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 May 13, 2001
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______________ to ____________________
Commission file number 0-23420
QUALITY DINING, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1804902
_______________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
_____________________________________________________
(Address of principal executive offices and zip code)
(219) 271-4600
______________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X____ No ________
The number of shares of the registrant's common stock outstanding as of
June 21, 2001 was 11,590,151.
QUALITY DINING, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MAY 13, 2001
INDEX
Page
PART I. - Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Statements of Operations....................3
Consolidated Balance Sheets..............................4
Consolidated Statements of Cash Flows....................5
Notes to Consolidated Financial Statements...............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........16
Part II - Other Information
Item 1. Legal Proceedings.......................................22
Item 2. Changes in Securities...................................22
Item 3. Defaults upon Senior Securities.........................22
Item 4. Submission of Matters to a Vote of Security Holders.....22
Item 5. Other Information.......................................22
Item 6. Exhibits and Reports on Form 8-K........................22
Signatures........................................................22
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 13, May 14, May13, May 14,
2001 2000 2000 2001
------ ------ ------- ------
Revenues:
Burger King $ 17,452 $ 18,536 $39,959 $ 43,048
Grady's American Grill 14,876 16,857 34,788 38,614
Chili's Grill & Bar 15,816 14,259 36,480 31,772
Italian Dining Division 4,070 3,937 9,258 8,923
------- ------- ------- -------
Total revenues 52,214 53,589 120,485 122,357
------- ------- ------- -------
Operating expenses:
Restaurant operating expenses:
Food and beverage 14,770 15,260 34,028 34,752
Payroll and benefits 15,208 15,500 35,225 35,792
Depreciation and
amortization 2,662 2,604 6,203 6,012
Other operating expenses 12,674 12,610 29,501 28,921
Total restaurant operating ------- ------- ------- -------
expenses 45,314 45,974 104,957 105,477
------- ------- ------- -------
Income from restaurant
operations 6,900 7,615 15,528 16,880
General and administrative 3,677 4,016 8,250 9,193
Facility closing costs - - 216 -
Amortization of intangibles 201 211 470 487
------- ------- ------- -------
Operating income 3,022 3,388 6,592 7,200
------- ------- ------- -------
Other income (expense):
Interest expense (2,429) (2,618) (5,864) (6,044)
Gain (loss) on sale of
Property and equipment 12 (163) 4 (151)
Interest income 6 6 13 23
Other income (expense), net 318 322 675 440
------- ------- ------- -------
Total other expense, net (2,093) (2,453) (5,172) (5,732)
------- ------- ------- -------
Income before income taxes 929 935 1,420 1,468
Income tax provision 490 468 857 776
------- ------- ------- -------
Net income $ 439 $ 467 $ 563 $ 692
======= ======= ======= =======
Basic net income per share $ 0.04 $ 0.04 $ 0.05 $ 0.06
Diluted net income ======= ======= ======= =======
per share $ 0.04 $ 0.04 $ 0.05 $ 0.06
======= ======= ======= =======
Weighted average shares outstanding:
Basic 11,590 12,287 11,686 12,409
======= ======= ======= =======
Diluted 11,625 12,305 11,709 12,421
======= ======= ======= =======
See Accompanying Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
May 13, October 29,
2001 2000
ASSETS ------- -------
Current assets:
Cash and cash equivalents $ 1,034 $ 2,912
Accounts receivable 1,995 2,216
Inventories 1,957 2,242
Deferred income taxes 1,915 2,729
Other current assets 2,287 1,651
------- -------
Total current assets 9,188 11,750
------- -------
Property and equipment, net 123,206 126,223
------- -------
Other assets:
Deferred income taxes 8,085 7,271
Trademarks, net 11,478 11,657
Franchise fees and development fees, net 9,029 9,204
Goodwill, net 7,222 7,513
Liquor licenses, net 2,577 2,595
Other 2,633 2,648
------- -------
Total other assets 41,024 40,888
------- -------
Total assets $ 173,418 $ 178,861
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capitalized leases
and long-term debt $ 1,755 $ 1,660
Accounts payable 11,454 11,441
Accrued liabilities 18,409 20,961
------- -------
Total current liabilities 31,618 34,062
Long-term debt 100,670 102,115
Capitalized leases principally to related
parties, less current portion 4,434 4,700
------- -------
Total liabilities 136,722 140,877
------- -------
Common stock subject to redemption 264 -
------- -------
Stockholders' equity:
Preferred stock, without par value:
5,000,000 shares authorized; none issued - -
Common stock, without par value: 50,000,000
shares authorized; 12,949,151 and 12,855,594
shares issued, respectively 28 28
Additional paid-in capital 237,032 237,031
Accumulated deficit (196,377) (196,940)
Unearned compensation (628) (437)
------- -------
40,055 39,682
Treasury stock, at cost, 1,359,000
and 624,500 shares, respectively (3,623) (1,698)
------- -------
Total stockholders' equity 36,432 37,984
------- -------
Total liabilities and stockholders' equity $ 173,418 $ 178,861
======= =======
See Accompanying Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Twenty-Eight Weeks Ended
May 13, May 14,
2001 2000
Cash flows from operating activities: ------ ------
Net income $ 563 $ 692
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
property and equipment 6,220 6,162
Amortization of other assets 1,008 998
Loss (gain) on sale of property and equipment (4) 151
Amortization of unearned compensation 55 109
Changes in current assets and current liabilities:
Net increase in current assets (130) (1,011)
Net increase (decrease)in current liabilities (2,520) 2,392
------ ------
Net cash provided by operating activities 5,192 9,493
------ ------
Cash flows from investing activities:
Proceeds from sales of property and equipment 144 28
Purchase of property and equipment (3,343) (5,446)
Purchase of other assets (330) (349)
------ ------
Net cash used in investing activities (3,529) (5,767)
------ ------
Cash flows from financing activities:
Borrowings of long-term debt 29,750 22,150
Repayment of long-term debt (31,100) (24,079)
Purchase of treasury stock (1,925) (1,307)
Repayment of capitalized lease obligations (266) (255)
------ ------
Net cash used by financing activities (3,541) (3,491)
------ ------
Net increase (decrease) in cash and cash equivalents (1,878) 235
Cash and cash equivalents, beginning of period 2,912 1,019
------ ------
Cash and cash equivalents, end of period $ 1,034 $ 1,254
====== ======
See Accompanying Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 13, 2001
(Unaudited)
Note 1: Description of Business.
Nature of Business Quality Dining, Inc. (the "Company") operates
four distinct restaurant concepts. It owns the Grady's American
Grill(R) and two Italian Dining concepts and operates Burger King(R)
restaurants and Chili's Grill & Bar (TM) ("Chili's"(R)) as a franchisee
of Burger King Corporation and Brinker International, Inc.
("Brinker"), respectively. The Company operates its Italian
Dining restaurants under the tradenames of Spageddies Italian
Kitchen(R) ("Spageddies"(R)) and Papa Vino's Italian Kitchen(R) ("Papa
Vino's"(R)). As of May 13, 2001, the Company operated 145
restaurants, including 72 Burger King restaurants, 31 Chili's, 34
Grady's American Grill restaurants, three Spageddies and five
Papa Vino's.
Note 2: Basis of Presentation.
The accompanying consolidated financial statements include the
accounts of Quality Dining, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X promulgated by the Securities and Exchange
Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for annual financial statement reporting
purposes. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered
necessary for a fair presentation have been included. Operating
results for the twenty-eight week period ended May 13, 2001 are
not necessarily indicative of the results that may be expected
for the 52-week year ending October 28, 2001.
These financial statements should be read in conjunction with the
Company's audited financial statements for the fiscal year ended
October 29, 2000 included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
Note 3: Disposition of Bagel-Related Businesses
On October 20, 1997, the Company sold its bagel-related
businesses to Mr. Nordahl L. Brue, Mr. Michael J. Dressell and an
entity controlled by them and their affiliates. The Company's
board of directors determined to sell the bagel-related
businesses after a careful evaluation of the future prospects for
the bagel business, the competitive environment that then existed
in the bagel segment, and the historical performance of the
Company's bagel-related businesses. The sale included the stock
of Bruegger's Corporation and the stock of all of the other bagel-
related businesses. The total proceeds from the sale were
$45,164,000. The consideration included the issuance by
Bruegger's Corporation of a junior subordinated note in the
amount of $10,000,000 (the "Subordinated Note"), the transfer of
4,310,740 shares of the Company's common stock valued at
$21,823,000, owned by Messrs. Brue and Dressell, which were
retired, a receivable for purchase price adjustment of $500,000,
and $16,841,000 in cash.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
The Subordinated Note has an annual interest rate of 12%, matures
in October 2004 and is guaranteed by certain affiliates of
Bruegger's Corporation ("Affiliate Guarantors"). The Company has
never recognized any interest income from this note. Bruegger's
Corporation failed to make the interest payment on the
Subordinated Note that was due to the Company on December 1, 2000
and the Company has been advised that the Affiliate Guarantors
failed to make an interest payment that was due to their senior
secured lender on January 2, 2001. The Affiliate Guarantors own
and operate Bruegger's Bagel Bakeries as franchisees of
Bruegger's Franchise Corporation, a subsidiary of Bruegger's
Corporation. The Company believes that the Bruegger's Bagel
Bakeries operated by the Affiliate Guarantors constitute a
majority of the Bruegger's Bagel Bakery System and therefore
account for a majority of Bruegger's Franchise Corporation's
revenues. The Company has been advised that Bruegger's Franchise
Corporation has subordinated its right to receive royalty
payments from the Affiliate Guarantors to the Affiliate
Guarantors' senior secured lender. Consequently, there can be no
assurance when, if ever, the Company might receive any principal
or interest payments in respect of the Subordinated Note. In
view of these and other circumstances, as of the fourth quarter
of fiscal 2000, the Company recorded a $10.0 million non-cash
charge to fully reserve for the Subordinated Note. On February
28, 2001, the Company agreed to restructure the Subordinated Note
as part of the resolution of the disputes the Company had with
Bruegger's Corporation. See Note 8.
Note 4: Commitments.
As of May 13, 2001, the Company had commitments aggregating
approximately $2,671,000 for restaurant construction and the
purchase of new equipment.
Note 5: Long-Term Debt.
On August 3, 1999 the Company completed the refinancing of its
existing debt with a financing package totaling $125,066,000,
consisting of a $76,000,000 revolving credit agreement and a
$49,066,000 mortgage facility, as described below. The revolving
credit agreement was executed with Chase Bank of Texas, as agent
for a group of six banks, providing for borrowings of up to
$76,000,000 with interest payable at the adjusted LIBOR rate plus
a contractual spread. The Company had $21,665,000 available under
its revolving credit agreement as of May 13, 2001. The revolving
credit agreement is collateralized by the stock of certain
subsidiaries of the Company, the Subordinated Note, certain
interests in the Company's franchise agreements with Brinker and
Burger King Corporation and substantially all of the Company's
personal property not pledged in the mortgage financing. The
revolving credit agreement will mature on October 31, 2002, at
which time all amounts outstanding thereunder are due.
The revolving credit agreement contains, among other provisions,
certain restrictive covenants including maintenance of certain
prescribed debt and fixed charge coverage ratios, limitations on
the incurrence of additional
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
indebtedness, limitations on consolidated capital expenditures,
restrictions on the payment of dividends (other than stock
dividends) and limitations on the purchase or redemption of
shares of the Company's capital stock.
The $49,066,000 mortgage facility has 34 separate mortgage notes.
The original term of each mortgage note is either 15 or 20 years.
The notes have fixed rates of interest of either 9.79% or 9.94%.
The notes require equal monthly interest and principal payments.
The Company used the proceeds of the mortgage facility to repay
indebtedness under its existing revolving credit agreement. The
mortgage notes are collateralized by a first mortgage and
security agreement on the real estate, improvements and equipment
on 19 of the Company's Chili's restaurants and 15 of the
Company's Burger King restaurants. The mortgage notes contain,
among other provisions, certain restrictive covenants including
maintenance of a consolidated fixed charge coverage ratio for the
financed properties.
Note 6: Earnings Per Share
During the first twenty-eight weeks of fiscal 2001 the Company
acquired 734,500 shares of common stock for $1,925,000. During
the first twenty-eight weeks of fiscal 2001 the Company issued
93,557 shares of restricted stock pursuant to its Long Term
Compensation Plans. The Company had outstanding at May 13, 2001
common shares totaling 11,590,151. The Company has also granted
options to purchase common shares to its employees and outside
directors. These options have a dilutive effect on the
calculation of earnings per share. The following is a
reconciliation of the numerators and denominators of the basic
and diluted earnings per share computation as required by SFAS
128.
Twelve weeks ended Twenty-eight weeks ended
May 13, May 14, May 13, May 14,
2001 2000 2001 2000
------ ------ ------ ------
(In thousands, except per share amounts)
Basic net income per share:
Net income available to
common shareholders (numerator) $ 439 $ 467 $ 563 $ 692
====== ====== ====== ======
Weighted average common shares
outstanding (denominator) 11,590 12,287 11,686 12,409
====== ====== ====== ======
Basic net income per share $ 0.04 $ 0.04 $ 0.05 $ 0.06
====== ====== ====== ======
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
Twelve weeks ended Twenty-eight weeks ended
May 13, May14, May 13, May 14,
2001 2000 2001 2000
------ ------ ------ ------
(In thousands, except per share amounts)
Diluted net income per share:
Net income available to
common shareholders (numerator) $ 439 $ 467 $ 563 $ 692
====== ====== ====== ======
Weighted average common shares
outstanding 11,590 12,287 11,686 12,409
Effect of dilutive securities:
Options on common stock 35 18 23 12
------ ------ ------ ------
Total common shares and dilutive
securities(denominator) 11,625 12,305 11,709 12,421
====== ====== ====== ======
Diluted net income per share $ 0.04 $ 0.04 $ 0.05 $ 0.06
====== ====== ====== ======
Note 7 Segment Reporting:
The Company operates four distinct restaurant concepts in the
food-service industry. It owns the Grady's American Grill and
two Italian Dining concepts and operates Burger King restaurants
and Chili's Grill & Bar restaurants as a franchisee of Burger
King Corporation and Brinker International, Inc., respectively.
The Company has identified each restaurant concept as an
operating segment based on management structure and internal
reporting. For purposes of applying SFAS 131, the Company
considers the Grady's American Grill, the two Italian concepts
and Chili's Grill & Bar to be similar and have aggregated them
into a single reportable operating segment (Full Service). The
Company considers the Burger King restaurants as a separate
reportable segment (Quick Service). Summarized financial
information concerning the Company's reportable segments is shown
in the following table. The "other" column includes corporate
related items and income and expense not allocated to reportable
segments.
Full Quick
(Dollars in thousands) Service Service Other Total
- ------------------------------------------------------------------------
Second quarter fiscal 2001
- --------------------------
Revenues $ 34,762 $ 17,452 $ - $ 52,214
Income from restaurant
operations 4,266 2,602 32 6,900
Operating income 2,376 933 (347) $ 3,022
Interest expense (2,429)
Other income 336
Income before income ------
taxes $ 929
======
Depreciation and
amortization 2,065 723 308 3,096
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
Full Quick
(Dollars in thousands) Service Service Other Total
- ---------------------------------------------------------------------------
Second quarter fiscal 2000
Revenues $ 35,053 $ 18,536 $ - $ 53,589
Income from restaurant
operations 4,363 3,222 30 7,615
Operating income 2,422 1,379 (413) $ 3,388
Interest expense (2,618)
Other income 165
Income before income ------
taxes $ 935
======
Depreciation and
amortization 2,031 711 363 3,105
First twenty-eight weeks of fiscal 2001
- ----------------------------------------
Revenues $ 80,526 $ 39,959 $ - $ 120,485
Income from restaurant
operations 9,833 5,620 75 15,528
Operating income 5,661 1,975 (1,044) $ 6,592
Interest expense (5,864)
Other income 692
Income before income ------
taxes $ 1,420
======
Depreciation and
amortization 4,810 1,684 734 7,228
First twenty-eight weeks of fiscal 2000
- ---------------------------------------
Revenues $ 79,309 $ 43,048 $ - $ 122,357
Income from restaurant
operations 9,370 7,440 70 16,880
Operating income 4,910 3,253 (963) $ 7,200
Interest expense (6,044)
Other income 312
Income before income ------
taxes $ 1,468
======
Depreciation and
amortization 4,698 1,631 831 7,160
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
Note 8: Contingencies
The Company and certain of its officers and directors are parties
to various legal proceedings relating to the Company's purchase,
operation and financing of the Company's bagel-related
businesses.
D & K Foods, Inc., Pacific Capital Ventures, Inc., and PLB
Enterprises, Inc., franchisees of Bruegger's Franchise
Corporation, and Ken Wagnon, Dan Carney, Jay Wagnon and Patrick
Beatty, principals of the foregoing franchisees, commenced an
action on July 16, 1997 in the United States District Court for
the District of Maryland, against Bruegger's Corporation,
Bruegger's Franchise Corporation, Quality Dining, Inc., Daniel B.
Fitzpatrick, Michael J. Dressell and Nordahl L. Brue, alleging
that the plaintiffs purchased their franchises based upon
financial representations that did not materialize, that they
purchased preferred stock in Bruegger's Corporation based upon
false representations, that Bruegger's Corporation falsely
represented its intentions with respect to purchasing bakeries
from the plaintiffs or providing financing to the plaintiffs, and
that the defendants violated implied covenants of good faith and
fair dealing. On February 28, 2001, the parties reached a
settlement of this matter pursuant to which the Company agreed to
make an initial payment of $125,000 and an additional payment of
$175,000 on December 31, 2001. As part of the settlement, the
Company also agreed to purchase 96,064 shares of its common stock
presently owned by the plaintiffs, on December 31, 2001, for an
amount equal to the greater of $2.75 per share or the midpoint
between $2.59 and the market price of the Company's stock at the
time of closing. As part of the settlement, the plaintiffs
agreed to vote their stock in the Company in accordance with the
recommendation of the Company's Board of Directors and Bruegger's
Corporation has purchased certain equipment from the plaintiffs
for $25,000. The Company had previously accrued for the full
amount of the settlement, including the expense portion of the
share repurchase. The Company has reclassified $264,000 from
stockholders' equity to common stock subject to redemption on its
consolidated balance sheet related to its agreement to purchase
96,064 shares from the plaintiff on December 31, 2001.
On or about April 15, 1997, Texas Commerce Bank National
Association ("Texas Commerce") made a loan of $4,200,000 (the
"Loan") to BFBC Ltd., a Florida limited partnership ("BFBC"). At
the time of the Loan, BFBC was a franchisee under franchise
agreements with Bruegger's Franchise Corporation (the
"Franchisor"). The Company at that time was an affiliate of the
Franchisor. In connection with the Loan and as an accommodation
of BFBC, the Company executed to Texas Commerce a "Guaranty". By
the terms of the Guaranty the Company agreed that upon maturity
of the Loan by default or otherwise that it would either (1) pay
the Loan obligations or (2) buy the Loan and all of the related
loan documents (the "Loan Documents") from Texas Commerce or its
successors. In addition several principals of BFBC (the
"Principal Guarantors") guaranteed repayment of the Loan by each
executing a "Principal Guaranty". On November 10, 1998, Texas
Commerce (1) declared that the Loan was in default, (2) notified
BFBC, the Principal Guarantors and the Company that all of the
Loan obligations were due and payable, and (3) demanded payment.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
The Company elected to satisfy its obligations under the Guaranty
by purchasing the Loan from Texas Commerce. On November 24,
1998, the Company bought the Loan for $4,294,000. Thereafter,
the Company sold the Loan to its Texas affiliate Grady's American
Grill, L.P. ("Grady's"). On November 30, 1998 Grady's commenced
an action seeking to recover the amount of the Loan from one of
the Principal Guarantors, Michael K. Reilly ("Reilly"). As part
of this action Grady's also seeks to enforce a Subordination
Agreement that was one of the Loan Documents against MKR
Investments, L.P., a partnership ("MKR"). Reilly
is the general partner of MKR. This action is pending in the
United States District Court for the Southern District of Texas
Houston Division as Case No. H-98-4015. Reilly has denied
liability and filed a counterclaim against Grady's alleging that
Grady's engaged in unfair trade practices, violated Florida's
"Rico" statute, engaged in a civil conspiracy and violated state
and federal securities laws in connection with the Principal
Guaranty (the "Counterclaims"). Reilly also filed a third party
complaint against Quality Dining, Inc., Grady's American Grill
Restaurant Corporation, David M. Findlay, Daniel B. Fitzpatrick,
Bruegger's Corporation, Bruegger's Franchise Corporation,
Champlain Management Services, Inc., Nordahl L. Brue, Michael J.
Dressell and Ed Davis ("Third Party Defendants") alleging that
Reilly invested in BFBC based upon false representations, that
the Third Party Defendants violated state franchise statutes,
committed unfair trade practices, violated covenants of good
faith and fair dealing, violated the state "Rico" statute and
violated state and federal securities laws in connection with the
Principal Guaranty.
In addition, BFBC and certain of its affiliates, including the
Principal Guarantors ("Intervenors") have intervened and asserted
claims against Grady's and the Third Party Defendants that are
similar to those asserted in the counter claims and the third
party complaint. Based upon the currently available information,
the Company does not believe that this matter will have a
materially adverse effect on the Company's financial position or
results of operations. However, there can be no assurance that
the Company will be able to realize sufficient value from Reilly
to satisfy the amount of the Loan or that the Company will not
incur any liability as a result of the Counterclaims or third
party complaints filed by Reilly and the Intervenors.
In each of the above cases, one or more present or former
officers and directors of the Company were named as party
defendants and the Company has and/or is advancing defense costs
on their behalf.
Pursuant to the Share Exchange Agreement by and among Quality
Dining, Inc., Bruegger's Corporation, Nordahl L. Brue and Michael
J. Dressell ("Share Exchange Agreement"), the Agreement and Plan
of Merger by and among Quality Dining, Inc., Bagel Disposition
Corporation and Lethe, LLC, and certain other related agreements
entered into as part of the disposition of the Company's bagel-
related businesses, the Company was responsible for 50% of the
first $14 million of franchise-related litigation expenses,
inclusive of attorney's fees, costs, expenses, settlements and
judgments (collectively "Franchise Damages"). Bruegger's
Corporation and certain of its affiliates are obligated to
indemnify the Company from all other Franchise Damages. The
Company was originally obligated to pay the first $3 million of
its share of Franchise Damages in cash. The Company has
satisfied this obligation. The remaining $4 million of the
Company's share of Franchise Damages was originally payable by
crediting amounts owed to the Company pursuant to the
Subordinated Note issued to the Company by Bruegger's
Corporation. However, as a result of the Bruegger's
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
Resolution (described below), remainder of the Company's share of
Franchise Damages is payable in cash.
On or about September 10, 1999, Bruegger's Corporation, Lethe
LLC, Nordahl L. Brue, and Michael J. Dressel commenced an action
against the Company in the United States District Court for the
District of Vermont alleging that the Company breached various
provisions of the Share Exchange Agreement which arise out of the
ongoing dispute concerning the net working capital adjustment
contemplated by the Share Exchange Agreement. On February 1,
2000, the Company filed counter-claims against Bruegger's
Corporation for the working capital adjustment to which it
believes it is entitled. Additionally, on or about September 13,
1999, Messrs. Brue and Dressell asserted a claim for breach of
representations and warranties under the Share Exchange
Agreement.
On February 28, 2001, the Company and Bruegger's Corporation
reached a settlement (the "Bruegger's Resolution") of their
various disputes that includes, among other things, the following
provisions: (a) the principal amount of the Subordinated Note
was restated to $10.7 million; (b) the Company and Bruegger's
Corporation each released their claim against the other to
receive a net working capital adjustment; (c) the Subordinated
Note was modified to, among other things, provide for an
extension of the period through which interest is to be accrued
and added to the principal amount of the Subordinated Note from
October, 2000 through January, 2002. From January, 2002 through
June, 2002, one-half of the interest is to be accrued and added
to the principal amount of the Subordinated Note and one-half of
the interest is to be paid in cash. Commencing in January, 2003,
interest is to be paid in cash through the maturity of the
Subordinated Note in October 2004; (d) the Company and Bruegger's
Corporation are each responsible for 50% of the Franchise Damages
with respect to the claims asserted by BFBC Ltd., et al.
Bruegger's Corporation is entitled to 25% of any net recovery
made by the Company on the BFBC, Ltd., Loan; provided, however,
that any such entitlement is required to be applied to the
outstanding balance of the Subordinated Note; (e) Bruegger's
Corporation and its affiliates released their claims for breach
of representations and warranties under the Share Exchange
Agreement; and (f) Bruegger's Corporation is entitled to a credit
of two dollars against the Subordinated Note for every one dollar
that Bruegger's Corporation prepays against the Subordinated Note
prior to October, 2003 up to a maximum credit of $4 million.
There can be no assurance when, if ever, the Company might
receive any principal or interest payments in respect of the
Subordinated Note.
On February 28, 2001, the Company entered into an agreement with
NBO, LLC which provided for the purchase by the Company of
785,000 shares of common stock of the Company owned by NBO in
exchange for four of the Company's Burger King restaurants. At
that time, NBO owned 1,159,014 shares of the Company's common
stock. In addition, the Company's Chairman, President and Chief
Executive Officer entered into an agreement with NBO to purchase
its remaining 374,014 shares for $2.1 million. NBO and its
principals also entered into a standstill arrangement with the
Company which provided that they would not solicit proxies, seek
to control or influence the policies of the Company, or otherwise
engage in activities hostile to the Company and its management.
Consummation of the proposed transactions between the Company,
Mr. Fitzpatrick and NBO was subject to numerous closing
conditions. Because all closing conditions could not be
satisfied, the agreements described above have been terminated.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
(Unaudited)
The Company is involved in various other legal proceedings
incidental to the conduct of its business, including employment
discrimination claims. Based upon currently available
information, the Company does not expect that any such
proceedings will have a material adverse effect on the Company's
financial position or results of operations but there can be no
assurance thereof.
Note 9: Burger King Franchisee Commitment and Early Renewal
Program
On January 27, 2000 the Company executed a "Franchisee
Commitment" in which it agreed to undertake certain
"Transformational Initiatives" including capital improvements and
other routine maintenance in all of its Burger King restaurants.
The capital improvements include the installation of signage
bearing the new Burger King logo and the installation of a new
drive-through ordering system. The Company is required to
complete these capital improvements by December 31, 2001. In
addition, the Company agreed to perform, as necessary, certain
routine maintenance such as exterior painting, sealing and
striping of parking lots and upgraded landscaping. The Company
completed this maintenance by September 30, 2000, as required.
In consideration for executing the Franchisee Commitment, the
Company received "Transformational Payments" totaling
approximately $3.9 million during fiscal 2000. The portion of the
Transformational Payments that corresponds to the amount required
for the capital improvements will be recognized as income over
the useful life of the capital improvements. The portion of the
Transformational Payments that corresponds to the required
routine maintenance was recognized as a reduction in maintenance
expense over the period during which maintenance was performed.
The remaining balance of the Transformational Payments is being
recognized as other income ratably through December 31, 2001, the
term of the Franchisee Commitment.
During fiscal 2000, Burger King Corporation increased its royalty
and franchise fees for most new restaurants. The franchise fee
for new restaurants increased from $40,000 to $50,000 for a 20
year agreement and the royalty rate increased from 3.5% of sales
to 4.5% of sales, after a transitional period. For franchise
agreements entered into during the transitional period, the
royalty rate will be 4% of sales for the first 10 years and 4.5%
of sales for the balance of the term.
For new restaurants, the transitional period will be from July 1,
2000 to June 30, 2003. As of July 1, 2003, the royalty rate will
become 4.5% of sales for the full term of new restaurant
franchise agreements. For renewals of existing franchise
agreements, the transitional period will be from July 1, 2000
through June 30, 2001. As of July 1, 2001, existing restaurants
that renew their franchise agreements will pay a royalty of 4.5%
of sales for the full term of the renewed agreement. The
advertising contribution will remain 4% of sales. Royalties
payable under existing franchise agreements are not affected by
these changes until the time of renewal, at which time the then
prevailing rate structure will apply.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 13, 2001
Burger King Corporation offered a voluntary program to incent
franchisees to renew their franchise agreements prior to the
scheduled expiration date ("Early Renewal Program"). Franchisees
that elected to participate in the Early Renewal Program are
required to make capital investments in their restaurants by,
among other things, bringing them up to Burger King Corporation's
current image, and to extend occupancy leases. Franchise
agreements entered into under the Early Renewal Program have
special provisions regarding the royalty payable during the term,
including a reduction in the royalty to 2.75% over five years
beginning April, 2002 and concluding in April, 2007.
The Company included 36 restaurants in the Early Renewal Program.
The Company paid franchise fees of $877,000 in the third quarter
of fiscal 2000 to extend the franchise agreements of the selected
restaurants for sixteen to twenty years. The Company expects to
invest approximately $7,000,000 to $8,000,000 to remodel the
selected restaurants to bring them up to Burger King
Corporation's current image. The remodeling is required to be
completed by December 31, 2001.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company has a 52/53-week fiscal year ending on the last
Sunday in October of each year. The current fiscal year is 52
weeks long and ends October 28, 2001. The first quarter of the
Company's fiscal year consists of 16 weeks with all subsequent
quarters being 12 weeks in duration.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages which certain items of revenue and expense bear to
total revenues.
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 13, May14, May 13, May 14,
2001 2000 2001 2000
------ ------ ------ ------
Total revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Restaurant operating expenses
Food and beverage 28.3 28.5 28.2 28.4
Payroll and benefits 29.1 28.9 29.2 29.3
Depreciation and amortization 5.1 4.9 5.1 4.9
Other operating expenses 24.3 23.5 24.6 23.6
Total restaurant operating ------ ------ ------ ------
expenses 86.8 85.8 87.1 86.2
Income from operations 13.2 14.2 12.9 13.8
General and administrative 7.0 7.5 6.8 7.5
Facility closing costs - - .2 -
Amortization of intangibles 0.4 0.4 0.4 0.4
------ ------ ------ ------
Operating income 5.8 6.3 5.5 5.9
------ ------ ------ ------
Other income (expense):
Interest expense (4.7) (4.9) (4.9) (4.9)
Interest income - - - -
Other income (expense), net .6 .3 .6 .2
------ ------ ------ ------
Total other expense, net (4.1) (4.6) (4.3) (4.7)
------ ------ ------ ------
Income before income taxes 1.7 1.7 1.2 1.2
Income tax provision 0.9 0.9 0.7 0.6
------ ------ ------ ------
Net income 0.8% 0.8% 0.5% 0.6%
====== ====== ====== ======
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Restaurant sales for the Company were $52,214,000 for the second
quarter of fiscal 2001 versus $53,589,000 for the comparable
period in fiscal 2000, a decrease of $1,375,000. Restaurant sales
for the first twenty-eight weeks of fiscal 2001 were $120,485,000
versus $122,357,000 for the comparable period in fiscal 2000, a
decrease of $1,872,000.
The Company's Burger King restaurant sales were $17,452,000 in
the second quarter of fiscal 2001 compared to sales of
$18,536,000 in the same period of fiscal 2000, a decrease of
$1,084,000. The Company's Burger King restaurants had average
weekly sales of $20,463 in the second quarter of fiscal 2001
versus $21,833 in the same period in fiscal 2000. Sales
decreased $3,089,000 to $39,959,000 for the first twenty-eight
weeks of fiscal 2001 compared to $43,048,000 for the comparable
period in fiscal 2000. Average weekly sales were $20,091 in the
first twenty-eight weeks of fiscal 2001 versus $21,785 in the
same period in fiscal 2000. The Company believes that the
reduction in sales was due to less successful promotional
programs in fiscal 2001 versus fiscal 2000.
Sales in the Company's Grady's American Grill restaurant division
were $14,876,000 in the second quarter of fiscal 2001 compared to
sales of $16,857,000 in the same period in fiscal 2000, a
decrease of $1,981,000. The Company closed one unit in fiscal
2000 and one unit during the first quarter of fiscal 2001. The
absence of these units accounted for approximately $562,000 of
the sales decrease during the second quarter of fiscal 2001. The
Company's Grady's American Grill restaurants had average weekly
sales of $36,461 in the second quarter of fiscal 2001 versus
$39,020 in the same period in fiscal 2000. Sales for the first
twenty-eight weeks of fiscal 2001 were $34,788,000 compared to
$38,614,000 for the same period in fiscal 2000, a decrease of
$3,826,000. The absence of the restaurants which were closed
contributed approximately $1,117,000 to the sales decrease.
Average weekly sales were $36,087 in the first twenty-eight weeks
of fiscal 2001 versus $38,307 in the same period in fiscal 2000.
The Company has implemented expanded marketing, operational and
menu initiatives intended to stimulate sales at its Grady's
American Grill restaurants. Due to the competitive nature of the
restaurant industry, these initiatives have not achieved the
intended results to date and there can be no assurances that
these initiatives will achieve the intended results.
The Company's Chili's Grill & Bar restaurant sales increased
$1,557,000 to $15,816,000 in the second quarter of fiscal 2001
compared to $14,259,000 in the same period in fiscal 2000. The
Company had increased revenue of $1,031,000 due to additional
sales weeks from three new restaurants which were opened during
fiscal 2000. Average weekly sales increased to $42,515 in the
second quarter of fiscal 2001 versus $41,450 in the same period
of fiscal 2000. Sales for the first twenty-eight weeks of fiscal
2001 increased $4,708,000 to $36,480,000 compared to $31,772,000
for the same period in fiscal 2000. The Company had increased
revenue of $3,283,000 due to additional sales weeks from three
new restaurants which were opened during fiscal 2000. The average
weekly sales were $42,027 in the first twenty-eight weeks of
fiscal 2001 versus $40,116 in the same period in fiscal 2000.
The Company's Italian Dining Division restaurant sales increased
$133,000 to $4,070,000 in the second quarter of fiscal 2001
compared to $3,937,000 in the same period in fiscal 2000. The
average weekly sales were $42,400 in the second quarter of
fiscal 2001 versus $41,016 in the same period of fiscal 2000.
Sales for the first twenty-eight weeks of fiscal 2001 increased
$335,000 to $9,258,000 compared to $8,923,000 for the same period
in fiscal 2000. The average weekly sales were $41,332 in the
first twenty-eight weeks of fiscal 2001 versus $39,840 in the
same period in fiscal 2000.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Total restaurant operating expenses, as a percentage of
restaurant sales, increased to 86.8% for the second quarter of
fiscal 2001 versus 85.8% in the second quarter of fiscal 2000 and
87.1% in the first twenty-eight weeks of fiscal 2001 versus 86.2%
in the same period of fiscal 2000. The following factors
influenced the operating margins.
Food and beverage costs improved to 28.3% of total revenues in
the second quarter of fiscal 2001 compared to 28.5% of total
revenues in the same period in fiscal 2000 and 28.2% in the first
twenty-eight weeks of fiscal 2001 compared to 28.4% in the same
period of fiscal 2000. Food and beverage costs improved as a
percentage of total revenues in both the Company's Full Service
and Quick Service segments during the second quarter of fiscal
2001 and the first twenty-eight weeks of fiscal 2001 compared to
the same periods in fiscal 2000. The improvement was due to menu
price increases and the continued benefit from the reinforcement
of operational standards.
Payroll and benefits were 29.1% of total revenues in the second
quarter of fiscal 2001 compared to 28.9% in the same period of
fiscal 2000. Payroll and benefits were 29.2% of total revenues in
the first twenty-eight weeks of fiscal 2000 compared to 29.3% in
the same period of fiscal 2000. For the second quarter and first
twenty-eight weeks of fiscal 2001, payroll and benefit costs, as
a percentage of total revenues, increased in the Company's Quick
Service segment mainly due to a decrease in average weekly sales
at the restaurants. Payroll and benefit costs, as a percentage of
total revenues, decreased in the Company's Full Service segment
for the second quarter and first twenty-eight weeks of fiscal
2001 compared to the same periods in fiscal 2000. The improvement
was due to increased revenues and the reinforcement of
operational standards.
Depreciation and amortization, as a percentage of total revenues,
increased to 5.1% for the second quarter of fiscal 2001 compared
to 4.9% in the same period in fiscal 2000 and to 5.1% in the
first twenty-eight weeks of fiscal 2001 compared to 4.9% in the
same period in fiscal 2000. The increase, as a percentage of
total revenues, is mainly due to the decrease in total revenues
in the second quarter and the first twenty-eight weeks of fiscal
2001 when compared to fiscal 2000.
Other restaurant operating expenses include rent and utilities,
royalties, promotional expense, repairs and maintenance, property
taxes and insurance. Other restaurant operating expenses as a
percentage of total revenues increased in the second quarter of
fiscal 2001 to 24.3% compared to 23.5% in the same period of
fiscal 2000 and to 24.6% in the first twenty-eight weeks of
fiscal 2001 compared to 23.6% in the same period of fiscal 2000.
The increases, as a percentage of total revenues, are mainly due
to lower sales and increased promotional expense in the Company's
Quick Service segment and higher utility expense in both the
Quick Service and Full Service segments.
Income from restaurant operations decreased $715,000 to
$6,900,000, or 13.2% of revenues, in the second quarter of fiscal
2001 compared to $7,615,0000, or 14.2% of revenues, in the
comparable period of fiscal 2000. Income from restaurant
operations in the Company's Quick Service segment accounted for
$620,000 of the decrease while the Company's Full Service segment
accounted for $97,000 of the decrease from the prior year. Income
from restaurant operations decreased $1,352,000 to $15,528,000,
or 12.9% of revenues, in the first twenty-eight weeks of fiscal
2001 compared to $16,880,0000, or 13.8% of revenues, in the
comparable period of fiscal 2000. Income from restaurant
operations in the Company's Quick Service segment decreased
$1,820,000 while the Company's Full Service segment increased
$463,000 when compared to the first twenty-eight weeks of the
prior year.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
General and administrative expenses were $3,677,000 in the second
quarter of fiscal 2001 compared to $4,016,000 in the second
quarter of fiscal 2000 and $8,250,000 in the first twenty-eight
weeks of fiscal 2001 compared to $9,193,000 in the same period of
fiscal 2000. As a percentage of total restaurant sales, general
and administrative expenses were 7.0% in the second quarter of
fiscal 2001 versus 7.5% in the second quarter of fiscal 2000 and
6.8% in the first twenty-eight weeks of fiscal 2001 compared to
7.5% in the same period of fiscal 2000. In the second quarter of
fiscal 2000 the Company recorded approximately $255,000 in
expenses related to the Company's proxy contest with NBO, LLC.,
and in the first twenty-eight weeks of fiscal 2000 the Company
recorded approximately $350,000 in expenses related to the proxy
contest with NBO, LLC. The Company did not incur similar expenses
during fiscal 2001.
The Company recorded expenses of $216,000 for facility closing
costs in the first twenty-eight weeks of fiscal 2001 versus none
in the same period of fiscal 2000. During the first quarter of
fiscal 2001 the Company closed one Grady's American Grill
restaurant because the unit was not meeting the Company's
performance targets.
Amortization of intangibles, as a percentage of total revenues,
remained consistent at 0.4% for the second quarter of fiscal 2001
and the same period in fiscal 2000, and at 0.4% in the first
twenty-eight weeks of fiscal 2001 and the same period of fiscal
2000.
Total other expenses, as a percentage of revenues, decreased to
4.1% for the second quarter of fiscal 2001 from 4.6% during the
comparable period in fiscal 2000 and to 4.3% in the first twenty-
eight weeks of fiscal 2001 compared to 4.7% in the same period of
fiscal 2000. The decrease was due to lower interest expense and
an increase in other income relating to the Transformational
Payments from Burger King Corporation. See Note 9 Franchisee
Commitment.
The provision for income taxes was $490,000 for the second
quarter of fiscal 2001 versus $468,000 in the comparable period
in fiscal 2001. The provision for income taxes was $857,000 for
the first twenty-eight weeks of fiscal 2001 versus $776,000 in
the comparable period in fiscal 2001. The Company's effective
income tax rate was 60.4% for the first twenty-eight weeks of
fiscal 2001 versus 52.9% in the comparable period in fiscal 2000.
The high effective income tax rate for the first twenty-eight
weeks of fiscal 2001 and fiscal 2000 is mainly due to a large
portion of state taxes being based on criteria other than income.
For the second quarter of fiscal 2001, the Company reported net
income of $439,000 compared to net income of $467,000 for the
same period of fiscal 2000 and $563,000 in the first twenty-eight
weeks of fiscal 2001 compared to $692,000 in the same period of
fiscal 2000.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $1,034,000 at May
13, 2001, a decrease of $1,878,000 from the $2,912,000 at October
29, 2000. Principal uses of funds consisted of: (i) expenditures
for property and equipment ($3,343,000) (ii) net repayment of
long-term debt ($1,350,000) and (iii) purchase of 734,500 shares
of the Company's stock ($1,925,000). Principal sources of funds
consisted of those provided by operations ($5,192,000).
The Company's primary cash requirements in fiscal 2001 will be
capital expenditures in connection with the opening of new
restaurants, remodeling of existing restaurants, maintenance
expenditures, purchases of the Company's stock and the reduction
of debt under the Company's debt agreements. The Company's
capital expenditures for fiscal 2001 are expected to range from
$10,000,000 to $13,000,000. The Company expects to incur the
majority of the Burger King Early Renewal Program expenses in
fiscal 2001 - See Note 9. During fiscal 2001, the Company
anticipates opening three to four Burger King restaurants and two
to three full service restaurants. As of May 13, 2001 the Company
has opened one Burger King restaurant. The actual amount of the
Company's cash requirements for capital expenditures depends in
part on the number of new restaurants opened, whether the Company
owns or leases new units and the actual expense related to
remodeling and maintenance of existing units and the requirements
and timing of the Burger King Early Renewal Program.
On August 3, 1999 the Company completed the refinancing of its
existing debt with a financing package totaling $125,066,000,
consisting of a $76,000,000 revolving credit agreement and a
$49,066,000 mortgage facility, as described below. The revolving
credit agreement was executed with Chase Bank of Texas, as agent
for a group of six banks, providing for borrowings of up to
$76,000,000 with interest payable at the adjusted LIBOR rate plus
a contractual spread. The Company had $21,665,000 available under
its revolving credit agreement as of May 13, 2001. The revolving
credit agreement is collateralized by the stock of certain
subsidiaries of the Company, the junior subordinated note issued
by Bruegger's Corporation, certain interests in the Company's
franchise agreements with Brinker and Burger King Corporation and
substantially all of the Company's personal property not pledged
in the mortgage financing. The revolving credit agreement will
mature on October 31, 2002, at which time all amounts outstanding
thereunder are due.
The revolving credit agreement contains, among other provisions,
certain restrictive covenants including maintenance of certain
prescribed debt and fixed charge coverage ratios, limitations on
the incurrence of additional indebtedness, limitations on
consolidated capital expenditures, restrictions on the payment of
dividends (other than stock dividends) and limitations on the
purchase or redemption of shares of the Company's capital stock.
The $49,066,000 mortgage facility has 34 separate mortgage notes.
The term of each mortgage note is either 15 or 20 years. The
notes have fixed rates of interest of either 9.79% or 9.94%. The
notes require equal monthly interest and principal payments. The
Company used the proceeds of the mortgage facility to repay
indebtedness under its existing revolving credit agreement.
The mortgage notes are collateralized by a first mortgage and
security agreement on the real estate, improvements and equipment
on 19 of the Company's Chili's restaurants and 15 of the
Company's Burger King restaurants. The mortgage notes contain,
among other provisions, certain restrictive covenants including
maintenance of a consolidated fixed charge coverage ratio for the
financed properties.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The Company anticipates that its cash flows from operations,
together with amounts available under its revolving credit
agreement, will be sufficient to fund its planned internal
expansion and other internal operating cash requirements through
the end of fiscal 2001.
This report contains certain forward-looking statements,
including statements about the Company's development plans, that
involve a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially are the
following: the availability and cost of suitable locations for
new restaurants; the availability and cost of capital to the
Company; the ability of the Company to develop and operate its
restaurants; the hiring, training and retention of skilled
corporate and restaurant management and other restaurant
personnel; the integration and assimilation of acquired concepts;
the overall success of the Company's franchisors; the ability to
obtain the necessary government approvals and third-party
consents; and changes in governmental regulations, including
increases in the minimum wage.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Note 8 to the unaudited consolidated financial statements of the
Company included in Part I of this report is incorporated herein
by reference.
Item 2. Changes in Securities
None
Items 3. Defaults upon Senior Securities
None
Item 4 Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Quality Dining, Inc.
(Registrant)
______________________
By: /s/Jeanne M. Yoder
Vice President & Controller
(Principal accounting officer)
Date: June 29, 2001