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 30, 1999
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
3001 E. PRESIDENT GEORGE BUSH HWY., STE. 200, RICHARDSON, TX 75082
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972)808-2923
- -------------------------------------------------------------------------------
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 May 7, 1999, there were 48,789,544 shares of Common Stock
outstanding.
Page 1 of 16
<PAGE>
FURR'S/BISHOP'S, INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 30, 1999(Unaudited) and December 29, 1998 3
Unaudited Condensed Consolidated Statements
of Operations - For the thirteen weeks
ended March 30, 1999 and March 31, 1998 5
Unaudited Condensed Consolidated Statement of
Stockholders' Deficit - For the thirteen weeks ended
March 30, 1999 6
Unaudited Condensed Consolidated Statements of
Cash Flows - For the thirteen weeks ended
March 30, 1999 and March 31, 1998 7
Notes to Unaudited Condensed Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION 15
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 30, December 29,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 12,004 $ 11,571
Accounts and notes receivable, net 853 715
Inventories 6,655 7,014
Prepaid expenses and other 1,195 441
----------- -----------
Total current assets 20,707 19,741
Property, plant and equipment, net 48,117 48,320
Other assets 781 448
----------- -----------
$ 69,605 $ 68,509
=========== ===========
</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 30, December 29,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt $ 5,493 $ 5,493
Trade accounts payable 5,140 3,990
Other payables and accrued expenses 16,426 17,303
Reserve for store closings - current 1,224 1,316
----------- -----------
Total current liabilities 28,283 28,102
Reserve for store closings, net of current portion 3,074 3,280
Long-term debt, net of current portion 60,712 60,712
Other payables 15,557 15,697
Excess of future lease payments over fair value,
net of amortization 2,226 2,330
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, 48,789,533 and
48,736,606 issued and outstanding
in 1999 and 1998, respectively 488 487
Additional paid-in capital 55,996 55,938
Accumulated other comprehensive loss (2,857) (2,857)
Accumulated deficit (93,874) (95,180)
----------- -----------
Total stockholders' deficit (40,247) (41,612)
----------- -----------
$ 69,605 $ 68,509
=========== ===========
</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 30, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 46,003 $ 46,212
Costs and expenses:
Cost of sales (excluding depreciation) 13,659 13,548
Selling, general and administrative 27,973 28,083
Depreciation and amortization 2,427 2,513
Special charge 566
----------- -----------
44,625 44,144
----------- -----------
Operating income 1,378 2,068
Interest expense 72 44
----------- -----------
Net income $ 1,306 $ 2,024
=========== ===========
Weighted average number of shares
of common stock outstanding:
Basic 48,775,186 48,675,168
=========== ===========
Diluted 49,158,855 48,675,168
=========== ===========
Net income per share:
Basic $ 0.03 $ 0.04
=========== ===========
Diluted $ 0.03 $ 0.04
=========== ===========
</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 30, 1999
(dollars in thousands)
<CAPTION>
Additional
Additional Other Total
Common Paid-In Comprehensive Accumulated Stockholders'
Stock Capital Loss Deficit Deficit
------ ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
December 29, 1998 $ 487 $ 55,938 $ (2,857) $ (95,180) $ (41,612)
Warrants exercised 1 58 59
Net income 1,306 1,306
------ ---------- ------------ ----------- ------------
Balance at
March 30, 1999 $ 488 $ 55,996 $ (2,857) $ (93,874) $ (40,247)
====== ========== ============ =========== ============
</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 30, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,306 $ 2,024
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,427 2,513
(Gain)/loss on disposition of assets (154) 5
Other, net (47) 154
Changes in operating assets and liabilities:
Accounts and notes receivable (13) 11
Inventories 359 (231)
Prepaid expenses and other (754) (311)
Trade accounts payable, other payables,
accrued expenses and other liabilities 273 (262)
----------- -----------
Net cash provided by operating activities 3,397 3,903
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (3,080) (1,719)
Expenditures charged to reserve for store closings (351) (405)
Proceeds from the sale of property, plant and
equipment 780 184
Other, net (13) (6)
----------- -----------
Net cash from investing activities (2,664) (1,946)
----------- -----------
Cash flows from financing activities:
Payment of indebtedness - (2,746)
Other, net (300) (55)
----------- -----------
Net cash from financing activities (300) (2,801)
----------- -----------
Increase/(decrease) in cash and cash equivalents 433 (844)
Cash and cash equivalents at beginning of period 11,571 4,516
----------- -----------
Cash and cash equivalents at end of period $ 12,004 $ 3,672
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid, including $2,746 of interest in 1998
classified as payment of indebtedness $ 2 $ 2,748
=========== ===========
Non-cash investing activity: note receivable
for sale of assets $ 125 $ -
=========== ===========
</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"),
currently operates 98 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 29, 1998. 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 30, 1999 may
not be indicative of the results that may be expected for the fiscal year
ending December 28, 1999.
The following table reconciles the denominators of basic and diluted
earnings per share for the thirteen week periods ended March 30, 1999 and March
31, 1998.
<TABLE>
<CAPTION>
March 30, March 31,
1999 1998
---------- ----------
<S> <C> <C>
Weighted average common shares outstanding-basic 48,775,186 48,675,168
Options 338,657
Warrants 45,012
---------- ----------
Weighted average common shares outstanding-diluted 49,158,855 48,675,168
========== ==========
</TABLE>
NOTE B: Income Tax
During the thirteen week periods ended March 30, 1999 and 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 in both periods.
Page 8
<PAGE>
NOTE C: Special Charge
The thirteen weeks ended March 30, 1999 includes a special charge of
$566,000 for the costs associated with the move of the Company's support center
from Lubbock, Texas to Richardson, Texas.
NOTE D: Business Segment
Following is a summary of segment information of the Company for the thirteen
weeks ended March 30, 1999 and March 31, 1998:
<TABLE>
<CAPTION>
Cafeterias Dynamic Foods Total
---------- ------------- ----------
<S> <C> <C> <C>
1999:
External revenues $ 45,763 $ 240 $ 46,003
Intersegment revenues - 14,595 14,595
Depreciation and amortization 2,186 241 2,427
Segment profit 1,082 224 1,306
1998:
External revenues 45,962 250 46,212
Intersegment revenues - 14,119 14,119
Depreciation and amortization 2,310 203 2,513
Segment profit 1,696 328 2,024
</TABLE>
Following is a reconciliation of reportable segments to the Company's
consolidated totals for the thirteen weeks ended March 30, 1999 and March 31,
1998:
<TABLE>
<CAPTION>
March 30, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues
Total revenues of reportable segments $ 60,598 $ 60,331
Elimination of inter-segment revenue (14,595) (14,119)
----------- -----------
Total consolidated revenues $ 46,003 $ 46,212
=========== ===========
</TABLE>
Page 9
<PAGE>
NOTE E: New Accounting Pronouncements
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". SOP 98-1
requires companies to capitalize certain internal-use software costs once
certain criteria are met. Adoption of this statement did not have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants SOP 98-5, "Reporting on the Costs of Start-up Activities".
SOP 98-5 requires costs of start-up activities to be expensed when incurred.
Adoption of this statement did not have a material impact on the Company's
consolidated financial position, results or operations or cash flows.
Page 10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended March 30, 1999 Compared to Thirteen Weeks Ended March 31,
1998
Results of operations. Sales for the first fiscal quarter of 1999 were
$46.0 million, a decrease of $209 thousand from the same quarter of 1998.
Operating income for the first quarter of 1999 was $1.4 million compared to
$2.1 million in the comparable period in the prior year. The operating results
of the first quarter of 1999 included a special charge of $566 thousand for the
costs associated with the move of the Company's support center from Lubbock,
Texas to Richardson, Texas. The net income for the first quarter of 1999 was
$1.3 million compared to $2.0 million in the first quarter of 1998.
Sales. Restaurant sales in comparable units increased $1.3 million, or
2.94% in the first quarter of 1999 over the same quarter of 1998. Sales for
the first fiscal quarter were $1.5 million lower than the same period of the
prior year due to there being a net of four fewer units included in operating
results. Sales by Dynamic Foods to third parties were $10 thousand lower in
the first quarter of 1999 than the first quarter of the prior year.
Cost of sales. Excluding depreciation, cost of sales were 29.7% of sales
for the first quarter of 1999 as compared to 29.3% for the same quarter of
1998. The increase in the percentage of sales was the result of higher product
costs.
Selling, general and administrative. Selling, general and administrative
("SG&A") expense was lower in the aggregate by $111 thousand in the first
quarter of 1999 as compared to 1998 due partially to there being fewer units
included in the operating results. The change in SG&A expense included an
increase of $236 thousand in marketing expense and $467 thousand in labor and
related benefits and a decrease of $140 thousand in utility expenses.
Depreciation and amortization. Depreciation and amortization expense was
lower by $86 thousand in the first quarter of 1999 due primarily to lower
depreciation on property, plant and equipment having been previously written
down in accordance with SFAS121.
Special charge. Income from operations for the quarter ended March 30,
1999 included a special charge of $566 thousand for the costs associated with
the move of the Company's support center from Lubbock, Texas to Richardson,
Texas.
Interest expense. 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 11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES OF
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
During the thirteen weeks ended March 30, 1999, cash provided by operating
activities of the Company was $3.4 million compared to $3.9 million in the same
period of 1998. The Company made capital expenditures of $3.1 million during
the first thirteen weeks of 1999 compared to $1.7 million during the same
period of 1998. Cash, temporary investments and marketable securities were
$12.0 million at March 30, 1999 compared to $3.7 million at March 31, 1998.
The current ratio of the Company was .73:1 at March 30, 1999 compared to .48:1
at March 31, 1998 and .70:1 at December 29, 1998. The Company's total assets
at March 30, 1999 aggregated $69.6 million, compared to $64.4 million at March
31, 1998 and $68.5 million at December 29, 1998.
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 three calendar
years are: $5.5 million in 1999, $5.5 million in 2000 and $55.2 million in
2001.
The Company has outstanding $63.7 million of 12% Notes due December 31,
2001, which includes $17.9 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 Company 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 Company 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.
The Company intends to pursue a program of remodeling existing cafeterias
and opening new restaurants. The Company anticipates expending approximately
$15 to $20 million in fiscal year 1999 to remodel existing cafeterias and open
new restaurants and to make other capital expenditures. No assurance can be
given that the Company will generate sufficient funds from operations or obtain
alternative financing sources to enable it to fully implement the anticipated
capital expenditures.
Page 12
<PAGE>
YEAR 2000 READINESS DISCLOSURE
Some computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result, some
of these systems will not operate correctly after 1999 because they may
interpret "00" to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000 approaches, and
are commonly referred to as the "Year 2000 Problem."
The Company believes that it has identified all significant digital systems
and applications that will require modification to ensure Year 2000 compliance.
The Company has commenced the process of modifying, upgrading and replacing any
digital systems that have been assessed as adversely affected, and estimates
that its compliance activities will be substantially completed no later than
the second quarter of 1999. The Company estimates that the total costs of this
effort during the 1998 and 1999 fiscal years will be less than $500,000, which
is being funded through operating cash flows. These estimates are based on
management's assumptions regarding future events, including the continued
availability of necessary resources and the effectiveness of hardware and
software solutions provided by third parties and by the Company's information
technology staff.
The Year 2000 Problem may also affect parties who provide critical goods
and services to the Company, for example banks, credit card companies, utility
providers and suppliers of raw and processed foodstuffs to the Company's
restaurants and its Dynamic Foods operation. The Company is evaluating the
extent to which the Company's operations are vulnerable to Year 2000 problems
of its material vendors and is seeking assurance of their Year 2000 compliance
status. Management believes that the Company's reliance upon large volumes of
independent consumer transactions at 100 restaurant locations, operation of its
own trucking fleet and utilization of the Dynamic Foods division to provide the
majority of its food products limit some aspects of the Company's Year 2000
exposure. However, the Company's ability to assure Year 2000 compliance by
many critical vendors is very limited. Year 2000 failures by one or more of
these vendors could disrupt materially the ability of the Company to operate.
The Company is in the process of preparing contingency plans to address the
possibility of significant performance failures by its material vendors, which
will include an analysis of advisable cash and inventory levels and
identification of alternative suppliers of critical goods and services. These
plans are expected to be completed by July 31, 1999. There is no assurance
that the Company can adequately plan for contingencies that may be associated
with Year 2000 failures by these third parties, or that alternative suppliers
will be available and themselves unaffected by Year 2000 Problems. In
particular, management is not able to predict with any assurance the effect of
Year 2000 Problems in the food product industry or among the suppliers of
utilities such as electricity, water and telecommunications to the Company, and
specifically to its Dynamic Foods operation. An interruption of the operation
of Dynamic Foods could require the Company to close its restaurants until
service can be resumed.
Page 13
<PAGE>
The discussion in "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" of the Company's plans, and management's
expectations, relating to the Company's business, including Year 2000
compliance, as well as other portions of this report, includes certain
statements that may constitute "forward-looking" information (as defined in the
Private Securities Litigation Reform Act of 1995). Words such as "anticipate,"
"estimate," "project" and similar expressions are intended to identify such
forward-looking statements. Such forward-looking statements are subject to
certain risks, uncertainties and assumptions, including without limitation
those discussed in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report.
Should one or more of these risks materialize, or should any of the underlying
assumptions prove incorrect, actual results of current and future operations
may vary materially from those anticipated, estimated or projected.
Prospective investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
assumes no obligation to update any such forward looking statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk from changes in commodity prices.
The Company purchases certain commodities used in food preparation. These
commodities are generally purchased based upon market prices established with
vendors. These purchase arrangements may contain contractual features that
limit the price paid by establishing certain price floors or caps. The Company
does not use financial instruments to hedge commodity prices because these
purchase arrangements help control the ultimate cost paid and any commodity
price aberrations are generally short term in nature.
The Company's long term debt does not expose it to market risk as all
interest accrues at fixed rates. The Company does not use derivative financial
instruments to manage overall borrowing costs.
This market risk discussion contains forward-looking statements. Actual
results may differ materially from this discussion based upon general market
conditions and changes in domestic and global financial markets.
Page 14
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceeding
The Company and certain of its subsidiaries, the Cavalcade Pension
Plan, the Cavalcade Pension Plan Committee, Kmart Corporation and its
pension plan and Michael Levenson have since 1996 been defendants in a
lawsuit brought against them in U.S. District Court in Denver,
Colorado by Robert H. Aull ("Plaintiff"), a former employee of the
Company and a participant in the Cavalcade Pension Plan. The
Plaintiff requested that the Court certify a class of other plaintiffs
who are similarly situated and sought unspecified damages.
The Plaintiff's allegations (all of which are disputed by the
defendants in the case) included: (i) that accrued benefits under the
Cavalcade Pension Plan were improperly reduced during the period from
1988 to 1993, (ii) the "freeze" of the Plan on June 30, 1989 was
improper, (iii) an insufficient amount of assets was transferred from
the Kmart Corporation pension plan to the Cavalcade Pension Plan in
connection with the acquisition of the Company from Kmart effected by
Mr. Levenson and his affiliates in 1988 and (iv) rent concessions
allowed to the Company by Kmart commencing in 1993 constituted
prohibited transactions that bestowed illegal benefits upon the
Company and Mr. Lewis.
The Company, the Cavalcade Pension Plan, the members of the Cavalcade
Pension Plan Committee, Kmart Corporation and its pension plan have
entered into a definitive settlement agreement (the "Agreement") with
the plaintiff and his counsel that would resolve all outstanding
claims among them. The Agreement is subject to (1) confirmation by an
independent actuary of the calculations that support the proposed
settlement and (2) approval of the settlement as "fair" to all members
of the plaintiff class by the court after notice to all purported
class members and a hearing. The Agreement has been filed with the
court and the required hearing should be completed by the end of the
second quarter of 1999. The Company is not able to provide assurance
that the conditions to the proposed settlement will be satisfied or
that the proposed settlement will be implemented as described herein.
As a result of the settlement of the Aull litigation and the
concurrent resolution of an IRS audit of the Plan that focused on
substantially identical issues, the Company has recognized a special
charge of $5,786 in the fourth quarter of 1998, of which approximately
$2,200 relates to resolution of the IRS audit and is not contingent
upon actuarial review or the fairness hearing in the Aull litigation.
The anticipated cash impact of the settlement on the Company includes
payment in 1999 of approximately $1,500 of expenses for legal and
professional fees, with the remainder of the settlement to be paid to
the Plan in future years to fund increased benefit payments to former
and current employees. The settlement will not require any funding
payments to the Plan by the Company in 1999 but is expected to require
payments by the Company to the Plan of approximately $1,700 in 2000
and approximately $850 in 2001, with additional funding payments
required in subsequent years in amounts that are expected to decline
Page 15
<PAGE>
over time, subject to the overall funding status of the Plan. The
Agreement provides for Kmart Corporation's pension plan to transfer
$700 to the Cavalcade Pension Plan to fund a portion of the additional
benefits required by the Agreement. Management does not believe that
payment of these amounts in 1999 and subsequent years will have a
material adverse effect on the Company's planned operations.
The Company filed a declaratory judgment lawsuit in the State District
Court in Lubbock, Texas, in which it asks the Court to find that the
Company is not obligated to make severance payments that have been
demanded by Theodore Papit, the former President and CEO of the
Company. Mr. Papit submitted his resignation on May 28, 1998,
following the election at the Company's annual meeting of shareholders
of a slate of directors proposed by Teacher's Insurance and Annuity
Association of American ("TIAA"), the Company's largest shareholder at
that time. He subsequently demanded payment of more than $500,000 of
severance and other amounts that he claimed were owing to him under a
"President and Chief Executive Officer Agreement" dated March 23,
1998. This Agreement was approved by a split vote of the Board of
Directors after TIAA had publicly announced that it might take action
affecting the control of the Company. The Company has requested a
jury trial and believes that there are a number of grounds that will
support the Court in granting the requested relief, among them being
that the Agreement is void as an interested party transaction that did
not receive the necessary approval of independent, disinterested
directors, the terms of the Agreement are not fair to the Company and
the Agreement was entered into by the Company without the benefit of
full disclosure by Mr. Papit and consideration by the Board of
Directors of material information regarding his management of the
Company.
Page 16
<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/ Phillip Ratner /s/ Dawn N. Rosignol
------------------------------- -------------------------------
Phillip Ratner Dawn N. Rosignol
President and Chief Executive Officer Chief Accounting Officer
DATE: May 10, 1999
Page 17
<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 30, 1999 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-28-1999
<PERIOD-START> DEC-30-1998
<PERIOD-END> MAR-30-1999
<CASH> 12,004
<SECURITIES> 0
<RECEIVABLES> 867
<ALLOWANCES> 14
<INVENTORY> 6,655
<CURRENT-ASSETS> 20,707
<PP&E> 103,428
<DEPRECIATION> 55,311
<TOTAL-ASSETS> 69,605
<CURRENT-LIABILITIES> 28,283
<BONDS> 60,712
0
0
<COMMON> 488
<OTHER-SE> (40,735)
<TOTAL-LIABILITY-AND-EQUITY> 69,605
<SALES> 46,003
<TOTAL-REVENUES> 46,003
<CGS> 13,659
<TOTAL-COSTS> 13,659
<OTHER-EXPENSES> 30,966
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> 1,306
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,306
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
