<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1998
----------------------------
[ ] 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 1-9684
--------------
CHART HOUSE ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0147725
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(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
640 North LaSalle, Suite 295, Chicago, IL, 60610
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(312) 266-1100
- --------------------------------------------------------------------------------
(registrant's telephone number, including area code)
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 periods 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of July 31, 1998:
Common Stock ($.01 par value) - 11,748,261
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 29, December 29,
ASSETS 1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 208 $ 205
Accounts Receivable 3,016 3,249
Refundable Income Taxes 537 537
Inventories 1,895 2,624
Prepaid Expenses and Other Current Assets 951 429
-------- --------
Total Current Assets 6,607 7,044
-------- --------
Property and Equipment, at Cost:
Land 6,401 6,582
Buildings 17,457 19,145
Equipment 30,399 29,236
Leasehold Interests & Improvements 48,475 46,541
Construction in Progress 1,289 924
-------- --------
104,021 102,428
Less: Accumulated Depreciation and Amortization 42,832 40,726
-------- --------
Net Property & Equipment 61,189 61,702
-------- --------
Leased Property under Capital Leases, Less Accumulated
Amortization of $5,946 in 1998 and $5,479 in 1997 4,559 5,026
-------- --------
Deferred Tax Asset 5,224 5,675
-------- --------
Other Assets and Goodwill, Net 8,374 8,798
-------- --------
$ 85,953 $ 88,245
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 29, December 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Debt $ - $ -
Current Portion of Obligations under Capital Leases 813 816
Accounts Payable 3,366 4,955
Accrued Liabilities 16,377 17,723
------- -------
Total Current Liabilities 20,556 23,494
------- -------
Long-Term Debt - -
------- -------
Long-Term Obligations under Capital Leases 5,330 5,746
------- -------
Stockholders' Equity:
Preferred Stock, $1.00 par value, authorized 10,000,000
shares; none outstanding - -
Common Stock, $.01 par value, authorized 30,000,000
shares; 11,741,305 shares outstanding in 1998 and
11,727,409 in 1997 117 117
Additional Paid-In Capital 60,964 60,926
Retained Earnings (Deficit) (1,014) (2,038)
------- -------
Total Stockholders' Equity 60,067 59,005
------- -------
$85,953 $88,245
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks Twenty-Six Weeks Twenty-Six Weeks
Ended June 29, Ended June 30, Ended June 29, Ended June 30,
1998 1997 1998 1997
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues $38,522 $39,344 $75,674 $77,691
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 12,172 11,859 24,129 23,687
Restaurant Labor 10,782 10,805 20,804 21,138
Other Operating Costs 9,358 9,520 17,786 18,626
Selling, General and Administrative
Expenses 3,851 3,062 7,437 6,091
Depreciation and Amortization 1,821 2,366 3,644 4,750
Write Down of Assets and
Restructuring and Unusual Charges - 933 - 933
Interest Expense 179 971 390 2,152
Interest Income (1) (498) (1) (989)
------- ------- ------- -------
Total Costs and Expenses 38,162 39,018 74,189 76,388
------- ------- ------- -------
Income Before Income Taxes 360 326 1,485 1,303
Provision for Income Taxes 112 101 461 404
------- ------- ------- -------
Net Income $ 248 $ 225 $ 1,024 $ 899
======= ======= ======= =======
Net Income Per Common Share $ .02 $ .02 $ .09 $ .09
======= ======= ======= =======
Weighted Average Shares Outstanding 11,730 10,723 11,729 9,686
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Twenty-Six Weeks
Ended June 29, Ended June 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 1,024 $ 899
Adjustments to Reconcile Net Income to
Cash Flows from Operating Activities:
Depreciation and Amortization 3,644 4,750
Deferred Income Taxes 451 68
Loss on Retirement and Disposition of Assets 19 243
Change in Net Current Liabilities (2,495) 5,367
------- --------
Cash Provided by Operating Activities 2,643 11,327
------- --------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (4,072) (2,283)
Reductions of Other Assets 80 433
Proceeds from Disposition of Assets 1,733 21
Payments Received on Notes - 564
------- --------
Cash Used in Investing Activities (2,259) (1,265)
------- --------
Cash Flows from Financing Activities:
Principal Payments on Obligations under
Capital Leases (419) (381)
Net Payments under Revolving Credit Agreement - (16,100)
Payments of Long-Term Debt - (12,000)
Net Proceeds from Sale/Issuance of Common Stock 38 18,505
------- --------
Cash Used in Financing Activities (381) (9,976)
------- --------
Increase in Cash 3 86
Cash, Beginning of Period 205 204
------- --------
Cash, End of Period $ 208 $ 290
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Twenty-Six Weeks
Ended June 29, Ended June 30,
1998 1997
---------------- ----------------
<S> <C> <C>
The Change in Net Current Liabilities is Comprised
of the Following:
Decrease in Accounts Receivable $ 233 $ 1,703
Decrease in Refundable Income Taxes - 1,852
Decrease in Inventories 729 377
Decrease (Increase) in Prepaid Expenses and
Other Current Assets (522) 219
Increase (Decrease) in Accounts Payable (1,589) 669
Increase (Decrease) in Accrued Liabilities (1,346) 547
------- -------
Change in Net Current Liabilities $(2,495) $ 5,367
======= =======
Supplemental Cash Flow Disclosures:
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 375 $ 2,442
Income Taxes (Net of Refunds) $ 304 $(1,875)
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1998
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements of Chart House
Enterprises, Inc. and subsidiaries (the "Company") for the quarterly and six
month periods ended June 29, 1998 and June 30, 1997 have been prepared in
accordance with generally accepted accounting principles, and with the
instructions to Form 10-Q. These financial statements have not been audited by
independent public accountants but include all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial condition, results of operations and cash
flows for such periods. However, these results are not necessarily indicative of
results for any other interim period or for the full year.
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.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to requirements of the Securities and Exchange Commission.
Management believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended December 29, 1997.
(2) NET INCOME PER COMMON SHARE
Earnings per share calculations are based on the weighted average number of
common shares and common stock equivalents (stock options) outstanding during
the period. Anti-dilutive securities are excluded from calculations of any
income per share. Diluted earnings per share equals basic earnings per share for
all periods presented. The incremental effect of dilutive securities on weighted
average shares outstanding used to compute diluted earnings per share was not
material at June 29, 1998 or June 30, 1997.
(3) COMPREHENSIVE INCOME
The Company implemented Statement of Financial Accounting Standards No.
130, ("Comprehensive Income"), effective January 1, 1998. This statement
requires disclosure of comprehensive income, including per share amounts, in
addition to the consolidated statements of
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<PAGE>
income. Comprehensive income is defined as the change in equity resulting from
transactions and other events, exclusive of changes resulting from investments
of or distributions to owners. For the quarters ended June 29, 1998 and June 30,
1997, the Company had no components of comprehensive income other than net
income as reported on the consolidated statement of income. As of June 29, 1998
there are no items requiring separate disclosure in accordance with this
statement.
(4) NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities." This statement is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 provides authoritative guidance on the financial
reporting of start-up and organization costs, including the costs incurred prior
to the opening of a restaurant, or pre-opening costs. This statement requires
that such costs be expensed as incurred as opposed to capitalized and amortized.
The Company currently capitalizes these costs as current assets with an
amortization period of twelve months. The Company will adopt SOP 98-5 for its
fiscal year beginning on December 29, 1998 and commence expensing pre-opening
costs as incurred. The effect of the adoption of SOP 98-5 is not expected be
material to the consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS No. 131"), "Disclosures about
Segments of an Enterprise and Related Information." It is effective for
financial statements for periods beginning after December 15, 1997 but is not
required in interim period financial statements in the first year of
implementation. The standard requires public companies to report upon and
disclose certain information about the Company's operating segments. Criteria
defining "operating segments" include the requirement that the chief operating
decision-maker regularly review the segment's operating results to make
decisions about resources to be allocated to the segment and assess its
performance. Currently, management does not operate the business based upon
operating segments. Accordingly, management has not provided segment disclosures
in these financial statements. Should the chief operating decision-maker begin
to use operating segment financial information in making decisions related to
resource allocation and segment performance, the Company will officially adopt
the provisions of SFAS No. 131. If implemented, these provisions will only have
a disclosure impact on the consolidated financial statements.
(5) RESTRUCTURING ACTIONS AND SPECIAL CHARGES
During 1996 and 1997 the Company incurred significant restructuring charges
in connection with the Company's strategy to, among other things, revitalize its
core Chart House restaurants, dispose of non-core assets and selected under-
performing Chart House restaurants, and reorganize senior management.
Five restaurants were held for disposal at December 29, 1997. One of these
had been written down in the restructuring actions of 1996 and was disposed
after June 29, 1998. All restaurants written down in restructuring actions of
1996 and previous years have been disposed. Of the four remaining restaurants,
one was closed early in 1998 and was sold during the second quarter. Therefore,
three of the five held for disposal at December 29, 1997 remain open at the end
of the second quarter.
Management is uncertain as to the timing of or ability to dispose of two of
the remaining three restaurants held for disposal at December 29, 1997.
Accordingly, in accordance with criteria for
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<PAGE>
determining assets held for disposal under Financial Accounting Standards Board
Statement No. 121 ("SFAS No. 121"), "Accounting for Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", the Company no longer defines these
restaurant assets as "held for disposal" and has begun recognizing depreciation
and amortization for these two restaurants in the second quarter. The impact on
depreciation and amortization expense resulting from the reclassification from
held for disposal was additional expense of approximately $48,000 for the second
quarter.
The Company anticipates that the ultimate disposition of the remaining
restaurant and other restructuring actions, including the planned sale of Solana
Beach Baking Company, will be substantially completed throughout the third and
fourth quarters of 1998. However, no assurance can be given that these
dispositions will occur within that time frame. In the unlikely event that the
Company is unable to dispose of these assets in a manner satisfactory to the
Company, management will explore other options with regard to these properties.
Depreciation and amortization for the assets management is holding for disposal,
which was insignificant, has not been recorded in the 1998 second quarter which
is in accordance with SFAS No. 121.
Revenues and pre-tax operating profits from restaurants and operations held
for disposal at June 29, 1998 were $2 million and $230,000, respectively, for
the 1998 second quarter and $4 million and $549,000, respectively, for the first
six months of the year. Included in property and equipment in the accompanying
balance sheets are the carrying amount of assets held for disposal of
approximately $624,000 at both June 29, 1998 and December 29, 1997.
In the second quarter of 1998, amounts paid and charged against the
liability for severance and other special costs totaled $1,429,000. At June 29,
1998 and December 29, 1997, the balance of the liability (included in other
current liabilities) was $1,661,000 and $4,087,000, respectively. The Company
anticipates that the remaining liability will be exhausted by the end of the
fiscal year.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
- ---------------------
The following is a comparative discussion of the results of operations for
the quarterly and six month periods ended June 29, 1998 and June 30, 1997. The
results of operations for the first six months of 1998 are not necessarily
indicative of the results to be expected for the fiscal year ending December 28,
1998. The dollar amounts in the table below are in thousands.
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks Twenty-Six Weeks Twenty-Six Weeks
Ended June 29, Ended June 30, Ended June 30, Ended June 30,
1998 1997 1998 1997
----------------- ----------------- ----------------- -------------------
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 38,522 100.0 39,344 100.0 75,674 100.0 77,691 100.0
------ ----- ------ ----- ------ ----- ------ -----
Costs and Expenses:
Cost of Sales 12,172 31.6 11,859 30.1 24,129 31.9 23,687 30.5
Restaurant Labor 10,782 28.0 10,805 27.5 20,804 27.5 21,138 27.2
Other Operating Costs 9,358 24.3 9,520 24.2 17,786 23.5 18,626 24.0
Selling, General and
Administrative Expenses 3,851 10.0 3,062 7.8 7,437 9.8 6,091 7.8
Depreciation and Amortization 1,821 4.7 2,366 6.0 3,644 4.8 4,750 6.1
Write Down of Assets and
Restructuring and Unusual
Charges - - 933 2.4 - - 933 1.2
Interest Expense 179 0.5 971 2.5 390 0.5 2,152 2.8
Interest Income (1) - (498) (1.3) (1) - (989) (1.3)
------ ----- ------ ----- ------ ----- ------ -----
Total Costs and Expenses 38,162 99.1 39,018 99.2 74,189 98.0 76,388 98.3
------ ----- ------ ----- ------ ----- ------ -----
Income Before Income Taxes 360 0.9 326 0.8 1,485 2.0 1,303 1.7
Provision for Income Taxes 112 0.3 101 0.2 461 0.6 404 0.5
------ ----- ------ ----- ------ ----- ------ -----
Net Income 248 0.6 225 0.6 1,024 1.4 899 1.2
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
Management believes that the most meaningful approach to analyzing results
of operations is through comparable restaurant sales and margin analysis, which
requires critically reviewing the relationships that certain costs and expenses
bear to revenues. Accordingly, the discussion below follows this approach.
Revenues for the second quarter and first half of 1998 decreased by
$822,000 and $2,017,000 from the respective periods of the prior year. Four
Chart House restaurants which were closed between November 1997 and January 1998
accounted for a decrease in revenues of $1,271,000 for the second quarter and
$2,573,000 for the first half of 1998. Excluding these, revenues for the second
quarter increased by $449,000 or 1% over the second quarter of 1997 and $555,000
or 1% over the first six months of 1997. These figures include one restaurant
that was temporarily closed during the quarter for remodeling.
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<PAGE>
Restaurant-level operating margins were lower in 1998 vs. 1997 primarily
because of higher food costs. Cost of sales as a percentage of revenues was
higher in 1998 primarily because of menu product mix changes as a result of a
new restaurant menu implemented in 1998. Further, the Company has realized
significantly higher food costs with the decision to purchase higher quality
shrimp and lobster beginning in July 1997. This strategy affects the
comparability of the 1998 costs with costs through June 1997. Restaurant labor
as a percentage of revenue was slightly higher during the 1998 periods as
compared to the 1997 periods as a result of the implementation of the new menu
and associated training programs. Other operating costs as a percentage of
revenues were lower for the six months in 1998 because, among other things, the
1997 losses on disposals of fixed assets exceeded 1998 losses by approximately
$224,000. Other operating costs as a percentage of revenues for the second
quarter of 1998 remained comparable with the second quarter of 1997.
Selling, general and administrative expenses increased by $789,000 and
$1,346,000 for the second quarter and six months, respectively, and as a
percentage of revenues increased from 7.8% in the second quarter of 1997 to 10%
in the second quarter of 1998, and from 7.8% to 9.8% for the respective six
month periods. These increases are primarily due to costs incurred to relocate
the Company's corporate office and hire and train new staff to better support
field operations. The Company also incurred costs related to the revitalization
program via a consulting arrangement with Lettuce Entertain You Enterprises,
Inc.
Depreciation and amortization decreased from 1997 levels because of asset
write-downs recorded at the end of the 1997 third quarter.
Special charges of $933,000 in 1997 were incurred for severance and
separation costs related to management organizational changes in the second
quarter of 1997.
Interest expense was reduced significantly, as throughout 1997 the Company
used net proceeds from the sale of shares of common stock and certain asset
sales and excess cash flows from operating activities to pay off remaining
balances of long-term senior notes and outstanding debt under the revolving
credit agreement.
Interest income was substantially reduced in 1998, as the note receivable,
which generated a majority of the interest income (related to the Islands
investment), was paid in December 1997.
The provision for income taxes reflects an effective rate of 31% for all
periods presented.
As a result of the foregoing, net income increased by $23,000 or 10% from
$225,000 for the second quarter of 1997 to $248,000 for the second quarter of
1998. Net income for the six month period increased by $125,000 or 14% from
$899,000 in 1997 to $1,024,000 in 1998.
Costs Increases
- ---------------
The Company made modifications to the Chart House menu beginning in the
second half of 1997, which contributed to higher cost of sales. Management
plans to continue to roll out the new menu and develop new products in efforts
to provide increased value to the customer, and expects higher cost of sales in
1998 related to those efforts.
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<PAGE>
Also expected as a result of the new menu implementation are higher labor
costs throughout the system, as training and additional staffing costs are
reflected throughout the 59 restaurants. Other operating expenses should also
temporarily increase as supplies, smallwares, and complementary food are
affected by the new menu rollout. Finally, the Company expects 1998 restaurant
sales and operating expenses to be impacted to the extent there are shutdowns in
connection with the overall continuing Chart House restaurant revitalization
efforts.
Separately, on March 1, 1998, the minimum hourly wage to employees based in
California (a state in which the Company operates 19 restaurants) increased from
$5.15 per hour to $5.75. Management believes that this recent measure will
increase the Company's 1998 labor costs, and has begun taking specific steps to
minimize the impact of the increased wage rate.
Liquidity and Capital Resources
- -------------------------------
The Company requires capital principally for the acquisition and
construction of new restaurants and the remodeling and refurbishing of existing
restaurants. The Company's primary sources of working capital are cash flows
from operations and borrowings under a revolving credit agreement with two banks
which provides a $20 million line of credit with interest at the agent bank's
base rate (or LIBOR plus 1.25%). Net cash flows from operating, financing and
investing activities are used primarily to reduce or increase those borrowings.
During the second quarter of 1998, the Company decreased its revolving credit
borrowings by $500,000. At June 29, 1998, the Company had no outstanding
borrowings under the revolving credit agreement.
Capital expenditures for the second quarter and the first half of 1998 were
primarily focused on prioritized projects, regular additions at all restaurants
and the significant remodeling work and conceptual changes done to the
restaurant located in Rancho Mirage, California. The remodel was completed and
the restaurant reopened in May 1998. Capital expenditures for each of the
remaining two quarters of 1998 are expected to increase as remodeling activities
accelerate under the restaurant revitalization program.
In the opinion of management, based on current estimates related to extent
and timing of revitalization activities, cash flows from operations plus
availability under the $20 million revolving credit agreement should be
sufficient to fund working capital and regular capital expenditure commitments
for 1998. Also, the Company will reduce debt borrowings (currently zero), if
any, to the extent that proceeds are received from the sale of certain remaining
assets held for disposal. The Company currently projects 1998 capital
expenditures to be approximately $10 million, however, this amount may vary
depending on the timing of revitalization activities. Significant unanticipated
changes in the extent and timing of remodeling and revitalization activities may
require alternative sources of long-term financing to fully implement. However,
no assurance can be given that such financing will be available or on terms
satisfactory to the Company.
Seasonality and Other Information
- ---------------------------------
Historically, the Company's business is seasonal in nature with revenues
and net income for the second and third quarters being greater than in the first
and fourth quarters.
Sales at Solana Beach Baking Company, which is being held for disposal,
increased by $169,000 over the 1997 second quarter and $261,000 over the first
six months of 1997. Operating profits
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<PAGE>
decreased by approximately $58,000 for the quarter and $118,000 for the six
month period from the respective periods of the prior year primarily because of
higher freight costs. Management believes that the disposal of Solana Beach
Baking Company will initially reduce operating profits but will allow the
Company to focus on the stronger growth opportunities within the core Chart
House restaurant organization.
In May 1998, the Chart House restaurant in Weehawken, New Jersey, which the
Company operates under a management agreement with the owner of the property,
was completely destroyed by fire. The Company is named as an insured party in a
policy held by the owner of the property. The insurance policy covers lost
profits due to business interruption for twelve months. Because of the business
interruption insurance this event has not had an impact on the operating
results. However, management believes it may take more than twelve months to
rebuild and reopen the restaurant and financial results may be negatively
impacted beginning June 1999. Management is currently in negotiations for a new
agreement with the property owner. Although management believes a deal to
rebuild the restaurant will be made, no assurances can be given that the
restaurant will be rebuilt nor can an estimate of the timing to rebuild and
reopen be made.
In 1997, the Company began converting its computer systems to be Year 2000
compliant. All systems are expected to be compliant by mid-1999. The total cost
of the project is estimated to be $100,000. Based on current estimates, the
Company does not expect the cost of resolving all Year 2000 issues to have a
material impact on the Company's business, operations or financial condition.
This report contains forward-looking statements that were made within the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Actual
results could differ materially from those projected in the forward-looking
statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders of Chart House Enterprises, Inc. was
held on May 6, 1998. Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and Regulation 14A thereunder for
the purpose of
(i) amending the Company's Certificate of Incorporation to eliminate classes
of directors relating to term of office,
(ii) electing directors,
(iii) approving the Stock Option Grant to Non-employee Director, F. Philip
Handy,
(iv) approving the Stock Option Grant to the Company's President, Thomas J.
Walters, and
(v) approving the 1998 Employee Stock Purchase Plan.
There was no solicitation in opposition to management's nominees for directors.
At the meeting, the amendment was approved, seven directors were
elected, both stock option grants were approved, and the 1998 Employee Stock
Purchase Plan was approved.
The tables below summarize the results of the stockholder vote:
<TABLE>
<CAPTION>
Number Percentage
------ ----------
<S> <C> <C>
Shares Outstanding and Entitled to Vote 11,728,589 100.0%
Shares Represented in Person or by Proxy at Meeting 10,898,510 92.9%
Shares Not Voted at Meeting 830,079 7.1%
</TABLE>
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstain Non-Votes
----- ------- ------- ---------
<S> <C> <C> <C> <C>
Proposal I (Approval of Amendment) 8,555,309 21,241 18,558 2,303,402
</TABLE>
<TABLE>
<CAPTION>
Votes Votes
For Withheld
----- --------
<S> <C> <C>
Proposal II (Election of Directors)
Breakdown of votes cast for each nominee:
Barbara R. Allen 10,877,971 20,539
Linda Walker Bynoe 10,878,171 20,339
William M. Diefenderfer III 10,793,275 105,235
F. Philip Handy 10,878,271 20,239
Stephen Ottmann 10,879,146 19,364
Thomas J. Walters 10,879,071 19,439
Samuel Zell 10,878,371 20,139
</TABLE>
<TABLE>
<CAPTION>
Votes Votes
For Against Abstain
----- ------- -------
<S> <C> <C> <C>
Proposal III (Approval of Stock Option-
Non-Employee Director) 9,422,831 1,457,487 18,192
Proposal IV (Approval of Stock Option-
President and COO) 9,462,339 1,417,954 18,217
Proposal V (Approval of 1998 Employee
Stock Purchase Plan) 10,768,056 112,021 18,433
</TABLE>
-13-
<PAGE>
Item 5. Other Information.
The SEC has amended Rule 14a-4, which governs a company's use of its
discretionary voting authority with respect to a non-Rule 14a-8 shareholder
proposal (i.e., where a shareholder has not sought inclusion of the proposal in
the Company's proxy statement.) The Company needs at least 45 days notice prior
to the month and day of mailing the proxy statement for seeking inclusion of a
shareholder proposal in the 1999 proxy statement. Management anticipates the
1999 proxy statement mailing to be April 2, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. 27 Financial Data Schedule (required for electronic
filing only).
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter of which this report is filed.
SIGNATURES
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.
CHART HOUSE ENTERPRISES, INC. (Registrant)
Date: August 13, 1998 By: /s/ F. PHILIP HANDY
--------------------------------------
F. Philip Handy
Acting Chief Executive Officer
By: /s/ THOMAS J. WALTERS
--------------------------------------
Thomas J. Walters
President and Chief Operating Officer
By: /s/ CYNTHIA T. QUIGLEY
--------------------------------------
Cynthia T. Quigley
Vice President--Finance and Chief
Financial Officer
-14-
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1998
<PERIOD-START> MAR-31-1998
<PERIOD-END> JUN-29-1998
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0
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