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 December 31, 1994
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
February 8, 1995: 4,089,321
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
DAKA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, July 2,
1994 1994
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and equivalents $ 6,096 $ 5,040
Accounts and notes receivable, net 28,030 25,642
Inventories 8,524 7,730
Prepaid expenses and other current
assets 3,163 1,743
------- -------
Total current assets 45,813 40,155
------- -------
Property and equipment, net 76,499 63,763
Investments in and advances
to affiliates 173 80
Other assets, net 15,886 14,671
Deferred income taxes 184 186
------- -------
$138,555 $118,855
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 20,173 $ 16,988
Accrued expenses 14,051 16,501
Current portion of long-term debt 564 1,312
Deferred income taxes 76 85
------- -------
Total current liabilities 34,864 34,886
------- -------
Long-term debt 54,579 46,140
Other long-term liabilities 6,990 3,133
Minority interests 1,812 1,916
Stockholders' equity:
Series A Preferred Stock, $.01 par
value, authorized 1,000,000
shares; 100,000 shares issued
and outstanding at December 31,
1994 and July 2, 1994 1 1
Common Stock, $.01 par value;
authorized 20,000,000 shares,
issued and outstanding 4,089,172
shares at December 31, 1994 and
3,773,503 at July 2, 1994 42 38
Capital in excess of par value 34,196 30,616
Retained earnings 6,071 2,125
------- -------
Total stockholders' equity 40,310 32,780
------- -------
$138,555 $118,855
======== ========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
December January December January
31, 1994 1, 1994 31, 1994 1, 1994
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 74,572 $ 61,878 $137,455 $115,325
Management fees
and franchising
income 2,584 2,918 4,712 5,157
------- ------- ------- -------
77,156 64,796 142,167 120,482
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of sales and
operating expenses 62,508 51,834 115,117 96,946
Selling, general and
administrative
expenses 6,769 6,777 13,697 13,245
Depreciation and
amortization 2,554 2,202 4,839 3,882
Interest expense 1,079 670 1,861 1,305
Interest income (33) (52) (104) (139)
Minority interests (101) (14) (104) 131
------- ------- ------- -------
72,776 61,417 135,306 115,370
------- ------- ------- -------
Income before
income taxes 4,380 3,379 6,861 5,112
Income tax expense 1,616 1,195 2,515 1,767
------- ------- ------- -------
Net income 2,764 2,184 4,346 3,345
Preferred Stock
dividend 400 400 400 400
------- ------- ------- -------
Net income
available for
Common Stockholders $ 2,364 $ 1,784 $ 3,946 $ 2,945
======= ======= ======= =======
EARNINGS PER SHARE:
Primary $ .58 $ .46 $ .98 $ .76
Fully diluted $ .36 $ .30 $ .58 $ .47
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended December 31, 1994 and January 1, 1994
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
December January
31, 1994 1, 1994
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 4,346 $ 3,345
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 4,839 3,882
Minority interests (104) 131
Change in assets and liabilities:
Accounts and notes receivable (2,388) (17,656)
Inventories (711) (803)
Other assets (2,553) (3,252)
Accounts payable and
accrued expenses (290) 8,529
Other long-term liabilities 3,856 (557)
-------- --------
Net cash provided by
(used in) operating activities 6,995 (6,381)
-------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property and equipment (16,406) (2,983)
Proceeds from sale of
property and equipment 212 5
Investments in and
advances to affiliates (93)
Cash paid for acquisitions,
net of cash acquired of $12 and $142 (563) (9,771)
-------- --------
Net cash used in
investing activities (16,850) (12,749)
-------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Increase in line of credit 12,239 9,928
Payment of Preferred Stock dividend (400) (400)
Repayment of long-term debt (1,038) (1,063)
Other 110 30
Net cash provided by
financing activities 10,911 8,495
-------- --------
Net increase (decrease) in
cash and equivalents 1,056 (10,635)
Cash and equivalents,
beginning of period 5,040 14,383
-------- --------
Cash and equivalents, end of period $ 6,096 $ 3,748
======== ========
SUPPLEMENTAL CASH
FLOW DISCLOSURES:
Interest paid $ 1,837 $ 1,221
Taxes paid 3,638 1,380
<FN>
During the period ended December 31, 1994 the Company acquired
equipment by entering into capital leases in the amount of $107.
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six months ended December 31, 1994 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 (Accumalated 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 14,254 1 109 110
Preferred Stock
dividend (400) (400)
Shares issued
upon conversion
of certain
Convertible
Subordinated
Notes, net 301,415 3 3,471 3,474
Net income 4,346 4,346
------- --- --------- --- ------- ------- -------
Balance,
December 31,
1994 100,000 $ 1 4,089,172 $42 $34,196 $ 6,071 $40,310
======= === ========= === ======= ======= =======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
DAKA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended December 31, 1994 and January 1, 1994
(Dollars 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. and its
majority-controlled subsidiaries (the "Company"). Significant
intercompany balances and transactions have been eliminated in
consolidation.
Business
The Company, through its principal subsidiaries, Daka, Inc.
("Daka"), Fuddruckers, Inc. ("Fuddruckers") and Americana Dining
Corporation ("ADC"), operates 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 six months ended December 31, 1994 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, ended July 2, 1994 and ending July 1, 1995 are
referred to as 1994 and 1995, respectively. The six months
ended December 31, 1994 include 26 weeks of operations while the
six months ended January 1, 1994 included 27 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>
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 2,222,222 shares
issuable upon conversion of the Preferred Stock and the
2,094,418 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 Six Months Ended
December January December January
31, 1994 1, 1994 31, 1994 1, 1994
<S> <C> <C> <C> <C>
Primary 4,044 3,898 4,020 3,892
Fully diluted 8,633 8,530 8,627 8,524
</TABLE>
2. 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 pay a commitment fee of 1.5% of the
sale price of the property and will sell to and lease back from FFCA
up to 25 Fuddruckers restaurants to be constructed, in which
Fuddruckers has an ownership interest. 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". At December 31, 1994
the entire commitment was available for use.
In December 1994 the Company amended its revolving line of
credit which increases the Company's borrowing capacity from $35
million to $50 million, extends the maturity date to December
31, 1997 and amends certain loan covenants. At December 31,
1994 borrowings under the line of credit totaled $27.9 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.
3. SUBSEQUENT EVENTS
On February 8, 1995, Daka, through a newly formed 80% owned
subsidiary, Daka Restaurants L.P. ("DRLP"), acquired substantially
all of the assets and foodservice contracts comprising
ServiceMaster Management Services L.P.'s ("SMLP") educational
foodservice business. SMLP owns a 20% limited partnership
interest in DRLP. Daka, as the general partner, will be
responsible for providing day-to-day management for the 110
contracts acquired which generate annual managed volume of
approximately $80 million.
<PAGE>
The purchase price of $10.3 million for certain assets and
foodservice contracts was substantially all paid in cash at the
closing. In addition, Daka purchased certain working
capital assets such as cash on hand, inventory, accounts
receivable and prepaid expenses, and assumed certain liabilities
related to the acquired contracts. The purchase price of
approximately $10 million for the working capital assets,
less the liabilities assumed, will be paid to SMLP in cash
on August 7, 1995.
In connection with the formation of the partnership between Daka
and SMLP, the parties have entered into a Put/Call Agreement
whereby SMLP may require that Daka 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, and Daka may require SMLP
to sell its limited partnership interest to Daka after the fifth
anniversary of the formation of the partnership for a purchase price
of 120% of $2.6 million and any net undistributed earnings
of DRLP.
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.
Letter of Credit
As of December 31, 1994, the Company has a $3 million letter of
credit outstanding related to its workers compensation insurance
program. The outstanding letter of credit reduces the Company's
borrowing capacity under its line of credit agreement.
<PAGE>
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
six months ended December 31, 1994 and January 1, 1994
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
December January December January
31, 1994 1, 1994 31, 1994 1, 1994
<S> <C> <C> <C> <C>
Revenues:
Sales from profit
and loss contracts $ 47,094 $ 42,379 $ 81,857 $ 72,921
Management fees 1,483 1,703 2,598 2,946
Restaurant sales -
Fuddruckers 25,594 19,499 51,925 42,404
Restaurant sales -
Champps 1,884 3,673
Franchising income 1,101 1,215 2,114 2,211
-------- -------- -------- --------
Total revenues $ 77,156 $ 64,796 $142,167 $120,482
======== ======== ======== ========
Foodservice Segment:
Sales from profit and
loss contracts $ 47,094 $ 42,379 $ 81,857 $ 72,921
Operating expenses:
Labor costs 15,640 14,422 27,360 25,427
Product costs 16,631 15,174 28,663 25,547
Other operating
expenses 7,207 5,754 12,941 10,787
Depreciation and
amortization 1,006 922 1,853 1,561
-------- -------- -------- --------
Income from profit
and loss contracts 6,610 6,107 11,040 9,599
Management fees 1,483 1,703 2,598 2,946
-------- -------- -------- --------
Income from foodservice
operations 8,093 7,810 13,638 12,545
-------- -------- -------- --------
Fuddruckers Segment:
Sales from restaurant
operations 25,594 19,499 51,925 42,404
Operating expenses:
Labor costs 7,623 5,750 15,081 12,342
Product costs 7,038 5,464 14,302 11,815
Other operating
expenses 6,844 5,270 13,770 11,028
Depreciation and
amortization 1,270 1,079 2,444 1,982
-------- -------- -------- --------
Income from restaurant
operations 2,819 1,936 6,328 5,237
Franchising income 1,101 1,215 2,114 2,211
-------- -------- -------- --------
Income from restaurant
and franchising
operations 3,920 3,151 8,442 7,448
-------- -------- -------- --------
Champps Segment:
Sales from restaurant
operations 1,884 3,673
Operating expenses:
Labor costs 624 1,239
Product costs 548 1,069
Other operating
expenses 353 692
Depreciation and
amortization 65 128
-------- --------
Operating contribution 294 545
-------- --------
Income from operations
before selling, general and
administrative
expenses 12,307 10,961 22,625 19,993
-------- -------- -------- --------
Selling, general and
administrative expenses:
Foodservice segment 1,726 1,913 4,196 3,610
Restaurant segment 1,964 1,813 4,042 3,413
Corporate (1)<F1> 3,144 3,252 5,599 6,561
Champps 148 274
-------- -------- -------- --------
Total 6,982 6,978 14,111 13,584
-------- -------- -------- --------
Operating income 5,325 3,983 8,514 6,409
Interest expense 1,079 670 1,861 1,305
Interest income (33) (52) (104) (139)
Minority interests (101) (14) (104) 131
-------- -------- -------- --------
Income before
income taxes 4,380 3,379 6,861 5,112
Income taxes 1,616 1,195 2,515 1,767
Net income $ 2,764 $ 2,184 $ 4,346 $ 3,345
======== ======== ======== ========
<FN>
<F1>
(1) Includes depreciation expense of $213, $201, $414 and $339
in the quarters and six months ended December 31, 1994 and
January 1, 1994, respectively.
</FN>
</TABLE>
<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 December 31, 1994 increased 27%
to $2.8 million on revenues of $77.2 million as compared to net
income of $2.2 million on revenues of $64.8 million for the
quarter ended January 1, 1994. Fully diluted earnings per share
increased 20% to $0.36 for the quarter compared to $0.30 for the
comparable quarter of last year.
Net income for the six month period ended December 31, 1994
increased 30% to $4.3 million on revenues of $142.2 million as
compared to net income of $3.3 million on revenues of $120.5
million for the period ended January 1, 1994. Fully diluted
earnings per share increased 23% to $0.58 during the six months
ended December 31, 1994 compared to $0.47 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 Six Months Ended
December January December January
31, 1994 1, 1994 31, 1994 1, 1994
<S> <C> <C> <C> <C>
Sales from profit and
loss contracts 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Labor costs (33.2) (34.0) (33.4) (34.9)
Product costs (35.3) (35.8) (35.0) (35.0)
Other operating
expenses (15.3) (13.6) (15.8) (14.8)
Depreciation and
amortization (2.2) (2.2) (2.3) (2.1)
-------- -------- -------- --------
Income from profit
and loss contracts 14.0% 14.4% 13.5% 13.2%
======== ======== ======== ========
Total foodservice
revenues $ 48,577 $ 44,082 $ 84,455 $ 75,867
======== ======== ======== ========
Managed volume:
Management fee
contracts $ 28,996 $ 31,443 $ 50,124 $ 53,984
Profit and loss
contracts 47,094 42,379 81,857 72,921
-------- -------- -------- --------
Total managed
volume $ 76,090 $ 73,822 $131,981 $126,905
======== ======== ======== ========
Income from foodservice
operations $ 8,093 $ 7,810 $ 13,638 $ 12,545
======== ======== ======== ========
Income from foodservice
operations as a percentage
of managed volume:
Management fee contracts 5.1% 5.4% 5.2% 5.5%
Profit and loss contracts 14.0% 14.4% 13.5% 13.2%
Income from foodservice
operations as
a percentage of total
managed volume 10.6% 10.6% 10.3% 9.9%
Income from foodservice
operations as
a percentage of
foodservice revenues 16.7% 17.7% 16.1% 16.5%
</TABLE>
<PAGE>
Income from foodservice operations increased 4% to $8.1 million
in the quarter ended December 31, 1994 as compared to $7.8
million in the comparable quarter of last year. For the six
month period ended December 31, 1994, income from foodservice
operations increased 9% to $13.6 million compared to $12.5
million in the comparable period of last year.
Total revenues in the foodservice segment for the quarter and
six months ended December 31, 1994 increased $4.5 million or 10%
and $8.6 million or 11%, respectively, as compared to the
comparable periods in fiscal 1994. These increases included the
impact of 26 new contracts sold in fiscal 1994, 8 new contracts
sold in fiscal 1995 and 16 contracts acquired in fiscal 1995,
together with a 5% increase in sales at existing locations for
the six month period ended December 31, 1994, offset, partially,
by certain contracts lost and one less week of operations during
the six month period. Overall, income from profit and loss
contracts increased as a percentage of sales from profit and
loss contracts during both the quarter and six month period
ended December 31, 1994 as compared to the comparable period of
last year. The increase is due to the continued emphasis on
managing labor and product costs. Improvements in these areas
were partially offset by higher operating costs at two new large
contracts.
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 Six Months Ended
December January December January
31, 1994 1, 1994 31, 1994 1, 1994
<S> <C> <C> <C> <C>
Sales from Fuddruckers-
owned restaurants: 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Labor costs (29.8) (29.5) (29.1) (29.1)
Product costs (27.5) (28.0) (27.5) (27.8)
Other operating expenses (26.7) (27.1) (26.5) (26.0)
Depreciation and
amortization (5.0) (5.5) (4.7) (4.7)
-------- -------- -------- --------
Income from restaurant
operations 11.0% 9.9% 12.2% 12.4%
======== ======== ======== ========
Restaurant sales $ 25,594 $ 19,499 $ 51,925 $ 42,404
======== ======== ======== ========
Income from restaurant
operations $ 2,819 $ 1,936 $ 6,328 $ 5,237
Franchising income 1,101 1,215 2,114 2,211
-------- -------- -------- --------
Income from restaurant
and franchising operations $ 3,920 $ 3,151 $ 8,442 $ 7,448
======== ======== ======== ========
Number of restaurants
(end of period):
Fuddruckers-owned 79 62
Franchised 76 84
-------- --------
Total restaurants 155 146
======== ========
</TABLE>
Sales in Fuddruckers-owned restaurants increased $6.1 million or
31% during the quarter ended December 31, 1994 compared to the
quarter ended January 1, 1994. This increase is due to a
combination of $3.6 million of sales at 12 restaurants acquired
from franchisees during the second half of fiscal 1994, a 3%
increase in comparable restaurant sales, $2.5 million of sales
at 8 new restaurants opened after the first quarter of last
year, offset, in part, by a $.5 million decrease in sales
resulting from the closing of two restaurants.
<PAGE>
Sales in Fuddruckers-owned restaurants increased $9.5 million or
22% during the six months ended December 31, 1994 compared to
the comparable period last year. This increase is due to a
combination of $7.4 million of sales at 12 restaurants acquired
from franchisees during the second half of fiscal 1994, a 2%
increase in comparable restaurant sales, $4.1 million of sales
at 8 new restaurants opened after the first quarter of last
year, offset, in part, by a $.8 million decrease in sales
resulting from the closing of two restaurants and one less week
of operations during the first six months of fiscal 1995 as
compared to fiscal 1994.
Income from restaurant and franchise operations increased to
$3.9 million and $8.4 million for the three and six month
periods ended December 31, 1994 as compared to $3.2 million and
$7.4 million during the comparable three and six month periods
of last year despite one less week of operations during the
first six months of fiscal year 1995. Income from restaurant
operations as a percentage of sales from Fuddruckers-owned
restaurants increased by 1.1% during the quarter ended December
31, 1994 as compared to last year, and remained relatively flat
during the six month period ended December 31, 1994 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>
Quarter Ended Six Months Ended
December December
31, 1994 31, 1994
<S> <C> <C>
Sales from Champps restaurants 100.0% 100.0%
Operating expenses:
Labor costs (33.1) (33.7)
Product costs (29.1) (29.1)
Other operating expenses (18.7) (18.9)
Depreciation and amortization (3.5) (3.5)
-------- --------
Income from restaurant operations 15.6% 14.8%
======== ========
Restaurant sales $ 1,884 $ 3,673
======== ========
Income from restaurant operations $ 294 $ 545
======== ========
Number of restaurants 2
========
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses at $7.0 million for
the quarter ended December 31, 1994 were flat compared to the
quarter ended January 1, 1994. For the six month period ended
December 31, 1994, selling, general and administrative expenses
increased $.5 million to $14.1 million compared to $13.6
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 6.7% and 7.5% during the three and six month
periods ended December 31, 1994 as compared to 7.5% and 8.0% in
the comparable periods of last year.
<PAGE>
Interest Expense
Interest expense increased $.4 million to $1.1 million during
the quarter and increased $.6 million to $1.9 million during the
six month period ended December 31, 1994 compared to comparable
periods of last year. The increase is a result of an overall
higher level of debt due to borrowings under the Company's line
of credit which were used to fund capital expenditures in both
the foodservice and Fuddruckers segments, higher interest rates
and a premium paid to holders of convertible notes.
Income Taxes
The Company's effective tax rate increased to 36.9% for the
three months ended December 31, 1994 as compared to 35.4% for
the comparable period of last year and 36.7% for the six months
ended December 31, 1994 as compared to 34.6% 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.
Earnings Per Share
During the quarter primary earnings per share increased 26% as
compared to last year and for six months primary earnings per
share increased 29% while fully diluted earnings per share
increased 20% and 23% compared to last year for the three and
six month periods respectively due to increased net income.
FINANCIAL CONDITION
Working capital amounted to $10.9 million at December 31, 1994,
an increase of $5.6 million, compared to working capital of $5.3
million at July 2, 1994. As of December 31, 1994 the Company
had approximately $19.1 million of available borrowing capacity
remaining on its line of credit. Subsequent to December 31,
1994 the Company used approximately $10.1 million of its
borrowing capacity to fund the acquisition described in Note 3
to the Consolidated Financial Statements.
Capital expenditures for the six month period ended December 31,
1994 aggregated approximately $16.6 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 build up to 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 $9 million under its line of credit agreement and
the $30 million sale leaseback facility with FFCA 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
10.15 First Amendment Agreement dated as of December 30,
1994 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 expects to file Form 8-K, with respect
to the acquisition described in Note 3 to the
Consolidated Financial Statements, on or before
February 23, 1995.
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
Date: February 13, 1995
FIRST AMENDMENT AGREEMENT
dated as of December 30, 1994
among
DAKA INTERNATIONAL, INC.
SUBSIDIARY GUARANTORS
THE BANKS SIGNATORY HERETO
and
THE CHASE MANHATTAN BANK, N.A.,
as Agent
<PAGE>
FIRST AMENDMENT AGREEMENT
FIRST AMENDMENT AGREEMENT (this "Agreement") dated as of
December 30, 1994 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"), each of the banks which is a
signatory hereto (collectively 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,
certain of the Banks and the Agent have entered into that
certain Credit Agreement dated as of October 13, 1993 (as
amended and restated as of April 29, 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 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 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, 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
$50,000,000, modification of certain covenants and definitions
contained in the Existing Credit Agreement and consents to
certain proposed transactions; 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:
<PAGE>
ARTICLE 1. AMENDMENTS TO EXISTING AGREEMENTS.
Section 1.01. Amendments to Existing Credit Agreement. 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 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 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.: $20,000,000;
The Chase Manhattan Bank of Connecticut, N.A.: $15,000,000;
Shawmut Bank, N.A.: $15,000,000;
Total: $50,000,000.
(b) The definition of "Consolidated Net Worth" is hereby added
in appropriate alphabetical order to Section 1.01 of the
Existing Credit Agreement to read as follows:
"Consolidated Net Worth" means, at any date of determination
thereof, the sum of (a) the amount of any capital stock, paid in
capital and similar equity accounts plus (or minus in the case
of a deficit) the capital surplus and retained earnings of the
Borrower and its Subsidiaries at such date plus (b) Consolidated
Subordinated Debt.
(c) The definition of "Leverage Ratio" in Section 1.01 of the
Existing Credit Agreement is hereby amended to substitute
"Consolidated Net Worth" in place of "Consolidated Tangible Net
Worth".
(d) The definition of "Margin" in Section 1.01 of the Existing
Credit Agreement is hereby amended to substitute "Tangible
Leverage Ratio" in place of "Leverage Ratio."
(e) The definition of "Required Banks" in Section 1.01 of the
Existing Credit Agreement is hereby amended to substitute "66
2/3%" in place of "75%".
<PAGE>
(f) The definition of "Tangible Leverage Ratio" is hereby
added in appropriate alphabetical order to Section 1.01 of the
Existing Credit Agreement to read as follows:
"Tangible Leverage Ratio" means, at any time, the ratio of (a)
the difference of (i) Consolidated Liabilities minus (ii)
Consolidated Subordinated Debt to (b) Consolidated Tangible Net
Worth, in each case determined at such time.
(g) The definition of "Termination Date" in Section 1.01 of
the Existing Credit Agreement is hereby amended to substitute
"December 31, 1997" in place of "March 31, 1997".
(h) Section 7.09 of the Existing Credit Agreement is hereby
amended to substitute "provided that Champps shall not be
required to become a "Subsidiary Guarantor" hereunder until
Champps becomes a wholly-owned Subsidiary of any Obligor" in
place of the proviso contained at the end of such Section 7.09.
(i) Section 8.01 of the Existing Credit Agreement is hereby
amended to substitute "Except as otherwise permitted under
Section 8.02, create" in place of "Create".
(j) Section 8.02 of the Existing Credit Agreement is hereby
amended to add immediately prior to the end of such Section "or
guaranties by such Obligor of any obligations of any other
Obligor permitted hereunder provided that the aggregate amount
of such obligations does not exceed $5,000,000".
(k) Section 9.03 of the Existing Credit Agreement is hereby
amended to substitute "2.00" in place of "1.45".
(l) Section 9.04 of the Existing Credit Agreement is hereby
amended to substitute "$75,000,000" in place of "$50,000,000".
(m) Section 13.05(a) of the Existing Credit Agreement is
hereby amended to substitute "40%" in place of "51%".
<PAGE>
(n) 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.
(o) Schedule A to the Security Agreement is hereby amended and
restated as set forth in Schedule IV hereto.
(p) 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.
<PAGE>
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 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.
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.
<PAGE>
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 October 1, 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 three 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 October 1, 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 October 1,
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
January 30, 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) copies of UCC searches identifying all of the financing
statements on file with respect to each Obligor in all locations
listed on Schedule IV;
(d) 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;
(e) ARVI shall have entered into an assumption agreement prior
to the date hereof substantially in the form of Exhibit I to the
Existing Credit Agreement;
(f) all promissory notes held by Fuddruckers, Inc. which have
been issued by ARVI (the "ARVI Notes") shall be in suitable form
for transfer by endorsement and delivery or shall be accompanied
by duly executed instruments of transfer or assignment in blank;
(g) certificates of the Secretary or Assistant Secretary of
each of the Obligors, dated the Effective Date, (i) attesting to
all corporate action taken by such Obligor, including
resolutions of its Board of Directors 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
of such Obligor attached thereto are true, correct and complete
as of the date thereof;
(h) 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;
<PAGE>
(i) good standing certificates with respect to each Obligor
ertified by the Secretary of State of its jurisdiction of
incorporation, and evidence that each of the Obligors is
qualified as a foreign corporation 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;
(j) 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
(k) 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".
<PAGE>
ARTICLE 4. PLEDGE.
As security for the payment by the Obligors of the Secured
Obligations (as defined in the Security Agreement) and the
performance by the Obligors of their other obligations and
undertakings under this Agreement and under the other Amended
Facility Documents, Fuddruckers, Inc. does hereby grant,
bargain, convey, assign, transfer, mortgage, hypothecate,
pledge, confirm and grant a continuing security interest to the
Agent in and to the ARVI Notes. Fuddruckers, Inc. hereby agrees
to, and does hereby, collaterally assign all of its right, title
and interest in and to all collateral granted to it or any other
Person as collateral security for the ARVI Notes (and all other
documents, instruments and agreements associated therewith) and
does hereby agree to execute such further instruments of
assignment as may be necessary to effectuate the intention of
Article 4.
ARTICLE 5. CONSENTS.
Subject to the satisfaction of the conditions set forth in
Article 3 hereof:
Section 5.01. FFCA Sale-Leasebacks. Notwithstanding Section
8.03, Section 8.04, Section 8.05, Section 8.07 and Section 8.11
of the Existing Credit Agreement and Section 3.01(b) of the
Security Agreement, each of the Agent and the Banks hereby
consents to the proposed purchase and subsequent sale by
Fuddruckers, Inc. of 25 newly constructed restaurants to, and
the simultaneous leaseback from, Franchise Finance Corporation
of America, a Delaware corporation (together with all affiliates
and subsidiaries thereof, "FFCA") and the grant by Fuddruckers,
Inc. in favor of FFCA of a security interest in the furnishings
and equipment located at each such restaurant substantially in
accordance with the terms and conditions of the commitment
letter dated September 13, 1994 from FFCA to Fuddruckers, Inc.
and the November 10, 1994 drafts of the Sale-Leaseback Agreement
and Lease between FFCA and Fuddruckers, Inc., copies of which
have been furnished to the Banks. Each of the Agent and the
Bank hereby agrees that the purchase of any such restaurant
subject to such sale-leaseback 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. Each of the Agent and the Banks hereby agrees to,
and does hereby, subordinate their Lien in the furnishings and
equipment located at each such restaurant subject to such
sale-leaseback and do hereby agree to execute such further
instruments and agreements of subordination as may be reasonably
necessary to effectuate or evidence the intention of this
Section 5.01.
Section 5.02. ARVI. Each of the Agent and the Banks hereby
consents effective as of May 28, 1994 to the deletion of Section
7.10 of the Existing Credit Agreement.
Section 5.03. Guaranty of ARVI Leases. Notwithstanding Section
8.01 and Section 8.02 of the Existing Credit Agreement, each of
the Agent and the Banks hereby consents to the guaranty by
Fuddruckers, Inc. of rental payments owed by ARVI under leases
of "Fuddruckers" restaurants which will be or have been entered
into in the ordinary course of business.
Section 5.04. PulseBack. Notwithstanding Section 8.01 and
Section 8.05 of the Existing Credit Agreement, each of the Agent
and the Banks hereby consents effective as of July 31, 1994 to
the making of a loan by the Borrower of $75,000 to PulseBack,
Inc. and the making of an equity investment of $1 in PulseBack,
Inc. in exchange for its common stock.
Section 5.05. IDM. Notwithstanding Section 8.07 of the
Existing Credit Agreement, each of the Agent and the Banks
hereby consents effective as of March 1, 1994 to the sale by
Daka, Inc. of certain pieces of equipment and accounts
receivable associated with that certain food service contract
transferred to Innovative Dining Management, Inc. ("IDM") in
exchange for a note receivable. Notwithstanding Section 8.01
and Section 8.02 of the Existing Credit Agreement, each of the
Agent and the Banks hereby consents to the guaranty by the
Borrower of the obligations of IDM under a performance bond in
an amount not to exceed $200,000.
<PAGE>
ARTICLE 6. MISCELLANEOUS.
Section 6.01. Defined Terms. The terms used herein and not
defined herein shall have the meanings assigned to such terms in
the Existing Credit Agreement.
Section 6.02. 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 6.03. 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 6.04. 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 6.05. Expenses. Each of the Obligors shall reimburse
the Agent and the Banks on demand for all reasonable costs,
expenses, and charges (including, without limitation, reasonable
fees and charges of external legal counsel for the Agent and
each Bank) incurred by the Agent or the Banks in connection with
the preparation, the performance, or enforcement of this
Agreement or the other Amended Facility Documents.
Section 6.06. 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.
<PAGE>
Section 6.07. 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 6.08. 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.
Section 6.09. 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 6.10. 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 6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE COMMONWEALTH OF MASSACHUSETTS.
<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:
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
<PAGE>
DAKA, INC.
By ------------------------
Name:
Title:
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:
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
<PAGE>
ATLANTIC RESTAURANT VENTURES, 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 FIRST 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 FIRST AMENDMENT AGREEMENT]
<PAGE>
BANKS:
THE CHASE MANHATTAN BANK, N.A.
By ------------------------
Name:
Title:
Lending Office and Address
for Notices:
535 Fifth Avenue
New York, New York 10017
Attn: Gaspare Galante, Jr.
Telecopier No.: (212) 557-0591
with a copy to:
999 Broad Street
Bridgeport, Conn. 06604
Attention: Karim T. Assef
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
<PAGE>
BANKS:
THE CHASE MANHATTAN BANK OF
CONNECTICUT, 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 FIRST 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 FIRST AMENDMENT AGREEMENT
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EXHIBIT A
PROMISSORY NOTE
[$____________] Boston, Massachusetts
April 1, 1994
For value received, DAKA INTERNATIONAL, INC., a corporation
organized under the laws of Delaware (the "Borrower"), hereby
promises to pay to the order of [THE CHASE MANHATTAN BANK, N.A.]
[SHAWMUT BANK, N.A.] (the "Bank") at the principal office of The
Chase Manhattan Bank, N.A., at 1 Chase Manhattan Plaza, New
York, New York 10081 (the "Agent"), for the account of the
appropriate Lending Office of the Bank, the principal sum of
($[___________]) or, if less, the amount loaned by the Bank to
the Borrower pursuant to the Credit Agreement referred to below,
in lawful money of the United States of America and in
immediately available funds, on the date(s) and in the manner
provided in said Credit Agreement. The Borrower also promises
to pay interest on the unpaid principal balance hereof, for the
period such balance is outstanding, at said principal office for
the account of said Lending Office, in like money, at the rates
of interest as provided in the Credit Agreement described below,
on the date(s) and in the manner provided in said Credit
Agreement.
The date and amount of each type of Loan made by the Bank to
the Borrower under the Credit Agreement referred to below, and
each payment of principal thereof, shall be recorded by the Bank
on its books and, prior to any transfer of this Note (or, at the
discretion of the Bank, at any other time), endorsed by the Bank
on the schedule attached hereto or any continuation thereof.
This is one of the Notes referred to in that certain Amended
and Restated Credit Agreement dated as of April 29, 1994 (as
amended as of December 30, 1994 and as may be further amended or
supplemented from time to time, the "Credit Agreement") among
the Borrower, each of the Subsidiaries of the Borrower which is
a signatory thereto (collectively, the "Subsidiary Guarantors"),
each of the banks which is a signatory thereto (including the
Bank) and the Agent and evidences the Loans made by the Bank
thereunder which shall, in the aggregate among all such Notes,
not exceed $50,000,000. All terms not defined herein shall have
the meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of principal upon the occurrence of certain Events of
Default and for prepayments on the terms and conditions
specified therein.
The Borrower waives presentment, notice of dishonor, protest
and any other notice or formality with respect to this Note.
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
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This Note is secured in accordance with, and entitled to the
benefits of, the Security Documents.
All obligations evidenced by this Note are guarantied by the
Subsidiary Guarantors pursuant to Article 11 of the Credit
Agreement.
This Note shall be governed by, and interpreted and construed
in accordance with, the laws of the Commonwealth of
Massachusetts.
DAKA INTERNATIONAL, INC.
By ------------------------
Name:
Title:
<PAGE>
Date Amount of Amount of Balance Notation
Loan Payment Outstanding By
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
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EXHIBIT B
[Letterhead of Counsel to the Obligors]
[Effective Date]
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
The Chase Manhattan Bank of Connecticut, N.A.
999 Broad Street
Bridgeport, Connecticut 06604
Shawmut Bank, N.A.
One Federal Street
Boston, Massachusetts 02211
Ladies and Gentlemen:
We have acted as counsel to DAKA International, Inc., a
Delaware corporation (the "Borrower"), Fuddruckers, Inc., a
Texas corporation, Daka, Inc., a Texas corporation, Daka School
and College Food Service, Inc., a Massachusetts corporation,
Daka Educational Food Service, Inc., a Massachusetts
corporation, Nicollet 851 Corporation, an Illinois corporation,
FDR 100, Inc., a California corporation, Viand Restaurants,
Inc., a Texas corporation, Casual Dining Ventures, Inc., a
Delaware corporation, Atlantic Restaurant Ventures, Inc.,
Virginia corporation, Fuddruckers, ARVI Fairfax, Inc., a Texas
corporation, and ARIV Rockville, Inc., a Virginia corporation
(collectively, the "Subsidiary Guarantors" and, together with
the Borrower, the "Obligors") in connection with the execution
and delivery of that certain Second Amendment Agreement (the
"Second Amendment Agreement") dated as of December 30, 1994
among the Borrower, the Subsidiary Guarantors, the Banks
signatory thereto and The Chase Manhattan Bank, N.A., as Agent.
Except as otherwise defined herein, all terms used herein and
defined in the Amendment Agreement or any agreement delivered
thereunder shall have the meanings assigned to them therein.
In connection with this opinion, we have examined executed
copies of the Amended Facility Documents and such other
documents, records, agreements and certificates as we have
deemed appropriate. We have also reviewed such matters of law
as we have considered relevant for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. Each of the Obligors is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
assets and to transact the business in which it is now engaged
or proposed to be engaged, and is duly qualified as a foreign
corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required and where
such failure to qualify could reasonably be expected to have a
Material Adverse Effect.
2. 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.
3. 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.
Very truly yours,
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
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EXHIBIT C
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated as of [__________] [__], 19[__], by
[_________], a [_________] corporation (the "New Subsidiary
Guarantor").
Under the terms of the Amended and Restated Credit Agreement
dated as of April 29, 1994 (as amended as of December 30, 1994,
the "Credit Agreement"), 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 thereto (individually a "Subsidiary Guarantor" and
collectively the "Subsidiary Guarantors" and, together with the
Borrower, the "Obligors"), each of the banks which is a
signatory thereto (individually a "Bank" and collectively 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"), the New
Subsidiary Guarantor is required to execute and deliver an
assumption agreement in substantially the form of this
Assumption Agreement and to become a joint and several
"Subsidiary Guarantor" of the obligations of the Borrower from
time to time outstanding thereunder and under the other Facility
Documents. All capitalized terms used but not defined herein
have the respective meanings given to such terms in the Credit
Agreement.
The New Subsidiary Guarantor hereby acknowledges and confirms
that it has received a copy of the Credit Agreement, the
Security Agreement, the Pledge Agreement, the Trademark Security
Agreement, the form of Mortgage Agreement and the form of
Leasehold Mortgage Agreement and hereby acknowledges and
confirms, as being applicable to it, the recitals set forth in
the Facility Documents, and in particular that it expects to
derive benefit, direct or indirect, from the credit heretofore
and hereafter outstanding to the Borrower under the Credit
Agreement.
NOW, THEREFORE:
(a) The New Subsidiary Guarantor agrees with the Banks and the
Agent that, by its execution and delivery of this Assumption
Agreement, the New Subsidiary Guarantor unconditionally and
irrevocably (irrespective, without limitation, of notice to,
acceptance of or reliance upon this Assumption Agreement by any
party hereto) accepts, adheres to, and becomes party to and
bound as a joint and several "Subsidiary Guarantor" under the
Credit Agreement, as fully as if the New Subsidiary Guarantor
had been a signatory to the Credit Agreement, as a "Subsidiary
Guarantor" thereunder, when the Credit Agreement was executed
and delivered by the Subsidiary Guarantors ab initio party
thereto and the Borrower, the Banks and the Agent. In
confirmation (but without limitation) of the foregoing, the New
Subsidiary Guarantor (i) jointly and severally hereby
unconditionally guarantees the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of
the principal of and interest on all Guaranteed Obligations from
time to time outstanding and all other amounts owing to the
Banks and the Agent under the Facility Documents, and (ii)
hereby makes each representation and warranty contained in the
Credit Agreement applicable to a Subsidiary Guarantor, mutatis
mutandis, as of the date hereof.
(b) The New Subsidiary Guarantor agrees with the Banks and the
Agent that, by its execution and delivery of this Assumption
Agreement, the New Subsidiary Guarantor unconditionally and
irrevocably (irrespective, without limitation, of notice to,
acceptance of or reliance upon this Assumption Agreement by any
party hereto) accepts, adheres to, and becomes party to and
bound as an "Obligor" as defined in and under the Security
Agreement as fully as if the New Subsidiary Guarantor had been a
signatory to such Security Agreement as an "Obligor", when the
Security Agreement was executed and delivered by the Obligors ab
initio party thereto and the Agent. In confirmation (but
without limitations) of the foregoing, the New Subsidiary
Guarantor (i) unconditionally grants, bargains, conveys,
assigns, transfers, mortgages, hypothecates, pledges, confirms
and grants a continuing security interest to the Agent in and to
the Collateral (as so defined in the Security Agreement) and
(ii) hereby makes each representation and warranty contained in
the Security Agreement, mutatis mutandis, as of the date hereof.
(c) This Assumption Agreement shall be governed by, and
construed in accordance with, the law of the State of
Massachusetts. The New Subsidiary Guarantor hereby irrevocably
submits to the jurisdiction of any Massachusetts state or United
States federal court sitting in Suffolk County over any action
or proceeding arising out of or relating to this Agreement, and
the New Subsidiary Guarantor hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and
determined in such Massachusetts state or federal court. The
New Subsidiary Guarantor hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an
inconvenient forum.
[SIGNATURE PAGE TO THE FIRST AMENDMENT AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed as of the date first written above.
[_______________]
By: -----------------------
Name:
Title:
Address for Notice:
[_________________________]
[_________________________]
Telecopier No.: [__________]
Exhibit 11
DAKA INTERNATIONAL, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
QUARTERS AND SIX MONTHS ENDED
JANUARY 1, 1994 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
Quarters ended Quarters ended
December January December January
31, 1994 1, 1994 31, 1994 1, 1994
<S> <C> <C> <C> <C>
PRIMARY:
Net income 2,764 2,184 4,346 3,345
Dividend on Preferred
Stock 400 400 400 400
----- ----- ----- -----
Net income available
to common stockholders 2,364 1,784 3,946 2,945
Weighted average
number of shares
outstanding 3,817 3,758 3,798 3,752
Weighted average
number of options
outstanding 227 140 222 140
------ ------ ------ ------
4,044 3,898 4,020 3,892
====== ====== ====== ======
Primary earnings
per share 0.58 0.46 0.98 0.76
FULLY DILUTED:
Net income available
to common
stockholders 2,364 1,784 3,946 2,945
Add back dividend
on Preferred Stock 400 400 400 400
Add back interest
expense on Convertible
Notes, after tax
effect 317 337 637 661
------ ------ ------ ------
3,081 2,521 4,983 4,006
------ ------ ------ ------
Weighted average
number of shares
outstanding 4,088 3,757 4,084 3,752
Weighted average
number of options
outstanding 228 155 227 154
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 2,094 2,396
------ ------ ------ ------
8,633 8,530 8,627 8,524
------ ------ ------ ------
Fully diluted earnings
per share 0.36 0.30 0.58 0.47
</TABLE>
