SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
November 4, 1997 (October 20, 1997)
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Date of Report (Date of earliest event reported)
QUALITY DINING, INC.
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(Exact name of registrant as specified in its charter)
INDIANA 0-23420 35-1804902
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4220 EDISON LAKES PARKWAY
MISHAWAKA, INDIANA 46545
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(Address of principal executive offices)
Registrant's telephone number, including area code: (219) 271-4600
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Not Applicable
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On October 20, 1997, the Company's sold its bagel-related businesses to Mr.
Nordahl L. Brue, Mr. Michael J. Dressell and an entity controlled by them and
their affiliates. The sale includes the stock of Bruegger's Corporation and
the stock of all of the other bagel-related businesses. Terms of the
transaction include the repayment by Bruegger's Corporation of $16.0 million
of debt to the Company, less certain reductions of approximately $7.5
million. These reductions relate to transaction expenses and liabilities to be
retained by the Company. Other consideration includes the issuance by Bruegger's
Corporation of a junior subordinated note in the amount of $10.0 million to
the Company, $4.0 million in cash and the transfer of the 4,310,740 shares of
the Company's common stock owned by Messrs. Brue and Dressell, which will be
retired. The subordinated note will have an annual interest rate of 12% and
will mature in seven years. Interest will be accrued and added to the
principal amount of the note for the first three years and will be paid in
cash for the remaining life of the note. Prior to the transaction, Messrs. Brue
and Dressell were directors of the Company and owned approximately 25% of the
Company's common stock. In connection with the sale of the bagel-related
businesses, Mr. Nordahl L. Brue, Mr. Michael J. Dressell and Mr. David T. Austin
have resigned from the Company's Board of Directors. The sale price was
determined by negotiations between the purchasers and the Company.
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information.
QUALITY DINING, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
The following unaudited pro forma consolidated balance sheet reflects the
disposition by the Company of its bagel-related businesses as if it had
occurred on August 3, 1997. Such pro forma information is based upon the
historical balance sheets of the Company and its bagel-related businesses as of
August 3, 1997, giving effect to the disposition and the pro forma adjustments
set forth in the accompanying notes to the pro forma consolidated balance
sheet. This pro forma consolidated balance sheet should be read in conjunction
with the pro forma consolidated statements of operations of the Company and the
historical financial statements and notes thereto of the Company filed in
other Securities and Exchange Commission fillings.
This unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual consolidated financial position of the Company
would have been at August 3, 1997, nor does it purport to
represent the future consolidated financial position of the Company.
Historical Pro forma
-------------------------- -----------------------
Quality Bagel related
Dining, Inc. businesses Adjusted
August 3, 1997 August 3, 1997 Adjustments Consolidated
-------------- -------------- ----------- ------------
ASSETS
Current assets:
Cash and cash
equivalents $ 1,625 $ $ 2,841 (1) $ 4,466
Accounts receivable
(less allowance for bad
debts of $673 in 1997) 6,859 4,498 2,361
Notes receivable 1,198 1,198 6,000 (2) 7,198
1,198 (3)
Refundable income taxes 2,390 2,390
Inventories 3,383 1,575 1,808
Deferred income taxes 7,579 7,579
Other current assets 3,682 1,127 2,555
-------- ------- ------- -------
Total current assets 26,716 8,398 10,039 28,357
-------- ------- ------- -------
Property and
equipment, net 183,045 36,039 147,006
-------- ------- ------- -------
Other assets:
Franchise fees and
development costs, net 10,191 10,191
Goodwill, net 9,260 9,260
Trademarks, net 12,825 97 12,728
Pre-opening and
non-competition
agreements, net 2,029 680 1,349
Liquor licenses, net 3,272 3,272
Other 1,110 47 1,063
-------- ------- ------- -------
Total other assets 38,687 824 37,863
-------- ------- ------- -------
Total assets $ 248,448 45,261 10,039 213,226
======== ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt $ 141,106 (141,106)(10)
Current portion of
capitalized lease and
non-competition
obligations 532 35 497
Accounts payable 7,490 3,136 4,354
Accrued liabilities 22,614 11,230 6,285 (5) 23,769
6,100 (4)
------- ------- ------- -------
Total current liabilities 171,742 14,401 (128,721) 28,620
Long-term debt (14,000)(6) 127,106
141,106 (10)
Capitalized lease and
non-competition
obligations, principally
to related parties, less
current portion 6,553 315 6,238
Deferred income taxes 5,112 5,112
------- ------- ------- -------
Total liabilities 183,407 14,716 (1,615) 167,076
======= ======= ======= =======
Stockholders' equity:
Preferred stock, without
par value: 5,000,000
shares authorized; none
issued Common stock,
without par value:
50,000,000 shares
authorized; 16,929,799
(proforma 12,618,295)
shares issued. 28 28
Additional paid-in
capital 258,243 (21,823)(7) 236,420
Retained earnings
(deficit) (192,980) 30,545 30,545 (9) (190,048)
2,932 (8)
------- ------- ------- -------
65,291 30,545 11,654 46,400
Less treasury stock,
at cost, 20,000 shares (250) (250)
------- ------- ------- ------
Total stockholders'
equity 65,041 30,545 11,654 46,150
Total liabilities and ------- ------- ------- -------
stockholders' equity $ 248,448 45,261 10,039 213,226
======= ======= ======= =======
See accompanying notes to pro forma consolidated balance sheet.
Quality Dining, Inc.
Notes to Pro Forma Consolidated Balance Sheet
As of August 3, 1997
(Unaudited)
(1) Reflects the receipt of $16.8 million less $14.0 million used to pay down
borrowings under the Company's revolving credit agreement.
(2) Represents the $10.0 million dollar note received in the sale net of a
$4.0 million reserve.
(3) Represents bagel-related business assets retained by the Company.
(4) Represents accruals for transaction costs and other bagel-related business
liabilities.
(5) Represents bagel-related business liabilities retained by the Company.
(6) Reflects payments against the Company's revolving credit agreement.
(7) Reflects the reduction of additional paid in capital for the 4,310,740
shares received and retired. The shares were valued at $5 1/16, the
Company's stock price on the date of the transaction.
(8) Consolidation of retained earnings of Mohold, Inc. which was consolidated
after August 3, 1997 and sold as part of the transaction.
(9) Represents retained earnings of the bagel-related businesses retained by
the Company.
(10 In accordance with Issue No. 86-30 of the FASB Emerging Issues Task Force
("ETIF"), the Company classified the entire amount outstanding under its
revolving credit facility at August 3, 1997 as current debt. Issue
No. 86-30 of the FASB Emerging Issues Task Force required the debt to be
classified as current because it was possible that the Company would not
meet the financial covenants under its existing revolving credit
agreement at year end, October 26, 1997, unless the bank credit agreement
was further amended. On October 9, 1997 the Company negotiated an
amendment in the financial covenants through the maturity of the loan,
April 26, 1999, and therefore has reclassified the debt as long-term.
QUALITY DINING, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Forty Weeks ended August 3, 1997
(Unaudited)
The following unaudited pro forma consolidated statement of operations reflects
the disposition by the Company of all its bagel-related businesses as if it had
occurred on October 30, 1995. Such pro forma information is based upon the
historical results of operations of the Company and its bagel-related businesses
for the forty weeks ended August 3, 1997 giving effects to the disposition and
the pro forma adjustments set forth in the accompanying notes to pro forma
consolidated statements of operations. This pro forma consolidated statement
of operations should be read in conjunction with the pro forma consolidated
balance sheet of the Company and the historical financial statements and notes
thereto of the Company filed in other Securities and Exchange Commission
fillings.
This unaudited pro forma consolidated statement of operations is not necessarily
indicative of what the actual consolidated results of operations of the
Company would have been assuming the disposition had been
completed as set forth above, nor does it purport to represent the future
consolidated financial operations of the Company for future periods.
Historical Pro forma
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Bagel-related
Quality Dining, Inc. Businesses
Forty weeks Ended Forty weeks ended Adjusted
August 3, 1997 August 3, 1997 Adjustments Consolidated
Revenues: ------------- -------------- ----------- ------------
Restaurant sales:
Grady's American Grill $ 66,821 $ $ $ 66,821
Burger King 56,225 56,225
Bruegger's Bagel Bakery 47,892 47,892
Chili's Grill & Bar 41,340 41,340
Italian Dining Division 9,481 9,481
------- -------
Total restaurant sales 221,759 47,892 173,867
Franchise related revenue 9,190 9,190
------- ------- -------
Total revenues 230,949 57,082 173,867
------- ------- -------
Operating expenses:
Restaurant operating expenses:
Food and beverage 67,637 15,905 51,732
Payroll and benefits 67,137 16,141 50,996
Depreciation and
amortization 13,401 4,421 8,980
Other operating expenses 56,900 14,972 41,928
------- ------- -------
Total restaurant operating
expenses 205,075 51,439 153,636
General and administrative 23,473 12,590 10,883
Amortization of intangibles 2,828 1,951 877
Impairment of assets 185,000 185,000
Store closing costs 15,513 15,513
Franchise operating
partner expense 2,066 2,066
------- ------- ________
Total operating expenses 433,955 268,559 165,396
------- ------- --------
Operating income (loss) (203,006) (211,477) 8,471
------- -------- --------
Other income (expense):
Interest expense (7,578) (29) 1,015(4) (6,534)
Gain (loss) on sale of
property and equipment 539 (20) 559
Interest income 158 30 128
Other income (expense), net 101 (39) 140
------- -------- ------- --------
Total other income (expense)
net (6,780) (58) 1,015 (5,707)
------- -------- ------- --------
Income (loss) before
income taxes (credit) (209,786) (211,535) 1,015 2,764
Income taxes (credit) (5,703) 6,706(2) 1,003
------- ------- ------- --------
Net income (loss) $ (204,083) $(211,535) $ (5,691) $ 1,761
======= ======= ======= ========
Net income (loss) per share $ (12.07) $ 0.14
======== ========
Weighted average shares
outstanding 16,910 4,311(3) 12,599
======== ======= ========
QUALITY DINING, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year Ended October 27, 1996
(Unaudited)
The following unaudited pro forma consolidated statement of operations reflects
the disposition by the Company of all its bagel-related businesses as if it
had occurred on October 30, 1995. Such pro forma information is based upon the
historical results of operations of the Company and its bagel-related
businesses for the fiscal year ended October 27, 1996 giving effects to the
disposition and the pro forma adjustments set forth in the accompanying notes to
pro forma consolidated statements of operations. This pro forma consolidated
statement of operations should be read in conjunction with the pro forma
consolidated balance sheet of the Company and the historical financial
statements and notes thereto of the Company filed in other Securities and
Exchange Commission fillings.
This unaudited pro forma consolidated statement of operations is not necessarily
indicative of what the actual consolidated results of operations of the Company
would have been assuming the disposition had been completed as set forth above,
nor does it purport to represent the future consolidated financial operations
of the Company for future periods.
Historical Pro forma
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Bagel-related
Quality Dining, Inc. Businesses
Fiscal Year Ended Fiscal Year ended Adjusted
October 27, 1996 October 27, 1996 Adjustments Consolidated
------------------ ---------------- ------------ ------------
Revenues:
Restaurant sales:
Grady's American Grill $ 85,101 $ $ $ 85,101
Burger King 70,987 70,987
Bruegger's Bagel Bakery 25,967 25,967
Chili's Grill & Bar 41,913 41,913
Italian Dining Division 8,388 8,388
------- ------- -------
Total restaurant sales 232,356 25,967 206,389
Franchise related revenue 5,274 5,274
------- ------- -------
Total revenues 237,630 31,241 206,389
------- ------- -------
Operating expenses:
Restaurant operating expenses:
Food and beverage 72,201 8,130 64,071
Payroll and benefits 66,176 7,848 58,328
Depreciation and
amortization 11,635 2,282 9,353
Other operating
expenses 52,452 5,394 47,058
Total restaurant ------- ------- -------
operating expenses 202,464 23,654 178,810
General and administrative 12,047 2,272 9,775
Amortization of
intangibles 2,537 1,383 1,154
Restructuring and
integration costs 9,938 8,000 1,938
------- ------- -------
Total operating expenses 226,986 35,309 191,677
------- ------- -------
Operating income (loss) 10,644 (4,068) 14,712
------- ------- -------
Other income (expense):
Interest expense (6,340) 972(1) (5,368)
Gain on sale of property
and equipment 4 4
Interest income 206 206
Other income (expense), net 154 2 152
------ ------ ------ -------
Total other expense, net (5,976) 6 972 (5,010)
------ ------ ------ -------
Income (loss) before
income taxes (credit) 4,668 (4,062) 972 9,702
Income taxes (credit) 1,998 57 1,580(2) 3,521
------ ------ ------ ------
Net income (loss) $ 2,670 $ (4,119) $ (608) $ 6,181
====== ====== ====== ======
Net income (loss)
per share $ 0.23 $ 0.62
====== ======
Weighted average shares
outstanding 11,855 (1,835)(3) 10,020
====== ====== ======
Quality Dining, Inc.
Notes to Pro Forma Consolidated Statement of Income
For the Forty Weeks Ended August 3, 1997
and the Fiscal year ended October 26, 1997
(Unaudited)
(1) Represents a decrease in interest expense (6.94% weighted average interest
rate) attributable to decreased borrowings ($14 million) under the
Company's revolving credit agreement.
(2) To apply federal and state income taxes to the net income assuming effective
tax rate of 36.3% for the Company after excluding the bagel-related
businesses.
(3) Reflects the retirement of 4,310,740 shares received in the disposition of
the bagel-related businesses.
(4) Represents a decrease in interest expense (7.25% weighted average interest
rate) attributable to decreased borrowings ($14 million) under the Company's
revolving credit agreement.
(c) Exhibits
The exhibits set forth on the Index to Exhibits on page 9 are incorporated
herein by reference.
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.
By: /s/ William W. Moreton
Its: Executive Vice President, Treasurer and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
No. Description
1* (a) Share Exchange Agreement by and among Quality Dining, Inc.,
Bruegger's Corporation, Nordahl L. Brue and Michael J. Dressell,
dated as of September 3, 1997.
2* (b) Agreement and Plan of Merger, by and among Quality Dining, Inc.,
Bagel Disposition Corporation and LETHE, LLC, dated as of
September 3, 1997.
3 Second Amendment, dated as of October 9, 1997,
between the Registrant, GAGHC, Inc., and BF Holding, inc.,
as borrowers, and Texas Commerce Bank National Association,
as agent, NBD Bank, N.A., LaSalle National Bank, NationsBank,
N.A. (South), SunTrust Bank, Central Florida, N.A., The Northern
Trust Company and Key Ban National Association.
(a) The copy of this Exhibit filed as exhibit number 1 to Amendment No. 5 of
Schedule 13D filed by Nordahl L. Brue, Michael J. Dressell, Steven P.
Schonberg and David T. Austin, dated September 4, 1997, is incorporated
herein by reference.
(b) The copy of this Exhibit filed as exhibit number 2 to Amendment No. 5 of
Schedule 13D filed by Nordahl L. Brue, Michael J. Dressell, Steven P.
Schonberg and David T. Austin, dated September 4, 1997, is incorporated
herein by reference.
* Schedules to exhibits 10-AN and 10-AO have been omitted but will be provided
to the Securities and Exchange Commission upon request.