<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
-----------
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1994
------------------
COMMISSION FILE NUMBER 1-9390
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FOODMAKER, INC.
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2698708
------------------------ --------------------------------
(State of incorporation) (IRS Employer Identification No.)
9330 Balboa Avenue, San Diego, CA 92123
---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 571-2121
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 15, 1994, computed by reference to the closing
price reported in the New York Stock Exchange-Composite Transactions, was
approximately $82.9 million.
Number of shares of common stock, $.01 par value, outstanding as of the
close of business December 15, 1994 - 38,669,850.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the 1995 Annual Meeting of Stockholders are
incorporated by reference into Part III hereof.
<PAGE>
<PAGE>
That portion of Foodmaker's definitive Proxy Statement appearing under the
captions "Information About the Board of Directors and Committees of the
Board" and "Nonconforming Securities and Exchange Commission Filings" to be
filed with the Commission pursuant to Regulation 14A within 120 days after
October 2, 1994 and to be used in connection with its 1995 Annual Meeting of
Stockholders is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
That portion of Foodmaker's definitive Proxy Statement appearing under the
caption "Executive Compensation" to be filed with the Commission pursuant to
Regulation 14A within 120 days after October 2, 1994 and to be used in
connection with its 1995 Annual Meeting of Stockholders is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
That portion of Foodmaker's definitive Proxy Statement appearing under the
caption "Security Ownership of Certain Beneficial Owners and Management" to
be filed with the Commission pursuant to Regulation 14A within 120 days after
October 2, 1994 and to be used in connection with its 1995 Annual Meeting of
Stockholders is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
That portion of Foodmaker's definitive Proxy Statement appearing under the
caption "Certain Transactions" to be filed with the Commission pursuant to
Regulation 14A within 120 days after October 2, 1994 and to be used in
connection with its 1995 Annual Meeting of Stockholders is hereby
incorporated by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES OF
FOODMAKER FOR THE YEAR ENDED OCTOBER 2, 1994 FILED WITH THIS
AMENDMENT ARE UNCHANGED FROM THOSE PREVIOUSLY FILED. THE COMPANY
HAS ALSO PREVIOUSLY FILED ITS QUARTERLY REPORT ON FORM 10-Q FOR
THE PERIOD ENDED JANUARY 22, 1995. THE SOLE PURPOSE OF THIS AMENDMENT
TO FOODMAKER'S ANNUAL REPORT ON FORM 10-K IS THE INCLUSION OF FAMILY
RESTAURANTS, INC. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FOR ITS FISCAL YEAR ENDED DECEMBER 25, 1994 UNDER ITEM 14(d).
ITEM 14(a)(1) Financial Statements. See the index to consolidated financial
statements and Schedules on page F-1 of this report.
ITEM 14(a)(2) Financial Statement Schedules. See the index to consolidated
financial statements and Schedules on page F-1 of this report.
-18-
<PAGE>
<PAGE>
ITEM 14(a)(3) Exhibits.
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation (4)
3.2 Restated Bylaws (4)
4.1 Warrant Agreement dated as of December 8, 1988, by and among PDV
Holding, Inc., Foodmaker, Inc., Fulcrum III Limited Partnership
and State Street Bank and Trust Company(2)
4.2 Indenture for the 9 1/4% Senior Notes due 1999(6)
4.3 Indenture for the 9 3/4% Senior Subordinated Notes due 2002(6)
(Instruments with respect to the registrant's long-term debt not in
excess of 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis have been omitted.
The registrant agrees to furnish supplementally a copy of any such
instrument to the Commission upon request.)
10.1 Revolving Credit Agreement dated as of July 26, 1994, among
Foodmaker, Inc. and the Banks and Agents, as defined therein(9)
10.1.1 First Amendment dated as of December 14, 1994 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as defined therein(9)
10.2 Purchase Agreements dated as of January 22, 1987 between Foodmaker,
Inc. and FFCA/IIP 1985 Property Company and FFCA/IIP 1986 Property
Company(1)
10.3 Land Purchase Agreements dated as of February 18, 1987, by and
between Foodmaker, Inc. and FFCA/IPI 1984 Property Company and
FFCA/IPI 1985 Property Company and Letter Agreement relating
thereto(1)
10.4 1992 Employee Stock Incentive Plan(5)
10.5 Capital Accumulation Plan for Executives(3)
10.6 Supplemental Executive Retirement Plan(3)
10.7 Foodmaker Performance Bonus Plan(7)
10.8 Memorandom of Agreement with Gibbons, Goodwin, van Amerongen dated
December 6, 1991(8)
21 Subsidiaries(3)
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Deloitte & Touche LLP
27 Financial Data Schedule (included only with electronic filing)(9)
- --------------
(1) Previously filed and incorporated herein by reference from
registrant's Registration Statement on Form S-1 (No. 33-10763) filed
February 24, 1987.
(2) Previously filed and incorporated herein by reference from Amendment
No. 2 to registrant's Registration Statement on Form S-1 (No. 33-27670)
filed June 30, 1989.
(3) Previously filed and incorporated herein by reference from
registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1990.
(4) Previously filed and incorporated herein by reference from Amendment
No. 1 to registrant's Registration Statement on Form S-1 (No. 33-44198)
filed February 3, 1992.
(5) Previously filed and incorporated herein by reference from
registrant's Quarterly Report on Form 10-Q for the quarter ended
January 19, 1992.
(6) Previously filed and incorporated herein by reference from
registrant's Quarterly Report on Form 10-Q for the quarter ended
April 12, 1992.
(7) Previously filed and incorporated herein by reference from
registrant's Annual Report on form 10-K for the fiscal year ended
September 27, 1992.
(8) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 11, 1993.
(9) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended October 2, 1994.
-19-
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<PAGE>
ITEM 14(b) During the fourth quarter ended October 2, 1994, the Company
filed with the Securities and Exchange Commission a report on Form 8-K under
Item 5, a press release dated November 9, 1994 announcing the Company's
losses for the fourth quarter and fiscal year ended October 2, 1994.
ITEM 14(c) All required exhibits are filed herein or incorporated by
reference as described in Item 14(a)(3).
ITEM 14(d) Copies of Schedules V, VI and X are attached hereto. All other
supplemental schedules other than as enumerated here and in the Index to
Consolidated Financial Statements and Schedules on page F-1 are omitted as
inapplicable or because the required information is included in the
consolidated financial statements or notes thereto.
-20-
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on its behalf
by the undersigned duly authorized and in the capacities indicated.
FOODMAKER, INC.
By:ROBERT L. SUTTIE
------------------------------
Robert L. Suttie
Vice President, Controller
and Chief Accounting Officer
(Duly Authorized Signatory)
Date: April 13, 1995
-21-
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Foodmaker, Inc and Subsidiaries Consolidated Financial Statements for the
52-week period ended October 2, 1994, the 53-week period ended October 3, 1993
and the 52-week period ended September 27, 1992.
Page
----
Independent Auditors' Report . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations. . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows. . . . . . . . . . . . F-6
Consolidated Statements of Stockholders' Equity. . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . F-8
Foodmaker, Inc. and Subsidiaries Financial Statement Schedules for each of the
three years ended October 2, 1994.
Independent Auditors' Report on Schedules and Consent. . . . F-23
Schedule V - Property and Equipment. . . . . . . . . . . . . F-24
Schedule VI - Accumulated Depreciation and Amortization
of Property and Equipment. . . . . . . . . . . F-25
Schedule X - Supplementary Income Statement Information. . . F-26
Family Restaurants, Inc. and Subsidiaries Consolidated Financial Statements
and Schedules for the one month ended January 26, 1994, the eleven months
ended December 25, 1994 and each of the two years in the period ended
December 26, 1993.
Independent Auditors' Reports. . . . . . . . . . . . . . . . F-27
Consolidated Balance Sheets as of December 25, 1994
and December 26, 1993 . . . . . . . . . . . . . . . . . F-29
Consolidated Statements of Operations. . . . . . . . . . . . F-30
Consolidated Statements of Common Stockholders' Deficit. . . F-31
Consolidated Statements of Cash Flows. . . . . . . . . . . . F-32
Notes to Consolidated Financial Statements . . . . . . . . . F-34
Schedule VIII - Valuation and Qualifying Accounts. . . . . . F-54
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Foodmaker, Inc.:
We have audited the accompanying consolidated balance sheets of Foodmaker,
Inc. and subsidiaries as of October 2, 1994 and October 3, 1993, and the
related consolidated statements of operations, cash flows and stockholders'
equity for the fifty-two weeks ended October 2, 1994, the fifty-three weeks
ended October 3, 1993 and the fifty-two weeks ended September 27, 1992.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Foodmaker, Inc. and subsidiaries as of October 2, 1994 and October 3, 1993,
and the results of their operations and their cash flows for the fifty-two
weeks ended October 2, 1994, the fifty-three weeks ended October 3, 1993 and
the fifty-two weeks ended September 27, 1992, in conformity with generally
accepted accounting principles.
As discussed in Notes 2, 7 and 10 to the consolidated financial statements,
the Company changed in 1993 its methods of accounting for postretirement
benefits and income taxes to adopt the provisions of the Financial Accounting
Standards Board's Statements of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
No. 109, "Accounting for Income Taxes".
KPMG PEAT MARWICK LLP
San Diego, California
November 8, 1994
F-2
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<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
ASSETS
October 2, October 3,
1994 1993
---------- ----------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 35,965 $ 4,481
Receivables, including notes receivable of $6,772
and $9,291, less allowance for doubtful
accounts of $4,173 and $3,392, respectively. . . . 31,167 30,277
Inventories. . . . . . . . . . . . . . . . . . . . . 25,319 40,977
Prepaid expenses . . . . . . . . . . . . . . . . . . 15,035 17,799
------- -------
Total current assets . . . . . . . . . . . . . . 107,486 93,534
------- -------
Investment in FRI. . . . . . . . . . . . . . . . . . 57,188 -
------- -------
Trading area rights, net of accumulated
amortization of $12,775 and $10,162, respectively. 62,932 55,678
------- -------
Lease acquisition costs, net of accumulated
amortization of $16,096 and $17,932, respectively. 27,660 46,013
------- -------
Other assets, net of accumulated
amortization of $17,277 and $15,185, respectively. 43,444 60,993
------- -------
Property at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . 90,036 93,725
Buildings. . . . . . . . . . . . . . . . . . . . . 264,560 350,115
Restaurant and other equipment . . . . . . . . . . 180,115 250,680
Construction in progress . . . . . . . . . . . . . 39,874 16,764
------- -------
574,585 711,284
Accumulated depreciation and amortization. . . . . (135,607) (164,813)
------- -------
438,978 546,471
------- -------
Cost of business in excess of net assets at
acquisition, net of accumulated amortization
of $497 and $12,920, respectively. . . . . . . . . 2,597 94,591
------- -------
$740,285 $897,280
======= =======
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
October 2, October 3,
1994 1993
---------- ----------
Current liabilities:
Current maturities of long-term debt . . . . . . . . $ 1,346 $ 33,163
Accounts payable . . . . . . . . . . . . . . . . . . 36,915 36,662
Accrued payroll and related taxes. . . . . . . . . . 22,101 25,018
Other accrued taxes. . . . . . . . . . . . . . . . . 9,713 12,000
Accrued advertising. . . . . . . . . . . . . . . . . 9,050 13,426
Accrued insurance. . . . . . . . . . . . . . . . . . 25,533 23,742
Accrued interest . . . . . . . . . . . . . . . . . . 10,932 10,004
Other accrued expenses . . . . . . . . . . . . . . . 23,792 37,396
Income tax liabilities . . . . . . . . . . . . . . . 8,148 10,783
------- -------
Total current liabilities. . . . . . . . . . . . . 147,530 202,194
------- -------
Deferred income taxes. . . . . . . . . . . . . . . . . 5,062 17,189
Long-term debt, net of current maturities. . . . . . . 447,822 500,460
Other long-term liabilities. . . . . . . . . . . . . . 39,820 38,305
Stockholders' equity:
Preferred stock, $.01 par value, 15,000,000 shares
authorized, none issued. . . . . . . . . . . . . . - -
Common stock, $.01 par value, voting
shares, 75,000,000 authorized, 40,080,854
and 39,646,904 issued, respectively. . . . . . . . 401 396
Capital in excess of par value . . . . . . . . . . . 280,837 280,353
Accumulated deficit. . . . . . . . . . . . . . . . . (166,724) (127,154)
Treasury stock, at cost, 1,412,654 shares. . . . . . (14,463) (14,463)
------- -------
Total stockholders' equity . . . . . . . . . . . . 100,051 139,132
------- -------
$740,285 $897,280
======= =======
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Fifty-two Fifty-three Fifty-two
weeks ended weeks ended weeks ended
October 2, October 3, September 27,
1994 1993 1992
--------- --------- ---------
Revenues:
Restaurant sales . . . . . . . . . .$ 843,038 $1,088,269 $1,061,904
Distribution sales . . . . . . . . . 171,711 108,546 104,041
Franchise rents and royalties. . . . 33,740 35,232 38,803
Other. . . . . . . . . . . . . . . . 4,837 8,680 14,585
--------- --------- ---------
1,053,326 1,240,727 1,219,333
--------- --------- ---------
Costs and expenses:
Costs of revenues:
Restaurant costs of sales. . . . . 244,560 307,940 309,380
Restaurant operating costs . . . . 495,340 644,434 576,221
Costs of distribution sales. . . . 165,789 104,817 97,873
Franchised restaurants costs . . . 22,822 67,727 20,993
Selling, general and administrative. 100,764 124,422 103,697
Equity in loss of FRI. . . . . . . . 2,108 - -
Interest expense . . . . . . . . . . 55,201 57,586 72,455
--------- --------- ---------
1,086,584 1,306,926 1,180,619
--------- --------- ---------
Earnings (loss) before income taxes,
extraordinary item and cumulative
effect of changes in accounting
principles . . . . . . . . . . . . . (33,258) (66,199) 38,714
Income taxes (benefit) . . . . . . . . 3,010 (22,071) 16,818
--------- --------- ---------
Earnings (loss) before extraordinary
item and cumulative effect of
changes in accounting principles . . (36,268) (44,128) 21,896
Extraordinary item - loss on early
extinguishment of debt, net of taxes (3,302) - (63,651)
Cumulative effect on prior years of
adopting SFAS 106 and SFAS 109 . . . - (53,980) -
--------- --------- ---------
Net earnings (loss). . . . . . . . . .$ (39,570) $ (98,108) $ (41,755)
========= ========= =========
Earnings (loss) per share - primary
and fully diluted:
Earnings (loss) before extraordinary
item and cumulative effect of
changes in accounting principles . (.94) (1.15) .67
Extraordinary item . . . . . . . . . (.09) - (1.95)
Cumulative effect on prior years of
adopting SFAS 106 and SFAS 109 . . - (1.40) -
--------- --------- ---------
Net loss per share . . . . . . . . . .$ (1.03) $ (2.55) $ (1.28)
========= ========= =========
Weighted average shares outstanding. . 38,531 38,486 32,577
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)
Fifty-two Fifty-three Fifty-two
weeks ended weeks ended weeks ended
October 2, October 3, September 27,
1994 1993 1992
--------- --------- ---------
Cash flows from operations:
Earnings (loss) before
extraordinary item . . . . . . . . $(36,268) $ (98,108) $ 21,896
Non-cash items included in income:
Depreciation and amortization. . . 39,925 53,499 50,810
Deferred finance cost amortization 2,685 3,200 4,001
Deferred income taxes. . . . . . . 4,535 (23,905) 150
Equity in loss of FRI. . . . . . . 2,108 - -
Cumulative effect of
accounting changes . . . . . . . - 53,980 -
Decrease (increase) in receivables . (3,373) 6,442 (13,848)
Decrease (increase) in inventories . 194 (5,646) (2,813)
Decrease (increase) in
prepaid expenses . . . . . . . . . (196) (2,200) 1,317
Increase (decrease) in
accounts payable . . . . . . . . . 16,375 (1,659) 4,326
Increase in other accrued
liabilities. . . . . . . . . . . . 3,417 40,067 473
--------- --------- ---------
Cash flows provided by
operations . . . . . . . . . . 29,402 25,670 66,312
--------- --------- ---------
Cash flows from investing activities:
Additions to property and equipment. (92,037) (46,269) (76,629)
Disposition of property
and equipment. . . . . . . . . . . 3,374 6,162 6,483
Investment in FRI, net . . . . . . . (59,296) - -
Disposition of Chi-Chi's . . . . . . 214,551 - -
Acquisition of Consul. . . . . . . . - (8,700) -
Increase in trading area rights. . . (9,915) (1,289) (2,370)
Other. . . . . . . . . . . . . . . . (3,936) (8,557) (7,289)
--------- --------- ---------
Cash flows provided (used)
in investing activities. . . . 52,741 (58,653) (79,805)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt . . . . . . . . . . 82,519 2,283 429,993
Principal payments on long-term debt,
including current maturities . . . (113,033) (25,015) (557,776)
Borrowings under revolving
bank loans . . . . . . . . . . . . 5,000 30,000 105,400
Principal repayments under
revolving bank loans . . . . . . . (35,000) - (113,967)
Extraordinary loss on retirement of
debt, net of taxes . . . . . . . . (3,302) - (63,651)
Increase (decrease) in
accrued interest . . . . . . . . . 1,678 (1,875) (14,593)
Proceeds from issuance of
common stock . . . . . . . . . . . 489 1,171 241,743
Repurchase of common stock . . . . . - (10,929) (3,495)
Other changes in equity. . . . . . . - 65 (95)
Proceeds from sale and leaseback
transactions . . . . . . . . . . . 9,695 22,035 8,982
Increase (decrease) in accrued
transaction costs. . . . . . . . . 1,295 (273) 385
--------- --------- ---------
Cash flows provided (used) by
financing activities . . . . . (50,659) 17,462 32,926
--------- --------- ---------
Net increase (decrease) in cash. . . .$ 31,484 $ (15,521) $ 19,433
========= ========= =========
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest, net of amounts
capitalized . . . . . . . . . . .$ 51,242 $ 56,070 $ 82,486
Income tax payments (refunds), net (275) 4,837 15,175
Noncash investing and financing
activities:
Increase in property and intangible
assets due to change in
accounting for income taxes . . .$ - $ 16,401 $ -
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Capital Notes
in excess Retained receivable-
Preferred stock Common stock of par earnings Treasury stock-
Shares Amount Shares Amount value (deficit) stock holders Total
------ ------ ------ ------ ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1991 600,000 $ 6 10,800,000 $ 1,080 $ 36,740 $ 12,709 $ - $ - $ 50,535
Reduction of common stock
par value to $.01 per share - - - (972) 972 - - - -
Effect of the merger with PDV 172,500 2 5,400,000 54 (47) - (39) (137) (167)
Sale of common stock
pursuant to a public offering - - 17,151,000 172 241,567 - - - 241,739
Exchange of preferred stock
for common stock (772,500) (8) 5,150,000 51 (43) - - - -
Exercise of stock options
and warrants - - 4,500 - 4 - - - 4
Payments on stockholder notes - - - - - - - 72 72
Purchases of treasury stock - - - - - - (3,495) - (3,495)
Net loss of the Company - - - - - (41,755) - - (41,755)
------- --- ---------- ------ ------- ------- -------- ------ -------
Balance at September 27, 1992 - - 38,505,500 385 279,193 (29,046) (3,534) (65) 246,933
Exercise of stock options
and warrants - - 1,141,404 11 1,160 - - - 1,171
Payments on stockholder notes - - - - - - - 65 65
Purchases of treasury stock - - - - - - (10,929) - (10,929)
Net loss of the Company - - - - - (98,108) - - (98,108)
------- --- ---------- ------ ------- ------- -------- ------ -------
Balance at October 3, 1993 - - 39,646,904 396 280,353 (127,154) (14,463) - 139,132
Exercise of stock options
and warrants - - 433,950 5 484 - - - 489
Net loss of the Company - - - - - (39,570) - - (39,570)
------- --- ---------- ------ ------- ------- -------- ------ -------
Balance at October 2, 1994 - $ - 40,080,854 $ 401 $280,837 $(166,724) $ (14,463) $ - $100,051
======= === ========== ====== ======= ======= ======== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. ORGANIZATION
Foodmaker, Inc. ("the Company") operates and franchises Jack In The Box
restaurants and formerly operated Chi-Chi's Mexican restaurants ("Chi-
Chi's") (See Note 3). The number of restaurants in operation at the end
of each fiscal year follows:
Jack In The Box Chi-Chi's
-------------------- ------------
1994 1993 1992 1993 1992
---- ---- ---- ---- ----
Operated by the Company . . . . . 810 725 720 207 181
Operated by franchisees . . . . . 414 447 435 28 51
----- ----- ----- ---- ----
System restaurants. . . . . . . . 1,224 1,172 1,155 235 232
===== ===== ===== ==== ====
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and fiscal year - The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions are eliminated.
Certain financial statement reclassifications have been made in prior
years to conform to the 1994 presentation. The Company's fiscal year is
52-53 weeks ending the Sunday closest to September 30.
Cash Equivalents, for the purposes of statement of cash flows, are
considered to be all highly liquid investments with a maturity of three
months or less when purchased.
Inventories are valued at the lower of cost, which approximates FIFO, or
market.
Investments - The Company accounts for its 39% investment in Family
Restaurants, Inc. ("FRI") using the equity method of accounting. The
carrying value differs from the amount of the underlying equity in net
assets of FRI by the $3,045 deferred gain resulting from the Company's
sale of its former subsidiary to FRI.
Trading area rights represent the amount allocated under purchase
accounting to reflect the value of operating existing restaurants within
their specific trading area and are amortized on a straight-line basis
over the period of control of the property, not exceeding 40 years, and
are retired when a restaurant is franchised or sold.
Lease acquisition costs represent the acquired values of existing lease
contracts having lower contractual rents than fair market rents and are
amortized over the remaining lease term.
Other assets are inclusive of deferred franchise contract costs
representing the acquired value of franchise contracts, amortized over the
term of the franchise agreement, usually 20 years; deferred finance costs
amortized on the interest method over the terms of the respective loan
agreements, from 7 to 14 years; and pre-opening costs, consisting
primarily of employee training costs incurred before a restaurant opens,
which are capitalized and amortized over a one-year period commencing the
date a restaurant opens.
Property at cost - Facilities leased under capital leases are stated at
the present value of minimum lease payments at the beginning of the lease
term, not to exceed fair value.
Depreciation is provided on a straight-line basis based on the estimated
useful lives of the buildings and equipment or over the lease term for
certain capital leases (buildings 3% to 6 2/3% per year and restaurant and
other equipment 3% to 33 1/3% per year).
F-8
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Expenditures for new facilities and those which substantially increase the
useful lives of the property are capitalized. Maintenance, repairs, and
minor renewals are expensed as incurred. When properties are retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the accounts and gains or losses on the dispositions are
reflected in results of operations.
Cost of business in excess of net assets at acquisition is amortized on a
straight-line basis over 40 years. The Company assesses the
recoverability of cost of business in excess of net assets at acquisition
by determining whether the amortization of the balance over its remaining
life can be recovered through projected undiscounted future cash flows.
Based on these calculations, the Company has determined that there is no
future impairment of this intangible asset at October 2, 1994, October 3,
1993 and September 27, 1992.
Franchise operations - Franchise fee revenues are recognized when all
material services have been performed by the Company. Expenses associated
with the issuance of the franchise are charged to expense as incurred.
Continuing fees from franchised restaurants, for which the Company is
obligated to maintain its restaurant concepts, are recorded as income on
an accrual basis. Gains on sales of restaurant businesses to franchisees,
including trading area rights and equipment, are recorded as other
revenues when the sales are consummated and certain other criteria are
met.
Income taxes - In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. ("SFAS") 109,
"Accounting for Income Taxes". SFAS 109 requires a change from the
deferred method of accounting for income taxes of APB Opinion 11 to the
asset and liability method of accounting for income taxes. Under the
asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Effective September 28, 1992,
the Company adopted SFAS 109 and has reported the cumulative effect of
this change in the 1993 consolidated statement of operations.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1992 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable in the year
of the calculation. Under the deferred method, deferred taxes are not
adjusted for subsequent changes in tax rates.
3. FAMILY RESTAURANTS, INC.
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 a 39% 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 45%,
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 39% and 18% equity positions in FRI. Management of FRI
invested $2.5 million in
F-9
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
3. FAMILY RESTAURANTS, INC. (continued)
cash and notes and holds an approximate 4% equity position. 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,
and to reduce other 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 eight months from the date of
the acquisition through and as of September 25, 1994, the end of its third
quarter, follows:
Balance sheet data: Statement of operations data:
Current assets . . . . . $ 44,133 Sales . . . . . . $778,592
Current liabilities. . . 201,316 Gross profit. . . 70,984
Total assets . . . . . . 873,942 Loss before extraordinary
Stockholders' equity . . 151,213 item. . . . . . (8,336)
Net loss. . . . . (5,395)
As a result of recent publicity regarding the nutritional value of Mexican
food, and resulting sales declines, FRI's management is evaluating the
future prospects for its Mexican Restaurant Division and the
recoverability of certain long-lived intangible assets based on consumer
reaction to new marketing programs.
4. LONG-TERM DEBT
In 1992, the Company completed a recapitalization plan which increased
stockholders' equity, reduced indebtedness and interest expense, and
improved the Company's operating and financial flexibility. The plan
included the sale of common stock for approximately $257 million and the
issuance of new lower interest rate debt of $300 million, the net proceeds
of which were used to retire approximately 94%, 86% and 40%, respectively,
of the Company's 12 3/4% senior notes, 141/4% senior subordinated notes and
subordinated debentures, and contributed to the Company's increased cash
position. The Company incurred an extraordinary loss of $79.6 million on
the early extinguishment of debt consisting of premiums, consent payments
and associated other costs, less currently recognizable income tax
benefits of $15.9 million.
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, interest payable semi-annually, and due in two equal
installments of principal on January 1, 2003 and November 1, 2003. The
Company is required semi-annually through 2002 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. Immediately prior to the
principal payment dates, 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
October 2, 1994, the Company had approximately $3.7 million in
construction funds available for new restaurants, which was classified in
other assets.
F-10
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
4. LONG-TERM DEBT (continued)
<TABLE>
<CAPTION>
October 2, October 3,
1994 1993
---------- ----------
The detail of long-term debt follows:
<S> <C> <C>
Bank loans, variable interest rates
based on established market indicators
which approximate 1 1/2% or less over prime. . . . . . . . . . . . . $ - $107,000
Senior notes, 9 1/4% interest, due March 1, 1999,
redeemable beginning March 1, 1997 . . . . . . . . . . . . . . . . . 175,000 175,000
Senior subordinated notes, 9 3/4% interest, due June 1, 2002,
redeemable beginning June 1, 1997. . . . . . . . . . . . . . . . . . 125,000 125,000
Senior notes, 12 3/4% interest, due July 1, 1996. . . . . . . . . . . 7,043 7,043
Senior notes, 13 1/2% interest, repaid in full September 30, 1994 . . - 23,283
Senior subordinated notes, 14 1/4% interest,
due May 15, 1998, redeemable beginning May 15, 1993. . . . . . . . . 42,843 42,843
Financing lease obligations, net of discounts of
$3,295 reflecting a 10.3% effective interest rate,
semi-annual payments of $3,400 and $700 to cover
interest and sinking fund requirements, respectively,
due in equal installments January 1, 2003 and
November 1, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 66,705 -
Subordinated debentures, net of discount of $10,413 in 1993
to record obligation at 15% effective interest rate,
due October 2009, assumed by FRI in the sale of Chi-Chi's. . . . . . - 19,268
Secured notes, 11 1/2% interest, due in monthly
installments through May 1, 2005 . . . . . . . . . . . . . . . . . . 10,489 10,965
Secured notes, 9 1/2% interest, due in monthly
installments through August 1, 2017. . . . . . . . . . . . . . . . . 8,692 8,794
Capitalized lease obligations, 11% average
interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,213 10,576
Other notes, principally unsecured,
10% average interest rate. . . . . . . . . . . . . . . . . . . . . . 2,183 3,851
------- -------
449,168 533,623
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . (1,346) (33,163)
------- -------
$447,822 $500,460
======= =======
</TABLE>
The secured notes, bank loans and senior notes are secured by
substantially all the Company's real and personal property.
The Company is subject to a number of covenants under its various credit
agreements including limits on additional borrowing, capital
expenditures, lease commitments and dividend payments, requirements to
maintain various financial ratios, and to meet certain requirements
regarding maximum leverage and minimum fixed charges, cash flows, interest
coverage and net worth.
F-11
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
4. LONG-TERM DEBT (continued)
In conjunction with the sale of Chi-Chi's in January 1994, the Company
repaid all of the bank loans then outstanding and cancelled its former
bank credit agreement. On July 26, 1994, the Company entered into a new
revolving bank credit agreement, expiring July 26, 1997, which provides
for a credit facility of up to $52.5 million, including letters of credit
for the account of the Company in an aggregate amount of up to $25
million. The revolving bank loans require the payment of a commitment fee
of 1/2% per year of the unused credit line.
Aggregate maturities and sinking fund requirements on all long-term debt
are $8,372, $1,798, $44,281 and $176,557 for the years 1996 through 1999,
respectively.
The amount of interest cost capitalized during the construction period of
restaurants was $727, $255, and $731 in 1994, 1993 and 1992, respectively.
5. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, trade receivables, trade
accounts payable, accrued expenses and notes payable to banks approximate
fair values.
The fair values of each of the Company's long-term debt instruments are
based on quoted market values, where available, or on the amount of future
cash flows associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of comparable
maturity. The carrying value and the estimated fair value of the
Company's long-term debt at October 2, 1994 are $437,955 and $414,267,
respectively.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgement and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
The Company does not maintain investments or commitments for which the
application of SFAS 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," would cause a
material effect.
6. LEASES
As Lessee - The Company leases restaurant and other facilities under
leases having terms expiring at various dates through 2039. The leases
generally have renewal clauses of 5 to 20 years exercisable at the option
of the Company and in some instances have provisions for contingent
rentals based upon a percentage of revenues, as defined. Total rent
expense for all operating leases was $77,296, $87,845 and $77,940
including contingent rentals of $3,486, $3,875 and $4,320 in 1994, 1993
and 1992, respectively.
F-12
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
6. LEASES (continued)
Future minimum lease payments under capital and operating leases are as
follows:
Capital Operating
leases leases
------ -------
1995 . . . . . . . . . . . . . . . $ 1,750 $ 60,529
1996 . . . . . . . . . . . . . . . 1,750 59,746
1997 . . . . . . . . . . . . . . . 1,697 57,622
1998 . . . . . . . . . . . . . . . 1,625 54,543
1999 . . . . . . . . . . . . . . . 1,547 51,302
Thereafter . . . . . . . . . . . . 18,481 420,041
------ -------
Total minimum lease payments . . . 26,850 $703,783
=======
Less amount representing interest. 15,637
------
Present value of obligations
under capital leases. . . . . . . 11,213
Less current portion . . . . . . . 485
------
Long-term capital lease obligation $10,728
======
Building assets recorded under capital leases were $10,464 and $8,865, net
of accumulated depreciation of $2,420 and $4,022, as of October 2, 1994
and October 3, 1993, respectively.
As Lessor - The Company leases or subleases restaurants to certain
franchisees and others under agreements which generally provide for the
payment of percentage rentals in excess of stipulated minimum rentals,
usually for a period of 20 years. Total rental revenue was $21,911,
$26,318 and $23,629, including contingent rentals of $4,979, $8,880 and
$7,097 in 1994, 1993 and 1992, respectively. The minimum rents receivable
under these non-cancelable leases are as follows:
Sales-type Operating
leases leases
--------- ---------
1995 . . . . . . . . . . . . . . . $ 44 $ 17,382
1996 . . . . . . . . . . . . . . . 44 16,961
1997 . . . . . . . . . . . . . . . 44 16,612
1998 . . . . . . . . . . . . . . . 44 15,955
1999 . . . . . . . . . . . . . . . 45 15,820
Thereafter . . . . . . . . . . . . 299 135,038
--- -------
Total minimum future rentals . . . 520 $217,768
=======
Less amount representing interest. 226
---
Net investment (included
in other assets) . . . . . . . . . $ 294
===
Land and building assets held for lease were $76,051 and $86,096, net of
accumulated depreciation of $14,664 and $13,041, as of October 2, 1994 and
October 3, 1993, respectively.
F-13
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
7. INCOME TAXES
The Company adopted SFAS 109 as of September 28, 1992. The $43,804
cumulative effect at that date of this change in accounting for income
taxes is reported separately in the 1993 consolidated statement of
operations. Prior years' financial statements have not been restated to
apply the provisions of SFAS 109 and the pro forma effects on prior years'
financial statements have not been included because such effects cannot be
reasonably estimated.
The provision for income taxes consists of the following:
Fifty-two Fifty-three Fifty-two
weeks ended weeks ended weeks ended
October 2, October 3, September 27,
1994 1993 1992
--------- ---------- ----------
Federal - current. . . . . . . $ (624) $ - $ 593
- deferred . . . . . . 3,236 (21,252) (3,087)
State - current. . . . . . . 478 1,834 3,803
- deferred . . . . . . (1,858) (2,653) (404)
------- ------- -------
Subtotal . . . . . . . . . . . 1,232 (22,071) 905
Income tax benefit of
extraordinary item. . . . . . (1,778) - (15,913)
------- ------- -------
Income taxes (benefit) . . . . $ 3,010 $(22,071) $ 16,818
======= ======= =======
A reconciliation of income taxes with the amounts computed at the
statutory federal rates of 35% in 1994 and 1993 and 34% in 1992 follows:
Fifty-two Fifty-three Fifty-two
weeks ended weeks ended weeks ended
October 2, October 3, September 27,
1994 1993 1992
--------- ---------- ----------
Computed at federal
statutory rates . . . . . . . $(11,640) $(23,170) $ 13,163
State income taxes (benefits),
net of federal tax benefits . (897) (410) 3,239
Amortization of intangibles. . 327 1,088 2,220
Tax basis differences relating
to business combinations. . . - - 571
Targeted jobs credit wages . . (742) (585) 914
Utilization of general
business credits. . . . . . . - - (3,035)
Addition to valuation allowance 18,520 537 -
Gain on sale of subsidiary . . (1,988) - -
Other, net . . . . . . . . . . (570) 469 (254)
------- ------- -------
$ 3,010 $(22,071) $ 16,818
======= ======= =======
F-14
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
7. INCOME TAXES (continued)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are presented
below:
October 2, October 3,
1994 1993
--------- ---------
Deferred tax assets:
Tax loss carryforwards and tax credits . . . . . $ 29,455 $ 34,312
Insurance reserves . . . . . . . . . . . . . . . 14,242 16,230
Accrued pension and postretirement benefits. . . 9,649 9,193
Accrued vacation pay expense . . . . . . . . . . 5,767 5,298
Other reserves and allowances. . . . . . . . . . 7,308 5,656
Deferred income. . . . . . . . . . . . . . . . . 4,190 4,444
Investment in subsidiary . . . . . . . . . . . . 3,140 -
Other, net . . . . . . . . . . . . . . . . . . . 1,511 3,494
------ ------
Total gross deferred tax assets . . . . . . . . 75,262 78,627
Less valuation allowance . . . . . . . . . . . . (23,227) (5,122)
------ ------
Net deferred tax assets . . . . . . . . . . . . 52,035 73,505
------ ------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation. . . . . . . . . . . 40,960 67,468
Intangible assets . . . . . . . . . . . . . . . . 15,539 17,183
Unamortized bond discount . . . . . . . . . . . . - 4,328
Other, net. . . . . . . . . . . . . . . . . . . . 598 1,715
------ ------
Total gross deferred liabilities . . . . . . . . 57,097 90,694
------ ------
Net deferred tax liability . . . . . . . . . . . $ 5,062 $ 17,189
====== ======
The valuation allowance of $23,227 as of October 2, 1994 represents
deferred tax assets that may not be realized by the reversal of future
taxable temporary differences. In fiscal 1994, the Company recognized an
increase in the valuation allowance of $18,520 related to the reduction of
deferred tax liabilities resulting from the sale of Chi-Chi's, the
investment in Family Restaurants, Inc. and the SFAS 106 pension accrual.
At October 2, 1994, the Company had federal tax net operating loss
carryforwards of approximately $27,328 which expire in 2009, and general
business credit carryforwards of approximately $9,302, which expire in
2001 through 2009. The Company has an alternative minimum tax credit
carryforward of approximately $8,948. The alternative minimum tax credit
carryforward has no expiration date; however, it may only be utilized to
reduce any regular tax liability the Company may have in the future.
8. 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 California, 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.
F-15
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
8. CONTINGENT LIABILITIES (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 its
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 action in Federal Court. The suit in Superior
Court has been voluntarily dismissed. The Company and the franchisee are
actively engaged in settlement discussions.
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 Federal Trade Commission is investigating whether the Company violated
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
when the Company's former subsidiary, Chi-Chi's, Inc., acquired Consul
Restaurant Corporation in October 1992 without first complying with the
reporting and waiting requirements of the HSR Act. The Company later made
the filing as it was preparing for the sale of Chi-Chi's. The Company has
engaged counsel in connection with the investigation and on August 17,
1994, counsel for the Company received a request, preliminary in nature,
for information and documents. The HSR Act provides for a penalty of up
to $10,000 per day for failure to comply with the above requirements.
Management believes that any potential penalty, if assessed, will not have
a material impact on the Company.
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.
F-16
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
9. RETIREMENT, SAVINGS AND BONUS PLANS
The Company has non-contributory pension plans covering substantially all
salaried and hourly employees meeting certain eligibility requirements.
These plans are subject to modification at any time. The plans provide
retirement benefits based on years of service and compensation. It is the
Company's practice to fund retirement costs as necessary.
The following items are the components of the net defined benefit pension
expense:
Fifty-two Fifty-three Fifty-two
weeks ended weeks ended weeks ended
October 2, October 3, September 27,
1994 1993 1992
---------- ----------- -------------
Present value of benefits earned
during the year. . . . . . . . . . $ 2,456 $ 2,075 $ 1,641
Interest cost on projected benefit
obligations. . . . . . . . . . . . 2,961 2,530 2,235
Actual return on plan assets. . . . (538) (300) (900)
Net amortization. . . . . . . . . . (908) (1,203) (134)
----- ----- -----
Net pension expense for the period. $ 3,971 $ 3,102 $ 2,842
===== ===== =====
<TABLE>
<CAPTION>
The funded status of the plans is as follows:
October 2, 1994 October 3, 1993
-------------------------- --------------------------
Qualified Non-qualified Qualified Non-qualified
plans plan plans plan
------ -------- ------ --------
Actuarial present value of benefit obligations:
<S> <C> <C> <C> <C>
Vested benefits . . . . . . . . . . . . . $(22,871) $(4,178) $(20,146) $(3,349)
Nonvested benefits. . . . . . . . . . . . (3,166) (1,169) (3,837) (2,036)
------ ----- ------ -----
Accumulated benefit obligation . . . . . . (26,037) (5,347) (23,983) (5,385)
Effect of future salary increases. . . . . (6,147) (3,773) (7,164) (2,003)
------ ----- ------ -----
Projected benefit obligation . . . . . . . (32,184) (9,120) (31,147) (7,388)
Plan assets at fair value. . . . . . . . . 26,583 - 23,112 -
------ ----- ------ -----
Projected benefit obligations in
excess of plan assets . . . . . . . . . . (5,601) (9,120) (8,035) (7,388)
Unrecognized prior service cost. . . . . . 267 3,203 380 1,997
Unrecognized net transition obligation . . 63 193 58 220
Unrecognized net (gain) loss . . . . . . . 2,158 1,534 3,991 2,143
------ ----- ------ -----
Pension liability. . . . . . . . . . . . . $ (3,113) $(4,190) $ (3,606) $(3,028)
====== ===== ====== =====
<CAPTION>
In determining the above information for each period, the Company's actuaries assumed the following:
October 2, 1994 October 3, 1993
-------------------------- --------------------------
Qualified Non-qualified Qualified Non-qualified
plans plan plans plan
------ -------- ------ --------
<S> <C> <C> <C> <C>
Discount rate. . . . . . . . . . . . . . . 8.25% 7.25% 7.75% 7.25%
Rate of increase in compensation levels. . 5.50% 5.00% 5.50% 6.50%
Long-term rate of return on assets . . . . 8.00% N/A 8.00% N/A
</TABLE>
Assets of the qualified plans consist primarily of listed stocks and
bonds.
F-17
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
9. RETIREMENT, SAVINGS AND BONUS PLANS (continued)
The Company maintains savings plans which are organized under Section
401(k) of the Internal Revenue Code, which allow non-executive
administrative and clerical employees who have completed at least one year
of service or reached age 21, whichever is later, to defer up to 12% of
their pay on a pre-tax basis. The Company contributes an amount equal to
50% of the first 4% of compensation that is deferred by the participant.
The Company also maintains an unfunded, non-qualified deferred
compensation plan, which was created in 1990 for key executives and other
members of management. This plan allows participants to defer up to 15%
of their salary on a pre-tax basis. The Company contributes an amount
equal to 100% of the first 3% contributed by the employee. In each plan,
a participant's right to Company contributions vests at a rate of 25% per
year of service. The Company's savings plans contributions were $1,081,
$1,162 and $1,209 in 1994, 1993 and 1992, respectively. The Company's
non-qualified deferred compensation plan contributions were $285, $376 and
$362 in 1994, 1993 and 1992, respectively.
The Company maintains a bonus plan which allows certain officers of the
Company to earn annual cash bonuses based upon achievement of certain
financial and performance goals approved by the compensation committee of
the Company's board of directors. Under this plan, $1,673 was expensed in
1992.
10. POSTRETIREMENT BENEFIT PLAN
The Company sponsors a health care plan that provides postretirement
medical benefits for employees who meet minimum age and service
requirements. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as
deductibles and coinsurance. The Company's policy is to fund the cost of
medical benefits in amounts determined at the discretion of management.
The Company adopted SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," as of September 28, 1992. The effect of
SFAS 106 on the net periodic postretirement benefit cost for 1994 and 1993
was $1,533 and $1,532, respectively. The cumulative effect on prior years
of adopting SFAS 106 was $10,176. Prior years have not been restated and
the pro forma effects on prior years' financial statements have not been
included because such effects cannot be reasonably estimated.
The plan's funded status reconciled with amounts recognized in the
Company's consolidated balance sheet is as follows:
October 2, October 3,
1994 1993
--------- ---------
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . $ (1,036) $ (1,008)
Fully eligible active plan participants. . . . . (2,171) (1,686)
Other active plan participants . . . . . . . . . (7,209) (7,882)
------ ------
(10,416) (10,576)
Plan assets at fair value. . . . . . . . . . . . . - -
------ ------
Accumulated postretirement benefit
obligation in excess of plan assets . . . . . . . (10,416) (10,576)
Unrecognized prior service cost. . . . . . . . . . - -
Unrecognized net gain. . . . . . . . . . . . . . . (2,825) (1,132)
------ ------
Accrued postretirement benefit cost
included in other liabilities . . . . . . . . . . $(13,241) $(11,708)
====== ======
The following items are the components of the net periodic
postretirement benefit cost:
Service cost . . . . . . . . . . . . . . . . . . . $ 770 $ 743
Interest cost. . . . . . . . . . . . . . . . . . . 763 789
Actual return on plan assets . . . . . . . . . . . - -
Recognition of transition obligation . . . . . . . - 10,176
Net amortization and deferral. . . . . . . . . . . - -
------ ------
Net periodic postretirement benefit cost . . . . . $ 1,533 $ 11,708
====== ======
F-18
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
10. POSTRETIREMENT BENEFIT PLAN (continued)
In determining the above information, the Company's actuaries assumed
discount rates of 8.25% and 7.25% as of October 2, 1994 and October 3,
1993, respectively.
For measurement purposes, an 11% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed
for 1994 for plan participants under age 65; the rate was assumed
to decrease 1/2% per year to 5% by the year 2006 and remain at that level
thereafter. For plan participants age 65 years or older, a 9% annual
health care cost trend rate was assumed for 1994; the rate was assumed to
decrease 1/2% per year to 4% by the year 2004. The health care cost trend
rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of October 2, 1994 by $2,300, or 22%,
and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year ended October 2, 1994 by
$450 or 29%.
11. FRANCHISE ARRANGEMENTS
Franchise arrangements generally provide for initial license fees of
approximately $25 per restaurant and continuing payments to the Company
based on a percentage of sales. Among other things, the franchisee is
provided the use of land and building, generally for a period of 20 years,
and is required to pay negotiated rent, property taxes, insurance and
maintenance. Included in other revenues is $358, $2,231 and $7,905 for
the Company in 1994, 1993 and 1992, respectively, representing gains on
sales of restaurant businesses to franchisees.
12. RELATED PARTY TRANSACTIONS
The Company provides distribution services to a portion of FRI's Mexican
restaurants, principally those operated under the Chi-Chi's name.
Distribution sales to those restaurants subsequent to January 27, 1994,
the date the Company sold Chi-Chi's and acquired its 39% interest in FRI,
aggregated $63,702. In relation to the distribution sales, the Company
had accounts receivable of $3,166 due from Chi-Chi's at October 2, 1994.
Gibbons, Goodwin, van Amerongen ("GGvA"), successor to Gibbons, Green, van
Amerongen, general partners in the limited partnerships which own
approximately 46% of the Company's outstanding common stock, were paid a
fee of $900, $827 and $900 in 1994, 1993 and 1992, respectively, under an
agreement expiring December 1994, whereby GGvA provides certain management
services to the Company.
13. STOCKHOLDERS' EQUITY
In March 1992, PDV Holding, Inc. ("PDV"), the Company's former parent
company, merged into Foodmaker (the "Merger"). In the Merger, 16,200,000
shares of Foodmaker common stock were issued for 10,800,000 shares of PDV
common stock, and 772,500 shares of Foodmaker preferred stock, $100
liquidation value, were issued for 600,000 shares of PDV preferred stock.
In May 1992, the preferred stock was exchanged (the "Exchange") for
5,150,000 shares of Foodmaker common stock. In conjunction with the
Merger, the Company's authorized stock was increased to 75,000,000 common
shares, par value $.01 per share (decreased from $.10) and 15,000,000
preferred shares, par value $.01 per share. During March 1992, the
Company sold 17,151,000 shares of common stock resulting in net proceeds
of approximately $242 million.
In conjunction with the December 1988 acquisition of the Company, warrants
for the purchase of 1,584,573 shares of common stock were issued and are
exercisable at $.93 per share, as adjusted for the Merger. As of
October 2, 1994, warrants for 1,359,531 shares had been exercised.
At October 2, 1994, the Company had 4,697,427 shares of common stock
reserved for issuance upon the exercise of stock options and 225,042
shares reserved for issuance upon exercise of warrants.
F-19
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
14. STOCK OPTIONS
In January 1992, the Company adopted the 1992 Employee Stock Incentive
Plan (the "1992 Plan") and, as part of the Merger, assumed outstanding
options to employees under PDV's 1990 Stock Option Plan and assumed
contractually the options to purchase 42,750 shares of common stock
granted to two non-employee directors of the Company. The purpose of the
1992 Plan is to enable the Company and its subsidiaries to attract, retain
and motivate key officers, directors and employees by providing for or
increasing the proprietary interests of such persons to work toward the
future financial success of the Company. Under the 1992 Plan, employees
are eligible to receive stock options, restricted stock and other various
stock-based awards. Subject to certain adjustments, up to a maximum of
1,875,000 shares of common stock may be sold or issued under the 1992
Plan. No awards shall be granted after January 16, 2002, although common
stock may be issued thereafter, pursuant to awards granted prior to such
date.
In August 1993, the Company adopted the 1993 Stock Option Plan (the "1993
Plan"). The purpose of the 1993 Plan is to enable the Company and its
subsidiaries to attract, retain and motivate non-officer employees by
providing for or increasing the proprietary interests of such persons to
work toward the future financial success of the Company. Under the 1993
Plan, employees who do not participate in the 1992 Plan are eligible to
receive annually stock options with an aggregate exercise price equivalent
to a maximum of 10 percent of their eligible earnings. Subject to certain
adjustments, up to a maximum of 3,000,000 shares of common stock may be
sold or issued under the 1993 Plan. No awards shall be granted after
December 11, 2003, although common stock may be issued thereafter,
pursuant to awards granted prior to such date.
The terms and conditions of the stock-based awards under both plans are
determined by a committee of the board of directors on each award date and
may include provisions for the exercise price, expiration, vesting,
restriction on sales and forfeiture, as applicable. Options granted under
the plans have terms not exceeding 11 years and provide for an option
exercise price no less than 100% of the fair market value of the common
stock on the day the option was granted.
The following is a summary of stock option activity for the three fiscal
years ended October 2, 1994:
Option price
Shares per share
------- ------------
Balance at September 30, 1991 . . . . . 345,855 $ .96-1.13
Granted . . . . . . . . . . . . . . . 1,082,885 1.13-10.00
Exercised . . . . . . . . . . . . . . (4,350) .96-1.13
Cancelled . . . . . . . . . . . . . . (4,500) 1.13-10.00
---------
Balance at September 27, 1992 . . . . . 1,419,890 .96-10.00
Granted . . . . . . . . . . . . . . . 547,334 10.13-13.38
Exercised . . . . . . . . . . . . . . (100,923) .96-10.00
Cancelled . . . . . . . . . . . . . . (10,690) 1.13-11.00
---------
Balance at October 3, 1993. . . . . . . 1,855,611 .96-13.38
Granted . . . . . . . . . . . . . . . 323,000 5.88-10.13
Exercised . . . . . . . . . . . . . . (115,050) .96-1.13
Cancelled . . . . . . . . . . . . . . (252,970) 5.88-13.38
---------
Balance at October 2, 1994. . . . . . . 1,810,591 .96-12.25
=========
Stock options for the purchase of 1,288,661 shares are exercisable at
October 2, 1994.
F-20
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
15. AVERAGE SHARES OUTSTANDING
Earnings per share for 1994, 1993 and 1992 are based on the weighted
average number of shares outstanding during the year, determined as
follows:
<TABLE>
<CAPTION>
October 2, October 3, September 27,
1994 1993 1992
---------- ---------- ------------
<S> <C> <C> <C>
Shares outstanding, beginning of fiscal year. . . 38,234,250 38,148,946 21,350,000
Effect of common stock issued . . . . . . . . . . 296,797 913,570 9,335,182
Effect of common stock reacquired . . . . . . . . - (1,027,008) (34,881)
Assumed additional shares issued upon
exercise of stock options and warrants,
net of shares reacquired at the average
market price . . . . . . . . . . . . . . . . . . - 450,819 1,927,001
---------- ---------- ----------
Weighted average shares outstanding . . . . . . . 38,531,047 38,486,327 32,577,302
========== ========== ==========
</TABLE>
In computing weighted average shares outstanding, all shares issued
pursuant to the Merger and the Exchange were considered to be outstanding
for all periods presented. Common equivalent shares for stock options and
warrants issued prior to the initial public offering were considered to be
outstanding for all periods presented in order to comply with requirements
of the Securities and Exchange Commission.
16. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
16 weeks ended 12 weeks ended 13 weeks ended
-------------- ---------------------------------- --------------
Jan. 17, 1993 Apr. 11, 1993 Jul. 4, 1993 Oct. 3, 1993
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $403,333 $244,913 $280,241 $312,240
Gross profit (loss) 70,760 13,420 (6,338) 37,967
Earnings (loss) before
cumulative effect of changes
in accounting principles 11,499 (22,175) (30,779) (2,673)
Net loss (42,481) (22,175) (30,779) (2,673)
Earnings (loss) per share before
cumulative effect of changes
in accounting principles .29 (.58) (.81) (.07)
Net loss per share (1.09) (.58) (.81) (.07)
<CAPTION>
16 weeks ended 12 weeks ended
-------------- --------------------------------------------------------
Jan. 23, 1994 Apr. 17, 1994 Jul. 10, 1994 Oct. 2, 1994
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $381,574 $218,706 $225,822 $227,224
Gross profit 43,602 24,574 27,988 28,651
Loss before extraordinary item (4,399) (22,913) (3,434) (5,522)
Net loss (4,399) (25,651) (3,434) (6,086)
Loss per share before
extraordinary item (.11) (.59) (.09) (.14)
Net loss per share (.11) (.67) (.09) (.16)
</TABLE>
Considering the sale of Chi-Chi's combined with the Company's recent
losses, the rules under SFAS 109 required the Company to provide a non-
cash valuation allowance for previously recognized tax benefits resulting
in an adjustment to the tax provision for the second quarter of 1994 of
$13.7 million or approximately 36 cents a share. This increase in the tax
provision increased the second quarter loss before extraordinary item to
$22.9 million, or 59 cents a share, from a loss of $9.2 million or 24
cents a share, as previously reported. The net loss is therefore also
increased to $25.7 million, or 67 cents a share, from a loss of $11.9
million, or 31 cents a share, as previously reported.
F-21
<PAGE>
<PAGE>
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
17. SELECTED PRO FORMA FINANCIAL DATA (Unaudited)
The following selected pro forma statement of operations for the 52 weeks
ended October 2, 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 39% 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 occurred at the beginning of the period or to project
the Company's results of operations in any future period.
<TABLE>
<CAPTION>
Pro forma As
Actual adjustments adjusted
-------- ----------- --------
<S> <C> <C> <C>
Revenues:
Restaurant sales . . . . . . . . . . . . . . . . . . . $ 843,038 $(123,247) $ 719,791
Distribution sales . . . . . . . . . . . . . . . . . . 171,711 28,163 199,874
Franchise rents and royalties. . . . . . . . . . . . . 33,740 (132) 33,608
Other. . . . . . . . . . . . . . . . . . . . . . . . . 4,837 (554) 4,283
--------- -------- -------
1,053,326 (95,770) 957,556
--------- -------- -------
Costs of revenues:
Company restaurant costs . . . . . . . . . . . . . . . 739,900 (113,299) 626,601
Costs of distribution sales. . . . . . . . . . . . . . 165,789 28,048 193,837
Franchised restaurant costs. . . . . . . . . . . . . . 22,822 (159) 22,663
Selling, general and administrative . . . . . . . . . . . 100,764 (3,425) 97,339
Equity in loss of FRI . . . . . . . . . . . . . . . . . . 2,108 6,779 8,887
Interest expense. . . . . . . . . . . . . . . . . . . . . 55,201 (4,373) 50,828
--------- -------- -------
1,086,584 (86,429) 1,000,155
--------- -------- -------
Loss before income taxes and extraordinary item . . . . . (33,258) (9,341) (42,599)
Income taxes (benefit). . . . . . . . . . . . . . . . . . 3,010 (1,710) 1,300
--------- -------- -------
Loss before extraordinary item. . . . . . . . . . . . . . $ (36,268) $ (7,631) $ (43,899)
========= ======== =======
Loss per share before extraordinary item. . . . . . . . . $ (.94) $ (1.14)
Weighted average shares outstanding . . . . . . . . . . . 38,531 38,531
-------------------
</TABLE>
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 39% equity in the pro forma net loss of FRI;
(iv) reflect the reduction of net interest expense through elimination
of approximately $35 million in debt assumed by FRI and utilization of
cash proceeds from the sale of Chi-Chi's for investments and for
retirement of the bank credit facility; and (v) adjust income taxes to
exclude the impact of Chi-Chi's operations and its disposition.
F-22
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES AND CONSENT
The Board of Directors
Foodmaker, Inc.:
Under date of November 8, 1994, we reported on the consolidated balance
sheets of Foodmaker, Inc. and subsidiaries as of October 2, 1994 and
October 3, 1993, and the related consolidated statements of operations, cash
flows, and stockholders' equity for the fifty-two weeks ended October 2,
1994, the fifty-three weeks ended October 3, 1993 and the fifty-two weeks
ended September 27, 1992. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
financial statement schedules in the Form 10-K. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statement schedules based on our audits.
In our opinion, such schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
We consent to incorporation by reference in the registration statement No.
33-50934 on Form S-3 of Foodmaker, Inc. and in registration statement Nos.
33-67450, 33-54602 and 33-51490 on Form S-8 of Foodmaker, Inc. of our report
dated November 8, 1994, relating to the consolidated balance sheets of
Foodmaker, Inc. and subsidiaries as of October 2, 1994 and October 3, 1993,
and the related consolidated statements of operations, cash flows, and
stockholders' equity and related schedules for the fifty-two weeks ended
October 2, 1994, the fifty-three weeks ended October 3, 1993 and the fifty-
two weeks ended September 27, 1992, and which report appears in the October 2,
1994 annual report on Form 10-K of Foodmaker, Inc. and subsidiaries.
KPMG PEAT MARWICK LLP
San Diego, California
December 29, 1994
F-23
<PAGE>
<PAGE>
SCHEDULE V -- PROPERTY AND EQUIPMENT
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Balance at Additions Balance at
beginning at Retire- end of
of period cost ments Other period
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fifty-two weeks ended September 27, 1992
Land $ 94,931 $ 9,822 $ 4,623 $ - $100,130
Buildings 296,099 23,663 6,241 - 313,521
Restaurant and other equipment 193,716 27,026 9,182 - 211,560
Construction in progress 24,784 16,118 - - 40,902
------- ------ ------ ------- -------
$609,530 $76,629 $20,046 $ - $666,113
======= ====== ====== ======= =======
Fifty-three weeks ended October 3, 1993
Land $100,130 $ 5,142 <F1> $11,547 $ - $ 93,725
Buildings 313,521 39,345 <F1> 12,180 9,429 <F2> 350,115
Restaurant and other equipment 211,560 38,439 <F1> 8,456 9,137 <F2> 250,680
Construction in progress 40,902 (24,138) - - 16,764
------- ------ ------ ------- -------
$666,113 $58,788 <F1> $32,183 $ 18,566 <F2> $711,284
======= ====== ====== ======= =======
Fifty-two weeks ended October 2, 1994
Land $ 93,725 $17,278 $ 5,670 $ (15,297)<F3> $ 90,036
Buildings 350,115 30,213 5,334 (110,434)<F3> 264,560
Restaurant and other equipment 250,680 18,086 4,678 (83,973)<F3> 180,115
Construction in progress 16,764 26,460 - (3,350)<F3> 39,874
------- ------ ------ ------- -------
$711,284 $92,037 $15,682 $(213,054)<F3> $574,585
======= ====== ====== ======= =======
<FN>
<F1>
The Company's additions to property include assets of $12,519 purchased by Chi-Chi's in the acquisition of Conusl
Restaurant Corporation, which have been recorded in accordance with purchase accounting at fair values as of
October 23, 1992, the effective date of the acquisition.
<F2>
In adopting SFAS 109 as of September 28, 1992, the Company adjusted the carrying amounts of fixed assets due to
business combinations in 1988 and 1989.
<F3>
Represents Chi-Chi's property and equipment at January 27, 1994, the date of Chi-Chi's sale.
</FN>
</TABLE>
F-24
<PAGE>
<PAGE>
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and Retire- end of
of period expenses ments Other period
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fifty-two weeks ended September 27, 1992
Buildings $ 37,107 $15,228 $ 634 $ - $ 51,701
Restaurant and other equipment 52,991 22,589 4,603 - 70,977
------- ------ ------ ------- -------
$ 90,098 $37,817 $ 5,237 $ - $122,678
======= ====== ====== ======= =======
Fifty-three weeks ended October 3, 1993
Buildings $ 51,701 $16,663 $ 1,793 $ 1,749 <F1> $ 68,320
Restaurant and other equipment 70,977 25,722 4,268 4,062 <F1> 96,493
------- ------ ------ ------- -------
$122,678 $42,385 $ 6,061 $ 5,811 <F1> $164,813
======= ====== ====== ======= =======
Fifty-two weeks ended October 2, 1994
Buildings $ 68,320 $13,411 $ 1,151 $ (17,912)<F2> $ 62,668
Restaurant and other equipment 96,493 18,223 2,348 (39,429)<F2> 72,939
------- ------ ------ ------- -------
$164,813 $31,634 $ 3,499 $ (57,341)<F2> $135,607
======= ====== ====== ======= =======
<FN>
<F1>
In adopting SFAS 109 as of September 28, 1992, the Company adjusted the carrying amounts of fixed assets due to
business combinations in 1988 and 1989.
<F2>
Represents Chi-Chi's accumulated depreciation and amortization of property and equipment at January 27, 1994, the date
of Chi-Chi's sale.
</FN>
</TABLE>
F-25
<PAGE>
<PAGE>
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Fifty-two Fifty-three Fifty-two
weeks ended weeks ended weeks ended
October 2, October 3, September 27,
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Maintenance and repairs $26,929 $30,928 $28,493
Advertising 71,136 84,301 69,344
</TABLE>
F-26
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Family Restaurants, Inc.:
We have audited the accompanying consolidated balance sheet of Family
Restaurants, Inc. and its subsidiaries as of December 25, 1994, and the related
consolidated statements of operations, common stockholders' deficit and
cash flows for the one month ended January 26, 1994 (Predecessor Company)
and the eleven months ended December 25, 1994 (Successor Company). In
connection with our audit of the consolidated financial statements, we also
audited the financial statement schedule as listed in the accompanying index.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the consolidated financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Family
Restaurants, Inc. and its subsidiaries at December 25, 1994, and the results of
their operations and their cash flows for the one month ended January 26, 1994
(Predecessor Company) and the eleven months ended December 25, 1994 (Successor
Company) in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information shown therein.
As discussed in Notes 1 and 2 to the consolidated financial
statements, the Company commenced a Chapter 11 bankruptcy case on November 23,
1993, which was confirmed by the United States Bankruptcy Court for the
District of Delaware on January 7, 1994. Accordingly, the accompanying
consolidated financial statements have been prepared in conformity with AICPA
Statement of Position 90-7, "Financial Reporting for Entities in Reorganization
and the Bankruptcy Code." As a result, the Successor Company's December 25,
1994 consolidated balance sheet is not comparable to the Predecessor Company's
December 26, 1993 consolidated balance sheet since it reports the financial
position of the reorganized entity.
KPMG PEAT MARWICK LLP
Orange County, California
March 15, 1995, except as to
the ninth paragraph of
note 10 to the consolidated
financial statements, which is
as of March 24, 1995
F-27
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Family Restaurants, Inc.:
We have audited the accompanying consolidated balance sheet of Family
Restaurants, Inc. and its subsidiaries as of December 26, 1993, and the related
consolidated statements of operations, common stockholders' deficit and cash
flows for each of the two years in the period ended December 26, 1993. Our
audits also included the financial statement schedule listed in the Index at
Item 14. The consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Family Restaurants, Inc.
and its subsidiaries at December 26, 1993, and the results of their operations
and their cash flows for each of the two years in the period ended December 26,
1993 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information shown therein.
As discussed in Notes 1 and 2, the Company commenced a Chapter 11
bankruptcy case on November 23, 1993, which was confirmed by the United States
Bankruptcy Court for the District of Delaware on January 7, 1994. Accordingly,
the accompanying consolidated financial statements have been prepared in
conformity with AICPA Statement of Position 90-7, "Financial Reporting for
Entities in Reorganization and the Bankruptcy Code."
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 22, 1994
F-28
<PAGE>
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
December 25, December 26,
1994 1993
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,239 $ 9,310
Restricted cash 1,850 1,867
Collateral deposit 0 38,688
Receivables 11,831 10,920
Inventories 12,916 10,849
Other current assets 8,179 5,475
------------- -------------
Total current assets 43,015 77,109
Property and equipment, net 445,354 235,516
Reorganization value in excess of amounts
allocable to identifiable assets, net 197,581 0
Goodwill, net 0 26,678
Property held for sale 339 7,122
Other assets 48,309 20,152
------------- -------------
$ 734,598 $ 366,577
============= =============
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable to Marriott $ 0 $ 12,719
Loan payable to Grace 0 2,900
Current portion of long-term debt, including
capitalized lease obligations 6,754 5,981
Accounts payable 41,999 38,363
Self-insurance reserves 50,692 36,778
Other accrued liabilities 96,426 74,049
Income taxes payable 2,625 1,528
------------- -------------
Total current liabilities 198,496 172,318
Liabilities subject to settlement under reoganization
proceedings 0 320,194
Other long-term liabilities 6,866 3,124
Long-term debt, including capitalized lease
obligations, less current portion 536,495 78,658
12% redeemable cumulative exchangeable preferred
stock subject to settlement under reorganization
proceedings - non-voting, authorized 3,000,000
shares; issued and outstanding 1,544,237 shares
in 1993 0 183,921
Common stockholders' deficit:
Class D common stock - authorized 1,040,000 shares,
par value $.01, 468,341 shares issued in 1993 0 4
Common stock - authorized 1,500,000 shares,
par value $.01, 997,277 shares issued in 1994 10 0
Additional paid-in capital 159,554 23,481
Notes receivable from stockholders (2,947) 0
Accumulated deficit (163,876) (415,066)
Less treasury stock, at cost (29,150 shares in 1993) 0 (57)
------------- -------------
$ 734,598 $ 366,577
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE>
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share
and shares outstanding)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
-------------- ------------------------------------------
Eleven Months One Month For the Years Ended
Ended Ended ----------------------------
December 25, January 26, December 26, December 28,
1994 1994 1993 1992
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 1,048,674 $ 64,741 $ 884,910 $ 930,069
-------------- ------------ ------------- -------------
Product cost 293,413 19,184 259,512 276,020
Payroll and related costs 377,569 24,780 331,747 352,841
Occupancy and other operating expenses 243,147 13,712 197,797 211,332
Depreciation and amortization 48,646 2,800 32,224 50,538
General and administrative expenses 49,059 4,071 44,164 48,376
Interest expense, net 51,419 4,097 50,276 45,582
Loss (gain) on disposition of
properties, net 5,685 (12) 4,916 7,786
Provision for divestitures 0 0 10,400 27,871
Write-down of goodwill 144,780 0 0 107,175
Debt restructuring costs 0 0 4,239 1,072
-------------- ------------ ------------- -------------
Total costs and expenses 1,213,718 68,632 935,275 1,128,593
-------------- ------------ ------------- -------------
Loss before reorganization items,
income tax provision, extraordinary
item and cumulative effect of a
change in accounting principle (165,044) (3,891) (50,365) (198,524)
-------------- ------------ ------------- -------------
Reorganization items:
Professional fees 0 (4,250) 0 0
Payment to Grace 0 (15,000) 0 0
Other 0 (3,029) (1,091) 0
Fresh start adjustment 0 501,706 0 0
-------------- ------------ ------------- -------------
Total reorganization items 0 479,427 (1,091) 0
-------------- ------------ ------------- -------------
Income (loss) before income tax provision,
extraordinary item and cumulative effect
of a change in accounting principle (165,044) 475,536 (51,456) (198,524)
Income tax provision 1,773 55 658 721
-------------- ------------ ------------- -------------
Income (loss) before extraordinary item
and cumulative effect of a change in
accounting principle (166,817) 475,481 (52,114) (199,245)
Extraordinary gain on extinguishment
of debt 2,941 72,561 0 0
Cumulative effect on prior years (to
December 30, 1991) of adopting SFAS 109 0 0 0 (667)
-------------- ------------ ------------- -------------
Net income (loss) (163,876) 548,042 (52,114) (199,912)
Preferred dividends 0 (1,698) (20,232) (17,737)
-------------- ------------ ------------- -------------
Net income (loss) attributable to
common shares $ (163,876) $ 546,344 $ (72,346) $ (217,649)
============== ============ ============= =============
Net loss per common share:
Loss before extraordinary item $ (168.55)
Extraordinary item 2.97
--------------
Net loss attributable to common shares $ (165.58)
==============
Weighted average common shares outstanding 989,683
==============
</TABLE>
Net loss per common share for the Predecessor Company is not meaningful due to
debt discharge, the issuance of new common stock and fresh start reporting.
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 25, 1994
(in thousands)
<TABLE>
<CAPTION>
Notes
Class A Class D Additional Receivable Treasury
Common Common Common Paid-in from Stock- Accumulated Stock,
Stock Stock Stock Capital holders Deficit at Cost Total
-------- -------- ------- ----------- ------------ ------------ ---------
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 30, 1991 $ 2 $ 0 $ 0 $ 22,464 $ 0 $ (125,071)$ (57) $
(102,662)
Net loss 0 0 0 0 0 (199,912) 0
(199,912)
Stock dividends on preferred
stock 0 0 0 0 0 (17,737) 0
(17,737)
Sale of treasury stock 0 0 0 1 0 0 3
4
Purchase of treasury stock 0 0 0 0 0 0 (3)
(3)
Exercise of warrants 0 2 0 838 0 0 0
840
-------- -------- ------- ----------- ------------ ------------ ---------
- -----------
Balance at December 28, 1992 2 2 0 23,303 0 (342,720) (57)
(319,470)
Net loss 0 0 0 0 0 (52,114) 0
(52,114)
Stock dividends on preferred
stock 0 0 0 0 0 (20,232) 0
(20,232)
Conversion of Class A Common
Stock to Class D Common Stock (2) 2 0 0 0 0 0
0
Exercise of warrants 0 0 0 102 0 0 0
102
Exercise of stock options 0 0 0 76 0 0 0
76
-------- -------- ------- ----------- ------------ ------------ ---------
- -----------
Balance at December 26, 1993 0 4 0 23,481 0 (415,066) (57)
(391,638)
Net income - one month ended
January 26, 1994 0 0 0 0 0 548,042 0
548,042
Fresh start adjustments:
Cancellation of former
equity 0 (4) 0 (23,481) 0 (132,976) 57
(156,404)
Issuance of new equity 0 0 10 159,554 (2,947) 0 0
156,617
Net loss - eleven months ended
December 25, 1994 0 0 0 0 0 (163,876) 0
(163,876)
-------- -------- ------- ----------- ------------ ------------ ---------
- -----------
Balance at December 25, 1994 $ 0 $ 0 $ 10 $ 159,554 $ (2,947) $ (163,876)$ 0 $
(7,259)
======== ======== ======= =========== ============ ============ =========
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE>
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------- --------------------------------------------
Eleven Months One Month For the Years Ended
Ended Ended -----------------------------
December 25, January 26, December 26, December 28,
1994 1994 1993 1992
-------------- ------------ ------------- -------------
Increase (Decrease) in Cash and Cash Equivalents
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 1,049,483 $ 65,257 $ 885,248 $ 931,236
Cash received from franchisees and licensees 7,308 84 847 4,272
Cash paid to suppliers and employees (1,000,332) (59,729) (846,290) (874,644)
Interest received 400 136 1,437 1,564
Interest paid (28,153) (877) (10,088) (29,619)
Debt restructuring costs 0 0 (2,900) (1,072)
Income taxes received (paid) (926) 157 (925) (485)
Charges to reserve for divestitures (9,434) (1,001) (886) 0
-------------- ------------ ------------- ------------
Net cash provided by operating activities
before reorganization items 18,346 4,027 26,443 31,252
Reorganization items:
Professional fees 0 (4,250) 0 0
Payment to Grace 0 (15,000) 0 0
Other 0 (3,029) (1,091) 0
-------------- ------------ ------------- ------------
Total reorganization items 0 (22,279) (1,091) 0
-------------- ------------ ------------- ------------
Net cash provided by (used in) operating
activities 18,346 (18,252) 25,352 31,252
-------------- ------------ ------------- ------------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 6,524 1,588 18,135 11,548
Acquisition of Chi-Chi's 2,478 (194,889) 0 0
Acquisition of Marriott family restaurants 0 0 0 (12,374)
Capital expenditures (65,618) (779) (20,064) (25,881)
Capitalized conversion costs (2,166) (21) (5,052) (4,341)
Other (5,385) 1,491 (3,736) (3,424)
-------------- ------------ ------------- ------------
Net cash used in investing activities (64,167) (192,610) (10,717) (34,472)
-------------- ------------ ------------- ------------
Cash flows from financing activities:
Proceeds from sale of treasury bonds 0 0 3,412 0
Proceeds from issuance of Notes 0 409,046 0 0
Proceeds from working capital borrowings, net 59,600 0 0 0
Payment of notes payable to Marriott, net (21,828) (10,969) 0 0
Proceeds (payment) of loan payable to Grace 0 (2,900) 2,900 0
Payment of debt issuance costs 0 (22,973) 0 0
Reductions of long-term debt, including
capitalized lease obligations (7,842) (447) (9,843) (7,310)
Cash settlement of liabilities subject to
settlement under reorganization proceedings 0 (279,055) 0 0
Decrease (increase) in restricted cash and
collateral deposit 17 38,688 (16,486) 6,108
Royalty receivable sold to Grace 0 0 0 3,835
Proceeds from issuance of common stock, net 1,911 92,364 0 0
Proceeds from sale of treasury stock 0 0 0 4
Proceeds from exercise of warrants 0 0 102 840
Proceeds from exercise of stock options 0 0 76 0
Purchase of treasury stock 0 0 0 (3)
-------------- ------------ ------------- ------------
Net cash provided by (used in) financing
activities 31,858 223,754 (19,839) 3,474
-------------- ------------ ------------- ------------
Net increase (decrease) in cash and cash
equivalents (13,963) 12,892 (5,204) 254
Cash and cash equivalents at beginning of period 22,202 9,310 14,514 14,260
-------------- ------------ ------------- ------------
Cash and cash equivalents at end of period $ 8,239 $ 22,202 $ 9,310 $ 14,514
============== ============ ============= ============
</TABLE>
F-32
<PAGE>
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------- --------------------------------------------
Eleven Months One Month For the Years Ended
Ended Ended ----------------------------
December 25, January 26, December 26, December 28,
1994 1994 1993 1992
-------------- ------------ ------------- ------------
Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
<S> <C> <C> <C> <C>
Net income (loss) $ (163,876) $ 548,042 $ (52,114) $ (199,912)
-------------- ------------ ------------- ------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities net
of effects of Chi-Chi's acquisition in 1994
and Marriott acquisition in 1992:
Depreciation and amortization 48,646 2,800 32,224 50,538
Amortization of debt issuance costs 3,006 215 2,531 1,835
Payment of accrued interest by issuance
of additional Junior Subordinated Notes 0 0 0 29
Loss (gain) on disposition of properties 5,685 (12) 4,916 7,786
Provision for divestitures 0 0 10,400 27,871
Write-down of goodwill 144,780 0 0 107,175
Fresh start adjustment 0 (501,706) 0 0
Extraordinary gain on extinguishment of debt (2,941) (72,561) 0 0
Accretion of interest on Discount Notes 11,362 0 0 0
Accrued interest on liabilities settled under
bankruptcy proceedings 0 3,113 0 0
Cumulative effect on prior years of
adopting SFAS 109 0 0 0 667
(Increase) decrease in receivables 697 54 (3,757) 554
(Increase) decrease in inventories (552) 394 5,209 1,717
(Increase) decrease in other current assets (566) 358 (2,331) 459
Increase (decrease) in accounts payable (14,611) 1,096 (3,925) 8,706
Increase (decrease) in self-insurance reserves 1,526 (386) (5,235) 4,367
Increase (decrease) in other accrued liabilities (6,223) 1,130 38,587 19,224
Charges to reserve for divestitures (9,434) (1,001) (886) 0
Increase (decrease) in income taxes payable 847 212 (267) 236
-------------- ------------ ------------- ------------
Total adjustments 182,222 (566,294) 77,466 231,164
-------------- ------------ ------------- ------------
Net cash provided by (used in) operating
activities $ 18,346 $ (18,252) $ 25,352 $ 31,252
============== ============ ============= ============
</TABLE>
Supplemental schedule of investing activities:
The components of acquisition of Chi-Chi's in 1994 are as follows:
<TABLE>
<S> <C>
Current assets $ (7,730)
Property and equipment (153,731)
Goodwill (149,376)
Other assets (13,908)
Current liabilities 59,324
Other long-term liabilities 5,975
Long-term debt assumed 4,694
Issuance of common stock 62,341
--------------
$ (192,411)
==============
</TABLE>
The components of acquisition of Marriott family restaurants in 1992 are as
follows:
<TABLE>
<S> <C>
Current assets $ (1,123)
Property and equipment (68,076)
Other assets (1,327)
Current liabilities 13,084
Long-term debt incurred 21,828
Issuance of preferred stock 23,240
--------------
Cash portion of purchase price $ (12,374)
==============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Common stockholders' deficit was increased by $20,232,000 and $17,737,000 in
1993 and 1992, respectively, for stock dividends on preferred stock.
Disclosure of accounting policy:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
See accompanying notes to consolidated financial statements.
F-33
<PAGE>
<PAGE>
FAMILY RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 25, 1994
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
Family Restaurants, Inc. (formerly known as The Restaurant Enterprises
Group, Inc.), incorporated in Delaware in 1986, is primarily engaged in the
operation of full-service restaurants throughout the United States through its
subsidiaries. As used in these consolidated financial statements, the term
"Company" refers to Family Restaurants, Inc. together with its subsidiaries.
Reference to the "Predecessor Company" refers to The Restaurant
Enterprises Group, Inc. and its consolidated subsidiaries (not including
Chi-Chi's) with respect to information relating to periods prior to January 27,
1994 included herein, and reference to the "Successor Company" refers to Family
Restaurants, Inc. and its consolidated subsidiaries, giving effect to the
Acquisition and related transactions and the Strategic Divestment Program, each
as described below, with respect to information about events occurring upon
completion of or after the Acquisition.
At December 25, 1994, the Company operated 702 restaurants located in
34 states, with 52% of its restaurants located in California. Additionally, as
of December 25, 1994, the Company was the licensor of 231 full-service
restaurants in Japan and South Korea, the franchisor of five family restaurants
and five Mexican restaurants in the United States and the franchisor of 21
Mexican restaurants outside the United States.
The consolidated financial statements of the Predecessor Company were
prepared on a going concern basis, which contemplated continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. While the Prepackaged Plan Chapter 11 cases were in process, the
Company continued in possession of its properties and operated and managed its
business as a debtor-in-possession pursuant to the Bankruptcy Code. The
Company applied the provisions of the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), in the December 26,
1993 and December 28, 1992 consolidated financial statements. The Company's
12 1/4% Senior Subordinated Notes (the "Old Senior Subordinated Notes") and
12 3/4% Subordinated Notes (the "Old Subordinated Notes" and, together with the
Old Senior Subordinated Notes, the "Old Notes") were in default in accordance
with the terms of the applicable debentures at December 26, 1993. In
accordance with SOP 90-7, those liabilities and obligations whose disposition
was dependent upon the outcome of the Prepackaged Plan Chapter 11 cases were
segregated and classified as "Liabilities subject to settlement under
reorganization proceedings" in the consolidated
F-34
<PAGE>
<PAGE>
balance sheet at December 26, 1993 (see Note 10). Likewise, the 12% redeemable
cumulative exchangeable preferred stock was also dependent upon the outcome of
the Prepackaged Plan Chapter 11 cases and was classified as "12% redeemable
cumulative exchangeable preferred stock subject to settlement under
reorganization proceedings" in the consolidated balance sheet at December 26,
1993. On January 7, 1994, the Company's Prepackaged Plan was confirmed by the
bankruptcy court (see Note 2).
Pursuant to SOP 90-7, the Company qualified for fresh start reporting
as of January 27, 1994. Under this concept, all assets and liabilities are
restated to current value of the reorganized entity, which approximates the
Company's fair value at the date of reorganization. The Company obtained an
appraisal of the assets and liabilities of the Successor Company. This
appraisal determined the reorganization value (i.e., fair value) of the assets
and liabilities of the Successor Company. The Company utilized the results of
this appraisal to implement fresh start reporting, which, along with
adjustments of $(2,561,000) to current assets, $24,804,000 to property and
equipment, $(26,646,000) to goodwill, $(2,795,000) to other assets, $5,455,000
to current liabilities, $4,062,000 to long-term debt and $(3,124,000) to other
long-term liabilities, resulted in reorganization value in excess of amounts
allocable to identifiable assets of $203,854,000 at January 27, 1994. This
amount is being amortized over 30 years.
The accumulated deficit of the Predecessor Company was eliminated as
required by fresh start reporting; additionally, the statement of operations
for the one month ended January 26, 1994 reflects the effects of the
forgiveness of debt resulting from confirmation of the plan of reorganization
and the effects of adjustments to restate assets and liabilities to reflect the
reorganization value of the Successor Company. As such, the consolidated
balance sheet of the Company as of December 25, 1994 and the accompanying
consolidated statement of operations for the eleven months then ended represent
that of the Successor Company which, in effect, is a new entity with assets,
liabilities and a capital structure having carrying values not comparable with
prior periods. The accompanying consolidated balance sheet as of December 26,
1993 and the consolidated statements of operations for the two years in the
period then ended and for the one month ended January 26, 1994 represent that
of the Predecessor Company.
NOTE 2 - THE ACQUISITION:
On January 27, 1994 (the "Closing Date"), Apollo FRI Partners, L.P.
("Apollo"), Green Equity Investors, L.P. ("GEI") and Foodmaker, Inc.
("Foodmaker") acquired approximately 98% of the outstanding common stock of the
Company (the "Acquisition"). The Acquisition involved the following components
and related transactions, all of which (unless otherwise noted) were
consummated on the Closing Date:
New Equity Investment. Apollo, GEI, Foodmaker and certain officers of
the Company made the $154.7 million New Equity
F-35
<PAGE>
<PAGE>
Investment in the Company pursuant to the Acquisition Agreement, dated as of
October 15, 1993, among the Company, Apollo, GEI, Foodmaker and Chi-Chi's (as
amended, the "Acquisition Agreement") and the Employee Stock Purchase (as
defined below). Apollo purchased 389,634 shares of the Company's common stock,
par value $.01 per share (the "Common Stock") (constituting 40.0% of the
Common Stock outstanding immediately following the Closing Date) for
$62.3 million in cash and GEI purchased 179,831 shares of Common Stock
(constituting 18.4% of the Common Stock outstanding immediately following
the Closing Date) for $28.8 million in cash. Foodmaker acquired 389,634 shares
of Common Stock (constituting 40.0% of the Common Stock outstanding
immediately following the Closing Date, with a value of $62.3 million) in the
Chi-Chi's Merger. Certain officers of the Company purchased 15,625 shares of
Common Stock in the Employee Stock Purchase (as defined below).
Chi-Chi's Merger. The Company acquired Chi-Chi's, a wholly-owned
subsidiary of Foodmaker and the operator, directly or indirectly through its
subsidiaries, or franchisor of 235 full-service Mexican restaurants, the
largest chain of such restaurants in the United States based upon both number
of restaurants and annual revenues. This acquisition was accounted for under
the purchase method. The Chi-Chi's Merger occurred through a merger of a
newly-formed subsidiary of the Company with Chi-Chi's. Pursuant to the
Acquisition Agreement, Foodmaker received (a) $205.0 million in cash, less the
principal amount of capital leases and the face amount of certain indebtedness
of Chi-Chi's (including certain Chi-Chi's debentures which were defeased
immediately following consummation of the Chi-Chi's Merger) existing or assumed
by the Company in connection with the Chi-Chi's Merger, (b) 389,634 shares of
Common Stock and (c) a warrant to purchase, at an aggregate exercise price
of $26.7 million, 111,111 shares of Common Stock (constituting 10% of the
Common Stock outstanding assuming the full exercise thereof) (the
"Foodmaker Warrant"). The Foodmaker Warrant expires on February 1, 1999. Pro
forma financial statements for the Chi- Chi's Merger have not been presented as
such merger was a component of the Acquisition, and pro forma financial
statements reflecting only this component of the Acquisition would not be
meaningful.
Credit Facility. The Company, FRI-M Corporation (formerly known as
REG-M Corp.), a wholly-owned subsidiary of the Company (the "Borrower"), and
certain subsidiaries of the Borrower (the "Subsidiary Guarantors") entered into
the Credit Facility on the Closing Date. The Credit Facility is a $150.0
million five-year fully revolving credit facility with a $100.0 million
sub-limit for standby letters of credit and is used for general corporate
purposes, including working capital and capital expenditures. The letter of
credit availability under the Credit Facility replaced the Amended and Restated
Letter of Credit Procurement Facility (the "Old L/C Facility") with W. R. Grace
& Co.-Conn. ("Grace"), which was terminated on the Closing Date. Borrowings
under the Credit Facility are made by the Borrower. Such borrowings are
guaranteed by the Company and the Subsidiary Guarantors and are secured by
F-36
<PAGE>
<PAGE>
substantially all of the assets of such subsidiaries and by a pledge of the
stock of the Borrower and the Subsidiary Guarantors.
Prepackaged Plan. The Company and REG-M Corp. commenced Chapter 11
cases on November 23, 1993 after receiving acceptances of their prepackaged
joint plan of reorganization (the "Plan") from 100% of the holders of the Old
Notes and Preferred Stock (each as defined) who voted on the Plan and from
holders of over 98% of the Old Common Stock (as defined) who voted on the Plan.
The Plan was confirmed by the United States Bankruptcy Court for the District
of Delaware on January 7, 1994. On the Closing Date, substantially all of the
Company's old debt and equity securities were cancelled and extinguished
through consummation of the Plan and holders thereof received cash
distributions (the "Cash Distributions") as follows. For each $1,000 principal
amount of 12 1/4% Senior Subordinated Notes due 1996 (the "Old Senior
Subordinated Notes"), holders received $939.26 in cash plus an additional cash
amount equal to interest accrued on $939.26 from May 19, 1993 to the Closing
Date at a rate equal to 10.05% per annum (the weighted average of the yields to
maturity of the Notes at the time they were issued) (the "Accrual Rate"). For
each $1,000 principal amount of 12 3/4% Subordinated Notes due 1998 (the "Old
Subordinated Notes" and, together with the Old Senior Subordinated Notes, the
"Old Notes"), holders received $646.18 in cash plus an additional cash amount
equal to interest accrued on $646.18 from May 19, 1993 to the Closing Date at
the Accrual Rate. For each share of 12% Cumulative Exchangeable Preferred
Stock (the "Preferred Stock"), holders received $17.88 in cash and for each
share of Class D Common Stock (the "Old Common Stock"), holders received $.50
in cash.
Employee Stock Purchase and Management Incentive Plan. In connection
with the Acquisition, the Company adopted a new management incentive plan (the
"Management Incentive Plan") pursuant to which certain officers and employees
of the Company were granted the right to purchase up to 40,900 shares of
Common Stock (constituting up to 4.1% of the Common Stock outstanding
immediately following such purchases) at $160 per share (the "Employee Stock
Purchase"), the same per share price paid by Apollo and GEI in the New Equity
Investment. The Employee Stock Purchase was consummated on the Closing Date
with respect to certain officers (15,625 shares of Common Stock) and on May
19, 1994 and July 31, 1994 with respect to the other participants (22,552
shares of Common Stock). No more than fifty percent of the purchase price
was authorized to be financed through interest-bearing resource notes payable
to the Company. These notes are due on May 31, 1999, if not paid earlier by
deductions from incentive compensation, and bear interest at 7%. Interest is
payable every six months. The individuals who purchased Common Stock were
also granted options to purchase 20,822 shares of Common Stock in the
future at an exercise price of $160 per share. The Company also granted
options to purchase 30,600 shares of Common Stock to approximately 820
other employees.
F-37
<PAGE>
<PAGE>
Investment Agreement. Grace, Western Family Restaurants, Inc.
("Grace/Western"), an affiliate of Grace which owned 74.6% of the Old Common
Stock, and the Company entered into an agreement as amended (the "Investment
Agreement"), with Apollo REG, Co., GEI REG, Co. and FMI REG, Co. and Foodmaker.
Under the Investment Agreement, among other things, the Company paid Grace
$15.0 million on the Closing Date in consideration of Grace's undertaking to
obtain written confirmation that although Grace would no longer hold an equity
interest in the Company, the Company would continue to receive royalties under
the Kasumi Licensing Agreement through February 4, 2010. The Kasumi Licensing
Agreement expired on February 4, 1995. The Company has reached an agreement on
terms to enter into a new Technical Assistance and Licensing Agreement that
will expire in 2010. Grace also agreed to indemnify the Company against
certain tax liabilities and with respect to certain previously divested leases.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
Previously, the Company reported results of operations based on 52 or
53 week periods ending on the last Monday in December. In 1993, the fiscal
year end was changed to the last Sunday in December. The fiscal years ended
December 25, 1994 and December 28, 1992 included 52 weeks, and the fiscal year
ended December 26, 1993 included 52 weeks, less one day.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and all its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Inventories
Inventories consist primarily of food and liquor and are stated at the
lower of cost or market. Costs are determined using the first-in, first-out
(FIFO) method.
Property and equipment
Property and equipment are stated at cost and are depreciated on a
straight-line basis over their estimated useful lives (buildings principally
over 25 to 35 years and furniture, fixtures and equipment over 3 to 10 years).
Leasehold improvements are amortized on a straight-line basis over the shorter
of their estimated useful lives or the terms of the related leases. Property
under capitalized leases is amortized over the terms of the leases using the
straight-line method.
The Company evaluates property and equipment for impairment based on a
comparison of the carrying value of the assets to the sum of the estimated
undiscounted cash flows expected to be generated over the estimated life of the
assets.
Losses on disposition of properties are recognized when a commitment
to divest a restaurant property is made by the Company and include estimated
carrying costs through the expected date of disposal.
F-38
<PAGE>
<PAGE>
Property held for sale
Property held for sale is carried at estimated net realizable value.
Advertising
Production costs of commercials and programming are charged to
operations when aired. The costs of other advertising, promotion and marketing
programs are charged to operations in the year incurred.
Franchise and license fees
Initial franchise and license fees are recognized when all material
services have been performed and conditions have been satisfied. Initial fees
of $35,000, $35,000 and $70,000 were earned in 1994, 1993 and 1992,
respectively. Monthly fees are accrued as earned based on the respective
monthly sales. Such fees totalled $6,006,000 for the eleven months ended
December 25, 1994 (including Chi-Chi's fees subsequent to the Acquisition),
$546,000 for the one month ended January 26, 1994, $4,907,000 for 1993 and
$4,815,000 for 1992 and are included as an offset to general and administrative
expenses.
Reorganization value and goodwill
Reorganization value in excess of amounts allocable to identifiable
assets is amortized using the straight-line method over 30 years. Goodwill
related to the Chi-Chi's Merger was amortized using the straight-line method
over 30 years through the fourth quarter of 1994 when the Company wrote off its
remaining goodwill balance (see Note 8). Accumulated amortization of
reorganization value amounted to $6,273,000 at December 25, 1994. Accumulated
amortization of the Predecessor Company's goodwill amounted to $5,703,000 at
December 26, 1993.
The Company evaluates the carrying value of its reorganization value
in excess of amounts allocable to identifiable assets and the goodwill related
to the Chi-Chi's Merger on an ongoing basis relying on a number of factors,
including operating results, business plans, budgets and economic projections.
In addition, the Company's evaluation considers non-financial data such as
continuity of personnel, changes in the operating environment, name
identification, competitive information and market trends. Finally, the
evaluation considers changes in management's strategic direction or market
emphasis. When the foregoing considerations suggest that a deterioration of
the financial condition of the Company or any of its divisions has occurred,
the Company measures the amount of an impairment, if any, based on the
estimated fair value of the restaurant operations for each of its divisions
over the remaining amortization period.
F-39
<PAGE>
<PAGE>
Income taxes
Beginning in 1992, the Company has accounted for income taxes using
the standards specified in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (see Note 13). Prior to 1992, the Company
accounted for income taxes using APB No. 11.
Loss per common share
Loss per common share for the Successor Company is computed based on
the weighted average number of shares actually outstanding. The impact of the
Foodmaker Warrant and options has not been included since the impact would be
antidilutive.
Reclassifications
Certain amounts as previously reported have been reclassified to
conform to the 1994 presentation.
NOTE 4 - STRATEGIC DIVESTMENT PROGRAM:
Effective year-end 1992 109 non-strategic restaurants were designated
for divestment (the "Strategic Divestment Program"). Two additional restaurants
were identified for divestment in late 1993. The restaurants included 12
family restaurants, 47 traditional dinnerhouses and 52 Mexican dinnerhouses.
During 1992, these restaurants had sales of $159,385,000 and losses of
$7,602,000, including direct general and administrative expenses of $5,191,000.
In conjunction with this divestment program, the Company recorded a provision
for divestitures of $27,871,000 during the fourth quarter of 1992. This
provision consisted of: (i) $2,180,000 for severance costs associated with the
restaurants to be divested and (ii) $25,691,000 for the write-down to net
realizable value of the property and equipment associated with such
restaurants. During 1993, these restaurants had sales of $116,032,000 and
losses of $8,690,000, including direct general and administrative expenses in
the amount of $4,049,000. The 1993 severance costs of $886,000 were charged
against the reserve for divestitures, reducing the reserve balance to
$1,294,000. During the fourth quarter of 1993, an additional write-down of
$1,908,000 to adjust property and equipment to net realizable value was
recorded, as the Company believed that further impairment had occurred. In
addition, during the fourth quarter of 1993 the reserve for severance costs was
reduced by $302,000, and, since the Company reached a measurement date on
December 26, 1993, it recorded a provision for future estimated operating
losses for the remaining restaurants to be divested of $7,615,000, including
direct general and administrative expenses of $2,383,000. During 1994, these
restaurants had sales of $58,511,000 and losses of $7,434,000, including direct
general and administrative expenses in the amount of $1,583,000, which were
charged against the reserve for divestitures. In addition, severance costs of
$617,000 were charged against the reserve for divestitures in 1994. During the
F-40
<PAGE>
<PAGE>
third quarter of 1994, the net realizable value of the remaining assets held
for sale was reduced by $2,344,000 which is included in loss on disposition of
properties in the accompanying consolidated statement of operations. At
December 25, 1994 and December 26, 1993, the net realizable value of the assets
held for sale, consisting principally of property and equipment, was $339,000
and $7,122,000, respectively. In addition, the Company increased the reserve
relating to potential shortfalls in future sublease income by $2,799,000 in the
third quarter of 1994. This adjustment is also included in loss on disposition
of properties.
In recording the acquisition of Chi-Chi's, eleven poor performing
restaurants were added to the Strategic Divestment Program, and reserves of
$10,758,000 were provided. These reserves included one year's estimated
operating losses and the potential shortfall in future sublease income. During
1994, operating losses of $2,404,000 and lease termination payments of
$1,439,000 were charged against these reserves.
As of December 25, 1994, 45 properties (including seven of the
Chi-Chi's restaurants) remained to be divested, of which eight were closed.
Since the Strategic Divestment Program was scheduled for completion at the end
of fiscal 1994, the operating results of the remaining 37 restaurants will be
included in the Company's consolidated statement of operations in 1995,
although many of the restaurants will continue to be marketed and sold.
NOTE 5 - RECEIVABLES:
A summary of receivables follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Trade, principally credit cards $ 3,184 $ 2,389
License and franchise fees
and related receivables 5,113 4,174
Receivable from Marriott
Distribution Services 661 1,348
Insurance recovery receivables 323 893
Notes receivable 428 0
Other 2,122 2,116
------- -------
$11,831 $10,920
======= =======
</TABLE>
NOTE 6 - MARRIOTT ACQUISITION:
In early 1992, the Company consummated an agreement with Marriott
Corporation and certain of its subsidiaries ("Marriott") and acquired 109 Bob's
Big Boy restaurants from Marriott. The purchase price was approximately $67.9
million (excluding the impact of approximately $1.3 million for cash, inventory
on hand, apportionments and purchase price adjustments mutually agreed upon by
the Company and Marriott and approximately $3.0 million in
F-41
<PAGE>
<PAGE>
acquisition costs) which was comprised of $9.9 million in cash, $34.8 million
in the form of three promissory notes and $23.2 million in the form of the
Company's 12% redeemable cumulative exchangeable preferred stock. One of the
promissory notes was a $13 million, 240-day note (due on October 7, 1992)
payable to Marriott bearing interest at the rate of 8% per annum for the first
120 days and at a rate of 10% per annum for the subsequent 120-day term (the
"Marriott Note") which had been secured by the pledge to Marriott of all the
outstanding capital stock of jojos California Family Restaurants, Inc. The
Marriott Note was paid at the closing of the Acquisition (see Note 2). The
other promissory notes held by Marriott had a balance of $21.8 million and were
secured as to the payment of principal and interest by the grant to Marriott of
deeds of trust on the fee properties sold to the Company by Marriott and the
additional grant to Marriott of leasehold deeds of trust on certain leasehold
interests assigned by Marriott to the Company. In the third quarter of 1994,
the Company purchased the remaining promissory notes and related accrued
interest at an 11-1/2% discount. This transaction resulted in an extraordinary
gain of $2.9 million.
NOTE 7 - PROPERTY AND EQUIPMENT:
A summary of property and equipment follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
(in thousands)
<S> <C> <C>
Land $ 55,872 $ 36,836
Buildings and improvements 293,847 252,503
Furniture, fixtures and
equipment 105,340 180,803
Projects under construction 23,296 3,976
-------- ---------
478,355 474,118
Accumulated depreciation
and amortization (33,001) (238,602)
-------- ---------
$445,354 $ 235,516
======== =========
</TABLE>
Property under capitalized leases in the amount of $64,201,000 at
December 25, 1994 and $85,363,000 at December 26, 1993 is included in buildings
and improvements. Accumulated amortization of property under capitalized
leases amounted to $7,215,000 at December 25, 1994 and $41,714,000 at December
26, 1993. Capitalized leases primarily relate to the buildings on certain
restaurant properties; the land portions of these leases are accounted for as
operating leases.
Depreciation and amortization relating to property and equipment was
$33,860,000 for the eleven months ended December 25, 1994, $2,359,000 for the
one month ended January 26, 1994, $28,394,000 for 1993 and $46,512,000 for
1992, of which $7,451,000, $412,000, $6,213,000 and $6,447,000, respectively,
was related to amortization of property under capitalized leases.
F-42
<PAGE>
<PAGE>
A majority of the capitalized and operating leases have original terms
of 25 years, and substantially all of these leases expire in the year 2005 or
later. Most leases have renewal options. The leases generally provide for
payment of minimum annual rent, real estate taxes, insurance and maintenance
and, in most cases, contingent rent, calculated as a percentage of sales, in
excess of minimum rent. The total amount of contingent rent under capitalized
leases for the eleven months ended December 25, 1994, the one month ended
January 26, 1994, and the years ended December 26, 1993 and December 28, 1992
was $4,895,000, $305,000, $5,315,000 and $5,307,000, respectively. Total
rental expense for all operating leases comprised the following:
<TABLE>
<CAPTION>
Eleven Months One Month
Ended Ended
Dec. 25, Jan. 26,
1994 1994 1993 1992
------------- --------- ------- -------
<S> <C> <C> <C> <C>
Minimum rent $50,373 $2,153 $26,315 $33,976
Contingent rent 3,636 208 3,339 3,924
Less: Sublease rent (5,685) (369) (5,035) (4,656)
------- ------ ------- -------
$48,324 $1,992 $24,619 $33,244
======= ====== ======= =======
</TABLE>
At December 25, 1994, the present value of capitalized lease payments
and the future minimum lease payments on noncancellable operating leases were:
<TABLE>
<CAPTION>
Capitalized Operating
Due in Leases Leases
------ ----------- ---------
(in thousands)
<S> <C> <C>
1995 $ 11,423 $ 50,470
1996 11,207 50,145
1997 10,888 48,885
1998 10,453 47,428
1999 9,608 45,920
Later years 37,416 267,221
-------- --------
Total minimum lease payments 90,995 $510,069
========
Interest (32,197)
--------
Present value of minimum
lease payments $ 58,798
========
</TABLE>
The future lease payments summarized above include commitments for
leased properties included in the Company's divestiture program.
NOTE 8 - GOODWILL WRITE-OFF:
Chi-Chi's reported significant sales declines in the second half of
1994 which have continued into the first quarter of 1995. These sales declines
have resulted in operating performance for Chi-Chi's which is significantly
lower than anticipated at the time of the Acquisition. These operating results
have caused the Company to reevaluate its business strategy for the Mexican
Restaurant Division, particularly Chi-Chi's. Consistent with this
F-43
<PAGE>
<PAGE>
strategic reevaluation, the Company has revised its forecasts for the future
operations of Chi-Chi's which has resulted in a significant reduction in
projected future cash flows and a lower valuation of the business. The Company
has determined that its projected results for Chi- Chi's would not support the
future amortization of the remaining Chi-Chi's goodwill balance of $144,780,000
at December 25, 1994.
The methodology employed to assess the recoverability of the Chi-Chi's
goodwill first involved the projection of operating cash flows forward through
the year 2001 and the determination of a residual factor. These projections
were then discounted using an internal rate of return developed by a review
of certain publicly traded restaurant companies. The Company then evaluated
the recoverability of Chi-Chi's goodwill on the basis of this forecast of
future operations. Based on such forecast, the cumulative discounted future
cash flow was insufficient to recover the Chi-Chi's goodwill balance.
Accordingly, the Company wrote off the remaining unamortized Chi-Chi's
goodwill balance of $144,780,000 in the fourth quarter of 1994.
The Company's forecast assumed that sales increases for comparable
restaurants would be approximately 2.6% in 1995 and average approximately 3%
during the forecast period (primarily due to price increases) and that certain
poor performing restaurants would be divested by the end of 1997. No new
restaurant expansion was justifiable given the poor performance achieved during
1994. Product cost inflation was projected at 1.8% through 1998 and flat
thereafter. Payroll and related costs were expected to increase 3% annually
based on inflation. Additionally, occupancy and other operating expenses (with
the exception of rent) and general and administrative expenses were projected
to increase annually at the 3% inflation rate. Rent was only projected to
increase at 1% per year. The Company believed that the projected operating
results based on these assumptions were the most likely scenario given
Chi-Chi's operating performance and recent negative comparable sales trends and
the Company's current plans.
NOTE 9 - OTHER ASSETS:
A summary of other assets follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Liquor licenses $ 7,079 $ 4,322
Debt issuance costs 20,078 0
Construction allowances 0 1,902
Franchise operating rights 8,733 1,241
Notes receivable 9,882 1,101
Conversion costs 0 7,131
Other 2,537 4,455
------- -------
$48,309 $20,152
======= =======
</TABLE>
F-44
<PAGE>
<PAGE>
Debt issuance costs are amortized over the terms of the respective
loan agreements.
Construction allowances represented advances made for restaurant
construction or remodeling which were recovered through reductions in
contingent rental payments. These amounts were considered leasehold
improvements at the time of the Acquisition.
Franchise operating rights at December 25, 1994 are stated at their
fair market value as of the date of the Acquisition based on royalty income
streams and are amortized over the terms of the franchise agreements.
Conversion costs (principally training costs and occupancy costs) have
been capitalized as part of the conversion of the acquired Marriott family
restaurants into the Company's Coco's and Carrows concepts. At the time of the
Acquisition, the Company adjusted the period of amortization for all preopening
and conversion costs to one year. The remaining balance of these costs at
December 25, 1994 is classified in prepaid expenses.
NOTE 10 - LONG-TERM DEBT, INCLUDING CAPITALIZED LEASE OBLIGATIONS:
Long-term debt, including capitalized lease obligations, is comprised
of the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
9-3/4% Senior Notes $300,000 $ 0
10-7/8% Senior Subordinated
Discount Notes 120,406 0
12-1/4% Senior Subordinated Notes,
net of unamortized discount of
$3,072,000 0 191,928
12-3/4% Subordinated Notes, net
of unamortized discount of
$1,084,000 0 78,916
Revolving credit loans 59,600 0
Capitalized lease obligations 58,798 58,304
8% Promissory notes 0 21,828
Mortgage notes, 12-1/4% - 12-1/2%,
due 1995-1998 1,719 2,307
Other 2,726 2,200
Debt issuance and other costs
(amortized over the lives of the
respective debt issues) 0 (3,370 )
-------- --------
543,249 352,113
Liabilities subject to settlement
under reorganization proceedings 0 267,474
Amounts due within one year 6,754 5,981
-------- --------
$536,495 $ 78,658
======== ========
</TABLE>
The Predecessor Company failed to pay $14.1 million of interest due
December 15, 1992 on the Old Notes, $2.6 million of
F-45
<PAGE>
<PAGE>
interest due March 15, 1993 on the Old Subordinated Notes, the $14.5 million of
interest due June 15, 1993 on the Old Notes, $2.6 million of interest due
September 15, 1993 on the Old Subordinated Notes and $14.5 million of interest
due December 15, 1993 on the Old Notes. In addition, because the Predecessor
Company failed to meet a minimum net worth requirement contained in the Old
Indentures, it was required to offer to redeem, on June 25, 1993, 10% of the
original outstanding amount of each issue of the Old Notes at a redemption
price equal to 100% of the principal amount plus accrued interest. The
Predecessor Company did not make such an offer. As a result, all unpaid
principal on the Old Notes ($275 million at December 26, 1993) and accrued
interest could have been declared immediately due and payable.
Liabilities that were extinguished as part of the Plan are separately
classified in the consolidated balance sheet as of December 26, 1993 as
liabilities subject to settlement under reorganization proceedings and include
the following (in thousands):
<TABLE>
<S> <C>
Old Senior Subordinated Notes $191,928
Old Subordinated Notes 78,916
Accrued interest 52,720
Debt issuance and other costs (3,370)
--------
$320,194
========
</TABLE>
In connection with the Acquisition, the Company sold $300.0 million
principal amount of 9-3/4% Senior Notes due in full in 2002 (the "Senior
Notes") and $150.0 million principal amount ($109.0 million in proceeds) of
10-7/8% Senior Subordinated Discount Notes due in full in 2004 (the "Discount
Notes" and, together with the Senior Notes, the "Notes"), and the Company and
certain of its subsidiaries entered into the Credit Facility.
The Credit Facility is a $150.0 million senior secured revolving
credit facility with a $100.0 million sub-limit for standby letters of credit
and is used for general corporate purposes including working capital, debt
service and capital expenditure requirements. The Credit Facility will
terminate and the obligations thereunder will be immediately due and payable on
January 27, 1999. Amounts borrowed will bear interest at rates, selected at
the Company's option from time to time, based on a base rate or LIBOR, in each
cash plus a fluctuating percentage based on the Company's utilization and
EBITDA (as defined in the Credit Facility).
Revolving credit loans of $59.6 million outstanding at December 25,
1994 have been classified as long-term debt since there are no current plans to
pay down the outstanding balance. At December 25, 1994, interest on the
revolving credit loans was being charged at 8.62%. Additionally, as of
December 25, 1994, $41.9 million in standby letters of credit had been issued.
Subject to certain exceptions, the Credit Facility provides for
mandatory prepayments of all net cash proceeds from asset
F-46
<PAGE>
<PAGE>
sales. Such mandatory prepayments will also reduce the facility commitment.
The Senior Notes require semiannual interest payments on February 1
and August 1 of each year and will mature on February 1, 2002. The Senior
Notes will not be redeemable at the option of the Company prior to February 1,
1999. Thereafter, such notes may be redeemed at prices starting at 102.786%
and declining ratably to 100% at February 1, 2001. The Discount Notes will not
require cash interest payments until August 1, 1997. Thereafter, interest on
the Discount Notes will be paid on February 1 and August 1 of each year, and
such notes will mature on February 1, 2004. The Discount Notes will not be
redeemable at the option of the Company prior to February 1, 1999. Thereafter,
such notes may be redeemed at prices starting at 104.078% and declining ratably
to 100% at February 1, 2002.
The Credit Facility contains various covenants including the
maintenance of certain financial ratios. The Company achieved
all required ratios in 1994, except for the fixed charge coverage ratio.
The Company and the banks have agreed to waive such non-compliance and to
revise the financial covenants applicable to 1995.
The mortgage notes were issued to a group of institutional lenders and
are collateralized by mortgages covering 15 restaurants having a book value of
approximately $15.6 million at December 25, 1994.
Maturities of long-term debt, including capitalized lease obligations,
during the four years subsequent to December 31, 1995 are as follows:
$7,384,000 in 1996; $6,948,000 in 1997; $6,896,000 in 1998 and $66,146,000 in
1999.
NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The recorded amounts of the Company's cash and cash equivalents,
restricted cash, collateral deposit, self-insurance reserves, other accrued
liabilities, note payable to Marriott, loan payable to Grace and revolving
credit borrowings at December 25, 1994 and December 26, 1993 approximate fair
value. The fair value of the Company's long-term debt, excluding capitalized
lease obligations, is estimated as follows:
F-47
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Recorded Fair Recorded Fair
Amount Value Amount Value
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Senior Notes $300,000 $233,250 $ 0 $ 0
Discount Notes 120,406 81,000 0 0
Old Senior Subordinated Notes 0 0 191,928 183,156
Old Subordinated Notes 0 0 78,916 51,694
8% Promissory notes 0 0 21,828 20,082
Mortgage notes 1,719 1,718 2,307 2,355
Other 2,726 2,460 2,200 1,748
</TABLE>
The fair values of the Company's Senior Notes and Discount Notes are
based on an average market price of these instruments as of the end of fiscal
1994. The fair values of the Company's Old Senior Subordinated Notes and Old
Subordinated Notes are based on the Cash Distributions paid on the Closing Date
pursuant to the Plan for 1993. The fair value of the 8% promissory notes,
mortgage notes and other debt was estimated using a discount rate which the
Company believes would be currently available to it for debt with similar
terms and average maturities.
The Company does not maintain investments or commitments for which the
application of SFAS 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments," would cause a material effect.
NOTE 12 - OTHER ACCRUED LIABILITIES:
A summary of other accrued liabilities follows;
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Wages, salaries and bonuses $27,292 $22,796
Carrying costs of closed properties 17,912 13,863
Reserve for divestitures 0 8,607
Interest 13,212 4,273
Sales tax 10,011 6,409
Property taxes 4,626 2,794
Accrued rent 3,474 3,083
Utilities 4,028 2,988
Other 15,871 9,236
------- -------
$96,426 $74,049
======= =======
</TABLE>
Carrying costs of closed properties represent the estimated future
costs associated with the Company's closed and subleased restaurants which
consists primarily of the net present value of lease subsidies which are mainly
comprised of the excess of future lease payments for which the Company is
liable, over amounts estimated to be received from related subleases.
F-48
<PAGE>
<PAGE>
NOTE 13 - INCOME TAXES:
The Company reported a loss before income tax provision in 1994, 1993
and 1992. Accordingly, the income tax provisions for each year primarily
reflect certain state, local and foreign taxes. On a tax return basis, the
federal regular operating loss carryforwards amounted to approximately $139.8
million ($78.3 million of alternative minimum tax operating loss carryforwards)
and expire in 2003 through 2010. The Company had approximately $2.4 million of
tax credit carryforwards (of which $0.7 million expire in 1995 and 1996 and
$1.7 million expire in 2003 and 2004).
Upon consummation of the Acquisition, the Company's net operating loss
carryovers and other tax attributes were reduced significantly for federal
income tax purposes. In addition, because the consummation of the Acquisition
triggered an ownership change of the Company for federal income tax purposes,
the Company's post-Acquisition use of its remaining net operating loss
carryovers for regular and alternative minimum federal income tax purposes is
subject to an annual limitation in an amount equal to the product of (i) the
long-term tax-exempt rate prevailing on the Closing Date and (ii) the value of
the Company's stock, increased to reflect the cancellation of indebtedness
pursuant to the Prepackaged Plan (but without taking into account contributions
to capital pursuant to the Acquisition). The Company's annual limit is
approximately $5.3 million.
At December 25, 1994, the Company and its subsidiaries had tax credit
carryforwards of approximately $4.1 million not utilized by Grace. In
accordance with the 1986 Acquisition, the Company must reimburse Grace for 75%
of the benefit of these tax credits if they are utilized in future Company tax
returns. Further, El Torito Restaurants, Inc. (a wholly owned subsidiary of
the Company) has approximately $12.5 million of tax depreciation deductions not
claimed in Grace tax returns as a result of a tax sharing agreement. The
Company will also reimburse Grace for 75% of any tax savings generated by these
deductions. In addition, operating loss and tax credit carryforwards ($6.1
million and $1.0 million, respectively) generated prior to the acquisition of
certain restaurant companies by Grace were available at December 25, 1994 to
offset future taxable income or income taxes, respectively, of those companies
for various years through 1999. To the extent such tax benefits are ultimately
realized, goodwill will be reduced.
Further, as a result of the Chi-Chi's Merger, the Company has net
operating loss and credit carryforwards not used by Chi-Chi's of $50.7 million
and $6.9 million, respectively. The net operating losses expire beginning in
2004 through 2009 and the credit carryovers expire in various years from 1995
through 2009. The Acquisition, as well as the 1992 acquisition of a previous
franchisee by Chi-Chi's, triggered ownership changes for federal income tax
purposes which result in separate annual limitations on the availability of
these losses and credits.
F-49
<PAGE>
<PAGE>
Beginning in fiscal 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This
statement requires the recognition of deferred tax assets and liabilities for
the future consequences of events that have been recognized in the Company's
financial statements or tax returns. The measurement of the deferred items is
based on enacted tax laws. In the event the future consequences of differences
between financial reporting bases and the tax bases of the Company's assets and
liabilities result in a deferred tax asset, SFAS 109 requires an evaluation of
the probability of being able to realize the future benefits indicated by such
asset. A valuation allowance related to a deferred tax asset is recorded when
it is more likely than not that some portion or all of the deferred tax asset
will not be realized. As permitted under the new statement, financial
statements of prior years were not restated. The cumulative effect on the
Company's deferred tax accounts at December 31, 1991 of adopting this new
statement was the recording of a net deferred tax asset of $53,346,000, a
reduction in property and equipment of $667,000, a valuation allowance of
$53,346,000 and a cumulative effect of $667,000.
A reconciliation of income tax expense to the amount of income tax
benefit that would result from applying the federal statutory rate (35% for
1994 and 1993 and 34% for 1992) to loss before income taxes is as follows:
<TABLE>
<CAPTION>
Eleven Months One Month Fiscal years ended
Ended Ended ----------------------
Dec. 25, Jan. 26, Dec. 26, Dec. 28,
1994 1994 1993 1992
------------- --------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Provision for income
taxes at statutory
rate $(56,736) $ 191,834 $(18,010) $(67,498)
State taxes, net of
Federal income tax
benefit (2,948) (16,300) (3,113) (4,589)
State minimum tax 1,183 55 187 256
Foreign taxes 541 49 471 465
Goodwill 54,679 0 1,923 38,112
Nondeductible reorgani-
zation costs 0 (175,597) 0 0
Addition to valuation
allowance 4,896 0 17,545 33,975
Surtax exemption 0 0 514 0
Other 158 14 1,141 0
-------- --------- -------- -------
$ 1,773 $ 55 $ 658 $ 721
======== ========= ======== =======
</TABLE>
At December 25, 1994 and December 26, 1993, the Company's deferred tax
asset was $136,383,000 and $122,461,000, respectively, and deferred tax
liability was $27,570,000 and $18,544,000, respectively. The major components
of the Company's net deferred
F-50
<PAGE>
<PAGE>
taxes of $108,813,000 at December 25, 1994 and $103,917,000 at December 26,
1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Depreciation $ (26,004) $ (10,723)
Net operating loss and
credit carryforwards 86,243 68,947
Capitalized leases 900 10,385
Divestment, carrying cost
and rent subsidy reserves 8,306 17,361
Self-insurance reserves 22,552 14,711
Kasumi payment to Grace 6,000 0
Straight-line rent 1,939 0
Reorganization costs 4,834 0
Other 4,043 3,236
--------- ---------
108,813 103,917
Valuation allowance (108,813) (103,917)
--------- ---------
$ 0 $ 0
========= =========
</TABLE>
The increase in the valuation allowance of $4,896,000 for 1994
resulted from the following activity (in thousands):
<TABLE>
<S> <C>
Acquired Chi-Chi's operating
loss and credit carryforwards $ 24,659
Reduction in cumulative temporary
differences (12,260)
Reduction in net operating loss
carryforwards (7,509)
Expired tax credits (1,427)
Other 1,433
--------
$ 4,896
========
</TABLE>
NOTE 14 - BENEFIT PLANS:
The Company maintains certain incentive compensation and related plans
for executives and key operating personnel, including restaurant and field
management. Total expenses for these plans were $8,217,000, $666,000,
$9,479,000 and $7,505,000 for the eleven months ended December 25, 1994, the
one month ended January 26, 1994, 1993 and 1992, respectively.
The Predecessor Company had two Retirement Savings Plans, and
substantially all of the Predecessor Company's salaried employees were eligible
to participate in them. Effective December 31, 1991, the Predecessor Company
suspended its match under one of the plans and terminated the other plan.
During 1994, the Company acquired two retirement plans related to the Chi-Chi's
Merger and established a new deferred compensation plan for highly compensated
employees. The Company's contributions and expenses under these plans were
$528,000, $2,000, $53,000 and $65,000 for the eleven months ended December 25,
1994, one month ended January 26, 1994, 1993 and 1992, respectively. The
Company has no defined benefit plans.
F-51
<PAGE>
<PAGE>
NOTE 15 - RELATED PARTY TRANSACTIONS:
Foodmaker provides distribution services to a portion of the Company's
Mexican restaurants, principally those operated under the Chi-Chi's name.
Distribution sales to those restaurants for the eleven months ended December
25, 1994 aggregated $81,537,000. In relation to the distribution sales, the
Company had accounts payable of $2,964,000 due to Foodmaker at December 25,
1994.
On the Closing Date, Apollo and GEI received an aggregate of $7.0
million as a financial advisory fee for services provided in connection with
the Acquisition and related transactions. In addition, Apollo and GEI are each
paid a monthly fee of $50,000 for providing certain management services to the
Company. For the eleven months ended December 25, 1994, the Company paid $1.1
million in connection with this arrangement.
NOTE 16 - REDEEMABLE CUMULATIVE EXCHANGEABLE PREFERRED STOCK:
The 1,544,237 shares of Preferred Stock held by Grace and Marriott at
December 26, 1993 were non-voting, had a liquidation value of $100 per share
(plus accrued and unpaid dividends) and were exchangeable at the option of the
Company into 13 1/2% Junior Subordinated Exchange Debentures due June 15, 1999.
Dividends were cumulative and were payable semi-annually in cash or in
additional shares of Preferred Stock at the option of the Company. Of the
1,544,237 shares outstanding, 500,000 were issued to Grace at the time of the
1986 Acquisition, 250,000 shares were issued, effective July 1, 1989, in
consideration for the cancellation of $25 million of the Company's 13 1/8%
Junior Subordinated Notes held by Grace, 232,400 shares were issued to Marriott
in early 1992 in connection with the acquisition of 109 family restaurants and
561,837 shares have been issued as stock dividends. At December 26, 1993, the
Company had accrued additional stock dividends on preferred stock. At $100 per
share, the value of the dividends was $29,497,000. All the outstanding
preferred stock was cancelled in connection with the Plan.
NOTE 17 - COMMON STOCK:
In December 1992, Grace entered into a series of agreements pursuant
to which it (i) obtained the right to purchase a majority of the shares of the
Old Common Stock from management and former management stockholders and (ii)
amended the terms of the Old Shareholders' Agreement, thereby effectively
gaining control of the Company. Grace also entered into a consent agreement
with the Company pursuant to which, among other things, the Company agreed not
to issue any shares of its capital stock or options without the consent of
Grace. In June 1993, Grace/Western as assignee exercised such purchase rights
and became the majority stockholder of the Company. Grace purchased 99,984 and
7,510 additional shares of Old Common Stock on October 15, 1993 and January 5,
1994, respectively, increasing its total holdings to 350,533 shares (or 74.6%
of the outstanding Old Common Stock). On the Closing Date,
F-52
<PAGE>
<PAGE>
Grace/Western received a cash payment of $175,267 for such Old Common Stock in
connection with the Plan.
In connection with the Acquisition, the Company adopted a new
management incentive plan (the "Management Incentive Plan"), pursuant to which
certain officers and employees of the Company were granted the right to
purchase up to 40,900 shares of Common Stock (constituting up to 4.1% of
the Common Stock outstanding immediately following such purchases) at $160
per share (the "Employee Stock Purchase"), the same per share price paid by
Apollo and GEI in the New Equity Investment. The Employee Stock Purchase was
consummated on the Closing Date with respect to certain officers (15,625 shares
of Common Stock) and on May 19, 1994 and July 31, 1994 with respect to the
other participants (22,552 shares of Common Stock). No more than fifty
percent of the purchase price was authorized to be financed through
interest-bearing recourse notes payable to the Company. The individuals who
purchased Common Stock were also granted options to purchase 20,822 shares
of Common Stock in the future at an exercise price of $160 per share. The
Company also granted options to purchase 30,600 shares of Common Stock to
approximately 820 other employees. All these options expire in 2004 and 2005
and become exercisable at a rate of 25% on the grant date and 25% on each of
the next three anniversaries of the grant date. Approximately 5,000 options
have expired since December 25, 1994 due to terminations.
NOTE 18 - CONTINGENCIES:
The Company is involved in various litigation matters incidental to
its business. The Company does not believe that any of the claims or actions
filed against it will have a material adverse effect upon the consolidated
financial position and results of operations of the Company.
F-53
<PAGE>
<PAGE>
SCHEDULE VIII
FAMILY RESTAURANTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for uncollectible
receivables:
For the year 1994 $955 $ 21 $360(1) $(523)(2) $813
For the year 1993 548 429 0 (22)(2) 955
For the year 1992 717 72 0 (241)(2) 548
</TABLE>
(1) Represents allowance established at the date of the Chi-Chi's Merger.
(2) Represents write-off of uncollectible receivables against allowance and
includes transfers to other accounts.
F-54
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Foodmaker, Inc.:
We consent to incorporation by reference in the registration statement
No. 33-50934 on Form S-3 of Foodmaker, Inc. and in registration statement
Nos. 33-67450, 33-54602 and 33-51490 on Form S-8 of Foodmaker, Inc. of our
report dated March 15, 1995, except as to the ninth paragraph of note 10 to
the consolidated financial statements which is as of March 24, 1995, relating
to the consolidated balance sheet of Family Restaurants, Inc. and its
subsidiaries as of December 25, 1994, and the related statements of
operations, common stockholders' deficit and cash flows, and related
financial statment schedule for the one month ended January 26, 1994
(Predecessor Company) and the eleven months ended December 25, 1994
(Successor Company), which report appears in the December 25, 1994 annual
report on Form 10-K of Family Restaurants, Inc. and subsidiaries. Our report
refers to a change in the method of financial statement reporting.
KPMG PEAT MARWICK LLP
Orange County, California
April 10, 1995
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
Foodmaker Inc.:
We consent to the incorporation by reference in registration statement
No. 33-50934 on Form S-3 of Foodmaker, Inc. and in registration statement
Nos. 33-67450, 33-54602 and 33-51490 on Form S-8 of Foodmaker, Inc. of our
report dated March 22, 1994, which included an explanatory paragraph
regarding the confirmation of Family Restaurants, Inc. bankruptcy plan,
relating to the consolidated balance sheet of Family Restaurants, Inc. and
its subsidiaries as of December 26, 1993 and the related statements of
operations, common stockholders' deficit and cash flows for each of the two
years in the period ended December 26, 1993, which report appears in the
December 25, 1994 annual report on Form 10-K of Family Restaurants, Inc.
and subsidiaries.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 11, 1995
