SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the Quarterly Period Ended
December 27, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 000-22006
DavCo Restaurants, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1633813
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
1657 Crofton Boulevard, Crofton Maryland 21114
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (410) 721-3770
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 than the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of February 8, 1998.
Class: Common Stock, $.001 par value Number of Shares: 6,428,821
DAVCO RESTAURANTS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
for the 13 weeks ended December 27, 1997
and December 28, 1996
Consolidated Balance Sheets as of
December 27, 1997 and September 27, 1997
Consolidated Statements of Cash Flows for the
13 weeks ended December 27, 1997 and
and December 28, 1996
Notes to Unaudited Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted since the items
are either inapplicable or the answer is negative
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. DAVCO RESTAURANTS, INC.
Item 1. CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in 000's except per share data)
<TABLE>
<CAPTION>
For the 13
weeks ended
December 27, December 28,
1997 1996
------------- --------------
<S> <C> <C>
Restaurant Sales $ 61,381 $ 52,029
-------------- --------------
Costs and Expenses:
Cost of restaurant sales 38,069 32,075
Restaurant operating expenses 12,561 10,543
Franchise royalties 2,462 2,082
General and administrative 2,274 1,865
Depreciation and amortization 2,422 2,174
--------------- --------------
57,788 48,739
--------------- --------------
Operating Income 3,593 3,290
Interest expense (1,176) (1,228)
Interest income 5 9
Other income, net 91 253
--------------- ---------------
Income before Provision for Income Taxes 2,513 2,324
Provision for Income Taxes (1,113) (961)
--------------- ---------------
Net Income $ 1,400 $ 1,363
--------------- ---------------
Earnings per Common Share - Basic $ .22 $ .21
--------------- ---------------
Earnings per Common Share - Diluted $ .20 $ .20
--------------- ---------------
Weighted Average Shares Outstanding -
Assuming Full Dilution 7,115 6,947
---------------- ---------------
</TABLE>
See notes to the unaudited consolidated financial statements.
DAVCO RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(in 000's except per share data)
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
------------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,309 $ 640
Receivables 936 580
Inventories 1,966 1,879
Prepaid expenses 3,527 2,121
Deferred tax asset 1,514 1,514
-------------- ---------------
Total Current Assets 9,252 6,734
--------------- ----------------
Property and equipment, net 59,433 58,074
---------------- -----------------
Leased properties, net 33,551 34,355
---------------- -----------------
Other Assets:
Franchise rights, net 4,911 5,015
Development rights, net 479 492
Goodwill, net 21,311 21,514
Other 238 250
----------------- -----------------
Total Other Assets 26,939 27,271
------------------ ------------------
Total Assets $ 129,175 $ 126,434
------------------ ------------------
Current Liabilities:
Accounts payable $ 6,523 $ 6,808
Accrued advertising and royalty fees 2,195 2,426
Accrued salaries and wages 1,599 3,420
Accrued expenses 9,897 10,200
Short-term borrowings 6,548 2,099
Current portion of long-term debt 3,640 3,674
Current portion of capital lease
obligations 2,936 3,034
Income taxes payable 1,090 -
---------------- ------------------
Total Current Liabilities 34,428 31,661
Long-term debt, less current portion 16,755 17,487
Capital lease obligations, less
current portion 24,680 25,374
Deferred taxes payable 278 278
---------------- -------------------
Total Liabilities 76,141 74,800
---------------- -------------------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.001 par value;
11,400,000 shares
authorized and 6,587,628 issued 7 7
Treasury stock, at cost, 158,807 shares (1,320) (1,320)
Additional paid-in capital 31,101 31,101
Warrants outstanding 3,000 3,000
Retained earnings 20,246 18,846
---------------- ------------------
Total Stockholders' Equity 53,034 51,634
----------------- ------------------
Total Liabilities and Stockholders'
Equity $ 129,175 $ 126,434
---------------- ------------------
</TABLE>
See notes to the unaudited consolidated financial statements.
DAVCO RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in 000's)
<TABLE>
<CAPTION>
For the 13 weeks ended
-----------------------
December 27, December 28,
1997 1996
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,400 $ 1,363
Adjustments to reconcile net income to net
cash flows provided by operating activities-
Depreciation and amortization 2,422 2,174
Net change in assets and liabilities (3,391) (795)
----------------- -------------
Net Cash Flows Provided By Operating
Activities 431 2,742
----------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in other assets (26) 49
Property and equipment acquired and
constructed (2,627) (3,330)
----------------- --------------
Net Cash Flows Used In Investing Activities (2,653) (3,281)
------------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease obligations (792) (818)
Repayments of long-term debt, net (766) (576)
Purchase of treasury stock - (236)
Short-term borrowings, net 4,449 1,486
----------------- --------------
Net Cash Flows Provided by (Used In)
Financing Activities 2,891 (144)
----------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS 669 (683)
----------------- --------------
CASH AND CASH EQUIVALENTS,
beginning of period 640 1,948
----------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 1,309 $ 1,265
---------------- ----------------
Supplemental Cash Flow Information:
Cash paid for interest $ 1,241 $ 1,284
---------------- ----------------
Cash paid for income taxes, net of refunds $ 263 $ 108
---------------- -----------------
</TABLE>
See notes to the unaudited consolidated financial statements.
DAVCO RESTAURANTS,INC.
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS DECEMBER 27, 1997
1. DESCRIPTION OF BUSINESS AND BASIS OF
PRESENTATION
As of December 27, 1997, DavCo Restaurants, Inc., a
Delaware corporation (the "Company"), operated 264
restaurants of which 230 are "Wendy's Old Fashioned
Hamburgers" restaurants, making it the world's largest
franchisee of Wendy's International, Inc. ("Wendy's"), and 34
Friendly's restaurants. The Company also manages under
contract 14 other Friendly's restaurants. The Company
maintains exclusive Wendy's franchise territories in
metropolitan Baltimore and Washington, D.C., the eastern
shore of Maryland and portions of northern Virginia (the
"Mid-Atlantic"), where it operates 139 Wendy's restaurants.
The Company also maintains exclusive rights to develop and
operate Friendly's restaurants in Maryland, northern Virginia,
Delaware and Washington, D.C. where it operates 34
Friendly's restaurants. The Company also operates 53
Wendy's restaurants in metropolitan St. Louis and central
Illinois (the "Midwest") and 38 Wendy's restaurants in the
metropolitan Nashville, Tennessee area (the"Southern
Market"). The Company does not maintain exclusive
franchise territories in the Midwest or Southern Market.
In management's opinion, the accompanying interim
consolidated financial statements of the Company include all
adjustments, consisting only of normal, recurring adjustments
necessary for a fair presentation of the Company's financial
position at December 27, 1997 and the results of its
operations and its cash flows for the periods ended December
27, 1997 and December 28, 1996. These statements are
presented in accordance with the rules and regulations of the
Securities and Exchange Commission. Certain information
and footnote disclosures normally included in the Company's
annual consolidated financial statements have been omitted
from these statements, as permitted under the applicable rules
and regulations. Readers of these statements should refer to
the consolidated financial statements and notes thereto as of
September 27, 1997 and for the year then ended. The results
of operations presented in the accompanying financial
statements are not necessarily representative of operations for
an entire year.
Certain reclassifications have been made to the prior year's
balances in order to conform to current year presentation.
The Company maintains its accounts on a 52/53 week fiscal
year. Both the fiscal 1998 and 1997 periods contained 13
weeks.
2. EARNINGS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board
Issued Statement No. 128 (SFAS 128). "Earnings Per Share"
which establishes new standards for computing and presenting
earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997,
including interim periods. This statement requires
presentation of basic and diluted earnings per share. The
Company's adoption of this pronouncement does not impact
earnings per share for the 13 weeks ended December 28,
1996, as previously reported. The Company's earnings per
share according to SFAS 128 are follows (in 000's except per
share data):
<TABLE>
<CAPTION>
13 weeks ended December 27, 1997
--------------------------------
<S> <C> <C> <C>
Per Share
Income Shares amount
---------- ---------- ----------
Basic EPS (Income available to common
stockholders) $ 1,400 6,429 $ 0.22
Dilutive effect of options - 245
Dilutive effect of warrants - 441
---------- ----------- -----------
Diluted EPS (Income available to
common stockholders plus assumed
conversions) $ 1,400 7,115 $ 0.20
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
13 weeks ended December 28, 1996
-----------------------------------
<S> <C> <C> <C>
Per Share
Income Shares amount
---------- ---------- ----------
Basic EPS (Income available to common
stockholders) $ 1,363 6,451 $ 0.21
Dilutive effect of options - 55
Dilutive effect of warrants - 441
----------- ----------- ------------
Diluted EPS (Income available to common
stockholders plus assumed conversions) $ 1,363 6,947 $ 0.20
----------- ----------- ------------
</TABLE>
Options to purchase 220,274 shares of common stock
between $12.00 and $16.13 were outstanding during the 13
weeks ended December 28, 1996 were not included in the
computation of diluted EPS because the options' exercise
price was greater than the average market price of the
common shares during the quarter. During the quarter ended
December 27, 1997, no exercise prices were greater than the
average market price.
3. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is party to a number of legal proceedings which
are considered by management to be customary and incidental
to its business. In the opinion of management, after consulting
with legal counsel, the ultimate disposition of these lawsuits
will not have a material adverse effect on the Company's
financial position or results of operations.
Letters of Credit
As of December 27, 1997, the Company was contingently
liable for outstanding letters of credit relating to liability
insurance, workers' compensation collateral and Wendy's
current royalty requirements, aggregating approximately
$4,970,000.
4. GOODWILL
The company's excess of cost over the fair value of net assets
acquired (or goodwill) is amortized on a straight-line basis
over 30 years. The carrying amount of goodwill is reviewed
if facts and circumstances suggest that it may be impaired. If
this review indicates that goodwill will not be recoverable, as
determined based on the estimated undiscounted cash flows of
the entity acquired over the remaining amortization period, the
carrying amount of the goodwill is reduced by the estimated
shortfall of cash flows.
5. TREASURY STOCK
On May 2, 1996, the Company announced that its Board of
Directors had authorized management to repurchase up to
1,000,000 shares of its common stock on the open market and
in privately negotiated transactions during the following
twenty four months. As of December 27, 1997, the Company
purchased 158,807 shares of its common stock for
$1,319,505. The Company is accounting for the treasury
stock at cost.
6. GOING PRIVATE TRANSACTION
DavCo Restaurants, Inc. has executed a definitive merger
agreement with DavCo Acquisition Holding, Inc. for a merger
transaction in which DavCo Acquisition Holding, Inc. would
acquire all of the Company's issued and outstanding shares
(other than shares held by DavCo Acquisition Holding, Inc.)
for $20 cash per share. The terms of the merger agreement
require approval by a majority of the Company's stockholders,
including approval by a majority of the stockholders
unaffiliated with the investor group. In addition, the merger
is subject to certain conditions, including a limitation on the
number of dissenting shareholders, regulatory approvals and
receipt of necessary financing. The investor group has
obtained a commitment from Global Alliance Finance
Company, L.L.C., a wholly-owned subsidiary of Deutsche
Bank North America, to provide up to $150 million of debt
financing to complete the merger.
PART I.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Components of Revenues and Expenses
The Company's revenues consist entirely of restaurant sales.
Any additional amounts of income are minor and are included
in other income, net.
Restaurant operating profit is computed by subtracting cost of
restaurant sales and restaurant operating expenses from
restaurant sales. Cost of restaurant sales consists of the
Company's expenditures for food, supplies (primarily paper
goods) and direct labor.
Restaurant operating expenses include all other direct costs,
including occupancy costs, advertising expenses, expenditures
for repairs and maintenance, area and regional management
expenses, and workers compensation, casualty and general
liability insurance costs. In addition to franchise royalty
payments, the Company is also required to contribute 4.0% of
its Wendy's restaurant sales to an advertising fund, which
consists of an amount (2.5% of sales) for the Wendy's
National Advertising Program, Inc. and the remainder for
Wendy's local advertising. The Company is required to
contribute 3% of its Friendly's restaurant sales to an
advertising fund managed by Friendly's Restaurants Franchise,
Inc. The fund will be used to enhance recognition of the
trademark products and patronage of Friendly's Restaurants
and Friendly's proprietary branded products.
Franchise royalties, as required by the Company's franchise
agreements with Wendy's International Inc. and Friendly's
Restaurant Franchise, Inc. have remained constant at 4.0% of
restaurant sales throughout the periods presented. General
and administrative expenses consist of corporate expenses,
including executive and administrative compensation, office
expenses and professional fees.
Results of Operations
The following table expresses certain items in the Company's
Consolidated Statements of Operations as a percentage of
restaurant sales for the interim periods indicated.
Note: Friendly's operations began on July 14, 1997,
therefore the related fiscal year 1997 information
consisted solely of Wendy's operations.
<TABLE>
<CAPTION>
For the 13 weeks ended
-----------------------
Consolidated
-------------
Dec. 27, 1997 Dec. 27, Dec. 28,
<S> <C> <C> <C> <C>
Wendy's Friendly's 1997 1996
-------- ---------- ---------- ----------
Restaurant sales 100.0% 100.0% 100.0% 100.0%
Cost of restaurant sales 61.1 69.2 62.0 61.6
Restaurant operating expenses 20.0 24.2 20.5 20.3
--------- ---------- ---------- ----------
Restaurant operating profit 18.9 6.6 17.5 18.1
Franchise royalties 4.0 4.0 4.0 4.0
General and administrative 4.0 1.1 3.7 3.6
Depreciation and amortization 4.2 1.8 3.9 4.2
--------- ---------- ---------- ----------
Operating income 6.7% (0.3%) 5.9% 6.3%
--------- ----------- ----------- -----------
</TABLE>
Thirteen Weeks Ended December 27, 1997 Compared to
Thirteen Weeks Ended December 28, 1996
Wendy's
- --------
Revenues. Company restaurant sales increased to $54.3
million for the 13 weeks ended December 27, 1997 from
$52.0 million for the 13 weeks ended December 28, 1996, an
increase of 4.4%. The increase in sales is attributed to new
stores opened since December 28, 1996 and an increase in
same store sales overall. Same store sales overall increased
2.6% from the same period in fiscal year 1997. Same store
sales for the Mid-Atlantic market increased by 4.2%, for the
Mid-West market increased by 0.7%, and for the Southern
market decreased by 2.1%. The overall improvement in sales
is attributable to improved operations, an expanded menu and
continued guest satisfaction.
The weighted average number of Wendy's restaurants open
was 228.0 for the fiscal 1998 period and 227.6 for the fiscal
1997 period. Average sales per Company Wendy's restaurant
increased to $238,300 for the 13 weeks ended December 27,
1997 from $228,600 for the 13 weeks ended December 28,
1996, a 4.2% increase. The weighted average number of
Mid-Atlantic restaurants open was 137.0 for the fiscal 1998 period
and 133.9 for the fiscal 1997 period, and average sales per
restaurant increased to $273,700 from $259,900, a 5.3%
increase. The weighted average number of Midwest
restaurants open for the fiscal 1998 period was 53.0 and 55.7
for the fiscal 1997 period, and average sales per restaurant
increased 2.5%, to $151,900 from $148,200. The weighted
average number of restaurants operating in the South was 38
for the fiscal 1998 period and the fiscal 1997 period, and
average sales per restaurant decreased to $231,100 from
$236,100, a 2.1% decrease.
Average guest count per Company Wendy's restaurant
increased to 71,600 for the 13 weeks ended December 27,
1997 from 71,400 for the 13 weeks ended December 28,
1996. An average guest check increased to $3.33 from $3.20
for the related periods. This increase is primarily due to the
change in product mix, such as the "Fresh Stuffed PITA"
sandwiches and strategically selected menu items price
increases.
Costs and Expenses. Cost of Wendy's restaurant sales
increased to $33.2 million or 61.1% of sales for the 13 weeks
ended December 27, 1997 from $32.1 million or 61.6% of
sales for the 13 weeks ended December 28, 1996. Cost of
restaurant sales as a percent of sales in the Mid-Atlantic
restaurants decreased to 59.3% in the fiscal 1998 period from
59.8% in the fiscal 1997 period. Comparing the components
of cost of restaurant sales for the Mid-Atlantic restaurants, the
cost of food and supplies remained constant at 33.2% of sales
in the fiscal 1998 period and fiscal 1997 period. Payroll and
benefits expense decreased to 26.1% of sales in the fiscal 1998
period from 26.6% of sales in the fiscal 1997 period. Cost of
restaurant sales as a percent of sales in the Midwest
restaurants decreased to 67.2% in the fiscal 1998 period from
67.8% in the fiscal 1997 period. Comparing the components
of cost of restaurant sales for the Midwest restaurants, the
cost of food and supplies decreased to 34.7% of sales in the
fiscal 1998 period from 35.6% of sales in the fiscal 1997
period. As a percent of sales, payroll and benefits expense
increased to 32.5% of sales in the fiscal 1998 period from
32.3% of sales in the fiscal 1997 period. For the restaurants
operating in the South, cost of restaurant sales was 62.9% of
sales for the 13 weeks ended December 27, 1997, and 63.0%
of sales for the 13 weeks ended December 28, 1996.
Comparing the components of cost of restaurant sales for the
South restaurants, the cost of food and supplies decreased as
a percentage of sales to 33.3% in the fiscal 1998 period from
33.9% in the fiscal 1997 period. As a percent of sales, payroll
and benefits expense increased to 29.6% of sales in the fiscal
1998 period from 29.1% of sales in the fiscal 1997 period. The
Wendy's consolidated decrease in food and supplies cost is
related to a change in the product mix such as the new "Fresh
Stuffed PITA" sandwiches which produced slightly better
margins, removal of salad bars and selected menu items price
increases. The consolidated decrease in labor cost as a
percentage of sales is related to Wendy's operating more efficiently
and the leveraging effect of increased sales. These factors more than
offset the negative impact of the increase in the Federal
Minimum wage.
Restaurant operating expenses increased to $10.9 million for
the 13 weeks ended December 27, 1997 from $10.5 million
for the 13 weeks ended December 28, 1996. Restaurant
operating expenses as a percent of sales were 20.0% and
20.3% for the fiscal 1998 and fiscal 1997 periods,
respectively. Restaurant operating expenses in the
Mid-Atlantic restaurants decreased to 19.6% in the fiscal 1998
period from 19.9% in the fiscal 1997 period. Restaurant
operating expenses in the Midwest restaurants decreased to
23.6% of sales in the fiscal 1998 period from 23.7% of sales
in the fiscal 1997 period. As a percent of sales, restaurant
operating expenses for the restaurants operating in the
South decreased to 18.2% for the 13 weeks ended December
27, 1997 from 18.5% for the 13 weeks ended December 28,
1996. The overall slight decrease in Wendy's restaurant
operating expenses as a percentage of sales can be attributed
to the leveraging effect of increased sales.
Friendly's
- ----------
The operations of Friendly's restaurants began on July 14,
1997, therefore there is no comparable information for the
fiscal 1997 period. The revenue from the Friendly's
operations was $7.0 million for the 13 weeks ended December
27, 1997. Cost of Friendly's restaurant sales was 69.2% of
sales, which is comprised of 34.3% for food and supplies and
34.9% for payroll and benefits. Friendly's restaurant
operating expenses constituted 24.2% of sales. Due to
seasonal fluctuations management believes that these results
are not necessarily indicative of an entire year's results.
The following discussion is based on the consolidated Company:
- --------------------------------------------------------------
General and administrative expenses increased as a percentage
of sales to 3.7% for the 13 weeks ended December 27, 1997
from 3.6% of sales for the 13 weeks ended December 28,
1996. The slight increase in general and administrative
expenses can be related to the additional expenses incurred
with increased sales such as bonus accruals.
Depreciation and amortization expense decreased as a
percentage of sales from 4.2% for the fiscal 1997 period to
3.9% for the 1998 fiscal period. The decrease as a percentage
of sales directly related to the leveraging effect of higher sales.
Depreciation and amortization increased to $2.4 million from
$2.2 million in the related periods. The additional
depreciation and amortization related to new assets acquired
since December 28, 1996, which included assets acquired
from the Friendly's acquisition.
Non-Operating Charges. Interest expense decreased slightly
to $1,176,000 for the 13 weeks ended December 27, 1997
from $1,228,000 for the 13 weeks ended December 28, 1996.
Interest income decreased to $5,000 in the fiscal 1998 period
from $9,000 in the fiscal 1997 period. The provision for
income taxes increased to $1,113,000 for the 13 weeks ended
December 27, 1997 from $961,000 for the 13 weeks ended
December 28, 1996. The Company's effective tax rate for the
fiscal year 1998 is expected to be the same as fiscal year 1997.
Liquidity and Capital Resources
The Company has historically financed its business activities
primarily from cash generated from operations and from long-term debt,
"build-to-suit" leases, ground leases and sale/leasebacks.
The Company has reviewed its policy of leasing all of its
new restaurants and has determined that it
may be in the Company's best interest to own certain
properties. Accordingly, during the 13 weeks ended
December 27, 1997, the Company purchased the land and/or
buildings for certain of its new restaurants. The Company
plans to continue this policy during the remainder of fiscal
year 1998.
Cash flow provided by operating activities was $431,000
for the 13 weeks ended December 27, 1997. Net cash used in
investing activities was $2.7 million for fiscal 1998 period,
which primarily consisted of capital expenditures and related
land acquisitions for new Company restaurants opened during
the period, and for additional restaurants under construction.
Financing activities during the 13 weeks ended December 27,
1997 provided net cash of $2.9 million, which reflected short-term
borrowings offset by capital lease and debt repayments.
The net change in cash and cash equivalents during the 13
weeks ended December 27, 1997 was an increase of
$669,000.
The Company anticipates that its future capital requirements
will be primarily for the development of new restaurants,
upgrading of existing restaurants and possible acquisitions.
On July 15, 1997 the Company signed an agreement
combining the revolving line of credit for $13 million and the
$5 million credit facility to form an $18 million revolving
credit facility. Also, on July 15, 1997, the Company's wholly
owned subsidiary FriendCo Restaurants, Inc. signed a $10
million term loan facility which was used to fund the purchase
price and start up costs for the Friendly's transaction.
Management anticipates that cash provided by operating
activities, cash on hand, the revolving line of credit facility of
$18 million, and the term loans will enable the Company to
meet its cash requirements through the remainder of fiscal
1998. The Company may take advantage of opportunities to
finance some it its new restaurant development with more
permanent debt or sale/leaseback financing, if such financing
is available at attractive rates and terms.
PART II.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description
27.1 Article 5 of Regulation S-X Financial
Data
Schedule for first quarter Form 10-Q (for
SEC use only)
(b) Reports on Form 8-K:
The company filed a report on Form 8-K on January 8,
1998 disclosing the agreement between the Company and
Wendy's International regarding the proposed going private
transaction.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act or 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
DAVCO RESTAURANTS, INC.
February 10, 1998 /S/ RONALD D.KIRSTIEN
---------------------
Ronald D. Kirstien
President and Director
February 10, 1998 /S/ CHARLES C. MCGUIRE, III
---------------------------
Charles C. McGuire, III
Vice President of Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF DECEMBER 27, 1997, AND THE STATEMENT OF OPERATONS FOR THE
13 WEEKS ENDED DECEMBER 27, 1997, 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> SEP-26-1998
<PERIOD-START> SEP-28-1997
<PERIOD-END> DEC-27-1997
<CASH> 1309
<SECURITIES> 0
<RECEIVABLES> 936
<ALLOWANCES> 0
<INVENTORY> 1966
<CURRENT-ASSETS> 9252
<PP&E> 118666
<DEPRECIATION> 25682
<TOTAL-ASSETS> 129175
<CURRENT-LIABILITIES> 34428
<BONDS> 41435
0
0
<COMMON> 7
<OTHER-SE> 53027
<TOTAL-LIABILITY-AND-EQUITY> 129175
<SALES> 61381
<TOTAL-REVENUES> 61381
<CGS> 38069
<TOTAL-COSTS> 50630
<OTHER-EXPENSES> 7158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1176
<INCOME-PRETAX> 2513
<INCOME-TAX> 1113
<INCOME-CONTINUING> 1400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1400
<EPS-PRIMARY> 0.22<F1>
<EPS-DILUTED> 0.20<F1>
<FN>
<F1>EARNINGS PER SHARE DATA IS IN ACTUAL DOLLARS. MULTIPLIER NOT APPLICABLE.
</FN>
</TABLE>
