-----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, QFFoPXSg4Q8LRpMAPIPRhMeZKbGuQrc3Y5jH6EouT2/vfAlACKi2bi/aQKUJHO+B m5+LoGFJNFxdeYO/hQXSyA== 0000840826-95-000037.txt : 19951109 0000840826-95-000037.hdr.sgml : 19951109 ACCESSION NUMBER: 0000840826-95-000037 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAKA INTERNATIONAL INC CENTRAL INDEX KEY: 0000840826 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 043024178 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17229 FILM NUMBER: 95588089 BUSINESS ADDRESS: STREET 1: ONE CORPORATE PL STREET 2: 55 FERNCROFT RD CITY: DANVERS STATE: MA ZIP: 01923 BUSINESS PHONE: 5087749115 MAIL ADDRESS: STREET 1: ONE CORPORATE PLACE 55 FERNCROFT RD CITY: DANVERS STATE: MA ZIP: 01923 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to __________ Commission file number 0-17229 DAKA INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 04-3024178 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Corporate Place, 55 Ferncroft Road, Danvers, MA 01923 (Address of principal executive offices) (Zip Code) (508) 774-9115 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) 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 at October 24, 1995: 6,927,028. PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements DAKA INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) (Unaudited)
September 30, July 1, 1995 1995 ASSETS: Current assets: Cash and cash equivalents $ 10,976 $ 7,236 Accounts receivable, net 38,741 29,844 Inventories 10,742 9,295 Prepaid expenses and other current assets 1,710 1,530 -------- -------- Total current assets 62,169 47,905 -------- -------- Property and equipment, net 89,540 86,513 Investments in, and advances to, affiliates 527 511 Other assets, net 30,685 30,524 Deferred income taxes 2,327 2,327 -------- -------- $185,248 $167,780 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $ 23,543 $ 19,492 Accrued expenses 17,051 17,364 Current portion of long-term debt 793 613 Deferred income taxes 236 236 -------- -------- Total current liabilities 41,623 37,705 -------- -------- Long-term debt 73,923 68,497 Other long-term liabilities 9,606 8,830 Minority interests 3,039 3,012 Commitments and contingencies (Note 3) Stockholders' equity: Series A Preferred Stock, $.01 par value; $100 liquidation preference; 1,000,000 shares authorized ; 11,912 and 100,000 shares issued and outstanding at September 30, 1995 and July 1, 1995, respectively 1 Common Stock, $.01 par value; 20,000,000 shares authorized; 6,922,431 and 4,495,193 shares issued and outstanding at September 30, 1995 and July 1, 1995, respectively 70 46 Capital in excess of par value 44,002 38,848 Retained earnings 12,985 10,841 -------- -------- Total stockholders' equity 57,057 49,736 -------- -------- $185,248 $167,780 ======== ========
See notes to consolidated financial statements. DAKA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended September 30, 1995 and October 1, 1994 (In thousands, except per share data) (Unaudited)
1995 1994 Revenues: Sales $ 84,218 $ 62,883 Management fees and franchising income 3,042 2,128 -------- -------- 87,260 65,011 -------- -------- Costs and expenses: Cost of sales and operating expenses 70,506 52,609 Selling, general and administrative expenses 8,534 6,928 Depreciation and amortization 3,499 2,285 Interest expense 1,297 782 Interest income (61) (71) Minority interests 27 (3) -------- -------- 83,802 62,530 -------- -------- Income before income taxes 3,458 2,481 Income tax expense 1,314 899 -------- -------- Net income $ 2,144 $ 1,582 ======== ======== Earnings per share: Primary $ .36 $ .40 Fully diluted $ .27 $ .22
See notes to consolidated financial statements. DAKA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended September 30, 1995 and October 1, 1994 (In thousands) (Unaudited)
September 30, October 1, 1995 1994 Cash flows from operating activities: Net income $ 2,144 $ 1,582 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,499 2,285 Minority interests 27 (3) Change in assets and liabilities: Accounts receivable (8,897) (1,511) Inventories (1,447) (1,009) Other assets (1,638) (754) Accounts payable and accrued expenses 3,738 (1,815) Other long-term liabilities 776 1,529 -------- -------- Net cash provided by (used in) operating activities (1,798) 304 -------- -------- Cash flows from investing activities: Purchase of property and equipment (11,029) (7,995) Proceeds from sale of property and equipment 43 147 Investments in and advances to affiliates (16) (47) -------- -------- Net cash used in investing activities (11,002) (7,895) -------- -------- Cash flows from financing activities: Borrowings under line-of-credit 10,600 9,539 Repayment of long-term debt (228) (792) Proceeds from sale-leaseback facility 5,850 Other 318 74 -------- -------- Net cash provided by financing activities 16,540 8,821 -------- -------- Net increase in cash and cash equivalents 3,740 1,230 Cash and cash equivalents, beginning of period 7,236 5,040 -------- -------- Cash and cash equivalents, end of period $ 10,976 $ 6,270 ======== ======== Supplemental cash flow disclosures: Cash paid for: Interest $ 1,694 $ 1,409 Income taxes $ 1,920 $ 829
During the period ended September 30, 1995 the Company acquired equipment by entering into capital leases in the amount of $271. See notes to consolidated financial statements. DAKA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Three Months Ended September 30, 1995 and Year Ended July 1, 1995 (Dollars in thousands) (Unaudited)
Capital Preferred Stock Common Stock In Excess Total Outstanding Par Outstanding Par of Par Retained Stockholders' Shares Value Shares Value Value Earnings Equity Balance, July 2, 1994 100,000 $ 1 3,773,503 $38 $ 30,616 $ 2,125 $ 32,780 Employee stock options exercised 37,360 1 339 340 Shares issued upon conversion of certain Convertible Subordinated Notes, net 684,330 7 7,893 7,900 Preferred Stock dividend (400) (400) Net income 9,116 9,116 ------- --- --------- --- -------- ------- ------- Balance, July 1, 1995 100,000 1 4,495,193 46 38,848 10,841 49,736 Employee stock options exercised 49,885 318 318 Shares issued upon conversion of certain Convertible Subordinated Notes, net 419,832 4 4,855 4,859 Shares issued upon conversion of certain Preferred Stock (88,088) (1) 1,957,521 20 (19) Net income 2,144 2,144 ------- --- --------- --- ------- ------ ------- Balance, September 30, 1995 11,912 6,922,431 $70 $ 44,002 $ 12,985 $ 57,057
See notes to consolidated financial statements. DAKA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended September 30, 1995 and October 1, 1994 (Dollars in thousands, except per share data) (Unaudited) 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements include the accounts of DAKA International, Inc. and its majority-controlled subsidiaries (the "Company"). Significant intercompany balances and transactions have been eliminated in consolidation. Business The Company's principal subsidiaries, Daka, Inc. ("Daka"), Fuddruckers, Inc. ("Fuddruckers") and Americana Dining Corp. ("ADC"), operate in the contract foodservice and restaurant industries. Daka provides restaurant style contract foodservice management at a variety of schools and colleges as well as other facilities. Fuddruckers owns, operates and franchises Fuddruckers restaurants throughout the United States and in Canada, Australia and the Middle East. ADC, a majority controlled subsidiary acquired during fiscal 1994, owns and operates two restaurants in the Minneapolis area under the name "Champps Americana" pursuant to a license agreement from Champps Entertainment, Inc., licensor and franchisor of Champps Americana restaurants. Unaudited Interim Consolidated Financial Statements In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of financial position and results of operations. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the fiscal year ended July 1, 1995. The consolidated results of operations for the three months ended September 30, 1995 and October 1, 1994 are not necessarily indicative of the results that could be expected for a full year. Fiscal Year The Company's fiscal year ends on the Saturday closest to June 30. For purposes of these notes to the consolidated financial statements, the three months ended September 30, 1995 and October 1, 1994 are referred to as 1995 and 1994, respectively. Classifications Certain reclassifications have been made to the prior year's consolidated financial statements in order to conform to the 1995 presentation. Such reclassifications had no effect on previously reported results of operations. Earnings Per Share Primary earnings per share are computed using the weighted average number of common and common equivalent shares (dilutive options and warrants) outstanding. In addition to the inclusion of common and common equivalent shares, the calculation of fully diluted earnings per share includes the shares issuable upon conversion of the Preferred Stock which amounted to 264,700 and 2,222,222 shares in 1995 and 1994, respectively, and the shares issuable upon conversion of the Convertible Subordinated Notes ("Notes") which amounted to 1,291,666 and 2,395,833 shares in 1995 and 1994, respectively. Fully diluted earnings per share assume that the Preferred Stock and Notes were converted into Common Stock as of the beginning of the fiscal year and reflect the elimination of interest expense related to the Notes, net of the related income tax effect, and dividends, to the extent accrued, related to the Preferred Stock. The weighted average number of shares used in the computation of earnings per share for 1995 and 1994 are as follows:
1995 1994 Primary 5,878,658 4,003,185 Fully Diluted 8,846,878 8,633,901
2. Subsequent Events In October 1995, Fuddruckers obtained a commitment for a $25,000 sale-leaseback financing facility from Franchise Finance Corporation of America ("FFCA"). Pursuant to the terms of the facility, Fuddruckers will sell and lease back from FFCA up to 20 Fuddruckers restaurants to be constructed, in which Fuddruckers has an ownership interest in the real estate and will pay a commitment fee of 1.5% of the sale price of each property sold to FFCA. The sale price is limited to the lesser of 80% of the fair market value of the property or $1,250. The unused commitment, if any, expires on October 31, 1996. The leases provide for a fixed minimum rent plus additional rent based on a percentage of sales and provide for an initial lease term of 20 years with two 5-year renewal options exercisable at the option of Fuddruckers. The terms and conditions of the sale-leaseback are such that they do not meet the criteria for treatment as capital leases under Statement of Financial Accounting Standards No. 13 - "Accounting for Leases." On October 10, 1995, CEI Acquisition Corp., a newly formed, wholly-owned subsidiary of the Company, and Champps Entertainment, Inc. ("Champps") entered into an Agreement and Plan of Merger whereby the Company would issue .40 (the "Exchange Ratio") shares of common stock for each share of Champps common stock outstanding or issuable upon exercise of Champps stock options or warrants, subject to adjustment. The Exchange Ratio will increase to .43 in the event that the average closing price of the Company's common stock during the 20 trading days preceding the second trading day prior to the closing date of the merger is less than $30 per share or decrease to .37 in the event that the average closing price of the Company's common stock during the 20 trading days preceding the second trading day prior to the closing date of the merger is greater than $35 per share. The consummation of the merger is conditioned upon the merger qualifying for treatment as a pooling of interests for accounting and financial reporting purposes. The merger is subject to approval by the shareholders of both the Company and Champps at shareholder meetings expected to be held in February 1996. Dean Vlahos, President and founder of Champps, will be the Chief Executive Officer of Champps subsequent to the merger. 3. Commitments and Contingencies Litigation In certain circumstances, where management and legal counsel believe that a loss has been incurred, the Company has recorded an estimate of such loss. The Company is also engaged in various other legal actions arising in the ordinary course of business which, in the judgment of management based upon consultation with legal counsel, the Company has adequate legal defenses or insurance coverage with respect to these actions or believes that the ultimate outcome will not have a material adverse affect on the Company's consolidated financial statements. Letters of Credit As of September 30, 1995, the Company has approximately $7 million of outstanding letters of credit. The outstanding letters of credit reduce the Company's borrowing capacity under its line of credit agreement. 4. Debt During 1995, $5,038 of Notes were converted into common stock by the Holders of such Notes. In connection with the conversion, the Company increased Stockholders' Equity by $4,859, net of related unamortized deferred debt issue costs. As of September 30, 1995, $15,500 of Notes remain outstanding. The conversion had no effect upon fully diluted earnings per share since the shares issuable upon conversion of the Notes were already included in the calculation of fully diluted earnings per share. 5. Preferred Stock During 1995, in two separate transactions, Holders of the Company's Series A Preferred Stock ("Preferred Stock") converted 88,088 shares of Preferred Stock into 1,957,521 shares of common stock. The conversion had no effect upon fully diluted earnings per share since the shares issuable upon conversion of the Preferred Stock were already included in the calculation of fully diluted earnings per share. As of September 30, 1995, 11,912 shares of Preferred Stock remain outstanding which may be converted into 264,700 shares of common stock at any time at the Holders option. 6. Segment Information The Company operates in the contract foodservice management and restaurant industries. The table below presents selected results of operations for the Company's businesses for the three months ended September 30, 1995 and October 1, 1994.
September 30, October 1, 1995 1994 Revenues: Sales from profit and loss contracts $ 48,838 $ 34,763 Management fees 1,070 1,115 Restaurant sales - Fuddruckers 33,528 26,331 Franchising income 1,972 1,013 Restaurant sales - Champps 1,852 1,789 -------- -------- Total revenues $ 87,260 $ 65,011 ======== ======== Foodservice: Managed volume $ 70,209 $ 55,891 ======== ======== Sales from profit and loss contracts $ 48,838 $ 34,763 Operating expenses: Labor costs 16,634 11,720 Product costs 17,216 12,032 Other operating expenses 7,617 5,734 Depreciation and amortization 1,289 847 -------- -------- Income from profit and loss contracts 6,082 4,430 Management fees 1,070 1,115 -------- -------- Income from foodservice operations 7,152 5,545 -------- -------- Fuddruckers: Sales from restaurant operations 33,528 26,331 Operating expenses: Labor costs 9,264 7,458 Product costs 9,291 7,264 Other operating expenses 8,946 6,926 Depreciation and amortization 1,887 1,174 -------- -------- Income from restaurant operations 4,140 3,509 Franchising income 1,972 1,013 -------- -------- Income from restaurant and franchising operations 6,112 4,522 -------- -------- Champps: Sales from restaurant operations 1,852 1,789 Operating expenses: Labor costs 649 615 Product costs 541 521 Other operating expenses 348 339 Depreciation and amortization 58 63 -------- -------- Income from restaurant operations 256 251 -------- -------- Income from operations before selling, general and administrative expenses 13,520 10,318 -------- --------
September 30, October 1, 1995 1994 Selling, general and administrative expenses (1): Foodservice 2,283 2,470 Fuddruckers 2,835 2,078 Corporate 3,452 2,455 Champps 229 126 -------- -------- Total 8,799 7,129 -------- -------- Operating income 4,721 3,189 Interest expense 1,297 782 Interest income (61) (71) Minority interest 27 (3) -------- -------- Income before income taxes 3,458 2,481 Income tax expense 1,314 899 -------- -------- Net income $ 2,144 $ 1,582 ======== ========
(1) Selling, general and administrative expenses include depreciation expense of $265 and $201 in 1995 and 1994, respectively. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS Summary Net income for the quarter ended September 30, 1995 increased 36% to $2.1 million on revenues of $87.3 million as compared to net income of $1.6 million on revenues of $65.0 million for the quarter ended October 1, 1994. Fully diluted earnings per share increased 23% to $0.27 for the quarter compared to $0.22 for the comparable quarter of last year. Foodservice The following table sets forth, for the periods presented, certain financial information for the Company's foodservice business. For further financial information relating to the foodservice business see Note 6 of Notes to the Consolidated Financial Statements.
- September 30, October 1, 1995 1994 Sales from profit and loss contracts 100.0% 100.0% Operating expenses: Labor costs (34.1) (33.7) Product costs (35.2) (34.6) Other operating expenses (15.6) (16.5) Depreciation and amortization (2.6) (2.5) -------- -------- Income from profit and loss contracts 12.5% 12.7% ======== ======== Total foodservice revenues $ 49,908 $ 35,878 ======== ======== Managed volume: Management fee contracts $ 21,371 $ 21,128 Profit and loss contracts 48,838 34,763 -------- -------- Total managed volume $ 70,209 $ 55,891 ======== ======== Income from foodservice operations $ 7,152 $ 5,545 ======== ======== Income from foodservice operations as a percentage of managed volume: Management fee contracts 5.0% 5.3% Profit and loss contracts 12.5% 12.7% Income from foodservice operations as a percentage of total managed volume 10.2% 9.9% Income from foodservice operations as a percentage of foodservice revenues 14.3% 15.5%
Daka conducts its operations on the basis of two types of foodservice contracts with its clients. The first type is a management fee contract pursuant to which a client pays Daka a negotiated fee for overseeing and administering its foodservice operations and reimburses Daka for all costs incurred in providing such service. Management fee contracts are prevalent where companies subsidize food services as part of the benefits provided to employees and in elementary and secondary schools. The second type of contract is a profit and loss contract whereby Daka assumes the risk of profit or loss from the foodservice operations. While Daka manages the total sales volume attributable to both contract types, generally accepted accounting principles require that Daka recognize sales and expenses from profit and loss contracts, but only the management fee amount derived from management fee contracts. Consequently, Daka does not recognize sales and expenses with respect to management fee contracts. As a result, Daka's managed volume, which represents both sales made pursuant to profit and loss contracts and sales to guests of foodservice clients pursuant to management fee contracts is considerably greater than the revenues it recognizes. Managed volume in the Company's foodservice business increased $14.3 million or 26% to $70.2 million during the quarter ended September 30, 1995 as compared to $55.9 million in the comparable quarter of 1994. The increase in managed volume was primarily due to $17.8 million of managed volume generated by the educational and corporate foodservice contracts acquired from ServiceMaster Management Services L.P. ("SMMSLP") on February 8, 1995 by Daka Restaurants, L.P. ("DRLP"), an 80.01% owned consolidated subsidiary of Daka, increased volume at existing foodservice operations and new contracts added during 1995, offset by managed volume associated with certain lost or terminated contracts. During fiscal 1995, a number of marginally profitable or unprofitable contracts expired and, accordingly, became subject to a competitive bidding process. Throughout this process, Daka rebid unprofitable or marginally profitable contracts on terms that should provide it with an acceptable profit. Certain of these contracts were retained, and, as anticipated, certain other contracts were not retained. However, despite the loss of these contracts, operating margins as well as income from foodservice operations in Daka's base business, excluding the educational and corporate foodservice contracts acquired in 1995 from SMMSLP, improved during the quarter ended September 30, 1995 compared to the same quarter last year. Income from foodservice operations increased 29% to $7.2 million during the quarter ended September 30, 1995 as compared to $5.5 million in the comparable quarter of 1994. Income from profit and loss contracts as a percentage of sales from profit and loss contracts decreased during the quarter ended September 30, 1995 as compared to the comparable quarter of 1994 due to the lower operating margins associated with the educational foodservice contracts acquired from SMMSLP in 1995. Operating margins in the base foodservice business, excluding the educational and corporate foodservice contracts acquired in 1995 from SMMSLP, increased during the quarter ended September 30, 1995 compared to the same quarter of last year while the acquired contracts performed as expected. The lower operating margins associated with the educational foodservice contracts acquired is typical of the educational foodservice industry and consistent with the operating margins in Daka's existing educational foodservice business. Fuddruckers The following table sets forth, for the periods presented, certain financial information for Fuddruckers. For further information relating to Fuddruckers see Note 6 of Notes to the Consolidated Financial Statements.
September 30, October 1, 1995 1994 Sales from Fuddruckers-owned restaurants: 100.0% 100.0% Operating expenses: Labor costs (27.7) (28.3) Product costs (27.7) (27.6) Other operating expenses (26.7) (26.3) Depreciation and amortization (5.6) (4.5) -------- -------- Income from restaurant operations 12.3% 13.3% ======== ======== Restaurant sales $ 33,528 $ 26,331 ======== ======== Income from restaurant operations $ 4,140 $ 3,509 Franchising income 1,972 1,013 -------- -------- Income from restaurant and franchising operations $ 6,112 $ 4,522 ======== ======== Number of restaurants (end of period): Fuddruckers-owned 102 77 Franchised 72 78 -------- -------- Total restaurants 174 155 ======== ========
Sales in Fuddruckers-owned restaurants increased $7.2 million or 27% during the quarter ended September 30, 1995 compared to the quarter ended October 1, 1994. This increase is due to a combination of $1.2 million of sales at 5 restaurants acquired from franchisees during fiscal 1995 and $8.1 million of sales at 26 new restaurants opened in the past year, offset, in part, by a $900 thousand decrease in sales resulting from the closing of one restaurant in fiscal 1995 and the sale of three restaurants to franchisees during the fourth quarter of fiscal 1995. In addition, comparable restaurant sales decreased by 1.5% during the quarter ended September 30, 1995 as compared to the first quarter of last year. Income from restaurant and franchise operations increased to $6.1 million during the quarter ended September 30, 1995 as compared to $4.5 million during the comparable quarter of last year. The increase in income from restaurant operations was primarily due to the increased number of restaurants in operation during the quarter as compared to the first quarter of last year. The increase in franchising income is primarily due to a development fee received in connection with the sale of the exclusive rights to build Fuddruckers restaurants in certain countries located in northern Asia. Operating margins remained relatively stable with the exception of depreciation and amortization which, as a percentage of sales, increased as a result of the amortization of preopening costs associated with the opening of 26 new restaurants. Champps The following table sets forth, for the periods presented, certain financial information for the two Champps Americana restaurants owned by ADC. For further information related to ADC see Note 6 of Notes to the Consolidated Financial Statements.
September 30, October 1, 1995 1994 Sales from Champps restaurants 100.0% 100.0% Operating expenses: Labor costs (35.1) (34.4) Product costs (29.2) (29.1) Other operating expenses (18.8) (19.0) Depreciation and amortization (3.1) (3.5) -------- -------- Income from restaurant operations 13.8% 14.0% ======== ======== Restaurant sales $ 1,852 $ 1,789 ======== ======== Income from restaurant operations $ 256 $ 251 ======== ======== Number of restaurants 2 2 ======== ========
Comparable sales increased 3.5% during the quarter ended September 30, 1995 compared to the first quarter of last year while operating margins remained relatively consistent during the quarter, resulting in a 2% increase in income from restaurant operations. ADC currently has two Champps Americana restaurants under development in Ohio which are expected to open in the second and third quarters of fiscal 1996. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $1.7 million to $8.8 million for the quarter ended September 30, 1995 compared to $7.1 million in the quarter ended October 1, 1994. Selling, general and administrative expenses as a percentage of managed volume of $105.6 million and $84.0 million, which includes foodservice managed volume as well as sales at Company-owned restaurants, decreased to 8.3% during the quarter compared to 8.5% in the comparable quarter of last year. The decrease in selling, general and administrative expenses as a percentage of managed volume reflects the Company's ability to leverage its corporate and field operations infrastructure as it continues to add new restaurants and grow its foodservice business through acquisitions of other contract foodservice management companies. Interest Expense Interest expense increased $500 thousand to $1.3 million during the quarter ended September 30, 1995 compared to $800 thousand in the first quarter of last year. The increase is a result of an overall higher level of debt due to borrowings under the Company's line of credit offset, in part, by a decrease in interest expense as a result of the conversion of $13.2 million of the Company's Convertible Subordinated Notes into common stock beginning in the second quarter of fiscal 1995. Income Taxes The Company's effective tax rate increased to 38% for the quarter ended September 30, 1995 compared to 36.2% for the comparable period of last year. The increase was primarily due to higher pretax income and the elimination of the targeted jobs tax credit in December 1994. Earnings Per Share Primary earnings per share decreased 10% while fully diluted earnings per share increased 23% during the quarter as compared to last year. The decrease in primary earnings per share was primarily due to a 47% increase in the primary weighted average number of shares outstanding offset, in part, by a 36% increase in net income. The shares issued upon conversion of the Company's Series A Preferred Stock into 1,957,521 shares of common stock and the conversion of a portion of the Company's Convertible Subordinated Notes into approximately 419,832 shares of common stock, included in the calculation of the weighted average number of primary shares outstanding from the conversion date to the end of the quarter were the principal reasons for the increase. The shares issued pursuant to the conversion of the Preferred Stock and Convertible Subordinated Notes had no effect on fully diluted earnings per share since such shares were previously included in the calculation of fully diluted earnings per share. FINANCIAL CONDITION AND LIQUIDITY Working capital amounted to $20.5 million at September 30, 1995, an increase of $10.3 million compared to working capital of $10.2 million at July 1, 1995. The increase in working capital is principally due to the use of borrowings under the Company's line-of-credit agreement, classified as long-term debt, to fund operating activities as a result of the seasonal increase in accounts receivable due to the commencement of foodservice operations at schools and colleges served by the Company. At September 30, 1995 the Company had approximately $11.4 million of available borrowing capacity remaining on its line-of-credit. Capital expenditures in the quarter ended September 30, 1995 aggregated approximately $11.0 million, and consisted of $7.9 million for new Fuddruckers restaurants and upgrades at existing restaurants, $1.3 million for new Champps restaurants under construction, $600 thousand for updating the Company's information systems and $1.2 million for improvements at facilities of foodservice clients. Capital expenditures were funded through a combination of borrowings under the Company's line-of-credit agreement and approximately $5.9 million of proceeds from its sale-leaseback facility. The Company plans to open 30 new Fuddruckers-owned restaurants, continue to reorient facilities of foodservice clients to a more retail restaurant environment and open two Champps Americana restaurants during fiscal 1996. Management believes that cash flow from operations, existing cash, available borrowings under its line-of-credit as well as the new $25 million sale-lease back facility obtained in October 1995 will provide sufficient liquidity to pay all liabilities in the normal course of business, fund capital expenditures and service debt requirements for the foreseeable future. PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) Exhibits 11 Computation Regarding Per Share Earnings (b) Reports on Form 8-K The Company filed Form 8-K on October 13, 1995 with respect to the merger described in Note 2 to the Consolidated Financial Statements. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DAKA INTERNATIONAL, INC. (Registrant) By: /s/Michael A. Woodhouse ------------------------- Michael A. Woodhouse Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Principal Accounting Officer) November 8, 1995 EX-11 2 PER SHARE EARNINGS COMPUTATION Exhibit 11 DAKA INTERNATIONAL, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS Three months ended September 30, 1995 and October 1, 1994 (In thousands, except per share data) (Unaudited)
1995 1994 Primary: Net income $ 2,144 $ 1,582 ======== ======== Weighted average number of common shares outstanding 5,538 3,778 Additional shares assuming conversion of stock options 341 225 -------- -------- Average common shares outstanding and equivalents 5,879 4,003 ======== ======== Primary earnings per share: Net income $ 0.36 $ 0.40 ======== ======== Fully Diluted: Net income $ 2,144 $ 1,582 Interest expense on Convertible notes, after tax effect 216 321 -------- -------- $ 2,360 $ 1,903 ======== ======== Weighted average number of common shares outstanding 5,538 3,778 Weighted average number of shares related to notes converted, prior to conversion 158 Weighted average number of shares related to Preferred Stock converted, prior to conversion 1,196 Additional shares issuable upon conversion of Preferred Stock 265 2,222 Additional shares issuable upon conversion of Notes 1,292 2,396 Additional shares assuming conversion of stock options 398 238 -------- -------- 8,847 8,634 ======== ======== Fully diluted earnings per share: Net income $ 0.27 $ 0.22 ======== ========
EX-27 3
5 0000840826 DAKA INTERNATIONAL, INC. 1000 3-MOS JUN-29-1996 SEP-30-1995 10,976 0 39,905 1,164 10,742 62,169 120,841 31,301 185,248 41,623 73,923 70 0 0 56,987 185,248 84,218 87,260 70,506 70,506 0 0 1,297 3,458 1,314 2,114 0 0 0 2,114 .36 .27
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