<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 1, 1995
---------------
COMMISSION FILE NUMBER 1-9390
-------------
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, 1995, computed by reference to the closing
price reported in the New York Stock Exchange-Composite Transactions, was
approximately $188.5 million.
Number of shares of common stock, $.01 par value, outstanding as of the
close of business December 15, 1995 - 38,802,195.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement filed with the Securities and Exchange
Commission in connection with the 1996 Annual Meeting of Stockholders are
incorporated by reference into Part III hereof.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
THE FINANCIAL STATEMENTS OF FOODMAKER FOR THE FISCAL YEAR ENDED OCTOBER 1,
1995 WERE PREVIOUSLY FILED AS PART OF FOODMAKER'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 1, 1995 (THE "1995 FORM 10-K").
THE SOLE PURPOSE OF THIS AMENDMENT TO FOODMAKER'S ANNUAL REPORT ON FORM 10-K
IS THE INCLUSION OF FAMILY RESTAURANTS, INC. FINANCIAL STATEMENTS FOR ITS
FISCAL YEAR ENDED DECEMBER 31, 1995.
ITEM 14(a)(1) Financial Statements
(i) Foodmaker Financial Statements. See the index to
consolidated financial statements on page F-1 of the
1995 Form 10-K.
(ii) Family Restaurants, Inc. Financial Statements. See the
index to consolidated financial statements on page F-1 of
this amended 1995 Form 10-K/A.
ITEM 14(a)(2) Financial Statement Schedules. Not applicable.
-2-
<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(8)
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(8)
10.1.2 Second Amendment dated as of January 24, 1995 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as defined therein(9)
10.1.3 Third Amendment dated as of February 15, 1995 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as defined therein(9)
10.1.4 Waiver and Amendment dated as of November 20, 1995 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as defined therein(11)
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 Performance Bonus Plan(7)
10.8 Deferred Compensation Plan for Non-Management Directors(10)
10.9 Non-Employee Director Stock Option Plan(10)
10.10 Exchange Agreement dated as of November 20, 1995, by and between
Foodmaker, Inc. and Apollo FRI Partners, L.P.(11)
21 Subsidiaries(3)
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Deloitte & Touche LLP
27 Financial Data Schedule (included only with electronic filing)(11)
- ------------
(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.
-3-
<PAGE>
Number Description
- ------ -----------
(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 Annual Report on Form 10-K for the fiscal year ended
October 2, 1994.
(9) Previously filed and incorporated herein by reference from
registrant's Quarterly Report on Form 10-Q for the quarter ended
January 22, 1995.
(10) Previously filed and incorporated herein by reference from registrant's
Definitive Proxy Statement dated January 17, 1995 for the Annual Meeting
of Stockholders on February 17, 1995.
(11) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended October 1, 1995.
ITEM 14(b) The Company did not file any reports on Form 8-K with the
Securities and Exchange Commission during the fourth quarter ended October 1,
1995.
ITEM 14(c) All required exhibits are filed herein or incorporated by
reference as described in Item 14(a)(3).
ITEM 14(d) All supplemental schedules are omitted as inapplicable or because
the required information is included in the consolidated financial statements
or notes thereto.
-4-
<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: DARWIN J. WEEKS
-------------------------
Darwin J. Weeks
Vice President, Controller
and Chief Accounting Officer
(Duly Authorized Signatory)
Date: April 5, 1996
-5-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Family Restaurants, Inc. and Subsidiaries Consolidated Financial Statements
and Schedule for the year ended December 31, 1995, the eleven months ended
December 25, 1994, the one month ended January 26, 1994 and the year ended
December 26, 1993.
Page
----
Independent Auditors' Reports. . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31,
1995 and December 25, 1994. . . . . . . . . . . F-4
Consolidated Statements of Operations. . . . . . . F-5
Consolidated Statements of Common Stockholders'
Deficit . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows. . . . . . . F-7
Notes to Consolidated Financial Statements . . . . F-9
Schedule VIII - Valuation and Qualifying Accounts. F-30
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Family Restaurants, Inc.:
We have audited the accompanying consolidated balance sheets of Family
Restaurants, Inc. and its subsidiaries as of December 31, 1995 and December 25,
1994, and the related consolidated statements of operations, common
stockholders' deficit and cash flows for the year ended December 31, 1995, the
eleven months ended December 25, 1994 (Successor Company) and the one month
ended January 26, 1994 (Predecessor Company). In connection with our audits 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
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 Family
Restaurants, Inc. and its subsidiaries at December 31, 1995 and December 25,
1994, and the results of their operations and their cash flows for the year
ended December 31, 1995, the eleven months ended December 25, 1994 (Successor
Company) and the one month ended January 26, 1994 (Predecessor 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 Under the Bankruptcy
Code."
KPMG PEAT MARWICK LLP
Orange County, California
March 15, 1996, except as
to the second paragraph
of note 9, which is as
of March 29, 1996
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Family Restaurants, Inc.:
We have audited the accompanying consolidated statements of operations,
common stockholders' deficit and cash flows of Family Restaurants, Inc. and its
subsidiaries for the year ended December 26, 1993. Our audit 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 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, such consolidated financial statements present fairly,
in all material respects, the results of operations and cash flows of Family
Restaurants, Inc. and its subsidiaries for the year 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 Under the Bankruptcy Code."
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 22, 1994
F-3
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
Successor Company
---------------------------
December 31, December 25,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 8,370 $ 8,239
Restricted cash 0 1,850
Receivables 8,172 11,831
Inventories 5,645 12,916
Other current assets 4,813 8,179
Property held for sale 240,077 0
--------- ---------
Total current assets 267,077 43,015
Property and equipment, net 207,223 445,354
Reorganization value in excess of amounts
allocable to identifiable assets, net 39,332 197,581
Other assets 37,638 48,648
--------- ---------
$ 551,270 $ 734,598
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Loan payable to banks $ 79,815 $ 0
Current portion of long-term debt, including
capitalized lease obligations 3,046 6,754
Accounts payable 22,400 41,999
Self-insurance reserves 35,488 50,692
Other accrued liabilities 78,319 96,426
Income taxes payable 2,895 2,625
--------- ---------
Total current liabilities 221,963 198,496
Other long-term liabilities 5,680 6,866
Long-term debt, including capitalized lease
obligations, less current portion 455,203 536,495
Stockholders' deficit:
Common stock - authorized 1,500,000 shares,
par value $.01, 997,277 shares issued 10 10
Additional paid-in capital 158,251 159,554
Notes receivable from stockholders (869) (2,947)
Accumulated deficit (287,585) (163,876)
Less treasury stock, at cost (8,950 shares) (1,383) 0
--------- ---------
Total stockholders' deficit (131,576) (7,259)
--------- ---------
$ 551,270 $ 734,598
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share
and shares outstanding)
<TABLE>
<CAPTION>
Successor Company Predecessor Company
-------------------------- -------------------------
For the Year Eleven Months One Month For the Year
Ended Ended Ended Ended
December 31, December 25, January 26, December 26,
1995 1994 1994 1993
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales $1,134,359 $1,048,674 $ 64,741 $884,910
---------- ---------- -------- --------
Product cost 322,194 293,413 19,184 259,512
Payroll and related costs 419,185 377,569 24,780 331,747
Occupancy and other operating expenses 275,164 243,147 13,712 197,797
Depreciation and amortization 57,836 48,646 2,800 32,224
General and administrative expenses 56,245 49,059 4,071 44,164
Interest expense, net 65,277 51,419 4,097 50,276
Loss (gain) on disposition of
properties, net 12,067 5,685 (12) 4,916
Provision for divestitures and write-down
of long-lived assets 44,500 144,780 0 10,400
Restructuring costs 4,392 0 0 0
Debt restructuring costs 0 0 0 4,239
---------- ---------- -------- --------
Total costs and expenses 1,256,860 1,213,718 68,632 935,275
---------- ---------- -------- --------
Loss before reorganization items,
income tax provision and
extraordinary item (122,501) (165,044) (3,891) (50,365)
---------- ---------- -------- --------
Reorganization items:
Professional fees 0 0 (4,250) 0
Payment to Grace 0 0 (15,000) 0
Other 0 0 (3,029) (1,091)
Fresh start adjustment 0 0 501,706 0
---------- ---------- -------- --------
Total reorganization items 0 0 479,427 (1,091)
---------- ---------- -------- --------
Income (loss) before income tax provision
and extraordinary item (122,501) (165,044) 475,536 (51,456)
Income tax provision 1,208 1,773 55 658
---------- ---------- -------- --------
Income (loss) before extraordinary item (123,709) (166,817) 475,481 (52,114)
Extraordinary gain on extinguishment
of debt 0 2,941 72,561 0
---------- ---------- -------- --------
Net income (loss) (123,709) (163,876) 548,042 (52,114)
Preferred dividends 0 0 (1,698) (20,232)
---------- ---------- -------- --------
Net income (loss) attributable to
common shares $ (123,709) $ (163,876) $546,344 $(72,346)
========== ========== ======== ========
Net loss per common share:
Loss before extraordinary item $ (124.75) $ (168.55)
Extraordinary item 0.00 2.97
---------- ----------
Net loss attributable to common shares $ (124.75) $ (165.58)
========== ==========
Weighted average common shares outstanding 991,650 989,683
========== ==========
</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-5
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(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 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)
Net loss 0 0 0 0 0 (123,709) 0 (123,709)
Payments and cancellation
of notes receivable from
stockholders 0 0 0 (1,303) 2,078 0 0 775
Purchase of treasury stock 0 0 0 0 0 0 (1,383) (1,383)
--- --- --- -------- ------- --------- ------- ---------
Balance at December 31, 1995 $ 0 $ 0 $10 $158,251 $ (869) $(287,585) $(1,383) $(131,576)
=== === === ======== ======= ========= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Successor Company Predecessor Company
--------------------------- -------------------------
For the Eleven Months One Month For the
Year Ended Ended Ended Year Ended
December 31, December 25, January 26, December 26,
1995 1994 1994 1993
------------ ------------- ----------- ------------
Increase (Decrease) in Cash and Cash Equivalents
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 1,133,206 $ 1,049,483 $ 65,257 $ 885,248
Cash received from franchisees and licensees 7,897 7,308 84 847
Cash paid to suppliers and employees (1,084,758) (1,000,332) (59,729) (846,290)
Interest received 266 400 136 1,437
Interest paid (45,198) (28,153) (877) (10,088)
Restructuring costs (4,392) 0 0 0
Debt restructuring costs 0 0 0 (2,900)
Income taxes received (paid) (938) (926) 157 (925)
Charges to reserve for divestitures 0 (9,434) (1,001) (886)
----------- ----------- --------- ---------
Net cash provided by operating activities
before reorganization items 6,083 18,346 4,027 26,443
Reorganization items:
Professional fees 0 0 (4,250) 0
Payment to Grace 0 0 (15,000) 0
Other 0 0 (3,029) (1,091)
----------- ----------- --------- ---------
Total reorganization items 0 0 (22,279) (1,091)
----------- ----------- --------- ---------
Net cash provided by (used in) operating
activities 6,083 18,346 (18,252) 25,352
----------- ----------- --------- ---------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 20,425 6,524 1,588 18,135
Acquisition of Chi-Chi's 0 2,478 (194,889) 0
Capital expenditures (38,022) (65,618) (779) (20,064)
Capitalized opening and conversion costs (2,155) (2,166) (21) (5,052)
Other 137 (5,385) 1,491 (3,736)
----------- ----------- --------- ---------
Net cash used in investing activities (19,615) (64,167) (192,610) (10,717)
----------- ----------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of treasury bonds 0 0 0 3,412
Proceeds from issuance of Notes 0 0 409,046 0
Proceeds from working capital borrowings, net 20,215 59,600 0 0
Payment of notes payable to Marriott, net 0 (21,828) (10,969) 0
Proceeds (payment) of loan payable to Grace 0 0 (2,900) 2,900
Payment of debt issuance costs 0 0 (22,973) 0
Reductions of long-term debt, including
capitalized lease obligations (7,794) (7,842) (447) (9,843)
Cash settlement of liabilities subject to
settlement under reorganization proceedings 0 0 (279,055) 0
Decrease (increase) in restricted cash and
collateral deposit 1,850 17 38,688 (16,486)
Proceeds from issuance of common stock, net 0 1,911 92,364 0
Proceeds from exercise of warrants 0 0 0 102
Proceeds from exercise of stock options 0 0 0 76
Purchase of treasury stock (1,383) 0 0 0
Payments of notes receivable from stockholders 775 0 0 0
----------- ----------- --------- ---------
Net cash provided by (used in) financing
activities 13,663 31,858 223,754 (19,839)
----------- ----------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 131 (13,963) 12,892 (5,204)
Cash and cash equivalents at beginning of period 8,239 22,202 9,310 14,514
----------- ----------- --------- ---------
Cash and cash equivalents at end of period $ 8,370 $ 8,239 $ 22,202 $ 9,310
=========== =========== ========= =========
</TABLE>
F-7
<PAGE>
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
<TABLE>
<CAPTION>
Successor Company Predecessor Company
---------------------------- --------------------------
For the Eleven Months One Month For the
Year Ended Ended Ended Year Ended
December 31, December 25, January 26, December 26,
1995 1994 1994 1993
------------ ------------- ----------- ------------
Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
<S> <C> <C> <C> <C>
Net income (loss) $(123,709) $(163,876) $ 548,042 $(52,114)
--------- --------- --------- --------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities net
of effects of Chi-Chi's acquisition in 1994:
Depreciation and amortization 57,836 48,646 2,800 32,224
Amortization of debt issuance costs 6,726 3,006 215 2,531
Loss (gain) on disposition of properties 12,067 5,685 (12) 4,916
Charges to reserve for divestitures 0 (9,434) (1,001) (886)
Provision for divestitures and write-down
of long-lived assets 44,500 144,780 0 10,400
Fresh start adjustment 0 0 (501,706) 0
Extraordinary gain on extinguishment of debt 0 (2,941) (72,561) 0
Accretion of interest on Discount Notes 13,454 11,362 0 0
Accrued interest on liabilities settled under
bankruptcy proceedings 0 0 3,113 0
(Increase) decrease in receivables 708 697 54 (3,757)
(Increase) decrease in inventories 1,976 (552) 394 5,209
(Increase) decrease in other current assets (3,382) (566) 358 (2,331)
Increase (decrease) in accounts payable 1,403 (14,611) 1,096 (3,925)
Increase (decrease) in self-insurance reserves 1,664 1,526 (386) (5,235)
Increase (decrease) in other accrued liabilities (7,430) (6,223) 1,130 38,587
Increase (decrease) in income taxes payable 270 847 212 (267)
--------- --------- --------- --------
Total adjustments 129,792 182,222 (566,294) 77,466
--------- --------- --------- --------
Net cash provided by (used in) operating
activities $ 6,083 $ 18,346 $ (18,252) $ 25,352
========= ========= ========= ========
Supplemental schedule of investing activities:
The components of acquisition of Chi-Chi's in 1994 are as follows:
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>
Supplemental schedule of noncash investing and financing activities:
Common stockholders' deficit was increased by $20,232,000 in 1993 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-8
<PAGE>
FAMILY RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
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. At December 31, 1995, the Company operated 670 restaurants located
in 33 states, with 53% of its restaurants located in California. Additionally,
as of December 31, 1995, the Company was the licensor of 255 full-service
restaurants in Japan and South Korea, the franchisor of six family restaurants
and three Mexican restaurants in the United States and the franchisor of 18
Mexican restaurants outside the United States. 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 (as defined below), with respect to information about events
occurring upon completion of or after the Acquisition.
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 Chapter 11 cases described below 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 United States 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 consolidated financial statements. On January 7, 1994, the Plan (as defined
below) was confirmed by the bankruptcy court (see Note 2).
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 and the effects of adjustments to
restate assets and liabilities to reflect the reorganization value of the
Successor Company. As such, the consolidated balance sheets of the Company as of
December 31, 1995 and December 25, 1994 and the
F-9
<PAGE>
accompanying consolidated statements of operations for the year ended December
31, 1995 and the eleven months ended December 25, 1994 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 statements of operations for the one month ended
January 26, 1994 and the year ended December 26, 1993 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, par
value $.01 per share (the "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 a $154.7 million new equity investment (the "New Equity
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 40.0% of the Common Stock outstanding
immediately following the Closing Date for $62.3 million in cash, and GEI
purchased 18.4% of the Common Stock outstanding immediately following the
Closing Date for $28.8 million in cash. Foodmaker acquired 40.0% of the Common
Stock immediately following the Closing Date, with a value of $62.3 million in
the Chi-Chi's Merger (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 acquisition occurred through a merger of a
newly-formed subsidiary of the Company with Chi-Chi's (the "Chi-Chi's Merger").
Pursuant to the Acquisition Agreement, Foodmaker received (i) $205.0 million in
cash, less the principal amount of capital leases and the face amount of certain
indebtedness of Chi-Chi's existing or assumed by the Company in connection with
the Chi-Chi's Merger, (ii) 389,634 shares of Common Stock and (iii) a warrant to
purchase, at an aggregate exercise price of $26.7 million, 10% of the Common
Stock outstanding assuming the full exercise thereof (the "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
F-10
<PAGE>
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 ("FRI-M"), and certain
subsidiaries of FRI-M (the "Subsidiary Guarantors") entered into a $150.0
million five-year fully revolving credit facility (the "Credit Facility") with a
$100.0 million sub-limit for standby letters of credit to be used for general
corporate purposes, including working capital and capital expenditures.
Borrowings under the Credit Facility are made by FRI-M. Such borrowings are
guaranteed by the Company and the Subsidiary Guarantors and are secured by
substantially all of the assets of such subsidiaries and by a pledge of the
stock of FRI-M and the Subsidiary Guarantors (see Note 9 for a discussion of
certain limitations to the total commitment available under the Credit
Facility).
Prepackaged Plan. The Company and REG-M Corp. commenced Chapter 11
cases on November 23, 1993, and a prepackaged joint plan of reorganization (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 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
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
F-11
<PAGE>
interest-bearing recourse 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, in cash or additional
notes. The Company has repurchased 8,992 shares of Common Stock due to employee
terminations, leaving 29,185 shares currently owned by management stockholders
and terminated employees. 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 initially set at $160 per share. The Company also granted options
to purchase approximately 30,000 shares of Common Stock to approximately 800
other employees.
Investment Agreement. W. R. Grace & Co.-Conn. ("Grace"), Western Family
Restaurants, Inc., 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 a license
agreement through February 4, 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
The Company reports results of operations based on 52 or 53 week
periods ending on the last Sunday in December. The fiscal year ended December
31, 1995 included 53 weeks, the fiscal year ended December 25, 1994 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.
Estimations
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-12
<PAGE>
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.
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.
Property held for sale
Property held for sale is carried at its estimated fair value, less
estimated selling costs.
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
for the periods presented are insignificant. Monthly fees are accrued as earned
based on the respective monthly sales. Such fees totalled $6,036,000 for 1995,
$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 and $4,907,000 for 1993 and are included as an offset to general and
administrative expenses.
The Company hedged its foreign currency royalties through forward
exchange contracts. These contracts reduced the exposure to currency movements
affecting the royalty receivable. Each contract's duration typically ended when
the receivable was expected to be paid. The future value of each contract and
the related currency position were subject to off-setting market risk. On
December 4, 1995, these contracts were terminated, resulting in a realized gain
of $2,405,000, which is included as a reduction to
F-13
<PAGE>
general and administrative expenses in the consolidated financial statements.
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 7). Accumulated amortization of
reorganization value amounted to $13,018,000 at December 31, 1995 and $6,273,000
at December 25, 1994. During 1995, the Company determined that an impairment of
the portion of this asset related to its traditional dinnerhouse restaurants had
occurred and wrote off $2,049,000.
Impairment of long-lived assets
The Company evaluates property and equipment for impairment by
comparison of the carrying value of the assets to estimated undiscounted cash
flows expected to be generated by the asset over its estimated useful life.
Other long-lived assets (i.e., reorganization value and franchise operating
rights) are evaluated by comparison of their carrying value to the discounted
cash flows expected to be generated. In addition, the Company's evaluation
considers non-fictional 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
restaurants has occurred, the Company measures the amount of an impairment, if
any, based on the estimated fair value of each of its restaurants over the
remaining amortization period.
During the third quarter of 1995, the Company closed seven Chi-Chi's
restaurants and identified additional restaurants to be sold or having impaired
asset value. Approximately 32 marginally profitable or unprofitable restaurants
are currently being offered for sale. In conjunction with this divestment
program, the Company analyzed the carrying value of the Chi-Chi's long-lived
assets to determine if any impairment had occurred. In connection with this
analysis, the Company recorded a charge for divestitures and writedowns of
long-lived assets of $41.9 million.
The Company believes that there has been no other impairment of its
long-lived assets, other than reorganization value associated with its
traditional dinnerhouse restaurants, as of December 31, 1995.
F-14
<PAGE>
Income taxes
The Company accounts for income taxes using the standards specified in
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (see Note 12).
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
Warrant and outstanding options have not been included since the impact would be
antidilutive.
Reclassifications
Certain amounts as previously reported have been reclassified to
conform to the 1995 presentation.
NOTE 4 - RECEIVABLES:
A summary of receivables follows:
<TABLE>
<CAPTION>
1995 1994
------ -------
(in thousands)
<S> <C> <C>
Trade, principally credit
cards $2,760 $ 3,184
License and franchise fees
and related receivables 3,184 5,113
Receivable from Marriott
Distribution Services 0 661
Insurance recovery receivables 0 323
Notes receivable 1,016 428
Other 1,212 2,122
------ -------
$8,172 $11,831
====== =======
</TABLE>
NOTE 5 - PROPERTY HELD FOR SALE:
On March 1, 1996, the Company entered into a definitive agreement (the
"Sale Agreement") to sell the Family Restaurant Division to an indirect
wholly-owned subsidiary of Flagstar Companies, Inc. ("Flagstar") in a
transaction with an enterprise value of approximately $306.5 million.
Consummation of the sale is subject to customary terms and conditions. At
December 31, 1995, the Family Restaurant Division operated 349 restaurants in
ten states and was the licensor of 251 full-service restaurants in Japan and
South Korea and the franchisor of six restaurants in the United States. Under
the terms of the Sale Agreement, the Company will receive, subject to certain
post-closing adjustments based on a closing balance sheet, cash of $125 million
and $150 million principal amount of 12-1/2% Senior Notes due in 2004 (the
"Flagstar Notes"), and Flagstar will assume $31.5 million of long-term debt,
primarily capitalized lease obligations. The Company expects the
F-15
<PAGE>
sale to be finalized in the second quarter of 1996 and to record a pretax gain
in 1996 as a result of this transaction. Cash proceeds from the sale will be
used to repay indebtedness outstanding under the Credit Facility and for
general corporate purposes, which may include future interest payments on the
Senior Notes (as defined below). In addition, Flagstar is required to (i) file
a registration statement with the Securities and Exchange Commission with
respect to the resale of the Flagstar Notes within 45 days after the date of
original issuance of the Flagstar Notes and (ii) use its best efforts to cause
such registration statement to become effective within 105 days after such
issue date (see Note 9).
During the fourth quarter of 1995, the Company determined that its
traditional dinnerhouse restaurants would be held for sale. The net assets of
these restaurants were written down to their estimated fair value (based in
part on a previously received offer in late 1995), less estimated selling
costs, of $12,908,000, resulting in a loss of $3,565,000 (including the
write-off of reorganization value of $2,049,000 associated with these
restaurants, which is included in loss (gain) on disposition of properties in
the accompanying consolidated statement of operations). Management is marketing
these restaurants as both a combined group and individually; however, it
believes the most likely disposition will be on an individual basis or through
lease terminations. Further, as a result of this divestment, approximately
1,350 employees will be terminated and estimated severance benefits (as well as
lease termination costs) of $1,354,000 have been accrued. Management has
identified the specific employees involved in the termination plan and has
communicated the benefit arrangements. The disposition of these restaurants is
expected to be completed by December 1996.
As a result of these transactions, the assets and liabilities of the
Family Restaurant Division and the traditional dinnerhouse restaurants have been
classified as property held for sale in the accompanying consolidated balance
sheet. The components of property held for sale are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 9,716
Property and equipment, net 166,187
Reorganization value, net 149,315
Other assets 9,405
Current liabilities (67,842)
Long-term debt (26,704)
--------
$240,077
========
</TABLE>
The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1995 presents pro forma operating
results for the Company as if the sale of the Family Restaurant Division and
related transactions had occurred as of the beginning of fiscal year 1995. The
following unaudited pro forma condensed consolidated balance sheet presents the
pro forma financial condition of the Company as if the sale of the Family
Restaurant Division had occurred on December 31, 1995. The unaudited pro forma
condensed consolidated balance sheet and statement of operations were prepared
assuming the following events had occurred in connection with the sale of the
Family Restaurant Division:
(i) the consummation of the sale of the Family Restaurant Division
and related transactions and
(ii) the repayment of existing loans payable under the Credit
Facility and related transactions.
The pro forma unaudited adjustments represent the Company's preliminary
determination of the necessary adjustments and are based upon certain
assumptions the Company considers reasonable under the circumstances. Final
amounts will differ from those set forth below. The unaudited pro forma
financial information presented herein does not purport to represent what the
Company's results of operations or financial position would have been had such
events occurred at the beginning of fiscal year 1995, or at
F-16
<PAGE>
the date indicated or to project the Company's results of operations in any
future period.
If the sale of the Family Restaurant Division had occurred as of the
beginning of 1995, the results of operations would have been as follows for the
year ended December 31, 1995 (in thousands except per share):
<TABLE>
<CAPTION>
Family Unaudited
Restaurants, -----------------------
Inc. for the Pro forma
year ended -----------------------
Dec. 31, 1995 Adjustments Combined
------------- ----------- ---------
<S> <C> <C> <C>
Sales $1,134,359 $(502,485) $ 631,874
---------- --------- ---------
Product cost 322,194 (143,534) 178,660
Payroll and related costs 419,185 (181,403) 237,782
Occupancy and other operating
expenses 275,164 (95,882) 179,282
Depreciation and amortization 57,836 (27,906) 29,930
General and administrative
expenses 56,245 (20,201) 36,044
Interest expense, net 65,277 (29,949) 35,328
Loss (gain) on disposition on
properties, net 12,067 (44,706) (32,639)
Provision for divestitures and
write-down of long-lived assets 44,500 0 44,500
Restructuring costs 4,392 0 4,392
---------- --------- ---------
Total costs and expenses 1,256,860 (543,581) 713,279
---------- --------- ---------
Loss before income tax
provision (122,501) 41,096 (81,405)
Income tax provision 1,208 (493) 715
---------- --------- ---------
Net loss $ (123,709) $ 41,589 $ (82,120)
========== ========= =========
Net loss per common share $ (124.75) $ (82.81)
========== =========
Weighted average common shares
outstanding 991,650 991,650
======= =======
</TABLE>
These unaudited pro forma adjustments include the effect of (i) the
elimination of the operating results of the Family Restaurant Division for the
year ended December 31, 1995, including certain allocated corporate general and
administrative expenses which are allocated to each of the Company's divisions
based on sales ($11,418,000 for the Family Restaurant Division); (ii) the
elimination of interest expense related to the Credit Facility of $7,887,000
and the inclusion of interest income related to the Flagstar Notes of
$18,750,000; (iii) the gain on the sale of the Family Restaurant Division of
$42,831,000; and (iv) the decrease in state, local and foreign income tax
expense of $493,000 resulting from the sale of the Family Restaurant Division
(the Company incurs no Federal income taxes due to its operating losses).
F-17
<PAGE>
If the sale of the Family Restaurant Division had occurred as of
December 31, 1995, the Company's Unaudited Pro Forma Condensed Consolidated
Balance Sheet would appear as follows (in thousands):
<TABLE>
<CAPTION>
Unaudited
Family -----------------------
Restaurants, Pro forma
Inc. at -----------------------
Dec. 31, 1995 Adjustments Combined
------------- ----------- --------
<S> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 8,370 $ 39,899 $ 48,269
Property held for sale 240,077 (227,169) 12,908
Other current assets 18,630 0 18,630
--------- --------- --------
Total current assets 267,077 (187,270) 79,807
Flagstar notes 0 150,000 150,000
Other long-term assets 246,555 0 246,555
Other assets 37,638 (739) 36,899
--------- --------- --------
$ 551,270 $ (38,009) $513,261
========= ========= ========
Liabiities and stockholders' deficit:
Current liabilities:
Loan payable to banks $ 79,815 $ (79,815) $ 0
Other accrued liabilities 78,319 (286) 78,033
Other current liabilities 63,829 0 63,829
--------- --------- --------
Total current liabilities 221,963 (80,101) 141,862
Long-term liabilities 460,883 0 460,883
Stockholders' deficit (131,576) 42,092 (89,484)
--------- --------- --------
$ 551,270 $ (38,009) $513,261
========= ========= ========
</TABLE>
These unaudited pro forma adjustments include the effect of (i) the
elimination of the Family Restaurant Division property held for sale balance of
$227,169,000; (ii) receipt of cash of $125,000,000 (net of estimated transaction
costs of $5,000,000) and the Flagstar Notes of $150,000,000, with no assumption
for the impact of any post-closing adjustments based on a closing balance sheet;
and (iii) the payment of existing loans ($79,815,000) and accrued interest
($286,000) payable under the Credit Facility and the elimination of the
remaining balance of capitalized debt issuance costs of $739,000.
F-18
<PAGE>
NOTE 6 - PROPERTY AND EQUIPMENT:
A summary of property and equipment follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(in thousands)
<S> <C> <C>
Land $ 24,030 $ 55,872
Buildings and improvements 151,245 293,847
Furniture, fixtures and
equipment 64,253 105,340
Projects under construction 2,666 23,296
--------- ---------
242,194 478,355
Accumulated depreciation
and amortization (34,971) (33,001)
--------- ---------
$ 207,223 $ 445,354
========= =========
</TABLE>
Property under capitalized leases in the amount of $23,800,000 at
December 31, 1995 and $64,201,000 at December 25, 1994 is included in buildings
and improvements. Accumulated amortization of property under capitalized leases
amounted to $5,227,000 at December 31, 1995 and $7,215,000 at December 25,
1994. 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
$45,766,000 for 1995, $33,860,000 for the eleven months ended December 25,
1994, $2,359,000 for the one month ended January 26, 1994 and $28,394,000 for
1993, of which $7,578,000, $7,451,000, $412,000 and $6,213,000, respectively,
was related to amortization of property under capitalized leases.
A majority of the capitalized and operating leases have original terms
of 25 years, and substantially all of these leases expire in the year 2006 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 year ended December 31, 1995, the eleven months ended December
25, 1994, the one month ended January 26, 1994 and the year ended December 26,
1993 was $5,491,000, $4,895,000, $305,000 and $5,315,000, respectively. Total
rental expense for all operating leases comprised the following:
F-19
<PAGE>
<TABLE>
<CAPTION>
Eleven
Months One Month
Ended Ended
Dec. 25, Jan. 26,
1995 1994 1994 1993
-------- -------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Minimum rent $ 56,577 $ 50,373 $ 2,153 $ 26,315
Contingent rent 3,775 3,636 208 3,339
Less: Sublease rent (5,815) (5,685) (369) (5,035)
-------- -------- -------- --------
$ 54,537 $ 48,324 $ 1,992 $ 24,619
======== ======== ======== ========
</TABLE>
At December 31, 1995, 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>
1996 $ 10,791 $ 50,984
1997 10,467 49,297
1998 10,067 48,450
1999 9,259 46,989
2000 8,207 45,010
Later years 27,609 259,769
-------- --------
Total minimum lease payments 76,400 $500,499
Interest (24,770) ========
--------
Present value of minimum
lease payments $ 51,630
========
</TABLE>
The future lease payments summarized above include commitments for
leased properties included in property held for sale and in the Company's
divestiture program.
NOTE 7 - GOODWILL WRITE-OFF:
Chi-Chi's reported significant sales declines in the second half of
1994 which continued into 1995. These sales declines resulted in operating
performance for Chi-Chi's which was significantly lower than anticipated at the
time of the Acquisition. These operating results caused the Company to
reevaluate its business strategy for the Mexican Restaurant Division,
particularly Chi-Chi's. Consistent with this strategic reevaluation, the
Company revised its forecasts for the future operations of Chi-Chi's which
resulted in a significant reduction in projected future cash flows and a lower
valuation of the business. The Company 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.
F-20
<PAGE>
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.
NOTE 8 - OTHER ASSETS:
A summary of other assets follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Liquor licenses $ 6,059 $ 7,079
Debt issuance costs 13,352 20,078
Franchise operating rights 0 8,733
Notes receivable 8,569 9,882
Property held for sale 8,753 339
Other 905 2,537
------- -------
$37,638 $48,648
======= =======
</TABLE>
Debt issuance costs are amortized over the terms of the respective
loan agreements.
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. The
franchise operating rights at December 31, 1995 have been reclassified as
property held for sale.
Property held for sale represents Chi-Chi's restaurants identified for
divestment during the third quarter of 1995 which management believes will be
sold over the next two years (see Note 3).
NOTE 9 - LONG-TERM DEBT, INCLUDING CAPITALIZED LEASE OBLIGATIONS:
Long-term debt, including capitalized lease obligations, is comprised
of the following (excluding amounts in 1995 related to the Family Restaurant
Division and traditional dinnerhouse restaurants):
F-21
<PAGE>
<TABLE>
<CAPTION>
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
9-3/4% Senior Notes $300,000 $300,000
10-7/8% Senior Subordinated
Discount Notes 133,860 120,406
Revolving credit loans 0 59,600
Capitalized lease obligations 21,159 58,798
Mortgage notes, 12-1/4% - 12-1/2%,
due 1996-1998 529 1,719
Other 2,701 2,726
-------- --------
458,249 543,249
Amounts due within one year 3,046 6,754
-------- --------
$455,203 $536,495
======== ========
</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 $150.0 million senior secured
revolving Credit Facility with a $100.0 million sub-limit for standby letters
of credit, which was to be 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. The outstanding total commitment available
under the Credit Facility, as amended, as of March 29, 1996, was $137.9
million, leaving $6.2 million of additional borrowings available thereunder.
Borrowings in the amount of $79,815,000 were outstanding under the
Credit Facility as of December 31, 1995, and interest on the revolving credit
loans was being charged at 10.0%. On August 1, 1995, the Company borrowed
$14,625,000 under the Credit Facility to fund an interest payment made on the
Senior Notes. This amount was paid off in December 1995. On February 1, 1996,
the Company borrowed $14,625,000 to fund an additional interest payment on the
Senior Notes. Standby letters of credit are issued under the Credit Facility
primarily to provide security for future amounts payable by the Company under
its workers' compensation insurance program ($37,600,000 of such letters of
credit were outstanding as of December 31, 1995).
The Credit Facility contains various covenants including the
maintenance of certain financial ratios. The Company is suffering from deficit
cash flows from operations and has made required debt service payments on other
obligations through borrowings on the Credit Facility. Accordingly, the Company
has failed to comply with certain of such financial covenants and anticipates
that it may not comply with such covenants for the fiscal quarters ending March
1996 and June 1996. However, the banks under the Credit Facility (the "Banks")
have agreed to waive such noncompliance
F-22
<PAGE>
through July 31, 1996. In accordance with generally accepted accounting
principles, and because the waivers only extend through July 31, 1996, at this
time the Company has classified the outstanding balance of $79,815,000 at
December 31, 1995 as a current liability. There can be no assurances that
further waivers or amendments will be obtained after July 31, 1996. Given this
uncertainty, the amortization of the related debt issuance costs was
accelerated assuming the debt will be retired or replaced earlier.
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.
In the third quarter of 1995, the Company retained Donaldson, Lufkin &
Jenrette Securities Corporation as a financial advisor to assist the Company in
the process of divesting certain divisions and operations. This process
culminated in the execution of the Sale Agreement on March 1, 1996 to sell the
Family Restaurant Division to Flagstar in a transaction with an enterprise
value of $306.5 million, subject to certain adjustments based on a closing
balance sheet. Cash proceeds from the sale will be used to repay
indebtedness outstanding under the Credit Facility and for general corporate
purposes, which may include future interest payments on the Senior Notes (see
Note 5). Consummation of the sale is subject to customary terms and conditions
and there can be no assurances that this transaction will be consummated.
Upon consummation of the sale, the Company will continue to be highly
leveraged and have significant debt service requirements. Although management
believes that the proceeds available to the Company as a result of the sale
(including funds available from potential sale of the Flagstar Notes), its cost
restructuring and revised marketing plans for Chi-Chi's, and other available
options (including sale of other divisions and sale/leaseback of owned
properties) should be sufficient to meet its operating and debt service
requirements for the foreseeable future, there can be no assurance that the
Company will be able to repay or refinance the Notes at their respective
maturities. The Company is currently exploring various alternatives to further
reduce its debt (including indebtedness outstanding under the Notes). Among
other things, the Company may use the Flagstar Notes to reduce such debt.
F-23
<PAGE>
The mortgage notes were issued to a group of institutional lenders and
are collateralized by mortgages covering five restaurants having a book value
of approximately $5.1 million at December 31, 1995.
Maturities of long-term debt, including capitalized lease obligations,
during the four years subsequent to December 29, 1996 are as follows:
$3,958,000 in 1997; $2,847,000 in 1998; $2,424,000 in 1999 and $2,327,000 in
2000.
NOTE 10 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The recorded amounts of the Company's cash and cash equivalents,
restricted cash, self-insurance reserves, other accrued liabilities and
revolving credit borrowings at December 31, 1995 and December 25, 1994
approximate fair value. The fair value of the Company's long-term debt,
excluding capitalized lease obligations, is estimated as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
Recorded Fair Recorded Fair
Amount Value Amount Value
-------- -------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Senior Notes $300,000 $165,000 $300,000 $233,250
Discount Notes 133,860 15,000 120,406 81,000
Mortgage notes 529 549 1,719 1,718
Other 2,701 2,368 2,726 2,460
</TABLE>
The fair values of the Notes are based on an average market price of
these instruments as of the end of fiscal 1995 and 1994. The fair value of the
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 11 - OTHER ACCRUED LIABILITIES:
A summary of other accrued liabilities follows (excluding amounts in
1995 related to the Family Restaurant Division and traditional dinnerhouse
restaurants):
F-24
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Wages, salaries and bonuses $16,136 $27,292
Carrying costs of closed properties 12,925 17,912
Interest 13,306 13,212
Reserve for divestitures 11,858 0
Sales tax 3,771 10,011
Property taxes 3,460 4,626
Accrued rent 868 3,474
Utilities 1,381 4,028
Other 14,614 15,871
------- -------
$78,319 $96,426
======= =======
</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.
NOTE 12 - INCOME TAXES:
The Company reported a loss before income tax provision in 1995, 1994
and 1993. 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 $208.5
million ($143.5 million of alternative minimum tax operating loss
carryforwards) and expire in 2003 through 2011. The Company had approximately
$1.7 million of tax credit carryforwards which 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 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 31, 1995, the Company and its subsidiaries had tax credit
carryforwards of approximately $4.1 million not utilized by Grace. In
accordance with the 1986 acquisition from Grace, 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
F-25
<PAGE>
the Company) has approximately $12.3 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 ($5.3
million and $0.7 million, respectively) generated prior to the acquisition of
certain restaurant companies by Grace were available at December 31, 1995 to
offset future taxable income or income taxes, respectively, of those companies
for various years through 1999.
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 1996
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.
A reconciliation of income tax expense to the amount of income tax
benefit that would result from applying the Federal statutory rate (35% for
1995, 1994 and 1993) to loss before income taxes is as follows:
<TABLE>
<CAPTION>
Fiscal Eleven One Fiscal
Year Months Month Year
Ended Ended Ended Ended
Dec. 31, Dec. 25, Jan. 26, Dec. 26,
1995 1994 1994 1993
-------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Provision for income
taxes at statutory
rate $(42,875) $(56,736) $ 191,834 $(18,010)
State taxes, net of
Federal income tax
benefit 332 (2,948) (16,300) (3,113)
State minimum tax 0 1,183 55 187
Foreign taxes 270 541 49 471
Goodwill 3,312 54,679 0 1,923
Nondeductible reorgani-
zation costs 0 0 (175,597) 0
Addition to valuation
allowance 0 4,896 0 17,545
Surtax exemption 0 0 0 514
Change in deferred tax
asset which is subject
to a full valuation
reserve and other 40,169 158 14 1,141
-------- -------- --------- --------
$ 1,208 $ 1,773 $ 55 $ 658
======== ======== ========= ========
</TABLE>
F-26
<PAGE>
At December 31, 1995 and December 25, 1994, the Company's deferred tax
asset was $186,874,000 and $136,383,000, respectively, and deferred tax
liability was $29,514,000 and $27,570,000, respectively. The major components
of the Company's net deferred taxes of $157,360,000 at December 31, 1995 and
$108,813,000 at December 25, 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(in thousands)
<S> <C> <C>
Depreciation $ (24,062) $ (26,004)
Net operating loss and
credit carryforwards 115,279 86,243
Capitalized leases 1,921 900
Divestment, carrying cost
and rent subsidy reserves 23,183 8,306
Self-insurance reserves 22,779 22,552
Kasumi payment to Grace 5,808 6,000
Property held for sale (5,451) 0
Straight-line rent 1,923 1,939
Reorganization costs 6,714 4,834
Other 9,266 4,043
--------- ---------
157,360 108,813
Valuation allowance (157,360) (108,813)
--------- ---------
$ 0 $ 0
========= =========
</TABLE>
The increase in the valuation allowance for 1995 resulted from an
increase in the cumulative temporary differences offset by expirations of
certain credits.
NOTE 13 - 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 $7,071,000, $8,217,000,
$666,000 and $9,479,000 for 1995, the eleven months ended December 25, 1994,
the one month ended January 26, 1994 and 1993, 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. In 1995, the Company reinstituted its match under the Retirement
Savings Plan. The Company's contributions and expenses under these plans were
$355,000, $528,000, $2,000 and $53,000 for 1995, the eleven months ended
December 25, 1994, one month ended
F-27
<PAGE>
January 26, 1994 and 1993, respectively. The Company has no defined benefit
plans.
NOTE 14 - 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 year ended December 31, 1995
and the eleven months ended December 25, 1994 aggregated $76,423,000 and
$81,537,000, respectively. In relation to the distribution sales, the Company
had accounts payable of $1,481,000 and $2,964,000 due to Foodmaker at December
31, 1995 and December 25, 1994, respectively.
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 each
charge a monthly fee of $50,000 for providing certain management services to
the Company. For the year ended December 31, 1995 and the eleven months ended
December 25, 1994, the Company was charged $1.2 million and $1.1 million,
respectively, in connection with this arrangement.
NOTE 15 - COMMON STOCK:
In connection with the Acquisition, the Company adopted a new
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
Company has repurchased 8,992 shares of Common Stock due to employee
terminations, leaving 29,185 shares currently owned by management stockholders
and terminated employees. 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 initially set at $160 per share. The Company also granted
options to purchase approximately 30,000 shares of Common Stock to
approximately 800 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 22,000 options
have expired due to terminations.
F-28
<PAGE>
NOTE 16 - 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-29
<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 1995 $813 $0 $0 $(131)(2) $682
For the year 1994 955 21 360 (1) (523)(2) 813
For the year 1993 548 429 0 (22)(2) 955
</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-30
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENTS
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 November 7, 1995, except for the last paragraph of Note 3, which is as
of November 20, 1995, relating to the consolidated balance sheets of
Foodmaker, Inc. and subsidiaries as of October 1, 1995 and October 2, 1994,
and the related consolidated statements of operations, cash flows and
stockholders' equity for the fifty-two weeks ended October 1, 1995 and
October 2, 1994, and the fifty-three weeks ended October 3, 1993, and which
report appears in the October 1, 1995 annual report on Form 10-K of
Foodmaker, Inc. and subsidiaries.
KPMG PEAT MARWICK LLP
San Diego, California
April 4, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Exhibit 23.2
The Board of Directors
Family Restaurants, Inc.:
We consent to incorporation by reference in the Registration Statement No.
33-52795 on Form S-8 of Family Restaurants, Inc. of our report dated
March 15, 1996, except as to the second paragraph of note 9 to the consolidated
financial statements which is as of March 29, 1996, relating to the consolidated
balance sheets of Family Restaurants, Inc. and its subsidiaries as of
December 31, 1995 and 1994 and the related statements of operations, common
stockholders' deficit and cash flows and related financial statement schedule
for the year ended December 31, 1995, the eleven months ended December 25, 1994
(Successor Company), and the one month ended January 26, 1994 (Predecessor
Company) which report appears in the December 31, 1995 annual report on Form
10-K of Family Restaurants, Inc. Our report refers to a change in the method
of financial statement reporting.
KPMG PEAT MARWICK LLP
Orange County, California
April 4, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Exhibit 23.3
To the Board of Directors of
Foodmaker, Inc.:
We consent to 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 statements of operations, common stockholder's deficit and cash
flows of Family Restaurants, Inc. and its subsidiaries for the year ended
December 26, 1993, which report appears in the December 31, 1995 Annual Report
on Form 10-K of Family Restaurants, Inc. and subsidiaries.
Deloitte & Touche LLP
March 29, 1996
