<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 15, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-10711
SIZZLER INTERNATIONAL, INC.
________________________________________________________________________________
(Exact Name of Registrant as specified in its Charter)
Delaware 95-4307254
________________________________________________________________________________
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6101 West Centinela Avenue, Suite 200, Culver City, California 90230
________________________________________________________________________________
(Address of Principal Executive Offices, including zip code)
(310) 568-0135
____________________________________________________________
(Registrant's telephone number, including area code)
____________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 29, 2000
------------------------------ -----------------------------------
Common Stock $0.01 Par Value 27,637,186 shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
October 15, April 30,
ASSETS 2000 2000
----------------------------------------------------------------- ------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 17,688 $ 38,789
Receivables, net of reserves of $786 at
October 15, 2000 and $847 at April 30, 2000 4,651 4,173
Inventories 4,042 4,333
Current tax asset 2,544 2,544
Prepaid expenses and other current assets 2,426 1,132
----------------------------------------------------------------- ------------- ------------
Total current assets 31,351 50,971
----------------------------------------------------------------- ------------- ------------
Property and equipment, net 60,353 46,316
Property held for sale, net 5,931 8,931
Long-term notes receivable, net of reserves of $133
at October 15, 2000 and $73 at April 30, 2000 824 1,224
Deferred income taxes 3,425 3,405
Intangible assets, net of accumulated amortization of
$997 at October 15, 2000 and $889 at April 30, 2000 19,610 1,876
Other assets 4,532 3,157
----------------------------------------------------------------- ------------- ------------
Total assets $ 126,026 $ 115,880
================================================================= ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
October 15, April 30,
LIABILITIES AND STOCKHOLDERS' INVESTMENT 2000 2000
------------------------------------------------------------------ ------------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 5,595 $ 5,206
Accounts payable 9,818 8,196
Other current liabilities 12,482 10,209
Income taxes payable 966 2,530
------------------------------------------------------------------ ------------- -----------
Total current liabilities 28,861 26,141
------------------------------------------------------------------ ------------- -----------
Long-term debt, net of current portion 24,282 21,198
Deferred gain 8,664 8,269
Pension liability 9,489 9,637
Stockholders' Investment:
Capital stock -
Preferred, authorized 1,000,000 shares, $5 par value;
no shares issued - -
Common, authorized 50,000,000 shares, $0.01 par value;
outstanding 27,637,186 shares at October 15, 2000
and 28,067,539 shares at April 30, 2000 288 288
Additional paid-in capital 279,356 278,408
Accumulated deficit (216,594) (219,769)
Treasury stock, 1,129,400 shares at cost at October 15, 2000
and 706,700 shares at April 30, 2000 (2,894) (1,948)
Accumulated other comprehensive loss (5,426) (6,344)
------------------------------------------------------------------ ------------- -----------
Total stockholders' investment 54,730 50,635
------------------------------------------------------------------ ------------- -----------
Total liabilities and stockholders' investment $ 126,026 $ 115,880
================================================================== ============= ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED
---------------------------------
OCTOBER 15, OCTOBER 17,
2000 1999
------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
(Unaudited)
Revenues
Restaurants $ 104,766 $ 108,050
Franchise operations 4,529 4,218
------------------------------------------------------------------------- ------------- --------------
Total revenues 109,295 112,268
------------------------------------------------------------------------- ------------- --------------
Costs and Expenses
Cost of sales 37,676 39,710
Labor and related expenses 29,263 29,377
Other operating expenses 24,692 23,272
Depreciation and amortization 3,914 4,232
General and administrative expenses 9,229 8,752
------------------------------------------------------------------------- ------------- --------------
Total operating costs 104,774 105,343
------------------------------------------------------------------------- ------------- --------------
Interest expense 1,680 1,688
Investment income (1,012) (380)
------------------------------------------------------------------------- ------------- --------------
Total costs and expenses 105,442 106,651
------------------------------------------------------------------------- ------------- --------------
Income before income taxes 3,853 5,617
------------------------------------------------------------------------- ------------- --------------
Provision for income taxes 678 1,048
------------------------------------------------------------------------- ------------- --------------
Net income $ 3,175 $ 4,569
========================================================================= ============= ==============
Basic and diluted earnings per share $ 0.11 $ 0.16
========================================================================= ============= ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
--------------------------------
OCTOBER 15, OCTOBER 17,
2000 1999
--------------------------------------------------------- --------- ----------
(Unaudited)
<S> <C> <C>
Revenues
Restaurants $ 52,454 $ 53,209
Franchise operations 2,183 2,054
--------------------------------------------------------- --------- ---------
Total revenues 54,637 55,263
--------------------------------------------------------- --------- ---------
Costs and Expenses
Cost of sales 18,733 19,503
Labor and related expenses 15,029 14,532
Other operating expenses 12,761 11,721
Depreciation and amortization 2,109 2,154
General and administrative expenses 4,917 4,094
--------------------------------------------------------- --------- ---------
Total operating costs 53,549 52,004
--------------------------------------------------------- --------- ---------
Interest expense 933 816
Investment income (452) (198)
--------------------------------------------------------- --------- ---------
Total costs and expenses 54,030 52,622
--------------------------------------------------------- --------- ---------
Income before income taxes 607 2,641
--------------------------------------------------------- --------- ---------
Provision for income taxes 297 578
--------------------------------------------------------- --------- ---------
Net income $ 310 $ 2,063
========================================================= ========= =========
Basic and diluted earnings per share $ 0.01 $ 0.07
========================================================= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED
--------------------------------
OCTOBER 15, OCTOBER 17,
2000 1999
---------------------------------------------------- -------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,175 $ 4,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,914 4,232
Deferred income taxes (19) 152
Provision for bad debts -- 221
Other -- 26
Changes in operating assets and liabilities:
Receivables 702 68
Inventories 457 345
Prepaid expenses and other current assets (128) 6
Accounts payable (961) 423
Accrued liabilities 555 2,724
Income taxes payable (1,565) 49
---------------------------------------------------- ----------- ---------
Net cash provided by operating activities 6,130 12,815
---------------------------------------------------- ----------- ---------
INVESTING ACTIVITIES
Additions to property and equipment (11,503) (1,837)
Disposal of property and equipment 5,975 1,041
Acquisition of Oscar's, net of cash acquired (16,383) --
Payments in escrow, Oscar's acquisition (1,151) --
Other, net (1,325) (1,523)
---------------------------------------------------- ----------- ---------
Net cash used in investing activities (24,387) (2,319)
---------------------------------------------------- ----------- ---------
FINANCING ACTIVITIES
Reduction of long-term debt (1,826) (1,627)
Payment of allowed claims pursuant to
the reorganization plan -- (2,547)
Repurchase of common stock (946) --
Other, net (72) 12
---------------------------------------------------- ----------- ---------
Net cash used in financing activities (2,844) (4,162)
---------------------------------------------------- ----------- ---------
Net increase (decrease) in cash and cash equivalents (21,101) 6,334
---------------------------------------------------- ----------- ---------
Cash and cash equivalents at beginning of period 38,789 14,691
---------------------------------------------------- ----------- ---------
Cash and cash equivalents at end of period $ 17,688 $ 21,025
==================================================== =========== =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
6
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 15, 2000
1. General:
The condensed consolidated financial statements include Sizzler
International, Inc. and its wholly owned subsidiaries ("Sizzler(R)" or the
"Company"). The financial statements include the Company's worldwide
operation of the Sizzler(R) family steak house concept, including company-
owned outlets, activity related to the development and operation of
Sizzler(R) franchises, the operation of Kentucky Fried Chicken(R)
("KFC(R)") franchises in Queensland, Australia and the operation of Oscar's
company-owned outlets in the United States. References to the Company
throughout these notes to Financial Statements may be made using the first
person notations of "we" or "us."
The 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 interim consolidated 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
financial statements are read in conjunction with the financial statements
and the notes thereto included in the Company's 2000 annual report on Form
10-K.
2. The 1996 Restructuring:
In June 1996, the Company and four subsidiaries filed for protection from
creditors under Chapter 11 of the federal Bankruptcy Code. The trust
established for the benefit of creditors maintains sufficient cash to pay
all remaining claims. Accordingly, on July 11, 2000 the Bankruptcy Court
entered an order directing the creditor trust to release the liens on the
stock of the Company's U.S. subsidiaries and their operating assets.
7
<PAGE>
3. Earnings Per Share:
The following table sets forth the computation of basic and diluted EPS:
<TABLE>
<CAPTION>
Twelve weeks ended Twenty-four weeks ended
------------------------- -------------------------
October 15, October 17, October 15, October 17,
In thousands, except EPS 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator for basic and diluted EPS
Net income $ 310 $ 2,063 $ 3,175 $ 4,569
======== ======= ======= =======
Denominator for basic EPS - weighted average
shares of common stock outstanding 27,776 28,776 27,907 28,786
Effect of dilutive stock options 121 271 234 210
-------- ------- ------- -------
Denominator for diluted EPS - adjusted
weighted average shares outstanding 27,897 29,047 28,141 28,996
-------- ------- ------- -------
Basic and diluted earnings per share $ 0.01 $ 0.07 $ 0.11 $ 0.16
======== ======= ======= =======
</TABLE>
4. 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. Comprehensive income, for the quarters
ended October 15, 2000 and October 17, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
Twelve weeks ended Twenty-four weeks ended
--------------------------- ----------------------------
October 15, October 17, October 15, October 17,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 310 $2,063 $3,175 $4,569
Foreign currency translation
adjustments (no tax effect) 960 (82) 918 (576)
------ ------ ------ ------
Total comprehensive income $1,270 $1,981 $4,093 $3,993
------ ------ ------ ------
</TABLE>
8
<PAGE>
5. Segment Information:
Substantially all of the Company's revenue results from the sale of menu
items at restaurants operated by the Company or by franchisees. The
Company's reportable segments are based on geographic area and product
type. Sizzler USA consists of all United States and Latin America
Sizzler(R) restaurants and franchise operations. Oscar's consists of nine
Oscar's restaurants in southern California and Arizona. Sizzler
International consists of all foreign company and franchise operated
Sizzler(R) restaurants. KFC consists of KFC(R) franchise restaurants in
Australia. Corporate and other includes any items not included in the
reportable segments listed above. Intercompany transactions are eliminated
when computing revenues, earnings before interest, taxes, and corporate
overhead, and identifiable assets.
Earnings before interest and tax includes 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.
<TABLE>
<CAPTION>
Twelve weeks ended Twenty-four weeks ended
--------------------------- -----------------------------
October 15, October 17, October 15, October 17,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues (in thousands):
------------------------
Sizzler - USA $22,816 $24,054 $ 48,282 $ 49,883
Oscar's 3,781 - 3,781 -
Sizzler - International 8,365 9,874 17,173 19,629
KFC 19,675 21,335 40,059 42,756
------- ------- -------- --------
Total revenues $54,637 $55,263 $109,295 $112,268
======= ======= ======== ========
<CAPTION>
Earnings before Interest and Taxes (in thousands):
-------------------------------------------------
<S> <C> <C> <C> <C>
Sizzler - USA $ 1,359 $ 2,568 $ 3,964 $ 5,287
Oscar's (363) - (363) -
Sizzler - International 270 452 616 935
KFC 2,171 2,370 4,580 4,542
Corporate and other (2,349) (2,131) (4,276) (3,839)
------- ------- -------- --------
Total earnings before interest
and taxes $ 1,088 $ 3,259 $ 4,521 $ 6,925
======= ======= ======== ========
</TABLE>
9
<PAGE>
6. E.coli Incident:
On July 26, 2000, the Company was informed of an incident of E.coli at two
of its franchised Sizzler(R) restaurants in Milwaukee, Wisconsin. Since
that time the Company has been working closely with Milwaukee health
officials in the investigation of the origin and cause of the E.coli
incident. It has been determined the E.coli bacteria originated with one of
the Company's meat suppliers.
Several years ago, the Company adopted a very stringent set of procedures
to protect and assure the quality of the food that is served to guests. In
light of the recent incident, the Company has completed the recertification
and retraining of personnel at both Company and franchise locations to
ensure strict compliance with safety procedures.
To date, there have been nine lawsuits filed (See Item 1: Legal
Proceedings), seven of which name one or more subsidiaries of the Company
as a defendant. Both the Company and its franchisees have insurance
policies to cover this type of event. The Company believes it has adequate
insurance coverage to address any liability or business interruption costs
that the Company is likely to experience. The franchisee involved in the
E.coli incident has ceased operations. At present, the Company does not
expect either a material or prolonged impact on its businesses as a result
of the incident.
The expenses incurred to date that are related to investigating and
minimizing the impact of the E.coli problem are reflected in the Company's
Statement of Operations. The Company is in the process of preparing its
insurance claims.
7. Oscar's:
On August 30, 2000, the Company completed the acquisition of 82 percent of
the outstanding membership interests of FFPE, LLC, a newly organized entity
that owns the assets used in the operation of restaurants doing business
under the name "Oscar's." The Oscar's concept represents 9 restaurants in
southern California and Arizona. The terms of the acquisition include the
Company's payment of approximately $16.4 million in cash and issuance of
warrants to purchase up to 1,000,000 shares of Sizzler(R) common stock at
$4.00 per share. Also, the Company has agreed to pay an earn-out amount in
two and one-half years, which may amount to as much as $8.1 million if
certain targets are achieved.
The Company has accounted for the acquisition under the purchase method,
accordingly the statement of operations include the results of Oscar's
since the date of acquisition. The acquisition resulted in goodwill of
approximately $17.8 million before potential earn-outs, which will be
amortized over 20 years.
10
<PAGE>
Presented below is unaudited selected pro forma financial information,
which includes the results of operations of the Company as if the
acquisition had taken place May 1, 2000 and 1999 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Twelve weeks ended Twenty-four weeks ended
------------------------ ------------------------
October 15, October 17, October 15, October 17,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 58,205 61,736 119,139 125,158
Net Income 160 1,455 3,007 3,943
Basic and diluted net income per share 0.01 0.05 0.11 0.14
Shares used in per share calculation 27,897 29,047 28,141 28,996
</TABLE>
8. Commitment:
During the quarter, the Company entered into an agreement whereby it will
guarantee up to $1.0 million in loans from a third party lending
institution to qualified Sizzler(R) franchisees in the U.S. The loans must
directly relate to the remodel of franchisee restaurants utilizing the
design that has been implemented in the Company-owned Sizzler(R)
restaurants in the United States. The guarantee will be reduced over time
and ends no later than April 30, 2004. As of the end of the quarter there
were no loans outstanding under this program.
11
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
TWELVE WEEKS ENDED OCTOBER 15, 2000 VERSUS OCTOBER 17, 1999
-----------------------------------------------------------
CONSOLIDATED OPERATIONS
-----------------------
Company-operated restaurant sales and franchised restaurant revenues (including
franchise fees, royalties and rental income) represent the Company's primary
sources of revenue. Consolidated revenues for the quarter ended October 15,
2000 were $54,637,000 compared to $55,263,000 for the quarter ended October 17,
1999, a decrease of $626,000 or 1.1 percent. The decrease is due to a 13.1
percent decrease in the Australian dollar exchange rate, the Australian goods
and services tax ("GST") implemented in Australia on July 1, 2000, the E.coli
incident at two Sizzler franchise locations and to a lesser extent, fewer
company-operated Sizzler USA restaurants. These decreases were partially offset
by the acquisition of Oscar's, same store sales increases from Sizzler USA and
KFC and higher guest check averages from all domestic and international
operations.
The following table shows the change in Company-operated same store sales versus
the prior year.
FY 2000 FY 2001
------------------------------ -----------------
QTR1 QTR2 QTR3 QTR4 QTR1 QTR2
----- ---- ---- ----- ---- ----
SIZZLER
-------
USA 2.9% (0.2%) 2.9% 5.7% 1.9% 0.7%
AUSTRALIA
(Based on A$) 4.3% 2.0% (0.6%) 0.8% 0.6% (4.1%)
KFC
---
(Based on A$) 2.8% 6.4% 6.5% 3.7% 6.1% 4.0%
OSCAR'S
-------
USA - - - - - 4.9%
12
<PAGE>
Consolidated operating expenses for the quarter ended October 15, 2000 were
$53,549,000 compared to $52,004,000 for the quarter ended October 17, 1999, an
increase of $1,545,000 or 3.0 percent. The increase is primarily due to the
addition of Oscar's, increased labor costs and increased rent expense. Rent
expense increased approximately $668,000 due to the sale and leaseback of
certain properties in Australia, offset by a $319,000 reduction in depreciation
expense and $185,000 amortization of the deferred gain associated with the
transaction. Operating expense increases were partially mitigated by lower food
costs associated with lower commodity prices, improvements in food cost controls
and a 13.1 percent decrease in the Australian dollar exchange rate.
Interest expense was $933,000 in the current quarter compared to $816,000 in the
same period of the prior year, an increase of $117,000, or 14.3 percent. The
increase is primarily due to higher debt with Westpac and the addition of
Oscar's. Under the terms of a refinanced credit facility with Westpac dated
August 21, 2000, the Company increased its borrowings by approximately $5.0
million. Interest expense also increased as a result of the Company's executive
supplemental retirement plan covering ten former and one active employee.
Investment income was $452,000 in the current quarter compared to $198,000 in
the same period of the prior year, an increase of $254,000 or 128.3 percent.
Investment income has increased as a result of higher cash balances associated
with the sale and leaseback transaction. Approximately $16.4 million of the
cash balances were used for the Oscar's acquisition during the quarter (See Note
7 - Oscar's, to Consolidated Financial Statements).
The provision for income taxes has been computed based on management's estimate
of the annual effective income tax rate applied to income before taxes and was
$297,000 in the current quarter compared to $578,000 in the same period of the
prior year. The $281,000 decrease is partially due to a decrease in the
Australian income tax rate to 34 percent from 36 percent effective July 1, 2000,
lower exchange rates and lower pre-tax income from Australian operations.
SIZZLER USA OPERATIONS
----------------------
Total revenues for the quarter ended October 15, 2000 were $22,816,000 compared
to $24,054,000 for the quarter ended October 17, 1999, a decrease of 5.1
percent. Restaurant sales for the current quarter were $21,068,000 compared to
$22,344,000 in the same period of the prior year. The sales decrease is
primarily due to the E.coli incident (See Note 6 - E.coli, to Consolidated
Financial Statements) and a reduction in Company-owned stores to 63 compared to
66 last year. In addition, there were 32 Sizzler(R) stores under remodel
construction or in their remodel coupon period during the current quarter. The
remodel process caused a decrease in sales due to promotions, guest reaction to
the inconvenience and certain menu changes such as the paring back of hot food
items on the food bar. It has been the Company's experience that starting the
month following the initial transition, new customers who prefer grilled entrees
and a fresher salad bar patronize the restaurants. This sales decrease is
partially offset by
13
<PAGE>
higher check averages. Franchise revenue was $1,748,000 in the current quarter
compared to $1,710,000 in the same period of the prior year, an increase of
$38,000 or 2.2 percent. Franchise revenues were produced by 194 franchised
Sizzler(R) locations, including 13 in Latin America, in the current quarter
compared to 199 franchised Sizzler(R) locations, including 12 in Latin America,
in the same period of the prior year. The royalty increase is due to higher
franchise sales weakened by the negative impact of the E.coli incident.
Franchise store count changes were the result of six closures and one new
franchise, formerly a company operated location. Two of the six closures were
the result of the E.coli incident, two closures were the result of lost leases,
and two closures were the result of operational problems. The Company does not
expect material restaurant count changes in the future.
Prime costs were $13,997,000 in the current quarter compared to $14,367,000 in
the same period of the prior year. Prime costs, which include food, paper and
labor, increased to 66.4 percent of sales compared to 64.3 percent in the same
period of the prior year. The increase is due to discount programs to
reintroduce remodeled locations and heavy discounting following the E.coli
incident. Labor costs were also up due to additional labor incurred during
remodeling and re-certification that occurred following the E.coli incident.
Management expects prime costs to decrease in the third quarter.
Other operating expenses amounted to $5,379,000 for the current quarter compared
to $5,288,000 for the same period of the prior year. The increase is due to
cost of promotional materials related to the E.coli incident, direct mail
expenses incurred to introduce guests to remodeled Sizzler(R) restaurant
locations and higher utility costs associated with utility deregulation that may
or may not continue.
Management is continuing its plan to reposition the Sizzler(R) concept back to a
midscale family steakhouse by upgrading the quality of the food, improving
cooking methods, upgrading equipment and educating all restaurant employees with
updated training programs. The quality of the Sizzler(R) customer experience is
also being improved by remodeling existing restaurants with a new design and
supporting these initiatives with appropriate marketing programs. As of the end
of the quarter, 47 restaurants have been remodeled. Same store sales for these
locations have increased over 4.0 percent during the quarter. Established
remodels, locations completed prior to the E.coli incident, continued to report
double-digit same store sales growth.
OSCAR'S OPERATIONS
------------------
The Company's acquisition of Oscar's was completed on August 30, 2000. Total
revenues for the seven weeks of Oscar's operating results included in the
quarter ended October 15, 2000 were $3,781,000, produced by nine locations
compared to zero for the quarter ended October 17, 1999. Same store sales
increases were 4.9 percent over the same period in the prior year.
Prime costs, which include food and labor, were $2,446,000 compared to zero in
the same period of the prior year. Prime costs represent 64.7 percent of sales,
which is slightly higher than historical levels. The above normal prime costs
are the result of the
14
<PAGE>
August 13, 2000 opening of Oscar's Mira Mesa, California location. Other
operating expenses were $897,000 compared to zero in the same period of the
prior year.
The Company plans to open 2 or 3 additional Oscar's locations during fiscal year
2001.
Management expects continued losses to be generated from Oscar's due to
expansion efforts and anticipates the acquisition will become accretive during
fiscal year 2002.
SIZZLER INTERNATIONAL OPERATIONS
--------------------------------
Total revenues for the quarter ended October 15, 2000 were $8,365,000 compared
to $9,874,000 for the quarter ended October 17, 1999, a decrease of 15.3
percent. The revenue decline is primarily due to a 13.1 percent decrease in the
Australian dollar exchange rate and the Australian GST implemented in the first
quarter of this year. The Sydney Olympics also negatively impacted sales for
two weeks of the quarter. Sales decreases were partially offset by higher check
averages. The Company has also implemented promotions to reduce the negative
impact of GST and it appears that sales are beginning to respond. Restaurant
sales for the current quarter were $7,930,000 compared to $9,530,000 in the same
period of the prior year, produced by 31 restaurants operating during the
current quarter and the same period of the prior year. Franchise revenue was
$435,000 in the current quarter compared to $344,000 in the same period of the
prior year, an increase of $91,000 or 26.5 percent. This increase is primarily
due to an increase in franchise fees and royalties from eight new locations
compared to same period in the prior year. Franchise revenues were produced by
three joint ventures and 54 franchised Sizzler(R) locations in the current
quarter compared to three joint ventures and 46 franchised Sizzler(R) locations
in the same period of the prior year. Current international franchise
restaurants are located in Japan, Taiwan, Thailand, South Korea, Singapore and
Indonesia.
Prime costs were $5,391,000 in the current quarter compared to $6,513,000 in the
same period of the prior year. Prime costs, which include food, paper and labor,
decreased to 68.0 percent of sales compared to 68.3 percent in the same period
of the prior year. The decrease is a result of lower commodity prices,
partially offset by higher labor costs associated with higher hourly wages.
Other operating expenses amounted to $1,984,000 for the current quarter compared
to $2,152,000 for the same period of the prior year primarily due to lower
exchange rates.
Management is continuing its plan to reposition the Sizzler(R) concept in
Australia by implementing the upgraded food quality and cooking methods that are
contributing to positive sales growth in the Company's domestic operations.
Additionally, more emphasis will be placed on providing customers with better
service by increasing the number of restaurant personnel. Four units have been
repositioned and the Company plans to complete another four this fiscal year.
There are currently two units being tested with plans for adding one more
remodel to the test. If the results are consistent with the domestic sales, the
Company plans to proceed with the remodel programs in Australia later this
fiscal year.
15
<PAGE>
KFC(R) OPERATIONS
-----------------
Revenues for the quarter ended October 15, 2000 were $19,675,000 compared to
$21,335,000 for the quarter ended October 17, 1999, a decrease of 7.8 percent
primarily due to a 13.1 percent decrease in the Australian dollar exchange rate.
In addition, the Company's KFC(R) restaurants were negatively impacted by the
Australian GST, which was implemented in the first quarter of this year. This
decrease is partially offset by higher check averages and a 4.0 percent increase
in same-store sales in Australian dollars. Sales for the current quarter
reflect 104 restaurants operating during the current quarter compared to 101
restaurants in the same period of the prior year. The Company expects to open a
total of 3 to 5 new KFC(R) restaurants in fiscal year 2001.
Prime costs were $11,928,000 in the current quarter compared to $12,957,000 in
the same period of the prior year. Prime costs, which include food, paper and
labor, decreased to 60.6 percent of sales compared to 60.7 percent in the same
period of the prior year. The decrease is primarily due to lower commodity
prices partially offset with higher labor costs.
Other operating expenses amounted to $4,707,000 for the current quarter compared
to $5,140,000 for the same period of the prior year primarily due to a 13.1
percent decrease in the Australian dollar exchange rate.
The Company reached an agreement with Tricon Global Restaurants, Inc. to test
co-branding KFC(R) locations with Pizza Hut(R). The Company is currently
reviewing the test locations. The Company also expects to open 2 to 4
additional KFC(R) locations during fiscal year 2002.
RESULTS OF OPERATIONS
---------------------
TWENTY-FOUR WEEKS ENDED OCTOBER 15, 2000 VERSUS OCTOBER 17, 1999
----------------------------------------------------------------
CONSOLIDATED OPERATIONS
-----------------------
Company-operated restaurant sales and franchised restaurant revenues (including
franchise fees, royalties and rental income) represent the Company's primary
sources of revenue. Consolidated revenues for the twenty-four weeks ended
October 15, 2000 were $109,295,000 compared to $112,268,000 for the twenty-four
weeks ended October 17, 1999, a decrease of $2,973,000 or 2.6 percent. This
decrease is primarily due to a 12.0 percent decrease in the Australian dollar
exchange rate, the Australian goods and services tax, the E.coli incident in the
USA, and to a lesser extent, six fewer Sizzler USA company operated stores for
most of the period. These decreases were partially offset by sales attained
through the acquisition of Oscar's, same store sales increases from Sizzler USA
and KFC and higher guest check averages from all domestic and international
operations.
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<PAGE>
Consolidated operating expenses for the quarter were $104,774,000 compared to
$105,343,000 in the prior year, a decrease of $569,000 or .5 percent.
Approximately $1.9 million of the decrease is due to a 12.0 percent decrease in
the Australian dollar exchange rate. This decrease is offset with increased
expenses resulting from the addition of Oscar's, increased labor costs and an
increase in rent expense. Rent expense increased $1,394,000 due to the sale and
leaseback of certain properties in Australia. The increase is partially offset
by a $666,000 reduction in depreciation expense and recognition of $386,000 of
the deferred gain related to the sale and leaseback.
Interest expense was $1,680,000 for the twenty-four weeks ended October 15, 2000
compared to $1,688,000 in the same period of the prior year, a decrease of
$8,000 or 0.5 percent. This decrease is primarily due to a 12.0 percent decrease
in the Australian dollar exchange rate, partially offset by increased interest
expense from higher balances on the Company's debt with Westpac. Under the
terms of a refinanced credit facility with Westpac on August 21, 2000, the
Company increased its borrowings by approximately $5.0 million. The decrease in
consolidated interest expense was partially offset with increased interest
expense related to Oscar's and the Company's executive supplemental retirement
plan covering ten former and one active employee. Investment income was
$1,012,000 compared to $380,000 in the same period of the prior year, an
increase of $632,000 or 166.3 percent. Investment income increased primarily
due to higher cash balances associated with the sale and leaseback transaction.
Approximately $16.4 million of the cash balances were used for the Oscar's
acquisition during the period (See Note 7 - Oscar's, to Consolidated Financial
Statements).
The provision for income taxes has been computed based on management's estimate
of the annual effective income tax rate applied to income before taxes. The
provision amounted to $678,000 in the first twenty-four weeks of fiscal year
2001 compared to $1,048,000 in the same period of the prior year, a decrease of
$370,000 or 35.3 percent. This decrease is partially due to lower exchange rate
in the current period and a decline in the Australian income tax from 36 percent
to 34 percent effective July 1, 2000.
SIZZLER USA OPERATIONS
----------------------
Total revenues for the twenty-four weeks ended October 15, 2000 were $48,282,000
compared to $49,883,000 for the twenty-four weeks ended October 17, 1999, a
decrease of $1,601,000 or 3.2 percent. Restaurant sales were $44,612,000
compared to $46,304,000 in the same period of the prior year. The decrease is
primarily due to fewer Company-owned stores, 63 this period compared to 66 last
year, and the E.coli incident. In addition, there were 49 Sizzler(R) stores
under remodel construction or in their remodel coupon phase during the current
year. In the remodel phase, sales decline due to guest reaction to the
inconvenience and menu changes such as the paring back of hot food items on the
food bar. It has been the Company's experience that during the month following
the initial transition, new customers who prefer grilled
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<PAGE>
entries and a fresher salad bar patronize the restaurants. The sales decrease is
partially offset by same stores sales increases and higher guest check averages.
Franchise revenue was $3,670,000 for the first twenty-four weeks of this year
compared to $3,579,000 in the same period of the prior year, an increase of
$91,000 or 2.5 percent. The increase is due to higher franchise sales tempered
by the impact of the E.coli incident. Franchise revenues were produced by 194
franchised Sizzler(R) locations, including 13 in Latin America, in the current
quarter compared to 199 franchised Sizzler(R) locations, including 12 in Latin
America, in the same period of the prior year.
Prime costs were $29,214,000 for the twenty-four weeks ended October 15, 2000
compared to $29,757,000 in the same period of the prior year. Prime costs, which
include food, paper and labor, increased to 65.5 percent of sales compared to
64.3 percent in the same period of the prior year. The increase is due to
higher labor costs, discount programs to reintroduce remodeled locations, heavy
discounting following the E.coli incident, training restaurant employees in
remodeled locations and re-certification of all employees on safe food handling
procedures.
Other operating expenses amounted to $10,763,000 for the current year compared
to $10,492,000 for the same period of the prior year. This increase is due to
the cost of marketing materials related to the E.coli incident and to direct
mail expenses incurred to introduce guests to remodeled Sizzler(R) locations.
Management is continuing its plan to reposition the Sizzler(R) concept back to a
mid-scale family steakhouse by upgrading the quality of the food, improving
cooking methods, upgrading equipment and educating all restaurant employees with
updated training programs. The quality of the Sizzler(R) customer experience is
also being improved by remodeling existing restaurants with a new design that is
currently being rolled-out, and supporting these initiatives with appropriate
marketing programs.
OSCAR'S OPERATIONS
------------------
The acquisition of Oscar's was completed on August 30, 2000, providing seven
weeks operating results for the Company. Total revenues for the seven weeks of
Oscar's included in the consolidated operations were $3,781,000 compared to zero
in the same period of the prior year. Sales were generated by nine locations.
Same store sales increased 4.9 over the same period in the prior year.
Prime costs, which include food and labor, were $2,446,000 compared to zero in
the same period of the prior year. Prime costs represent 64.7 percent of sales,
which is slightly higher than historical levels due to the opening of the Mira
Mesa, California restaurant on August 13, 2000. Operating expenses amounted to
$897,000 in the current period compared to zero in the same period of the prior
year.
The Company plans to open 2 or 3 additional Oscar's locations during fiscal year
2001.
Management expects continued losses to be generated from Oscar's due to
expansion
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efforts and anticipates the acquisition will become accretive during fiscal year
2002.
SIZZLER INTERNATIONAL OPERATIONS
--------------------------------
Total revenues for the twenty-four weeks ended October 15, 2000 were $17,173,000
compared to $19,629,000 for the twenty-four weeks ended October 17, 1999, a
decrease of $2,456,000 or 12.5 percent. The decrease is primarily due to a 12.0
percent decrease in the Australian dollar exchange rate, the Australian GST, and
is partially offset by higher guest check averages associated with menu
repositioning and successful marketing promotions. Restaurant sales for the
twenty-four weeks ended October 15, 2000 were $16,314,000 compared to
$18,990,000 in the same period of the prior year, produced by 31 restaurants
operating during the current year and the same period of the prior year.
Franchise revenue was $859,000 in the current year compared to $639,000 in the
same period of the prior year, an increase of $220,000 or 34.4 percent. This
increase is primarily due to an increase in franchise fees and royalties from
eight new locations during the year compared to last year. Three joint venture
restaurants and 54 international franchised restaurants produced current
franchise revenues. In the same period of the prior year, the Company operated
three joint venture restaurants and 46 international franchised restaurants.
Current international franchise restaurants are located in Japan, Taiwan,
Thailand, South Korea, Singapore and Indonesia.
Prime costs were $11,133,000 for the twenty-four weeks ended October 15, 2000
compared to $12,947,000 in the same period of the prior year. Prime costs, which
include food, paper and labor, were unchanged at 68.2 percent of sales in the
current year and the same period of the prior year.
Other operating expenses amounted to $3,996,000 for the current fiscal year
compared to $4,238,000 for the same period of the prior year primarily due to
lower exchange rates.
Management is continuing its plan to reposition the Sizzler(R) concept in
Australia by implementing the upgraded food quality and cooking methods that are
contributing to positive sales growth in the Company's domestic operations.
Additionally, more emphasis will be placed on providing customers with better
service by increasing the number of restaurant personnel. Four units have been
repositioned and the Company plans to complete another four this fiscal year.
There are currently two units being tested with plans for adding one more
remodel to the test. If the results are consistent with the domestic sales, the
Company plans to proceed with the remodel program in Australia later this fiscal
year.
KFC(R) OPERATIONS
-----------------
Revenues for the twenty-four weeks ended October 15, 2000 were $40,059,000
compared to $42,756,000 for the twenty-four weeks ended October 17, 1999, a
19
<PAGE>
decrease of $2,697,000 or 6.3 percent. The decrease is primarily due to a 12.0
percent decrease in the Australian dollar exchange rate and the Australian GST.
This decrease is partially offset by a 5.1 percent increase in same-store sales.
The increase in same store sales is the result of successful marketing
promotions that resulted in higher customer traffic and to a lesser extent, an
increase in the average guest check. Sales for the current year reflect 104
restaurants operating during the current year compared to 101 restaurants in the
same period of the prior year. The Company expects to open a total of 3 to 5
new KFC(R) restaurants in fiscal year 2001.
Prime costs were $24,146,000 in the current year compared to $26,020,000 in the
same period of the prior year. Prime costs, which include food, paper and labor,
decreased to 60.3 percent of sales compared to 60.9 percent in the same period
of the prior year due to promotions of higher margin products, lower commodity
prices that may or may not continue, net of increases in labor costs.
Other operating expenses amounted to $9,593,000 for the current year compared to
$10,282,000 for the same period of the prior year primarily due to a decrease in
the Australian dollar exchange rate.
The Company reached an agreement with Tricon Global Restaurants, Inc. to test
co-branding KFC(R) locations with Pizza Hut(R) and the Company is currently
reviewing the test locations. The Company also expects to open 2 to 4
additional KFC(R) locations during fiscal year 2002.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working Capital
---------------
The Company's principal source of liquidity is cash flows from operations, which
was $6,130,000 for the first twenty-four weeks of fiscal year 2001 compared to
$12,815,000 for the same period of the prior year. This decrease is the result
of fluctuations in the Company's operating account balances, lease payments
associated with the sale and leaseback and lower operating income in the United
States.
The Company's working capital at October 15, 2000 was $2,490,000 including cash
and cash equivalents of $17,688,000. At April 30, 2000 the Company had a working
capital surplus of $24,830,000. This decrease is primarily due to cash payments
for the acquisition of Oscar's and funds paid to remodel the Sizzler USA
restaurants. The current ratio was 1.1 at October 15, 2000 and 1.9 at April 30,
2000.
Total Assets / Capital Expenditures
-----------------------------------
At October 15, 2000, total assets were $126,026,000, an increase of $10,146,000
or 8.8 percent from April 30, 2000 primarily due to the acquisition of Oscar's
(See Note 7 - Oscar's, to Consolidated Financial Statements). Property and
equipment, excluding property held for sale, represented approximately 47.9
percent of total assets at October 15, 2000 and 40.0 percent at April 30, 2000.
20
<PAGE>
Capital expenditures were $11,503,000 for the twenty-four weeks ended October
15, 2000 and $1,837,000 for the same period last year. The current year's
capital expenditures funded remodels in the United States, three new KFC(R)
restaurants in Australia, the construction of new Oscar's and maintenance of
existing restaurants. The Company anticipates increased international operations
through additional investment in Company-operated restaurants, joint ventures
and the development of the franchise system.
Debt
----
On August 21, 2000, the Company completed the refinancing of its existing credit
facility with Westpac Banking Corporation. In connection with the refinancing,
the Company increased its existing Westpac credit facility by AUD$8 million to
AUD$46 million. The credit facility is collateralized by the Australian
division's assets and intellectual property. The loan provides for a three-year
term at an interest rate equal to the Australian interbank borrowing rate, plus
a 2.25 percent margin. The credit facility terms include a mandatory principal
reduction and interest payment of AUD$10 million by December 15, 2000, given the
occurrence of certain events. The agreement is also subject to certain
financial covenants and restrictions which management believes is customary for
a loan of this type.
Based on current operations and anticipated sales growth, management believes
that cash flow from operations will be sufficient to meet all of its debt
service requirements and working capital needs. The sale and leaseback of the
14 remaining properties in Australia and additional third-party financing will
also be utilized to fund the Company's capital expenditure requirements.
Share Repurchase
----------------
During the quarter ended October 15, 2000, the Company repurchased 282,700
shares of Sizzler(R) common stock for a total of $589,000. This brings the
total number of shares repurchased to 1,129,400 out of 1.5 million authorized.
The Company may purchase additional shares in the third quarter subject to SEC
and NYSE rules.
QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES
----------------------------------------------------
The Company's primary financial instrument subject to market risk is a bank loan
with an outstanding principal balance of $23,981,000 at October 15, 2000. The
loan is payable in Australian dollars and is collateralized by the principal
operating assets of
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<PAGE>
the Company's international division. The line-of-credit bears variable interest
at a rate equal to the Australian interbank borrowing rate, plus a margin of
2.25 percent. The primary exposures relating to this financial instrument result
from both changes in the interest rates and fluctuation in foreign exchange
rates. As of the end of this quarter the Australian interbank borrowing rate was
approximately 6.6 percent.
To limit the Company's exposure to interest rate increases, the Company entered
into an interest rate cap contract which prevents the Company's interest rate
from exceeding 7.60 percent, in which case the subsidiary would receive the
difference between the contract rate and the actual interest rate. The interest
rate cap is in place and covers approximately 33 percent of the loan principal
outstanding and expires August 31, 2003.
In addition, the Company has entered into an interest rate swap contract to
convert part of its variable interest exposure to a fixed rate of 7.60 percent.
The interest rate swap contract in place as of the end of the fiscal year
covered approximately 33 percent of the loan principal outstanding and expires
August 31, 2003.
The Company's foreign exchange exposure related to its bank debt is hedged since
payments are made from operating cash flows generated from the operations of the
Company's Australian subsidiaries.
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
Act of 1995. These statements may include but are not limited to, statements
regarding: (1) the expected continuation of the Company's growth in revenues and
earnings; (2) the anticipated continuation of the remodeling of U.S. company-
owned and franchised Sizzler(R) locations; (3) the Company's plans to continue
the re-positioning of its Australian Sizzler(R) restaurants through remodeling,
menu changes and better service; (4) the addition of new KFC(R) and co-branded
units in fiscal 2001 and 2002; (5) the financial impact of the E.coli incident
and the adequacy of the Company's insurance; (6) the goodwill anticipated from
the Oscar's acquisition; (7) any increase in the Company's borrowing; (8) the
adequacy of cash flow from operations to meet debt service, capital expenditure
and working capital needs.
Sizzler(R) cautions that these statements are qualified by important factors
that could cause actual results to differ materially from those reflected in the
forward looking statements contained herein. Such factors include, but are not
limited to: (1) the Company's ability to continue achieving growth in revenues
and earnings; (2) the Company's ability to complete the remodeling of all U.S.
company and franchise restaurants in a timely manner; (3) the Company's ability
to complete the remodeling of its existing Australian Sizzler(R) and KFC(R)
locations; (4) whether the repositioning of the U.S. and international
Sizzler(R) concepts will attract new customers and prove effective
22
<PAGE>
in retaining existing customers; (5) the Company's ability to open additional
KFC(R) locations and commence its co-branding test at certain locations; (6)
when the company can recover the sales lost due to the E.coli incident; (7) the
valuation of net assets acquired from Oscar's; (8) the Company's ability to open
new Oscar's locations on schedule and achieve sales growth at the new and
existing Oscar's locations; (9) the Company's future cash requirements; (10) the
Company's ability to control cash flow margins; (11) other risks as detailed
from time to time in Sizzler(R)'s SEC reports, including Quarterly Reports on
Form 10Q, Current Reports on Form 8-K, and Annual Reports on Form 10-K.
23
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
a. Subsidiaries of the Company were named as defendants in seven of nine
lawsuits filed by individuals who were affected by the E.coli incident at
two franchised locations in the Milwaukee area, Wisconsin on July 26, 2000.
Out of nine lawsuits, two were filed as class action.
b. Secura Insurance v. Sizzler USA Franchise, Inc. and Sizzler Restaurants
International Inc., Case No. 00CV003314 (Circuit Court, Milwaukee,
Wisconsin). Lawsuit seeking declaratory relief that our franchisee's
insurance company has unilateral right to select counsel in the E.coli
litigation in Milwaukee and that the Company failed to cooperate with their
selected counsel.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
The Company filed a report on Form 8-K dated July 26, 2000 reporting that
from July 26, 2000 through August 03, 2000 Sizzler International, Inc.
issued press releases relating to the investigation of an E.coli incident at
its independent franchisee owner-operated Sizzler(R) restaurants in
Milwaukee, Wisconsin.
The Company filed a report on Form 8-K dated August 21, 2000 reporting the
following event and press release:
On August 21, 2000, the Company successfully concluded an internal
reorganization of its Australian division and a refinancing of its
existing credit facility with Westpac Banking Corporation.
On August 23, 2000, the Company issued a press release announcing
earnings for the first quarter and same-store sales.
The Company filed a report on Form 8-K dated August 30, 2000 reporting that
on August 30, 2000 Sizzler International, Inc. issued a press release to
announce that the Company completed acquisition of an 82% interest in FFPE,
LLC, a San Diego based restaurant company doing business under the name
"Oscar's".
24
<PAGE>
The Company filed a report on Form 8-K dated September 25, 2000 reporting
that on September 25, 2000 Sizzler International, Inc. issued a press
release to announce that Steven R. Selcer will resign his position as Chief
Financial Office effective October 15, 2000.
25
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIZZLER INTERNATIONAL, INC.
Registrant
Date: November 29, 2000 /s/ Charles L. Boppell
_________________________________
Charles L. Boppell
Chief Executive Officer
Date: November 29, 2000 /s/ Mary E. Arnold
__________________________________
Mary E. Arnold
Vice President and Controller
(Principal Accounting Officer)
26
