,024
Self insurance 851,096 1,092,733
Accounts payable 7,377,357 7,431,751
Accrued expenses 6,277,932 5,401,819
Income taxes 436,715 425,383
------------ ------------
Total current liabilities 17,722,066 16,533,674
LONG-TERM OBLIGATIONS
Long-term debt 26,330,582 21,248,526
Obligations under capitalized leases 4,511,312 5,146,170
Self insurance 2,924,433 3,019,947
Other 2,124,272 2,190,343
------------ ------------
Total long-term obligations 35,890,599 31,604,986
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
shares - stated value - $1 7,362,279 7,362,279
Additional contributed capital 60,345,436 60,401,456
------------ ------------
67,707,715 67,763,735
Retained earnings 14,196,749 9,804,637
------------ ------------
81,904,464 77,568,372
Less cost of treasury stock (2,017,526 and 1,461,054 shares) 27,737,801 22,280,869
------------ ------------
Total shareholders' equity 54,166,663 55,287,503
------------ ------------
$107,779,328 $103,426,163
============ ============
</TABLE>
19
<PAGE> 20
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three years ended May 28, 2000
<TABLE>
<CAPTION>
2000 1999 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
REVENUE
Sales $ 165,846,505 $ 146,670,462 $ 139,473,555
Other 1,353,295 1,346,429 1,213,320
----------------- ----------------- -----------------
Total revenue 167,199,800 148,016,891 140,686,875
COSTS AND EXPENSES
Cost of sales
Food and paper 54,621,455 47,029,072 45,277,165
Payroll and related 57,286,588 50,558,599 46,895,199
Other operating costs 34,230,261 30,724,162 30,525,368
----------------- ----------------- -----------------
146,138,304 128,311,833 122,697,732
Administrative and advertising 9,224,978 8,962,550 7,553,311
Impairment of long-lived assets - 1,125,000 375,000
Interest 2,410,443 2,437,117 3,075,615
----------------- ----------------- -----------------
Total costs and expenses 157,773,725 140,836,500 133,701,658
----------------- ----------------- -----------------
Earnings from continuing operations
before income taxes and extraordinary item 9,426,075 7,180,391 6,985,217
INCOME TAXES
Current
Federal 3,194,952 2,644,314 1,914,034
Less tax credits (239,750) (217,325) (198,532)
State and municipal 577,307 460,762 212,849
Deferred (181,580) (267,046) 397,033
----------------- ----------------- -----------------
3,350,929 2,620,705 2,325,384
----------------- ----------------- -----------------
EARNINGS FROM CONTINUING OPERATIONS 6,075,146 4,559,686 4,659,833
Income (loss) from discontinued
operations (net of applicable tax) 70,395 (141,845) (115,100)
Extraordinary item (net of applicable tax) - 3,712,000 -
----------------- ----------------- -----------------
NET EARNINGS $ 6,145,541 $ 8,129,841 $ 4,544,733
================= ================= =================
Basic and diluted net earnings per share
of common stock
Continuing operations $ 1.08 $ .76 $ .75
Discontinued operations .01 (.02) (.02)
Extraordinary item - .62 -
----------------- ----------------- -----------------
$ 1.09 $ 1.36 $ .73
================= ================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 21
<TABLE>
<CAPTION>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three years ended May 28, 2000
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 6,145,541 $ 8,129,841 $ 4,544,733
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 9,620,862 9,937,195 9,256,466
(Gain) loss on disposition of assets (129,439) 340,242 (896)
Impairment of long-lived assets - 1,125,000 375,000
Gain on sale of investment in Cincinnati Reds - (3,712,000) -
Changes in assets and liabilities:
Decrease (increase) in receivables 102,548 (317,959) 208,542
(Increase) decrease in inventories (4,398) (93,718) 19,104
Decrease (increase) in prepaid expenses and sundry deposits 91,601 (82,622) 129,740
(Increase) decrease in prepaid and deferred income taxes (206,689) (186,051) 508,735
(Decrease) increase in accounts payable (54,394) 1,089,564 (14,990)
Increase (decrease) in accrued expenses 876,113 (378,104) (271,081)
Increase (decrease) in accrued income taxes 11,332 (1,662,617) -
Increase in other assets (543,204) (330,243) (1,469,493)
Decrease in self insured obligations (337,151) (388,321) (746,221)
Decrease in other liabilities (66,071) (530,111) (75,235)
------------ ------------ ------------
Net cash provided by operating activities 15,506,651 12,940,096 12,464,404
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to property and equipment (13,837,269) (12,708,832) (11,235,376)
Proceeds from disposition of property 1,071,836 4,852,765 6,798,563
Proceeds from sale of investment in Cincinnati Reds - 7,000,000 -
Increase in other assets (154,124) (322,277) (201,336)
------------ ------------ ------------
Net cash (used in) investing activities (12,919,557) (1,178,344) (4,638,149)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from borrowings 11,000,000 6,000,000 18,644,490
Payment of long-term debt and capital lease obligations (5,955,824) (14,893,488) (7,299,387)
Cash dividends paid (1,753,429) (1,672,689) (1,629,980)
Treasury share transactions (5,472,275) (1,057,273) (17,688,571)
Other (40,677) (22,362) -
------------ ------------ ------------
Net cash (used in) financing activities (2,222,205) (11,645,812) (7,973,448)
------------ ------------ ------------
Net increase (decrease) in cash and equivalents 364,889 115,940 (147,193)
Cash and equivalents at beginning of year 200,200 84,260 231,453
------------ ------------ ------------
Cash and equivalents at end of year $ 565,089 $ 200,200 $ 84,260
============ ============ ============
Supplemental disclosures:
Interest paid $ 2,288,527 $ 2,638,569 $ 2,700,697
Income taxes paid 3,667,348 4,388,158 1,984,439
Income tax refunds received 82,318 785 224,789
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 22
<TABLE>
<CAPTION>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three years ended May 28, 2000
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 June 1, 1997 $ 7,362,279 $ 60,427,514 $ 432,732 ($ 3,538,721) $ 64,683,804
Net earnings for the year - - 4,544,733 - 4,544,733
Treasury shares reissued - (215) - 1,407 1,192
Treasury shares acquired - - - (17,689,763) (17,689,763)
Dividends
Cash - $.26 per share - - (1,629,980) - (1,629,980)
------------ ------------ ------------ ------------ ------------
Balance at May 31, 1998 7,362,279 60,427,299 3,347,485 (21,227,077) 49,909,986
Net earnings for the year - - 8,129,841 - 8,129,841
Treasury shares reissued - (3,481) - 13,693 10,212
Treasury shares acquired - - - (1,067,485) (1,067,485)
Employee stock ownership plan - (22,362) - - (22,362)
Dividends
Cash - $.28 per share - - (1,672,689) - (1,672,689)
------------ ------------ ------------ ------------ ------------
Balance at May 30, 1999 7,362,279 60,401,456 9,804,637 (22,280,869) 55,287,503
Net earnings for the year - - 6,145,541 - 6,145,541
Treasury shares reissued - (15,343) - 46,111 30,768
Treasury shares acquired - - - (5,503,043) (5,503,043)
Employee stock ownership plan - (40,677) - - (40,677)
Dividends
Cash - $.31 per share - - (1,753,429) - (1,753,429)
------------ ------------ ------------ ------------ ------------
Balance at May 28, 2000 $ 7,362,279 $ 60,345,436 $ 14,196,749 ($27,737,801) $ 54,166,663
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE> 23
Frisch's Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended May 28, 2000
NOTE A - DESCRIPTION OF THE BUSINESS
Frisch's Restaurants, Inc., headquartered in Cincinnati, Ohio, operates and
sub-licenses family restaurants, most of which have "drive-thru" service, which
use the trade name Frisch's Big Boy, and the Company operates Golden Corral
grill buffet restaurants. These operations are located in various regions of
Ohio, Kentucky and Indiana. Additionally, the Company operates two high rise
hotels with restaurants in metropolitan Cincinnati, which are accounted for as
discontinued operations (see note C). Trademarks which the Company has the right
to use include "Frisch's," "Big Boy," "Golden Corral," "Clarion Hotel," and
"Quality Hotel."
NOTE B - ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows:
Consolidation Practices
-----------------------
The consolidated financial statements include the accounts of Frisch's
Restaurants, Inc. and all of its subsidiaries. Significant inter-company
accounts and transactions are eliminated in consolidation.
Fiscal Year
-----------
The Company's fiscal year ends on the Sunday nearest to the last day of May.
Fiscal years 2000, 1999 and 1998 were each comprised of 52 weeks.
Reclassification
----------------
Certain reclassifications have been made to prior year information to conform to
the current year presentation.
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, value of intangible assets, 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. Outstanding checks in the amount of $691,000
were included in accounts payable at May 30, 1999.
Receivables
-----------
The Company values its trade notes and accounts receivable on the reserve
method. The reserve balance was immaterial at May 28, 2000 and May 30, 1999.
Inventories
-----------
Inventories, comprised principally of food items, are valued at the lower of
cost, determined by the first-in, first-out method, or market.
23
<PAGE> 24
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is provided principally
on the straight-line method over the estimated service lives ranging from 10 to
25 years for buildings or components thereof and 5 to 10 years for equipment.
Leasehold improvements are depreciated over 10 to 25 years or the remaining
lease term, whichever is shorter. Interest on borrowings is capitalized during
active construction periods of major capital projects. The cost of land not yet
in service is included in "construction in progress" if construction has begun
or if construction is likely within the next twelve months. The cost of land on
which construction is not likely within the next twelve months is included in
other assets under the caption "investments in land".
The Company considers a history of cash flow losses in established areas to be
its primary indicator of potential impairment pursuant to 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." Carrying values
are reviewed for impairment when events or changes in circumstances indicate
that the assets' carrying values may not be recoverable from the estimated
future cash flows expected to result from the properties' use and eventual
disposition. When undiscounted expected future cash flows are less than carrying
values, an impairment loss is recognized equal to the amount by which the
carrying values exceed the net realizable values of the assets.
During the fourth quarter of fiscal year 1997, the Company closed fifteen Big
Boy restaurants in certain markets in which cash flow losses had occurred.
Accordingly, a $4,600,000 non-cash pretax impairment charge was recorded to
reduce the carrying costs of the properties to net realizable value, as
determined by estimates provided by real estate brokers and the Company's past
experience in disposing of other unprofitable restaurant properties. Additional
non-cash pretax charges of $375,000 and $1,125,000 were recorded respectively,
during the fourth quarter of fiscal 1998 and the second quarter of fiscal 1999
to further lower the net realizable values of the remaining properties to be
sold. The $1,125,000 charge recorded in the second quarter of 1999 was
necessitated when it became apparent that the seven remaining restaurants to
then be sold would ultimately have to be disposed of for values significantly
below the initial estimates that were used when the restaurants closed.
Contracts were accepted at prices lower than originally estimated on four of the
properties during the second quarter of fiscal 1999, and expectations were
lowered for the remaining three. Three of the four accepted contracts were with
a Big Boy franchise operator, a minority shareholder and the president of which
was an officer of the Company prior to May 31, 2000 (see note K).
Twelve of the fifteen properties closed at the end of fiscal 1997 have been
disposed of through May 28, 2000. The sale proceeds were used to repay
borrowings under the loan agreement that funded the company's modified "Dutch
Auction" self-tender offer (see notes D and G). The remaining three properties
are listed for sale with a broker, and are carried at a net realizable value of
approximately $1,653,000 on the Company's balance sheet at May 28, 2000 as a
component of the long-term asset caption "Property held for sale." Disposition
of these properties is expected within the next six to twelve months, the
proceeds of which will be used for working capital. Certain surplus land is also
currently held for sale and is stated at the lower of cost or market.
Intangible Assets and Other Assets
----------------------------------
The excess of cost over equity in net assets of subsidiaries acquired prior to
November 1, 1970, approximating $710,000, is not currently being amortized
because, in the opinion of management, the value has not decreased.
The Golden Corral license agreement requires the Company to pay initial license
fees for each new restaurant. Amortization of the initial fee begins when the
restaurant opens and is computed using the straight-line method over the 15 year
term of the individual restaurant franchise agreement.
Advertising
-----------
Advertising costs are charged to expense as incurred. Advertising expense for
continuing operations for fiscal years 2000, 1999 and 1998 was $3,864,000,
$3,479,000 and $3,336,000, respectively.
24
<PAGE> 25
New Store Opening Costs
-----------------------
New store opening costs consist of new employee training costs, the cost of a
team to coordinate the opening and the cost of certain replaceable items such as
uniforms and china. Effective June 1, 1998, the Company accounts for these costs
in accordance with The American Institute of Certified Public Accountants'
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires new store opening costs to be expensed as
incurred.
Opening costs were $984,000 in fiscal 2000, $404,000 in fiscal 1999 and $35,000
in fiscal 1998. Opening costs in fiscal years 2000 and 1999 were exclusively for
Golden Corral restaurants, while fiscal 1998 consisted of amortization of new
Big Boy restaurant opening costs.
Benefit Plans
-------------
The Company has two defined benefit pension plans covering substantially all of
its eligible employees. The benefits are based on years-of-service and other
factors. The Company's funding policy is to annually contribute amounts
sufficient to satisfy legal funding requirements plus such additional tax
deductible amounts deemed advisable under the circumstances. Contributions are
intended to provide not only for benefits attributed to service-to-date, but
also for those expected to be earned in the future. The Company also has a
non-qualified supplemental retirement plan for certain key employees.
Self Insurance
--------------
The Company self-insures its Ohio workers' compensation claims up to $250,000
per claim. Costs are accrued based on management's estimate for future claims.
Licensing Agreements
--------------------
The agreement under which the Company has the right to operate and sub-license
others to operate Big Boy restaurants calls for no license fees to be paid by
the Company. Revenue from franchise fees, based on sales of Big Boy restaurants
sub-licensed to other operators, is recorded on the accrual method as earned.
Initial license fees are recognized as revenue when the sub-licensed restaurants
begin operations.
Under the terms of the Golden Corral license agreement, the Company is obligated
to pay fees based on defined gross sales. These costs are charged to operations
as incurred.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of the Company's financial instruments approximates fair
value.
Investment in Sports Franchise
------------------------------
On September 30, 1998, the Company completed the sale of its 1/15 limited
partnership investment in the Cincinnati Reds professional baseball team for
$7,000,000 cash (see note J). A final partnership distribution of $101,000 was
recorded in earnings during the third quarter of fiscal 1999. No distributions
were received in fiscal 1998.
Income Taxes
------------
Taxes are provided on all items included in the statement of earnings regardless
of when such items are reported for tax purposes.
Stock Based Compensation
------------------------
The Company accounts for stock options using the intrinsic value method of
measuring compensation expense prescribed by Accounting Principles Board Opinion
No. 25 (APB 25), as permitted by Statement of Financial
25
<PAGE> 26
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock Based
Compensation." Pro forma disclosures of net income and earnings per share based
on options granted and stock issued are reflected in Note G - Capital Stock.
NOTE C - DISCONTINUED OPERATIONS
In March 2000, the Board of Directors authorized management to develop a plan to
divest the Company's hotel operations, consisting of two high rise hotels - the
Clarion Riverview Hotel and the Quality Central Hotel. The Company plans to
operate the hotels until buyers are found, which is anticipated to take up to
one year. The services of a broker have been engaged for this purpose. Hotel
operations are accounted for as a discontinued operation, and accordingly,
amounts in the financial statements for all periods shown have been restated to
reflect discontinued operations accounting. The investment in the hotels is
comprised of the hotels' real property, leasehold improvements, equipment,
furnishings and fixtures, and is carried as a current asset under the caption
"Hotel assets held for sale - net". The sale proceeds, which are expected to
exceed the carrying values, will be used in the short-term to repay debt and
ultimately will be reinvested in Big Boy and Golden Corral restaurant expansion.
Certain information with respect to discontinued hotel operations is summarized
below:
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 11,594 $ 11,534 $ 11,535
Cost of sales $ 11,186 $ 11,425 $ 11,373
Administrative and advertising 299 333 334
-------- -------- --------
Total costs and expenses 11,485 11,758 11,707
-------- -------- --------
Earnings (Loss) before income tax 109 (224) (172)
Income tax (benefit) 39 (82) (57)
-------- -------- --------
Earnings (Loss) from discontinued operations $ 70 $ (142) $ (115)
======== ======== ========
</TABLE>
NOTE D - LONG-TERM DEBT
<TABLE>
<CAPTION>
2000 1999
--------------------------- -----------------------------
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 $ - $17,000 $ - $13,500
Term loan 1,500 1,700 1,500 3,200
Tender offer - - - 1,780
Golden Corral facility -
Construction loan - 1,000 - 1,000
Term loans 924 6,631 231 1,769
------- ------- ------- -------
$ 2,424 $26,331 $ 1,731 $21,249
======= ======= ======= =======
</TABLE>
The portion payable after one year matures as follows:
<TABLE>
<CAPTION>
2000 1999
--------- -------
(in thousands)
<S> <C> <C>
Period ending in 2001 $ - $ 3,527
2002 20,501 16,266
2003 1,283 485
2004 1,172 305
2005 1,270 666
Subsequent to 2005 2,105 -
--------- ---------
$ 26,331 $ 21,249
========= =========
</TABLE>
The revolving credit loan is a $20,000,000 unsecured line of credit, $17,000,000
of which is outstanding at May 28, 2000. Unless extended, this credit loan
matures on September 1, 2001. Interest rates, currently ranging from 6.94%
26
<PAGE> 27
to 7.77%, are determined by various indices as selected by the Company. Interest
is payable in arrears on the last day of the rate period chosen by the Company,
which may be monthly, bi-monthly or quarterly.
The term loan is also unsecured and is payable in monthly installments of
$125,000 through July 31, 2002. Interest is also payable monthly at a rate,
currently 8.5%, equal to the prime rate but not to exceed 8.5%.
The tender offer loan was arranged in August 1997, under which the Company
borrowed $17,144,000 to finance the repurchase of 1,142,966 shares of the
Company's common stock (see note F). In October 1999 the Company converted the
$1,720,000 outstanding balance of the loan into the $20,000,000 revolving credit
loan.
The Golden Corral credit facility is an unsecured draw credit line under which
the Company may borrow up to $20,000,000 to construct and open Golden Corral
restaurants. No more than $8,000,000 may be advanced for new restaurants under
construction (Construction Loan) at any one time. As of May 28, 2000, the
Company had cumulatively borrowed $9,000,000 of which $1,000,000 was a
Construction Loan and $8,000,000 had been converted to Term Loans. Availability
of draws ceases on September 1, 2001. Payments on Construction Loans are on an
interest only basis. At the Company's option, interest on prime rate based
borrowings are payable monthly, or in the case of LIBOR or CD based adjusted
rate borrowings, payable at the end of each specific rate period selected by the
Company, which may be monthly, bi-monthly or quarterly. The quarterly Libor
based rate 7.62% is currently in effect. Within six months of the completion and
opening of each restaurant, the balance outstanding under each Construction Loan
is converted to a Term Loan amortized over a period not to exceed seven years.
Upon conversion, the Company has the option to fix the interest rate at the
lender's then cost of funds plus 150 basis points. Five Term Loans totaling
$8,000,000 have fixed interest rates, the weighted average of which is 7.88%,
and are being repaid in 84 equal monthly installments of principal and interest
aggregating $124,684 through periods expiring in 2007.
These loan agreements contain covenants relating to tangible net worth, interest
expense, cash flow, debt levels, capitalization changes, asset dispositions,
investments and restrictions on pledging certain restaurant operating assets.
The Company was in compliance with all loan covenants at May 28, 2000.
Compensating balances are not required by any of these loan agreements.
As of May 28, 2000, the Company had three outstanding letters of credit totaling
$1,296,000 in support of its self insurance program.
NOTE E - LEASED PROPERTY
The Company has capitalized the leased property of 35% 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 capitalized leased property follows:
<TABLE>
<CAPTION>
Asset balances at
----------------------------
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 6,306 $ 7,248
Equipment 977 977
------- -------
7,283 8,225
Less accumulated amortization (4,839) (5,125)
------- -------
$ 2,444 $ 3,100
======= =======
</TABLE>
Total rental expense of operating leases for continuing operations was
$1,470,000 in 2000, $1,389,000 in 1999, and $1,344,000 in 1998.
27
<PAGE> 28
Future minimum lease payments under capitalized leases and operating leases for
continuing operations 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>
2001 $ 862 $ 1,254
2002 820 1,190
2003 808 954
2004 808 717
2005 747 547
2006 to 2020 3,666 1,269
--------- ---------
Total 7,711 $ 5,931
=========
Amount representing interest (2,845)
--------
Present value of obligations 4,866
Portion due within one year (355)
--------
Long-term obligations $ 4,511
========
</TABLE>
NOTE F - INCOME TAXES
The variations between the statutory Federal rate and the effective rates are
summarized as follows:
<TABLE>
<CAPTION>
Percent of pretax earnings
-----------------------------------
2000 1999 1998
--------- --------- --------
<S> <C> <C> <C>
Statutory U.S. Federal income tax 34.0 34.0 34.0
Tax credits (2.5) (1.7) (2.9)
State and municipal income taxes
(net of Federal tax benefit) 4.0 3.9 2.0
Other - .1 .2
--------- --------- -------
Effective Rate 35.5 36.3 33.3
========= ========= =======
</TABLE>
Deferred tax assets and liabilities result from timing differences in the
recognition of revenue and expense between financial reporting and tax purposes.
The components of the deferred tax asset (liability) were as follows (in
thousands):
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Deferred compensation $ 679 $ 681
Compensated absences 576 607
Self insurance 1,107 1,202
Impairment of assets 660 675
Other 590 450
------- -------
Total deferred tax assets 3,612 3,615
Investment in tax benefits - (234)
Depreciation (441) (651)
Pension contributions (498) (368)
Other (450) (346)
------- -------
Total deferred tax liabilities (1,389) (1,599)
------- -------
Net deferred tax asset $ 2,223 $ 2,016
======= =======
</TABLE>
28
<PAGE> 29
NOTE G - CAPITAL STOCK
Stock Options
-------------
The 1993 Stock Option 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 to employees at not less than 75%
of fair market value on the date granted. Shareholders approved the Amended and
Restated 1993 Stock Option Plan (Amended Plan) in October 1998 which provides
for automatic, annual stock option grants of 1,000 shares to each of the
Company's non-employee directors. The per share exercise price for options
granted to non-employee directors must equal 100% of fair market value on the
date of grant. The Amended Plan adds a Company right to repurchase shares
acquired on exercise of options if an optionee chooses to dispose of such
shares. Stock appreciation rights are not provided for under the Amended Plan.
Outstanding options under the 1993 Plan have been granted at fair market value
and expire 10 years from the date of grant. Outstanding options to employees
vest in three equal annual installments, while outstanding options to
non-employee directors vest after one year.
The 1984 Stock Option Plan expired May 8, 1994. As of May 28, 2000, 28,488
options remain outstanding, which are exercisable within 10 years from the date
of grant, expiring during periods to 2003. The exercise price is the fair market
value as of the date granted, subsequently adjusted for stock dividends in
accordance with the anti-dilution provisions of the Plan.
Transactions involving both the 1993 and the 1984 Plans are summarized below:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------- -------------------------- ------------------------
NO. OF OPTION No. of Option No. of Option
SHARES PRICE Shares Price Shares Price
--------- ----------- ------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 169,163 $8.31 TO $20.83 134,413 $12.38 to $20.83 259,835 $14.38 -$20.83
Exercisable at
beginning of year 108,580 $12.38 TO $20.83 96,913 $14.38 to $20.83 259,835 $14.38 - $20.83
Granted during the year 27,750 $10.06 TO $10.25 38,000 $8.31 to $11.25 37,500 $12.38
Exercised during the year 0 0 0
Expired during the year 68,425 $20.83 0 162,922 $16.81
Forfeited during the year 9,750 $8.31 TO $12.38 3,250 $11.25 to $12.38 0
--------- ------- --------
Outstanding at end of year 118,738 $8.31 TO $17.05 169,163 $8.31 to $20.83 134,413 $12.38 - $20.83
========= ======= ========
Exercisable at end of year 69,987 $8.31 TO $17.05 108,580 $12.38 to $20.83 96,913 $14.38 - $20.83
========= ======= ========
</TABLE>
Using the fair value on the grant date under the methodology prescribed by SFAS
123, the respective pro forma effect on net income for options granted in fiscal
years 2000, 1999 and 1998 amounted to charges of approximately $14,000, $16,000
and $1,400, with no effect on basic and diluted net earnings per share. These
estimates were determined using the modified Black Scholes option pricing model
with the following weighted average assumptions:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Dividend yield 3.18% 2.75% 2.38%
Expected volatility 24% 30% 22%
Risk free interest rate 5.82% 5.08% 5.75%
Expected lives 5 YEARS 5 years 5 years
Weighted average fair value of options granted $2.32 $2.94 $2.93
</TABLE>
Shareholders approved the Employee Stock Option Plan in October 1998. The Plan
was effective November 1, 1998 and provides employees who have completed 90 days
continuous service an opportunity to purchase shares of the Company's common
stock through payroll deduction. Immediately following the end of each
semi-annual offering period, participant account balances are used to purchase
shares of stock at the lesser of 85% of the fair market value of shares at the
beginning of the offering period or at the end of the offering period. The Plan
29
<PAGE> 30
authorizes a maximum of 1,000,000 shares which may be purchased on the open
market or from the Company's treasury.
The Company also has reserved 58,492 common shares for issuance under the
Frisch's Executive Savings Plan. Shares reserved under these plans have been
adjusted for stock dividends. There are no other outstanding options, warrants
or rights.
Modified "Dutch Auction" Self-Tender Offer
------------------------------------------
In August 1997 the Company repurchased 1,142,966 shares of its common stock at
$15.00 per share, a total cost of approximately $17,690,000. The transaction had
the immediate effect of reducing the number of common shares outstanding from
7,148,334 to 6,005,368.
Stock Repurchase Program
------------------------
On October 5, 1998, the Board of Directors approved a program to repurchase up
to 500,000 shares of the Company's common stock on the open market. Purchases
are being made from time to time within a two-year time frame. On December 8,
1999 and June 6, 2000, the Board of Directors authorized additional repurchases
of up to 200,000 and 300,000 shares, respectively. During the year ended May 28,
2000, the Company repurchased 559,508 shares at a cost of $5,503,000, bringing
total repurchases since the inception of the program to 664,306 shares at a cost
of $6,567,000.
Earnings Per Share
------------------
The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share," on December 15, 1997. SFAS 128 simplifies
established standards by requiring a presentation of basic earnings per share
(EPS), and if applicable, diluted EPS, instead of primary and fully diluted EPS.
The adoption of SFAS 128 had no impact on the recalculation of prior period
earnings per share.
Basic earnings per share is based on the weighted average number of outstanding
common shares during the period. Diluted earnings per share includes the effect
of common stock equivalents, which assumes the exercise of dilutive stock
options.
<TABLE>
<CAPTION>
Weighted Average
Common Shares Outstanding Stock Total
(used for Basic EPS) Equivalents (used for Diluted EPS)
-------------------- ----------- ----------------------
<S> <C> <C> <C>
May 28, 2000 5,657,479 924 5,658,403
May 30, 1999 5,966,672 916 5,967,588
May 31, 1998 6,237,761 0 6,237,761
</TABLE>
NOTE H - PENSION PLANS
Effective June 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 132 (SFAS 132), "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which revised employers'
disclosures about pensions and other post retirement benefit plans. As required,
disclosures for 1998 have been restated for comparative purposes.
The changes in the Company's benefit obligation are computed as follows:
<TABLE>
<CAPTION>
(in thousands)
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Projected benefit obligation at beginning of year $ 15,768 $ 14,765 $ 13,792
Service cost 1,306 1,264 1,209
Interest cost 1,114 1,018 1,013
Actuarial (gain) loss (176) (289) 203
Benefits paid (2,120) (990) (1,452)
-------- -------- --------
Projected benefit obligation at end of year $ 15,892 $ 15,768 $ 14,765
======== ======== ========
</TABLE>
30
<PAGE> 31
The changes in the Plans' assets are computed as follows:
<TABLE>
<CAPTION>
(in thousands)
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Fair value of plan assets at beginning of year $ 23,726 $ 23,189 $ 19,782
Actual return on plan assets 1,615 1,317 4,449
Employer contributions 421 402 410
Benefits paid (2,284) (1,182) (1,452)
-------- -------- --------
Fair value of plan assets at end of year $ 23,478 $ 23,726 $ 23,189
======== ======== ========
</TABLE>
The following table sets forth the Plans' funded status and amounts recognized
on the Company's accompanying balance sheet:
<TABLE>
<CAPTION>
(in thousands)
2000 1999
------- -------
<S> <C> <C>
Funded Status $ 7,585 $ 7,958
Unrecognized net actuarial (gain) loss (6,277) (6,865)
Unrecognized prior service cost 529 599
Unrecognized net transition (asset) (474) (711)
------- -------
Prepaid benefit cost $ 1,363 $ 981
======= =======
</TABLE>
The weighted - average actuarial assumptions used were:
<TABLE>
<CAPTION>
As of MAY 28, May 30, May 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.25% 7.25% 7.25%
Weighted average rate of compensation increase 5.50% 5.50% 5.50%
Weighted average expected long-term rate of return on plan assets 8.50% 8.50% 8.50%
</TABLE>
Net periodic pension cost (benefit) includes the following components:
<TABLE>
<CAPTION>
(in thousands)
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Service cost $ 1,306 $ 1,264 $ 1,209
Interest cost 1,114 1,018 1,013
Expected return on plan assets (1,966) (1,907) (1,632)
Amortization of prior service cost 70 70 70
Amortization of net transition asset (237) (237) (237)
Recognized net actuarial (gain) loss (248) (316) (136)
------- ------- -------
Net periodic pension cost (benefit) $ 39 $ (108) $ 287
======= ======= =======
</TABLE>
NOTE I - SEGMENT INFORMATION
On June 1, 1998, the Company adopted Statement of Financial Accounting Standards
No. 131 (SFAS 131) "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 established standards for reporting information about
operating segments and related disclosures about products and services,
geographic areas and major customers. An operating segment is defined as
components of an enterprise for which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
31
<PAGE> 32
The Company has historically had food service and lodging operations. In March
2000, the Board of Directors authorized management to develop plans to divest
the lodging segment (see note C - Discontinued Operations). The Company now has
two reportable segments: Big Boy restaurants and Golden Corral restaurants.
Financial information by operating segment as of and for the three fiscal years
in the period ended May 28, 2000 is as follows:
<TABLE>
<CAPTION>
(in thousands)
--------------
2000 1999 1998
--------- --------- ---------
Revenue
<S> <C> <C> <C>
Big Boy $ 153,335 $ 145,335 $ 139,565
Franchise & other fees from sub-licenses 1,164 1,159 1,122
--------- --------- ---------
Total Big Boy 154,499 146,494 140,687
Golden Corral 12,701 1,523 0
--------- --------- ---------
$ 167,200 $ 148,017 $ 140,687
========= ========= =========
Operating profit (loss)
Big Boy $ 16,141 $ 14,074 $ 13,100
Opening expense 0 0 (35)
--------- --------- ---------
Total Big Boy 16,141 14,074 13,065
Golden Corral 669 85 0
Opening expense (984) (404) 0
--------- --------- ---------
Total Golden Corral (315) (319) 0
--------- --------- ---------
$ 15,826 $ 13,755 $ 13,065
========= ========= =========
Identifiable assets
Big Boy $ 78,289 $ 83,289 $ 92,463
Golden Corral 15,096 5,159 0
Discontinued operations & other 14,394 14,978 14,261
--------- --------- ---------
$ 107,779 $ 103,426 $ 106,724
========= ========= =========
Depreciation and amortization
Big Boy $ 7,835 $ 8,136 $ 7,828
Golden Corral 428 40 0
Discontinued operations & other 1,358 1,761 1,428
--------- --------- ---------
$ 9,621 $ 9,937 $ 9,256
========= ========= =========
Capital expenditures
Big Boy $ 3,487 $ 5,607 $ 7,141
Golden Corral 9,810 4,620 0
Discontinued operations & other 540 2,482 4,094
--------- --------- ---------
$ 13,837 $ 12,709 $ 11,235
========= ========= =========
</TABLE>
Impairment losses of $1,125,000 and $375,000 respectively, were charged against
Big Boy operating profit in 1999 and 1998.
NOTE J - EXTRAORDINARY ITEM
On September 30, 1998, the Company completed an unusual and infrequent
transaction when it sold its 1/15 limited partnership interest in the Cincinnati
Reds professional baseball team for $7,000,000 cash. The net gain of $3,712,000
resulted in basic and diluted net earnings per share of $.62. The investment,
originally made in June 1985, had been carried at cost and was the Company's
only passive non-operating asset. Prior to 1985, the Company had not owned any
other such assets, and it is extremely unlikely that another investment of this
nature will be made in the future.
32
<PAGE> 33
NOTE K - RELATED PARTY TRANSACTIONS
In each of the three years in the period ended May 28, 2000, a Big Boy
sub-licensed restaurant owned by an officer and director of the Company and two
Big Boy sub-licensed restaurants owned by children and other family members of
an officer and directors of the Company paid the Company franchise and
advertising fees, employee leasing and other fees, and made purchases from the
Company's commissary.
During the fiscal year ended May 30, 1999, three of the unprofitable Big Boy
restaurants closed at the end of 1997 were sold and sub-licensed to a Big Boy
franchise operator, a minority shareholder and the president of which was an
officer of the Company prior to May 31, 2000. Another of the unprofitable Big
Boy restaurants that closed in 1997 is currently leased and sub-licensed to this
Big Boy franchise operator. In addition, this Big Boy franchise operator has
acquired three other Big Boy sub-licensed restaurants from other sub-licensees
of the Company. During the years ended May 28, 2000 and May 30, 1999, certain of
these restaurants paid the Company rent, franchise and advertising fees and
other fees and made purchases from the Company's commissary.
These transactions were effected on substantially similar terms as transactions
with persons having no relationship with the Company.
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended May 28, 2000 Year Ended May 30, 1999
------------------------------------------------------ -----------------------------------------------------
(In Thousands) (In Thousands)
------------------------------------------- -------------------------------------------
Earnings Earnings
from Net from Net
Gross continuing Net Earnings Gross continuing Net Earnings
Revenue profit operations earnings per share Revenue profit operations earnings per share
---------- ---------- ---------- --------- ---------- ----------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $48,922 $5,551 $1,628 $1,751 $.30 $44,178 $5,390 $1,315 $1,378 $.23
2nd Quarter 39,623 4,414 1,425 1,448 .25 35,070 4,924 780 4,454 .74
3rd Quarter 37,513 4,158 1,208 855 .16 33,171 3,771 1,159 968 .16
4th Quarter 41,142 5,585 1,814 2,092 .38 35,598 4,274 1,306 1,330 .23
---------- ---------- ---------- --------- ---------- ----------- --------- ---------- -------- ---------
Year's Total $167,200 $19,708 $6,075 $6,146 $1.09 $148,017 $18,359 $4,560 $8,130 $1.36
========== ========== ========== ========= ========== =========== ========= ========== ======== =========
</TABLE>
The first quarter of each year contained sixteen weeks, while the last three
quarters each contained twelve weeks.
Net earnings for the first quarters of 2000 and 1999 included favorable
adjustments of $320,000 and $410,000 respectively, resulting from lower than
anticipated claims in the Company's self insured casualty insurance program.
The second quarter of fiscal 1999 included an impairment loss of $740,000, net
of tax, resulting from the closing of fifteen underperforming restaurants in
1997. In addition, the fourth quarters of fiscal 2000 and 1999 include charges
to income tax expense of $90,000 and $30,000, respectively, to reflect the
actual effective tax rate for the years.
During the second quarter of fiscal 1999, the Company completed the sale of its
limited partnership investment in the Cincinnati Reds professional baseball team
for $7,000,000 in cash. The net gain of $3,712,000 or approximately $.62 per
share was reported as an extraordinary gain.
Item 9. - Changes in and Disagreements with Accountants on Accounting and
------- ---------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
33
<PAGE> 34
PART III
--------
(Items 10 through 13)
---------------------
Item 10. - Directors and Executive Officers of the Registrant
-------- --------------------------------------------------
Information regarding directors is incorporated by reference to the Registrant's
proxy statement to be filed with the Securities and Exchange Commission within
120 days after May 28, 2000.
Information regarding executive officers appears at the end of Part I.
Item 11. - Executive Compensation
-------- ----------------------
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission within 120 days after May 28, 2000.
Item 12. - Security Ownership of Certain Beneficial Owners and Management
-------- --------------------------------------------------------------
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission within 120 days after May 28, 2000.
Item 13. - Certain Relationships and Related Transactions
-------- ----------------------------------------------
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission within 120 days after May 28, 2000.
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, 1984, is incorporated herein by reference.
(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.
34
<PAGE> 35
(10) Material Contracts
---- -------------------
(10) (a) Area Development Agreement and Addendum effective July 25,
2000 between the Registrant and Golden Corral Franchising Systems,
Inc.
(10) (b) Exhibit (10) (a) to the Registrant's Form 10-Q Quarterly
Report for December 14, 1997, being Area Development Agreement and
Addendum between the Registrant and Golden Corral Franchising
Systems, Inc. effective January 6, 1998, is incorporated herein by
reference.
(10) (c) Exhibit (10) (a) to the Registrant's Form 10-Q Quarterly
Report for December 12, 1999, being Second Amendment dated October
6, 1999 to Area Development Agreement between the Registrant and
Golden Corral Franchising Systems, Inc. effective January 6, 1998,
is incorporated herein by reference.
(10) (d) Exhibit (10) (a) to the Registrant's Form 10-K Annual
Report for 1997, being employment agreement between the Registrant
and Jack C. Maier effective June 2, 1997, is incorporated herein by
reference.
(10) (e) 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) (f) 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) (g) 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) (h) Exhibit (10) (a) to the Registrant's Form 10-Q Quarterly
Report for December 13, 1998, being amendment dated November 24,
1998 to employment contract between the Registrant and Craig F.
Maier dated May 29, 1995, is incorporated herein by reference.
(10) (i) 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) (j) 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) (k) Exhibit A to the Registrant's Proxy Statement dated
September 9, 1998, being the Amended and Restated 1993 Stock Option
Plan, is incorporated herein by reference.
(10)(l) Exhibit B to the Registrant's Proxy Statement dated
September 9, 1998, being the Employee Stock Option Plan, is
incorporated herein by reference.
(10) (m) 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) (n) 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) (o) 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.
35
<PAGE> 36
(10) (p) 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 dated November 2, 1987, is incorporated herein by
reference.
(10) (q) Agreement dated June 15, 2000 between the Registrant and
Elias Brothers Restaurants, Inc. modifying the Restated and Amended
Area Franchise Agreement between the Registrant and Elias Brothers
Restaurants, Inc. dated November 2, 1987.
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule
b). Reports on Form 8-K:
On March 20, 2000 under Item 5, to report that on March 14, 2000 the
Company's Board of Directors authorized management to develop a plan to
divest the Company's hotel operations. Financial statements were not
required to be filed.
On June 9, 2000 under Item 5, to report that on June 6, 2000 the
Company's Board of Directors authorized an additional repurchase of up
to 300,000 shares of the Company's common stock on the open market.
This supplements the Board's previous authorizations to purchase up to
700,000 shares. Financial statements were not required to be filed.
On July 12, 2000 under Item 5, to report quarterly financial data for
the Company's fiscal year that ended May 28, 2000 that will be
presented as prior year data in Forms 10-Q during the Company's fiscal
year that ends June 3, 2001.
On July 27, 2000 under Item 5, to report that the Company has signed an
area development agreement with Golden Corral Franchising Systems, Inc.
whereby the Company will open and operate fifteen additional Golden
Corral restaurants during the next seven years in the Cleveland and
Toledo, Ohio market areas.
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 /s/ Donald H. Walker August 4, 2000
---------------------------- ------------------
Donald H. Walker Date
Vice President, Treasurer
Chief Financial Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this 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
/s/ Jack C. Maier Director August 10, 2000
--------------------------- -------------------
Jack C. Maier
President and Chief Executive Officer
/s/ Craig F. Maier Director August 7, 2000
--------------------------- ------------------
Craig F. Maier
/s/ Dale P. Brown Director August 8, 2000
--------------------------- ------------------
Dale P. Brown
/s/ Daniel W. Geeding Director August 14, 2000
--------------------------- -------------------
Daniel W. Geeding
/s/ Lorrence T. Kellar Director August 9, 2000
--------------------------- ------------------
Lorrence T. Kellar
/s/ Malcolm M. Knapp Director August 8, 2000
--------------------------- ------------------
Malcolm M. Knapp
/s/ Blanche F. Maier Director August 9, 2000
--------------------------- ------------------
Blanche F. Maier
/s/ William A. Mauch Director August 10, 2000
--------------------------- -------------------
William A. Mauch
/s/ William J. Reik, Jr. Director August 14, 2000
--------------------------- -------------------
William J. Reik, Jr.
</TABLE>
37
