FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
JUNE 13, 1996 (JUNE 7, 1996)
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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)
3820 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 June 7, 1996, Quality Dining, Inc. (the "Registrant") acquired
Bruegger's Corporation ("Bruegger's") by means of the merger of BAC, Inc., a
wholly owned subsidiary of the Registrant, into Bruegger's. As a result of the
merger, Bruegger's became a wholly owned subsidiary of the Registrant. The
acquisition was made pursuant to an Agreement and Plan of Merger which resulted
from arms-length negotiation. As of June 6, 1996, Bruegger's owned and operated
53 retail bagel bakeries (the "Company-Owned Bakeries") and franchised an
additional 279 retail bagel bakeries (the "Franchised Bakeries") in 31 states.
Of the 279 Franchised Bakeries, 21 were operated by the Registrant (the
"Registrant-Owned Bakeries"). The Registrant will continue to operate the
Company-Owned Bakeries and Registrant-Owned Bakeries as retail bagel bakeries,
and will continue to franchise retail bagel bakeries.
Under the terms of the merger, the shareholders of Bruegger's common
stock received approximately 5,142,147 shares of the Registrant's common stock,
and the shareholders of Bruegger's Class A Cumulative Convertible Preferred
Stock received up to 141,450 shares of the Registrant's Series A Convertible
Cumulative Preferred Stock which are convertible until September 5, 1996 into an
aggregate of up to 399,299 shares of the Registrant's common stock. All of such
shares of the Registrant's stock were registered on a Registration Statement on
Form S-4 (Registration No. 333-2050). Prior to the merger, Nordahl L. Brue and
Michael J. Dressell owned approximately 84% of the outstanding shares of
Bruegger's common stock.
Daniel B. Fitzpatrick, the President and Chief Executive Officer of
the Registrant, has served on the Board of Directors of Bruegger's since October
1995. Pursuant to the Agreement and Plan of Merger, Messrs. Brue and Dressell
and Stephen A. Finn, the President and Chief Executive Officer of Bruegger's,
became directors of the Registrant and Mr. Brue became the Co-Chairman of the
Registrant. Mr. Finn will continue to serve as the President and Chief
Executive Officer of Bruegger's. The Registrant has also agreed to provide
Messrs. Brue and Dressell certain registration rights with respect to the
Registrant's common stock issued to them in the merger.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
The following financial statements which have not been previously
filed are incorporated herein by reference from pages 5 through 9
hereto: Unaudited consolidated financial statements of Bruegger's
Corporation and subsidiaries for the quarter ended March 19, 1996.
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(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The exhibits set forth on the Index to Exhibits on page 10 are
incorporated herein by reference.
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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.
Dated: June 13, 1996 By: /s/ Michael G. Sosinski
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Michael G. Sosinski
Chief Financial Officer
and Treasurer
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BRUEGGER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE 12 WEEKS ENDED
(Unaudited)
March 19, March 21,
1996 1995
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Operating Revenues:
Restaurant sales 4,886,700 3,106,800
Franchise related income 1,383,200 867,700
Commissary revenue 1,216,777 958,600
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Total operating revenues 7,486,677 4,933,100
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Operating Costs and Expenses:
Cost of restaurant sales 1,674,700 1,142,500
Restaurant operating expenses:
Payroll & other employee expenses 1,776,000 1,008,700
Controllable expenses 697,100 359,200
Occupancy 524,700 283,400
Depreciation 320,900 149,600
Amortization of pre-opening costs 97,700 88,400
Commissary related expenses 1,104,291 874,400
Depreciation and amortization - other 172,433 107,496
Selling general & administrative 1,593,042 1,159,180
Non recurring expenses 950,000 -
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Total operating costs and expenses 8,910,866 5,172,876
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Loss from operations (1,424,189) (239,776)
Interest expense (291,460) (113,461)
Interest income 12,507 876
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Loss before income taxes (1,703,142) (352,361)
State & local income taxes 7,200 4,400
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Net loss (1,710,342) (356,761)
Accumulated deficit, beginning of period (8,341,650) (2,884,303)
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Accumulated deficit, end of period ($10,051,992) ($3,241,064)
============ ==============
See notes to consolidated financial statements
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BRUEGGER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 19,1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $780,935
Franchise and other receivables 771,499
Inventories 513,772
Prepaid expenses and other current assets 604,893
Due from related parties 113,700
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Total current assets 2,784,799
PROPERTY AND EQUIPMENT, net 17,152,579
OTHER ASSETS 145,320
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Total assets $20,082,698
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $12,196,001
Subordinated debt and accrued interest to stockholders 703,890
Accounts payable 1,705,528
Accrued expenses 2,998,671
Deferred revenue 860,000
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Total current liabilities 18,464,090
REDEEMABLE, CONVERTIBLE PREFERRED STOCK, $100 par value; 9,690,000
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cumulative, convertible Class A: 250,000 shares authorized; 166,200 shares
subscribed; 96,900 shares issued and outstanding
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.001 par value; 5,000,000 shares authorized;
3,965,000 shares issued and outstanding 3,965
Additional paid-in-capital 1,976,635
Accumulated deficit (10,051,992)
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Total stockholders' equity (deficiency) (8,071,392)
Total liabilities and stockholders' equity $20,082,698
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See notes to consolidated financial statements
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BRUEGGER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12 WEEKS ENDED
(Unaudited)
March 19, March 21,
1996 1995
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Cash flows from operating activities:
Net loss ($1,710,342) ($356,761)
Adjustments to reconcile net loss to net cash provided/(used) in
operating activities:
Depreciation and amortization 591,033 345,496
Changes in operating assets and liabilities
Franchise and other receivables (172,940) (163,477)
Inventories (85,757) (27,458)
Prepaid expenses and other current assets 83,935 (148,886)
Other assets 83,169 225,444
Amounts payable 414,833 (327,501)
Other liabilities 117,237 (73,163)
Deferred revenue 205,000 -
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Net cash used in operating activities (473,832) (526,306)
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Cash flows from investing activities:
Purchases of property and equipment (3,852,852) (1,846,480)
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Net cash used for investing activities (3,852,852) (1,846,480)
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Cash flows from financing activities:
Net increase in line of credit 3,850,000 653,000
Net increase in subordinated debt 13,118 7,755
Proceeds from issuance of preferred stock 625,000 825,000
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Net cash provided from financing activities 4,488,118 1,485,755
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Net increase (decrease) in cash 161,434 (887,031)
Cash and cash equivalents - beginning of period 619,501 2,002,482
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Cash and cash equivalents - end of period $780,935 $1,115,451
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Supplemental cash flow information:
Cash paid during the periods for:
Interest $219,610 $126,908
Income taxes 7,200 4,400
See notes to consolidated financial statements
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BRUEGGER'S CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 19, 1996
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
Bruegger's Corporation and subsidiaries (collectively "Bruegger's" or the
"Company") develops and operates a chain of retail fresh bagel stores in the
United States, with 39 Company-owed and 246 franchised units as of March 19,
1996. Included in the franchised units are franchisees owned, in part, by the
majority shareholders of Bruegger's (the "Affiliated Franchisees") that operate
142 units as of March 19, 1996. The Affiliated Franchisees are not included in
the consolidated financial statements of Bruegger's Corporation and
subsidiaries.
On February 21, 1996, the Company entered into an Agreement and Plan of Merger
with Quality Dining, Inc. See Note 4 for further discussion of this transaction.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bruegger's
Corporation and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principals for interim
financial reporting. 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 twelve
(12) week period ended March 19, 1996 are not necessarily indicative of the
results that may be expected for the 53-week year ending December 31, 1996.
These unaudited consolidated financial statements should be read in conjunction
with the Company's audited financial statements for the fiscal year ended
December 26, 1995 which are included in a Registration Statement on Form S-4
filed with the Securities and Exchange Commission by Quality Dining, Inc. on
April 19, 1996.
3. LONG - TERM DEBT
On December 23, 1994, the Company entered into a $10,000,000 revolving credit
agreement (the "Agreement") with a bank, in order to refinance existing debt
with the same bank and finance the Company's ongoing development of stores. The
Agreement bore interest at the bank's base rate plus
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BRUEGGER'S CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 19, 1996
(UNAUDITED)
a specified percentage driven by the Company's leverage ratio. Borrowings
outstanding under the Agreement were secured by certain of the following: 1)
assets of the Company, 2) assignments of leases and leasehold mortgages, 3)
assignment of franchise agreements and franchise payments, 4) trademark and
security agreements, and 5) stock of the Company.
On February 15, 1996, the Company amended the existing Agreement (the "Amended
Agreement"), effectively increasing the availability of borrowings to
$15,000,000 in order to refinance the existing debt as described above and
continue funding the Company's ongoing development. The amount outstanding is
personally guaranteed by the majority shareholders of the Company in an amount
not to exceed $5,000,000, in the aggregate, and is secured by substantially the
same collateral as under the Agreement. Borrowings under the Amended Agreement
bears interest at the bank's base rate plus 1/2% (8.75% at March 19, 1996).
The Company is required under the Amended Agreement to maintain certain
financial ratios. Additionally, the Amended Agreement contains a clause which
prohibits the prepayment of the subordinated debt to stockholders. On March 5,
1996, the Agreement was further amended to mature on the earlier of the
consummation of the Agreement and Plan of Merger described in Note 4 or January
1, 1997.
In May 1996, the Company again amended the Agreement to increase the
availability under the line of credit to $17,000,000.
4. PENDING MERGER
On February 21, 1996, the Company entered into an Agreement and Plan of Merger
(the "Merger") whereby the Company will be merged with a subsidiary of Quality
Dining, Inc. ("QDI"), a multi-unit restaurant operator. QDI operates five
distinct restaurant concepts and among those concepts, operated 18 Bruegger's
Bagel Bakeries as of February 18, 1996. To effect the Merger, each issued and
outstanding share of the Company's common stock will be converted into 1.2931
shares of common stock of QDI. In addition, each issued and outstanding share
of the Company's cumulative convertible preferred stock will be converted into
one share of convertible cumulative preferred stock of QDI. QDI will also
convert all outstanding options of the Company into stock options of QDI.
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INDEX TO EXHIBITS
Page No.
Exhibit in this
No. Description Filing
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2-E (1) Agreement and Plan of Merger, dated
as of February 21, 1996, among the
Registrant, BAC, Inc. and
Bruegger's Corporation....................
4-B (2) Terms of Series A Convertible
Cumulative Preferred Stock, as
contained in Section 5.6 of the
Registrant's Restated Articles of
Incorporation, as amended to date.........
27 Financial Data Schedule...................
99-A Press Release of Registrant dated
June 7, 1996..............................
99-B Press Release of Registrant dated
June 7, 1996..............................
(1) The copy of this exhibit filed as the same exhibit number to the Company's
Registration Statement on Form S-4 (Registration No. 333-2050) is
incorporated herein by reference.
(2) The copy of this exhibit filed as Annex B to Exhibit 2-E filed herewith is
incorporated herein by reference.
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