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 5, 1998the quarterly period ended January 17, 1999
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Commission File No.file no. 1-9390
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FOODMAKER, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2698708
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(State of Incorporation) (I.R.S. Employer Identification No.)
9330 BALBOA AVENUE, SAN DIEGO, CA 92123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 571-2121
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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
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Number of shares of common stock, $.01 par value, outstanding as of the close of
business August 10, 1998February 19, 1999 - 39,136,614
-1-38,116,292.
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1
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 5,January 17, September 28,27,
1999 1998
1997
--------- -------------- ------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalentsequivalents. . . . . . . . . $ 3,430 $ 9,952
Receivables. . . . . . . . . . . . . . . . 13,254 13,705
Inventories. . . . . . . . . . . . . . . . 21,416 17,939
Prepaid expenses . . . . . . . . . . . . . 40,089 40,826
--------- ---------
Total current assets . . . . . . . . . . 78,189 82,422
--------- ---------
Trading area rights. . . . . . . . . . . . . 71,857 72,993
--------- ---------
Lease acquisition costs. . . . . . . . . . . 16,562 17,157
--------- ---------
Other assets . . . . . . . . . . . . . . . . 39,468 39,309
--------- ---------
Property at cost . . . . . . . . . . . . . . 785,346 759,680
Accumulated depreciation and amortization. (237,085) (227,973)
--------- ---------
548,261 531,707
--------- ---------
TOTAL. . . . . . . . . . . . . . . . . . $ 2,271754,337 $ 28,527
Receivables743,588
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt . . . $ 1,699 $ 1,685
Accounts payable . . . . . . . . . . . . . 53,684 52,086
Accrued expenses . . . . . . . . . . . . . 152,625 171,974
--------- ---------
Total current liabilities. . . . . . . . 208,008 225,745
--------- ---------
Deferred income taxes. . . . . . . . . . . . 2,847 2,347
--------- ---------
Long-term debt, net of current maturities. . 324,663 320,050
--------- ---------
Other long-term liabilities. . . . . . . . . 65,208 58,466
--------- ---------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . 409 408
Capital in excess of par value . . . . . . 286,819 285,940
Accumulated deficit. . . . . . . . . . . . (99,154) (114,905)
Treasury stock . . . . . . . . . . . . . . (34,463) (34,463)
--------- ---------
Total stockholders' equity . . . . . . . 153,611 136,980
--------- ---------
TOTAL. . . . . . . . . . . . . . . . . . $ 754,337 $ 743,588
========= =========
See accompanying notes to financial statements.
2
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Sixteen Weeks Ended
------------------------------
January 17, January 18,
1999 1998
- -----------------------------------------------------------------------------
Revenues:
Restaurant sales. . . . . . . . . . . . . . $ 384,440 $ 325,333
Distribution and other sales. . . . . . . . 10,297 6,773
Franchise rents and royalties . . . . . . . 11,701 10,934
Other . . . . . . . . . . . . . . . . . . 11,312 10,482
Inventories. 696 734
--------- ---------
407,134 343,774
--------- ---------
Costs and expenses:
Costs of revenues:
Restaurant costs of sales . . . . . . . . 123,596 105,072
Restaurant operating costs. . . . . . . . 187,341 159,147
Costs of distribution and other sales . . 10,170 6,625
Franchised restaurant costs . . . . . . . 7,154 6,975
Selling, general and administrative . . . . 44,905 37,735
Interest expense. . . . . . . . . . . . . . 9,017 11,046
--------- ---------
382,183 326,600
--------- ---------
Earnings before income taxes. . . . . . . . . 24,951 17,174
Income taxes. . . . . . . . . . . . . . . . . . . 18,278 18,300
Prepaid expenses. . . . . . . . . . . . . . . . 45,588 42,8539,200 5,500
--------- ---------
Total current assets . . . . . . . . . . . . 77,449 100,162
--------- ---------
Property at cost.Net earnings. . . . . . . . . . . . . . . . . 713,656 660,076
Accumulated depreciation and amortization . . . (222,666) (201,289)
--------- ---------
490,990 458,787
--------- ---------
Trading area rights . . . . . . . . . . . . . . . 73,835 69,921
--------- ---------
Lease acquisition costs . . . . . . . . . . . . . 17,129 18,788
--------- ---------
Other assets. . . . . . . . . . . . . . . . . . . 39,116 34,100
--------- ---------
TOTAL .$ 15,751 $ 11,674
========= =========
Net earnings per share:
Basic . . . . . . . . . . . . . . . . . . . $ 698,5190.41 $ 681,758
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt. . . . . . $ 1,584 $ 1,470
Accounts payable. . . . . . . . . . . . . . . . 25,197 39,575
Accrued expenses. . . . . . . . . . . . . . . . 144,084 134,960
Income tax liabilities. . . . . . . . . . . . . 13,473 17,208
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Total current liabilities . . . . . . . . . . 184,338 193,213
--------- ---------
Long-term debt, net of current maturities . . . . 307,892 346,191
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Other long-term liabilities . . . . . . . . . . . 58,272 54,093
--------- ---------
Deferred income taxes . . . . . . . . . . . . . . 4,382 382
--------- ---------
Stockholders' equity:
Common stock.0.30
Diluted . . . . . . . . . . . . . . . . . 407 405
Capital in excess of par value. . . . . . . . . 285,002 283,517
Accumulated deficit . . . . . . . . . . . . . . (127,311) (181,580)
Treasury stock. . . . . . . . . . . . . . . . . (14,463) (14,463)
--------- ---------
Total stockholders' equity. . . . . . . . . . 143,635 87,879
--------- ---------
TOTAL$ 0.40 $ 0.29
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . $ 698,519 $ 681,758
========= =========
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
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July 5, July 6, July 5, July 6,
1998 1997 1998 1997
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Revenues:
Restaurant sales. . . . . . . $263,668 $234,828 $838,506 $749,860
Distribution and other sales. 6,666 7,129 18,985 41,989
Franchise rents and royalties 8,285 8,461 27,248 27,166
Other . . . . . . . . . . . . 1,947 1,263 49,510 3,142
-------- -------- -------- --------
280,566 251,681 934,249 822,157
-------- -------- -------- --------
Costs and expenses:
Costs of revenues:
Restaurant costs of sales . 84,345 77,285 271,610 250,078
Restaurant operating costs. 138,991 119,494 441,384 385,238
Costs of distribution and
other sales . . . . . . . 6,491 6,956 18,431 41,606
Franchised restaurant costs 5,365 6,175 17,820 18,194
Selling, general and
administrative 19,041 19,652 71,844 62,682
Interest expense. . . . . . . 7,707 9,324 26,913 31,342
-------- -------- -------- --------
261,940 238,886 848,002 789,140
-------- -------- -------- --------
Earnings before income taxes. . 18,626 12,795 86,247 33,017
Income taxes. . . . . . . . . . 6,000 2,800 27,600 7,300
-------- -------- -------- --------
Earnings before extraordinary
item. . . . . . . . . . . . . 12,626 9,995 58,647 25,717
Extraordinary item - loss on
early extinguishment of debt,
net of taxes. . . . . . . . . (4,378) - (4,378) -
-------- -------- -------- --------
Net earnings. . . . . . . . . . $ 8,248 $ 9,995 $ 54,269 $ 25,717
======== ======== ======== ========
Earnings per share - basic:
Earnings before extraordinary
item . . . . . . . . . . . . $ .32 $ .26 $ 1.49 $ .66
Extraordinary item. . . . . . .11 - .11 -
-------- -------- -------- --------
Net earnings per share. . . . $ .21 $ .26 $ 1.38 $ .66
======== ======== ======== ========
Earnings per share - diluted:
Earnings before extraordinary
item . . . . . . . . . . . . $ .31 $ .25 $ 1.46 $ .65
Extraordinary item. . . . . . .11 - .11 -
-------- -------- -------- --------
Net earnings per share. . . . $ .20 $ .25 $ 1.35 $ .65
======== ======== ======== ========
Weighted average shares
outstanding:
Basic . . . . . . . . . . . . 39,300 38,983 39,214 38,89638,000 39,142
Diluted . . . . . . . . . . . 40,348 39,871 40,281 39,633
See accompanying notes to financial statements.
-3-
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Forty Weeks Ended
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July 5, July 6,
1998 1997
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Cash flows from operations:
Earnings before extraordinary item. . . . . . . . . . $ 58,647 $ 25,717
Non-cash items included above:
Depreciation and amortization . . . . . . . . . . . 32,312 30,501
Deferred income taxes . . . . . . . . . . . . . . . 4,000 (3,300)
Decrease (increase) in receivables. . . . . . . . . . (830) 3,808
Decrease in inventories38,991 40,197
See accompanying notes to financial statements.
3
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Sixteen Weeks Ended
-----------------------------------
January 17, January 18,
1999 1998
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Cash flows from operations:
Net earnings. . . . . . . . . . . . . . . . 22 2,125
Increase in prepaid expenses.$ 15,751 $ 11,674
Non-cash items included above:
Depreciation and amortization . . . . . . 13,697 13,085
Deferred income taxes . . . . . . . . . . . . (3,608) (17,405)
Increase (decrease)500 860
(Increase) decrease in accounts payablereceivables. . . . . . . . (14,378) 8,346451 (482)
Increase in other accrued liabilitiesinventories . . . . . . . . 9,850 25,008. . (3,477) (480)
(Increase) decrease in prepaid expenses . . 737 (1,211)
Increase (decrease) in accounts payable . . 1,598 (11,256)
Decrease in other accrued liabilities . . . (12,492) (724)
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Cash flows provided by operations . . . . . . . . . 86,015 74,80016,765 11,466
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Cash flows from investing activities:
Additions to property and equipment . . . . . . . . . (61,203) (26,017)(28,183) (11,392)
Dispositions of property and equipment. . . . . . . . 4,099 2,814565 735
Increase in trading area rights . . . . . . . . . . . (6,719) (1,424)(30) (2,193)
Increase in other assets. . . . . . . . . . . . . . . (7,081) (2,206)(1,023) (1,160)
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Cash flows used in investing activities . . . . . . (70,904) (26,833)(28,671) (14,010)
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Cash flows from financing activities:
Borrowings under revolving bank loans . . . . . . . . 118,000100,500 -
Principal repayments under revolving
bank loans . . . (32,000) -
Proceeds from issuance of long-term debt. . . . . . . 126,690 -
Principal payments on long-term debt,
including current maturitiesloans. . . . . . . . . . . . (251,166) (1,023)
Extraordinary loss. . . . (96,000) -
Proceeds from issuance of long-term debt. . 500 -
Principal payments on retirement oflong-term debt,
net of tax. (4,378) -including current maturities. . . . . . . (496) (444)
Proceeds from issuance of common stock. . . . . . . . 1,487 929880 497
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Cash flows used inprovided by financing
activitiesactivities. . . . . . . (41,367) (94). . . . . . . . 5,384 53
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Net increase (decrease)decrease in cash and cash equivalents.equivalents . . $ (26,256)(6,522) $ 47,873(2,491)
========= =========
See accompanying notes to financial statements.
-4-4
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements of Foodmaker,
Inc. (the "Company") and its subsidiaries 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 19971998 financial
statements.
2. In 1998, the Company adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"), Earnings per Share. SFAS 128 requires the presentation of
basic earnings per share, computed using the weighted average number of
shares outstanding during the period, and diluted earnings per share,
computed using the additional dilutive effect of all common stock
equivalents. The dilutive impact of stock options and warrants account for
the additional weighted average shares of common stock outstanding for the
Company's diluted earnings per share computation. All prior periods have
been restated to conform with the provisions of SFAS 128.
3. The income tax provisions reflect the expected annual tax rate of 32%37% of
pretax earnings before income taxes in 19981999 and the actual tax rate of 22%32% of pretax
earnings in 1997.1998. The low
effectivefavorable income tax rates in each year result from the Company's
ability to realize previously unrecognized tax benefits. The Company cannot
determine with certainty the actual 19981999 annual effective tax rate until the end of the fiscal
year,year; thus the rate could differ from expectations.
4. Legal Proceedings
During last quarter, the Company settled the litigation it filed against the
Vons Companies, Inc. ("Vons") and various suppliers seeking reimbursement
for all damages, costs and expenses incurred in connection with food-borne
illness attributed to hamburgers served at Jack in the Box restaurants in
1993. The initial litigation was filed by the Company on February 4, 1993.
Vons 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 were settled on February 24, 1998.
Foodmaker received in its second quarter approximately $58.5 million in the
settlement, of which a net of approximately $45.8 million was realized after
litigation costs and before income taxes (the "Litigation Settlement").
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, attorneys fees and prejudgment
-5-
interest. In an amended complaint, damages were 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 agreement on settlement terms both as to the individual plaintiff
Concetta Jorgensen and the claims for injunctive relief, and the settlement
agreement has been approved by the U.S. District Court. The settlement
requires the Company to make access improvements at Company-operated
restaurants to comply with the standards set forth in the Americans with
Disabilities Act Access Guidelines. The settlement requires compliance at
85% of the Company-operated restaurants by April 2001 and for the balance of
Company-operated restaurants by October 2005. The Company has agreed to make
modifications to its restaurants to improve accessibility and anticipates
investing an estimated $11 million in capital improvements in connection
with these modifications over the next several years. Foodmaker has been
notified by attorneys for plaintiffs that claims may be made against certain
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.3. Contingent Liabilities
On April 6, 1996, an action was filed by one of the Company's international
franchisees, Wolsey, Ltd., a Hong Kong corporation, in the United StatesU.S. District
Court in San Diego, California against the Company and its directors, its
international franchising subsidiary, and certain current and former officers
of the Company and others.Company. The complaint allegesalleged certain contractual, tort, and law
violations, related to
the franchisees' development rights in the Far East and seeks damages in
excess ofsought $38.5 million in damages, injunctive relief,
attorneysattorneys' fees and costs. The Company has successfullyfiled a counterclaim seeking, among
other things, declaratory relief, and attorneys' fees and costs. Prior to the
trial, the Court dismissed portions of the complaint,plaintiff's claim, including the
single claim alleging wrongdoing by the Company's outsidenon-management directors,
and the claims against its current officers. Management believes the remaining
allegations are without foundation and intendsThe case proceeded to vigorously defend the
action. A trial date ofon
January 5, 1999 has been set by1999. Prior to the court.
On November 5, 1996 an action was filed by the National JIB Franchisee
Association, Inc. and severalconclusion of the Company's franchisees intrial, on January 29, 1999,
the Superior
Courtparties reached agreement on a settlement which provided for a mutual
exchange of California, Countynon-cash consideration, including execution of San Diego in San Diego, California, againsta new agreement
between the Company and others. The lawsuit alleges that certain Company policies
are unfair business practices and violate sectionsthe plaintiff for development of the California
Corporations Code regarding material modifications of franchise agreements
and interfere with franchisees' right of association. It seeks injunctive
relief, a declaration of the rights and duties of the parties, unspecified
damages and recision of alleged material modifications of plaintiffs'
franchise agreements. The complaint also alleges fraud, breach of a
fiduciary duty and breach of a third party beneficiary contract in
connection with certain payments that the Company received from suppliers
and seeks unspecified damages, interest, punitive damages and an accounting.
Management believes that its policies are lawful and that it has satisfied
any obligation to its franchisees in regard to such supplier payments. The
trial is set for October 5, 1998.
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 insolvencyAsia. The settlement was formally approved, and failure to meet operational standards. The Foodmex
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. The Company and its
subsidiary counterclaimed and sought a preliminary injunction against
-6-
Foodmex. On March 28, 1997 the court granted the Company's request for an
injunction, held that the Companyjudgment 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. Onentered on February 24, 1998, the Court issued an order dismissing
Foodmex's complaint without prejudice. In March 1998, Foodmex filed a Second
Amended Complaint in the United States District Court in San Diego,
California alleging contractual, tort and law violations arising out of the
same business relationship and seeking damages in excess of $10 million,
attorneys fees and costs. The Company believes such allegations are without
merit and will defend the action vigorously.
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, damages, interest,
attorneys' fees and costs. In August 1998 this action was settled with no
material impact on the operations or financial condition of the Company.2, 1999.
The Company is also subject to normal and routine litigation. The amount of
liability from the claims and actions described aboveagainst the Company cannot be
determined with certainty, but in the opinion of management, the ultimate
liability from all pending legal proceedings, asserted legal claims and known
potential legal claims which are probable of assertion should not materially
affect the results of operations and liquidity of the Company. -7-Other than as
described in this quarterly report, there have been no material changes to
the litigation matters set forth in the Company's Annual Report on Form 10-K
for the fiscal year ended September 27, 1998.
5
FOODMAKER, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL INFORMATIONCONDITION AND RESULTS OF OPERATIONS
- ---------------------RESULTS OF OPERATIONS
All comparisons under this heading between 19981999 and 19971998 refer to the 12-week and 40-week16-
week periods ended July 5,January 17, 1999 and January 18, 1998, and July 6, 1997, respectively, unless
otherwise indicated.
Restaurant sales increased $28.9$59.1 million, and $88.6or 18.2%, to $384.4 million respectively,
to $263.7 million and $838.5in
1999 from $325.3 million in 1998, from $234.8 million and $749.9
millionreflecting increases in 1997, as both the number of Company-operated restaurants and per
store average sales increased from a year ago. The average number of Company-
operated restaurants for the 40-week period increased to 986and in 1998 from 891 in
1997, through the addition of new units and the acquisition of restaurants from
franchisees. Perper store average ("PSA") sales. The average number
of Company-operated restaurants increased 11.4% to 1,081 in 1999 from 970
restaurants in 1998. PSA sales for comparable Company-operated restaurants,
which
are calculated for only those restaurants open for all periods beingmore than one year, grew 6.8% in 1999 compared increased 2.0% and 2.3%, respectively, in 1998 compared towith the same periodsperiod
in 1997. PSA sales improved due to increases in both the1998. Sales growth was distributed fairly evenly between average number of
transactions and the average transaction amounts, increasing 3.7% and 3.1%,
respectively, compared with a year ago. Management believes that the sales
growth is attributable to effective advertising and strategic initiatives,
especially the Assemble-To-Order ("ATO") program in which sandwiches are made
when customers order them, are attracting customers to Jack in the Box
restaurants. New menu boards that showcase the combo meals are helping to
increase average check amounts. Restaurant sales improvements are
attributedIn addition, a new drive-thru order confirmation
system is helping to improve order accuracy while alerting customers to the
Company's two-tier marketing strategy featuring both premium
sandwiches and value-priced alternatives, as well as to a popular brand-building
advertising campaign that features the Company's fictional founder, "Jack".amount of their purchase.
Distribution and other sales of food and supplies declined $.4increased $3.5 million and
$23.0to $10.3 million respectively, to $6.7 million and $19.0in
1999 from $6.8 million in 1998, from $7.1
millionprimarily due to an increase in the number of
franchise restaurants serviced by the Company's distribution division and $42.0 million in 1997. A distribution contract with Chi-Chi's, Inc.
("Chi-Chi's") was not renewed when it expired in May 1997; sales
to Chi-Chi's
restaurants were $5.2 million and $35.3 million, respectively, in 1997. Because
distribution is a low-margin business, the loss of distribution revenues did not
have a material impact on the results of operations or financial condition of
the Company. Sales to franchisees and others increased $4.8 million and $12.3
million, respectively, to $6.7 million and $19.0 million in 1998 from $1.9
million and $6.7 million in 1997.growth at franchise restaurants.
Franchise rents and royalties decreased slightlyincreased $.8 million to $11.7 million in
the 12-week period to
$8.31999 from $10.9 million in 1998, from $8.5and were slightly more than 10% of sales at
franchise restaurants in both years. Franchise restaurant sales increased to
$112.6 million in 1997. Franchise rents and royalties
were $27.21999 from $106.1 million in 1998. Sales at domestic franchise
restaurants were also strengthened by the 40-week periods of both years. Rents and royalties
were approximately 10% of franchisees' sales.
In 1998, otherstrategic initiatives implemented at
Company-operated restaurants.
Other revenues typicallyinclude interest income from investments and notes
receivable also include the net Litigation Settlement of $45.8 million as
described in Note 4. Excluding this unusual item, other revenues increased
slightly to $1.9 million and $3.7were approximately $.7 million in 1998 from $1.3 millioneach year.
Restaurant costs of sales and $3.1
million in 1997.operating costs increased with sales growth
and the addition of Company-operated restaurants. Restaurant costs of sales,
which include food and packaging costs, increased with restaurant sales growth and the addition of Company-operated
restaurants to $84.3 million and $271.6 million, respectively, in 1998 from
$77.3 million and $250.1$123.6 million in 1997.1999 from
$105.1 million in 1998. As a percent of restaurant sales, restaurant costs of sales
declineddecreased to 32.0% and 32.4%, respectively,32.1% of sales in 19981999 from 32.9% and 33.3%32.3% of sales in 19971998, primarily due
to favorable ingredientlower costs principallyof beef and pork, and beverages,partially offset partially by increased producehigher dairy costs.
-8-
Restaurant operating costs increased principally with restaurant sales
growth and the addition of Company-operated restaurants to $139.0 million and
$441.4 million, respectively, in 1998 from $119.5 million and $385.2$187.3 million in 1997.1999 from $159.1
million in 1998. As a percent of restaurant sales, operating costs decreased to
48.7% in 1999 from 48.9% in 1998, in spite of higher labor costs. Labor costs
increased due to minimum wage increases and implementation costs associated with
strategic initiatives that strengthened PSA sales. Occupancy and other
restaurant operating expenses improved as a percent of sales as such costs,
which tend to be less variable, increased to 52.7% and
52.6%, respectively, in 1998 from 50.9% and 51.4% in 1997 primarily reflecting
higher labor costs due to increases in the minimum wage, initial training for
operational improvements and other operations administrative costs.at a lesser rate than PSA sales
growth.
6
Costs of distribution and other sales decreasedincreased to $6.5$10.2 million and $18.4in 1999
from $6.6 million respectively, in 1998, from $7.0 million and $41.6 millionreflecting an increase in 1997
reflecting the decline in distributionrelated sales. CostsAs a
percent of distribution and other sales, decreased as a percent of salesthese costs increased to 97.3% and 97.1%, respectively,98.8% in 19981999
from 97.6% and 99.1%97.8% in 1997,1998, primarily due to the loss of the lower margin Chi-Chi's distribution business. In 1997 costs of distribution andrealized from other sales
include $.4 million in expenses related to the closure of a distribution center
which had been used primarily to distribute to Chi-Chi's.sales.
Franchised restaurant costs, which includeconsist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous costs,
decreasedincreased slightly to $5.4$7.2 million and $17.8in 1999 from $7.0 million respectively, in 1998,
from $6.2 million and
$18.2 million in 1997 reflecting lower internationalprincipally due to higher franchise-related legal expense.expenses.
Selling, general and administrative expenses decreasedcosts increased to $44.9 million in
the 12-week
period1999 from $37.7 million in 1998. Advertising and promotion costs increased $2.5
million to $19.0$19.8 million in 1999 from $17.3 million in 1998, from $19.7 million in 1997 and increased in the
40-week period to $71.8 million in 1998 from $62.7 million in 1997. The
increase in the 40-week period was primarily caused by a non-cash charge of
approximately $8 million last quarter principally resulting from the write-down
of underperforming restaurants and asset write-offs associated with customer
service enhancements. Advertising and local promotion costs, which were
maintained at approximately 5.3% of sales in the 1998 and 1997 periods,
increased with the higher restaurant sales. The Company received from suppliers
cooperative advertising funds of approximately .5%slightly over 5% of
restaurant sales in each
period.both years. Regional administrative and training expenses
have been reclassified to general and administrative costs in 1999. The 1998
amounts, which had previously been included with restaurant operating costs,
have been restated to conform with the 1999 presentation. General,
administrative and other expenses, excluding last quarter's
unusual write-offs, declinedcosts increased to 2.4% and 2.8%6.2% of revenues excluding the
Litigation Settlement,in 1999 from 6.0%
of revenues in 1998, from 3.4% and 3.2%, respectively, in 1997 primarily due to an increase in regional costs to support
the growing number of Company-operated restaurants and higher pension costs.
Actuarial valuations of the Company's pension investment at the beginning of the
fiscal year, during a decreasedownturn in legal costs and fewer normal write-offs.the stock market, resulted in higher pension
expense in 1999 compared to a year ago.
Interest expense declined $1.6$2.0 million and $4.4 million, respectively, to $7.7 million and $26.9$9.0 million in 19981999 from $9.3 million and $31.3$11.0
million in 1997,1998, principally due to a reduction in total debt outstanding.and lower interest
rates. In September
1997, the Company repaid $50 million of its 9 1/4% senior notes due 1999. During
the 12-week period of 1998 the Company completed a refinancing plan, thereby reducing total debt including current maturities,
by approximately $38$22 million to $309.5 million at July 5, 1998. (Seefrom a year ago and improving effective interest
rates. See "Liquidity and Capital Resources.")
The income tax provisions reflect the expected annual tax rate of 32%37% of
pretax
earnings before income taxes in 19981999 and the actual tax rate of 22%32% of pretax
earnings in 1997.1998. The low effectivefavorable income tax rates in each year result from the Company's
ability to realize previously unrecognized tax benefits. The Company cannot
determine with certainty the actual
19981999 annual effective tax rate until the end of the fiscal
year,year; thus the rate could differ from expectations.
The Company incurred an extraordinary loss of $7.0 million, less income tax
benefits of $2.6 million, on the early retirement of debt.
-9-
Net earnings in the 40-week period of 1998 improved $28.6 million to $54.3
million, or $1.35 per share diluted compared to a year ago. These results
include an unusual increase of $25.6 million, or $.63 per share diluted, net of
income taxes, resulting from the Litigation Settlement income offset by the
aforementioned write-offs, and the extraordinary loss of $4.4increased $4.1 million, or $.11 per share. Excluding these unusual and extraordinary items, earnings in 1998
were $33.0diluted share, to $15.8
million, or $.83$.40 per diluted share, compared to $25.7in 1999 from $11.7 million, or $.65$.29 per
diluted share, in 1997. This increase in1998. The earnings improvement reflects the impact of sales
growth and lower interest expense, offset partiallyin part by the higher effective income
tax rate in 1998.1999.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and cash equivalents decreased $26.2$6.6 million to $2.3$3.4 million at
July 5, 1998January 17, 1999 from $28.5$10.0 million at the beginning of the fiscal year. This
decrease reflects, among other things,The
Company expects to maintain low levels of cash and cash equivalents and plans to
reinvest available cash flows from operations of $86.0
million including the net Litigation Settlement less capital expendituresto develop new and other investing activities of $70.9 million. A significant portion of this cash
was usedexisting
restaurants and to reduce long-term debt inborrowings under the refinancing plan described hereafter.revolving credit agreement.
The Company's working capital deficit increased $13.8decreased $13.5 million to $106.9$129.8
million at July 5, 1998January 17, 1999 from $93.1$143.3 million at September 28, 1997, primarily27, 1998,
principally due to the decline in cash and cash equivalents which was partially offset by a decline in currentaccrued liabilities. The Company and the
restaurant industry in general, maintain relatively low levels of receivablesaccounts
receivable 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.
7
On April 1, 1998, the Company entered into a new revolving bank credit
agreement, which provides for a credit facility expiring in 2003 of up to $175
million, including letters of credit of up to $25 million. At July 5, 1998,January 17, 1999,
the Company had borrowings of $86$102 million and approximately $81.4$67.4 million of
availability under the agreement.
Beginning in September 1997, the Company initiated a refinancing plan to
reduce and restructure its debt. At that time, the Company prepaid $50 million
of theits 9 1/4% senior notes due 1999 using available cash. By July 5,In 1998 the Company had
repaid the remaining $125 million of its 9 1/4% senior notes and all $125
million of its 9 3/4% senior subordinated notes due 2002.
In order to fund these repayments, the Company completed on April 14, 1998,
a private offering of $125 million of 8 3/8% senior subordinated notes due 2008,
redeemable beginning 2003. Additional funding sources included available cash,
as well as bank borrowings under the new bank credit facility. The Company
incurred an extraordinary loss of $7.0 million, less income tax benefits of $2.6
million, relating to the early retirement of the debt. The Company expects that annual interest expense will be reduced by over $10 million from
1997 levels due to the reduction in debt and lower interest rates on the new
debt. Total debt outstanding decreased to $309.5$326.4 million at July 5, 1998January 17, 1999
from $347.7$347.3 million at the beginning of the fiscal year and $397.4 million at this time last year.
-10-
January 18, 1998.
The Company is subject to a number of covenants under its various debt
instruments including limitations on additional borrowings, capital
expenditures, lease commitments and dividend payments, and requirements to
maintain certain financial ratios, cash flows and net worth. The bank credit
facility is secured by a first priority security interest in certain assets and
properties of the Company. In addition, certain of the Company's real estate and
equipment secure other indebtedness.
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. 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
additionalAdditional
potential sourcesources of liquidity isinclude financing opportunities and the
conversion of Company-operated restaurants to franchised restaurants. 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
financing opportunities, the Company will be ablesufficient to meet debt service, capital expenditure and
working capital requirements.
Although the amount of liability from claims and actions against the
Company cannot be determined with certainty, management believes the ultimate
liability of such claims and actions should not materially affect the results of
operations and liquidity of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary exposure relating to financial instruments is to
changes in interest rates. The Company uses interest rate swap agreements to
reduce exposure to interest rate fluctuations. At January 17, 1999, the Company
had a $25 million notional amount interest rate swap agreement expiring in June
2001. This agreement effectively converts a portion of the Company's variable
rate bank debt to fixed rate debt and has a pay rate of 6.88%.
At January 17, 1999, a hypothetical one percentage point increase in short-
term interest rates would result in a reduction of $.8 million in annual pre-tax
earnings. The estimated reduction is based on holding the unhedged portion of
bank debt at its January 17, 1999 level.
8
At January 17, 1999, the Company had no other material financial
instruments subject to significant market exposure.
YEAR 2000 - ---------COMPLIANCE
Historically, most computer databases, as well as embedded microprocessors
in computer systems and industrial equipment, were designed with date data using
only two digits of the year. Most computer programs, computers, and embedded
microprocessors controlling equipment were programmed to assume that all two
digit dates were preceededpreceded by "19","19," causing "00" to be interpreted as the year
1900. This formerly common practice now could result in a computer system or
embedded microprocessor which fails to recognize properly a year that begins
with "20","20," rather than "19"."19." This in turn could result in computer system
miscalculations or failures, as well as failures of equipment controlled by
date-sensitive microprocessors, and is generally referred to as the "Year 2000"
problem.issue.
The Company's State of Year 2000 Readiness. In 1995 the Company began to
formulate a plan to address its Year 2000 issues. To date,The Company's Year 2000 plan
now involves five phases: 1) Awareness, 2) Assessment, 3) Remediation, 4)
Testing and 5) Implementation.
Awareness involves helping employees who deal with the Company's primary focuscomputer
assets, and managers, executives and directors to understand the nature of the
Year 2000 problem. Assessment involves the identification and inventory of the
Company's information technology ("IT") systems and embedded microprocessor
technology ("ET") and the determination as to whether such technology will
properly recognize a year that begins with "20," rather than "19." IT/ET
systems that, among other things, properly recognize a year beginning with "20"
are said to be "Year 2000 ready." Remediation involves the repair or
replacement of IT/ET systems that are not Year 2000 ready. Testing involves the
testing of repaired or replaced IT/ET systems. Implementation is the
installation and integration of remediated and tested IT/ET systems.
The phases overlap substantially. The Company has been onmade substantial progress
in the Awareness, Assessment, Remediation and Testing phases and has completed
implementation of a number of systems.
Awareness and Assessment. The Company has established an ad hoc Committee
of the Board of Directors and multiple management teams which are responsible
for the Company's activities in addressing the Year 2000 issue. The Company has
also sent letters to approximately 2,700 of its own internal computer systems.vendors of goods and services to
bring the Year 2000 issue to their attention and to assess their readiness. The
Company has advised its franchisees (who operate approximately 25% of system
restaurants) that they are required to be Year 2000 ready by December 31, 1999
and has provided video information and regional presentations regarding Year
2000 issues. The Company's franchisees are represented on a Year 2000 team.
While the Awareness and Assessment phases will continue into the Year 2000, they
are substantially complete at this time.
9
Remediation, Testing and Implementation. Although Remediation, Testing and
Implementation will be substantially completed during 1999, some systems
identified as non-critical may not be addressed until after January 2000. The
following table describes by category and status, major identified IT
applications.
Remediation Status
In
Category Ready Process Remaining
- -----------------------------------------------------------------------------
Mainframe
Third party developed software 67% 33% 0%
Internally developed software 74% 23% 3%
Hardware (Peripherals) 0% 100% 0%
Desktop
Third party developed software 77% 21% 2%
Internally developed software 33% 65% 2%
Corporate hardware 21% 79% 0%
Restaurant hardware 57% 43% 0%
Client-Server
Third party developed software 38% 62% 0%
Internally developed software 20% 80% 0%
Hardware 58% 42% 0%
Embedded Technology. The Company has identified categories of critical
restaurant equipment in which ET may be found, has sent letters to the majority
of the vendors of such equipment and is in the process of identifying the
remaining vendors. About 90% of restaurant equipment vendors who have received
letters have responded. The Company is reviewing the responses. To date the
Company has identified only one type of equipment with date sensitive ET that
the Company believes should be replaced. Replacement components are currently
being tested and are expected to be implemented in Company restaurants during
1999. Franchisees have been informed and offered the opportunity to participate
in the Company's replacement program. The Company continues to evaluate
information in letter responses and other materials received from vendors, on
web sites, and from other sources, in identifying date sensitive ET.
Vendors of Important Goods and Services. The Company has identified and
sent letters to approximately 2,700 key vendors in an attempt to gain assurance
of vendors' Year 2000 readiness. As of February 1999, the Company had received
responses concerning Year 2000 readiness from approximately 40% of those
vendors. The Company is in the process of identifying which of those vendors it
considers to be critical to its business. The Company expects to continue
discussions with the critical vendors of goods and services throughout 1999 to
attempt to ensure the uninterrupted supply of goods and services and to develop
contingency plans in the event of the failure of any of such vendors to become
and remain Year 2000 ready.
The Company's Franchisees. At January 17, 1999, 336 restaurants were
operated by franchisees in the United States. Seven restaurants were operated by
franchisees outside the United States. The Company has completed an assessment
of the Year 2000 readiness of the personal computers it has leased to
approximately 80% of franchised restaurants in the United States, together with
10
software it has licensed them to use. Such computers and software were
determined not to be Year 2000 ready and are being replaced with compliant
computers and remediated software at franchisees' expense during 1999. The
Company has advised its franchisees, both domestic and international, that they
are required to be Year 2000 ready by December 31, 1999.
The Company has completed an assessment of major portions of its internal
computer systems and is modifying existing internal software, as well as
purchasing new software, to attempt to achieve Year 2000 readiness in this area
and has made substantial progress in making such modifications and replacements.
The Company has begun an assessment of the potential for Year 2000 problems
with embedded microprocessors in its equipment, restaurants, warehouse and
distribution facilities, and corporate offices.
The Company has received some preliminary information concerning the Year
2000 readiness of some of its vendors of goods and services, and expects to
engage in discussions with its most important vendors during the balance of 1998
and 1999 in an attempt to determine the extent to which the Company is
vulnerable to those vendors' possible failure to become Year 2000 ready.
-11-
The Company currently plans to have addressed all computer systems which
are critical to its operations by mid 1999. Some non-critical systems may not
be addressed, however, until after January 2000.
The Costs to Address the Company's Year 2000 Issues. It is estimatedThe Company estimates
that it has incurred costs of approximately $9 million to date for the
Company willAwareness, Assessment, Remediation, Testing and Implementation phases of its
Year 2000 plan. These amounts have incurred approximately $7.5 million in costs by the end of
this fiscal year to remediate or replace portions of the Company's internal
computer systems. This amount has been fundedcome principally from the general operating
and capital budgets of the Company's Management Information Systems and other
departments.department.
The Company currently estimates the total costcosts of implementingcompleting its Year 2000
plan, including replacement of embedded microprocessorscosts incurred to date, to be approximately $13 million, with
approximately 25% relating to new systems which have been or will be
capitalized. Some planned system replacements, which are anticipated to provide
significant future benefits, were accelerated due to the Year 2000 and testing,
will not exceed $13 million.have
resulted in increased IT spending. This estimate is based on currently available
information and will be updated as the Company continues its assessment andof third
party relationships, proceeds with its testing and implementation, and testing, and may need to be increased upon
receipt of more information from vendors of material goods and services and upon
the design and implementation of the Company'sdesigns
contingency plan.plans.
The Risks of the Company's Year 2000 Issues. If someany IT or all of the
Company's remediated or replaced internal computerET systems fail the testing
phase, or if any software applications or embedded microprocessors
critical to the Company's operations arehave been overlooked in the assessmentAssessment,
Remediation, Testing or implementationImplementation phases, if any of the Company's
remediated internal computer systems are not successfully remediated, or if a
significant number of the Company's franchisees do not become Year 2000 ready in
a timely manner, there could be a material adverse effect on the Company's
results of operations, liquidity and financial condition of a magnitude which
the Company has not yet fully analyzed.
In addition, the Company has not yet been assured that (1) the computer
systems of all of its key vendors of material goods and services will be Year 2000 ready in a timely manner or
that (2) the computer systems of third parties with which the Company's computer
systems exchange data will be Year 2000 ready both in a timely manner and in a
manner compatible with continued data exchange with the Company's computer
systems.
If the vendors of the Company's most important goods and services, or the
suppliers of the Company's necessary energy, telecommunications and
transportation needs, fail to provide the Company with (1) the materials and
services which are necessary to produce, distribute and sell its products, (2)
the electrical power and other utilities necessary to sustain its operations, or
(3) reliable means of obtaining and transporting supplies to its restaurants and franchisees,
such failure could have a material adverse effect on the results of operations,
liquidity and financial condition of the Company.
The Company's Contingency Plan. The Company has not yet establishedis developing a business
contingency plan to address both unavoided orand unavoidable Year 2000 risks, but itrisks.
Although the Company expects to create such ahave the plan duringsubstantially complete by late
summer 1999, enhancements and revisions will be continuously considered and
implemented, as appropriate, throughout the balanceremainder of 1998the year and 1999.into the
year 2000.
11
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, Year 2000 compliance and sources of
liquidity. The words
"anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends"
and similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. SuchForward-looking statements reflect the
current views of the Company, with respect to future events and are subject to certainknown and unknown risks and
uncertainties and assumptions, including thewhich may cause actual results to differ materially from
expectations. The following risk
-12-
is a discussion of some of those factors. The
Company's tax provision is highly sensitive to expected earnings.
As earnings and as
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. In addition, amongThe Company has urged certain vendors to develop and implement Year
2000 compliance plans. However, any failure by vendors to ensure compliance with
Year 2000 requirements could have a material, adverse effect on the other factors that could cause the Company'sfinancial
condition and results to differ materially are: the effectiveness and cost of advertising and
promotional efforts; the degree of success of the Company's product offerings;
weather conditions; difficulties in obtaining ingredients and variations in
ingredient costs; the Company's ability to control operating, general and
administrative costs and to raise prices sufficiently to offset cost increases;
competitive products and pricing and promotions; the impact of any wide-spread
negative publicity; the impact on consumer eating habits of new scientific
information regarding diet, nutrition and health; competition for labor; general
economic conditions; changes in consumer tastes and in travel and dining-out
habits; the impact on operations and the costs to comply with laws and
regulations and other activities of governing entities; the costs and other
effects of legal claims by franchisees, customers, vendors and others, including
settlement of those claims; the effect of a failure of the Company its
franchisees, or its important suppliers of goods and services to achieve timely
Year 2000 readiness; the ability of the Company to continue to exchange
electronic data with others without causing damage to the Company's databases;
the effect of delays or disruptions in the supply of the materials and services
necessary for the Company to produce, distribute and sell its products; the
effect of Year 2000-related interruptions of energy, telecommunications or
transportation services; and the effectiveness of management strategies and
decisions.after January 1, 2000.
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.
NEW ACCOUNTING STANDARDS
- ------------------------
In June 1997, the FASB issued SFAS No. 130, "ReportingReporting Comprehensive Income."
This Statement establishedestablishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purposes financial statements. This Statement shall bestatements and is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. This statement,SFAS 130,
requiring only additional informational disclosures, is effective for the
Company's fiscal year ending October 3, 1999.
In June 1997, the FASB issued SFAS No. 131, "DisclosuresDisclosures about Segments of an
Enterprise and Related Information." This Statement established SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that enterprises report selected
information about operating segments in interim financial reports issued to
stockholders. This Statement shall beis effective for fiscal years beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is required to be restated. This statement,SFAS 131, requiring only
additional informational disclosures, is effective for the Company's fiscal year
ending October 3, 1999.
-13-
In FebruaryJune 1998, the FinancialFASB issued SFAS 133, Accounting Standards Board issued Statementfor Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS 133 requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensionsfinancial position and Other Postretirement Benefits."measure those instruments at fair value.
This Statement standardizesis effective for all fiscal years beginning after June 15, 1999.
SFAS 133 is effective for the disclosure requirements for pensions and other postretirement benefits, requires
additional information on changes in the benefit obligations and fair values of
plan assets and climinates certain disclosures. Restatment of disclosures for
earlier periods is required. The Company will adopt this Statement in its
financial statements for theCompany's fiscal year ending October 3, 1999.
-14-1, 2000 and
is not expected to have a material effect on the Company's financial position or
results of operations.
12
PART II - OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
Item 1. Legal Proceedings
- SeeFor information regarding legal proceedings required by this item, see
Note 43 to the Unaudited Consolidated Financial
Statements.unaudited consolidated financial statements which is incorporated
herein by this reference.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of stockholders in the first quarter
ended January 17, 1999. The Company's annual meeting was held February 12, 1999
at which the following matters were voted as indicated:
For Withheld
---------- -----------
1. Election of the following directors to
serve until the next annual meeting of
stockholders and until their successors
are elected and qualified.
Michael E. Alpert 31,908,694 1,061,694
Jay W. Brown 32,413,765 556,623
Paul T. Carter 32,566,199 404,189
Charles W. Duddles 32,567,199 403,189
Edward Gibbons 32,552,372 418,016
Jack W. Goodall 31,763,199 1,207,189
Murray H. Hutchison 32,408,002 562,386
Robert J. Nugent 32,376,371 594,017
L. Robert Payne 32,042,668 927,720
For Against Abstain Not Voted
---------- ---------- ------- ---------
2. Adoption of the Amended
and Restated Non-Employee 21,237,247 11,667,766 65,375 0
Director Stock Option
Plan
3. Ratification of the
appointment of KPMG LLP
as independent 32,922,013 21,672 26,703 0
accountants
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
------ -----------
27 Financial Data Schedule (included only with electronic
filing)
(b) Reports on Form 8-K A form 8-K was filed July 28, 1998, reporting under Item 5 thereof,
a common stock repurchase program.
-15-- None
13
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 19, 1998
-16-March 3, 1999
14