SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXHANGE ACT OF 1934
For the quarter ended March 31, 1999
Commission file number 1-7697
I.C.H. Corporation
------------------
Exact name of Registrant as specified in its charter
Delaware 43-6069928
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9255 Towne Centre Drive, Suite 600, San Diego, California 92121
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (619) 587-8533
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes _X_ No ___
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _X_ No___
Number of shares of common stock outstanding on March 31, 1999: 2,821,582
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements 3
Consolidated Balance Sheets - December 31, 1998
and March 31, 1999 3
Consolidated Statements of Operations for the
Three Months ended March 31, 1998 and for the
Three Months ended March 31, 1999 4
Consolidated Statements of Cash Flows for the
Three Months ended March 31, 1998 and for the
Three Months ended March 31, 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Part II.
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
2
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
<TABLE>
<CAPTION>
As of As of
December 31, 1998 March 31, 1999
----------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,235 $ 8,416
Accounts receivable 1,293 1,092
Inventories 2,828 2,747
Deferred income taxes 1,137 1,137
Other current assets--net 4,473 4,369
-------- --------
Total current assets 18,966 17,761
Property and equipment, net 40,141 42,163
Intangible assets, net 47,462 45,882
Other assets 4,326 4,765
Deferred income taxes 2,571 2,777
-------- --------
Total assets $113,466 $113,348
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,254 $ 8,070
Accrued liabilities 12,743 12,438
Current portion of long-term debt 4,839 4,823
Current portion of capital lease obligations 589 589
-------- --------
Total current liabilities 26,425 25,920
-------- --------
Non-current liabilities:
Long-term debt 63,193 63,205
Long-term capital lease obligations 2,484 2,348
Other liabilities 6,338 6,142
-------- --------
Total liabilities 98,440 97,615
-------- --------
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,000,000
authorized; none issued and outstanding
Common stock, $0.01 par value; 9,000,000
authorized; 2,667,000 outstanding 28 28
Paid-in-capital 12,558 12,558
Retained earnings 2,440 3,147
-------- --------
Total stockholders' equity 15,026 15,733
-------- --------
Total liabilities and stockholders' equity $113,466 $113,348
======== ========
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statement
3
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands except share amounts)
<TABLE>
<CAPTION>
For the three For the three
Months ended Months ended
March 31, 1998 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenue and other income:
Restaurant sales $28,336 $59,720
Real estate operations and other 358 104
------- -------
28,694 59,824
Cost and expenses:
Restaurant costs and expenses 23,357 51,609
General and administrative 1,957 3,689
Depreciation and amortization 1,271 1,337
Other 247 --
------- -------
Operating income 1,862 3,189
Interest expense 1,366 2,001
------- -------
Income (loss) before income taxes 496 1,188
Provision (benefit) for income taxes 203 481
------- -------
Net income (loss) $ 293 $ 707
======= =======
Net income (loss) per share:
Basic $.11 $.27
Diluted $.11 $.22
Weighted-average common shares
Outstanding (see note)
Basic 2,667,000 2,667,000
Diluted 2,786,000 3,280,000
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
4
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1998 March 31, 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 293 $ 707
Adjustments to reconcile net income (loss) to cash
from operating activities:
Depreciation and amortization 1,271 1,337
Deferred income taxes 13 (206)
Changes in current assets and liabilities:
Accounts receivable (286) 201
Inventories 3 81
Accounts payable and accrued expenses 1,284 (489)
Other, net (291) 104
------- -------
Net cash provided by operating activities 2,287 1,735
------- -------
Cash flows from investing activities:
Capital expenditures (2,481) (2,838)
Proceeds from disposition of property and equipment 9 --
Acquisition of restaurant properties (577) (58)
Other, net (50) (635)
------- -------
Net cash provided (used) by investing activities (3,099) (3,531)
------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net 1,975 1,645
Repayment of long-term debt and capital
lease obligation (713) (668)
Other, net 29 --
------- -------
Net cash provided (used) by financing activities 1,291 977
------- -------
Net changes in cash and cash equivalents 479 (819)
Cash and cash equivalents at beginning of period 4,418 9,235
------- -------
Cash and cash equivalents at end of period $ 4,897 $ 8,416
======= -------
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements
5
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
NOTE 1. BUSINESS
Organization, Business and Summary of Significant Accounting Policies:
Preparation of Iterim Financial Statements
The Consolidated Financial Statements of I.C.H. Corporation (the "Company") and
Subsidiaries have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain amounts have been
reclassified from previous presentations. These Consolidated Financial
Statements include estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities and the
amounts of revenues and expenses. Actual results could differ from those
estimates. In the opinion of the Company, these statements include all
adjustments necessary for a fair presentation of the results of all interim
periods reported herein. All adjustments are of a normal recurring nature unless
otherwise disclosed. Certain information and footnote disclosures prepared in
accordance with generally accepted accounting principles have been either
condensed or omitted pursuant to SEC rules and regulations. The Company
believes, however, that the disclosures made are adequate for a fair
presentation of results of operations, financial position and cash flows. These
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and accompanying notes included in +the
Company's latest annual report on Form 10-K.
Organization
I.C.H. Corporation is the post-reorganization successor to ICH Corporation ("Old
ICH"). Old ICH, together with its subsidiaries, filed voluntary petitions for
relief under Chapter 11 on October 10, 1995. The Company's plan of
reorganization (the "Reorganization Plan") was confirmed February 7, 1997 and
became effective on February 19, 1997 (the "Effective Date"). Until its
acquisition of Sybra, Inc., the Company had no significant business operations.
On the Effective Date, all of the outstanding equity securities ("Old ICH Common
Stock" and "Old ICH Preferred Stock", collectively the "Old ICH Stock") of Old
ICH were canceled. The Company's Restated Certificate of Incorporation
authorized the issuance of 9,000,000 shares of common stock and 1,000,000 shares
of preferred stock. Holders of Old ICH Stock had two years from the Effective
Date in which to exchange their canceled shares for the Company's common stock.
Generally, holders of the canceled Old ICH shares are entitled to receive 0.0269
shares of the Company's common stock for each share of Old ICH Common Stock and
0.2 shares of the Company's common stock for each share of Old ICH Preferred
Stock. 2,549,281 shares of the Company's Common Stock were issued in exchange
for Old ICH Stock during the two year conversion period ending on February 19,
1999.
Business and Presentation
The accompanying Consolidated Financial Statements labeled "Company" include the
accounts of the Company and its wholly-owned subsidiaries, principally Sybra,
Inc. ("Sybra") and Lyon's of California, Inc. ("Lyon's"). All significant
inter-company accounts and transactions have been eliminated.
6
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
Significant Accounting Policies
Fiscal Year. The Company operates on a calendar year basis. Sybra, however, uses
a 52/53 week fiscal year ending on the last Saturday of the year and Lyon's uses
a 52/53 week fiscal year ending on the last Sunday of the year. Accordingly, the
accompanying financial statements include Sybra's results for the periods ended
March 28, 1998 and April 3, 1999 and Lyon's results for the period ended April
4, 1999.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash
equivalents.
Food and Supplies Inventories. Food and supplies inventories are stated at the
lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.
Property and Equipment. Property and equipment is stated at cost less
accumulated depreciation and amortization. Normal repairs and maintenance costs
are expensed as incurred. Depreciation is being recorded on a straight-line
basis over the following estimated useful lives:
Buildings 40 years
Restaurant equipment 5-10 years
Buildings under capitalized leases and leasehold improvements are amortized on a
straight-line basis over the lesser of the lease term or the estimated useful
lives of the assets.
Intangibles. Franchise agreements with Arby's require the Company to pay a
franchise fee for each new restaurant developed and de minimis renewal fees for
franchises that have expired. Each franchise agreement provides the Company the
right to operate an Arby's restaurant for a period of 20 years and is renewable
by the Company, subject to certain conditions, for varying terms of up to 20
years. Franchise fees are capitalized and amortized using the straight-line
method over 40 years.
Acquired royalty rights, representing the fair value of royalty rates of
acquired franchises, are capitalized and amortized on a straight-line basis over
20 years or the remaining life of the franchise agreement, whichever is less.
Equity in operating leases, representing the estimated fair value of base rental
rates, less the actual rental obligation, is amortized on a straight-line basis
over 20 years or the remaining life of the lease including option periods,
whichever is less.
Goodwill is amortized using the straight-line method over 40 years. At each
balance sheet date, the Company evaluates the realizability of goodwill based
upon expectations of operating income for the restaurants as a group. The
Company believes that no material impairment of goodwill exists at March 31,
1999.
7
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
Income Taxes. Deferred income taxes are computed using the liability method,
which provides that deferred tax assets and liabilities are recorded based on
the differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Advertising Expenses. All advertising costs are expensed as incurred.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses in the financial statements and in the disclosure of
contingent assets and liabilities. While actual results could differ from those
estimates, management believes that actual results will not be materially
different from amounts provided in the accompanying consolidated financial
statements.
Earnings Per Share. In 1997, the Company adopted SFAS No. 128, "Earnings Per
Share," which requires presentation of both basic and diluted earnings per
share. Basic net income per share is computed based on the weighted-average
number of common shares outstanding during the year (see Note 4).
Segment Reporting. The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131 Disclosures about Segments of an Enterprise and
Related Information during the year ended December 31, 1998. This Statement
supersedes substantially all the reporting requirements previously required
under SFAS No. 14 Financial Reporting for Business Segments of an Enterprise and
establishes standards for reporting information about operating segments and
requires certain disclosures about products and services, geographic areas and
major customers. Under SFAS No. 131, the determination of segments to be
reported in the financial statements is to be consistent with the manner in
which management organizes and evaluates the internal organization to make
operating decisions and assess performance. This statement also allows a Company
to aggregate similar segments for reporting purposes. Management has determined
that its operating units can be aggregated into one segment. Additionally, as
the Company operates restaurants within the U.S. and no customer accounts for
more that 10% of sales, no segment disclosures have been included in the
accompanying notes to the consolidated financial statements.
8
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
NOTE 2. ACQUISITION
LYON'S
On December 14, 1998, the Company acquired substantially all of the assets of
Lyon's restaurants for $22,600. The Company incurred $16,500 in acquisition
indebtedness and paid the remainder of the purchase price with cash and a $600
note payable to the seller. The Company also issued 125,000 warrants to purchase
share of the Company's common stock at $.01 per share to USRP (Finance), LLC as
part of the financing of the Lyon's acquisition. The acquisition was recorded
under the purchase method of accounting.
The purchase price was allocated to identifiable tangible and intangible assets
and liabilities based on their estimated fair values, with the excess of the
purchase over the fair value of such net assets acquired reflected as goodwill,
as follows:
<TABLE>
<S> <C>
Current assets and liabilities, net $ 1,409
Other intangibles, excluding goodwill 2,057
Goodwill 7,734
Tangible assets 11,400
-------
Purchase price $22,600
=======
</TABLE>
NOTE 3. LONG-TERM DEBT
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Term loan, 10.63%, payable monthly
through 2012 $32,319 $31,874
Loan, 14.40% 9,000 7,764
Acquisition indebtedness due in 1999 2,000 2,000
Term loan, 12.75% payable monthly
through February 1, 2011 16,500 16,500
Other 8,213 9,890
------- -------
68,032 68,028
Less: current portion 4,839 4,823
------- -------
Total $63,193 $63,205
======= =======
</TABLE>
The term loan bearing interest at 10.63% has a weighted-average maturity of 12.5
years and is collateralized by substantially all of the restaurant equipment
owned by Sybra. The loan agreement contains covenants which require, among other
things, the maintenance of a minimum fixed charge coverage ratio, restrictions
that limit the payment of dividends, and other provisions and restrictive
covenants. As of March 31, 1999, the Company was in compliance with all such
covenants.
As an element of certain sale/leaseback transactions completed by the Company,
Sybra received $9,000 as a loan. The loan element of the transaction carries an
interest rate of approximately 14.40% and may be repaid at any time without
penalty. If not repaid in full earlier than December 31, 1999, the loan
amortizes over 20 years. The Company currently intends on refinancing this loan
prior to fiscal 2000.
9
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
On December 14, 1998, the Company entered into a term loan agreement for the
acquisition of Lyon's Restaurants with USRP(Finance),LLC. The 12.75% term loan
matures in 12 years and is collateralized by substantially all of the assets of
Lyon's. The agreement contains covenants which require, among other things, the
maintenance of a minimum fixed charge ratio and other provisions and restrictive
covenants.
The Company also has sixteen separate notes for the financing of equipment used
in restaurants with a remaining principal balance ranging from $150 to $785,
interest rates ranging from 8.52% to 10.11% and with an average remaining
maturity of 6 years. These loans are collateralized by equipment.
At March 31, 1999, long-term debt had a fair value that approximates the
carrying value.
NOTE 4. EQUITY AND EARNINGS PER COMMON SHARE
Basic earnings per share is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding during
each period. Diluted computations include dilutive common share equivalents.
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1998 March 31, 1999
-------------- --------------
<S> <C> <C>
Income for computation of basic earnings
per share and diluted earnings per share $293 $ 707
==== =====
Weighted-average shares for computation
of basic earnings per share
2,667 2,667
Incremental shares on assumed issuance
and repurchase of stock options 116 613
----- -----
Weighted-average shares for computation of
diluted earnings per share 2,783 3,280
===== =====
Basic earnings per share $0.11 $0.27
===== =====
Diluted earnings per share $0.11 $0.22
===== =====
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain information discussed below may constitute forward-looking statements
within the meaning of the federal securities laws. Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its expectations will
be achieved. Forward-looking information is subject to certain risks, trends and
uncertainties that could cause actual results to differ materially from
projected results. Among those risks, trends and uncertainties are the general
economic climate, costs of food and labor, consumer demand, interest rate
levels, the availability of financing and other risks associated with the
acquisition, development and operation of new and existing restaurants. Unless
otherwise indicated all amounts are in thousands, except share amounts.
GENERAL
The Company conducts its restaurant operations principally through two
wholly-owned subsidiaries, Sybra, Inc. and Lyon's of California, Inc.
Restaurant costs and expenses include all direct costs, including direct labor,
occupancy costs, advertising expenses, royalty payments, expenditures for
repairs and maintenance, and workers' compensation, casualty and general
liability insurance costs. Advertising fees paid by the Company's Sybra
Subsidiary to the AFA Service Corporation, a non-profit association of Arby's
restaurant operators, to develop and prepare advertising materials and to
undertake marketing research, are equal to 0.7% of restaurant sales. In
addition, the Company operates its restaurants pursuant to licenses which
require the Company to pay Arby's, Inc. a royalty based upon percentages of its
restaurant sales (presently an aggregate of approximately 2.9% of the Company's
restaurant sales). The royalty rate for new restaurants (currently 4%) will
result in an increase in the Company's aggregate royalty rate as new Arby's
restaurants are opened.
General and administrative expenses consist of corporate and regional office
expenses, including executive and administrative compensation, office expenses,
travel and professional fees.
RESULTS OF OPERATIONS
The following table sets forth, with respect to the Company and for the periods
indicated, the percentage of total revenues represented by certain expense and
income items.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1999
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
Expenses
Restaurant costs & expenses 81.4% 86.3%
General & administrative 6.8% 6.2%
Depreciation & amortization 4.4% 2.2%
Other 0.9% --
----- -----
Operating income 6.5% 5.3%
Interest expense 4.8% 3.3%
----- -----
Income (loss) before taxes 1.7% 2.0%
Income tax (benefit) expense 0.7% 0.8%
----- -----
Net income (loss) 1.0% 1.2%
----- -----
</TABLE>
11
<PAGE>
Comparison of the Quarter Ended March 31, 1999 and the Quarter Ended March 31,
1998.
Revenues - Revenues were $59.8 million for the first quarter of FY 1999 as
compared to $28.7 million for the same period of FY 1998, an increase of $31.1
million or 108%. Sybra's sales for the three month period ended March 31, 1999
were $34.6 million, an increase of $6.0 million or 21% over the prior year
comparable period, primarily as a result of a same store sales increase of 6.1%
for the period, sales from new store openings and store acquisitions. Sales from
the Company's Lyon's restaurants for the three month period ended March 31, 1999
were $25.2 million. Sales from the Company's restaurants are moderately
seasonal, with the months of January, February and March historically generating
the lowest sales volumes.
Restaurant Costs & Expenses - Restaurant costs and expenses were $51.6 million,
or 86.3% of sales, for the first quarter of FY 1999 as compared to $23.4, or
81.4% of sales for the same period of FY 1998, an increase of $28.3 million.
Restaurant costs and expenses at Sybra were $28.6 million, or 82.6% of sales for
the three month period ending March 31, 1999, as compared to $23.4 million, or
82.4% of sales for the prior period. Restaurant costs and expenses at Lyon's
were $23 million, or 91.5% of sales for the three months ending March 31, 1999.
As a percent of sales, costs increased as a result of higher labor costs due to
increased store manager incentive bonuses from improved store performance.
General and Administrative - General and administrative costs and expenses were
$3.7 million, or 6.2% of sales, for the first quarter of FY 1999 as compared to
$2.0 million, or 6.8% of sales for the same period of FY 1998, an increase of
$1.7 as a result of costs and expenses related to the Lyon's acquisition and
increased expenses associated with business development and real estate
operations necessary to achieve new store development requirements.
Depreciation and Amortization - Depreciation and amortization expense was $1.3
million, or 2.2% of sales in the first quarter of FY 1999 as compared to $1.3
million, or 4.4% of sales in the same period of FY 1998.
Interest Expense - Interest expense was $2.0 million in the first quarter of FY
1999 as compared to $1.4 million in the same period of FY 1998, a increase of
$635,000 primarily related to interest expense associated with debt incurred for
the Lyon's acquisition.
IMPACT OF THE YEAR 2000 ISSUES
The Company has completed its assessment of internal systems and has concluded
that its hardware and software are Year 2000 compliant. The Company has
concluded that it will not be necessary to replace its retail point of sale
hardware. Based on information available at this time, management believes that
the remaining costs to implement the program will not be material.
Communication with respect to Year 2000 issues with the Company's customers and
suppliers is ongoing. While not expected, the Company may experience delays in
receipt of product, which could adversely affect sales and earnings. The Company
cannot currently estimate to what extent future operating results might be
adversely affected by the possible failure of these third parties to
successfully address their Year 2000 issues. However, the Company's program
includes actions designed to identify and minimize, where possible, any third
party exposures.
Costs to implement the program are based on management's estimates, which were
derived utilizing numerous assumptions related to future events. There can be no
guarantee that additional costs will not be incurred, or that the objective of
the program will be achieved. However, the Company continues to monitor
activities related to the program designed to insure Year 2000 readiness. The
need for contingency plans will be reviewed throughout 1999.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs arise from debt service on indebtedness
incurred in connection with the Sybra acquisition, the Lyon's acquisition and
the funding of capital expenditures primarily for new store openings. As of
March 31, 1999, the Company had outstanding indebtedness for borrowed money of
$33.2 million under a term facility with Atherton Capital Incorporated (the
"Atherton Loan") and $16.5 million under a term facility with USRP (Finance) LLC
(the "USRP Loan"). The Atherton Loan has a weighted-average maturity of 12.5
years, bears interest at 10.63%, requires monthly payments of principal and
interest, is collateralized by substantially all of the restaurant equipment
owned by Sybra and imposes certain financial restrictions and covenants. The
USRP Loan has a weighted average maturity of 12 years and a weighted average
interest rate of 12.75%, requires monthly payments of principal and interest, is
collateralized by substantially all of the assets owned by Lyon's and imposes
certain financial restrictions and covenants.
The Company's primary source of liquidity during the year was the operation of
the restaurants owned by its principal operating subsidiaries, Sybra and Lyon's
and debt and lease financing.
In the future, the Company's liquidity and capital resources will primarily
depend on the operations of Sybra and Lyon's which, under the provisions of the
Company's loan agreements would permit, under certain conditions, distributions
and dividends to the Company. Sybra's and Lyon's, like most restaurant
businesses, are able to operate with nominal or deficit working capital because
all sales are for cash and inventory turnover is rapid. Renovation and/or
remodeling of existing stores is either funded directly from available cash or,
in some instances, is financed through outside lenders. Construction or
acquisition of new stores is generally, although not always, financed by outside
lenders. The Company believes that it will continue to be able to secure
adequate financing on acceptable terms for new store construction and
acquisitions and that cash generated from operations will be adequate to meet
its needs for the foreseeable future, although no assurances can be given.
Recent Developments
On January 5, 1999, Sybra entered into a sales/leaseback transaction with CNL
Fund Advisors, Inc. ("CNL") for approximately $6.5 million, resulting in a gain,
net of closing costs, of approximately $700 and a reduction of $1.1 million to
the $9.0 million loan bearing an interest rate at 14.40%. The sale/leaseback
transaction relates to ten Arby's restaurant located in Florida. The new leases
with CNL have a base term of 20 years.
On February 17, 1999, Sybra executed a new loan commitment letter with FFCA
Acquisition Corporation ("FFCA") to finance the construction of up to 15 new
Arby's restaurants during the next 18 months. Under the terms of the commitment
letter, FFCA has agreed to finance mortgage and equipment loans for up to 15 new
Arby's restaurants (of which up to seven sites may involve land leased by Sybra
pursuant to long term ground leases) to be built by Sybra, to a maximum of $1.1
million per location.
CAPITAL LOSS CARRY FORWARD
On April 25, 1997, the Company sold its interest in the stock of Bankers
Multiple Line Insurance Company, which generated a significant tax loss. Due to
limitations pursuant to the Internal Revenue Code and Treasury regulations
thereunder, no deferred tax asset has been recorded for the capital loss carry
forward due to the uncertainty of its existence and realizability.
13
<PAGE>
CAPITAL EXPENDITURES
The Company's capital expenditures were $2.8 million for the three months ended
March 31, 1999 which includes new store development as well as store
maintenance, store remodel and store renovation capital expenditures. The
Company anticipates that Sybra and Lyon's store maintenance, store remodel and
store renovation capital expenditures in 1999 (which excludes new store
development capital expenditures) will approximate $2.5 million and $2.0
million, respectively. The level of capital expenditures for Sybra's new store
development and acquisitions will be dependent upon several factors, including
the number of stores constructed and/or acquired as well as the capital
structure of any such transactions.
ITEM 5. OTHER INFORMATION
NONE
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit No. Exhibit Title
- ----------- -------------
27.1 Financial Data Schedule
(b) A Current Report on F 8-K/A, dated February 26, 1999 was filed by the
Company during the quarter ended March 31, 1999. Items 5 and 7 were
reported thereon.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, I.C.H.
Corporation has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 13, 1999
I.C.H. Corporation
By:/s/ James R. Arabia
-------------------
James R. Arabia
Chairman and Chief
Executive Officer
By:/s/ David A. Brainard
---------------------
David A. Brainard
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049588
<NAME> I.C.H. Corporation Financial Data Schedule
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 8,416
<SECURITIES> 0
<RECEIVABLES> 1,092
<ALLOWANCES> 0
<INVENTORY> 2,747
<CURRENT-ASSETS> 17,761
<PP&E> 42,163
<DEPRECIATION> 1,337
<TOTAL-ASSETS> 113,348
<CURRENT-LIABILITIES> 25,920
<BONDS> 0
0
0
<COMMON> 28
<OTHER-SE> 12,558
<TOTAL-LIABILITY-AND-EQUITY> 113,348
<SALES> 59,720
<TOTAL-REVENUES> 59,824
<CGS> 51,609
<TOTAL-COSTS> 56,635
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,001
<INCOME-PRETAX> 1,118
<INCOME-TAX> 481
<INCOME-CONTINUING> 707
<DISCONTINUED> 707
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 707
<EPS-PRIMARY> .27
<EPS-DILUTED> .22
</TABLE>
