<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 28, 1999
----------------------------------
[_] 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
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(Address of principal executive offices, including zip code)
(312) 266-1100
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(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 August 4, 1999:
Common Stock ($.01 par value) - 11,762,561
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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 28, December 28,
ASSETS 1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 372 $ 266
Accounts Receivable 3,406 3,093
Inventories 2,027 2,288
Prepaid Expenses and Other Current Assets 221 306
Current Portion of Deferred Tax Asset 685 685
-------- --------
Total Current Assets 6,711 6,638
-------- --------
Property and Equipment, at Cost:
Land 5,628 6,258
Buildings 16,648 18,844
Equipment 35,270 31,400
Leasehold Interests & Improvements 52,825 50,532
Construction in Progress 3,068 2,063
-------- --------
113,439 109,097
Less: Accumulated Depreciation and Amortization 45,111 44,659
-------- --------
Net Property & Equipment 68,328 64,438
-------- --------
Leased Property under Capital Leases, Less Accumulated
Amortization of $6,826 in 1999 and $6,376 in 1998 3,678 4,128
-------- --------
Non-current Portion of Deferred Tax Asset 4,679 4,679
-------- --------
Other Assets and Goodwill, Net 19,631 8,127
-------- --------
$103,027 $ 88,010
======== ========
</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 28, December 28,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Current Portion of Obligations under Capital Leases $ 688 $ 724
Accounts Payable 3,629 4,772
Accrued Liabilities 13,852 14,290
-------- -------
Total Current Liabilities 18,169 19,786
-------- -------
Deferred Payments on Acquisition 1,400 -
-------- -------
Long-Term Debt 17,394 3,450
-------- -------
Long-Term Obligations under Capital Leases 4,640 5,020
-------- -------
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; 11,762,561 shares outstanding in 1999 and 1998 118 118
Additional Paid-In Capital 61,103 61,103
Retained Earnings (Accumulated Deficit) 203 (1,467)
-------- -------
Total Stockholders' Equity 61,424 59,754
-------- -------
$103,027 $88,010
======== =======
</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 28, Ended June 29, Ended June 28, Ended June 29,
1999 1998 1999 1998
-------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $37,329 $38,522 $71,960 $75,674
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 11,810 12,172 22,909 24,129
Restaurant Labor 11,056 10,782 21,462 20,804
Other Operating Costs 8,155 9,351 16,059 17,767
Selling, General and Administrative
Expenses 3,142 3,851 6,128 7,437
Depreciation and Amortization 2,034 1,821 3,871 3,644
(Gain) Loss on Sales of Assets (742) 7 (742) 19
Interest Expense 328 179 603 390
Interest Income - (1) - (1)
------- ------- ------- -------
Total Costs and Expenses 35,783 38,162 70,290 74,189
------- ------- ------- -------
Income Before Income Taxes 1,546 360 1,670 1,485
Provision for Income Taxes - 112 - 461
------- ------- ------- -------
Net Income $ 1,546 $ 248 $ 1,670 $ 1,024
======= ======= ======= =======
Net Income Per Common Share $.13 $.02 $.14 $.09
- Basic and Diluted ======= ======= ======= =======
Weighted Average Shares Outstanding 11,763 11,730 11,763 11,729
======= ======= ======= =======
</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 28, Ended June 29,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 1,670 $ 1,024
Adjustments to Reconcile Net Income to
Cash Flows from Operating Activities:
Depreciation and Amortization 3,871 3,644
Deferred Income Taxes - 451
(Gain) Loss on Retirement and Disposition of Assets (742) 19
Change in Net Current Liabilities (Excluding Net
Current Liabilities Acquired) (2,461) (2,495)
-------- -------
Cash Provided by Operating Activities 2,338 2,643
-------- -------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (8,325) (4,072)
Expenditures for Acquisitions (Net of Cash Acquired) (10,383) -
(Additions) Reductions of Other Assets (740) 80
Proceeds from Disposition of Assets 3,688 1,733
-------- -------
Cash Used in Investing Activities (15,760) (2,259)
-------- -------
Cash Flows from Financing Activities:
Principal Payments on Obligations under
Capital Leases (416) (419)
Debt Issuance Costs (475) -
Net Payments under Revolving Credit Agreement (581) -
Proceeds from Issuance of Long-Term Debt 15,000 -
Net Proceeds from Sale/Issuance of Common Stock - 38
-------- -------
Cash Provided by (Used in) Financing Activities 13,528 (381)
-------- -------
Increase in Cash 106 3
Cash, Beginning of Period 266 205
-------- -------
Cash, End of Period $ 372 $ 208
======== =======
</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 28, Ended June 29,
1999 1998
---------------- ----------------
<S> <C> <C>
The Change in Net Current Liabilities (Excluding Net
Current Liabilities Acquired) is Comprised of
the Following:
(Increase) Decrease in Accounts Receivable $ (313) $ 233
Decrease in Inventories 407 729
Decrease (Increase) in Prepaid Expenses and
Other Current Assets 85 (522)
Decrease in Accounts Payable (1,143) (1,589)
Decrease in Accrued Liabilities (1,497) (1,346)
------- -------
Change in Net Current Liabilities (Excluding
Net Current Liabilities Acquired) $(2,461) $(2,495)
======= =======
Supplemental Cash Flow Disclosures:
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 335 $ 375
Income Taxes (Net of Refunds) $ (142) $ 304
</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 28, 1999
(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 28, 1999 and June 29, 1998 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 28, 1998.
(2) INCOME TAXES
No provision for income taxes has been recorded as of June 28, 1999 as the
Company expects to offset 1999 income tax expense with income tax benefits
associated with net operating losses and tax credits.
(3) COMPUTER SOFTWARE COSTS
The Company implemented AICPA, Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use,"
effective December 29, 1998. This Statement provides criteria to determine
whether costs of computer software developed or obtained for internal use are
expensed or capitalized. The adoption of this Statement had no material impact
on the Company's financial statements for the quarter ended June 28, 1999.
-6-
<PAGE>
(4) RESTRUCTURING ACTIONS AND SPECIAL CHARGES FROM 1997
At June 28, 1999 and December 28, 1998, the balance of the liability for
severance and other special costs (included in accrued liabilities) was $100,000
and $519,000, respectively. There were no significant charges taken against
this liability during the second quarter of 1999. The Company anticipates that
the remaining liability will be exhausted by the end of the fiscal year.
(5) BUSINESS COMBINATION
The Company purchased a restaurant business located in New York, New York
d/b/a Angelo and Maxie's Steakhouse ("Angelo and Maxie's"). The acquisition was
accounted for under the purchase method of accounting. The purchase price was
$12,633,000. Of this amount approximately $10,383,000 was paid at closing,
including costs of acquisition, and the remaining $2,250,000 will be paid in
equal monthly installments over the next three years. The identifiable net
assets acquired included tangible net assets of $1,015,000, the value of the
trade name of $6,975,000, and the value of a non-compete agreement of $450,000.
Goodwill of $4,193,000, representing the excess of costs over the fair value of
net assets acquired was recorded as a result of the acquisition. The intangible
assets are being amortized on a straight-line basis over lives of three to
twenty years. The results of operations of Angelo and Maxie's are included in
the Company's consolidated results of operations from the date of its
acquisition, April 22, 1999.
The following unaudited pro forma results present combined year to date
historical financial information as if the acquisition occurred at the beginning
of each period.
<TABLE>
<CAPTION>
1999 1998
$ per share $ per share
------------------ ------------------
<S> <C> <C>
Revenues (in thousands) $74,772 $80,321
Income before Extraordinary Items and
Cumulative Effects of Accounting Changes
(in thousands) $ 1,733 $.15 $ 2,239 $.19
Net Income (in thousands) $ 1,733 $.15 $ 2,215 $.19
</TABLE>
(6) LONG TERM DEBT
In April 1999, the Company paid off the outstanding balance of an existing
revolving credit agreement and entered into a revolving credit and term loan
agreement with the same bank. This agreement provides for a revolving loan of up
to $25 million and a term loan of $15 million, each of which mature on March 31,
2004. Interest under the agreement is payable, at the Company's option, at the
bank's base rate or LIBOR, plus a multiple based on certain financial covenants.
Principal payments on the term loan are not required before the third quarter
2000. The Company increased its total outstanding borrowings during the second
quarter of 1999 by approximately $9 million. The proceeds of the $15 million
term loan were used to pay down the outstanding balance of the revolving credit
agreement and to execute the acquisition of Angelo and Maxie's.
-7-
<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 28, 1999 and June 29, 1998. The
results of operations for the first six months of 1999 are not necessarily
indicative of the results to be expected for the fiscal year ending December 27,
1999. The dollar amounts in the table below are in thousands.
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks Twenty-Six Weeks Twenty-Six Weeks
Ended June 28, Ended June 29, Ended June 28, Ended June 29,
1999 1998 1999 1998
----------------- ----------------- ----------------- -----------------
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 37,329 100.0 38,522 100.0 71,960 100.0 75,674 100.0
------ ----- ------ ----- ------ ----- ------ -----
Costs and Expenses:
Cost of Sales 11,810 31.6 12,172 31.6 22,909 31.8 24,129 31.9
Restaurant Labor 11,056 29.6 10,782 28.0 21,462 29.8 20,804 27.5
Other Operating Costs 8,155 21.9 9,351 24.3 16,059 22.3 17,767 23.5
Selling, General and
Administrative Expenses 3,142 8.4 3,851 10.0 6,128 8.5 7,437 9.8
Depreciation and Amortization 2,034 5.4 1,821 4.7 3,871 5.4 3,644 4.8
(Gain) Loss on Sales of Assets (742) (2.0) 7 - (742) (1.0) 19 -
Interest Expense 328 0.9 179 0.5 603 0.9 390 0.5
Interest Income - - (1) - - - (1) -
------ ----- ------ ----- ------ ----- ------ -----
Total Costs and Expenses 35,783 95.8 38,162 99.1 70,290 97.7 74,189 98.0
------ ----- ------ ----- ------ ----- ------ -----
Income Before Income Taxes 1,546 4.2 360 0.9 1,670 2.3 1,485 2.0
Provision for Income Taxes - - 112 0.3 - - 461 0.6
------ ----- ------ ----- ------ ----- ------ -----
Net Income 1,546 4.2 248 0.6 1,670 2.3 1,024 1.4
====== ===== ====== ===== ====== ===== ====== =====
</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 1999 decreased by
$1,193,000 and $3,714,000 from the respective periods of the prior year. The
decrease is entirely represented by closure of several restaurants and other
operations; while comparable restaurant revenues have increased since 1998. Six
Chart House restaurants were closed between July 1998 and June 1999; five
permanently and one for major reconstruction. These restaurants accounted for a
$2,179,000 decrease for the second quarter and a $3,123,000 decrease in the
first half of 1999. Along with these restaurant closures, the Company sold the
Solana Beach Baking Company in 1998. This sale represented a $1,656,000 decrease
in sales for the second quarter and a $3,191,000 decrease in sales for the first
half of 1999. Added to the sales results this quarter are approximately ten
weeks of sales from the newly acquired Angelo and Maxie's. This restaurant
contributed approximately 4.4% of the second quarter's revenue and approximately
2.3% of
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<PAGE>
the revenue for the first half of 1999. Excluding the impacts of these events,
comparable restaurant revenues for the second quarter increased by $1,007,000 or
3% over the second quarter of 1998 and $965,000 or 1.5% over the first six
months of 1998.
The Company has substantially completed the year long process of rolling
out a new more contemporary menu in designated restaurants. The second quarter
sales for restaurants with the new menu were up overall by approximately 3.5%
over the same period of 1998. The first half of the year realized a 2% increase
in sales. Management expects to close two restaurants in third quarter 1999,
and, at this time, has no intentions to close any additional restaurants. The
Company is in the preliminary phases of converting up to ten Chart House
restaurants into Angelo and Maxie's Steakhouses. The decision to convert an
existing restaurant to the new concept is based upon several factors including
location, customer preferences, and feasibility. Management is unable, at this
phase in the planning, to confirm the likelihood or timing of the proposed
restaurant conversions.
Cost of sales as a percentage of revenues was consistent in the second
quarter of 1999 with the second quarter of 1998. During the first half of 1999
the Company maintained a slightly lower cost of sales percentage than in 1998,
despite the implementation of the new menu. The new menu includes lower priced
entrees as well as larger, pre-portioned meat and better quality seafood, all of
which contribute a negative impact to the cost of sales margin. The Company has
effectively managed product mix to compensate for this impact. In general, Chart
House restaurants have been able to maintain a lower cost of sales percentage
than the Angelo and Maxie's restaurant. As the Company begins to convert
existing restaurants to the Angelo and Maxie's concept, and therefore increases
its ratio to the total number of restaurants, management anticipates the
consolidated cost of sales percentage to increase. Aware of this potential, the
Company is confident that this increasing cost can be controlled by managing
product mix and negotiations with current vendors. Restaurant labor as a
percentage of revenues was higher during the 1999 periods as compared to the
1998 periods due in part to the Company's initiative to increase management
presence at the restaurants. Labor has also increased as a result of the
implementation of the new menu and associated training programs. Other operating
costs have decreased during both periods of 1999 from the respective periods in
1998 primarily because of a decrease in repairs and maintenance. Several
restaurants have undergone significant remodeling since June 1998, eliminating
the need for extensive and costly repairs.
Selling, general and administrative expenses decreased by $709,000 and
$1,309,000 for the second quarter and first half of 1999, respectively. These
decreases are primarily due to costs incurred in 1998 to relocate the Company's
corporate office. Further, the Company is realizing savings in both
administrative salaries and consulting fees during 1999.
Depreciation and amortization has increased from 1998 levels as a result of
significant capital expenditures with restaurant remodeling and the acquisition
of tangible and intangible assets of Angelo and Maxie's.
The Company sold three restaurant properties during the second quarter of
1999 resulting in gains of $742,000. There were no sales of restaurant
properties during the second quarter of 1998.
Interest expense has increased from 1998 levels subsequent to the debt
incurred to acquire Angelo and Maxie's.
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<PAGE>
No provision for income taxes has been recorded as of June 28, 1999 as the
Company expects to offset 1999 income tax expense with income tax benefits
associated with net operating losses and tax credits.
As a result of the foregoing, net income increased by $1,298,000, from
$248,000 to $1,546,000 for the second quarter of 1999. Net income for the first
half of 1999 increased by $646,000 from $1,024,000 in 1998 to $1,670,000 in
1999.
Financial Condition
- -------------------
The significant changes in financial condition of the Company are the
result of both the acquisition of Angelo and Maxie's and the continuing
remodeling of existing Chart House restaurants. The acquisition included
approximately $1 million in fixed assets acquired and $11 million in intangible
assets. The Company borrowed $15 million in a long-term loan. The proceeds of
the loan were used to execute the Angelo and Maxie's acquisition and to pay down
the outstanding balance on the revolving credit agreement. Approximately $4.6
million in net capital expenditures, exclusive of the Angelo and Maxie's
expenditure, have contributed to the increase in net assets for the first half
of 1999.
Liquidity and Capital Resources
- -------------------------------
The Company requires liquidity principally for working capital, for the
acquisition and construction of new restaurants, and for 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
and term loan agreement which provides a $25 million line of credit and a term
loan of $15 million, each of which mature on March 31, 2004. The proceeds of the
term loan were used primarily for the acquisition of Angelo and Maxie's as well
as to pay down the outstanding balance on the line of credit. Principal payments
on this loan will not begin until the third quarter 2000.
During the second quarter of 1999, the Company decreased its revolving
credit borrowings by $5,606,000 for an outstanding balance at June 28, 1999 of
$2,394,000. This reduction was funded by the proceeds of the term loan and cash
flows from operating activities. At June 28, 1999, the Company had more than $22
million in available credit. At June 29, 1998, the Company had no outstanding
borrowings under its revolving credit agreement.
The Company had $11,458,000 working capital deficit at the end of the
second quarter 1999; a decrease of $2,491,000 from a balance of $13,949,000, at
the end of the second quarter 1998. Most of this decrease is attributed to the
payments of severance and other special costs charged during the restructuring
activities of 1997. Payments of approximately $1,500,000 occurred during the
twelve months between July 1998 and June 1999. The remaining decrease is
attributed to, among other things, payments of outstanding insurance claims.
In the opinion of management, cash flows from operations, plus availability
under the $25 million revolving credit agreement should be sufficient to fund
working capital, ongoing capital maintenance, remodeling of restaurants under
the restaurant revitalization program, and site selection and development
activities for new restaurants, for at least the next twelve months. Significant
unanticipated changes in the extent and timing of remodeling and development
activities may require alternative sources of long-term financing. However, no
assurance can be given that such financing will be available or on terms
satisfactory to the Company.
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<PAGE>
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.
Year 2000
- ---------
Many software applications and operational programs written in the past
were not designed to recognize calendar dates beginning in the year 2000. The
failure of such applications or systems to properly recognize the dates
beginning in the year 2000 could result in miscalculations or system failures
that may adversely affect the Company's operations. The Company has instituted a
Year 2000 project in an attempt to prevent these occurrences. As of June 28,
1999, the Company was approximately 70% complete in achieving compliance with
the project's requirements. The Company has completed the Awareness and
Assessment phases of this project and has partially completed Replacement,
Testing, and Implementation. The Company expects the remaining phases to be
substantially complete by the end of 1999.
The operation of Chart House restaurants does not rely heavily on
information technology. The most direct operational issue the Company faces with
its information technology is the point-of-sale system at each of the
restaurants. The replacement of the point-of-sale system was one part of a
significant operational and financial systems overhaul. The point-of-sale system
replacement was completed during second quarter 1999. The Company has received
assurances from the hardware and software manufacturers that the replacement
technology will be Year 2000 compliant. The remaining phase of the overhaul
includes upgrading the "back-office" system linking the point-of-sale system
with the general ledger system. Incremental expense of approximately $150,000 is
anticipated to ensure the upgraded technology will be Year 2000 compliant. The
Company expects to fund the remaining compliance requirements with operating
cash flows and availability under its revolving line of credit. The Company does
not believe that it faces any significant operational issues with embedded
technology or non-IT systems.
In identifying a "worst case scenario," the Company believes that a failure
of the project will only affect internal reporting capabilities. As a result,
the Company's restaurants should be able to function with no anticipated
interruption. Under this scenario, the Company's contingency plan consists of
administrative personnel analyzing source data information, if necessary, to
continue daily operations support for the Company.
The Company's potential third party risk is with its food distributors.
Evaluations, including review of disclosures in third party SEC filings and
review of correspondence regarding Year 2000 compliance, indicate that such
distributors are addressing the issue on a timely basis and, therefore, do not
expect significant operational difficulties.
Due to the general uncertainty inherent in the Year 2000 issue as well as
the uncertainty of third party suppliers and distributors becoming Year 2000
compliant, the Company is unable at this time to determine if consequences of
Year 2000 failures, both internal and external, will have a material impact on
the Company's results of operations, liquidity and financial condition. The
Company believes that its Year 2000 compliance efforts should reduce the
likelihood of a material and adverse impact to normal operations.
-11-
<PAGE>
Other Information
- -----------------
Certain of the statements contained in this report may be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
include financial projections, estimates and statements regarding plans,
objectives and expectations of the Company and its management. Examples of
certain forward-looking statements are the Company's estimates of the cost,
timing and effect of its Year 2000 compliance efforts, the anticipated effect of
menu changes and acquisitions, the Company's intentions to dispose of assets,
remodel assets, or acquire assets, and the Company's quantitative and
qualitative disclosures about market risk. Although the Company believes that
the expectations reflected in all such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk from changes in interest rates on
debt and changes in commodity prices. The Company's exposure to interest rate
risk results from the fact that borrowings under its revolving credit and term
loan agreement are payable at floating rates of interest, which are based upon
the lender's base rate or the LIBOR rate. The Company does not use derivative
instruments to manage borrowing costs or reduce exposure to adverse fluctuations
in the interest rate. The Company does not use derivative instruments for
trading purposes. The potential loss in future earnings resulting from a one-
point interest rate change on the outstanding debt balance as of June 28, 1999
may be significant to the extent the Company's earnings do not increase, or
decrease to break-even levels.
The Company purchases certain commodities such as beef, seafood, chicken,
and cooking oil. These commodities are generally purchased based upon purchase
agreements established with vendors. These purchase agreements may contain
contractual features that fix the commodity price or define the price from an
agreed upon formula. The Company does not use financial instruments to hedge
commodity prices because these purchase arrangements help control the ultimate
cost paid and any commodity price fluctuations are generally short term in
nature.
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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 18, 1999. Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and Regulation 14A thereunder for
purposes of:
(i) electing directors, and
(ii) transacting such other business as may properly come before the meeting.
There was no solicitation in opposition to management's nominees for directors.
At the meeting, seven directors were elected.
The tables below summarize the results of the stockholder vote:
<TABLE>
<CAPTION>
Number Percentage
------ ----------
<S> <C> <C>
Shares Outstanding and Entitled to Vote 11,762,561 100.0%
Shares Represented in Person or by Proxy at Meeting 10,672,130 90.7%
Shares Not Voted at Meeting 1,090,431 9.3%
</TABLE>
<TABLE>
<CAPTION>
Votes Votes
For Against
---------- -------
<S> <C> <C>
Proposal I (Election of Directors)
Breakdown of votes cast for each nominee:
Barbara R. Allen 10,655,736 16,394
Linda Walker Bynoe 10,655,636 16,494
William M. Diefenderfer III 10,655,535 16,595
F. Philip Handy 10,654,636 17,494
Stephen Ottmann 10,654,736 17,394
Thomas J. Walters 10,654,816 17,314
Samuel Zell 10,656,275 15,855
</TABLE>
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. A report on Form 8-K/A was filed on July 6, 1999
providing financial statements, pro forma information, and related
exhibits required subsequent to the Company's acquisition of Angelo and
Maxie's.
-13-
<PAGE>
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 11, 1999 By: /s/ THOMAS J. WALTERS
------------------------------------------
Thomas J. Walters
President and Chief Executive Officer
By: /s/ WILLIAM M. SULLIVAN
------------------------------------------
William M. Sullivan
Executive Vice President and Chief
Financial Officer
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1999
<PERIOD-START> MAR-30-1999
<PERIOD-END> JUN-28-1999
<CASH> 372
<SECURITIES> 0
<RECEIVABLES> 3,406
<ALLOWANCES> 0
<INVENTORY> 2,027
<CURRENT-ASSETS> 6,711
<PP&E> 113,439
<DEPRECIATION> 45,111
<TOTAL-ASSETS> 103,027
<CURRENT-LIABILITIES> 18,169
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 61,306
<TOTAL-LIABILITY-AND-EQUITY> 103,027
<SALES> 37,329
<TOTAL-REVENUES> 37,329
<CGS> 11,810
<TOTAL-COSTS> 22,866
<OTHER-EXPENSES> 3,142
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 328
<INCOME-PRETAX> 1,546
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,546
<EPS-BASIC> .13
<EPS-DILUTED> .13
</TABLE>
