<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 SEPTEMBER 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 September 30, 2000:
2,834,986
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<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-September 30, 2000 and December 31, 1999................ 3
Consolidated Statements of Operations for the Three Months ended
September 30, 2000 and for the Three Months ended September 30, 1999.............. 4
Consolidated Statements of Operations for the Nine Months ended
September 30, 2000 and for the Nine Months ended September 30, 1999............... 5
Consolidated Statements of Cash Flows for the Nine Months ended
September 30, 2000 and for the Nine Months ended September 30, 1999............... 6
Notes to Consolidated Financial Statements.......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 9
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
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 3,416 $ 15,085
Accounts receivable....................................... 933 735
Inventories............................................... 3,110 2,867
Deferred income taxes..................................... 1,029 1,029
Other current assets, net................................. 2,654 2,769
-------- --------
Total current assets.................................... 11,142 22,485
Property and equipment, net................................. 68,084 54,461
Intangible assets, net...................................... 50,842 47,622
Deferred income taxes....................................... 70 70
Other Assets................................................ 7,658 8,018
-------- --------
Total assets............................................ $137,796 $132,656
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 8,797 $ 9,962
Accrued liabilities....................................... 8,498 11,539
Current portion of long-term debt......................... 5,452 4,295
Current portion of capital lease obligations.............. 502 244
-------- --------
Total current liabilities............................... 23,249 26,040
Non-current liabilities:
Long-term debt............................................ 87,009 78,009
Long-term capital lease obligations....................... 3,100 2,174
Other liabilities......................................... 7,610 7,113
-------- --------
Total liabilities....................................... 120,968 113,336
-------- --------
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........................................... 12,434 12,662
Retained earnings......................................... 4,366 6,630
-------- --------
Total stockholders' equity.............................. 16,828 19,320
-------- --------
Total liabilities and stockholders' equity.............. $137,796 $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
SEPTEMBER
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Restaurant sales............................................ $ 64,090 $ 61,127
Other....................................................... 462 166
--------- ---------
Total Revenues.......................................... 64,552 61,293
Cost and expenses:
Restaurant costs and expenses............................. 56,222 52,259
General and administrative................................ 3,940 3,489
Depreciation and amortization............................. 1,985 1,386
Other..................................................... (72) 62
--------- ---------
Operating income (loss)..................................... 2,477 4,097
Interest expense.......................................... 2,681 2,062
--------- ---------
Income (loss) before income taxes........................... (204) 2,035
Provision for income taxes................................ (83) 824
--------- ---------
Net income (loss)........................................... $ (121) $ 1,211
========= =========
Net income (loss) per share:
Basic..................................................... $ (.04) $ .43
Diluted................................................... $ (.04) $ .34
Weighted-average common shares outstanding (see Note 3):
Basic..................................................... 2,862,000 2,847,000
Diluted................................................... 2,862,000 3,603,000
</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 NINE
MONTHS ENDED
SEPTEMBER
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Restaurant sales............................................ $ 186,748 $ 181,863
Other....................................................... 736 338
--------- ---------
Total Revenues............................................ 187,484 182,201
Cost and expenses:
Restaurant costs and expenses............................. 161,552 155,294
General and administrative................................ 11,865 10,904
Depreciation and amortization............................. 5,448 4,128
Non-recurring and restructuring charges................... 4,920 --
Other..................................................... (173) 187
--------- ---------
Operating income............................................ 3,872 11,688
Interest expense.......................................... 7,511 6,053
--------- ---------
Income (loss) before income taxes........................... (3,639) 5,635
Provision for income taxes................................ (1,474) 2,282
--------- ---------
Net income (loss)........................................... $ (2,165) $ 3,353
========= =========
Net income (loss) per share:
Basic..................................................... $ (.75) $ 1.20
Diluted................................................... $ (.75) $ .96
Weighted-average common shares outstanding (see Note 3):
Basic..................................................... 2,873,000 2,796,000
Diluted................................................... 2,873,000 3,503,000
</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 NINE
MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $(2,165) $3,353
Adjustments to reconcile net income to cash from operating
activities
Depreciation and amortization........................... 5,448 4,128
Deferred income taxes................................... -- (206)
Changes in current assets and liabilities:
Accounts receivable....................................... (198) (115)
Inventories............................................... (243) (337)
Accounts payable and accrued expenses..................... (4,206) 1,229
Other, net................................................ (51) 394
------- ------
Net cash provided (used) by operating activities........ (1,415) 8,446
------- ------
Cash flows from investing activities:
Capital expenditures...................................... (17,152) (8,246)
Proceeds from disposition of property and equipment....... -- --
Acquisition of restaurant properties...................... (4,849) (1,351)
Other, net................................................ 680 1,458
------- ------
Net cash used by investing activities................... (21,321) (8,139)
------- ------
Cash flows from financing activities:
Proceeds from issuance of long-term debt and capital lease
obligations, net........................................ 18,373 3,726
Repayment of long-term debt and capital lease
obligations............................................. (6,979) (5,563)
Issuance of common stock.................................. 188 119
Repurchases of common stock................................. (515) (282)
------- ------
Net cash provided (used) by financing activities........ 11,067 (2,000)
------- ------
Net changes in cash and cash equivalents.................... (11,669) (1,693)
Cash and cash equivalents at beginning of period............ 15,085 9,235
------- ------
Cash and cash equivalents at end of period.................. $ 3,416 $7,542
======= ======
Supplemental Disclosure of Non-Cash Financing Activity:
During the nine months ended September 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 PER 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 September 30, 2000,
Sybra owned and operated 208 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.
7
<PAGE>
NOTE 2. SEGMENT INFORMATION (CONTINUED)
The Company evaluates performance based on several factors, of which the
primary financial measure is business segment operating income (defined as
restaurant sales less restaurant costs and expenses, depreciation and
amortization.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES
Sybra................................................. $40,997 $36,192 $117,459 $106,451
Lyon's................................................ 23,093 24,935 69,289 75,412
Corporate and other................................... -- -- -- --
------- ------- -------- --------
Total consolidated sales.............................. $64,090 $61,127 $186,748 $181,863
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
DEPRECIATION AND AMORTIZATION
Sybra....................................................... $1,505 $1,130 $4,174 $3,367
Lyon's...................................................... 480 256 1,274 761
Corporate and other......................................... -- -- -- --
------ ------ ------ ------
Total consolidated depreciation and amortization............ $1,985 $1,386 $5,448 $4,128
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING INCOME
Sybra..................................................... $5,226 $5,350 $16,795 $16,046
Lyon's.................................................... 617 2,132 2,953 6,395
Corporate and other....................................... -- -- -- --
------ ------ ------- -------
Total operating income for reportable segments............ $5,843 $7,482 $19,748 $22,441
====== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
CAPITAL EXPENDITURES
Sybra....................................................... $14,599 $6,986
Lyon's...................................................... 2,553 1,260
Corporate and other......................................... -- --
------- ------
Total capital expenditures for reportable segments.......... $17,152 $8,246
======= ======
</TABLE>
8
<PAGE>
NOTE 2. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Sybra....................................................... $102,909 $ 97,627
Lyon's...................................................... 32,017 30,540
Corporate and other......................................... 2,870 4,489
-------- --------
Total consolidated assets................................... $137,796 $132,656
======== ========
</TABLE>
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>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------- -------------
<S> <C> <C>
Income for computation of basic earnings per share and
diluted earnings per share................................ $ (2,165) $3,353
=========== ======
Weighted-average shares for computation of basic earnings
per share................................................. 2,873 2,796
Incremental shares on assumed issuance and repurchase of
stock options............................................. -- 707
----------- ------
Weighted-average shares for computation of diluted earnings
per share................................................. 2,873 3,503
=========== ======
Basic earnings per share.................................... $ (.75) $ 1.20
Diluted earnings per share.................................. $ (.75) $ .96
</TABLE>
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
9
<PAGE>
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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses................................. 87.1% 85.3% 86.2% 85.2%
General & administrative.................................... 6.1% 5.7% 6.3% 6.0%
Depreciation & amortization................................. 3.1% 2.3% 2.9% 2.3%
Non-recurring and restructuring charge...................... -- -- 2.6% --
Other....................................................... (0.1%) -- (0.1%) 0.1%
----- ----- ----- -----
Operating income............................................ 3.8% 6.7% 2.1% 6.4%
Interest expense............................................ 4.1% 3.4% 4.0% 3.3%
----- ----- ----- -----
Income (loss) before taxes.................................. (0.3%) 3.3% (1.9%) 3.1%
Income tax expense.......................................... (0.1%) 1.3% (0.8%) 1.3%
----- ----- ----- -----
Net income (loss)........................................... (0.2%) 2.0% (1.1%) 1.8%
===== ===== ===== =====
</TABLE>
COMPARISON OF THE QUARTER ENDED SEPTEMBER 30, 2000 AND THE QUARTER ENDED
SEPTEMBER 30, 1999.
Revenues-Consolidated revenues were $64.6 million for the quarter ended
September 30, 2000 as compared to $61.3 million for the quarter ended
September 30, 1999, an increase of $3.3 million or 5.3%. 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, a Sybra same store sales decrease of 2.8%, one closed Lyon's
restaurant in the fourth quarter of 1999, the temporary closing of one Lyon's
restaurant for remodeling during the quarter, one Lyon's restaurant closed due
to fire in July, 2000 and a Lyon's same store sales decrease of 4.8%.
Restaurant Costs & Expenses-Consolidated restaurant costs and expenses were
$56.2 million, or 87.1% of revenues, for the quarter ended September 30, 2000,
as compared to $52.3 million or 85.3% of revenues for the quarter ended
September 30, 1999, an increase of $4.0 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.
General and Administrative-General and administrative costs and expenses
were $3.9 million, or 6.1% of revenues, for the quarter ended September 30,
2000, as compared to $3.5 million, or 5.7% of sales, for the quarter ended
September 30, 1999. General and administrative costs for the three months
10
<PAGE>
ended September 30, 2000 include a non-recurring, pre-opening charge amounting
to $131,000 related to Lyon's remodels.
Depreciation and Amortization-Consolidated depreciation and amortization
expense was $2.0 million, or 3.1% of revenues, for the quarter ended
September 30, 2000, as compared to $1.4 million, or 2.3% of revenues, for the
quarter ended September 30, 1999, an increase of $599,000. 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, depreciation associated with the capital expenditures for the three
remodeled Lyon's restaurants and depreciation related to normal capital
expenditures at both Sybra and Lyon's.
Interest Expense-Consolidated interest expense was $2.7 million, or 4.1% of
revenues for the quarter ended September 30, 2000, as compared to $2.1 million
or 3.4% of revenues for the quarter ended September 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
Lyon's.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999.
Revenues-Consolidated revenues were $187.5 million for the nine months ended
September 30, 2000 as compared to $182.2 million for the nine months ended
September 30, 1999, an increase of $5.3 million, or 2.9%. This 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, a Sybra same store sales decrease of 1.6%, one closed Lyon's restaurant in
the fourth quarter of 1999, the temporary closing of three Lyon's restaurants
for remodeling during the period, one Lyon's restaurant closed due to fire in
July, 2000 and a Lyon's same store sales decrease of 6.3%.
Restaurant Costs & Expenses-Consolidated restaurant costs and expenses were
$161.6 million, or 86.2% of revenues, for the nine months ended September 30,
2000, as compared to $155.3 million, or 85.2% of revenues, for the nine months
ended September 30, 1999, an increase of $6.3 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.
General and Administrative-General and administrative costs and expenses
were $11.9 million, or 6.3% of revenues, for the nine months ended
September 30, 2000, as compared to $10.9 million, or 6.0% of revenues, for the
nine months ended September 30, 1999. General and administrative costs for the
nine months ended September 30, 2000 include a non-recurring, pre-opening charge
amounting to $153,000 related to the remodeling of three Lyon's restaurants.
Depreciation and Amortization-Consolidated depreciation and amortization
expense was $5.4 million, or 2.9% of revenues, for the nine months ended
September 30, 2000, as compared to $4.1 million, or 2.3% of revenues, for the
nine months ended September 30, 1999, an increase of $1.3 million. 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, depreciation associated with the capital expenditures for the three
remodeled Lyon's restaurants and depreciation related to normal capital
expenditures at both Sybra and Lyon's.
Non-recurring and Restructuring Charges-In the second 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.
11
<PAGE>
Interest Expense-Consolidated interest expense was $7.5 million, or 4.0% of
revenues, for the nine months ended September 30, 2000, as compared to
$6.1 million, or 3.3% of revenues, for the nine months ended September 30, 1999.
This increase is due to interest expense related to Sybra's new store openings
and acquisitions and 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 September 30, 2000,
Sybra owned and operated 208 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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
SYBRA, INC. 2000 1999 2000 1999
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales...................................... 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses.............. 83.5% 82.1% 82.1% 81.8%
Depreciation & amortization.............. 3.7% 3.2% 3.6% 3.1%
----- ----- ----- -----
Operating income........................... 12.8% 14.8% 14.3% 15.0%
===== ===== ===== =====
</TABLE>
COMPARISON OF THE QUARTER ENDED SEPTEMBER 30, 2000 AND QUARTER ENDED
SEPTEMBER 30, 1999-SYBRA, INC.
Sales-Sybra's sales for the quarter ended September 30, 2000 were
$41.0 million, as compared to $36.2 million for the quarter ended September 30,
1999, an increase of $4.8 million, or 13.3% 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 2.8% and the disposition
of 9 Arby's units in the fourth quarter of 1999.
Restaurant Costs & Expenses-Sybra's restaurant costs and expenses were
$34.2 million, or 83.5% of sales, for the quarter ended September 30, 2000 as
compared to $29.7 million, or 82.1% of sales, for the quarter ended
September 30, 1999, an increase of $4.5 million due to the sales increase
explained above. As a percentage of sales, costs increased primarily as a result
of lower same store sales volumes and moderate inflation in the cost of food,
labor and other restaurant operating costs.
Depreciation and Amortization-Sybra's depreciation and amortization expense
was $1.5 million, or 3.7% of sales, for the quarter ended September 30, 2000, as
compared to $1.1 million, or 3.1% of sales, for the quarter ended September 30,
1999. This increase is due to additional depreciation related to Sybra's new
store openings and store acquisitions.
12
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND NINE MONTHS ENDED
SEPTEMBER 30, 1999-SYBRA, INC.
Sales-Sybra's sales for the nine months ended September 30, 2000 were
$117.5 million, as compared to $106.5 million for the nine months ended
September 30, 1999, an increase of $11.0 million, or 10.3%, 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 1.6% and the
disposition of 9 Arby's units in the fourth quarter of 1999.
Restaurant Costs & Expenses-Sybra's restaurant costs and expenses were
$96.5 million, or 82.1% of sales, for the nine months ended September 30, 2000,
as compared to $87.0 million, or 81.8% of sales, for the nine months ended
September 30, 1999, an increase of $9.5 million due to the sales increase
explained above. As a percentage of sales, restaurant operating costs increased
slightly as a result of the lower same store sales volumes and moderate
inflation in the cost of food, labor and other restaurant operating costs.
Depreciation and Amortization-Sybra's depreciation and amortization expense
was $4.2 million, or 3.6% of sales, for the nine months ended September 30,
2000, as compared to $3.4 million, or 3.2% of sales, for the nine months ended
September 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 $14.6 million and $7.0 million for the
nine month periods ended September 30, 2000 and September 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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
LYON'S 2000 1999 2000 1999
------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales...................................... 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses.............. 95.2% 90.4% 93.9% 90.5%
Depreciation & amortization.............. 2.1% 1.0% 1.8% 1.0%
----- ----- ----- -----
Operating income........................... 2.7% 8.6% 4.3% 8.5%
===== ===== ===== =====
</TABLE>
COMPARISON OF THE QUARTER ENDED SEPTEMBER 30, 2000 AND QUARTER ENDED
SEPTEMBER 30, 1999-LYON'S
Sales-Lyon's sales for the quarter ended September 30, 2000 were
$23.1 million as compared to $24.9 million for the quarter ended September 30,
1999, a decrease of $1.8 million, or 7.4%, from the prior year comparable
period. This decrease is due to the closing of one Lyon's restaurant in the
fourth quarter of 1999, the temporary closing of one restaurant for remodeling
during this quarter, one store closed due to fire in July, 2000 and a same store
sales decrease of 4.8%.
Restaurant Costs & Expenses-Lyon's restaurant costs and expenses were
$22.0 million, or 95.2% of sales, for the quarter ended September 30, 2000, as
compared to $22.5 million, or 90.4% of sales, for the quarter ended
September 30, 1999, a decrease of $551,000 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 and moderate inflation in the cost of food, labor and other
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restaurant operating costs. Additionally, Lyon's financial performance during
the quarter was adversely impacted by the earlier conversion to an unregulated
utility provider which was subsequently reversed.
Depreciation and Amortization-Lyon's depreciation and amortization expense
was $480,000, or 2.1% of sales, for the quarter ended September 30, 2000, as
compared to $256,000, or 1.0% of sales for the quarter ended September 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, depreciation associated with three
restaurant remodels and depreciation associated with ongoing capital
expenditures.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND NINE MONTHS ENDED
SEPTEMBER 30, 1999-LYON'S
Sales-Lyon's sales for the nine months ended September 30, 2000 were
$69.3 million as compared to $75.4 million for the nine months ended
September 30, 1999, a decrease of $6.1 million, or 8.1%, from the prior year
comparable period. This decrease is due to the closing of one Lyon's restaurant
in the fourth quarter of 1999, the temporary closing of three Lyon's restaurants
for remodeling during the period, one Lyon's restaurant closed due to fire in
July, 2000 and a Lyon's same store sales decrease of 6.3%.
Restaurant Costs & Expenses-Lyon's restaurant costs and expenses were
$65.1 million, or 93.9% of sales, for the nine months ended September 30, 2000,
as compared to $68.3 million, or 90.5% of sales, for the nine months ended
September 30, 1999, a decrease of $3.2 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 sales and
moderate inflation in the cost of food, labor and other restaurant operating
costs.
Depreciation and Amortization-Lyon's depreciation and amortization expense
was $1.3 million or 1.8% of sales, for the nine months ended September 30, 2000,
as compared to $761,000, or 1.0% of sales, for the nine months ended
September 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, depreciation associated
with three restaurant remodels and depreciation associated with ongoing capital
expenditures.
CAPITAL EXPENDITURES-LYON'S
Lyon's capital expenditures were $5.7 million and $1.3 million for the nine
months ended September 30, 2000 and September 30, 1999, respectively. Capital
expenditures for the period ended September 30, 2000 include approximately
$3.1 million related to the purchase of new point of sale equipment. The balance
of these costs are related to restaurant remodels and 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 September 30, 2000, the
Company had total long-term debt of $92.5 million, which included $26.4 million
under a term facility with Atherton Capital Incorporated (the "Atherton Loan"),
$15.4 million under a term facility with USRP (Finance) LLC (the "USRP Loan"),
$15.5 million under three term loans with FINOVA Capital Corporation (the
"FINOVA Loans") and certain other indebtedness totaling $35.2 million. The
Atherton Loan has a weighted-average maturity of 12.5 years (of which
approximately 9.1 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
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<PAGE>
of 12 years (of which approximately 10.3 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 original
maturities of 10 to 15 years, interest rates ranging from 10.10% to 10.88%,
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 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
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 $6,75 million, of which approximately $2.25
million was financed through sale-leaseback transactions, and approximately
$4.45 million was financed through leasehold mortgages.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
<C> <S>
27.1........ Financial Data Schedule
</TABLE>
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<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: November 14, 2000
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
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