UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarter ended April 1, 1995
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 0-17229
DAKA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3024178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Corporate Place, 55 Ferncroft Road, Danvers,MA 01923
(Address of principal executive offices) (Zip Code)
(508) 774-9115
(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 period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Number of shares of Common Stock, $.01 par value,
outstanding at May 2, 1995: 4,473,548.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
DAKA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
April 1, July 2,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and equivalents $ 12,575 $ 5,040
Accounts and notes receivable, net 37,575 25,642
Inventories 10,458 7,730
Prepaid expenses and other current assets 3,720 1,743
---------- ----------
Total current assets 64,328 40,155
---------- ----------
Property and equipment, net 78,792 63,763
Investments in and advances to affiliates 162 80
Other assets, net 27,065 14,671
Deferred income taxes 184 186
---------- ----------
$ 170,531 $ 118,855
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 17,327 $ 16,988
Accrued expenses 19,081 16,501
Current portion of long-term debt 619 1,312
Deferred purchase price 10,227
Deferred income taxes 76 85
---------- ----------
Total current liabilities 47,330 34,886
---------- ----------
Long-term debt 69,457 46,140
Other long-term liabilities 8,500 3,133
Minority interests 2,744 1,916
Stockholders' equity:
Series A Preferred Stock, $.01 par value,
authorized 1,000,000 shares; 100,000 shares
issued and outstanding at April 1, 1995
and July 2, 1994 1 1
Common Stock, $.01 par value; authorized
20,000,000 shares, issued and outstanding
4,093,923 shares at April 1, 1995 and
3,773,503 at July 2, 1994 42 38
Capital in excess of par value 34,247 30,616
Retained earnings 8,210 2,125
---------- ----------
Total stockholders' equity 42,500 32,780
---------- ----------
$ 170,531 $ 118,855
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Sales $ 83,693 $ 61,055 $ 221,148 $ 176,380
Management fees and
franchising income 2,714 2,742 7,426 7,899
--------- --------- --------- ---------
86,407 63,797 228,574 184,279
--------- --------- --------- ---------
Costs and expenses:
Cost of sales and
operating expenses 71,483 51,736 186,600 148,682
Selling, general and
administrative expenses 7,699 6,596 21,396 19,841
Depreciation and amortization 2,796 2,216 7,635 6,098
Interest expense 1,097 686 2,958 1,991
Interest income (92) (57) (196) (196)
Minority interests 13 15 (91) 146
--------- --------- --------- ---------
82,996 61,192 218,302 176,562
--------- --------- --------- ---------
Income before income taxes 3,411 2,605 10,272 7,717
Income tax expense 1,272 941 3,787 2,708
--------- --------- --------- ---------
Net income 2,139 1,664 6,485 5,009
Preferred Stock dividend 400 400
--------- --------- --------- ---------
Net income available for
Common Stockholders $ 2,139 $ 1,664 $ 6,085 $ 4,609
========= ========= ========= =========
Earnings per share:
Primary $ 0.49 $ 0.42 $ 1.47 $ 1.18
Fully diluted $ 0.28 $ 0.23 $ 0.85 $ 0.70
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended April 1, 1995 and April 2, 1994
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
April 1, April 2,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,485 $ 5,009
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,635 6,098
Minority interests (91) 146
Change in assets and liabilities:
Accounts and notes receivable (3,511) (16,938)
Inventories (1,000) (1,492)
Other assets (3,866) (1,091)
Accounts payable and accrued expenses 553 14,962
Other long-term liabilities 5,366 (64)
-------- --------
Net cash provided by operating activities 11,571 6,630
Cash flows from investing activities:
Purchase of property and equipment (22,700) (7,992)
Proceeds from sale of property and equipment 244 101
Investments in and advances to affiliates (82) (3,010)
Cash paid for acquisitions, net of cash
acquired of $175 and $142 (11,297) (10,804)
-------- --------
Net cash used in investing activities: (33,835) (21,705)
Cash flows from financing activities:
Increase in line of credit 26,700 9,269
Proceeds from sale leaseback facility 4,540
Payment of Preferred Stock dividend (400) (400)
Repayment of long-term debt (1,202) (948)
Other 161 90
-------- --------
Net cash provided by financing activities 29,799 8,011
-------- --------
Net increase (decrease) in cash and equivalents 7,535 (7,064)
Cash and equivalents, beginning of period 5,040 14,383
-------- --------
Cash and equivalents, end of period $ 12,575 $ 7,319
======== ========
Supplemental cash flow disclosures:
Interest paid $ 3,627 $ 2,375
Taxes paid 5,693 1,198
</TABLE>
During the periods ended April 1, 1995 and April 2,
1994 the Company acquired equipment by entering into capital
leases in the amount of $743 and $1,674, respectively.
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine months ended April 1, 1995 and Years ended
July 2, 1994 and June 26, 1993
(In thousands, except share data)
<TABLE>
<CAPTION>
Retained Total
Preferred Stock Common Stock Capital Earnings Stock-
Outstanding Par Outstanding Par In Excess (Accumulated holders'
Shares Value Shares Value of Par Deficit) Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June
26, 1993 100,000 $ 1 3,730,395 $37 $30,443 $ (3,977) $26,504
Employee stock
options exercised 43,108 1 173 174
Preferred Stock
dividend (800) (800)
Net income 6,902 6,902
------- --- --------- --- -------- ------- -------
Balance, July
2, 1994 100,000 1 3,773,503 38 30,616 2,125 32,780
Employee stock
options exercised 19,005 1 160 161
Preferred Stock
dividend (400) (400)
Shares issued
upon conversion
of certain
Convertible
Subordinated
Notes, net 301,415 3 3,471 3,474
Net income 6,485 6,485
------- --- --------- --- -------- ------- -------
Balance, April
1, 1995 100,000 $ 1 4,093,923 $42 $34,247 $ 8,210 $42,500
======= === ========= === ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended April 1, 1995 and April 2, 1994
(In thousands, except per share data)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial
statements include the accounts of DAKA International, Inc. (the
"Company") and its majority-controlled subsidiaries.
Significant intercompany balances and transactions have been
eliminated in consolidation.
Business
The Company's principal subsidiaries, Daka, Inc.
("Daka"), Fuddruckers, Inc. ("Fuddruckers") and Americana Dining
Corporation ("ADC"), operate in the contract foodservice and
restaurant industries. Daka provides restaurant style contract
foodservice at numerous schools and colleges as well as a
variety of other facilities. Fuddruckers owns, operates and
franchises Fuddruckers restaurants. ADC, a majority controlled
subsidiary acquired during fiscal 1994, owns and operates two
restaurants in the Minneapolis area under the name "Champps
Sports Cafe" pursuant to a license agreement from Champps
Entertainment, Inc., licensor and franchisor of Champps
restaurants.
Unaudited Interim Financial Statements
In the opinion of management, the consolidated
financial statements include all adjustments, consisting of
normal recurring adjustments, necessary for the fair
presentation of financial position and results of operations.
The accompanying consolidated financial statements should be
read in conjunction with the audited consolidated financial
statements included in the Company's Annual Report on Form 10-K
for the fiscal year ended July 2, 1994. The consolidated
results of operations for the quarter and nine months ended
April 1, 1995 are not necessarily indicative of results that
could be expected for a full year.
Fiscal Year
The Company's fiscal year ends on the Saturday
closest to June 30th. For purposes of these notes to the
consolidated financial statements, the fiscal years, and interim
fiscal periods contained therein, ending July 1, 1995 and ended
July 2, 1994 are referred to as 1995 and 1994, respectively.
The nine months ended April 1, 1995 include 39 weeks of
operations while the nine months ended April 2, 1994 included 40
weeks.
Classifications
Certain reclassifications have been made to the prior
year's consolidated financial statements in order to conform to
the 1995 presentation. Such reclassifications had no effect on
previously reported results of operations.<PAGE>
<Body Text>
<PAGE>
Earnings Per Share
Primary earnings per share are computed using the
weighted average number of common and common equivalent shares
(dilutive options and warrants) outstanding. In addition to the
inclusion of common and common equivalent shares, the
calculation of fully diluted earnings per share includes the
2,222 shares issuable upon conversion of the Preferred Stock and
the 2,094 shares issuable upon conversion of the remaining
Convertible Subordinated Notes. Fully diluted earnings per
share assume that the Preferred Stock and Notes were converted
into Common Stock as of the beginning of the fiscal year and
reflect the elimination of interest expense related to the
Notes, net of the related income tax effect and the elimination
of dividends related to the Preferred Stock.
The weighted average number of shares used in the
computation of earnings per share for 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary 4,360 3,939 4,147 3,902
Fully diluted 8,715 8,557 8,693 8,532
</TABLE>
2. Acquisition
On February 8, 1995, Daka acquired an 80.01% general
partnership interest in a newly formed limited partnership, Daka
Restaurants, L.P. ("DRLP"), for cash of $10.1 million. Also on
February 8, 1995, DRLP acquired substantially all of the assets
and foodservice contracts comprising the education foodservice
business of ServiceMaster Management Services L.P. ("SMMSLP") in
exchange for a cash payment of $10.1 million, the assumption of
$200 thousand of liabilities and the issuance of a 19.99%
limited partnership interest in DRLP to SMMSLP. In addition,
DRLP acquired certain current assets such as cash on hand,
inventory, accounts receivable and prepaid expenses, and assumed
certain liabilities related to the acquired contracts. The
purchase price for the current assets acquired of $10.2 million,
subject to adjustment, will be paid by DRLP to SMMSLP in cash on
August 7, 1995. The Company has guaranteed the August 7, 1995
payment to be made by DRLP.
In connection with the acquisition by DRLP, the
Company and SMMSLP have entered into a Put/Call Agreement
whereby SMMSLP may require that the Company purchase its limited
partnership interest in DRLP anytime during the ten year term of
the partnership for a purchase price equal to $2.6 million plus
any net undistributed earnings of DRLP. In addition, the
Company may require SMMSLP to sell its limited partnership
interest to the Company for a purchase price of 120% of the sum
of (i) $2.6 million and (ii) SMMSLP's portion of any net
undistributed earnings of DRLP.
The following unaudited proforma results of
operations for the nine months ended April 1, 1995 assume that
the acquisition described above occurred at the beginning of
fiscal 1994. In addition to combining the historical results of
operations, the proforma amounts shown include adjustments for
the estimated effect of depreciation, amortization and interest
expense associated with such acquisition. The acquisition
described above has been accounted for using the purchase method
of accounting.
<PAGE>
The proforma information below does not purport to be
indicative of the results of operations that would have actually
been achieved if the acquisition described above had actually
been consummated as of the beginning of fiscal 1994. In
addition, the proforma information below does not purport to be
indicative of the results of operations which may be achieved in
the future.
<TABLE>
<CAPTION>
1995 1994
(Unaudited)
<S> <C> <C>
Revenues 275,546 237,438
Net income 6,737 5,138
Earnings per share:
Primary 1.62 1.32
Fully diluted 0.88 0.72
</TABLE>
3. Debt
In October 1994 Fuddruckers obtained a commitment for
a $30 million sale leaseback financing facility from Franchise
Finance Corporation of America, ("FFCA"). Pursuant to the terms
of the facility, Fuddruckers will sell to and lease back from
FFCA up to 25 Fuddruckers restaurants to be constructed and will
pay a commitment fee of 1.5% of the sale price of each
restaurant sold to FFCA. The unused commitment expires on
September 1, 1995. The leases provide for a fixed minimum rent
plus additional rent based on a percentage of sales and provides
for an initial lease term of 20 years with two 5 year renewal
options. Terms and conditions of the leases are such that they
do not meet the criteria for treatment as capital leases under
Statement of Financial Accounting Standards No. 13, "Accounting
for Leases". As of April 1, 1995, $ 25.5 million of the
commitment was available for use.
In March 1995 the Company amended its revolving line
of credit agreement, increasing the Company's borrowing capacity
from $50 million to $75 million. In December 1994 the Company
amended its revolving line of credit agreement increasing the
Company's borrowing capacity from $35 million to $50 million and
extended the maturity date to December 31, 1997. As of April 1,
1995 borrowings under the line of credit totaled $42.4 million.
In December 1994, $3.6 million of the Company's 7%
Convertible Subordinated Debentures were converted into Common
Stock by the holders of such notes. In connection with the
conversion, the Company increased Stockholders Equity by $3.5
million net of related unamortized deferred debt issue costs.
Subsequent to April 1, 1995 an additional $4.5 million of the
Company's 7% Convertible Subordinated Debentures were converted
into Common Stock by the holders of such notes.
<PAGE>
4. Commitments and Contingencies
Litigation
In certain circumstances, where management and legal
counsel believe that a loss has been incurred, the Company has
recorded an estimate of such loss. The Company is also engaged
in various other legal actions arising in the ordinary course of
business which, in the opinion of management and legal counsel,
the Company has adequate legal defenses or insurance coverage
with respect to these actions and believes that the ultimate
outcome will not have a material adverse affect on the Company's
consolidated financial statements.
Letters of Credit
As of April 1, 1995, the Company has approximately $6
million of outstanding letters of credit. The outstanding
letters of credit reduce the Company's borrowing capacity under
its line of credit agreement
5. Segment Information
The Company operates in the contract foodservice
management and restaurant industry segments. The table below
presents selected results of operations for these segments for
the quarters and nine months ended April 1, 1995 and April 2,
1994
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Sales from profit and
loss contracts $ 54,006 $ 40,106 $135,863 $113,027
Management fees 1,536 1,876 4,134 4,822
Restaurant sales-Fuddruckers 27,822 20,949 79,747 63,353
Restaurant sales - Champps 1,865 5,538
Franchising income 1,178 866 3,292 3,077
-------- -------- -------- --------
Total revenues $ 86,407 $ 63,797 $228,574 $184,279
======== ======== ======== ========
Foodservice Segment:
Sales from profit and
loss contracts $ 54,006 $ 40,106 $135,863 $113,027
Operating expenses:
Labor costs 18,688 13,537 46,048 38,964
Product costs 19,919 14,392 48,582 39,939
Other operating expenses 8,385 6,624 21,326 17,411
Depreciation and amortization 1,223 1,031 3,076 2,592
-------- -------- -------- --------
Income from profit and
loss contracts 5,791 4,522 16,831 14,121
Management fees 1,536 1,876 4,134 4,822
-------- -------- -------- --------
Income from foodservice
operations 7,327 6,398 20,965 18,943
-------- -------- -------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Fuddruckers Segment:
Sales from restaurant
operations 27,822 20,949 79,747 63,353
Operating expenses:
Labor costs 8,154 6,014 23,235 18,356
Product costs 7,712 5,770 22,014 17,585
Other operating expenses 7,129 5,399 20,899 16,427
Depreciation and amortization 1,322 998 3,766 2,980
------- ------- ------- -------
Income from restaurant
operations 3,505 2,768 9,833 8,005
Franchising income 1,178 866 3,292 3,077
------- ------- ------- -------
Income from restaurant and
franchising operations 4,683 3,634 13,125 11,082
------- ------- ------- -------
Champps Segment:
Sales from restaurant
operations 1,865 5,538
Operating expenses:
Labor costs 638 1,877
Product costs 545 1,614
Other operating expenses 313 1,005
Depreciation and amortization 41 169
------- -------
Operating contribution 328 873
------- -------
Income from operations before
selling, general and
administrative expenses 12,338 10,032 34,963 30,025
------- ------- ------- -------
Selling, general and
administrative expenses:
Foodservice segment 2,103 2,063 6,299 5,673
Restaurant segment 2,152 1,441 6,194 4,854
Corporate (1) 3,441 3,279 9,040 9,840
Champps 213 487
------- ------- ------- -------
Total 7,909 6,783 22,020 20,367
------- ------- ------- -------
Operating income 4,429 3,249 12,943 9,658
Interest expense 1,097 686 2,958 1,991
Interest income (92) (57) (196) (196)
Minority interests 13 15 (91) 146
------- ------- ------- -------
Income before income taxes 3,411 2,605 10,272 7,717
Income taxes 1,272 941 3,787 2,708
------- ------- ------- -------
Net income $ 2,139 $ 1,664 $ 6,485 $ 5,009
======= ======= ======= =======
</TABLE>
(1) Includes depreciation expense of $210, $187, $624 and $526
in the quarters and nine months ended April 1, 1995 and April
2, 1994, respectively.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Summary
Net income for the quarter ended April 1, 1995
increased 29% to $2.1 million on revenues of $86.4 million as
compared to net income of $1.7 million on revenues of $63.8
million for the quarter ended April 2, 1994. Fully diluted
earnings per share increased 22% to $0.28 for the quarter
compared to $0.23 for the comparable quarter of last year.
Net income for the nine month period ended April 1,
1995 increased 29% to $6.5 million on revenues of $228.6 million
as compared to net income of $5.0 million on revenues of $184.3
million for the period ended April 2, 1994. Fully diluted
earnings per share increased 21% to $0.85 during the nine months
ended April 1, 1995 compared to $0.70 for the comparable period
of last year.
Foodservice Segment
The following table sets forth, for the periods
presented, certain financial information for the foodservice
segment. For further information regarding the foodservice
segment, see Note 5 of Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales from profit and
loss contracts 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Labor costs (34.6) (33.8) (33.9) (34.5)
Product costs (36.9) (35.9) (35.7) (35.3)
Other operating expenses (15.5) (16.5) (15.7) (15.4)
Depreciation and amortization (2.3) (2.5) (2.3) (2.3)
-------- -------- -------- --------
Income from profit and
loss contracts 10.7% 11.3% 12.4% 12.5%
======== ======== ======== ========
Total foodservice revenues $ 55,542 $ 41,982 $139,997 $117,849
Managed volume:
Management fee contracts $ 29,283 $ 30,032 $ 79,407 $ 84,016
Profit and loss contracts 54,006 40,106 135,863 113,027
-------- -------- -------- --------
Total managed volume $ 83,289 $ 70,138 $215,270 $197,043
======== ======== ======== ========
Income from foodservice operations $ 7,327 $ 6,398 $ 20,965 $ 18,943
======== ======== ======== ========
Income from foodservice operations
as a percentage of managed volume:
Management fee contracts 5.2% 6.2% 5.2% 5.7%
Profit and loss contracts 10.7% 11.3% 12.4% 12.5%
Income from foodservice operations
as a percentage of total
managed volume 8.8% 9.1% 9.7% 9.6%
Income from foodservice operations
as a percentage of foodservice
revenues 13.2% 15.2% 15.0% 16.1%
</TABLE>
<PAGE>
Total revenues in the foodservice segment for the quarter and
nine months ended April 1, 1995 increased $13.6 million or 32%
and $22.1 million or 19%, respectively, as compared to the
comparable periods in fiscal 1994. These increases included the
impact of 26 new contracts sold in fiscal 1994, 27 new contracts
added in fiscal 1995 and revenues of $9.6 million from the 110
contracts acquired from ServiceMaster Management Services
L.P.("ServiceMaster"), on February 8, 1995, offset, partially,
by certain contracts lost and one less week of operations during
the nine month period.
Income from foodservice operations increased 15% to
$7.3 million during the quarter ended April 1, 1995 as compared
to $6.4 million in the comparable quarter of last year. For the
nine month period ended April 1, 1995, income from foodservice
operations increased 11% to $21.0 million compared to $18.9
million in the comparable period of last year. While income
from foodservice operations increased, income from profit and
loss contracts, as a percentage of sales, decreased slightly
during the quarter and nine month periods ended April 1, 1995 as
a result of lower operating margins associated with the
contracts acquired from ServiceMaster, which is typical of the
educational foodservice industry and consistent with Daka's
operating margins in its existing educational foodservice
business. Operating margins, excluding the acquired contracts
remained relatively consistent during the quarter and nine month
periods ended April 1, 1995 as compared to last year.
Restaurant Segment - Fuddruckers
The following table sets forth, for the periods
presented, certain financial information for the Fuddruckers
segment. For further information regarding the Fuddruckers
segment, see Note 5 of Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales from Fuddruckers-owned
restaurants: 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Labor costs (29.3) (28.7) (29.2) (29.0)
Product costs (27.7) (27.5) (27.6) (27.8)
Other operating expenses (25.6) (25.8) (26.2) (25.9)
Depreciation and amortization (4.8) (4.8) (4.7) (4.7)
-------- -------- -------- --------
Income from restaurant operations 12.6% 13.2% 12.3% 12.6%
======== ======== ======== ========
Restaurant sales $ 27,822 $ 20,949 $ 79,747 $ 63,353
======== ======== ======== ========
Income from restaurant operations $ 3,505 $ 2,768 $ 9,833 $ 8,005
Franchising income 1,178 866 3,292 3,077
-------- -------- -------- --------
Income from restaurant and
franchising operations $ 4,683 $ 3,634 $ 13,125 $ 11,082
======== ======== ======== ========
Number of restaurants (end of period):
Fuddruckers-owned 86 65
Franchised 70 81
-------- --------
Total restaurants 156 146
======== ========
</TABLE>
<PAGE>
Sales in Fuddruckers-owned restaurants increased $6.8
million or 33% to $27.8 million during the quarter ended April
1, 1995 compared to the quarter ended April 2, 1994. This
increase is due to a combination of $3.6 million of sales at 13
restaurants acquired from franchisees during the second half of
fiscal 1994, a 0.2% increase in comparable restaurant sales,
$3.8 million of sales at 13 new restaurants opened after the
second quarter of last year, offset, in part, by a $.5 million
decrease in sales resulting from the closing of two restaurants.
Sales in Fuddruckers-owned restaurants increased
$16.4 million or 26% to $79.7 million during the nine months
ended April 1, 1995 compared to the comparable period last year.
This increase is due to a combination of $11.0 million of sales
at 13 restaurants acquired from franchisees during the second
half of fiscal 1994, a 1.0% increase in comparable restaurant
sales, $7.9 million of sales at 13 new restaurants opened after
the second quarter of last year, offset, in part, by a $1.3
million decrease in sales resulting from the closing of two
restaurants and one less week of operations during the first
nine months of fiscal 1995 as compared to fiscal 1994.
Income from restaurant and franchise operations
increased to $4.7 million and $13.1 million respectively for the
quarter and nine month periods ended April 1, 1995 as compared
to $3.6 million and $11.1 million respectively during the
comparable quarter and nine month periods of last year despite
one less week of operations during the first nine months of
fiscal year 1995. Income from restaurant operations as a
percentage of sales from Fuddruckers-owned restaurants decreased
by 0.6% during the quarter ended April 1, 1995 as compared to
last year, and remained relatively consistent during the nine
month period ended April 1, 1995 as compared to last year.
Restaurant Segment - Champps
The following table sets forth certain financial
information for the Champps segment. Comparable data for
Champps is not available as the restaurants were acquired on
March 29, 1994.
<TABLE>
<CAPTION>
Nine
Quarter ended Months ended
April 1, April 1,
1995 1995
<S> <C> <C>
Sales from Champps restaurants 100.0% 100.0%
Operating expenses:
Labor costs (34.2) (33.9)
Product costs (29.2) (29.1)
Other operating expenses (16.8) (18.1)
Depreciation and amortization (2.2) (3.1)
-------- --------
Income from restaurant operations 17.6% 15.8%
======== ========
Restaurant sales $ 1,865 $ 5,538
======== ========
Income from restaurant operations $ 328 $ 873
======== ========
Number of restaurants 2
========
</TABLE>
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses
increased $1.1 million to $7.7 million for the quarter ended
April 1, 1995 from $6.6 million in the quarter ended April 2,
1994. For the nine month period ended April 1, 1995, selling,
general and administrative expenses increased $1.6 million to
$21.4 million compared to $19.8 million in the comparable period
of last year. Selling, general and administrative expenses as a
percentage of managed volume, which includes managed volume in
the foodservice segment as well as sales at Company-owned
Fuddruckers and Champps restaurants, decreased to 6.8% and 7.1%
during the quarter and nine month periods ended April 1, 1995 as
compared to 7.2% and 7.6% in the comparable periods of last year.
Interest Expense
Interest expense increased $.4 million to $1.1
million during the quarter and increased $.9 million to $2.9
million during the nine month period ended April 1, 1995
compared to last year. The increase is a result of an overall
higher level of debt due to borrowings under the Company's line
of credit agreement used to fund capital expenditures in both
the foodservice and Fuddruckers segments, as well as a portion
of the purchase price of the acquired foodservice contracts, and
higher interest rates.
Income Taxes
The Company's effective tax rate increased to 37.3%
for the quarter ended April 1, 1995 as compared to 36.1% for the
comparable period of last year and 36.9% for the nine months
ended April 1, 1995 as compared to 35.1% for the comparable
period of last year. The increase was primarily due to higher
pretax income combined with the fact that the amount of net
operating loss carryforward which can be utilized is fixed at
$1.1 million per year, thereby diluting the effect of the net
operating loss carryforward as a percentage of pretax income.
In addition, the Targeted Jobs Tax Credit, which has been a
significant factor in lowering the Company's effective tax rate
was eliminated effective December 31, 1994.
Earnings Per Share
During the quarter primary earnings per share
increased 17% as compared to last year and for the nine months
primary earnings per share increased 25% while fully diluted
earnings per share increased 22% and 21% compared to last year
during the quarter and nine month periods respectively due to
increased net income.
<PAGE>
FINANCIAL CONDITION
Working capital amounted to $17.0 million at April 1,
1995, an increase of $11.7 million, compared to working capital
of $5.3 million at July 2, 1994. Cash and equivalents increased
$7.5 million to $12.6 million as of April 1, 1995 as compared to
$5.0 million at July 2, 1994. The increase in cash and
equivalents and working capital is primarily due to the
acquisition of the current assets associated with the acquired
foodservice contracts in exchange for the assumption of certain
current liabilities and a deferred payment due on August 7,
1995. Excess cash flow, generated primarily by the collection
of the acquired accounts receivable, cannot be distributed by
DRLP until such time as the deferred payment to ServiceMaster is
made and cannot therefore be used by Daka to pay down existing
borrowings under its line of credit.
As of April 1, 1995 the Company had approximately
$26.6 million of available borrowing capacity remaining on its
$75 million line of credit. During the quarter ended April 1,
1995 the Company used approximately $10.1 million of its
borrowing capacity to fund the acquisition described in Note 2
to the Consolidated Financial Statements.
Capital expenditures for the nine month period ended
April 1, 1995 aggregated approximately $22.7 million. Such
expenditures included the construction of new Fuddruckers
restaurants, upgrades at existing restaurants and improvements
at facilities of foodservice clients. The Company plans to
complete 25 new Fuddruckers-owned restaurants during fiscal 1995
and to continue to reorient facilities of foodservice clients to
a more retail restaurant environment.
The Company believes that the remaining borrowing
capacity of approximately $26.6 million under its line of credit
agreement and the $30 million sale leaseback facility with FFCA
together with operating cash flow will provide sufficient
liquidity to meet its obligations on a timely basis and to fund
capital expenditures for the foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
10.25 Second Amendment Agreement dated as of March 21, 1995
among DAKA International, Inc. and the Chase Manhattan Bank, N.A.
11 Computation Regarding Per Share Earnings
(b) Reports on Form 8-K
The Company filed Form 8-K/A on April 21, 1995 with respect
to the acquisition described in Note 2 to the Consolidated
Financial Statements.
The Company filed Form 8-K on February 23, 1995 with respect
to the acquisition described in Note 2 to the Consolidated
Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
DAKA INTERNATIONAL, INC.
(Registrant)
By: /s/Michael A. Woodhouse
--------------------------
Michael A. Woodhouse
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Principal
Accounting Officer)
Date: May 12, 1995
SECOND AMENDMENT AGREEMENT
dated as of March 21, 1995
among
DAKA INTERNATIONAL, INC.
SUBSIDIARY GUARANTORS
THE BANKS SIGNATORY HERETO
and
THE CHASE MANHATTAN BANK, N.A.,
as Agent
<PAGE>
SECOND AMENDMENT AGREEMENT
SECOND AMENDMENT AGREEMENT (this "Agreement") dated
as of March 21, 1995 among DAKA INTERNATIONAL, INC., a
corporation organized under the laws of Delaware (the
"Borrower"); each of the Subsidiaries of the Borrower which is a
signatory hereto (collectively the "Subsidiary Guarantors" and,
together with the Borrower, the "Obligors"); THE CHASE MANHATTAN
BANK, N.A., a national banking association organized under the
laws of the United States of America and SHAWMUT BANK, N.A., a
national banking association organized under the laws of the
United States of America (collectively the "Existing Banks");
MELLON BANK, N.A., a national banking association organized
under the laws of the United States of America and THE FIRST
NATIONAL BANK OF BOSTON, a national banking association
organized under the laws of the United States of America
(collectively the "New Banks" and, together with the Existing
Banks, the "Banks"); and THE CHASE MANHATTAN BANK, N.A., a
national banking association organized under the laws of the
United States of America, as agent for the Banks (in such
capacity, together with its successors in such capacity, the
"Agent").
WHEREAS, the Borrower, certain of the Subsidiary
Guarantors, the Existing Banks and the Agent have entered into
that certain Credit Agreement dated as of October 13, 1993 (as
amended and restated by that certain Amended and Restated Credit
Agreement dated as of April 29, 1994, as amended by that certain
First Amendment Agreement dated as of December 30, 1994 and as
in effect prior to the effectiveness of this Agreement, the
"Existing Credit Agreement," and, as amended by this Agreement,
the "Amended Credit Agreement") pursuant to which the Existing
Banks have extended credit to the Obligors evidenced by certain
Promissory Notes dated October 13, 1993 (as amended and restated
on April 1, 1994 and as amended and restated on January 30, 1995
and as in effect prior to the effectiveness of this Agreement,
the "Existing Notes," and, as amended and restated by this
Agreement, the "Amended Notes") issued by the Borrower and
guarantied by the Subsidiary Guarantors;
WHEREAS, each New Bank has agreed to become a Bank
party to the Amended Credit Agreement and to provide Loans to
and to participate in Letters of Credit issued for the benefit
of the Borrower up to the amount of its Commitment;
WHEREAS, Daka Restaurants, L.P. has entered into
that certain Business Transfer Agreement dated February 8, 1995
(the "Business Transfer Agreement") with ServiceMaster
Management Services, L.P. ("ServiceMaster") pursuant to which
Daka Restaurants, L.P. purchased certain of the food service
contracts, property, equipment, cash, accounts receivable and
inventory relating to the educational food service division of
ServiceMaster (the "ServiceMaster Acquisition");
<PAGE>
WHEREAS, the Borrower entered into a Put and Call
Agreement dated February 8, 1995 (the "Put and Call Agreement")
with ServiceMaster pursuant to which the Borrower may be
required to purchase from ServiceMaster its equity interest in
Daka, L.P. (the "Put and Call");
WHEREAS, the Borrower, the Subsidiary Guarantors,
the Banks and the Agent have agreed to enter into this Agreement
and the Borrower has agreed to issue the Amended Notes to
provide for, among other things, an increase in the aggregate
Commitments to $75,000,000 and modification of certain covenants
and definitions contained in the Existing Credit Agreement; and
WHEREAS, the Facility Documents, as amended and
supplemented by this Agreement (including, without limitation,
this Agreement, the Amended Credit Agreement and the Amended
Notes) and as each may be amended or supplemented from time to
time, are referred to herein as the "Amended Facility Documents".
NOW THEREFORE, for valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1. AMENDMENTS TO EXISTING AGREEMENTS.
Section 1.01. Amendments to Existing Credit
Agreement. Each of the Obligors and, subject to the
satisfaction of the conditions set forth in Article 3, the Agent
and the Banks hereby consents and agrees to the amendments to
the Existing Credit Agreement set forth below:
(a) The definition of "Commitment" in Section
1.01 of the Existing Credit Agreement is hereby amended and
restated as follows:
"Commitment" means, with respect to each Bank,
the obligation of such Bank to make its Loans and participate in
its Pro Rata Share of Letter of Credit Obligations under this
Agreement in the aggregate principal amount following, as such
amount may be reduced or otherwise modified from time to time:
The Chase Manhattan Bank, N.A.: $30,000,000;
Shawmut Bank, N.A.: $15,000,000;
Mellon Bank, N.A.: $15,000,000;
The First National Bank of Boston: $15,000,000;
Total: $75,000,000.
<PAGE>
(b) The definition of "Common Stock Price" is
hereby added in appropriate alphabetical order to Section 1.01
of the Existing Credit Agreement to read as follows:
"Common Stock Price" means, at any time, as to
the Common Stock of the Borrower, par value $.01 per share, the
average of the closing prices of such security's sales on all
domestic securities exchanges on which such security may at the
time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or,
if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ system
as of 4:00 p.m., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of
the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor
organization.
(c) The definition of "Consolidated Funded Debt" is
hereby added in appropriate alphabetical order to Section 1.01
of the Existing Credit Agreement to read as follows:
"Consolidated Funded Debt" means, at any time, the
aggregate amount, without duplication, of (a) indebtedness of
the Borrower and its Subsidiaries for borrowed money (as
reflected on the consolidated financial statements of the
Borrower and its Subsidiaries), (b) indebtedness of the Borrower
and its Subsidiaries for the deferred purchase price of Property
or services (except trade payables in the ordinary course of
business), (c) obligations of the Borrower and its Subsidiaries
arising under acceptance facilities, (d) obligations secured by
any Lien on Property of the Borrower and its Subsidiaries (as
reflected on the consolidated financial statements of the
Borrower and its Subsidiaries) and (e) obligations of the
Borrower and its Subsidiaries as lessee under Capital Leases (as
reflected on the consolidated financial statements of the
Borrower and its Subsidiaries), in each case as determined on a
consolidated basis in accordance with GAAP.
(d) The definition of "Debt to EBIT Ratio" is
hereby added in appropriate alphabetical order to Section 1.01
of the Existing Credit Agreement to read as follows:
"Debt to EBIT Ratio" means, at any time, the ratio
of (a) Consolidated Funded Debt (other than the principal amount
of the DAKA Subordinated Notes if and only if the Common Stock
Price at such time is greater than $12 per share (subject to
equitable adjustment whenever there shall occur a stock split,
stock dividend, combination, recapitalization, reclassification
or other similar event)) to (b) Consolidated EBIT for the
immediately preceding four fiscal quarters of the Borrower, as
determined at such time.
<PAGE>
(e) The definition of "Margin" in Section 1.01
of the Existing Credit Agreement is hereby amended and restated
to read as follows:
"Margin" means, for each type of Loan, the
percentage for such type of Loan set forth opposite the range of
the Debt to EBIT Ratio in the schedule below as determined as
of the last day of each fiscal quarter of the Borrower, with
adjustments to become effective on the date of receipt by the
Agent of a Compliance Certificate of a senior financial officer
of the Borrower demonstrating the Debt to EBIT Ratio for such
fiscal quarter accompanied by the most recent financial
statements of the Borrower and its Subsidiaries required to be
furnished to the Banks under Section 7.08:
Margin
------
Debt to EBIT Ratio Variable Rate Fixed Rate
Loans Loans
(a) less than 1.50 to 1.00 0% .50%
(b) equal to or greater 0% .75%
than 1.50 to 1.00 and
less than 2.00 to 1.00
(c) equal to or greater 0% 1.00%
than 2.00 to 1.00 and
less than 3.00 to 1.00
(d) equal to or greater 0% 1.25%
than 3.00 to 1.00 and
less than 4.00 to 1.00
(e) equal to or greater .50% 1.75%
than 4.00 to 1.00
(f) The definition of "Required Banks" in
Section 1.01 of the Existing Credit Agreement is hereby amended
and restated to read as follows:
<PAGE>
"Required Banks" means, at any time while no
Loans or Letters of Credit are outstanding, Banks having at
least 60% of the aggregate amount of the Commitments and, at any
time while Loans or Letters of Credit are outstanding, Banks
holding at least 60% of the aggregate principal amount of the
Loans and the Letter of Credit Obligations.
(g) The definition of "Tangible Leverage Ratio" in
Section 1.01 of the Existing Credit Agreement is hereby deleted.
(h) The definition of "UCP" in Section 1.01 of the
Existing Credit Agreement is hereby amended to substitute "500"
in place of "400".
(i) Section 2.11(a) of the Existing Credit
Agreement is hereby amended and restated to read as follows:
"The Borrower shall pay to the Agent for the
account of each Bank a commitment fee on the daily average of
the result of (x) the unused Commitment of such Bank minus (y)
such Bank's Pro Rata Share of Letter of Credit Obligations, for
the period from and including the date hereof to the earlier of
the date the Commitments are terminated or the Termination Date
at a rate per annum equal to (i) if the Debt to EBIT Ratio is
less than 2.00 to 1.00, 1/4 of one percent or (ii) if the Debt
to EBIT Ratio is equal to or greater than 2.00 to 1.00, 3/8 of
one percent, calculated on the basis of a year of 360 days for
the actual number of days elapsed. The accrued commitment fee
shall be due and payable in arrears upon any reduction or
termination of the Commitments and on the last day of each
September, December, March and June."
(j) Section 8.01(d) of the Existing Credit
Agreement is hereby amended to add immediately prior to the ";"
at the end of such section "and (iii) if such Debt is secured,
such Debt is evidenced by a promissory note and such note
together with such security is pledged as collateral for the
Loans, the Letter of Credit Obligations and the other
obligations under the Facility Documents and (iv) if Debt is
evidenced by a promissory note or other instrument, such note is
pledged to the Agent as collateral for the Loans, the Letter of
Credit Obligations and the other obligations under the Facility
Documents".
(k) Section 9.02 of the Existing Credit
Agreement is hereby amended and restated to read as follows:
"Consolidated Tangible Net Worth shall not be
less than the sum of (a) $45,000,000 plus (b) for each fiscal
year of the Borrower ending on or after June 29, 1996, the
aggregate sum of the Fiscal Year Net Worth Increase Amounts for
each such fiscal year."
(l) Section 9.04 of the Existing Credit Agreement
is hereby amended to substitute "$100,000,000" in place of
"$75,000,000".
<PAGE>
(m) Section 13.01 of the Existing Credit Agreement
is hereby amended to substitute "any provision of this Agreement
or any other Facility Document" in place of "any provision of
this Agreement" and to substitute "," in place of "or"
immediately prior to subsection (f) and to add the following at
the end of subsection (f) ", (g) discharge any Subsidiary
Guarantor from its Unconditional Guaranty under Article 10
hereof or (h) release all or any part of the "Collateral" under
and as defined in each of the Security Documents (except for
sales otherwise allowed hereunder)."
(n) Section 13.03 of the Existing Credit Agreement
is hereby amended and restated to read as follows:
"The Obligors shall reimburse the Agent on demand
for all reasonable costs, expenses and charges (including,
without limitation, reasonable fees and charges of external
legal counsel for the Agent) in connection with the preparation
of, and any amendment, supplement, waiver or modification to (in
each case, whether or not consummated), this Agreement, any
other Facility Document and any other documents prepared in
connection herewith or therewith. The Obligors shall reimburse
the Agent and each Bank for all reasonable costs expenses and
charges (including, without limitation, reasonable fees and
charges of external legal counsel for the Agent and each Bank)
in connection with the enforcement or preservation of any rights
or remedies during the existence of an Event of Default
(including, without limitation, in connection with any
restructuring or insolvency or bankruptcy proceeding). The
Obligors agree to indemnify the Agent and each Bank and their
respective directors, officers, employees and agent from, and
hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them
arising out of or by reason of any investigation or litigation
or other proceedings (including any threatened investigation or
litigation or other proceedings) directly relating to this
Agreement or to any actual or proposed use by the Borrower of
the proceeds of the Loans or to the performance or enforcement
of this Agreement or the other Facility Documents, including,
without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation or
litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of
the negligence or wilful misconduct of the Person to be
indemnified)."
(o) Schedule I, Schedule II and Schedule III to the
Existing Credit Agreement is hereby amended and restated as set
forth in Schedule I, Schedule II and Schedule III hereto,
respectively.
<PAGE>
(p) Schedule A to the Security Agreement is hereby
amended and restated as set forth in Schedule IV hereto.
(q) Exhibit A to the Existing Credit Agreement is
hereby amended and restated as set forth in Exhibit A hereto.
Section 1.02. Amendment and Restatement of Existing
Notes. Each of the Borrower and, subject to the satisfaction of
the conditions set forth in Article 3, the Agent and the Banks
hereby consents and agrees to the amendment and restatement of
the Existing Notes, substantially in the form of the Amended
Notes set forth in Exhibit A to this Agreement. Such amendment
and restatement is incorporated herein by reference as if set
forth verbatim in this Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES.
Each of the Obligors hereby represents and
warrants that as of the Effective Date:
Section 2.01. Existing Representations and
Warranties. Each of the representations and warranties
contained in Article 6 of the Existing Credit Agreement, in
Article 3 of the Security Agreement, in Article 3 of the
Trademark Security Agreement and in Article 3 of the Pledge
Agreement are true and correct (except (w) for in all instances
transactions and changes not prohibited by the Amended Credit
Agreement, (x) Section 6.05 of the Existing Credit Agreement,
(y) an Amended Judgment dated December 5, 1994 in an aggregate
amount of $1,710,019.17 plus interest and attorney fees has been
entered against the Borrower and Daka, Inc., in favor of
Boulevard Associates, the enforcement of which the plaintiff has
verbally agreed not to pursue at this time and (z) the executed
financing statements delivered pursuant to clause (c) of Article
3 will be filed subsequent to the Effective Date).
Section 2.02. No Defaults. No event has occurred
and no condition exists which would constitute a Default or an
Event of Default under the Facility Documents, and no event has
occurred and no condition exists which would constitute a
Default or an Event of Default under the Amended Facility
Documents.
<PAGE>
Section 2.03. Corporate Power and Authority; No
Conflicts. The execution, delivery and performance by each of
the Obligors of the Amended Facility Documents to which it is a
party have been duly authorized by all necessary corporate
action and do not and will not: (a) require any consent or
approval of its stockholders; (b) contravene its charter or
by-laws; (c) violate any provision of, or require any filing
(other than the filing of the financing statements contemplated
by the Security Agreement and the filing of the trademark
assignment contemplated by the Trademark Security Agreement),
registration, consent or approval under, any law, rule,
regulation (including, without limitation, Regulation U), order,
writ, judgment, injunction, decree, determination or award
presently in effect having applicability to any Obligor; (d)
result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which any Obligor is a
party or by which it or its properties may be bound or affected
if such breach, default or failure to obtain consent could
reasonably be expected to have a Material Adverse Effect; (e)
result in, or require, the creation or imposition of any Lien
(other than as created under the Security Documents), upon or
with respect to any of the properties now owned or hereafter
acquired by any Obligor; or (f) cause any Obligor to be in
default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument if such default could
reasonably be expected to have a Material Adverse Effect.
Section 2.04. Legally Enforceable Agreements. Each
Amended Facility Document to which any Obligor is a party has
been duly executed and delivered by such Obligor. Each Amended
Facility Document to which any Obligor is a party is a legal,
valid and binding obligation of such Obligor enforceable against
such Obligor in accordance with its terms, except to the extent
that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights
generally.
Section 2.05. Financial Statements. The
consolidated balance sheet of the Borrower and its Subsidiaries,
together with the consolidating balance sheets setting forth a
minimum of two separate consolidated groups for Daka, Inc, and
Fuddruckers, Inc. and their respective Subsidiaries, as at July
2, 1994, and the related consolidated income statement and
statements of cash flows and changes in stockholders' equity of
the Borrower and its Subsidiaries, together with the
consolidating income statements setting forth a minimum of two
separate consolidated groups for Daka, Inc, and Fuddruckers,
Inc. and their respective Subsidiaries, for the fiscal year then
ended, and the accompanying footnotes, together with the opinion
on the consolidated statements of Deloitte & Touche, independent
certified public accountants, and the interim consolidated
balance sheet of the Borrower and its Subsidiaries, together
with the consolidating balance sheets setting forth a minimum of
two separate consolidated groups for Daka, Inc, and Fuddruckers,
Inc. and their respective Subsidiaries, as at December 31, 1994,
and the related consolidated income statement and statements of
cash flows and changes in stockholders' equity of the Borrower
and its Subsidiaries, together with the consolidating income
statements setting forth a minimum of two separate consolidated
groups for Daka, Inc, and Fuddruckers, Inc. and their respective
Subsidiaries, for the six month period then ended, copies of
which have been furnished to each of the Banks, are complete and
correct and fairly present the financial condition of the
Borrower and its Subsidiaries at such dates and the results of
the operations of the Borrower and its Subsidiaries for the
periods covered by such statements, all in accordance with GAAP
consistently applied. There are no liabilities of the Borrower
or any of its Subsidiaries, fixed or contingent, which are
material but are not reflected in the financial statements or in
the notes thereto and which would be required to be recorded in
such financial statements or notes in accordance with GAAP,
other than liabilities arising in the ordinary course of
business since December 31, 1994. No information, exhibit or
report furnished by the Borrower or any of its Subsidiaries to
the Banks in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state
a material fact or any fact necessary to make the statements
contained therein not materially misleading. Since December 31,
1994, there has been no change which could reasonably be
expected to have a Material Adverse Effect.
<PAGE>
ARTICLE 3. CONDITIONS PRECEDENT.
The effectiveness of this Agreement is subject
to the condition precedent that the Agent shall have received on
or before March 21, 1995 (the "Effective Date") each of the
following, in form and substance satisfactory to the Agent and
its counsel:
(a) counterparts of this Agreement executed by each
of the Borrower, the Subsidiary Guarantors, the Banks and the
Agent;
(b) the Amended Notes executed by the Borrower;
(c) evidence that all financing statements to
perfect the Liens created by the Security Agreement in all
locations listed on Schedule IV have been executed and delivered;
(d) the Assumption Agreement dated as of February
17, 1995 executed by Daka Restaurants, L.P. and the Second
Amended and Restated Pledge Agreement dated as of February 17,
1995 executed by the Borrower, Daka, Inc., Fuddruckers, Inc. and
Casual Dining Ventures, Inc.;
(e) certificates of the Secretary or Assistant
Secretary of each of the Obligors, dated the Effective Date, (i)
attesting to all corporate or partnership action taken by such
Obligor, including resolutions of its Board of Directors or the
Board of Directors of its general partner authorizing the
execution, delivery and performance of each of the Amended
Facility Documents to which it is a party and each other
document to be delivered pursuant to this Agreement, (ii)
certifying the names and true signatures of the officers of such
Obligor authorized to sign the Amended Facility Documents to
which it is a party and the other documents to be delivered by
such Obligor under this Agreement and (iii) verifying that the
charter and by-laws or partnership agreement of such Obligor
attached thereto are true, correct and complete as of the date
thereof;
<PAGE>
(f) a certificate of a duly authorized officer of
each of the Obligors, dated the Effective Date, stating that the
representations and warranties in Article 2 are true and correct
on such date as though made on and as of such date and that no
event has occurred and is continuing which constitutes a Default
or Event of Default;
(g) good standing certificates with respect to each
Obligor certified by the Secretary of State of its jurisdiction
of incorporation or organization, and evidence that each of the
Obligors is qualified as a foreign corporation or partnership in
every other jurisdiction in which it does business where the
failure to so qualify could reasonably be expected to have a
Material Adverse Effect;
(h) opinions of Goodwin, Procter & Hoar, outside
counsel for the Obligors, and Sheinfeld, Maley & Kay, special
Texas counsel to Viand Restaurants, Inc. and Fuddruckers, Inc.,
each dated the Effective Date, in substantially the form of
Exhibit B and as to such other matters as the Agent or any Bank
may reasonably request; and
(i) evidence of the consent of First Capital
Corporation of Chicago and Cross Creek Partners I to the
incurrence of the obligations of the Obligors hereunder and
under the other Facility Documents.
On the Effective Date, each of the Banks shall
surrender to the Borrower the Existing Notes held by it under
the Existing Credit Agreement, in each case marked "Replaced".
ARTICLE 4. CONSENT.
Subject to the satisfaction of the conditions
set forth in Article 3 hereof, notwithstanding Section 8.01,
Section 8.02 and Section 8.11 of the Existing Credit Agreement,
each of the Agent and the Banks hereby consents to (a) the
ServiceMaster Acquisition and to the incurrence of Debt in
connection with the ServiceMaster Acquisition by Daka
Restaurants, L.P. and the Borrower to ServiceMaster pursuant to
the Business Transfer Agreement in an amount equal to the "DRLP
Payoff Obligation" (as defined in the Business Transfer
Agreement) which Debt is estimated to be not greater than
$15,000,000 is non-interest bearing except if unpaid after the
date it becomes due, is unsecured and is not required to be
repaid prior to August 7, 1995 except in the event of default
and acceleration of indebtedness of any of the Obligors in
excess of $5,000,000, and (b) the incurrence by the Borrower of
obligations under the Put and Call Agreement. Each of the Agent
and the Banks agrees that the ServiceMaster Acquisition and the
Put and Call shall not be counted towards the $12,500,000 annual
limitation contained in the definition of "Acceptable
Acquisition" in Section 1.01 of the Existing Credit Agreement.
<PAGE>
ARTICLE 5. MISCELLANEOUS.
Section 5.01. Defined Terms. The terms used herein
and not defined herein shall have the meanings assigned to such
terms in the Existing Credit Agreement.
Section 5.02. Reaffirmation. Each of the Obligors
acknowledges that the Liens granted to the Agent under the
Security Documents in and to the collateral described therein
secures all obligations of each of the Obligors under the
Amended Credit Agreement, the Amended Notes and the other
Amended Facility Documents, including, without limitation, all
liabilities and obligations under the Loans as herein modified
and increased. All references to "Note" or "Notes" in any
Facility Document shall be deemed to be to the Amended Notes.
All references to "Secured Obligations" in any Facility Document
shall be deemed to include all liabilities and obligations under
the Loans as herein modified and increased. Each of the
Obligors further acknowledges and reaffirms all of its other
respective obligations and duties under the Amended Facility
Documents to which it is a party.
Section 5.03. Nonwaiver. The terms of this
Agreement shall not operate as a waiver by the Agent or the
Banks, or otherwise prejudice the rights, remedies or powers of
the Agent or the Banks, under the Amended Facility Documents or
under applicable law. Except as expressly provide herein: (a)
no terms and provisions of the Facility Documents are modified
or changed by this Agreement; and (b) the terms and provisions
of the Facility Documents shall continue in full force and
effect.
Section 5.04. Amendments and Waivers. Any provision
of this Agreement may be amended or modified only by an
instrument in writing signed by the Borrower, the Agent and the
Required Banks, or by the Borrower and the Agent acting with the
consent of the Required Banks and any provision of this
Agreement may be waived by the Required Banks or by the Agent
acting with the consent of the Required Banks.
Section 5.05. Notices. Unless the party to be
notified otherwise notifies the other party in writing as
provided in this Section, and except as otherwise provided in
this Agreement, notices shall be given to the Agent by
telephone, confirmed by telex, telecopy or other writing, and to
the Banks and to the Obligors by ordinary mail or telecopier
addressed to such party at its address on the signature page of
this Agreement. Notices shall be effective: (a) if given by
mail, 72 hours after deposit in the mails with first class
postage prepaid, addressed as aforesaid; and (b) if given by
telecopier, when the telecopy is transmitted to the telecopier
number as aforesaid; provided that notices to the Agent and the
Banks shall be effective upon receipt.
Section 5.06. Table of Contents; Headings. Any
table of contents and the headings and captions hereunder are
for convenience only and shall not affect the interpretation or
construction of this Agreement.
Section 5.07. Severability. The provisions of this
Agreement are intended to be severable. If for any reason any
provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any
other jurisdiction or the remaining provisions hereof in any
jurisdiction.
<PAGE>
Section 5.08. Counterparts. This Agreement may be
executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing any such
counterpart.
Section 5.09. Integration. The Amended Facility
Documents set forth the entire agreement among the parties
hereto relating to the transactions contemplated thereby and
supersede any prior oral or written statements or agreements
with respect to such transactions.
SECTION 5.10. GOVERNING LAW. THIS AGREEMENT SHALL
BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.
Section 5.11. Loans. All Loans (as defined in the
Existing Credit Agreement) which are outstanding under the
Existing Credit Agreement immediately prior to the Effective
Date shall be deemed to be Loans made under the Amended Credit
Agreement at the Effective Date the type and Interest Period of
which shall be determined by the mutual agreement of the
Borrower and the Banks and the Borrower agrees to provide to the
Agent for the account of each Bank compensation in accordance
with Section 3.05 of the Amended Credit Agreement.
Section 5.12. Assignment of Loans. Not later than
12:00 noon, New York, New York time on the Effective Date, the
New Banks shall, through their respective Lending Offices and
subject to the conditions of this Agreement, transfer to the
Agent for the account of the Existing Banks an amount in
immediately available funds equal to its Pro Rata Share of the
outstanding Loans and the other amounts owing to the Existing
Banks under the Existing Credit Agreement, the Existing Notes
and the other Facility Documents. On and after the Effective
Date, each New Bank shall be considered a Bank for all purposes
under the Amended Credit Agreement and the other Facility
Documents and shall be liable for all obligations of a Bank
thereunder, including, without limitation, the obligation to
make Loans under Article 2 and to take a Participating Interest
in the Letters of Credit under Article 3. Interest shall accrue
on the outstanding Loans of the New Banks and commitment fees
shall accrue with respect to the unused Commitment of the New
Banks on and after the Effective Date; provided that the New
Banks shall not be entitled to any interest or commitment fees
accruing prior to the Effective Date.
Section 5.13. Maximum Amount of Liability. To the
extent that mandatory and non-waivable provisions of applicable
law (including but not limited to any applicable laws pertaining
to fraudulent conveyance and any applicable business corporation
and partnership laws) otherwise would render the full amount of
any Subsidiary Guarantor's obligations under the Amended Credit
Agreement and under the other Facility Documents invalid or
unenforceable, such Subsidiary Guarantor's obligations under the
Amended Credit Agreement and under the other Facility Documents
shall be limited to the maximum amount which does not result in
such invalidity or unenforceability.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the day and year first
above written.
DAKA INTERNATIONAL, INC.
By___________________________________
Name:
Title:
FUDDRUCKERS, INC.
By___________________________________
Name:
Title:
VIAND RESTAURANTS, INC.
By___________________________________
Name:
Title:
NICOLLET 851 CORPORATION
By___________________________________
Name:
Title:
DAKA, INC.
By___________________________________
Name:
Title:
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
DAKA SCHOOL AND COLLEGE FOOD SERVICE, INC.
By___________________________________
Name:
Title:
DAKA EDUCATIONAL FOOD SERVICE, INC.
By___________________________________
Name:
Title:
FDR 100, INC.
By___________________________________
Name:
Title:
CASUAL DINING VENTURES, INC.
By___________________________________
Name:
Title:
ATLANTIC RESTAURANT VENTURES, INC.
By___________________________________
Name:
Title:
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
DAKA RESTAURANTS, L.P.
By its General Partner, Daka, Inc.
By___________________________________
Name:
Title:
Address for Notices:
One Corporate Place
55 Ferncroft Road
Danvers, Massachusetts 01923
Telecopier No.:(508) 774-1334
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
AGENT:
THE CHASE MANHATTAN BANK, N.A.
By____________________________________
Name:
Title:
Address for Notices:
4 Chase Metrotech Center
13th Floor
Brooklyn, NY 11245
Attention: New York Agency
with a copy to:
999 Broad Street
Bridgeport, Conn. 06604
Attention: Karim T. Assef
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
BANKS:
THE CHASE MANHATTAN BANK, N.A.
By____________________________________
Name:
Title:
Lending Office and Address for Notices:
999 Broad Street
Bridgeport, Conn. 06604
Attention: Karim T. Assef
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
BANKS:
SHAWMUT BANK, N.A.
By____________________________________
Name:
Title:
Lending Office and Address for Notices:
One Federal Street
Boston, MA 02211
Attention: David Splaine
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
BANKS:
MELLON BANK, N.A.
By____________________________________
Name:
Title:
Lending Office and Address for Notices:
One Boston Place
Boston, MA 02108
Attention: Joseph MacDonald
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
<PAGE>
BANKS:
THE FIRST NATIONAL BANK OF BOSTON
By____________________________________
Name:
Title:
Lending Office and Address for Notices:
New England Corporate Banking
Mail Stop 01-20-03
100 Federal Street
Boston, MA 02110
Attention: Susan Pardus-Galland
[SIGNATURE PAGE TO THE SECOND AMENDMENT AGREEMENT]
Exhibit 11
DAKA INTERNATIONAL, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
QUARTERS AND NINE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
<TABLE>
<CAPTION>
Quarters ended Nine Months ended
April 1, April 2, April 1, April 2,
<S> <C> <C> <C> <C>
Primary:
Net income 2,139 1,664 6,485 5,009
Net income available to
common stockholders 2,139 1,664 6,085 4,609
Weighted average number
of shares outstanding 4,091 3,762 3,896 3,755
Weighted average number
of options outstanding 269 177 251 147
------ ------ ------ ------
4,360 3,939 4,147 3,902
====== ====== ====== ======
Primary earnings per share:
Net income available to
common stockholders $ 0.49 $ 0.42 $ 1.47 $ 1.18
Fully Diluted:
Net income available to
common stockholders 2,139 1,664 6,085 4,609
Add back dividend on
Preferred Stock 400 400
Add back interest expense
on Convertible Notes,
after tax effect 275 337 912 991
------ ------ ------ ------
2,414 2,001 7,397 6,000
------ ------ ------ ------
Weighted average number
of shares outstanding 4,091 3,762 4,086 3,755
Weighted average number
of options outstanding 307 177 290 159
Shares issuable upon
conversion of
Preferred Stock 2,222 2,222 2,222 2,222
Shares issuable upon
conversion of Notes 2,095 2,396 2,095 2,396
------ ------ ------ ------
8,715 8,557 8,693 8,532
------ ------ ------ ------
Fully diluted earnings per share:
Net income $ 0.28 $ 0.23 $ 0.85 $ 0.70
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> APR-01-1995
<CASH> 12,575
<SECURITIES> 0
<RECEIVABLES> 37,575
<ALLOWANCES> 0
<INVENTORY> 10,458
<CURRENT-ASSETS> 64,328
<PP&E> 78,792
<DEPRECIATION> 0
<TOTAL-ASSETS> 170,531
<CURRENT-LIABILITIES> 47,330
<BONDS> 69,457
<COMMON> 42
0
1
<OTHER-SE> 42,500
<TOTAL-LIABILITY-AND-EQUITY> 170,531
<SALES> 221,148
<TOTAL-REVENUES> 228,574
<CGS> 186,600
<TOTAL-COSTS> 186,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,958
<INCOME-PRETAX> 10,272
<INCOME-TAX> 3,787
<INCOME-CONTINUING> 6,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,485
<EPS-PRIMARY> 1.47
<EPS-DILUTED> .85
</TABLE>
