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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 7, 1996 Commission File No. 1-9390
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FOODMAKER, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2698708
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(State of Incorporation) (I.R.S. Employer
Identification No.)
9330 BALBOA AVENUE, SAN DIEGO, CA 92123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 571-2121
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of shares of common stock, $.01 par value, outstanding
as of the close of business August 12, 1996 - 38,839,985
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FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 7, October 1,
1996 1995
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ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 34,354 $ 35,865
Receivables . . . . . . . . . . . . . . . . . 13,496 25,272
Inventories . . . . . . . . . . . . . . . . . 22,159 22,385
Prepaid expenses. . . . . . . . . . . . . . . 17,293 14,367
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Total current assets . . . . . . . . . . . 87,302 97,889
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Trading area rights . . . . . . . . . . . . . . 67,193 69,761
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Lease acquisition costs . . . . . . . . . . . . 21,631 25,003
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Other assets. . . . . . . . . . . . . . . . . . 36,961 36,310
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Property at cost. . . . . . . . . . . . . . . . 601,963 589,642
Accumulated depreciation and amortization . . (173,049) (155,931)
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428,914 433,711
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TOTAL. . . . . . . . . . . . . . . . . . . $642,001 $662,674
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt. . . . . $ 1,804 $ 1,836
Accounts payable. . . . . . . . . . . . . . . 22,202 32,015
Accrued expenses. . . . . . . . . . . . . . . 117,595 98,166
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Total current liabilities. . . . . . . . . 141,601 132,017
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Deferred income taxes . . . . . . . . . . . . . 7,951 9,586
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Long-term debt, net of current maturities . . . 396,148 440,219
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Other long-term liabilities . . . . . . . . . . 50,784 49,599
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Stockholders' equity:
Common stock. . . . . . . . . . . . . . . . . 402 402
Capital in excess of par value. . . . . . . . 281,040 280,996
Accumulated deficit . . . . . . . . . . . . . (221,462) (235,682)
Treasury stock. . . . . . . . . . . . . . . . (14,463) (14,463)
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Total stockholders' equity . . . . . . . . 45,517 31,253
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TOTAL. . . . . . . . . . . . . . . . . . . $642,001 $662,674
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See accompanying notes to financial statements.
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FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Twelve Weeks Ended Forty Weeks Ended
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July 7, July 9, July 7, July 9,
1996 1995 1996 1995
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Revenues:
Restaurant sales. . . . . . . . . . . $209,043 $193,921 $677,391 $602,506
Distribution sales. . . . . . . . . . 25,297 42,077 117,219 138,307
Franchise rents and royalties . . . . 7,927 7,585 25,926 24,808
Other . . . . . . . . . . . . . . . . 880 492 3,216 1,795
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243,147 244,075 823,752 767,416
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Costs and expenses:
Costs of revenues:
Restaurant costs of sales. . . . . 56,220 55,079 187,536 169,820
Restaurant operating costs . . . . 110,049 104,740 362,527 337,143
Costs of distribution sales. . . . 24,849 41,298 115,179 135,672
Franchised restaurant costs. . . . 4,704 5,001 15,746 16,809
Selling, general and administrative . 29,327 24,265 88,097 85,652
Equity in loss of FRI . . . . . . . . -- -- -- 57,188
Interest expense. . . . . . . . . . . 10,983 11,070 36,649 37,447
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236,132 241,453 805,734 839,731
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Earnings (loss) before income taxes . . 7,015 2,622 18,018 (72,315)
Income taxes. . . . . . . . . . . . . . 1,500 -- 3,800 500
------- ------- ------- -------
Net earnings (loss) . . . . . . . . . . $ 5,515 $ 2,622 $ 14,218 $(72,815)
======= ======= ======= =======
Net earnings (loss) per share - primary
and fully diluted. . . . . . . . . $ .14 $ .07 $ .36 $ (1.88)
======= ======= ======= =======
Weighted average shares outstanding . . 39,358 39,157 39,260 38,827
See accompanying notes to financial statements.
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FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Forty Weeks Ended
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July 7, July 9,
1996 1995
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Cash flows from operations:
Net earnings (loss) . . . . . . . . . . . . . $ 14,218 $(72,815)
Non-cash items included above:
Depreciation and amortization. . . . . . . 30,101 29,194
Deferred income taxes. . . . . . . . . . . (1,635) --
Equity in loss of FRI. . . . . . . . . . . -- 57,188
Decrease in receivables . . . . . . . . . . . 11,776 4,470
Decrease (increase) in inventories. . . . . . 226 (1,323)
Decrease (increase) in prepaid expenses . . . (2,926) 4,905
Decrease in accounts payable. . . . . . . . . (9,813) (6,791)
Increase (decrease) in accrued expenses . . . 23,546 (5,191)
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Cash flows provided by operations. . . . . 65,493 9,637
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Cash flows from investing activities:
Additions to property and equipment . . . . . (20,622) (22,783)
Dispositions of property and equipment. . . . 2,909 3,233
Decrease (increase) in trading area rights. . 122 (7,067)
Decrease (increase) in other assets . . . . . (2,136) 4,963
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Cash flows used by investing activities. . (19,727) (21,654)
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Cash flows from financing activities:
Borrowings under revolving bank loans . . . . -- 29,000
Principal repayments under revolving
bank loans . . . . . . . . . . . . . . . . -- (29,000)
Proceeds from issuance of LTD . . . . . . . . -- 1,131
Principal payments on long-term debt,
including current maturities . . . . . . . (44,391) (9,001)
Decrease in accrued interest. . . . . . . . . (2,932) (1,839)
Proceeds from issuance of common stock. . . . 46 55
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Cash flows used by financing activities. . (47,277) (9,654)
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Net decrease in cash and cash equivalents . . . $ (1,511) $(21,671)
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See accompanying notes to financial statements.
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FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements of Foodmaker, Inc. (the
"Company") do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation have
been included. Operating results for any interim period are not necessarily
indicative of the results for any other interim period or for the full year.
The Company reports results quarterly with the first quarter having 16 weeks
and each remaining quarter having 12 weeks. Certain financial statement
reclassifications have been made in the prior year to conform to the current
year presentation. These financial statements should be read in conjunction
with the 1995 financial statements.
2. Income taxes for the 40 weeks ended July 7, 1996 were provided at the
expected annual tax rate of 21% of pretax earnings. The low effective
annual income tax rate results from the Company's ability to realize
previously unrecognized tax benefits. The Company cannot determine the
actual annual effective tax rate until the end of the fiscal year, thus the
rate could differ from expectations. Although the Company incurred a loss
in 1995, income taxes were $.5 million due to required minimum taxes and
the Company's inability under Statement of Financial Accounting Standards
No. ("SFAS") 109, "Accounting for Income Taxes", to recognize the benefit
from the carryover of losses to future years.
3. On January 27, 1994, the Company contributed its former wholly-owned
subsidiary, Chi-Chi's, Inc. ("Chi-Chi's"), to Family Restaurants, Inc.
("FRI") in exchange for an approximate 39% equity interest in FRI valued at
the date of exchange at approximately $62 million, a five-year warrant to
acquire 111,111 additional shares at $240 per share (which if exercised
would increase the Company's ownership to 45%), and approximately $173
million in cash. Because of substantial continuing losses, FRI wrote off
at the end of 1994 approximately $160 million of goodwill causing Foodmaker
to write off its entire investment in FRI during the first quarter of its
fiscal year ended October 1, 1995. As disclosed in the Company's fiscal
1995 financial statements, FRI lost almost $100 million through its third
quarter ended September 24, 1995. Because of such losses and resulting
increased borrowing requirements, the major FRI stockholders were required
to purchase a participation with respect to any additional advances by the
banks to FRI. Rather than doing so, the Company, by an agreement dated
November 20, 1995, transferred all of its stock and warrants to another
stockholder of FRI. Since the Company's investment in FRI was previously
written off, the consummation of this agreement had no effect on the
financial condition or results of operations of the Company.
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4. 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
state of Washington, seeking monetary damages for personal injuries
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.
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 franchisees. 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 the
Company 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. Substantially the same claims
were made by the parties in a separate lawsuit in Superior Court of
California, County of Los Angeles. On May 17, 1995 it was determined the
litigation between the Company, Vons, and other defendants would be heard in
Los Angeles. The cases have been consolidated and are set for trial in
February 1997.
The Federal Trade Commission has been 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.
As announced by the FTC on August 13, 1996, Foodmaker has agreed to pay a
$1.45 million civil penalty to settle the matter. The Company had
substantially provided for this expense in its financial statements as of
July 7, 1996.
On April 6, 1996 an action was filed by one of the Company's international
franchisees, Wolsey, Ltd., in the United States District Court in San Diego,
California against the Company and its directors, its international
franchising subsidiary, and certain officers of the Company and others.
The complaint alleges certain contractual, tort, and law violations related
to the franchisees' development rights in the Far East and seeks unspecified
damages, injunctive relief, attorneys fees and costs. Management believes
the allegations are without foundation and intends to vigorously defend the
action. It is further believed that if there is any liability of the
Company, such liability will not have a material effect on the Company.
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On May 17, 1996 an action was filed by the "National JIB Franchise
Association, Inc. (the "Association") in the Superior Court of California,
County of San Diego in San Diego, California, against the Company and
others. The complaint alleges that certain funds which the Company
received from certain suppliers, in an amount alleged to be in excess of
$15,000,000 over a period of 14 years, were intended for distribution to,
or for the benefit of, the Association or its members or otherwise were
impressed with a trust of which the Association and/or its members are the
beneficiaries. The complaint seeks a judicial declaration of whether the
Company is obligated to the Association or to its members and if so, the
nature and extent of such obligations in respect to such funds and an
accounting of the receipt, use and disposition of such funds. Management
believes that the Company has met any obligation to the Association or its
members that may exist and that if any unfulfilled obligation exists, the
fulfillment of such obligation will not have a material adverse effect on
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. During the quarter,
these proposed adjustments were satisfied at approximately $.6 million
(exclusive of $.6 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). A final report has not been issued but
agreement has been reached to satisfy these proposed adjustments at $.1
million. Management believes that adequate provision for income taxes has
been made.
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FOODMAKER, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION
RESULTS OF OPERATIONS
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All comparisons under this heading between 1996 and 1995, unless otherwise
indicated, refer to the 12-week and 40-week periods ended July 7, 1996 and
July 9, 1995, respectively.
Sales by Company-operated restaurants increased $15.1 million and $74.9
million, respectively, to $209.0 million and $677.4 million in 1996 from $193.9
million and $602.5 million in 1995, reflecting increases in both per store
average sales and in the average number of restaurants. Per store average sales
for comparable restaurants ("PSA"), which increased 5.2% and 8.2%, respectively,
in 1996 as compared to 1995, continued to improve under the Company's marketing
program which features a new advertising campaign, new product introductions and
aggressive value-priced product alternatives. The average number of Company-
operated restaurants increased to 867 in 1996 from 832 in 1995, reflecting the
addition of new restaurants and the acquisition of restaurants from franchisees.
Distribution sales of food and supplies declined approximately $16.8 million
and $21.1 million, respectively, to $25.3 million and $117.2 million in 1996
from $42.1 million and $138.3 million in 1995 primarily due to declines in sales
to franchisees of $13.5 million and $9.8 million. Jack In The Box franchisees
have formed a purchasing cooperative and contracted with another supplier for
distribution services. Most franchisees have elected to participate in the
cooperative. This transition was completed during the Company's third quarter
and will result in a substantial decline in distribution sales in the future.
Distribution sales to franchisees were $9.9 million and $65.2 million during the
respective periods of 1996. The loss of these extremely low profit margin sales
is not expected to have a material effect on the profits of the Company.
Distribution sales to FRI and others also declined $3.2 million and $11.3
million, respectively, in 1996 compared to the same periods in 1995.
Franchise rents and royalties increased $.3 million and $1.1 million,
respectively, to $7.9 million and $25.9 million in 1996 from $7.6 million and
$24.8 million in 1995, due to increased franchisee sales in 1996 as compared to
the same periods of 1995.
Other revenues increased $.4 million and $1.4 million, respectively, to
$.9 million and $3.2 million in 1996 from $.5 million and $1.8 million in 1995,
primarily due to interest income earned on higher levels of invested cash in
1996.
Revenues declined $1.0 million during the quarter and increased $56.4
million for the fiscal year to $243.1 million and $823.8 million, respectively,
in 1996 from $244.1 million and $767.4 million in 1995 principally due to an
increase in restaurant sales, offset in whole or in part by a decline in
distribution sales.
Restaurant costs of sales increased $1.1 million and $17.7 million,
respectively, to $56.2 million and $187.5 million in 1996 from $55.1 million and
$169.8 million in 1995, principally due to the costs related to increased
restaurant sales. Costs of sales declined as a percent of sales in 1996 as
compared to 1995 due to the impact of generally lower ingredient costs and the
lower food cost of certain promotions, offset by higher packaging costs.
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Restaurant operating costs increased $5.3 million and $25.4 million,
respectively, to $110.0 million and $362.5 million in 1996 from $104.7 million
and $337.1 million in 1995 primarily due to the increase in average number of
Company-operated restaurants and variable costs associated with increased sales.
Restaurant operating costs declined as a percent of sales in 1996 as compared
to the same period in 1995 principally due to lower percentages of restaurant
labor, operations administrative costs and fixed expenses.
Costs of distribution sales declined $16.5 million and $20.5 million,
respectively, to $24.8 million and $115.2 million in 1996 from $41.3 million and
$135.7 million in 1995 consistent with the decline in distribution sales.
Franchised restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous costs,
decreased to $4.7 million and $15.7 million, respectively, in 1996 from $5.0
million and $16.8 million in 1995, primarily due to a decline in the average
number of domestic franchisee-operated restaurants.
Selling, general and administrative expenses increased $5.0 million and $2.4
million, respectively, to $29.3 million and $88.1 million in 1996 from $24.3
million and $85.7 million in 1995. Advertising and promotion costs increased
$3.5 million and $12.3 million, respectively, to $22.4 million and $69.9 million
in 1996 from $18.9 million and $57.6 million in 1995 due to costs of aggressive
promotions and discounting of products and the increase in contributions to the
marketing fund related to higher sales in 1996. In 1996 the Company received
from suppliers cooperative advertising funds of approximately $1.1 million and
$3.4 million, respectively, which effectively offset some of the aforementioned
higher advertising and promotion costs. Such funds were contributed to the
advertising fund in the prior year. Selling, general and administrative expenses
include an $8.0 million settlement with stockholders in the first quarter of
1995 as described in the Company's fiscal 1995 consolidated financial
statements.
In the first quarter of 1995, the Company recorded a loss of $57.2 million
relating to its 39% equity in the operations of FRI, resulting from the complete
write-down of the Company's investment in FRI due to the write-off by FRI of the
goodwill attributable to Chi-Chi's Mexican restaurants. In the first quarter
of 1996, the Company transferred all of its stock and warrants to another
stockholder of FRI. Since the Company's investment in FRI was previously
written off, the transfer of the stock and warrants had no effect on the
financial condition or results of operations of the Company. See Note 3 to the
financial statements.
Interest expense declined $.1 million and $.8 million, respectively, to
$11.0 million and $36.6 million in 1996 from $11.1 million and $37.4 million in
1995 due to a reduction of debt and lower other financing costs. Interest
expense in the current quarter includes approximately $1.0 million in costs
associated with the early retirement of the Company's 14 1/4% senior
subordinated notes due in May 1998.
The tax provision reflects the expected annual tax rate of 21% of pretax
earnings. The low effective annual income tax rate results from the Company's
ability to realize previously unrecognized tax benefits. The Company cannot
determine the actual annual effective tax rate until the end of the fiscal year,
thus the rate could differ from expectations. Although the Company incurred a
loss in 1995, income taxes were $.5 million due to required minimum taxes and
the Company's inability under SFAS 109 to recognize the benefit from the
carryover of losses to future years.
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FINANCIAL CONDITION
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The Company's primary sources of liquidity are expected to be cash flows
from operations, the revolving bank credit facility described below, and the
sale and leaseback of restaurant properties. An additional potential source of
liquidity is the conversion of Company-operated Jack In The Box restaurants to
franchised restaurants. The Company requires capital principally to construct
new restaurants, to maintain, improve and refurbish existing restaurants, and
for general corporate purposes.
At July 7, 1996, the Company's working capital deficit increased $18.4
million to $52.5 million from $34.1 million at October 1, 1995, and reflects
principally a decrease of $11.8 million in receivables resulting from the
franchisees' transition to another distributor and their repayment of other
obligations. On May 15, 1996, $43.5 million of available cash was utilized to
prepay the Company's 14 1/4% senior subordinated notes due in May 1998. At July
7, 1996, the Company had $34.4 million in cash. The restaurant business does
not require the maintenance of significant receivables or inventories, and it
is common to receive trade credit from vendors for purchases such as food and
supplies. In addition, the Company, and generally the industry, continually
invests in its business through the addition of new units and refurbishment of
existing units, which are reflected as long-term assets and not as part of
working capital.
At July 7, 1996, the Company's total debt outstanding declined to $398.0
million from $442.1 million at October 1, 1995, reflecting principally the early
retirement of the Company's 14 1/4% senior subordinated notes due in May 1998.
Substantially all of the Company's real estate and machinery and equipment is,
and is expected to continue to be, pledged to its lenders.
The Company's revolving bank credit agreement which was amended and restated
March 15, 1996, expires December 31, 1998 and provides for a credit facility of
up to $60 million, including letters of credit for the account of the Company
in an aggregate amount of up to $25 million. At July 7, 1996, the Company had
no borrowings and had a total of approximately $51.8 million of unused credit
under the agreement. Covenants contained in the agreement include limitations
on additional borrowing, capital expenditures, lease commitments and dividend
payments, and requirements to maintain certain financial ratios, cash flows and
net worth.
Based upon current levels of operations and anticipated growth, the Company
expects that sufficient cash flow will be generated from operations so that,
combined with other financing alternatives available to it, including the bank
credit facility, the utilization of cash on hand and the sale and leaseback of
restaurants, the Company will be able to meet all of its current debt service
requirements, as well as its capital expenditures and working capital
requirements.
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PART II - OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
Item 1. Legal Proceedings
For information regarding legal proceedings required by this item, see Note
4 to the unaudited consolidated financial statements which is incorporated
herein by this reference.
Item 5. Other Information
"SAFE HARBOR" under the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers that the forward-looking statements
involve known and unknown risks and uncertainties which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by any
forward-looking statements made by or on behalf of the Company. In connection
with the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995, the Company is filing the following cautionary statements
identifying important factors that in some cases have affected, and in the
future could cause, the Company's actual results to differ materially from those
expressed in any such forward-looking statements.
In addition to factors discussed in this Form 10-Q, among the other factors
that could cause the Company's results to differ materially are: the
effectiveness and cost of advertising and promotional efforts; the degree of
success of the Company's new and unique product offerings; weather conditions;
difficulties in obtaining ingredients and variations in ingredient costs; the
Company's ability to control operating, as well as general and administrative,
costs; the Company's ability to recognize value from any current or future
co-branding efforts; competitive products and pricing and promotions; the impact
of any wide-spread negative publicity; the impact on consumer eating habits of
new scientific information regarding diet, nutrition and health; competition for
labor; general economic conditions; changes in consumer tastes and in travel and
dining-out habits; changes in laws and regulations and other activities of
governing entities; the costs and other effects of legal claims by franchisees,
customers, vendors and others, including settlement of those claims; and the
effectiveness of management strategies and decisions.
There can be no assurance that the Company or its franchisees, domestic and
international, will achieve growth objectives or that new restaurants will be
profitable. The opening and profitability of restaurants are subject to various
risk factors including the identification, availability and lease or purchase
terms of suitable sites, both traditional and non-traditional; the ability of
the Company and its franchisees to finance new restaurant development; the
ability to meet construction schedules and permitting and regulatory compliance.
The growth of Jack in the Box restaurants outside the United States is
subject to a number of additional factors. The Company has limited experience
with international franchise development. The growth and profitability of
international restaurants are subject to the financial, development and
operational capabilities of franchisees, the franchisees' ability to develop a
support structure and adequately support subfranchisees, as well as currency
regulations and fluctuations.
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<PAGE>
Because the Company's business is regional, with approximately 75% of its
company-operated and franchised restaurants located in the states of California
and Texas, the economic conditions and weather conditions affecting those states
may have a material impact upon the Company's results.
The Company has a substantial number of minimum wage employees and employees
who are paid at wage rates slightly above the minimum wage. In the event
federal and/or state minimum wage rates are increased, the Company may need to
increase not only the wages of its minimum wage employees but also the wages
paid to the employees at wage rates which are above minimum wage. If competitive
pressures or other factors prevent the Company from offsetting the increased
costs by increases in prices, the Company's profitability may decline.
The Company has been required under FAS 109, because of operating losses
incurred over the past several years, to establish valuation allowances against
deferred tax assets recorded for net operating losses, tax credit carryforwards
and various other items. Until there is sufficient available evidence that the
Company will be able to realize such deferred tax assets through future taxable
earnings, the Company's tax provision will be highly sensitive to the expected
annual level of earnings, the impact of the alternative minimum tax under the
Internal Revenue Code and the limited current recognition of the deferred tax
assets. As a result of changing expectations, the relationship of the Company's
income tax provision to pre-tax earnings will vary more significantly from
quarter to quarter and year to year than companies that have been continuously
profitable. However, the Company's effective tax rates are likely to increase
in the future.
The Company is highly leveraged. Its substantial indebtedness may limit the
Company's ability to respond to changing business and economic conditions. The
contracts under which the Company acquired its debt impose significant operating
and financial restrictions which limit the Company's ability to borrow money,
sell assets or make capital expenditures or investments without the approval of
certain lenders. If the Company is unable to generate cash flows sufficient to
make payments on its substantial debt, it may not be able to refinance or obtain
additional financing.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
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27 Financial Data Schedule (included only with
electronic filing)
(b) Reports on Form 8-K
A Form 8-K was filed on August 1, 1996, reporting under Item 5
thereof, the amendment of the Bylaws of the Company and the adoption
of a Stockholder Rights Plan.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized and in the capacities indicated.
FOODMAKER, INC.
By: DARWIN J. WEEKS
---------------------
Darwin J. Weeks
Vice President, Controller
and Chief Accounting Officer
(Duly Authorized Signatory)
Date: August 14, 1996
-13-
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