<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2000
COMMISSION FILE NUMBER 1-7697
------------------------
I.C.H. CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 43-6069928
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9255 TOWNE CENTRE DRIVE 92121
SUITE 600 (Zip code)
SAN DIEGO, CALIFORNIA
(Address of principal executive offices)
</TABLE>
------------------------
Registrant's telephone number, including area code: (858) 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 June 30, 2000: 2,832,986
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<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets--June 30, 2000 and December 31,
1999........................................................ 3
Consolidated Statements of Operations for the Three Months
ended June 30, 2000 and for the Three Months ended June 30,
1999........................................................ 4
Consolidated Statements of Operations for the Six Months
ended June 30, 2000 and for the Six Months ended June 30,
1999........................................................ 5
Consolidated Statements of Cash Flows for the Six Months
ended June 30, 2000 and for the Six Months ended June 30,
1999........................................................ 6
Notes to Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Part II.
Item 5. Other Information........................................... 15
Item 6. Exhibits and Reports on Form 8-K............................ 16
Signatures.................................................. 17
</TABLE>
2
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 5,309 $ 15,085
Accounts receivable....................................... 1,169 735
Inventories............................................... 3,045 2,867
Deferred income taxes..................................... 1,029 1,029
Other current assets, net................................. 2,702 2,769
Total current assets.................................... 13,254 22,485
Property and equipment, net................................. 62,736 54,461
Intangible assets, net...................................... 47,136 47,622
Deferred income taxes....................................... 70 70
Other Assets................................................ 7,651 8,018
Total assets............................................ $130,847 $132,656
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 7,872 $ 9,962
Accrued liabilities....................................... 9,934 11,539
Current portion of long-term debt......................... 4,680 4,295
Current portion of capital lease obligations.............. 244 244
Total current liabilities............................... 22,730 26,040
Non-current liabilities:
Long-term debt............................................ 80,781 78,009
Long-term capital lease obligations....................... 3,224 2,174
Other liabilities......................................... 7,166 7,113
Total liabilities....................................... 113,901 113,336
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,000,000 authorized;
none issued and outstanding............................. -- --
Common stock, $0.01 par value; 19,000,000 authorized;
2,832,986 outstanding................................... 28 28
Paid-in-capital........................................... 12,429 12,662
Retained earnings......................................... 4,489 6,630
Total stockholders' equity.............................. 16,946 19,320
Total liabilities and stockholders' equity.............. $130,847 $132,656
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
3
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS--UNAUDITED
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Restaurant sales............................................ $ 61,985 $ 61,016
Other....................................................... 118 68
Total Revenues.......................................... 62,103 61,084
Cost and expenses:
Restaurant costs and expenses............................. 52,906 51,426
General and administrative................................ 4,089 3,789
Depreciation and amortization............................. 1,842 1,405
Non-recurring and restructuring charges................... 4,920 --
Other..................................................... (101) 63
Operating income (loss)..................................... (1,553) 4,401
Interest expense.......................................... 2,415 1,989
Income (loss) before income taxes........................... (3,968) 2,412
Provision for income taxes................................ (1,607) 977
Net income (loss)........................................... $ (2,361) $ 1,435
Net income (loss) per share:
Basic..................................................... $ (.82) $ .51
Diluted................................................... $ (.82) $ .41
Weighted-average common shares outstanding (see Note 3)
Basic..................................................... 2,894,000 2,840,000
Diluted................................................... 2,894,000 3,523,000
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
4
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS--UNAUDITED
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Restaurant sales............................................ $ 122,658 $ 120,736
Other....................................................... 274 172
Total Revenues.......................................... 122,932 120,908
Cost and expenses:
Restaurant costs and expenses............................. 105,330 103,035
General and administrative................................ 7,925 7,415
Depreciation and amortization............................. 3,463 2,742
Non-recurring and restructuring charges................... 4,920 --
Other..................................................... (101) 125
Operating income............................................ 1,395 7,591
Interest expense.......................................... 4,830 3,991
Income (loss) before income taxes........................... (3,435) 3,600
Provision for income taxes................................ (1,391) 1,458
Net income (loss)........................................... $ (2,044) $ 2,142
Net income (loss) per share:
Basic..................................................... $ (.71) $ .77
Diluted................................................... $ (.71) $ .65
Weighted-average common shares outstanding (see Note 3)
Basic..................................................... 2,867,000 2,782,000
Diluted................................................... 2,867,000 3,275,000
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
5
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ (2,044) $ 2,142
Adjustments to reconcile net income to cash from operating
activities
Depreciation and amortization............................. 3,463 2,742
Deferred income taxes..................................... -- (206)
Changes in current assets and liabilities:
Accounts receivable....................................... (434) (154)
Inventories............................................... (178) (195)
Accounts payable and accrued expenses..................... (3,695) 889
Other, net................................................ (99) 225
Net cash provided (used) by operating activities........ (2,987) 5,443
Cash flows from investing activities:
Capital expenditures...................................... (10,793) (5,041)
Proceeds from disposition of property and equipment....... 236 --
Acquisition of restaurant properties...................... -- (1,351)
Other, net................................................ (162) 1,638
Net cash used by investing activities................... (10,719) (4,754)
Cash flows from financing activities:
Proceeds from issuance of long-term debt and capital lease
obligations, net........................................ 9,129 2,810
Repayment of long-term debt and capital lease
obligations............................................. (4,869) (4,653)
Other, net................................................ (330) 58
Net cash provided (used) by financing activities........ 3,930 (1,785)
Net changes in cash and cash equivalents.................... (9,776) (1,096)
Cash and cash equivalents at beginning of period............ 15,085 9,235
Cash and cash equivalents at end of period.................. $ 5,309 $ 8,139
Supplemental Disclosure of Non-Cash Financing Activity:
During the six months ended June 30, 2000, the Company
entered into a $3.1 million capital lease for the
purchase of point of sale equipment.
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
6
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
NOTE 1. BUSINESS
PREPARATION OF INTERIM FINANCIAL STATEMENTS
The Consolidated Interim 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"). These
Consolidated Interim 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 management, 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 Interim 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.
BUSINESS AND PRESENTATION
The accompanying Consolidated Interim Financial Statements 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
intercompany accounts and transactions have been eliminated.
NOTE 2. SEGMENT INFORMATION
The Company operates entirely in the food service industry with
substantially all of its revenues flowing from the sale of menu products at the
restaurants operated by its wholly-owned subsidiaries. At June 30, 2000, Sybra
owned and operated 193 Arby's restaurants and Lyon's owned and operated 72
Lyon's restaurants. The Company considers each subsidiary a reportable segment.
Amounts described as "Corporate and other" relate to revenues, expenses and
assets associated with non-segmented operations.
The Company evaluates performance based on several factors, of which the
primary financial measure is business segment operating income before interest,
taxes, depreciation, amortization and charges for (recoveries of) restructuring
and impairment ("EBITDA as defined").
7
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES
Sybra............................... $ 38,541 $ 35,712 $ 76,462 $ 70,259
Lyon's.............................. 23,444 25,304 46,196 50,477
Corporate and other................. -- -- -- --
Total consolidated sales............ $ 61,985 $ 61,016 $122,658 $120,736
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
DEPRECIATION AND AMORTIZATION
Sybra............................... $ 1,390 $ 1,153 $ 2,669 $ 2,237
Lyon's.............................. 452 252 794 505
Corporate and other................. -- -- -- --
Total consolidated depreciation and
amortization...................... $ 1,842 $ 1,405 $ 3,463 $ 2,742
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EBITDA AS DEFINED
Sybra............................... $ 23 $ 4,324 $ 4,301 $ 7,766
Lyon's.............................. 1,049 1,604 1,352 2,836
Corporate and other................. (783) (122) (795) (269)
Total EBITDA as defined for
reportable segments............... $ 289 $ 5,806 $ 4,858 $ 10,333
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
CAPITAL EXPENDITURES
Sybra...................................................... 8,964 4,150
Lyon's..................................................... 4,289 868
Corporate and other........................................ -- 23
Total capital expenditures for reportable segments......... $13,253 $5,041
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS
Sybra................................................. $ 96,154 $ 97,627
Lyon's................................................ 32,273 30,540
Corporate and other................................... 2,420 4,489
Total consolidated assets............................. $130,847 $132,656
</TABLE>
8
<PAGE>
NOTE 3. 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>
SIX MONTHS ENDED
-----------------------
JUNE 30, JUNE 30,
2000 1999
---------- ----------
<S> <C> <C>
Income for computation of basic earnings per share
and diluted earnings per share..................... $ (2,044) $ 2,142
Weighted-average shares for computation of basic
earnings per share................................. 2,867,000 2,782,000
Incremental shares on assumed issuance and repurchase
of stock options................................... -- 493,000
Weighted-average shares for computation of diluted
earnings per share................................. 2,867,000 3,275,000
Basic earnings per share............................. $ (.71) $ .77
Diluted earnings per share........................... $ (.71) $ .65
</TABLE>
9
<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 3.3% of the Company's
restaurant sales). The royalty rate for new restaurants (currently 4.0%) 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 SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues...................................... 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses................. 85.2% 84.2% 85.7% 85.2%
General & administrative.................... 6.6% 6.2% 6.4% 6.1%
Depreciation & amortization................. 3.0% 2.3% 2.8% 2.3%
Non-recurring and restructuring charge...... 7.9% -- 4.1% --
Other....................................... (0.2%) 0.1% (0.1)% 0.1%
Operating income (loss)....................... (2.5%) 7.2% 1.1% 6.3%
Interest expense.............................. 3.9% 3.3% 3.9% 3.3%
Income (loss) before taxes.................... (6.4%) 3.9% (2.8)% 3.0%
Income tax expense............................ (2.6%) 1.6% (1.1)% 1.2%
Net income (loss)............................. (3.8%) 2.3% (1.7)% 1.8%
</TABLE>
10
<PAGE>
COMPARISON OF THE QUARTER ENDED JUNE 30, 2000 AND THE QUARTER ENDED JUNE 30,
1999.
Revenues--Consolidated revenues were $62.1 million for the quarter ended
June 30, 2000 as compared to $61.1 million for the quarter ended June 30, 1999,
an increase of $1.0 million or 1.7%. This sales increase is due primarily to
additional sales from Sybra new store openings and acquisitions offset by the
sale of 9 Sybra Arby's location during the fourth quarter of 1999, one closed
Lyon's restaurant in the fourth quarter of 1999, a Sybra same store sales
decrease of 2.1% and a Lyon's same store sales decrease of 5.9%.
Restaurant Costs & Expenses--Consolidated restaurant costs and expenses were
$52.9 million, or 85.2% of revenues, for the quarter ended June 30, 2000, as
compared to $51.4 million or 84.2% of revenues for the quarter ended June 30,
1999, an increase of $1.5 million. The increase in total restaurant costs and
expenses is due to costs associated with the new Sybra restaurants discussed
above. As a percentage of sales, costs increased primarily as a result of
reduced restaurant level efficiencies related to the decrease in same store
sales and moderate inflation in the cost of food, labor and other restaurant
costs.
General and Administrative--General and administrative costs and expenses
were $4.1 million, or 6.6% of revenues, for the quarter ended June 30, 2000, as
compared to $3.8 million, or 6.2% of sales, for the quarter ended June 30, 1999.
Depreciation and Amortization--Consolidated depreciation and amortization
expense was $1.8 million, or 3.0% of revenues, for the quarter ended June 30,
2000, as compared to $1.4 million, or 2.3% of revenues, for the quarter ended
June 30, 1999, an increase of $437,000. This increase is due to added
depreciation expense associated with the new Sybra restaurants discussed above
depreciation associated with a new point of sale system at Lyon's and
depreciation related to normal capital expenditures at both Sybra and Lyon's.
Non-recurring and Restructuring Charges--During the quarter ended June 30,
2000, the Company recorded a charge of $4.9 million primarily related to
payments associated with the departure of the former Chief Executive Officer of
the Company. See "Item 5. Other Information."
Interest Expense--Consolidated interest expense was $2.4 million, or 3.9% of
revenues for the quarter ended June 30, 2000, as compared to $2.0 million or
3.3% of revenues for the quarter ended June 30, 1999. This increase is due to
interest expense related to Sybra's new store openings and acquisitions as well
as interest related to the financing of new point of sale equipment at the
Lyon's restaurants.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND THE SIX MONTHS ENDED
JUNE 30, 1999.
Revenues--Consolidated revenues were $122.9 million for the six months ended
June 30, 2000 as compared to $120.9 million for the six months ended June 30,
1999, an increase of $2.0 million, or 1.7%. This sales increase is due primarily
to additional sales from Sybra new store openings and acquisitions offset by the
sale of 9 Sybra Arby's locations during the fourth quarter of 1999, one closed
Lyon's restaurant in the fourth quarter of 1999, a Sybra same store sales
decrease of 1.3% and a Lyon's same store sales decrease of 7.3%.
Restaurant Costs & Expenses--Consolidated restaurant costs and expenses were
$105.3 million, or 85.7% of revenues, for the six months ended June 30, 2000, as
compared to $103.0 million, or 85.2% of revenues, for the six months ended
June 30, 1999, an increase of $2.3 million. The increase in total restaurant
costs and expenses is due to costs associated with the new Sybra restaurants
discussed above. As a percentage of sales, costs increased primarily as a result
of reduced restaurant level efficiencies related to the decrease in same store
sales and moderate inflation in the cost of food, labor and other restaurant
operating costs.
11
<PAGE>
General and Administrative--General and administrative costs and expenses
were $7.9 million, or 6.4% of revenues, for the six months ended June 30, 2000,
as compared to $7.4 million, or 6.1% of revenues, for the six months ended
June 30, 1999.
Depreciation and Amortization--Consolidated depreciation and amortization
expense was $3.5 million, or 2.8% of revenues, for the six months ended
June 30, 2000, as compared to $2.7 million, or 2.3% of revenues for the six
months ended June 30, 1999, an increase of $721,000. This increase is due to
depreciation expense associated with the new Sybra restaurants discussed above
as well as, additional depreciation associated with a new point of sale system
at Lyon's and normal capital expenditures at both Sybra and Lyon's.
Non-recurring and Restructuring Charges--During the quarter ended June 30,
2000, the Company recorded a charge of $4.9 million primarily related to
payments associated with the departure of the former Chief Executive Officer of
the Company. See "Item 5. Other Information."
Interest Expense--Consolidated interest expense was $4.8 million, or 3.9% of
revenues for the six months ended June 30, 2000, as compared to $4.0 million or
3.3% of revenues for the six months ended June 30, 1999. This increase is due to
interest expense related to Sybra's new store openings and acquisitions and
interest related to the purchase of new point of sale equipment for the
Company's Lyon's restaurants.
OPERATING SEGMENTS
The Company operates entirely in the food service industry with
substantially all revenues resulting from the sale of menu products at the
restaurants operated by its wholly-owned subsidiaries. At June 30, 2000, Sybra
owned and operated 193 Arby's restaurants and Lyon's owned and operated 72
Lyon's restaurants. The Company considers each subsidiary a reportable segment.
The Company evaluates performance based on several factors, of which the primary
financial measure is business segment operating income.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
SYBRA, INC. ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales........................................... 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses................... 81.3% 80.5% 81.4% 81.6%
Depreciation & amortization................... 3.6% 3.2% 3.5% 3.2%
Operating income................................ 15.1% 16.3% 15.1% 15.2%
</TABLE>
COMPARISON OF THE QUARTER ENDED JUNE 30, 2000 AND QUARTER ENDED JUNE 30,
1999--SYBRA, INC.
Sales--Sybra's sales for the quarter ended June 30, 2000 were
$38.5 million, as compared to $35.7 million for the quarter ended June 30, 1999,
an increase of $2.8 million, or 7.9% over the prior year comparable period. This
increase is due to sales from new store openings and store acquisitions, offset
by a same store sales decrease of 2.1% and the disposition of 9 Arby's units in
the fourth quarter of 1999.
Restaurant Costs & Expenses--Sybra's restaurant costs and expenses were
$31.3 million, or 81.3% of sales, for the quarter ended June 30, 2000 as
compared to $28.7 million, or 80.5% of sales, for the quarter ended June 30,
1999, an increase of $2.6 million due to the sales increase explained above. As
a percentage of sales, costs increased primarily as a result of the lower same
store sales volumes and moderate inflation in the cost of food, labor and other
restaurant costs.
12
<PAGE>
Depreciation and Amortization--Sybra's depreciation and amortization expense
was $1.4 million, or 3.6% of sales, for the quarter ended June 30, 2000, as
compared to $1.2 million, or 3.2% of sales for the quarter ended June 30, 1999.
This increase is due to additional depreciation related to Sybra's new store
openings and store acquisitions.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND SIX MONTHS ENDED JUNE 30,
1999--SYBRA, INC.
Sales--Sybra's sales for the six months ended June 30, 2000 were
$76.5 million, as compared to $70.3 million for the six months ended June 30,
1999, an increase of $6.2 million, or 8.8%, over the prior year comparable
period. This increase is due to sales from new store openings and store
acquisitions, offset by a six month same store sales decrease of 1.3% and the
disposition of 9 Arby's units in the fourth quarter of 1999.
Restaurant Costs & Expenses--Sybra's restaurant costs and expenses were
$62.3 million, or 81.4% of sales, for the six months ended June 30, 2000 as
compared to $57.3 million, or 81.6% of sales, for the six months ended June 30,
1999, an increase of $5.0 million due to the sales increase explained above. As
a percentage of sales, these costs were unchanged.
Depreciation and Amortization--Sybra's depreciation and amortization expense
was $2.7 million, or 3.5% of sales, for the six months ended June 30, 2000, as
compared to $2.2 million, or 3.2% of sales for the six months ended June 30,
1999. This increase is due to additional depreciation related to Sybra's new
store openings and store acquisitions. New stores typically experience higher
depreciation as a percentage of sales and as a result depreciation will increase
as a blended percentage of sales as new Arby's units are opened.
CAPITAL EXPENDITURES--SYBRA, INC.
Sybra's capital expenditures were $8.9 million and $4.2 million for the six
month periods ended June 30, 2000 and June 30, 1999, respectively. These amounts
include new store development, as well as store maintenance, store remodel and
store renovation capital expenditures.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
LYON'S ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales............................................... 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses....................... 92.0% 89.6% 93.2% 90.6%
Depreciation & amortization....................... 1.9% 1.0% 1.7% 1.0%
Operating income.................................... 6.1% 9.4% 5.1% 8.4%
</TABLE>
COMPARISON OF THE QUARTER ENDED JUNE 30, 2000 AND QUARTER ENDED JUNE 30,
1999--LYON'S
Sales--Lyon's sales for the quarter ended June 30, 2000 were $23.4 million
as compared to $25.3 million for the quarter ended June 30, 1999, a decrease of
$1.9 million or 7.4% from the prior year comparable period. This decrease is due
to the closing of one Lyon's restaurant at the end of the fourth quarter of 1999
and a same store sales decrease of 5.9%.
Restaurant Costs & Expenses--Lyon's restaurant costs and expenses were
$21.6 million, or 92.0% of sales, for the quarter ended June 30, 2000, as
compared to $22.7 million, or 89.6% of sales, for the quarter ended June 30,
1999, a decrease of $1.1 million due to the sales decline explained above. As a
percentage of sales, costs increased primarily as a result of reduced restaurant
level efficiencies related to the decrease in same store sales.
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Depreciation and Amortization--Lyon's depreciation and amortization expense
was $452,000, or 1.9% of sales, for the quarter ended June 30, 2000, as compared
to $252,000, or 1.0% of sales for the quarter ended June 30, 1999. The increase
both in dollars and as a percentage of sales is primarily due to additional
depreciation associated with the installation of new point of sale equipment in
67 of the Lyon's locations.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND SIX MONTHS ENDED JUNE 30,
1999--LYON'S
Sales--Lyon's sales for the six months ended June 30, 2000 were
$46.2 million as compared to $50.5 million for the six months ended June 30,
1999, a decrease of $4.3 million, or 8.5%, from the prior year comparable
period. This decrease is due to the closing of one Lyon's restaurant at the end
of the fourth quarter of 1999 and a same store sales decrease of 7.3%.
Restaurant Costs & Expenses--Lyon's restaurant costs and expenses were
$43.1 million, or 93.2% of sales, for the six months ended June 30, 2000, as
compared to $45.7 million, or 90.6% of sales, for the six months ended June 30,
1999, a decrease of $2.6 million due to the sales decline explained above. As a
percentage of sales, costs increased primarily as a result of reduced restaurant
level efficiencies related to the decrease in same store sales.
Depreciation and Amortization--Lyon's depreciation and amortization expense
was $794,000, or 1.7% of sales, for the six months ended June 30, 2000, as
compared to $505,000, or 1.0% of sales, for the six months ended June 30, 1999.
The increase both in dollars and as a percentage of sales is primarily due to
additional depreciation associated with the installation of new point of sale
equipment in 67 of the Company's Lyon's restaurants.
CAPITAL EXPENDITURES--LYON'S
Lyon's capital expenditures were $4.3 million and $868,000 for the six
months ended June 30, 2000 and June 30, 1999, respectively. The capital
expenditures for the period ended June 30, 2000 includes approximately
$3.1 million related to the purchase of new point of sale equipment. The balance
of these costs are primarily related to store maintenance.
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, operating lease requirements and the funding of capital
expenditures primarily for new store openings. As of June 30, 2000, the Company
had total long-term debt of $85.5 million, which included $26.9 million under a
term facility with Atherton Capital Incorporated (the "Atherton Loan"), $15.6
million under a term facility with USRP (Finance) LLC (the "USRP Loan"),
$11.3 million under two term loans with FINOVA Capital Corporation (the "FINOVA
Loans") and certain other indebtedness totaling $31.7 million. The Atherton Loan
has a weighted-average maturity of 12.5 years (of which approximately 9.2 years
remain), bears interest at 10.63%, requires monthly payments of principal and
interest, is collateralized by substantially all of the assets owned by Sybra at
the time it was acquired by the Company and imposes certain financial
restrictions and covenants. The USRP Loan has a weighted average maturity of
12 years (of which approximately 10.7 years remain) 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 FINOVA loans have maturities
of 10 years and 15 years (of which approximately 9.5 years and 14.75 years
remain) interest rates of 10.88% and 10.27%, require monthly payments of
principal and interest and are collateralized by certain restaurant assets as
defined in the agreements.
The Company's primary source of liquidity during the quarter was the
operation of the restaurants owned by its principal operating subsidiaries,
Sybra and Lyon's, debt and lease financing, and a $7.0 million
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revolving credit facility with FINOVA Capital which may be used for the
development and acquisition of Arby's restaurants and for the refinancing of
other existing Sybra indebtedness..
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 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 restaurants is either funded directly from available cash or, in some
instances, is financed through outside lenders. Construction or acquisition of
new restaurants 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 restaurant 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.
ITEM 5. OTHER INFORMATION
Effective June 15, 2000, James R. Arabia resigned as chairman, Chief
Executive Officer and President of the Company and its subsidiaries at the
request of the Company's board of directors. The terms of Mr. Arabia's
separation from the Company are goverened by and set out in an Agreement,
Release and Waiver (the "Agreement") entered into between Mr. Arabia and the
Company and dated June 26, 2000. The Agreement is attached as Exhibit 10.29 to
the Report on Form 8-K filed by the Company on July 12, 2000, which is
incorporated herein by reference.
On July 24, 2000 the Company's Sybra subsidiary completed the acquisition of
eight Arby's restaurants located in the state of Connecticut. The purchase price
of the acquisition was approximately $6,750,000, of which approximately
$2,250,000 was financed through sale-leaseback transactions, and approximately
$4,450,000 was financed through leasehold mortgages.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
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<CAPTION>
EXHIBIT NO. EXHIBIT TITLE
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<C> <S>
27.1 Financial Data Schedule
</TABLE>
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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: August 15, 2000
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<S> <C> <C>
I.C.H. CORPORATION
By:
---------------------------------------------
John A. Bicks
CO-CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
By:
---------------------------------------------
Robert H. Drechsler
CO-CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
By:
---------------------------------------------
Glen V. Freter
CHIEF FINANCIAL OFFICER
</TABLE>
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