-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sej60gNQcYKQAPcImmcXQJ8k3uJGfJOx25IGtYADiig/TUCNSaBaO8p3uKiKZzoV fuwoW4RPyWLeEeCZ5avPzQ== 0000950152-96-000154.txt : 19960119 0000950152-96-000154.hdr.sgml : 19960119 ACCESSION NUMBER: 0000950152-96-000154 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951210 FILED AS OF DATE: 19960118 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRISCHS RESTAURANTS INC CENTRAL INDEX KEY: 0000039047 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 310523213 STATE OF INCORPORATION: OH FISCAL YEAR END: 0530 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07323 FILM NUMBER: 96505195 BUSINESS ADDRESS: STREET 1: 2800 GILBERT AVE CITY: CINCINNATI STATE: OH ZIP: 45206 BUSINESS PHONE: 5139612660 MAIL ADDRESS: STREET 1: 2800 GILBERT AVE CITY: CINCINNATI STATE: OH 10-Q 1 FRISCH'S RESTAURANTS, INC. 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR QUARTER ENDED DECEMBER 10, 1995 COMMISSION FILE NUMBER 1-7323 FRISCH'S RESTAURANTS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 31-0523213 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2800 GILBERT AVENUE, CINCINNATI, OHIO 45206 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 513-961-2660. ------------ Not Applicable - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 total number of shares outstanding of the issuer's no par common stock, as of December 29, 1995 was: 6,882,609 2
TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF EARNINGS ........... 3 CONSOLIDATED BALANCE SHEET ................... 4 - 5 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY 6 CONSOLIDATED STATEMENT OF CASH FLOWS ......... 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ... 8 - 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......... 13 - 14 PART II - OTHER INFORMATION 14
3 FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
Twenty-eight Weeks Ended Twelve Weeks Ended ----------------------------- ---------------------------- December 10, December 11, December 10, December 11, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- REVENUE Sales $91,084,119 $88,771,844 $38,877,144 $38,491,436 Other 787,226 937,082 328,222 381,526 ----------- ----------- ----------- ----------- Total revenue 91,871,345 89,708,926 39,205,366 38,872,962 COST AND EXPENSES Cost of sales Food and Paper 28,863,530 28,313,377 12,360,221 12,347,249 Payroll and related 31,997,368 30,257,971 13,663,231 13,222,534 Other operating costs 22,744,615 21,754,946 9,783,604 9,296,106 ----------- ----------- ----------- ----------- 83,605,513 80,326,294 35,807,056 34,865,889 General and administrative 2,246,841 2,528,538 713,941 833,622 Advertising 2,267,764 2,201,241 964,129 957,406 Interest 1,293,394 975,612 559,882 470,532 ----------- ----------- ----------- ----------- Total costs and expenses 89,413,512 86,031,685 38,045,008 37,127,449 ----------- ----------- ----------- ----------- Earnings before income taxes 2,457,833 3,677,241 1,160,358 1,745,513 INCOME TAXES 787,000 1,366,000 372,000 638,000 ----------- ----------- ----------- ----------- NET EARNINGS $ 1,670,833 $ 2,311,241 $ 788,358 $ 1,107,513 =========== =========== =========== =========== Primary and fully diluted net earnings per share of common stock $ .24 $ .34 $ .11 $ .16 =========== =========== =========== ===========
The accompanying notes are an intergral part of these statements. 3 4 FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS
December 10, May 28, 1995 1995 (unaudited) ------------ ------------- CURRENT ASSETS Cash $ 1,102,525 $219,650 Receivables Trade 979,611 986,360 Other 509,481 560,122 Inventories 4,200,854 3,945,660 Prepaid expenses and sundry deposits 1,997,144 1,705,463 Prepaid and deferred income taxes 536,226 723,523 ------------ ------------- Total current assets 9,325,841 8,140,778 PROPERTY, EQUIPMENT AND CAPITALIZED LEASES - AT COST Land and improvements 24,580,222 23,623,581 Buildings 55,221,525 53,292,215 Equipment and fixtures 54,249,695 53,466,613 Leasehold improvements and buildings on leased land 24,759,165 24,404,208 Capitalized leases 10,030,938 9,640,938 Construction in progress 1,031,599 3,226,921 ------------ ------------- 169,873,144 167,654,476 Less accumulated depreciation and amortization 72,492,391 69,596,486 ------------ ------------- 97,380,753 98,057,990 OTHER ASSETS Intangible assets 762,898 765,092 Investments in land - at cost 2,420,235 641,764 Property held for sale 1,068,949 1,966,681 Net cash surrender value-life insurance policies 3,392,395 3,162,902 Deferred income taxes 409,643 409,643 Other 2,507,673 2,403,243 ------------ ------------- 10,561,793 9,349,325 ------------ ------------- $117,268,387 $115,548,093 ============ =============
The accompanying notes are an integral part of these statements. 4 5 LIABILITIES
December 10, May 28, 1995 1995 (unaudited) ------------- ------------- CURRENT LIABILITIES Long-term obligations due within one year Long-term debt $1,834,012 $2,206,048 Obligations under capitalized leases 523,594 466,035 Self insurance 2,681,492 1,221,460 Accounts payable 8,424,977 8,572,166 Accrued expenses 5,534,547 5,758,656 ------------ ------------ Total current liabilities 18,998,622 18,224,365 LONG-TERM OBLIGATIONS Long-term debt 18,618,684 18,437,837 Obligations under capitalized leases 6,493,025 6,409,216 Self insurance 5,799,750 5,641,927 Other 2,277,223 2,207,356 ------------ ------------ 33,188,682 32,696,336 COMMITMENTS - - SHAREHOLDERS' EQUITY Capital stock Preferred stock - authorized, 3,000,000 shares without par value; none issued - - Common stock - authorized, 12,000,000 shares without par value; issued, 7,080,195 and 6,808,939- stated value $1 7,080,195 6,808,939 Additional contributed capital 56,794,272 54,624,224 ------------ ------------ 63,874,467 61,433,163 Retained earnings 4,634,762 6,622,375 ------------ ------------ 68,509,229 68,055,538 Less cost of treasury stock (197,586 and 189,987 shares) 3,428,146 3,428,146 ------------ ------------ 65,081,083 64,627,392 ------------ ------------ $117,268,387 $115,548,093 ============ ============
5 6 FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY TWENTY-EIGHT WEEKS ENDED DECEMBER 10, 1995 AND DECEMBER 11, 1994 (UNAUDITED)
Common stock at $1 per share - Additional Shares and contributed Retained Treasury amount capital earnings shares Total ----------- ----------- ---------- ----------- ----------- Balance at May 29, 1994 $6,548,201 $52,188,112 $8,540,882 ($3,447,154) $63,830,041 Net earnings for twenty-eight weeks - - 2,311,241 - 2,311,241 Treasury shares reissued - (2,232) - 7,836 5,604 Dividends Cash - $.18 per share - - (1,173,282) - (1,173,282) Stock - 4% 260,738 2,445,722 (2,706,460) - - ----------- ----------- ---------- ----------- ----------- Balance at December 11,1994 6,808,939 54,631,602 6,972,381 (3,439,318) 64,973,604 Net earnings for twenty-four weeks - - 47,130 - 47,130 Treasury shares reissued - (7,378) - 15,935 8,557 Treasury shares acquired - - - (4,763) (4,763) Dividends Cash - $.06 per share - - (397,136) - (397,136) ----------- ----------- ---------- ----------- ----------- Balance at May 28,1995 6,808,939 54,624,224 6,622,375 (3,428,146) 64,627,392 Net earnings for twenty-eight weeks - - 1,670,833 - 1,670,833 Dividends Cash - $.18 per share - - (1,217,142) - (1,217,142) Stock - 4% 271,256 2,170,048 (2,441,304) - - ----------- ----------- ---------- ----------- ----------- Balance at December 10, 1995 $7,080,195 $56,794,272 $4,634,762 ($3,428,146) $65,081,083 =========== =========== ========== =========== ===========
The accompanying notes are an integral part of these statements. 7 FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS TWENTY-EIGHT WEEKS ENDED DECEMBER 10, 1995 AND DECEMBER 11, 1994 (UNAUDITED)
1995 1994 ----------- ---------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $1,670,833 $2,311,241 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 5,591,874 5,155,283 Gain on disposition of assets (221,032) (128,915) Changes in assets and liabilities: Decrease in receivables 57,390 539,176 (Increase) decrease in inventories (255,194) 206,304 Increase in prepaid expenses and sundry deposits (291,681) (793,711) Decrease in accounts payable (570,056) (850,714) (Increase) decrease in accrued expenses (224,109) 290,905 Increase in income taxes 187,297 451,680 Decrease in other assets 120,631 195,999 Increase in self insured obligations 1,617,855 566,341 Increase in other liabilities 69,867 195,578 ----------- ---------- Net cash provided by operating activities 7,753,675 8,139,167 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Additions to property - net (7,376,055) (12,420,883) Proceeds from disposition of property 2,221,411 1,175,195 Increase in other assets (482,060) (251,344) ----------- ---------- Net cash (used in) investing activities (5,636,704) (11,497,032) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from borrowings 4,000,000 4,885,000 Payment of long-term obligations (4,439,821) (470,096) Cash dividends paid (794,275) (763,820) Treasury share transactions - 5,604 ----------- ---------- Net cash (used in) provided by financing activities (1,234,096) 3,656,688 ----------- ---------- Net increase in cash and equivalents 882,875 298,823 Cash and equivalents at beginning of year 219,650 200,900 ----------- ---------- Cash and equivalents at end of quarter $1,102,525 $499,723 =========== ========== Supplemental disclosures: Stock dividends issued $2,441,304 $2,706,460 Interest paid 1,445,262 883,465 Income taxes paid 1,091,871 983,229 Income tax refunds received (492,168) (68,909) Dividends declared but not paid 422,867 409,462 Lease transactions capitalized 390,000 -
The accompanying notes are an integral part of these statements. 7 8 Frisch's Restaurants, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - ACCOUNTING POLICIES A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows: Consolidation Practices - ----------------------- The consolidated financial statements include the accounts of Frisch's Restaurants, Inc. and all of its subsidiaries. Cash and Cash Equivalents - ------------------------- Highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Outstanding checks in the amount of $690,462 at May 28, 1995 were included in accounts payable. Receivables - ----------- The Company values its trade notes and accounts receivable on the reserve method. The reserve balance was $47,736 at December 10, 1995 and $56,736 at May 28, 1995. Inventories - ----------- Inventories, comprised principally of food items, are valued at the lower of cost or market. During the first quarter of fiscal 1995, the Company changed its method of determining cost for its commissary inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. The change to the FIFO method more appropriately reflects the Company's financial condition, and conforms all its inventories to the same valuation method. Due to this change, inventories were increased by approximately $365,000 and the cumulative effect on retained earnings, net of income taxes, was approximately $241,000. Last year's financial statements have been restated to reflect this change in accounting principle. Income Taxes - ------------ Taxes are provided on all items included in the statement of earnings regardless of when such items are reported for tax purposes. Property and Equipment - ---------------------- Depreciation is provided principally on the straight-line method over the estimated service lives of the assets. Intangible Assets and Other Assets - ---------------------------------- The excess of cost over equity in net assets of subsidiaries acquired prior to November 1, 1970, is not currently being amortized because, in the opinion of management, the value has not decreased. Net cash surrender value of life insurance policies includes the cash values of two policies written by a life insurance company that is under regulatory supervision pursuant to an Order of Rehabilitation on August 12, 1994. There are restraints which restrict policy surrenders, loans and reductions in face amount. Although adjustments may become necessary to values in existence prior to August 12, 1994, the rehabilitator has concluded that policyholders' account values should be fully preserved. New Store Opening Costs - ----------------------- New store opening costs are capitalized and amortized over a one year period from the date each new store opened. Items capitalized include new employee training costs, the cost of an employee team to coordinate the opening and the cost of certain replacement items such as uniforms and china. 8 9 Frisch's Restaurants, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE A - ACCOUNTING POLICIES (CONTINUED) Benefit Plans - ------------- The Company has three defined benefit pension plans covering substantially all of its employees. The benefits are based on years-of-service and other factors. The Company's funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service-to-date, but also for those expected to be earned in the future. The Company also has a non-qualified supplemental retirement plan for certain key employees. Self Insurance - -------------- The Company self-insures its casualty and a portion of its employee medical coverages. The amounts shown on the balance sheet represent management's estimate for future claims. There is insurance in place which provides for catastrophic losses. Revenue Recognition - ------------------- Franchise fees, based on sales of franchisees, are recorded on the accrual method as earned. There was no significant income from initial fees. Fair Value of Financial Instruments - ----------------------------------- The carrying value of the Company's financial instruments approximates fair value. Investment in Sports Franchise - ------------------------------ The Company's limited partnership investment in the Cincinnati Reds is carried at cost. Income distributions are recorded in earnings when received. NOTE B - LONG-TERM DEBT
December 10, 1995 May 28, 1995 --------------------------- ------------------------- Payable Payable Payable Payable within after within after one year one year one year one year -------- -------- -------- -------- (in thousands) Revolving credit loan $ - $ 9,000 $ - $ 8,000 Term loan 1,500 9,125 1,625 9,875 Industrial revenue bond financing 200 400 400 400 Other 134 94 181 163 ------- --------- ------- --------- $ 1,834 $ 18,619 $ 2,206 $ 18,438 ======= ========= ======= =========
The portion payable after one year matures as follows: December 10, May 28, 1995 1995 ------------ ------- (in thousands) Period ending in 1997 $ 1,794 $ 1,839 1998 10,700 1,724 1999 1,500 9,500 2000 1,500 1,500 Subsequent to 2000 3,125 3,875 --------- --------- $ 18,619 $ 18,438 ========= =========
9 10 Frisch's Restaurants, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE B - LONG TERM DEBT (CONTINUED) The revolving credit loan is a $20,000,000 line of credit, $9,000,000 of which is outstanding at December 10, 1995. This credit loan matures on August 30, 1998, unless extended. Interest is payable quarterly determined by various indices, currently 6.71%. The term loan, converted from a revolving credit loan during the year ended May 28, 1995, is payable in monthly installments of $125,000 through December 31, 2002. Interest is also payable monthly at a rate equal to the prime rate up to a maximum of 7.5% through December 31, 1997. The rate for the final five years shall also be equal to the prime rate, not to exceed 8.5%. These agreements contain covenants relating to net worth, interest expense, debt and capitalization changes, investments, leases, and restrictions on pledging certain restaurant operating assets. Compensating balances are not required. The Company also has a $2,494,000 outstanding letter of credit in support of its self insurance. The industrial revenue bonds, issued in 1978, are payable in annual installments of $200,000 through 1998 and bear interest at 7.4%. Property and equipment having a book value at December 10, 1995 of $2,839,000 is pledged as collateral for the bonds. NOTE C - LEASED PROPERTY The Company has capitalized the leased property of 54% of its non-owned restaurant locations. The majority of the leases are for fifteen or twenty years and contain renewal options for ten to fifteen years. Delivery equipment is held under capitalized leases expiring during periods to 2001. The Company also occupies office space under an operating lease which expires during 2003.
An analysis of the leased property follows: Asset balances at -------------------------- Dec. 10, May 28, 1995 1995 -------- -------- (in thousands) Restaurant facilities $ 9,161 $ 9,161 Equipment 870 480 -------- -------- 10,031 9,641 Less accumulated amortization (5,339) (5,057) --------- --------- $ 4,692 $ 4,584 ======== ========
Total rental expense of operating leases for the twenty-eight weeks was: 1995 1994 ------- -------- (in thousands) Minimum rentals $ 858 $ 864 Contingent rentals (percent of excess sales) 9 23 ------ ----- $ 867 $ 887 ====== =====
10 11 Frisch's Restaurants, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE C - LEASED PROPERTY (CONTINUED) Future minimum lease payments under capitalized leases and operating leases having an initial or remaining term of one year or more follow:
Capitalized Operating Period ending December 10, leases leases -------------------------- ----------- --------- (in thousands) 1996 $1,269 $ 1,289 1997 1,163 1,275 1998 1,082 1,137 1999 1,013 957 2000 926 819 2001 to 2020 7,456 4,525 ------ -------- Total 12,909 $ 10,002 ======== Amount representing interest (5,892) ------ Present value of obligations 7,017 Portion due within one year (524) ------ Long-term obligations $6,493 ======
NOTE D - INCOME TAXES The provision for income taxes in all periods has been computed based on management's estimate of the tax rate for the entire fiscal year. NOTE E - CAPITAL STOCK Shareholders approved the 1993 Stock Option Plan on October 4, 1993. The plan authorizes the grant of stock options for up to 540,800 shares of the Common Stock of the Company for a ten year period beginning May 9, 1994, the day after the expiration of the 1984 Stock Option Plan. The shares may be optioned at not less than seventy-five percent of the fair market value on the date granted and may include stock appreciation rights. No options have been granted under the 1993 plan. The 1984 Stock Option Plan expired on May 8, 1994. Outstanding options are exercisable within ten years from the date of grant. The exercise price is the fair market value as of the date granted.
The outstanding stock options for the 1984 plan follow: Option Price --------------------------------------- Shares Per Share Total ----------------- ----------------- ----------------- Chairman 82,110 $17.48 $1,435,283 President 97,975 $14.95-$21.66 1,956,804 Other key employees 79,338 $17.48 1,386,828
The Company also has reserved 56,243 shares for issuance under the Frisch's Executive Savings Plan. 11 12 Frisch's Restaurants, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE E - CAPITAL STOCK (CONTINUED) Shares reserved under these plans have been adjusted for stock dividends. There are no other outstanding options, warrants or rights. NOTE F - PENSION PLANS The following table sets forth the plans' funded status and amounts recognized in the Company's balance sheet at May 28, 1995 and May 29, 1994 (latest available data, in thousands):
1995 1994 ------- ------- Plan assets at fair market value, primarily marketable securities and insurance funds $16,451 $18,229 ------- ------- Actuarial present value of benefit obligations: Vested benefits 8,300 10,116 Non vested benefits 823 814 --------- --------- Accumulated benefit obligations 9,123 10,930 Effect of projected future salary increases 3,201 3,388 --------- --------- Projected benefit obligations 12,324 14,318 --------- --------- Plan assets in excess of projected benefit obligations (including approximately $360 at 1995 and $531 at 1994 withdrawable by participants upon demand) 4,127 3,911 Unrecognized net gains (3,259) (2,840) Unrecognized prior service cost 599 947 Unrecognized net transition (assets) (1,658) (1,895) ---------- ---------- Net (accrued) prepaid pension cost included in the balance sheet $ (191) $ 123 ========== =========
Assumptions used to develop net periodic pension cost and the actuarial present value of projected benefit obligations:
1995 1994 --------- ------- Expected long-term rate of return on plan assets 8.50% 8.50% Weighted average discount rate 7.25 7.25 Rate of increase in compensation levels 5.50 5.50
Pension expense for the twenty-eight weeks ended December 10, 1995 and December 11, 1994 was $191,298 and $189,538, respectively. NOTE G - EARNINGS PER SHARE Earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during each period, which gives effect to stock options.
Weighted average common shares (Primary and fully diluted) -------------- Quarter ending December 10,1995 6,882,609 Year-to-date at December 10, 1995 6,882,609 Quarter ending December 11, 1994 6,882,220 Year-to-date at December 11, 1994 6,882,181
12 13 NOTE H - COMPANY REPRESENTATIONS The financial information is unaudited but in the opinion of management includes all adjustments (all of which were normal recurring adjustments) necessary for a fair presentation of results of operations for such periods. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Total revenue increased $2,162,000 or 2.4%, climbing to a record $91,871,000 during the twenty-eight weeks ended December 10, 1995. Record sales of $91,084,000 were also posted, increasing $2,312,000 or 2.6% over last year. The increase is attributable principally to five new Big Boy restaurants opened during the last twelve months. Big Boy same store sales are showing improvement, but continue to run slightly behind last year. Menu prices were increased moderately at the beginning of the fourth quarter of fiscal 1995 and in the first quarter of this year. Hotel operations also added to the sales improvement. Other income declined 16.0% for the first half of the year. Franchise fees declined as there are thirteen fewer licensed units in operation than a year ago. The pressure on margins continued. Cost of sales increased $3,279,000 year to date while revenue rose only $2,162,000. Lower beef prices have helped food and paper cost to decline from 31.6% of revenue last year to 31.4% this year. However, payroll and related expenses and other operating expenses have risen more rapidly than revenues. Payroll and related expenses increased from 33.7% of revenue last year to 34.8% of revenue this year. Competition for employees due to labor shortages in most of the Company's marketing areas continues to result in higher average hourly rates for restaurant workers and higher starting salaries for store managers. Other operating expenses increased to 24.8% of revenue this year against 24.3% of revenue last year. Higher depreciation and other charges relating to recent expansion and modernization accounted for most of the increase. Estimates for future obligations of self-insured plans were favorably adjusted during the first quarter of both years, although this year's adjustment was significantly lower. General and Administrative expense was $282,000 or 11.1% lower than last year due principally to lower officer compensation this year. Interest expense for the first half of the year rose 32.6% or $317,000 above last year due to higher debt levels that were incurred to complete the fiscal 1995 construction cycle. The estimated annual rate of income tax is 32.0% this year versus 37.1% last year. Congress is presently considering a bill that would replace the Targeted Jobs Tax Credit that expired at the end of 1994 with a scaled down version to be known as the Work Opportunity Tax Credit that would be effective January 1, 1996. While potentially helpful to the Company in the long run, the impact on this year's effective tax rate would be minimal. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities was $7,800,000, generated principally from net income and depreciation. Investing activities included $7,400,000 in additions to property. This consisted of approximately $1,900,000 to complete the 1995 construction cycle, $1,900,000 to remodel existing properties, $1,700,000 for acquisitions of future sites, $400,000 to start the 1996 expansion, and $1,500,000 in equipment replacements and other capital expenditures. Approximately $2,200,000 in proceeds from property dispositions were also included in investing activities, consisting of the sale of the two Hardee's restaurants that closed in the first quarter, five other restaurant locations that had been held for sale since ceasing operations several years ago, and the sale of the Company's former commissary in Dallas, Texas. Shortly after the end of the quarter, the Company sold its four remaining Hardee's restaurants. The Company now operates 104 Big Boy restaurants and two Quality Hotels. Financing activities included $4,000,000 of new debt, $3,000,000 of which had been repaid at December 10, 1995. Revised expansion plans that provide for fewer new restaurants allowed funds scheduled for capital spending to be used to reduce debt. Real estate sale proceeds were also used to lower debt levels. Scheduled debt payments of approximately $1,400,000 were also made and dividends of $800,000 were paid to shareholders. 13 14 The 1996 construction cycle is underway. It calls for the opening of two new Big Boy restaurants in the spring, introducing a new, smaller building design. The projected cost to build and equip each of these units is estimated at $1,300,000 to $1,500,000 including land, a reduction of approximately $200,000 from last year's average new unit cost. This smaller prototype will allow the Company to reduce break-even sales for new restaurants and to expand into locations not feasible previously. Current plans also include the replacement of two existing restaurants with new buildings that will open in the summer of 1996. Capital outlays for restaurants currently under construction will amount to approximately $1,800,000. It remains the Company's intention to operate within cash flow and reduce long-term debt whenever cash flow permits. PART II - OTHER INFORMATION - --------------------------- Items 1, 2, 3, 4, and 5, the answers to which are either "none" or "not applicable", are omitted. Item 6. Exhibits and reports on Form 8-K. a) Exhibits (27) Financial Data Schedule b) Reports on Form 8-K. The Company did not file a report on Form 8-K during the twenty-eight weeks ended December 10, 1995. 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. FRISCH'S RESTAURANTS, INC. -------------------------- (registrant) DATE January 17, 1996 ---------------------------- January 17, 1996 BY /s/ Louis J. Ullman ------------------------ Louis J. Ullman Senior Vice President-Finance and Principal Financial Officer 14 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF EARNINGS OF FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-02-1996 MAY-29-1995 DEC-10-1995 1,102,525 0 1,489,092 0 4,200,854 9,325,841 169,873,144 72,492,391 117,268,387 18,998,622 25,111,709 7,080,195 0 0 58,000,888 117,268,387 91,084,119 91,871,345 83,605,513 83,605,513 4,514,605 0 1,293,394 2,457,833 787,000 1,670,833 0 0 0 1,670,833 .24 .24
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