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 March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-10725
FURR'S/BISHOP'S, INCORPORATED
INCORPORATED IN DELAWARE I.R.S. EMPLOYER IDENTIFICATION
NO.75-2350724
6901 QUAKER AVENUE, LUBBOCK, TX 79413
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (806)792-7151
- -------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
- -------------------------------------------------------------------------------
As of April 27, 1998, there were 48,675,168 shares of Common Stock
outstanding.
Page 1 of 13
Exhibit Index Located on Page 12
<PAGE>
FURR'S/BISHOP'S, INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998(Unaudited) and December 30, 1997 3
Unaudited Condensed Consolidated Statements
of Operations - For the thirteen weeks
ended March 31, 1998 and April 1, 1997 5
Unaudited Condensed Consolidated Statement of
Stockholders' Deficit - For the thirteen weeks ended
March 31, 1998 6
Unaudited Condensed Consolidated Statements of
Cash Flows - For the thirteen weeks ended
March 31, 1998 and April 1, 1997 7
Notes to Unaudited Condensed Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 11
SIGNATURES
Page 2
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value amounts)
<CAPTION>
March 31, December 30,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,672 $ 4,516
Accounts and notes receivable, net 871 882
Inventories 6,269 6,038
Prepaid expenses and other 1,433 1,122
----------- -----------
Total current assets 12,245 12,558
Property, plant and equipment, net 51,687 52,784
Other assets 466 459
----------- -----------
$ 64,398 $ 65,801
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
(Continued on following page)
Page 3
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(dollars in thousands, except par value amounts)
<CAPTION>
March 31, December 30,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt $ 5,493 $ 5,493
Trade accounts payable 4,983 4,287
Other payables and accrued expenses 14,168 15,126
Reserve for store closings - current 1,102 1,344
----------- -----------
Total current liabilities 25,746 26,250
Reserve for store closings, net of current portion 3,207 3,331
Long-term debt, net of current portion 63,459 66,205
Other payables 7,350 7,276
Excess of future lease payments over fair value,
net of amortization 2,710 2,837
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.01 par value; 5,000,000
shares authorized, none issued
Common stock, $.01 par value; 65,000,000
shares authorized, 48,675,168 issued and
outstanding in 1998 and 1997 487 487
Additional paid-in capital 55,870 55,870
Pension liability adjustment (2,504) (2,504)
Accumulated deficit (91,927) (93,951)
----------- -----------
Total stockholders' deficit (38,074) (40,098)
----------- -----------
$ 64,398 $ 65,801
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 4
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<CAPTION>
Thirteen weeks ended
-------------------------
March 31, April 1,
1998 1997
----------- -----------
<S> <C> <C>
Sales $ 46,212 $ 47,353
Costs and expenses:
Cost of sales (excluding depreciation) 13,548 14,343
Selling, general and administrative 28,083 29,469
Depreciation and amortization 2,513 2,725
Net special charges 2,431
----------- -----------
44,144 48,968
----------- -----------
Operating income (loss) 2,068 (1,615)
Interest expense 44 56
----------- -----------
Net income (loss) $ 2,024 $ (1,671)
=========== ===========
Weighted average number of shares
of common stock outstanding:
Basic 48,675,168 48,671,750
=========== ===========
Diluted 48,675,168 49,152,508
=========== ===========
Net income (loss) per share:
Basic $ 0.04 $ (0.03)
=========== ===========
Diluted $ 0.04 $ (0.03)
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 5
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THIRTEEN WEEKS ENDED MARCH 31, 1998
(dollars in thousands)
<CAPTION>
Additional Pension Total
Common Paid-In Liability Accumulated Stockholders'
Stock Capital Adjustment Deficit Deficit
------ ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
December 30, 1997 $ 487 $ 55,870 $ (2,504) $ (93,951) $ (40,098)
Net income 2,024 2,024
------ ---------- ---------- ----------- ------------
Balance at
March 31, 1998 $ 487 $ 55,870 $ (2,504) $ (91,927) $ (38,074)
====== ========== ========= =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 6
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Thirteen weeks ended
-------------------------
March 31, April 1,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,024 $ (1,671)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 2,513 2,725
Loss on disposition of assets 5 34
Net special charges 2,431
Other, net 154 111
Changes in operating assets and liabilities:
Decrease in accounts and notes receivable 11 5
(Increase) decrease in inventories (231) 119
Increase in prepaid expenses and other (311) (798)
Decrease in trade accounts payable, other
payables, accrued expenses and other
liabilities (262) (485)
----------- -----------
Net cash provided by operating activities 3,903 2,471
----------- -----------
Cash flows used in investing activities:
Purchases of property, plant and equipment (1,719) (1,641)
Expenditures charged to reserve for store
closings (405) (377)
Proceeds from the sale of property, plant and
equipment 184 4
Other, net (6) (1)
----------- -----------
Net cash used in investing activities (1,946) (2,015)
----------- -----------
Cash flows used in financing activities:
Payment of indebtedness (2,746) (2,746)
Other, net (55) 7
----------- -----------
Net cash used in financing activities (2,801) (2,739)
----------- -----------
Decrease in cash and cash equivalents (844) (2,283)
Cash and cash equivalents at beginning of period 4,516 3,696
----------- -----------
Cash and cash equivalents at end of period $ 3,672 $ 1,413
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid, including $2,746 of interest in
1998 and 1997 classified as payment of
indebtedness $ 2,748 $ 2,748
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 7
<PAGE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Summary of Significant Accounting Policies
Furr's/Bishop's, Incorporated, a Delaware corporation (the "Company"),
operates cafeterias and a buffet through its subsidiary Cafeteria Operators,
L.P., a Delaware limited partnership (together with its subsidiaries, the
"Partnership"). The financial statements presented herein are the unaudited
condensed consolidated financial statements of the Company and its majority
owned subsidiaries.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. These statements should be read in conjunction
with the consolidated financial statements, and notes thereto, which are
included in the Company's Form 10-K for the year ended December 30, 1997. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation.
The results of operations for the thirteen weeks ended March 31, 1998 may
not be indicative of the results that may be expected for the fiscal year
ending December 29, 1998.
The following table reconciles the denominators of basic and diluted
earnings per share for the thirteen week periods ended March 31, 1998 and April
1, 1997.
<TABLE>
<CAPTION>
March 31, April 1,
1998 1997
---------- ----------
<S> <C> <C>
Weighted average common shares outstanding 48,675,168 48,671,750
Warrants 480,758
---------- ----------
Total Shares 48,675,168 49,152,508
========== ==========
</TABLE>
NOTE B: Income Tax
During the thirteen week period ended March 31, 1998, the Company had a net
loss for income tax purposes. The resulting tax benefit from the net operating
loss has been offset by an increase in the tax valuation allowance.
NOTE C: Special Charges
For the quarter ended April 1, 1997, the Company recognized net special
charges of $2,431,000, including a charge of $1,888,000 for the writedown of
assets and adjustments to closed store reserves, a charge of $1,835,000 to
recognize the writedown of certain assets in accordance with Statement of
Financial Accounting Standards, No.121, "Accounting for the Impairment of
Long-Lived Assets" ("SFAS121"), and a credit of $1,292,000 related to the
settlement of a lawsuit previously filed against the Company.
Page 8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended March 31, 1998 Compared to Thirteen Weeks Ended April 1,
1997
Results of operations. Sales for the first fiscal quarter of 1998 were
$46.2 million, a decrease of $1.1 million from the same quarter of 1997.
Operating income for the first quarter of 1998 was $2.1 million compared to an
operating loss of $1.6 million in the comparable period in the prior year. The
operating results of the first quarter of 1997 included net special charges of
$2.4 million. The net income for the first quarter of 1998 was $2.0 million
compared to a net loss of $1.7 million in the first quarter of 1997.
Sales. Restaurant sales in comparable units were 2.64% higher in the first
quarter of 1998 than the same quarter of 1997. Sales for the first fiscal
quarter were $2.2 million lower than the same period of the prior year due to
there being a net of nine fewer units included in operating results. Sales by
Dynamic Foods to third parties were $550 thousand lower in the first quarter of
1998 than the first quarter of the prior year.
Cost of sales. Excluding depreciation, cost of sales was 29.3% of sales
for the first quarter of 1998 as compared to 30.3% for the same quarter of
1997. The decrease in the percentage of sales was the result of changes in
pricing, menu mix and lower product costs.
Selling, general and administrative. Selling, general and administrative
("SG&A") expense was lower in the aggregate by $1.4 million in the first
quarter of 1998 as compared to 1997 due partially to there being fewer units
included in the operating results. The change in SG&A expense included an
increase of $106 thousand in marketing expense and $372 thousand in labor and
related benefits and a decrease of $186 thousand in utility expenses.
Depreciation and amortization. Depreciation and amortization expense was
lower by $212 thousand in the first quarter of 1998 due primarily to lower
depreciation on property, plant and equipment having been written down in
accordance with SFAS121.
Special charges. The loss from operations for the quarter ended April 1,
1997 included net special charges of $2.4 million, which included charges of
$1.9 million for the writedown of assets and adjustments to closed store
reserves and $1.8 million to recognize the writedown of certain assets in
accordance with SFAS121 and a credit of $1.3 million related to the settlement
of a lawsuit previously filed against the Company.
Interest expense. Interest expense was $44 thousand in the first quarter
of 1998, which was slightly lower than the comparable period in the prior year.
Also, in accordance with Statement of Financial Accounting Standards No. 15,
the Company's debt that was restructured at January 2, 1996 was recorded at the
sum of all future principal and interest payments and there is no recognition
of interest expense thereon.
Page 9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES OF
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
During the thirteen weeks ended March 31, 1998, cash provided by operating
activities of the Company was $3.9 million compared to $2.5 million in the same
period of 1997. The Company made capital expenditures of $1.7 million during
the first thirteen weeks of 1998 compared to $1.6 million during the same
period of 1997. Cash, temporary investments and marketable securities were
$3.7 million at March 31, 1998 compared to $1.4 million at April 1, 1997. The
current ratio of the Company was .48:1 at March 31, 1998 compared to .35:1 at
April 1, 1997 and .48:1 at December 30, 1997. The Company's total assets at
March 31, 1998 aggregated $64.4 million, compared to $69.2 million at April 1,
1997 and $65.8 million at December 30, 1997.
The improvement in results of operations in the thirteen weeks ended March
31, 1998 over the comparable period of the prior year reflects the impact of
the present marketing program, operating cost controls, as well as more
favorable winter weather in most of the company's markets.
The Company's restaurants are a cash business. Funds available from cash
sales are not needed to finance receivables and are not generally needed
immediately to pay for food, supplies and certain other expenses of the
restaurants. Therefore, the business and operations of the Company have not
historically required proportionately large amounts of working capital, which
is generally common among similar restaurant companies.
Total scheduled maturities of long-term debt and interest classified as
long-term debt of the Company and its subsidiaries over the next five calendar
years are: $2.7 million in 1998, $5.5 million in 1999, $5.5 million in 2000 and
$52.7 million in 2001.
The Partnership has outstanding $66.4 million of 12% Notes due December 31,
2001, which includes $20.6 million of interest to maturity. Under the terms of
the indenture covering the 12% Notes, a semi-annual cash interest payment of
approximately $2.7 million is due on each March 31 and September 30. The
obligations of the Partnership under the 12% Notes are secured by a security
interest in and a lien on all of the personal property of the Partnership and
mortgages on all fee and leasehold properties of the Partnership (to the extent
such properties are mortgageable).
The Partnership has outstanding $2.5 million of 10.5% Notes due December
31, 2001. A semi-annual cash interest payment of approximately $134 thousand
is due on each June 30 and December 31.
In 1993, the Partnership entered into an amendment of a master sublease
agreement pursuant to which it leased 43 properties from Kmart Corporation
("Kmart"). Pursuant to the amendment and subject to the terms and conditions
thereof, two properties were removed from the master sublease, and the
aggregate monthly rent for the period January 1, 1997 through and including
December 31, 1999 has been reduced by 20%. The reductions in rent are subject
to termination by Kmart if Kevin E. Lewis ceases to be Chairman of the Board of
Directors of the Company. The one-year term of Mr. Lewis expires in 1998 and
Mr. Lewis has not been nominated for reelection at the Company's Annual Meeting
of Stockholders on May 28, 1998. The Company has entered into negotiations
with Kmart to modify the amendment to remove the provisions permitting
termination of the reductions in rent if Mr. Lewis does not remain as Chairman
Page 10
<PAGE>
of the Board until the end of 1999. To date, Kmart has been unwilling to make
such modifications and as a result, the Company may be required to pay
additional rent payments of approximately $1.8 million through December 31,
1999. Because the Company accounts for its rental payments under the
straight-line method, any increase in rent through December 31, 1999 would be
amortized over the remaining life of the leases, which run through December 31,
2003, December 31, 2007, June 29, 2008 and December 31, 2008. If the maximum
additional rent described above is incurred, the increase in annual rent
expense would be approximately $288 thousand.
PART II
OTHER INFORMATION
Item 5. Other Information
Description of Employment Contracts and Termination of Employment and Change of
Control Agreements
On March 23, 1998, the Board of Directors voted to retain Theodore J. Papit
as President and Chief Executive Officer and the Company entered into the
President and Chief Executive Officer Agreement (the "CEO Agreement") with Mr.
Papit. Pursuant to the CEO Agreement (i) the Company will pay Mr. Papit a base
salary of $30,000 per month, (ii) Mr. Papit will participate in the Company's
Incentive Compensation Plan for Senior Management (which provides for cash
bonuses as a percentage of the participant's salary for the achievement of
positive comparable store sales and budgeted earnings targets), (iii) Mr. Papit
will participate in other executive benefit programs consistent with those
offered to other members of senior management, which include vacation time and
reimbursement for appropriate business expenses, and (iv) Mr. Papit was granted
options to purchase 500,000 shares of Common Stock, vesting over five years, at
a purchase price of $0.75 per share, the fair market value of the Common Stock
immediately prior to the date of grant. The CEO Agreement provides (a) that
Mr. Papit's duties will require him to spend approximately one-half of his
working time in the Company's executive offices in Lubbock, Texas and the
remainder of his time in either an executive office to be provided by the
Company in Dallas, Texas or visiting field operations, (b) that Mr. Papit will
be nominated for election to the Board of Directors of the Company at each
annual meeting of shareholders as long as he continues to serve as President
and Chief Executive Officer, (c) that if Mr. Papit resigns or is terminated, he
will also resign as a director of the Company, unless the Board of Directors
requests that Mr. Papit remain a member of the Board of Directors and (d) that
Mr. Papit will receive a lump sum payment of eighteen times his monthly base
salary if (x) the Company terminates him for a reason other than cause (as
defined below) or (y) he resigns within twelve months of a change in control
(as defined below) of the Company. Also, if there is a change in control (as
defined below) of the Company or if the Company terminates Mr. Papit for a
reason other than cause (as defined below), Mr. Papit's options will vest
immediately. For purposes of the CEO Agreement, termination for "cause" means
termination because of (i) Mr. Papit's failure to perform, or willful and
continual neglect of, his material duties or obligations as President and Chief
Executive Office, which continues after written notice that such actions are
occurring has been furnished by the Company to Mr. Papit and Mr. Papit has been
afforded a reasonable opportunity of at least ten (10) days to cure the same,
all as determined by the Board of Directors of the Company, (ii) Mr. Papit's
conviction of any crime or offense involving (A) moral turpitude either in
connection with the performance of Mr. Papit's obligations to the Company or
Page 11
<PAGE>
its affiliates or which shall adversely affect Mr. Papit's ability to perform
such obligations or (B) money or other property of the Company or its
affiliates or (iii) drug addiction. For purposes of the CEO Agreement, a
"change of control" shall be deemed to have occurred under the CEO Agreement
(a) if the Company's stockholders approve a sale or disposition of all or
substantially all of the Company's assets to an entity that is not then an
affiliate (as such term is defined in Rule 405 ("Rule 405") promulgated under
the Securities Act of 1933, as amended) of the Company, or (b) if the Company
merges with an entity that is not an affiliate (as such term is defined in Rule
405) of the Company and persons who were members of the Board of Directors
immediately prior to the merger do not constitute a majority of the directors
of the surviving entity immediately afer the merger or (c) the election during
any period of 12 months or less of a majority of the members of the Board of
Directors of the Company without the approval of the election or nomination for
election of such new member or members by a majority of the members of the
Board of Directors who were members at the beginning of the period, or members
of the Board thereafter recommended to succeed such original members (or
recommended to succeed their successors that were recommended as required
hereunder) by a majority of the members of the Board of Directors who were
members at the beginning of the period (or their successors that were
recommended as required hereunder).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 President and Chief Executive Officer Agreement,
effective as of March 23, 1998, between Theodore J.
Papit and Furr's/Bishop's, Incorporated.
(b) Reports on Form 8-K
A report on Form 8-K was filed on March 24, 1998 with respect
to the appointment of two additional members of the Board of
Directors and the retention of Theodore J. Papit as President
and Chief Executive Officer of the Company.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FURR'S/BISHOP'S, INCORPORATED FURR'S/BISHOP'S, INCORPORATED
BY: /s/Theodore J. Papit /s/Alton R. Smith
------------------------------------- ------------------------------
Theodore J. Papit Alton R. Smith
President and Chief Executive Officer Principal Accounting Officer
Date: April 28, 1998
Page 13
<PAGE>
Exhibit 10.1
PRESIDENT AND CHIEF EXECUTIVE OFFICER AGREEMENT
This President and Chief Executive Officer Agreement (the "Agreement") is
entered into effective as of March 23, 1998, between Theodore J. Papit
("Papit") and Furr's/Bishop's, Incorporated, a Delaware corporation ("Furr's").
WHEREAS, Papit has served since March 1997 as President and Chief Executive
Officer of Furr's as contemplated by certain agreements between Furr's and
Papit; and
WHEREAS, Papit and Furr's wish to set forth the terms pursuant to which
Papit has agreed to continue to serve as President and Chief Executive Officer
of Furr's;
NOW, THEREFORE, in consideration of the above premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the adequacy and sufficiency of which hereby are acknowledged,
the parties hereto agree as follows:
1. President and Chief Executive Officer. Papit will continue to serve as
President and Chief Executive Officer of Furr's and will continue to perform
the duties and responsibilities appurtenant thereto as described in the bylaws
of Furr's from and after March 31, 1998, until his resignation or removal from
such position by the Board of Directors of Furr's. Papit's duties as President
and Chief Executive Officer will require him to spend approximately one-half of
his working time in Furr's executive offices in Lubbock, Texas and
approximately one-half of his working time visiting restaurants or at an
executive office that Furr's establishes in Dallas, Texas.
2. Salary. From and after March 31, 1998, for so long as Papit serves as
President and Chief Executive Officer of Furr's, Papit will be paid a base
salary at a rate of $30,000 per month, payable at the times and in accordance
with the normal procedures for Furr's executive payroll. Papit's base salary
may be increased from time to time as may be approved by the Board of Directors
of the Company.
3. Bonus. Papit will be entitled to participate in Furr's Incentive Bonus
Plan as it may be approved and amended by the Board of Directors from time to
time. Papit's participation in the Furr's Incentive Bonus Plan for fiscal year
1998 shall be at the same level and on the same terms and conditions as the
participation of Jim Hale and Danny Meisenheimer. Papit's participation level
for future years shall be determined by the Board of Directors. No bonus
amount is guaranteed.
4. Options. Pursuant to Furr's 1995 Stock Option Plan, Papit will be
granted options to purchase 500,000 shares of the common stock, par value $.01
per share, of Furr's. The granted options will vest as to one-fifth (1/5) of
the shares underlying the granted options on each of the first five anniversary
dates of the date of this Agreement.
<PAGE>
5. Severance. In the event that
(a) Papit is terminated by Furr's other than for cause (as defined
below), or
(b) within twelve (12) months of a change in control (as defined
below), either
(i) Papit is terminated by Furr's other than for cause, or
(ii) Papit resigns his positions as President and Chief
Executive Officer and terminates his employment with
Furr's for any reason, then
Furr's will promptly pay Papit in one lump sum an amount equal to his monthly
base salary then in effect times eighteen (18).
6. Expenses. Papit will be reimbursed by Furr's for his reasonable
out-of-pocket expenses incurred by him in fulfilling his duties under this
Agreement, including travel and lodging expenses, such reimbursement to be in
accordance with Furr's normal policies and procedures for reimbursement of
executive expenses.
7. Vacation. Papit will be entitled to four (4) weeks of paid
vacation per year.
8. Policies and Benefits. Papit will be subject to the policies that
apply to and will receive the benefits afforded to Furr's senior management.
9. Board Membership. While Papit is President and Chief Executive Officer
of Furr's, he will be nominated and will accept his nomination to Furr's slate
of directors presented to the stockholders of Furr's at each annual meeting of
stockholders of Furr's. If Papit resigns or is terminated, Papit will also
resign as a director of Furr's, unless the Board of Directors requests that he
remain a member of the Board of Directors, in which case Papit will remain a
member of the Board of Directors for the remainder of his then existing term
and any future terms for which he may be elected, or until his earlier
resignation or removal.
10. Governing Law; Venue. This Agreement shall be governed and construed
in accordance with the laws of the State of Texas. In the event that any
judicial proceedings are instituted concerning the interpretation or
enforcement of this Agreement, exclusive venue over such proceedings shall be
vested in the courts sitting in Lubbock County, Texas.
11. Definitions. For purposes of this Agreement, the following definitions
apply:
Termination for "cause" means termination because of:
(i) Papit's failure to perform, or willful and continual neglect
of, his material duties or obligations as President and Chief
Executive Officer, which continues after written notice that
such actions are occurring has been furnished by Furr's to Papit
and Papit has been afforded a reasonable opportunity of at least
ten (10) days to cure the same, all as determined by the Board
of Directors of Furr's;
(ii) Papit's conviction of any crime or offense involving moral
turpitude either in connection with the performance of Papit's
obligations to Furr's or its affiliates or which shall adversely
affect Papit's ability to perform such obligations or money or other
property of Furr's or its affiliates; or drug addiction.
<PAGE>
A "change of control" shall be deemed to have occurred upon any of
the following events:
(a) if the stockholders of Furr's approve a sale or disposition
of all or substantially all of the assets of Furr's to an
entity that is not then an affiliate (as such term is defined
in Rule 405 promulgated under the Securities Act of 1933, as
amended) of Furr's; or
(b) if Furr's merges with an entity that is not an affiliate
(as such term is defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of Furr's and persons who
were members of the Board of Directors of Furr's immediately
prior to the merger do not constitute a majority of the
directors of the surviving entity immediately after the merger;
or
(c) the election during any period of twelve (12) months or
less of a majority of the members of the Board of Directors of
Furr's without the approval of the election or nomination for
election of such new member or members by a majority of the
members of the Board who were members at the beginning of the
period, or members of the Board thereafter recommended to
succeed such original members (or recommended to succeed their
successors that were recommended as required hereunder) by a
majority of the members of the Board who were members at the
beginning of the period (or their successors that were
recommended as required hereunder).
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date set forth below, to be effective as of March 23, 1998.
April 14, 1998 /s/ Theodore J. Papit
-----------------------------
Date Theodore J. Papit
FURR'S/BISHOP'S, INCORPORATED
By: /s/ Kevin E. Lewis
-----------------------------
April 15, 1998 Name: Kevin E. Lewis
Date Title: Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FURR'S/BISHOP'S, INCORPORATED FINANCIAL STATEMENTS AS OF AND FOR THE
PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 3,672
<SECURITIES> 0
<RECEIVABLES> 900
<ALLOWANCES> 29
<INVENTORY> 6,269
<CURRENT-ASSETS> 12,245
<PP&E> 102,019
<DEPRECIATION> 50,332
<TOTAL-ASSETS> 64,398
<CURRENT-LIABILITIES> 25,746
<BONDS> 63,459
0
0
<COMMON> 487
<OTHER-SE> (38,561)
<TOTAL-LIABILITY-AND-EQUITY> 64,398
<SALES> 46,212
<TOTAL-REVENUES> 46,2121
<CGS> 13,548
<TOTAL-COSTS> 13,548
<OTHER-EXPENSES> 30,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> 2,024
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,024
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
