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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
(X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required) for the fiscal year ended April 30, 1999 or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) for the transition period from __
to __
Commission file number 1-10711
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SIZZLER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4307254
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6101 West Centinela Avenue, Culver City, California 90230
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (310) 568-0135
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
[X] YES [ ] NO
The aggregate market value of the voting stock held by non-affiliates of the
registrant on June 30, 1999, computed by reference to the closing sale price of
such shares on such date was $54,957,949.
The number of shares outstanding of common stock, $0.01 par value, as of June
30, 1999, was 28,797,828.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
Portions of the registrants proxy statement for its 1999 annual meeting of
stockholders are incorporated by reference into Part III of this form 10-K.
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PART I
Introduction
Sizzler International, Inc. ("Sizzler" or the "Company") is principally engaged
in the operation, development and franchising of the Sizzler family steak house
concept and the operation of Kentucky Fried Chicken ("KFC") franchises.
Sizzler International, Inc. was incorporated on January 18, 1991 in connection
with a reorganization of its parent company Collins Foods International, Inc.
("CFI") undertaken in contemplation of CFI's merger with PepsiCo, Inc. As part
of the reorganization, the Company's common stock was distributed to
stockholders of CFI. In addition, as part of the transaction, the Company
acquired the remaining outstanding shares of common stock of its 66%-owned
subsidiary Sizzler Restaurants International, Inc. ("SRI"), which became the
Company's wholly-owned subsidiary.
The 1996 Restructuring
As a result of continued domestic operating losses in the early 1990's the
Company's management enacted a restructuring strategy designed to return its
U.S. operations to profitability. In June 1996 the Company and four subsidiaries
filed for protection from creditors under Chapter 11 of the federal Bankruptcy
Code. The plan of reorganization was confirmed by the Bankruptcy Court and
became effective September 23, 1997.
Restaurant Concepts
Sizzler
The Company operates approximately 100 Sizzler restaurants worldwide. Sizzler
restaurants operate in the mid-scale dining market featuring a selection of
grilled steak, chicken and seafood entrees, sandwiches and specialty platters,
as well as a fresh fruit and salad bar in a family dining environment. Sizzler
restaurants provide its guests with a service system in which guests place
orders and pay upon entering the restaurant and are then seated and assisted by
a server who deliver entrees and follow up on guest service. This system
combines the benefits of convenience with the experience of a full service
restaurant.
The Company licenses approximately 250 additional Sizzler restaurants worldwide.
Individual franchise agreements for a Sizzler restaurant provide a franchise
term of 20 years, payment of an initial franchise fee and payment of royalties
based on a percentage of gross sales. Multi-unit franchise development
agreements may offer additional benefits. Franchisees are required to contribute
a percentage of gross sales to a national advertising fund and may contribute to
regional cooperative advertising
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funds. Company-operated and franchised restaurants are operated in a consistent
manner.
Sizzler restaurants are typically free-standing buildings that are 5,000 to
6,000 square feet providing seating for 150 to 200 guests. Sizzler restaurants
are open for lunch and dinner seven days a week. During fiscal year 1999 lunch
and dinner sales were approximately 35 percent and 65 percent of revenues,
respectively. The average restaurant check was approximately $8.50.
Kentucky Fried Chicken ("KFC")
The Company operates 101 KFC restaurants in Queensland, Australia under
franchise agreements with its franchisor. The term of the agreements vary from
8 to 22 years and require payment of royalties based on a percentage of sales.
As a franchisee the Company is required to contribute a percentage of revenues
to a national Australian cooperative advertising fund administered by the
franchisor and contribute to local advertising initiatives. KFC restaurants
provide quick service to its guests and offer unique chicken products,
sandwiches and various side orders. During 1999 lunch and dinner sales were
approximately 38 percent and 62 percent respectively. The average ticket was
approximately $5.05.
KFC restaurants are typically free-standing buildings that are 1,875 to 2,500
square feet providing seating for 20 to 65 guests. Approximately 65 percent of
the restaurants offer drive-through window and approximately 15 percent are
located in shopping mall food courts.
Restaurant Locations
At May 2, 1999 the Company's operated and franchise restaurants included 447
locations in 18 states and 11 countries as illustrated below.
<TABLE>
<CAPTION>
April 30,
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1999 1998 1997
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<S> <C> <C> <C>
Domestic Sizzler Restaurants
Company-operated 66 66 69
Franchised (including Latin America) 198 199 208
International Restaurants
Company-operated Sizzlers 31 31 39
Franchised Sizzlers 51 52 49
Company-operated KFCs 101 98 96
The Italian Oven - - 1
</TABLE>
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Suppliers
The Company has entered into distribution arrangements with a number of
suppliers of food and other products used in its restaurants. From time to time
the Company makes advance purchases of selected commodity items to minimize
fluctuation of costs. Although wholesale commodity prices are subject to change
due to various economic conditions, the Company has in the past been able to
obtain sufficient supplies to carry on its businesses and the Company believes
that it will be able to do so in the future.
Trademarks and Service Marks
The Company owns certain registered trademarks, trade names and service marks
domestically and internationally which are of material importance to the
business conducted by Sizzler. These include the trademarks of SIZZLER. Sizzler
licenses the right to use certain trademarks, trade names and service marks to
its franchisees. The Company has licensed the right to use certain trademarks,
trade names and service marks which relate to the operation of KFC(R)
restaurants in Australia pursuant to the franchise agreements with the
franchisor. The Company also has a first right of refusal to open Taco Bell(R)
restaurants in Queensland, Australia with certain conditions in the event its
franchisor, Tricon Global Restaurants, Inc., commences development of this
market.
Research and Development
The Company continuously evaluates its menus and restaurant concepts. New
products are developed by the Company's research staff in conjunction with
outside consultants and food suppliers. Before introduction, new menu items are
rigorously tested and evaluated for guest satisfaction, quality and
profitability.
The Company intends to maintain its existing research programs to develop new
food products and evaluate marketing activities. The costs associated with these
activities are not material to the Company.
Seasonality
The Company's operations are subject to some seasonal fluctuation with the
summer months being slightly stronger followed by the spring months. The fall
and winter seasons are weaker due to climatic and other conditions, which
negatively impact guest dining patterns, although the overall effect of
seasonality is moderated to a limited extent because the Australian seasons fall
in reverse of the seasons in the United States.
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Working Capital Requirements
The Company's working capital requirements generally do not fluctuate
significantly during the year because revenues consist primarily of cash sales
and there is a rapid turnover of inventory. The Company does not carry
significant inventories of beef, poultry, seafood, produce or other food
products. Food products are ordered and delivered two or more times per week.
Individual restaurants maintain supplies adequate to support their needs for two
to five days.
Competition
The restaurant business is highly competitive and is impacted by changes in
consumer eating habits and preferences, demographic and sociocultural patterns,
and local and national economic conditions that may affect spending habits. The
Company's restaurants compete directly and indirectly with a large number of
national and regional restaurant establishments, as well as with locally owned
restaurants and numerous other eating places that offer moderately priced steak,
chicken, salads and other menu items to the public. The Company relies on
innovative concept development, marketing techniques and promotions and competes
in terms of perceived value, the variety and quality of menu items, service, and
price. There are other companies engaged in restaurant operations and
franchising programs similar to the Company's that have greater financial
resources and a higher volume of sales than the Company.
Environmental Matters
Federal and state environmental regulations have not had a material effect on
the Company, but more stringent and varied requirements of local government
bodies with respect to zoning, land use and environmental factors sometimes
impact construction of new restaurants or remodels of existing restaurants.
Employees
At April 30, 1999, the Company had approximately 2,600 employees in the United
States and approximately 4,700 employees in Australia. None of the Company's
employees are subject to collective bargaining agreements. Labor relations with
employees have traditionally been good. As is true with most restaurant
operations, the majority of the Company's employees work part time.
Government Regulation
Each of the Company's restaurants is subject to federal, state and local, as
well as Australian laws and regulations governing health, sanitation,
environmental matters, safety, the sale of alcoholic beverages and regulations
regarding wages, hiring and employment practices. The Company believes it has
all licenses and approvals required
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to operate its business, and that its operations are in compliance with
applicable laws and regulations.
Risks Associated With Foreign Operations
The Company operates Sizzler restaurants in Australia and New Zealand, as well
as KFC restaurants in Queensland, Australia. The Company also licenses the right
to operate Sizzler restaurants to others in a number of countries and U.S.
territories. Possible risks associated with such operations include fluctuations
in currency exchange rates, higher rates of inflation, possible changes in tax
rates and structures, and possible foreign political and economic conditions.
The Company is not able to predict the likelihood of or degree of future changes
in exchange rates, rates of inflation, tax rates and structures, or other
conditions.
ITEM 2. Properties
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Through its subsidiaries, the Company owns or leases the real property on which
its restaurants are operated. A small number of franchised restaurants are also
located on property owned or leased by the Company. Periodically the Company
reviews the appropriateness of owning versus leasing restaurant locations in
light of its strategic plan.
The Company owns outright a total of 30 operating Sizzler restaurant properties
in the United States, Australia and New Zealand. Sizzler restaurants typically
are free-standing buildings ranging from 5,000 to 6,000 square feet. The Company
owns outright 48 KFC properties. The KFC restaurants in Australia are typically
free-standing buildings ranging from 1,875 to 2,500 square feet.
Approximately 60 percent of the restaurant locations operated by the Company are
leased. The leases generally are for primary terms of 15 to 20 years, with two
or three five-year renewal options and expire on various dates up to the year
2012. The Company has the right to extend many of these leases. The Company has
the option under some of these leases to purchase the facilities at the end of
the lease terms for varying amounts as specified in the respective lease
agreements.
ITEM 3. Legal Proceedings
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The Company is subject to various lawsuits, claims and other legal matters in
the ordinary course of conducting its business. As of the date of this Report,
management believes that there are no legal proceedings pending, the adverse
resolution of which is expected to have a material adverse financial impact on
the Company's consolidated financial position.
ITEM 4. Submission of Matters to a Vote of Security Holders
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None.
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Executive Officers of the Registrant as of June 30, 1999
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<TABLE>
<S> <C> <C>
James A. Collins 72 Chairman of the Board of the Company and its predecessor CFI since 1968.
Chief Executive Officer of CFI (1968-1987). Chairman of the Board, SRI (1982-1991).
Chief Executive Officer of the Company (1997-1999).
Charles L. Boppell 57 President and Chief Executive Officer of the Company since February 8, 1999.
President and Chief Executive Officer of La Salsa Holding Company (1994-1999).
President and Chief Executive Officer of Godfather's Pizza (1984-1993).
Kevin W. Perkins 47 Executive Vice President of the Company and President and Chief Executive Officer
of International Operations since May 29, 1997. Director of the Company (1994 to
present). President and Chief Executive Officer of the Company (1994-1997).
President of the Company's Sizzler Asia/Pacific Division (1988-1994).
Christopher R. Thomas 50 Executive Vice President of the Company since 1991. President and Chief Executive
Officer of Sizzler USA since 1997. Chief Financial Officer of the Company and its
predecessor CFI (1985-1997). Announced resignation on June 4, 1999.
Ryan S. Tondro 51 Vice President and Chief Financial Officer of the Company since May 1997. Vice
President, Controller of the Company (1995-1997). Vice President, Finance and
Controller of Washington Inventory Service, a division of Huffy Corporation (1993-
1995). Vice President, Controller of Thrifty Drug Stores (1978-1993).
</TABLE>
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<TABLE>
<S> <C> <C>
Diane Hardesty 48 Vice President of the Company since April 1999. Vice President of La Salsa Holding
Company (1995-1999). Vice President Adray's (1994-1996). Vice President Hudson's
Grill (1991-1994)
Michael J. Raedeke 41 Vice President, Taxation and Internal Audit of the Company since 1995. Director
of Tax/Internal Audit of the Company (1991-1995).
Kimberly Forster 33 Vice President of Strategic Planning of the Company since March 1999. Director of
Financial Analysis, Times Mirror Company (1996-1999). Vice President and Manager
of Financial Analysis Group, First Interstate Bank of California (1993-1996).
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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MARKET INFORMATION
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The Company's common stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "SZ". As of July 2, 1999, the approximate number of record
holders of the Company's common stock was 2,767. The high and low sales prices
for a share of the Company's common stock as reported on the NYSE, by quarter,
for the past two fiscal years are as follows:
<TABLE>
<CAPTION>
1999 1998
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High Low High Low
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<S> <C> <C> <C> <C>
First Quarter $ 3.188 $ 2.375 $ 3.125 $ 2.250
Second Quarter 2.563 1.500 4.750 3.000
Third Quarter 3.000 2.063 4.000 2.250
Fourth Quarter 2.375 1.689 4.000 2.250
</TABLE>
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COMMON STOCK DIVIDENDS
The Company has no current plans to recommence payment of cash dividends. Future
dividends will depend on a number of factors, including earnings, financial
position, capital requirements and other relevant factors.
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ITEM 6. SELECTED FINANCIAL DATA
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The following table sets forth consolidated financial data with respect to the
Company and should be read in conjunction with the Consolidated Financial
Statements, including Notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" presented elsewhere herein.
<TABLE>
<CAPTION>
For the Years Ended April 30, 1999 1998 1997 1996 1995
- ----------------------------- -------- -------- -------- -------- --------
(In millions, except per share data
and exchange rates)
<S> <C> <C> <C> <C> <C>
Systemwide sales $ 532.7 $ 557.9 $ 677.9 $ 875.7 $ 937.7
Revenues 226.3 242.3 299.9 436.2 462.2
Net income (loss) 7.4 5.4 0.6 (138.5) (a) 6.7
Basic and diluted earnings
(loss) per share 0.26 0.19 0.02 (4.99) (a) 0.24
Average Australian dollar
exchange rate 0.6208 0.7063 0.7880 0.7471 0.7434
Total assets 108.7 119.5 168.1 178.5 276.7
Long-term debt 26.9 35.5 0.3 (c) 7.0 (b) 17.1
Liabilities subject to compromise - - 83.9 (c) - -
Total stockholders' investment 52.7 43.8 44.4 43.5 177.1
Dividends paid per share - - - 0.08 0.16
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</TABLE>
(a) Includes an after-tax charge of $108.9 million or $3.92 per share,
primarily related to the costs and asset write downs associated with
restaurant closings and reorganization. In addition to the restructuring
charge, the Company recorded a charge of $12.8 million or $0.46 per share
related to the adoption of SFAS 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of, during fiscal
year 1996.
(b) This total does not include line of credit borrowings totaling $27.0
million which, as a result of acceleration of maturity, are presented as
current liabilities in the consolidated financial statements.
(c) Substantially all prepetition debt has been reclassified as "Liabilities
subject to compromise under reorganization proceedings."
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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RESULTS OF OPERATIONS
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INTRODUCTION
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The following discussion should be read in conjunction with "Selected Financial
Data," the Consolidated Financial Statements and other financial information
appearing elsewhere herein.
As discussed in more detail in "Business - The 1996 Restructuring" and in Note 2
to the Consolidated Financial Statements, Sizzler International, Inc. and four
subsidiaries emerged from bankruptcy on September 23, 1997.
Fiscal years 1999, 1998 and 1997 marked periods during which the Company's
domestic operations were revitalized. This process was completed during fiscal
year 1999 with the repositioning of the Sizzler restaurant concept back to a
mid-scale family steakhouse featuring high quality and high value entrees and a
high-quality fresh fruit and salad bar designed to be either a light lunch
entree or an addition to grilled entrees at dinner.
During fiscal years 1999, 1998 and 1997 the Company also repositioned its
international operations in response to strong competition in both the casual
dining and fast food markets. In addition, international operations were
impacted by significant declines in the local currencies of its franchise
operations in Asia and by a weaker Australian dollar.
RESULTS OF OPERATIONS
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The Company's revenues are generated from three primary sources: domestic
Company-operated restaurant sales and franchise revenues (including franchise
fees, royalties and rental income), international Company-operated restaurant
sales and franchise revenues, and revenues from international KFC franchises
operated by the Company.
FIFTY TWO WEEKS ENDED APRIL 30, 1999 vs. FIFTY THREE WEEKS ENDED APRIL 30, 1998
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Revenues totaled $226.3 million in fiscal 1999 compared to $242.3 million in
fiscal 1998, a decrease of $16.0 million or 6.6 percent. The decrease includes
$17.1 million due to a 12.1 percent decrease in the Australian dollar exchange
rate offset by higher
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average unit sales from international KFC operations and higher average unit
sales and franchise revenues from domestic operations. The impact of the
additional week in fiscal 1998 is approximately $4.4 million. Domestic revenues
increased $4.7 million or 4.9 percent in fiscal 1999 compared to fiscal 1998 due
to the impact of menu repositioning and a marketing strategy that minimized the
use of customer discounts. International revenues decreased $20.8 million or
14.3 percent due to a decrease in the Australian dollar exchange rate and to
lower Sizzler sales offset by higher KFC sales.
Earnings before interest, taxes and parent company overhead were $18.0 million
in fiscal 1999 compared to $16.2 million in fiscal 1998, an increase of $1.8
million or 11.3 percent. This increase was due to a $2.3 million increase in
domestic operations, offset by a $.5 million decrease in international
operations.
Domestic Operations
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Company-operated restaurants accounted for 42.1 percent of consolidated revenues
compared to 38.3 percent in fiscal 1998. Fiscal 1999 revenues were $95.3 million
compared to $92.9 million in fiscal 1998, an increase of $2.4 million or 2.6
percent. On a comparative restaurant basis, Sizzler restaurants open more than
one year, with fiscal 1998 adjusted to 52 weeks, experienced a 6.1 percent
increase in average sales per restaurant, a 2.0 percent decrease in average
customers per restaurant and an 8.3 percent increase in average customer check
total. Gross margins per guest increased by 7.6 percent in fiscal 1999 compared
to fiscal 1998 due to the impact of menu repositioning and marketing strategies.
There were 66 Company-operated Sizzler restaurants as of April 30, 1999 and
April 30, 1998.
Earnings before interest, taxes and parent company allocation were $6.9 million
in fiscal 1999 compared to $2.6 million in 1998, an increase of $4.3 million or
168.1 percent.
Domestic Franchise
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Domestic franchise revenues, including franchise fees, royalties and rental
income accounted for 2.9 percent of consolidated revenues in fiscal 1999
compared to 1.8 percent in fiscal 1998. Franchise revenues were $6.5 million in
fiscal 1999 compared to $4.2 million in fiscal 1998, an increase of $2.3 million
or 54.8 percent. The increase in fiscal 1999 reflects higher franchise sales in
fiscal 1999 and the impact of a temporary royalty abatement program that offered
lower royalty fees to franchisees during fiscal 1998. As of April 30, 1999
there were 198 Sizzler franchise locations compared to 199 as of April 30, 1998.
International Operations
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International operations accounted for 55.0 percent of consolidated revenues in
fiscal 1999 compared to 59.9 percent in fiscal 1998. Revenues were $124.5
million in fiscal 1999 compared to $145.2 million in fiscal 1998, a decrease of
$20.7 million or 14.3 percent. The decrease is primarily due to a 12.1 percent
decrease in foreign currency
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exchange rates and lower average sales volumes which were partially offset by
the addition of three KFC restaurants.
Earnings before interest, taxes and parent company allocation were $9.8 million
in fiscal 1999 compared to $10.3 million in 1998, a decrease of $.5 million or
4.4 percent.
Excluding franchise revenues, results from Company-operated Sizzler restaurants
were $39.0 million in fiscal 1999 compared to $47.3 million in fiscal 1998, a
decrease of $8.3 million or 17.6 percent. This decrease includes $5.4 million
related to a decrease in the Australian dollar exchange rate. On a comparative
restaurant basis, in Australian dollars Sizzler restaurants open more than one
year, with fiscal 1998 adjusted to 52 weeks, experienced a .2 percent decrease
in average sales per restaurant, a 2.8 percent decrease in average customers per
restaurant and a 2.7 percent increase in average customer check total. There
were 31 Company-operated Sizzler restaurants as of April 30, 1999 and April 30,
1998.
International franchise revenues were $1.2 million in fiscal 1999 compared to
$2.1 million in fiscal 1998, a decrease of $.9 million or 42.4 percent. The
decrease is due to a decrease in the Australian dollar exchange rate and to a
decrease in the number of franchise locations. As of April 30, 1999 there were
48 international franchised restaurants and three joint venture restaurants in
six countries compared to 49 international franchise restaurants and three joint
venture restaurants as of April 30, 1998. During fiscal 1999 two franchised
restaurants were opened in Japan and three restaurants were closed, one each in
Indonesia, South Korea and Taiwan.
Revenues from the Company's KFC restaurants were $84.3 million in fiscal 1999
compared to $94.8 million in fiscal 1998, a decrease of $10.5 million or 11.1
percent. This decrease includes $11.6 million related to a decrease in the
Australian dollar exchange rate offset by higher unit sales. On a comparative
restaurant basis in Australian dollars, KFC restaurants open more than one year,
with fiscal 1998 adjusted to 52 weeks, experienced a 4.3 percent increase in
average sales per restaurant, a .4 percent decrease in average customers per
restaurant and a 4.7 percent increase in average customer check total. As of
April 30, 1999 there were 101 KFC restaurants compared to 98 as of April 30,
1998.
Consolidated Costs and Expenses
- -------------------------------
Consolidated costs and expenses were 95.9 percent of revenues in fiscal 1999
compared to 96.9 percent of revenues in fiscal 1998, a decrease of .9 points.
Payroll and related expenses were 26.2 percent of revenues in fiscal 1999
compared to 26.7 percent in fiscal 1998, a decrease of .5 points. Cost of sales
were 35.6 percent of revenues in fiscal 1999 compared to 36.5 percent in fiscal
1998, a decrease of .9 points. Interest expense was 1.5 percent of revenues in
fiscal 1999 compared to 2.2 percent in fiscal 1998, a decrease of .7 points.
These decreases were partially offset by a .6 point increase in general and
administrative expenses to 7.5 percent of revenues in fiscal 1999 compared to
6.9
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percent in fiscal 1998 and by a .3 point increase in other costs to 5.2 percent
of revenues in fiscal 1999 compared to 4.9 in fiscal 1998.
Interest expense was $3.3 million in fiscal 1999 compared to $5.3 million in
fiscal 1998, a decrease of $2.0 million or 37.7 percent. This decrease is due
to lower interest expense on bankruptcy claims.
The provision for income taxes was $1.8 million in fiscal 1999 compared to $2.2
million in fiscal 1998. (See Note 3, to Consolidated Financial Statements).
FIFTY THREE WEEKS ENDED APRIL 30, 1998 VS. FIFTY TWO WEEKS ENDED APRIL 30, 1997
- -------------------------------------------------------------------------------
Revenues totaled $242.3 million in fiscal 1998 compared to $299.9 million in
fiscal 1997, a decrease of $57.6 million or 19.2 percent. The decrease in 1998
was primarily due to the closure of nine Company-operated restaurants, the sale
of two Company-operated restaurants to franchisees and a net decrease of six
franchised Sizzler restaurants. These decreases were offset by the addition of
two KFC restaurants in Australia. The impact of the additional week in fiscal
1998 is approximately $4.4 million. Domestic revenues decreased $25.5 million or
20.8 percent in fiscal 1998 compared to fiscal 1997 due to a net decrease of
three Company-operated and nine franchised restaurants. International revenues
decreased $ 32.1 million or 18.1 percent. This decrease is primarily due to a
net decrease of eight Sizzler Company-operated restaurants and a net decrease of
three franchised Sizzler restaurants which were offset by the addition of two
KFC restaurants during fiscal year 1998.
Earnings before interest, taxes and parent company overhead were $16.2 million
in fiscal 1998 compared to $5.8 million in fiscal 1997, an increase of $10.4
million or 181.4 percent. This increase was due to a $8.1 million increase in
domestic operations and a $2.3 million increase in international operations.
Domestic Operations
- -------------------
Excluding franchise revenues, Company-operated restaurants accounted for 38.3
percent of consolidated revenues in fiscal 1998 compared to 38.8 percent in
fiscal 1997. Fiscal 1998 revenues were $92.9 million compared to $116.5 million
in fiscal 1997, a decrease of $23.6 million or 20.3 percent. On a comparative
restaurant basis, Sizzler restaurants open more than one year, with fiscal 1998
adjusted to 52 weeks, experienced a .4 percent decrease in average sales per
restaurant, a 5.5 percent decrease in average customers per restaurant and a
5.6 percent increase in average customer check total. Gross margins per guest
increased by 7.5 percent in fiscal 1998 compared to fiscal 1997 reflecting the
impact of the menu repositioning.
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Earnings before interest, taxes and parent company allocation were $2.6 million
in fiscal 1998 compared to a loss of $7.0 million in 1997, an increase of $9.6
million or 136.5 percent.
Domestic Franchise
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Domestic franchise revenues, including franchise fees, royalties and rental
income accounted for 1.8 percent of consolidated revenues in fiscal 1998
compared to 2.0 percent in fiscal 1997. Franchise revenues were $4.2 million in
fiscal 1998 compared to $6.1 million in fiscal 1997, a decrease of $1.9 million
or 30.5 percent. The decrease in fiscal 1998 reflects lower franchise sales in
fiscal 1998, a net reduction of nine franchised restaurants during fiscal 1998
and a royalty abatement program that offered lower royalty fees to franchisees
during fiscal 1998.
International Operations
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International operations accounted for 59.9 percent of consolidated revenues in
fiscal 1998 compared to 59.1 percent in fiscal 1997. Revenues were $145.2
million in fiscal 1998 compared to $177.3 million in fiscal 1997, a decrease of
$32.1 million or 18.1 percent. The decrease is primarily due to a 10.5 percent
decrease in foreign currency exchange rates and lower average sales volumes
which were partially offset by the addition of two KFC restaurants.
Earnings before interest, taxes and parent company allocation were $10.3 million
in fiscal 1998 compared to $8.0 million in 1997, an increase of $2.3 million or
29.1 percent.
Excluding franchise revenues, results from Company-operated Sizzler restaurants
were $47.3 million in fiscal 1998 compared to $69.8 million in fiscal 1997, a
decrease of $22.5 million or 32.2 percent. This decrease reflects lower average
restaurant sales, restaurant closings and a decrease in the Australian dollar
exchange rate. On a comparative restaurant basis, in Australian dollars, Sizzler
restaurants open more than one year, with fiscal 1998 adjusted to 52 weeks,
experienced a 13.2 percent decrease in average sales per restaurant, a 17.1
percent decrease in average customers per restaurant and a 4.7 percent increase
in average customer check total.
International franchise revenues were $2.1 million in fiscal 1998 compared to
$3.8 million in fiscal 1997, a decrease of $1.7 million or 44.1 percent. The
decrease is primarily due to the closure of 39 franchised restaurants at the end
of fiscal 1997 and a decrease in the Australian dollar exchange rate. As of
April 30, 1998 there were 49 international franchised restaurants and three
joint venture restaurants in six countries compared to 46 international
franchise restaurants and three joint venture restaurants as of April 30, 1997.
During fiscal 1998 five franchised restaurants were opened in Japan, Thailand
and Indonesia and two restaurants were closed, one each in South Korea and
Taiwan.
15
<PAGE>
Revenues from the Company's KFC restaurants were $94.9 million in fiscal 1998
compared to $102.6 million in fiscal 1997, a decrease of $7.7 million or 7.5
percent. This decrease is primarily due to a decrease in the Australian dollar
exchange rate. On a comparative restaurant basis in Australian dollars, KFC
restaurants open more than one year, with fiscal 1998 adjusted to 52 weeks,
experienced a 1.3 percent decrease in average sales per restaurant, a 6.7
percent decrease in average customers per restaurant and a 5.7 percent increase
in average customer check total. As of April 30, 1998 there were 98 KFC
restaurants compared to 96 as of April 30, 1997.
Consolidated Costs And Expenses
- -------------------------------
Consolidated costs and expenses were 96.9 percent of revenues in fiscal 1998
compared to 102.3 percent of revenues in fiscal 1997, a decrease of 5.4 points.
Payroll and related expenses were 26.7 percent of revenues in fiscal 1998
compared to 28.4 percent in fiscal 1997, a decrease of 1.7 points. Cost of
sales were 36.5 percent of revenues in fiscal 1998 compared to 37.1 percent in
fiscal 1997, a decrease of .6 points. Interest expense was 2.2 percent of
revenues in fiscal 1998 compared to 2.3 percent in fiscal 1997, a decrease of
0.1 points. These decreases were partially offset by a 0.1 point increase in
rent expense to 3.6 percent of revenues in fiscal 1998 compared to 3.5 percent
in fiscal 1997.
Interest expense was $5.3 million in fiscal 1998 compared to $7.0 million in
fiscal 1997, a decrease of $1.7 million or 24.3 percent. This decrease is due to
lower interest expense on bankruptcy claims offset by new borrowings.
The provision for income taxes was $2.2 million in fiscal 1998 compared to a
benefit of $7.3 million in fiscal 1997. (See Note 3 to Consolidated Financial
Statements).
- -------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
WORKING CAPITAL
- ---------------
The Company's primary source of liquidity is cash flows from operations which
was $15.3 million in fiscal 1999 and $1.6 million in fiscal 1998. This increase
is primarily due to improved U.S. and international operations. The current
ratio was 1.0 at April 30, 1999 and 1.1 at April 30, 1998. At April 30, 1999,
working capital was negative $0.8 million compared to a positive $2.9 million at
the end of the prior year. The decrease in the current ratio and working capital
is primarily due to payment of allowed claims pursuant to the reorganization
plan and reduction of long-term debt.
16
<PAGE>
TOTAL ASSETS/CAPITAL EXPENDITURES
- ---------------------------------
Total assets decreased $10.8 million or 9.0 percent in fiscal 1999. Property and
equipment represented 71.6 percent of total assets at the end of fiscal 1999 and
66.3 percent at the end of fiscal 1998. In fiscal 1998, total assets decreased
$48.6 million or 28.9 percent from fiscal 1997.
Capital expenditures were $7.7 million in fiscal 1999, which included new
restaurant construction of $1.2 million and remodels of $6.5 million. The
Company anticipates continuing to grow International operations through
additional investment in Company-operated restaurants, joint ventures and the
development of the franchise system.
The Company anticipates capital expenditures in fiscal 2000 will be
approximately $13.4 million, which will be used for new restaurants and
maintenance of existing restaurants.
In fiscal 1998, capital expenditures were $8.9 million, consisting of new
restaurant construction of $1.7 million and remodels of $7.2 million.
DEBT
- ----
On September 23, 1997, the Company obtained a $63.5 million AUD (approximately
$46.9 million US) bank facility from Westpac Banking Corporation in order to
refinance the claims of the Company's unsecured creditors. The Westpac loan
provides for a five-year term at an interest rate equal to the Australian
interbank borrowing rate, plus a margin. The margin is based on a formula tied
to the Company's international operations ratio of debt to earnings before
interest and taxes, and varies between 1.25% and 2.25%. The Westpac loan
involved the collateralization of the Company's principal operating assets of
its international division. The Westpac loan is subject to a number of financial
covenants and other restrictions.
Based on current levels of operations and anticipated sales growth, management
believes that cash flow from operations will be sufficient to meet all of its
debt service requirements when due and to fund its capital expenditure and
working capital requirements.
INFLATION
- ---------
Increases in interest rates and the costs of labor, food and construction can
significantly affect the Company's operations. Management believes that the
current practices of maintaining adequate operating margins through a
combination of menu price increases and cost controls, careful management of
working capital and evaluation of property and equipment needs are its most
effective tools for coping with inflation.
17
<PAGE>
OTHER
- -----
The Company is aware of industry concerns regarding the potential impact of
possible further increases in the minimum wage, the increased marketing of
prepared foods by grocery and convenience stores, customer resistance to
increases in menu prices, the growth of home delivery of prepared foods,
increased concerns over the nutritional value of foods and compliance with
existing or proposed health and safety legislation and other similar
contingencies. The Company is unable to predict the possible impact of such
factors on its business. In the past, the Company has been able to address
similar types of changes in the business climate and been able to pass any
associated higher costs along to its customers, because the changes have
generally impacted all restaurant companies.
YEAR 2000
- ---------
The Company is aware of the broad impact the Year 2000 issue could have on its
business and, as a result, in fiscal 1998 established a comprehensive
enterprise-wide program to prepare its computer systems and applications. This
program consists of three areas: information systems, supply chain and critical
third party readiness and business equipment. The Company has utilized both
internal and external resources to inventory, assess, remediate, replace and
test its systems for Year 2000 compliance and expects that all mission-critical
systems will be Year 2000 compliant by October, 1999.
The Company's assessment of the impact of the Year 2000 issue indicated that
several information technology projects required acceleration due to potential
Year 2000 issues. Specifically the Company has upgraded certain software
applications and is in the process of replacing others in connection with a
lease that ended in the ordinary course of business.
To reduce the risks associated with the Year 2000 the Company has closely
assessed the vendors supplying the Company's restaurants with food and other
products to ensure that they are aware of the Year 2000 business risks and are
appropriately addressing them. Surveys were sent to critical suppliers and
service providers to obtain reasonable assurance that plans are in place to
address the Year 2000 issue. Contingency plans have been developed for those
vendors that have not provided the Company with satisfactory evidence of their
readiness to handle Year 2000 issues. The Company is also communicating with its
franchise business partners regarding the potential business risks associated
with the Year 2000 issue.
Equipment critical to restaurant and corporate office operations was scheduled
to be replaced in early fiscal 2000 in connection with a lease ending in the
ordinary course of business. The new equipment is Year 2000 compliant and is
currently being installed.
18
<PAGE>
The cost incurred by the Company to date for software and hardware is
approximately $300,000 and management estimates the remaining cost to complete
Year 2000 upgrades to be approximately $80,000. These costs were budgeted and
will be funded by cash flow from operations.
The Company believes that based on available information the costs related to
Year 2000 compliance will not be material to its financial position. However,
the cost of the project and the date on which the Company plans to complete the
Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions including the availability of certain
resources, third party modification programs and other factors. Unanticipated
failures by critical vendors and franchise partners, as well as the failure by
the Company to execute its own remediation efforts could have a material adverse
effect on the cost of the project and its completion date. As a result there can
be no assurance that these forward looking estimates will be achieved and the
actual cost and vendor compliance could differ materially from those plans
resulting in material financial risk.
QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES
- -----------------------------------------------------
The Company is protected against the risk of foreign exchange fluctuations
associated with its bank facility with Westpac Banking Corporation because both
the borrowings and principal and interest payments are denominated in Australian
dollars and the Company funds its principal and interest payments from cash
generated by its restaurant operations in Australia.
NEW ACCOUNTING STANDARDS
- ------------------------
In fiscal year 1999, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income". Other
comprehensive income may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
investments in equity securities.
In Fiscal 1999, the Company adopted statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
established standards for related disclosures about products and services,
geographic areas, and major customers. The adoption of SFAS 131 does not impact
the Company's consolidated results of operations, financial position or cash
flows.
In Fiscal 1999, the Company adopted statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits"
19
<PAGE>
("SFAS 132"). This statement does not change the measurement or recognition of
those plans, but is designed to simplify disclosures about pension and other
postretirement benefit plans. Specifically, it standardizes the disclosure
requirement to the extent practicable, requires additional information on
changes in the benefit obligations and fair values of plan assets that will
facilitate financial analysis, and eliminates certain disclosures that are no
longer as useful as they were when SFAS No. 87, "Employers' Accounting for
Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
were issued. The Statement also suggests combined formats for presentation of
pension and other postretirement benefit disclosures. The adoption of SFAS 132
does not impact the Company's consolidated results of operations, financial
position or cash flows.
In Fiscal 1999, the Company adopted Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 addresses the accounting for derivative instruments,
including derivative instruments embedded in other contracts and hedging
activities. The adoption of SFAS No. 133 does not impact the Company's
consolidated results of operations, financial position or cash flows.
FORWARD-LOOKING STATEMENTS
- --------------------------
With the exception of any historical information contained in this report, the
matters described herein contain forward-looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve various risks which may cause actual
results to differ materially. These risks include, but are not limited to,
changes in global and local business and economic conditions; consumer
preferences, spending patterns and demographic trends; food, labor and other
operating costs; availability and cost of land and construction; currency
exchange rates; and other risks outside the control of the Company referred to
in the Company's registration statement and periodic reports filed with the
Securities and Exchange Commission.
20
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands of dollars, except per share data)
The following tables show comparative quarterly financial results during the
past two fiscal years. The first, second and fourth fiscal quarters normally
include twelve weeks of operations whereas the third fiscal quarter includes
sixteen weeks of operations. Fiscal 1998 was a fifty-three week year, therefore,
the fourth fiscal quarter includes thirteen weeks of operations.
<TABLE>
<CAPTION>
First Second Third Fourth
Fiscal 1999 Quarter Quarter Quarter Quarter
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Restaurants $50,733 $48,973 $66,147 $52,708
Franchise operations 1,845 2,041 1,955 1,924
------- ------- ------- -------
Revenues 52,578 51,014 68,102 54,632
Cost of sales 18,550 17,971 24,728 19,446
Labor and related expenses 13,745 13,443 18,380 13,611
Other operating expenses 10,604 10,584 15,238 11,463
General and administrative costs 4,267 4,233 4,228 4,146
------- ------- ------- -------
Earnings before interest, taxes and depreciation 5,412 4,783 5,528 5,966
Depreciation 2,259 2,152 3,048 2,468
------- ------- ------- -------
Earnings before interest and taxes 3,153 2,631 2,480 3,498
------- ------- ------- -------
Net income $ 2,061 $ 1,604 $ 1,212 $ 2,515
======= ======= ======= =======
Basic and diluted earnings per share $0.07 $0.06 $0.04 $0.09
======= ======= ======= =======
<CAPTION>
First Second Third Fourth
Fiscal 1998 Quarter Quarter Quarter Quarter
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Restaurants $58,270 $54,770 $68,311 $54,640
Franchise operations 1,316 1,737 1,762 1,527
------- ------- ------- -------
Revenues 59,586 56,507 70,073 56,167
Cost of sales 21,721 20,567 25,917 20,275
Labor and related expenses 15,853 14,945 18,898 14,930
Other operating expenses 11,835 11,847 14,808 10,667
General and administrative costs 4,407 3,801 4,310 4,177
------- ------- ------- -------
Earnings before interest, taxes and depreciation 5,770 5,347 6,140 6,118
Depreciation 2,819 2,931 3,430 2,589
------- ------- ------- -------
Earnings before interest and taxes 2,951 2,416 2,710 3,529
------- ------- ------- -------
Net income $ 1,487 $ 776 $ 755 $ 2,360
======= ======= ======= =======
Basic and diluted earnings per share $ 0.05 $ 0.03 $ 0.03 $ 0.08
======= ======= ======= =======
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sizzler International, Inc.:
We have audited the accompanying consolidated balance sheets of Sizzler
International, Inc. (a Delaware corporation) and subsidiaries as of April 30,
1999 and 1998, and the related consolidated statements of operations and
comprehensive income, stockholders' investment and cash flows for each of the
three years in the period ended April 30, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sizzler International, Inc. and
subsidiaries as of April 30, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1999 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
June 16, 1999
22
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except share data)
<TABLE>
<CAPTION>
For the Years Ended April 30, 1999 1998 1997
- ----------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Restaurant sales $ 218,561 $ 235,991 $ 290,061
Franchise revenues 7,765 6,342 9,867
------------ ------------ ------------
Total revenues 226,326 242,333 299,928
------------ ------------ ------------
Costs and Expenses
Cost of sales 80,695 88,480 111,330
Labor and related costs 59,179 64,626 85,138
Other operating expenses 47,889 49,157 65,956
Depreciation and amortization 9,927 11,769 16,260
General and administrative expenses 16,874 16,695 22,192
------------ ------------ ------------
Total operating costs and expenses 214,564 230,727 300,876
------------ ------------ ------------
Interest expense 3,284 5,274 6,981
Investment income, net (724) (1,271) (1,178)
------------ ------------ ------------
Total costs and expenses 217,124 234,730 306,679
------------ ------------ ------------
Income (loss) before income taxes 9,202 7,603 (6,751)
Provision (benefit) for income taxes 1,810 2,225 (7,316)
------------ ------------ ------------
Net income $ 7,392 $ 5,378 $ 565
============ ============ ============
Basic and diluted earnings per share $ 0.26 $ 0.19 $ 0.02
============ ============ ============
Weighted Average common shares outstanding:
Basic 28,815,000 28,864,000 28,967,000
Diluted 28,878,000 28,879,000 28,967,000
============ ============ ============
Comprehensive Income:
Net Income $ 7,392 $ 5,378 $ 565
Foreign currency translation adjustments (no tax effect) 579 (7,171) (1,621)
------------ ------------ ------------
Total comprehensive income (loss) $ 7,971 $ (1,793) $ (1,056)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
As of April 30, 1999 1998
- -------------------------------------------------- ----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 14,691 $ 21,167
Receivables, net of reserves of $1,726
in 1999 and $2,608 in 1998 3,546 2,926
Inventories 4,346 4,333
Prepaid expenses and other current assets 1,669 1,281
- -------------------------------------------------- ----------- -----------
Total current assets 24,252 29,707
- -------------------------------------------------- ----------- -----------
Property and equipment, at cost
Land 22,582 22,252
Buildings and leasehold improvements 88,537 83,735
Equipment 64,969 62,942
Capital leases 2,616 2,616
Construction in progress 2,628 4,534
- -------------------------------------------------- ----------- -----------
181,332 176,079
Less - Accumulated depreciation and amortization (103,496) (96,869)
- -------------------------------------------------- ----------- -----------
Total property and equipment, net 77,836 79,210
- -------------------------------------------------- ----------- -----------
Long-term notes receivable, net of reserves
of $508 in 1999 and $772 in 1998 1,553 1,268
Deferred income taxes 795 3,829
Intangible assets, net of accumulated amortization
of $887 in 1999 and $696 in 1998 2,104 2,162
Other assets, net of accumulated amortization
and reserves of $6 in 1999 and $1 in 1998 2,129 3,285
- -------------------------------------------------- ----------- -----------
Total assets $108,669 $119,461
================================================== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
As of April 30, 1999 1998
- --------------------------------------------------------------- --------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities
Current portion of long-term debt $ 5,898 $ 5,764
Accounts payable 7,892 7,753
Other current liabilities 8,853 9,562
Income taxes payable 2,449 3,761
- --------------------------------------------------------------- --------- ---------
Total current liabilities 25,092 26,840
- --------------------------------------------------------------- --------- ---------
Long-term debt, net of current portion 26,918 35,497
Other liabilities 3,916 13,364
Commitments and contingencies - -
Stockholders' investment
Preferred stock, authorized 1,000,000 shares, $5 par value; no
shares issued and outstanding - -
Common stock, authorized 50,000,000 shares at $.01 par value;
issued and outstanding 28,797,828 in 1999 and 28,840,908
shares in 1998 288 288
Additional paid-in capital 278,365 277,353
Accumulated deficit (222,191) (229,583)
Accumulated other comprehensive income (3,719) (4,298)
- --------------------------------------------------------------- --------- ---------
Total stockholders' investment 52,743 43,760
- --------------------------------------------------------------- --------- ---------
Total liabilities and stockholders' investment $ 108,669 $ 119,461
=============================================================== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Investment
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Additional Accumulated Other
Shares Common Paid-In Accumulated Comprehensive
Outstanding Stock Capital Deficit Income Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1996 27,767,706 $ 278 $ 274,221 $ (235,526) $ 4,494 $ 43,467
Restricted stock repurchased (18,381) (1) (56) (57)
Restricted stock canceled (311,958) (3) (3)
Grant of restricted stock 1,457,000 15 651 666
Stock issued 3,636 10 10
Net income 565 565
Amortization of restricted stock 1,374 1,374
Foreign currency translation
adjustment (1,621) (1,621)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1997 28,898,003 289 276,200 (234,961) 2,873 44,401
Restricted stock repurchased (7,022) (17) (17)
Restricted stock canceled (55,833) (1) (1)
Stock issued 5,760 14 14
Net income 5,378 5,378
Amortization of restricted stock 1,156 1,156
Foreign currency translation
adjustment (7,171) (7,171)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1998 28,840,908 288 277,353 (229,583) (4,298) 43,760
Restricted stock repurchased (37,080) (103) (103)
Restricted stock canceled (6,000) 0
Net income 7,392 7,392
Amortization of restricted stock 1,115 1,115
Foreign currency translation
adjustment 579 579
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1999 28,797,828 $ 288 $ 278,365 $ (222,191) $ (3,719) $ 52,743
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended April 30, 1999 1998 1997
- ------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,392 $ 5,378 $ 565
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,927 11,769 16,260
Deferred income tax provision (benefit) 3,377 (925) (12,167)
Provision for bad debts 446 651 479
Other 1,114 (473) 791
Changes in operating assets and liabilities:
Receivables (1,394) 1,015 704
Inventories (13) 1,131 1,421
Prepaid expenses and other current assets (388) 950 (477)
Accounts payable 139 (5,881) 14,339
Accrued liabilities (1,607) (10,681) (19,740)
Income taxes payable (1,703) 2,353 (1,329)
Changes due to reorganization activities:
Payments of reorganization costs (2,016) (6,442) (8,826)
Interest expense accrued - 2,773 6,000
- ------------------------------------------------------------------- --------- --------- ---------
Net cash provided by (used in) operating activities 15,274 1,618 (1,980)
- ------------------------------------------------------------------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (7,684) (8,931) (6,399)
Disposal of property and equipment 1,754 28,896 21,370
Other assets (1,137) (489) 739
- ------------------------------------------------------------------- --------- --------- ---------
Net cash provided by (used in) investing activities (7,067) 19,476 15,710
- ------------------------------------------------------------------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings - 46,895 11,461
Reduction of long-term debt (8,580) (4,865) (266)
Payment of allowed claims pursuant to
the reorganization plan (6,000) (75,159) -
Other, net (103) (883) (56)
- ------------------------------------------------------------------- --------- --------- ---------
Net cash provided by (used in) financing activities (14,683) (34,012) 11,139
- ------------------------------------------------------------------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents (6,476) (12,918) 24,869
- ------------------------------------------------------------------- --------- --------- ---------
Cash and cash equivalents at beginning of year 21,167 34,085 9,216
- ------------------------------------------------------------------- --------- --------- ---------
Cash and cash equivalents at end of year $ 14,691 $ 21,167 $ 34,085
- ------------------------------------------------------------------- --------- --------- ---------
Supplemental Cash Flow Disclosures
Cash paid during the year for:
Interest expense $ 3,290 $ 2,481 $ 1,175
Income taxes 72 693 5,989
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Line of Business: Sizzler International, Inc. and subsidiaries ("Sizzler" or
the "Company") is principally engaged in the operation, development and
franchising of the Sizzler family steak house concept and the operation of
Kentucky Fried Chicken ("KFC") franchises in Australia.
Introduction: As discussed in Note 2, the Company operated as a debtor-in-
possession under the provisions of Chapter 11 of the federal bankruptcy laws
from June 2, 1996 to September 22, 1997, when the reorganization plans became
effective. Consequently, the consolidated statements have been prepared in
accordance with Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," issued by the American Institute of
Certified Public Accountants in November, 1980.
Principles of Consolidation: The consolidated financial statements include the
accounts of Sizzler International, Inc., and all majority-owned subsidiaries.
Intercompany accounts and transactions have been eliminated.
Certain financial statements, notes and supplementary data for the prior years
have been reclassified to conform with the 1999 presentation.
Accounting Period: The Company utilizes a fifty-two, fifty-three week fiscal
year ending on the Sunday nearest to April 30. Fiscal year 1998 was a fifty-
three week year ending on May 3, 1998. Fiscal year 1999 was a fifty-two week
year. For clarity of presentation, the Company has described all periods
presented as if the year ended April 30.
Use of Estimates in Preparation of Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Franchise Operations: The Company recognizes initial franchise fees as income
when the franchised restaurant commences operation, at which time the Company
has substantially performed its obligations relating to such fees. Royalties
which are based
28
<PAGE>
upon a percentage of sales, are recognized as income on the accrual basis. On a
limited basis, franchisees have also entered into leases of restaurant
properties leased or owned by Sizzler. Royalty revenues, franchise fees and rent
payments from franchisees are included in "Franchise Operations" in the
Consolidated Statements of Operations and Comprehensive Income.
Marketing Costs: Marketing costs are reported in the Other Operating Expenses
and include costs of advertising, marketing and promotional programs.
Promotional discounts are expensed as incurred.
Stock-Based Compensation: In accordance with Statement of Financial Accounting
Standards No. 123 (SFAS 123), the Company uses the intrinsic value-based method
of measuring stock-based compensation cost which measures compensation cost as
the excess, if any, of the quoted market price of Sizzler's capital stock at the
grant date over the amount the employee must pay for the stock. The Company's
policy generally is to grant stock options at fair market value at the date of
grant.
Common Stock and Net Income or Loss per Share: Basic earnings per share is
computed as net income (loss) divided by the weighted average number of common
shares outstanding for the period. Diluted EPS includes the dilutive effects of
options and warrants using the treasury stock method.
Cash and Cash Equivalents: At April 30, 1999 and 1998 cash and cash equivalents
consists of cash and short-term investments carried at cost with original
maturities of less than three months.
Inventories: Inventories are valued at the lower of cost (first-in, first-out
method) or market, and primarily consist of food products.
Property and Equipment: Property and equipment are stated at cost, which
includes interest capitalized during construction and costs relating to the
selection of sites for new restaurant locations, except for assets that have
been impaired, for which the carrying amount is reduced to the estimated fair
value.
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset or a
group of assets may not be recoverable. The Company considers a history of
operating losses to be its primary indicator of potential impairment. Assets are
grouped and evaluated for impairment at the lowest level for which there are
identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The Company deems an asset to be impaired if a forecast of
undiscounted future operating cash flows directly related to the asset,
including disposal value, if any, is less than its carrying amount. If an asset
is determined to be impaired, the loss is measured as the amount by which the
carrying amount of the asset exceeds fair value. The Company generally measures
fair value by discounting estimated future cash flows. Considerable management
judgment is
29
<PAGE>
necessary to estimate discounted future cash flows. Accordingly, actual results
could vary significantly from such estimates.
Depreciation and Amortization: Depreciation and amortization are provided over
the estimated useful lives of the assets using the straight-line method.
Estimated useful lives range from 10 to 30 years for buildings and 2 to 8 years
for equipment. Leasehold improvements are amortized primarily over the
remaining lives of the leases, generally 15 to 20 years.
Properties Held for Sale or Lease: Properties held for sale or lease were
$711,000 at April 30, 1999 and $2,637,000 at April 30, 1998, and are included in
Other Assets. These assets represent excess land carried at estimated realizable
values.
Intangible Assets: Intangible assets are amortized on a straight-line basis over
appropriate periods ranging from 12 to 40 years. The Company continually
evaluates the recoverability of these intangible assets by assessing whether the
recorded value of the intangible assets will be recovered through future
expected operating results. The methodology used to assess the recoverability of
intangible and other long lived assets is to determine its expected net
realizable value based upon the historical trend and their expected impact on
future operating cash flows.
Other Current Liabilities: Other current liabilities include amounts accrued for
compensation and benefits, insurance, advertising, legal fees, rent, taxes and
others.
Translation of Foreign Currencies: The consolidated financial statements of the
Company's foreign operations are translated in accordance with the Statement of
Financial Accounting Standards No. 52 "Foreign Currency Translation". As a
result, translation adjustments are included in stockholders' investment. The
functional currency used in the Company's foreign operations is primarily the
Australian dollar.
Income Taxes: Income taxes are accounted for using the asset and liability
method pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FAS 109"). Deferred taxes are recognized for the
tax consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes for a change in tax rates is recognized in income in
the period of enactment.
Comprehensive Income: In fiscal year 1999, the Company adopted Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income". Other comprehensive income may include foreign currency translation
adjustments, minimum pension liability adjustments, and unrealized gains and
losses on investments in equity securities.
30
<PAGE>
New Accounting Standards: In Fiscal 1999, the Company adopted statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also established standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS 131 does not impact the Company's consolidated results of
operations, financial position or cash flows.
In Fiscal 1999, the Company adopted statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" ("SFAS 132"). This statement does not change the measurement or
recognition of those plans, but is designed to simplify disclosures about
pension and other postretirement benefit plans. Specifically, it standardizes
the disclosure requirement to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures that
are no longer as useful as they were when SFAS No. 87, "Employers' Accounting
for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," were issued. The Statement also suggests combined formats for
presentation of pension and other postretirement benefit disclosures. The
adoption of SFAS 132 does not impact the Company's consolidated results of
operations, financial position or cash flows.
In Fiscal 1999, the Company adopted Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 addresses the accounting for derivative instruments,
including derivative instruments embedded in other contracts and hedging
activities. The adoption of SFAS No. 133 does not impact the Company's
consolidated results of operations, financial position or cash flows.
Note 2 - Bankruptcy Reorganization
- ----------------------------------
Bankruptcy Proceedings
- ----------------------
On June 2, 1996, in response to continued domestic operating losses, the Company
enacted a comprehensive restructuring strategy designed to return the U.S.
operations to profitability. This strategy included the closure of under-
performing restaurants in the U.S. and filing for bankruptcy protection. The
Company and four subsidiaries, (Sizzler Restaurants Inc. ("SRI"), Buffalo Ranch
Steakhouses,, Inc., ("BRSH"), Tenly Enterprises, Inc., ("Tenly"), and Collins
Properties, Inc. ("CPI")) became debtors-in-possession subject to the
supervision of the U.S. Bankruptcy Court. The debtor subsidiaries
31
<PAGE>
collectively owned and operated substantially all of the Company's U.S.
restaurant businesses and assets. The Company's international division
businesses and assets were owned and operated by separate subsidiaries and were
not subject to the U.S. Chapter 11 provisions.
On June 2, 1997, the Bankruptcy Court entered an order confirming the Chapter 11
plans of reorganization of the Company, SRI and CPI. The plans of reorganization
for Tenly and BRSH were confirmed on February 24, 1997, On September 23, 1997,
the reorganization plans became effective and the Company and its subsidiaries
emerged from the bankruptcy proceedings.
The Company's plan of reorganization provided for full payment of allowed
creditor claims, including interest, over five years, from the Company's
international operations. In September 1997, the Company obtained financing
sufficient to pay its allowed creditor claims from Westpac Banking Corporation.
SRI's plan provided for full payment of allowed unsecured creditors' claims
through the formation of a creditor trust. Installment payments to the trust
were evidenced by a four-year note with interest at the floating annual rate of
prime plus one percent through the first year, prime plus two percent for the
next two years, and prime plus three percent for the fourth year. SRI secured
the note with a pledge of the stock of its subsidiaries and with substantially
all of the domestic division's operating assets.
The Company and its subsidiaries have paid approximately $81 million in pre-
petition claims and interest and reinstated the remaining pre-petition
liabilities. Remaining bankruptcy liabilities are included in the appropriate
liability captions of the consolidated balance sheet.
Reorganization Costs
- --------------------
The Company incurred severance, temporary staff, legal and professional costs
relating to the reorganization of $1.4 million, $6.4 million and $8.8 million,
in fiscal 1999, 1998 and 1997, respectively. These reorganization costs were
charged against established reserves.
32
<PAGE>
Note 3 - Income Taxes
- ---------------------
The Company files a consolidated United States income tax return which includes
all domestic subsidiaries in which it owns 80 percent or more of the voting
stock and 80 percent or more of the value of the outstanding stock. Foreign
withholding taxes have not been provided on the unremitted earnings totaling
$3,891,000 of the Company's foreign operations at April 30, 1999. It is the
Company's intention to reinvest such earnings permanently.
The components of the provision (benefit) for income taxes attributable to
income (loss) from operations consists of the following (in thousands):
<TABLE>
<CAPTION>
For the years ended April 30, 1999 1998 1997
- ----------------------------- -------- -------- --------
<S> <C> <C> <C>
Current
Federal $ - $ - $ -
State - - -
Foreign 1,435 3,150 4,851
-------- -------- --------
1,435 3,150 4,851
-------- -------- --------
Deferred
Federal - - -
State - 450 -
Foreign 375 (1,375) (12,167)
-------- -------- --------
375 (925) (12,167)
-------- -------- --------
Provision (benefit) for income taxes $ 1,810 $ 2,225 $ (7,316)
-------- -------- --------
</TABLE>
A reconciliation of the statutory United States Federal income tax rate to the
Company's consolidated effective income tax rate follows:
<TABLE>
<CAPTION>
For the years ended April 30, 1999 1998 1997
- ----------------------------- -------- -------- ----------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of
related Federal income tax benefit 6.1 6.1 6.1
Tax credits, net - - 3.3
Goodwill write-off and
non-deductible amortization - - (3.3)
Valuation allowance (21.4) (11.8) (149.1)
Other - - (0.4)
------ ----- ------
Effective tax rate 19.7% 29.3% (108.4)%
</TABLE>
33
<PAGE>
Pre-tax income (loss) for domestic and foreign operations is as follows (in
thousands):
<TABLE>
<CAPTION>
For the years ended April 30, 1999 1998 1997
- ---------------------------- --------- --------- ---------
<S> <C> <C> <C>
Domestic $ 3,741 $ 3,527 $(6,137)
Foreign 5,461 4,076 (614)
--------- --------- ---------
$ 9,202 $ 7,603 $(6,751)
========= ========= =========
</TABLE>
The tax effects of temporary differences and carryforwards which give rise to
significant amounts of deferred tax assets and deferred liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
As of April 30, 1999 1998
- -----------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Deferred income $ 18 $ 4,493
Foreign tax credit carryover 11,075 10,304
Minimum tax credit carryover 1,849 1,849
Other credits 2,840 2,840
Operating reserves and accruals 3,092 27,613
Net operating loss carry forward 49,582 37,988
-------- ---------
Total gross deferred tax assets 68,456 85,087
Less: valuation allowance (61,979) (72,455)
-------- ---------
Net deferred tax assets 6,477 12,632
-------- ---------
Deferred Tax Liabilities:
State income taxes - (2,476)
Property and equipment (886) (3,969)
Capital leases (769) (776)
Other (4,027) (1,582)
-------- ---------
Total gross deferred tax liabilities (5,682) (8,803)
-------- ---------
Net deferred tax assets/(liability) $ 795 $ 3,829
======== =========
</TABLE>
34
<PAGE>
The following is a summary of the net operating loss carry forward and the
credit carry forward (in thousands) and related expiration dates at April 30,
1999.
<TABLE>
<CAPTION>
Gross
Amount Expiration
------ ----------
<S> <C> <C>
Federal net operating loss $ 134,361 2011 - 2013
California net operating loss 27,474 2001 - 2003
Foreign tax credit 11,074 2000 - 2005
Minimum tax credit 1,849 Indefinite
General business credit 2,840 2005 - 2010
</TABLE>
Note 4 - Debt
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
A summary of debt outstanding as of April 30, 1999 and 1998, is as follows (in
thousands):
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured borrowings, at variable interest rates,
due through 2012 $ 2,255 $ 2,608
Mortgage notes payable, with interest rate of 10.015
percent, secured by land and building with an original
cost of approximately $600 at April 30, 1999 and 1998,
due through 2039 564 565
Other secured note, with a variable interest rate, due
through 2002 29,110 37,035
Capital lease obligations 887 1,053
- ---------------------------------------------------------------------------------------------------------------------
32,816 41,261
Less - current portion (5,898) (5,764)
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt $ 26,918 $ 35,497
=====================================================================================================================
</TABLE>
Payment of $5,675 on long-term debt, excluding capital lease obligations is due
in fiscal 2000, $5,677 in 2001, $5,677 in 2002, $13,646 in 2003, and $1,254
thereafter.
On September 23, 1997, the Company obtained a $63.5 million AUD (approximately
$46.9 million US) bank facility from Westpac Banking Corporation (included in
'Other secured note' above) in order to refinance the claims of the Company's
unsecured creditors. The Westpac loan provides for a five-year term at an
interest rate equal to the Australian interbank borrowing rate, plus a margin.
The margin is based on a formula tied to the Company's international operations
ratio of debt to earnings before interest and taxes, and varies between 1.25%
and 2.25%. The Westpac loan involved the collateralization of the Company's
principal operating assets of its international division.
35
<PAGE>
The Westpac loan is subject to a number of financial covenants and other
restrictions. The Company is in compliance with all covenants and restrictions.
Management believes that the aggregate fair value of the Company's long-term
debt approximates the aggregate book value, as substantially all such debt is
comprised of variable-rate obligations.
Note 5 - Stock Options and Restricted Stock
- -------------------------------------------
The Company has an Employee Stock Incentive Plan for certain officers and key
employees, and a stock option plan for non-employee directors. The maximum
number of shares that may be issued under these plans is 2,800,000 and 400,000
shares, respectively. Grants of options to employees and the periods during
which such options can be exercised are at the discretion of the Board of
Directors.
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock Based Compensation". As allowed by SFAS No. 123, the
Company has elected to continue to measure compensation cost under the
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees" and comply with the pro forma disclosure requirements of the new
standard. The fair value of option grants is estimated on the date of grant
utilizing the Black-Scholes option-pricing model with the following assumptions:
expected life of option of 5 years, expected volatility of 61%, risk free
interest rate of 5.3% and a 0% dividend yield. Had compensation cost for these
plans been determined consistent with SFAS 123, the Company's net income and
earnings per share would have been reduced to the following pro-forma amounts.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net Income: As Reported $7,392 $5,378 $ 565
Pro Forma $6,501 $4,515 $ 99
Basic and Diluted Earnings Per Share: As Reported $ 0.26 $ 0.19 $0.02
Pro Forma $ 0.23 $ 0.16 $0.00
------ ------ -----
</TABLE>
36
<PAGE>
Stock Options:
- --------------
The outstanding options become exercisable in varying amounts through 2005. A
summary of stock option transactions follows:
<TABLE>
<CAPTION>
For the years ended April 30,
------------------------------------------
Shares Outstanding 1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at the beginning of the year 229,523 109,347 1,471,074
Options granted 2,182,752 164,040 -
Options exercised - - -
Options canceled (81,121) (43,864) (1,361,727)
- ----------------------------------------------------------------------------------------------------
Options outstanding at April 30 2,331,154 229,523 109,347
Options available for grant at April 30 943,208 1,235,950 366,305
- ----------------------------------------------------------------------------------------------------
Total reserved shares 3,274,362 1,465,473 475,652
====================================================================================================
Options exercisable at April 30 217,381 97,483 73,226
====================================================================================================
Option prices per share:
Granted $0.01-$2.69 $0.281-$3.906 -
Exercised - - -
Canceled $2.69-$12.50 $5.625-$12.50 $5.00-$17.125
====================================================================================================
</TABLE>
Restricted Stock Plan:
- ----------------------
Stock issued under the Company's stock incentive plan is delivered subject to
various conditions relating to corporate performance. Compensation expense
related to these options amounted to approximately $1,115,000 in 1999,
$1,156,000 in 1998 and $1,374,000 in 1997. A summary of restricted stock
transactions follows:
<TABLE>
<CAPTION>
For the years ended April 30,
--------------------------------------
Shares Outstanding 1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares restricted at beginning of the year 526,336 1,016,625 110,498
Shares granted - - 1,457,000
Shares released (234,174) (434,456) (238,915)
Shares canceled (6,000) (55,833) (311,958)
- --------------------------------------------------------------------------------------------------
Shares restricted at April 30 286,162 526,336 1,016,625
==================================================================================================
</TABLE>
37
<PAGE>
Note 6 - Leases
- -------------------------------------------------------------------------------
The Company is a party to a number of noncancelable lease agreements involving
land, buildings and equipment. The leases are generally for terms ranging from
three to 20 years and expire on varying dates through 2019. The Company has the
right to extend many of these leases. Certain leases require contingent rent,
determined as a percentage of sales, when annual sales exceed specified levels.
The Company is also a lessor and a sublessor of land, buildings and equipment.
The Company is a co-lessee or guarantor on leases of certain franchisees which
are not significant in amount.
Following is a schedule by year of future minimum lease commitments and sublease
rental income under all noncancelable leases (in thousands):
<TABLE>
<CAPTION>
Commitments
---------------------------------
Sublease
Capital Operating Rental
Years ended April 30, Leases Leases Income
- --------------------- ---------------------------------
<S> <C> <C> <C>
2000 $ 290 $ 9,664 $ 831
2001 196 8,764 748
2002 101 7,877 748
2003 101 7,099 687
2004 101 6,638 625
Thereafter 406 24,985 1,270
--------------------------------
Total minimum lease
commitments/receivables 1,195 $ 65,027 $4,909
======== ======
Less amount representing interest 530
-------
Present value of minimum lease payments 665
Less current portion of capital lease obligations 222
-------
Long-term capital lease obligations $ 443
=======
</TABLE>
<TABLE>
<CAPTION>
Rent expense consists of (in thousands):
------------------------------------
Years ended April 30, 1999 1998 1997
- --------------------- ------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 8,564 $ 11,594 $ 11,355
Contingent rentals 475 489 623
Less sublease rentals (1,427) (1,078) (2,141)
------------------------------------
Net rent expense $ 7,612 $ 11,005 $ 9,837
======== ========= =========
</TABLE>
38
<PAGE>
Note 7-Information by Industry Segment and Geographic Area
- ----------------------------------------------------------
Substantially all of the Company's revenues result from the sale of menu items
at restaurants operated by the Company or generated from franchise activity. The
Company's reportable segments are based on geographic area and product type.
Sizzler USA consists of all domestic Sizzler restaurant and franchise
operations. Sizzler International consists of all foreign Sizzler restaurant and
franchise operations. KFC consists of KFC franchise restaurants in Australia.
Corporate and other includes any items not included in the reportable segments
listed above. The effect of all intercompany transactions are eliminated when
computing revenues, earnings before interest, taxes, and corporate overhead, and
identifiable assets.
Earnings before interest, taxes, and corporate overhead includes segment
operating results before investment income, interest expense, income taxes, non-
recurring charges, and allocated corporate overhead. The corporate and other
component of earnings before interest, taxes, and corporate overhead represents
corporate selling, and general and administrative expenses prior to being
allocated to the operating segments.
Identifiable assets are those assets used in the operations of each segment.
Corporate and other assets include cash, investments, accounts receivable,
deferred taxes, and various other assets. The negative amount in corporate and
other assets is a result of a deferred income tax liability that nets with the
deferred assets of the other segments.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues (in thousands):
- ------------------------
Sizzler - USA $101,872 $ 97,127 $123,128
Sizzler - International 40,176 50,364 72,575
KFC 84,278 94,842 102,566
Corporate and other - - 1,659
- ------------------------------------------------------------------------------------
Total $226,326 $242,333 $299,928
- ------------------------------------------------------------------------------------
Depreciation and Amortization (in thousands):
- ---------------------------------------------
Sizzler - USA $ 3,484 $ 3,942 $ 4,477
Sizzler - International 2,565 3,081 4,882
KFC 3,575 4,149 5,152
Corporate and other 303 597 1,749
- ------------------------------------------------------------------------------------
Total $ 9,927 $ 11,769 $ 16,260
- ------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Earnings before Interest and Taxes
- ----------------------------------
(in thousands):
- ---------------
Sizzler - USA $ 8,175 $ 5,891 $ (2,219)
Sizzler - International 2,161 615 (7,748)
KFC 7,679 9,678 15,719
Corporate and other (6,253) (4,578) (6,700)
- ---------------------------------------------------------- ------------ ------------
Total $ 11,762 $ 11,606 $ (948)
- ---------------------------------------------------------- ------------ ------------
Capital Expenditures (in thousands):
- -----------------------------------
Sizzler - USA $ 4,501 $ 4,286 $ 1,358
Sizzler - International 619 726 1,951
KFC 2,453 3,582 2,697
Corporate and other 111 337 393
- ---------------------------------------------------------- ------------ ------------
Total $ 7,684 $ 8,931 $ 6,399
- ---------------------------------------------------------- ------------ ------------
Identifiable Assets (in thousands):
- ----------------------------------
Sizzler - USA $ 60,538 $ 59,199 $71,034
Sizzler - International 33,641 30,939 31,904
KFC 33,384 42,626 62,860
Corporate and other (18,894) (13,303) 2,312
- ---------------------------------------------------------- ------------ ------------
Total $108,669 $ 119,461 $168,110
- ---------------------------------------------------------- ------------ ------------
</TABLE>
Note 8 - Commitments and Contingencies
- --------------------------------------
At April 30, 1999, there were no material commitments for capital projects.
The Company is a party to certain litigation arising in the ordinary course of
business which, in the opinion of management, should not have a material adverse
effect upon the consolidated financial position of the Company or its results of
operations.
40
<PAGE>
Note 9 - Employee Benefit Plans
- -------------------------------
The Company maintains an executive supplemental benefit plan that covers nine
former employees and four active employees. The Company discontinued adding new
participants to the plan in fiscal 1992. The components of net cost of the
pension plan for the years ended April 30, 1999, 1998 and 1997 determined under
SFAS No. 87 are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
April 30, April 30, April 30,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
(in thousands)
Pension Plan:
Service cost $ 51 $ 44 $ 40
Interest cost 962 1,024 753
Expected return on plan assets - - -
Amortization of prior service cost - - -
Recognized net actuarial loss 81 57 63
------ ------ ----
Net periodic benefit cost $1,094 $1,125 $856
====== ====== ====
</TABLE>
There were no plan costs charged to continuing operations for the years ended
April 30, 1999, 1998 and 1997.
41
<PAGE>
The following table sets forth the funded status and amounts recognized in the
Company's balance sheet for the plan:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------
April 30, April 30,
1999 1998
------------ ------------
<S> <C> <C>
(in thousands)
Change in Benefit Obligation
Benefit obligation at beginning of year $ 9,065 $ 10,064
Service cost 51 44
Interest cost 962 1,024
Actuarial loss 42 (147)
Benefits paid (1,182) (1,182)
---------- ---------
Benefit obligation at end of year $ 8,938 $ 9,803
---------- ---------
Change in Plan Assets
Fair value of plan assets at beginning of year - -
Actual return on plan assets - -
Employer contributions - -
Benefits paid - -
----------- ----------
Net periodic benefit cost $ - $ -
----------- ----------
Reconciliation of Funded Status
Funded Status - -
Unrecognized actuarial (gain)/loss - -
Unrecognized transition amount - -
Unrecognized prior service cost - -
----------- ----------
Net amount recognized $ - $ -
----------- ----------
Amounts Recognized in the Consolidated
Balance Sheet Consist of:
Accrued benefit liability $ 8,938 $ 9,803
Accumulated other comprehensive income - -
---------- ----------
Net amount recognized $ 8,938 $ 9,803
---------- ----------
</TABLE>
42
<PAGE>
Significant assumptions used in determining net cost and funded status
information for all the periods shown above are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate 8.5% 8.5% 8.5%
Rates of salary progression 5.0% 5.0% 5.0%
</TABLE>
In addition, the Company has a contributory employee profit sharing, savings and
retirement plan whereby eligible employees can elect to contribute from 1% to
15% of their salary the plan. Under the plan the Company can elect to make
matching contributions, with certain limitations. Amounts charged to income
under these plans were zero for the years ended April 30, 1997 and 1998 and
$198,000 for the year ended April 30, 1999.
Note 10 - Earnings Per Share
- ----------------------------
Earnings per share (EPS) has been calculated as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 30,
----------------------------------------
(In thousands, except EPS) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Numerator for both basic and diluted
EPS - Net income $ 7,392 $ 5,378 $ 565
======= ======= =======
Denominator:
Denominator for basic EPS - weighted average
shares of common stock outstanding 28,815 28,864 28,967
Effect of dilutive stock options 63 15 - (a)
------- ------- -------
Denominator for diluted EPS - adjusted
weighted average shares outstanding 28,878 28,879 28,967
======= ======= =======
Basic and diluted earnings per share $ 0.26 $ 0.19 $ 0.02
======= ======= =======
</TABLE>
(a) No recognition has been given to common stock equivalents as they are anti-
dilutive.
43
<PAGE>
Note 11- Valuation Accounts
- ---------------------------
The following is a summary of the activity in valuation accounts (in thousands):
<TABLE>
<CAPTION>
Balance at Balance
Beginning at End of
of Period Addition Deductions Period
---------- -------------------- ---------
<S> <C> <C> <C> <C>
Reserve for Account Receivable and
- ----------------------------------
Note Receivable Bad Debt
- ------------------------
Year ended April 30, 1999 $ 3,380 $ 501 $ 1,647 $ 2,234
======= ======= ======= ========
Year ended April 30, 1998 $ 3,971 $ 1,169 $ 1,760 $ 3,380
======= ======= ======= ========
Year ended April 30, 1997 $10,291 $ 828 $ 7,148 $ 3,971
======= ======= ======= ========
</TABLE>
Note 12- Related Party Transactions
- -----------------------------------
The Company has entered into a services agreement dated May 1, 1999 with
director Charles F. Smith. Under the agreement, Mr. Smith is obligated to be
available to provide consulting services from time to time on a mutually agreed
upon basis regarding corporate business asset dispositions and financings. The
agreement is terminable by either party upon ten days' written notice. The
agreement provides for compensation to Mr. Smith of $2,000 per day for services
rendered and reimbursement of Mr. Smith's reasonable out of pocket expenses
incurred at the Company's request. No payments were made to Mr. Smith under the
agreement during the 1999 fiscal year.
A subsidiary of the Company is party to a consulting agreement with Barry E.
Krantz, a director of the Company. Under the agreement, Mr. Krantz provides
marketing consulting services at an hourly rate. The agreement is terminable by
the Company's subsidiary at any time and for any reason upon two weeks' notice.
During fiscal years 1999, 1998 and 1997, the Company paid Mr. Krantz an
aggregate of $124,000, $244,000 and $75,000, respectively, of fees and expenses
under the consulting agreement. These amounts are recorded in general and
administrative expenses in the statement of operations and comprehensive income.
44
<PAGE>
The Company leases approximately 36,000 square feet of headquarters office
premises from Pacifica Plaza Office Building, a limited partnership
("Pacifica"). James A. Collins, his spouse and his brother-in-law are among the
partners of Pacifica, which was formed in 1979. Mr. Collins is the Company's
Chairman of the Board. Mr. Collins, his spouse and his brother-in-law, directly
or indirectly, own a majority interest in Pacifica. Under the four-year lease,
the Company is responsible for rent payment of $34,000 a month during the period
through December 1999 (except for an initial four months of abated rent), and
$42,000 a month thereafter through October 31, 2001. Base rent under the lease
was predicated upon the terms of a sublease negotiated between the Company and
Digital Equipment Corporation ("DEC"), a tenant of Pacifica. In lieu of a
sublease between the Company and DEC, the Company elected to enter into a direct
lease with Pacifica for the headquarters office premises upon the condition that
DEC be responsible for the difference between rent under its former lease with
Pacifica (plus utilities) and the Company's base rent under the lease. The
Company believes these terms were competitive at the time it entered into the
lease. The expense for rent is included in general and administrate expenses in
the statement of operations and comprehensive income.
45
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosures.
- ----------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
Information required by this item with respect to the Company's directors is set
forth under the captions "Election of Directors" and "Stock Ownership of
Management" in the Company's Proxy Statement for its Annual Meeting of the
Stockholders. Such information is incorporated herein by reference.
Information required by this item with respect to the Company's executive
officers is set forth in Part I of this Annual Report under the caption
"Executive Officers of the Registrant as of June 30, 1999".
Item 11. Executive Compensation
- -------------------------------
Information required by this item is set forth under the caption "Executive
Compensation" and "Election of Directors" in the Company's Proxy Statement for
its Annual Meeting of the Stockholders. Such information is incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
Information required by this item is set forth under the caption "Stock
Ownership of Management" in the Company's Proxy Statement for its Annual Meeting
of the Stockholders. Such information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Information required by this item is set forth under the caption "Transactions
with Directors and Management" in the Company's Proxy Statement for its Annual
Meeting of the Stockholders. Such information is incorporated herein by
reference.
46
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------------------------------------------------------------------------
(a) List of documents filed as part of the report:
(1) Financial Statements:
Report of Independent Public Accountants
Consolidated Statements of Operations and Comprehensive Income of
Sizzler International, Inc. and Subsidiaries for each of the three
years in the period ended April 30, 1999
Consolidated Balance Sheets of Sizzler International, Inc. and
Subsidiaries as of April 30, 1999 and 1998
Consolidated Statements of Stockholders' Investment of Sizzler
International, Inc. and Subsidiaries for each of the three years in
the period ended April 30, 1999.
Consolidated Statements of Cash Flows of Sizzler International, Inc.
and Subsidiaries for each of the three years in the period ended April
30, 1999.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules:
Schedules omitted because the required information is shown in the
consolidated financial statements or in the notes thereto, or the
amounts involved are not significant, or the required matter is not
applicable.
(3) Exhibits:
Number Description
------ -----------
2.1 Registrant's Sixth Amended Plan of Reorganization dated August
26, 1997, incorporated by reference to Exhibit 2.1 to the
Registrant's Form 8-K report filed October 8, 1997.
2.2 Sizzler Restaurants International, Inc.'s Second Amended Plan of
Reorganization, incorporated by reference to Exhibit 2.2 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1997.
2.3 Collins Properties, Inc.'s Plan of Reorganization, incorporated
by reference to Exhibit 2.3 to the Registrant's Form 10-K report
for the fiscal year ended April 30, 1997.
3.1 Certificate of Incorporation of Registrant, incorporated herein
by reference to Exhibit 3.1 to Amendment No. 1 to Registrant's
Form S-4 Registration Statement Number 33-38412.
3.2 Bylaws of Registrant, as amended June 16, 1999.
4.1 Rights Agreement dated January 22, 1991 between The Bank of New
York and Registrant, incorporated herein by reference to Exhibit
4.1 to Amendment No. 1 to the Registrant's Form S-4 Registration
Statement Number 33-38412.
47
<PAGE>
4.2 Amendment to Rights Agreement dated March 20, 1996 between The
Bank of New York and the Registrant, incorporated herein by
reference to Exhibit 4.2 to the Registrant's Form 10-K report for
the fiscal year ended April 30, 1996.
4.3 Certificate of Designation of Series A Junior Participating
Preferred Stock of Registrant, incorporated herein by reference
to Exhibit 4.2 to Amendment No. 1 to Registrant's Form S-4
Registration Statement Number 33-38412.
10.1 Employee Savings Plan of Registrant, restated as of January 1,
1992, incorporated herein by reference to Exhibit 10.2 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1995.
10.2 Amendment to Employee Savings Plan of Registrant, incorporated by
reference to Exhibit 2.2 to the Registrant's Form 10-K report for
the fiscal year ended April 30, 1997.
10.3 Registrant's Executive Supplemental Retirement Plan (effective
May 1, 1985, and including amendments through May 1, 1993),
incorporated herein by reference to Exhibit 10.3 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1996.
10.4 Employment Agreement dated February 8, 1999 between Registrant
and Charles L. Boppell.
10.5 Employment Agreement dated May 1, 1996 between Registrant and
Kevin W. Perkins, incorporated herein by reference to Exhibit
10.5 to the Registrant's Form 10-K report for the fiscal year
ended April 30, 1996.
10.6 Amendment to Employment Agreement dated September 25, 1996
between the Registrant and Kevin W. Perkins, incorporated by
reference to Exhibit 10.6 to the Registrant's Form 10-K report
for the fiscal year ended April 30, 1997.
10.7 Amendment to Employment Agreement dated January 1, 1997 between
the Registrant and Kevin W. Perkins, incorporated by reference to
Exhibit 10.7 to the Registrant's Form 10-K report for the fiscal
year ended April 30, 1997.
10.8 Third Amendment to Employment Agreement dated May 5, 1997 between
the Registrant and Kevin W. Perkins, incorporated by reference to
Exhibit 10.8 to the Registrant's Form 10-K report for the fiscal
year ended April 30, 1997.
10.9 Employment Agreement dated May 1, 1996 between Registrant and
Christopher R. Thomas, incorporated herein by reference to
Exhibit 10.6 to the Registrant's Form 10-K report for the fiscal
year ended April 30, 1996.
10.10 Employment Agreement dated May 1, 1996 between Registrant and
Ryan S. Tondro, incorporated herein by reference to Exhibit 10.9
to the Registrant's Form 10-K report for the fiscal year ended
April 30, 1996.
10.11 Employment Agreement dated May 1, 1996 between Registrant and
Michael J. Raedeke, incorporated herein by reference to Exhibit
10.11 to the Registrant's Form 10-K for the fiscal year ended
April 30, 1996.
10.12 Consulting Agreement dated December 17, 1996 between Barry Krantz
and Collins Foods International Pty Ltd., incorporated by
reference to Exhibit 10.14 to the Registrant's Form 10-K report
for the fiscal year ended April 30, 1997.
10.13 Consulting Agreement dated May 5, 1999 between Registrant and
Charles F. Smith.
48
<PAGE>
10.14 Paid Leave Plan and Trust and Summary Plan Description of
Registrant, as amended as of June 30, 1994, incorporated herein
by reference to Exhibit 10.5 to the Registrant's Form 10-K report
for the fiscal year ended April 30, 1995.
10.15 1997 Employee Stock Incentive Plan of Registrant, incorporated
herein by reference to Exhibit 99.1 to the Registrant's Form S-8
Registration Statement Number 333-476661 filed March 10, 1998.
10.16 1997 Non-Employee Directors Stock Incentive Plan of Registrant,
incorporated herein by reference to Exhibit 99.1 to Registrant's
Form S-8 Registration Statement No. 333-47659 filed March 10,
1998.
10.17 Form of Franchise Agreement between Sizzler USA Franchise, Inc.
and Franchisee, incorporated by reference to Exhibit 10.26 to the
Registrant's Form 10-Q report for the quarterly period ended
February 1, 1998.
10.18 Development Agreement dated October 4, 1996 between Kentucky
Fried Chicken Pty. Limited and Collins Foods International Pty
Ltd., incorporated by reference to Exhibit 10.20 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1997.
10.19 Master Franchise Agreement dated October 4, 1996 between Kentucky
Fried Chicken Pty Limited and Collins Foods International Pty
Ltd., incorporated by reference to Exhibit 10.21 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1997.
10.20 Form of Franchise Agreement between Kentucky Fried Chicken Pty
Limited and Collins Foods International Pty Ltd. relating to KFC
restaurant franchise, incorporated by reference to Exhibit 10.22
to the Registrant's Form 10-K report for the fiscal year ended
April 30, 1997.
10.21 Letter of Offer dated August 18, 1997 among certain subsidiaries
of the Registrant and Westpac Banking Corporation, incorporated
by reference to Exhibit 3.1 to the Registrant's Form 8-K report
filed October 8, 1997.
10.22 A $63,500,000 Bill Acceptance and Discount Facility dated as of
September 19, 1997 among certain subsidiaries of the Registrant
and Westpac Banking Corporation, incorporated by reference to
Exhibit 3.2 to the Registrant's Form 8-K report filed October 8,
1997.
10.23 Unlimited Cross Guarantee and Indemnity and Negative Pledge with
Financial Ratio Covenants dated as of September 19, 1997 among
certain subsidiaries of the Registrant and Westpac Banking
Corporation, incorporated by reference to Exhibit 3.3 to the
Registrant's Form 8-K report filed October 8, 1997.
10.24 Subordination Deed dated as of September 24, 1997 among the
Registrant and certain of its subsidiaries and Westpac Banking
Corporation, incorporated by reference to Exhibit 3.4 to the
Registrant's Form 8-K report filed October 8, 1997.
10.25 Stock Pledge dated as of September 24, 1997 between the
Registrant and Westpac Banking Corporation, incorporated by
reference to Exhibit 3.5 to the Registrant's Form 8-K report
filed October 8, 1997.
10.26 Form of Fixed and Floating Charge dated as of September 19, 1997
between various subsidiaries of the Registrant and Westpac
Banking Corporation, incorporated by reference to Exhibit 3.6 to
the Registrant's Form 8-K report filed October 8, 1997.
49
<PAGE>
10.27 Corporate headquarters lease agreement between Pacifica Plaza
Office Building and Sizzler USA Real Property, Inc., incorporated
by reference to Exhibit 10.25 to the Registrant's Form 10-K
report for the fiscal year ended April 30, 1998.
21.00 Subsidiaries of Registrant
23.00 Consent of Arthur Andersen LLP
27.00 Financial Data Schedule
(b) Reports on Form 8-K
Registrant has filed no reports on Form 8-K during the last quarter of
its 1999 fiscal year.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant had duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: July 14, 1999 SIZZLER INTERNATIONAL, INC.
By: /s/ Charles L. Boppell
----------------------
Charles L. Boppell
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ James A. Collins Chairman of the Board July 14, 1999
- --------------------
James A. Collins
/s/ Charles L. Boppell President, Chief July 14, 1999
- ----------------------
Charles L. Boppell Executive Officer and
Director
/s/ Barry E. Krantz Director July 14, 1999
- -------------------
Barry E. Krantz
50
<PAGE>
/s/ Phillip D. Matthews Director July 14, 1999
- -----------------------
Phillip D. Matthews
/s/ Robert A. Muh Director July 14, 1999
- -----------------
Robert A. Muh
/s/ Charles F. Smith Director July 14, 1999
- --------------------
Charles F. Smith
/s/ Kevin W. Perkins Executive Vice President July 14, 1999
- --------------------
Kevin W. Perkins and Director
/s/ Ryan S. Tondro Vice President and July 14, 1999
- ------------------
Ryan S. Tondro Chief Financial Officer
(principal financial and
accounting officer)
51
<PAGE>
EXHIBIT 3.2
BYLAWS OF
SIZZLER INTERNATIONAL, INC.
(a Delaware corporation)
as amended June 16, 1999
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. The registered office of Sizzler
International, Inc. (hereinafter called the "Corporation") in the State of
Delaware shall be at 1013 Centre Road, Wilmington, Delaware, New Castle County,
and the name of the registered agent at that address shall be Corporation
Service Company.
SECTION 1.02 Principal Office. The principal office for the transaction of
the business of the Corporation shall be at 6101 West Centinela Avenue, Suite
200, Culver City, California, Los Angeles County. The Board of Directors
(hereinafter called the "Board") is hereby granted full power and authority to
change said principal office from one location to another.
SECTION 1.03 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. Special meetings of the stockholders of the
Corporation for any purpose or purposes may be called at any time by the Board,
or by a committee of the Board which has been duly designated by the Board and
whose powers and authority, as provided in a resolution of the Board or in the
Bylaws, include the power to call such meetings, but such special meetings may
not be
<PAGE>
called by any other person or persons; provided, however, that if and to the
extent that any special meeting of stockholders may be called by any other
person or persons specified in any provisions of the Certificate of
Incorporation or any amendment thereto or any certificate filed under Section
151(g) of the Delaware General Corporation Law (or its successor statute as in
effect from time to time hereafter), then such special meeting may also be
called by the person or persons, in the manner, at the times and for the
purposes so specified.
SECTION 2.03 Place of Meetings. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholder shall not be required to be given to any stockholder who
shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the election of
directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting
2
<PAGE>
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of
the stock of the Corporation having voting rights on the matter in question
and which shall have been held by him and registered in his name on the
books of the Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting
shall be waived, at the close of business on the day next preceding
the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes. Persons holding stock of the Corporation in a
fiduciary capacity shall be entitled to vote such stock. Persons whose
stock is pledged shall be entitled to vote, unless in the transfer by the
pledgor on the books of the Corporation he shall have expressly empowered
the pledgee to vote thereon, in which case only the pledgee, or his proxy,
may represent such stock and vote thereon. Stock having voting power
standing of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants in common, tenants by
entirety or otherwise, or with respect to which two or more persons have
the same fiduciary relationship, shall be voted in accordance with the
provisions of the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto
authorized and delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from
its date unless said proxy shall provide for a longer period. The
attendance at any meeting of a stockholder who may theretofore have given a
proxy shall not have the effect of revoking the same unless he shall in
writing so notify the secretary of the
3
<PAGE>
meeting prior to the voting of the proxy. At any meeting of the
stockholders all matters, except as otherwise provided in the Certificate
of Incorporation, in these Bylaws or by law, shall be decided by the vote
of a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat and thereon, a quorum being present.
The vote at any meeting of the stockholders on any question need not be by
ballot, unless so directed by the chairman of the meeting. On a vote by
ballot each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and it shall state the number of shares
voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest.
SECTION 2.09 Advance Notice of Stockholder Proposals and Stockholder
Nominations.
(a) At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board or (ii) by any stockholder of the Corporation who
complies with the notice procedures set forth in this Section 2.09(a). For
business to be properly brought before any meeting of the stockholders by a
4
<PAGE>
stockholder, the stockholder must have given notice thereof in writing to
the Secretary of the Corporation not less than 90 days in advance of such
meeting or, if later, the seventh day following the first public
announcement of the date of such meeting. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting (1) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business
at the meeting, (2) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (3) the
class and number of shares of the Corporation that are beneficially owned
by the stockholder, and (4) any material interest of the stockholder in
such business. In addition, the stockholder making such proposal shall
promptly provide any other information reasonably requested by the
Corporation. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any meeting of the stockholders except in
accordance with the procedures set forth in this Section 2.09. The Chairman
of any such meeting shall direct that any business not properly brought
before the meeting shall not be considered.
(b) Nominations for the election of directors may be made by the
Board or by any stockholder entitled to vote in the election of directors;
provided, however, that a stockholder may nominate a person for election as
a director at a meeting only if written notice of such stockholder's intent
to make such nomination has been given to the Secretary of the Corporation
not later than 90 days in advance of such meeting or, if later, the seventh
day following the first public announcement of the date of such meeting.
Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons
to be nominated; (ii) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting and nominate the
person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder; (iv)
such other information regarding each nominee proposed by such stockholder
as would be required to be included in a proxy statement filed pursuant to
the proxy rules of the United States Securities and Exchange Commission had
the nominee been nominated, or intended to be nominated, by the Board; and
(v) the consent of each nominee to serve as a director of the Corporation
if so elected. In addition, the stockholder making such nomination shall
promptly provide any other information reasonably requested by the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 2.09 (b). The Chairman of any meeting of stockholders shall
direct that any nomination not made in accordance with these procedures be
disregarded.
5
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The authorized number of directors
of the Corporation shall be seven (7) and such authorized number shall not be
changed except by a Bylaw or amendment thereof duly adopted by the stockholders
in accordance with the Certificate of Incorporation or by the Board amending
this Section 3.02. Each of the directors of the Corporation shall hold office
until his successor shall have been duly elected and shall qualify or until he
shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected by the
stockholders of the Corporation, and at each election the persons receiving the
greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including any provisions for a classified board and for cumulative voting.
Nominations of persons to serve as directors must be submitted to the Secretary
of the Corporation not less than ten (10) days prior to the meeting of
stockholders at which directors shall be elected.
SECTION 3.04 Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person
6
<PAGE>
or persons calling the meeting or in the notice or a waiver of notice of any
such meeting. Directors may participate in any regular or special meeting of the
Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting shall be held at the same hour and
place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board may be called
at any time by the Chairman of the Board or the President or by any two (2)
directors, to be held at the principal office of the Corporation, or at such
other place or places, within or without the State of Delaware, as the person or
persons calling the meeting may designate.
Notice of all special meetings of the Board shall be given to each director
by two (2) days' service of the same by telegram, by letter, or personally. Such
notice may be waived by any director and any meeting shall be a legal meeting
without notice having been given if all the directors shall be present thereat
or if those not present shall, either before or after the meeting, sign a
written waiver of notice of, or a consent to, such meeting or shall after the
meeting sign the approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or be made part of the
minutes of the meeting.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise provided in
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or
7
<PAGE>
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee.
SECTION 3.12 Compensation. No stated salary need be paid directors, as
such, for their services, but, by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board or an annual directors' fee may be paid; provided
that nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 3.13 Committees. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board, and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have any power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of the
dissolution, or amending the Bylaws of the Corporation; and unless the
resolution of the Board expressly so provides, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
Any such committee shall keep written minutes of its meetings and report the
same to the Board at the next regular meeting of the Board.
SECTION 3.14 Officers of the Board. The Board shall have a Chairman of the
Board and may, at the discretion of the Board, have a Vice Chairman. The
Chairman of the Board and the Vice Chairman shall be appointed from time to time
by the Board and shall have such powers and duties as shall be designated by the
Board.
ARTICLE IV
OFFICERS
SECTION 4.01 Officers. The officers of the Corporation shall be a Chairman
of the Board, a Chief Executive Officer, a President, a Chief Financial Officer
and Treasurer, one or more Vice Presidents and a Secretary. The Corporation may
also have, at the discretion of the Board, a Chief Operating Officer, one or
more Assistant Vice Presidents, one or more
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Assistant Secretaries, one or more Assistant Treasurers and such other officers
as may be appointed in accordance with the provisions of Section 4.03 of this
Article IV. One person may hold two or more offices, except that the Secretary
may not also hold the office of President or Chief Executive Officer.
SECTION 4.02 Election. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 4.03
or Section 4.05 of this Article, shall be chosen annually by the Board, and each
shall hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
SECTION 4.03 Subordinate Officers, Etc. The Board may appoint such other
officers as the business of the Corporation may require, each of whom shall have
such authority and perform such duties as are provided in these Bylaws or as the
Board may from time to time specify, and shall hold office until he shall resign
or shall be removed or otherwise disqualified to serve.
SECTION 4.04 Removal and Resignation. Any officer may be removed, either
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board, by any officer upon whom such power of removal may be
conferred by the Board.
Any officer may resign at any time by giving written notice to the Board,
the Chairman of the Board, the President or the Secretary of the Corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.05 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for the regular appointments to such office.
SECTION 4.06 Chairman of the Board. The Chairman of the Board shall,
subject to the control of the Board, serve a general oversight, planning and
policy making function, shall preside at all meetings of stockholders and at all
meetings of the Board, and shall perform such other functions as determined from
time to time by the Board.
SECTION 4.07 Chief Executive Officer. The Chief Executive Officer of the
Corporation shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs of the
Corporation. In the absence of the Chairman of the Board, he shall preside at
all meetings of stockholders. He shall have the general powers and duties of
management usually vested in the chief
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executive officer of a corporation, and shall have such other powers and duties
with respect to the administration of the business and affairs of the
Corporation as may from time to time be assigned to him by the Board or as is
prescribed by the Bylaws.
SECTION 4.08 President. The President shall exercise and perform such
powers and duties with respect to the administration of the business and affairs
of the Corporation as may from time to time be assigned to such officer by the
Chief Executive Officer (unless the President is also the Chief Executive
Officer) or by the Board or as is prescribed by the Bylaws. In the absence or
disability of the Chief Executive Officer, the President shall perform all of
the duties of the Chief Executive Officer and when so acting shall have all of
the powers and be subject to all the restrictions upon the Chief Executive
Officer.
SECTION 4.09 Vice Presidents. The Vice Presidents shall exercise and
perform such powers and duties with respect to the administration of the
business and affairs of the Corporation as may from time to time be assigned to
each of them by the President or by the Chief Executive Officer or by the Board
or as is prescribed by the Bylaws. In the absence or disability of the
President, the Vice Presidents, in order of their rank as fixed by the Board, or
if not ranked, the Vice President designated by the Board, shall perform all of
the duties of the President and when so acting shall have all of the powers of
and be subject to all the restrictions upon the President.
SECTION 4.10 The Chief Financial Officer and Treasurer. The Chief
Financial Officer and Treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and shares. Any
surplus, including earned surplus, paid-in surplus and surplus arising from a
reduction of capital, shall be classified according to source and shown in a
separate account. The books of account shall at all reasonable times be open to
inspection by any director.
The Chief Financial Officer and Treasurer shall deposit all moneys and
other valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. He shall disburse the funds of
the Corporation as may be ordered by the Board, shall render to the President,
to the Chief Executive Officer, and to the directors, whenever they request it,
an account of all his transactions as Chief Financial Officer and Treasurer and
of the financial condition of the Corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board or these Bylaws.
SECTION 4.11 Secretary. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office for the transaction of the business of
the Corporation, or such other place as the Board may order, of all meetings of
directors and stockholders, with the time and place of holding, whether regular
or special, and if special, how authorized and the notice thereof given, the
names of those present at
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directors' meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office for
the transaction of the business of the Corporation or at the office of the
Corporation's transfer agent, a share register, or a duplicate share register,
showing the names of the stockholders and their addresses; the number and
classes of shares held by each; the number and date of certificates issued for
the same; and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board required by these Bylaws or by law to be
given, and he shall keep the seal of the Corporation in safe custody, and shall
have such other powers and perform such other duties as may be prescribed by the
Board or these Bylaws. If for any reason the Secretary shall fail to give notice
of any special meeting of the Board called by one or more of the persons
identified in Section 3.09, or if he shall fail to give notice of any special
meeting of the stockholders called by one or more of the persons identified in
Section 2.02, then any such person or persons may give notice of any such
special meeting.
SECTION 4.12 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 Execution of Contracts. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name and on behalf of
the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any amount.
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SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person shall give such bond, if any, as the
Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the Chief Executive Officer,
the President, any Vice President or the Chief Financial Officer and Treasurer
(or any other officer or officers, assistant or assistants, agent or agents, or
attorney or attorneys of the Corporation who shall from time to time be
determined by the Board) may endorse, assign and deliver checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
Chairman of the Board, the President, or a Vice President, and by the Secretary
or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any or
all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate shall thereafter have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may
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nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be stated expressly in the entry
of transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper to do so.
SECTION 6.05 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10)
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days before the date of such meeting, nor more than sixty (60) days prior to any
other action. If in any case involving the determination of stockholders for any
purpose other than notice of or voting at a meeting of stockholders, the Board
shall not fix such a record date, the record date for determining stockholders
for such purpose shall be the close of business on the day on which the Board
shall adopt the resolution relating thereto. A determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of such meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Actions, Etc., Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
SECTION 7.02 Actions, Etc., by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or as a member of any committee or similar
body, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
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or suit if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
SECTION 7.03 Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee, or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.01 and 7.02. Such determination shall be made (i)
by the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 Advance of Expenses. Expenses incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as authorized by the
Board in the specific case upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
SECTION 7.06 Other Rights and Remedies. The indemnification provided by
this Article shall not be deemed exclusive and is declared expressly to be
nonexclusive of any other rights to which one seeking indemnification may be
entitled under any Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
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SECTION 7.07 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or as a member of any committee or similar body, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article.
SECTION 7.08 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or as a member of any committee or similar body,
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
SECTION 7.09 Other Enterprises, Fines and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Seal. The Board shall provide a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
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and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Fiscal Year. The fiscal year of the Corporation shall end on
the Sunday nearest to April 30 in each year and the succeeding fiscal year shall
begin on the Monday immediately following such Sunday.
SECTION 8.04 Amendments. These Bylaws, or any of them, may be rescinded,
altered, amended, or repealed, and new Bylaws may be made, (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the Board, or (ii) by the vote of the holders of not
less than seventy percent (70%) of the total voting power of all outstanding
shares of voting stock of the Corporation, at an annual meeting of stockholders,
without previous notice, or at any special meeting of stockholders, provided
that notice of such proposed amendment, modification, repeal or adoption is
given in the notice of special meeting. Any Bylaws made or altered by the
stockholders may be altered or repealed by the Board or may be altered or
repealed by the Stockholders.
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[Execution Copy]
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into this
8th day of February, 1999, by and between SIZZLER INTERNATIONAL, INC., a
Delaware corporation (the "Company"), and CHARLES L. BOPPELL ("Executive").
WHEREAS, the Company desires to engage the services of Executive as its
President and Chief Executive Officer on the terms and conditions set forth
herein, and Executive desires to accept such employment with the Company;
NOW, THEREFORE, in consideration of the foregoing premises, the terms and
conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment and Duties. The Company hereby employs Executive as its
---------------------
President and Chief Executive Officer to perform such duties and functions as
shall be specified from time to time by the Company's Board of Directors (the
"Board"). During the term of this Agreement, Executive shall not be required
without his consent to undertake responsibilities not consistent with his
position as the Company's President and Chief Executive Officer. Executive
hereby accepts such employment and agrees to perform his duties pursuant to this
Agreement and to observe and comply with all lawful written policies and
practices of the Company as they now exist and as they may be duly and properly
adopted from time to time.
2. Base Salary. For all services to be rendered by Executive to the
-----------
Company, Executive shall be paid a base salary at the rate of three hundred and
fifty thousand dollars ($350,000) per year. Executive's base compensation shall
be reviewed at least annually and may be increased at the discretion of the
Board, but during the term of this Agreement it may not be decreased below the
then-effective base salary. Executive's salary shall be paid on a regular
periodic basis in accordance with the normal payment pattern for executive
officers of the Company. The base salary payable under this Section 2 shall be
in addition to, and exclusive of, any payments to Executive from time to time
under bonus, incentive compensation or similar plans now in effect or which
hereafter may be adopted.
3. Performance Bonus. With respect to each full fiscal year of the
-----------------
Company during which Executive is employed by the Company pursuant to this
Agreement (each, a "Bonus Year"), Executive shall be entitlesd to earn a
performance bonus in accordance with the Company's standard bonus plan, a copy
of the current version of which is attached hereto as Exhibit A. The
calculation and payment to Executive of any performance bonus earned pursuant to
this Section 3 shall be made as soon as practicable in the fiscal year of the
Company immediately succeeding each Bonus Year following preparation of the
Company's annual financial statements for each such Bonus Year.
4. Stock Options. Executive shall participate in the Company's Amended
-------------
and Restated 1997 Stock Option Plan (or such other stock option plan as may
hereafter be adopted to
<PAGE>
provide for the grant of stock options to executive officers of the Company)
pursuant to which Executive is receiving a grant of options on the date hereof
to purchase 1,000,000 shares of the Company's Common Stock (the "Options"). The
exercise price payable by Executive to the Company upon exercise of the Options
shall be the closing price for shares of the Company's Common Stock on The New
York Stock Exchange on the business day prior to the grant of the Options on the
date of this Agreement. The said Options shall vest and become exercisable
periodically, beginning one year from the date of this Agreement with respect to
200,000 shares and an additional 200,000 shares on each annual anniversary date
thereafter. The form of stock option agreement between the Company and Executive
is attached hereto as Exhibit B.
5. Other Benefits.
--------------
(a) Executive shall be entitled to such fringe benefits and perquisites
as are generally made available to executive officers of the Company and such
other fringe benefits as may be approved by the Board in the future for
executive officers of the Company.
(b) The Company shall furnish Executive with a motor vehicle of his
choice to use for business purposes in accordance with the Company's policies in
effect from time to time.
(c) Executive shall be entitled to a paid vacation each year of at least
four weeks subject to the present vacation policy of the Company with respect to
senior executives.
(d) The Company agrees to include Executive's name among nominees for
election to the Board, and will use its best efforts to ensure the election of
Executive to the Board throughout the term of this Agreement.
(e) The Company will provide Executive with, and pay the premiums on, a
policy of term life insurance providing a death benefit to Executive of $1
million (provided, however, that Executive is insurable at no more than 200% of
standard premium rates for his age category).
6. Reimbursement of Expenses. The Company shall pay or reimburse Executive
-------------------------
for all reasonable business expenses incurred by Executive in connection with
the performance of his duties hereunder, provided that Executive furnishes to
the Company receipts and other appropriate documentation reasonably acceptable
to the Company evidencing such expenditures.
7. Performance of Duties. In consideration of the payments to be made to
---------------------
him hereunder, Executive agrees to devote his entire business time and attention
to the performance of his duties hereunder, to serve the Company diligently to
the best of his abilities and not to compete with the Company in any manner
whatsoever. Without limiting the generality of the foregoing, Executive shall
not, during the term of his employment by the Company, directly or indirectly
(whether for compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder or in any other
capacity, own, manage, operate, join, control or participate in the ownership,
management, operation or control of or furnish any capital to or be connected in
any manner with or provide any services as a consultant for any
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business which competes directly or indirectly with the restaurant business of
the Company as it may be conducted from time to time; provided, however, that
notwithstanding the foregoing, nothing contained in this Section 7 shall be
deemed to preclude Executive from owning not more than one percent (1%) of the
publicly-traded capital stock of an entity which is engaged in the restaurant
business. Executive may continue any civic, educational or charitable activities
in which he is now engaged and may serve on boards of directors of other
companies, if consistent with this Section 7 or if otherwise approved by the
Board.
8. Term and Termination
--------------------
(a) The initial term of Executive's employment with the Company
shall commence on the date hereof and shall continue until February 7, 2004 or
until (i) the initial term of this Agreement is extended by mutual written
agreement of the parties or (ii) termination otherwise occurs as contemplated by
this Section 8.
(b) In the event of Executive's death or in the event of
Executive's total disability for any consecutive four (4) month period during
the term of this Agreement, this Agreement shall terminate, and in such event
the sole right hereunder of Executive, Executive's surviving spouse or
Executive's legal representative, as the case may be, shall be to: (i) receive,
as the case may be, the base salary due Executive through the last day of the
month in which his death shall have occurred or through the last day of the four
month period of Executive's disability; (ii) have any and all previously accrued
bonuses or vested options vest in Executive or in his estate immediately, plus,
in the event of his disability, 50,000 Options which were otherwise unvested
shall vest and become exercisable with respect to each fiscal quarter Executive
was employed during the year in which he became disabled; and (iii) in the event
of termination by reason of disability, have the Company continue to maintain in
effect at its expense COBRA medical coverage for eighteen (18) months following
the date of disability termination.
(c) The Company may terminate this Agreement For Cause (as
defined herein) upon thirty (30) days prior to written notice to Executive. For
the purposes of this Agreement, the term "For Cause" shall mean: (i) Executive's
breach of his covenants contained in this Agreement; (ii) Executive's entry of a
plea of guilty or nolo contendere in a court of competent jurisdiction for any
crime involving moral turpitude or any felony punishable by imprisonment of his
conviction of any such offense; (iii) Executive's commission of any act of fraud
in connection with, or related to, his duties hereunder; or (iv) Executive's
willful misconduct, dishonesty or gross negligence in performance of his duties
as determined in good faith by the Company's Board. If, however, a termination
is made pursuant to either subsection (i) or (iv) of this Section 8(c),
Executive shall be entitled to a period of one month to correct and cure the
grounds for the termination to the reasonable satisfaction of the Company's
correct and cure the grounds for the termination to the reasonable satisfaction
of the Company's Board. Upon termination of Executive For Cause, this Agreement
shall immediately terminate, and Executive shall not be entitled to any further
rights or payments hereunder. Without limiting the generality of the foregoing,
Executive shall have no right on or after the date of such termination to any of
the benefits set forth in Section 5 hereof (other than payment for accrued
vacation, any payment of base salary pursuant to Section 2 (other than payment
for services
<PAGE>
rendered prior to the date of such termination), any payment of a performance
bonus pursuant to Section 3 for the Bonus Year in which such termination occurs,
or any other benefit or payment of any kind whatsoever.
(d) The Company shall be entitled to terminate Executive's
employment without cause at any time upon thirty (30) days prior written notice,
provided, however, that (i) if the termination occurs prior to February 1, 2001,
the Company shall continue to make, for a period of two years from the date of
termination, base salary payments to Executive plus monthly payments of
one-twelfth of the average of the annual performance bonuses Executive actually
received from the Company during the last two fiscal years prior to his
termination; (ii) if the termination occurs on or after February 1, 2001, the
Company shall continue to make, for a period of one year from the date of
termination, base salary payments to Executive plus monthly payments of
one-twelfth of the average of the annual performance bonuses Executive actually
received from the Company during the last two fiscal years prior to his
termination; (iii) Executive shall be entitled to receive all appropriate COBRA
insurance benefits at the expense of the Company during an additional eighteen
(18) month period; (iv) in addition to Executive's right to exercise his vested
Options, he shall also be entitled (x) to exercise an additional 50,000 Options
for each fiscal quarter he remained employed by the Company in the year of his
termination under this Section 8(d) and (y) to receive a prorated portion of the
annual performance bonus which had accrued for his benefit through the end of
the last fiscal quarter he was employed; and (v) Executive shall not be required
or obligated to obtain other employment to mitigate the payments due to him
hereunder. It is expressly understood and agreed that the continuation of
payments of base salary to Executive as contemplated by this Section 8(d) shall
not constitute Executive to be considered to be an ongoing employee of the
Company.
(e) Executive shall be entitled to terminate this Agreement upon
thirty (30) days prior written notice to the Company if Just Grounds (as defined
herein) exist therefor. For the purposes of this Agreement, the term "Just
Grounds" shall mean: (i) a material breach by the Company of its covenants
contained in this Agreement; or (ii) a material reduction or expansion in the
scope of authority and duties and responsibilities assigned to Executive by the
Board which is inconsistent with Executive's serving in the capacity as the
Chief Executive Officer of the Company; or (iii) relocation of the Company's
principal executive offices to a location more than fifty (50) miles from its
present location shown in Section 12(f) below; or (iv) a Change in Control (as
defined herein) in the ownership of the Company. For the purposes of this
Agreement, a "Change in Control" shall be deemed to have occurred if any
"person" (as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly of securities of the
Company representing more than 50.1% of the voting power of the Company's then
outstanding securities as a result of purchases or acquisition of shares of the
Company's Common Stock which are not expressly approved by the Board. For
purposes of this Section 8(e), the Board expressly approving the 50.1% voting
power ownership must consist of individuals who for the previous consecutive
twelve (12) month period, constituted at least a majority of the Board. In the
event that Executive seeks to terminate this Agreement pursuant to either
subsection (i) or (ii) of this Section 8(e), the Company shall be entitled to a
period of one month to correct and cure the grounds for termination to the
reasonable satisfaction of Executive.
4
<PAGE>
Upon termination of Executive's employment pursuant to subsections (i),
(ii) or (iii) of this Section 8(e), Executive shall receive the compensation and
benefits which would be provided to him if the termination occurred under
Section 8(d) above. Upon termination of Executive's employment without cause or
his resignation upon Just Grounds at any time during the term of this Agreement
after a Change of Control has occurred of the type contemplated by subsection
(iv) of this Section 8(e), then (x) Executive shall receive a lump sum severance
payment equal to twice (A) the annual base salary then being paid to Executive
as contemplated by Section 2 hereof plus (B) the average performance bonus
earned by Executive during the Company's latest two fiscal years and (y) all of
the Options granted to Executive pursuant to Section 4 above shall be
accelerated and vested so that Executive shall be immediately entitled to
exercise all Options granted to him thereunder.
9. Confidentiality.
---------------
(a) The Company and Executive recognize that during the course of
Executive's employment with the Company he will accumulate certain crucial
proprietary and confidential information and trade secrets used in the Company's
business and will become aware of certain crucial confidential and proprietary
information and trade secrets about the business, operations and prospects of
the Company, including, without limitation, confidential and proprietary
information regarding suppliers and employees of the Company, which constitute
valuable business assets providing the Company the opportunity to obtain an
advantage over competitors who do not know or use such information or have
access to it without the investment of considerable resources. Executive hereby
acknowledges and agrees that such information (the "Proprietary Information") is
confidential and proprietary and a trade secret of the Company.
(b) Executive agrees that he shall not, at any time subsequent to the
execution of this Agreement, whether during or after the term hereof, disclose,
divulge or make known, directly or indirectly, to any person, or otherwise use
or exploit, any Proprietary Information obtained by Executive at any time prior
to or subsequent to the execution of this Agreement, except to the extent
required by his performance of duties hereunder for the Company. Executive
agrees to disclose to the Company the identity and nature of any contacts with
any person or entity soliciting from Executive disclosure of any Proprietary
Information or soliciting Executive's involvement in any business venture
competitive with the Company. Executive shall not conceal from or fail to
disclose to the Company, or divert or exploit for his own personal profit or
that of others, any business opportunity or other opportunity to acquire an
interest in or a contractual relationship with any person or entity where such
person or entity is in the Company's line of business or where such contractual
relationship involves the acquisition of real estate and which would be
considered a feasible and advantageous opportunity or acquisition for the
Company. Upon termination of this Agreement, Executive will deliver to the
Company all tangible documentation and repositories of supplier and employee
lists, files, records of research, proposals, reports, memoranda, photographs,
business methods and techniques, computer software and programming, budgets and
other financial plans and information and other materials or records or writings
of any other type (including all copies thereof) made, used or obtained by, or
provided to, Executive, containing any Proprietary Information, whether obtained
prior to or subsequent to the execution of this Agreement.
5
<PAGE>
10. Non-Solicitation of Employees, Suppliers and Others. Executive
---------------------------------------------------
agrees that during the period from the date of termination of this Agreement
until two (2) years after the termination of this Agreement he shall not solicit
any employee or supplier of the Company, and he shall not participate in any
endeavor or activity which would disrupt the Company's good business
relationships with the employees, suppliers and/or other persons engaged in
business or activities relating to the Company, and he shall not make any false,
deceptive or misleading statement or statements to any one or more of such
suppliers or such persons which would be likely to cause such disruption.
11. Arbitration.
------------
(a) Any controversy, claim or dispute between the parties
directly or indirectly concerning this Agreement or the breach hereof, or the
subject matter hereof (except in instances where only injunctive relief is
sought by the Company), shall be finally settled by arbitration held in Los
Angeles, California. The Company and Executive shall each select an arbitrator
from a panel of seven (7) arbitrators (the "Arbitration Pool") obtained by the
Company from the Federal Mediation and Conciliation Service within thirty (30)
days of receiving written notice form either party demanding any such
proceeding. Such two chosen arbitrators shall agree on a third arbitrator from
the Arbitration Pool within fifteen (15) days thereafter. In the event an
agreement has not been reached on the third arbitrator by the end of such
fifteen (15) day period, the third arbitrator shall be chosen by the American
Arbitration Association. The arbitration shall be held and a final decision
reached within thirty (30) days thereafter. The decision of a majority of the
three chosen arbitrators shall be final and conclusive on the parties, and there
shall be no appeal therefrom. A decision of the arbitrators may be enforced by
the prevailing party in a court of competent jurisdiction. All other issues in
connection with such arbitration shall be in accordance with the Rules of the
American Arbitration Association.
(b) The parties hereby agree that an action to compel
arbitration pursuant to this Agreement may be brought in any appropriate court
and in connection therewith the laws of the State of California shall control.
Application may also be made to such court for confirmation of any decision or
award of the arbitrators but only if necessary to effectuate such decision or
award. The parties hereto hereby consent to the jurisdiction of the arbitrators
and of such court and waive any objection to the jurisdiction of such
arbitrators or court.
12. Miscellaneous.
-------------
(a) Executive represents and warrants to the Company that (i)
his is not now under any obligation of a contractual or other nature to any
person, firm or corporation which is inconsistent or in conflict with this
Agreement, or which would prevent, limit or impair in any way the performance by
him of his obligations hereunder and (ii) this Agreement constitutes the valid
and legally binding obligation of Executive enforceable in accordance with its
terms. The Company represents and warrants to Executive that the execution,
delivery and performance by the Company of this Agreement has been duly
authorized by the Board and constitutes a valid and legally binding obligation
of the Company enforceable in accordance with its terms.
<PAGE>
(b) In the event that the Company sells or issues an aggregate of
more than 300,000 shares of its Common Stock in any consecutive twelve (12)
month period for a price per share which is either (i) less than the prevailing
per share closing market price on the date of issuance or (ii) less than the
exercise price of Executive's unexercised Options, then the exercise price
payable by Executive with respect to his unexercised Options shall be
appropriately adjusted so as to provide Executive with anti-dilution protection.
Specifically excepted from the provisions of this Section 12(b), however, shall
be sales of Common Stock of the Company upon exercise of stock options duly
granted under stock option plans of the Company.
(c) In the event that any amount or benefit that may be paid or
otherwise provided to Executive by the Company (collectively, "Covered
Payments"), is or may become subject to the tax imposed under Code Section 4999
("Excise Tax"), the Company will pay to Executive a "Reimbursement Amount,"
equal to the total of: (A) any Excise Tax on the Covered Payments, plus (B) any
Federal, state, and local income taxes, employment and excise taxes (including
the Excise Tax) on the Reimbursement Amount (but without reduction for any
Federal, state, or local income or employment taxes on such Covered Payments),
plus (C) the product of any deductions disallowed for Federal, state or local
income tax purposes because of the inclusion of the Reimbursement Amount in
Executive's adjusted gross income multiplied by the highest applicable marginal
rate of Federal, state, and local income taxation, respectively, for the
calendar year in which the Reimbursement Amount is to be paid. Notwithstanding
the foregoing, if the after-tax value of the Covered Payments Executive would
have netted after all taxes (federal, state and local income, employment and
excise taxes) had the present value of his total Covered Payments equalled 2.99
times his Base Amount (as defined under Code Section 280G(b)(2)) is equal to at
least 85 percent of the amount Executive would net after all taxes (federal,
state and local income, employment and excise taxes) had he received all Covered
Payments and the Reimbursement Amount, then no Reimbursement shall be paid and
the present value of his total Covered Payments shall be limited to 2.99 times
his Base Amount. For purposes of this Section 12(c), Executive shall be deemed
to pay (i) Federal income taxes at the highest applicable marginal rate of
Federal income taxation for the calendar year in which the Reimbursement Amount
is to be paid and (ii) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in which such
Reimbursement Amount is to be paid, net of the maximum reduction in Federal
income taxes which could be obtained from the deduction of such state or local
taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income.)
(d) The waiver by either party of a breach of any provision of
this Agreement must be in writing and shall not operate or be construed as a
waiver of any subsequent breach thereof.
(e) This Agreement constitutes the entire Agreement of Executive
and the Company and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations between the
parties with respect to the subject matter hereof, and it may only be amended in
a writing duly signed by both parties.
7
<PAGE>
(f) Any and all notices referred to herein shall be
sufficiently furnished if in writing, and sent by registered or certified mail,
postage prepaid, or by facsimile transmission (but only if confirmation of
receipt is subsequently received by the sender either orally or in writing), or
by overnight courier (if such overnight courier guarantees next day delivery and
such notice is sent for delivery on a day on which such courier guarantees such
overnight delivery), to the respective parties at the following addresses or
such other address as either party may from time to time designate in writing
set forth in this Section 12(f):
The Company:
Sizzler International, Inc.
6101 West Centinela Avenue
Suite 200
Culver City, California 90230
Attention: Chairman of the Board
Facsimile: (310) 645-6646
Executive: Charles L. Boppell
11837 Henley Lane
Los Angeles, California 90077
Facsimile: (310) 476-3678
(g) If any portion of this Agreement shall be invalid or
unenforceable for any reason, there shall be deemed to be made such minor
changes (and only such minor changes) in such provisions or portion as are
necessary to make it valid and enforceable. The invalidity or unenforceability
of any provision or portion of this Agreement shall not affect the validity or
enforceability of any other provisions or portions of this Agreement. If any
such unenforceable or invalid provision or provisions shall be rendered
enforceable and valid by changes in application law, then such provision or
provisions shall be deemed to read as they presently do in this Agreement
without change.
(h) The rights and obligations of the parties hereto shall inure
to and be binding upon the parties hereto and their respective heirs, successors
and assigns.
(i) The waiver by either party of a breach of a provision of
this Agreement shall not operate or be construed as a waiver of a subsequent
breach hereof.
(j) This Agreement is intended to and shall be governed by, and
interpreted under and construed in accordance with, the laws of the State of
California, without reference to any conflict of laws or principles.
(k) If any litigation, arbitration or any other proceeding is
instituted in connection with or related to this Agreement, the non-prevailing
party in such litigation, arbitration or other proceeding shall pay the
expenses, including, without limitation, the attorneys' fees and expenses of
investigation, of the prevailing party; provided, however, that the
8
<PAGE>
maximum amount for which the non-prevailing party shall be responsible under
this Section 12(k) shall be $100,000.
(1) The Company and Executive expressly agree that the provisions of
Sections 9, 10 and 11 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE COMPANY: SIZZLER INTERNATIONAL, INC.
By: /s/ Charles L. Boppell
-----------------------------
Its: Chairman of Board
-----------------------------
By:
-----------------------------
Its:
-----------------------------
EXECUTIVE:
/s/ Charles L. Boppell
----------------------------------
Charles L. Boppell
9
<PAGE>
EXHIBIT A
SIZZLER INTERNATIONAL, INC.
FY 99 KEY MANAGEMENT INCENTIVE PLAN
Sizzler International Inc. has created the Key Management Incentive Plan to
motive those key management people who have the direct ability to influence
short and long-term results and to reward them for successful attainment of the
Company's objectives, goals, and strategies.
Eligibility
- -----------
Employees eligible to participate in the FY 99 Incentive Plan are those
designated on the FY 99 Incentive Plan structure schedules attached. The
percent of salary payable as an incentive award appears in the Bonus Percent
column. The Chief Executive Officer, with the approval of the Compensation
Committee of the Board of Directors, may amend the participant list or
percentage factors to meet special situations which may occur during the year.
Eligible employees terminating prior to the bonus payment will not be eligible
to receive the payment or any portion thereof.
If an eligible employee is employed by the Company and on the payroll at the
end of the fiscal year, but terminates prior to the time the incentive award is
determined and distributed, any incentive award earned and due, will be payable
to the employee as soon as possible.
Performance Factor
- ------------------
Incentive awards will be earned based on the achievement of target earnings
before interest and taxes (EBIT). FY 99 Target EBIT is $13,323,000.
Payments
- --------
Incentive awards will be paid out, at 25% of target bonus, with attainment of
90% ($11,990,700) of EBIT. Payments increase after 90% attainment of EBIT. Not
more than nine and one-half cents ($.095) of each incremental dollar increase in
target achievement over 100% will be added to the bonus pool. Participants will
share in those increases in the same proportion as they do at 100% target
attainment.
Administration of Plan
- ----------------------
This Plan is administered by the Administration Department at the direction of
the Chief Executive Officer and with the approval of the Compensation Committee.
<PAGE>
SII
1999 Bonus Plan
Bonus Achievements
<TABLE>
<CAPTION>
EBIT % of % of
Attained EBIT Target Target Bonus
- --------- ----------- ------------
<S> <C> <C>
$11,990.7 90% 25%
$12,123.9 91% 30%
$12,257.2 92% 35%
$12,390.4 93% 40%
$12,523.6 94% 45%
$12,656.9 95% 50%
$12,790.1 96% 60%
$12,923.3 97% 70%
$13,056.5 98% 80%
$13,189.8 99% 90%
- --------- ----------- ------------
$13,323.0 100% 100%
========= =========== ============
</TABLE>
Plan Note: For all EBIT above the EBIT Budget Target of $13,323, 9.5 cents of
each incremental dollar will be added to the bonus pool, to be shared by the
plan participants in the same proportion as their share of the bonus pool paid
on 100% EBIT attainment.
<PAGE>
SII
1999 Bonus Plan
Target Modifier
<TABLE>
<CAPTION>
Bonus Target Participation Earnings Bonus Incremental Indicated
Salary Percent Bonus % Increment Pool @ 9.5% Bonus Bonus Modifier
-------- ------- -------- ------------- --------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
R. Tondro $167,200 35% $ 58,520 0.265 $500,000 $ 47,500 $ 12,606.35 $ 71,126 1.21542
M. Raedeke $130,000 25% $ 32,500 0.147 $500,000 $ 47,500 $ 7,001.13 $ 39,501 1.21542
J. McGinnis $122,700 15% $ 18,405 0.083 $500,000 $ 47,500 $ 3,964.80 $ 22,370 1.21542
M. Green $127,500 25% $ 31,875 0.145 $500,000 $ 47,500 $ 6,866.50 $ 38,741 1.21542
T. Robinson $102,000 25% $ 25,500 0.116 $500,000 $ 47,500 $ 5,493.20 $ 30,993 1.21542
At Large $ 53,700 0% $ 53,700 0.244 $500,000 $ 47,500 $ 11,568.03 $ 65,268 1.21542
-------- ----------- --------
Total Standard Bonus $220,500 1.000 $500,000 $ 47,500 $ 47,500.00 $268,000
======== ===== ======== ======== =========== ========
</TABLE>
<PAGE>
SII
1999 Bonus Plan
Bonus Increments
<TABLE>
<CAPTION>
Target % Percent Improvement over Target EBIT
- -------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.00% 101.88% 103.75% 105.63% 107.51% 109.38% 111.26% 113.14% 115.01% 116.89%
<CAPTION>
Target EBIT EBIT Improvement over Target - $250,000 Increments
- ----------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$13,323 $13,573 $13,823 $14,073 $14,323 $14,573 $14,823 $15,073 $15,323 $15,573
<CAPTION>
Target Bonus Bonus Pool - Target + Incremental @ 9.5%
- ------------ ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$220,500 $244,250 $268,000 $291,750 $315,500 $339,250 $363,000 $386,750 $410,500 $434,250
<CAPTION>
Target
Bonus % Modifier to "At Target" Bonus
- ------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.00% 110.77% 121.54% 132.31% 143.08% 153.85% 164.63% 175.40% 186.17% 196.94%
</TABLE>
<PAGE>
EXHIBIT B
SIZZLER INTERNATIONAL, INC.
Stock Option Agreement
This Stock Option Agreement ("Agreement") is made and entered into this 8th
day of February, 1999, by and between SIZZLER INTERNATIONAL, INC., a Delaware
corporation (the "Company") and CHARLES L. BOPPELL ("Option Holder").
RECITALS
--------
WHEREAS, the Board of Directors of the Company has adopted and the
stockholders of the Company have approved the Sizzler International, Inc. 1997
Employee Stock Incentive Plan (the "Plan"); and
WHEREAS, the Plan provides among other things for the grant of stock
options to key employees of the Company and its subsidiaries; and
WHEREAS, pursuant to the Plan, the Committee administering the Plan has
determined that it is to the advantage and best interest of the Company and its
stockholders to grant a stock option to Option Holder on the terms and
conditions set forth below as an inducement to join the Company as its President
and Chief Executive Officer and as an incentive to remain in the employ of the
Company during the term of this Agreement;
NOW, THEREFORE, the Company grants to Option Holder a stock option (the
"Option) to purchase one million (1,000,000) shares of the Company's Common
Stock, $.01 par value, at an option exercise price of $2.19 per share (which is
the closing price of shares of the Company's Common Stock on the New York Stock
Exchange on the last business day prior to the date of this Agreement), and
Option Holder hereby confirms acceptance of such Option which is expressly
subject to the following terms and conditions:
1. Term. The specified term of this Option shall be a period of ten (10)
----
years, commencing on the date of this Option.
2. Exercisability. The number of shares of the Company's Common Stock
--------------
which may be purchased under this Option is as follows:
On or after February 8, 2000, Option Holder may purchase up to 200,000
shares at $2.19 per share;
On or after February 8, 2001, Option Holder may purchase up to an
additional 200,000 shares at $2.19 per share;
On or after February 8, 2002, Option Holder may purchase up to an
additional 200,000 shares at $2.19 per share;
<PAGE>
On or after February 8, 2003, Option Holder may purchase up to an
additional 200,000 shares at $2.19 per share; and
On or after February 8, 2004, Option Holder may purchase up to an
additional 200,000 shares at $2.19 per share.
All purchases of shares under this Option must be made before February
8, 2009.
3. Method of Exercise. This Option may be exercised only by Option Holder
------------------
or his transferees by will or the laws of descent and distribution, or pursuant
to a Qualified Domestic Relations Order ("QDRO") as defined by the Code or title
I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
This Option may be exercised during its term by written notice thereof signed
and delivered by Option Holder (or permitted transferee) to the Secretary of
the Company at its office in the City of Los Angeles, State of California. Such
notice shall state the number of shares being purchased and shall be accompanied
by the option exercise price for such shares in full in cash or by cashier's
check. To the extent that it would not result in liability under Section 16 of
the Securities Exchange Act of 1934 ("1934 Act") (unless the Option Holder
consents to such liability and consents to disgorge any profits relating thereto
to the Company), the option exercise price may instead be paid, in whole or in
part, in any of the following forms:
(a) By the delivery of Common Shares, duly endorsed or accompanied
by a duly executed stock power, which delivery effectively transfers to the
Company good and valid title to such shares, free and clear of any pledge,
commitment, lien, claim or other encumbrance, such shares to be valued on the
basis of the fair market value of such shares on the date of exercise, provided
that the Company is not then prohibited from purchasing or acquiring Common
Shares; and/or
(b) At the discretion of the Committee, by reducing the number of
Common Shares to be delivered to Option Holder upon such exercise (such
reduction to be valued on the basis of the aggregate fair market value,
determined on the date of exercise, of the additional Common Shares that would
otherwise have been delivered to Option Holder upon such exercise) provided that
the Company is not then prohibited from purchasing or acquiring Common Shares.
4. Nontransferability. Option Holder may not transfer this Option other
------------------
than by will or by the laws of descent and distribution, or pursuant to a QDRO.
Except as provided herein, this Option shall not be sold, transferred, assigned,
conveyed, gifted, pledged, hypothecated or disposed of in any way, whether by
operation of law or otherwise, and shall not be subject to execution, attachment
or similar process.
5. Option Holder's Employment Agreement. This Option is expressly subject
------------------------------------
to the specific terms and conditions of the Option Holder's Employment Agreement
being executed on the date hereof.
6. Requirements of Law and of Stock Exchanges. The issuance of shares
------------------------------------------
upon the exercise of this Option shall be subject to compliance with all of the
applicable requirements of
2
<PAGE>
law with respect to the issuance and sale of such shares. In addition, the
Company shall not be required to issue or deliver any certificate or
certificates for such purchase upon exercise of this Option prior to the
admission of such shares to listing on notice of issuance on The New York Stock
Exchange or any other stock exchange on which shares of the Company's Common
Stock are then listed.
By accepting this Option, Option Holder represents and agrees for himself
and his permitted transferees that unless a registration statement under the
Securities Act of 1933 is in effect as to shares purchased upon any exercise of
this Option, any and all shares so purchased shall be acquired for investment
and not for sale or for distribution, and any notice of the exercise of any
portion of this Option delivered to the Company pursuant to paragraph 3 hereof
shall be accompanied by a representation and warranty in writing, signed by the
person entitled to exercise the same, that the shares are being so acquired in
good faith for investment and not for sale or distribution.
7. Notices. Any notice to be given to the Company shall be personally
_______
delivered to or addressed to the Secretary of the Company, at its principal
office, and any notice to be given to Option Holder shall be addressed to him at
the address given beneath his signature hereto, or at such other address as
Option Holder may hereafter designate in writing to the Company. Any notice to
the Company is deemed given when received by the Company. Any notice to Option
Holder is deemed given when enclosed in a properly sealed envelope addressed as
aforesaid, registered or certified, and deposited, postage and registration or
certification fee prepaid, in a post office or branch post office regularly
maintained by the United States.
8. Payment of Income Taxes. If the Company is required to withhold an
_______________________
amount on account of any federal, state or local tax (including, without
limitation, any income, FICA, disability insurance, or employment tax) imposed
as a result of the exercise of the Option, Option Holder shall, concurrently
with such withholding, pay such amount to the Company in full in cash; provided,
however, that in the discretion of the Committee, and to the extent that it
would not result in liability under Section 16 of the 1934 Act (unless Option
Holder consents to such liability and consents to disgorge any profits, relating
thereto to the Company), the payment of such amount to the Company may be made,
in whole or in part:
(a) with Common Shares delivered by Option Holder concurrently with such
withholding, duly endorsed or accompanied by a duly executed stock power, which
delivery effectively transfers to the Company good and valid title to such
shares, free and clear of any pledge, commitment, lien, or other encumbrance
(such shares to be valued on the basis of the fair market value of such shares
on the date of such sale or exercise), provided that the Company is not then
prohibited from purchasing or acquiring Common Shares; and/or
(b) by reducing the number of Common Shares to be delivered to Option
Holder upon exercise of such Option (such reduction to be valued on the basis of
the aggregate fair market value (determined on the date of such exercise) of the
additional Common Shares that would otherwise have been delivered to Option
Holder upon exercise of such option), provided that the Company is not then
prohibited from purchasing or acquiring Common Shares.
<PAGE>
9. Stock Option Plan. This Option is subject to all of the terms and
-----------------
conditions of the Company's 1997 Employee Stock Incentive Plan as the same shall
be amended from time to time in accordance with the terms thereof, but no such
amendment shall, without Option Holder's consent, adversely affect Option
Holder's rights under this Option. The interpretation and construction by the
Committee of the Plan, this Agreement, the Option, and such rules and
regulations as may be adopted by the Committee for the purpose of administering
the Plan, shall be final and binding upon Option Holder. All capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Plan.
10. Stockholder Rights. Option Holder shall be entitled to vote, receive
------------------
dividends, and be deemed the holder of Common Stock of the Company purchasable
hereunder only to the extent this Option shall have been duly exercised (in
whole or in part) to purchase such Common Stock in accordance with the
provisions of this Agreement.
11. Governing Law. This Agreement and the Option granted hereunder shall be
-------------
construed and enforced in accordance with the laws of the State of Delaware
(except to the extent prempted by federal law).
IN WITNESS WHEREOF, the Company has granted and issued this Option, at
Culver City, California, on the day and year first above written.
SIZZLER INTERNATIONAL, INC.
By: /s/ James A. Collins
----------------------------
James A. Collins
Chief Executive Officer
ACCEPTED:
/s/ Charles L. Boppell
-----------------------------------------
"Option Holder"--Charles L. Boppell
Address: 11837 Henley Lane
Los Angeles, California 90077
###-##-####
-----------------------------------------
Social Security Number
4
<PAGE>
EXHIBIT 10.13
AMENDED & RESTATED SERVICES AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED SERVICES AGREEMENT ("Agreement") is entered into this
5th day of May, 1999 by and between Sizzler International, Inc., with principal
offices at 6101 West Centinela Avenue, hereinafter called "Sizzler" and Charles
F. Smith, hereinafter called "Smith".
WHEREAS, Smith presently is a Director of Sizzler; and
WHEREAS, Smith has been providing services to Sizzler with regard to various
possible business asset dispositions and/or financings, which are in addition to
his responsibilities as Director; and
WHEREAS, Sizzler desires to compensate Smith for the additional services he is
providing with respect to the possible business asset dispositions and/or
financings noted above;
NOW THEREFORE, it is agreed as follows:
1. Smith will perform such services with regard to possible business asset
dispositions and refinancings as are mutually agreed upon by Sizzler and Smith.
2. Sizzler will pay Smith the sum of $2,000 per day that Smith provides such
services during the term of the Agreement. The days in which Smith shall work
shall be mutually agreed upon between the parties. Sizzler will pay Smith
monthly within seven (7) days of receipt of an invoice.
3. Sizzler will reimburse Smith for all reasonable out of pocket expenses
incurred at the request of Sizzler, including the cost of meals, hotel and
airfare (in accordance with Sizzler travel policy) in connection with the
provisions of services under this Agreement.
4. This Agreement contains all of the understandings between the parties with
respect to the subject matter herein and can not be amended or modified, except
by written agreement of both parties.
5. This Agreement shall commence as of the date written above and continue
until canceled by either party with a ten (10) day written notice. At the end
of this period, all outstanding charges shall be due and payable as outlined on
a closing invoice delivered to Sizzler.
6. The Services Agreement dated May 1, 1999 is amended and restated in its
entirety herein.
SIZZLER INTERNATIONAL, INC.
BY: /s/ RYAN S. TONDRO /s/ CHARLES F. SMITH
------------------- --------------------
RYAN S. TONDRO CHARLES F. SMITH
DATE:_________________ DATE:_________________
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 21
PARENTS AND SUBSIDIARIES
- ------------------------
James A. Collins, Chairman of the Board, owned of record and beneficially, at
June 30, 1999, 3,814,911 shares of the Company's common stock, representing
approximately 13 percent of the Company's total shares outstanding and may be
considered a "parent" of the Company as such term is defined by the rules and
regulations of the Securities and Exchange commission under the Securities Act
of 1933, as amended.
Set forth below is a list of all of the Company's subsidiaries as of June 30,
1999:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------------------------------------------------
<S> <C>
Buffalo Ranch Australia Pty, Ltd. Australia
CFI Insurers, Ltd. Bermuda
Collins Finance and Management Pty, Ltd. Australia
Collins Foods Australia Pty, Ltd. Australia
Collins Foods International, Pty, Ltd. Nevada
Collins International, Inc. Delaware
Collins Properties, Inc. Delaware
Collins Property Development Pty, Ltd. Australia
Curly's of Springfield, P.A., Inc. Pennsylvania
Dalton's Roadhouse, Inc. California
Furnace Concepts Australia Corp. Nevada
Furnace Concepts International, Inc. Nevada
Gulliver's Australia Pty, Ltd. Australia
Josephina's, Inc. California
Restaurant Concepts International, Inc. Nevada
Restaurant Concepts of Australia Pty, Ltd. Nevada
Scott's & Sizzler Ltd. Canada
Sizzler Australia Pty, Ltd. Australia
Sizzler Family Steak Houses, Inc. Nevada
Sizzler Franchise Development, Ltd. Bermuda
Sizzler Holdings of Canada, Inc. Canada
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- -----------------------------------------------------------
<S> <C>
Sizzler International Marks, Inc. Delaware
Sizzler New Zealand Limited Nevada
Sizzler of N.Y., Inc. New York
Sizzler Project Pty, Ltd. Australia
Sizzler Restaurant Services, Inc. Nevada
Sizzler South Pacific Pty, Ltd. Nevada
Sizzler Southeast Asia, Inc. Nevada
Sizzler Steak Seafood Salad (S) Pte. Ltd. Singapore
Sizzler USA Franchise, Inc. Delaware
Sizzler USA Real Property, Inc. Delaware
Sizzler USA Restaurants, Inc. Delaware
Sizzler USA. Inc. Delaware
Tenly Enterprises, Inc. Pennsylvania
</TABLE>
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 23
----------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Sizzler International, Inc.
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement file Number 33-38412, 333-47659 and 333-476661.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 14, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-02-1999
<PERIOD-START> MAY-04-1998
<PERIOD-END> MAY-02-1999
<CASH> 14,691
<SECURITIES> 0
<RECEIVABLES> 5,272
<ALLOWANCES> 1,726
<INVENTORY> 4,346
<CURRENT-ASSETS> 24,252
<PP&E> 181,332
<DEPRECIATION> 103,496
<TOTAL-ASSETS> 108,669
<CURRENT-LIABILITIES> 25,092
<BONDS> 0
0
0
<COMMON> 288
<OTHER-SE> 52,455
<TOTAL-LIABILITY-AND-EQUITY> 108,669
<SALES> 218,561
<TOTAL-REVENUES> 226,326
<CGS> 80,695
<TOTAL-COSTS> 80,695
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,284
<INCOME-PRETAX> 9,202
<INCOME-TAX> 1,810
<INCOME-CONTINUING> 7,392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,392
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.26
</TABLE>
