<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended June 30, 1996 or
Transition report pursuant to section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the transition period from to
Commission file number 33-14051
Family Restaurants, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0197361
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18831 Von Karman Avenue, Irvine, California 92715
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 757-7900
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
Number of shares of outstanding common stock as of August 12, 1996 is 988,285.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FAMILY RESTAURANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,634 $ 8,370
Restricted cash 24,785 0
Notes receivable 132,687 0
Receivables 5,499 8,172
Inventories 5,131 5,645
Other current assets 12,280 4,813
Property held for sale 11,207 240,077
--------- ---------
Total current assets 232,223 267,077
Property and equipment, net 202,107 207,223
Reorganization value in excess of amounts
allocable to identifiable assets, net 38,631 39,332
Other assets 29,353 37,638
--------- ---------
$ 502,314 $ 551,270
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Loans payable to banks $ 0 $ 79,815
Current portion of long-term debt, including
capitalized lease obligations 256,555 3,046
Accounts payable 23,455 22,400
Self-insurance reserves 36,344 35,488
Other accrued liabilities 80,437 78,319
Income taxes payable 3,124 2,895
--------- ---------
Total current liabilities 399,915 221,963
Other long-term liabilities 4,623 5,680
Long-term debt, including capitalized lease
obligations, less current portion 207,890 455,203
Stockholders' deficit:
Common stock - authorized 1,500,000 shares, par
value $.01 per share, 997,277 shares issued 10 10
Additional paid-in capital 158,251 158,251
Notes receivable from stockholders (934) (869)
Accumulated deficit (266,058) (287,585)
Less treasury stock, at cost (8,992 shares) (1,383) (1,383)
--------- ---------
Total stockholders' deficit (110,114) (131,576)
--------- ---------
$ 502,314 $ 551,270
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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FAMILY RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended
-------------------------
June 30, June 25,
1996 1995
-------- --------
<S> <C> <C>
Sales $219,023 $289,570
-------- --------
Product cost 60,835 83,612
Payroll and related costs 81,260 106,164
Occupancy and other operating expenses 54,438 71,275
Depreciation and amortization 10,158 15,105
General and administrative expenses 11,239 14,981
Loss on disposition of properties, net 1,117 1,174
Restructuring costs 3,368 0
-------- --------
Total costs and expenses 222,415 292,311
-------- --------
Operating loss (3,392) (2,741)
Interest expense, net 12,091 15,237
Gain on sale of division 60,876 0
-------- --------
Income (loss) before income tax provision 45,393 (17,978)
Income tax provision 416 487
-------- --------
Net income (loss) $ 44,977 $(18,465)
======== ========
Net income (loss) per common share $ 45.51 $ (18.60)
======== ========
Weighted average common shares outstanding 988,285 992,649
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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FAMILY RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------
June 30, June 25,
1996 1995
-------- --------
<S> <C> <C>
Sales $478,075 $570,703
-------- --------
Product cost 133,613 163,022
Payroll and related costs 180,761 211,939
Occupancy and other operating expenses 116,731 139,783
Depreciation and amortization 22,954 28,945
General and administrative expenses 25,288 30,399
Loss on disposition of properties, net 4,195 1,395
Restructuring costs 4,573 0
-------- --------
Total costs and expenses 488,115 575,483
-------- --------
Operating loss (10,040) (4,780)
Interest expense, net 28,477 30,150
Gain on sale of division 60,876 0
-------- --------
Income (loss) before income tax provision 22,359 (34,930)
Income tax provision 832 974
-------- --------
Net income (loss) $ 21,527 $(35,904)
======== ========
Net income (loss) per common share $ 21.78 $ (36.09)
======== ========
Weighted average common shares outstanding 988,285 994,964
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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FAMILY RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------
June 30, June 25,
1996 1995
--------- ---------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Cash received from customers, franchisees
and licensees $ 481,534 $ 573,766
Cash paid to suppliers and employees (467,171) (550,079)
Interest paid, net (20,346) (21,691)
Income taxes paid (603) (854)
Restructuring costs (4,573) 0
--------- ---------
Net cash provided by (used in) operating activities (11,159) 1,142
--------- ---------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 18,927 1,905
Proceeds from sale of Family Restaurant Division, net 121,342 0
Proceeds from sale of notes receivable, net 15,868 0
Capital expenditures (4,363) (26,968)
Capitalized opening costs (235) (1,280)
Other (796) 461
--------- ---------
Net cash provided by (used in) investing
activities 150,743 (25,882)
--------- ---------
Cash flows from financing activities:
Proceeds from (repayment of) working capital
borrowings, net (79,815) 25,700
Reductions of long-term debt, including
capitalized lease obligations (2,720) (3,056)
(Increase) decrease in restricted cash (24,785) 1,850
Purchase of treasury stock 0 (1,301)
Payments of notes receivable from stockholders 0 715
--------- ---------
Net cash provided by (used in) financing activities (107,320) 23,908
--------- ---------
Net increase (decrease) in cash and cash
equivalents 32,264 (832)
Cash and cash equivalents at beginning of period 8,370 8,239
--------- ---------
Cash and cash equivalents at end of period $ 40,634 $ 7,407
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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FAMILY RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
June 30, June 25,
1996 1995
-------- --------
<S> <C> <C>
Reconciliation of net income (loss) to net cash
provided by (used in) operating activities:
Net income (loss) $ 21,527 $(35,904)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 22,954 28,945
Amortization of debt issuance costs 1,704 1,644
Loss on disposition of properties 4,195 1,395
Gain on sale of division (60,876) 0
Accretion of interest on Discount Notes 7,280 6,548
Decrease in receivables, inventories and
other current assets 1,633 1,253
Decrease in accounts payable, self-insurance
reserves, other accrued liabilities and
income taxes payable (9,576) (2,739)
-------- --------
Net cash provided by (used in) operating activities $(11,159) $ 1,142
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 7
FAMILY RESTAURANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. COMPANY. Family Restaurants, Inc. (together with its subsidiaries,
the "Company") was incorporated in Delaware in 1986 and is primarily engaged in
the operation of full-service restaurants through its subsidiaries. At June 30,
1996 the Company operated 307 restaurants in 30 states, with approximately 67%
of its restaurants located in California, Ohio, Pennsylvania, Illinois, Indiana
and Michigan. The Company is the licensor of four restaurants in Japan, the
franchisor of one restaurant in the United States and the franchisor of 18
restaurants outside the United States.
On May 23, 1996, the Company completed the sale of its family
restaurant division which operated full-service family restaurants (the "Family
Restaurant Division") to an indirect wholly-owned subsidiary of Flagstar
Companies, Inc. ("Flagstar") in exchange for cash of $125 million, $150 million
principal amount of 12-1/2% Senior Notes due in 2004 (the "Flagstar Notes"), and
the assumption of $31.5 million of long-term debt, primarily consisting of
capitalized lease obligations. Based on the subsequent completion of a balance
sheet as of the date of closing, the purchase price has been adjusted upward and
will be satisfied by the issuance of at least $5.7 million in additional
Flagstar Notes, subject to a final determination of closing balance sheet
adjustments. The Company recorded a gain of approximately $61 million on the
sale of the Family Restaurant Division, including the $5.7 million discussed
above, in the second quarter of 1996. Cash proceeds from the sale were used to
pay indebtedness outstanding under the Credit Facility (as defined below) of $82
million. On June 25, 1996, the Company sold $16.5 million aggregate principal
amount of the Flagstar Notes. See Note 5 for a discussion of certain additional
sales of Flagstar Notes.
2. FINANCIAL STATEMENTS. The Condensed Consolidated Financial
Statements in this Form 10-Q have been prepared in accordance with Securities
and Exchange Commission Regulation S-X. Reference is made to the Notes to the
Consolidated Financial Statements for the Year Ended December 31, 1995 included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 (the "Form 10-K") for information with respect to the Company's
significant accounting and financial reporting policies, as well as other
pertinent information. The Company believes that all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results of the interim periods presented have been made. The results of
operations for the quarter and six months ended June 30, 1996 are not
necessarily indicative of those for the full year.
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<PAGE> 8
3. IMPAIRMENT OF LONG-LIVED ASSETS. Effective January 1, 1996, the
Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which generally requires
the assessment of certain long-lived assets for possible impairment when events
or circumstances indicate the carrying value of these assets may not be
recoverable.
The Company evaluates property and equipment for impairment by
comparison of the carrying value of the assets to estimated undiscounted cash
flows (before interest charges) expected to be generated by the asset over its
estimated useful life. In addition, the Company's evaluation considers 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 assets has occurred, the
Company measures the amount of an impairment, if any, based on the estimated
fair value of each of its assets over the remaining amortization period.
The Company believes that there has been no impairment of its
long-lived assets based on re-engineering and re-positioning plans currently
under development, other than impairment already recognized in connection with
various properties held for sale.
4. INCOME (LOSS) PER COMMON SHARE. Income (loss) per common share is
computed based on the weighted average number of shares actually outstanding.
The impact of a warrant to acquire an additional 111,111 shares of common stock
of the Company and outstanding options have not been included since the impact
would be antidilutive for 1995 and would not provide meaningful information in
1996 since the Company believes that neither the warrant nor the outstanding
options would be exercised at their current exercise prices.
5. SUBSEQUENT EVENTS. On July 3, 1996, the Company repurchased $151.0
million aggregate principal amount of its 9-3/4% Senior Notes due 2002 (the
"Senior Notes") and $108.6 million aggregate principal amount of its 10-7/8%
Senior Subordinated Discount Notes due 2004 (the "Discount Notes" and together
with the Senior Notes, the "Notes") in exchange for (or from the proceeds from
the sale of) $133.5 million aggregate principal amount of the Flagstar Notes,
which aggregate principal amount includes the proceeds from the $16.5 million of
Flagstar Notes sold at the end of the second quarter. The values of such
Flagstar Notes and Notes have been classified as current assets and current
liabilities in the condensed consolidated balance sheet. The Company will
recognize an extraordinary gain of approximately $118 million in the third
quarter of 1996 as a result of this repurchase. The Company has agreed to sell
an additional $10.0 million aggregate principal amount of the Flagstar Notes,
which transaction is expected to close during the week of August 12, 1996.
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<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain information and statements included in Management's Discussion
and Analysis of Financial Condition and Results of Operations, including,
without limitation, statements containing the words "believes," "anticipates,"
"expects" and words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
involve known and unknown risks and uncertainties that could result in actual
results of the Company or industry differing materially from expected results
expressed or implied by such forward-looking statements. Although it is not
possible to itemize all of the factors and specific events that could affect the
outlook of a restaurant company operating in a competitive environment, factors
that could significantly impact expected results include (i) the implementation
of a successful cost restructuring program and the development of a successful
marketing strategy for Chi-Chi's, (ii) the effect of national and regional
economic conditions, (iii) the availability of adequate working capital, (iv)
competitive products and pricing, (v) changes in legislation, (vi) demographic
changes, (vii) the ability to attract and retain qualified personnel, (viii)
changes in business strategy or development plans and (ix) business disruptions.
The Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
The following should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
presented in the Form 10-K.
As used herein, "comparable restaurants" means restaurants operated by
the Company on January 1, 1995, which continued in operation through the end of
the second quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES.
A. LIQUIDITY
The Company currently relies primarily on internally generated funds,
supplemented by proceeds received from the sale of the Family Restaurant
Division, for its liquidity. The Company's viability is therefore dependent upon
its ability to generate sufficient cash flow to meet its obligations on a timely
basis.
Operating Cash Flow. During the first six months of 1996, the Company
reported EBITDA (defined as earnings (loss) before gain (loss) on disposition of
properties, restructuring costs, interest, taxes, depreciation and amortization)
of $21.7 million. The Company has included information concerning EBITDA herein
because it understands that such information is used by certain investors as one
measure of a company's historical ability to service debt. EBITDA should not be
considered as an alternative to, or more meaningful than, operating income
(loss) as an indicator of
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<PAGE> 10
operating performance or to cash flows from operating activities as a measure of
liquidity.
Working Capital Deficiency. The Company operates with a substantial
working capital deficiency because (i) restaurant operations are conducted
primarily on a cash (and cash equivalent) basis with a low level of accounts
receivable, (ii) rapid turnover allows a limited investment in inventories and
(iii) cash from sales is usually received before related accounts payable for
food, beverages and supplies become due. The Company had a working capital
deficiency of $65.4 million on June 30, 1996 (excluding the impact of (i) $11.2
million in property held for sale, (ii) $132.7 million of Flagstar Notes
classified as a current asset, (iii) $6.8 million in debt issuance costs
classified as a current asset and (iv) $253.1 million of the Notes classified as
a current liability, as discussed above).
Credit Facility. On January 27, 1994, the Company, FRI-M Corporation
("FRI-M") and certain subsidiaries of FRI-M entered into a credit facility (the
"Credit Facility"). In connection with the sale of the Family Restaurant
Division, (i) the Company used a portion of the cash proceeds from the sale to
repay $82 million outstanding under the Credit Facility and (ii) the Credit
Facility was amended to change the borrower from FRI-M (which, following
consummation of the sale, is no longer owned by the Company) to FRI-MRD
Corporation, a wholly owned subsidiary of the Company, to remove all restrictive
covenants and to reduce the commitment thereunder to up to $32 million of
letters of credit with no provision for revolving loans. 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
($23.9 million of such letters of credit were outstanding as of August 12, 1996)
and must be fully cash collateralized. The Company is currently in discussions
with certain lending institutions regarding a replacement credit facility to
provide working capital and letters of credit, although there can be no
assurances that the Company will be able to obtain such a facility on acceptable
terms.
Other. On July 3, 1996, the Company repurchased $151 million aggregate
principal amount of its Senior Notes and $108.6 million aggregate principal
amount of its Discount Notes in exchange for (or from the proceeds from the sale
of) $133.5 million aggregate principal amount of the Flagstar Notes. The
Company has agreed to sell an additional $10.0 million aggregate principal
amount of the Flagstar Notes, which transaction is expected to close during the
week of August 12, 1996.
Notwithstanding the completion of the sale of the Family Restaurant
Division and the repurchase of the Notes, the Company continues to be highly
leveraged and have significant debt service requirements. Although management
believes that its current sources of cash 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 satisfy current debt service
requirements of the Notes or to repay or refinance the
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<PAGE> 11
Notes at their respective maturities. The Company is continuing to explore
alternatives to further reduce its debt (including open market purchases or
other transactions to further reduce remaining indebtedness outstanding under
the Notes). However, there can be no assurances that the Company will be able to
further reduce such debt on satisfactory terms.
B. CAPITAL EXPENDITURES
Net cash provided by investing activities was $150.8 million for the
first six months of 1996 versus net cash used in investing activities of $25.9
million for the first six months of 1995, primarily due to the completion of the
sale of the Family Restaurant Division and certain Flagstar Notes during the
first six months of 1996 and a reduction in capital expenditures during such
period. The reduction in capital expenditures resulted primarily from the
indefinite suspension of the Company's remodel and new restaurant construction
programs for all restaurants, which was necessary due to the current levels of
operating cash flow.
RESULTS OF OPERATIONS.
SECOND QUARTER OF 1996 AS COMPARED TO THE SECOND QUARTER OF 1995.
The Company's total sales decreased by $70,547,000 or 24.4% for the
second quarter of 1996 as compared to the same period in 1995. This decrease was
due to (i) sales from the Family Restaurant Division, which was sold by the
Company at the end of May 1996, (ii) decreased sales of comparable restaurants
and (iii) restaurants divested or closed.
<TABLE>
<CAPTION>
Second Quarter Sales
Decrease
--------------------
($ in thousands)
<S> <C>
Decrease in Sales of Family Restaurant Division $(50,566)
Decrease in Sales of Comparable Restaurants (10,135)
Decrease in Sales of Restaurants Divested or Closed (9,846)
--------
Total $(70,547)
========
</TABLE>
Sales for comparable restaurants decreased by $10,135,000 or 6.7% for
the second quarter of 1996 as compared to the same period in 1995. This
comparable sales decrease reflects decreases in both the El Torito and
Chi-Chi's restaurants and is due to an increasingly competitive operating
environment for restaurants. The Company continues to work to develop an
appropriate long-term marketing plan for Chi-Chi's and has begun similar
programs at El Torito. Chi-Chi's has completed the development and
implementation of a new, scaled down menu, which features a new design and
focuses on core traditional Mexican entrees.
Product cost decreased by $22,777,000 or 27.2% in the second quarter of
1996 as compared to the same period in 1995, reflecting the impact of 33
restaurants sold or closed since the end of the
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<PAGE> 12
second quarter of 1995 and the decrease in Family Restaurant Division's product
cost, based on the sale of the Family Restaurant Division at the end of May
1996. As a percentage of sales, product cost declined to 27.8% in the second
quarter of 1996 as compared to 28.9% in the same period in 1995.
Payroll and related costs decreased by $24,904,000 or 23.5% in the
second quarter of 1996 as compared to the same period in 1995. This decrease
reflects the impact of the restaurants sold or closed since the end of the
second quarter of 1995 and the sale of the Family Restaurant Division. As a
percentage of sales, payroll and related costs increased from 36.7% in the
second quarter of 1995 as compared to 37.1% in the same period in 1996,
primarily as a result of higher management costs at the restaurant level due to
salary increases and higher bonuses earned in 1996 in the Family Restaurant
Division.
Increases in the minimum wage or decreases in the allowable tip credit
(which reduces the minimum wage that must be paid to tipped employees) increase
the Company's payroll cost. The federal minimum wage has been increased from
$4.25 to $5.15. The increase is to take effect in two steps, to $4.75 effective
October 1, 1996 and to $5.15 effective September 1, 1997. A provision of the
measure effectively freezes the minimum wage for tipped employees, in those
states which allow for a tip credit, at current levels by increasing the
allowable tip credit. The Company's actual response to, and the impact of, this
legislation or any state legislation covering minimum wages depends on the
specific terms of any such legislation. However, management generally
anticipates that it would attempt to cover all or a portion of increases in
labor costs resulting from any minimum wage increase by raising menu prices.
Occupancy and other expenses decreased by $16,837,000 or 23.6% in the
second quarter of 1996 as compared to the same period in 1995. This decrease
reflects the impact of the restaurants sold or closed since the end of the
second quarter of 1995 and the sale of the Family Restaurant Division. As a
percentage of sales, occupancy and other operating expenses increased from 24.6%
in the second quarter of 1995 to 24.9% in the same period in 1996, primarily
reflecting higher comparable rent expense in the Family Restaurant Division due
to the sale/leaseback of certain owned properties completed in late 1995 and
early 1996. The impact of the increased rent expense more than offset lower
advertising costs due to changes in marketing strategy.
Depreciation and amortization decreased by $4,947,000 or 32.8% in the
second quarter of 1996 as compared to the same period in 1995. The decrease
reflects the reduced depreciable asset base resulting from (i) the third quarter
1995 adjustment for Chi-Chi's restaurants either held for sale or having
impaired values, (ii) the sale of certain owned properties and (iii) the sale of
the Family Restaurant Division. The decrease is offset, in part, by additional
depreciation related to capital expenditures made from the third quarter of 1995
through the second
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<PAGE> 13
quarter of 1996. Depreciation and amortization of $4.3 million related to the
Family Restaurant Division was recorded in the first eight weeks of the second
quarter of 1996, as the Company treated the related restaurants as operating
assets until their sale.
General and administrative expenses decreased by $3,742,000 or 25.0% in
the second quarter of 1996 as compared to the same period in 1995. The decrease
resulted from overall cost reductions plus the impact of the sale of the Family
Restaurant Division. As a percentage of sales, general and administrative
expenses decreased from 5.2% in the second quarter of 1995 to 5.1% in the same
period of 1996.
Chi-Chi's management continues to work to significantly restructure
Chi-Chi's costs during 1996 in an attempt to bring operating margins in line
with the current sales levels. This restructuring is intended to reduce
restaurant operating costs and includes strong inventory and meal preparation
controls as well as closely monitored restaurant labor scheduling and management
staffing levels. El Torito management is also analyzing several cost categories
in an effort to improve margins during 1996. Finally, management is closely
evaluating the Company's general and administrative cost structure in light of
the sale of the Family Restaurant Division.
The Company reported a loss on disposition of properties of $1.1
million in the second quarter of 1996 as compared to a loss of $1.2 million for
the same period in 1995.
Restructuring costs of $3,368,000 were incurred in the second quarter
of 1996. These costs are primarily related to amounts paid to consultants,
professional fees, severance and related costs and other restructuring related
expenses. In April 1996, the Company announced that it would eliminate
approximately 130 positions in its Louisville corporate office and approximately
50 positions in its Irvine corporate offices over the next four to six months as
it reorganizes after the sale of the Family Restaurant Division. Severance and
other costs related to these staff reductions amounted to approximately $1.5
million and was provided for in the second quarter of 1996.
Interest expense, net decreased by $3,146,000 or 20.6% in the second
quarter of 1996 as compared to the same period in 1995. This decrease primarily
resulted from (i) interest income related to the Flagstar Notes, (ii) no
comparable interest on working capital borrowings under the Credit Facility for
the five weeks of June 1996 compared to June 1995 and (iii) the impact of Family
Restaurant Division's June 1995 interest costs, primarily for capitalized lease
obligations. The decrease is offset, in part, by (i) interest on working capital
borrowings which were outstanding throughout the first eight weeks of the second
quarter of 1996 as compared to lower working capital borrowings during the
similar period of 1995 and (ii) higher accretion of interest related to the
Discount Notes.
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<PAGE> 14
The Company recorded a gain of $60.9 million in the second quarter of
1996 as a result of the sale of the Family Restaurant Division.
FIRST SIX MONTHS OF 1996 AS COMPARED TO FIRST SIX MONTHS OF 1995.
The Company's total sales decreased by $92,682,000 or 16.2% for the
first six months of 1996 as compared to the same period in 1995. This decrease
was due to (i) sales from Family Restaurant Division which was sold by the
Company at the end of May 1996, (ii) decreased sales of comparable restaurants
and (iii) restaurants divested or closed.
<TABLE>
<CAPTION>
First Six Months
1996 Sales
Decrease
----------------
($ in thousands)
<S> <C>
Decrease in Sales of Family Restaurant Division $(49,166)
Decrease in Sales of Comparable Restaurants (24,862)
Decrease in Sales of Restaurants Divested or Closed (18,600)
--------
Total $(92,628)
========
</TABLE>
Sales for comparable restaurants decreased by $24,862,000 or 8.2% for
the first six months of 1996 as compared to the same period in 1995. This
comparable sales decrease reflects decreases in both the El Torito and Chi-Chi's
restaurants.
Product cost decreased by $29,409,000 or 18.0% in the first six months
of 1996 as compared to the same period in 1995, reflecting the impact of 33
restaurants sold or closed since the end of the first quarter of 1995 and the
sale of the Family Restaurant Division. As a percentage of sales, product cost
declined to 27.9% in the first six months of 1996 as compared to 28.6% in the
same period in 1995.
Payroll and related costs decreased by $31,178,000 or 14.7% in the
first six months of 1996 as compared to the same period in 1995. This decrease
reflects the impact of the restaurants sold or closed since the end of the first
quarter of 1995 and the sale of the Family Restaurant Division. As a percentage
of sales, payroll and related costs increased from 37.1% in the first six months
of 1995 as compared to 37.8% in the same period in 1996, primarily as a result
of higher management costs at the restaurant level due to salary increases and
higher bonuses earned in 1996 in the Family Restaurant Division.
Occupancy and other expenses decreased by $23,052,000 or 16.5% in the
first six months of 1996 as compared to the same period in 1995. This decrease
reflects the impact of the restaurants sold or closed since the end of the first
quarter of 1995 and the sale of the Family Restaurant Division. As a percentage
of sales, occupancy and other operating expenses decreased from 24.5% in the
first six months of 1995 to 24.4% in the same period in 1996, primarily
reflecting lower advertising costs due to changes in marketing
- 14 -
<PAGE> 15
strategy. The decrease is offset, in part, by higher comparable rent expense in
the Family Restaurant Division due to the sale/leaseback of certain owned
properties completed in late 1995 and early 1996.
Depreciation and amortization decreased by $5,991,000 or 20.7% in the
first six months of 1996 as compared to the same period in 1995. The decrease
reflects the reduced depreciable asset base resulting from (i) the third quarter
1995 adjustment for Chi-Chi's restaurants either held for sale or having
impaired values, (ii) the sale of certain owned properties and (iii) the sale of
the Family Restaurant Division. The decrease is offset, in part, by additional
depreciation related to capital expenditures made from the second quarter of
1995 through the second quarter of 1996. Depreciation and amortization of $11.2
million related to the Family Restaurant Division was recorded in the first 21
weeks of 1996, as the Company treated the related restaurants as operating
assets until their sale.
General and administrative expenses decreased by $5,111,000 or 16.8% in
the first six months of 1996 as compared to the same period in 1995. The
decrease resulted from overall cost reductions plus the impact of the sale of
the Family Restaurant Division. As a percentage of sales, general and
administrative expenses of 5.3% for the first six months of 1995 remained flat
compared to the same period in 1996.
The Company reported a loss on disposition of properties of $4.2
million in the first six months of 1996 as compared to a loss of $1.4 million
for the same period in 1995. The loss in 1996 is primarily due to losses related
to the sale of certain owned properties.
Restructuring costs of $4,573,000 were incurred in the first six months
of 1996. These costs are primarily related to amounts paid to consultants,
professional fees, severance and related costs and other restructuring related
expenses.
Interest expense, net decreased by $1,673,000 or 5.5% in the first six
months of 1996 as compared to the same period in 1995. This decrease primarily
resulted from (i) interest income related to the Flagstar Notes, (ii) no
comparable interest on working capital borrowings under the Credit Facility for
the five weeks of June 1996 compared to June 1995 and (iii) the impact of Family
Restaurant Division's June 1995 interest costs, primarily for capitalized lease
obligations. The decrease is offset, in part, by (i) interest on working capital
borrowings which were outstanding throughout the first 21 weeks of 1996 as
compared to lower working capital borrowings during the first 21 weeks of 1995,
(ii) fees paid to the banks in connection with an amendment to the Credit
Facility, (iii) higher accretion of interest related to the Discount Notes and
(iv) accelerated amortization of the Credit Facility debt issuance costs as
compared to the same period of 1995.
- 15 -
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in various litigation matters incidental to its
business. The Company does not believe that any of the existing claims or
actions will have a material adverse effect upon the consolidated financial
position and results of operations of the Company.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 3, 1996 the Company repurchased $150,966,000 aggregate
principal amount of its Senior Notes and $108,600,000 aggregate principal amount
of its Discount Notes from unrelated third parties in exchange for (or from the
proceeds from the sale of) $133,500,000 aggregate principal amount of the
Flagstar Notes acquired by the Company in connection with its previously
announced sale of the Family Restaurant Division. In connection therewith, the
Company also received the requisite consent to certain amendments to the
indentures relating to the Notes and had effected such amendments.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Seventh Amendment to the Revolving Credit Agreement
dated as of May 23, 1996 by and among the parties
thereto.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On May 30, 1996 the Company filed a report on Form 8-K
announcing the completion of the sale of the Family Restaurant
Division to Flagstar.
- 16 -
<PAGE> 17
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.
Family Restaurants, Inc.
(Registrant)
By: /S/ Robert T. Trebing, Jr.
-----------------------------
Robert T. Trebing, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1996
- 17 -
<PAGE> 1
SEVENTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO THE REVOLVING CREDIT AGREEMENT (the
"Seventh Amendment") is made as of May 23, 1996, among FRI-M Corporation, a
Delaware corporation ("FRI- M"), Family Restaurants, Inc., a Delaware
corporation ("FRI"), FRI-MRD Corporation, a Delaware corporation ("FRI- MRD"),
each of the Subsidiary Guarantors, each of the banks and institutions identified
on the signature pages hereof (each a "Bank" and, collectively, the "Banks") and
Credit Lyonnais New York Branch, as Agent, Collateral Agent, Issuing Bank and
Swing Line Bank.
W I T N E S S E T H
WHEREAS, FRI-M, FRI, the Subsidiary Guarantors, the Banks, the
Agent, the Collateral Agent, the Issuing Bank and the Swing Line Bank have
entered into the Revolving Credit Agreement, dated as of January 27, 1994, as
amended by the First Amendment to the Revolving Credit Agreement, dated as of
April 15, 1994, by the Second Amendment to the Revolving Credit Agreement, dated
as of August 15, 1994, by the Third Amendment to the Revolving Credit Agreement,
dated as of March 24, 1995, by the Fourth Amendment to the Revolving Credit
Agreement, dated as of August 1, 1995, by the Fifth Amendment to the Revolving
Credit Agreement, dated as of October 31, 1995, and by the Sixth Amendment to
Revolving Credit Agreement, dated as of January 31, 1996 (the "Credit
Agreement");
WHEREAS, FRI has entered into a Stock Purchase Agreement,
dated as of March 1, 1996 (the "Stock Purchase Agreement"), by and among FRI,
Flagstar Companies, Inc., Flagstar Corporation and FRD Acquisition Co. ("FRD
Acquisition") pursuant to which the outstanding shares of FRI-M owned by FRI are
to be acquired by FRD Acquisition (the "Acquisition");
WHEREAS, concurrently with the Acquisition, FRI-M and each of
its subsidiaries have asked to be released from any and all obligations under
the Credit Agreement and each of the other Loan Documents;
WHEREAS, FRI-MRD became a direct subsidiary of FRI immediately
prior to the Acquisition and now desires to assume the role of Borrower under
the Credit Agreement, rather than that of Subsidiary Guarantor;
<PAGE> 2
WHEREAS, FRI-FRD Corporation, FRI-DHD Corporation, FRI-NA
Corporation, FRI-J Corporation, FRI-C Corporation, Coco's Restaurants, Inc., Far
West Concepts, Inc., jojos Restaurants, Inc., jojos California Family
Restaurants, Inc., Carrows Restaurants, Inc., and Carrows California Family
Restaurants, Inc. (the "Released Guarantors") have asked to be released as
Subsidiary Guarantors under the Credit Agreement and to be released as parties
to all Loan Documents;
WHEREAS, Chi-Chi's Inc., El Torito Restaurants, Inc., CCMR of
Cumberland, Inc., CCMR of Greenbelt, Inc., CCMR of Maryland, Inc., CCMR of
Timonium, Inc., Chi-Chi's of South Carolina, Inc. and Chi-Chi's of West
Virginia, Inc. shall all remain as Subsidiary Guarantors;
NOW, THEREFORE, the parties hereto agree that the Credit
Agreement is hereby amended as set forth herein:
1. Capitalized terms used herein which are not otherwise
defined herein but are defined in the Credit Agreement shall have the meanings
given to them in the Credit Agreement.
2. In consideration of the release of FRI-MRD as Subsidiary
Guarantor and in order to permit the sale of FRI-M and its subsidiaries under
the Stock Purchase Agreement, FRI-MRD hereby assumes all obligations of FRI-M
remaining after the date hereof under the Credit Agreement and each of the other
Loan Documents to which FRI-M is a party and shall be treated for all purposes
of the Credit Agreement and the other Loan Documents as the Borrower after the
date hereof.
3. In consideration of the assumption by FRI-MRD of all
obligations of the Borrower under the Credit Agreement and the repayment of the
amounts outstanding under the Credit Agreement, FRI-M and the Released
Guarantors are hereby released from any and all liabilities and obligations
(including without limitation Reimbursement Obligations) under the Credit
Agreement and each of the other Loan Documents to which FRI-M or any Released
Guarantor is a party (including, without limitation, the Notes, the Security
Agreement, the Syndicated Letters of Credit and the Guaranty).
4. Notwithstanding any other provision in the Credit
Agreement, the parties hereby agree that the Total Commitment shall be available
only for the issuance of Syndicated Letters of Credit. Syndicated Letters of
Credit
-2-
<PAGE> 3
may be issued upon a request by FRI-MRD but only if simultaneously with the
issuance, cash collateral in the face amount of such Syndicated Letters of
Credit is deposited with the Issuing Bank.
5. The definition of "Borrower" in the initial paragraphs of
the Credit Agreement and of the amendments to the Credit Agreement is hereby
deleted and the following definition is added to Section 1.01 to read in its
entirety as follows:
"Borrower" shall mean FRI-MRD Corporation, a Delaware
corporation.
6. Section 1.01 of the Credit Agreement is hereby amended to
add the following definition:
"Seventh Amendment" shall mean the Seventh Amendment to
Revolving Credit Agreement made as of May 23, 1996 among FRI-M
Corporation, Family Restaurants, Inc., FRI-MRD Corporation, each of the
Subsidiary Guarantors, each of the banks and institutions identified on
the signature pages hereof and Credit Lyonnais New York Branch, as
Agent, Collateral Agent, Issuing Bank and Swing Line Bank.
7. The following definitions of Section 1.01 of the Credit
Agreement are hereby amended and restated as follows:
"Commitment" of each Bank shall mean the amount set forth
opposite such Bank's name in Schedule A of the Seventh Amendment, as
such amount may be reduced from time to time pursuant to Section 12.08.
"Guarantors" shall mean FRI, FRI-Admin Corporation, a Delaware
corporation, Chi-Chi's Inc., a Delaware corporation, El Torito
Restaurants, Inc., a Delaware corporation, CCMR of Cumberland, Inc., a
Kentucky corporation, CCMR of Greenbelt, Inc., a Kentucky corporation,
CCMR of Maryland, Inc., a Delaware corporation, CCMR of Timonium, Inc.,
a Delaware corporation, Chi-Chi's of South Carolina, Inc., a Kentucky
corporation, and Chi-Chi's of West Virginia, Inc., a Kentucky
corporation.
8. The definition of "Subsidiary Holding Company" in Section
1.01 of the Credit Agreement is hereby deleted.
-3-
<PAGE> 4
9. Section 3.01(i) is hereby amended to read in its entirety
as follows:
"(i) The Borrower shall pay to the Agent for the account of
each Bank a letter of credit fee (the "Letter of Credit Fee") on such
Bank's share (as determined in accordance with Section 3.01(d) above)
of each Syndicated Letter of Credit based on the daily average undrawn
face amount of such Syndicated Letter of Credit for the period from and
including the date of issuance thereof to and including the date of
expiration or termination thereof at a rate per annum equal to 0.50%,
such fee to be paid quarterly in arrears on the last day of each March,
June, September and December, and on the date of expiration of such
Syndicated Letter of Credit; provided that if any such day is not a
Business Day, such fee shall be payable on the next preceding Business
Day."
10. Section 3.01(r) is hereby added to the Credit Agreement to
read in its entirety as follows:
"(r) With respect to cash deposited with the Issuing Bank as
collateral for outstanding Syndicated Letters of Credit, the Issuing
Bank shall hold funds so deposited for the ratable benefit of the Banks
as collateral against the obligation of the Banks to pay such
Syndicated Letters of Credit in the event of any draw with respect
thereto and shall pay interest thereon to the Borrower at the NRS Rate
at the end of each month. The Issuing Bank shall return to the Borrower
the applicable amounts deposited with it, together with any accrued but
unpaid interest thereon, promptly upon the expiration, cancellation or
reduction of each Syndicated Letter of Credit with respect to which
such funds were deposited. In addition, notwithstanding any other
provision hereof, upon the expiration, replacement or cancellation of
all such Syndicated Letters of Credit, the Collateral Agent will
release all of the collateral securing the obligations under the Loan
Documents."
11. Article VIII is hereby deleted in its entirety and
replaced with the following:
"ARTICLE VIII
RESERVED"
-4-
<PAGE> 5
12. The parties hereby agree that the Collateral
Agent hereby releases all collateral of FRI-M and of each Released Guarantor
securing the Loans, Swing Line Advances, Syndicated Letters of Credit and all
other obligations under the Loan Documents and, upon the expiration of the 90
day preference period, if applicable, and at the request of FRI- MRD, the
Collateral Agent will release all other collateral (other than cash collateral
for outstanding Syndicated Letters of Credit) securing the Loans, Swing Line
Advances and Syndicated Letters of Credit and all other obligations under the
Loan Documents. The Collateral Agent agrees to execute proper instruments
acknowledging the termination of the Credit Documents and the release of any
liens then existing in favor of the Banks, Agent or Collateral Agent on the
assets of the Borrower and the Guarantors. Notwithstanding any provision in the
Credit Agreement to the contrary, cash (other than cash collateral referred to
in paragraph 4), notes or other securities received by FRI or any of its
subsidiaries in connection with the Acquisition will not be required to be
pledged to the Banks or the Collateral Agent and Net Cash Proceeds upon
liquidation of such notes or securities will not reduce the Total Commitment.
13. FRI-M, FRI-MRD and FRI represent and warrant that the
execution and delivery of this Seventh Amendment by each of FRI-M, FRI-MRD, FRI,
the Subsidiary Guarantors and the Released Guarantors has been duly authorized
by all necessary corporate action and this Seventh Amendment is enforceable
without any further approval, authorization or consent.
14. THIS SEVENTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA.
15. This Seventh Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts and
each such counterpart shall together constitute but one and the same instrument.
This Seventh Amendment shall become effective as of the date hereof upon the
delivery to the Agent of executed counterparts of this Seventh Amendment from
FRI, FRI-M, FRI- MRD, the Subsidiary Guarantors, the Released Guarantors and the
Banks and the Agent shall so inform all of the parties hereto.
16. The Credit Agreement, as amended hereby, shall be binding
upon FRI-MRD, FRI, the Subsidiary Guarantors, the Banks, the Agent, the
Collateral Agent, the
-5-
<PAGE> 6
Issuing Bank and the Swing Line Bank and their respective successors and
assigns, and shall inure to the benefit of FRI-MRD, FRI, the Subsidiary
Guarantors, the Banks, the Agent, the Collateral Agent, the Issuing Bank and the
Swing Line Bank and their respective successors and assigns.
17. Except as expressly provided in this Seventh Amendment, all
of the terms, conditions, restrictions and other provisions contained in the
Credit Agreement shall remain in full force and effect. The Credit Agreement as
amended by this Seventh Amendment, the materials delivered pursuant hereto and
the other Credit Documents constitute the entire agreement and understanding
among the parties hereto and supersede all prior agreements and understandings
among them relating to the subject matter hereof and thereof.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date first above written.
FRI-M CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
FAMILY RESTAURANTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Senior Vice President,
Chief Financial Officer
FRI-ADMIN CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
FRI-FRD CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
FRI-DHD CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
-7-
<PAGE> 8
FRI-NA CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
FRI-J CORPORATION
By:/s/ R.T. Trebing, Jr.
Name: R.T. Trebing, Jr.
--------------------------------
Title: President
FRI-MRD CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
FRI-C CORPORATION
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
CCMR OF CUMBERLAND, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Authorized Signatory
-8-
<PAGE> 9
CCMR OF GREENBELT, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
CCMR OF MARYLAND, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
CCMR OF TIMONIUM, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF SOUTH CAROLINA, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF WEST VIRGINIA, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: President
COCO'S RESTAURANTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
-9-
<PAGE> 10
FAR WEST CONCEPTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
jojos RESTAURANTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
jojos CALIFORNIA FAMILY
RESTAURANTS INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
EL TORITO RESTAURANTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
CARROWS RESTAURANTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
CARROWS CALIFORNIA FAMILY
RESTAURANTS, INC.
By:/s/ R.T. Trebing, Jr.
--------------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
-10-
<PAGE> 11
CREDIT LYONNAIS NEW YORK BRANCH
as Agent for the Banks
By:/s/ Frederick Haddad
--------------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
as Collateral Agent for the Banks
By:/s/ Frederick Haddad
--------------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
Signing as a Bank, as the Issuing
Bank and as the Swing Line Bank
By:/s/ Frederick Haddad
--------------------------------
Name: Frederick Haddad
Title: Senior Vice President
-11-
<PAGE> 12
Schedule A
<TABLE>
<CAPTION>
COMMITMENT
--------------
<S> <C>
$ Amounts:
Credit Lyonnais $32,000,000.00
Percentage Shares
Credit Lyonnais 100.00%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR
THE QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 40,634
<SECURITIES> 0
<RECEIVABLES> 5,499
<ALLOWANCES> 0
<INVENTORY> 5,131
<CURRENT-ASSETS> 232,223
<PP&E> 248,362
<DEPRECIATION> 46,255
<TOTAL-ASSETS> 502,314
<CURRENT-LIABILITIES> 399,915
<BONDS> 441,669
0
0
<COMMON> 10
<OTHER-SE> (110,124)
<TOTAL-LIABILITY-AND-EQUITY> 502,314
<SALES> 478,075
<TOTAL-REVENUES> 478,075
<CGS> 133,613
<TOTAL-COSTS> 488,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,477
<INCOME-PRETAX> 22,359
<INCOME-TAX> 832
<INCOME-CONTINUING> 21,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,527
<EPS-PRIMARY> 21.78
<EPS-DILUTED> 0
</TABLE>
