United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 July 17, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number: 0-22402
HOMETOWN BUFFET, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0463002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
9171 Towne Centre Drive, Suite 575
San Diego, California 92122
(Address of principal executive offices) (Zip Code)
(619) 546-9096
(Registrant's telephone number, including area code)
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) had been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Number of shares of Common Stock outstanding as of August 27, 1996:
11,667,639
<PAGE>
TABLE OF CONTENTS
Item in
Form 10-Q Page No.
--------- --------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets-
July 17, 1996 and January 3, 1996 ............................3
Consolidated Income Statements-
Twelve Weeks Ended July 17, 1996 and July 12, 1995
and Twenty-Eight Weeks Ended July 17, 1996 and
July 12, 1995 ................................................4
Consolidated Statements of Cash Flows-
Twenty-Eight Weeks Ended July 17, 1996 and
July 12, 1995 ................................................5
Notes to Consolidated Financial Statements ...................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................7
PART II OTHER INFORMATION
Item 1. Legal Proceedings ............................................II-1
Item 4. Submission of Matters to a Vote of Security Holders...........II-I
Item 6. Exhibits and Reports on Form 8-K .............................II-3
2
<PAGE>
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
HomeTown Buffet, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
July 17, January 3,
Assets 1996 1996
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ................. $ 3,172 $ 1,155
Short-term investments .................... 14,958 27,828
Receivables ............................... 2,321 2,830
Inventories ............................... 1,152 1,094
Prepaid expenses .......................... 1,080 865
Pre-opening costs ......................... 1,471 1,784
-------- --------
Total current assets .................... 24,154 35,556
Property and equipment, net ................. 119,275 107,946
Other assets ................................ 3,283 2,355
-------- --------
$146,712 $145,857
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade .................... $ 8,437 $ 12,357
Accrued expenses ........................... 8,130 5,453
Deferred income taxes ...................... 469 542
Current portion of capital leases .......... 2,111 2,012
Short-term debt ............................ 0 2,000
-------- --------
Total current liabilities ................. 19,147 22,364
Deferred income taxes ....................... 1,930 1,530
Long-term portion of capital leases ......... 6,045 7,143
Other liabilities ........................... 1,790 1,102
Long-term debt .............................. 41,500 41,500
Stockholders' equity:
Common stock, $.01 par value.
Authorized 20,000,000 shares;
11,654,379 shares and 11,581,779
shares issued and outstanding at the
end of second quarter 1996 and fiscal
1995, respectively ......................... 117 116
Additional paid-in capital ................. 62,265 62,065
Retained earnings .......................... 13,918 10,037
-------- --------
Total stockholders' equity ................ 76,300 72,218
-------- --------
$ 146,712 $ 145,857
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
HomeTown Buffet, Inc. and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
(Unaudited)
Twelve Weeks Twenty-Eight
Ended Weeks Ended
----------------- -----------------
July 17, July 12, July 17, July 12,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Net restaurant sales ............................. $50,965 $34,589 $112,368 $72,923
Franchise income, net (primarily related party) .. 225 226 569 507
------- ------- ------- -------
Total revenues ................................ 51,190 34,815 112,937 73,430
------- ------- ------- -------
Costs and expenses:
Cost of restaurant sales ......................... 17,767 12,551 39,741 26,580
Restaurant operating expenses:
Labor .......................................... 14,473 9,687 32,445 20,973
Occupancy and other ............................ 8,253 5,372 18,084 11,172
General and administrative expenses .............. 3,096 2,233 7,146 4,838
Depreciation and amortization .................... 3,396 2,278 7,600 4,885
------- ------- ------- -------
Total costs and expenses ...................... 46,985 32,121 105,016 68,448
------- ------- ------- -------
Income from operations ........................ 4,205 2,694 7,921 4,982
Interest expense ................................. (900) (230) (2,114) (410)
Interest income .................................. 244 86 643 195
Other income (expense), net ...................... (5) 28 19 29
------- ------- ------- -------
Net income before income taxes .............. 3,544 2,578 6,469 4,796
Income taxes ..................................... 1,418 954 2,588 1,775
------- ------- ------- -------
Net income .................................. $ 2,126 $ 1,624 $ 3,881 $ 3,021
======= ======= ======= =======
Net income per common and
common equivalent shares $ 0.18 $ 0.14 $ 0.32 $ 0.25
======= ======= ======= =======
Weighted average common and common
equivalent shares 12,091 11,976 12,024 11,947
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
HomeTown Buffet, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twenty-Eight
Weeks Ended
---------------------
July 17, July 12,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................. $ 3,881 $ 3,021
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization .......................... 7,600 4,885
Amortization of premium/discount on investments ........ 0 (41)
Changes in assets and liabilities:
Receivables ............................................ 509 1,832
Inventories ............................................ (58) (161)
Prepaid expenses ....................................... (215) (304)
Pre-opening costs ...................................... (998) (1,035)
Other assets ........................................... (998) 122
Accounts payable, trade ................................ (3,920) (3,827)
Accrued expenses. ...................................... 2,677 1,404
Deferred income taxes .................................. 327 379
Other liabilities ...................................... 688 193
-------- --------
Net cash provided by operating activities............... 9,533 6,468
-------- --------
Cash flows from investing activities:
Purchase of investments ................................ (106,349) (5,645)
Proceeds from sale of investments ...................... 119,219 11,185
Purchase of property and equipment ..................... (17,588) (22,880)
-------- --------
Net cash used in investing activities .................. (4,718) (17,340)
-------- --------
Cash flows from financing activities:
Sale of common stock ................................... 201 84
Proceeds on borrowings ................................. 3,000 20,831
Payments on borrowings ................................. (5,000) (9,375)
Payments on capital leases ............................. (999) (699)
-------- --------
Net cash provided by financing activities .............. (2,798) 10,841
-------- --------
Increase/(decrease) in cash and cash equivalents ...... 2,017 (31)
Cash and cash equivalents at beginning of period ....... 1,155 85
-------- --------
Cash and cash equivalents at end of period ............. $ 3,172 $ 54
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest ............................................... $ 1,672 $ 410
Income taxes ........................................... $ 1,824 $ 1,435
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
HomeTown Buffet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. In the opinion of Management, the accompanying unaudited consolidated
Financial Statements contain all adjustments, which are of a normal
recurring nature, necessary to present fairly the financial position
as of July 17, 1996 and the results of operations for the twelve weeks
ended July 17, 1996 and July 12, 1995 and the results of operations
and cash flows for the twenty-eight weeks ended July 17, 1996 and July
12, 1995. The results of operations for the twelve weeks and
twenty-eight weeks are not necessarily indicative of the results for
the entire fiscal year ending January 1, 1997.
These financial statements have been prepared by HomeTown Buffet, Inc.
(the "Company") pursuant to 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 regulations, although the
Company believes the disclosures provided are adequate to prevent the
information presented from being misleading.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
Annual Report for the fiscal year ended January 3, 1996.
2. Primary and fully diluted net income per share are computed using the
weighted average number of common and dilutive common equivalent
shares assumed to be outstanding during the period. Common equivalent
shares consist of options to purchase common shares. The treasury
stock method was used to calculate the common equivalent number of
shares from options.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
HomeTown Buffet, Inc. (the "Company") operates and franchises scatter
bar buffet restaurants under the name "HomeTown Buffet." As of July 17,
1996, the Company had 77 Company-owned HomeTown Buffet restaurants in
operation in 12 states and 19 franchised restaurants in eight states. The
Company also operates two Roadhouse Grill steakhouse restaurants located in
two states.
On June 3, 1996 the Company announced that it signed a definitive
agreement to combine with Buffets, Inc. through the merger of HomeTown
Buffet, Inc. with a newly-formed, wholly-owned subsidiary of Buffets, Inc.
The definitive agreement provides for all the Company's shareholders
to receive 1.17 shares of Buffets common stock for each share of the
Company common stock that they own. In addition, Buffets would assume
certain obligations under the Company's outstanding 7% Subordinated
Convertible Notes, including the issuance of Buffets common stock upon
conversion thereof. $41.5 million in principal amount of the Notes are
currently outstanding.
Shareholder meetings for the Company's shareholders and Buffets'
shareholders are scheduled for September 19, 1996. If approved by each
company's shareholders, the transaction is expected to close shortly after
the meetings. All of the information herein, and in particular, information
about the Company's expectations for future quarters, should be read in
light of this pending merger.
The Company's fiscal year ends on the Wednesday nearest December 31
and is comprised of fifty-two or fifty-three weeks divided into four
quarters of sixteen, twelve, twelve, and twelve or thirteen weeks,
respectively.
7
<PAGE>
Results of Operations
The following table sets forth the percentage relationship to total
revenues, unless otherwise indicated, of certain income statement data. The
table also sets forth certain restaurant data for the periods indicated.
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Eight Weeks Ended
------------------- ------------------------
July 17, July 12, July 17, July 12,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Net restaurant sales .............. 99.6% 99.4% 99.5% 99.3%
Franchise income, net ............. 0.4 0.6 0.5 0.7
-------- -------- -------- --------
Total revenues ................... 100.0 100.0 100.0 100.0
======== ======== ======== ========
Costs and expenses:
Cost of restaurant sales(1) ....... 34.9 36.3 35.4 36.4
Restaurant operating expenses:
Labor(1) ........................ 28.4 28.0 28.9 28.8
Occupancy and other(1) .......... 16.2 15.5 16.1 15.3
General and administrative
expenses ........................ 6.0 6.4 6.3 6.6
Depreciation and amortization ..... 6.6 6.5 6.7 6.7
Income from operations .......... 8.2 7.7 7.0 6.8
Interest expense ................... (1.8) (0.7) (1.9) (0.6)
Interest income .................... 0.5 0.2 0.6 0.3
Other income (expense), net ....... 0.0 0.1 0.0 0.0
-------- -------- -------- --------
Net income before income taxes .. 6.9 7.4 5.7 6.5
Provision for income taxes ........ (2.8) (2.7) (2.3) (2.4)
-------- -------- -------- --------
Net income ....................... 4.2% 4.7% 3.4% 4.1%
======== ======== ======== ========
Restaurant Data:
Company-owned restaurants .......... 79 55
Franchised restaurants ............. 19 18
-------- --------
Total restaurants .................. 98 73
======== ========
Average weekly net sales during
the period ....................... $ 54,775 $ 56,350 $ 53,802 $ 54,893
Total number of operating weeks
during the period ................ 928 612 2,081 1,323
<FN>
(1) As a percentage of net restaurant sales.
</FN>
</TABLE>
8
<PAGE>
Twelve Weeks Ended July 17, 1996 Compared to Twelve Weeks Ended
July 12, 1995
- ---------------------------------------------------------------
Net restaurant sales. Net restaurant sales increased $16,376,000
(47.3%) to $50,965,000 for the twelve week period ended July 17, 1996 (the
"1996 second quarter") from $34,589,000 for the twelve week period ended
July 12, 1995 (the "1995 second quarter"). This increase was largely the
result of the addition of 25 new HomeTown Buffet restaurants since the 1995
second quarter.
Average weekly net sales per restaurant decreased $1,575 (2.8%) to
$54,775 for the 1996 second quarter from $56,350 for the 1995 second
quarter. The Company is unable to predict average weekly sales in the
remaining quarters of fiscal 1996.
Franchise income. Net franchise income remained constant at $225,000
in the 1996 second quarter compared to $226,000 in the 1995 second quarter.
Franchise income declined to 0.4% of total revenues in the 1996 second
quarter from 0.6% in the 1995 second quarter primarily because of the lower
growth in franchised restaurant revenues as compared to Company-owned
restaurant revenues. The Company expects this trend to continue.
Costs and expenses. Cost of restaurant sales increased $5,216,000
(41.6%) during the 1996 second quarter compared to the 1995 second quarter,
but as a percentage of net restaurant sales declined to 34.9% in the 1996
second quarter from 36.3% in the 1995 second quarter. Management believes
this decrease was due to improved purchasing, improved controls at the
operating units and in part due to a small increase in the average meal
price since the 1995 second quarter.
Restaurant operating expenses increased $7,667,000 (50.9%) during the
1996 second quarter compared to the 1995 second quarter, and as a
percentage of net restaurant sales these expenses increased to 44.6% in the
1996 second quarter from 43.5% in the 1995 second quarter. This increase
was due to higher costs of certain supplies, including paper, as well as
increased expenditures in repairs and maintenance, and the higher rent cost
in the more recently opened locations on the East Coast.
General and administrative expenses increased $863,000 (38.6%) to
$3,096,000 in the 1996 second quarter from $2,233,000 in the 1995 second
quarter but declined slightly as a percentage of total revenues to 6.0%
from 6.4%.
Depreciation and amortization increased $1,118,000 (49.1%) in the 1996
second quarter compared to the 1995 second quarter primarily due to opening
and operation of 24 additional restaurants in the 1996 second quarter. As a
percentage of restaurant sales these expenses remained relatively constant
at 6.6% in the 1996 second quarter compared to 6.5% in the 1995 second
quarter.
Interest expense. Interest expense increased $670,000 in the 1996
second quarter to $900,000 from $230,000 in the 1995 second quarter due to
increased borrowings to fund restaurant development through equipment
financing and the issuance of $41,500,000 convertible subordinated 7% notes
in a public offering in December 1995 (the "1995 Debt Offering").
Interest income. Interest income increased $158,000 in the 1996 second
quarter to $244,000 from $86,000 in the 1995 second quarter due to higher
amounts of excess cash available for investment in the 1996 second quarter.
Cash available for the purchase of investment grade,
9
<PAGE>
interest-bearing securities increased as a result of receipt of net
proceeds of $40.3 million from the 1995 Debt Offering.
Income taxes. Income tax expense of $1,418,000 in the 1996 second
quarter reflects an estimated annual effective tax rate of 40.0% compared
to an estimated annual effective tax rate of 37.0% in the 1995 second
quarter. The increase in the effective tax rate from the 1995 second
quarter to the 1996 second quarter was due to additional state income tax
liabilities and the unavailability in 1996 of net operating loss
carryforwards utilized in 1995.
Twenty-Eight Weeks Ended July 17, 1996 Compared
to Twenty-Eight Weeks Ended July 12, 1995
- -----------------------------------------------
Net restaurant sales. Net restaurant sales increased $39,445,000
(54.1%) to $112,368,000 for the twenty-eight week period ended July 17,
1996 (the "1996 first twenty-eight weeks") from $72,923,000 for the
twenty-eight week period ended July 12, 1995 (the "1995 first twenty-eight
weeks"). This increase was largely the result of the addition of new
HomeTown Buffet restaurants since the 1995 first twenty-eight weeks .
Average weekly net sales per restaurant decreased $1,091 (2.0%) to
$53,802 for the 1996 first twenty-eight weeks from $54,893 for the 1995
first twenty-eight weeks. The Company is unable to predict average weekly
sales in the remaining quarters of fiscal 1996.
Franchise income. Net franchise income increased $62,000 (12.2%) in
the 1996 first twenty-eight weeks compared to the 1995 first twenty-eight
weeks. Franchise income declined to 0.5% of total revenues in the 1996
first twenty-eight weeks from 0.7% in the 1995 first twenty-eight weeks
primarily because of the lower growth in franchised units as compared to
growth in Company-owned restaurant revenues. The Company expects this trend
to continue.
Costs and expenses. Cost of restaurant sales increased $13,161,000
(49.5%) during the 1996 first twenty-eight weeks compared to the 1995 first
twenty-eight weeks but as a percentage of net restaurant sales declined to
35.4% in the 1996 first twenty-eight weeks from 36.4% in the 1995 first
twenty-eight weeks. Management believes this decrease was due to improved
purchasing, improved controls at the operating units and in part due to a
small increase in the average meal price since the 1995 second quarter.
Restaurant operating expenses increased $18,384,000 (57.2%) during the
1996 first twenty-eight weeks compared to the 1995 first twenty-eight
weeks, and as a percentage of net restaurant sales these expenses increased
to 45.0% in the 1996 first twenty-eight weeks from 44.1% in the 1995 first
twenty-eight weeks. This increase was due to higher costs of certain
supplies, including paper, as well as increased expenditures in repairs and
maintenance, and the higher rent cost in the more recently opened locations
on the East Coast.
General and administrative expenses increased $2,308,000 (47.7%) to
$7,146,000 in the 1996 first twenty-eight weeks from $4,838,000 in the 1995
first twenty-eight weeks but declined slightly as a percentage of total
revenues to 6.3% from 6.6%.
10
<PAGE>
Depreciation and amortization increased $2,715,000 (55.6%) in the 1996
first twenty-eight weeks compared to the 1995 first twenty-eight weeks
primarily due to opening and operation of additional restaurants in the
1996 first twenty-eight weeks and the full twenty-eight weeks of
depreciation on the restaurants that opened during the 1995 first
twenty-eight weeks. As a percentage of total revenues these expenses
remained constant at 6.7%.
Interest expense. Interest expense increased $1,704,000 in the 1996
first twenty-eight weeks to $2,114,000 from $410,000 in the 1995 first
twenty-eight weeks due to increased borrowings to fund restaurant
development through equipment financing and the 1995 Debt Offering.
Interest income. Interest income increased $448,000 in the 1996 first
twenty-eight weeks to $643,000 from $195,000 in the 1995 first twenty-eight
weeks due to higher amounts of excess cash available for investment in the
1996 first twenty-eight weeks. Cash available for the purchase of
investment grade, interest-bearing securities increased as a result of
receipt of net proceeds of $40.3 million from the 1995 Debt offering.
Provision for income taxes. Income tax expense of $2,588,000 in the
1996 first twenty-eight weeks reflects an estimated annual effective tax
rate of 40.0% compared to an estimated annual effective tax rate of 37.0%
in the 1995 first twenty-eight weeks. The increase in the effective tax
rate from the 1995 first twenty-eight weeks to the 1996 first twenty-eight
weeks was due to additional state income tax liabilities and the
unavailability in 1996 of net operating loss carryforwards utilized in
1995.
Liquidity and Capital Resources
Almost all of the Company's restaurants generate cash immediately
through sales. The Company does not have significant inventory or trade
receivables (nearly all of its sales are in cash) and it generally receives
several weeks of trade credit in purchasing food and supplies.
The Company's amended credit line with Sanwa Bank of California allows
for borrowings of up to $10 million. As of July 17, 1996, there was no
outstanding principal balance on the credit line; loans under the credit
line bear interest at the bank's reference rate (8.25% on July 17, 1996)
and the credit line expires on April 30, 1998.
The Company plans to open approximately 24 restaurants in fiscal 1996,
of which 9 had been opened through July 17, 1996. The Company has estimated
capital expenditures to be approximately $50 to $55 million in fiscal 1996,
of which approximately $17.6 million had been spent through July 17, 1996.
Actual capital needs could vary significantly depending on the number of
restaurants the Company develops through the lease of space in existing
buildings as compared to the purchase or lease of building sites and the
construction of free-standing restaurants. The development costs for a
restaurant increase substantially when the Company purchases or leases land
for the building site and constructs a free-standing restaurant. The
Company expects that in fiscal 1996 a greater percentage of the restaurant
development will come through the purchase or lease of building sites and
construction of free-standing units as compared to prior years, and that
therefore the Company's average cash investment in new unit development
will be somewhat greater than in prior years.
11
<PAGE>
The Company's expansion plans constitute forward-looking information.
The Company's ability to achieve its projected expansion plans will depend
on a variety of factors, many of which may be beyond the Company's control,
including the Company's ability to locate suitable restaurant sites; to
negotiate acceptable lease or purchase terms; to obtain required
governmental approvals and construct new restaurants in a timely manner; to
attract, train and retain qualified and experienced personnel and
management; to obtain adequate funds; and to continue to operate its
restaurants profitably. Locating suitable restaurant sites at acceptable
costs and on acceptable terms has become increasingly difficult due to an
improved real estate market in the Company's principal areas of planned
expansion, including California. In addition, part of the Company's growth
strategy includes expansion in the Northeast, a geographic region where the
Company has limited experience locating and developing sites and operating
restaurants. Moreover, the Company's construction may be delayed in the
Northeast due to inclement weather conditions and somewhat longer build-out
times and more complex labor relations than the Company experiences in the
western Untied States. Due to these factors and the others set out above,
there is no assurance that the Company will be able to continue to
effectively develop or operate additional restaurants in this region or
that it will be able to expand as planned. There is also no assurance that
additional restaurants that may be opened in the future will be profitable
or that expansion will not result in reduced sales in existing restaurants
in close proximity to new restaurants, and to the extent this reduces cash
flow available for new development and construction, it could cause the
Company to fail to meet its expansion plans. Overall, the Company's forward
looking information concerning planned expansion should be considered in
light of these factors.
The Company expects that proceeds from the 1995 Debt Offering along
with cash flows from restaurant operations, equipment financing, and
borrowings under the Company's credit line will fund planned expansion
through fiscal 1996. The Company will require additional capital to carry
out its current expansion plans beyond fiscal 1996. Various factors,
however, could cause the Company to use capital more rapidly than planned.
These factors include increased expansion, an increased number of
restaurants developed through the purchase or lease of a building site and
the construction of a free-standing building rather than through leased
in-line space, and decreased cash flows from existing or new restaurants.
Although to date the Company has developed each of its restaurants
individually, it has in the past considered expansion through the
acquisition of groups of existing restaurants (including restaurants owned
by its franchisees) and may do so again in the future. In that case the
Company might use capital more rapidly than expected. Moreover, the Company
may not be able to obtain the additional capital required to complete
projected growth. If the Company uses capital more rapidly than expected
and/or fails to obtain the additional required capital through some type of
financing, it would reduce future planned expansion, particularly beyond
fiscal 1996.
12
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On September 12, 1995, the Company was served with a complaint filed
in the Superior Court for the State of California on July 31, 1995. The
complaint asserted that the plaintiffs were denied access to a pre-reserved
banquet room for which they had paid a deposit and that such denial was
racially motivated and done with fraud and malice in Violation of the Unruh
Act, a California anti-discrimination statute. The complaint further
alleged that the Company continues to deny plaintiffs full and equal
accommodations. The complaint sought damages of up to three times actual
damages but not less than $250, without specifying any amount of actual
damages, and further sought exemplary and punitive damages in the amount of
$5 million. Recently, the court granted a motion for summary judgment filed
by the Company on the ground that plaintiffs were not entitled to relief as
a matter of law under the Unruh Act. The court, however, granted plaintiffs
leave to amend the complaint to state claims for breach of contract or in
tort, or both. Regardless, the Company believes the underlying allegations
are without merit and expects to continue to defend itself vigorously.
On August 9, 1996, HTB Restaurants, Inc. ("HTB Restaurants"), a
franchisee of the Company, along with its parent entities, Summit Family
Restaurants, Inc. and CKE Restaurants, Inc. (the "Plaintiffs"), filed suit
against Buffets, Inc. ("Buffets") and the Company in Federal District Court
for the District of Utah, Central Division. The suit alleges, among other
things, that Buffets and the Company have illegally conspired to restrict
competition and to prevent the Plaintiffs from developing additional
HomeTown Buffet restaurants under the multiple unit agreement between the
Company and HTB Restaurants. The suit includes claims against Buffets and
the Company for violations of both federal and state antitrust laws, claims
for unfair business practices, and claims for tortious interference with
contract and economic relations. The suit also alleges claims against the
Company for breach of contract and breach of the covenant of good faith and
fair dealing. Plaintiffs seek up to $160 million in damaged and to enjoin
the merger between Buffets and the Company. The Company and Buffets both
intend to vigorously defend the lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders
On May 14, 1996 at the Company's Annual Meeting, the holders of the
Company's outstanding Common Stock took the actions described below:
1. The stockholders elected the following persons to the Company's
Board of Directors, by the votes indicated below, to serve for the ensuing year.
a. C. Dennis Scott
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
b. Dr. Christian F. Horn
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
II-1
<PAGE>
c. Neal L. Wichard
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
d. Kerry A. Kramp
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
e. Phillip Freidman
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
f. Rebecca McKinnon
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
g. Phillip Ratner
8,447,706 shares in favor
71,537 shares against or withheld
0 abstentions
3,073,061 broker non-votes
2. The stockholders approved, by the vote indicated below, an
amendment to the Company's 1991 Stock Incentive Plan to increase the authorized
shares of Common Stock available under the Plan from 1,600,000 shares to
2,100,000 shares.
7,333,278 shares in favor
1,169,109 shares against or withheld
16,856 abstentions
3,073,061 broker non-votes
II-2
<PAGE>
3. The stockholders ratified, by the vote indicated below, the
appointment of KPMG Peat Marwick as the independent accounts for fiscal
1996.
8,489,980 shares in favor
6,010 shares against or withheld
23,253 abstentions
3,073,061 broker non-votes
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Ex. 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the period for
which this report is filed.
II-3
<PAGE>
Signature
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.
HomeTown Buffet, Inc.
(Registrant)
September 3, 1996 GLENN E. GLASSHAGEL
-------------------------------------------
Chief Financial and
Accounting Officer and Authorized
Officer
II-4
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-1997
<PERIOD-END> JUL-17-1996
<CASH> 3,172
<SECURITIES> 14,958
<RECEIVABLES> 2,321
<ALLOWANCES> 0
<INVENTORY> 1,152
<CURRENT-ASSETS> 24,154
<PP&E> 138,080
<DEPRECIATION> 18,805
<TOTAL-ASSETS> 146,712
<CURRENT-LIABILITIES> 19,147
<BONDS> 41,500
0
0
<COMMON> 62,382
<OTHER-SE> 13,918
<TOTAL-LIABILITY-AND-EQUITY> 146,712
<SALES> 112,368
<TOTAL-REVENUES> 112,937
<CGS> 39,741
<TOTAL-COSTS> 65,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,114
<INCOME-PRETAX> 6,469
<INCOME-TAX> 2,588
<INCOME-CONTINUING> 3,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,881
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
