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 April 14, 1996 Commission 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 May 15, 1996 - 38,821,010
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 14, October 1,
1996 1995
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ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 53,727 $ 35,865
Receivables . . . . . . . . . . . . . . . . . . . 23,794 25,272
Inventories . . . . . . . . . . . . . . . . . . . 23,118 22,385
Prepaid expenses. . . . . . . . . . . . . . . . . 16,536 14,367
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Total current assets . . . . . . . . . . . . . 117,175 97,889
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Trading area rights . . . . . . . . . . . . . . . . 67,928 69,761
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Lease acquisition costs . . . . . . . . . . . . . . 22,175 25,003
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Other assets. . . . . . . . . . . . . . . . . . . . 36,863 36,310
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Property at cost. . . . . . . . . . . . . . . . . . 599,904 589,642
Accumulated depreciation and amortization . . . . (168,490) (155,931)
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431,414 433,711
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TOTAL. . . . . . . . . . . . . . . . . . . . . $ 675,555 $ 662,674
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt. . . . . . . $ 1,790 $ 1,836
Accounts payable. . . . . . . . . . . . . . . . . 24,497 32,015
Accrued expenses. . . . . . . . . . . . . . . . . 110,578 98,166
Income taxes payable. . . . . . . . . . . . . . . -- --
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Total current liabilities. . . . . . . . . . . 136,865 132,017
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Deferred income taxes . . . . . . . . . . . . . . . 9,751 9,586
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Long-term debt, net of current maturities . . . . . 439,250 440,219
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Other long-term liabilities . . . . . . . . . . . . 49,701 49,599
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Stockholders' equity:
Common stock. . . . . . . . . . . . . . . . . . . 402 402
Capital in excess of par value. . . . . . . . . . 281,028 280,996
Accumulated deficit . . . . . . . . . . . . . . . (226,979) (235,682)
Treasury stock. . . . . . . . . . . . . . . . . . (14,463) (14,463)
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Total stockholders' equity . . . . . . . . . . 39,988 31,253
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TOTAL. . . . . . . . . . . . . . . . . . . . . $ 675,555 $ 662,674
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See accompanying notes to financial statements.
-2-
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Twelve Twenty-eight
Weeks Ended Weeks Ended
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April 14, April 16, April 14, April 16,
1996 1995 1996 1995
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Revenues:
Restaurant sales. . . . . . . . . $202,283 $180,972 $468,348 $408,585
Distribution sales. . . . . . . . 39,322 40,971 91,922 96,230
Franchise rents and royalties . . 7,610 7,283 17,999 17,223
Other . . . . . . . . . . . . . . 760 435 2,336 1,303
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249,975 229,661 580,605 523,341
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Costs and expenses:
Costs of revenues:
Restaurant costs of sales. . . 56,809 50,691 131,316 114,741
Restaurant operating costs . . 109,460 101,484 252,478 232,403
Costs of distribution sales. . 38,392 40,216 90,330 94,374
Franchised restaurant costs. . 4,806 4,986 11,042 11,808
Selling, general and
administrative. . . . . . . . 26,177 24,320 58,770 61,387
Equity in loss of FRI . . . . . . -- -- -- 57,188
Interest expense. . . . . . . . . 11,017 11,110 25,666 26,377
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246,661 232,807 569,602 598,278
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Earnings (loss) before income
taxes. . . . . . . . . . . . . . 3,314 (3,146) 11,003 (74,937)
Income taxes (benefit). . . . . . . (699) -- 2,300 500
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Net earnings (loss) . . . . . . . . $ 4,013 $ (3,146) $ 8,703 $(75,437)
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Net earnings (loss) per share -
primary and fully diluted. . . . $ .10 $ (.08) $ .22 $ (1.95)
======= ======= ======= =======
Weighted average shares outstanding 39,257 38,690 39,219 38,681
See accompanying notes to financial statements.
-3-
FOODMAKER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Twenty-eight Weeks Ended
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April 14, April 16,
1996 1995
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Cash flows from operations:
Net earnings (loss) . . . . . . . . . . . . . . . $ 8,703 $ (75,437)
Non-cash items included above:
Depreciation and amortization. . . . . . . . . 20,951 20,222
Deferred income taxes. . . . . . . . . . . . . 165 --
Equity in loss of FRI. . . . . . . . . . . . . -- 57,188
Decrease in receivables . . . . . . . . . . . . . 1,478 2,581
Decrease (increase) in inventories. . . . . . . . (733) 114
Decrease (increase) in prepaid expenses . . . . . (2,169) 1,542
Decrease in accounts payable. . . . . . . . . . . (7,518) (9,384)
Increase (decrease) in accrued expenses . . . . . 11,479 (18,624)
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Cash flows provided (used) by operations . . . 32,356 (21,798)
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Cash flows from investing activities:
Additions to property and equipment . . . . . . . (14,805) (19,141)
Dispositions of property and equipment. . . . . . 1,362 1,967
Decrease (increase) in trading area rights. . . . 122 (5,783)
Decrease (increase) in other assets . . . . . . . (1,022) 5,514
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Cash flows used by investing activities. . . . (14,343) (17,443)
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Cash flows from financing activities:
Borrowings under revolving bank loans . . . . . . -- 25,000
Principal repayments under revolving bank loans . -- (10,000)
Principal payments on long-term debt,
including current maturities . . . . . . . . . (1,218) (7,602)
Increase in accrued interest. . . . . . . . . . . 1,035 1,420
Proceeds from issuance of common stock. . . . . . 32 24
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Cash flows provided (used) by
financing activities. . . . . . . . . . . . (151) 8,842
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Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . $ 17,862 $ (30,399)
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See accompanying notes to financial statements.
-4-
FOODMAKER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements 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 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 1995 financial statements.
2. The tax provision for the quarter reflects $.7 million credit, adjusting
the provision for the first two quarters of the year to the expected
annual tax rate of 21% of pretax earnings. The lower effective annual
income tax rate results from the Company's ability to realize previously
unrecognized tax benefits. The Company cannot determine the actual annual
effective tax rate until the end of the fiscal year, thus the rate could
differ from expectations. Although the Company incurred a loss in 1995,
income taxes were $.5 million due to required minimum taxes and the
Company's inability under Statement of Financial Accounting Standards No.
("SFAS") 109, "Accounting for Income Taxes", to recognize the benefit from
the carryover of losses to future years.
3. On January 27, 1994, Foodmaker, Inc. (the "Company") contributed its
former wholly-owned subsidiary, Chi-Chi's, Inc. ("Chi-Chi's"), to Family
Restaurants, Inc. ("FRI") in exchange for an approximate 39% equity
interest in FRI valued at the date of exchange at approximately $62
million, a five-year warrant to acquire 111,111 additional shares at $240
per share (which if exercised would increase the Company's ownership to
45%), and approximately $173 million in cash. Because of substantial
continuing losses, FRI wrote off at the end of 1994 approximately $160
million of goodwill causing FMI to write off its entire investment in FRI
during the first quarter of its fiscal year ended October 1, 1995. As
disclosed in the Company's fiscal 1995 financial statements, FRI lost
almost $100 million through its third quarter ended September 24, 1995.
Because of such losses and resulting increased borrowing requirements, the
major FRI stockholders were required to purchase a participation with
respect to any additional advances by the banks to FRI. Rather than doing
so, the Company, by an agreement dated November 20, 1995, transferred all
of its stock and warrants to another stockholder of FRI. Since the
Company's investment in FRI was previously written off, the consummation
of this agreement had no effect on the financial condition or results of
operations of the Company.
-5-
4. Contingent Liabilities
Various claims and legal proceedings are pending against the Company in
various state and federal courts. Many of those proceedings are in the
state of Washington, seeking monetary damages for personal injuries
relating to the outbreak of food-borne illness (the "Outbreak") attributed
to hamburgers served at Jack in the Box restaurants. The Company, in
consultation with its insurance carriers and attorneys, does not
anticipate that the total liability on all such lawsuits and claims will
exceed the coverage available under its applicable insurance policies.
Actions were filed on July 2, 1993, in the Superior Court of California,
County of San Diego, by certain of the Company's franchisees against the
Company, The Vons Companies, Inc., ("Vons") and other suppliers (Syed
Ahmad, et al, versus Foodmaker, Inc., et al), claiming damages from
reduced sales and profits due to the Outbreak. After extensive
negotiations, settlements were reached with all franchisees. The Company
on July 19, 1993, filed a cross-complaint against Vons and other suppliers
seeking reimbursement for all damages, costs and expenses incurred in
connection with the Outbreak. On or about January 18, 1994, Vons filed a
cross-complaint against the Company and others in this action alleging
certain contractual and tort liabilities and seeking damages in
unspecified amounts and a declaration of the rights and obligations of the
parties. Substantially the same claims were made by the parties in a
separate lawsuit in Superior Court of California, County of Los Angeles.
On May 17, 1995 it was determined the litigation between the Company,
Vons, and other defendants would be heard in Los Angeles. The cases have
been consolidated and are set for trial in November 1996.
The Federal Trade Commission ("FTC") is investigating whether the Company
violated the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") when the Company's former subsidiary, Chi-Chi's, Inc., acquired
Consul Restaurant Corporation in October 1992 without first complying with
the reporting and waiting requirements of the HSR Act. The Company later
made the filing as it was preparing for the sale of Chi-Chi's. The
Company has engaged counsel in connection with the investigation and on
August 17, 1994, counsel for the Company received a request, preliminary
in nature, for information and documents. A subpoena covering the
preliminary material supplied and additional information and documents was
issued on January 19, 1995. Sworn statements have been given to the FTC
by various people, including certain officers and former officers of the
Company and Chi-Chi's. The HSR Act provides for a penalty of up to
$10,000 per day for failure to comply with the above requirements.
Management believes that any potential penalty, if assessed, will not have
a material impact on the Company.
On April 6, 1996 an action was filed by one of the Company's international
franchisees, Wolsey, Ltd., in the United States District Court in San
Diego, California against the Company and its directors, its international
franchising subsidiary, and certain officers of the Company and others.
The complaint alleges certain contractual, tort, and law violations
related to the franchisees' development rights in the Far East and seeks
unspecified damages, rescission, injunctive relief, attorneys fees and
costs. Management believes the allegations are without foundation and
intends to vigorously defend the action. It is further believed that if
there is any liability of the Company, such liability will not have a
material effect on the Company.
-6-
On May 17, 1996 an action was filed by the "National JIB Franchise
Association, Inc. (the "Association") in the Superior Court of
California, County of San Diego in San Diego, California, against the
Company and others. The complaint alleges that certain funds which the
Company received from certain suppliers, in an amount alleged to be in
excess of $15,000,000 over a period of 14 years, were intended for
distribution to, or for the benefit of, the Association or its members or
otherwise were impressed with a trust of which the Association and/or its
members are the beneficiaries. The complaint seeks a judicial
declaration of whether the Company is obligated to the Association or to
its members and if so, the nature and extent of such obligations in
respect to such funds and an accounting of the receipt, use and
disposition of such funds. Management believes that the Company has met
any obligation to the Association or its members that may exist and that
if any unfulfilled obligation exists, the fulfillment of such obligation
will not have a material adverse effect on the Company.
The U.S. Internal Revenue Service ("IRS") had proposed adjustments to tax
liabilities of $17 million (exclusive of interest) for the Company's
federal income tax returns for fiscal years 1986 through 1988. A final
report has been issued to satisfy these proposed adjustments at
approximately $.6 million (exclusive of $.4 million interest). The IRS
examinations of the Company's federal income tax returns for fiscal years
1989 and 1990 resulted in the issuance of proposed adjustments to tax
liabilities aggregating $2.2 million (exclusive of $.7 million interest).
A final report has not been issued but agreement has been reached to
satisfy these proposed adjustments at $.1 million. Management believes
that adequate provision for income taxes has been made.
-7-
FOODMAKER, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION
RESULTS OF OPERATIONS
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All comparisons under this heading between 1996 and 1995, unless otherwise
indicated, refer to the 12-week and 28-week periods ended April 14, 1996 and
April 16, 1995, respectively.
Revenues increased $20.3 million and $57.3 million, respectively, to
$250.0 million and $580.6 million in 1996 from $229.7 million and $523.3
million in 1995 principally due to an increase in restaurant sales, offset in
part by a decline in distribution sales.
Sales by Company-operated restaurants increased $21.3 million and $59.7
million, respectively, to $202.3 million and $468.3 million in 1996 from
$181.0 million and $408.6 million in 1995, reflecting increases in both per
store average sales and in the average number of restaurants. Per store
average sales for comparable restaurants ("PSA"), which increased 7.8% and
9.6%, respectively, in 1996 as compared to 1995, continued to improve under
the Company's marketing program which features a new advertising campaign,
new product introductions and aggressive value-priced product alternatives.
The average number of Company-operated restaurants increased to 868 in 1996
from 823 in 1995, reflecting the addition of new restaurants and the
acquisition of restaurants from franchisees.
Distribution sales of food and supplies declined approximately $1.7
million and $4.3 million, respectively, to $39.3 million and $91.9 million in
1996 from $41.0 million and $96.2 million in 1995 primarily due to declines
in sales to FRI and others of $2.8 million and $8.0 million, offset by
increases in sales to franchisees. Jack In The Box franchisees have formed a
purchasing cooperative and contracted with another supplier for distribution
services. Most franchisees have elected to participate in the cooperative.
This transition is expected to be completed during the Company's next fiscal
quarter and will result in a substantial decline in distribution sales in the
future. Distribution sales to franchisees were $23.1 million and $55.3
million during the respective periods of 1996. The loss of these extremely
low profit margin sales is not expected to have a material effect on the
profits of the Company.
Franchise rents and royalties increased $.3 million and $.8 million,
respectively, to $7.6 million and $18.0 million in 1996 from $7.3 million and
$17.2 million in 1995, primarily due to increased franchisee sales in 1996 as
compared to the same period of 1995.
Other revenues increased $.4 million and $1.0 million, respectively, to
$.8 million and $2.3 million in 1996 from $.4 million and $1.3 million in
1995, primarily due to interest income earned on higher levels of invested
cash in 1996.
Restaurant costs of sales increased $6.1 million and $16.6 million,
respectively, to $56.8 million and $131.3 million in 1996 from $50.7 million
and $114.7 million in 1995, principally due to the costs related to increased
restaurant sales. Costs of sales were relatively flat as a percent of sales
in 1996 as compared to 1995 due to the impact of generally lower ingredient
costs and the lower food cost of certain promotions, offset by higher
packaging costs and a temporary increase in tomato costs.
-8-
Restaurant operating costs increased $8.0 million and $20.1 million,
respectively, to $109.5 million and $252.5 million in 1996 from $101.5
million and $232.4 million in 1995 primarily due to the increase in average
number of Company-operated restaurants and variable costs associated with
increased sales. Restaurant operating costs declined as a percent of sales
in 1996 as compared to the same period in 1995 primarily due to lower
percentages of restaurant labor, operations administrative costs and fixed
expenses.
Costs of distribution sales declined $1.8 million and $4.1 million,
respectively, to $38.4 million and $90.3 million in 1996 from $40.2 million
and $94.4 million in 1995 consistent with the decline in distribution sales.
Franchised restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous
costs, decreased to $4.8 million and $11.0 million, respectively, in 1996
from $5.0 million and $11.8 million in 1995, primarily due to a decline in
the average number of domestic franchisee-operated restaurants.
Selling, general and administrative expenses increased $1.9 million for
the 12-week period and declined $2.6 million for the 28-week period to $26.2
million and 58.8 million, respectively, in 1996 from $24.3 million and $61.4
million in 1995. Advertising and promotion costs increased $4.5 million and
$8.9 million, respectively, to $21.4 million and $47.5 million in 1996 from
$16.9 million and $38.6 million in 1995 due to costs of aggressive promotions
and discounting of products and the increase in contributions to the
marketing fund related to higher sales in 1996. In 1996 the Company received
from suppliers cooperative advertising funds of approximately $2.3 million,
which effectively offset some of the aforementioned higher advertising and
promotion costs. Such funds were contributed to the advertising fund in the
prior year. Selling, general and administrative expenses include an $8.0
million settlement with stockholders in the first quarter of 1995 as
described in the Company's fiscal 1995 consolidated financial statements.
In the first quarter of 1995, the Company recorded a loss of $57.2 million
relating to its 39% equity in the operations of FRI, resulting from the
complete write-down of the Company's investment in FRI due to the write-off
by FRI of the goodwill attributable to Chi-Chi's Mexican restaurants. In the
first quarter of 1996, the Company transferred all of its stock and warrants
to another stockholder of FRI. Since the Company's investment in FRI was
previously written off, the transfer of the stock and warrants had no effect
on the financial condition or results of operations of the Company. See Note
3 to the financial statements.
Interest expense declined $.1 million and $.7 million, respectively, to
$11.0 million and $25.7 million in 1996 from $11.1 million and $26.4 million
in 1995 due to a reduction of debt and lower other financing costs.
The tax provision for the quarter reflects $.7 million credit, adjusting
the provision for the first two quarters of the year to the expected annual
tax rate of 21% of pretax earnings. The lower effective annual income tax
rate results from the Company's ability to realize previously unrecognized
tax benefits. The Company cannot determine the actual annual effective tax
rate until the end of the fiscal year, thus the rate could differ from
expectations. Although the Company incurred a loss in 1995, income taxes
were $.5 million due to required minimum taxes and the Company's inability
under SFAS 109 to recognize the benefit from the carryover of losses to
future years.
-9-
FINANCIAL CONDITION
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The Company's primary sources of liquidity are expected to be cash flows
from operations, the revolving bank credit facility described below, and the
sale and leaseback of restaurant properties. An additional potential source
of liquidity is the conversion of Company-operated Jack In The Box
restaurants to franchised restaurants. The Company requires capital
principally to construct new restaurants, to maintain, improve and refurbish
existing restaurants, and for general corporate purposes.
At April 14, 1996, the Company's working capital deficit decreased $14.4
million to $19.7 million from $34.1 million at October 1, 1995, and reflects
an increase of $17.9 million in cash. At April 14, 1996, the Company had
$53.7 million in cash. On May 15, 1996, $43.5 million of available cash was
utilized to prepay the Company's 14 1/4% senior subordinated notes due in May
1998. The restaurant business does not require the maintenance of
significant receivables or inventories, and it is common to receive trade
credit from vendors for purchases such as food and supplies. In addition,
the Company, and generally the industry, 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.
At April 14, 1996, the Company's total debt outstanding was $441.0
million. Substantially all of the Company's real estate and machinery and
equipment is, and is expected to continue to be, pledged to its lenders.
On July 26, 1994, the Company entered into a revolving bank credit
agreement which was amended and restated as of March 15, 1996 and provides
for a credit facility of up to $60.0 million, including letters of credit for
the account of the Company in an aggregate amount of up to $25 million. At
April 14, 1996, the Company had a total of approximately $52.7 million of
unused credit under the agreement. Covenants contained in the agreement
include limitations on additional borrowing, capital expenditures, lease
commitments and dividend payments, and requirements to maintain certain
financial ratios, cash flows and net worth.
Based upon current levels of operations and anticipated growth, the
Company expects that sufficient cash flow will be generated from operations
so that, combined with other financing alternatives available to it,
including the bank credit facility, the utilization of cash on hand and the
sale and leaseback of restaurants, the Company will be able to meet all of
its current debt service requirements, as well as its capital expenditures
and working capital requirements.
-10-
PART II - OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
Item 5. Other Information
"SAFE HARBOR" under the Private Securities Litigation Reform Act of
1995.
The Company wishes to caution readers that the forward-looking
statements involve known and unknown risks and uncertainties which may cause
the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by any forward-looking statements made by or on behalf
of the Company. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company is filing the
following cautionary statements identifying important factors that in some
cases have affected, and in the future could cause, the Company's actual
results to differ materially from those expressed in any such forward-looking
statements.
In addition to factors discussed in this Form 10-Q, among the other
factors that could cause the Company's results to differ materially are: the
effectiveness and cost of advertising and promotional efforts; the degree of
success of the Company's new and unique product offerings; weather
conditions; difficulties in obtaining ingredients and variations in
ingredient costs; the Company's ability to control operating, as well as
general and administrative, costs; the Company's ability to recognize value
from any current or future co-branding efforts; competitive products and
pricing and promotions; the impact of any wide-spread negative publicity; the
impact 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; changes in 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; and the effectiveness of management strategies
and decisions.
There can be no assurance that the Company or its franchisees, domestic
and international, will achieve growth objectives or that new restaurants
will be profitable. The opening and profitability of restaurants are subject
to various risk factors including the identification, availability and lease
or purchase terms of suitable sites, both traditional and non-traditional;
the ability of the Company and its franchisees to finance new restaurant
development; the ability to meet construction schedules and permitting and
regulatory compliance.
The growth of Jack in the Box restaurants outside the United States is
subject to a number of additional factors. The Company has limited
experience with international franchise development. The growth and
profitability of international restaurants are subject to the financial,
development and operational capabilities of franchisees, the franchisees'
ability to develop a support structure and adequately support subfranchisees,
as well as currency regulations and fluctuations.
Because the Company's business is regional, with 75% of its
company-operated and franchised restaurants located in the states of
California and Texas, the economic conditions and weather conditions
affecting those states may have a material impact upon the Company's results.
-11-
The Company has a substantial number of minimum wage employees and
employees who are paid at wage rates slightly above the minimum wage. If the
federal minimum wage is increased, the Company may need to increase not only
the wages of its minimum wage employees but also the wages paid to the
employees at wage rates which are above minimum wage. If competitive
pressures or other factors prevent the Company from offsetting the increased
costs by increases in prices, the Company's profitability may decline.
The Company has been required under FAS 109, because of operating losses
incurred over the past several years, to establish valuation allowances
against deferred tax assets recorded for net operating losses, tax credit
carryforwards and various other items. Until there is sufficient available
evidence that the Company will be able to realize such deferred tax assets
through future taxable earnings, the Company's tax provision will be highly
sensitive to the expected annual level of earnings, the impact of the
alternative minimum tax under the Internal Revenue Code and the limited
current recognition of the deferred tax assets. As a result of changing
expectations, the relationship of the Company's income tax provision to pre-
tax earnings will vary more significantly from quarter to quarter and year
to year than companies that have been continuously profitable. However, the
Company's effective tax rates are likely to increase in the future.
The Company is highly leveraged. Its substantial indebtedness may limit
the Company's ability to respond to changing business and economic
conditions. The contracts under which the Company acquired its debt impose
significant operating and financial restrictions which limit the Company's
ability to borrow money, sell assets or make capital expenditures or
investments without the approval of certain lenders. If the Company is unable
to generate cash flows sufficient to make payments on its substantial debt,
it may not be able to refinance or obtain additional financing.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
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10 Amended and Restated Revolving Credit Agreement dated as
of March 15, 1996, as amended as of April 5, 1996 by the
Agreement to Add Banks, among Foodmaker, Inc. and the
Banks named therein
27 Financial Data Schedule (included only with electronic
filing)
(b) Reports on Form 8-K - None
-12-
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: CHARLES W. DUDDLES
-------------------------------
Charles W. Duddles
Executive Vice President, Chief
Administrative Officer and
Chief Financial Officer
(Duly Authorized Signatory)
Date: May 29, 1996
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