-----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, EM2y2MFNzYVDOknPQYkV9f86rBa3qK9uD7ADS3msNLpVPGAvGbDUpmKsHCrQaFj2 KBHhJWM6fQ3D5wEal8Gfdg== 0000872548-99-000004.txt : 19990512 0000872548-99-000004.hdr.sgml : 19990512 ACCESSION NUMBER: 0000872548-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990330 FILED AS OF DATE: 19990511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURRS BISHOPS INC CENTRAL INDEX KEY: 0000872548 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 752350724 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10725 FILM NUMBER: 99616399 BUSINESS ADDRESS: STREET 1: 3001 E PRESIDENT GEORGE BUSH HWY STREET 2: SUITE 200 CITY: RICHARDSON STATE: TX ZIP: 75085-5943 BUSINESS PHONE: 972-808-2923 MAIL ADDRESS: STREET 1: P.O. BOX 852800 CITY: RICHARDSON STATE: TX ZIP: 75085-2800 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-10725 FURR'S/BISHOP'S, INCORPORATED INCORPORATED IN DELAWARE I.R.S. EMPLOYER IDENTIFICATION NO.75-2350724 3001 E. PRESIDENT GEORGE BUSH HWY., STE. 200, RICHARDSON, TX 75082 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972)808-2923 - ------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 [ ] - ------------------------------------------------------------------------------- As of May 7, 1999, there were 48,789,544 shares of Common Stock outstanding. Page 1 of 16 FURR'S/BISHOP'S, INCORPORATED INDEX PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 30, 1999(Unaudited) and December 29, 1998 3 Unaudited Condensed Consolidated Statements of Operations - For the thirteen weeks ended March 30, 1999 and March 31, 1998 5 Unaudited Condensed Consolidated Statement of Stockholders' Deficit - For the thirteen weeks ended March 30, 1999 6 Unaudited Condensed Consolidated Statements of Cash Flows - For the thirteen weeks ended March 30, 1999 and March 31, 1998 7 Notes to Unaudited Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION 15 SIGNATURES Page 2 FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except par value amounts)
March 30, December 29, 1999 1998 ----------- ----------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 12,004 $ 11,571 Accounts and notes receivable, net 853 715 Inventories 6,655 7,014 Prepaid expenses and other 1,195 441 ----------- ----------- Total current assets 20,707 19,741 Property, plant and equipment, net 48,117 48,320 Other assets 781 448 ----------- ----------- $ 69,605 $ 68,509 =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements. (Continued on following page) Page 3 FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (dollars in thousands, except par value amounts)
March 30, December 29, 1999 1998 ----------- ----------- (Unaudited) Liabilities and Stockholders' Deficit Current liabilities: Current maturities of long-term debt $ 5,493 $ 5,493 Trade accounts payable 5,140 3,990 Other payables and accrued expenses 16,426 17,303 Reserve for store closings - current 1,224 1,316 ----------- ----------- Total current liabilities 28,283 28,102 Reserve for store closings, net of current portion 3,074 3,280 Long-term debt, net of current portion 60,712 60,712 Other payables 15,557 15,697 Excess of future lease payments over fair value, net of amortization 2,226 2,330 Commitments and contingencies Stockholders' deficit: Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued Common stock, $.01 par value; 65,000,000 shares authorized, 48,789,533 and 48,736,606 issued and outstanding in 1999 and 1998, respectively 488 487 Additional paid-in capital 55,996 55,938 Accumulated other comprehensive loss (2,857) (2,857) Accumulated deficit (93,874) (95,180) ----------- ----------- Total stockholders' deficit (40,247) (41,612) ----------- ----------- $ 69,605 $ 68,509 =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements. Page 4 FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts)
Thirteen weeks ended ------------------------- March 30, March 31, 1999 1998 ----------- ----------- Sales $ 46,003 $ 46,212 Costs and expenses: Cost of sales (excluding depreciation) 13,659 13,548 Selling, general and administrative 27,973 28,083 Depreciation and amortization 2,427 2,513 Special charge 566 ----------- ----------- 44,625 44,144 ----------- ----------- Operating income 1,378 2,068 Interest expense 72 44 ----------- ----------- Net income $ 1,306 $ 2,024 =========== =========== Weighted average number of shares of common stock outstanding: Basic 48,775,186 48,675,168 =========== =========== Diluted 49,158,855 48,675,168 =========== =========== Net income per share: Basic $ 0.03 $ 0.04 =========== =========== Diluted $ 0.03 $ 0.04 =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements. Page 5 FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE THIRTEEN WEEKS ENDED March 30, 1999 (dollars in thousands)
Additional Additional Other Total Common Paid-In Comprehensive Accumulated Stockholders' Stock Capital Loss Deficit Deficit ------ ---------- ------------ ----------- ------------ Balance at December 29, 1998 $ 487 $ 55,938 $ (2,857) $ (95,180) $ (41,612) Warrants exercised 1 58 59 Net income 1,306 1,306 ------ ---------- ------------ ----------- ------------ Balance at March 30, 1999 $ 488 $ 55,996 $ (2,857) $ (93,874) $ (40,247) ====== ========== ============ =========== ============
See accompanying notes to unaudited condensed consolidated financial statements. Page 6 FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Thirteen weeks ended ------------------------- March 30, March 31, 1999 1998 ----------- ----------- Cash flows from operating activities: Net income $ 1,306 $ 2,024 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,427 2,513 (Gain)/loss on disposition of assets (154) 5 Other, net (47) 154 Changes in operating assets and liabilities: Accounts and notes receivable (13) 11 Inventories 359 (231) Prepaid expenses and other (754) (311) Trade accounts payable, other payables, accrued expenses and other liabilities 273 (262) ----------- ----------- Net cash provided by operating activities 3,397 3,903 ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (3,080) (1,719) Expenditures charged to reserve for store closings (351) (405) Proceeds from the sale of property, plant and equipment 780 184 Other, net (13) (6) ----------- ----------- Net cash from investing activities (2,664) (1,946) ----------- ----------- Cash flows from financing activities: Payment of indebtedness - (2,746) Other, net (300) (55) ----------- ----------- Net cash from financing activities (300) (2,801) ----------- ----------- Increase/(decrease) in cash and cash equivalents 433 (844) Cash and cash equivalents at beginning of period 11,571 4,516 ----------- ----------- Cash and cash equivalents at end of period $ 12,004 $ 3,672 =========== =========== Supplemental disclosure of cash flow information: Interest paid, including $2,746 of interest in 1998 classified as payment of indebtedness $ 2 $ 2,748 =========== =========== Non-cash investing activity: note receivable for sale of assets $ 125 $ - =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements. Page 7 FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Summary of Significant Accounting Policies Furr's/Bishop's, Incorporated, a Delaware corporation (the "Company"), currently operates 98 cafeterias and a buffet through its subsidiary Cafeteria Operators, L.P., a Delaware limited partnership (together with its subsidiaries, the "Partnership"). The financial statements presented herein are the unaudited condensed consolidated financial statements of the Company and its majority owned subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements, and notes thereto, which are included in the Company's Form 10-K for the year ended December 29, 1998. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations for the thirteen weeks ended March 30, 1999 may not be indicative of the results that may be expected for the fiscal year ending December 28, 1999. The following table reconciles the denominators of basic and diluted earnings per share for the thirteen week periods ended March 30, 1999 and March 31, 1998.
March 30, March 31, 1999 1998 ---------- ---------- Weighted average common shares outstanding-basic 48,775,186 48,675,168 Options 338,657 Warrants 45,012 ---------- ---------- Weighted average common shares outstanding-diluted 49,158,855 48,675,168 ========== ==========
NOTE B: Income Tax During the thirteen week periods ended March 30, 1999 and March 31, 1998, the Company had a net loss for income tax purposes. The resulting tax benefit from the net operating loss has been offset by an increase in the tax valuation allowance in both periods. Page 8 NOTE C: Special Charge The thirteen weeks ended March 30, 1999 includes a special charge of $566,000 for the costs associated with the move of the Company's support center from Lubbock, Texas to Richardson, Texas. NOTE D: Business Segment Following is a summary of segment information of the Company for the thirteen weeks ended March 30, 1999 and March 31, 1998:
Cafeterias Dynamic Foods Total ---------- ------------- ---------- 1999: External revenues $ 45,763 $ 240 $ 46,003 Intersegment revenues - 14,595 14,595 Depreciation and amortization 2,186 241 2,427 Segment profit 1,082 224 1,306 1998: External revenues 45,962 250 46,212 Intersegment revenues - 14,119 14,119 Depreciation and amortization 2,310 203 2,513 Segment profit 1,696 328 2,024
Following is a reconciliation of reportable segments to the Company's consolidated totals for the thirteen weeks ended March 30, 1999 and March 31, 1998:
March 30, March 31, 1999 1998 ----------- ----------- Revenues Total revenues of reportable segments $ 60,598 $ 60,331 Elimination of inter-segment revenue (14,595) (14,119) ----------- ----------- Total consolidated revenues $ 46,003 $ 46,212 =========== ===========
Page 9 NOTE E: New Accounting Pronouncements On January 1, 1999, the Company adopted the American Institute of Certified Public Accountants Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires companies to capitalize certain internal-use software costs once certain criteria are met. Adoption of this statement did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. On January 1, 1999, the Company adopted the American Institute of Certified Public Accountants SOP 98-5, "Reporting on the Costs of Start-up Activities". SOP 98-5 requires costs of start-up activities to be expensed when incurred. Adoption of this statement did not have a material impact on the Company's consolidated financial position, results or operations or cash flows. Page 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Thirteen Weeks Ended March 30, 1999 Compared to Thirteen Weeks Ended March 31, 1998 Results of operations. Sales for the first fiscal quarter of 1999 were $46.0 million, a decrease of $209 thousand from the same quarter of 1998. Operating income for the first quarter of 1999 was $1.4 million compared to $2.1 million in the comparable period in the prior year. The operating results of the first quarter of 1999 included a special charge of $566 thousand for the costs associated with the move of the Company's support center from Lubbock, Texas to Richardson, Texas. The net income for the first quarter of 1999 was $1.3 million compared to $2.0 million in the first quarter of 1998. Sales. Restaurant sales in comparable units increased $1.3 million, or 2.94% in the first quarter of 1999 over the same quarter of 1998. Sales for the first fiscal quarter were $1.5 million lower than the same period of the prior year due to there being a net of four fewer units included in operating results. Sales by Dynamic Foods to third parties were $10 thousand lower in the first quarter of 1999 than the first quarter of the prior year. Cost of sales. Excluding depreciation, cost of sales were 29.7% of sales for the first quarter of 1999 as compared to 29.3% for the same quarter of 1998. The increase in the percentage of sales was the result of higher product costs. Selling, general and administrative. Selling, general and administrative ("SG&A") expense was lower in the aggregate by $111 thousand in the first quarter of 1999 as compared to 1998 due partially to there being fewer units included in the operating results. The change in SG&A expense included an increase of $236 thousand in marketing expense and $467 thousand in labor and related benefits and a decrease of $140 thousand in utility expenses. Depreciation and amortization. Depreciation and amortization expense was lower by $86 thousand in the first quarter of 1999 due primarily to lower depreciation on property, plant and equipment having been previously written down in accordance with SFAS121. Special charge. Income from operations for the quarter ended March 30, 1999 included a special charge of $566 thousand for the costs associated with the move of the Company's support center from Lubbock, Texas to Richardson, Texas. Interest expense. In accordance with Statement of Financial Accounting Standards No. 15, the Company's debt that was restructured at January 2, 1996 was recorded at the sum of all future principal and interest payments and there is no recognition of interest expense thereon. Page 11 LIQUIDITY AND CAPITAL RESOURCES OF FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES During the thirteen weeks ended March 30, 1999, cash provided by operating activities of the Company was $3.4 million compared to $3.9 million in the same period of 1998. The Company made capital expenditures of $3.1 million during the first thirteen weeks of 1999 compared to $1.7 million during the same period of 1998. Cash, temporary investments and marketable securities were $12.0 million at March 30, 1999 compared to $3.7 million at March 31, 1998. The current ratio of the Company was .73:1 at March 30, 1999 compared to .48:1 at March 31, 1998 and .70:1 at December 29, 1998. The Company's total assets at March 30, 1999 aggregated $69.6 million, compared to $64.4 million at March 31, 1998 and $68.5 million at December 29, 1998. The Company's restaurants are a cash business. Funds available from cash sales are not needed to finance receivables and are not generally needed immediately to pay for food, supplies and certain other expenses of the restaurants. Therefore, the business and operations of the Company have not historically required proportionately large amounts of working capital, which is generally common among similar restaurant companies. Total scheduled maturities of long-term debt and interest classified as long-term debt of the Company and its subsidiaries over the next three calendar years are: $5.5 million in 1999, $5.5 million in 2000 and $55.2 million in 2001. The Company has outstanding $63.7 million of 12% Notes due December 31, 2001, which includes $17.9 million of interest to maturity. Under the terms of the indenture covering the 12% Notes, a semi-annual cash interest payment of approximately $2.7 million is due on each March 31 and September 30. The obligations of the Company under the 12% Notes are secured by a security interest in and a lien on all of the personal property of the Partnership and mortgages on all fee and leasehold properties of the Partnership (to the extent such properties are mortgageable). The Company has outstanding $2.5 million of 10.5% Notes due December 31, 2001. A semi-annual cash interest payment of approximately $134 thousand is due on each June 30 and December 31. The Company intends to pursue a program of remodeling existing cafeterias and opening new restaurants. The Company anticipates expending approximately $15 to $20 million in fiscal year 1999 to remodel existing cafeterias and open new restaurants and to make other capital expenditures. No assurance can be given that the Company will generate sufficient funds from operations or obtain alternative financing sources to enable it to fully implement the anticipated capital expenditures. Page 12 YEAR 2000 READINESS DISCLOSURE Some computers, software, and other equipment include computer code in which calendar year data is abbreviated to only two digits. As a result, some of these systems will not operate correctly after 1999 because they may interpret "00" to mean 1900, rather than 2000. These problems are widely expected to increase in frequency and severity as the year 2000 approaches, and are commonly referred to as the "Year 2000 Problem." The Company believes that it has identified all significant digital systems and applications that will require modification to ensure Year 2000 compliance. The Company has commenced the process of modifying, upgrading and replacing any digital systems that have been assessed as adversely affected, and estimates that its compliance activities will be substantially completed no later than the second quarter of 1999. The Company estimates that the total costs of this effort during the 1998 and 1999 fiscal years will be less than $500,000, which is being funded through operating cash flows. These estimates are based on management's assumptions regarding future events, including the continued availability of necessary resources and the effectiveness of hardware and software solutions provided by third parties and by the Company's information technology staff. The Year 2000 Problem may also affect parties who provide critical goods and services to the Company, for example banks, credit card companies, utility providers and suppliers of raw and processed foodstuffs to the Company's restaurants and its Dynamic Foods operation. The Company is evaluating the extent to which the Company's operations are vulnerable to Year 2000 problems of its material vendors and is seeking assurance of their Year 2000 compliance status. Management believes that the Company's reliance upon large volumes of independent consumer transactions at 100 restaurant locations, operation of its own trucking fleet and utilization of the Dynamic Foods division to provide the majority of its food products limit some aspects of the Company's Year 2000 exposure. However, the Company's ability to assure Year 2000 compliance by many critical vendors is very limited. Year 2000 failures by one or more of these vendors could disrupt materially the ability of the Company to operate. The Company is in the process of preparing contingency plans to address the possibility of significant performance failures by its material vendors, which will include an analysis of advisable cash and inventory levels and identification of alternative suppliers of critical goods and services. These plans are expected to be completed by July 31, 1999. There is no assurance that the Company can adequately plan for contingencies that may be associated with Year 2000 failures by these third parties, or that alternative suppliers will be available and themselves unaffected by Year 2000 Problems. In particular, management is not able to predict with any assurance the effect of Year 2000 Problems in the food product industry or among the suppliers of utilities such as electricity, water and telecommunications to the Company, and specifically to its Dynamic Foods operation. An interruption of the operation of Dynamic Foods could require the Company to close its restaurants until service can be resumed. Page 13 The discussion in "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of the Company's plans, and management's expectations, relating to the Company's business, including Year 2000 compliance, as well as other portions of this report, includes certain statements that may constitute "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995). Words such as "anticipate," "estimate," "project" and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including without limitation those discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report. Should one or more of these risks materialize, or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated, estimated or projected. Prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company assumes no obligation to update any such forward looking statements. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to market risk from changes in commodity prices. The Company purchases certain commodities used in food preparation. These commodities are generally purchased based upon market prices established with vendors. These purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. The Company does not use financial instruments to hedge commodity prices because these purchase arrangements help control the ultimate cost paid and any commodity price aberrations are generally short term in nature. The Company's long term debt does not expose it to market risk as all interest accrues at fixed rates. The Company does not use derivative financial instruments to manage overall borrowing costs. This market risk discussion contains forward-looking statements. Actual results may differ materially from this discussion based upon general market conditions and changes in domestic and global financial markets. Page 14 PART II OTHER INFORMATION Item 1. Legal Proceeding The Company and certain of its subsidiaries, the Cavalcade Pension Plan, the Cavalcade Pension Plan Committee, Kmart Corporation and its pension plan and Michael Levenson have since 1996 been defendants in a lawsuit brought against them in U.S. District Court in Denver, Colorado by Robert H. Aull ("Plaintiff"), a former employee of the Company and a participant in the Cavalcade Pension Plan. The Plaintiff requested that the Court certify a class of other plaintiffs who are similarly situated and sought unspecified damages. The Plaintiff's allegations (all of which are disputed by the defendants in the case) included: (i) that accrued benefits under the Cavalcade Pension Plan were improperly reduced during the period from 1988 to 1993, (ii) the "freeze" of the Plan on June 30, 1989 was improper, (iii) an insufficient amount of assets was transferred from the Kmart Corporation pension plan to the Cavalcade Pension Plan in connection with the acquisition of the Company from Kmart effected by Mr. Levenson and his affiliates in 1988 and (iv) rent concessions allowed to the Company by Kmart commencing in 1993 constituted prohibited transactions that bestowed illegal benefits upon the Company and Mr. Lewis. The Company, the Cavalcade Pension Plan, the members of the Cavalcade Pension Plan Committee, Kmart Corporation and its pension plan have entered into a definitive settlement agreement (the "Agreement") with the plaintiff and his counsel that would resolve all outstanding claims among them. The Agreement is subject to (1) confirmation by an independent actuary of the calculations that support the proposed settlement and (2) approval of the settlement as "fair" to all members of the plaintiff class by the court after notice to all purported class members and a hearing. The Agreement has been filed with the court and the required hearing should be completed by the end of the second quarter of 1999. The Company is not able to provide assurance that the conditions to the proposed settlement will be satisfied or that the proposed settlement will be implemented as described herein. As a result of the settlement of the Aull litigation and the concurrent resolution of an IRS audit of the Plan that focused on substantially identical issues, the Company has recognized a special charge of $5,786 in the fourth quarter of 1998, of which approximately $2,200 relates to resolution of the IRS audit and is not contingent upon actuarial review or the fairness hearing in the Aull litigation. The anticipated cash impact of the settlement on the Company includes payment in 1999 of approximately $1,500 of expenses for legal and professional fees, with the remainder of the settlement to be paid to the Plan in future years to fund increased benefit payments to former and current employees. The settlement will not require any funding payments to the Plan by the Company in 1999 but is expected to require payments by the Company to the Plan of approximately $1,700 in 2000 and approximately $850 in 2001, with additional funding payments required in subsequent years in amounts that are expected to decline Page 15 over time, subject to the overall funding status of the Plan. The Agreement provides for Kmart Corporation's pension plan to transfer $700 to the Cavalcade Pension Plan to fund a portion of the additional benefits required by the Agreement. Management does not believe that payment of these amounts in 1999 and subsequent years will have a material adverse effect on the Company's planned operations. The Company filed a declaratory judgment lawsuit in the State District Court in Lubbock, Texas, in which it asks the Court to find that the Company is not obligated to make severance payments that have been demanded by Theodore Papit, the former President and CEO of the Company. Mr. Papit submitted his resignation on May 28, 1998, following the election at the Company's annual meeting of shareholders of a slate of directors proposed by Teacher's Insurance and Annuity Association of American ("TIAA"), the Company's largest shareholder at that time. He subsequently demanded payment of more than $500,000 of severance and other amounts that he claimed were owing to him under a "President and Chief Executive Officer Agreement" dated March 23, 1998. This Agreement was approved by a split vote of the Board of Directors after TIAA had publicly announced that it might take action affecting the control of the Company. The Company has requested a jury trial and believes that there are a number of grounds that will support the Court in granting the requested relief, among them being that the Agreement is void as an interested party transaction that did not receive the necessary approval of independent, disinterested directors, the terms of the Agreement are not fair to the Company and the Agreement was entered into by the Company without the benefit of full disclosure by Mr. Papit and consideration by the Board of Directors of material information regarding his management of the Company. Page 16 SIGNATURES 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. FURR'S/BISHOP'S, INCORPORATED FURR'S/BISHOP'S, INCORPORATED BY: /s/ Phillip Ratner /s/ Dawn N. Rosignol ------------------------------- ------------------------------- Phillip Ratner Dawn N. Rosignol President and Chief Executive Officer Chief Accounting Officer DATE: May 10, 1999 Page 17 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FURR'S/BISHOP'S, INCORPORATED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED MARCH 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-28-1999 DEC-30-1998 MAR-30-1999 12,004 0 867 14 6,655 20,707 103,428 55,311 69,605 28,283 60,712 0 0 488 (40,735) 69,605 46,003 46,003 13,659 13,659 30,966 0 72 1,306 0 1,306 0 0 0 1,306 0.03 0.03
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