<PAGE> 1
FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: February 15, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: to
----------------- ----------------
Commission file number: 001-12315
---------
Skyline Chili, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0717287
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4180 Thunderbird Lane, Fairfield, Ohio 45014
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(513) 874-1188
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] YES [ ] NO
There were 3,397,773 shares of the registrant's no par value common stock
outstanding as of March 27, 1998.
<PAGE> 2
SKYLINE CHILI, INC.
-------------------
INDEX
Form 10-Q
February 15, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets.............................. 3
Consolidated Statements of Income........................ 4
Consolidated Statements of Cash Flows.................... 5
Notes to Condensed Consolidated Financial Statements..... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................ 9
SIGNATURES......................................................... 10
2
</TABLE>
<PAGE> 3
ITEM 1
SKYLINE CHILI, INC.
-------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF FEBRUARY 15, 1998 & OCTOBER 26, 1997
------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 2,423,000 $ 2,152,000
ACCOUNTS RECEIVABLE 1,250,000 1,873,000
INVENTORIES 1,540,000 1,412,000
PREPAID EXPENSES 195,000 145,000
DEFERRED INCOME TAXES 212,000 212,000
----------- -----------
TOTAL CURRENT ASSETS 5,620,000 5,794,000
PROPERTY AND EQUIPMENT, AT COST:
LAND 1,388,000 1,438,000
BUILDINGS AND IMPROVEMENTS 14,740,000 14,920,000
EQUIPMENT AND FIXTURES 9,962,000 9,653,000
----------- -----------
26,090,000 26,011,000
LESS ACCUMULATED DEPRECIATION 10,334,000 9,671,000
----------- -----------
NET PROPERTY AND EQUIPMENT 15,756,000 16,340,000
INTANGIBLE ASSETS - NET 756,000 571,000
OTHER ASSETS 355,000 181,000
----------- -----------
$22,487,000 $22,886,000
=========== ===========
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 1,449,000 $1,476,000
INCOME TAXES 282,000 209,000
ACCRUED LIABILITIES:
SALARIES AND WAGES 653,000 1,645,000
INTEREST 43,000 50,000
OTHER 461,000 365,000
LONG-TERM DEBT DUE WITHIN ONE YEAR 416,000 410,000
----------- -----------
TOTAL CURRENT LIABILITIES 3,304,000 4,155,000
MINORITY INTEREST 31,000 31,000
LEASE ESCALATION 109,000 109,000
DEFERRED COMPENSATION 319,000 153,000
DEFERRED INCOME TAXES 680,000 680,000
LONG-TERM DEBT DUE AFTER ONE YEAR 5,196,000 5,305,000
SHAREHOLDERS' EQUITY:
COMMON STOCK, NO PAR VALUE;
5,400,000 SHARES AUTHORIZED;
3,398,000 SHARES ISSUED AND OUTSTANDING 5,414,000 5,414,000
ADDITIONAL PAID-IN CAPITAL 19,000 19,000
RETAINED EARNINGS 7,415,000 7,020,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 12,848,000 12,453,000
----------- -----------
$22,487,000 $22,886,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE> 4
SKYLINE CHILI, INC.
-------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
-----------------------------
February 15, February 16,
1998 1997
----------- -----------
<S> <C> <C>
REVENUES:
SALES:
COMMISSARY $ 4,401,000 $4,161,000
RESTAURANT 5,638,000 5,133,000
FRANCHISE FEES AND ROYALTIES 432,000 443,000
----------- ----------
10,471,000 9,737,000
COSTS AND EXPENSES:
COST OF SALES - COMMISSARY 3,141,000 2,861,000
RESTAURANT OPERATING COSTS:
COST OF FOOD AND PAPER PRODUCTS 1,513,000 1,405,000
PAYROLL COSTS 1,766,000 1,588,000
OCCUPANCY AND OTHER EXPENSES 1,302,000 1,135,000
SELLING, GENERAL AND ADMINISTRATIVE 2,026,000 2,112,000
----------- ----------
9,748,000 9,101,000
----------- ----------
INCOME FROM OPERATIONS 723,000 636,000
OTHER INCOME (EXPENSE):
INTEREST INCOME 29,000 14,000
INTEREST EXPENSE (104,000) (111,000)
----------- ----------
(75,000) (97,000)
----------- ----------
INCOME BEFORE INCOME TAXES 648,000 539,000
PROVISION FOR INCOME TAXES 253,000 210,000
----------- ----------
NET INCOME $ 395,000 $ 329,000
=========== ==========
BASIC EARNINGS PER COMMON SHARE $0.12 $0.10
=========== ==========
WEIGHTED AVERAGE COMMON SHARE
OUTSTANDING 3,397,773 3,390,260
=========== ==========
DILUTED EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $0.11 $0.09
=========== ==========
WEIGHTED AVERAGE COMMON & COMMON
EQUIVALENT SHARES 3,614,000 3,592,000
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE> 5
SKYLINE CHILI, INC.
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
-------------------------------
February 15, February 16,
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 395,000 $ 329,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 681,000 767,000
DEFERRED INCOME TAXES
DECREASE (INCREASE) IN:
ACCOUNTS RECEIVABLE 623,000 459,000
INVENTORIES (128,000) (109,000)
PREPAID EXPENSES (50,000) 10,000
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE (27,000) (442,000)
INCOME TAXES PAYABLE 73,000 (35,000)
ACCRUED LIABILITIES (904,000) (328,000)
OTHER - NET (8,000) 1,000
----------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 655,000 652,000
INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (907,000) (202,000)
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT 826,000 1,000
ADDITIONS TO INTANGIBLE ASSETS (201,000)
----------- ----------
NET CASH USED BY
INVESTING ACTIVITIES ($ 282,000) ($201,000)
<CAPTION>
SIXTEEN WEEKS ENDED
-----------------------------
February 15, February 16,
1998 1997
----------- -----------
<S> <C> <C>
FINANCING ACTIVITIES:
PAYMENTS OF LONG-TERM DEBT (103,000) (96,000)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 5,000
CASH DIVIDENDS PAID (68,000)
----------- ----------
NET CASH USED BY
FINANCING ACTIVITIES (103,000) (159,000)
----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 270,000 292,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,152,000 1,140,000
----------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,422,000 $1,432,000
=========== ==========
CASH PAID FOR:
INTEREST $ 68,000 $146,000
INCOME TAXES $ 202,000 $195,000
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE> 6
SKYLINE CHILI, INC.
-------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. Operating results
for the sixteen week period ended February 15, 1998 are not necessarily
indicative of the results that may be expected for the year ended October 25,
1998. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended October 26, 1997.
RECLASSIFICATIONS
Certain fiscal 1997 amounts have been reclassified to conform to the fiscal 1998
presentation.
6
<PAGE> 7
SKYLINE CHILI, INC.
-------------------
Item 2.
- -------
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of
----------------------------------
Operations
----------
Results of Operations
- ---------------------
Revenues
- --------
Total revenues for the first quarter ended February 15, 1998 of $10.4 million
increased 8% over the same period last year. These increases were principally
due to increased sales of canned products to the Company's grocery store
customers, increased same-store sales by Company-owned restaurants, and
additional revenues from new restaurant locations.
Commissary revenues for the quarter were 6% higher than the same period last
year. These increases were principally due to an 88% increase in sales of canned
chili products to grocery customers over last year. This increase was partially
offset by a 3% decrease in the frozen product sales in the first quarter
compared to the same period last year. In addition, sales of chili and related
food products to franchised Skyline Chili restaurants in the first quarter
increased 2% over the same period last year.
Same-store sales in Company-owned restaurants increased 4% for the first quarter
compared to the same period last year. This increase, plus the additional sales
from the two stores opened during fiscal 1997, and a new location opened at the
beginning of the quarter, accounted for the 10% increase in restaurant revenues
in the first quarter over the prior year.
There were 36 Company-owned units at the end of the first quarter, an increase
of one compared to the end of fiscal 1997. The number of franchised units
remained unchanged at 67 at the end of the first quarter compared to the end of
fiscal 1997.
Franchise fees and royalties for the first quarter were 3% lower than the same
period last year. This decrease was principally due to the initial franchise
fees from two franchised units opened in the first quarter of last year compared
to no new openings in the first quarter of fiscal 1998.
Cost of Sales - Commissary
- --------------------------
Cost of sales for the first quarter was 71% of the corresponding commissary
revenue compared to 69% in fiscal 1997. This increased rate was principally due
to unfavorable manufacturing variances related to lower production levels of
frozen products compared to last year and higher beef prices. The Company's cost
of sales rate is heavily influenced by beef prices which can fluctuate
significantly.
Restaurant Operating Expenses
- -----------------------------
The cost of food and paper products for the first quarter remained unchanged at
27% of restaurant revenues compared to the same period last year. Labor costs
for the first quarter also remained unchanged at 31% of restaurant revenues
compared to the first quarter of fiscal 1997. Occupancy and other expenses for
the first quarter were higher than last year due to the addition of two new
Company-owned units opened last year and the one unit opened this year.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses for the first quarter decreased 4%
compared to the same period last year due to lower management bonus levels.
7
<PAGE> 8
Other Income (Expense)
- ----------------------
Net interest expense for the first quarter was lower than the same period last
year because of interest income on higher cash balances and lower debt levels
resulting from scheduled principal payments on the City of Fairfield, Ohio
Adjustable Rate Demand Industrial Development Revenue Bonds.
Impact of Year 2000
- -------------------
The Company has completed an assessment and will have to modify portions of its
software so that its computer systems will function properly with respect to
dates in the year 2000 and thereafter. With these modifications, the Company
believes that the Year 2000 Issue will not pose significant operational problems
for its computer systems. The Company does not anticipate the project costs to
be material.
Merger Agreement
- ----------------
On November 26, 1997, the Company entered into an Agreement and Plan of Merger
with Skyline Acquisition Corp. ("Acquisition Co."), a new corporation organized
by Fleet Venture Resources, Inc. and certain of its affiliates ("Fleet Equity
Partners") and certain members of the Company's management (the "Management
Group"). Fleet Equity Partners, headquartered in Providence, Rhode Island, is a
$750,000,000 private equity fund with investments in a number of industries
including telecommunications services, health care services, industrial
manufacturing, media and information, and consumer products and services.
The merger agreement contemplates a transaction in which Fleet Equity Partners
and the Management Group will acquire substantially all of the outstanding
common stock of the Company for cash through a reverse merger of Acquisition Co.
with and into the Company. Completion of the acquisition remains subject to debt
financing and approval by the Company's shareholders. Upon completion of the
merger, the Company's existing shareholders, other than Acquisition Co., would
receive $6.75 per share in cash. Upon completion of the merger, the Company
would no longer be registered as a public company with the Securities and
Exchange Commission and would no longer be subject to public reporting
requirements.
Liquidity and Capital Resources
-------------------------------
Cash levels increased $271,000 over fiscal 1997 year end levels to $2.4 million.
Working capital was $2.3 million at the end of the first quarter compared to
$1.6 million at the end of fiscal 1997.
During the first quarter of fiscal 1998, the Company spent approximately
$194,000 on equipment replacements, remodels of existing locations and other
ongoing maintenance throughout the system. The Company also spent $40,000 of the
$50,000 expected to be spent to complete the installation of new point-of-sale
equipment in all Company-owned restaurants. The Company spent approximately
$248,000 to complete the construction of a free-standing unit in Dayton, Ohio
which began operations at the beginning of the quarter. The total cost for this
unit was $1,018,000 including amounts spent in the prior fiscal year. In a
sale-leaseback transaction, the Company received $825,000 for this location. The
Company spent approximately $424,000 to begin construction of three freestanding
units during the first quarter; one in Dayton, Ohio and two in Columbus, Ohio.
The Company intends to spend approximately $971,000 to complete the construction
of these locations. One of the Columbus locations began operations during the
second quarter of fiscal 1998 and the other two locations are expected to begin
operations during the third quarter of fiscal 1998. The Company also intends to
spend approximately $618,000 on equipment replacements, remodels of existing
locations and other ongoing maintenance throughout the system during the last
three quarters of fiscal 1998. The Company believes that cash provided by
operations, planned sale-leaseback transactions and its $4 million unsecured
bank line of credit will be adequate to fund anticipated expansion and new
equipment purchases.
The Company maintains a compensating balance of $400,000 with the bank that has
issued a letter of credit guaranteeing payment of the principal and related
interest on the City of Fairfield, Ohio Adjustable Rate Demand Industrial
Development Revenue Bonds issued in 1990 to fund in part the construction of the
Company's new commissary, warehouse and office facility. There are no legal
restrictions on the use of those compensating balance funds.
8
<PAGE> 9
Skyline Chili, Inc.
-------------------
FORM 10-Q
February 15, 1998
PART II. OTHER INFORMATION
--------------------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------
(a) Exhibits filed with this Report:
Exhibit 2.1 Second Amendment dated March 26, 1998 to Agreement and
Plan of Merger dated November 26, 1997 between Skyline
Chili, Inc., certain consenting shareholders and
Skyline Acquisition Corp.
Exhibit 10.1 Second Addendum dated October 27, 1997 to Consulting
Agreement with Lambert N. Lambrinides.
Exhibit 10.2 Second Addendum dated October 27, 1997 to Consulting
Agreement with Christie N. Lambrinides.
Exhibit 10.3 Second Addendum dated October 27, 1997 to Consulting
Agreement with William N. Lambrinides.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed one Report on Form 8-K dated December 2, 1997
during the quarter for which this Report on Form 10-Q is filed. The
Form 8-K reported, under Item 1(b), the execution of the Agreement
and Plan of Merger and pending change-in-control of the Company
described in Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations of this Form 10-Q.
9
<PAGE> 10
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.
Skyline Chili, Inc.
-------------------
Registrant
by: /s/Kevin R. McDonnell
-------------------------
Kevin R. McDonnell
President and Chief
Executive
Officer (Duly Authorized Officer)
by: /s/Jeffry W. Shelton
------------------------
Jeffry W. Shelton, Corporate Vice
President - Finance
Chief Financial Officer and Treasurer
(Principal Financial and
Chief Accounting Officer)
Date: March 30, 1998
10
<PAGE> 1
EXHIBIT 2.1
SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER dated as of March 20,
1998 by and among SKYLINE ACQUISITION CORP., an Ohio corporation (the "Buyer"),
SKYLINE CHILI, INC., an Ohio corporation (the "Company"), and certain
stockholders of the Company executing this instrument (the "Consenting
Stockholders") amending a certain Agreement and Plan of Merger dated as of
November 26, 1997, as amended by a First Amendment to Agreement and Plan of
Merger dated as of January 9, 1998, both by and among the Buyer, the Company and
the Consenting Stockholders (as so amended, the "Agreement"). Capitalized terms
used herein which are defined in the Agreement shall have the same meanings
herein as therein unless defined otherwise herein or the context hereof requires
otherwise.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein made, the Parties agree as follows:
1. EXCLUSIVITY TERMINATION DATE. The Exclusivity Termination Date shall
be May 8, 1998 and, accordingly, ss. 5(i) of the Agreement is hereby amended by
replacing the date "April 11, 1998" in the first line thereof with the date "May
8, 1998".
2. TERMINATION. Each of ss.7(a)(ii)(B) and ss.7(a)(iii)(B) of the
Agreement is hereby amended by replacing the date "April 11, 1998" therein with
the date "May 8, 1998".
3. NO OTHER AMENDMENTS. Except to the extent expressly amended hereby
the Agreement shall not be deemed amended or modified in any way and shall
remain in full force and effect.
4. MISCELLANEOUS.
(a) SUCCESSION AND ASSIGNMENT. This instrument shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
instrument or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties.
(b) COUNTERPARTS. This instrument may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(c) HEADINGS. The section headings contained in this
instrument are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this instrument.
(d) GOVERNING LAW. This instrument shall be governed by and
construed in accordance with the domestic laws of the State of Ohio without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Ohio or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Ohio.
<PAGE> 2
IN WITNESS WHEREOF, the Parties hereto have executed this instrument as
of the date first above written.
SKYLINE CHILI, INC.
By: /s/ Joseph E. Madigan
-----------------------------
Title: Chairman of the Special
Committee
/s/ Lambert N. Lambrinides
----------------------------------
(LAMBERT N. LAMBRINIDES)
/s/ Christie N. Lambrinides
----------------------------------
(CHRISTIE N. LAMBRINIDES)
/s/ William N. Lambrinides
----------------------------------
(WILLIAM N. LAMBRINIDES)
/s/ Kevin R. McDonnell
----------------------------------
(KEVIN R. McDONNELL)
SKYLINE ACQUISITION CORP.
By: /s/ Bernard V. Buonnano, III
----------------------------------
(BERNARD V. BUONNANO, III)
Title: President
2
<PAGE> 1
EXHIBIT 10. 1
SECOND ADDENDUM TO CONSULTING AGREEMENT
This Second Addendum to Consulting Agreement is made and entered into
effective the 27th day of October 1997 (the "Effective Date"), by and between
Lambert N. Lambrinides ("Mr. Lambrinides") and Skyline Chili, Inc., an Ohio
corporation (the "Company").
WHEREAS, Mr. Lambrinides and the Company entered into a Consulting
Agreement dated August 31, 1994 (the "Consulting Agreement"), which was renewed
pursuant to a First Addendum to Consulting Agreement dated October 31, 1996,
pursuant to which Mr. Lambrinides has been providing consulting services to the
Company;
WHEREAS, the renewal term of the Consulting Agreement expired on
October 26, 1997; and
WHEREAS, pursuant to Paragraph 9(a) of the Consulting Agreement, Mr.
Lambrinides and the Company have mutually agreed to renew the Consulting
Agreement for an additional one year term.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, Mr. Lambrinides and the Company agree as follows:
1. RENEWAL OF CONSULTING PERIOD. From the Effective Date through
October 25, 1998 (the "Consulting Period"), Mr. Lambrinides shall continue to
provide such Consulting Services as are reasonably requested by the Company. All
of the terms and conditions of the Consulting Agreement shall continue to apply
during this extended Consulting Period, including without limitation the
provision that the Consulting Agreement shall terminate immediately upon a
change in control of the Company. The Company shall continue to maintain the
life insurance policy on Mr. Lambrinides' life in the amount of $250,000 from
the Effective Date through October 25, 1998.
2. TERM OF SECOND ADDENDUM. Unless terminated on an earlier date or
renewed as provided in the Consulting Agreement, the extended term of the
Consulting Agreement and this Second Addendum shall expire on October 25, 1998.
All references in the Consulting Agreement to its "initial term" shall now be
deemed references to the extended term described in this Second Addendum as the
context requires.
3. MISCELLANEOUS. Except as modified in this Second Addendum, all of
the terms and conditions of the Consulting Agreement shall remain in effect and
are hereby reaffirmed by the parties hereto. Capitalized terms used in this
Second Addendum and not defined herein shall have the meanings ascribed to them
in the Consulting Agreement.
IN WITNESS WHEREOF, Mr. Lambrinides and the Company have signed this
Second Addendum as of the Effective Date.
/s/ Lambert N. Lambrinides
--------------------------------
Lambert N. Lambrinides
SKYLINE CHILI, INC.
By: /s/ Kevin R. McDonnell
-----------------------------
Its: President
<PAGE> 1
EXHIBIT 10. 2
SECOND ADDENDUM TO CONSULTING AGREEMENT
This Second Addendum to Consulting Agreement is made and entered into
effective the 27th day of October 1997 (the "Effective Date"), by and between
Christie N. Lambrinides ("Mr. Lambrinides") and Skyline Chili, Inc., an Ohio
corporation (the "Company").
WHEREAS, Mr. Lambrinides and the Company entered into a Consulting
Agreement dated August 31, 1994 (the "Consulting Agreement"), which was renewed
pursuant to a First Addendum to Consulting Agreement dated October 31, 1996,
pursuant to which Mr. Lambrinides has been providing consulting services to the
Company;
WHEREAS, the renewal term of the Consulting Agreement expired on
October 26, 1997; and
WHEREAS, pursuant to Paragraph 9(a) of the Consulting Agreement, Mr.
Lambrinides and the Company have mutually agreed to renew the Consulting
Agreement for an additional one year term.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, Mr. Lambrinides and the Company agree as follows:
1. RENEWAL OF CONSULTING PERIOD. From the Effective Date through
October 25, 1998 (the "Consulting Period"), Mr. Lambrinides shall continue to
provide such Consulting Services as are reasonably requested by the Company. All
of the terms and conditions of the Consulting Agreement shall continue to apply
during this extended Consulting Period, including without limitation the
provision that the Consulting Agreement shall terminate immediately upon a
change in control of the Company. The Company shall continue to maintain the
life insurance policy on Mr. Lambrinides' life in the amount of $250,000 from
the Effective Date through October 25, 1998.
2. TERM OF SECOND ADDENDUM. Unless terminated on an earlier date or
renewed as provided in the Consulting Agreement, the extended term of the
Consulting Agreement and this Second Addendum shall expire on October 25, 1998.
All references in the Consulting Agreement to its "initial term" shall now be
deemed references to the extended term described in this Second Addendum as the
context requires.
3. MISCELLANEOUS. Except as modified in this Second Addendum, all of
the terms and conditions of the Consulting Agreement shall remain in effect and
are hereby reaffirmed by the parties hereto. Capitalized terms used in this
Second Addendum and not defined herein shall have the meanings ascribed to them
in the Consulting Agreement.
IN WITNESS WHEREOF, Mr. Lambrinides and the Company have signed this
Second Addendum as of the Effective Date.
/s/ Christie N. Lambrinides
--------------------------------
Christie N. Lambrinides
SKYLINE CHILI, INC.
By: /s/ Kevin R. McDonnell
----------------------------
Its: President
<PAGE> 1
EXHIBIT 10.3
SECOND ADDENDUM TO CONSULTING AGREEMENT
This Second Addendum to Consulting Agreement is made and entered into
effective the 27th day of October 1997 (the "Effective Date"), by and between
William N. Lambrinides ("Mr. Lambrinides") and Skyline Chili, Inc., an Ohio
corporation (the "Company").
WHEREAS, Mr. Lambrinides and the Company entered into a Consulting
Agreement dated August 31, 1994 (the "Consulting Agreement"), which was renewed
pursuant to a First Addendum to Consulting Agreement dated October 31, 1996,
pursuant to which Mr. Lambrinides has been providing consulting services to the
Company;
WHEREAS, the renewal term of the Consulting Agreement expired on
October 26, 1997; and
WHEREAS, pursuant to Paragraph 9(a) of the Consulting Agreement, Mr.
Lambrinides and the Company have mutually agreed to renew the Consulting
Agreement for an additional one year term.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, Mr. Lambrinides and the Company agree as follows:
1. RENEWAL OF CONSULTING PERIOD. From the Effective Date through
October 25, 1998 (the "Consulting Period"), Mr. Lambrinides shall continue to
provide such Consulting Services as are reasonably requested by the Company. All
of the terms and conditions of the Consulting Agreement shall continue to apply
during this extended Consulting Period, including without limitation the
provision that the Consulting Agreement shall terminate immediately upon a
change in control of the Company. The Company shall continue to maintain the
life insurance policy on Mr. Lambrinides' life in the amount of $250,000 from
the Effective Date through October 25, 1998.
2. TERM OF SECOND ADDENDUM. Unless terminated on an earlier date or
renewed as provided in the Consulting Agreement, the extended term of the
Consulting Agreement and this Second Addendum shall expire on October 25, 1998.
All references in the Consulting Agreement to its "initial term" shall now be
deemed references to the extended term described in this Second Addendum as the
context requires.
3. MISCELLANEOUS. Except as modified in this Second Addendum, all of
the terms and conditions of the Consulting Agreement shall remain in effect and
are hereby reaffirmed by the parties hereto. Capitalized terms used in this
Second Addendum and not defined herein shall have the meanings ascribed to them
in the Consulting Agreement.
IN WITNESS WHEREOF, Mr. Lambrinides and the Company have signed this
Second Addendum as of the Effective Date.
/s/ William N. Lambrinides
-----------------------------
William N. Lambrinides
SKYLINE CHILI, INC.
By: /s/ Kevin R. McDonnell
-------------------------
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AS OF
AND FOR THE SIXTEEN WEEKS ENDED FEBRUARY 15, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000803497
<NAME> SKYLINE CHILI, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-25-1998
<PERIOD-START> OCT-27-1997
<PERIOD-END> FEB-15-1998
<CASH> 2,423
<SECURITIES> 0
<RECEIVABLES> 1,250
<ALLOWANCES> 0
<INVENTORY> 1,540
<CURRENT-ASSETS> 5,620
<PP&E> 26,090
<DEPRECIATION> 10,334
<TOTAL-ASSETS> 22,487
<CURRENT-LIABILITIES> 3,304
<BONDS> 5,196
0
0
<COMMON> 5,414
<OTHER-SE> 7,434
<TOTAL-LIABILITY-AND-EQUITY> 22,487
<SALES> 10,039
<TOTAL-REVENUES> 10,471
<CGS> 3,141
<TOTAL-COSTS> 9,748
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> 648
<INCOME-TAX> 253
<INCOME-CONTINUING> 395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 395
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.11
</TABLE>
