UNITED STATES 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 September 23, 1996
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-66392
------------------------------------
HOULIHAN'S RESTAURANT GROUP, INC.
Incorporated pursuant to the Laws of Delaware State
------------------------------------
Internal Revenue Service - Employer Identification No. 43-0913506
Two Brush Creek Boulevard, Kansas City, Missouri 64112
(816) 756-2200
------------------------------------
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 requirements
for the past 90 days. Yes x No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes x No
Number of shares of common stock outstanding as of November 7, 1996: 9,998,012
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets............................ 3
Consolidated Statements of Income...................... 4
Consolidated Statements of Cash Flows.................. 5
Notes to Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial Condition 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 14
Signature............................................................. 15
2
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
Sept.23, Dec.25,
1996 1995
-------- --------
(Unaudited)(Audited)
ASSETS
Current assets:
Cash and cash equivalents ................................ $15,395 $10,314
Receivables .............................................. 1,399 1,661
Inventories .............................................. 2,244 2,276
Other current assets ..................................... 1,755 2,918
Deferred income taxes .................................... 3,644 1,401
-------- --------
Total current assets ................................. 24,437 18,570
Property, equipment and leaseholds, net ..................... 105,073 104,521
Reorganization value in excess of amounts allocable to
identifiable assets, net ................................. 59,370 62,108
Deferred debt issuance costs, net ........................... 248 330
Other assets, net ........................................... 5,260 5,487
-------- --------
Total assets ......................................... $194,388 $191,016
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capitalized lease
obligations .......................................... $57,224 $11,202
Accounts payable ......................................... 6,774 8,811
Accrued interest ......................................... 1,030 676
Accrued liabilities ...................................... 13,953 13,375
-------- --------
Total current liabilities ............................ 78,981 34,064
Long-term debt, including capitalized lease obligations, less
current portion .......................................... 26,109 72,779
Other liabilities ........................................... 11,870 10,834
Deferred income taxes ....................................... 4,129 3,147
-------- --------
Total liabilities .................................... 121,089 120,824
-------- --------
Stockholders' equity:
Common stock-par value $.01 per share, 20,000,000 shares
authorized, 9,998,012 shares issued and outstanding .. 100 100
Additional paid-in capital ............................... 59,900 59,900
Retained earnings ........................................ 13,299 10,192
-------- --------
Total stockholders' equity ........................... 73,299 70,192
-------- --------
Total liabilities and stockholders' equity ........... $194,388 $191,016
======== ========
See accompanying notes to consolidated financial statements.
3
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
Quarter Ended Thirty-Nine Weeks Ended
------------------------------ ------------------------------
Sept. 23, Sept. 25, Sept. 23, Sept. 25,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales .................................................. $ 66,821 $ 66,330 $ 202,019 $ 200,749
Cost of sales:
Food and bar costs ...................................... 19,865 19,613 59,260 58,624
Labor costs ............................................. 20,581 21,029 63,391 64,356
Operating expenses (exclusive of depreciation and
amortization shown separately) ........................ 15,491 15,291 46,877 44,561
------------ ------------ ------------ ------------
Total cost of sales ................................. 55,937 55,933 169,528 167,541
------------ ------------ ------------ ------------
Gross profit ........................................ 10,884 10,397 32,491 33,208
Depreciation and amortization .............................. 3,927 3,792 11,571 11,085
General and administrative expenses ........................ 4,140 4,329 12,699 12,408
Loss on disposition of properties, net...................... 81 86 285 475
Other (income), net ........................................ (1,189) (696) (3,630) (2,524)
Interest expense ........................................... 1,697 1,932 5,207 6,371
Merger expenses ............................................ 147 -- 731 --
------------ ------------ ------------ ------------
Income before taxes ................................. 2,081 954 5,628 5,393
Income tax provision ....................................... 682 497 2,521 2,520
------------ ------------ ------------ ------------
Net income .......................................... $ 1,399 $ 457 $ 3,107 $ 2,873
============ ============ ============ ============
Earnings per common and common equivalent share ............ $ 0.14 $ 0.05 $ 0.31 $ 0.29
============ ============ ============ ============
Weighted average common and common
equivalent shares ....................................... 10,078,572 9,998,012 10,042,332 9,998,012
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
39 Weeks Ended
--------------------
Sept. 23, Sept. 25,
1996 1995
-------- --------
Cash flows from operating activities:
Net income .......................................... $ 3,107 $ 2,873
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 11,571 11,085
Amortization of deferred debt issuance costs .... 82 82
Loss on disposition of properties, net .......... 285 475
Deferred income tax benefit ..................... (1,261) (273)
Changes in operating assets and liabilities:
Receivables ................................... 262 31
Inventories ................................... 32 105
Other current assets .......................... 1,163 843
Accounts payable .............................. (2,037) (3,557)
Accrued interest .............................. 354 (983)
Accrued liabilities ........................... 578 (1,123)
Other assets .................................... 493 538
Other liabilities ............................... 1,036 2,305
-------- --------
Net cash provided by operating activities ..... 15,665 12,401
-------- --------
Cash flows from investing activities:
Capital expenditures, excluding capital leases ...... (10,076) (9,140)
Proceeds from disposition of properties ............. 140 818
-------- --------
Net cash used for investing activities ........ (9,936) (8,322)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of long-term debt,
excluding capitalized lease obligations ........... 5,000 7,000
Payments on long-term debt, including capitalized
lease obligations ................................ (5,648) (8,525)
-------- --------
Net cash used for financing activities ........ (648) (1,525)
-------- --------
Net increase in cash and cash equivalents .............. 5,081 2,554
Cash and cash equivalents at beginning of period ....... 10,314 10,310
-------- --------
Cash and cash equivalents at end of period ............. $ 15,395 $ 12,864
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest ............................................ $ 4,771 $ 7,272
======== ========
Income taxes ........................................ $ 2,073 $ 2,707
======== ========
Disclosure of Accounting Policy:
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
See accompanying notes to consolidated financial statements.
5
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 23, 1996
(Unaudited)
1. Basis of Presentation
The consolidated financial statements of Houlihan's Restaurant Group, Inc. and
subsidiary (the "Company") included in this Form 10-Q have been prepared without
audit (except that the balance sheet information as of December 25, 1995 has
been derived from consolidated financial statements which were audited) in
accordance with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make the
information presented not misleading. The accompanying consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 25, 1995.
Company management believes that the information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of the interim periods presented. The results
of operations for the interim periods presented are not necessarily indicative
of those to be expected for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company owns and operates full service casual dining restaurants under the
names of Houlihan's(R), Darryl's(R), Bristol Bar & Grill(sm), Braxton Seafood
Grill & Chophouse(R), Chequers Bar & Grill(sm), J. Gilbert's(sm), Charley's
Place(sm), Phineas(sm) and The Buena Vista(R).
2. Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share are based on the weighted
average number of shares outstanding and the assumed exercise of outstanding
dilutive stock options issued under the Company's stock option plans less the
number of treasury shares assumed to be purchased from the proceeds using the
average market price of the Company's common stock. At September 23, 1996,
warrants to purchase up to 47,740 shares of common stock at a price of $37.92
per share were outstanding. Additional shares of common stock issuable upon the
exercise of these warrants have not been considered in the calculation as the
effect would be antidilutive.
6
<PAGE>
3. Long-Term Debt
Long-term debt, including capitalized lease obligations, is comprised of the
following (in thousands):
September 23, December 25,
1996 1995
------------- -------------
Bank debt:
Term Loan ................................. $ 34,612 $ 40,112
Real Estate Loan .......................... 40,000 40,000
Revolving Credit Loan ..................... 6,000 1,000
Capitalized lease obligations .................. 2,721 2,869
------------- -------------
83,333 83,981
Less: Current portion ......................... 57,224 11,202
------------- -------------
$ 26,109 $ 72,779
============= =============
The Company's bank credit agreement was amended on November 1, 1996, to revise
certain covenants of the agreement (the "Fourth Amendment"). Effective for the
third fiscal quarter of 1996, the minimum fixed charge coverage ratio was
reduced to 1.8. Pursuant to the Third Amendment dated June 24, 1996, the
aggregate Revolving Credit Facility commitment was reduced to $12,500,000 from
$15,000,000 effective October 1, 1996. The Company is in compliance with all
covenants of its bank credit agreement as amended.
The Real Estate Loan and the Revolving Credit Facility are scheduled to mature
on March 31, 1997. The Company intends to refinance its outstanding bank debt
prior to its maturity.
4. Merger Expenses
Merger expenses through September 23, 1996 consisted primarily of professional
fees related to the terminated merger of the Company with Zapata Corporation.
See "Subsequent Event".
5. Contingencies and Commitments
Severance Agreements
In prior years, the Company entered into agreements with certain officers which
provide for severance payments in the event the employment of such officers is
terminated upon a change of control of the Company, as defined in the
agreements. As of September 23, 1996, the contingent liability under the
agreements for all participants was approximately $2,300,000.
6. Subsequent Event
The Company entered into a merger agreement on June 4, 1996 with Zapata
Corporation ("Zapata"), which provided for Zapata's acquisition of the Company
for a combination of cash and stock valued at $8.00 per share. The agreement was
terminated on October 8, 1996 pursuant
7
<PAGE>
to its terms. The termination follows the decision of the Delaware Chancery
Court that a vote of 80% of the Zapata stockholders would be required to approve
the merger. The merger agreement provided that either party could terminate the
agreement if the merger was not consummated by October 1, 1996.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" presented in the Company's Annual Report on Form 10-K for the fiscal
year ended December 25, 1995.
General
The Company operates full service casual dining restaurants in 23 states. At
September 23, 1996, it operated 100 restaurants, including 62 Houlihan's, 28
Darryl's, four upscale Seafood Grills and six Specialty Restaurants comprised of
four dinnerhouses, one upscale steakhouse and the Buena Vista Cafe. At that
date, the Company also franchised 26 Houlihan's restaurants in ten states and
the Commonwealth of Puerto Rico.
Results of Operations
The following table sets forth information derived from the Company's
Consolidated Statements of Income expressed as a percentage of net sales.
<TABLE>
Quarter Ended Thirty-Nine Weeks Ended
----------------------------- -----------------------------
September 23, September 25, September 23, September 25,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales ................................. 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales:
Food and bar costs ................... 29.7 29.6 29.3 29.2
Labor costs .......................... 30.8 31.7 31.4 32.1
Operating expenses ................... 23.2 23.0 23.2 22.2
------------- ------------- ------------- -------------
Total cost of sales .............. 83.7 84.3 83.9 83.5
------------- ------------- ------------- -------------
Gross profit ................... 16.3 15.7 16.1 16.5
Depreciation and amortization ............. 5.9 5.7 5.7 5.5
General and administrative expense ........ 6.2 6.5 6.3 6.2
Loss on disposition of properties, net .... 0.1 0.1 0.1 0.2
Other (income), net ....................... (1.7) (0.9) (1.7) (1.3)
Interest expense .......................... 2.5 2.9 2.6 3.2
Merger expenses ........................... 0.2 -- 0.4 --
------------- ------------- ------------- -------------
Income before income taxes ....... 3.1 1.4 2.7 2.7
Income tax provision ...................... 1.0 0.7 1.2 1.3
------------- ------------- ------------- -------------
Net income ....................... 2.1 % 0.7 % 1.5 % 1.4 %
============= ============= ============= =============
</TABLE>
Net Sales. Net sales for the third quarter increased 0.7% from the same quarter
of 1995 and increased 0.6% for the thirty-nine week period over the same period
of 1995. The increase was primarily due to sales generated by nine new
restaurants that were opened during 1995 and 1996 and one Darryl's restaurant
that was converted to a Specialty Restaurant in 1995. The new
9
<PAGE>
restaurants included eight Houlihan's and one Seafood Grill. The year-to-date
sales increase was also partially due to an increase in comparable sales of 0.9%
in the Seafood Grills concept. However, sales were unfavorably impacted by
inclement winter weather during January and February, which caused 43 of the
Company's restaurants to close for an average of 1.7 days. Additionally, third
quarter sales were affected by inclement weather caused by Hurricane Fran during
September.
"Comparable restaurants" are restaurants open throughout fiscal years 1995 and
1996. The increases (decreases) in comparable restaurant sales, by concept, for
the third quarter and thirty-nine week period of 1996 versus 1995 were as
follows:
Third Quarter Thirty-Nine Week Period
------------------------ -------------------------
Food Bar Total Food Bar Total
Houlihan's ......... (4.1)% (7.1)% (4.8)% (2.8)% (5.3)% (3.4)%
Darryl's ........... (0.4) (0.4) (0.4) (0.5) (1.0) (0.6)
Seafood Grills ..... (0.9) 4.0 (0.1) 0.3 3.3 0.9
Specialty .......... (4.8) 0.2 (3.2) (5.1) (3.1) (4.4)
Total Company ...... (3.0)% (5.1)% (3.4)% (2.1)% (4.1)% (2.6)%
Cost of Sales. Cost of sales as a percentage of net sales decreased during the
third quarter of 1996 from the same period of 1995 and increased during the 1996
year-to-date period from the same period of 1995. Cost of sales are composed of
three major items: food and bar costs, labor costs and operating expenses.
Combined food and bar costs increased slightly during the quarter and
year-to-date periods primarily due to cost increases associated with the new
menu that was implemented in the Darryl's concept during the first quarter. The
new menu, which emphasizes quality wood-fired steaks, was in place in all
Darryl's restaurants by April 1996. Due to the shift in the menu mix to higher
priced items such as steak, food cost for the third quarter was impacted by the
rising cost of beef during the quarter.
Labor costs decreased in both the 1996 quarter and year-to-date period compared
to the 1995 quarter and year-to-date period due primarily to cost savings
realized from new labor scheduling systems that were implemented in a majority
of the Company's restaurants. The new systems are currently in place in all of
the Company's Houlihan's and Darryl's restaurants.
Operating expenses increased to 23.2% from 23.0% during the third quarter and
increased to 23.2% from 22.2% during the year-to-date period due to increases in
promotional expenses. During the first three quarters of 1996, the Company
tested various advertising promotions in selected markets using radio, print,
billboard and television. Additionally, promotional expenses increased due to
the amortization of costs associated with the agreement for the right to name
the Tampa Bay Buccaneer football team's stadium "Houlihan's Stadium".
10
<PAGE>
Depreciation and Amortization Expense. Depreciation and amortization expense as
a percentage of net sales increased during the third quarter and year-to-date
period due to increased capital expenditures from new unit construction and
ongoing restaurant renovation and replacements.
General and Administrative Expenses. General and administrative expenses as a
percent of sales decreased to 6.2% from 6.5% during the third quarter and
increased to 6.3% from 6.2% during the year-to-date period. The decrease during
the quarter was mostly attributable to costs incurred in the prior year quarter
related to a debt registration filed in July that was later withdrawn by the
Company. The increase for the year-to-date period was caused by increasing costs
associated with the continuing rapid growth of the Company's franchise program,
the most significant expense of which related to the training teams associated
with franchise restaurant openings. During the 1996 year-to-date period, eight
franchise Houlihan's were opened as compared to the same period in 1995, in
which two franchise Houlihan's were opened.
Other Income. Other income increased during the 1996 quarter and year-to-date
period primarily as a result of an increase in franchise revenues over the prior
periods. As of September 23, 1996, the Company franchised 26 restaurants and had
signed agreements with 19 franchise development groups providing for the
development of an aggregate of 78 additional Houlihan's over a five to six year
period.
Interest Expense. Interest expense decreased in the 1996 quarter and
year-to-date period compared to the same periods in 1995 due to lower interest
rates during the periods, as well as a lower outstanding debt balance. The
average interest rate on the Company's outstanding bank debt for the 1996
year-to-date period was 7.5% as compared to 9.0% for the same period in 1995.
Merger Expenses. Merger expenses consisted primarily of professional fees
related to the terminated merger of the Company with Zapata Corporation. See
"Liquidity and Capital Resources".
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, was 32.8% for the third quarter of 1996, compared to 52.0% for the
same period of 1995. The year-to-date effective rate was 44.8% in 1996 and 46.7%
in 1995. The lower effective rate for the third quarter was a result of the
increase in pretax income for the period in relation to the fixed amortization
of the reorganization value in excess of amounts allocable to identifiable
assets.
Liquidity and Capital Resources
The Company relies principally upon internally generated funds to finance its
restaurant operations and to fund working capital expenditures. Historically,
the Company has operated with working capital deficiencies. The Company's
ability to operate with such deficiencies is due to the nature of the restaurant
business, which does not require significant investments in
11
<PAGE>
accounts receivable or inventories and which generally allows the procurement of
food and supplies on trade credit. At September 23, 1996, the Company had cash
and cash equivalents of $15,395,000 and a working capital deficiency of
$54,544,000. The larger than normal deficiency is the result of an increase in
the Company's current portion of long-term debt. Current maturities include the
$40,000,000 Real Estate Loan and the $6,000,000 Revolving Credit Loan which are
scheduled to mature on March 31, 1997. Additionally, the Company is required to
make a $5,500,000 principal payment on September 30, 1996 and March 31, 1997 on
its outstanding Term Loan. The Company expects to refinance all of its
outstanding bank debt prior to its maturity.
The Company's bank credit agreement contains various covenants and restrictions
which, among other things, require the maintenance of minimum fixed charge
coverage ratios and interest coverage ratios. The Company did not maintain the
required fixed charge ratio for the third quarter of 1996 and as a result, on
November 1, 1996, the bank credit agreement was amended to revise certain
covenants of the agreement (the "Fourth Amendment"). Effective for the third
fiscal quarter of 1996, the minimum fixed charge coverage ratio was reduced to
1.8. As a result, the Company is currently in compliance with all covenants of
its bank credit agreement as amended. The Company has engaged a bank as agent to
refinance the existing bank debt. At this time, the agent has not secured the
required commitments to complete the refinancing. While the Company intends to
complete the refinancing, there are no assurances that such refinancing will be
obtained and the Company will continue to remain in compliance with all
covenants of its bank credit agreement.
At September 23, 1996, the Company had $4,477,000 available to it under the
$15,000,000 Revolving Credit Facility, reduced by $4,523,000 of outstanding
standby letters of credit and a $6,000,000 outstanding loan. Pursuant to the
Third Amendment to the bank credit agreement dated June 24, 1996, the aggregate
Revolving Credit Facility commitment will be reduced to $12,500,000 effective
October 1, 1996. Additionally, on September 26, 1996, the Company borrowed
$1,950,000 on its Revolving Credit Facility.
Capital expenditures for the 1996 year-to-date period totalled $10,076,000. The
expenditures were incurred for three new Houlihan's and one new Seafood Grill
that were opened during the period, as well as ongoing remodeling projects,
normal restaurant renovations and replacements and the installation of new
management information systems in the Company's restaurants, which was completed
in the second quarter. The Company expects to incur capital expenditures of
approximately $3,000,000 for the remainder of 1996, a majority of which will be
used in connection with opening one Specialty Restaurant. Management believes
that cash on hand, funds to be generated internally from operations and the use
of working capital changes will be adequate to meet the Company's capital
expenditure requirements for the foreseeable future.
The Company entered into a merger agreement on June 4, 1996 with Zapata
Corporation ("Zapata"), which provided for Zapata's acquisition of the Company
for a combination of cash and stock valued at $8.00 per share. The agreement was
terminated on October 8, 1996 pursuant to its terms. The termination follows the
decision of the Delaware Chancery Court that a vote
12
<PAGE>
of 80% of the Zapata stockholders would be required to approve the merger. The
merger agreement provided that either party could terminate the agreement if the
merger was not consummated by October 1, 1996.
Impact of Inflation
Inflationary increases in costs, namely food, labor and operating expenses,
could have a significant impact on the Company's operations. In the past, the
Company has been able to recover inflationary cost increases through increased
food and beverage menu prices. There have been, and there may be in the future,
delays in implementing such menu price increases, and competitive pressures may
limit the Company's ability to recover such cost increases in their entirety.
Historically, the effects of inflation have not had a significant impact on the
Company's net income.
A significant number of the Company's employees are paid hourly rates tied to
federal and state minimum wage and tip credit laws. An increase in the federal
minimum wage was effective October 1, 1996, and other minimum wage increases are
currently proposed by various state governments. Although the Company has and
will continue to attempt to pass along any increased labor costs through food
and beverage price increases, there can be no assurance that all such increased
labor costs can be reflected in its prices or that increased prices will be
absorbed by consumers without diminishing to some degree consumer spending at
the restaurants. However, the Company has not experienced to date a significant
reduction in gross profit margins as a result of changes in such laws, and
management does not anticipate any related future significant reductions in
gross profit margins.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits listed on the accompanying Exhibit Index are filed as part of
this report.
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HOULIHAN'S RESTAURANT GROUP, INC.
(Registrant)
Date: November 7, 1996 By: /s/ William W. Moreton
------------------------- ------------------------------
William W. Moreton
Executive Vice President/Chief
Financial Officer (Principal
Financial and Accounting
Officer)
15
<PAGE>
HOULIHAN'S RESTAURANT GROUP, INC.
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ------------------------------------------------------------
10.1 Fourth Amendment and Consent to Credit Agreement among
Houlihan's Restaurants, Inc. and Caisse Nationale De Credit
Agricole, New York Branch, as agent, dated November 1, 1996.
27 Financial Data Schedule (filed with EDGAR version).
16
<PAGE>
FOURTH AMENDMENT
FOURTH AMENDMENT dated as of November 1, 1996 (this "Amendment"), with
respect to the Credit Agreement dated as of December 28, 1992 (the "Loan
Agreement"), among HOULIHAN'S RESTAURANTS, INC., a Delaware corporation (the
"Borrower"), the financial institutions listed on Schedule A to the Loan
Agreement, which on the date of this Agreement consist solely of Caisse
Nationale de Credit Agricole (the "Banks"), and CAISSE NATIONALE DE CREDIT
AGRICOLE, NEW YORK BRANCH, as Agent, (the "Agent"), as such Loan Agreement has
been amended by that certain First Amendment and Consent dated as of December
14, 1993, that certain Second Amendment and Consent dated as of March 25, 1996
and that certain Third Amendment dated as of June 24, 1996 by and among the
Borrower, the Banks and the Agent.
The Borrower has requested that the Banks and the Agent amend a
covenant of the Loan Agreement, and the Banks and the Agent have agreed to amend
the Loan Agreement, all upon the terms and conditions set forth in this
Amendment.
It is therefore agreed, effective as of the Effective Date (as
hereinafter defined), as follows:
1. Capitalized terms used herein without definition have the meanings
specified in the Loan Agreement.
2. The Loan Agreement is hereby amended as follows:
(a) Section 7.12 of the Loan Agreement is hereby amended by adding the
following sentence to the end of such Section (which was added by the Third
Amendment) to read in its:
"Notwithstanding the terms of this Section 7.12, the minimum Fixed Charge
Coverage Ratio (i) for the second fiscal quarter of fiscal year 1996 shall not
be less than 1.6:1 and (ii) for the third fiscal quarter of fiscal year 1996
shall not be less than 1.8:1.
(b) As material inducement for the Banks and the Agent to enter into this
Amendment, the Borrower hereby agrees to pay to the Agent on behalf of the
Banks amendment fees of (i) $25,000 on the Effective Date and (ii) an
additional $25,000 on December 31, 1996, but such additional fee will not
be payable if the Termination Date has occurred on or before such date.
3. The Borrower hereby represents and warrants to the Banks and the Agent
that:
(a) it has full corporate power and authority to execute, deliver and perform
this Amendment;
<PAGE>
(b) the execution, delivery and performance by the Borrower of this Amendment
have been duly authorized by the Borrower by all requisite corporate action
and will not (i) violate any provision of law, any order, rule or
regulation of any court or other governmental agency, authority or
regulatory body or other person, or The Certificate of Incorporation or
Bylaws of the Borrower, (ii) violate any provision of any material
indenture, agreement, mortgage, contract or other instrument to which the
Borrower is a party or by which any of its property, assets or revenues are
bound, or be in conflict with, result in a breach of or constitute (with or
without notice of lapse of time or both) a default under, any such material
indenture, agreement, mortgage, contract or other instrument, or (iii)
result in the creation or imposition of any Lien of any nature whatsoever
upon any of the property, assets or revenues of the Borrower;
(c) this Amendment constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting creditor's rights generally and
that enforceability may be subject to general principles of equity;
(d) no registration with or consent or approval of, or other action by
stockholders or any Federal, state or other governmental agency, authority
or regulatory body or other person is required in connection with the
execution, delivery and performance of this Amendment;
(e) each Credit Party is now in compliance with all the terms, provisions and
covenants set forth in each of the Loan Documents on its part to be
observed or performed;
(f) no Default or Event of Default has occurred and is continuing;
(g) upon the effectiveness of the amendments contained in this Amendment, (i)
each Credit Party will be in compliance with all the terms, provisions and
covenants set forth in each of the Loan Documents on its part to be
observed or performed and (ii) no Default or Event of Default will have
occurred and be continuing;
(h) all of the representations and warranties contained in the Loan Agreement
are true and correct in all material respects as of the date hereof as if
made on and as of the date hereof; and
(i) the parties to the consent attached hereto as Exhibit A include all the
Borrower's existing Subsidiaries.
4. This Amendment shall become effective on the date (the "Effective Date") of
the receipt by the Agent of the amendment fee referred to in Section
2(b)(i) above and the following documents, in each case in form and
substance satisfactory to the Agent and its legal counsel:
(a) counterparts of this Amendment, duly executed by each of the Borrower and
the Required Banks; and
<PAGE>
(b) certified copies of resolutions of the Board of Directors of the Borrower
approving the execution, delivery and performance of this Amendment and the
documents contemplated hereby; and
(c) a consent in the form of Exhibit A hereto shall have been executed and
delivered by each other Credit Party.
5. The Borrower agrees to pay all reasonable out-of-pockets costs and expenses
incurred by the Agent in connection with the preparation of this Amendment
including, without limitation, the reasonable fees and disbursements of
legal counsel for the Agent.
6. This Amendment shall be construed in accordance with and shall be governed
by the laws of the State of New York applicable to agreements made and to
be performed in New York and shall be construed without regard to any
presumption or any other rule requiring construction against the party
causing the agreement to be drafted.
7. If any provision of this Amendment is invalid or unenforceable, the balance
of this Amendment shall remain in effect.
8. This Amendment may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective as of the
Effective Date when copies hereof, when taken together, bear the signature
of each of the parties hereto.
9. Except as amended hereby, the Loan Agreement and each of the other Loan
Documents shall continue in full force and effect on the date of execution
and delivery of this Amendment. As used in the Loan Agreement, all
references to the terms "Loan Agreement" "this Agreement," "hereof,"
"hereby," or the like shall mean the Loan Agreement, as amended by this
Amendment, unless the context otherwise specifically requires.
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Banks and the Agent have caused
this Amendment to be duly executed, all as of the day and year first above
written.
HOULIHAN'S RESTAURANTS, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Executive Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Richard Manix
Name: Richard Manix
Title: First Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE, NEW YORK BRANCH,
as Agent
By: /s/ Richard Manix
Name: Richard Manix
Title: First Vice President
<PAGE>
CONSENT
Reference is made to that Credit Agreement dated as of December 28,
1992 (the "Loan Agreement") among Gilbert/Robinson, Inc., now known as
Houlihan's Restaurants, Inc. (the "Borrower"), the Banks referred to therein
(the "Banks") and Caisse Nationale de Credit Agricole, New York Branch, as agent
(the "Agent"), as such Loan Agreement has been amended by that certain First
Amendment and Consent dated as of December 14, 1993, that certain Second
Amendment and Consent dated as of March 25, 1996 and that certain Third
Amendment and Consent dated as of June 24, 1996 by and among the Borrower, the
Banks and the Agent. Each of the undersigned, collectively with the Borrower
constituting all of the Credit Parties, hereby (a) acknowledges receipt of and
consents to the execution, delivery and performance of the Fourth Amendment
dated as of November 1, 1996 (the "Fourth Amendment") among the Borrower, the
Banks and the Agent, (b) ratifies and affirms each of the Loan Documents and (c)
acknowledges and agrees that each of the Loan Documents remains in full force
and effect and constitutes its valid and binding obligation, which obligation
shall not be impaired or affected in any way by the execution, delivery or
performance of the Fourth Amendment, except to incorporate modifications
effected by the Fourth. Capitalized terms used herein will have the meanings
specified in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Consent to be duly
executed this November 1, 1996.
HOULIHAN'S RESTAURANTS, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Executive Vice President
DARRYL'S OF KISSIMMEE, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
DARRYL'S OF OVERLAND PARK, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
<PAGE>
DARRYL'S OF ST. LOUIS COUNTY, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
G/R TEXAS ENTERPRISES, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
S&H BEVERAGE CO., INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
HOULIHAN'S/BERGEN COUNTY, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
HOULIHAN'S OF CALIFORNIA, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
HOULIHAN'S OF FARMINGDALE, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
HOULIHAN'S OF INDIANAPOLIS, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
<PAGE>
HOULIHAN'S/MARYLAND, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
HOULIHAN'S/MILWAUKEE, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
HOULIHAN'S/SAN FRANCISCO, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
RED STEER, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
RESTAURANT SUPPLY, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
SAM WILSON'S/KANSAS, INC.
By: /s/ William W. Moreton
Name: William W. Moreton
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's third quarter Form 10-Q and is qualified in its entirety by reference
to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-END> SEP-23-1996
<CASH> 15,395
<SECURITIES> 0
<RECEIVABLES> 1,399
<ALLOWANCES> 0
<INVENTORY> 2,244
<CURRENT-ASSETS> 24,437
<PP&E> 148,930
<DEPRECIATION> 43,857
<TOTAL-ASSETS> 194,388
<CURRENT-LIABILITIES> 78,981
<BONDS> 26,109
0
0
<COMMON> 100
<OTHER-SE> 73,199
<TOTAL-LIABILITY-AND-EQUITY> 194,388
<SALES> 202,019
<TOTAL-REVENUES> 202,019
<CGS> 169,528
<TOTAL-COSTS> 193,798
<OTHER-EXPENSES> 1,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,207
<INCOME-PRETAX> 5,628
<INCOME-TAX> 2,521
<INCOME-CONTINUING> 3,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,107
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
