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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 17, 1994 Commission File No. 1-9390
-------------- ------
FOODMAKER, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-2698708
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(State of Incorporation) (I.R.S. Employer
Identification No.)
9330 BALBOA AVENUE, SAN DIEGO, CA 92123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 571-2121
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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
---- ----
Number of shares of common stock, $.01 par value, outstanding
as of the close of business May 31, 1994 - 38,573,400
1
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FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 17, October 3,
1994 1993
------- -------
ASSETS
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . $ 79,626 $ 4,481
Receivables . . . . . . . . . . . . . . . . . . 25,533 30,277
Inventories . . . . . . . . . . . . . . . . . . 26,681 40,977
Prepaid expenses. . . . . . . . . . . . . . . . 8,946 17,799
------- -------
Total current assets . . . . . . . . . . . . 140,786 93,534
------- -------
Investment in FRI . . . . . . . . . . . . . . . . 57,455 -
------- -------
Trading area rights . . . . . . . . . . . . . . . 61,114 55,678
------- -------
Lease acquisition costs . . . . . . . . . . . . . 27,089 46,013
------- -------
Other assets. . . . . . . . . . . . . . . . . . . 78,153 54,133
------- -------
Property at cost. . . . . . . . . . . . . . . . . 526,407 711,284
Accumulated depreciation and amortization . . . (125,351) (164,813)
------- -------
401,056 546,471
------- -------
Cost of business in excess of net assets
at acquisition. . . . . . . . . . . . . . . . . 2,632 94,591
------- -------
TOTAL. . . . . . . . . . . . . . . . . . . . $768,285 $890,420
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt. . . . . . $ 12,816 $ 33,163
Accounts payable. . . . . . . . . . . . . . . . 35,707 36,662
Accrued expenses. . . . . . . . . . . . . . . . 85,017 122,741
Income taxes payable. . . . . . . . . . . . . . 6,976 10,783
------- -------
Total current liabilities. . . . . . . . . . 140,516 203,349
------- -------
Deferred income taxes . . . . . . . . . . . . . . - 17,189
------- -------
Long-term debt, net of current maturities . . . . 463,689 500,460
------- -------
Other long-term liabilities . . . . . . . . . . . 40,939 30,290
------- -------
Stockholders' equity:
Common stock. . . . . . . . . . . . . . . . . . 400 396
Capital in excess of par value. . . . . . . . . 280,677 280,353
Accumulated deficit . . . . . . . . . . . . . . (143,473) (127,154)
Treasury stock. . . . . . . . . . . . . . . . . (14,463) (14,463)
------- -------
Total stockholders' equity. . . . . . . . . . . 123,141 139,132
------- -------
TOTAL. . . . . . . . . . . . . . . . . . . . $768,285 $890,420
======= =======
See accompanying notes to financial statements.
2
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FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Twelve Weeks Ended Twenty-eight Weeks Ended
---------------------- ------------------------
April 17, April 11, April 17, April 11,
1994 1993 1994 1993
-------- -------- -------- --------
Revenues:
Restaurant sales. . . . . . . $165,003 $217,319 $499,366 $569,004
Distribution sales. . . . . . 45,117 20,273 79,993 55,087
Franchise rents and royalties 7,540 5,944 18,538 18,544
Other . . . . . . . . . . . . 1,046 1,373 2,383 5,605
-------- -------- -------- --------
218,706 244,909 600,280 648,240
-------- -------- -------- --------
Costs and expenses:
Costs of revenues:
Restaurant cost of sales . 48,731 61,288 144,650 158,867
Restaurant operating costs 96,475 140,440 297,981 335,118
Cost of distribution sales 43,798 19,629 77,081 52,993
Franchised restaurant costs 5,128 10,132 12,392 17,082
Selling, general and
administrative . . . . . . 23,048 33,773 56,097 70,112
Equity in loss of FRI . . . . 1,261 - 1,261 -
Interest expense. . . . . . . 12,375 12,915 30,783 30,085
-------- -------- -------- --------
230,816 278,177 620,245 664,257
-------- -------- -------- --------
Loss before income taxes,
extraordinary item and
cumulative effect of changes
in accounting principles. . . (12,110) (33,268) (19,965) (16,017)
Income taxes (benefit). . . . . (2,928) (11,093) (6,384) (5,341)
-------- -------- -------- --------
Loss before extraordinary item
and cumulative effect of
changes in accounting
principles. . . . . . . . . . (9,182) (22,175) (13,581) (10,676)
Extraordinary item - loss on
early extinguishment of debt,
net of taxes. . . . . . . . . (2,738) - (2,738) -
Cumulative effect on prior
years (to September 27, 1992)
ofadopting SFAS 106 and
SFAS 109. . . . . . . . . . . - - - (53,980)
-------- -------- -------- --------
Net loss. . . . . . . . . . . . $(11,920) $(22,175) $(16,319) $(64,656)
======== ======== ======== ========
Loss per share - primary
and fully diluted:
Loss before extraordinary
item and cumulative effect
of changes in accounting
principles . . . . . . . . $ (.24) $ (.58) $ (.35) $ (.28)
Extraordinary item. . . . . . (.07) - (.07) -
Cumulative effect on prior
years (to September 27,
1992) of adopting SFAS 106
and SFAS 109 . . . . . . . - - - (1.39)
-------- -------- -------- --------
Net loss per share. . . . . . $ (.31) $ (.58) $ (.42) $ (1.67)
======== ======== ======== ========
Weighted average shares
outstanding 38,559 38,111 38,467 38,725
See accompanying notes to financial statements.
3
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FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Twenty-eight Weeks Ended
-------------------------
April 17, April 11,
1994 1993
------- -------
Cash flows from operations:
Net loss, excluding extraordinary item. . . . . $(13,581) $(64,656)
Non-cash items included above:
Depreciation and amortization. . . . . . . . 25,959 30,356
Deferred income taxes. . . . . . . . . . . . (9,358) (2,388)
Equity in loss of FRI. . . . . . . . . . . . 1,261 -
Cumulative effect of accounting changes. . . - 53,980
Decrease in receivables . . . . . . . . . . . . 1,771 4,532
Increase in inventories . . . . . . . . . . . . (1,168) (2,776)
Decrease in prepaid expenses. . . . . . . . . . 5,893 150
Increase (decrease) in accounts payable . . . . 15,167 (6,200)
Decrease in accrued expenses. . . . . . . . . . (3,823) (6,881)
------- -------
Cash flows provided by operations. . . . . . 22,121 6,117
------- -------
Cash flows from investing activities:
Additions to property and equipment . . . . . . (37,979) (21,215)
Dispositions of property and equipment. . . . . 411 3,794
Decrease (increase) in trading area rights. . . (6,766) 245
Acquisition of Consul . . . . . . . . . . . . . - (8,700)
Investment in FRI, net. . . . . . . . . . . . . (58,716) -
Disposition of Chi-Chi's. . . . . . . . . . . . 225,606 -
Increase in other assets. . . . . . . . . . . . (33,852) (1,318)
------- -------
Cash flows provided (used) in investing
activities . . . . . . . . . . . . . . . . 88,704 (27,194)
------- -------
Cash flows from financing activities:
Borrowings under revolving bank loans . . . . . 5,000 17,000
Principal repayments under revolving bank loans (35,000) -
Proceeds from issuance of long-term debt. . . . 81,211 1,737
Principal payments on long-term debt,
including current maturities . . . . . . . . (84,388) (5,222)
Extraordinary loss on retirement of debt,
net of tax . . . . . . . . . . . . . . . . . (2,738) -
Increase (decrease) in accrued interest . . . . 2,313 (1,066)
Repurchase of common stock. . . . . . . . . . . - (10,929)
Proceeds from issuance of common stock. . . . . 328 1,106
Other changes in equity . . . . . . . . . . . . - 46
Net proceeds from sale and leaseback transactions 7,118 6,989
Decrease in accrued transaction costs . . . . . - (259)
------- -------
Cash flows provided (used) by financing
activities . . . . . . . . . . . . . . . . (26,156) 9,402
------- -------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . $ 84,669 $(11,675)
======= =======
See accompanying notes to financial statements.
4
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FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
April 17, 1994
1. The accompanying unaudited financial statements 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 only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for
any interim period are not necessarily indicative of the results for any
other interim period or for the full year. The Company reports results
quarterly with the first quarter having 16 weeks and each remaining quarter
having 12 weeks. Certain financial statement reclassifications have been
made in the prior year to conform to the current year presentation.
Additionally, the prior year financial statements have been restated to
reflect the Company's adoption as of September 28, 1992 of Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting
for Income Taxes". These financial statements should be read in conjunction
with the 1993 financial statements.
2. The income tax benefit for 1994 was 32% of the pretax loss. Income taxes in
1993 were 33% of pretax earnings before the cumulative effect of changes in
accounting principles, and reflect the restatement for the annualized effect
of adopting SFAS No. 109.
3. On January 27, 1994, Foodmaker, Apollo Advisors, L.P. ("Apollo") and Green
Equity Investors, L.P. ("GEI"), whose general partner is Leonard Green &
Partners, (collectively, the "Investors"), acquired Restaurant Enterprises
Group, Inc. ("REGI"), a company that owns, operates and franchises various
restaurant chains including El Torito, Carrows and Coco's.
Contemporaneously, REGI changed its name to Family Restaurants, Inc.
("FRI"). Concurrently, Foodmaker contributed its entire Chi-Chi's Mexican
restaurant chain to FRI in exchange for an approximate 40% equity interest
in FRI, valued at $62 million, a five-year warrant to acquire 111,111
additional shares at $240 per share, which would increase its equity
interest to 46%, and approximately $173 million in cash ($208 million less
the face amount of Chi-Chi's debt assumed, aggregating approximately $35
million). Apollo and GEI, respectively, contributed $62 million and $29
million in cash and hold approximate 40% and 18.4% equity positions in FRI.
Management of FRI invested $2.5 million in cash and notes and holds an
approximate 1.6% equity position. A portion of the net cash received was
used by Foodmaker to repay all of the debt outstanding under its then
existing bank credit facility, which has been terminated. It is expected
that the balance of proceeds will be used to reduce other existing debt, to
the extent permitted by the Company's financing agreements, and to provide
funds for capital expenditures and general corporate purposes. The Company
does not anticipate receiving dividends on its FRI common stock in the
foreseeable future. The payment of dividends is restricted by FRI's public
debt instruments.
Summarized FRI financial information for the two months from the date of the
acquisition through March 27, 1994, the end of its first quarter, follows
(in thousands):
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,580
--------
Costs of sales. . . . . . . . . . . . . . . . . . . . . . . 52,986
Operating costs . . . . . . . . . . . . . . . . . . . . . . 120,314
General and administrative expense. . . . . . . . . . . . . 9,045
Interest expense. . . . . . . . . . . . . . . . . . . . . . 9,878
--------
Loss before income tax provision. . . . . . . . . . . . . . (2,643)
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 594
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,237)
========
5
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FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. In early January 1994, the Company entered into financing lease arrangements
with two limited partnerships, (the "Partnerships"), in which estates for
years relating to 42 existing and approximately 34 to-be-constructed
restaurants were sold. The acquisition of the properties, including costs
and expenses, was funded through the issuance by a special purpose
corporation acting as agent for the Partnerships of $70 million senior
secured notes, having interest payable semi-annually and due in two equal
annual installments of principal beginning November 1, 2002. The Company is
required semi-annually through year nine to make payments to a trustee of
approximately $3.4 million and special payments of approximately $.7
million, which effectively cover interest and sinking fund requirements,
respectively, on the notes. At the end of years nine and ten, the Company
must make rejectable offers to reacquire 50% of the properties at each date
at a price which is sufficient, in conjunction with previous sinking fund
deposits, to retire the notes. If the Partnerships reject the offers, the
Company may purchase the properties at less than fair market value or cause
the Partnerships to fund the remaining principal payments on the notes and,
at the Company's option, cause the Partnerships to acquire the Company's
residual interest in the properties. If the Partnerships are allowed to
retain the estates for years, the Company has available options to extend
the leases for total terms of up to 35 years, at which time the ownership
of the property will revert to the Company. The transactions are reflected
as financings with the properties remaining in the Company's financial
statements. As a result of the foregoing transaction, at April 17, 1994,
the Company had approximately $28 million in construction funds available
for new restaurants, which was classified in the financial statements in
other assets.
5. Long-term debt has changed as a result of the aforementioned transactions as
indicated in the following table:
April 17, October 3,
1994 1993
--------- ---------
Bank credit agreement. . . . . . . . . . . . . . . $ -- $107,000
13 1/2% Senior notes . . . . . . . . . . . . . . . 23,283 23,283
9 1/4% Senior notes, due March 1, 1999 . . . . . . 175,000 175,000
9 3/4% Senior subordinated notes, due June 1, 2002 125,000 125,000
12 3/4% Senior notes, due July 1, 1996 . . . . . . 7,043 7,043
14 1/4% Senior subordinated notes, due May 15, 1998 42,843 42,843
Subordinated debentures. . . . . . . . . . . . . . -- 19,268
Other notes, principally secured . . . . . . . . . 25,707 23,610
Financing lease obligations. . . . . . . . . . . . 68,940 --
Capitalized lease obligations. . . . . . . . . . . 8,689 10,576
-------- --------
476,505 533,623
Less current portion . . . . . . . . . . . . . . . (12,816) (33,163)
-------- --------
$463,689 $500,460
======== ========
6. Contingent Liabilities
Various claims and legal proceedings are pending against the Company in
various state and Federal courts; many of those proceedings are in the
states of Washington, Nevada and Idaho and in Federal Court, Western
District of Washington at Seattle seeking monetary damages and other relief
relating to the outbreak of food-borne illness (the "Outbreak") attributed
to hamburgers served at Jack In The Box restaurants. The Company, in
consultation with its insurance carriers and attorneys, does not anticipate
that the total liability on all such lawsuits and claims will exceed the
coverage available under its applicable insurance policies.
6
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FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Actions were filed on July 2, 1993, in the Superior Court of California,
County of San Diego, by certain of the Company's franchisees against the
Company, The Vons Companies, Inc., ("Vons") and other suppliers (Syed Ahmad,
et al, versus Foodmaker, Inc., et al), claiming damages from reduced sales
and profits due to the Outbreak. After extensive negotiations, settlements
were reached with all but one of the franchisees. During 1993, the Company
provided approximately $44.5 million to cover the settlements and associated
costs, including a then anticipated settlement with the remaining
franchisee.
On January 14, 1994, the non-settling Franchisee filed two substantially
identical suits against the Company and The Vons Companies in Superior Court
of California, County of San Diego and in Federal Court, Southern District
of California (Ira Fischbein, et al versus Foodmaker, Inc., et al) claiming
damages from reduced sales, lost profits and reduced value of the franchise
due to the Outbreak. The Company has engaged legal counsel and is
vigorously defending the actions.
The Company on July 19, 1993, filed a cross-complaint against Vons and other
suppliers seeking reimbursement for all damages, costs and expenses incurred
in connection with the Outbreak. On or about January 18, 1994, Vons filed
a cross complaint against Foodmaker and others in this action alleging
certain contractual and tort liabilities and seeking damages in unspecified
amounts and a declaration of the rights and obligations of the parties.
In April 1993, a class action, In re Foodmaker, Inc./Jack In The Box
Securities Litigation, was filed in Federal Court, Western District of
Washington at Seattle against the Company, its Chairman, and the President
of the Jack In The Box Division on behalf of all persons who acquired the
Company's common stock between March 4, 1992 and January 22, 1993 seeking
damages in an unspecified amount as well as punitive damages. In general
terms, the complaint alleges that there were false and misleading statements
in the Company's March 4, 1992 prospectus and in certain public statements
and filings in 1992 and 1993, including claims that the defendants
disseminated false information regarding the Company's food quality
standards and internal quality control procedures. The Company has engaged
legal counsel and is vigorously defending the action.
The amount of liability from the claims and actions described above cannot
be determined with certainty, but in the opinion of management, based in
part upon advice from legal counsel, the ultimate liability from all pending
legal proceedings, asserted legal claims and known potential legal claims
which are probable of assertion will not materially affect the consolidated
financial position or operations of the Company.
The U.S. Internal Revenue Service ("IRS") had proposed adjustments to tax
liabilities of $17 million (exclusive of interest) for the Company's federal
income tax returns for fiscal years 1986 through 1988. A final report has
not been issued but agreement has been reached to satisfy these proposed
adjustments at approximately $1.3 million (exclusive of $.8 million
interest). The IRS examinations of the Company's federal income tax returns
for fiscal years 1989 and 1990 resulted in the issuance of proposed
adjustments to tax liabilities aggregating $2.2 million (exclusive of $.7
million interest). The Company has filed a protest with the Regional Office
of Appeals of the IRS contesting the proposed assessments. Management
believes that adequate provision for income taxes has been made.
7
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FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Selected Pro Forma Financial Data
The following selected pro forma statement of operations for the 28 weeks
ended April 17, 1994 give effect to the following transactions and events as
if they had occured as of the beginning of the period presented: (i) the
acquisition by the Company of a 40% equity interest in FRI, valued at $62
million; (ii) the concurrent contribution by the Company of its entire Chi-
Chi's Mexican restaurant chain to FRI for the above equity interest and
approximately $173 million in cash ($208 million less the face amount of
Chi-Chi's debt assumed); and (iii) the utilization of cash to repay all of
the debt outstanding under the Company's then existing bank credit facility,
which has since been terminated, with the balance of cash available for
capital expenditures and general corporate purposes.
The pro forma financial data presented herein do not purport to represent
what the Company's results of operations would have been had such
transactions in fact occured at the beginning of the period or to project
the Company's results of operations in any future period.
Pro Forma As
Actual Adjustments Adjusted
-------- ----------- --------
(In thousands, except per share data)
Revenues:
Restaurant sales. . . . . . . . . . . $499,366 $(123,247) $376,119
Distribution sales. . . . . . . . . . 79,993 28,163 108,156
Franchise rents and royalties . . . . 18,538 (132) 18,406
Other . . . . . . . . . . . . . . . . 2,383 (554) 1,829
-------- -------- --------
600,280 (95,770) 504,510
-------- -------- --------
Costs of revenues:
Company restaurant costs. . . . . . . 442,631 (113,299) 329,332
Costs of distribution sales . . . . . 77,081 28,048 105,129
Franchised restaurant costs . . . . . 12,392 (159) 12,233
Selling, general and administrative . . 56,097 (3,425) 52,672
Equity in loss of FRI . . . . . . . . . 1,261 6,779 8,040
Interest expense. . . . . . . . . . . . 30,783 (4,373) 26,410
-------- -------- --------
620,245 (86,429) 533,816
-------- -------- --------
Loss before income taxes and cumulative
effect of changes in accounting
principles. . . . . . . . . . . . . . (19,965) (9,341) (29,306)
Income taxes (benefit). . . . . . . . . (6,384) (3,036) (9,420)
-------- -------- --------
Loss before cumulative effect of
changes in accounting principles. . . $(13,581) $(6,305) $(19,886)
======== ======== ========
Loss per share before cumulative effect
of changes in accounting principles . $ (.35) $ (.52)
Weighted average shares outstanding . . 38,467 38,467
-------------
(1) The pro forma adjustments (i) eliminate revenues, costs of revenues and
general and administrative expenses of Chi-Chi's; (ii) record sales and
cost of sales for the Company's distribution activity with Chi-Chi's,
previously eliminated in consolidation; (iii) record the Company's
approximate 40% equity in the pro forma net loss of FRI; (iv) reflect
the reduction of net interest expense through elimination of
approximately $35 million assumed by FRI and utilization of proceeds
from the sale of Chi-Chi's investments and for retirement of the bank
credit facility; and (v) increase the income tax benefit as a result of
the increased pro forma pre-tax loss.
8
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FOODMAKER, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION
RESULTS OF OPERATIONS
All comparisons under this heading between 1994 and 1993, unless otherwise
indicated, refer to the 12-week and 28-week periods ended April 17, 1994 and
April 11, 1993, respectively. On January 27, 1994, the Company contributed its
entire Chi-Chi's Mexican restaurant chain ("Chi-Chi's") to Family Restaurants,
Inc. ("FRI") in exchange for an approximate 40% interest in FRI and other
consideration including cash and debt assumption as described in Note 3 to the
consolidated financial statements. The consolidated statements of operations,
therefore, include Chi-Chi's results of operations only for the 16 weeks (first
fiscal quarter) ended in January 1994, and for both the 12-week and 28-week
periods ended in 1993.
Sales by Jack In The Box Company-operated restaurants increased $38.2
million and $16.0 million, respectively, to $165.0 million and $376.1 million
in 1994 from $126.8 million and $360.1 million in 1993. The sales
improvement is primarily due to an increase in the average number of
Company-operated restaurants to 740 in 1994 from 715 in 1993 and due in part
to increases in per store average sales for comparable restaurants ("PSA") of
approximately 23% and 2%, respectively, in 1994 as compared to 1993. The PSA
increase results primarily from a recovery of sales in 1994 in comparison to
the depressed levels subsequent to January 1993 when Jack In The Box was
linked to an outbreak of food-borne illness in the Pacific Northwest ("the
Outbreak"). Chi-Chi's restaurant sales were $123.3 million in the first
quarter of 1994 and $90.5 million and $208.9 million, respectively, in the
12-week and 28-week periods of 1993.
Distribution sales of food and supplies increased approximately $25 million
in both periods to $45.1 million and $80.0 million, respectively, in 1994 from
$20.3 million and $55.1 million in 1993. The increases are primarily due to
sales of $21.3 million to Chi-Chi's (FRI) restaurants, which were previously
eliminated as intercompany sales, and in part due to a $3.5 million increase in
sales to Jack In The Box franchisees and others.
Jack In The Box franchise rents and royalties increased to $7.5 million and
$18.4 million, respectively, in 1994 from $5.7 million and $17.8 million in 1993
principally due to PSA increases at franchisee-operated operated Jack In The Box
restaurants, which were also affected negatively by the Outbreak in 1993.
Franchise rents and royalties for Chi-Chi's were $.1 million in the first
quarter of 1994 and $.2 million and $.7 million, respectively, in the 12-week
and 28-week periods of 1993.
Other revenues for Jack In The Box increased $.4 million to $1.0 million
from $.6 million for the 12-week period primarily due to interest income earned
on cash proceeds from the sale of Chi-Chi's, and declined $1.6 million to $1.8
million from $3.4 million for the 28-week period due to the decline in the
number of conversions of Company-operated restaurants to franchised restaurants
to 4 in 1994 from 9 in 1993, resulting in reduced gains and fees. Chi-Chi's
other revenues were $.6 million in the first quarter of 1994 and $.8 million and
$2.2 million, respectively, in the 12-week and 28-week periods of 1993.
Jack In The Box costs of sales increased to $48.7 million and $112.0
million, respectively, in 1994 from $37.5 million and $104.3 million in 1993
principally due to the variable costs associated with higher sales. Costs of
sales also increased as a percent of sales in 1994 as compared to 1993 due to
the impact of higher ingredient costs not offset by price increases and the
higher proportional food cost of certain discount promotions which have
increased average customer checks to a level higher than any other quarter
since the Outbreak. Chi-Chi's costs of sales were $32.7 million in 1994 and
$23.8 million and $54.6 million, respectively, in the 12-week and 28-week
periods of 1993.
9
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<PAGE>
RESULTS OF OPERATIONS (Continued)
Restaurant operating costs for Jack In The Box increased $13.7 million and
$12.4 million, respectively, to $96.5 million and $217.3 million in 1994 from
$82.8 million and $204.9 million in 1993 primarily due to the variable costs
associated with increased sales, and in part due to higher occupancy and other
operating costs. The higher occupancy costs are the result of increases in the
number of new leased properties and the sale and leaseback of existing
properties. As a result of the increase in average sales in 1994, restaurant
operating costs represent a lower percent of sales for the 12-week period in
1994 in comparison to the similar period of 1993. Chi-Chi's restaurant
operating costs were $80.7 million in the first quarter of 1994 and $57.6
million and $130.2 million, respectively, in the 12-week and 28-week periods of
1993.
Costs of distribution sales increased approximately $24 million in both
periods to $43.8 million and $77.1 million in 1994 from $19.6 million and $53.0
million in 1993, consistent with the increase in distribution sales.
Jack In The Box franchise restaurant costs, which consist primarily of rents
and depreciation on properties leased to franchisees, decreased to $5.1 million
and $12.2 million, respectively, in 1994 from $10.0 million and $16.8 million
in 1993 primarily due to the elimination of assistance provided to franchisees
in 1993. Chi-Chi's franchise restaurant costs were $.2 million in the first
quarter of 1994 and $.1 million and $.3 million, respectively, in the 12-week
and 28-week periods of 1993.
Selling, general and administrative expenses for Jack In The Box decreased
to $23.0 million and $47.0 million, respectively, in 1994 from $25.4 million and
$51.9 million in 1993, principally due to (1) a $5.7 million gain recognized
from the sale of Chi-Chi's, (2) a decrease in write-offs associated with normal
asset disposals, offset by (3) $2.0 million in severance expenses and associated
costs resulting from the elimination of approximately 80 administrative
positions, and (4) a charge of $3.5 million principally for the write-down of
assets to net realizable values and providing for costs of closing seven older,
under-performing restaurants with short remaining lease terms. Chi-Chi's
incurred selling, general and administrative expenses of $9.1 million in the
first quarter of 1994 and $8.4 million and $18.2 million, respectively, in the
12-week and 28-week periods of 1993.
Interest expense for the 12-week period decreased $.5 million to $12.4
million from $12.9 million due to the repayment of $79 million of bank debt
offset partially by the addition of an approximate $70 million finance lease
obligation, and increased $.7 million for the 28-week period to $30.8 million
in 1994 from $30.1 million in 1993 due to interest related to prior year tax
audits.
Income tax benefit was 24% and 32%, respectively, of pretax loss in 1994,
and 33% of pretax loss for both periods in 1993. The U.S. Internal Revenue
Service ("IRS") had proposed adjustments to tax liabilities of $17 million
(exclusive of interest) for the Company's federal income tax returns for
fiscal years 1986 through 1988. A final report has not been issued but
agreement has been reached to satisfy these proposed adjustments at
approximately $1.3 million (exclusive of $.8 million interest). The IRS
examinations of the Company's federal income tax returns for fiscal years
1989 and 1990 resulted in the issuance of proposed adjustments to tax
liabilities aggregating $2.2 million (exclusive of $.7 million interest).
The Company has filed a protest with the Regional Office of Appeals of the
IRS contesting the proposed assessments. Management believes that adequate
provision for income taxes has been made.
Effective September 28, 1992, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pension Benefits",
and No. 109, "Accounting for Income Taxes". As a result, the Company reported
in 1993 a $54.0 million cumulative effect to September 27, 1992 of these changes
in accounting principles, $10.2 million relating to SFAS 106 and $43.8 million
relating to SFAS 109.
10
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<PAGE>
FINANCIAL CONDITION
The Company's primary sources of liquidity are cash flows from operations,
funds available from the finance lease transaction described below and the sale
and leaseback of restaurant properties. An additional potential source of
liquidity is the conversion of Company-operated Jack In The Box restaurants to
franchised restaurants. The Company requires capital principally to construct
new restaurants, to maintain, improve and refurbish existing restaurants, and
for general corporate purposes.
At April 17, 1994, the Company's working capital had increased $110.1
million to $.3 million from a working capital deficit of $109.8 million at
October 3, 1993, due primarily to net cash proceeds received from the sale of
Chi-Chi's, after the repayment of bank debt. The Company's working capital
position was also improved by the recognition of tax benefits and partial
payment of franchisee settlements and associated costs. The restaurant
business does not require the maintenance of significant receivables or
inventories, and it is common to receive trade credit from vendors for
purchases such as supplies. In addition, the Company, and generally the
industry, continually invests it its business through the addition of new
units and refurbishment of existing units, which are reflected as long-term
assets and not as part of working capital.
At April 17, 1994, the Company's total debt outstanding was $476.5 million.
In early January 1994, the Company completed financing arrangements (see Note
3 to the consolidated financial statements), which added an approximate $70
million finance lease obligation to the Company's debt, enabling the Company to
repay approximately $28 million in bank borrowings, fund existing capital
expenditures and establish a construction fund of approximately $28 million for
new restaurants. With the sale of Chi-Chi's on January 27, 1994, the Company
reduced its outstanding debt, including full repayment of all bank borrowings
and termination of the bank credit facility, and had approximately $80 million
in cash on hand at April 17, 1994. Substantially all of the Company's real
estate and machinery and equipment is, and is expected to continue to be,
pledged to its lenders.
Based upon current levels of operations and anticipated growth, the Company
expects that sufficient cash flow will be generated from operations so that,
combined with other financing alternatives available to it, including the
utilization of cash on hand, cash in the construction fund referred to above and
the sale and leaseback of restaurants, the Company will be able to meet all of
its debt service requirements, as well as its capital expenditures and working
capital requirements, for the foreseeable future. In addition, the Company is
seeking a new bank credit facility to provide an additional source of funds for
the future.
11
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<PAGE>
PART II - OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
Item 1. Legal Proceedings.
Various claims and legal proceedings are pending against the Company in
various state and Federal courts; many of those proceedings are in the states
of Washington, Nevada and Idaho and in Federal Court, Western District of
Washington at Seattle seeking monetary damages and other relief relating to
the Outbreak attributed to hamburgers served at Jack In The Box restaurants.
The Company, in consultation with its insurance carriers and attorneys, does
not anticipate that the total liability on all such lawsuits and claims will
exceed the coverage available under its applicable insurance policies.
Actions were filed on July 2, 1993, in the Superior Court of California,
County of San Diego, by certain of the Company's franchisees against the
Company, The Vons Companies, Inc., ("Vons") and other suppliers (Syed Ahmad, et
al, versus Foodmaker, Inc., et al), claiming damages from reduced sales and
profits due to the Outbreak. After extensive negotiations, settlements were
reached with all but one of the franchisees. During 1993, the Company provided
approximately $44.5 million to cover the settlements and associated costs,
including a then anticipated settlement with the remaining franchisee. On
January 14, 1994, the non-settling Franchisee filed two substantially identical
suits against the Company and The Vons Companies in Superior Court of
California, County of San Diego and in Federal Court, Southern District of
California (Ira Fischbein, et al versus Foodmaker, Inc., et al) claiming damages
from reduced sales, lost profits and reduced value of the franchise due to the
Outbreak. The Company has engaged legal counsel and is vigorously defending the
actions.
The Company on July 19, 1993, filed a cross-complaint against Vons and other
suppliers seeking reimbursement for all damages, costs and expenses incurred in
connection with the Outbreak. On or about January 18, 1994, Vons filed a cross
complaint against Foodmaker and others in this action alleging certain
contractual and tort liabilities and seeking damages in unspecified amounts and
a declaration of the rights and obligations of the parties.
In April 1993, a class action, In re Foodmaker, Inc./Jack In The Box
Securities Litigation, was filed in Federal Court, Western District of
Washington at Seattle against the Company, its Chairman, and the President of
the Jack In The Box Division on behalf of all persons who acquired the Company's
common stock between March 4, 1992 and January 22, 1993 seeking damages in an
unspecified amount as well as punitive damages. In general terms, the complaint
alleges that there were false and misleading statements in the Company's
March 4, 1992 prospectus and in certain public statements and filings in 1992
and 1993, including claims that the defendants disseminated false information
regarding the Company's food quality standards and internal quality control
procedures. The Company has engaged legal counsel and is vigorously defending
the action.
The amount of liability from the claims and actions described above cannot
be determined with certainty, but in the opinion of management, based in part
upon advice from legal counsel, the ultimate liability from all pending legal
proceedings, asserted legal claims and known potential legal claims which are
probable of assertion will not materially affect the consolidated financial
position or operations of the Company.
The U.S. Internal Revenue Service ("IRS") had proposed adjustments to tax
liabilities of $17 million (exclusive of interest) for the Company's federal
income tax returns for fiscal years 1986 through 1988. A final report has not
been issued but agreement has been reached to satisfy these proposed adjustments
at approximately $1.3 million (exclusive of $.8 million interest). The IRS
examinations of the Company's federal income tax returns for fiscal years 1989
and 1990 resulted in the issuance of proposed adjustments to tax liabilities
aggregating $2.2 million (exclusive of $.7 million interest). The Company has
filed a protest with the Regional Office of Appeals of the IRS contesting the
proposed assessments. Management believes that adequate provision for income
taxes has been made.
12
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
------ -----------
10.1 Ninth Amendment dated as of January 27, 1994 to Amended and
Restated Securities Purchase Agreement dated as of
February 28, 1991 by and between Foodmaker, Inc. and The
Prudential Insurance Company of America.
(b) Reports on Form 8-K
A Form 8-K was filed on February 11, 1994, reporting under
Item 2 thereof, the disposition of Chi-Chi's and acquisition of an
approximate 40% interest in FRI on January 27, 1994. (See Note 3 to
the financial statements).
A Form 8-K/A was filed on April 12, 1994, with respect to
the same matter.
13
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<PAGE>
SIGNATURE
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 and in the capacities indicated.
FOODMAKER, INC.
By: /S/ ROBERT L. SUTTIE
----------------------
Robert L. Suttie
Vice President, Controller
and Chief Accounting Officer
(Duly Authorized Signatory)
Date: June 1, 1994
14
<PAGE>
Exhibit 10.1
NINTH AMENDMENT TO
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT is
dated as of January 27, 1994 (this "Amendment"), by and between Foodmaker,
Inc., a Delaware corporation (the "Company"), The Prudential Insurance
Company of America (the "Purchaser"), and for purposes of paragraph 5 hereof,
the Guarantors listed on the signature pages hereof ("Guarantors") and the
Grantors listed on the signature pages hereof ("Grantors"). This Amendment
amends certain provisions of the Amended and Restated Securities Purchase
Agreement dated as of February 28, 1991 by and between the Company and the
Purchaser, as heretofore amended (the "Agreement") and consents to the
release of certain liens in connection therewith.
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser have entered into the Agreement;
capitalized terms used in this Amendment without definition have the meanings
ascribed to such terms in the Agreement;
WHEREAS, the Company, together with certain other investors, is
acquiring all of the issued and outstanding capital stock of Family
Restaurants, Inc., a Delaware corporation ("FRI"), and in connection with
such acquisition, the Company is transferring all of the issued and
outstanding stock of Chi-Chi's to FRI;
WHEREAS, the Company and the Banks propose to enter into an Amended and
Restated Credit Agreement dated as of January __, 1994 (the "Amended and
Restated Credit Agreement"), to, among other things, (i) consent to the
transfer of Chi-Chi's, (ii) continue the revolving credit facility of $45
million to the Company with a $25 million subfacility for letters of credit,
(iii) eliminate Chi-Chi's as a borrower under and a party to the Credit
Agreement, (iv) release Chi-Chi's and its Subsidiaries from their obligations
in respect of the Credit Agreement and the collateral documents and
guaranties related thereto in exchange for the repayment in full of the
Existing Chi-Chi's Loans and the Existing Company Loans consisting of term
loans and (v) make certain other changes;
WHEREAS, the Company requested and the Purchaser has agreed to amend
certain provisions of the Agreement to conform it with the proposed Amended
and Restated Credit Agreement and to consent to the transfer of Chi-Chi's;
WHEREAS, certain Collateral Parties are parties to the Non-Recourse
Guaranties, and such Collateral Parties desire expressly to consent to the
amendments to the Agreement set forth herein and to reaffirm the
effectiveness of the Non-Recourse Guaranties to which they are a party; and
WHEREAS, the collateral Parties are parties to the Collateral Documents,
and such Collateral Parties desire
<PAGE>
<PAGE>
expressly to consent to the amendments of the Agreement set forth herein and
to reaffirm the effectiveness of the Collateral Documents to which they are a
party;
WHEREAS, the collateral Parties are parties to the Collateral Documents,
and such Collateral Parties desire expressly to consent to the amendments of
the Agreement set forth herein and to reaffirm the effectiveness of the
Collateral Documents to which they are a party;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Company and the Purchaser agree as follows:
1. Amendment to the Agreement. The Agreement is hereby amended as
follows:
1A. Paragraph 4D of the Agreement is hereby amended by deleting
paragraph 4D(ii) and substituting in its place the following:
"(ii) The Company may invest in FRI in connection with the
Acquisition; provided that the consideration given by the Company for such
Investment shall not exceed $65,000,000 in value allocated pursuant to the
Acquisition Agreement."
1B. Paragraph 4N of the Agreement is hereby amended by deleting
the chart in such paragraph and substituting in its place the following
chart:
Expansion Capital
Fiscal Year Capital Expenditures Expenditures
- ----------- -------------------- ------------
1994 $20,000,000 $38,000,000
1995 $52,000,000 $80,000,000
1996 $54,000,000 $85,000,000
1997 $55,000,000 $90,000,000
1C. Paragraph 4Q of the Agreement is hereby amended by deleting
such paragraph in its entirety and inserting the following:
4Q. Incorporation by Reference. Each of the covenants of the
Company and its Subsidiaries contained in Exhibit D hereto, and the each of
the corresponding definitions relating to such covenants contained in such
Exhibit D, are hereby adopted as
2
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<PAGE>
amendments to the Agreement and are hereby incorporated in paragraph 4Q of
the Agreement by this reference with the same effect as though set forth in
their entirety herein."
1D. Paragraph 7 of the Agreement is hereby amended by:
(i) deleting the following definitions therefrom:
"Acknowledgement and Consent," "Intercreditor Agreement," "Recapitalization
Senior Indebtedness," Recapitalization Senior Note Indenture,"
"Recapitalization Subordinated Debt Indenture," "Recapitalization
Subordinated Indebtedness," "Revolving Commitments," and "Subordinated
Indebtedness;" and
(ii) inserting the following definitions thereto:
"Acknowledgment and Consent" means those certain Acknowledgment and
Consents dated as of the Ninth Amendment Effective Date pursuant to which the
Company and its Subsidiaries acknowledge and affirm the continued validity
and effect of the Collateral Documents and Guaranties.
"Acquisition" means the acquisition of approximately 40% of the FRI
capital stock by the Company pursuant to the Acquisition Agreement.
"Acquisition Agreement" means that certain Acquisition Agreement
dated as of October 15, 1993 among Apollo Advisors, L.P. on behalf of one or
more managed entities, Green Equity Investors, L.P., FRI, Chi-Chi's and the
Company, as amended, in accordance with which the Acquisition and the Chi-
Chi's Sale will occur.
"Chi-Chi's Sale" means the merger of Chi-Chi's with an indirect
subsidiary of FRI pursuant to the Acquisition Agreement.
"Credit Agreement" means the Third Amended and Restated Credit
Agreement dated as of February 28, 1991, among the Company, Chi-Chi's, the
Banks and Wells Fargo, as Agent, including all Schedules and Exhibits
thereto, as such Credit Agrement was amended, supplemented or otherwise
modified from time to time and as in effect prior to January 26, 1994.
"FRI" means Family Restaurants, Inc., a Delaware corporation.
"Recapitalization Senior Indebtedness" means Indebtedness of the
Company incurred through the issuance by the Company of 9-1/4% Senior Notes
due 1999 in an initial aggregate principal amount of $175,000,000 pursuant to
the Recapitalization Senior Note Indenture.
3
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<PAGE>
"Recapitalization Senior Note Indenture" means the indenture
between the Company, as issuer, and IBJ Schroder Bank & Trust Company, as
trustee, dated as of March 1, 1992 pursuant to which the Recapitalization
Senior Indebtedness was issued and is outstanding.
"Recapitalization Subordinated Debt Indenture" means the indenture
between the Company, as issuer, and First Fidelity Bank, N.A., as trustee,
dated as of March 1, 1992 pursuant to which the Recapitalization Subordinated
Indebtedness was issued and is outstanding.
"Recapitalization Subordinated Indebtedness" means Subordinated
Indebtedness of the Company incurred through the issuance by the Company of
9-3/4% Senior Subordinated Notes due 2002 in an initial aggregate principal
amount of $125,000,000 pursuant to the Recapitalization Subordinated Debt
Indenture.
"Revolving Commitments" means the commitments of the Banks to make
the Revolving Loans and Converted Loans as set forth in subsection 2.1A of
the Credit Agreement.
"Senior Drexel Indebtedness Defeasance" means the purchase,
redemption or defeasance by the Company of the Senior Drexel Indebtedness
pursuant to the terms of the Senior Drexel Indenture.
"Subordinated Indebtedness" means the Senior Drexel Indebtedness,
the Old Subordinated Debt and the Recapitalization Subordinated Indebtedness
and any other Indebtedness of the Company or its Subsidiaries which is
subordinated in right of payment to the payment of the Senior Note
Obligations (the Incurrence of which and the terms of payment, covenants,
events of default and the form of subordination of which shall have been
approved in writing by the Purchaser).
2. Consents.
2A. In accordance with paragraph 4L of the Agreement, the
Purchaser hereby consents to the proposed amendments to the Credit Agreement
pursuant to the Amended and Restated Credit Agreement, in substantially the
form attached hereto as Exhibit A.
2B. In accordance with paragraph 4H of the Agreement, the
Purchaser hereby consents to the Chi-Chi's Sale and the Acquisition pursuant
to the Acquisition Agreement, in substantially the form attached hereto as
Exhibit B.
2C. In accordance with paragraph 4L, the Purchaser hereby
terminates (a) the guaranty by Chi-Chi's and its
4
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<PAGE>
Subsidiaries under the Chi-Chi's Non-Recourse Guaranty, the Lumex/USA/Holding
Non-Recourse Guaranties and the Subsidiary Non-Recourse Guaranty, solely as
they relate to Chi-Chi's and its Subsidiaries and (b) the security interests
in the Collateral created by the Chi-Chi's Pledge and Security Agreement, the
Chi-Chi's Trademark Security Agreement, the Lumex/USA Pledge and Security
Agreements and the Foodmaker Pledge Agreement, solely as they relate to Chi-
Chi's and its Subsidiaries. The Purchaser further gives its consent to
Citicorp North America, Inc., as Collateral Agent under the Intercreditor
Agreement, to enter into that certain Termination and Release Agreement,
dated January 27, 1994, on behalf of the Purchaser.
3. Conditions to Effectiveness. This Amendment shall become effective
only upon satisfaction of the following conditions precedent (the first date
such conditions are satisfied being the "Ninth Amendment Effective Date"):
3A. On or before the Ninth Amendment Effective Date, the Company
and each Collateral Party to the Non-Recourse Guaranties and the Collateral
Documents shall deliver to the Purchaser an executed copy of this Amendment;
and
3B. On or before the Ninth Amendment Effective Date, the Purchaser
shall have received an executed copy of the Acquisition Agreement.
4. Representations and Warranties. In order to induce the Purchaser
to enter into this Amendment, the Company represents and warrants to the
Purchaser as follows:
4A. Continued Effectiveness. After giving effect to the
provisions of this Amendment, all of the representations and warranties
contained in the Agreement are true, correct and complete on and as of the
Ninth Amendment Effective Date to the same extent 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 on and as of such earlier date.
4B. No Defaults. As of the date hereof and the Ninth Amendment
Effective Date, there will exist no Default or Event of Default.
5. Acknowledgment and Consent. Each Guarantor and Grantor
acknowledges as follows:
Each Guarantor, as a guarantor under one or more Non-Recourse
Guaranties, and each Grantor, as a grantor under one or more Collateral
Documents, hereby acknowledges that it has reviewed the terms of the
Agreement and this Amendment and
5
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<PAGE>
consents to the amendment of the Agreement effected by this Amendment. Each
Guarantor hereby confirms and agrees that each of the Non-Recourse Guaranties
to which it is a party guaranties, and shall continue to guaranty, the Senior
Note Obligations under the Agreement in accordance with its terms to the
fullest extent possible. Each Grantor hereby confirms and agrees that each
of the Collateral Documents to which it is a party secures, and will continue
to secure, the Senior Note Obligations under the Agreement in accordance with
its terms to the fullest extent possible. Each Guarantor and each Grantor
hereby acknowledges and confirms its understanding and intent that, upon the
effectiveness of this Amendment, as a result of this Amendment, the Senior
Note Obligations arising under the Agreement and guaranteed by any Non-
Recourse Guaranty or secured by any Collateral Document to which it is a
party shall be modified to include the Senior Note Obligations arising under
the Agreement as modified by this Amendment.
Each Guarantor and each Grantor agrees and acknowledges that each Non-
Recourse Guaranty and each Collateral Document to which it is a party shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired by the execution or
effectiveness of this Amendment. Each Guarantor and each Grantor represents
and warrants that all representations and warranties contained in the Non-
Recourse Guaranty and/or Collateral Document to which it is a party or
otherwise bound are true, correct and complete in all material respects on
and as of the Ninth Amendment Effective Date to the same extent as though
made on and as of such date, except to the extent that such representations
and warranties specifically relate to an earlier date, in which case they are
true, correct and complete in all material respects on and as of such earlier
date.
Each Guarantor and each Grantor hereby agrees that upon the
effectiveness of this Amendment, all references to the Agreement,
"thereunder", "thereof", or words of like import referring to the Agreement
in any Non-Recourse Guaranty and any Collateral Document to which it is a
party shall mean the Agreement as modified by this Amendment.
Each Guarantor and each Grantor acknowledges and agrees that (i) the
foregoing consent of the Guarantors and the Grantors (other than the Company)
is not required by the terms of the Agreement or any other Loan Document and
(ii) nothing in the Agreement, this Amendment or any other Loan Document
shall be deemed to require the consent of any Guarantor or any Grantor (other
than the Company) to any future waiver under the Agreement.
6
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<PAGE>
6. Miscellaneous.
6A. Covenants. (i) On or before the January 31, 1994, the Company
shall deliver, and the Purchaser shall have received an amendment fee from
the Company in the amount of $174,623.
(ii) In the event that this Amendment does not accurately reflect
the agreements of the parties hereto, the parties agree to make any changes
necessary to conform this Amendment with such agreements.
6B. Ratification of Agreement. It is hereby agreed that, except
as specifically provided herein, this Amendment does not in any way effect or
impair the terms and conditions of the Agreement or the other Loan Documents,
and all terms and conditions of the Agreement and the other Loan Documents
are to remain in full force and effect unless otherwise specifically amended,
waived or changed pursuant to the terms and conditions thereof or of this
Amendment. On and after the Ninth Amendment Effective Date, any reference to
the Agreement shall be deemed to be a reference to the Agreement as modified
by this Amendment.
6C. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6D. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
7<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
FOODMAKER, INC.
By: /S/ CHARLES W. DUDDLES
---------------------------
Title:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /S/ RICHARD A. HUBBARD
----------------------------
Vice President
GUARANTORS AND GRANTORS:
FOODMAKER, INC.
By: /S/ CHARLES W. DUDDLES
----------------------------
Title:
CHI-CHI'S, INC.
By: /S/ CHARLES W. DUDDLES
----------------------------
Title:
CHI-CHI'S USA, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
LUMEX, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
8
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<PAGE>
CCMR OF CATONSVILLE, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF CUMBERLAND, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF FREDERICK, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF GOLDEN RING, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF GREENBELT, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF MARYLAND, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF RITCHIE HIGHWAY, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
9
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<PAGE>
CHI-CHI'S OF KANSAS, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CHI-CHI'S OF SOUTH CAROLINA, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CCMR OF TIMONIUM, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CHI-CHI'S OF WEST VIRGINIA, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
CHI-CHI'S OF NEW YORK, INC.
By: /S/ MICHAEL GUERRA
----------------------------
Title:
FOODMAKER INTERNATIONAL
FRANCHISING, INC.
By: /S/ CHARLES W. DUDDLES
----------------------------
Title:
10
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Exhibit D
A. Ratio of Consolidated Liabilities to Consolidated Net Worth.
Commencing with the second fiscal quarter of the fiscal year ending in 1994,
the Borrower will not permit at any time during each Fiscal Period the ratio
of (i) Consolidated Liabilities minus deferred taxes, to (ii) Consolidated
Net Worth to be greater than the correlative amounts indicated below for such
period:
Period Maximum Ratio
------ -------------
Fiscal year ending 1994
- -----------------------
Second fiscal quarter 4.25:1.00
Third fiscal quarter 4.20:1.00
Fourth fiscal quarter 4.00:1.00
Fiscal year ending 1995
- -----------------------
First fiscal quarter 3.85:1.00
Second fiscal quarter 3.70:1.00
Third fiscal quarter 3.50:1.00
Fourth fiscal quarter 3.40:1.00
Fiscal year ending 1996
- -----------------------
First fiscal quarter 3.20:1.00
Second fiscal quarter 3.10:1.00
Third fiscal quarter 2.90:1.00
Fourth fiscal quarter 2.80:1.00
Fiscal year ending 1997
- -----------------------
First fiscal quarter 2.60:1.00
Second fiscal quarter 2.50:1.00
B. Consolidated Net Worth. Commencing with the second fiscal
quarter of the fiscal year ending in 1994, the Borrower will not permit
Consolidated Net Worth at any time during any Fiscal Period to be less than
the greater of (i) the sum of (A) Consolidated Net Worth (x) during any
Fiscal Period in the fiscal year ending in 1994, as of the last day of the
first fiscal quarter of the fiscal year ending in 1994 and (y) during any
Fiscal Period thereafter, as of the last day of the immediately preceding
fiscal year plus (B) Consolidated Net Income (if positive) for the period
from but excluding the last day of the immediately preceding fiscal year
through the current Fiscal Period plus (C) the net cash proceeds of any sales
of capital stock during such period; provided that the foregoing calculation
of Consolidated Net Worth shall not give effect to cumulative foreign
currency translation adjustments pursuant to Financial Accounting Standards
Board Statement Number 52, or (ii) the correlative amounts indicated below:
E-1
<PAGE>
<PAGE>
Minimum Consolidated
Period Net Worth
------ --------------------
Fiscal year ending 1994
- -----------------------
Second fiscal quarter $125,000,000
Third fiscal quarter $130,000,000
Fourth fiscal quarter $135,000,000
Fiscal year ending 1995
- -----------------------
First fiscal quarter $140,000,000
Second fiscal quarter $145,000,000
Third fiscal quarter $150,000,000
Fourth fiscal quarter $160,000,000
Fiscal year ending 1996
- -----------------------
First fiscal quarter $165,000,000
Second fiscal quarter $175,000,000
Third fiscal quarter $185,000,000
Fourth fiscal quarter $195,000,000
Fiscal year ending 1997
- -----------------------
First fiscal quarter $200,000,000
Second fiscal quarter $200,000,000
C. Fixed Charge Coverage Ratio. The Borrower will not permit, at
any time during any fiscal quarter, the ratio of (i) aggregate Consolidated
Operating Earnings (w) for the period of the second fiscal quarter of the
fiscal year ending in 1994, (x) for the period of two consecutive fiscal
quarters ending on the last day of the third fiscal quarter of the fiscal
year ending in 1994, (y) for the period of three consecutive fiscal quarters
ending on the last day of the fourth fiscal quarter of the fiscal year ending
in 1994 and (z) thereafter for the period of four consecutive fiscal quarters
ending on the last day of each fiscal quarter set forth below, in each case
determined without deduction of any lease expense (with all such amounts
being determined for such period in accordance with GAAP) to (ii) the
Company's Fixed Charges for such period (the "Fixed Charge Coverage Ratio")
to be less than the correlative amounts indicated below:
Minimum
Fixed Charge
Period Coverage Ratio
------ --------------
Fiscal year ending 1994
- -----------------------
Second fiscal quarter 1.10:1.00
Third fiscal quarter 1.15:1.00
Fourth fiscal quarter 1.20:1.00
E-2
<PAGE>
<PAGE>
Fiscal year ending 1995
- -----------------------
First fiscal quarter 1.25:1.00
Second fiscal quarter 1.30:1.00
Third fiscal quarter 1.40:1.00
Fourth fiscal quarter 1.45:1.00
Fiscal year ending 1996
- -----------------------
First fiscal quarter 1.50:1.00
Second fiscal quarter 1.55:1.00
Third fiscal quarter 1.60:1.00
Fourth fiscal quarter 1.65:1.00
Fiscal year ending 1997
- -----------------------
First fiscal quarter 1.70:1.00
Second fiscal quarter 1.70:1.00
D. Cash Flow Coverage Ratio. The Borrower will not permit, at
any time during any fiscal quarter, the ratio of (i) Cash Flow (w) for the
period of the second fiscal quarter of the fiscal year ending in 1994, (x)
for the period of two consecutive fiscal quarters ending on the last day of
the third fiscal quarter of the fiscal year ending in 1994, (y) for the
period of three consecutive fiscal quarters ending on the last day of the
fourth fiscal quarter of the fiscal year ending in 1994 and (z) thereafter
for the period of four consecutive fiscal quarters ending on the last day of
each fiscal quarter set forth below to (ii) the sum of Corporate Capital
Expenditures for such period plus all scheduled principal payments due and
payable during such period on all Indebtedness of the Company and its
Subsidiaries (including, without limitation, all scheduled principal payments
on the Senior Notes) to be less than the minimum ratio indicated below:
Minimum Cash
Period Flow Coverage Ratio
------ -------------------
Fiscal year ending 1994
- -----------------------
Second fiscal quarter 1.00:1.00
Third fiscal quarter 1.00:1.00
Fourth fiscal quarter 1.00:1.00
Fiscal year ending 1995
- -----------------------
First fiscal quarter 1.20:1.00
Second fiscal quarter 1.30:1.00
Third fiscal quarter 1.30:1.00
Fourth fiscal quarter 1.40:1.00
E-3
<PAGE>
<PAGE>
Fiscal year ending 1996
- -----------------------
First fiscal quarter 1.60:1.00
Second fiscal quarter 1.70:1.00
Third fiscal quarter 1.90:1.00
Fourth fiscal quarter 2.00:1.00
Fiscal year ending 1997
- -----------------------
First fiscal quarter 2.40:1.00
Second fiscal quarter 2.70.1.00
E. Capital Coverage Ratio. The Borrower will not permit at any
time during any fiscal quarter, the ratio of (i) the sum of (a) Cash Flow (w)
for the period of the second fiscal quarter of the fiscal year ending in
1994, (x) for the period of two consecutive fiscal quarters ending on the
last day of the third fiscal quarter of the fiscal year ending in 1994, (y)
for the period of three consecutive fiscal quarters ending on the last day of
the fourth fiscal quarter of the fiscal year ending in 1994 and (z)
thereafter for the period of four consecutive fiscal quarters ending on the
last day of each fiscal quarter set forth below plus (b) Net Cash Proceeds of
Sale from Sale and Leasebacks (to the extent not included in Consolidated Net
Income) received by the Borrower during such period plus (c) Net Cash
Proceeds of Sale from sales of land, buildings, machinery, equipment, and
intangibles in connection with sales of franchise rights during such period
to (ii) the sum of (a) the aggregate amount of Capital Expenditures incurred
during such period plus (b) the aggregate amount of all scheduled principal
payments due and payable on all Indebtedness of the Company and its
Subsidiaries (including, without limitation, all scheduled principal payments
on the Senior Notes during such period (such ratio hereinafter referred to as
the "Capital Coverage Ratio") to be less than the minimum ratio indicated
below:
Minimum
Capital
Period Coverage Ratio
------ --------------
Fiscal year ending 1994
- -----------------------
Second fiscal quarter 1.00:1.00
Third fiscal quarter 1.00:1.00
Fourth fiscal quarter 1.00:1.00
Fiscal year ending 1995
- -----------------------
First fiscal quarter 1.00:1.00
Second fiscal quarter 1.05:1.00
Third fiscal quarter 1.05:1.00
Fourth fiscal quarter 1.10:1.00
E-4
<PAGE>
<PAGE>
Fiscal year ending 1996
- -----------------------
First fiscal quarter 1.10:1.00
Second fiscal quarter 1.15:1.00
Third fiscal quarter 1.15:1.00
Fourth fiscal quarter 1.20:1.00
Fiscal year ending 1997
- -----------------------
First fiscal quarter 1.25:1.00
Second fiscal quarter 1.30:1.00
F. Long-Term Senior Indebtedness to Consolidated Operating Earnings
Ratio. The Borrower will not permit at any time during any fiscal quarter
the ratio of (i) Long-Term Senior Indebtedness as at any date of
determination to (ii) Consolidated Operating Earnings calculated (w) for the
period of the second fiscal quarter of the fiscal year ending in 1994 and
multiplied by 13/3, (x) for the period of two consecutive fiscal quarters
ending on the last day of the third fiscal quarter of the fiscal year ending
in 1994 and multiplied by 13/6, (y) for the period of three consecutive
fiscal quarters ending on the last day of the fourth fiscal quarter of the
fiscal year ending in 1994 and multiplied by 13/9 and (z) thereafter for the
period of four consecutive fiscal quarters ending on the last day of each
fiscal quarter set forth below to be greater than the correlative ratio
indicated below for the period containing such date:
Period Ratio
------ -----
Fiscal year ending 1994
- -----------------------
Second fiscal quarter 3.50:1.00
Third fiscal quarter 3.10:1.00
Fourth fiscal quarter 2.65:1.00
Fiscal year ending 1995
- -----------------------
First fiscal quarter 2.45:1.00
Second fiscal quarter 2.40:1.00
Third fiscal quarter 2.20:1.00
Fourth fiscal quarter 2.00:1.00
Fiscal year ending 1996
- -----------------------
First fiscal quarter 1.90:1.00
Second fiscal quarter 1.80:1.00
Third fiscal quarter 1.60:1.00
Fourth fiscal quarter 1.50:1.00
Fiscal year ending 1997
- -----------------------
First fiscal quarter 1.40:1.00
Second fiscal quarter 1.30:1.00
E-5
