<PAGE> 1
================================================================================
- --------------------------------------------------------------------------------
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
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 14, 1996 Commission file number 0-7961
TPI ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1899681
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3950 RCA BOULEVARD
SUITE 5001
PALM BEACH GARDENS, FLORIDA 33410
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (407) 691-8800
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Shares, Par Value $.01 per Share
-----------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's common stock is
20,661,822 as of August 23, 1996.
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
Companies for which information is furnished:
TPI Enterprises, Inc.
Maxcell Telecom Plus, Inc.
Telecom Plus Shared Tenant Services, Inc.
TPI Restaurants, Inc.
The Insurex Agency, Inc. (1)
Insurex Benefits Administrators, Inc. (1)
TPI Entertainment, Inc.
TPI-West Palm Inc. (1)
TPI Commissary, Inc. (1)
TPI Transportation, Inc. (1)
TPI Insurance Corporation
(1) Wholly-owned subsidiaries of TPI Restaurants, Inc.
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 14, DECEMBER 31,
1996 1995
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,371 $ 8,744
Accounts receivable-trade (net of allowance for doubtful accounts of $61 in 1996 and
$125 in 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 1,248
Litigation settlement receivable . . . . . . . . . . . . . . . . . . . . . . . . . . --- 30,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,330 13,020
Deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,005 5,728
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,527 3,237
-------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,873 61,977
-------- ----------
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,050 ---
-------- ----------
Property and equipment (at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,184 236,969
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . 83,900 79,637
Less allowance for restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . 8,506 8,752
-------- ----------
134,778 148,580
-------- ----------
Other assets:
Goodwill (net of accumulated amortization of $10,103 in 1996 and $9,431 in 1995) . . 35,723 36,396
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 17,000
-------- ----------
35,723 19,396
Other intangible assets (net of accumulated amortization of $7,346 in 1996 and $6,504
in 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,352 18,298
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628 625
-------- ----------
53,703 38,319
-------- ----------
$237,404 $ 248,876
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,163 $ 24,231
Accounts payable-trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,833 16,052
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . 35,255 30,604
Accrued costs of litigation settlement . . . . . . . . . . . . . . . . . . . . . . . --- 13,537
Income taxes currently payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 618
-------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,741 85,042
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,706 81,628
Reserve for restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,577 8,162
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,629 5,537
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,350 1,641
</TABLE>
3
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 14, DECEMBER 31,
1996 1995
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commitments and contingencies
Shareholders' equity:
Preferred shares - no par value - 20,000,000 shares authorized; none issued and --- ---
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares - .$01 par value - 100,000,000 shares authorized; issued -33,431,029
shares in 1996 and 33,402,553 shares in 1995. . . . . . . . . . . . . . . . . . . . . . 334 334
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,523 226,454
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,731) (90,157)
-------- --------
137,126 136,631
Less treasury stock, at cost, 12,795,230 and 12,805,266 common shares in 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,725 69,765
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,401 66,866
-------- --------
$237,404 $248,876
======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
------------------ ------------------------
JULY 14, 1996 JULY 9, 1995 JULY 14, 1996 JULY 9, 1995
------------- ------------ ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restaurant Revenues $ 66,356 $67,241 $151,290 $150,985
-------- ------- -------- --------
Costs and expenses:
Food, supplies and uniforms . . . . . . 24,120 24,318 55,153 54,723
Restaurant labor and benefits . . . . . 21,183 20,799 48,641 46,333
Restaurant depreciation and amortization 2,707 2,597 6,301 6,919
Other restaurant operating expenses . . 12,620 12,487 29,029 27,608
General and administrative expenses . . 4,728 5,227 11,696 11,677
Provision for asset valuation . . . . . (833) --- (17,000) ---
Closed unit reserve . . . . . . . . . . 4,657 --- 4,657 ---
Restructuring . . . . . . . . . . . . . (136) --- (170) ---
Other . . . . . . . . . . . . . . . . . . 5,247 259 7,113 573
-------- ------- -------- --------
74,293 65,687 145,420 147,833
-------- ------- -------- --------
Operating income . . . . . . . . . . . . . . . (7,937) 1,554 5,870 3,152
-------- ------- -------- --------
Other income and expenses:
Interest income . . . . . . . . . . . . . . . (202) (44) (507) (174)
Interest expense . . . . . . . . . . . . . . 2,454 2,357 5,951 5,590
-------- ------- -------- --------
2,252 2,313 5,444 5,416
-------- ------- -------- --------
Income (loss) for continuing operations before
provision for income taxes . . . . . . . . . . (10,189) (759) 426 (2,264)
Provision for income taxes . . . . . . . . . . --- --- --- ---
Net income (loss) . . . . . . . . . . . . . . . $(10,189) $ (759) $ 426 $ (2,264)
======== ======= ======== ========
Net income (loss) per share . . . . . . . . . $ (.49) $ (.04) $ .02 $ (.11)
======== ======= ======== ========
Primary and fully diluted:
Weighted average number of common and common
equivalent shares used in per share
calculation . . . . . . . . . . . . . . . . . 20,649 20,437 20,635 20,422
======== ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWENTY-EIGHT WEEKS ENDED
----------------------------------
JULY 14, 1996 JULY 9, 1995
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 426 $ (2,264)
---------- ----------
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 8,790 9,660
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (184) ---
Reserve for restructuring . . . . . . . . . . . . . . . . . . . . . . . (170) ---
Provision for asset valuation . . . . . . . . . . . . . . . . . . . . . (17,000) ---
Closed unit reserve . . . . . . . . . . . . . . . . . . . . . . . . . . 4,657 ---
Changes in assets and liabilities:
Accounts receivable-trade . . . . . . . . . . . . . . . . . . . . 607 (392)
Litigation settlement receivable . . . . . . . . . . . . . . . . . 30,000 ---
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,690 792
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 1,706 (132)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (243) (440)
Accounts payable-trade . . . . . . . . . . . . . . . . . . . . . . (2,219) 133
Accrued expenses and other current liabilities . . . . . . . . . . (6,844) 2,224
Income taxes currently payable . . . . . . . . . . . . . . . . . . (128) (134)
Reserve for restructuring . . . . . . . . . . . . . . . . . . . . (1,836) (2,431)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . (109) (110)
---------- ----------
Total adjustments . . . . . . . . . . . . . . . . . . . 20,717 9,170
---------- ----------
Net cash provided by operating activities . . . . . . . . . . . . . . . 21,143 6,906
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . . . . . . . . . . (2,012) (4,943)
Disposition of property and equipment . . . . . . . . . . . . . . . . . 356 662
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 (30)
---------- ----------
Net cash used in investing activities . . . . . . . . . . . . . . (1,593) (4,311)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on Credit Facility . . . . . . . . . . . . . 1,000 (8,400)
Other long-term debt payments . . . . . . . . . . . . . . . . . . . . . (992) (941)
Common shares issued . . . . . . . . . . . . . . . . . . . . . . . . . 69 192
---------- ----------
Net cash provided by (used in) financing activities . . . . . . . 77 (9,149)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . 19,627 (6,554)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . 8,744 17,228
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 28,371 $ 10,674
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments (refunds) during the twenty eight weeks for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,703 $ 4,818
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 134
Non-cash transactions
Capitalized lease obligation . . . . . . . . . . . . . . . . . . . . . $ 299 $ 78
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of July 14, 1996, and the consolidated
statements of operations and cash flows for the periods ended July 14, 1996
and July 9, 1995, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the consolidated financial position at
July 14, 1996 and the consolidated results of operations and consolidated cash
flows for the periods ended July 14, 1996 and July 9, 1995 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the 1995 audited financial statements of the Company included
in its Annual Report on Form 10-K for the year ended December 31, 1995. The
results of operations for the twelve and twenty-eight week periods ended July
14, 1996 and July 9, 1995 are not necessarily indicative of the operating
results for the full year.
NOTE 2 - NET INCOME (LOSS) PER COMMON SHARE
Primary earnings per share amounts are computed by dividing net income by
the weighted average number of common and common equivalent shares (dilutive
options and warrants) outstanding during the period. There were no dilutive
stock options in the 1996 and 1995 period.
Fully diluted earnings per share amounts are similarly computed, but also
include the effect, when dilutive, of the Company's 8 1/4% Convertible
Subordinated Debentures and 5% Convertible Senior Subordinated Debentures,
after the elimination of the related interest requirements, net of income
taxes. The Company's options, warrants, and convertible debentures are
excluded from the July 14,1996 and July 9, 1995 computation due to their
antidilutive effect during these periods.
NOTE 3 - SHONEY'S, INC. TRANSACTION
On March 15, 1996, the Company entered into a Plan of Tax-Free
Reorganization Under Section 368(a)(1)(C) of the Internal Revenue Code and
Agreement (the "Agreement") with Shoney's, Inc. to sell substantially all of
the Company's assets to Shoney's, Inc. (the "Shoney's, Inc. Sale Transaction").
At the closing of the Shoney's, Inc. Sale Transaction, under the terms of the
Agreement, Shoney's, Inc. will deliver to the Company 6,654,451 shares of
Shoney's, Inc,. subject to certain adjustments as provided in the Agreement.
The Company will deliver to Shoney's, Inc. all of the issued and outstanding
shares of capital stock of TPI Restaurants, Inc. ("Restaurants") and its
wholly-owned subsidiaries, TPI Entertainment, Inc. and TPI Insurance
Corporation. Additionally, the Company will transfer certain liabilities, all
intercompany accounts and all cash and cash equivalents of the Company except
for up to $14,850,000 in cash, of which $7,350,000 is designated to pay certain
specified wind-up expenses. If the specified wind-up expenses are less than
the designated $7,350,000, the Company is required to transfer the difference
to Shoney's, Inc.; if the expenses are greater, the excess will be paid from
the remaining $7,500,000 of cash. The $14,850,000 is subject to reduction under
certain other circumstances. Under the Agreement, the amount of the $7,500,000
in retained cash may not exceed an amount which equals 10% of the value of the
shares of Shoney's, Inc. common stock received by the Company. In the event
that the Company is unable to retain all $7,500,000 as a result of this
limitation, Shoney's, Inc. will issue additional shares of its common stock to
the Company. Based on a recent price of $9.375 per share of Shoney's, Inc.
common stock, the retained cash would be reduced by approximately $1,140,000
and approximately 118,000 shares of Shoney's, Inc. common stock will be issued.
The exchange amounts will not be determined until immediately before closing.
To satisfy the requirements for a tax-free reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"), the portion of the $7,350,000
relating to wind-up expenses not accrued for federal income tax purposes at the
closing of the Shoney's, Inc. Sale Transaction, when added to the $7,500,000
(or such lessor amounts as is permitted to be retained) in retained cash not
designated to pay certain specified wind-up expenses, may not exceed an amount
equal to 10% of the Company's net asset value on such date, the Company will
not be able to retain such cash. In addition, an aggregate of up to
approximately $659,000 is required
7
<PAGE> 8
to be set aside by the Company for the benefit of holders of stock options and
warrants of the Company if such stock options and warrants are exercised prior
to the complete liquidation of the Company, which will occur after the
consummation of the Shoney's, Inc. Sale Transaction.
At December 31, 1995, the Company recorded a provision of $17,000,000 to
reduce the carrying value of the net assets to be exchanged to the estimated
fair value of the consideration to be received from Shoney's, Inc. At the end
of the first and second quarters of 1996, the Company reduced this provision by
$16,167,000 and $833,000, respectively, to reflect an increase in the Shoney's,
Inc. stock price from March 15, 1996, the date the Agreement was signed. The
valuation allowance was reflected as a reduction in the Company's recorded
goodwill at December 31, 1995.
The Agreement may be terminated by mutual consent of the Company and
Shoney's, Inc. or by either party under certain circumstances, including if the
closing does not occur prior to September 9, 1996. Management currently expects
the closing of the transaction to occur on September 9, 1996. As a condition
to closing of the Shoney's, Inc. Sale Transaction, the obligations of the
Company under the Debentures must be assumed by Shoney's, Inc. and the Company
released from all obligations thereunder. In addition, as a condition to
closing, Shoney's, Inc. is required to repay in full all amounts owed under the
Senior Debentures and the Company's credit facility (the "Credit Facility").
The Agreement is also subject to the absence of a material adverse change to
the Company or Shoney's, Inc. Shoney's, Inc. received a commitment for its
additional financing necessary to consummate the Shoney's, Inc. Sale
Transaction in May, 1996. The Agreement provides for the payment by the Company
of a break-up fee in the case of certain third party acquisition events or
proposals.
The Agreement requires the Company after closing to wind-down its
operations and distribute, to the Company's shareholders, the shares of
Shoney's, Inc. common stock received in the Shoney's, Inc. Sale Transaction and
any remaining cash amount of the $7,500,000 retained (or such lesser amount as
is permitted to be retained) after paying or making provision for its
liabilities. Management anticipates that the majority of such distributions to
the Company's shareholders will be made during 1996.
NOTE 4 - RESTAURANT CLOSINGS
During the second quarter of 1996, the Company closed 10 of its Shoney's
restaurants and one of its Captain D's restaurants. These underperforming
restaurants were closed to reduce overhead and the impact of the projected cash
flows. In connection with these closings, the Company recorded a provision of
$4,657,000 to write-down the related assets of these restaurants to $5,050,000
which is their estimated fair value at July 14, 1996 and to record
liabilities associated with the closing of these locations. These liabilities
include the cost of future lease payments and other expenses. The Company
reclassified the $5,050,000 discussed above from property, plant and equipment
to assets held for sale on its balance sheet at July 14, 1996. The reserve for
closed stores and the estimated fair value of the remaining assets of these
stores includes management's best estimates. Due to uncertainties inherent in
the estimation process, it is at least reasonably possible that the Company's
estimates of these amounts will change in the near term.
NOTE 5 - RESTRUCTURING CHARGES
The Company's reserve for restructuring was reduced by approximately
$189,000 and $584,000 for the quarter and year-to-date, respectively, for
expenditures related to restaurants closed in connection with the restructuring
plan adopted by the Company as of the end of the fourth quarter of 1993 and by
approximately $209,000 and $356,000 for the quarter and year-to-date,
respectively, for expenditures related to the Company's restructuring of its
divisional management and consolidation of the Company's corporate offices. The
Company also reduced its allowance for restructuring by approximately $80,000
and $246,000 for the quarter and year to date, respectively, for the write off
of assets. At July 14, 1996, the Company's reserve for restructuring of
$10,676,000 represents the amounts owed for lease and other expenses. The
Company has classified $3,099,000 of the reserve for restructuring as a current
liability at July 14, 1996. The Company's allowance for restructuring is
$8,506,000 at July 14, 1996 and represents an amount recorded on its balance
sheet for the write off of assets. The reserve for restructuring and allowance
for restructuring includes management's best estimates of the remaining
liabilities associated with its restructuring and the net realizable value of
property. Due to uncertainties inherent in the estimation process, it is at
least reasonably possible that the
8
<PAGE> 9
Company's estimates of these amounts will change in the near term.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Continuing operations primarily include the results of Restaurants, whose
revenues are derived from restaurant sales. The first quarterly reporting
period consists of 16 weeks, the second, third and fourth quarters are 12 weeks
each in 1996. The restaurant business is seasonal in nature with the second
and third fiscal quarters (Spring and Summer) having higher weekly sales volume
than the first and fourth quarters.
Results of Operations
Revenues
Restaurant revenues are $66.4 million and $151.2 million for the twelve and
twenty-eight week periods ended July 14, 1996, respectively. This represents a
1.3% decrease and a .2% increase, respectively, versus the same periods for
1995. The decrease in the second quarter was driven primarily by the decrease
in the Company's Shoney's concept sales which were down 2.2% versus last year.
The twenty-eight week period increase is primarily a result of a 1.5% increase
in Captain D's concept sales.
Comparable store sales had a decrease of .03% to $65.1 million and an
increase of .08% to $146.3 million for the quarter and the twenty-eight weeks,
respectively. The decrease is due to a decline in comparable store sales at
the Shoney's concept of .67% for the quarter. The overall increase in
comparable store sales was due to a comparable sales increase of of 2.0% year
to date at the Captain D's concept.
New restaurant operations are included in the comparable store sales
computation after they have been operational for sixteen periods. New
restaurant sales were $.4 million and $.9 million for the quarter and the
year-to-date. The Company's operating results include 177 Shoney's and 67
Captain D's units operating at the end of the first twenty-eight weeks of 1996
compared to 188 Shoney's and 69 Captain D's operating at the end of the same
period in 1995.
Cost and Expenses
Cost of sales includes food, supplies and uniforms, restaurant labor and
benefits, restaurant depreciation and amortization, and other restaurant
operating expenses. A summary of cost of sales as a percentage of revenues for
1996 and 1995 is shown below:
<TABLE>
<CAPTION>
=======================================================================================================================
Twelve weeks ended Twenty-eight weeks ended
=======================================================================================================================
July 14, 1996 July 9, 1995 July 14, 1996 July 9, 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Food, supplies and uniforms 36.4% 36.2% 36.5% 36.2%
Restaurant labor and benefits 31.9% 30.9% 32.2% 30.7%
Restaurant depreciation and amortization 4.1% 3.9% 4.2% 4.6%
Other restaurant operating expenses 19.0% 18.6% 19.2% 18.3%
General and administrative 7.1% 7.8% 7.7% 7.7%
- -----------------------------------------------------------------------------------------------------------------------
98.5% 97.4% 99.8% 97.5%
=======================================================================================================================
</TABLE>
The Company's food costs as a percentage of revenues increased .2% for the
quarter and .3% year-to-date due to price increases in several high volume
commodities, primarily pork and produce, and the higher costs of various
promotions which ran during the first and second quarters of 1996. Restaurant
labor and benefits increased as a
9
<PAGE> 10
percentage of sales both for the quarter and year-to-date due to additional
labor being added at the restaurant level to improve customer service.
Restaurant depreciation and amortization was up .2% for the quarter and down
.4% year-to-date. The decrease year-to-date is the result of the Shoney's
South assets acquired by the Company in 1988 becoming fully depreciated in
April of 1995. The increase for the quarter is related to increased
depreciation related to one new store opening in 1995 and additional
depreciation charges for capital expenditures in late 1995 and the first half
of 1996. Other restaurant operating expenses increased as a percentage of
revenues for the quarter and year-to-date primarily due to increases in utility
costs, advertising and rent. Utility costs are up due to the severe weather
conditions in several of the Company's markets during the first quarter of 1996
compared to the same time period in 1995. The increase in advertising costs is
due to an increase in radio and television promotions for the first and second
quarters of 1996 compared to the first and second quarters of 1995.
Advertising costs for the year are expected to remain comparable to the prior
year for the quarter and year-to-date. Rent expense is up year to date in
1996 due largely to the rent associated with the Company's one new store
opening during the second quarter of 1995.
General and administrative expenses are down .7% for the quarter but
consistent with the prior year for the year-to-date period. General and
administrative costs were higher in the first quarter due to inefficiencies
related to turnover in personnel due to the pending Shoney's, Inc. Sale
Transaction and because the Company was in the process of transitioning its
Memphis office to Palm Beach Gardens and was not fully staffed during
the same time period of 1995. The decrease in general and administrative
expenses during the second quarter largely related to savings associated with
the consolidation of the Company's corporate headquarters and cost savings of
approximately $150,000 in divisional costs. Divisional costs are down in the
second quarter due to a realignment which led to a reduced head count.
The provision for asset valuation was reduced by approximately $.8 million
and $16.1 million at the end of the second and first quarter, respectively, to
reflect the increase in the market price of the Shoney's, Inc. common stock to
better reflect the estimated fair value of the consideration to be received by
the Company in connection with the Shoney's, Inc. Sale Transaction. (See Note
3)
The Company recorded a provision of $4.7 million for a closed unit reserve
at the end of the second quarter to record the write-down of assets and accrue
for costs associated with the restaurants closed during the second quarter of
1996. (See Note 4)
Other costs are up for the quarter and year-to-date as a result of
approximately $4.7 million of costs and expenses incurred to date in connection
with the Shoney's, Inc. Sale Transaction.
Other Income and Expenses
Other income and expenses for the second quarter of 1996 and year-to-date
are comparable to 1995. Interest income is up due to interest earned on the
Maxcell litigation settlement proceeds. The increase in interest income is
offset, however, by an increase in interest expense resulting from the
increased borrowings on the Credit Facility.
Liquidity and Capital Resources
The Company has a working capital deficit of $30.9 million at July 14, 1996
compared to a working capital deficit at December 31, 1995 of $23.1 million.
The $7.8 million, or 33% increase in the working capital deficit is primarily
due to additional borrowings of $1.0 million on the Credit Facility, a decrease
of $1.7 million in the Company's current deferred income taxes, a decrease of
$3.6 million in the Company's inventory levels, an increase in accrued expenses
of $4.6 million and a decrease of $2.2 million in accounts payable. The
Company's additional borrowings were required as a result of decreased
operating performance and cash outlays of approximately $1.6 million related to
the approximately $4.8 million of costs and expenses incurred during 1996 as a
result of the pending Shoney's, Inc. Sale Transaction. Inventory was reduced
as a result of an effort by management to reduce carrying costs. Accrued
expenses are up year-to-date as a result of the provisions recorded for the
stores closed in 1996 and the costs related to the Shoney's, Inc. Sale
Transaction. The reduction in accounts payable relates to the decrease in
spending by the Company for inventory.
10
<PAGE> 11
Approximately 88% of the Company's restaurant sales are for cash and the
remainder are for credit card receivables which are generally collected within
3 days. Since the Company's payables are paid over a longer period of time, it
is not unusual for the Company, like many others in the restaurant industry, to
operate with a working capital deficit. However, as a result of the near term
maturity of the Credit Facility, which has caused the indebtedness thereunder
to be classified as a current liability, the working capital deficit as of July
14, 1996 is significantly higher than in prior years and if the Shoney's, Inc.
Sale Transaction is not consummated, the facility should be replaced with long-
term financing. (See "Financing Activities" below)
Operating Activities
Net cash provided by operating activities increased by $14.2 million. This
increase is largely attributable to the receipt during the first quarter of the
Maxcell litigation proceeds of $30.0 million less the payout of approximately
$13.7 million of costs associated with the settlement. Other changes include
those discussed above in connection with the increase in the Company's working
capital deficit.
Investing Activities
Net cash used in investing activities decreased $2.7 million. The decrease
in cash used is the result of a decrease in capital expenditures during the
first and second quarters of 1996 compared to the first and second quarters of
1995. Capital expenditures for 1996 largely relate to maintenance for Shoney's
and Captain D's restaurants and miscellaneous equipment additions. The Company
has not opened any new stores in 1996 and has only spent approximately $100,000
for remodels. The Company plans to hold capital expenditures to a minimum due
to the pending Shoney's, Inc. Sale Transaction.
The Company has various reserved areas with minimum development
requirements for its Shoney's concept. Aggregate commitments beyond 1995
require 35 restaurants to be constructed in the Company's reserved areas in
Phoenix, West Palm Beach, Michigan, Houston, and certain other counties in
Texas prior to October 6, 2004. The Company also has the right to develop
Captain D's restaurants in 124 counties in seven Southeastern states (Alabama,
Arkansas, Georgia, Mississippi, North Carolina and Tennessee). To avoid
termination of the reserved area agreement, the Company is required to open 30
additional Captain D's by July 11, 2011. Due to the pending Shoney's, Inc.
Sale Transaction and the recent performance of Shoney's restaurants, the
Company does not intend to build any Shoney's or Captain D's restaurants in
1996. In the event that the Shoney's, Inc. Sale Transaction does not occur,
the Company will evaluate the requirements under these agreements and its
available capital resources and work with Shoney's, Inc. to revise or extend
them as needed. There can be no assurance that if the Shoney's, Inc. Sale
Transaction does not occur, the Company will be able to revise or extend these
reserved area agreements. However, management believes that an acceptable
agreement could be reached with Shoney's, Inc. If an acceptable agreement can
not be reached, Shoney's, Inc. could terminate these agreements.
Financing Activities
Net cash provided by financing activities was $77,000 for the first half of
1996 compared to the use of $9.1 million in the first half of 1995. During the
first half of 1996, the Company borrowed an additional $1.0 million on the
Credit Facility. These borrowings were necessary due a reduction in cash
provided by operations. Cash provided by operations was down due to decreased
operating performance and cash outlays of approximately $1.6 million related
to approximately $4.8 million of costs and expenses the incurred as a result of
the pending Shoney's, Inc. Sale Transaction.
The Credit Facility was amended as of August 23, 1996. The amendment
extended the Credit Facility's expiration date from August 30, 1996 to the
earliest of September 16, 1996, the date on which the Shoney's, Inc. Sale
Transaction is consummated or the date on which the Agreement is terminated.
The amendment also revised the interest coverage ratio and consolidated
tangible net worth covenants for the second quarter of 1996 and certain terms
that the Company would have been required to meet. The amendment also allowed
the Company to exclude the effects of the provision for store closings in 1996.
(See Note 4) At July 14, 1996, $22.4 million was outstanding on the Credit
Facility and letters of credit in the amount of $10.6 million were outstanding,
resulting in a remaining
11
<PAGE> 12
balance available to borrow of $7.0 million.
In the event the Agreement is terminated, or on September 16, 1996 if the
Shoney's, Inc. Sale Transaction is not theretofore consummated, the Company's
Credit Facility will terminate and all amounts outstanding thereunder become
due unless the Company can renegotiate the Credit Facility. Management
believes that if it has sufficient time to negotiate with its banks, it will
likely be able to obtain an extension with respect to some or all of the
amounts due or obtain alternative sources of financing. However, there can be
no assurance that management will have sufficient time to negotiate or that a
renegotiation can be accomplished or that the terms of the extended Credit
Facility or alternative sources will be as favorable as those currently in
place. In addition, management's opinion is a forward-looking statement; a
number of factors could cause management's view to be incorrect including a
return to a declining trend in same store sales, increased cost pressures,
changes in external or internal conditions which make finding timely sources of
cost effective capital impossible, and termination of the Shoney's Inc. Sale
Transaction. In the event the Shoney's, Inc. Sale Transaction is consummated,
the Company will liquidate and distribute its assets, consisting of shares of
Shoney's, Inc. common stock received in the Shoney's, Inc. Sale Transaction and
any remaining amount of the $7,500,000 in retained cash, after paying or making
adequate provision for liabilities.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reading Company and James J. Cotter v. TPI Enterprises, Inc.
On March 7, 1995, a civil action captioned Reading Company and James J.
Cotter v. TPI Enterprises, Inc. 95 Civ. 1579 (DLC) was filed in the United
States District for the Southern District of New York. The plaintiffs alleged
inter alia breach of contract in connection with the sale in April 1991, to a
subsidiary of American Multi-Cinema, Inc. of TPI Entertainment, Inc.'s interest
in Exhibition Enterprises Partnership. On July 5, 1996, the Company and
plaintiffs entered into a settlement of this matter pursuant to which the
Company paid to the plaintiffs an aggregate of $1,250,000 and received a full
general release. The parties filed with the Court a stipulation of dismissal
and on July 10, 1996, the Court issued an order dismissing the action with
prejudice. The Company recorded an additional provision of $800,000 during the
second quarter as a result of this settlement.
Porpoise Asset Management and Lawrence Capital Management, Inc. v. J. Gary
Sharp, et al.; Brock Weiner v. TPI Enterprises, Inc., et al. and Crandon
Capital Partners, et al. v. TPI Enterprises, Inc., et al.
During 1995, three shareholder suits were filed against the Company and its
Board of Directors. The plaintiffs allege, among other things, that the
Company's shareholders will receive inadequate consideration in the proposed
Shoney's, Inc. Sale Transaction, that the proposed transaction is the result of
unfair dealing and economic coercion and that the Directors have breached their
fiduciary duties to the Company's shareholders to maximize shareholder value.
The plaintiffs seek class action status and to enjoin the proposed transaction
and recover damages. The Company signed a letter of understanding dated March
15, 1996 for the settlement of these three lawsuits. This letter of
understanding followed the execution on March 15, 1996 of the Agreement. The
settlement would entail the payment of up to $250,000 in legal fees and
expenses and the consolidation and settlement of the three lawsuits and is
subject to several conditions, including Court approval of the settlement and
the closing of the Shoney's, Inc. Sale Transaction. On August 8, 1996, the
Court issued an order scheduling a hearing on the settlement for October 29,
1996. Notice of the hearing has been mailed to all members of the class. The
class action settlement will not require any additional payments to be made to
the plaintiffs. The Company recorded a liability at December 31, 1995 for
$250,000.
TPI Restaurants, Inc. v. Marlin Services, Inc., Marlin Electric, Inc., d/b/a/
Marlin Services and The Aetna Casualty and Surety Company and Marlin Electric,
Inc. v. TPI Restaurants, Inc. and Related Matters
On March 7, 1996, the Company filed a civil action in the Circuit Court of
Palm Beach County; captioned TPI Restaurants, Inc. v. Marlin Services, Inc.,
Marlin Electric, Inc., d/b/a/ Marlin Services, Inc. ("Marlin") and The Aetna
Casualty and Surety Company. The Company contends among other things that
Marlin breached the terms of a maintenance service agreement that Restaurants
had entered into with Marlin by failing to perform timely maintenance as
required by the agreement, overcharging for parts and materials, improperly
billing for labor and improperly charging for overhead. On March 7, 1996,
Marlin filed a separate action in the U.S. District Court of Virginia against
Restaurants alleging among other things that Restaurants breached its contract
with Marlin by failing to pay amounts owed under the contract. Marlin claims
damages in excess of $2.2 million through March, 1996.
On June 27, 1996, the Company entered into a settlement with Marlin. The
settlement provides for the payment to Marlin of an aggregate of $1,150,000 in
cash in settlement of the civil action brought by Marlin against Restaurants.
Under the terms of the settlement agreement, Marlin shall be obligated to use
the settlement proceeds to fulfill its obligations with all subcontractors
hired by Marlin to perform work under Marlin's maintenance service agreement
with Restaurants, and Marlin shall be entitled to the excess, if any, after all
of the subcontractors have been paid. No payment shall be made to any
subcontractor unless the subcontractor fully releases Restaurants from any
liability and releases all liens, if any, filed against Restaurants. As part of
the settlement, mutual releases have been exchanged among the parties and the
two civil actions will be dismissed. Based on the terms of the settlement, the
Company currently estimates that it will spend an aggregate of $1,500,000 to
settle this action.
13
<PAGE> 14
The Company recorded an additional provision of $400,000 during the second
quarter as a result of this settlement.
In the Agreement, Shoney's and the Company agreed to provide for a cap in
the amount of repair and maintenance exposure to be assumed by Shoney's, Inc.
based on historical repair and maintenance expenses, with the remainder to be
offset against the $7,350,000 allocated to the Company in the Agreement to pay
certain specified wind-up expenses. The Company currently estimates that
approximately $1,835,000, which includes the $1,500,000 of settlement costs
above, will be offset against the $7,350,000.
Other Proceedings
The Company and its subsidiaries are defendants in various lawsuits arising
in the ordinary course of business. While the result of any litigation
contains an element of uncertainty, it is the opinion of the management of the
Company that the outcome of such litigation will not have a significant adverse
effect on the consolidated financial statements.
14
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders of the Company was held on June
14, 1996.
(b) Election of Directors. All nominees for director were elected
pursuant to the following vote:
<TABLE>
<CAPTION>
Name of Nominee Votes in Favor Withheld
--------------- -------------- --------
<S> <C> <C>
J. Gary Sharp 17,755,881 188,349
Frederick W. Burford 17,755,919 188,311
Osvaldo Cisneros 17,755,619 188,611
Paul James Siu 17,755,619 188,611
Edwin B. Spievack 17,755,919 188,311
Thomas M. Taylor 17,755,919 188,311
Lawrence W. Levy 17,755,719 188,511
John L. Marion, Jr. 17,759,919 188,311
Douglas K. Bratton 17,755,613 188,611
</TABLE>
(c) Ratification of the appointment of Deloitte & Touche LLP as
independent auditors for the Company's fiscal year ending December
29, 1996: 17,859,230 votes in favor; 49,958 votes against and
34,952 shares abstained from voting.
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 Amendment No. 3, dated as of August 23, 1996 to the Second and
Amended and Restated Credit Agreement, dated as of January 31,
1995, by and among TPI Restaurants, Inc. , and banks party
thereto, The Bank of New York, as administrative Agent, and
NationsBank of North Carolina, N.A., a as Collateral Agent, as
amended by Amendment No. 1, dated as of February 29, 1996 and
Amendment No. 2, dated as of May 21.
10.2 Amendment No. 3 to Plan of Tax-Free Reorganization under
Section 368 (a) (1) (c ) of the Internal Revenue Code and
Agreement
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
Registrant filed a current report on Form 8-K dated May 29,
1996 reporting Item 5 - Other Events, acurrent report on Form
8-K dated June 18, 1996 reporting Item 5-Other Events and a
current report on Form 8-K dated July 5, 1996 reporting Item
5-Other Events.
15
<PAGE> 16
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.
TPI Enterprises, Inc.
(Registrant)
Date: August 28, 1996 /s/ J. Gary Sharp
-----------------------------------------
J. Gary Sharp
President & Chief Executive Officer
Date: August 28, 1996 /s/ Frederick W. Burford
-----------------------------------------
Frederick W. Burford
Executive Vice President, Secretary and
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 3 TO THE CREDIT AGREEMENT
AMENDMENT NO. 3 (this "Amendment"), dated as of August 23, 1996, to the
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 31, 1995, by
and among TPI RESTAURANTS, INC., a Tennessee corporation (the "Company"), the
banks party thereto (each a "Bank" and, collectively, the "Banks"), THE BANK OF
NEW YORK, as administrative agent for the Banks (in such capacity, the
"Administrative Agent") and NATIONSBANK, N.A. as successor in interest to
NATIONSBANK, N.A. (CAROLINAS), as Collateral Agent for the Banks (in such
capacity, the "Collateral Agent"), as amended by Amendment No. 1, dated as of
February 29, 1996, and Amendment No. 2, dated as of May 21, 1996 (the "Credit
Agreement").
RECITALS
A. Capitalized terms used herein that are not defined herein and are
defined in the Credit Agreement shall have the same meanings as therein
defined.
B. The Company has requested that the Agents and the Banks extend the
Revolving Credit Termination Date and amend certain financial covenants in the
Credit Agreement and the Banks are willing to do so on the terms and conditions
set forth herein.
In consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. The following definition contained in Paragraph 1.1 of the Credit
Agreement is amended in its entirety to read as follows:
"Revolving Credit Termination Date": the earliest of (i)
September 16, 1996 (ii) the date on which the Plan and Agreement is
consummated and (iii) the date on which the Plan and Agreement is
terminated.
2. Paragraph 7.11 of the Credit Agreement is amended and restated in
its entirety to read as follows:
Maintain as of the last day of each fiscal quarter of the
Company during the fiscal years of the Company set forth below, an
Interest Coverage Ratio of not less than the following:
<TABLE>
<CAPTION>
Fiscal Quarter/Year Ratio
------------------- -----
<S> <C>
Fourth quarter, 1994 1.50:1.00
First quarter, 1995 1.40:1.00
Second quarter, 1995 1.30:1.00
Third quarter, 1995 1.35:1.00
Fourth quarter, 1995 1.50:1.00
</TABLE>
- 1 -
<PAGE> 2
<TABLE>
<S> <C>
First quarter, 1996 1.40:1.00
Second quarter, 1996
and thereafter 1.30:1.00;
</TABLE>
provided, however, that for the purpose of calculating the Interest
Coverage Ratio for any preceding period of four fiscal quarters
which includes the fiscal quarter (i) ending December 31, 1995, the
Company may exclude the effects of the one-time charge taken with
respect to such quarter in an amount not to exceed $25,000,000
arising out of a reduction in the amount of its goodwill, provided
further that commencing on the 30th day after the expiration,
termination or abandonment of the Plan and Agreement, a draft of
which was conditionally approved by the Company's Board of
Directors on February 20, 1996, the Company shall be required to
include the effects of such charge in calculating the Interest
Coverage Ratio for any preceding period of four fiscal quarters
which includes the fiscal quarter ending December 31, 1995, and if
all or any part of such charge is reversed, the amount reversed may
not be included in any calculation of EBIT or Consolidated Tangible
Net Worth, and (ii) ending July 14, 1996, the Company may exclude
the effects of the one-time charge taken with respect to the
closing of Shoney's units 183, 234, 249, 333, 346, 508, 518, 519,
528, 539, 540 and 550 and Captain D's units 438 and 458.
3. Paragraph 7.14 of the Credit Agreement is amended and
restated in its entirety to read as follows:
Maintain as of the last day of each fiscal quarter of the
Company during the fiscal years of the Company set forth below,
Consolidated Tangible Net Worth of not less than the amounts set
forth below:
<TABLE>
<CAPTION>
Fiscal Quarter/Year Amount
------------------- ------
<S> <C>
Fourth quarter, 1994 $26,000,000
First quarter, 1995 $28,000,000
Second quarter, 1995 $27,500,000
Third quarter, 1995 $26,500,000
Fourth quarter, 1995 $26,000,000
First quarter, 1996 $21,000,000
Second quarter, 1996
and thereafter $20,000,000;
</TABLE>
provided, however, that for the purpose of calculating the
Consolidated Tangible Net Worth for any preceding period of four
fiscal quarters which includes the fiscal quarter ending July 14,
1996, the Company may exclude the effects of the one-time charge
- 2 -
<PAGE> 3
taken with respect to the closing of Shoney's restaurant units 183,
234, 249, 333, 346, 508, 518, 519, 528, 539, 540 and 550 and
Captain D's restaurant units 438 and 458.
4. This Amendment shall not be deemed effective until such time
as all of the following conditions precedent shall have been satisfied:
(a) The Agents shall have received a copy of this Amendment
duly executed by the Company, Enterprises, TPI Commissary, TPI Transportation
and the Banks.
(b) The Agents shall have received a certificate, dated the
date hereof, of an officer of the Company (i) attaching a true and complete
copy of the resolutions of the Executive Committee of the Board of Directors
and of all documents evidencing other necessary corporate action (in form and
substance satisfactory to the Administrative Agent) taken by the Company to
authorize this Amendment (ii) certifying that its certificate of incorporation
and by- laws have not been amended since January 31, 1995, or, if so, setting
forth the same and (ii) setting forth the incumbency of its officer or officers
who may sign this Amendment, including therein a signature specimen of such
officer or officers.
(c) The Administrative Agent shall have received an amendment
fee, for the pro rata account of the Banks, in the sum of $25,000.
(d) The Company shall have paid the fees and disbursements of
Special Counsel incurred through and including August 20, 1996, including those
in connection with the preparation, negotiation and closing of this Amendment.
5. The Company, and by their consents hereto, each of Enterprises, TPI
Commissary and TPI Transportation, hereby (a) reaffirms and admits the validity
and enforceability of the Loan Documents to which it is a party and all of its
obligations thereunder, (b) agrees and admits that it has no defenses to or
offsets against any of its obligations to either Agent or any Bank thereunder
and (c) represents and warrants that after giving effect to this Amendment
there will exist no Default or Event of Default.
6. This Amendment may be executed in any number of counterparts, each
of which shall be an original and all of which shall constitute one amendment.
It shall not be necessary in making proof of this Amendment to produce or
account for more than one counterpart signed by the party to be charged.
7. This Amendment is being delivered in and is intended to be
performed in the State of New York and shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of New York,
without regard to principles of conflict of laws (other than Section 5-1401 of
the New York General Obligations Law).
8. Except as amended hereby, the Credit Agreement shall in all other
respects remain in full force and effect and this Amendment shall not be
construed as an amendment of, or a consent to the departure from, any other
provision of the Credit Agreement or a waiver of any Default or Event of
Default except as set forth herein.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
TPI RESTAURANTS, INC.
By:
---------------------------------------
Name: Frederick W. Burford,
Title: Vice President, Treasurer
Chief Financial Officer
and Secretary
THE BANK OF NEW YORK,
Individually and as
Administrative Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
NATIONSBANK, N.A., Individually and as
Collateral Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FIRST AMERICAN NATIONAL BANK
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
- 4 -
<PAGE> 5
CONSENTED TO:
TPI ENTERPRISES, INC.
TPI COMMISSARY, INC.
TPI TRANSPORTATION, INC.
AS TO EACH OF THE FOREGOING:
By:
------------------------------------
Name: Frederick W. Burford,
Title: Vice President and Treasurer
- 5 -
<PAGE> 1
EXHIBIT #10.2
AMENDMENT NO. 3 TO
PLAN OF TAX-FREE REORGANIZATION ON UNDER
SECTION 3 6 8 (a) (1) ( c)
OF THE INTERNAL REVENUE CODE
AND AGREEMENT
This Amendment No.3 ("Amendment"), dated August 21, 1996,
amends the Plan of Tax-Free Reorganization Under Section 368 (a) (1) ( c) of
the Internal Revenue Code and Agreement dated March 15, 1996 as amended by
Amendment No. 1 and Amendment No. 2 thereto (as heretofore amended, the
"Agreement"), by and among Shoney's, Inc., a Tennessee corporation,
("Shoney's"), TPI Restaurants Acquisition Corporation, a Tennessee corporation
( "TPAC"), and TPI Enterprises, Inc., a New Jersey corporation ("Enterprises").
Except as otherwise provided herein, capitalized terms used in
this Amendment have the earnings ascribed to them in the Agreement.
WHEREAS, the parties mutually desire to extend the Termination
Date, as that term is used in this Amendment, from August 30, 1996 to September
9, 1996;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, Shoney's, TPAC and Enterprises agree as
follows:
1. Amendment to ARTICLE 1. The definition of "Termination
'Date" appearing in ARTICLE I of the Agreement is hereby amended to read in its
entirety as follows:
"Termination Date" means September 9, 1996.
2. Consent. Enterprises consents to the amendment of
Shoney's Charter to increase to 200 million, the number of authorized shares
of Shoney's Common Stock, the amendment of Shoney's Stock Plan and the grant of
performance based options covering as many an 2,650,000 shares of Shoney's
Common Stock, as contemplated and described in the Proxy Statement.
3. Reaffirmation of Other Terms and Conditions. Except as
modified by this Amendment, all other terms and conditions of the Agreement, as
in affect prior to the execution of this Amendment, shall remain in full force
and effect and the same are hereby reaffirmed and ratified as if fully set
forth herein.
<PAGE> 2
IN WITNESS WHEREOF, Shoney's, Enterprises and TPAC have caused
this Amendment No. 3 to the Agreement to be signed by their respective officers
thereunto duly authorized, on this _____ day of August, 1996.
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
--------------------------------------
President and Chief Executive Officer
SHONEY'S, INC.
By:
--------------------------------------
W. Craig Barber, Senior Vice President
and Chief Financial Officer
TPI RESTAURANTS ACQUISITION CORP.
By:
--------------------------------------
W. Craig Barber, Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-22-1996
<PERIOD-END> JUL-14-1996
<CASH> 28,371
<SECURITIES> 0
<RECEIVABLES> 701
<ALLOWANCES> 61
<INVENTORY> 9,330
<CURRENT-ASSETS> 43,873
<PP&E> 218,678
<DEPRECIATION> 83,900
<TOTAL-ASSETS> 237,404
<CURRENT-LIABILITIES> 74,741
<BONDS> 80,706
0
0
<COMMON> 334
<OTHER-SE> 67,067
<TOTAL-LIABILITY-AND-EQUITY> 237,404
<SALES> 66,356
<TOTAL-REVENUES> 151,290
<CGS> 60,630
<TOTAL-COSTS> 74,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,454
<INCOME-PRETAX> (10,189)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,189)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
