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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 FEBRUARY 16, 1997
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 0-4377
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SHONEY'S, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TENNESSEE 62-0799798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1727 ELM HILL PIKE, NASHVILLE, TN 37210
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 391-5201
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 .
As of March 28, 1997, there were 48,551,609 shares of Shoney's, Inc.,
$1 par value common stock outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(Unaudited)
February 16, October 27,
1997 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 9,930,552 $ 13,968,882
Notes and accounts receivable, less allowance
for doubtful accounts of $1,556,000 in 1997
and $1,504,000 in 1996 12,792,619 13,012,160
Inventories 48,734,390 44,248,060
Deferred income taxes and other current assets 44,889,326 38,496,158
Net assets held for disposal 50,932,699 16,605,300
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Total current assets 167,279,586 126,330,560
Property, plant and equipment, at cost 804,651,168 865,150,325
Less accumulated depreciation and amortization (312,857,304) (317,243,085)
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Net property, plant and equipment 491,793,864 547,907,240
Other assets:
Goodwill (net of accumulated amortization of
$1,561,000 in 1997 and $622,000 in 1996) 52,781,094 57,021,411
Deferred charges and other intangible assets 6,374,063 7,289,488
Other assets 8,292,438 8,532,742
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Total other assets 67,447,595 72,843,641
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$ 726,521,045 $ 747,081,441
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 43,048,512 $ 44,746,056
Federal and state income taxes 3,614,019
Other accrued liabilities 102,320,242 110,294,109
Reserve for litigation settlement due within one year 22,806,923 22,887,523
Debt and capital lease obligations
due within one year 60,087,441 33,823,795
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Total current liabilities 228,263,118 215,365,502
Long-term senior debt and
capital lease obligations 360,642,132 381,182,625
Zero coupon subordinated convertible debentures 97,843,861 95,357,650
Reserve for litigation settlement 10,340,000 16,000,000
Deferred credits:
Income taxes 20,658,295 17,923,295
Income and other liabilities 21,468,283 20,724,789
Shareholders' equity (deficit):
Common stock, $1 par value: authorized
200,000,000 shares; issued 48,551,609
in 1997 and 48,458,231 in 1996 48,551,609 48,458,231
Additional paid-in capital 114,416,938 113,889,253
Unrealized gain on securities available for sale 169,917 243,481
Retained earnings (accumulated deficit) (175,833,108) (162,063,385)
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Total shareholders' equity (deficit) (12,694,644) 527,580
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$ 726,521,045 $ 747,081,441
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See notes to consolidated condensed financial statements
(2)
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SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(Unaudited)
Sixteen Weeks Ended
February 16, February 18,
1997 1996
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Revenues
Net sales $ 356,743,001 $ 292,782,922
Franchise fees 4,354,776 6,309,927
Other income 2,192,556 1,084,244
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363,290,333 300,177,093
Costs and expenses
Cost of sales 328,274,313 266,468,079
General and administrative expenses 25,035,929 20,139,394
Impairment write down of long-lived assets 17,612,067
Interest expense 13,984,747 10,817,854
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Total costs and expenses 384,907,056 297,425,327
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Income (loss) from continuing operations before income taxes (21,616,723) 2,751,766
Provision for (benefit from) income taxes (7,847,000) 1,123,000
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Income (loss) from continuing operations (13,769,723) 1,628,766
Income from discontinued operations, net of income taxes 397,816
Gain on sale of discontinued operations, net of income taxes 22,080,375
------------- -------------
Net income (loss) $ (13,769,723) $ 24,106,957
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Earnings per common share
Primary:
Income (loss) from continuing operations $ (0.28) $ 0.04
Income from discontinued operations 0.00 0.01
Gain on sale of discontinued operations 0.00 0.53
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Net income (loss) $ (0.28) $ 0.58
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Fully diluted:
Income (loss) from continuing operations $ (0.28) $ 0.06
Income from discontinued operations 0.00 0.01
Gain on sale of discontinued operations 0.00 0.47
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Net income (loss) $ (0.28) $ 0.54
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Weighted average shares outstanding
Primary 48,538,025 41,635,639
Fully diluted 48,538,025 46,845,459
Common shares outstanding 48,551,609 41,622,264
Dividends per share
See notes to consolidated condensed financial statements.
(3)
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SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Sixteen Weeks Ended
February 16, February 18,
1997 1996
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Operating activities
Net income (loss) $ (13,769,723) $ 24,106,957
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Income from discontinued operations, net of taxes (397,816)
Gain on sale of discontinued operations, net of taxes (22,080,375)
Depreciation and amortization 16,910,219 13,389,585
Amortization of deferred charges and other
non-cash charges 3,914,916 3,360,552
Impairment write down of long-lived assets 17,612,067
Change in deferred income taxes 2,735,000 2,250,000
Changes in operating assets and liabilities (22,980,917) (15,999,899)
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Net cash provided by continuing operating activities 4,421,562 4,629,004
Net cash used by discontinued operating activities (655,622)
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Net cash provided by operating activities 4,421,562 3,973,382
Investing activities
Cash required for property, plant and equipment (14,923,660) (31,026,216)
Proceeds from disposal of property, plant
and equipment 6,644,125 2,077,441
Proceeds from disposal of discontinued operations 51,279,601
Cash required for other assets (52,885) (4,971,170)
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Net cash (used) provided by investing activities (8,332,420) 17,359,656
Financing activities
Payments on long-term debt and
capital lease obligations (6,974,985) (51,397,209)
Proceeds from long-term debt 27,000,000
Net proceeds from short-term borrowings 12,672,000 9,534,000
Payments on litigation settlement (5,740,600) (5,940,350)
Cash required for debt issue costs (239,604) (27,742)
Proceeds from exercise of employee stock options 155,717 334,402
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Net cash used by financing activities (127,472) (20,496,899)
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Change in cash and cash equivalents $ (4,038,330) $ 836,139
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See notes to consolidated condensed financial statements.
(4)
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SHONEY'S, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
February 16, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q. As a result,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The Company,
in management's opinion, has included all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the results of
operations. Certain reclassifications have been made in the consolidated
condensed financial statements to conform to the 1997 presentation. Operating
results for the sixteen week period ended February 16, 1997 are not necessarily
indicative of the results that may be expected for all or any balance of the
fiscal year ending October 26, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Shoney's, Inc. Annual Report on Form 10-K for the year ended October 27, 1996.
NOTE 2 - IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), at
the beginning of the first quarter of fiscal 1997. Based on a review of the
Company's restaurants which had incurred operating losses or negative cash
flows during fiscal 1996 and a review of the cash flows from individual
restaurant properties rented to others ("rental properties"), the Company
determined that certain of its restaurant assets and rental properties were
impaired and recorded a loss to write them down to their estimated fair values.
The charge related to the initial adoption of SFAS 121 was $17.6 million ($11.2
million, net of tax). Approximately $11.2 million of the asset impairment write
down related to properties that are held for disposal and approximately $6.4
million related to assets to be held and used in the Company's operations. At
February 16, 1997, the value of the 82 properties to be disposed of was $50.9
million and are reflected on the balance sheet as net assets held for disposal.
In connection with the Company's market rationalization program, which involves
a strategic shift to focus resources for the Company's restaurant operations
into its core 13 state southeastern market, the Company announced on January
21, 1997, that it was closing approximately 55 under-performing restaurants and
would sell those assets to reduce the Company's bank debt. In addition to the
55 under-performing restaurants, which were targeted for immediate closure, the
Company identified 27 other restaurant properties that it intends to sell,
however, the Company has elected to operate these restaurants until buyers are
found. During the first quarter of 1997, these restaurants had revenues of
$18.6 million and reported operating losses before interest and taxes of $(3.6)
million. Under the provisions of SFAS 121, depreciation and amortization are
not recorded during the period in which assets are being held for disposal.
Management's projections of the expected future undiscounted cash flows from
these restaurants indicated that such cash flows were insufficient to recover
the asset carrying value; therefore, such carrying values were written down to
fair values less estimated cost to sell. Under SFAS 121, the potential
impairment evaluation is made on an individual restaurant basis and involves
considerable management judgment as
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to the expected future sales and profitability of each restaurant. Actual
results of these restaurants will likely differ from management's estimates.
NOTE 3 - ACQUISITIONS
As of September 9, 1996, the Company completed the acquisition of substantially
all the assets of TPI Enterprises, Inc. ("TPI") which operated 176 Shoney's
Restaurants and 67 Captain D's restaurants. The purchase price was $164.4
million consisting of the issuance of 6,785,114 shares of the Company's common
stock valued at $59.1 million, the assumption of $46.9 million of TPI 8.25%
convertible subordinated debentures, the assumption or satisfaction of all
remaining TPI debt of approximately $59.1 million, transaction costs of $3.0
million and net of cash acquired of $3.7 million. The Company borrowed $100
million under a bridge loan to finance the acquisition and to provide
additional working capital for the Company. Approximately $43 million of the
bridge loan proceeds were utilized to retire TPI debt at the date of closing.
The acquisition has been accounted for as a purchase and the results of
operations acquired from TPI have been included in the Company's consolidated
financial statements since September 9, 1996. The purchase price was allocated
based on estimated fair values at the date of acquisition and resulted in an
excess of purchase price over net assets acquired (goodwill) of approximately
$50.6 million, which is being amortized on a straight line basis over 20 years.
This allocation was based on preliminary estimates and may be revised at a
later date.
At February 16, 1997, the Company had closed 23 of the acquired Shoney's
Restaurants, two commissary and distribution facilities that had provided
TPIR's restaurants with food and supplies, and the former TPI corporate
headquarters in West Palm Beach, Florida. The Company closed 14 of the acquired
Shoney's Restaurants during the first quarter of 1997 and plans to close an
additional 11 of the acquired Shoney's restaurants in connection with the
Company's strategic focus of its restaurant operations in its core 13 state
southeastern market. The majority of these restaurants had been targeted for
closure during the Company's due diligence process as under-performing units.
These units are included in the 55 stores which the Company announced would be
closed during the first quarter of 1997 (See Note 2). Costs to exit these
businesses were accrued as liabilities assumed in the purchase accounting and
consisted principally of severance pay for certain employees, costs for leased
property and equipment, and the accrual of future minimum lease obligations in
excess of anticipated sublease rental income. The total amount of such
liabilities included in the purchase price allocation was approximately $21
million. The Company plans to dispose of the owned property and equipment
either by sale or lease of the property. For leased property and equipment, the
Company will seek to terminate the leases or to enter into subleases or lease
assignments covering the remaining term of the leases.
NOTE 4 - DISCONTINUED OPERATIONS AND RESTRUCTURING
In January 1995, the Company's Board of Directors announced a reorganization
designed to improve the performance and growth of the Shoney's Restaurant
concept. The reorganization included the decision to divest certain non-core
lines of business including Lee's Famous Recipe, Pargo's and Fifth Quarter
restaurants, as well as Mike Rose Foods, Inc., a private label manufacturer of
food products. In July 1996
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the Company made a decision to retain the Pargo's and Fifth Quarter restaurants
and to combine them with its BarbWire's concept to form a casual dining group.
The Company sold its Lee's Famous Recipe Chicken restaurants, in October 1995,
to RTM Restaurant Group for $24.5 million cash and a $4 million promissory
note. The transaction removed the Company from the fast-food chicken line of
business. The promissory note is due in monthly installments over five years,
is guaranteed by RTM, Inc. and is further secured by perfected security
interests in the Lee's Famous Recipe trademarks and in the franchise license
agreements of Lee's Famous Recipe.
The Company sold Mike Rose Foods, Inc. ("MRF") to Levmark Capital Corporation
for $55 million in cash in the first quarter of 1996. The transaction was
effected through the sale of all issued and outstanding capital shares of MRF
and resulted in a gain on sale of discontinued operations of $22.1 million, net
of income taxes. The Company also entered into a five year supply agreement
through which MRF will continue to be the supplier of salad dressings,
mayonnaise, sauces, condiments, breadings, and a variety of food products for
all company-owned restaurants. The supply agreement contains minimum purchase
commitments generally equal to the actual quantities of various products the
Company purchased from MRF during fiscal 1994 for company-owned restaurants.
For financial reporting purposes, the results of operations and cash flows of
MRF have been treated as discontinued operations in the accompanying financial
statements and are presented net of any related income tax expense.
NOTE 5 - EARNINGS PER SHARE
Primary earnings per share have been computed using the weighted average number
of shares of common stock and common stock equivalents outstanding during each
period presented. Common stock equivalents include all dilutive outstanding
stock options. The fully diluted earnings per share calculation includes the
assumed conversion of the Company's subordinated convertible debentures. This
calculation adjusts earnings for the interest that would not be paid if such
debentures were converted. The primary and fully diluted earnings per share for
the first quarter of 1997 were computed using the weighted average number of
shares of common stock and common stock equivalents outstanding during the
quarter. No consideration was given to the convertible debentures for the first
quarter of 1997 because the effect was anti-dilutive. The fully diluted
earnings per share from continuing operations for the first quarter of 1996 are
anti-dilutive, but have been presented on a fully diluted basis because fully
diluted net income per share is less than primary net income per share.
NOTE 6 - INCOME TAXES
Income taxes for the sixteen week periods ended February 16, 1997 and February
18, 1996 were provided based on the Company's estimate of its effective tax
rates (36.3% and 39.8%) for the entire respective fiscal years.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
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Significant components of the Company's deferred tax assets and liabilities as
of October 27, 1996 are as follows:
Deferred tax assets:
Reserve for lawsuit settlement $14,874,478
Reserve for self-insurance 20,142,213
Reserve for restructuring 6,022,886
Amortization of intangibles 5,296,270
Net operating loss, contribution
and tax credit carryforwards 14,791,571
Other - net 8,176,412
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Deferred tax assets 69,303,830
Less valuation allowance for deferred tax assets (4,748,634)
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Net deferred tax asset 64,555,196
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Deferred tax liabilities:
Tax over book depreciation 26,753,667
Capital contribution 22,501,840
Other - net 1,770,118
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Deferred tax liabilities 51,025,625
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Total net deferred tax asset $13,529,571
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A valuation allowance has been established for tax credit carryforwards that
are not expected to be realized. The Company believes it is more likely than
not that the remaining deferred tax assets will be realized through the
reversal of existing taxable temporary differences within the carryforward
period, the carryback of existing deductible temporary differences to prior
years' taxable income or through the use of alternative tax planning
strategies.
NOTE 7 - SENIOR DEBT
The Company has a reducing revolving credit facility ("Revolver") with a
syndicate of financial institutions which matures in October 1999 with
scheduled reductions in the aggregate credit facility that began in October
1995. The maximum amount available under the Revolver at February 16, 1997 was
$189.6 million. Scheduled reductions in the maximum amount available under the
Revolver of $30 million will occur in April and October 1997. At February 16,
1997, the Company had $135 million borrowed under the Revolver and had
outstanding letters of credit of $12.7 million which also were supported by the
Revolver. The interest rate for this facility is a floating rate (the London
Interbank Offered Rate ("LIBOR") plus 2%) and was 7.5% at February 16, 1997.
During the second quarter of 1996, the Company obtained a senior secured Bridge
Loan for $100 million from a bank ("Bridge Loan"). The Bridge Loan was obtained
to provide working capital and a source of financing for the 1996 acquisition
of substantially all of the assets of TPI (See Note 3). Concurrent with the
execution of the Bridge Loan, the Company borrowed $20 million under the Bridge
Loan, which was used to reduce the outstanding balance under the Company's
Revolver. The remaining $80 million available under the Bridge Loan was drawn
September 9, 1996 concurrent with the closing of the acquisition. The Bridge
Loan bears interest at LIBOR plus 2.5% (or the announced Alternative Base Rate
of the bank plus 1.5%) with 0.5% increases in the interest rate effective 9,
12, and 18 months after
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September 9, 1996. The Bridge Loan converts to a term loan on May 3, 1998 if
not repaid on or before that date and the term loan will mature October 22,
1999. Upon conversion to a term loan, the Company will be required to pay a fee
equal to 3% of the outstanding balance of the Bridge Loan at the conversion
date. At February 16, 1997, the balance outstanding under the Bridge Loan was
$95.1 million and the interest rate was 8.0%.
The Company has an unsecured line of credit for $20,000,000 with interest
payable monthly at the lending bank's index rate (8.25% at February 16, 1997).
There were borrowings of $5.3 million under the line at February 16, 1997. The
line is available through April 30, 1998 with a three month extension each
quarter at the option of the bank. The Company also had an unsecured revolving
credit facility for $10,000,000 with interest payable quarterly at rates based
on the prime lending rate (8.25% at February 16, 1997). Borrowings under this
facility, which expires June 25, 1998, if not terminated earlier, are due upon
notice. As of February 16, 1997, the balance outstanding under this facility
was $9,480,000. On March 25, 1997, one of the participating banks in the $10
million line of credit notified the Company that the bank was withdrawing its
portion of the line of credit effective March 31, 1997. Accordingly, the
Company repaid the outstanding balance of $7.5 million on March 31, 1997.
Substantially all material assets of the Company have been pledged as
collateral for the Company's various credit agreements. The Company's senior
debt requires satisfaction of certain financial ratios and tests; imposes
limitations on capital expenditures; limits the ability to incur additional
debt, leasehold obligations and contingent liabilities; prohibits dividends and
distributions on common stock; prohibits mergers, consolidations or similar
transactions; and includes other affirmative and negative covenants. The
Company was in compliance with all of its debt covenants as of February 16,
1997.
NOTE 8 - RESERVE FOR LITIGATION SETTLEMENT
In January 1993, court approval was granted for a consent decree settling
litigation against the Company and its former senior chairman. The litigation
was certified a class, under Title VII of the Civil Rights Act of 1964,
consisting of black restaurant employees, to represent claims of alleged
discriminatory failure to hire, harassment, failure to promote, discharge and
retaliation. This class consisted only of employees from the Company's
"Shoney's" and "Captain D's" restaurant concepts and the class period was from
February 4, 1988 through April 19, 1991.
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Under the consent decree, the Company will pay $105 million to settle these
claims. The settlement covered all of the Company's restaurant concepts and the
corporate offices from February 4, 1985 through November 3, 1992. In addition,
the Company agreed to pay $25.5 million in plaintiffs' attorneys fees and an
estimated $2.3 million in applicable payroll taxes and administrative costs.
The settlement resulted in a charge of $77.2 million, net of insurance
recoveries and applicable taxes, in the fourth quarter of 1992. Under the terms
of the consent decree, payments, without interest, are made quarterly and
substantially all payments will be completed by March 1, 1998.
NOTE 9 - LITIGATION
The Company is a defendant in a federal Court suit styled J&J Seafood, Inc. and
Sunbelt Restaurant Management, Inc. v. Shoney's, Inc. which was filed on
December 19, 1994 in U.S. District Court for the Middle District of Tennessee.
The suit was filed by a franchisee of the Company's Captain D's restaurant
concept which claims that the Company imposes a "tying" arrangement by
requiring franchisees to purchase food products from the Company's commissary.
The complaint seeks damages for an alleged class of similarly situated
plaintiffs in an amount not to exceed $500 million and treble damages. On May
5, 1994, the same plaintiff had also filed a state Court suit in the Chancery
Court of Tennessee in Davidson County (J&J Seafood v. Shoney's, Inc.) making
essentially the same claims; however, in that suit, the plaintiff did not make
a class action claim. On December 16, 1994, counsel for the plaintiff advised
the Company that the federal Court case described above would be filed unless
the Company settled the pending state Court case by purchasing the plaintiff's
franchised Captain D's restaurant for $1.65 million, plus assumption of certain
equipment leases. The Company rejected the demand and the federal Court lawsuit
was filed. On January 23, 1995, the Company filed a motion to dismiss or stay
this federal Court case pending the resolution of the state case. Thereafter,
the plaintiffs filed an amended complaint adding a second plaintiff, a former
franchisee, Sunbelt Restaurant Management, Inc. The motion to dismiss was
denied on May 31, 1995. The plaintiff filed a motion to certify the case as a
class action on August 7, 1995. The motion was argued on May 9, 1996 to the
Magistrate Judge. The U.S. District Court Judge accepted the recommendation of
the Magistrate Judge and on October 10, 1996 denied the motion for class
certification.
On December 31, 1996, J&J Seafood, Inc. filed a third lawsuit against the
Company, certain members of the Captain D's franchisee advisory council and two
suppliers styled J&J Seafood, Inc. v. Shoney's, Inc. et al., which was filed in
the Chancery Court of Tennessee in Wilson County. The Plaintiff seeks class
certification for two unspecified classes of allegedly similarly situated
plaintiffs. Some allegations in the lawsuit are similar to claims made in the
Plaintiff's previous two lawsuits against the Company. In addition, this
complaint alleges interference with prospective business advantage, wrongful
appropriation, forgery, fraud, breach of the covenant of good faith and fair
dealing, RICO violations and that the Company improperly collects and retains
sales taxes that are not owed. The complaint seeks damages in excess of $10
million on each of the seven counts, plus punitive damages. The complaint also
seeks damages of $70 million, trebled, on the RICO claim. On January 31, 1997,
all defendants removed the case to the U.S. District Court in Nashville,
Tennessee. Thereafter, the plaintiffs have filed a brief to remand and
defendants have filed a brief to oppose that motion. On March 10, 1997, the
Company filed motions to dismiss or for summary judgment on all counts and to
deny class certifications. All motions are pending.
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Management believes it has substantial defenses to the claims made and intends
to vigorously defend these cases. In the opinion of management, the ultimate
liability with respect to these cases will not materially affect the operating
results or the financial position of the Company.
On December 1, 1995, five current and/or former Shoney's Restaurant managers or
assistant restaurant managers filed the case of Robert Belcher, et al. v.
Shoney's, Inc. in the U.S. District Court for the Middle District of Tennessee
claiming that the Company had violated the overtime provisions of the Fair
Labor Standards Act. Plaintiffs purported to act on behalf of similarly
situated current and former employees and requested Court supervised notice of
their lawsuit be sent to other potential plaintiffs. The Court granted
provisional class status, and directed notice be sent to all former and current
salaried general managers and assistant general managers who were employed by
the Company's Shoney's Restaurants during the three years prior to filing of
the suit. Approximately 900 potential class members opted to participate in the
suit as of the cutoff date set by the Court. By virtue of the provisional class
status, the Court could subsequently amend its decision and either reduce or
increase the scope of those individuals who are similarly situated or determine
that certification as a class is altogether unwarranted.
On January 2, 1996, five current and/or former Shoney's hourly and/or
fluctuating work week employees filed the case of Bonnie Belcher, et al. v.
Shoney's, Inc. in the U.S. District Court for the Middle District of Tennessee
claiming that the Company violated the Fair Labor Standards Act by either not
paying them for all hours worked or improperly paying them for regular and/or
overtime hours worked. Plaintiffs purported to act on behalf of similarly
situated current and former employees and requested Court supervised notice of
their lawsuit be sent to other potential plaintiffs. The Court granted
provisional class status and directed notice be sent to all current and former
Shoney's concept hourly and fluctuating work week employees who were employed
during the three years prior to filing of the suit. Approximately 18,000
potential class members opted to participate in this suit as of the cutoff
date set by the Court. By virtue of the provisional class status, the Court
could subsequently amend its decision and either reduce or increase the scope
of those individuals who are similarly situated or determine that certification
as a class is altogether unwarranted.
In both lawsuits, the plaintiffs claim to be entitled to recover unpaid wages,
liquidated damages, attorneys' fees and expenses, for an unspecified period of
time, claiming that certain of Shoney's acts resulted in a tolling of the
statute of limitations. Discovery is proceeding in both cases, but is in a
preliminary stage. Management believes it has substantial defenses to the
claims made and intends to vigorously defend the cases. However, neither the
likelihood of an unfavorable outcome nor the amount of ultimate liability, if
any, with respect to these cases can be determined at this time. Accordingly,
no provision for any potential liability has been made in the consolidated
financial statements.
In addition to the litigation described in the preceding paragraphs, the
Company is a party to other legal proceedings incidental to its business. In
the opinion of management, the ultimate liability with respect to these actions
will not materially affect the operating results or the financial position of
the Company.
NOTE 10 - SALE OF SHONEY'S LODGING, INC. AND RELATED INVESTMENTS
As of February 16, 1997, the Company owned approximately 36,800 shares of
common stock of ShoLodge, Inc. ("ShoLodge") obtained as consideration for the
1994 sale of the Company's minority interest in four Shoney's Inns to ShoLodge.
At February 16, 1997, the Company's investment in
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ShoLodge common stock had a fair value of $460,000 and the Company recorded an
unrealized loss during the first quarter of 1997 of approximately $74,000.
During 1996, the Company also owned additional shares and certain warrants to
acquire ShoLodge common stock which were obtained in the 1992 sale of the
Company's lodging division to ShoLodge. During 1996 and 1997, under the
provisions of FASB Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", the ShoLodge common stock and certain of these
warrants were classified as securities available for sale. These ShoLodge
common shares and warrants have been carried at their fair value and increases
and decreases in fair value are reflected as a component of shareholders'
equity.
During the first quarter of 1996, the Company recorded an unrealized gain of
$1.3 million on its investment in ShoLodge common stock and warrants. The
Company sold approximately 85,000 shares of ShoLodge during October 1996 and
also sold its ShoLodge warrants to ShoLodge in the fourth quarter of 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated condensed
financial statements and notes thereto. The first quarters of fiscal 1997 and
1996 covered sixteen weeks. All references are to fiscal years unless otherwise
noted. The forward-looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations ("MD&A") relating to
certain matters, which reflect management's best judgment based on factors
currently known, involve risks and uncertainties, including anticipated
financial performance, adequacy of management personnel resources, shortages of
restaurant labor, commodity price increases, product shortages, adverse general
economic conditions, turnover and retention of key management personnel and a
variety of other factors. Actual results and experience could differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements as a result of a number of factors,
including but not limited to those discussed in MD&A. Forward-looking
information provided by the Company pursuant to the safe harbor established
under the Private Securities Litigation Reform Act of 1995 should be evaluated
in the context of these factors. In addition, the Company disclaims any intent
or obligation to update these forward-looking statements.
On September 9, 1996, the Company completed the acquisition of
substantially all of the operating assets of TPI Enterprises, Inc. ("TPI"),
which as the Company's largest franchisee, operated 176 Shoney's Restaurants
and 67 Captain D's restaurants. The acquisition was accounted for as a purchase
and the results of operations of the acquired business are included in the
first quarter 1997 financial statements with no comparable amounts in the first
quarter of 1996.
RESULTS OF OPERATIONS
REVENUES
Revenues from continuing operations for the first quarter of 1997
increased 21% ($63.1 million) to $363.3 million as compared to revenues of
$300.2 million in the first quarter of 1996. The following table summarizes the
components of the increase in revenues:
First Quarter
1997
-------------
Restaurant revenue $ 69.8
Commissary and other sales (5.8)
Franchise fees (2.0)
Other income 1.1
------
$ 63.1
======
Restaurant revenues increased $72.6 million during the first quarter
of 1997 due to the addition of the TPI restaurants acquired in September 1996.
This increase was offset by a 1.9% decline in comparable store sales during the
first quarter and a decline in revenue due to the closure of 51
under-performing restaurants during the first quarter of 1997 and the closure
of 15 under-performing restaurants during 1996. The comparable store sales
decrease of 1.9% during the first quarter of 1997 included a menu price
increase of 2.0%, as compared with a comparable store sales decline of 2.0% in
first quarter of 1996, which included a 1.4% menu price increase.
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The following table summarizes the change in number of restaurants operated by
the Company's continuing operations and its franchisees during the first
quarter of 1997 and 1996:
First Quarter First Quarter
1997 1996
------------- -------------
Company-owned restaurants opened(1) 5 23
Company-owned restaurants closed (51) (4)
Franchised restaurants opened 2 2
Franchised restaurants closed (10) (32)
---- ----
(54) (11)
==== =====
(1)Includes four and sixteen units acquired from franchisees during the first
quarter of 1997 and 1996, respectively.
Commissary and manufacturing revenues decreased $5.4 million or 12%
during the first quarter of 1997 compared to the first quarter of 1996. This
decline in revenues resulted from a decrease in the number of franchised or
third-party restaurants being served by the Commissary when comparing the first
quarters of 1997 and 1996. The decline is primarily due to the loss of Lee's
Famous Recipe Chicken as a customer during the fourth quarter of 1996. In
addition, manufacturing revenues declined as a result of the closure of the
Company's bakery and coleslaw manufacturing operations during the latter half
of 1996 and the loss of the revenues from those operations.
Franchise fees declined $2.0 million or 31% in the first quarter of
1997 compared to the same period in the prior year as a result of a net
decrease in franchised restaurants resulting principally from the Company's
fourth quarter 1996 acquisition of 176 Shoney's and 67 Captain D's restaurants
from TPI.
Other income increased $1.1 million in the first quarter of 1997 as
compared to the same quarter last year principally due to an increase in asset
sales and additional revenue from an insurance service operation acquired from
TPI during the fourth quarter of 1996.
COSTS AND EXPENSES
Costs of sales increased during the first quarter of 1997 compared to
the same period last year principally as a result of the acquisition of 176
Shoney's and 67 Captain D's restaurants in the fourth quarter of 1996. Cost of
sales as a percentage of revenues for the first quarter of 1997 increased 1.6%
over the same quarter in 1996 to 90.4% in 1997 as compared to 88.8% in 1996.
Food and supplies costs decreased as a percentage of revenues due to the
decline in comparable store sales and lower cost of sales in the Commissary
operation. Commissary sales have a higher percentage food cost and lower
operating expenses, as a percentage of revenue, when compared to the Company's
restaurant operations. Food and supplies cost at the restaurant level were
slightly lower (.25%) in the first quarter of 1997.
Restaurant labor increased as a percentage of total revenues because
of the decline in Commissary and manufacturing revenue and franchise revenues
(which have no associated restaurant labor in their cost of sales). Restaurant
labor as a percentage of restaurant revenues were 30.7% in the first quarter
1997 compared with 30.8% in 1996. Increased average wage rates at the
restaurant level were offset by increased productivity at the Company's
Shoney's Restaurants (as measured by higher sales per dollar of restaurant
labor). Shoney's Restaurants labor costs as a percentage of restaurant revenues
improved by 1% comparing the first quarter of 1997 with the same period last
year. However, higher overall
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restaurant labor costs at Captain D's and the Company's Casual Dining
restaurants mitigated the overall savings on a consolidated restaurant basis.
Operating expenses increased as a percentage of revenues principally
due to the decline in comparable store sales and because the restaurants
acquired from TPI have lower average unit sales volumes than the
Company's existing restaurants. The Company also experienced increased costs
for utilities, increased transportation costs due to lease costs on
transportation equipment acquired from TPI's Commissary along with higher fuel
costs, and increased advertising and insurance expenses.
General and administrative expenses increased by $4.9 million to $25.0
million in the first quarter of 1997 as compared with the same period last
year. General and administrative expenses as a percentage of revenues increased
from 6.7% in the first quarter of 1996 to 6.9% in the first quarter of 1997.
[This increase resulted from higher salary costs and related payroll taxes
($1.7 million), increased telephone, travel, mailing, and office supplies costs
($1.2 million), increased goodwill amortization expense resulting from the
acquisition of substantially all the assets of TPI ($0.8 million) and higher
levels of legal, employee benefit and other costs ($1.2 million) associated
with providing corporate support services for the additional restaurants
acquired from TPI in the fourth quarter of 1996.] Salary costs have increased
as a result of additional personnel and higher salaries paid to senior
management personnel recruited during the prior year as the Company made
significant personnel changes. During the latter part of the first quarter of
1997, management implemented a reorganization of the multi-unit management
structure for the Shoney's Restaurant division which eliminated a layer of
management. This reorganization was designed to improve management
communication through a flatter organizational structure and to position the
Company's strongest operations management personnel closer to the Company's
restaurant customers. Additionally, this change is expected to decrease general
and administrative expenses by approximately $3.5 million annually. In
addition, the Company is completing an assessment (begun in the fourth quarter
of 1996) of its general and administrative expense structure to lower corporate
expenses to respond to the declines in revenues which are anticipated from the
Company's plan to close under-performing restaurants and to focus on its core
markets.
Interest expense for the first quarter of 1997 increased $3.2 million
as compared to the same period last year, principally due to a $2.1 million
increase attributable to higher outstanding debt caused by the Company's
borrowing to finance the acquisition of substantially all of the operating
assets of TPI in the fourth quarter of 1996 coupled with lower operating cash
flows in the first quarter of 1997. In addition, interest expense increased
comparing the first quarter of 1997 and the first quarter of 1996 as a result
of increased amortization of deferred debt issue costs ($437,000); additional
interest expense for capital leases which were assumed in connection with the
TPI acquisition ($399,000); and the increase in non-cash interest related to
the Company's zero coupon subordinated debentures ($212,000).
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has met its liquidity requirements with cash
provided by operating activities supplemented by external borrowing from banks.
The Company's cash provided by operating activities declined during fiscal 1996
and has declined slightly during the first quarter of 1997 as compared to the
same period in the prior year. The decline in cash flow from operations is
principally a result of a decline in the profitability of the Company's
Shoney's Restaurants and a reduction in franchise profits resulting from the
acquisition of the restaurants of the Company's largest franchisee in the
fourth quarter of 1996.
Management of the Company continues to believe that the implementation
of performance and operational improvement programs in an expanded number of
core markets for Shoney's Restaurants will produce improved results of
operations and cash flow in 1997. While recent performance improvement
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efforts in test markets have produced positive comparable restaurant sales
trends, the Shoney's Restaurant concept as a whole has yet to achieve sustained
growth in comparable restaurant sales. Additionally, the family dining sector
in which Shoney's Restaurants competes is experiencing intense competitive
pressures and is in a weak overall sales environment. Accordingly, there are a
variety of risk factors that will influence whether the Company is successful
in improving the results of operations for its Shoney's Restaurants. These risk
factors include, but are not limited to, factors such as the adequacy of
management personnel resources, shortages of restaurant labor, commodity price
increases, product shortages, adverse general economic conditions, employee
turnover, retention of key management personnel and a variety of other factors.
In the event that operational improvements and increased cash flows in the
Company Shoney's Restaurants are not achieved, it is possible that the Company
could experience difficulty meeting all of its bank debt covenants during
fiscal 1998. In such event, the Company may be required to curtail its capital
spending plans, explore further asset sales, obtain modifications to some or
all of its credit agreements, or to refinance indebtedness. Management and its
lenders are currently reviewing the Company's expected operating results for
the remainder of fiscal 1997 and the Company plans to seek modifications to its
debt agreements, if required, in advance of violation of any of its debt
covenants. There can be no certainty that the Company can obtain a modification
with its existing lenders and the Company could be required to refinance some
or all of its debt. In the event such actions are necessary, it is possible
that the Company's interest costs could increase.
In 1996 the Company borrowed $100 million under a senior secured
bridge loan to provide working capital and a source of financing for the
acquisition of substantially all of the operating assets of TPI. Approximately
$43 million of the bridge loan proceeds were used to retire indebtedness of TPI
and the remainder was used to reduce amounts outstanding under the Company's
revolving credit facility, reduce short-term debt and to provide working
capital. The bridge loan bears interest at 2.5% over LIBOR with 0.5% increases
in the interest rate effective 9, 12, and 18 months from September 9, 1996. The
bridge loan converts to a term loan if not repaid by May 3, 1998 and such term
loan has a bullet maturity in October 1999. If converted, the Company will be
required to pay a fee equal to 3% of the outstanding balance of the bridge
loan. At February 16, 1997, the amount outstanding under the Bridge Loan was
$95.1 million. Management plans to retire the bridge loan prior to its
conversion to a term facility and anticipates that it will obtain the funds for
retirement either from proceeds from asset sales or by refinancing all or a
portion of its debt.
As more fully discussed in Note 9 to the consolidated condensed
financial statements, the Company is a defendant in two class action lawsuits
which allege the Company violated provisions of the Fair Labor Standards Act.
In both lawsuits, the plaintiffs claim to be entitled to recover unpaid wages,
liquidated damages, and attorney's fees and expenses, for an unspecified period
of time, claiming that certain of Shoney's acts resulted in a tolling of the
statute of limitations. Discovery is proceeding in both cases but is in a
preliminary stage. Management believes that it has substantial defenses to the
claims made and intends to vigorously defend these cases. However; neither the
likelihood of an unfavorable outcome nor the amount of ultimate liability, if
any, with respect to these cases can currently be determined and no provision
for any potential liability has been accrued in the financial statements. In
the event of an unfavorable outcome in these cases that results in a material
award for the plaintiffs, the Company's financial position, results of
operations and liquidity could be adversely affected.
During the first quarter of 1997, cash provided from operations was
$4.4 million, an increase of $.4 million as compared to the first quarter of
1996. Cash provided by continuing operations for the first quarter of 1997 was
$4.4 million as compared to $4.6 million in the same period last year. The
Company reported a loss from operations in the first quarter of 1997 of ($13.8)
million compared to net income of $24.1 million in 1996. However, the first
quarter of 1997 included a $17.6 million non-cash charge ($11.2 million, net of
tax) for the impairment of long-lived assets in connection with the Company's
initial adoption of FASB Statement No. 121, "Accounting for Impairments of
Long-Lived
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Assets and for Long-Lived Assets to be Disposed Of". Additionally, the first
quarter of 1996 included a $22 million gain on disposal of discontinued
operations and $400,000 of income (net of tax) from such discontinued
operations. Excluding these unusual items from both years, the first quarter
1997 net loss would have been $2.6 million as compared to net income of $1.6
million in the first quarter of 1996, or a decline of $4.2 million. This
decrease in net income was offset by higher depreciation and non-cash
amortization (including goodwill), and an increase in deferred income taxes.
The significant decrease in operating assets and liabilities in the first
quarter of 1997 reflects significant declines in accounts payable, accrued
expenses and federal income taxes offset somewhat by an increase in
inventories. The inventory increase was related to the additional restaurants
in operation from the TPI acquisition and an increase in the levels of fish and
seafood inventory being held.
Cash used by investing activities during the first quarter of 1997
totaled $8.3 million as compared to cash provided by investing activities of
$17.4 million in the same quarter of 1996. The decrease in cash provided by
investing activities of $25.7 million resulted from $51.3 million in proceeds
from the sale of Mike Rose Foods in the first quarter of 1996 with no
comparable item in 1997. This decline in cash flow was offset by a $21.0
million decrease in capital spending (in the first quarter of 1997) for
property, plant and equipment and goodwill related to franchise acquisitions
and a $4.6 million increase in proceeds from property disposals associated with
the closure and sale of under-performing restaurants during the first quarter
of 1997.
During the first quarter of 1997, the Company's cash used by financing
activities was $127,000 compared with $20.5 million in the same period in 1996.
Significant 1997 financing activities included net borrowings of $12.7 million
from short-term credit facilities offset by debt payments and capital lease
obligations of $7.0 million and payments on the Company's litigation settlement
of $5.7 million. Significant financing activity during the first quarter of
1996 included long-term debt reduction of $51.4 million from the proceeds from
the sale of Mike Rose Foods, $27.0 million in borrowings under the Company's
Revolver, net borrowings of $9.5 million from short-term credit facilities and
payments of $5.9 million on the Company's litigation settlement.
The Company had $135 million outstanding under its Revolver at
February 16, 1997 and had approximately $12.7 million in letters of credit
supported by the Revolver with a maximum available credit of $189.6 million.
The maximum amount available under the Revolver will be reduced by $30 million
in both April and October 1997. Currently, the Company's borrowings under the
Revolver ($147.7 million) are below maximum available credit following the
April 1997 reduction ($159.8 million); therefore, no principal payment is
anticipated to meet the April 1997 reduction in available credit.
In conjunction with the Company's market rationalization program,
which focuses development and operational improvement resources on the
Company's core southeastern markets, during the first quarter of 1997 the
Company elected to close a number of under-performing restaurants. The Company
plans to close a total of approximately 82 restaurants, of which 50 had been
closed as of February 16, 1997 and the remainder are expected to be closed by
the end of the fourth quarter. The Company is aggressively marketing these
properties and leasehold interests and will utilize the proceeds to reduce its
bridge loan or other debt for which these properties serve as collateral.
The Company has identified an additional 75 restaurants which have
been given increased supervisory management attention in an effort to
immediately improve their financial performance. If the performance of these
restaurants does not improve, management will consider their potential closure
and sale to generate additional cash to reduce debt. Revenues were $23.7
million and loss before interest and taxes were $(2.4) million for this group of
restaurants for the first quarter of 1997 and their carrying value was $27.2
million at February 16, 1997. In addition, the Company has approximately 72
surplus
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properties and 58 rental properties, most of which are former Company
restaurants or parcels of land acquired for future expansion. Management will
consider the sale of approximately 100 of these properties that are deemed to
be marketable and will use the proceeds from any such sales to reduce debt.
At February 16, 1997, the Company had cash and cash equivalents of
approximately $9.9 million and had unsecured lines of credit totaling $30
million under which the Company had borrowed $14.8 million. On March 25, 1997,
the Company was informed by one of its banks that the bank was withdrawing the
Company's $10 million unsecured line of credit effective March 31, 1997. While
the loss of this $10 million line of credit negatively impacts the Company's
overall liquidity, management believes that it can adequately manage its cash
requirements for the near term without replacing this source of credit.
Capital expenditures for fiscal 1997 were budgeted to be approximately
$65 million. In light of the Company's first quarter loss from operations and
year-to-date negative comparable store sales trends being experienced by the
Company's Shoney's Restaurants (which account for over 50% of the Company's
revenue on a consolidated basis), management anticipates that it will reduce
its capital spending in 1997 to balance its cash flow and to provide a margin
of safety in the event operations do not improve as management expects. The
reduction in capital spending will likely be achieved by postponement of the
construction of new and replacement restaurants and the elimination of all
non-essential operational capital spending. Such curtailment of new unit
construction is not expected to materially impact 1997 results of operations.
The Company plans to maintain capital spending for its planned remodeling of
restaurants acquired from TPI; however, the Company may reduce such spending
below the $10 million budgeted based on business results over the remainder of
fiscal 1997. In the near term, the Company expects to be able to meet its needs
for debt service, capital expenditures, the payments required by the litigation
settlement and other general corporate purposes through cash generated by the
Company's operations, the Company's credit facilities, and from the proceeds
from disposition of real estate and other assets.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Item 3 of the Company's Annual Report on Form 10-K, filed with the
Commission on January 27, 1997, is incorporated herein by this reference. See
also Note 9 to the Notes to Consolidated Condensed Financial Statements at
pages 10-11 of this Quarterly Report on Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The annual meeting of the Company's shareholders (the "Annual
Meeting") was held on March 26, 1997. At that time, there were present, in
person or by proxy, 40,535,640 shares of the Company's common stock.
(b) At the meeting, two items were submitted to a vote of
shareholders: (1) the election of directors; and (2) a proposal to authorize
and approve a stock bonus policy which will provide that formerly all-cash
incentive bonuses of certain key officers shall be paid in equal increments of
cash and Company common stock. Proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was
no solicitation in opposition to management's nominees for director as listed
in the proxy statement and all such nominees were elected.
(c) The results of voting for the election of directors at the Annual
Meeting were as follows:
Nominee For Withheld
------- ---------- ---------
Dennis C. Bottorff 32,456,062 8,079,578
Carole F. Hoover 32,456,407 8,079,233
Victoria B. Jackson 32,456,664 8,078,976
C. Stephen Lynn 32,457,409 8,078,231
Jeffry F. Schoenbaum 35,719,025 4,816,615
B. Franklin Skinner 32,469,657 8,065,983
Cal Turner, Jr. 35,714,009 4,821,631
There were no abstentions or broker non-votes in the election of directors.
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The results of voting for the approval of a stock bonus plan to
provide that formerly all-cash incentive bonuses of certain key officers shall
be paid in equal increments of cash and Company common stock were as follows:
For Against Withheld
--- ------- --------
Bonus Proposal 30,847,077 8,651,409 1,037,154
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) In accordance with the provisions of Item 601 of Regulation S-K,
the following have been furnished as Exhibits to this Quarterly Report on Form
10-Q:
2 Plan of Tax-Free Reorganization Under Section
368(a)(1)(C) of the Internal Revenue Code and
Agreement, dated March 15, 1996, filed as Exhibit 2
to the Company's current report on Form 8-K filed
with the Commission on March 20, 1996, and
incorporated herein by this reference, as amended by
Amendment No. 1, dated June 14, 1996, filed as
Exhibit 2.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 12, 1996, and
incorporated herein by this reference, and Amendment
No. 2, dated July 18, 1996, and Amendment No. 3,
dated August 21, 1996, filed as Exhibit 2.3 to the
Company's Current Report on Form 8-K filed with the
Commission on September 11, 1996, and incorporated
herein by this reference.
3(i), 4.1 Charter of Shoney's, Inc., as amended, filed as
Exhibit 4.1 to the Company's Registration Statement
on Form S-8 (File No. 333-11715) filed with the
Commission effective September 11, 1996, and
incorporated herein by this reference.
3(ii), 4.2 Amended and Restated Bylaws of Shoney's, Inc., filed
as Exhibits 3(ii) and 4.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended February
18, 1996 and incorporated herein by this reference.
4.3 Amended and Restated Rights Agreement, dated as of
May 25, 1994, between Shoney's, Inc. (the "Company")
and Harris Trust and Savings Bank, as Rights Agent,
filed as Exhibit 4 to the Company's Current Report
on Form 8-K filed with the Commission on June 9,
1994 and incorporated herein by this reference.
4.4 Amendment No. 1 dated as of April 18, 1995 to
Amended and Restated Rights Agreement, dated as of
May 25, 1994, between Shoney's, Inc. (the "Company")
and Harris Trust and Savings Bank, as Rights Agent,
filed as Exhibit 4 to the Company's Current Report
on Form 8-K filed with the Commission on May 4, 1995
and incorporated herein by this reference.
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21
4.5 Amendment No. 2 dated as of June 14, 1996 to Amended
and Restated Rights Agreement, dated as of May 25,
1994, between Shoney's, Inc. (the "Company") and
Harris Trust and Savings Bank, as Rights Agent,
filed as Exhibit 4.5 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 12,
1996, filed with the Commission on June 25, 1996,
and incorporated herein by this reference.
4.6 Indenture dated as of April 1, 1989 between the
Company and Sovran Bank/Central South, as Trustee
relating to $201,250,000 in principal amount of
liquid yield option notes due 2004, filed as Exhibit
4.8 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 filed with the Commission on
April 3, 1989 (No. 33-27571), and incorporated
herein by this reference.
4.7 Revolving Credit Agreement dated as of July 13, 1988
between the Company and First American National
Bank, filed as Exhibit 4.1 and 19.1 to the Company's
Current Report on Form 8-K filed with the Commission
on December 3, 1991, and incorporated herein by this
reference.
4.8 Modification Agreement No. 1 dated as of March 5,
1991 to Revolving Credit Agreement, dated as of July
13, 1988 between the Company and First American
National Bank, filed as Exhibit 4.2 and 19.2 to the
Company's Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.
4.9 Alternative Rate Agreement dated as of June 4, 1992
supplementing that certain Revolving Credit
Agreement dated as of July 13, 1988 between the
Company and First American National Bank, filed as
Exhibit 4.36 and 10.29 to Post Effective Amendment
No. 5 to the Company's Registration Statement on
Form S-8 (File No. 2-64257) filed with the
Commission on January 25, 1993, and incorporated
herein by this reference.
4.10 Note Issuance Agreement, dated as of October 1,
1989, among the Company, Sovran Bank, N.A., as Note
Agent and Placement Agent and Sovran Bank / Central
South, as Escrow Agent, filed as Exhibit 19.5 and
28.3 to the Company's Current Report on Form 8-K
filed with the Commission on December 3, 1991, and
incorporated herein by this reference.
4.11 Reimbursement Agreement, dated as of October 1,
1989, together with the Standby Note relating
thereto, among the Company, Sovran Bank / Central
South, Long Term Credit Bank of Japan, Limited, New
York Branch, Kredeitbank, N.V., New York Branch and
Sovran Bank / Central South, as Agent, filed as
Exhibit 19.6 and 28.4 to the Company's Current
Report on Form 8-K filed with the Commission on
December 3, 1991, and incorporated herein by this
reference.
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4.12 Modification Agreement No. 1 dated as of July 21,
1993 to Reimbursement Agreement, dated as of October
1, 1989, together with the Standby Note relating
thereto, among the Company, Sovran Bank / Central
South, Long Term Credit Bank of Japan, Limited, New
York Branch, Kredeitbank, N.V., New York Branch and
Sovran Bank / Central South, as Agent, filed as
Exhibit 4.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 1, 1993 filed
with the Commission on September 15, 1993, and
incorporated herein by this reference.
4.13 Modification Agreement No. 2 dated as of June 8,
1994 to Reimbursement Agreement, dated as of October
1, 1989, together with the Standby Note relating
thereto, among the Company, NationsBank of
Tennessee, N.A. (formerly Sovran Bank / Central
South), Long Term Credit Bank of Japan, Limited, New
York Branch, Kredeitbank, N.V., New York Branch and
NationsBank of Tennessee, N.A., as Agent, filed as
Exhibit 4.30 to the Company's Annual Report on Form
10-K for the fiscal year ended October 30, 1994
filed with the Commission on January 30, 1995, and
incorporated herein by this reference.
4.14 Modification Agreement No. 3 dated as of August 21,
1996 to Reimbursement Agreement dated as of October
1, 1989, together with the Standby Note relating
thereto, among the Company, NationsBank of
Tennessee, N.A. (formerly Sovran Bank / Central
South), Long Term Credit Bank of Japan, Limited, New
York Branch, Kredeitbank, N.V., New York Branch and
NationsBank of Tennessee, N.A., as Agent, filed as
Exhibit 4.14 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 4, 1996 filed
with the Commission on September 17, 1996, and
incorporated herein by this reference.
4.15 Note Issuance Agreement, dated as of October 1,
1990, among the Company, Sovran Bank, N.A., as Note
Agent and Placement Agent and Sovran Bank / Central
South, as Escrow Agent, filed as Exhibit 19.7 and
28.5 to the Company's Current Report on Form 8-K
filed with the Commission on December 3, 1991, and
incorporated herein by this reference.
4.16 Reimbursement Agreement, dated as of October 1,
1990, together with the Standby Note relating
thereto, between the Company and Sovran Bank /
Central South, filed as Exhibit 19.8 and 28.6 to the
Company's Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.
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23
4.17 Modification Agreement No. 1 dated as of July 21,
1993 to Reimbursement Agreement, dated as of October
1, 1990, together with the Standby Note relating
thereto, between the Company and Sovran Bank /
Central South, filed as Exhibit 4.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
August 1, 1993 filed with the Commission on
September 15, 1993, and incorporated herein by this
reference.
4.18 Modification Agreement No. 2 dated as of April 1,
1994 to Reimbursement Agreement, dated as of October
1, 1990, together with the Standby Note relating
thereto, between the Company and NationsBank of
Tennessee, N.A. (formerly Sovran Bank / Central
South), filed as Exhibit 4.34 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 30, 1994 filed with the Commission on
January 30, 1995, and incorporated herein by this
reference.
4.19 Amended and Restated Note Issuance Agreement, dated
as of November 1, 1993, among the Company,
NationsBank of Virginia, N.A., as Note Agent and
Placement Agent and NationsBank of Tennessee, as
Escrow Agent, filed as Exhibit 4.36 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1993 filed with the Commission on
January 31, 1994, and incorporated herein by this
reference.
4.20 Reimbursement Agreement, dated as of October 1,
1991, together with the Standby Note relating
thereto, between the Company and National Bank of
Canada, New York Branch, filed as Exhibit 28.10 to
the Company's Current Report on Form 8-K filed with
the Commission on December 3, 1991, and incorporated
herein by this reference.
4.21 Assignment, Assumption and Modification Agreement
dated as of November 4, 1993 relating to
Reimbursement Agreement, dated as of October 1,
1991, among the Company, NationsBank of Georgia,
N.A. and National Bank of Canada, New York Branch,
filed as Exhibit 4.38 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31,
1993 filed with the Commission on January 31, 1994,
and incorporated herein by this reference.
4.22 Loan Agreement dated as of September 24, 1992
between the Company and CIBC Inc., filed as Exhibit
4.43 and 10.36 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
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4.23 Modification Agreement No. 1 dated as of October 25,
1992 to Loan Agreement dated as of September 24, 1992
between the Company and CIBC Inc., filed as Exhibit
4.44 and 10.37 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
4.24 Modification Agreement No. 2 dated as of July 21,
1993 to Loan Agreement dated as of September 24,
1992 between the Company and CIBC Inc., filed as
Exhibit 4.6 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 1, 1993 filed
with the Commission on September 15, 1993, and
incorporated herein by this reference.
4.25 Modification Agreement No. 3 dated as of January 23,
1997 to Loan Agreement dated as of September 24,
1992 between the Company and CIBC Inc., filed as
Exhibit 4.25 to the Company's Annual Report on Form
10-K for the fiscal year ended October 27, 1996
filed with the Commission on January 27, 1997, and
incorporated herein by this reference.
4.26 Loan Agreement dated as of April 21, 1993 between
the Company and NationsBank of Tennessee, N.A., filed
as Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 9, 1993 filed
with the Commission on June 23, 1993, and
incorporated herein by this reference.
4.27 Modification Agreement No. 1 dated as of July 21,
1993 to Loan Agreement dated as of April 21, 1993
between the Company and NationsBank of Tennessee,
N.A., filed as Exhibit 4.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
August 1, 1993 filed with the Commission on
September 15, 1993, and incorporated herein by this
reference.
4.28 Loan Agreement dated as of December 1, 1994 between
the Company and NationsBank of Tennessee, N.A.,
filed as Exhibit 4.43 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 30,
1994 filed with the Commission on January 30, 1995,
and incorporated herein by this reference.
4.29 U.S. $270,000,000 Amended and Restated Reducing
Revolving Credit Agreement, dated as of July 21,
1993, as amended and restated as of May 3, 1996,
among Shoney's, Inc., as the Borrower, CIBC Inc.,
acting through its Atlanta Office and various other
financial institutions now or hereafter parties
hereto, as the Lenders, and Canadian Imperial Bank
of Commerce acting through its New York Agency, as
the Agent for the Lenders, filed as Exhibit 4.2 to
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the Company's Current Report on Form 8-K filed with
the Commission on May 15, 1996, and incorporated
herein by this reference.
4.30 Modification Agreement No. 1 dated as of October
24,1996 to U.S. $270,000,000 Amended and Restated
Reducing Revolving Credit Agreement, dated as of
July 21, 1993, as amended and restated as of May 3,
1996, among Shoney's, Inc., as the Borrower, CIBC
Inc., acting through its Atlanta Office and various
other financial institutions now or hereafter
parties hereto, as the Lenders, and Canadian
Imperial Bank of Commerce acting through its New
York Agency, as the Agent for the Lenders, filed as
Exhibit 4.30 to the Company's Annual Report on Form
10-K for the fiscal year ended October 27, 1996
filed with the Commission on January 27, 1997, and
incorporated herein by this reference.
4.31 Modification Agreement No. 2 dated as of January 9,
1997 to U.S. $270,000,000 Amended and Restated
Reducing Revolving Credit Agreement, dated as of
July 21, 1993, as amended and restated as of May 3,
1996, among Shoney's, Inc., as the Borrower, CIBC
Inc., acting through its Atlanta Office and various
other financial institutions now or hereafter
parties hereto, as the Lenders, and Canadian
Imperial Bank of Commerce acting through its New
York Agency, as the Agent for the Lenders, filed as
Exhibit 4.31 to the Company's Annual Report on Form
10-K for the fiscal year ended October 27, 1996
filed with the Commission on January 27, 1997, and
incorporated herein by this reference.
4.32 U.S. $100,000,000 Bridge Loan Credit Agreement,
dated as of May 3, 1996, among Shoney's, Inc., as
the Borrower, Canadian Imperial Bank of Commerce,
and various other financial institutions now or
hereafter parties hereto, as the Lenders, and
Canadian Imperial Bank of Commerce acting through
its New York Agency, as the Agent for the Lenders,
filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the Commission on May 15,
1996, and incorporated herein by this reference.
4.33 Modification Agreement No. 1 dated as of October 24,
1996 to U.S. $100,000,000 Bridge Loan Credit
Agreement, dated as of May 3, 1996, among Shoney's,
Inc., as the Borrower, Canadian Imperial Bank of
Commerce, and various other financial institutions
now or hereafter parties hereto, as the Lenders, and
Canadian Imperial Bank of Commerce acting through
its New York Agency, as the Agent for the Lenders,
filed as Exhibit 4.33 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 27,
1996 filed with the Commission on January 27, 1997,
and incorporated herein by this reference.
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4.34 Modification Agreement No. 2 dated as of January 9,
1997 to U.S. $100,000,000 Bridge Loan Credit
Agreement, dated as of May 3, 1996, among Shoney's,
Inc., as the Borrower, Canadian Imperial Bank of
Commerce, and various other financial institutions
now or hereafter parties hereto, as the Lenders, and
Canadian Imperial Bank of Commerce acting through
its New York Agency, as the Agent for the Lenders,
filed as Exhibit 4.34 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 27,
1996 filed with the Commission on January 27, 1997,
and incorporated herein by this reference.
4.35 Indenture, dated as of July 15, 1992, among TPI
Enterprises, Inc., TPI Restaurants, Inc., as
Guarantor, and NationsBank of Tennessee (now The
Bank of New York, as successor trustee), as trustee,
relating to 8.25% Convertible Subordinated
Debentures due 2002, filed as Exhibit 10 (a) of the
Current Report on Form 8-K of TPI Restaurants, Inc.
dated July 29, 1992 (Commission File No. 0-12312)
and incorporated herein by this reference.
4.36 First Supplemental Indenture, dated as of September
9, 1996, among TPI Enterprises, Inc., TPI
Restaurants, Inc., as Guarantor, The Bank of New
York, as trustee, and Shoney's, Inc., relating to
8.25% Convertible Subordinated Debentures due 2002,
filed as Exhibit 4.2 to the Company's Current Report
on Form 8-K filed with the Commission on September
11, 1996, and incorporated herein by this reference.
10.1 License Agreement, dated as of October 25, 1991,
between Shoney's Investments, Inc. and Shoney's
Lodging, Inc., filed as Exhibit 28.7 to the
Company's Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.
10.2 Amendment No. 1 dated as of September 16, 1992 to
License Agreement, dated as of October 25, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc. (formerly Shoney's
Lodging, Inc.), filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1993 filed with the
Commission on January 31, 1994, and incorporated
herein by this reference.
10.3 Amendment No. 2 dated as of March 18, 1994 to
License Agreement, dated as of October 25, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc., filed as Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended May 14, 1995 filed with the Commission
on June 28, 1995, and incorporated herein by this
reference.
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10.4 Amendment No. 3 dated as of March 13, 1995 to
License Agreement, dated as of October 25, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc., filed as Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended May 14, 1995 filed with the Commission
on June 28, 1995, and incorporated herein by this
reference.
10.5 Amendment No. 4 dated as of June 26, 1996 to License
Agreement, dated as of October 25, 1991, between
Shoney's Investments, Inc. and ShoLodge Franchise
Systems, Inc., filed as Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 4, 1996 filed with the
Commission on September 17, 1996, and incorporated
herein by this reference.
10.6 Amendment No. 5 dated as of October 25, 1996 to
License Agreement, dated as of October 25, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc., filed as Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the
fiscal year ended October 27, 1996 filed with the
Commission on January 27, 1997, and incorporated
herein by this reference.
10.7 Stock Purchase and Warrant Agreement, dated as of
October 25, 1991, between Shoney's Investments, Inc.
and Gulf Coast Development, Inc., filed as Exhibit
28.8 to the Company's Current Report on Form 8-K
filed with the Commission on December 3, 1991, and
incorporated herein by this reference.
10.8 Warrant Purchase Agreement dated as of October 25,
1996 between Shoney's Investments, Inc. and
ShoLodge, Inc., filed as Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 27, 1996 filed with the
Commission on January 27, 1997, and incorporated
herein by this reference.
10.9 Agreement dated as of September 15, 1992 between the
Company and Raymond L. Danner, filed as Exhibit 10.41
to Post Effective Amendment No. 5 to the Company's
Registration Statement on Form S-8 (File No.
2-64257) filed with the Commission on January 25,
1993, and incorporated herein by this reference.
10.10 Consent Decree entered by the United States District
Court for the Northern District of Florida on
January 25, 1993 in Haynes, et al. v. Shoney's,
Inc., et al., filed as Exhibit 28 to the Company's
Current Report on Form 8-K filed with the Commission
on February 3, 1993, and incorporated herein by this
reference.
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10.11 Shoney's, Inc. 1981 Stock Option Plan, as amended
through October 28, 1996, filed as Exhibit 10.11 to
the Company's Annual Report on Form 10-K for the
fiscal year ended October 27, 1996 filed with the
Commission on January 27, 1997, and incorporated
herein by this reference.
10.12 Shoney's, Inc. Stock Option Plan, filed as Exhibit
4.7 to Post Effective Amendment No. 4 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on April 11,
1990, and incorporated herein by this reference.
10.13 Shoney's, Inc. Stock Option Plan, filed as Exhibit
10.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 27, 1996 filed
with the Commission on January 27, 1997, and
incorporated herein by this reference.
10.14 Shoney's, Inc. Employee Stock Purchase Plan, filed
as Exhibit 4.7 to Post Effective Amendment No. 4 to
the Company's Registration Statement on Form S-8
(File No. 33-605) filed with the Commission on
October 26, 1989, and incorporated herein by this
reference.
10.15 Shoney's, Inc. Employee Stock Purchase Plan, as
amended through December 17, 1996, filed as Exhibit
10.15 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 27, 1996 filed
with the Commission on January 27, 1997, and
incorporated herein by this reference.
10.16 Shoney's, Inc. Employee Stock Bonus Plan, filed as
Exhibit 10.9 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1993
filed with the Commission on January 31, 1994, and
incorporated herein by this reference.
10.17 Shoney's, Inc. Directors' Stock Option Plan, filed
as Exhibit 4.38 to the Company's Registration
Statement on Form S-8 File No. 33-45076) filed with
the Commission on January 14, 1992, and incorporated
herein by this reference.
10.18 Shoney's Ownership Plan 1977, filed as Exhibit 10.47
to Post Effective Amendment No. 5 to the Company's
Registration Statement on Form S-8 (File No. 2-64257)
filed with the Commission on January 25, 1993, and
incorporated herein by this reference.
10.19 Captain D's Ownership Plan 1976, filed as Exhibit
10.48 to Post Effective Amendment No. 5
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to the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
10.20 Captain D's Ownership Plan 1978-1979, filed as
Exhibit 10.49 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
10.21 Shoney's, Inc. Supplemental Executive Retirement
Plan, filed as Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the fiscal year ended
October 29, 1995 filed with the Commission on
January 28, 1996, and incorporated herein by this
reference, as amended by Amendment No. 1 to the
Shoney's, Inc. Supplemental Executive Retirement
Plan, filed as Exhibit 10.17 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
February 18, 1996 and incorporated herein by this
reference.
10.22 Employment Agreement dated as of January 13, 1995
between the Company and Taylor H. Henry, filed as
Exhibit 10.15 to the Company's Annual Report on Form
10-K for the fiscal year ended October 30, 1994
filed with the Commission on January 30, 1995, and
incorporated herein by this reference.
10.23 Amended and Restated Agreement dated as of May 1,
1996 between the Company and Charles E. Porter, as
amended through December 17, 1996, filed as Exhibit
10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 27, 1996 filed
with the Commission on January 27, 1997, and
incorporated herein by this reference.
10.24 Employment Agreement dated as of November 1, 1996
between the Company and W. Craig Barber, as amended
through December 17, 1996, filed as Exhibit 10.24 to
the Company's Annual Report on Form 10-K for the
fiscal year ended October 27, 1996 filed with the
Commission on January 27, 1997, and incorporated
herein by this reference.
10.25 Employment Agreement dated as of April 11, 1995,
between the Company and C. Stephen Lynn, filed as
Exhibit 10.20 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 14, 1995 filed
with the Commission on June 28, 1995, and
incorporated herein by this reference, as amended by
Amendment No. 1, filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 29, 1995, filed
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with the Commission on January 28, 1996, and
incorporated herein by this reference.
10.26 Employment Agreement dated as of November 1, 1996
between the Company and Robert M. Langford.
10.27 Asset Sale and Purchase Agreement dated as of July
7, 1995, by and among Shoney's, Inc., as Seller and
RTM, Inc., as Buyer, relating to the sale of the
assets comprising the Company's "Lee's Famous
Recipe" division, filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 29, 1995, filed with the
Commission on January 29, 1996, and incorporated
herein by this reference.
10.28 Stock Purchase Agreement dated as of August 3, 1995,
by and between Shoney's, Inc., as Seller, and
Levmark Capital Corporation, as Buyer, relating to
the purchase of all of the issued and outstanding
stock of Mike Rose Foods, Inc., filed as Exhibit
10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 29, 1995, filed
with the Commission on January 29, 1996, and
incorporated herein by this reference.
10.29 Amendment No. 1 dated as of November 10, 1995 to
Stock Purchase Agreement dated as of August 3, 1995,
by and between Shoney's, Inc., as Seller, and
Levmark Capital Corporation, as Buyer, relating to
the purchase of all of the issued and outstanding
stock of Mike Rose Foods, Inc., filed as Exhibit
10.24 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 29, 1995, filed
with the Commission on January 29, 1996, and
incorporated herein by this reference.
10.30 Supply Agreement dated as of November 17, 1995
between the Company and Mike Rose Foods, Inc., filed
as Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 29,
1995, filed with the Commission on January 29, 1996,
and incorporated herein by this reference.
11 Statement regarding computation of per share
earnings.
27 Financial Data Schedule. (for SEC use only)
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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 both on behalf of the registrant and in
his capacity as principal financial officer of the registrant.
Date: April 2, 1997 By: /s/ W. Craig Barber
----------------------------------
W. Craig Barber
Senior Executive Vice President,
Chief Administrative Officer,
And Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
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