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This is an electronic confirming copy.
Sequential Page 1 of 19
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 June 30, 1995, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
_____________
Commission file number 0-18051
FLAGSTAR COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3487402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
203 East Main Street
Spartanburg, South Carolina 29319-9966
(Address of principal executive offices)
(Zip Code)
(803) 597-8000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
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 [ ]
As of August 10, 1995, 42,434,611 shares of the registrant's Common Stock, par
value $0.50 per share, were outstanding.
<PAGE>
FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Flagstar Companies, Inc.
Statements of Consolidated Operations
For the Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues..................... $681,464 $679,563 $1,317,927 $1,305,836
Operating Expenses:
Product costs........................ 238,514 234,770 456,760 452,377
Payroll & benefits................... 238,889 241,419 467,698 468,737
Depreciation & amortization expense.. 33,748 31,767 66,998 63,480
Utilities expense.................... 23,708 24,003 46,969 48,441
Other................................ 96,471 102,168 192,029 188,612
631,330 634,127 1,230,454 1,221,647
Operating Income....................... 50,134 45,436 87,473 84,189
Other Charges:
Interest and debt expense - net...... 56,491 55,034 115,426 108,604
Other non-operating expenses - net... 53 431 388 678
56,544 55,465 115,814 109,282
Loss From Continuing Operations
Before Income Taxes.................. (6,410) (10,029) (28,341) (25,093)
Provision For(Benefit From) Income
Taxes................................ (76) 2,857 396 446
Loss From Continuing Operations........ (6,334) (12,886) (28,737) (25,539)
Gain on Sale of Discontinued Operation,
Net of Income Taxes of $7,056........ --- 383,944 --- 383,944
Loss From Discontinued
Operations, Net of Income Tax
Provision (Benefit) of $(6);
$3,302; $354; and $771............... (7,220) (9,439) (15,877) (19,858)
Income(Loss) From Discontinued
Operations, Net...................... (7,220) 374,505 (15,877) 364,086
Extraordinary Item, Net of Income Tax
Benefit of $1,111.................... --- (10,822) --- (10,822)
Net Income (Loss)...................... (13,554) 350,797 (44,614) 327,725
Dividends on Preferred Stock........... (3,544) (3,544) (7,088) (7,088)
Net Income(Loss) Applicable to Common
Stockholders......................... $(17,098) $347,253 $ (51,702) $ 320,637
</TABLE>
<PAGE>
Flagstar Companies, Inc.
Statements of Consolidated Operations (Continued)
For the Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Income(Loss) Per Share Applicable
to Common Stockholders:
Primary
Loss From Continuing Operations....... $(0.23) $(0.21) $(0.84) $(0.41)
Income (Loss) From Discontinued
Operations, Net...................... (0.17) 7.30 (0.38) 7.09
Extraordinary Item, Net............... --- (0.21) --- (0.21)
Net Income(Loss)...................... $(0.40) $ 6.88 $(1.22) $ 6.47
Average Outstanding and Equivalent
Common Shares........................ 42,434 51,329 42,426 51,329
Fully Diluted
Loss From Continuing Operations...... $(0.23) $(0.07) $(0.84) $(0.15)
Income(Loss) From Discontinued
Operations, Net.................... (0.17) 5.85 (0.38) 5.69
Extraordinary Item, Net.............. --- (0.17) --- (0.17)
Net Income(Loss)..................... $(0.40) $ 5.61 $(1.22) $ 5.37
Average Outstanding and Equivalent
Common Shares....................... 42,434 64,026 42,426 64,026
</TABLE>
<PAGE>
FORM 10-Q
Flagstar Companies, Inc.
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(In thousands)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents.............. $ 23,193 $ 66,720
Receivables, less allowance for doubtful
accounts of:
1995 - $4,081; 1994 - $4,561......... 28,067 37,381
Merchandise and supply inventories....... 71,389 62,293
Net assets held for sale................. 73,651 77,320
Other.................................... 15,787 14,344
212,087 258,058
Property:
Property owned (at cost):
Land................................... 273,818 273,411
Buildings and improvements............. 847,617 813,305
Other property and equipment........... 479,548 462,421
Total property owned..................... 1,600,983 1,549,137
Less accumulated depreciation............. 534,627 477,176
Property owned - net...................... 1,066,356 1,071,961
Buildings and improvements, vehicles, and
other equipment held under capital
leases.................................. 194,927 194,348
Less accumulated amortization............. 78,049 69,958
Property held under capital leases - net.. 116,878 124,390
1,183,234 1,196,351
Other Assets:
Intangible assets - net................... 23,281 25,009
Deferred financing costs - net............ 68,697 71,955
Other..................................... 30,934 30,762
122,912 127,726
Total Assets $1,518,233 $1,582,135
</TABLE>
<PAGE>
FORM 10-Q
Flagstar Companies, Inc.
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(In thousands)
<C> <C> <C>
Liabilities
Current Liabilities:
Short-term borrowings............................... $ 33,000 $ ---
Current maturities of long-term debt................ 31,868 31,408
Accounts payable.................................... 85,366 102,464
Accrued salaries and vacations...................... 59,359 56,159
Accrued insurance................................... 46,615 45,165
Accrued taxes....................................... 21,199 21,795
Accrued interest and dividends...................... 44,362 47,568
Other............................................... 66,044 81,757
387,813 386,316
Long-Term Liabilities:
Debt, less current maturities....................... 2,053,578 2,067,648
Deferred income taxes............................... 20,992 21,679
Liability for self-insured claims................... 57,869 58,128
Other non-current liabilities and deferred credits.. 112,183 110,864
2,244,622 2,258,319
Total Liabilities 2,632,435 2,644,635
Stockholders' Deficit (1,114,202) (1,062,500)
Total Liabilities & Stockholders' Deficit $1,518,233 $1,582,135
</TABLE>
<PAGE>
FORM 10-Q
Flagstar Companies, Inc.
Statements of Consolidated Cash Flows
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(In thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income(loss) $ (44,614) $ 327,725
Adjustments to reconcile net income(loss)
to cash flows from operating
activities:
Depreciation and amortization
of property 63,747 60,114
Amortization of
intangible assets 3,251 3,364
Amortization of deferred
financing costs 3,258 3,448
Deferred income tax benefit (687) (228)
Extraordinary items, net --- 10,822
Gain on sale of discontinued operation, net --- (383,944)
Loss from discontinued operations, net 15,877 19,858
Other (8,548) 3,951
Decrease (increase) in assets:
Receivables 11,461 (6,915)
Inventories (9,096) (2,401)
Other current assets (1,442) (505)
Other assets (926) (8,255)
Increase (decrease) in
liabilities:
Accounts payable (16,847) (215)
Accrued salary and vacations 3,199 5,665
Accrued taxes 3,034 4,430
Other accrued liabilities (16,855) (33,741)
Other non-current liabilities
and deferred credits (1,919) (8,484)
Total adjustments 47,507 (333,036)
Net cash flows from (used in) operating
activities 2,893 (5,311)
Cash Flows From (Used In) Investing Activities:
Purchases of property (52,382) (45,024)
Proceeds from disposition of
property 10,854 8,956
Proceeds from sale of discontinued operation --- 450,000
Receipts from (advances to)discontinued
operations (12,826) 1,904
Other long-term assets, net (1,207) 818
Net cash flows from (used in)
investing activities (55,561) 416,654
</TABLE>
<PAGE>
FORM 10-Q
Flagstar Companies, Inc.
Statements of Consolidated Cash Flows
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(In thousands)
<S> <C> <C>
Cash Flows From (Used in) Financing Activities:
Net short-term borrowings(repayments)
under credit agreement $ 33,000 $ (93,000)
Deferred financing costs --- (8)
Long-term debt payments (16,768) (186,845)
Cash dividends on preferred stock (7,088) (7,088)
Other (3) (2)
Net cash flows provided by (used in)
financing activities 9,141 (286,943)
Increase(Decrease) in cash and
cash equivalents (43,527) 124,400
Cash and Cash Equivalents at:
Beginning of period 66,720 24,174
End of period $ 23,193 $ 148,574
Supplemental Cash Flow Information:
Income taxes paid $ 664 $ 2,307
Interest paid $ 127,642 $ 126,339
Non-cash financing activities:
Capital lease obligations $ 3,545 $ 10,194
Dividends declared but not paid $ 3,544 $ 3,544
</TABLE>
<PAGE>
FORM 10-Q
FLAGSTAR COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
Note 1. Introduction.
Flagstar Companies, Inc. ("FCI" or, together with its subsidiaries,
the "Company") is the parent holding company of Flagstar Corporation
("Flagstar"). Flagstar, through its wholly-owned subsidiaries, Denny's
Holdings, Inc. and Spartan Holdings, Inc. (and their respective
subsidiaries), operates four restaurant chains.
Note 2. Interim Period Presentation.
The Statements of Consolidated Operations of FCI and its subsidiaries
for the three months and six months ended June 30, 1995 and 1994,
respectively, include all adjustments management believes are necessary for
a fair presentation of the results of operations for such interim periods.
All such adjustments are of a normal and recurring nature.
Note 3. Divestiture of Canteen Holdings, Inc.
During the second quarter of 1994, the Company sold its food and
vending subsidiary for approximately $450.0 million and adopted a plan to
dispose of the remaining concession and recreation services businesses of
its subsidiary, Canteen Holdings, Inc. The accompanying Consolidated
Balance Sheets and Statements of Consolidated Operations and Cash Flows
reflect such businesses as discontinued operations. On July 17, 1995, the
Company announced that it had entered into an agreement to sell TW
Recreational Services, Inc. ("TWRS"), which operates its recreation
services business, for $110.0 million, subject to certain adjustments.
Such transaction is subject to National Park Service approval and is
expected to be completed during the fourth quarter of 1995. The Company is
also continuing in its efforts to sell Volume Services, Inc. ("Volume"),
which operates its concession services business. Although the major league
baseball strike ended during April 1995, continuing uncertainty regarding
labor issues in baseball has delayed the sale of Volume beyond the time
originally anticipated.
The Company has allocated to the discontinued segment a pro-rata
portion of its interest and debt expense related to its acquisition debt
based on the ratio of net assets of its discontinued operations to its
total consolidated net assets as of the 1989 acquisition date. Interest
and debt expense included in discontinued operations was $4.9 million and
$14.7 million for the three months ended June 30, 1995 and 1994,
respectively, and $9.5 million and $29.1 million for the six months ended
June 30, 1995 and 1994, respectively.
Note 4. Divestiture of Proficient Food Company
On July 10, 1995, the Company announced that it had entered into an
agreement to sell Proficient Food Company ("PFC"), a food products and
supplies distribution subsidiary, for approximately $130.0 million, subject
to certain adjustments. Upon closing, which is expected to occur at the
end of the third quarter of 1995, the restaurant subsidiaries of the
Company will enter into separate, long-term distribution agreements with
PFC.
<PAGE>
FORM 10-Q
Note 5. Employee Benefit Plan
During the quarter ended June 30, 1995, the Company offered
replacement grants to certain individuals holding options outstanding under
the 1989 Stock Option Plan. The replacement grants entitle such
individuals, upon cancellation of the previously outstanding options, to
receive options equal to the number of options canceled; those options have
an exercise price of $6.00 and are exercisable at a rate of 20% per year
beginning one year from the date of grant. In addition, the Company
adjusted the exercise price on options previously granted to its field
managers and administrative employees to $6.00 per share. No change was
made in the vesting schedule related to these options.
<PAGE>
FORM 10-Q
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results of Operations
The following discussion is intended to highlight significant changes
in financial position as of June 30, 1995 and the results of operations for
the three months and six months ended June 30, 1995 as compared to the
corresponding 1994 periods.
The interim Consolidated Financial Statements and this Management's
Discussion and Analysis of Financial Condition and Results of Operations
should be read in conjunction with the Consolidated Financial Statements
and Notes thereto for the year ended December 31, 1994 and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations, both of which are contained in the Flagstar Companies, Inc.
1994 Annual Report on Form 10-K.
Results of Operations
Three Months Ended June 30, 1995 Compared to Three Months Ended June 30, 1994
Operating revenues from continuing operations for the second quarter
of 1995 increased by approximately $1.9 million (0.3%) as compared with the
same period in 1994. Denny's revenues increased by $6.7 million (1.7%)
despite a 29-unit net decrease in the number of Company-operated
restaurants. Such decrease is largely due to the sale of restaurants to
franchisees. Comparable store sales at Denny's increased by 2.5% during
the 1995 quarter over the corresponding 1994 period and reflect an increase
in average check of 5.3% which was partially offset by a decrease in
traffic of 2.7%. During the 1995 quarter, Denny's completed remodels on 44
Company-owned restaurants. Hardee's revenues decreased 3.5% to $175.1
million during the 1995 quarter from $181.5 million in the corresponding
quarter of 1994 despite a 16-unit net increase in the number of restaurants
operated at June 30, 1995 as compared to June 30, 1994. Hardee's
comparable store sales decreased by 7.0% during the 1995 quarter as
compared with the 1994 quarter reflecting an 8.9% decrease in traffic
offset, in part, by a 2.1% increase in average check. Aggressive
discounting and promotions by competitors continued within the quick-service
segment and more than offset the net increase in the number of
Hardee's restaurants operated by the Company. During the 1995 quarter, the
Company completed remodels on 17 of its Hardee's units. Quincy's revenues
increased 5.2% to $76.1 million during the second quarter of 1995 from
$72.4 million during the comparable quarter of 1994 principally as a result
of a 6.2% increase in comparable store sales. Such increase included
increases in traffic of 5.6% and in average check of 0.5%. Quincy's
revenue gains reflect the favorable impact of remodeled restaurants which
was offset, in part, by a 7-unit net decrease in the number of restaurants
operated at June 30, 1995 in comparison to June 30, 1994. During the 1995
quarter, the Company completed remodels on 19 of its Quincy's restaurants.
El Pollo Loco revenues decreased by $2.2 million (6.4%) to $32.6 million
during the second quarter of 1995 from $34.9 million during the
corresponding quarter of 1994 primarily due to a 22-unit decline in the
number of Company-owned restaurants at June 30, 1995 as compared to June
30, 1994. Such decline in the number of Company-operated restaurants is
<PAGE>
FORM 10-Q
due to the sale of restaurants to franchisees during 1994 and 1995.
Comparable store sales for El Pollo Loco increased by 0.2% during the
second quarter of 1995 over the corresponding 1994 quarter and reflect an
increase in average check of 5.2% which was offset, in part, by a decrease
in traffic of 4.7%. During the 1995 quarter, the Company completed
remodels on 23 of its El Pollo Loco restaurants.
The Company's operating expenses from continuing operations decreased
by $2.8 million (0.4%) in the second quarter of 1995 as compared with the
same period of 1994. Such decrease reflects a $6.1 million decrease in
operating expenses attributable to Denny's. Denny's operating expenses
were reduced by gains on the sale of restaurants to franchisees of $6.0
million during the second quarter of 1995 as compared with $0.5 million
during the comparable 1994 quarter. Additional decreases in operating
expenses at Denny's are comprised primarily of decreases of $4.2 million in
payroll and benefits expense, $2.9 million in product cost at the
restaurant operating subsidiary, $1.3 million in repairs and maintenance
expense, and $1.6 million in occupancy expenses. These decreases resulted
principally from the decrease in the number of Company-operated
restaurants. Such decreases were offset, in part, by an increase in
product costs of $9.7 million at Denny's processing and distribution
subsidiaries which resulted from increased revenues. At Hardee's,
operating expenses increased by $0.3 million during the second quarter of
1995 over the corresponding 1994 period reflecting a decrease in product
costs of $3.3 million due to decreased sales during the 1995 quarter which
was more than offset by increases of $1.2 million in payroll and benefits
expense, $1.1 million in overhead, $0.4 million in worker's compensation,
and $0.5 million in promotions expenses. Quincy's operating expenses
increased by $4.0 million during the 1995 quarter over the corresponding
period of 1994 primarily due to increases of $1.6 million in payroll and
benefits expense, $0.9 million in product costs, $0.4 million in
advertising expense, and $0.3 million in depreciation and amortization.
Operating expenses at El Pollo Loco decreased by $3.4 million due primarily
to the 22-unit decrease in the number of Company-operated restaurants at
June 30, 1995 as compared with June 30, 1994 as a result of the sale of
restaurants to franchisees. El Pollo Loco's operating expenses included
gains on the sale of restaurants to franchisees of $0.8 million and $0.1
million during the second quarters of 1995 and 1994, respectively.
Corporate and other expenses increased by $2.5 million due primarily to
increased expenses of $1.4 million recorded at the corporate level related
to the Denny's consent decree with the U. S. Department of Justice and
non-recurring charges of $1.1 million related to various management recruiting,
training, and information services initiatives.
Total interest and debt expense from continuing and discontinued
operations decreased by $8.4 million in the second quarter of 1995 as
compared with the corresponding quarter of 1994 principally as a result of
a reduction in interest expense following the payment during June 1994 of
the principal amount ($170.2 million) outstanding under the term facility
of the Company's Restated Credit Agreement and certain other indebtedness
following the sale of the Company's food and vending subsidiary, and an
increase in interest income.
The loss from continuing operations in the second quarter of 1995 was
$6.3 million or $(0.23) per common share as compared with $12.9 million or
$(0.21) per common share in the 1994 period. The net loss in the second
quarter of 1995 was $13.6 million or $(0.40) per common share as compared
<PAGE>
FORM 10-Q
with net income of $350.8 million or $6.88 per common share in the 1994
period. Net income for the second quarter of 1994 includes a $383.9
million gain on the sale of the Company's Canteen food and vending
subsidiary. Although the loss from continuing operations for the second
quarter of 1995 was favorable in comparison to the 1994 period, the per
common share comparison was unfavorable due to the dilutive impact of
options and warrants required to be reflected in the per common share
computations. See Exhibit 11.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
Operating revenues from continuing operations for the first six months
of 1995 increased by approximately $12.1 million (0.9%) as compared with
the same period in 1994. Denny's revenue increased by $14.7 million (1.9%)
during the first six months of 1995 as compared with the same 1994 period.
Comparable store sales at Denny's increased by 3.1% during the first six
month period of 1995 as compared with the first six months of 1994,
reflecting increases in traffic of 2.7% and average check of 0.5%, while
the number of Company-owned units declined. During the first six months of
1995, the Company completed remodels on 86 Company-owned Denny's
restaurants. Hardee's revenues decreased by 2.8% to $333.2 million from
$342.6 million from the corresponding period of 1994 despite a 16-unit net
increase in the number of restaurants operated at June 30, 1995 as compared
to June 30, 1994. Hardee's comparable store sales decreased by 6.8% during
the first six months of 1995 as compared with the 1994 period reflecting an
1.0% increase in average check which was more than offset by a 7.7%
decrease in traffic. Hardee's traffic has been significantly affected by
aggressive discounting by its quick-service segment competitors. During the
first six months of 1995, the Company has remodeled 57 of its Hardee's units.
Quincy's revenues increased by $8.7 million (6.2%) during the first six
months of 1995 as compared with the first six months of 1994, primarily due
to a 7.2% increase in comparable store sales and despite a 7-unit decrease in
the number of units. The increase in comparable store sales resulted from a
7.8% increase in traffic which was offset, in part, by a 0.5% decrease in
average check. During the first six months of 1995, the Company completed
remodels on 35 of its Quincy's units. Revenues at El Pollo Loco decreased by
$1.9 million (2.8%) to $64.2 million during the first six months of 1995 from
$66.0 million during the corresponding period of 1994. Such decrease is
attributable to a 22-unit net decrease in the number of Company-operated
restaurants following the sale of units to franchisees. Comparable store
sales at Company-operated El Pollo Loco units increased by 3.0% reflecting an
increase in average check of 3.2% which was partially offset by a 0.2%
decrease in traffic. During the first six months of 1995, the Company
completed remodels on 39 of its El Pollo Loco units.
Operating expenses from continuing operations increased by $8.8
million (0.7%) in the first six months of 1995 as compared with the same
period of 1994. Operating expenses at Denny's decreased by $5.6 million
principally due to decreases in payroll and benefits expense of $8.6
million, product costs at the restaurant operating subsidiary of $8.1
million, repairs and maintenance of $1.8 million, and occupancy of $1.5
million. Denny's operating expenses were also reduced by gains on the sale
of restaurants to franchisees of $8.5 million during the first six months
of 1995 as compared with $3.9 million during the 1994 period. Such
decreases were offset, in part, by increases in product cost of $14.1
million at Denny's processing and distribution subsidiaries which resulted
<PAGE>
FORM 10-Q
from increased revenues. At Hardee's, an increase in operating expenses of
$5.9 million is mainly attributable to increased expenses for payroll and
benefits of $3.7 million, other expense of $2.7 million, overhead expense
of $2.3 million, and occupancy expense of $1.5 million. Such increases
were offset, in part, by a $4.5 million decrease in product costs
associated with decreased revenues in the 1995 period. An increase in
operating expenses of $9.8 million at Quincy's is principally attributable
to increases in payroll and benefits expense of $3.5 million, product costs
of $2.6 million associated with an increase in revenues during the first
six months of 1994, advertising expense of $1.8 million, and occupancy
expense of $1.4 million. Operating expenses at El Pollo Loco decreased by
$4.1 million during the first six months of 1995 as compared with the same
period of 1994 due primarily to a 22-unit decrease in the number of
Company-operated restaurants at June 30, 1995 as compared with June 30,
1994 following the sale of restaurants to franchisees. El Pollo Loco's
operating expenses during the first six months of 1995 included gains on
the sale of restaurants of $1.7 million as compared with $0.1 million
during the corresponding period of 1994. Corporate and other expenses
increased by $3.0 million during the first six months of 1995 as compared
with 1994 due primarily to increased expenses of $2.8 million recorded at
corporate level related to the Denny's consent decree with the U. S.
Department of Justice and non-recurring charges of $0.8 million related to
various management recruiting, training, and information services initiatives.
Total interest and debt expense from continuing and discontinued
operations decreased by $12.7 million during the first six months of 1995
as compared with the first six months of 1994 principally as a result of a
reduction in interest expense following the payment during June 1994 of the
principal amount ($170.2 million) outstanding under the term facility of
the Company's Restated Credit Agreement and certain other indebtedness
following the sale of the Company's food and vending subsidiary, and an
increase in interest income, offset by an increase in expense related to
interest rate exchange agreements.
The loss from continuing operations in the first six months of 1995
was $28.7 million or $(0.84) per common share as compared with $25.5
million or $(0.41) per common share in the 1994 period. The net loss for
the first six months of 1995 was $44.6 million or $(1.22) per common share
as compared with net income of $327.7 million or $6.47 per common share in
the 1994 period. Net income for the first six months of 1994 includes a
$383.9 million gain on the sale of the Company's Canteen food and vending
subsidiary. Although the net loss from continuing operations for the first
six months of 1995 was unfavorable to the 1994 period by $3.2 million, the
per common share comparison was significantly affected by the dilutive
impact of options and warrants required to be reflected in the per common
share computations. See Exhibit 11.
<PAGE>
FORM 10-Q
Liquidity And Capital Resources
At June 30, 1995 and December 31, 1994, the company had working
capital deficits of $175.7 million and $128.3 million, respectively. The
increase in the deficit between December 31, 1994 and June 30, 1995 is
attributable primarily to a reduction in cash and cash equivalents which
has been used to finance the Company's restaurant remodeling programs. The
Company is able to operate with a substantial working capital deficiency
because (i) restaurant operations and most other food service operations
are conducted primarily on a cash (and cash equivalent) basis with a low
level of accounts receivable, (ii) rapid turnover allows a limited
investment in inventories and (iii) accounts payable for food, beverages
and supplies usually become due after the receipt of cash from the related
sales.
The Company is currently evaluating its options regarding the
potential use of $130.0 million in gross proceeds from the pending sale of
its food distribution subsidiary, Proficient Food Company, and $110.0
million in gross proceeds from the pending sale of its recreation services
subsidiary, TW Recreational Services, Inc. Such options include the
repayment of short-term borrowings or long-term debt and financing the
Company's restaurant remodeling and capital expenditure programs.
<PAGE>
FORM 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of FCI was held on Tuesday,
May 2, 1995 at which time the following matters were voted on by
the stockholders of FCI:
(i) Election of Directors
Votes Against
Name Votes For or Withheld
James B. Adamson 36,498 664 363,807
Michael Chu 36,498,468 364,003
Vera King Farris 36,496,024 366,447
Henry R. Kravis 36,471,177 391,294
A. Andrew Levison 36,493,887 368,584
Paul E. Raether 36,492,397 370,074
Jerome J. Richardson 36,485,752 376,719
Clifton S. Robbins 36,484,423 378,048
George R. Roberts 36,472,904 389,567
L. Edwin Smart 36,493,982 368,489
Michael T. Tokarz 36,491,923 370,548
(ii) Ratification of the Selection of Auditors
Votes Abstaining
Votes For Votes Against and Broker Non-Votes
36,726,532 112,494 23,445
(iii) Approval of Amendment to 1989 Non-Qualified Stock Option Plan.
Votes Abstaining
Votes For Votes Against and Broker Non-Votes
35,667,102 1,120,649 74,720
(iv) Approval of 1995 Incentive Compensation for the Company's Senior
Management.
Votes Abstaining
Votes For Votes Against and Broker Non-Votes
35,694,326 935,487 81,180
<PAGE>
FORM 10-Q
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibit 11, Computation of Earnings (Loss) per Share, and
Exhibit 27, Financial Data Schedule, are filed as exhibits to
this report.
b. The registrant filed no reports on Form 8-K during the quarter
for which this report is filed.
<PAGE>
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FLAGSTAR COMPANIES, INC.
Date: August 14, 1995 By: /s/ Rhonda J. Parish
Rhonda J. Parish
Vice President and
General Counsel
Date: August 14, 1995 By: /s/ C. Robert Campbell
C. Robert Campbell
Vice President and
Chief Financial Officer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
FORM 10-Q
Exhibit 27
FLAGSTAR COMPANIES, INC.
FINANCIAL DATA SCHEDULE
(In Thousands Except Per Share Amounts)
This schedule contains summary financial information extracted from the financial statements of
Flagstar Companies, Inc. as contained in its Form 10-Q for the quarterly period ended June 30,
1995 and is qualified in its entirety by reference to such financial statements.
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 23,193 0
<RECEIVABLES> 32,148 0
<ALLOWANCES> (4,081) 0
<INVENTORY> 71,389 0
<CURRENT-ASSETS> 212,087 0
<PP&E> 1,795,910 0
<DEPRECIATION> (612,679) 0
<TOTAL-ASSETS> 1,518,233 0
<CURRENT-LIABILITIES> 387,813 0
<BONDS> 2,053,578 0
0 0
630 0
<COMMON> 21,217 0
<OTHER-SE> (1,136,049) 0
<TOTAL-LIABILITY-AND-EQUITY> 1,518,233 0
<SALES> 1,317,927 681,464
<TOTAL-REVENUES> 1,317,927 681,464
<CGS> 1,230,454 631,330
<TOTAL-COSTS> 1,230,454 631,330
<OTHER-EXPENSES> 388 53
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 115,426 56,491
<INCOME-PRETAX> (28,341) (6,410)
<INCOME-TAX> 396 (76)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (44,614) (13,554)
<EPS-PRIMARY> (1.22) (0.40)
<EPS-DILUTED> (1.22) (0.40)
<PAGE>
</TABLE>
[MULTIPLIER] 1,000
<TABLE>
<CAPTION>
FLAGSTAR COMPANIES, INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(In Thousands Except Ratios)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1994(C) June 30,1995 June 30, 1994(C)
Primary and Primary and
Fully Diluted(B) Primary Fully Diluted Fully Diluted(B) Primary Fully Diluted
<S> <C> <C> <C> <C> <C> <C>
Adjustment of common and equivalent shares:
Average number of common shares
outstanding before adjustments 42,434 42,369 42,369 42,426 42,369 42,369
Assumed exercise of stock warrants and options --- 8,960 8,960 --- 8,960 8,960
Conversion of convertible securities --- --- 4,136 --- --- 4,136
Conversion of preferred stock --- --- 8,561 --- --- 8,561
Total average outstanding and equivalent
common shares 42,434 51,329 64,026 42,426 51,329 64,026
Adjustment of net income (loss):
Loss from continuing operations (A) $ (9,878)$ (16,430)$ (16,430)$ (35,825)$ (32,627)$ (32,627)
Interest on senior debt, net of income taxes --- 5,784 5,784 --- 11,266 11,266
Interest on convertible debentures, net
of income taxes --- --- 2,432 --- --- 4,864
Dividends on preferred stock --- --- 3,544 --- --- 7,088
Loss on continuing operations
applicable to common stock (9,878) (10,646) (4,670) (35,825) (21,361) (9,409)
Income (loss) from discontinued operations (7,220) 374,505 374,505 (15,877) 364,086 364,086
Extraordinary item, net of income taxes --- (10,822) (10,822) --- (10,822) (10,822)
Adjusted net income (loss) applicable to
common stockholders $ (17,098)$ 353,037 $ 359,013 $ (51,702)$ 331,903 $ 343,855
Earnings (loss) per common share:
On continuing operations $ (0.23)$ (0.21)$ (0.07)$ (0.84)$ (0.41)$ (0.15)
On discontinued operations (0.17) 7.30 5.85 (0.38) 7.09 5.69
On extraordinary item net --- (0.21) (0.17) --- (0.21) (0.17)
On net income (loss) $ (0.40)$ 6.88 $ 5.61 $ (1.22)$ 6.47 $ 5.37
(A)After deduction of the dividends on preferred stock for the respective periods.
(B)The computation of primary and fully diluted loss per share during the 1995 periods is based on the weighted average
number of outstanding shares. The stock options and warrants have been omitted from the primary computations because
assumed exercise of such options and warrants would have an antidilutive effect on loss per share. In addition, the 10%
Convertible Debentures and $2.25 Preferred Stock are omitted from the fully diluted computation because they have also have
an antidilutive effect on loss per share. As such, primary and fully diluted loss per common share for the 1995 periods are
the same.
(C)The computation of primary earning per share for the 1994 periods is based on the weighted average number of outstanding
shares as adjusted by the assumed dilutive effect that would occur if the outstanding stock options and warrants were
exercised using the modified treasury stock method. The computation of fully diluted earnings per share during the 1994
periods is based on additional adjustments to the primary earnings per share amount for the dilutive effect of the assumed
conversion of Company's 10% Junior Convertible Debentures and $2.25 Preferred Stock.
</TABLE>
