<PAGE> 1
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 June 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
American Restaurant Group, Inc.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-48183 33-0193602
- ------------------------------- --------------- ----------------
(State or other jurisdiction of (Commission File (I.R.S. employer
incorporation or organization) Number) identification no.)
450 Newport Center Drive
Newport Beach, CA 92660
(949) 721-8000
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(Address and telephone number of principal executive offices)
----------------------------------------------------
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
----- -----
The number of outstanding shares of the Company's Common Stock (one cent par
value) as of August 3, 1998 was 128,081.
<PAGE> 2
AMERICAN RESTAURANT GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Condensed Balance Sheets....................................................... 1
Consolidated Statements of Operations....................................................... 3
Consolidated Statements of Cash Flows....................................................... 4
Notes to Consolidated Condensed Financial Statements........................................ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................... 6
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................... 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................ 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 29, 1997 AND JUNE 29, 1998
<TABLE>
<CAPTION>
ASSETS December 29, June 29,
1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 5,737,000 $ 6,329,000
Accounts and notes receivable, net of reserve of
$916,000 and $845,000 at December 29, 1997
and June 29, 1998, respectively 6,606,000 6,473,000
Inventories 5,893,000 5,881,000
Prepaid expenses 3,142,000 2,550,000
------------ ------------
Total current assets 21,378,000 21,233,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land and land improvements 5,610,000 5,610,000
Buildings and leasehold improvements 110,800,000 112,396,000
Fixtures and equipment 85,603,000 86,061,000
Property held under capital leases 12,375,000 12,161,000
Construction in progress 1,827,000 3,743,000
------------ ------------
216,215,000 219,971,000
Less-- Accumulated depreciation 123,893,000 127,775,000
------------ ------------
92,322,000 92,196,000
------------ ------------
OTHER ASSETS-- NET 38,311,000 42,562,000
------------ ------------
Total Assets $152,011,000 $155,991,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
statements. (consolidated condensed balance sheets continued on the
following page)
1
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<TABLE>
<CAPTION>
LIABILITIES AND COMMON STOCKHOLDERS' December 29, June 29,
EQUITY 1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 29,420,000 $ 21,237,000
Accrued liabilities 18,021,000 10,805,000
Accrued insurance 11,251,000 5,104,000
Accrued interest 7,514,000 6,457,000
Accrued payroll costs 10,861,000 9,742,000
Current portion of obligations
under capital leases 926,000 936,000
Current portion of long-term debt 537,000 551,000
------------ ------------
Total current liabilities 78,530,000 54,832,000
------------ ------------
LONG-TERM LIABILITIES, net of current portion:
Obligations under capital leases 7,517,000 7,037,000
Long-term debt 172,419,000 159,654,000
------------ ------------
Total long-term liabilities 179,936,000 166,691,000
------------ ------------
DEFERRED GAIN 5,283,000 5,110,000
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
------------ ------------
CUMULATIVE PREFERRED STOCK,
MANDATORILY REDEEMABLE - 34,400,000
------------ ------------
REDEEMABLE CUMULATIVE PREFERRED STOCK:
Redeemable cumulative senior
preferred stock, $0.01 par value;
1,400,000 shares authorized,
no shares issued or outstanding - -
Redeemable cumulative junior
preferred stock, $0.01 par value;
100,000 shares authorized,
no shares issued or outstanding - -
COMMON STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 1,000,000
shares authorized; 93,150 and 128,081
shares issued and outstanding at
December 29, 1997 and June 29, 1998,
respectively 1,000 1,000
Paid-in capital 63,246,000 59,646,000
Accumulated deficit (174,985,000) (164,689,000)
------------ ------------
Total common stockholders' deficit (111,738,000) (105,042,000)
------------ ------------
Total liabilities and common
stockholders' equity $152,011,000 $155,991,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed statements.
2
<PAGE> 5
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED JUNE 30, 1997 and JUNE 29, 1998
AND THE TWENTY-SIX WEEKS ENDED JUNE 30, 1997 AND JUNE 29, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------------- ----------------------------------
June 30, June 29, June 30, June 29,
1997 1998 1997 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $112,835,000 $110,872,000 $226,945,000 $222,994,000
RESTAURANT COSTS:
Food and beverage 35,608,000 35,263,000 71,958,000 70,868,000
Payroll 32,904,000 33,510,000 67,598,000 66,712,000
Direct operating 28,995,000 27,619,000 57,301,000 54,853,000
Depreciation and
amortization 5,034,000 3,503,000 9,857,000 7,252,000
GENERAL AND ADMINISTRATIVE
EXPENSES 10,352,000 5,146,000 16,489,000 10,455,000
------------ ------------ ------------ ------------
Operating profit (loss) (58,000) 5,831,000 3,742,000 12,854,000
INTEREST EXPENSE, net 5,945,000 4,939,000 11,870,000 10,460,000
------------ ------------ ------------ ------------
Income (loss) before
provision for income
taxes and extraordinary
gain(loss) (6,003,000) 892,000 (8,128,000) 2,394,000
PROVISION FOR INCOME
TAXES 28,000 73,000 31,000 77,000
------------ ------------ ----------- ------------
Income (loss) before
extraordinary gain(loss) (6,031,000) 819,000 (8,159,000) 2,317,000
EXTRAORDINARY GAIN(LOSS)
ON EXTINGUISHMENT OF DEBT - (3,000) - 9,559,000
------------ ------------ ----------- ------------
Net income (loss) $ (6,031,000) $ 816,000 $ (8,159,000) $ 11,876,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed statements.
3
<PAGE> 6
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 1997 AND JUNE 29, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, June 29,
1997 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $227,353,000 $223,127,000
Cash paid to suppliers and employees (216,084,000) (217,512,000)
Interest paid, net (10,539,000) (11,496,000)
Income taxes paid (31,000) (77,000)
------------ ------------
Net cash provided by(used in)operating activities 699,000 (5,958,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,339,000) (5,041,000)
Net increase in other assets (757,000) (464,000)
Proceeds from disposition of assets 610,000 1,000
------------ ------------
Net cash used in investing activities (2,486,000) (5,504,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on indebtedness (651,000) (155,840,000)
Borrowings on indebtedness 1,199,000 155,215,000
Net increase in deferred debt costs (1,438,000) (10,536,000)
Costs included in extraordinary gain on extinguishment
of debt - (1,686,000)
Issuance of cumulative preferred stock - 35,000,000
Cost related to issuance of cumulative preferred
stock - (2,179,000)
Payments on insurance-related financing - (7,450,000)
Payments on capital lease obligations (441,000) (470,000)
------------ ------------
Net cash provided by (used in) financing activities (1,331,000) 12,054,000
------------ ------------
NET INCREASE (DECREASE) IN CASH (3,118,000) 592,000
CASH, at beginning of period 7,493,000 5,737,000
------------ ------------
CASH, at end of period $ 4,375,000 $ 6,329,000
============ ============
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income (loss) $ (8,159,000) $ 11,876,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary gain on
extinguishment of debt - (9,559,000)
Depreciation and amortization 9,857,000 7,252,000
Loss on disposition of assets 4,114,000 28,000
Amortization of deferred gain (247,000) (173,000)
Accretion on indebtedness 54,000 21,000
Decrease in current assets:
Accounts and notes receivable, net 408,000 133,000
Inventories 368,000 12,000
Prepaid expenses 399,000 689,000
Increase (decrease) in current liabilities:
Accounts payable 1,034,000 (8,183,000)
Accrued liabilities (4,462,000) (7,181,000)
Accrued insurance (3,690,000) 1,303,000
Accrued interest 1,277,000 (1,057,000)
Accrued payroll (254,000) (1,119,000)
------------ ------------
Net cash provided by (used in)
operating activities $ 699,000 $ (5,958,000)
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed statements.
4
<PAGE> 7
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. MANAGEMENT OPINION
The Consolidated Condensed Financial Statements included were
prepared by the Company, without audit, in accordance with Securities
and Exchange Commission Regulation S-X. In the opinion of management
of the Company, these Consolidated Condensed Financial Statements
contain all adjustments (all of which are of a normal recurring
nature) necessary to present fairly the Company's financial position
as of December 29, 1997 and June 29, 1998, and the results of its
operations and its cash flows for the twenty-six weeks ended June 30,
1997 and June 29, 1998. The Company's results for an interim period
are not necessarily indicative of the results that may be expected
for the year.
Although the Company believes that all adjustments necessary for a
fair presentation of the interim periods presented are included and
that the disclosures are adequate to make the information presented
not misleading, it is suggested that these Consolidated Condensed
Financial Statements be read in conjunction with the Consolidated
Financial Statements and related notes included in the Company's
annual report on Form 10-K, File No. 33-48183, for the year ended
December 29, 1997 and the Company's current report on Form 8-K, File
No. 33-48183, dated March 3, 1998.
2. INCOME TAXES
The tax provision against the Company's pre-tax income in 1998 was
minimal because of the availability of previously reserved net
operating loss carryforwards.
3. COMPREHENSIVE INCOME
Effective December 30, 1997, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130 Reporting
Comprehensive Income. There were no differences between the Company's
net income (loss), as reported, and comprehensive income.
4. SUBSIDIARY GUARANTORS
Separate financial statements of the Company's subsidiaries are not
included in this report on Form 10-Q because the subsidiaries are
fully, unconditionally jointly and severally liable for the
obligations of the Company under the Company's 11.5% Senior Secured
Notes, due 2003, and the aggregate net assets, earnings and equity of
such subsidiary guarantors are substantially equivalent to the net
assets, earnings and equity of the Company on a consolidated basis.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of American Restaurant Group, Inc.'s
financial condition and results of operations should be read in conjunction
with the historical financial information included in the Consolidated
Condensed Financial Statements.
RESULTS OF OPERATIONS
Thirteen weeks ended June 30, 1997 and June 29, 1998:
Revenues. Total revenues decreased to $110.9 million in the second quarter of
1998 from $112.8 million in the second quarter of 1997. Same-store-sales
increased 1.9%. During the thirteen weeks ended June 29, 1998, the Company
closed one restaurant. There were 239 restaurants operating as of June 30, 1997
and 229 operating as of June 29, 1998.
Black Angus revenues increased 1.4% to $69.0 million in the second quarter of
1998 as compared to the same period in 1997. The increase was primarily due to
a $3.3 million increase in same-store-sales (excluding late-night entertainment
and discontinued lunch) partially offset by a $1.5 million decrease from three
restaurants which closed in 1997 at the end of the leases and a $0.6 million
decrease due to discontinued late-night entertainment at 13 restaurants.
Same-store-sales increased 5.4% (4.1% including late-night entertainment and
discontinued lunch) in 1998.
Grandy's revenues decreased 6.8% to $18.6 million in the second quarter of 1998
as compared to the same period in 1997. The decrease resulted from a $0.7
million decline due to the closure of nine poorly performing restaurants during
the second and third quarters of 1997 and a $0.7 million, or a 3.8%, decline in
same-store-sales. Franchise revenues were constant.
Revenues from other concepts (Spoons, Spectrum and National Sports Grill)
decreased 6.2% to $23.3 million in the second quarter of 1998 compared to the
same quarter in 1997. The decrease resulted from a $1.2 million decline due to
the closure of three restaurants during 1997 and one restaurant during the
second quarter of 1998 and a $0.6 million, or 1.9%, decline in
same-store-sales. This decline was offset in part by sales of $0.3 million from
the opening of one new restaurant in 1998.
Food and Beverage Costs. As a percentage of revenues, food and beverage costs
increased slightly to 31.8% in the second quarter of 1998 from 31.6% in the
second quarter of 1997.
Payroll Costs. As a percentage of revenues, labor costs increased to 30.2% in
the second quarter of 1998 from 29.2% in the second quarter of 1997. The
increase was primarily due to higher management payroll expense at Black Angus.
Direct Operating Costs. Direct operating costs consist of occupancy,
advertising and other expenses incurred by individual restaurants. As a
percentage of revenues, these costs decreased to 24.9% in the second quarter of
1998 from 25.7% in the second quarter of 1997. The decrease was primarily due
to lower general liability expenses and occupancy costs partially offset by
higher advertising expenses.
Depreciation and Amortization. Depreciation and amortization consists of
depreciation of fixed assets used by individual restaurants, divisions and
corporate offices, as well as amortization of intangible assets. As a
percentage of revenues, depreciation and amortization decreased to 3.2% in the
second quarter of 1998 from 4.5% in the second quarter of 1997. The decrease
was primarily due to the reduction in amortization of deferred debt costs
related to the refinancing of the Company's debt in the first quarter of 1998.
6
<PAGE> 9
General and Administrative Expenses. General and administrative expenses
decreased to $5.1 million in the second quarter of 1998 from $10.4 million in
the second quarter of 1997. In the prior year period, the Company recorded a
non-cash charge of $4.1 million for costs associated with closed restaurants
primarily in the Grandy's division. The decrease was also due to a reduction in
corporate overhead expenses. General and administrative expenses as a
percentage of revenues decreased to 4.6% from 9.2% (5.5% before the non-cash
charge).
Operating Profit. Due to the above items, operating profit increased to a
profit of $5.8 million in the second quarter of 1998 from a loss of $0.1
million in the second quarter of 1997. As a percentage of revenues, operating
profit increased to a positive 5.3% from a negative 0.1%.
Interest Expense - Net. Interest expense decreased to $4.9 million in the
second quarter of 1998 from $5.9 million in the second quarter of 1997. The
decrease was primarily due to the refinancing of the Company's debt in
February, 1998. The Company's average stated interest rate decreased to 11.5%
in the second quarter of 1998 from 12.2% in the second quarter of 1997. The
weighted-average debt balance (excluding capitalized lease obligations)
decreased to $158.6 million in the second quarter of 1998 from $172.3 million
in the second quarter of 1997.
Twenty-six weeks ended June 30, 1997 and June 29, 1998:
Revenues. Total revenues decreased to $223.0 million in 1998 from $226.9
million in 1997. Same-store-sales increased 1.7%. During the twenty-six weeks
ended June 29, 1998, the Company closed two restaurants. There were 239
restaurants operating as of June 30, 1997 and 229 operating as of June 29,
1998.
Black Angus revenues increased 1.5% to $139.8 million in 1998 as compared to
the same period in 1997. The increase was due to a $5.9 million increase in
same-store-sales (excluding late-night entertainment and discontinued lunch)
and a $0.8 million increase related to three new stores opened in the first
quarter of 1997. This increase was partially offset by a $3.0 million decrease
from three closed restaurants and a $1.4 million decrease due to discontinued
late-night entertainment at 13 restaurants. Same-store-sales increased 4.7%
(3.3% including late-night entertainment and discontinued lunch) in 1998.
Grandy's revenues decreased 8.1% to $37.1 million in 1998 as compared to the
same period in 1997. The decrease resulted from a $1.8 million decline due to
the closure of 14 poorly performing restaurants during 1997 and a $1.4 million,
or a 3.8%, decline in same-store-sales. Franchise revenues were constant.
Revenues from other concepts (Spoons, Spectrum and National Sports Grill)
decreased 5.7% to $46.1 million in 1998 compared to the same period in 1997.
The decrease resulted from a $2.1 million decline due to the closure of four
restaurants and a $0.9 million, or 2.0%, decline in same-store-sales, partially
offset by sales of $0.3 million from one new restaurant opened in 1998.
Food and Beverage Costs. As a percentage of revenues, food and beverage costs
increased slightly to 31.8% in 1998 from 31.7% in 1997.
Payroll Costs. As a percentage of revenues, labor costs increased slightly to
29.9% in 1998 from 29.8% in 1997. The increase was primarily due to higher
management payroll costs at Black Angus offset in part by lower unit staff
payroll costs at Grandy's as a result of closing 14 poorly performing
restaurants during 1997.
Direct Operating Costs. As a percentage of revenues, these costs decreased to
24.6% in 1998 from 25.2% in 1997. The decrease was primarily due to lower
general liability expenses and occupancy costs partially offset by higher
advertising expenses.
7
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Depreciation and Amortization. As a percentage of revenues, depreciation and
amortization decreased to 3.3% in 1998 from 4.3% in 1997. The decrease was
primarily due to the reduction in amortization of deferred debt costs related
to the refinancing of the Company's debt in the first quarter of 1998.
General and Administrative Expenses. General and administrative expenses
decreased to $10.5 million in 1998 from $16.5 million in 1997. As stated above,
the decrease was primarily due to a non-cash charge of $4.1 million for costs
associated with closed restaurants recorded in 1997 and a reduction in
corporate overhead expenses. General and administrative expenses as a
percentage of revenues decreased to 4.7% from 7.3% (5.4% before the non-cash
charge).
Operating Profit. Due to the above items, operating profit increased to $12.9
million in 1998 from $3.7 million in 1997. As a percentage of revenues,
operating profit increased to 5.8% from 1.6%.
Interest Expense - Net. Interest expense decreased to $10.5 million in 1998
from $11.9 million in 1997. The decrease was primarily due to the refinancing
of the Company's debt in February 1998. The Company's average stated interest
rate decreased slightly to 12.0% in the first half of 1998 from 12.2% in the
first half of 1997. The weighted-average debt balance (excluding capitalized
lease obligations) decreased to $162.6 million in 1998 from $171.8 million in
1997.
Extraordinary Gain. The company recognized an extraordinary gain of $9.6 million
on the extinquishment of debt in 1998. This gain resulted from the refinancing
of the Company's debt in February 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations and
borrowings under its credit facilities. The Company requires capital
principally for the acquisition and construction of new restaurants, the
remodeling of existing restaurants and the purchase of new equipment and
leasehold improvements. As of June 29, 1998, the Company had cash of $6.3
million.
In general, restaurant businesses do not have significant accounts receivable
because sales are made for cash or by credit card vouchers which are ordinarily
paid within three to five days, and do not maintain substantial inventory as a
result of the relatively brief shelf life and frequent turnover of food
products. Additionally, restaurants generally are able to obtain trade credit
in purchasing food and restaurant supplies. As a result, restaurants are
frequently able to operate with working capital deficits, i.e., current
liabilities exceed current assets. At June 29, 1998, the Company had a working
capital deficit of $33.6 million.
The Company estimates that capital expenditures of $6.0 million to $10.0
million are required annually to maintain and refurbish its existing
restaurants. In addition, the Company spends approximately $10.0 million to
$13.0 million annually for repairs and maintenance which are expensed as
incurred. Other capital expenditures, which are generally discretionary, are
primarily for the construction of new restaurants and for expanding,
reformatting and extending the capabilities of existing restaurants and for
general corporate purposes. Total capital expenditures in the first half of
1998 were $5.0 million compared with $2.3 million in the same period in 1997.
The Company estimates that capital expenditures in 1998 will be approximately
$12.0 million. The Company intends to open new restaurants with small capital
outlays and to finance most of the expenditures through operating leases.
On February 25, 1998 the Company completed a recapitalization plan (the
"Recapitalization Plan") which included, among other things, the issuance by
the Company of (a) $155.0 million of the 11.5% senior secured notes due 2003
(the "Notes") and (b) 35,000 preferred stock units of the Company, each unit
consisting of $1,000 initial liquidation preference of 12% senior pay-in-kind
mandatorily redeemable cumulative preferred stock and one common stock purchase
warrant initially to purchase 2.66143 shares of common stock at an initial
exercise price of one cent per share.
8
<PAGE> 11
Also as part of the Recapitalization Plan, the Company concurrently (a)
redeemed at par senior secured notes of $126.4 million together with accrued
and penalty interest and repaid certain other interest-bearing short-term
liabilities, (b) repurchased its existing 10.25% subordinated notes at 65% of
the aggregate principal amount of $45.0 million together with accrued and
penalty interest, and canceled the related warrants to purchase common stock of
the Company's parent, American Restaurant Group Holdings, Inc. ("Holdings") and
(c) established a $15.0 million revolving credit facility to include letters of
credit. Letters of credit outstanding as of August 3, 1998 were $5.1 million. A
quarterly fee of 0.5% per annum is payable on the unused portion of the
revolving credit facility and a fee of 2.5% per annum is payable on outstanding
letters of credit.
As an additional component of the Recapitalization Plan, Holdings extended the
accretion period on its senior discount debentures due 2005 (the "Holdings
Debentures"), from June 15, 1999 to maturity on December 15, 2005, and amended
certain provisions of the Holdings Debentures. The Holdings Debentures will
accrete at a rate of 14.25%, compounded semi-annually. Certain holders of the
Holdings Debentures with an accreted value of approximately $10.8 million
surrendered such debentures for cancellation and received $3.6 million
principal amount of the Notes, which was in addition to the $155.0 million of
the Notes sold as mentioned above. The Notes issued in lieu of Holdings
Debentures were recorded as a non-cash distribution to Holdings by the Company.
Substantially all assets of the Company are pledged to its senior lenders. In
addition, the subsidiaries have guaranteed the indebtedness owed by the Company
and such guarantee is secured by substantially all of the assets of the
subsidiaries. In connection with such indebtedness, contingent and mandatory
prepayments may be required under certain specified conditions and events.
There are no compensating balance requirements.
Although the Company is highly leveraged, based upon current levels of
operations and anticipated growth, the Company expects that cash flows
generated from operations together with its other available sources of
liquidity will be adequate to make required payments of principal and interest
on its indebtedness, to make anticipated capital expenditures and to finance
working capital requirements. However, the Company does not expect to generate
sufficient cash flow from operations in the future to pay the Notes upon
maturity and, accordingly, it expects to refinance all or a portion of such
debt, obtain new financing or possibly sell assets.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information
was issued in June 1997. The Company anticipates reporting three restaurant
segments: "Black Angus", "Grandy's" and "Other Concepts". Other Concepts will
include the Company's Spoons, Spectrum and National Sports Grill divisions. The
Company adopted SFAS No. 131 in 1998 and anticipates providing segment
disclosures as of December 28, 1998.
Statement of Position ("SOP") No. 98-5 Reporting on the Costs of Start-up
Activities was issued in April 1998. SOP NO. 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. The Company has
historically accumulated costs incurred in connection with opening a new
restaurant and amortized these costs over the initial year of operations. Any
previously deferred preopening costs as of the beginning of fiscal year 1999
will be recognized as the cumulative effect of an accounting method change. New
restaurant openings are typically staggered throughout the year and, therefore,
the Company does not anticipate the adoption of SOP No. 98-5 will materially
affect the Company's financial statements. Preopening costs were immaterial as
of June 29, 1998.
9
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Exhibit No. Description
---------- -----------
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only.
10
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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.
AMERICAN RESTAURANT GROUP, INC.
-------------------------------
(Registrant)
Date: August 10, 1998 By: /s/KEN DI LILLO
--------------------- ----------------------------
Ken Di Lillo
Treasurer and Assistant Secretary
11
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INDEX TO EXHIBITS
Exhibit No. Description
---------- -----------
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 29, 1998 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THE THREE MONTHS ENDED JUNE 29, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS ON FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1998
<PERIOD-START> DEC-30-1997
<PERIOD-END> JUN-29-1998
<CASH> 6,329,000
<SECURITIES> 0
<RECEIVABLES> 7,318,000
<ALLOWANCES> 845,000
<INVENTORY> 5,881,000
<CURRENT-ASSETS> 21,233,000
<PP&E> 219,971,000
<DEPRECIATION> 127,775,000
<TOTAL-ASSETS> 155,991,000
<CURRENT-LIABILITIES> 54,832,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (105,042,000)
<TOTAL-LIABILITY-AND-EQUITY> 155,991,000
<SALES> 110,872,000
<TOTAL-REVENUES> 110,872,000
<CGS> 35,263,000
<TOTAL-COSTS> 61,129,000
<OTHER-EXPENSES> 3,503,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,939,000
<INCOME-PRETAX> 892,000
<INCOME-TAX> 73,000
<INCOME-CONTINUING> 819,000
<DISCONTINUED> 0
<EXTRAORDINARY> (3,000)
<CHANGES> 0
<NET-INCOME> 816,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
