UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended October 3, 1999
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: 0-19542
AVADO BRANDS, INC.
(Exact name of registrant as specified in its charter)
Georgia 59-2778983
- ---------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Hancock at Washington, Madison, GA 30650
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
706-342-4552
------------------------
(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.
X Yes No
As of November 17, 1999, there were 25,310,004 shares of common stock of
the Registrant outstanding.
<PAGE>
AVADO BRANDS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 3, 1999
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements:
Consolidated Statements of Earnings..........................3
Consolidated Balance Sheets..................................4
Consolidated Statements of Shareholders' Equity and
Comprehensive Income.........................................5
Consolidated Statements of Cash Flows........................6
Notes to Consolidated Financial Statements...................7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations...............13
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk.................................................18
Part II - Other Information
Item 5 - Other Information...........................................19
Item 6 - Exhibits and Reports on Form 8-K............................20
Signature ............................................................21
Page 2
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)
<CAPTION>
Quarter Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------------
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Canyon Cafe $ 10,050 11,081 33,128 34,944
Don Pablo's 78,461 70,306 236,916 195,985
Hops 36,348 26,891 104,053 75,778
McCormick & Schmick's 32,392 26,939 90,774 73,642
Applebee's - 69,225 21,176 305,612
- ------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 157,251 204,442 486,047 685,961
- ------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 44,303 57,242 137,283 191,939
Payroll and benefits 47,407 67,235 148,940 223,210
Depreciation and amortization 5,186 4,009 14,869 12,397
Other operating expenses 38,347 48,487 113,269 160,844
- ------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 135,243 176,973 414,361 588,390
- ------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 9,096 10,983 27,950 36,179
- ------------------------------------------------------------------------------------------------------------------------
Operating income 12,912 16,486 43,736 61,392
- ------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense, net (6,907) (5,925) (16,141) (20,278)
Distributions on preferred securities (2,013) (2,013) (6,038) (6,038)
Gain on disposal of assets - 31,661 2,270 78,358
Income (loss) from investments carried at equity (111) 21 (341) 808
Other, primarily goodwill amortization (875) (1,267) (2,735) (4,490)
- ------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (9,906) 22,477 (22,985) 48,360
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
- ------------------------------------------------------------------------------------------------------------------------
effect of change in accounting principle 3,006 38,963 20,751 109,752
Income taxes 575 14,525 6,400 40,450
- ------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
change in accounting principle 2,431 24,438 14,351 69,302
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle, net of tax benefit - - - 1,461
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,431 24,438 14,351 67,841
========================================================================================================================
Basic earnings per common share:
Basic earnings before cumulative effect of
change in accounting principle $ 0.10 0.67 0.51 1.84
Cumulative effect of change in accounting principle - - - (0.04)
- ------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.10 0.67 0.51 1.80
========================================================================================================================
Diluted earnings per common share:
Diluted earnings before cumulative effect of
change in accounting principle $ 0.10 0.58 0.51 1.61
Cumulative effect of change in accounting principle - - - (0.03)
- ------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.10 0.58 0.51 1.58
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Oct. 3, Jan. 3,
1999 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,268 7,216
Short-term investments - 27
Accounts receivable 9,280 9,124
Inventories 8,873 8,599
Prepaid expenses and other 7,975 3,205
Assets held for sale 2,339 72,814
- -------------------------------------------------------------------------------------------------------------
Total current assets 31,735 100,985
Premises and equipment, net 412,323 367,587
Goodwill, net 135,996 138,005
Investments in and advances to unconsolidated affiliates 17,475 16,106
Other assets 45,952 47,914
- -------------------------------------------------------------------------------------------------------------
$ 643,481 670,597
=============================================================================================================
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 17,952 28,474
Accrued liabilities 37,751 42,053
Current installments of long-term debt 16 140,500
Income taxes 28,920 28,091
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 84,639 239,118
Long-term debt 306,411 116,978
Deferred income taxes 8,200 8,200
Other long-term liabilities 7,220 8,177
- -------------------------------------------------------------------------------------------------------------
Total liabilities 406,470 372,473
- -------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities
of Avado Financing I, a subsidiary holding solely Avado
Brands, Inc. 7% convertible subordinated debentures
due March 1, 2027 115,000 115,000
Temporary equity, net - 71,095
Shareholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares;
none issued - -
Common stock, $0.01 par value. Authorized 75,000,000 shares;
40,478,760 issued in 1999 and 1998 405 405
Additional paid-in capital 144,926 63,431
Retained earnings 175,566 162,411
Accumulated other comprehensive income (61) 24
Treasury stock at cost; 15,168,756 shares in 1999 and 8,910,174
shares in 1998 (198,825) (114,242)
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 122,011 112,029
- -------------------------------------------------------------------------------------------------------------
$ 643,481 670,597
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
(Unaudited)
(In thousands, except per share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Stock Paid-in Retained Comprehensive Treasury Shareholders'
Shares Amount Capital Earnings Income Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 3, 1999 40,479 $405 $63,431 $162,411 $24 ($114,242) $112,029
Comprehensive income:
Net earnings - - - 5,952 - - 5,952
Foreign currency translation adjustment - - - - (341) - (341)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 5,952 (341) - 5,611
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock - - - - - (32,435) (32,435)
Common stock issued to ESOP and ESPP - - (264) - - 849 585
Settlement of equity forward contracts - - 31,421 - - - 31,421
Cash dividends ($0.0125 per share) - - - (378) - - (378)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at April 4, 1999 40,479 405 94,588 167,985 (317) (145,828) 116,833
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings - - - 5,968 - - 5,968
Foreign currency translation adjustment - - - - (174) - (174)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 5,968 (174) - 5,794
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock - - - - - (52,902) (52,902)
Common stock issued to ESOP and ESPP - - (35) - - 65 30
Settlement of equity forward contracts - - 50,388 - - - 50,388
Cash dividends ($0.015 per share) - - - (437) - - (437)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at July 4, 1999 40,479 405 144,941 173,516 (491) (198,665) 119,706
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings - - - 2,431 - - 2,431
Foreign currency translation adjustment - - - - 430 - 430
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 2,431 430 - 2,861
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock - - - - - (201) (201)
Common stock issued to ESOP and ESPP - - (15) - - 41 26
Cash dividends ($0.015 per share) - - - (381) - - (381)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at October 3, 1999 40,479 $405 $144,926 $175,566 $(61) ($198,825) $122,011
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------
Oct. 3, Sept. 27,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 14,351 67,841
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 19,190 17,506
Deferred income taxes - 2,469
Gain on disposal of assets (2,270) (78,358)
Loss (income) from investments carried at equity 341 (21)
(Increase) decrease in assets:
Accounts receivable (160) (3,543)
Inventories (1,101) (1,305)
Prepaid expenses and other (5,113) (6,327)
Increase (decrease) in liabilities:
Accounts payable (10,814) (7,366)
Accrued liabilities (5,765) 5,227
Income taxes 829 21,125
Other long-term liabilities (781) 1,057
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 8,707 18,305
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (64,986) (112,224)
Proceeds from disposal of assets, net 86,092 338,365
Decrease in short-term investments 27 10
Investments in and advances to unconsolidated affiliates (2,352) -
Additions to noncurrent assets (1,271) (30,539)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 17,510 195,612
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayment of) revolving credit agreements (49,585) (176,721)
Proceeds from issuance of long-term debt, net 95,467 -
Principal payments on long-term debt (27) -
Dividends declared and paid (1,196) (1,299)
Purchase of treasury stock (85,538) (37,001)
Net collateral payments on equity forward contracts 10,714 -
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (30,165) (215,021)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (3,948) (1,104)
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the beginning of the period 7,216 2,503
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $ 3,268 1,399
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
AVADO BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 3, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual financial statement
reporting purposes. However, there has been no material change in the
information disclosed in the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended January 3, 1999, except
as disclosed herein. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation
have been included. Operating results for the nine-month period ended October 3,
1999 are not necessarily indicative of the results that may be expected for the
year ending January 2, 2000.
NOTE 2 - ASSET DIVESTITURES
In 1999, the Company completed the divestiture of its 279 Applebee's
restaurants, including the divestiture of 21 restaurants for proceeds of $35.1
million completed during the first quarter and the divestiture of the final 25
locations for proceeds of $43.8 million completed during the second quarter.
Gross proceeds related to the Applebee's divestiture were $514.0 million,
including $10.2 million in notes outstanding at October 3, 1999.
NOTE 3 - LONG-TERM DEBT
In June 1999, the Company completed the private placement of $100 million
of 11.75% senior subordinated notes due June 15, 2009. The notes were priced at
98.561 to yield 12.0%. In the third quarter of 1999, the notes were registered
under the Securities Act of 1933. Simultaneously with the notes offering, a new,
three-year $125 million bank revolving credit facility (the "Facility") was
executed. The Company's existing credit facilities were refinanced with proceeds
from the notes offering and the new credit facility. At October 3, 1999,
approximately $36.1 million was available under revolving credit agreements.
Terms of the Facility include various provisions, which, among other things,
require the Company to maintain certain coverage ratios including a total debt
to earnings before interest, taxes, depreciation and amortization ("EBITDA")
ratio of less than 4.0 (as calculated for the preceding four quarter period,
excluding operations related to divested Applebee's restaurants). At October 3,
1999, the Company was not in compliance with this provision with a debt to
EBITDA ratio of 4.2. The Company has obtained a waiver of this requirement
through December 31, 1999. In exchange for such waiver, the Company has agreed
to grant a security interest in the stock of its material subsidiaries. The
security interest would also apply to the Company's 9.75% Senior Notes due 2006.
The Company expects to be in Compliance with the terms of the Facility at
January 2, 2000, either by selling certain assets or negotiating an amendment to
the Facility.
Page 7
<PAGE>
NOTE 4 - SHAREHOLDERS' EQUITY
Cash dividends declared and paid in the quarter ended October 3, 1999 were
$0.015 per share. On November 2, 1999, the Company declared a cash dividend of
$0.015 per share, payable on November 30, 1999 to shareholders of record on
November 15, 1999.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
For the nine-month periods ended October 3, 1999 and September 27, 1998,
the following supplements the consolidated statements of cash flows (amounts in
thousands):
1999 1998
----------------------------
Interest paid (net of amounts capitalized) $ 10,602 16,451
Distributions paid on preferred securities $ 6,038 6,038
Income taxes paid $ 5,571 16,103
As discussed in Note 2, during 1999 the Company sold 46 Applebee's
restaurants. The accompanying consolidated balance sheet reflects changes in
asset and liability accounts related to the divestiture of these restaurants as
follows: decrease in assets held for sale of $68.7 million, decreases in assets
not classified as held for sale of $6.2 million and increases in accrued
liabilities of $0.5 million.
NOTE 6 - INCOME TAXES
Income tax expense as a percent of earnings before income taxes was 30.8%
in the first nine months of 1999 compared to 36.9% in the corresponding period
of 1998. Income tax reflects, for each period, taxes on the gain on disposal of
assets held for sale provided at 38.0%. Taxes on continuing operations were
provided at 30.0% in 1999 compared to 34.0% in 1998. The lower tax rate on 1999
continuing operations primarily reflects an increase in the impact of FICA tip
credits and permanent tax planning strategies to reduce state income taxes.
NOTE 7 - CONTINGENCIES
During 1997, two lawsuits were filed by persons seeking to represent a
class of shareholders of the Company who purchased shares of the Company's
common stock between May 26, 1995 and September 24, 1996. Each plaintiff named
the Company and certain of its officers and directors as defendants. The
complaints alleged acts of fraudulent misrepresentation by the defendants which
induced the plaintiffs to purchase the Company's common stock and alleged
illegal insider trading by certain of the defendants, each of which allegedly
resulted in losses to the plaintiffs and similarly situated shareholders of the
Company. The complaints each sought damages and other relief. During 1998, one
of these suits was dismissed. During the third quarter of 1999, the Company
received a favorable ruling from the 11th Circuit Court of Appeals relating to
the remaining suit. As a result of the ruling, the District Court will again
consider the motion to dismiss the case. Although the ultimate outcome of the
remaining lawsuit cannot be determined at this time, the Company believes that
the allegations therein are without merit and intends to vigorously defend
itself.
Page 8
<PAGE>
NOTE 8 - GUARANTOR SUBSIDIARIES
The Company's senior notes and revolving credit facilities are fully and
unconditionally guaranteed on a joint and several basis by substantially all of
its wholly owned subsidiaries. The Company's indebtedness is not guaranteed by
its non-wholly owned subsidiaries. These non-guarantor subsidiaries primarily
include certain partnerships of which the Company is typically a 90% owner. At
October 3, 1999 and January 3, 1999, these partnerships in the non-guarantor
subsidiaries operated 47 and 36, respectively, of the Company's restaurants.
Accordingly, condensed consolidated balance sheets as of October 3, 1999 and
January 3, 1999, and condensed consolidated statements of earnings and cash
flows for the nine-month periods ended October 3, 1999 and September 27, 1998
are provided for such guarantor and non-guarantor subsidiaries. Separate
financial statements and other disclosures concerning the guarantor and
non-guarantor subsidiaries are not presented because management has determined
that they are not material to investors. There are no contractual restrictions
on the ability of the guarantor subsidiaries to make distributions to the
Company.
<TABLE>
Condensed Consolidated Statement of Earnings
Nine Months Ended October 3, 1999
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales $ 408,361 77,686 - 486,047
Restaurant operating expenses 345,861 68,500 - 414,361
General and administrative expenses 24,067 3,883 - 27,950
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 38,433 5,303 - 43,736
- ----------------------------------------------------------------------------------------------------------------------------
Other income (expense) (21,140) (1,845) - (22,985)
Earnings before income taxes 17,293 3,458 - 20,751
Income taxes 5,375 1,025 - 6,400
============================================================================================================================
Net earnings $ 11,918 2,433 - 14,351
============================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Earnings
Nine Months Ended September 27, 1998
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales $ 630,862 55,099 - 685,961
Restaurant operating expenses 540,823 47,567 - 588,390
General and administrative expenses 33,686 2,493 - 36,179
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 56,353 5,039 - 61,392
- ----------------------------------------------------------------------------------------------------------------------------
Other income (expense) 49,295 (935) - 48,360
Earnings before income taxes and cumulative effect
of change in accounting principle 105,648 4,104 - 109,752
Income taxes 39,050 1,400 - 40,450
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
accounting principle 66,598 2,704 - 69,302
Cumulative effect of change in accounting principle,
net of tax benefit 1,461 - - 1,461
============================================================================================================================
Net earnings $ 65,137 2,704 - 67,841
============================================================================================================================
</TABLE>
Page 9
<PAGE>
NOTE 8 - GUARANTOR SUBSIDIARIES (Continued)
<TABLE>
Condensed Consolidated Balance Sheet
October 3, 1999
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 29,796 1,939 - 31,735
Premises and equipment, net 350,834 61,489 - 412,323
Goodwill, net 112,796 23,200 - 135,996
Investments carried at equity 17,475 - - 17,475
Other assets 45,098 854 - 45,952
Intercompany investments 46,893 - (46,893) -
Intercompany advances 37,560 - (37,560) -
============================================================================================================================
$ 640,452 87,482 (84,453) 643,481
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 172,859 2,651 - 175,510
Long-term liabilities 230,582 378 - 230,960
Intercompany payables - 37,560 (37,560) -
Convertible preferred securities 115,000 - - 115,000
Shareholders' equity 122,011 46,893 (46,893) 122,011
============================================================================================================================
$ 640,452 87,482 (84,453) 643,481
============================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Balance Sheet
January 3, 1999
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 99,129 1,856 - 100,985
Premises and equipment, net 309,919 57,668 - 367,587
Goodwill, net 116,014 21,991 - 138,005
Investments carried at equity 16,106 - - 16,106
Other assets 47,588 326 - 47,914
Intercompany investments 44,699 - (44,699) -
Intercompany advances 33,103 - (33,103) -
============================================================================================================================
$ 666,558 81,841 (77,802) 670,597
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 235,497 3,621 - 239,118
Long-term liabilities 132,937 418 - 133,355
Intercompany payables - 33,103 (33,103) -
Convertible preferred securities 115,000 - - 115,000
Temporary equity, net 71,095 - - 71,095
Shareholders' equity 112,029 44,699 (44,699) 112,029
============================================================================================================================
$ 666,558 81,841 (77,802) 670,597
============================================================================================================================
</TABLE>
Page 10
<PAGE>
NOTE 8 - GUARANTOR SUBSIDIARIES (Continued)
<TABLE>
Condensed Consolidated Statement of Cash Flows
Nine Months Ended October 3, 1999
(In thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 3,929 4,778 - 8,707
Cash flows from investing activities:
Capital expenditures (56,996) (7,990) - (64,986)
Proceeds from disposal of assets, net 86,092 - - 86,092
Other investing activities (2,368) (1,228) - (3,596)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 26,728 (9,218) - 17,510
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayment of) revolving
credit agreements (49,585) - - (49,585)
Proceeds from issuance of long-term debt 95,467 - - 95,467
Purchase of treasury stock (74,824) - - (74,824)
Proceeds from (payment of) intercompany advances (4,457) 4,457 - -
Other financing activities (1,223) - - (1,223)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (34,622) 4,457 - (30,165)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (3,965) 17 - (3,948)
Cash and cash equivalents at the beginning of the period 7,162 54 - 7,216
=========================================================================================================================
Cash and cash equivalents at the end of the period $ 3,197 71 - 3,268
=========================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Nine Months Ended September 27, 1998
(In thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 12,028 6,277 - 18,305
Cash flows from investing activities:
Capital expenditures (87,222) (25,002) - (112,224)
Proceeds from disposal of assets, net 338,365 - - 338,365
Other investing activities (29,553) (976) - (30,529)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 221,590 (25,978) - 195,612
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayment of) revolving
credit agreements (176,721) - - (176,721)
Purchase of treasury stock (37,001) - - (37,001)
Proceeds from (payment of) intercompany advances (19,723) 19,723 - -
Other financing activities (1,299) - - (1,299)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (234,744) 19,723 - (215,021)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (1,126) 22 - (1,104)
Cash and cash equivalents at the beginning of the period 2,471 32 - 2,503
=========================================================================================================================
Cash and cash equivalents at the end of the period $ 1,345 54 - 1,399
=========================================================================================================================
</TABLE>
Page 11
<PAGE>
NOTE 9 - SUBSEQUENT EVENTS
In connection with an initiative announced on August 30, 1999, the Company
has appointed a Special Committee of its Board of Directors to evaluate
strategic alternatives which could enhance and maximize shareholder value. The
Special Committee is comprised of two independent directors. On November 10,
1999, a management group formed by Tom E. DuPree, Jr., the Company's Chairman
and Chief Executive Officer, filed a Schedule 13D with the Securities and
Exchange Commission indicating that the management group was making a proposal
to acquire the Company. The Company has received a letter outlining the
proposal, which is included as an exhibit to the Schedule 13D. The Special
Committee is taking the management proposal under advisement and will evaluate
and consider the proposal along with other strategic alternatives. On November
10, 1999, a purported class action shareholder lawsuit was filed against the
Company and its Board of Directors in the Superior Court of Morgan County,
Georgia, entitled Herbert Behrens v. Avado Brands, Inc., et al. The Complaint
alleges, among other things, that the Company and its directors intend to
violate their fiduciary obligations to shareholders by approving a management
proposal to acquire the Company. The Company and its directors believe that this
suit is without merit and intend to vigorously deny the allegations of the
Complaint. Subsequently, the Company has learned that several similar lawsuits
have been filed, although such additional suits have not been served upon the
Company.
Page 12
<PAGE>
Item 2.
AVADO BRANDS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Third Quarter and Nine Months Ended October 3, 1999
Consolidated Overview
Consolidated restaurant sales for the third quarter and nine months ended
October 3, 1999 were $157.3 million and $486.0 million, respectively, compared
to $204.4 million and $686.0 million for the same respective periods of 1998.
The sales decrease primarily reflects the completion of the Applebee's
divestiture. Declining Applebee's revenues were partially offset by revenues
generated by new restaurant openings in the Company's other brands. Applebee's
comprised 4% of revenues in the first nine months of 1999 compared to 45% in the
first nine months of 1998.
Restaurant operating expenses for the first nine months of 1999 decreased
to 85.3% of sales compared to 85.8% for the corresponding period of 1998. The
decrease was primarily a result of a decrease in payroll and benefits generated
by the declining impact of increased payroll and benefits incurred at Applebee's
during 1998 and 1999 as a result of performance-based, pay-to-stay bonus
programs implemented to control management turnover and operating costs during
the divestiture period. This decrease was partially offset by an increase in
depreciation and amortization due primarily to a decrease in the impact of
Applebee's fixed assets which were not depreciated due to their "held for sale"
status.
In 1999, the Company completed the divestiture of its 279 Applebee's
restaurants, including the divestiture of 21 restaurants for proceeds of $35.1
million completed during the first quarter and the divestiture of the final 25
locations for proceeds of $43.8 million completed during the second quarter.
Gross proceeds related to the Applebee's divestiture were $514.0 million,
including $10.2 million in notes outstanding at October 3, 1999.
Core Brands
During the first nine months of 1999, the Company opened 30 "Core" brand
restaurants including six opened during the third quarter. Core brands include
Canyon Cafe, Don Pablo's, Hops and McCormick & Schmick's. In addition, the
Company has opened one restaurant with each of its joint venture partners Belgo
Group PLC and PizzaExpress PLC and closed six core brand restaurants during
1999. The following table presents core brand restaurants open as of the end of
the third quarters of 1999 and 1998:
1999 1998
- --------------------------------------------------------------------------------
Canyon Cafe 16 18
Don Pablo's 137 120
Hops 59 44
McCormick & Schmick's 24 21
- --------------------------------------------------------------------------------
Total 236 203
================================================================================
Page 13
<PAGE>
The following table sets forth the percentages which certain items of
income and expense bear to total restaurant sales for the Company's core brands
for the quarter and nine-month periods ended October 3, 1999 and September 27,
1998 (i.e., assuming no operations related to the Company's divested Applebee's
restaurants):
<TABLE>
Core Brands:
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
Oct. 3, 1999 Sept. 27, 1998 Oct. 3, 1999 Sept. 27, 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Canyon Cafe 6.4% 8.2% 7.1% 9.2%
Don Pablo's 49.9% 52.0% 51.0% 51.5%
Hops 23.1% 19.9% 22.4% 19.9%
McCormick & Schmick's 20.6% 19.9% 19.5% 19.4%
- ------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 100.0% 100.0% 100.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 28.2% 28.1% 28.3% 28.0%
Payroll and benefits 30.1% 30.1% 30.5% 30.2%
Depreciation and amortization 3.3% 3.0% 3.2% 3.3%
Other operating expenses 24.4% 23.7% 23.5% 23.2%
- ------------------------------------------------------------------------------------------------------------------------
Total restaurant operating 86.0% 84.9% 85.4% 84.7%
expenses
- ------------------------------------------------------------------------------------------------------------------------
Income from restaurant operations 14.0% 15.1% 14.6% 15.3%
General and administrative expenses 5.8% 6.2% 5.9% 6.9%
========================================================================================================================
Operating income 8.2% 8.9% 8.7% 8.4%
========================================================================================================================
</TABLE>
Core brand restaurant sales for the third quarter and nine-month period
ended October 3, 1999 increased by 16% and 22% over the results of the
comparable, prior-year periods, respectively. Increased core brand revenues were
primarily attributable to sales from 59 restaurants opened in 1998 and 30
restaurants opened in 1999. Sales increases attributable to new restaurant
openings were somewhat offset by the closing of six core brand restaurants
during 1999. On a consolidated core brand basis, same-store sales for the third
quarter of 1999 were 1.6% negative compared to the same period of 1998
(same-store-sales comparisons include all restaurants open for 18 months as of
the beginning of the quarter). Same-store-sales increases of 6.6% at McCormick &
Schmick's were offset primarily by same-store-sales decreases of 3.6% and 2.0%
at Don Pablo's and Hops, respectively. Sales at Don Pablo's were negatively
impacted by two hurricanes during the third quarter of 1999. In addition, Don
Pablo's advertising efforts during the third quarter of 1999 were limited
primarily to local restaurant marketing compared to the year-ago period which
was covered by an aggressive, system-wide advertising campaign. Same-store-sales
comparisons at Hops were negatively impacted by discount couponing which ran in
six restaurants throughout the third quarter of 1998. Excluding these six
restaurants, same-store-sales comparisons for the third quarter of 1999 were
slightly positive at 0.1%.
Core brand restaurant operating expenses for the third quarter of 1999
increased to 86.0% of sales compared to 84.9% in the corresponding period of the
prior year. The increase was primarily attributable to lower average unit
volumes at Don Pablo's and Hops which decreased leverage on fixed depreciation
and amortization expenses and certain fixed operating expenses. In addition,
approximately $1.0 million in additional costs related to the Don Pablo's summer
promotional campaign, which were not previously anticipated, were expensed
during the third quarter of 1999.
Page 14
<PAGE>
Core brand general and administrative expenses for the quarter ended
October 3, 1999 decreased to 5.8% from 6.2% in the corresponding period of 1998.
The decrease was primarily attributable to staff reductions and other actions
taken in the fourth quarter of 1998 as well as leverage gained from increased
sales in core brands.
Interest and Other Expenses
Interest expense for the third quarter and nine-month period ended October
3, 1999 was $6.9 million and $16.1 million, respectively, compared to $5.9
million and $20.3 million for the corresponding periods of the prior year. The
year-to-date decrease from 1998 was primarily attributable to lower average
borrowings under revolving credit agreements. During the third quarter of 1999,
however, increased average borrowings and average borrowing rates associated
with the Company's $100 million 11.75% senior subordinated notes issued in the
second quarter of 1999, resulted in an increase in interest expense as compared
to the third quarter of 1998.
Income (loss) from investments carried at equity for the third quarter of
1999 primarily reflects income from the Company's 20% equity interest in Belgo
Group PLC which was more than offset by the Company's portion of losses
associated primarily with the start-up phase of two restaurants opened in 1999
under the Company's joint venture agreements with PizzaExpress PLC and Belgo
Group PLC.
Income tax expense as a percent of earnings before income taxes was 30.8%
in the first nine months of 1999 compared to 36.9% in the corresponding period
of 1998. Income tax reflects, for each period, taxes on the gain on disposal of
assets provided at 38.0%. Taxes on continuing operations were provided at 30.0%
in 1999 compared to 34.0% in 1998. The lower tax rate on 1999 continuing
operations primarily reflects an increase in the impact of FICA tip credits and
permanent tax planning strategies to reduce state income taxes.
Net earnings for the nine-month period ended October 3, 1999 was $14.4
million and included an after-tax gain on disposal of assets held for sale of
$1.4 million. Net earnings for the corresponding period of 1998 was $67.8
million and included an after-tax gain on disposal of assets of $48.6 million
and a $1.5 million after-tax charge related to a change in accounting principle
requiring the expensing of preopening costs as incurred.
Liquidity and Capital Resources
The Company's historical and projected growth and its preference to own its
real estate cause it to be a net user of cash, even after a significant amount
of expansion financing is internally generated from operations. Principal
sources of funds in the first nine months of 1999 consisted of proceeds from
disposal of assets of $86.1 million, proceeds from issuance of long-term debt of
$95.5 million and cash generated from operations of $8.7 million. The primary
uses of funds consisted of treasury stock acquired primarily through settlement
of equity forward agreements of $74.8 million (net of collateral payments on
equity forward contracts), repayment of revolving credit agreements of $49.6
million and capital expenditures of $65.0 million.
Since substantially all sales in the Company's restaurants are for cash and
accounts payable are generally due in 15 to 45 days, the Company operates with
negative working capital. Increases in accounts receivable, prepaid expenses and
other, inventory, accounts payable and accrued liabilities occurred during the
Page 15
<PAGE>
first nine months of 1999 primarily as a result of new restaurant openings. In
some instances, these increases were more than offset by decreases resulting
from divested Applebee's restaurants. Further increases in current asset and
liability accounts are expected as the Company continues its restaurant
development program.
In June 1999, the Company completed the private placement of $100 million
of 11.75% senior subordinated notes due June 15, 2009. The notes were priced at
98.561 to yield 12.0%. During the third quarter of 1999, the notes were
registered under the Securities Act of 1933. Simultaneously with the notes
offering, a new, three-year $125 million bank revolving credit facility (the
"Facility") was executed. Terms of the Facility include various provisions,
which, among other things, require the Company to maintain certain coverage
ratios including a total debt to earnings before interest, taxes, depreciation
and amortization ("EBITDA") ratio of less than 4.0 (as calculated for the
preceding four quarter period, excluding operations related to divested
Applebee's restaurants). At October 3, 1999, the Company was not in compliance
with this provision with a debt to EBITDA ratio of 4.2. The Company has obtained
a waiver of this requirement through December 31, 1999. In exchange for such
waiver, the Company has agreed to grant a security interest in the stock of its
material subsidiaries. The security interest would also apply to the Company's
9.75% Senior Notes due 2006. The Company expects to be in Compliance with the
terms of the Facility at January 2, 2000, either by selling certain assets or
negotiating an amendment to the Facility.
Capital expenditures during the first nine months of 1999 provided for the
opening of 15 Don Pablo's, 13 Hops and two McCormick & Schmick's restaurants in
addition to ongoing refurbishments of existing restaurants. Capital requirements
for the construction of new core restaurants are expected to approximate $20
million for the remainder of 1999 and $70 million in 2000, approximately $60
million of which is expected to be generated internally. Management believes
that credit availability under the Facility, cash flow from operations and
liquidation of other assets will provide funding sufficient to satisfy expansion
plans through fiscal 2000.
Effect of Inflation
Management believes that inflation has not had a material effect on
earnings during the past several years. Inflationary increases in the cost of
labor, food and other operating costs could adversely affect the Company's
restaurant operating margins. In the past, however, the Company generally has
been able to modify its operations, including raising prices, to offset
increases in its operating costs.
Forward-Looking Information
Certain information contained in this Form 10-Q, particularly information
regarding future economic performance and finances, restaurant development
plans, capital requirements and objectives of management, is forward looking. In
some cases, information regarding certain important factors that could cause
actual results to differ materially from any such forward-looking statement
appear together with such statement. Furthermore, the following factors, in
addition to other possible factors not listed, could affect the Company's actual
results and cause such results to differ materially from those expressed in
forward-looking statements. These factors include competition within the casual
dining restaurant industry, which remains intense; changes in economic
Page 16
<PAGE>
conditions such as inflation or a recession; consumer perceptions of food
safety; weather conditions; changes in consumer tastes; labor and benefit costs;
legal claims; the continued ability of the Company to obtain suitable locations
and financing for new restaurant development; government monetary and fiscal
policies; laws and regulations and governmental initiatives such as minimum wage
rates and taxes. Other factors that may cause actual results to differ from the
forward-looking statements contained in this release and that may affect the
Company's prospects in general are described in Exhibit 99.1 to the Company's
Form 10-Q for the fiscal quarter ended June 29, 1997, and the Company's other
filings with the Securities and Exchange Commission.
Year 2000
Historically, certain computer programs were written and certain computer
chips were designed using two-digit year designations. These programs and chips
may experience problems handling dates beyond 1999. Incomplete or untimely
resolution of these problems by the Company, by its critical suppliers, or by
governmental entities could have a material adverse effect on the Company's
consolidated financial position or results of operations. Work on Year 2000
related issues began in 1997 with executive awareness programs and the
engagement of outside consultants to assist in developing a consistent Year 2000
methodology, time line and project plan. An inventory and assessment of
information technology ("IT") systems as well as non-IT systems was completed
during 1998, and the solution implementation and testing phases have been
substantially completed. As the Company has invested primarily in licensed
software rather than developing it internally, remediation efforts and related
expenditures have not been material. An evaluation of key suppliers to determine
the status of their Year 2000 compliance programs is also in process. Currently,
management does not anticipate any material adverse effects related to the Year
2000. Contingency plans, however, are being developed to address all aspects of
operation level functionality and vendor management in the event unforeseen
circumstances arise.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." As amended by SFAS No. 137, "Deferral of
the Effective Date of FASB Statement No. 133", SFAS 133 will be effective for
the Company's first quarter financial statements in fiscal 2001. The Company has
not completed its evaluation of the impact, if any, that adoption of this
statement will have on its consolidated financial position or results of
operations.
Page 17
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates and
changes in commodity prices. Exposure to interest rate risk relates primarily to
variable rate U.S. LIBOR obligations on revolving credit and interest rate swap
agreements. Interest rate swap agreements are utilized to manage overall
borrowing costs and reduce exposure to adverse fluctuations in interest rates.
Three interest rate swap agreements are currently in place under which the
Company pays an average of certain foreign or U.S. LIBOR-based variable rates.
These agreements also contain interest rate caps which further limit interest
rate exposures. If interest rates related to the Company's U.S. LIBOR
obligations increased by 100 basis points over the rates in effect at October 3,
1999, interest expense for the remainder of fiscal 1999, after considering the
effects of interest rate swap agreements, would increase by approximately $0.5
million. If an additional 100 basis point interest rate increase occurred in the
Company's foreign LIBOR-based obligations, interest expense in 1999 would
increase by an additional $0.3 million. These amounts were determined by
considering the impact of hypothetical interest rates on the Company's borrowing
cost and interest rate swap agreements. In the event of a change of such
magnitude, management would likely take actions to further mitigate interest
rate exposures.
The Company purchases certain commodities such as beef, chicken, flour and
cooking oil. Purchases of these commodities are generally based on vendor
agreements which often contain contractual features that limit the price paid by
establishing price floors or caps. As commodity price aberrations are generally
short term in nature and have not historically had a significant impact on
operating performance, financial instruments are not used to hedge commodity
price risk.
Page 18
<PAGE>
Part II. Other Information
Item 5. Other Information
In connection with an initiative announced on August 30, 1999, the Company
has appointed a Special Committee of its Board of Directors to evaluate
strategic alternatives which could enhance and maximize shareholder value. The
Special Committee is comprised of two independent directors. On November 10,
1999, a management group formed by Tom E. DuPree, Jr., the Company's Chairman
and Chief Executive Officer, filed a Schedule 13D with the Securities and
Exchange Commission indicating that the management group was making a proposal
to acquire the Company. The Company has received a letter outlining the
proposal, which is included as an exhibit to the Schedule 13D. The Special
Committee is taking the management proposal under advisement and will evaluate
and consider the proposal along with other strategic alternatives. On November
10, 1999, a purported class action shareholder lawsuit was filed against the
Company and its Board of Directors in the Superior Court of Morgan County,
Georgia, entitled Herbert Behrens v. Avado Brands, Inc., et al. The Complaint
alleges, among other things, that the Company and its directors intend to
violate their fiduciary obligations to shareholders by approving a management
proposal to acquire the Company. The Company and its directors believe that this
suit is without merit and intend to vigorously deny the allegations of the
Complaint. Subsequently, the Company has learned that several similar lawsuits
have been filed, although such additional suits have not been served upon the
Company.
The Special Committee has determined that disclosure with respect to
possible strategic alternatives, the parties to any such arrangements, and the
possible terms of any such proposal or arrangement might jeopardize the
commencement of continuation of any discussions or negotiations that the Special
Committee may conduct. The Special Committee accordingly has determined not to
disclose the terms of any such discussions or negotiations, including any
discussions and negotiations with the management group, until an agreement has
been reached or until otherwise required by law. There can be no assurance that
any discussions concerning strategic alternatives will result in any transaction
being authorized or consummated.
Page 19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
11.1 Computation of earnings per common share
27.1 Financial Data Schedule (EDGAR version only)
99.1 Safe Harbor Under the Private Securities Litigation Reform Act
of 1995*
*Incorporated by reference to the corresponding exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, as amended by
a Form 10-Q/A filed on August 27, 1997
(b) Reports on Form 8-K. None
Page 20
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Avado Brands, Inc.
(Registrant)
Date: November 17, 1999 By:/s/ Erich J. Booth
--------------------------------
Erich J. Booth
Chief Financial Officer and
Corporate Treasurer
/s/ Louis J. Profumo
--------------------------------
Louis J. Profumo
Senior Vice President of Finance
and Chief Accounting Officer
Page 21
<TABLE>
Exhibit 11.1
Computation of Earnings Per Common Share
(In thousands, except per share data)
<CAPTION>
Quarter Ended Nine Months Ended
- ----------------------------------------------------------------------------------------------------------------------------------
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average number of common shares used in basic calculation 25,335 36,547 28,328 37,627
Net additional shares issuable pursuant to employee stock
option plans at period-end market price 1 16 2 25
Shares issuable on assumed conversion of convertible
preferred securities - * 7,774 7,774 7,774
- ----------------------------------------------------------------------------------------------------------------------------------
Average number of common shares used in diluted calculation 25,336 44,337 36,104 45,426
==================================================================================================================================
Earnings before cumulative effect of change in accounting principle $ 2,431 24,438 14,351 69,302
Cumulative effect of change in accounting principle, net of tax benefit - - - (1,461)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings 2,431 24,438 14,351 67,841
Distribution savings on assumed conversion of convertible
preferred securities, net of income taxes - * 1,328 4,227 3,985
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings for computation of diluted earnings per common share $ 2,431 25,766 18,578 71,826
==================================================================================================================================
Basic earnings before cumulative effect of change in accounting principle $ 0.10 0.67 0.51 1.84
Cumulative effect of change in accounting principle - - - (0.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.10 0.67 0.51 1.80
==================================================================================================================================
Diluted earnings before cumulative effect of change in accounting principle $ 0.10 * 0.58 0.51 1.61
Cumulative effect of change in accounting principle - - - (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.10 * 0.58 0.51 1.58
==================================================================================================================================
* Diluted EPS increases from $0.10 to $0.12 when the Convertible Preferred Securities are included in the calculation.
As those shares are antidilutive, they are excluded from the computation of diluted EPS.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR THE PERIOD ENDING OCTOBER 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS).
</LEGEND>
<CIK> 0000849101
<NAME> Avado Brands, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jan-02-2000
<PERIOD-START> Jan-04-1999
<PERIOD-END> Oct-03-1999
<CASH> 3,268
<SECURITIES> 0
<RECEIVABLES> 9,280
<ALLOWANCES> 0
<INVENTORY> 8,873
<CURRENT-ASSETS> 31,735
<PP&E> 412,323
<DEPRECIATION> 0
<TOTAL-ASSETS> 643,481
<CURRENT-LIABILITIES> 84,639
<BONDS> 215,097
115,000
0
<COMMON> 405
<OTHER-SE> 121,606
<TOTAL-LIABILITY-AND-EQUITY> 643,481
<SALES> 486,047
<TOTAL-REVENUES> 486,047
<CGS> 137,283
<TOTAL-COSTS> 442,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,141
<INCOME-PRETAX> 20,751
<INCOME-TAX> 6,400
<INCOME-CONTINUING> 14,351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,351
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.51
</TABLE>
