-----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, Nu5QKHkQTwGVTFbVHELHb5vPlkVpeTvxA3c1tR9pfFjp/06yK+ah/GI71OhgUMOK YYVv86LrV/xsaewlMs5C8A== 0000807882-97-000012.txt : 19970820 0000807882-97-000012.hdr.sgml : 19970820 ACCESSION NUMBER: 0000807882-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970706 FILED AS OF DATE: 19970819 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOODMAKER INC /DE/ CENTRAL INDEX KEY: 0000807882 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 952698708 STATE OF INCORPORATION: DE FISCAL YEAR END: 0929 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09390 FILM NUMBER: 97666061 BUSINESS ADDRESS: STREET 1: 9330 BALBOA AVE CITY: SAN DIEGO STATE: CA ZIP: 92123-1516 BUSINESS PHONE: 6195712121 MAIL ADDRESS: STREET 1: PO BOX 783 CITY: SAN DIEGO STATE: CA ZIP: 92112-4126 10-Q 1 FORM 10Q FOR THIRD QUARTER ENDED JULY 6, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended July 6, 1997 Commission File No. 1-9390 ------------ ------ FOODMAKER, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 95-2698708 - ------------------------------------------------------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 9330 BALBOA AVENUE, SAN DIEGO, CA 92123 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (619) 571-2121 -------------- 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 --- --- Number of shares of common stock, $.01 par value, outstanding as of the close of business August 11, 1997 - 39,060,332 -1- FOODMAKER, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) July 6, September 29, 1997 1996 ------- ------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . $ 89,856 $ 41,983 Receivables . . . . . . . . . . . . . . . . . 8,674 12,482 Inventories . . . . . . . . . . . . . . . . . 18,725 20,850 Prepaid expenses. . . . . . . . . . . . . . . 38,566 21,161 -------- -------- Total current assets . . . . . . . . . . . 155,821 96,476 -------- -------- Property at cost. . . . . . . . . . . . . . . . 628,683 610,756 Accumulated depreciation and amortization . . (195,862) (177,817) -------- -------- 432,821 432,939 -------- -------- Trading area rights . . . . . . . . . . . . . . 66,574 67,663 -------- -------- Lease acquisition costs . . . . . . . . . . . . 19,303 22,299 -------- -------- Other assets. . . . . . . . . . . . . . . . . . 35,085 34,261 -------- -------- TOTAL. . . . . . . . . . . . . . . . . . . $709,604 $653,638 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt. . . . . $ 1,446 $ 1,812 Accounts payable. . . . . . . . . . . . . . . 37,639 29,293 Accrued expenses. . . . . . . . . . . . . . . 139,485 115,958 -------- -------- Total current liabilities. . . . . . . . . 178,570 147,063 -------- -------- Long-term debt, net of current maturities . . . 395,972 396,340 -------- -------- Other long-term liabilities . . . . . . . . . . 53,042 51,561 -------- -------- Deferred income taxes . . . . . . . . . . . . . 3,990 7,290 -------- -------- Stockholders' equity: Common stock. . . . . . . . . . . . . . . . . 404 403 Capital in excess of par value. . . . . . . . 282,003 281,075 Accumulated deficit . . . . . . . . . . . . . (189,914) (215,631) Treasury stock. . . . . . . . . . . . . . . . (14,463) (14,463) -------- -------- Total stockholders' equity . . . . . . . . 78,030 51,384 -------- -------- TOTAL. . . . . . . . . . . . . . . . . . . $709,604 $653,638 ======== ======== See accompanying notes to financial statements. -2- FOODMAKER, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Twelve Weeks Ended Forty Weeks Ended ----------------- ----------------- July 6, July 7, July 6, July 7, 1997 1996 1997 1996 ------- ------- ------- ------- Revenues: Restaurant sales. . . . . . . . . . . $234,828 $209,043 $749,860 $677,391 Distribution sales. . . . . . . . . . 7,129 25,297 41,989 117,219 Franchise rents and royalties . . . . 8,461 7,927 27,166 25,926 Other . . . . . . . . . . . . . . . . 1,263 880 3,142 3,216 ------- ------- ------- ------- 251,681 243,147 822,157 823,752 ------- ------- ------- ------- Costs and expenses: Costs of revenues: Restaurant costs of sales. . . . . 77,285 67,401 250,078 221,225 Restaurant operating costs . . . . 119,494 110,049 385,238 362,527 Costs of distribution sales. . . . 6,956 24,849 41,606 115,179 Franchised restaurant costs. . . . 6,175 4,704 18,194 15,746 Selling, general and administrative . 19,652 18,146 62,682 54,408 Interest expense. . . . . . . . . . . 9,324 10,983 31,342 36,649 ------- ------- ------- ------- 238,886 236,132 789,140 805,734 ------- ------- ------- ------- Earnings before income taxes. . . . . . 12,795 7,015 33,017 18,018 Income taxes. . . . . . . . . . . . . . 2,800 1,500 7,300 3,800 ------- ------- ------- ------- Net earnings. . . . . . . . . . . . . . 9,995 5,515 25,717 14,218 ======= ======= ======= ======= Net earnings per share - primary and fully diluted. . . . . . . . . $ .25 $ .14 $ .65 $ .36 ======= ======= ======= ======= Weighted average shares outstanding . . 39,871 39,358 39,633 39,260 See accompanying notes to financial statements. -3- FOODMAKER, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Forty Weeks Ended ----------------------- July 6, July 7, 1997 1996 ------ ------ Cash flows from operations: Net earnings. . . . . . . . . . . . . . . . . $ 25,717 $ 14,218 Non-cash items included above: Depreciation and amortization. . . . . . . 30,501 30,101 Deferred income taxes. . . . . . . . . . . (3,300) (1,635) Decrease in receivables . . . . . . . . . . . 3,808 11,776 Decrease in inventories . . . . . . . . . . . 2,125 226 Increase in prepaid expenses. . . . . . . . . (17,405) (2,926) Increase (decrease) in accounts payable . . . 8,346 (9,813) Increase in accrued expenses. . . . . . . . . 25,008 20,614 ------ ------ Cash flows provided by operations. . . . . 74,800 62,561 ------ ------ Cash flows from investing activities: Additions to property and equipment . . . . . (26,017) (20,622) Dispositions of property and equipment. . . . 2,814 2,909 Decrease (increase) in trading area rights. . (1,424) 122 Increase in other assets. . . . . . . . . . . (2,206) (2,136) ------ ------ Cash flows used in investing activities. . (26,833) (19,727) ------ ------ Cash flows from financing activities: Principal payments on long-term debt, including current maturities . . . . . . . (1,023) (44,391) Proceeds from issuance of common stock. . . . 929 46 ------ ------ Cash flows used in financing activities. . (94) (44,345) ------ ------ Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 47,873 $ (1,511) ====== ====== See accompanying notes to financial statements. -4- FOODMAKER, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited financial statements of Foodmaker, Inc. (the "Company") do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation of financial condition and results of operations for the interim periods, have been included. Operating results for any interim period are not necessarily indicative of the results for any other interim period or for the full year. The Company reports results quarterly with the first quarter having 16 weeks and each remaining quarter having 12 weeks. Certain financial statement reclassifications have been made in the prior year to conform to the current year presentation. These financial statements should be read in conjunction with the 1996 financial statements. 2. The Company adopted Statement of Financial Accounting Standards ("SFAS") 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in 1997. SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The statement also addresses the accounting for long-lived assets that are held for disposal. The adoption of SFAS 121 did not result in a material impact on the financial position or results of operations of the Company. 3. In March 1997, the Financial Accounting Standards Board issued SFAS 128, Earnings per Share, effective for fiscal years ending after December 15, 1997. SFAS 128 requires the presentation of "basic" earnings per share which excludes the dilutive effect of all common stock equivalents. Presentation of "diluted" earnings per share, which reflects the dilutive effects of all common stock equivalents, will also be required. The diluted presentation is similar to the current presentation of fully diluted earnings per share, but uses the average market price of the stock during the period. The Company is currently evaluating the impact of implementation of SFAS 128. 4. The tax provision reflects the expected annual tax rate of 22% of earnings before income taxes in 1997 and the effective annual tax rate of 21% of pretax earnings in 1996. The low effective income tax rates in each year result from the Company's ability to realize previously unrecognized tax benefits. The Company cannot determine the actual annual effective tax until the end of the fiscal year, thus the rate could differ from expectations. -5- 5. Contingent Liabilities Various claims and legal proceedings are pending against the Company in federal and state courts in the state of Washington, seeking monetary damages for personal injuries relating to food-borne illness (the "Outbreak") attributed to hamburgers served at Jack in the Box restaurants. The Company, in consultation with its insurance carriers and attorneys, does not anticipate that the total liability on all such lawsuits and claims will exceed the coverage available under its applicable insurance policies. The Company is engaged in litigation with the Vons Companies, Inc. ("Vons") and various suppliers seeking reimbursement for all damages, costs and expenses incurred in connection with the Outbreak. The initial litigation was filed by the Company on February 4, 1993. Vons has filed cross-complaints against the Company and others alleging certain contractual, indemnification and tort liabilities; seeking damages in unspecified amounts and a declaration of the rights and obligations of the parties. The claims of the parties arise out of two separate lawsuits which have been consolidated and are now set for trial in the Los Angeles Superior Court, Los Angeles, California in October 1997. On February 2, 1995, an action by Concetta Jorgensen was filed against the Company in the U.S. District Court in San Francisco, California alleging that restrooms at a Jack in the Box restaurant failed to comply with laws regarding disabled persons and seeking damages in unspecified amounts, punitive damages, injunctive relief, attorney fees and prejudgment interest. In an amended complaint damages are also sought on behalf of all physically disabled persons who were allegedly denied access to restrooms at the restaurant. In February 1997, the court ordered that the action for injunctive relief proceed as a nationwide class action on behalf of all persons in the United States with mobility disabilities. The Company has reached tentative agreement on settlement terms both as to the individual plaintiff Concetta Jorgensen and the claims for injunctive relief, but a settlement agreement has not yet been signed or presented to the U.S. District Court for approval. During the course of settlement discussions, Foodmaker was notified by attorneys for plaintiffs that claims may be made against Jack in the Box franchisees and Foodmaker relating to locations that franchisees lease from Foodmaker which may not be in compliance with the Americans With Disabilities Act. On December 10, 1996, a suit was filed by the Company's Mexican licensee, Foodmex, Inc., in the United States District Court in San Diego, California against the Company and its international franchising subsidiary. Foodmex formerly operated several Jack in the Box franchise restaurants in Mexico, but its licenses were terminated by the Company for, among other reasons, chronic insolvency and failure to meet operational standards. Foodmex's suit alleges wrongful termination of its master license, breach of contract and unfair competition and seeks an injunction to prohibit termination of its license as well as unspecified monetary damages. In January, 1997 Foodmex amended its complaint to name several individual defendents and to allege additional causes of action. The Company and its subsidiary counterclaimed and sought a preliminary injunction against Foodmex. On March 28, 1997 the court granted the Company's request for an injunction, held that the Company was likely to prevail in its suit, and ordered Foodmex to immediately cease using the Jack in the Box marks and proprietary operating systems. On June 30, 1997 the court held Foodmex and its president in contempt of court for failing to comply with the March 28, 1997 order. -6- On May 23, 1997 an action by Ralston Purina Company was filed against the Company in the U.S. District court for the Eastern District of Missouri in St. Louis, Missouri alleging the Company's breach of a tax sharing agreement and unjust enrichment and seeking an accounting and damages in an amount not less than $11,000,000 and attorneys' fees and costs. The Company believes it has meritorious defenses and intends to vigorously resist the lawsuit. The Company is also subject to normal and routine litigation. None of the foregoing is expected to have a material adverse effect on results of operations and liquidity of the Company. -7- FOODMAKER, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION RESULTS OF OPERATIONS - --------------------- All comparisons under this heading between 1997 and 1996, refer to the 12-week and 40-week periods ended July 6, 1997 and July 7, 1996, respectively, unless otherwise indicated. Restaurant sales increased $25.8 million and $72.5 million, respectively, to $234.8 million and $749.9 million in 1997 from $209.0 million and $677.4 million in 1996, as both per store average sales and the number of Company-operated restaurants increased from a year ago. Per store average ("PSA") sales for comparable restaurants, which are calculated for only those restaurants open for the full fiscal years being compared, increased 7.7% and 7.2%, respectively, in 1997 compared to the same periods in 1996. The PSA sales improvement reflects increases of 5.5% and 6.2% in the average number of transactions, and increases of 2.2% and 1.0% in average transaction amounts. Sales continued to improve under the Company's two-tier marketing strategy featuring premium sandwiches, such as the Sourdough Jack sandwich, and value-priced alternatives from "Jack's Value Menu". Sales were further strengthened by the "New and Improved" campaign which began in August 1996. Since January 1996, the Company has increased prices on certain products to offset commodity cost and minimum wage increases. The average number of Company-operated restaurants increased to 891 in 1997 from 867 in 1996 through the addition of new units and the acquisition of restaurants from franchisees. Distribution sales of food and supplies declined $18.2 million and $75.2 million, respectively, to $7.1 million and $42.0 million in 1997 from $25.3 million and $117.2 million in 1996. Distribution sales to franchisees declined $7.9 million and $58.5 million, respectively, in 1997 compared to the same periods in 1996 as the franchisees have transitioned to their own purchasing cooperative, which contracts with another supplier for distribution services. Most franchisees have elected to participate in the cooperative, which has resulted in a substantial decline in distribution sales. Distribution sales to Chi-Chi's, Inc. have also declined $10.2 million and $16.7 million, respectively, in 1997 compared to the same periods in 1996. The Company's distribution agreement with Chi-Chi's was not renewed when the contract expired in April 1997. Ongoing distribution sales, which relate only to franchisees who continue to use Foodmaker distribution services, are expected to be approximately $2 million per quarter. Because distribution is a low-margin business, the loss of distribution revenues is not expected to have a material impact on the financial condition of the Company. Franchise rents and royalties increased to $8.5 million and $27.2 million, respectively, in 1997 from $7.9 million and $25.9 million in 1996, reflecting an increase in sales at franchise-operated restaurants to $82.3 million and $271.8 million in 1997 from $78.0 million and $256.2 million, respectively, in 1996. The Company receives rents and royalties averaging approximately 10% of sales at franchise-operated restaurants. -8- Other revenues increased in the 12-week period to $1.3 million in 1997 from $.9 million in 1996, principally due to increased interest income from higher levels of investments. In the 40-week period other revenues declined slightly to $3.1 million in 1997 from $3.2 million in 1996. Total revenues increased $8.6 million in the 12-week period to $251.7 million in 1997 from $243.1 million in 1996 as restaurant sales increases outpaced distribution sales declines. In the 40-week period total revenues declined slightly to $822.2 million in 1997 from $823.8 million in 1996, reflecting the decline in distribution sales. Restaurant costs of sales, which include food and packaging costs, increased with restaurant sales growth to $77.3 million and $250.1 million, respectively, in 1997 from $67.4 million and $221.2 million in 1996. Restaurant costs of sales increased as a percent of sales to 32.9% and 33.3%, respectively, in 1997 from 32.2% and 32.7% in 1996, principally due to higher food costs of certain discount promotions, the cost of improved french fries and commodity cost increases, primarily pork and dairy. Restaurant operating costs increased with sales growth and the addition of Company-operated restaurants to $119.5 million and $385.2 million, respectively, in 1997 from $110.0 million and $362.5 million in 1996. Restaurant operating costs declined to 50.9% and 51.4% of sales in 1997 from 52.6% and 53.5% of sales, respectively, in 1996 principally due to labor efficiencies and lower percentages of occupancy and other operating costs, as sales have increased at a greater rate than these costs. Costs of distribution sales decreased to $7.0 million and $41.6 million, respectively, in 1997 from $24.8 million and $115.2 million in 1996 reflecting the decline in distribution sales. Costs of distribution sales have increased slightly as a percent of sales to 99.1% in 1997 from 98.3% in 1996 due to expenses of $.4 million related to the closure of a distribution center which had been used primarily to distribute to Chi-Chi's restaurants. Franchised restaurant costs, which include rents and depreciation on properties leased to franchisees and other miscellaneous costs, increased to $6.2 million and $18.2 million, respectively, in 1997 from $4.7 million and $15.7 million in 1996. The higher costs reflect increases in franchise-related legal expense. Selling, general and administrative expenses increased $1.6 million and $8.3 million to $19.7 million and $62.7 million, respectively, in 1997 from $18.1 million and $54.4 million in 1996. Advertising and promotion costs, which were approximately 5.3% of sales in both years, increased with the higher restaurant sales. General, administrative and other expenses increased $.3 million and $4.3 million, respectively, in 1997 compared to 1996. Expenses for the 40-week period reflect higher legal expenses, other general increases and approximately $1.2 million in expenses and write-offs related to the test of dual brand concepts (two brands operating in the same restaurant facility). Interest expense declined $1.7 million and $5.3 million, respectively, to $9.3 million and $31.3 million in 1997 from $11.0 million and $36.6 million in 1996 principally due to a reduction in total debt outstanding. Total debt at July 6, 1997 was $397.4 million, a decline of $44.6 million since the beginning of fiscal year 1996 reflecting the early retirement in May 1996 of $42.8 million of the Company's 14 1/4% senior subordinated notes. -9- The tax provision reflects the expected annual tax rate of 22% of earnings before income taxes in 1997 and the effective annual tax rate of 21% of pretax earnings in 1996. The low effective income tax rates in each year result from the Company's ability to realize previously unrecognized tax benefits. The Company cannot determine the actual annual effective tax until the end of the fiscal year, thus the rate could differ from expectations. Net earnings for the 12-week period improved $4.5 million to $10.0 million, or $.25 per share, in 1997 from $5.5 million, or $.14 per share, in 1996. Net earnings for the 40-week period improved $11.5 million to $25.7 million, or $.65 per share, in 1997 from $14.2 million, or $.36 per share, in 1996 reflecting sales growth and cost management. FINANCIAL CONDITION - ------------------- Cash and cash equivalents increased $47.9 million to $89.9 million at July 6, 1997 from $42.0 million at the beginning of the fiscal year. The cash increase in 1997 reflects, among other things, cash flows from operations of $74.8 million and capital expenditures of $26.0 million. The Company's working capital deficit decreased $27.9 million to $22.7 million at July 6, 1997 from $50.6 million at September 29, 1996, principally due to the increase in cash. The Company and the restaurant industry, in general, maintain relatively low levels of receivables and inventories and vendors grant trade credit for purchases such as food and supplies. The Company also continually invests in its business through the addition of new units and refurbishment of existing units, which are reflected as long-term assets and not as part of working capital. Total debt outstanding declined to $397.4 million at July 6, 1997 from $398.2 million at the beginning of the fiscal year and $442.1 million at the beginning of fiscal year 1996. On May 15, 1996, the Company used $43.5 million of available cash to prepay the 14 1/4% senior subordinated notes due in May 1998. In September 1997, the Company expects to use available cash to prepay $50 million of its 9 1/4% Senior Notes due March 1, 1999, thereby reducing total debt to approximately $347 million. The Company's revolving bank credit agreement, which expires December 31, 1998, provides for a credit facility of up to $60 million, including letters of credit of up to $25 million. At July 6, 1997, the Company had no borrowings and approximately $53.3 million of unused credit under the agreement. The Company is subject to a number of covenants under its various credit agreements including limitations on additional borrowings, capital expenditures, lease commitments and dividend payments, and requirements to maintain certain financial ratios, cash flows and net worth. Substantially all of the Company's real estate and machinery and equipment is pledged to its lenders under the credit agreement and other secured notes. The Company's primary sources of liquidity are expected to be cash flows from operations, the revolving bank credit facility, and the sale and leaseback of restaurant properties. An additional potential source of liquidity is the conversion of Company-operated restaurants to franchised restaurants. The Company requires capital principally to grow the business through new restaurant construction, as well as to maintain, improve and refurbish existing restaurants, and for general operating purposes. -10- Based upon current levels of operations and anticipated growth, the Company expects that sufficient cash flows will be generated from operations so that, combined with other financing alternatives available, including utilization of cash on hand, bank credit facilities, the sale and leaseback of restaurants and refinancing opportunities, the Company will be able to meet all of its debt service, capital expenditure and working capital requirements. CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS - ---------------------------------------------------------- This Quarterly Report on Form 10-Q contains forward looking statements including, but not limited to, the Company's expectations regarding its effective tax rate, its continuing investment in new restaurants and refurbishment of existing facilities and sources of liquidity. Forward looking statements are subject to known and unknown risks and uncertainties which may cause actual results to differ materially from expectations. The following is a discussion of some of those factors. The Company's tax provision is highly sensitive to expected earnings. As earnings expectations change, the Company's income tax provision may vary more significantly from quarter to quarter and year to year than companies which have been continuously profitable. However, the Company's effective tax rates are expected to increase in the future. There can be no assurances that growth objectives in the regional domestic markets in which the Company operates will be met or that capital will be available for refurbishment of existing facilities. Additional risk factors associated with the Company's business are detailed in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. PART II - OTHER INFORMATION There is no information required to be reported for any items under Part II, except as follows: Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Number Description ------ ----------- 10 Second Amendment dated as of July 11, 1997 to the Amended and Restated Revolving Credit Agreement dated as of March 15, 1996, as amended as of April 5, 1996 by the Agreement to Add Banks, among Foodmaker, Inc. and the Banks named therein 27 Financial Data Schedule (included only with electronic filing) (b) Reports on Form 8-K - None -11- 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 and in the capacities indicated. FOODMAKER, INC. By: DARWIN J. WEEKS ---------------------------- Darwin J. Weeks Vice President, Controller and Chief Accounting Officer (Duly Authorized Signatory) Date: August 18, 1997 EX-10 2 2ND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS SECOND AMENDMENT TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ("Amendment") is made as of July 11, 1997, among Foodmaker, Inc., a Delaware corporation (the "Company"), each of the banks identified on the signature pages hereof (each a "Bank" and, collectively, the "Banks"), Credit Lyonnais New York Branch, as Agent, Collateral Agent and Swing Line Bank, and Union Bank, as Issuing Bank. W I T N E S S E T H WHEREAS, the Company, the Banks, the Agent, the Collateral Agent, the Swing Line Bank and the Issuing Bank entered into the Amended and Restated Revolving Credit Agreement, dated as of March 15, 1996, as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of November 26, 1996 (the "Credit Agreement"); and WHEREAS, the signatories hereto desire to amend the Credit Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and of the covenants and agreements contained herein and in the Credit Agreement, the parties hereto agree that the Credit Agreement is hereby amended as set forth herein: 1. Capitalized terms used herein which are not otherwise defined herein but are defined in the Credit Agreement shall have the meanings given to such terms in the Credit Agreement. 2. Clause (xi) of the definition of Permitted Encumbrances in Section 1.01(c) is amended to read in its entirety as follows: (xi) any mortgage, encumbrance or other Lien upon, or security interest in, any property hereafter acquired by the Company or its Subsidiaries, created contemporaneously with such acquisition to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any Lien upon, or security interest in, any such property hereafter acquired existing at the time of such acquisition, or the acquisition of any such property subject to any Lien without the assumption thereof (or any Permitted Refinancing thereof); provided, that (A) the Indebtedness secured by any such Lien shall not exceed $5,000,000 except that the limitation in this clause (A) shall not apply to Indebtedness secured by the estates for years to be purchased by Subsidiaries created for such purpose from CRC-I Limited Partnership and CRC-II Limited Partnership and (B) each such Lien shall attach only to the property so acquired and fixed improvements thereon. 3. The definition of "Subsidiary" in Section 1.01(c) is amended to read in its entirety as follows: "Subsidiary" shall mean (i) any corporation the majority of the voting shares of which at the time are owned directly or indirectly by the Company and/or by one or more Subsidiaries of the Company, and (ii) any limited or general partnership in which the Company or any Subsidiary has at least a majority ownership interest and has the power to direct the policies, management and affairs thereof. 4. The first sentence of Section 2.07(a) of the Credit Agreement is hereby amended to read as follows: (a) If (i) the Company or any Subsidiary shall sell, lease, assign, transfer or otherwise dispose of any of its assets, other than pursuant to an Excluded Asset Sale, (ii) any of Company's or Subsidiary's capital assets shall be subject to loss, casualty, fire damage, theft or other destruction or condemnation or (iii) the Company or a Subsidiary issues, assumes or incurs Specified Additional Indebtedness, other than the assumption of or guarantee of Indebtedness by the Subsidiaries created as permitted by Section 8.02(h) in connection with the purchases by such Subsidiaries of certain estates for years from CRC-I Limited Partnership and CRC-II Limited Partnership, the Commitment of each Bank shall be reduced as provided below by an amount equal to such Bank's Pro Rata Share of the Net Cash Proceeds from any such sale, lease, assignment, transfer, disposi- tion, loss, casualty, fire damage, theft, destruction, condemnation, issuance, assumption or incurrence. 5. Section 6.01(b) of the Credit Agreement is hereby amended to read in its entirety as follows: (b) Good Standing and Power. The Company and each of its Subsidiaries are corporations or partnerships, as the case may be, each duly organized and validly -2- existing, under the laws of the jurisdiction of its formation, and each has the power to own its property and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where any such failure could not individually or together with all other such failures to be so qualified reasonably be expected to have a Material Adverse Effect. 6. Section 8.02(a) of the Credit Agreement is hereby amended to read in its entirety as follows: (a) Transactions with Affiliates. Enter into, or permit any of its Subsidiaries to enter into any transaction or series of related transactions with any Affiliate, other than transactions in the ordinary course of business which are on terms and conditions substantially as favorable to the Company or such Subsidiary as would be obtainable by the Company or such Subsidiary in an arms-length transaction with a Person other than an Affiliate except (i) payments for management advisory work not in excess of $375,000, (ii) the sale of any of the Common Stock of the Company to any officers or employees of the Company or any of its Subsidiaries or the issuance of options to purchase Common Stock of the Company and (iii) the lease by the Company from the Subsidiaries created as permitted by Section 8.02(h) of real property in which any such Subsidiary owns an estate for years. 7. Section 8.02(b) of the Credit Agreement is amended to read in its entirety as follows: (b) Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, or permit any Subsidiary so to do, except (i) Indebtedness set forth under clauses (i) through (viii) of Specified Additional Indebtedness, (ii) Indebtedness of the Company and any Subsidiary secured by mortgages, encumbrances or liens specifically permitted by Section 8.02(c),including, but not limited to, Indebtedness secured by a Lien on the estates for years purchased from CRC-I Limited Partnership and CRC-II Limited Partnership existing at the time of such purchase, (iii) contingent liabilities permitted by Section 8.02(f), (iv) Indebtedness existing as of the date hereof and specified on Schedule 8.02(b) hereto and (v) the guarantees by the Subsidiaries created as permitted by -3- Section 8.02(h) of the 9.75% Senior Secured Notes due November 1, 2003 of FM 1993A Corp. 8. Section 8.02(d) of the Credit Agreement is amended to read in its entirety as follows: (d) Merger, Acquisition or Sales of Assets. Enter into any merger or consolidation or acquire assets of any Person, other than Permitted Restaurant Repurchases, Permitted Sale Leaseback Repurchases, purchases by Subsidiaries created for such purpose of certain estates for years from CRC-I Limited Partnership and CRC-II Limited Partnership or assets acquired in the ordinary course of the Company's business, or sell, lease, or otherwise dispose of any of its assets, except pursuant to an Excluded Asset Sale, or permit any Subsidiary so to do, except that a Wholly Owned Subsidiary may be merged or consolidated with one or more other Wholly Owned Subsidiaries or into the Company. 9. Clause (i) of Section 8.02(f) of the Credit Agreement is amended to read in its entirety as follows: (i) in connection with a merger or the purchase of certain estates for years from CRC-I Limited Partnership or CRC-II Limited Partnership, each as permitted by Section 8.02(d). 10. (a) The first sentence of Section 8.02(g) of the Credit Agreement is amended to read in its entirety as follows: (g) Loans and Investments. Purchase or acquire the obligations or stock of, or any other interest in, or make loans, advances or capital contributions to, or form any joint ventures or partnerships with, any Person, or permit any Subsidiary so to do, except (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, with a maturity not exceeding one year, (ii) certificates of deposit, time deposits, banker s acceptances or other instruments of a bank having a combined capital and surplus of not less than $500,000,000 with a maturity not exceeding one year, (iii) commercial paper rated at least A-1 or P-1 maturing within one year after the date of acquisition thereof or rated at least A-2 or P-2 maturing within ninety days after the date of acquisition thereof, (iv) money market accounts maintained at a bank -4- having combined capital and surplus of not less than $500,000,000 or at another financial institution satisfactory to the Agent, and (v) money market funds organized under the laws of the United States or any State thereof that invest solely in (a) any of the types of investments permitted under Subsections 8.02(g)(i) and (ii), (b) commercial paper rated at least A-1 or P-1 maturing within one year after the date of acquisition thereof, or (c) any combination of the types of investments set forth in items (a) and (b) of this Subsection 8.02(g)(v). (b) Section 8.02(g) of the Credit Agreement is further amended by adding a new clause (G) immediately following clause (F), which shall read in its entirety as follows: (G) Acquire the stock or other interests in the Subsidiaries created as permitted by Section 8.02(h). 11. Section 8.02(h) of the Credit Agreement is amended to read in its entirety as follows: (h) Corporate Organization. (i) Create any Subsidiaries not in existence as of the date hereof, except that the Company may create Subsidiaries in connection with, and for the purpose of, effectuating the purchase of certain estates for years currently owned by CRC-I Limited Partnership and CRC-II Limited Partnership, provided that the Company pledges the stock or general partnership interest, as the case may be, of such Subsidiaries as Collateral pursuant to the Security Agreement; (ii) amend its certificate of incorporation in any material respect without the written consent of the Agent; or (iii) change its corporate structure. 12. Section 8.02(l) of the Credit Agreement is amended to read in its entirety as follows: (l) Prepayment of Debt. Prepay, redeem, defease (whether actually or in substance) or purchase in any manner (or deposit or set aside funds or securities for the purpose of the foregoing)(i) in excess of $50,000,000 in principal amount of the Company s 9.25% outstanding Senior Notes due 1999, or (ii) any of the Company s 9.75% Senior Subordinated Notes due 2002. 13. Schedule 6.01 to the Credit Agreement is hereby replaced with Schedule 6.01 to this Amendment. -5- 14. The Company agrees to pay on demand all reasonable costs and expenses of the Agent (including all reasonable fees and expenses of counsel to the Agent) in connection with the preparation and execution of this Amendment. 15. This Amendment has been duly executed and delivered by the Company and the Credit Agreement, as amended hereby, constitutes a valid and legally binding obligation of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. As of the date hereof, the Company is in compliance in all respects with all covenants set forth in the Agreement on its part to be observed or performed and no Default or Event of Default under the Agreement has occurred and is continuing. 16. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. 17. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. This Amendment shall become effective as of the date hereof upon the delivery to the Agent of executed counterparts from the Company and all Banks. 18. The Credit Agreement, as amended hereby, shall be binding upon the Company, the Banks, the Agent, the Collateral Agent, the Swing Line Bank and the Issuing Bank and their respective successors and assigns, and shall inure to the benefit of the Company, the Banks, the Agent, the Collateral Agent, the Swing Line Bank and the Issuing Bank and their respective successors and assigns. 19. Except as expressly provided in this Amendment, all of the terms, covenants, conditions, restrictions and other provisions contained in the Credit Agreement shall remain in full force and effect. -6- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. FOODMAKER, INC. By:/s/ Harold L. Sachs Name: Harold L. Sachs Title: Treasurer CREDIT LYONNAIS, NEW YORK BRANCH, as Agent for the Banks By:/s/ Attila Koc Name: Attila Koc Title: First Vice President Address for Notices: Credit Lyonnais Los Angeles Branch 515 South Flower Street Los Angeles, California 90071 Attn: David Miller Fax: (213) 362-5949 Sullivan & Cromwell 444 South Flower Street Suite 1200 Los Angeles, California 90071 Attn: Alison S. Ressler Fax: (213) 683-0457 -7- CREDIT LYONNAIS NEW YORK BRANCH Signing as a Bank, Swing Line Bank and Collateral Agent By:/s/ Attila Koc Name: Attila Koc Title: First Vice President Address for Notices: Credit Lyonnais Los Angeles Branch 515 South Flower Street Los Angeles, California 90071 Attn: David Miller Fax: (213) 362-5949 Sullivan & Cromwell 444 South Flower Street Suite 1200 Los Angeles, California 90071 Attn: Alison S. Ressler Fax: (213) 683-0457 -8- NATIONSBANK OF TEXAS, N.A. as a Bank By: /s/ Brad DeSpain Name: Brad DeSpain Title: Senior Vice President Address for Notices: NationsBank of Texas, N.A. 901 Main Street, 14th Floor Dallas, Texas 95202 Attn: Kay Hibbs Fax: (214) 508-0944 Eurodollar Lending Office: NationsBank of Texas, N.A. 901 Main Street, 14th Floor Dallas, Texas 95202 Attn: Kay Hibbs Fax: (214) 508-0944 -9- U.S. NATIONAL BANK OF OREGON as a Bank By:/s/ Janet E. Jordan Name: Janet E. Jordan Title: Vice President Address for Notices: 111 S.W. Fifth Avenue, T-29 Portland, Oregon 97204 Attn: Janet E. Jordan Fax: (503) 275-5428 Eurodollar Lending Office: 111 S.W. Fifth Avenue, T-29 Portland, Oregon 97204 Attn: Janet E. Jordan Fax: (503) 275-5428 -10- UNION BANK OF CALIFORNIA, N.A. as a Bank and as the Issuing Bank By: /s/ Ali Pasha Moghaddam Name: Ali Pasha Moghaddam Title: Vice President Address for Notices: 445 South Figueroa Street 16th Floor Los Angeles, California 90071 Attn: Jason Kim Fax: (213) 236-7636 Eurodollar Lending Office: 445 South Figueroa Street 16th Floor Los Angeles, California 90071 Attn: Jason Kim Fax: (213) 236-7636 -12- EX-27 3 ARTICLE 5 FDS FOR FISCAL YEAR 1997 THIRD QUARTER 10-Q
5 FISCAL YEAR THRU THIRD QUARTER CONTAINS 40 WEEKS 1000 9-MOS SEP-28-1997 SEP-30-1996 JUL-06-1997 89,856 0 11,611 4,108 18,725 155,821 628,683 195,862 709,604 178,570 395,972 404 0 0 77,626 709,604 791,849 822,157 291,684 695,116 0 0 31,342 33,017 7,300 25,717 0 0 0 25,717 .65 .65
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