<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: August 30, 2000
(Date of earliest event reported)
1-10711
---------
(Commission File No.)
Sizzler International, Inc.
-------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-4307254
---------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation) (IRS Employer Identification
Number)
</TABLE>
6101 West Centinela Avenue, Suite 200, Culver City, CA 90230
--------------------------------------------------------------
(Address of principal executive offices, including zip code)
(310) 568-0135
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 30, 2000, Sizzler International, Inc. ("Sizzler") completed the
acquisition of 82% of the membership interests of FFPE, LLC, a Delaware limited
liability company, from the sole member of the company for cash and warrants.
FFPE, LLC, the successor to S & C Company, Inc., a California corporation, is
the owner and operator of nine casual dining restaurants doing business under
the name "Oscar's" in the San Diego and Phoenix markets. The seller was FFPE
Holding Company, Inc., a Delaware corporation, owned by John Sarkisian and
certain Sarkisian family members and partnerships. Sizzler expects that FFPE,
LLC will continue to operate the business under the management of John
Sarkisian.
The acquisition, previously announced, was made pursuant to the terms and
conditions of an amended and restated purchase agreement. The agreement provided
for a purchase price of $16 million cash, warrants to purchase 1,250,000 shares
of Sizzler common stock at $4.00 per share and, subject to future performance of
the Oscar's chain, an earn-out of up to $9.1 million. In accordance with the
purchase agreement, Sizzler anticipates providing a loan to FFPE, LLC of up to
$9.5 million.
The source of the cash portion of the purchase price was cash on hand, generated
primarily from the sale and leaseback of certain company-owned real estate in
Australia.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) Financial Statements of Business Acquired
Independent Auditor's Report .............................................................. F-1
Consolidated Balance Sheet as of December 31, 1999 ........................................ F-2
Consolidated Statement of Income and Retained Earnings for the year ended December 31, 1999 F-3
Consolidated Statement of Cash Flows for the year ended December 31, 1999 ................. F-4
Notes to Consolidated Financial Statements ................................................ F-5
Consent of Independent Public Accountants ................................................. F-13
(b) Unaudited Condensed Interim Financial Statements of Business Acquired
Unaudited Condensed Consolidated Interim Balance Sheet as of April 30, 2000 ................ F-14
Unaudited Condensed Consolidated Interim Statements of Income and Retained Earnings for the
year ended April 30, 2000 ........................................................... F-15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Unaudited Condensed Consolidated Interim Statements of Cash Flows for the year ended
April 30, 2000 ..................................................................... F-16
Notes to Unaudited Condensed Consolidated Financial Statements .......................... F-17
(c) Pro Forma Financial Data
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July 23, 2000 .............. F-19
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended
April 30, 2000 ...................................................................... F-21
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the interim period
ended July 23, 2000 ................................................................ F-22
</TABLE>
(d) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
10.1 Amended and Restated LLC Membership Interest Purchase
Agreement dated August 21, 2000 among the Registrant, as
purchaser, and FFPE Holding Company, Inc. JBS Investments,
Ltd., OMS Investments, Ltd., TDM Enterprises, Ltd., Oscar
Sarkisian and Martha Patricia Sarkisian (individually and as
co-Trustees of the Sarkisian Family Trust UDT dated 7/19/95),
John Sarkisian, Bernadette Sarkisian, Tamara Sarkisian-Celmo
(individually and as Trustee of the Tamara Sarkisian-Celmo
Family Trust UDT dated 10/16/97), S&C Company, Inc., and FFPE,
LLC, as selling parties.
10.2 Amended and Restated Limited Liability Company Agreement of
FFPE, LLC dated August 30, 2000 between the Registrant and
FFPE Holding Company, Inc.
10.3 Membership Interest Pledge Agreement dated August 30, 2000
between the Registrant, as secured party, and FFPE Holding
Company, Inc., as debtor.
10.4 Call Option Agreement dated August 30, 2000 between FFPE
Holding Company, Inc., as optionor, and the Registrant, as
optionee.
10.5 Put Option Agreement (John Sarkisian) dated August 30, 2000
between the Registrant, as optionor, and FFPE Holding Company,
Inc., as optionee.
10.6 Put Option Agreement (Tamara Sarkisian-Celmo) dated August 30,
2000 between the Registrant, as optionor, and FFPE Holding
Company, Inc., as optionee.
10.7 Warrant dated August 30, 2000, issued by the Registrant to
FFPE Holding Company, Inc.
10.8 Warrant Registration Rights Agreement dated August 30, 2000
between the Registrant and FFPE Holding Company, Inc.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
10.9 Employment Agreement of John Sarkisian dated August 30, 2000
between FFPE, LLC, as employer, and John Sarkisian, as
employee.
10.10 Employment Agreement of Tamara Sarkisian-Celmo dated August
30, 2000 between FFPE, LLC, as employer, and Tamara
Sarkisian-Celmo, as employee.
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
Sizzler International, Inc.
By: /s/ Steven R. Selcer
-------------------------------------
Name: Steven R. Selcer
Title: Vice President and
Chief Financial Officer
Dated: September 14, 2000
<PAGE> 5
To The Stockholders
S & C Company, Inc. and Subsidiary
DBA Oscar's
9823 Pacific Heights Blvd, Suite J
San Diego, CA 92121
Independent Auditor's Report
We have audited the accompanying consolidated balance sheet of S & C Company,
Inc. (A California Corporation) and Subsidiary, DBA Oscar's as of December 31,
1999, and the related consolidated statements of income, retained earnings and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of S & C Company, Inc.
and Subsidiary, DBA Oscar's, as of December 31, 1999, and the results of its
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
OLIVA, SAHMEL & GODDARD
Certified Public Accountants
August 24, 2000
Page F-1
<PAGE> 6
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash (Note 2) $ 2,919
Accounts Receivable (Net of $4,000 in reserve) 105,256
Inventory (Note 2) 145,592
Prepaid Expenses (Note 2) 103,408
-----------
TOTAL CURRENT ASSETS 357,175
PROPERTY AND EQUIPMENT (Note 3) 6,565,800
OTHER ASSETS
Security Deposits (Note 5) 121,821
Net Intangibles (Note 4) 20,447
Deferred Tax Asset (Note 11) 3,000
-----------
TOTAL OTHER ASSETS 145,268
TOTAL ASSETS $ 7,068,243
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable $ 1,253,013
Accrued Liabilities 709,328
Deferred Revenue & Rent (Net) (Note 6) 624,090
Intercompany - SRA Ventures, LLC (Note 7) 61,152
Line of Credit (Note 8) 200,000
Stockholder Notes (Note 9) 763,209
Current Portion - Notes Payable 765,822
-----------
TOTAL CURRENT LIABILITIES 4,376,614
NOTES PAYABLE (Note 10) 2,804,132
-----------
TOTAL LIABILITIES 7,180,746
COMMITMENTS (Note 13)
STOCKHOLDERS' DEFICIT
Capital Stock (Note 12) (authorized 20,000,000 shares;
issued and outstanding 1,320,000 shares) 64,413
Accumulated Deficit (176,916)
-----------
TOTAL STOCKHOLDERS' DEFICIT (112,503)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 7,068,243
===========
</TABLE>
See Accompanying Notes
Page F-2
<PAGE> 7
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
SALES $ 24,086,840
COST OF SALES
Product Costs 7,402,229
Labor Costs 7,639,774
Other Operating Expenses (Includes $974,306 in
write down of long lived assets) 6,945,682
------------
TOTAL COST OF SALES 21,987,685
------------
GROSS PROFIT 2,099,155
SELLING, GENERAL AND ADMINISTRATIVE 2,837,786
NET LOSS ATTRIBUTABLE TO MINORITY INTEREST (Note 2) (66,978)
------------
LOSS BEFORE INCOME TAXES (671,653)
INCOME TAX EXPENSE (Note 11) 800
------------
NET LOSS (672,453)
RETAINED EARNINGS - BEGINNING OF PERIOD 1,078,262
DISTRIBUTIONS PAID (582,725)
------------
ACCUMULATED DEFICIT - END OF PERIOD $ (176,916)
============
</TABLE>
See Accompanying Notes
Page F-3
<PAGE> 8
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY OPERATIONS
Net Loss $ (672,453)
ADJUSTMENTS TO RECONCILE NET CASH TO NET
LOSS FROM OPERATING ACTIVITIES
Depreciation & Amortization 667,243
Write down of Long-lived assets 974,306
Change in Operating Accounts
Accounts Receivable (58,724)
Inventory 16,102
Prepaid Expenses (6,716)
Other Assets (87,498)
Deferred Tax Asset (3,000)
Accounts Payable 123,924
Accrued Liabilities 261,230
Deferred Rent and Revenue 624,090
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,838,504
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (2,027,391)
Purchase of Deer Valley (238,446)
-----------
NET CASH USED IN INVESTING ACTIVITIES (2,265,837)
CASH FLOWS FROM FINANCING ACTIVITIES
Line of Credit 184,858
Proceeds From Notes Payable 1,094,571
Paydown on Notes Payable (558,319)
Shareholder Loans 591,537
Distributions Paid (582,723)
Oscar's of Arizona, LLC Buy-Out (270,629)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 459,295
-----------
NET INCREASE IN CASH 31,962
CASH AT BEGINNING OF PERIOD (29,043)
-----------
CASH AT END OF PERIOD $ 2,919
===========
Additional Cash Flow Information
Cash Paid for Interest $ 297,092
Cash Paid for Taxes $ 800
</TABLE>
See Accompanying Notes
Page F-4
<PAGE> 9
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 THE COMPANY
S & C Company, Inc. and Subsidiary, DBA Oscar's operates Oscar's
restaurants with eight locations of full service dining and catering.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The consolidated financial statements have been prepared using generally
accepted accounting principles.
Cash and Cash Equivalents
The Company considers financial instruments with a fixed maturity date
of less than three months to be cash equivalents.
Inventory
Inventory is valued at the lower of cost or market. Cost is determined
using the first-in, first-out method of accounting.
Prepaid Expenses
Expense items of a nature, which will benefit future periods, are
charged to the prepaid expense account and are amortized over the actual
periods benefited.
Deferred Revenue and Rent
Deferred Rent represents tenant improvement allowances, which are being
amortized over the term of the various leases using the straight-line
method. Deferred Revenue represents a vendor rebate and is being
amortized over five years using the straight-line method.
Property and Equipment
Property and Equipment is carried at cost. Depreciation is computed
using a straight-line method of depreciation over the assets estimated
useful lives of five to forty years (See Note 3). Maintenance and
repairs are charged to the expense as incurred; major renewals are
capitalized. When items of property and equipment are sold or retired,
the related cost and accumulated depreciation are removed from the
accounts, and any gain or loss is included in income.
Page F-5
<PAGE> 10
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-lived Assets
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 judgement is necessary to estimate
discounted future cash flows. Accordingly, actual results could vary
significantly from such estimates.
Stock Options
Stock Options are accounted for using the intrinsic value method. The
Board of Directors determines the value at the grant date. All stock
options are granted at fair market value as determined by the Board of
Directors.
Deferred Taxes
The Company adopted Statement of Financial Accounting Standards No.109
(SFAS 109), Accounting for Income Taxes. SFAS 109 is an asset and
liability approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally
considers all expected future events other than enactments of changes in
the tax law or rates.
Income Taxes
The Corporation elected to be taxed as a Sub-Chapter S Corporation.
Income from the Corporation is combined with income and expenses of the
shareholders from other sources and reported on the shareholders'
individual Federal and State income tax returns. The Corporation is not
a tax paying entity for Federal purposes and pays a State income tax of
$800 or 1.5% of taxable income, whichever is greater.
Page F-6
<PAGE> 11
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Consolidation
The consolidated financial statements include the accounts of S & C
Company, Inc. and its 100% owned subsidiary, Oscar's of Arizona, LLC. S
& C Company, Inc. owned a 50% interest in Oscar's of Arizona, LLC
through December 1, 1999 at which time it acquired the remaining 50%.
The financial statements reflect the entire activity of the subsidiary
with the net minority interest identified separately. Intercompany
accounts and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements requires management
to make estimates and assumptions that affect the reported amounts of
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.
NOTE 3 PROPERTY AND EQUIPMENT
Major classifications of Property and Equipment and Accumulated
Depreciation are as follows:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Leasehold Improvements $ 4,233,519
Restaurant Equipment 2,799,693
Furniture and Fixtures 256,674
Electronic Equipment 296,445
Automobiles 282,511
-----------
TOTAL PROPERTY AND EQUIPMENT 7,868,842
Accumulated Depreciation (1,303,042)
-----------
PROPERTY AND EQUIPMENT $ 6,565,800
===========
</TABLE>
NOTE 4 INTANGIBLES
Intangible Assets consist of Loan Costs and are being amortized over the
term of the loans using the straight-line method. Intangible Assets are
shown net of accumulated amortization of $11,235.
NOTE 5 SECURITY DEPOSITS
Security Deposits consist of lease deposits for the eight restaurant
locations and the corporate office.
Page F-7
<PAGE> 12
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 DEFERRED REVENUE AND RENT
Deferred Revenue is being amortized over five years and shown net of
accumulated amortization of $7,500. Deferred Rent is being amortized
over the life of the leases and is shown net of accumulated amortization
of $60,492.
NOTE 7 INTERCOMPANY - SRA VENTURES, LLC
The Intercompany - SRA Ventures, LLC represents funds advanced from a
related company for a restaurant site in Temecula, California.
NOTE 8 LINE OF CREDIT
The Line of Credit consists of a credit line with Southwest Community
Bank. The limit on the line is $200,000.
NOTE 9 STOCKHOLDER NOTES
Stockholder Notes consist of the following:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Oscar and Martha Sarkisian
8% interest, multiple maturities $355,000
Tammy Celmo
8% interest, matures December 2000 55,000
John Sarkisian
8% interest, $200,000 matures November 2000,
$150,000 December 2000 350,000
Bernadette Sarkisian
$3,386.35 per month, 8% interest 3,209
--------
TOTAL STOCKHOLDER NOTES $763,209
========
</TABLE>
Page F-8
<PAGE> 13
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 10 NOTES PAYABLE (Continued)
Notes Payable consists of the following:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Southwest Community Bank
Term note, variable interest rate of prime +
1%, matures November 1, 2003 $1,429,090
Southwest Community Bank
Construction loan converting to a term loan in
April of 1999, variable interest rate of prime +
1% , matures April 2004 709,449
Southwest Community Bank
Construction loan converting to a term loan in
May of 2000, variable interest rate of prime +
1% , matures May 2005 800,000
Bank of America - Working Capital
$1,250 per month plus interest at prime plus 3% 1,300
Notes Payable - Vans
Auto loans on eight Company vans with
various interest rates and monthly payments 153,380
Note Payable - Greentree
Five year note, 13.4% interest 13,167
Equipment Lease - Orange
Twelve month note, 9% interest 24,447
Note Payable - C. Thomas
Twelve month note, 8% interest 97,000
Bank of America - Prime +2% interest,
Ten year note matures in 2008. Secured by assets of
Oscar's of Arizona, LLC 342,121
-------
</TABLE>
Page F-9
<PAGE> 14
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 10 NOTES PAYABLE (Continued)
<TABLE>
<S> <C>
TOTAL NOTES PAYABLE 3,569,954
Less: Current Portion (765,822)
NOTES PAYABLE $ 2,804,132
===========
</TABLE>
The Company has three loans outstanding with Southwest Community Bank.
These loans require that the company maintain a minimum tangible net
worth of not less than $1,250,000, a ratio of total liabilities to
tangible net worth of not more than 4.0 to 1.0, a ratio of cash flow
coverage of not less than 1.2, and a minimum current ratio of not less
than 0.2. The Company is not in compliance with these covenants as of
December 31, 1999. The financial institution has granted a waiver of all
incidences of noncompliance.
Maturities of the Notes Payable is as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1999
----
<S> <C>
2000 $ 765,822
2001 709,052
2002 777,715
2003 807,118
2004 340,861
Thereafter 169,386
----------
$3,569,954
==========
</TABLE>
NOTE 11 INCOME TAX AND DEFERRED TAXES
Income Tax Expense consists of the following:
<TABLE>
<S> <C>
Deferred Taxes $ --
State Income Taxes 800
----
INCOME TAX EXPENSE $800
====
</TABLE>
Page F-10
<PAGE> 15
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 12 CAPITAL STOCK
The Company incorporated on December 17, 1992 under the laws of the
State of California, with 20,000,000 shares of common stock authorized.
The shareholders' ownership is as follows:
<TABLE>
<S> <C>
Oscar and Martha Sarkisian 35.0%
Tammy Sarkisian-Celmo 27.3%
John Sarkisian 16.0%
Bernadette Sarkisian 16.0%
George Celmo 5.7%
</TABLE>
NOTE 13 COMMITMENTS
The Company leases its facilities under operating leases. Minimum
annual rental commitments (excluding taxes, insurance, and maintenance)
for the years ended December 31, are as follows:
<TABLE>
<S> <C>
2000 $ 1,329,840
2001 1,290,236
2002 1,293,939
2003 1,297,754
2004 1,301,683
Thereafter 4,091,017
-----------
$10,604,469
===========
</TABLE>
NOTE 14 RELATED PARTY TRANSACTIONS
Lease Arrangements
The Company leases its Temecula facility from SRA Ventures, LLC. Total
rents paid to SRA Ventures, LLC were $317,741 for 1999. The lease
expires December 1, 2006. SRA Ventures, LLC and the Company have common
ownership.
Personal Guaranty
The three notes payable with Southwest Community Bank are personally
guaranteed by the following: Bernadette Sarkisian, Oscar Sarkisian,
John Sarkisian, Tamara Sarkisian-Celmo, Martha Sarkisian, SRA Ventures,
LLC, Sarkisian Family Trust, Tamara Sarkisian-Celmo Family Trust.
Page F-11
<PAGE> 16
S & C COMPANY, INC. AND SUBSIDIARY (DBA OSCAR'S)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 15 INCENTIVE STOCK OPTION PLAN
The Company has an incentive stock option plan covering 97 select
employees. As of December 31, 1999 the Company has granted options to
acquire a total of 56,450 shares of its common stock at prices ranging
from $.35 to $2.58 per share. All options are subject to a five year
vesting schedule. As of December 31, 1999 none of the options had been
exercised. All stock options will be settled for cash in 2000 as a
result of the sale of S & C Company, Inc.
A summary of the Company's outstanding options and activity are as
follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER EXERCISE
OPTION PRICE
------ -----
<S> <C> <C>
OPTIONS OUTSTANDING,
Beginning of year 48,600 $1.21
Granted 7,850 $2.58
Canceled -- --
Exercised -- --
------ -----
OPTIONS OUTSTANDING,
End of year 56,450 $1.26
====== =====
</TABLE>
NOTE 16 SUBSEQUENT EVENTS
As of the date of this report the entity is in negotiations to sell a
majority interest in the common stock of S & C Company, Inc.
Page F-12
<PAGE> 17
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
report dated August 24, 2000 in this Form 8-K. It should be noted that we have
not audited any financial statements of the company subsequent to December 31,
1999 or performed any audit procedures subsequent to the date of our report.
OLIVA, SAHMEL & GODDARD
Certified Public Accountants
September 14, 2000
Page F-13
<PAGE> 18
S&C COMPANY (OSCAR'S)
UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
As of April 30, 2000
--------------- ----
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 287
Receivables, net of reserves 92
Inventories 92
InterCompany Phoenix --
Prepaid expenses and other current assets 128
-------
Total current assets 599
=======
Property and equipment, at cost --
Land --
Buildings and leasehold improvements 3,895
Equipment 4,094
Capital leases --
Construction in progress --
-------
7,989
Less - Accumulated depreciation and amortization (1,462)
-------
Total property and equipment, net 6,527
=======
INTANGIBLE ASSETS, NET 13
OTHER ASSETS, NET 122
-------
Total assets $ 7,261
=======
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Line of Credit $ 285
Notes payable current 766
Accounts payable 1,121
Other current liabilities 977
Intercompany payable 61
Income taxes payable 20
-------
Total current liabilities 3,230
=======
NOTES PAYABLE 3,425
DEFERRED REVENUE AND RENT 598
STOCKHOLDERS' INVESTMENT
Common Stock 64
Additional paid-in capital --
Accumulated deficit (56)
-------
Total stockholders' investment 8
-------
Total liabilities and stockholders' investment $ 7,261
=======
</TABLE>
The accompanying notes are an integral part of these Unaudited Condensed
Consolidated Interim Financial Statements
Page F-14
<PAGE> 19
S&C COMPANY (OSCAR'S)
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME AND RETAINED
EARNINGS
(In thousands)
<TABLE>
<CAPTION>
For the four months ended April 30, 2000 1999
----------------------------------- ---- ----
<S> <C> <C>
REVENUES
Restaurant sales $ 8,587 $ 7,006
COSTS AND EXPENSES
Cost of sales 2,514 2,225
Labor and related costs 2,583 2,255
Other operating expenses 1,944 1,712
Depreciation and amortization 171 147
General and administrative expenses 1,025 672
------- -------
Total operating costs and expenses 8,237 7,012
------- -------
Interest expense 131 92
Other income (27) (46)
------- -------
Total costs and expenses 8,341 7,057
------- -------
Income (loss) before income taxes 247 (51)
Provision for income taxes -- --
------- -------
Net income (Loss) $ 247 $ (51)
======= =======
Retained Earnings (Deficit) - Beginning of the Period (176) 1,078
Distributions Paid (127) (327)
------- -------
RETAINED EARNINGS (DEFICIT) - END OF THE PERIOD $ (56) $ 700
======= =======
</TABLE>
The accompanying notes are an integral part of these Unaudited Condensed
Consolidated Interim Financial Statements
Page F-15
<PAGE> 20
S&C COMPANY (OSCAR'S)
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the four months Ended April 30, 2000 1999
----------------------------------- ---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities $ 593 $ 698
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (125) (108)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Notes Payable, Net (57) (95)
Distributions to shareholders (127) (327)
----- -----
Net cash (used in) financing activities (184) (422)
----- -----
Net increase in cash and equivalents 284 168
----- -----
Beginning balance, cash and cash equivalents 3 (197)
----- -----
Ending balance, cash and cash equivalents $ 287 $ (29)
===== =====
</TABLE>
The accompanying notes are an integral part of these Unaudited Condensed
Consolidated Interim Financial Statements
Page F-16
<PAGE> 21
S & C COMPANY, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF APRIL 30, 2000
Note 1 - Unaudited Condensed Consolidated Interim Financial Statements
The unaudited interim condensed consolidated financial statements have been
prepared without audit in accordance with generally accepted accounting
principles. Pursuant to the rules and regulations of the Securities and Exchange
Commission, certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been omitted or condensed. In our opinion, the
condensed consolidated interim financial statements include all adjustments
necessary for a fair presentation of financial position and results of
operations for the periods presented. The results of operations for the periods
presented should not necessarily be considered indicative of operations for the
full year. Certain reclassifications have been made to prior period financial
statements in order to conform to the current period presentation. It is
recommended that these condensed consolidated interim financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included previously in this Form 8-K.
Page F-17
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On August 30, 2000, Sizzler International, Inc. ("Sizzler") entered into a
agreement to acquire an eighty-two percent interest in FFPE Holding Company,
Inc. ("Oscar's") the owner of Oscar's Restaurants. As consideration, Sizzler
paid $16 million in cash and issued a warrant to purchase 1,250,000 shares of
Sizzler common stock at $4.00 a share. The purchase agreement also contains
provisions that provide an earn-out of up to $9.1 million contingent upon
meeting certain operating criteria. Sizzler's management has prepared the
following Unaudited Pro Forma Condensed Consolidated Financial Information to
give effect to this acquisition. The Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the year ended April 30, 2000 and for the three
months ended July 23 and July 31, 2000 for Sizzler and Oscar's respectively,
give effect to the Oscar's acquisition as if it had taken place at the beginning
of the period. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of July 23, 2000 gives effect to the Oscar's acquisition as if it had taken
place on such date.
The pro forma adjustments, which are based upon available information and
certain assumptions that Sizzler believes are reasonable based on the
circumstances, are applied to the historical consolidated financial statements
of Sizzler and Oscar's. The Oscar's acquisition will be accounted for using the
purchase method of accounting. Sizzler's allocation of purchase price is based
upon management's current estimates of the fair value of assets acquired and
liabilities assumed in accordance with Accounting Principles Board No. 16. The
purchase price allocations reflected in the accompanying unaudited pro forma
condensed consolidated financial statements may be different from the final
allocation of the purchase price. The Company expects to finalize the purchase
price during the second quarter and make any necessary adjustments at that time.
Management does not expect the differences to be material.
The accompanying unaudited pro forma condensed consolidated financial
information should be read in conjunction with the historical financial
statements and the notes thereto for Sizzler and Oscar's in its annual form 10-K
filed on July 21, 2000 and Oscar's audited financial statements which are
included elsewhere in this filing. The unaudited pro forma condensed
consolidated financial information is provided for informational purposes only
and does not purport to represent what Sizzler financial position or results of
operations would actually have been had the Oscar's acquisition occurred on such
dates or to project Sizzler's results of operations or financial position for
any future period.
Page F-18
<PAGE> 23
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Sizzler Oscar's Pro Forma
As of 7/23/00 7/31/00 Adjustments Total
----- ------- ------- ----------- -----
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 36,905 $ 586 $(14,950)(1) $22,541
Receivables, net of reserves 4,811 97 (1,100)(2) 3,808
Inventories 4,124 110 -- 4,234
Current tax asset 2,544 -- -- 2,544
Prepaid expenses and other current assets 888 173 -- 1,061
-------- ------ -------- ---------
Total current assets 49,272 966 (16,050) 34,188
======== ====== ======== =========
Property and equipment, net 52,177 7,555 -- 59,732
Property held for sale, net 6,781 -- -- 6,781
Long-term notes receivable, net of reserves 1,830 -- -- 1,830
Deferred income taxes 3,490 -- -- 3,490
Intangible assets, net of accumulated amortization 1,869 14 17,221 (3) 19,104
Other assets 3,644 123 (500)(4) 3,267
-------- ------ -------- ---------
Total assets $119,063 $8,658 $ 671 $ 128,392
======== ====== ======== =========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page F-19
<PAGE> 24
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Sizzler Oscar's Pro Forma
As of 7/23/00 7/31/00 Adjustments Total
----- ------- ------- ----------- -----
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of long-term debt $ 5,147 $ 952 $ -- $ 6,099
Accounts payable 9,746 1,578 -- 11,324
Other current liabilities 10,471 1,000 900 (4) 12,371
Income taxes payable 2,820 20 -- 2,840
--------- ------ ------- ---------
Total current liabilities 28,184 3,550 900 32,634
--------- ------ ------- ---------
Long-term debt, net of current portion 20,126 4,348 (1,100)(2) 23,374
Deferred gain on sale and lease back 8,074 578 -- 8,652
Pension liability 9,563 -- -- 9,563
Minority interest -- -- 33 (5) 33
Stockholders' Investment:
Common, authorized 50,000,000 shares, $0.01 par value;
outstanding 27,919,886 shares at July 23, 2000 288 64 (64)(6) 288
Additional paid-in capital 278,421 -- 1,020 (7) 279,441
Retained Earnings (Accumulated deficit) (216,904) 118 (118)(8) (216,904)
Treasury stock, 846,700 shares at cost at July 23, 2000 (2,303) -- -- (2,303)
Accumulated other comprehensive income (6,386) -- -- (6,386)
--------- ------ ------- ---------
Total stockholders' investment 53,116 182 838 54,136
--------- ------ ------- ---------
Total liabilities and stockholders' investment $ 119,063 $8,658 $ 671 $ 128,392
========= ====== ======= =========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page F-20
<PAGE> 25
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Sizzler Oscar's Proforma
For the year ended, 4/30/00 4/30/00 Adjustments Total
------------------- ------- ------- ----------- -----
<S> <C> <C> <C> <C>
REVENUES
Restaurant sales $ 230,869 $ 25,668 $ -- $ 256,537
Franchise revenues 8,625 -- -- 8,625
--------- --------- -------- ---------
Total revenues 239,494 25,668 -- 265,162
========= ========= ======== =========
COSTS AND EXPENSES
Cost of sales 84,599 7,691 -- 92,290
Labor and related costs 63,081 7,968 -- 71,049
Other operating expenses 50,847 6,712 57,559
Depreciation and amortization 8,628 497 861 (9) 9,986
Non-recurring items 12,087 -- -- 12,087
General and administrative expenses 20,346 2,894 1,980 (10) 25,220
--------- --------- -------- ---------
Total operating costs and expenses 239,588 25,762 2,841 268,191
========= ========= ======== =========
Interest expense 3,631 371 -- 4,002
Investment income, net (1,423) -- -- (1,423)
Other income (1,411) -- -- (1,411)
--------- --------- -------- ---------
Total costs and expenses 240,385 26,133 2,841 269,359
========= ========= ======== =========
Loss before income taxes (891) (465) (2,841) (4,197)
Benefit for income taxes (3,313) -- -- (3,313)
--------- --------- -------- ---------
Net income (loss) $ 2,422 $ (465) $ (2,841) $ (884)
========= ========= ======== =========
Basic and diluted earnings (loss) per share $ 0.08 $(0.03)
========= =========
Weighted average common shares outstanding:
Basic 28,559 28,559
Diluted 28,877 28,877
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page F-21
<PAGE> 26
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
<TABLE>
<CAPTION>
Sizzler Oscar's Pro Forma
For the interim period ended 7/23/00 7/31/00 Adjustments Total
---------------------------- ------- ------- ----------- -----
<S> <C> <C> <C> <C>
REVENUES
Restaurants $ 52,312 $ 7,349 $ -- $ 59,661
Franchise operations 2,346 -- -- 2,346
-------- ------- ----- --------
Total revenues 54,658 7,349 -- 62,007
======== ======= ===== ========
COSTS AND EXPENSES
Cost of sales 18,943 2,231 -- 21,174
Labor and related expenses 14,234 2,194 -- 16,428
Other operating expenses 11,930 1,544 -- 13,474
Depreciation and amortization 1,805 128 215 (9) 2,149
General and administrative expenses 4,312 960 -- 5,272
-------- ------- ----- --------
Total operating costs 51,224 7,057 215 58,497
======== ======= ===== ========
Interest expense 747 117 -- 864
Investment income (559) -- -- (559)
-------- ------- ----- --------
Total costs and expenses 51,412 7,174 215 58,801
====== ===== === ======
INCOME BEFORE INCOME TAXES 3,246 174 (215) 3,205
Provision for income taxes 381 -- -- 381
-------- ------- ----- --------
NET INCOME $ 2,865 $ 174 $(215) $ 2,824
======== ======= ===== ========
Basic and diluted earnings per share $ 0.10 $ 0.10
======== ========
Weighted average common shares outstanding:
Basic 27,986 27,986
Diluted 28,371 28,371
====== ======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page F-22
<PAGE> 27
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
General
The pro forma financial information gives effect to the following pro forma
adjustments:
Sizzler's acquisition of an eighty-two percent ownership interest in Oscar's
will be accounted for using the purchase method of accounting. In connection
with the acquisition, Sizzler paid $16.0 million in cash with, $0.8 million to
remain in escrow for six months to cover potential undisclosed claims, and
issued warrants to purchase 1,250,000 shares of Sizzler common stock at $4.00 a
share. The purchase agreement also contains provisions that provide for an
earn-out of up to $9.1 million contingent on meeting certain operating criteria.
The aggregate estimated purchase price is approximately $17.4 million, which is
the total of cash paid, acquisition expenses and the value assigned to the
warrants issued using the Black Scholes pricing model. This aggregated purchase
price does not include contingent consideration of $0.8 million cash that will
be held in an escrow account or the potential earn-out payments.
The pro forma financial information has been prepared on the basis of
assumptions described in these notes and include assumptions relating to the
allocation of the consideration paid for the assets and liabilities of Oscar's
based on preliminary estimates of their fair value. The actual allocation of
such consideration may differ from that reflected in the pro forma financial
information after valuations and other procedures have been performed following
the closing of the Oscar's acquisition. Management does not expect these
differences to be material.
Below is a table of the estimated acquisition cost, purchase price allocation
and annual amortization of the intangible assets acquired (in thousands):
<TABLE>
<CAPTION>
ANNUAL AMORTIZATION OF
DESCRIPTION AMOUNT AMORTIZATION LIFE INTANGIBLES
------------------------------------------------------------------------ ------------------- --------------------------
<S> <C> <C> <C>
Cash $15,200
Acquisition Costs 1,400
Value of Warrants Issued 1,020
Price Adjustment based on Closing Indebtedness (250)
Total Consideration 17,370
Eighty-Two percent of Net Tangible Assets 149
------------------------------------------------------------------------ ------------------- --------------------------
Goodwill $17,221 20 $861
------------------------------------------------------------------------ ------------------- --------------------------
</TABLE>
Tangible assets of Oscar's acquired were primarily cash and fixed assets.
Liabilities of Oscar's assumed in the acquisition include accounts payable,
accrued liabilities, deferred revenue and debt.
Page F-23
<PAGE> 28
Notes
(1) The pro forma reduction in cash is a result of the $15.2 million paid in
cash to purchase Oscar's which is the $16 million purchase price net of
the $0.8 million that will be held in escrow. The decrease in cash is also
affected by an estimated $250,000 decrease resulting from a purchase price
adjustment computed based on the ending balances in liability and asset
accounts.
(2) The pro forma adjustment is to eliminate a bridge loan made by Sizzler to
Oscar's.
(3) The pro forma adjustment is for goodwill of $17.2 million. The goodwill is
the amount the purchase price exceeds the fair value of the net tangible
and intangible assets assumed.
(4) The pro forma reduction of Other Assets by $0.5 million is to remove the
acquisition expenses already incurred and the $0.9 million increase in
accrued liabilities is to record the estimated acquisition expenses
incurred but not yet paid.
(5) The pro forma adjustment is to record minority interest for the other
owners of membership interest. The minority interest equals eighteen
percent of the net tangible and intangible assets assumed.
(6) The pro forma decrease to "common stock" reflects the elimination of
Oscar's shareholders' equity $64,000.
(7) The pro forma adjustment to increase additional paid in capital reflects
the $1,020,000 impact of the issuance of Sizzler warrants to purchase
common stock. The warrants were valued using the Black Scholes method with
the following variables:
<TABLE>
<S> <C>
Life 5
Rate 6.1%
Volatility 61%
Dividend --
Sizzler Stock price $ 2.00
</TABLE>
(8) The pro forma increase to accumulated deficit is a result of eliminating
the $118,000 retained earnings of Oscars.
(9) The pro forma adjustment is to record the amortization of goodwill.
$861,000 is the pro forma annual amortization for the year-ended April 30,
2000. The amortization expense for the three month period is approximately
$215,000.
(10) The pro forma adjustment records the compensation expense which resulted
from the repurchase of all of the outstanding options in Oscar's prior to
the close of the acquisition. The repurchase of the outstanding options
will result in compensation expense to the extent of cash paid to settle
outstanding options ($1,980,000).
Page F-24
