UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
American Restaurant Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 33-48183 33-0193602
- ------------------------------- ---------------- -------------------
(State or other jurisdiction of (Commission File (I.R.S. employer
incorporation or organization) Number) identification no.)
4410 El Camino Real, Suite 201
Los Altos, CA 94022
(650) 949-6400
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(Address and telephone number of principal executive offices)
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Former name, former address and former fiscal year
if changed since last report.
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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The number of outstanding shares of the Company's Common Stock (one cent par
value) as of October 30, 2000 was 128,081.
AMERICAN RESTAURANT GROUP, INC.
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Condensed Balance Sheets....................................................... 1
Consolidated Statements of Operations....................................................... 3
Consolidated Statements of Cash Flows....................................................... 4
Notes to Consolidated Condensed Financial Statements........................................ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................... 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ............................. 11
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................................................ 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................ 11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 27, 1999 AND SEPTEMBER 25, 2000
ASSETS December 27, September 25,
1999 2000
------------ -------------
(unaudited)
CURRENT ASSETS:
Cash $ 8,316,000 $ 14,267,000
Accounts and notes receivable, net of reserve of
$2,000 at December 27, 1999 and September 25, 2000 2,574,000 2,747,000
Inventories 2,755,000 3,065,000
Prepaid expenses 2,789,000 1,545,000
Net current assets from discontinued operations 6,233,000 0
------------ -------------
Total current assets 22,667,000 21,624,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land and land improvements 2,629,000 2,629,000
Buildings and leasehold improvements 65,024,000 66,908,000
Fixtures and equipment 47,975,000 48,121,000
Property held under capital leases 7,480,000 7,480,000
Construction in progress 427,000 2,683,000
------------ ------------
123,535,000 127,821,000
Less-- Accumulated depreciation 72,307,000 74,427,000
------------ ------------
51,228,000 53,394,000
------------ ------------
Net property and equipment from discontinued
operations 36,272,000 0
------------ -------------
87,500,000 53,394,000
------------ ------------
OTHER ASSETS -- NET:
Net other assets 23,441,000 20,310,000
Net other assets from discontinued operations 9,121,000 0
------------ ------------
32,562,000 20,310,000
------------ ------------
Total assets $142,729,000 $ 95,328,000
============ ============
The accompanying notes are an integral part of these consolidated condensed
statements. (consolidated condensed balance sheets continued on the following
page)
1
LIABILITIES AND COMMON STOCKHOLDERS' December 27, September 25,
EQUITY 1999 2000
------------ ------------
(unaudited)
CURRENT LIABILITIES:
Accounts payable $ 15,980,000 $ 12,283,000
Accrued liabilities 9,384,000 6,601,000
Accrued insurance 2,419,000 2,742,000
Accrued interest 7,010,000 2,312,000
Accrued payroll costs 5,256,000 4,580,000
Current portion of obligations
under capital leases 638,000 693,000
Current portion of long-term debt 477,000 447,000
Current liabilities from discontinued operations 19,317,000 3,443,000
------------ ------------
Total current liabilities 60,481,000 33,101,000
------------ ------------
LONG-TERM LIABILITIES, net of current portion:
Obligations under capital leases 3,300,000 2,773,000
Long-term debt 160,297,000 160,182,000
Long-term liabilities from discontinued operations 2,299,000 0
------------ -------------
Total long-term liabilities 165,896,000 162,955,000
------------ ------------
DEFERRED GAIN 4,395,000 4,243,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
CUMULATIVE PREFERRED STOCK,
MANDATORILY REDEEMABLE:
Senior pay-in-kind exchangeable preferred stock, $0.01 par value; 160,000
shares authorized; 41,584 shares issued and outstanding at December 27, 1999
and 49,144 shares issued and outstanding
at September 25, 2000 41,914,000 48,315,000
------------ ------------
COMMON STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 1,000,000
shares authorized; 128,081 shares
issued and outstanding at December 27,
1999 and September 25, 2000 1,000 1,000
Paid-in capital 50,552,000 17,969,000
Accumulated deficit (180,510,000) (171,256,000)
------------ ------------
Total common stockholders' deficit (129,957,000) (153,286,000)
------------ ------------
Total liabilities and common
stockholders' equity $142,729,000 $ 95,328,000
============ ============
The accompanying notes are an integral part of these
consolidated condensed statements.
2
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS AND THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1999 AND
SEPTEMBER 25, 2000
(UNAUDITED)
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------------------- ----------------------------------
September 27, September 25, September 27, September 25,
1999 2000 1999 2000
------------ ------------ ------------ ------------
REVENUES $ 61,514,000 $ 72,962,000 $200,308,000 $226,567,000
RESTAURANT COSTS:
Food and beverage 20,870,000 25,728,000 66,777,000 77,675,000
Payroll 17,774,000 19,742,000 56,311,000 60,715,000
Direct operating 15,395,000 17,724,000 48,139,000 52,852,000
Depreciation and
amortization 2,509,000 2,205,000 7,103,000 7,352,000
GENERAL AND ADMINISTRATIVE
EXPENSES 3,080,000 1,738,000 9,093,000 7,660,000
------------ ------------ ------------ ------------
Operating profit 1,886,000 5,825,000 12,885,000 20,313,000
INTEREST EXPENSE, net 4,796,000 4,802,000 14,573,000 14,322,000
------------ ------------ ------------ ------------
Income / (loss) before
provision for income
taxes and discontinued
operations (2,910,000) 1,023,000 (1,688,000) 5,991,000
PROVISION FOR INCOME
TAXES 33,000 10,000 120,000 211,000
----------- ------------ ----------- ------------
Income / (loss) from
continuing operations (2,943,000) 1,013,000 (1,808,000) 5,780,000
NET INCOME / (LOSS) FROM
DISCONTINUED OPERATIONS (1,862,000) 0 348,000 3,474,000
------------ ------------ ----------- ------------
Net Income / (Loss) $(4,805,000) $ 1,013,000 $ (1,460,000) $ 9,254,000
============ ============ ============== ============
The accompanying notes are an integral part of these
consolidated condensed statements.
3
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1999 AND SEPTEMBER 25, 2000
(UNAUDITED)
September 27, September 25,
1999 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $200,199,000 $226,054,000
Cash paid to suppliers and employees (165,928,000) (204,032,000)
Interest paid, net (19,157,000) (19,020,000)
Income taxes paid (83,000) (211,000)
------------- -------------
Net cash provided by continuing operating activities 15,031,000 2,791,000
Net operating cash flow - discontinued operations (16,556,000) (9,641,000)
Net income from discontinued operations 348,000 3,474,000
------------- -------------
Net cash (used in) discontinued activities (16,208,000) (6,167,000)
Net cash (used in) operating activities (1,177,000) (3,376,000)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,491,000) (6,438,000)
Net (increase) decrease in other assets 372,000 (606,000)
Proceeds from disposition of assets 453,000 (12,000)
------------ -------------
Net cash (used in) investing activities (3,666,000) ( 7,056,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on indebtedness (10,276,000) (264,000)
Borrowings on indebtedness 10,138,000 119,000
Net increase in deferred debt costs (228,000) -
Payments on capital lease obligations (513,000) (472,000)
Proceeds received from stock sale 0 17,000,000
------------- -----------
Net cash provided by /(used in) financing activities (879,000) 16,383,000
------------- ------------
NET INCREASE / (DECREASE) IN CASH (5,722,000) 5,951,000
CASH, at beginning of period 7,988,000 8,316,000
------------- ------------
CASH, at end of period $ 2,266,000 $ 14,267,000
============= ============
RECONCILIATION OF NET INCOME FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income from continuing operations $ (1,808,000) $ 5,780,000
Adjustments to reconcile net income from operations to net cash
provided by /(used in) operating activities:
Depreciation and amortization 7,103,000 7,352,000
(Gain) loss on disposition of assets 2,099,000 581,000
Amortization of deferred gain (239,000) (152,000)
(Increase) / decrease in current assets:
Accounts and notes receivable, net (109,000) (173,000)
Inventories 170,000 (310,000)
Prepaid expenses 501,000 1,244,000
Increase / (decrease) in current liabilities:
Accounts payable 8,132,000 (3,697,000)
Accrued liabilities 527,000 (2,783,000)
Accrued insurance (891,000) 323,000
Accrued interest (4,584,000) (4,698,000)
Accrued payroll 4,130,000 (676,000)
------------- ------------
Net cash provided by continuing operating activities 15,031,000 2,791,000
============= ============
Net income from discontinued operations 348,000 3,474,000
Net operating cash flow - discontinued operations (16,556,000) (9,641,000)
-------------- -----------
Net cash (used by) discontinued activities (16,208,000) (6,167,000)
Net cash (used by) operating activities $ (1,177,000) $ (3,376,000)
============= ============
The accompanying notes are an integral part of these consolidated condensed
statements.
4
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. MANAGEMENT OPINION
The Consolidated Condensed Financial Statements included were prepared
by American Restaurant Group, Inc. (the "Company"), without audit, in
accordance with Securities and Exchange Commission Regulation S-X. In
the opinion of the Company's management, these Consolidated Condensed
Financial Statements contain all adjustments (all of which are of a
normal recurring nature except for the discontinued operations)
necessary to present fairly the Company's financial position as of
December 27, 1999 and September 25, 2000, and the results of its
operations for the thirteen weeks and the thirty-nine weeks ended
September 27, 1999 and September 25, 2000 and its cash flows for the
thirty-nine weeks ended September 27, 1999 and September 25, 2000. The
Company's results for an interim period are not necessarily indicative
of the results that may be expected for the year.
Although the Company believes that all adjustments necessary for a
fair presentation of the interim periods presented are included and
that the disclosures are adequate to make the information presented
not misleading, the Company suggests that these Consolidated Condensed
Financial Statements be read in conjunction with the Consolidated
Financial Statements and related notes included in the Company's
annual report on Form 10-K, File No. 33-48183, for the year ended
December 27, 1999.
2. SALE OF STOCK TO NBACO, INC.
The Company sold all of the outstanding stock of four wholly owned
subsidiaries (Grandy's, Inc., Spoons Restaurants, Inc., Spectrum
Foods, Inc., and Local Favorite, Inc., collectively, the "Non-Black
Angus Subsidiaries") to NBACo, Inc. The consideration was determined
by arm's length negotiations between the parties. There was no gain or
loss recorded because the stock was sold to a controlling entity. The
Company received proceeds of $17.0 million in cash on June 28,2000.
The paid-in capital account was reduced by a net amount of $ 26.2
million because of the sale of stock to NBACo, Inc. The stock sale
included releasing the Non-Black Angus Subsidiaries from liability for
the obligations of the Company. The Company retained the assets and
liabilities associated with certain closed restaurants as well as
certain liabilities associated with the operating restaurants that
were sold, subject to a liability ceiling of $ 12.6 million. The
amount of liabilities remaining under that ceiling at September 25,
2000 was $ 3.4 million.
3. OPERATIONS
The Company's operations are affected by local and regional economic
conditions, including competition in the restaurant industry. The
Company has had recurring operating losses in recent years. A
recapitalization plan was consummated during 1998. This plan
substantially eliminated debt principal payments until the year 2003.
4. INCOME TAXES
The tax provision against the Company's pre-tax income in 1999 and in
2000 consisted of certain state income tax and estimated Federal
income tax payments. The Company previously established a valuation
allowance against net-operating-loss carryforwards.
5
5. CREDIT FACILITY AND PREFERRED STOCK
In the second quarter of 2000 the Company became aware of and agreed
to an interpretation of the financial covenants under its revolving
credit facility (the "Credit Facility") that required a waiver of
noncompliance and revised covenants, both of which were accomplished.
A similar interpretation was also adopted to determine the dividend
rate on the Company's preferred stock and, accordingly, the Company
accrued for preferred stock dividends related to prior periods at
higher dividend rates than were used at the time. The dividend rate is
now 15%. The Company accrued an additional $ 2.2 million in dividends
related to the prior periods. This amount is recorded as a charge to
paid-in capital.
6. SEGMENT REPORTING
Effective December 28, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. As a result of the sale of the
outstanding stock of four of its wholly owned subsidiaries effective
June 26, 2000, the Company has only one operating segment, Black
Angus.
7. SUBSIDIARY GUARANTORS
Separate financial statements of the Company's subsidiaries are not
included in this report on Form 10-Q because the subsidiaries are
fully, unconditionally, jointly and severally liable for the
obligations of the Company under the Company's 11 1/2% Senior Secured
Notes due 2003 (the "Senior Secured Notes"), and the aggregate net
assets, earnings, and equity of such subsidiary guarantors are
substantially equivalent to the net assets, earnings, and equity of
the Company on a consolidated basis.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the historical
financial information included in the Consolidated Condensed Financial
Statements.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED SEPTEMBER 27, 1999 AND SEPTEMBER 25, 2000:
REVENUES. Total revenues from continuing operations increased to $73.0 million
in the third quarter of 2000 from $61.5 million in the third quarter of 1999.
Same-store-sales increased 15.4%. There were 103 Black Angus restaurants
operating as of September 25, 2000 and 100 Black Angus restaurants operating as
of September 27, 1999.
FOOD AND BEVERAGE COSTS. As a percentage of revenues, food and beverage costs
from continuing operations increased to 35.3% in the third quarter of 2000 from
33.9% in the third quarter of 1999. The increase relates primarily to higher
meat and seafood costs.
PAYROLL COSTS. As a percentage of revenues, labor costs from continuing
operations decreased to 27.1% in the third quarter of 2000 from 28.9% in the
third quarter of 1999. The decrease is primarily from leveraging costs over a
higher sales base.
DIRECT OPERATING COSTS. Direct operating costs consist of occupancy,
advertising, and other expenses incurred by individual restaurants. As a
percentage of revenues, these costs from continuing operations decreased to
24.3% in the third quarter of 2000 from 25.0% in the third quarter of 1999. The
decrease relates primarily to leveraging costs over a higher sales base.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization consists of
depreciation of fixed assets as well as amortization of intangible assets. As a
percentage of revenues, depreciation and amortization from continuing operations
decreased to 3.0% in the third quarter of 2000 from 4.1% in the third quarter of
1999. The decrease relates primarily to corporate assets not retained by the
Company pursuant to the stock sale and leveraging costs over a higher sales
base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses from
continuing operations decreased to $1.7 million in the third quarter of 2000
from $3.1 million in the third quarter of 1999. The decrease relates to the
reduction of corporate expenses as a result of the stock sale and reduction of
other overhead expenses.
OPERATING PROFIT. Due to the above items, profit from continuing operations
increased to $5.8 million in the third quarter of 2000 from $1.9 million in the
third quarter of 1999. As a percentage of revenues, profit from continuing
operations increased to 8.0% in the third quarter of 2000 from 3.1% in the third
quarter of 1999.
INTEREST EXPENSE - NET. Interest expense was $4.8 million in the third quarter
of 2000, the same as the third quarter of 1999, due to a level amount of debt
principal outstanding.
NET INCOME/(LOSS) FROM DISCONTINUED OPERATIONS. Effective June 26, 2000, the
Company sold all of the outstanding stock of the Non-Black Angus Subsidiaries.
7
The following is a summary of the net income/(loss) from discontinued operations
for the thirteen weeks ended September 27, 1999 and September 25, 2000. There
was no activity for the third quarter.
($000) September 27, 1999 September 25, 2000
Revenues ............................. $ 34,875 $ 0
Food and Beverage Costs .............. 9,722 0
Payroll Costs ........................ 12,298 0
Direct Operating Costs ............... 9,349 0
Depreciation and Amortization ........ 854 0
General and Administrative ........... 3,975 0
Non-Cash Charge for Impairment ....... 540 0
Grandy's Conversion:
(Gain)/Loss on Sale of Assets (77) 0
Non-Cash Charges ............ 93 0
-------- --------
Operating Profit / (Loss) ............ (1,879) 0
Interest Expense ..................... 0 0
-------- --------
Income/(Loss) Before Taxes ........... (1,879) 0
Provision for Income Taxes ........... (17) 0
-------- --------
Net Income/(Loss) from
Discontinued Operations .............. $ (1,862) $ 0
======== ========
THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1999 AND SEPTEMBER 25, 2000:
REVENUES. Total revenues from continuing operations increased to $226.6 million
in 2000 from $200.3 million in 1999. Same-store-sales increased 10.7%. There
were 103 Black Angus restaurants operating as of September 25, 2000 and 100
Black Angus restaurants operating as of September 27, 1999.
FOOD AND BEVERAGE COSTS. As a percentage of revenues, food and beverage costs
from continuing operations increased to 34.3% in 2000 from 33.3% in 1999. The
increase relates primarily to higher meat and seafood costs.
PAYROLL COSTS. As a percentage of revenues, labor costs from continuing
operations decreased to 26.8% in 2000 from 28.1% in 1999. The decrease is
primarily from leveraging costs over a higher sales base.
DIRECT OPERATING COSTS. As a percentage of revenues, these costs from continuing
operations decreased to 23.3% in 2000 from 24.0% in 1999. The decrease relates
primarily to leveraging costs over a higher sales base.
DEPRECIATION AND AMORTIZATION. As a percentage of revenues, depreciation and
amortization from continuing operations decreased to 3.2% in 2000 from 3.5% in
1999. The decrease relates primarily to corporate assets not retained by the
Company pursuant to the stock sale and leveraging costs over a higher sales
base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses from
continuing operations decreased to $7.7 million in 2000 from $9.1 million in
1999. The decrease relates to the reduction of corporate expenses as a result of
the stock sale and reduction of other overhead expenses.
OPERATING PROFIT. Due to the above items, profit from continuing operations
increased to $20.3 million in 2000 from $12.9 million in 1999. As a percentage
of revenues, profit from continuing operations increased to 9.0% in 2000 from
6.4% in 1999.
INTEREST EXPENSE - NET. Interest expense decreased slightly to $14.3 million in
2000 from $14.6 million in 1999.
8
NET INCOME/(LOSS) FROM DISCONTINUED OPERATIONS. The following chart summarizes
the net income/(loss) from discontinued operations for the thirty-nine weeks
ended September 27, 1999 and thirty-nine weeks ended September 25, 2000. There
were only twenty-six weeks of activity for the period ended September 25, 2000
because the discontinued operations were sold at the end of the second quarter
and there was no activity in the third quarter.
($000) September 27, 1999 September 25, 2000
Revenues ............................. $ 110,228 $ 65,111
Food and Beverage Costs .............. 30,964 17,123
Payroll Costs ........................ 38,277 21,605
Direct Operating Costs ............... 29,216 16,888
Depreciation and Amortization ........ 3,079 2,003
General and Administrative ........... 8,478 3,137
Non-Cash Charge for Impairment ....... 540 112
Grandy's Conversion:
(Gain)/Loss on Sale of Assets (913) 752
Non-Cash Charges ............ 239 0
--------- ---------
Operating Profit / (Loss) ............ 348 3,491
Interest Expense ..................... 0 0
--------- ---------
Income / (Loss)Before Taxes .......... 348 3,491
Provision for Income Taxes ........... 0 17
--------- ---------
Net Income/(Loss) from
Discontinued Operations .............. $ 348 $ 3,474
========= =========
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations and
borrowings under its Credit Facility. The Company requires capital principally
for the acquisition and construction of new restaurants, the remodeling of
existing restaurants, and the purchase of new equipment and leasehold
improvements. As of September 25, 2000, the Company had cash of $14.3 million.
The Company expects to use the proceeds of the sale of the Non-Black Angus
Subsidiaries to repay a portion of the Senior Secured Notes in the fourth
quarter.
In general, restaurant businesses do not have significant accounts receivable
because sales are made for cash or by credit card vouchers, which are ordinarily
paid within three to five days, and restaurant businesses do not maintain
substantial inventory because of the relatively brief shelf life and frequent
turnover of food products. Additionally, restaurants generally are able to
obtain trade credit in purchasing food and restaurant supplies. As a result,
restaurants are frequently able to operate with working capital deficits, i.e.,
current liabilities exceed current assets. At September 25, 2000, the Company
had a working capital deficit of $11.5 million.
The Company estimates that capital expenditures of $3.0 million to $4.0
million are required annually to maintain and refurbish its existing
restaurants. Other capital expenditures, which are generally discretionary,
are primarily for the construction of new restaurants and for expanding,
reformatting, and extending the capabilities of existing restaurants and for
general corporate purposes. Total capital expenditures year-to-date are $6.4
million in 2000 and $4.5 million in 1999. The Company estimates that total
capital expenditures in 2000 will be approximately $8.0 million. The Company
intends to open new restaurants with small capital outlays and to finance
most of the expenditures through operating leases.
The Company is obligated to make semiannual interest payments on the Senior
Secured Notes each February 15 and August 15 through February 2003. Accordingly,
interest payments of $9.1 million were made in February and August 2000.
9
On June 28, 2000, the Company amended the terms of the Credit Facility to reduce
the aggregate commitment of the lenders from $15 million to $12 million, to
reduce the amount available for issuances of letters of credit from $10 million
to $7 million, and to extend the maturity date from February 25, 2001 to June
30, 2002. On September 25, 2000, the Company had outstanding letters of credit
primarily related to its self-insurance programs of $5.5 million. As of
September 25, 2000, letters of credit were the only drawing against the Credit
Facility, with $6.5 million remaining available under the Credit Facility.
Substantially all assets of the Company are pledged to secure the Credit
Facility and the Senior Secured Notes. In addition, the Company's subsidiaries
have guaranteed the indebtedness owed by the Company under the Credit Facility
and the Senior Secured Notes and such guarantees are secured by substantially
all of the assets of the subsidiaries. In connection with such indebtedness,
contingent and mandatory prepayments may be required under certain specified
conditions and events. There are no compensating balance requirements.
Although the Company is highly leveraged, based upon current levels of
operations and anticipated growth, the Company expects that cash flows generated
from operations together with its other available sources of liquidity will be
adequate to make required payments of principal and interest on its
indebtedness, to make anticipated capital expenditures, and to finance working
capital requirements. However, the Company does not expect to generate
sufficient cash flow from operations in the future to pay the Senior Secured
Notes upon maturity and, accordingly, it expects to refinance all or a portion
of such debt, obtain new financing, or possibly sell assets.
10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk of the Company's financial instruments as of September 25, 2000
has not materially changed since December 27, 1999. The market risk profile on
December 27, 1999 is disclosed in the Company's annual report on Form 10-K, File
No. 33-48183, for the year ended December 27, 1999.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company was not in compliance with the financial covenants under the Credit
Facility for the fiscal periods ended December 27, 1999, March 27, 2000, and
June 26, 2000. Upon closing of the stock sale of the Non-Black Angus
Subsidiaries on June 28, 2000, the majority lenders under the Credit Facility
waived such noncompliance and agreed with the Company to revise such covenants.
The Company is in compliance for the fiscal period ended September 25, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only.
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN RESTAURANT GROUP, INC.
-------------------------------
(Registrant)
Date: November 8, 2000 By: /s/ Ralph S. Roberts
------------------------------ ---------------------------------
Ralph S. Roberts
Chief Executive Officer and President
12