<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 26, 2000
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)
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<CAPTION>
Delaware 33-48183 33-0193602
------------------------------- ---------------- ---------------
<S> <C> <C>
(State or other jurisdiction of (Commission File (I.R.S. employer
incorporation or organization) Number) identification no.)
</TABLE>
4410 El Camino Real, Suite 201
Los Altos, CA 94022
(650) 949-6400
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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 July 31, 2000 was 128,081.
<PAGE> 2
AMERICAN RESTAURANT GROUP, INC.
INDEX
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PAGE
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<S> <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............................. 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................ 11
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................................... 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................... 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................... 11
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 27, 1999 AND JUNE 26, 2000
<TABLE>
<CAPTION>
ASSETS December 27, June 26,
1999 2000
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 8,316,000 $ 15,361,000
Receivable from affiliate from sale of
subsidiaries 0 17,000,000
Accounts and notes receivable, net of reserve of
$2,000 at December 27, 1999 and June 26, 2000 2,574,000 2,764,000
Inventories 2,755,000 3,103,000
Prepaid expenses 2,789,000 1,430,000
Net current assets from discontinued operations 6,233,000 131,000
------------ ------------
Total current assets 22,667,000 39,789,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land and land improvements 2,629,000 2,629,000
Buildings and leasehold improvements 65,024,000 66,199,000
Fixtures and equipment 47,975,000 48,032,000
Property held under capital leases 7,480,000 7,480,000
Construction in progress 427,000 1,431,000
------------ ------------
123,535,000 125,771,000
Less -- Accumulated depreciation 72,307,000 73,399,000
------------ ------------
51,228,000 52,372,000
------------ ------------
Net property and equipment from discontinued
operations 36,272,000 --
------------ ------------
87,500,000 52,372,000
------------ ------------
OTHER ASSETS -- NET:
Net other assets 23,441,000 21,053,000
Net other assets from discontinued operations 9,121,000 2,000
------------ ------------
32,562,000 21,055,000
------------ ------------
Total assets $142,729,000 $113,216,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated condensed statements.
(consolidated condensed balance sheets continued on the following page)
1
<PAGE> 4
<TABLE>
<CAPTION>
LIABILITIES AND COMMON STOCKHOLDERS' December 27, June 26,
EQUITY 1999 2000
------------- -------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 15,980,000 $ 14,727,000
Accrued liabilities 9,384,000 6,721,000
Accrued insurance 2,419,000 4 047,000
Accrued interest 7,010,000 6,787,000
Accrued payroll costs 5,256,000 5,935,000
Current portion of obligations
under capital leases 638,000 674,000
Current portion of long-term debt 477,000 436,000
Current liabilities from discontinued operations 19,317,000 12,625,000
------------- -------------
Total current liabilities 60,481,000 51,952,000
------------- -------------
LONG-TERM LIABILITIES, net of current portion:
Obligations under capital leases 3,300,000 2,954,000
Long-term debt 160,297,000 160,220,000
Long-term liabilities from discontinued operations 2,299,000 --
------------- -------------
Total long-term liabilities 165,896,000 163,174,000
------------- -------------
DEFERRED GAIN 4,395,000 4,294,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
CUMULATIVE PREFERRED STOCK,
MANDATORILY REDEEMABLE:
Senior pay-in-kind exchangeable preferred stock, $0.01 par value; 160,000
shares authorized; 41,584 shares issued and outstanding at December 27, 1999
and 44,083 shares issued and
outstanding at June 26, 2000 41,914,000 47,379,000
------------- -------------
COMMON STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 1,000,000
shares authorized; 128,081 shares
issued and outstanding at December 27,
1999 and June 26, 2000 1,000 1,000
Paid-in capital 50,552,000 18,685,000
Accumulated deficit (180,510,000) (172,269,000)
------------- -------------
Total common stockholders' deficit (129,957,000) (153,583,000)
------------- -------------
Total liabilities and common
stockholders' equity $ 142,729,000 $ 113,216,000
============= =============
</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 AND THE TWENTY-SIX WEEKS ENDED
JUNE 28, 1999 AND JUNE 26, 2000
(UNAUDITED)
<TABLE>
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Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------------- ---------------------------
June 28, June 26, June 28, June 26,
1999 2000 1999 2000
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 67,584,000 $75,015,000 $138,794,000 $153,605,000
RESTAURANT COSTS:
Food and beverage 22,581,000 25,288,000 45,907,000 51,947,000
Payroll 18,795,000 20,274,000 38,537,000 40,973,000
Direct operating 15,977,000 17,356,000 32,744,000 35,128,000
Depreciation and
amortization 2,212,000 2,239,000 4,593,000 5,147,000
GENERAL AND ADMINISTRATIVE
EXPENSES 3,115,000 3,001,000 6,014,000 5,922,000
------------ ----------- ------------ ------------
Operating profit 4,904,000 6,857,000 10,999,000 14,488,000
INTEREST EXPENSE, net 4,937,000 4,706,000 9,777,000 9,520,000
------------ ----------- ------------ ------------
Income (loss) before
provision for income
taxes and discontinued
operations (33,000) 2,151,000 1,222,000 4,968,000
PROVISION FOR INCOME
TAXES 102,000 215,000 87,000 201,000
------------ ----------- ------------ ------------
Income (loss) from
continuing operations (135,000) 1,936,000 1,135,000 4,767,000
NET INCOME FROM DISCONTINUED
OPERATIONS 965,000 1,688,000 2,210,000 3,474,000
------------ ----------- ------------ ------------
Net income $ 830,000 $ 3,624,000 $ 3,345,000 $ 8,241,000
============ =========== ============ ============
</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 28, 1999 AND JUNE 26, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
June 28, June 26,
1999 2000
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 213,904,000 $ 219,004,000
Cash paid to suppliers and employees (202,733,000) (194,108,000)
Interest paid, net (9,777,000) (9,743,000)
Income taxes paid (67,000) (218,000
Excess net book value of assets over sales price 0 (2,640,000)
------------- -------------
Net cash provided by operating activities 1,327,000 12,295,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,714,000) (7,928,000)
Net (increase) decrease in other assets 257,000 (339,000)
Proceeds from disposition of assets 444,000 1,118,000
Proceeds from sale of Grandy's assets 2,915,000 1,585,000
------------- -------------
Net cash provided by (used in) investing activities (2,098,000) (5,564,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on indebtedness (5,190,000) (211,000)
Borrowings on indebtedness 5,132,000 93,000
Net increase in deferred debt costs (191,000) --
Payments on capital lease obligations (443,000) (469,000)
------------- -------------
Net cash used in financing activities (692,000) (587,000)
------------- -------------
NET INCREASE (DECREASE) IN CASH (1,463,000) 6,144,000
CASH, at beginning of period 8,832,000 9,217,000
------------- -------------
CASH, at end of period $ 7,369,000 $ 15,361,000
============= =============
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income from continuing operations $ 1,135,000 $ 4,767,000
Adjustments to reconcile net income from continuing
operations to net cash provided by
operating activities:
Net income from discontinued operations 2,210,000 3,474,000
Depreciation and amortization 6,818,000 7,150,000
Loss on impairment of assets -- 112,000
Non-cash charge for assets to be disposed 146,000 --
(Gain) loss on disposition of assets (816,000) 690,000
Amortization of deferred gain (188,000) (101,000)
(Increase) decrease in current assets:
Accounts and notes receivable, net (243,000) 391,000
Inventories 305,000 (148,000)
Prepaid expenses 432,000 1,370,000
Increase (decrease) in current liabilities:
Accounts payable (873,000) 541,000
Accrued liabilities (6,912,000) (5,286,000)
Accrued insurance (57,000) 1,472,000
Accrued interest -- (223,000)
Accrued payroll (630,000) 726,000
Excess net book value of assets over sales price 0 (2,640,000)
------------- -------------
Net cash provided by operating activities $ 1,327,000 $ 12,295,000
============= =============
</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 American Restaurant Group, Inc. (the "Company"), without audit, in
accordance with Securities and Exchange Commission Regulation S-X. In
the opinion of the Company's management, these Consolidated Condensed
Financial Statements contain all adjustments (all of which are of a
normal recurring nature except for the discontinued operations)
necessary to present fairly the Company's financial position as of
December 27, 1999 and June 26, 2000, and the results of its operations
for the thirteen weeks and the twenty-six weeks ended June 28, 1999 and
June 26, 2000 and its cash flows for the twenty-six weeks ended June
28, 1999 and June 26, 2000. 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, the Company suggests 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 27,
1999.
2. SALE OF STOCK TO NBACO, INC.
The Company sold all of the outstanding stock of four wholly owned
subsidiaries (Grandy's, Inc., Spoons Restaurants, Inc., Spectrum Foods,
Inc., and Local Favorite, Inc., collectively, the "Non-Black Angus
Subsidiaries") to NBACo, Inc. Effective June 26, 2000 the Company was
due proceeds in the amount of $17.0 million from the sale of the
Non-Black Angus Subsidiaries. This amount was received on June 28,
2000. The consideration was determined by arm's length negotiations
among the parties. There was no gain or loss recorded because the stock
was sold to a controlling entity. The paid-in capital account was
reduced by a net amount of $26.4 million because of the sale of stock
to NBACo, Inc. The stock sale included releasing the Non-Black Angus
Subsidiaries from liability for the obligations of the Company. The
Company retained the assets and liabilities associated with certain
closed restaurants as well as certain liabilities associated with the
operating restaurants that were sold.
3. OPERATIONS
The Company's operations are affected by local and regional economic
conditions, including competition in the restaurant industry. The
Company has had recurring operating losses in recent years. A
recapitalization plan was consummated during 1998. This plan
substantially eliminated debt principal payments until the year 2003.
4. INCOME TAXES
The tax provision against the Company's pre-tax income in 1999 and in
2000 consisted of certain state income tax and estimated Federal income
tax payments. The Company previously established a valuation allowance
against net operating loss carryforwards.
5. CREDIT FACILITY AND PREFERRED STOCK
In the second quarter of 2000 the Company became aware of and agreed to
an interpretation of the financial covenants under its revolving credit
facility (the "Credit Facility") which required a waiver of
noncompliance and revised covenants, both of which were accomplished.
This interpretation also affected the dividend rate on the Company's
preferred stock and, accordingly, the Company has accrued for preferred
stock dividends related to prior periods at higher dividend rates than
had been used at the time.
5
<PAGE> 8
6. SEGMENT REPORTING
Effective December 28, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of
an Enterprise and Related Information. As a result of the sale of the
outstanding stock of four of its wholly owned subsidiaries effective
June 26, 2000, the Company has only one operating segment, Black
Angus.
7. 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 1/2% Senior Secured
Notes due 2003 (the "Senior Secured Notes"), 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.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company'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 28, 1999 and June 26, 2000:
Revenues. Total revenues from continuing operations increased to $75.0 million
in the second quarter of 2000 from $67.6 million in the second quarter of 1999.
Same-store-sales increased 8.7%. There were 102 Black Angus restaurants
operating as of June 26, 2000 and 100 Black Angus restaurants operating as of
June 28, 1999.
Food and Beverage Costs. As a percentage of revenues, food and beverage costs
from continuing operations increased to 33.7% in the second quarter of 2000 from
33.4% in the second quarter of 1999. The increase was related primarily to
higher meat and seafood costs.
Payroll Costs. As a percentage of revenues, labor costs from continuing
operations decreased to 27.0% in the second quarter of 2000 from 27.8% in the
second quarter of 1999. The decrease was primarily from leveraging costs over a
higher sales base.
Direct Operating Costs. Direct operating costs consist of occupancy, advertising
and other expenses incurred by individual restaurants. As a percentage of
revenues, these costs from continuing operations decreased to 23.1% in the
second quarter of 2000 from 23.6% in the second quarter of 1999. The decrease
was related primarily to repair and maintenance costs and leveraging costs over
a higher sales base.
Depreciation and Amortization. Depreciation and amortization consists of
depreciation of fixed assets as well as amortization of intangible assets. As a
percentage of revenues, depreciation and amortization from continuing operations
decreased to 3.0% in the second quarter of 2000 from 3.3% in the second quarter
of 1999.
General and Administrative Expenses. General and administrative expenses from
continuing operations decreased slightly to $3.0 million in the second quarter
of 2000 from $3.1 million in the second quarter of 1999.
Operating Profit. Due to the above items, profit from continuing operations
increased to $6.9 million in the second quarter of 2000 from $4.9 million in the
second quarter of 1999. As a percentage of revenues, profit from continuing
operations increased to 9.1% in the second quarter of 2000 from 7.3% in the
second quarter of 1999.
Interest Expense - Net. Interest expense from continuing operations decreased to
$4.7 million in the second quarter of 2000 from $4.9 million in the second
quarter of 1999. The Company's average interest rate decreased to 11.2% in the
second quarter of 2000 from 11.5% in the second quarter of 1999. The Company's
weight-averaged debt balance (excluding capitalized lease obligations) increased
to $160.6 million in 2000 from $159.8 million in 1999.
7
<PAGE> 10
Net Income from Discontinued Operations. Effective June 26, 2000, the Company
sold all of the outstanding stock of the Non-Black Angus Subsidiaries.
The following is a summary of the net income from discontinued operations for
the thirteen weeks ended June 28, 1999 and June 26, 2000:
<TABLE>
<CAPTION>
($000) June 28, 1999 June 26, 2000
<S> <C> <C>
Revenues $ 37,100 $32,545
Food and Beverage Costs 10,382 8,605
Payroll Costs 12,423 10,514
Direct Operating Costs 9,927 8,886
Depreciation and Amortization 1,084 993
General and Administrative 2,283 1,628
Non-Cash Charge for Impairment 0 112
Grandy's Conversion:
(Gain)/Loss on Sale of Assets (2) 119
Non-Cash Charges 38 0
-------- -------
Operating Profit 965 1,688
Interest Expense 0 0
-------- -------
Income Before Taxes 965 1,688
Provision for Income Taxes 0 0
-------- -------
Net Income from
Discontinued Operations $ 965 $ 1,688
======== =======
</TABLE>
Twenty-six weeks ended June 28, 1999 and June 26, 2000:
Revenues. Total revenues from continuing operations increased to $153.6 million
in 2000 from $138.8 million in 1999. Same-store-sales increased 8.5%. There were
102 Black Angus restaurants operating as of June 26, 2000 and 100 Black Angus
restaurants operating as of June 28, 1999.
Food and Beverage Costs. As a percentage of revenues, food and beverage costs
from continuing operations increased to 33.8% in 2000 from 33.1% in 1999. The
increase was related primarily to higher meat and seafood costs.
Payroll Costs. As a percentage of revenues, labor costs from continuing
operations decreased to 26.7% in 2000 from 27.8% in 1999. The decrease was
primarily from leveraging costs over a higher sales base.
Direct Operating Costs. As a percentage of revenues, these costs from continuing
operations decreased to 22.9% in 2000 from 23.6% in 1999. The decrease was
related primarily to repair and maintenance costs and leveraging costs over a
higher sales base.
Depreciation and Amortization. As a percentage of revenues, depreciation and
amortization from continuing operations increased to 3.4% in 2000 from 3.3% in
1999. The year-to-date depreciation and amortization increased as a result of
higher depreciation and amortization in the first quarter of 2000 compared to
the first quarter of 1999.
General and Administrative Expenses. General and administrative expenses from
continuing operations decreased slightly to $5.9 million in 2000 from $6.0
million in 1999.
Operating Profit. Due to the above items, profit from continuing operations
increased to $14.5 million in 2000 from $11.0 million in 1999. As a percentage
of revenues, profit from continuing operations increased to 9.4% in 2000 from
7.9% in 1999.
Interest Expense - Net. Interest expense from continuing operations decreased to
$9.5 million in 2000 from $9.8 million in 1999. The Company's average interest
rate decreased to 11.2% in 2000 from 11.3% in 1999. The Company's
weighted-average debt balance (excluding capitalized lease obligations)
decreased to $160.6 million in 2000 from $161.1 million in 1999.
8
<PAGE> 11
Net Income from Discontinued Operations. The following is a summary of the net
income from discontinued operations for the twenty-six weeks ended June 28, 1999
and June 26, 2000:
<TABLE>
<CAPTION>
($000) June 28, 1999 June 26, 2000
<S> <C> <C>
Revenues $ 75,353 $65,111
Food and Beverage Costs 21,242 17,123
Payroll Costs 25,979 21,605
Direct Operating Costs 19,867 16,888
Depreciation and Amortization 2,225 2,003
General and Administrative 4,503 3,137
Non-Cash Charge for Impairment 0 112
Grandy's Conversion:
(Gain)/Loss on Sale of Assets (836) 752
Non-Cash Charges 146 0
-------- -------
Operating Profit 2,227 3,491
Interest Expense 0 0
-------- -------
Income Before Taxes 2,227 3,491
Provision for Income Taxes 17 17
-------- -------
Net Income from
Discontinued Operations $ 2,210 $ 3,474
======== =======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations and
borrowings under its Credit Facility. 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 26, 2000, the Company had cash of $15.4 million. The
Company recorded a receivable from NBACO, Inc. for $17.0 million for the sale
of stock which was paid on June 28, 2000. The proceeds of the sale of the
Non-Black Angus Subsidiaries will be applied by the Company to repay a portion
of the Senior Secured Notes and/or for general corporate purposes.
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 restaurant businesses do not maintain
substantial inventory because 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 26, 2000, the Company had a
working capital deficit of $12.2 million.
The Company estimates that capital expenditures of $3.0 million to $4.0 million
are required annually to maintain and refurbish its existing restaurants. 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 year-to-date were $4.0 million and $3.2 million in
2000 and 1999, respectively. The Company estimates that capital expenditures in
2000 will be approximately $8.0 million. The Company intends to open new
restaurants with small capital outlays and to finance most of the expenditures
through operating leases.
The Company is obligated to make semiannual interest payments on the Senior
Secured Notes each February 15 and August 15 through February 2003. Accordingly,
an interest payment of $9.1 million was made in February 2000.
On June 28, 2000, the Company amended the terms of the Credit Facility to reduce
the aggregate commitment of the lenders from $15 million to $12 million, to
reduce the amount available for issuances of letters of credit from $10 million
to $7 million and to extend the maturity date from February 25, 2001 to June 30,
2002. On June 28, 1999 and June 26, 2000, the Company had outstanding letters of
credit primarily related to its self-insurance programs of $3.6 million and $6.9
million, respectively. As of June 26, 2000 letters of credit were the only
drawing against the Credit Facility, with $5.1 million available under the
Credit Facility.
9
<PAGE> 12
Substantially all assets of the Company are pledged to secure the Credit
Facility and the Senior Secured Notes. In addition, the Company's subsidiaries
have guaranteed the indebtedness owed by the Company under the Credit Facility
and the Senior Secured Notes and such guarantees are 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 Senior Secured
Notes upon maturity and, accordingly, it expects to refinance all or a portion
of such debt, obtain new financing or possibly sell assets.
10
<PAGE> 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk of the Company's financial instruments as of June 26, 2000 has
not materially changed since December 27, 1999. The market risk profile on
December 27, 1999 is disclosed in the Company's annual report on Form 10-K, File
No. 33-48183, for the year ended December 27, 1999.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company was not in compliance with the financial covenants under the Credit
Facility for the fiscal periods ended December 27, 1999 and March 27, 2000. On
June 28, 2000, the majority lenders under the Credit Facility waived such
noncompliance and agreed with the Company to revise such covenants. The Company
expects to be in compliance with the covenants as revised.
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.
(b) Reports on Form 8-K
On July 12, 2000 the Company filed a current report on Form 8-K
disclosing the consummation of the sale of four of its wholly owned
subsidiaries (Grandy's, Inc., Spoons Restaurants, Inc., Spectrum Foods,
Inc., and Local Favorite, Inc.,) to NBACo, Inc.
On July 13, 2000 the Company filed a current report on Form 8-K/A
adjusting certain EDGAR filing codes.
11
<PAGE> 14
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, 2000 By: /s/ Ralph S. Roberts
------------------------------ ---------------------------
Ralph S. Roberts
President and Chief Operating Officer
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
