<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
For Quarter Ended: Commission File Number
April 23, 1997 0-14370
BUFFETS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1462294
(State of incorporation) (I.R.S. Employer Identification No.)
10260 Viking Drive, Eden Prairie, MN 55344
(Address of principal executive offices)
(612) 942-9760
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of May 16, 1997
----- ------------------------------
Common Stock, $.01 par value 45,213,659 shares
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BUFFETS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets-
January 1, 1997 and April 23, 1997. . . . . . . . . . . . . 3
Consolidated Statements of Operations-
Sixteen Weeks ended April 24, 1996
and April 23, 1997. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows-
Sixteen Weeks ended April 24, 1996 and
April 23, 1997. . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . 11
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Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JANUARY 1, APRIL 23,
ASSETS 1997 1997
---------- --------
(IN THOUSANDS)
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . $ 10,772 $ 16,053
Receivable from landlords. . . . . . . . . . . . 2,642 3,822
Inventory. . . . . . . . . . . . . . . . . . . . 3,653 3,878
Notes receivable . . . . . . . . . . . . . . . . 52 52
Prepaid rents. . . . . . . . . . . . . . . . . . 2,782 852
Other current assets . . . . . . . . . . . . . . 2,587 1,234
Deferred income taxes. . . . . . . . . . . . . . 11,975 12,320
-------- --------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . 34,463 38,211
PROPERTY AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . 15,686 15,686
Buildings. . . . . . . . . . . . . . . . . . . . 30,537 30,960
Equipment. . . . . . . . . . . . . . . . . . . . 228,046 236,034
Leasehold improvements . . . . . . . . . . . . . 185,263 193,088
-------- --------
459,532 475,768
Less accumulated depreciation and amortization . 131,811 143,106
-------- --------
327,721 332,662
GOODWILL, net of accumulated amortization of $1,615
and $1,723, respectively . . . . . . . . . . . . 5,974 5,866
OTHER ASSETS . . . . . . . . . . . . . . . . . . . 2,525 2,435
-------- --------
$370,683 $379,174
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . $ 29,483 $ 26,602
Accrued payroll and related benefits . . . . . . 16,229 16,635
Accrued rents. . . . . . . . . . . . . . . . . . 13,892 13,101
Accrued sales taxes. . . . . . . . . . . . . . . 3,497 4,255
Accrued insurance. . . . . . . . . . . . . . . . 4,390 5,651
Accrued store closing costs. . . . . . . . . . . 7,703 7,244
Other accrued expenses . . . . . . . . . . . . . 5,779 6,559
Income taxes . . . . . . . . . . . . . . . . . . 615 2,806
Current portion of capital leases. . . . . . . . 2,055 2,055
-------- --------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . 83,643 84,908
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . 41,500 41,500
LONG-TERM PORTION OF CAPITAL LEASES. . . . . . . . 5,078 4,527
DEFERRED INCOME. . . . . . . . . . . . . . . . . . 405 284
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . 3,266 4,485
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 5,000
shares; none issued and outstanding
Common stock, $.01 par value; authorized 60,000
shares; issued and outstanding 45,159 and
45,209 shares, respectively. . . . . . . . . . 452 452
Additional paid-in capital . . . . . . . . . . . 116,330 116,634
Retained earnings. . . . . . . . . . . . . . . . 120,009 126,384
-------- --------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . 236,791 243,470
-------- --------
$370,683 $379,174
-------- --------
-------- --------
See Notes to Consolidated Financial Statements.
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BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIXTEEN WEEKS ENDED
-------------------------
APRIL 24, APRIL 23,
1996 1997
---------- ----------
(in thousands, except per share amounts)
RESTAURANT SALES . . . . . . . . . . . . . . . . . $217,452 $240,741
RESTAURANT COSTS:
Food costs . . . . . . . . . . . . . . . . . . . 76,614 83,779
Labor costs . . . . . . . . . . . . . . . . . . 64,005 73,801
Direct and occupancy costs . . . . . . . . . . . 51,652 58,951
-------- --------
Total restaurant costs . . . . . . . . . . . . 192,271 216,531
-------- --------
RESTAURANT PROFITS . . . . . . . . . . . . . . . . 25,181 24,210
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . . . . . . . . . . 13,040 13,270
-------- --------
12,141 10,940
OTHER EXPENSE. . . . . . . . . . . . . . . . . . . 260 485
-------- --------
EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . 11,881 10,455
INCOME TAXES . . . . . . . . . . . . . . . . . . . 4,584 4,080
-------- --------
NET EARNINGS . . . . . . . . . . . . . . . . . . . $ 7,297 $ 6,375
-------- --------
-------- --------
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE . . . . . . . . . . . . . $ .16 $ .14
-------- --------
-------- --------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . 45,656 45,440
See Notes to Consolidated Financial Statements.
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BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIXTEEN WEEKS ENDED
-------------------------
APRIL 24, APRIL 23,
1996 1997
---------- ----------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . $ 7,297 $ 6,375
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . 12,435 12,316
Tax benefit from early disposition of
common stock . . . . . . . . . . . . . . . . 32 120
Deferred income. . . . . . . . . . . . . . . . (121) (121)
Deferred income taxes . . . . . . . . . . . . 432 874
Changes in assets and liabilities:
Inventory. . . . . . . . . . . . . . . . . . 137 (225)
Other current assets . . . . . . . . . . . . 1,041 3,283
Refundable income taxes. . . . . . . . . . . 1,829
Other assets . . . . . . . . . . . . . . . . (60) (29)
Accounts payable . . . . . . . . . . . . . . (5,765) (2,881)
Accrued payroll and related benefits . . . . (1,772) 406
Accrued store closing costs . . . . . . . . (459)
Other accrued expenses . . . . . . . . . . . 1,848 2,008
Income taxes currently payable . . . . . . . 1,151 2,191
-------- --------
Total adjustments. . . . . . . . . . . . . 11,187 17,483
-------- --------
Net cash provided by operating activities. 18,484 23,858
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . (19,398) (18,784)
Cash received from landlords . . . . . . . . . 1,216 574
Purchase of investments. . . . . . . . . . . . (57,583)
Proceeds from sale of investments. . . . . . . 64,577
Purchase of minority interest in HTB I . . . . (950)
-------- --------
Net cash used in investing activities. . . (12,138) (18,210)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital leases . . . . . . . . . . (501) (551)
Proceeds from exercise of employees'
stock options. . . . . . . . . . . . . . . . 331 184
Payments of long-term debt . . . . . . . . . . (7,500)
Borrowing under long-term debt . . . . . . . . 2,500
-------- --------
Net cash used in financing activities. . . . (5,170) (367)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . 1,176 5,281
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . 14,530 10,772
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . $15,706 $16,053
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized interest of $134 and
$81 in 1996 and 1997, respectively). . . . . . $ 258 $ 334
Income taxes . . . . . . . . . . . . . . . . . 1,931 895
See Notes to Consolidated Financial Statements.
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BUFFETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of Buffets, Inc. and subsidiaries as of April 23,
1997 and the results of operations and cash flows for the sixteen weeks
ended April 24, 1996 and April 23, 1997.
2. These statements should be read in conjunction with the Notes to
Financial Statements contained in the Company's Annual Report on Form
10-K for the fiscal year ended January 1, 1997 and with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing on pages 7 through 10 of this quarterly report.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company operates on a fifty-two or fifty-three week fiscal year, which
ends on the Wednesday nearest December 31. The Company's first quarter consists
of sixteen weeks; all other quarters are comprised of twelve weeks. When a
fifty-three week year occurs, the Company's fourth quarter consists of thirteen
weeks.
RESULTS OF OPERATIONS
SIXTEEN WEEKS ENDED APRIL 23, 1997
RESTAURANT SALES. Restaurant sales of $240.7 million during the first sixteen
weeks of 1997 represented a 10.7% increase over sales of $217.5 million for the
comparable period of 1996, due to sales generated by new restaurants. Ten new
restaurants opened and one restaurant (previously reserved for) closed in the
first quarter of 1997, bringing the total number of Company-owned restaurants to
355 at the end of the quarter (256 Old Country Buffets, 96 HomeTown Buffets and
three Roadhouse Grills), compared to 326 restaurants open at the end of the
comparable 1996 period. Average weekly sales per restaurant for the first
sixteen weeks of 1997 increased 1.3% to $43,089 from $42,543 in the comparable
period of 1996. The 10 new restaurants opened during the quarter generated
average weekly sales of $59,417, well above the Company average. Comparable
sales per restaurant were down 2.8% for the comparable periods. The Company's
price increases have been nominal.
RESTAURANT COSTS. As a percentage of restaurant sales, total restaurant costs
increased to 90.0% for the first sixteen weeks of 1997 from 88.4% for the first
sixteen weeks of 1996. Food costs as a percentage of restaurant sales decreased
slightly to 34.8% from 35.2%, primarily due to decreases in the price of dairy
products. Labor costs increased to 30.7% in 1997 from 29.4% in 1996, primarily
due to an increase in the base compensation of store-level managers. The
Company intends to implement menu changes in a majority of its restaurants late
in the second quarter 1997 that may affect food and labor costs. although
initial tests of the new menu in thirteen restaurants have resulted in overall
savings in food and labor costs, it is unknown what effect the menu changes will
have when implemented on a larger scale. Direct and occupancy costs increased
as a percentage of sales to 24.5% in 1997 from 23.8% in 1996, due to increases
in utilities, repair and maintenance, and various other restaurant costs.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of restaurant sales decreased to 5.5% in
the first sixteen weeks of 1997 from 6.0% in the first sixteen weeks of 1996.
Such expenses in absolute terms were slightly higher at $13.3 million for the
first sixteen weeks of 1997 from $13.0 million in the comparable period of 1996,
primarily as a result of increases in operations and training costs, offset by a
decrease in opening costs. Advertising costs as a percentage of restaurant
sales were .5% for both periods compared. The Company expects that advertising
expenditures as a percentage of restaurant sales in the second quarter will
remain at substantially this level, but will increase in the final half of the
year such that overall advertising spending for 1997 will approximate 1.25% of
restaurant sales.
INCOME TAXES. Income taxes were 39.0% of earnings before taxes for the 1997
quarter and 38.6% in the 1996 quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's restaurants generate cash immediately through sales. New
restaurants are generally profitable shortly after opening. The Company does
not have significant assets in the form of trade receivables or inventory, and
often receives several weeks of trade credit from food and supply purveyors;
therefore, the Company's operations generate substantial cash which is available
to fund new restaurants. The investment of cash flow from operations in
restaurant property and equipment results in a "working capital deficit"
(current liabilities exceeding current assets) which, to a considerable extent,
represents interest-free financing from trade creditors that the Company intends
to continue to utilize.
The Company currently has an unsecured revolving line of credit of up to
$50 million with interest payable at the option of the Company, at the
applicable "eurodollar rate", "certificate of deposit rate", or the "reference
rate" of the bank at the time of the advance. The Company is also required to
pay a commitment fee equal to 1/4 of 1% per annum of the unused balance, payable
quarterly in arrears. On July 1, 1999, providing no default or event of default
has occurred and is continuing, the line of credit is convertible, at the
Company's option, to a three-year term loan, maturing on July 1, 2002. As of
April 23, 1997, the Company had no borrowings outstanding under this credit
line.
In 1995, HomeTown Buffet, Inc., a wholly-owned subsidiary of the Company
("HomeTown"), issued $41.5 million in aggregate principal amount of 7.0%
subordinated convertible notes due on December 1, 2002. Interest is payable
semi-annually on June 1 and December 1, commencing June 1, 1996. The notes are
convertible into shares of the Company's common stock at a conversion price of
$11.67, subject
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to adjustment under certain conditions, at any time until maturity. The notes
are subordinated in right of payment to all existing and future senior
indebtedness of the Company. The notes are redeemable in whole or in part, at
the option of the Company, at any time on or after December 2, 1998.
The Company continues to require substantial amounts of capital to fund its
growth. The Company currently expects to open a total of approximately 25 new
restaurants and convert 25 to 30 restaurants, principally from Old Country
Buffets to HomeTown Buffets, during 1997, with 10 new restaurants already opened
and eight conversions completed at April 23, 1997.
The Company expects to spend an aggregate of approximately $12 to $17
million during the remainder of 1997 on its restaurants being opened in 1997,
depending on the level of contributions obtained from landlords for leasehold
improvements and the amount of land purchased for freestanding buildings. The
Company anticipates that, as it further pursues the development of freestanding
locations, the cost per location and related cash requirements will increase
substantially over prior years and that these costs will not be offset by
landlord contributions that typically have been associated with strip mall
locations. The capital expenditure required for a freestanding location can be
over 100% greater than for a mall location. The Company estimates that
approximately 50% of 1997 new locations will be freestanding units, and of the
freestanding restaurants virtually all will be ground leased rather than owned.
The Company expects to spend an aggregate of approximately $4 to $7 million
during the remainder of 1997 on the conversion of restaurants. Sources of
capital for restaurant development projects are anticipated to be funds provided
by operations, credit received from trade suppliers, landlord contributions to
leasehold improvements and current bank financing. The Company believes that
these sources will be adequate to finance operations and the additional
restaurants and restaurant conversions included in the Company's restaurant
development plans for at least through fiscal 1997 and early fiscal 1998.
However, in order to remain prepared for further significant growth in future
years, the Company will continue to evaluate its financing needs and seek
additional funding if appropriate.
ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, earnings per share, which is
effective for interim and annual reporting periods ending after December 15,
1997. SFAS No. 128 supersedes Accounting Principles Board Opinion No.
15, earnings per share, and replaces the presentation of primary earnings per
share with a presentation of basics earnings per share. It also requires dual
presentation for all entities with complex capital structures and provides
guidance on other computational changes. Basic earnings per share is not
expected to be materially different than primary earnings per share due to the
impact of common stock equivalents being insignificant.
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FORWARD-LOOKING INFORMATION
Certain statements in this quarterly report and in the Company's press
releases and oral statements made by or with the approval of the Company's
executive officers constitute or will constitute "forward-looking statements."
All forward-looking statements involve risks and uncertainties, and actual
results may be materially different. The following factors are among those that
could cause the Company's actual results to differ materially from those set
forth in such forward-looking statements.
The ability of the Company to open new restaurants depends on a number of
factors, including its ability to find suitable locations and negotiate
acceptable leases and land purchases, its ability to attract and retain a
sufficient number of qualified restaurant managers and the availability of
capital. The proportion of new restaurants that will be free-standing units,
either owned or leased, rather than strip mall locations will depend upon the
availability of suitable mall locations. The costs of restaurant development
and conversion will depend upon the level of contributions from landlords for
leasehold improvements, the actual number of free-standing sites utilized in
such development, and whether such sites involve land purchases, the cost of
building supplies and general construction risks and costs. The Company's
ability to generate revenue as currently expected, unexpected expenses and the
need for additional funds to react to changes in the marketplace, including
unexpected increases in personnel costs and food supply costs, may impact
whether the Company has sufficient cash resources to fund its restaurant
development and conversion plans for 1997 and early 1998.
Other factors that could cause actual results of the Company to differ
materially from those contained in any such forward-looking statements include
the success and timing of the continuing integration of the operations of the
Company and HomeTown, the number, cost and success of restaurant conversions,
changes in the cost and supply of food and labor, the impact of menu changes,
the timing of television advertising planned for the remainder of 1997 and the
cost and effectiveness of such advertising as well as the Company's other
marketing programs, general economic conditions, the actions of existing and
future competitors, weather factors, unforseen health and safety developments
regarding restaurant operations, and regulatory constraints. The Company
assumes no obligation to publicly release the results of any revision or updates
to these forward-looking statements to reflect future events or unanticipated
occurrences.
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PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions arising in the
normal course of business. Management is of the opinion that their
outcome will not have a significant effect on the Company's
consolidated financial statements.
The Company and certain of its directors and executive officers
have been named as defendants in a Third Amended Consolidated Class
Action Complaint (the "complaint") brought on behalf of a putative
class of all purchasers of common stock of the Company from October
26, 1993 through October 25, 1994 (the "class period") in the United
States District Court for the District of Minnesota. The complaint
alleges that the defendants made misrepresentations and omissions of
material fact during the class period with respect to the Company's
operations and restaurant development activities, as a result of which
the price of the Company's stock allegedly was artificially inflated
during the class period. The complaint further alleges that certain
defendants made sales of common stock of the Company during the class
period while in possession of material undisclosed information about
the Company's operations and restaurant development activities. The
complaint alleges that the defendants' conduct violated the Securities
Exchange Act of 1934 and seeks compensatory damages in an unspecified
amount, prejudgement interest, and an award of attorneys fees, costs
and expenses. The defendants have moved to dismiss the current
complaint with prejudice. The Company expects that a hearing on this
motion will be held in June or July 1997. The two previous complaints
were dismissed without prejudice. Management of the Company believes
that the action is without merit and intends to defend it vigorously.
Although the outcome of this action cannot be predicted with
certainty, the Company's management believes that while the outcome
may have a material effect on earnings in a particular period, the
outcome should not have a material effect on the financial condition
of the Company.
On August 9, 1996 HTB Restaurants, Inc. ("HTB Restaurants"), a
franchisee of HomeTown, along with its parent entities, Summit Family
Restaurants, Inc. ("Summit") and CKE Restaurants, Inc. (collectively,
the "Plaintiffs"), filed suit against the Company and HomeTown in
United States District Court for the District
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of Utah, Central Division. The suit alleges, among other things, that
the Company and HomeTown illegally conspired to restrict competition
and to prevent the Plaintiffs from developing additional HomeTown
restaurants under the Multiple Unit Agreement between HomeTown and HTB
Restaurants (the "Multiple Unit Agreement"). The suit includes claims
against the Company and HomeTown for violations of both federal and
state antitrust laws, claims for unfair business practices, and claims
for tortuous interference with contract and economic relations. The
suit also alleges claims against HomeTown for breach of contract and
breach of the covenant of good faith and fair dealing. Plaintiffs
sought damages and to enjoin the merger between the Company and
HomeTown. On September 19, 1996, the court denied Plaintiffs' motion
for preliminary injunctive relief. On January 31, 1997, an arbitrator
ruled that HomeTown is entitled to terminate the Multiple Unit
Agreement, along with all of HTB Restaurants' development rights. HTB
Restaurants and Summit have moved to vacate the arbitrator's award,
while HomeTown has moved to confirm it. Both motions are being
briefed and a hearing will be held on the motions at a future date.
The Company and HomeTown believe that the suit is without merit, and
intend to vigorously defend the arbitrator's award and the remaining
claims under the lawsuit. Although the outcome of this action cannot
be predicted with certainty, the Company's management believes that
the outcome should not have a material effect on the financial
condition of the Company.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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Item 6. Exhibits and reports on Form 8-K
a) Exhibits
3(a) Composite Amended and Restated Articles of Incorporation (1)
3(b) By-laws of the Company (2)
4(a) Form of Rights Agreement, dated as of October 24, 1995 between
the Company and the American Stock Transfer and Trust Company, as
Rights Agent (3)
10.1 Second Amendment dated May 28, 1997 to Second Amended and
Restated Credit Agreement by and between the Company and First
Bank National Association
27 Financial Data Schedule
(1) Incorporated by reference to Exhibit 4.1 to Registration Statement on Form
S-3 dated June 2, 1993 (Registration No. 33-63694).
(2) Incorporated by reference to Exhibit 3(b) to Annual Report on Form 10-K for
the fiscal year ended December 29, 1993.
(3) Incorporated by reference to Exhibit 1 to Report on Form 8-K dated
October 24, 1995.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUFFETS, INC.
(Registrant)
Date: May 29, 1997
/s/ Roe H. Hatlen
------------------------------
Roe H. Hatlen
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ Clark C. Grant
------------------------------
Clark C. Grant
Executive Vice President of
Finance and Administration
and Treasurer
(Principal Financial
Officer)
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EXHIBIT INDEX
Exhibits Page
-------- ----
3(a) Composite Amended and Restated Articles of
Incorporation . . . . . . . . . . . . . . . Incorporated by Reference
3(b) By-laws of the Company. . . . . . . . . . . Incorporated by Reference
4(a) Form of Rights Agreement, dated as of
October 24, 1995 between the Company and
the American Stock Transfer and Trust
Company, as Rights Agent. . . . . . . . . . Incorporated by Reference
10.1 Second Amendment dated May 28, 1997 to
Second Amended and Restated Credit
Agreement by and betweeen the Company
and First Bank National Association . . . . Filed Electronically
27 Financial Data Schedule . . . . . . . . . . Filed Electronically
====================
<PAGE>
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT (the "Amendment") is made and entered into as of May 28, 1997 by
and between BUFFETS, INC., a Minnesota corporation (the "Borrower"), the
Banks as defined in the Credit Agreement (as hereinafter defined) and FIRST
BANK NATIONAL ASSOCIATION, a national banking association, one of the Banks,
as agent for the Banks (in such capacity, the"Agent").
RECITALS
1. The Borrower, the Banks and the Agent are parties to that
certain Second Amended and Restated Credit Agreement dated as of April 30,
1996, as amended by that certain First Amendment thereto dated as of
September 20, 1996 (as so amended and as the same may be amended,
supplemented, restated, or otherwise modified, the "Credit Agreement").
2. The Borrower has requested that the Banks amend certain
provisions contained in the Credit Agreement, and the Banks have agreed to do
so, subject to the terms and conditions set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration,the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby covenant
and agree to be bound as follows:
SECTION 1. CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the
Credit Agreement, unless the context shall otherwise require.
SECTION 2. AMENDMENTS. The Credit Agreement is hereby amended as
follows:
2.1 FIXED CHARGE COVERAGE RATIO. Section 6.17 of the Credit
Agreement is amended to read in its entirety as follows:
Section 6.17 Minimum Fixed Charge Coverage Ratio. The
Borrower shall not permit its Fixed Charge Coverage Ratio for any four
consecutive Quarterly Periods to be less than (a) for the four consecutive
Quarterly Periods ending on October 9, 1996, January 1, 1997, April 23,
1997, July 16, 1997 and October 8, 1997,
<PAGE>
1.15 to 1.00, and (b) for any other four consecutive Quarterly Periods,
1.75 to 1.00.
SECTION 3. EFFECTIVENESS OF AMENDMENTS. This Amendment shall become
effective as of October 6, 1996 upon delivery to the Agent with sufficient
counterparts for the Banks of this Amendment, executed by the Borrower and
the Majority Banks.
SECTION 4. REPRESENTATIONS: NO DEFAULT. The Borrower hereby
represents that on and as of the date hereof and after giving effect to this
Amendment (a) all of the representations and warranties contained in the
Credit Agreement are true, correct and complete in all material respects as
of the date hereof as though made on and as of such date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they are true and correct as of such earlier date, and
(b) there will exist no Default or Event of Default on such date which has
not been waived by the Banks. The Borrower represents and warrants that the
Borrower has the power and legal right and authority to enter into the
Amendment and has duly authorized as appropriate the execution and delivery
of the Amendment, and the Amendment does not contravene or constitute a
default under any agreement, instrument or indenture to which the Borrower or
any of its Subsidiaries is a party or a signatory or a provision of the
Borrower's or any such Subsidiary's certificate of incorporation, bylaws or,
to the best of the Borrower's knowledge, any other agreement or requirement
of law. The Borrower represents and warrants that no consent, approval or
authorization of or registration or declaration with any Person, including
but not limited to any governmental authority, is required in connection with
the execution and delivery by the Borrower of the Amendment or the
performance of obligations of the Borrower herein described. The Borrower
represents and warrants that the Amendment is the legal, valid and binding
obligation of the Borrower enforceable in accordance with its terms. The
Borrower warrants that no events have taken place and no circumstance exists
at the date hereof which would give the Borrower or any of its Subsidiaries a
basis to assert a defense, offset or counterclaim to any claim of the Agent
or any Bank as to any obligations of the Borrower or any of its Subsidiaries
to the Agent or any Bank.
SECTION 5. AFFIRMATION FURTHER REFERENCES. The Banks, the Agent and
the Borrower each acknowledge and affirm that the Credit Agreement, as hereby
amended, is hereby ratified and confirmed in all respects and all terms,
conditions and provisions of the Credit Agreement, except as amended by this
Amendment, shall remain unmodified and in full force and effect. All
references in any document or instrument to the Credit Agreement are hereby
amended and shall refer to the Credit Agreement as amended by this Amendment.
SECTION 6. MERGER AND INTEGRATION. SUPERSEDING EFFECT. This
Amendment, from and after the date hereof, embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes and has merged into it all prior oral and written
agreements on the same subjects by and between the parties hereto with the
effect that this Amendment shall control with respect to the specific
subjects hereof.
-2-
<PAGE>
SECTION 7. LEGAL EXPENSES. As provided in Section 9.2 of the Credit
Agreement, the Borrower agrees to reimburse the Agent upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal expenses
of Dorsey & Whitney LLP, counsel for the Agent) incurred in connection with the
negotiation or preparation of this Amendment and all other documents negotiated
and prepared in connection with this Amendment, and the Borrower agrees
to reimburse the Agent upon demand for all other reasonable expenses, including
attorneys' fees incurred as a result of or in connection with the enforcement of
the Credit Agreement as amended hereby, and including, without limitation,
all expenses of collection of any loans made or to be made under the Credit
Agreement as amended hereby.
SECTION 8. SEVERABILITY. Each provision of this Amendment and any
other statement, instrument or transactions contemplated hereby or relating
hereto shall be interpreted in such manner as to be effective, valid and
enforceable under the applicable law of any jurisdiction, but, if any
provision of this Amendment or relating hereto or thereto shall be held to be
prohibited, invalid or unenforceable under the applicable law, such provision
shall be ineffective in such jurisdiction only to the extent of such
prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto in
such jurisdiction, or affecting the effectiveness, validity or enforceability
of such provision in any such jurisdiction.
SECTION 9. SUCCESSORS. This Amendment shall be binding upon the
Borrower, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Banks and the
Agent and the successors and assigns of the Borrower, the Banks and the Agent.
SECTION 10. HEADINGS. The headings of various sections of this
Amendment have been inserted for reference only and shall not be deemed to be
a part of this Amendment.
SECTION 11. COUNTERPARTS. This Amendment may be executed in several
counterparts, all or any of which shall be regarded as one and the same document
and either party to such agreements may execute any such agreement by executing
a counterpart of such agreement.
SECTION 12. GOVERNING LAW. This amendment shall be governed by the
internal laws of the State of Minnesota, without giving effect to conflict of
law principles thereof, but giving effect to federal laws applicable to
national banks.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first above written.
BUFFETS, INC.
By /s/ Clark C. Grant
-----------------------------
Its CFO
---------------------------
Address for Borrower:
10260 Viking Drive
Eden Prairie, Minnesota 55344
Attention: Chief Financial Officer
FIRST BANK NATIONAL ASSOCIATION
In its individual corporate capacity and
as Agent
By /s/ Megan G. Mourning
-----------------------------
Its Vice President
---------------------------
Address:
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Megan Mourning MPFPO6O1
-4-
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF APRIL 23, 1997 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE PERIOD ENDED APRIL 23, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> APR-23-1997
<CASH> 16,053
<SECURITIES> 0
<RECEIVABLES> 3,822
<ALLOWANCES> 0
<INVENTORY> 3,878
<CURRENT-ASSETS> 38,211
<PP&E> 475,768
<DEPRECIATION> 143,106
<TOTAL-ASSETS> 379,174
<CURRENT-LIABILITIES> 84,908
<BONDS> 46,027
0
0
<COMMON> 452
<OTHER-SE> 243,018
<TOTAL-LIABILITY-AND-EQUITY> 379,174
<SALES> 240,741
<TOTAL-REVENUES> 240,741
<CGS> 216,531
<TOTAL-COSTS> 216,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,231
<INCOME-PRETAX> 10,455
<INCOME-TAX> 4,080
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,375
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
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