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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q/A2
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 15, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period to
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Commission file number 0-4377
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SHONEY'S, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-0799798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1727 Elm Hill Pike, Nashville, TN 37210
(Address of principal executive (Zip Code)
offices)
Registrants telephone number, including area code (615)391-5201
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
---- ----
As of June 24, 1994, there were 41,150,672 shares of
Shoney's, Inc. $1 par value common stock outstanding.
==================================================================<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
May 15, October 31,
1994 1993
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,819,276 $ 7,841,426
Notes and accounts receivable, less allowance for doubtful
accounts of $2,996,000 in 1994 and $2,061,000 in 1993 22,423,514 24,857,375
Inventories 46,186,309 52,795,971
Deferred income taxes and other current assets 25,890,206 21,633,965
------------- ------------
Total current assets 105,319,305 107,128,737
Property, plant and equipment, at cost 719,331,781 684,218,089
Less accumulated depreciation and amortization (298,051,604) (280,421,156)
------------- ------------
Net property, plant and equipment 421,280,177 403,796,933
Other assets:
Deferred charges and other intangible assets 6,877,476 7,950,725
Other assets 5,216,319 9,215,940
------------- -------------
Total other assets 12,093,795 17,166,665
------------- -------------
$ 538,693,277 $ 528,092,335
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 30,106,522 $ 36,636,478
Federal and state income taxes 1,914,801 2,303,533
Other accrued liabilities 61,744,296 68,979,196
Reserve for litigation settlement 24,292,782 25,713,422
Debt and capital lease obligations due within one year 114,453,280 111,401,224
------------ ------------
Total current liabilities 232,511,681 245,033,853
Senior debt-recapitalization 60,000,000
Other long-term senior debt and capital lease obligations 160,069,049 111,251,814
Subordinated debentures 144,306,830 144,187,529
Zero coupon subordinated convertible debentures 77,762,051 74,614,987
Reserve for litigation settlement 74,537,339 86,413,339
Deferred credits:
Income taxes 9,635,958 9,424,823
Income and other liabilities 7,818,936 7,153,808
Shareholders' equity (deficit):
Common stock, $1 par value: authorized 100,000,000 shares;
issued 41,126,018 in 1994 and 40,724,536 in 1993 41,126,018 40,724,536
Additional paid-in capital 56,872,269 50,771,605
Retained earnings (deficit) (265,946,854) (301,483,959)
------------ ------------
Total shareholders' equity (deficit) (167,948,567) (209,987,818)
------------ ------------
$ 538,693,277 $ 528,092,335
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
-2-<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
May 15, May 9,
1994 1993
------------ ------------
<S> <C> <C>
Revenues $ 616,759,872 $ 580,422,966
Costs and expenses
Cost of sales 509,358,848 480,920,927
General and administrative expenses 34,135,663 32,053,108
Interest expense 23,555,642 23,523,608
----------- -----------
Total costs and expenses 567,050,153 536,497,643
----------- -----------
Income before income taxes and
cumulative effect of change
in accounting principle 49,709,719 43,925,323
Provision for income taxes 18,641,000 16,692,000
----------- -----------
Net income before cumulative effect of
change in accounting principle 31,068,719 27,233,323
Cumulative effect of change
in accounting for income taxes 4,468,386
---------- ----------
Net income $ 35,537,105 $ 27,233,323
========== ==========
Earnings per common share
Primary:
Income before cumulative effect of
change in accounting principle $ 0.75 $ 0.68
Cumulative effect of change in
accounting for income taxes 0.11
---- ----
Net income $ 0.86 $ 0.68
Fully diluted:
Income before cumulative effect of
change in accounting principle $ 0.71 $ 0.64
Cumulative effect of change in
accounting for income taxes 0.10
---- ----
Net income $ 0.81 $ 0.64
Weighted average shares outstanding
Primary 41,329,524 40,271,942
Fully diluted 46,559,701 45,521,364
Common shares outstanding 41,126,018 39,978,313
Dividends per share NONE NONE
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended
May 15, May 9,
1994 1993
------------ ------------
<S> <C> <C>
Revenues $ 277,539,917 $ 262,751,379
Costs and expenses
Cost of sales 226,019,227 215,569,273
General and administrative expenses 14,438,911 12,770,283
Interest expense 10,097,102 10,020,683
----------- -----------
Total costs and expenses 250,555,240 238,360,239
----------- -----------
Income before income taxes 26,984,677 24,391,140
Provision for income taxes 10,120,000 9,269,000
----------- -----------
Net income $ 16,864,677 $ 15,122,140
========== ==========
Earnings per common share
Primary $ 0.41 $ 0.37
Fully diluted $ 0.38 $ 0.35
Weighted average shares outstanding
Primary 41,430,511 40,490,410
Fully diluted 46,649,849 45,723,048
Common shares outstanding 41,126,018 39,978,313
Dividends per share NONE NONE
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
May 15, May 9,
1994 1993
-------------- -------------
<S> <C> <C>
Operating activities
Net income $ 35,537,105 $ 27,233,323
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 23,593,741 21,773,976
Amortization of deferred charges
and other noncash charges 5,854,735 4,811,420
Gain on marketable securities
and sale of other assets (2,928,040)
Cumulative effect of change in
accounting for income taxes (4,468,386)
Change in deferred income taxes 3,728,000 2,036,000
Changes in operating assets
and liabilities 7,359,986 (10,758,153)
----------- -----------
Net cash provided by operating activities 68,677,141 45,096,566
Investing activities
Cash required for property, plant and equipment (48,658,129) (42,265,357)
Proceeds from disposal of
property, plant and equipment 2,117,401 1,523,405
Cash (required for) derived from other assets (30,635) 2,986,124
----------- -----------
Net cash used by investing activities (46,571,363) (37,755,828)
Financing activities
Payments on long-term debt and
capital lease obligations (51,638,709) (24,061,243)
Proceeds from long-term debt 50,000,000 10,000,000
Net (payments on) proceeds from
short-term borrowings (6,492,000) 11,054,000
Payments on litigation settlement (13,296,640) (10,076,662)
Cash required for debt issue costs (583,923) (438,837)
Proceeds from exercise of employee stock options 2,883,344 8,246,852
----------- -----------
Net cash used by financing activities (19,127,928) (5,275,890)
----------- -----------
Increase in cash $ 2,977,850 $ 2,064,848
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
-5-
<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
May 15, 1994
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited Consolidated Condensed Financial
Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-Q. As a result, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The Company, in management's opinion, has included all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the results of operations. Certain
reclassifications have been made in the Consolidated Condensed
Financial Statements to conform to the 1994 presentation.
Operating results for the twelve and twenty-eight week periods
ended May 15, 1994 are not necessarily indicative of the results
that may be expected for all or any balance of the fiscal year
ending October 30, 1994.
NOTE 2 - CHANGES IN ACCOUNTING POLICIES
Effective November 1, 1993, the Company adopted FASB Statement No.
109 "Accounting for Income Taxes" through a cumulative effect
adjustment that resulted in an increase to net income of approximately
$4.5 million or $.10 per share. Statement No. 109 changes the
Company's method of accounting for income taxes from the deferred
method to the liability method. The liability method requires the
recognition of deferred income tax liabilities and assets for the
expected future tax consequences of temporary differences between
the tax bases and financial reporting bases of assets and
liabilities (See Note 4).
Effective November 1, 1993, the Company also adopted FASB Statement
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". This Statement requires that debt and equity
securities be carried at fair value unless the Company has the
positive intent and ability to hold debt securities to maturity.
Debt and equity securities must be classified into one of three
categories: 1) held-to maturity, 2) available-for-sale or 3) trading
securities. Each category has different accounting treatment for
the change in fair values. There was no cumulative effect from the
adoption of Statement No. 115 since, at the time of adoption, the
Company held no investments in debt or equity securities.
-6-
<PAGE>
NOTE 3 - EARNINGS PER SHARE
Earnings per share have been computed using the weighted average
number of shares of common stock and common stock equivalents
outstanding during each period presented. Common stock equivalents
include all dilutive outstanding stock options. Fully diluted
earnings per share also includes the assumed conversion of the zero
coupon subordinated convertible debentures. In calculating earnings
per share for 1993, the 2,694,444 shares held in escrow at October 25,
1992 were considered to be retired effective with the provisional
court approval of a consent decree settling certain litigation on
November 3, 1992 (See Note 7).
NOTE 4 - INCOME TAXES
Income taxes for the twelve and twenty-eight week periods ended May
15, 1994 and May 9, 1993 were provided based on the Company's estimate
of its effective tax rates (37.5% and 38.0%, respectively,) for the
entire respective fiscal years. The Company's estimate of its
effective tax rate for the 1994 fiscal year decreased from 1993 due
primarily to the reinstatement of the Targeted Jobs Tax Credit in
August 1993 and the effects of the new tax credit on FICA tips. The
statutory federal income tax rate was 35% and 34.8% for the twelve
and twenty-eight week periods ended May 15, 1994 and May 9, 1993,
respectively.
Effective November 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the
liability method as required by FASB Statement No. 109, "Accounting
for Income Taxes" (See Note 2). As permitted under the new rules,
prior years' financial statements have not been restated. The
cumulative effect of adoption of the Statement increased deferred
tax assets and net income by $4.5 million or $.10 per common share.
This amount is reflected in the first quarter of fiscal 1994 as the
effect of a change in accounting for income taxes.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of November 1, 1993 are as follows:
Deferred tax assets:
Reserve for lawsuit settlement $40,338,486
Reserves for self insurance 7,325,098
Other - net 4,949,912
----------
Deferred tax assets - net 52,613,496
==========
Deferred tax liabilities:
Tax over book depreciation 18,341,848
Capital contribution 22,501,840
Other - net 149,268
----------
Deferred tax liability 40,992,956
----------
Net deferred tax asset $11,620,540
==========
No valuation allowance is considered necessary, as management
believes that the deferred tax assets will ultimately be realized.
-7-<PAGE>
NOTE 5 - SENIOR DEBT
The senior debt-recapitalization of $110 million ($110 million due
in one year) is due in two installments ($50 million in October 1994
and $60 million in April 1995) and is collateralized by certain land
and buildings. As of May 15, 1994, this indebtedness had a fixed
rate of interest (9.78%) to maturity in April 1995. The Company has
interest rate swap agreements, which expire at varying dates to
April 1995, which effectively convert the interest rate on this
indebtedness to 6.0%.
In July 1993, the Company entered into a $125 million reducing
revolving credit facility with a syndicate of financial
institutions. All material assets of the Company not otherwise
pledged (including all common shares of a wholly-owned real estate
company which owns 107 of the Company's restaurant properties) have
been pledged as collateral for the facility. The facility has a
four year, three month term expiring October 22, 1997, with
reductions in the aggregate credit facility beginning in 1995. The
interest rate for this facility is at floating rates (the London
Interbank Offered Rate ("LIBOR") plus 2%) and was 5.9% at May 15,
1994. The Company had borrowed $65 million under this facility as
of May 15, 1994.
Subsequent to the end of the second quarter, the Company and the
financial institutions amended this credit facility to allow the
Company to redeem its 12% subordinated debentures issued in the
Company's 1988 recapitalization. The credit facility was increased
to a maximum of $270 million, the interest rate will remain at LIBOR
plus 2% and the maturity was extended to October 1999. The Company
has given notice that it will redeem at par, on July 2, 1994, the
entire $145.7 million of 12% subordinated debentures presently
outstanding.
The Company's senior debt requires satisfaction of certain
financial ratios and tests; imposes limitations on capital
expenditures; limits the ability to incur additional debt,
leasehold obligations and contingent liabilities; prohibits
dividends and distributions on common stock; prohibits mergers,
consolidations or similar transactions; and includes other
affirmative and negative covenants.
NOTE 6 - RESERVE FOR LITIGATION SETTLEMENT
On January 25, 1993, the Company received final court approval of
a settlement of a three and one-half year old class action race
discrimination lawsuit against the Company and its former senior
chairman. Under the terms of the settlement, the Company has
agreed to pay $105 million in claims. In addition, the Company
agreed to pay $25.5 million in plaintiffs' attorneys fees and an
estimated $4 million in applicable payroll taxes and
administrative costs. Under the terms of the consent decree,
payments are made quarterly and substantially all payments will be
completed by March 1, 1998.
-8-
<PAGE>
NOTE 7 - SHAREHOLDERS' EQUITY (DEFICIT)
On February 26, 1993, the Company received a capital contribution
of 2,694,444 shares of the Company's common stock. The Company had
recorded the net effect of the shares, which were held in escrow
pending final court approval of the litigation settlement (see Note
6), at October 25, 1992 in shareholders' equity. The Company
recorded the effect (net of estimated income taxes) of the
contribution and subsequent retirement of these shares in
shareholders' equity during the first quarter of 1993.
NOTE 8 - LEGAL PROCEEDINGS
The Company is a party to legal proceedings incidental to its
business. In the opinion of management, the ultimate liability
with respect to these actions will not materially affect the
operating results or the financial position of the Company.
NOTE 9 - SALE OF MOTEL JOINT VENTURES
Effective February 16, 1994, the Company sold its minority
ownership interests in four Shoney's Inns to ShoLodge, Inc.
("ShoLodge") in exchange for 90,909 common shares of ShoLodge. The
shares received were recorded at their fair value on the date of
the transaction of approximately $2.4 million resulting in a gain
of $1.7 million in the quarter ended February 20, 1994.
The ShoLodge common shares were classified as trading
securities under FASB Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (See Note 2). The
change in fair value of the ShoLodge common shares subsequent
to the transaction is reflected in the results of operations.
The Company also owns certain warrants to acquire ShoLodge common
stock which were obtained in the 1992 sale of the Company's lodging
division to ShoLodge. In connection with the sale of the Company's
minority motel interests described in the preceding paragraph, the
Company received future registration rights with respect to the
shares that may be acquired upon exercise of the warrants. Under
the provisions of FASB Statement No. 115, certain of these warrants
were classified as trading securities during the first and second
quarters and adjusted to their fair value. The resulting gains of
approximately $1 million in the first quarter and $580,000 in the
second quarter were reflected in results of operations. Once
classified as a trading security, the warrants are carried at fair
value with increases and decreases in fair value reflected in results
of operations. During the second quarter, the value of the ShoLodge
warrants and ShoLodge common stock held by the Company declined by
approximately $448,000.
-9-
<PAGE>
NOTE 10 - RESTATEMENT - CUMULATIVE EFFECT OF ACCOUNTING CHANGE
The Company's first quarter net income has been restated to reflect
a correction of the cumulative effect of adopting FASB Statement
No. 109, "Accounting for Income Taxes." In the first quarter the
Company had estimated the cumulative effect of adopting Statement
No. 109 to be an increase to income of $5.4 million or $.12 per
share (fully diluted), resulting in originally reported net income
for the quarter of $19.6 million or $.45 per share (fully diluted).
During the fourth quarter, the Company reassessed the cumulative
effect and found that it had been overstated by approximately $.9
million or $.02 per share (fully diluted). Accordingly, the first
quarter results have been restated to reflect the revised
cumulative effect from the change in accounting for income taxes of
$4.5 million or $.10 per share (fully diluted), resulting in net
income for the first quarter, as restated, of $18.7 million or $.43
per share (fully diluted).
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations
and financial condition. The discussion should be read in
conjunction with the consolidated condensed financial statements
and notes thereto. The second quarter and first half of both
fiscal 1994 and 1993 covered periods of twelve and twenty-eight
weeks, respectively.
Revenues increased $14.8 million or 6% to $277.5 million
during the second quarter of fiscal 1994 as compared with the second
quarter of fiscal 1993. For the first half of fiscal 1994, revenues
increased $36.3 million to $616.8 million, 6% higher than the same
period of fiscal 1993. An analysis of the increase in revenues is
shown below.
<TABLE>
<CAPTION>
16 Weeks Ended 28 Weeks Ended
May 15, 1994 May 15, 1994
Millions % Millions %
-------- -- -------- --
<S> <C> <C> <C> <C>
Restaurant revenue $ 11.9 80 $ 23.6 65
Manufacturing, distribution
and other sales 2.0 14 7.2 20
Franchise fees .1 1 .7 2
Other income .8 5 4.8 13
----- --- ----- ---
$ 14.8 100 $ 36.3 100
===== === ===== ===
</TABLE>
The Company opened 14 restaurants during the first half of
1994, including nine Shoney's, two Lee's, two Pargo's and one Captain
D's. During the first quarter, the Company sold ten Captain D's
units to a franchisee and closed four other units. Franchisees
opened 45 units during the first half of fiscal 1994 (including the
ten Captain D's purchased from the Company) and closed 37 units.
Comparable store sales of Company-owned restaurants increased 2.6%
for the second quarter, resulting in a real sales increase of .7%
after adjusting for menu price increases. For the first half of
fiscal 1994, comparable store sales of Company-owned restaurant
increased 1.8%, which included a 1.8% menu price increase.
Other income increased $4.8 million in the first half of
fiscal 1994 as compared with the first half of fiscal 1993 as the
result of several factors. During the first quarter of 1994, the
Company sold its minority ownership interests in four Shoney's Inns
to ShoLodge, Inc. ("ShoLodge"), the majority owner. The sale
resulted in a $1.7 million gain, which is included in other income.
In conjunction with the sale, the Company also received future
registration rights for shares of ShoLodge stock that may be
acquired by the Company upon the exercise of
-11-
<PAGE>
certain warrants that it owns. Under the provisions of FASB
Statement No. 115, certain of these warrants were classified as
trading securities and adjusted to fair value resulting in gains
of approximately $1 million in the first quarter of 1994 and
$580,000 in the second quarter, which were included in other income.
(See Note 9--Sale of Motel Joint Ventures). As required by FASB
Statement No. 115, these warrants will be adjusted to their fair
value each quarter. During the second quarter of 1994, the Company
also recorded a decline in value of $448,000 for the warrants and
other ShoLodge common stock held by the Company. In addition, during
the first quarter of 1994, the Company received $.9 million from the
settlement of certain class action securities litigation.
Manufacturing and commissary sales increased 4.6% and 6.0%,
respectively, for the second quarter and first half of fiscal 1994,
when compared with the corresponding periods of 1993. When compared
to restaurant sales, these sales have a higher percentage of food
costs while operating expenses are lower. There is no restaurant
labor associated with these sales.
Cost of sales for the second quarter of fiscal 1994
increased $10.4 million over the same quarter in fiscal 1993 and
equalled 81.4% and 82% of revenues in the second quarters of 1994
and 1993, respectively. Food and supplies decreased as a percentage
of revenues principally due to the increase in other income. During
the second quarter, operating expenses declined as a percentage of
revenues from 19.3% in the second quarter of 1993 to 19% in the same
period this year. This decline was primarily due to the settlement
of a lawsuit against a former insurance carrier for the Company,
which reduced insurance expense for the quarter.
Cost of sales as a percentage of revenues for the first half
of fiscal 1994 decreased to 82.6% from 82.9% in 1993. Food and
supplies as a percentage of revenues increased principally due to
higher food costs at the restaurant level. This increase in costs
resulted from the introduction of a new menu in the Shoney's division
early in the first quarter and an increased cost of whitefish and
other food products in the Captain D's division. For the first half
of 1994, operating expenses as a percentage of revenues decreased due
to the reduction in insurance expense during the second quarter.
General and administrative expenses increased as a percentage
of revenues from 4.9% in the second quarter of 1993 to 5.2% in the
second quarter of 1994. General and administrative expenses in the
second quarter of 1993 were lower than normal due to relatively lower
personnel costs and a significant decline in legal expenses. The
relationship of general and administrative expenses to revenues in the
second quarter of 1994 of 5.2% is the same as the second quarter of
1992. General and administrative expenses as a percentage of revenues
remained unchanged at 5.5% for the first half of 1994 compared to the
first half of 1993 due to the increase in other income.
Interest expense for the second quarter and first half of
1994 was marginally higher as compared to the same periods of fiscal
1993 because there were no material changes in the Company's debt
structure or interest rates.
-12-
<PAGE>
The effective income tax rates for both the second quarter
and first half of 1994 and 1993 were 37.5% and 38.0%, respectively.
The decrease in the effective tax rate for fiscal 1994 is primarily
due to the reinstatement of the Targeted Jobs Tax Credit in August
1993 and the effects of the new tax credit on FICA tips. Effective
November 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required
by FASB Statement No. 109, "Accounting for Income Taxes" (See Note 2--
Changes in Accounting Policies). As permitted under the new rules,
prior years' financial statements have not been restated. The
cumulative effect of adoption of the new Statement during the first
quarter was to increase deferred tax assets and net income by $4.5
million or $.10 per common share.
Cash provided from operations increased $23.6 million to
$68.7 million for the first half of 1994 compared to $45.1 million
for the first half of 1993. This improved cash flow was due primarily
to a reduction in cash required for operating assets and liabilities,
principally inventory and accounts receivable. In the prior year, cash
required for operating assets increased, principally due to the
increase in inventory. Cash used by investing activities during the
first half of 1994 increased by approximately $6.4 million as compared
to the same period in 1993 as the Company continued to construct new
units and expanded its store remodeling program in 1994. In addition,
the Company used $3.4 million of restricted cash in 1993 to purchase
certain restaurants which reduced cash used by investing activities in
the first half of 1993 when compared to the first half of 1994.
Cash used by financing activities increased approximately $14
million in the first half of fiscal 1994 as compared to 1993.
Significant financing activities in the first half of 1994 included an
increase in borrowing under the Company's reducing revolving credit
facility of $50 million that was used to fund a $50 million payment on
the Company's senior debt. In the first half of 1993, borrowings
totaled approximately $21 million which were used to partially fund
long-term debt payments of $24 million. Additional 1994 financing
activities included increased payments required under the terms of
the litigation settlement (See Note 6--Reserve for Litigation
Settlement) of $3.2 million and the repayment of short-term borrowings
of $6.5 million. Cash provided from the exercise of employee stock
options decreased $5.4 million in the first half of 1994 as compared
to the first half of 1993, principally due to the exercise, during
the first half of 1993, of a significant number of options granted
during the Company's 1988 recapitalization. These options had an
expiration date of July 1993.
At May 15, 1994, the Company had cash and cash equivalents
of approximately $10.8 million. The Company has unsecured lines of
credit totalling $30 million under which the Company had borrowings
of $1.5 million outstanding at May 15, 1994. Additionally, the
Company has a $125 million reducing revolving credit facility under
which it had borrowed $65 million at May 15, 1994.
The Company's 12% subordinated debentures, due July 2000,
are redeemable at par at the option of the Company after July 1, 1994.
Subsequent to the end of the quarter, the Company completed financing
necessary to redeem the debentures at par on July 2, 1994. The
-13-
<PAGE>
Company's reducing revolving credit facility was increased from $125
million to $270 million to fund the redemption and the maturity of
the facility was extended from 1997 to October 1999. At current
interest rates, the Company expects this refinancing will reduce the
annual effective interest rate on this debt by approximately 5%.
Unamortized original issue discount and debt issue costs of
approximately $1,710,000 related to the debentures will be expensed
in the third quarter.
Capital expenditures for fiscal 1994 are expected to be
approximately $114 million. The Company expects to meet its needs
for debt service, capital expenditures (excluding those for land and
buildings which are expected to be met through mortgage financing
arrangements), the payments required by the settlement of the class
action litigation and general corporate purposes through cash generated
by the Company's operations and from the Company's reducing revolving
credit facility (See Note 5--Senior Debt).
PART II- OTHER INFORMATION.
ITEM 2. CHANGES IN SECURITIES.
On May 25, 1994, the Company and Harris Trust and Savings
Bank (the "Rights Agent") amended and restated the rights agreement,
originally entered into March 7, 1988, as subsequently amended,
relating to certain common stock purchase rights (the "Rights")
issued by the Company. The terms of the Rights, as previously amended
and as amended and restated on May 25, 1994, were summarized in the
Company's Current Report on Form 8-K filed with the Commission on June
9, 1994. That Current Report on Form 8-K contained as an exhibit a
copy of the amended and restated rights agreement (which included the
forms of Rights Certificate and Election to Exercise). For a complete
description of the changes to the Rights, reference is made to the
Company's Current Report on Form 8-K filed with the Commission on June
9, 1994, which is incorporated herein by this reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) The annual meeting of the Company (the "Annual Meeting")
was held on March 17, 1994. At that time, there were present, in
person or by proxy, 26,498,926 shares of the Company's common stock.
(b) At the Annual Meeting, one item that was submitted to
a vote of shareholders was the election of directors. Proxies for the
Annual Meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934. There was no solicitation in
opposition to management's nominees for director as listed in the
proxy statement and all such nominees were elected.
(c) In addition to the election of directors, there were
submitted to a vote of the shareholders: (1) a proposal by the Company
to amend the Shoney's, Inc. 1981 Stock Option
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<PAGE>
Plan; and (2) a proposal by a shareholder to require the Company
to prepare a report on the Company's policies and programs regarding
certain employment and purchasing matters. The results of that
voting are as follows:
Votes Broker
Proposal Votes For Against Non-votes
-------- --------- ------- ---------
Amendments to the
Shoney's, Inc. 1981
Stock Option Plan 15,747,999 5,846,497 4,609,378
Shareholder Proposal
to Require Report 3,723,547 17,288,145 4,607,201
ITEM 5. OTHER EVENTS.
As of May 3, 1994, the Company amended its reducing revolving
credit agreement to increase the available credit thereunder from
$125,000,000 to $270,000,000. Thereafter, the Company notified holders
of the Company's 12% subordinated debentures due 2000 that the Company
was redeeming the debentures at par on July 2, 1994. The Company plans
to use funds available from the reducing revolving credit facility to
redeem the debentures, $145,700,000 in principal amount of which
currently is outstanding. A copy of the amendment to the Company's
reducing revolving credit agreement is filed as Exhibit 99.1 to this
Quarterly Report on Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) In accordance with the provisions of Item 601 of
Regulation S-K, the following have been furnished as Exhibits to
this Quarterly Report on Form 10-Q:
Exhibit No. Description
----------- -----------
11 Statement regarding computation of earnings
per share.
99.1 Modification Agreement No. 3 dated as of May 3,
1994 to Reducing Revolving Credit Agreement,
dated as of July 21, 1993, among the Company,
various financial institutions now or hereafter
parties thereto and Canadian Imperial Bank of
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<PAGE>
Commerce, New York Agency, filed as Exhibit 99.1
to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 15, 1994 filed with
the Commission on June 29, 1994 and incorporated
herein by this reference.
99.2 Amended and Restated Bylaws of Shoney's, Inc.,
filed as Exhibit 99.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 15,
1994 filed with the Commission on June 29, 1994
and incorporated herein by this reference.
(b) During the quarter ended May 15, 1994, no Current Reports
on Form 8-K were filed by the Company.
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 both on
behalf of the registrant and in his capacity as principal financial
officer of the registrant.
January 30, 1994 SHONEY'S, INC.
By:/s/ W. Craig Barber
---------------------------
W. Craig Barber
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
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<PAGE>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - EXHIBIT 11
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
May 15, 1994 May 9, 1993
------------ -----------
<S> <C> <C>
Primary:
Average shares outstanding 40,948,818 39,426,584
Net effect of dilutive stock options
--based on the treasury stock method
using average market price 380,706 845,358
---------- ----------
Totals 41,329,524 40,271,942
========== ==========
Net income before cumulative effect of
change in accounting principle $ 31,068,719 $ 27,233,323
Cumulative effect of change in
accounting for income taxes 4,468,386
---------- ----------
Net income $ 35,537,105 $ 27,233,323
========== ==========
Earnings per share:
Income before cumulative effect
of change in accounting principle $ .75 $ .68
Cumulative effect of change
in accounting for income taxes .11
--- ---
Net income $ .86 $ .68
=== ===
Fully diluted:
Average shares outstanding 40,948,818 39,426,584
Net effect of dilutive stock options
--based on the treasury stock method
using the quarter-end market price,
if higher than average market price 391,560 869,996
Assumed conversion of 8.5% zero coupon
convertible debentures 5,219,323 5,224,784
---------- ----------
Totals 46,559,701 45,521,364
========== ==========
Net income before cumulative effect of
change in accounting principle $ 31,068,719 $ 27,233,323
Add 8.5% zero coupon convertible
debentures interest, net of income
taxes 2,136,502 1,949,678
---------- ---------
Total before cumulative effect of
change in accounting principle 33,205,221 29,183,001
Cumulative effect of change in
accounting for income taxes 4,468,386
---------- ----------
Net income $ 37,673,607 $ 29,183,001
========== ==========
Earnings per share:
Income before cumulative effect
of change in accounting principle $ .71 $ .64
Cumulative effect of change
in accounting for income taxes .10
--- ---
Net income $ .81 $ .64
=== ===
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Weeks Ended
May 15, 1994 May 9, 1993
------------ -----------
<S> <C> <C>
Primary:
Average shares outstanding 41,088,812 39,774,449
Net effect of dilutive stock
options--based on the
treasury stock method using
average market price 341,699 715,961
---------- ----------
Totals 41,430,511 40,490,410
========== ==========
Net income $ 16,864,677 $ 15,122,140
========== ==========
Earnings per share: $ .41 $ .37
=== ===
Fully diluted:
Average shares outstanding 41,088,812 39,774,449
Net effect of dilutive stock
options--based on the
treasury stock method using
the quarter-end market
price, if higher than
average market price 346,200 723,969
Assumed conversion of 8.5%
zero coupon convertible
debentures 5,214,837 5,224,630
---------- ----------
Totals 46,649,849 45,723,048
========== ==========
Net income $ 16,864,677 $ 15,122,140
Add 8.5% zero coupon
convertible debentures
interest, net of income
taxes 922,841 797,077
---------- ----------
Totals $ 17,787,518 $ 15,919,217
========== ==========
Earnings per share $ .38 $ .35
=== ===
</TABLE>
