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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended: Commission file number:
January 1, 1997 0-14370
BUFFETS, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 41-1462294
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(State of incorporation) (IRS Employer Identification No.)
10260 Viking Drive, Eden Prairie, Minnesota 55344-4668
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(Address of principal executive offices) (Zip code)
(612) 942-9760
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.01 per share
Preferred Share Purchase Rights
7% Convertible Subordinated Notes due 2002
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the shares of voting stock held by
non-affiliates of the registrant was approximately $291,903,227.00 at March 26,
1997, based on the closing sale price for that date as reported on The Nasdaq
National Market.
On March 26, 1997, there were 45,204,504 shares of common stock of the
Company, par value $.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for its 1997 Annual Meeting to
be held May 13, 1997 are incorporated by reference in Part III. Portions of
Registrant's Annual Report to Shareholders for the fiscal year ended January
1, 1997 (the "1996 Annual Report") are incorporated by reference in Parts II
and IV.
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PART I
ITEM 1. BUSINESS
GENERAL
Buffets, Inc., a Minnesota corporation, was organized in 1983. Its
executive offices are located at 10260 Viking Drive, Eden Prairie, Minnesota
55344-4668. In September 1996, Buffets acquired HomeTown Buffet, Inc., a
Delaware corporation ("HomeTown Buffet"), as discussed below. References herein
to the "Company" are to Buffets, Inc. and its subsidiaries, Dinertainment, Inc.,
Evergreen Buffets Inc., HTB Ventures I, Inc., HTB Ventures II, Inc., HomeTown
Buffet, HomeTown Construction and Development, Inc., OCB Restaurant Co., OCB
Realty Co., OCB Purchasing Co. and OCB Property Co., unless the context
indicates otherwise.
On September 20, 1996, HomeTown Buffet merged with Country Delaware, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company, with
HomeTown Buffet as the surviving corporation (the "Merger"). Under the Merger,
HomeTown Buffet became a wholly-owned subsidiary of the Company. In connection
with the Merger, which was accounted for as a pooling of interests, the Company
issued a total of 13,733,728 shares of its common stock in exchange for all
outstanding shares of HomeTown Buffet common stock (at an exchange ratio of 1.17
shares of Company common stock for each share of HomeTown Buffet common stock).
The Company also assumed options covering, in the aggregate, 1,967,167 shares of
the Company's common stock in substitution for previously outstanding options to
acquire shares of HomeTown Buffet's common stock. In addition, the Company
guaranteed the obligations of HomeTown Buffet under its outstanding 7%
Subordinated Convertible Notes, and the Company's common stock will be issued
upon any conversion thereof. Approximately $41.5 million in principal amount of
these notes were outstanding at the time of the Merger.
The Company is principally engaged in the development and operation of
"buffet" restaurants under the names "Old Country Buffet" ("Country Buffet" in
the state of Colorado) and "HomeTown Buffet." The Company obtained a federal
trademark registration covering the words "Old Country Buffet" in June of 1985.
Under the Merger, the Company gained access to a perpetual license to the
"HOMETOWN" mark, including a California state trademark registration, a U.S.
application pending to register "HOMETOWN BUFFET," and a U.S. trademark for
"HTB" in the restaurant field.
As of March 25, 1997, the Company operated 355 Company-owned restaurants
(256 Old Country Buffets, 96 HomeTown Buffets, and three Roadhouse Grills) in 34
states (including ten new openings and one closing since fiscal year-end 1996
and eight Old Country Buffets converted to HomeTown Buffets). The Company
contemplates that approximately 25 Company-owned restaurants will be opened in
1997. In addition, the Company has 24 franchised restaurants (five Old Country
Buffets and 19 HomeTown Buffets) are in operation in ten states.
The Company's restaurants offer a wide variety of freshly prepared menu
items, including soups, salads, entrees, vegetables, non-alcoholic beverages and
desserts, presented in a self-
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service buffet format in which customers select the items and portions of
their choice. The restaurants' typical dinner entrees include chicken,
carved roast beef and ham, and two or three other hot entrees such as
casseroles, shrimp and fish. Chicken, fish and two or three other entrees
usually are offered at lunch. The Company's restaurants utilize uniform
menus, recipes and ingredient specifications, except for certain variations
adopted in response to regional preferences.
The Company's restaurants range in size from approximately 5,500 to 15,740
square feet, seat from 225 to 600 people, and generally include areas that can
be partitioned to accommodate private meetings and group outings. The decor is
attractive and informal. To date, the Company has located its restaurants
primarily within or adjacent to strip or neighborhood shopping centers. The
Company has 75 freestanding locations, 21 of which it owns. The Company's
restaurants generally are open from 11:00 a.m. to 8:00 p.m. or 9:00 p.m. A
majority of the Company's restaurants also serve breakfast from 8:00 a.m. to
11:30 a.m. on weekends.
FORWARD-LOOKING INFORMATION
Certain statements in this Annual Report and in the Company's press
releases and oral statements made by or with the approval of the Company's
executive officers constitute or will constitute "forward-looking statements."
All forward-looking statements involve risks and uncertainties, and actual
results may be materially different. The following factors are among those that
could cause the Company's actual results to differ materially from those set
forth in such forward-looking statements.
The ability of the Company to open new restaurants depends on a number of
factors, including its ability to find suitable locations and negotiate
acceptable leases and land purchases, its ability to attract and retain a
sufficient number of qualified restaurant managers and the availability of
capital. The proportion of new restaurants that will be free-standing units,
either owned or leased, rather than strip mall locations will depend upon the
availability of suitable mall locations. The costs of restaurant development
and conversion will depend upon the level of contributions from landlords for
leasehold improvements, the actual number of free-standing sites utilized in
such development and whether such sites involve land purchases, the cost of
building supplies and general construction risks and costs. The Company's
ability to generate revenue as currently expected, unexpected expenses and the
need for additional funds to react to changes in the marketplace, including
unexpected increases in personnel costs and food supply costs, may impact
whether the Company has sufficient cash resources to fund its restaurant
development and conversion plans for 1997 and early 1998.
Other factors that could cause actual results of the Company to differ
materially from those contained in any such forward-looking statements include
the success and timing of the continuing integration of the operations of
Buffets and HomeTown Buffet, general economic conditions, the actions of
existing and future competitors, weather factors, the success of conversions,
unforeseen health developments, and regulatory constraints. The Company assumes
no obligation to publicly release the results of any revision or updates to
these forward-looking statements to reflect future events or unanticipated
occurrences.
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SCATTER SYSTEM FORMAT
Menu items generally are presented to diners using a "scatter system"
rather than a conventional straight buffet serving line. Under the scatter
system, six to eight separate food islands or counters are used to present
various courses of each meal to diners (for example, salads on one island,
desserts on another), with diners able to proceed directly to those islands
presenting the menu items they desire at the time. The scatter system promotes
easier food access and has helped reduce the long lines that often occurred
during peak hours in the Company's restaurants utilizing the conventional
straight-line serving format. The scatter system was introduced by the Company
in August 1989 and has been utilized in all of its restaurants developed since
March 1990. In addition, because of the success of the scatter system, the
Company pursued a remodeling program from February 1990 through 1995 with the
goal of converting substantially all of its then-existing restaurants from the
conventional straight-line format to the scatter system. The last restaurant
was converted in 1995.
SMALL BATCH PREPARATION
To ensure freshness, hot foods and bakery items are prepared repeatedly
throughout the day in relatively small batches. Restaurant managers closely
monitor the servicing area for the quality and availability of all items. The
Company believes the freshness achieved through small batch preparation
contributes significantly to the high quality of its food.
ALL-INCLUSIVE PRICE
Depending on the market area, the Company's buffet restaurants
currently charge an all-inclusive price of $5.49 to $6.29 for lunch, Monday
through Saturday, and $6.99 to $9.19 for dinner Monday through Sunday. On
Saturday and Sunday, certain restaurants serve breakfast at prices ranging
from $5.69 to $6.59. Reduced prices are available to senior citizens who
purchase an annual senior club card for $1.00 per year and to children under
the age of ten or twelve depending on the market area. Children's prices for
all meals are $.40 to $.55 per year of their age from two through ten or
twelve. Customers pay prior to entering the dining area and are assisted to
tables by restaurant employees. They may return for second helpings and
additional beverages and desserts without additional charge. This
all-inclusive pricing approach exists at virtually all of the Company's
restaurants, although alternative pricing and service arrangements are
occasionally implemented on a test basis.
RESTAURANT OPERATIONS AND CONTROLS
GENERAL. In order to maintain a consistently high level of food quality
and service in all of its restaurants, the Company has established uniform
operational standards which are implemented by the managers of each restaurant.
All restaurants are required to be operated in accordance with rigorous
standards and specifications relating to the quality of ingredients, preparation
of food, maintenance of premises and employee conduct.
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MENU SELECTION AND PURCHASING. Headquarters personnel prepare and
periodically revise standard recipes and menus and a list of approved
ingredients and supplies based upon the quality, availability, cost and
customer acceptance of various menu items. Food quality is maintained
through centralized coordination with suppliers and frequent restaurant
visits by District Representatives and other management personnel.
The Company purchases its food and beverage inventories and restaurant
supplies from independent suppliers approved by headquarters personnel, who
negotiate quality specifications, delivery schedules and pricing and payment
terms (typically 28 days) directly with the suppliers. Although all supplier
invoices are paid from Company headquarters, restaurant managers place orders
for inventories and supplies with, and receive shipments directly from,
suppliers. Restaurant managers approve invoices before forwarding them to
Company headquarters for payment. To date, the Company has not experienced
any difficulties in obtaining food and beverage inventories or restaurant
supplies, and the Company does not anticipate that any material difficulties
will develop in the foreseeable future.
RESTAURANT MANAGEMENT. Each restaurant typically employs a General
Manager, Kitchen Manager, Service Manager, and one to two assistant managers.
Each of the Company's restaurant general managers has primary responsibility
for day-to-day operations in one of the Company's restaurants, including
customer relations, food service, cost controls, restaurant maintenance,
personnel relations, implementation of Company policies and the restaurant's
profitability. A portion of each general manager's and other restaurant
manager's compensation depends directly on the restaurant's profitability.
In addition, restaurant managers receive stock options under the Company's
current stock option program entitling them to acquire an equity interest in
the Company. The Company believes that its compensation policies have been
important in attracting, motivating and retaining qualified operating
personnel.
Each restaurant general manager reports to a District Representative,
each of whom in turn reports to a regional director (currently 13 persons).
Each regional director reports to one of the Company's Executive Vice
President of Operations.
The Company maintains centralized financial and accounting controls for its
restaurants. On a daily basis, restaurant managers forward customer counts,
sales, labor costs and deposit information to Company headquarters. On a weekly
basis, restaurant managers forward a summarized profit and loss statement, sales
report, and supplier invoices. Payroll data is forwarded every two weeks.
MANAGEMENT TRAINING. The Company has a series of training programs that
are designed to provide managers with the appropriate knowledge and skills
necessary to be successful in their current position. All new managers hired
from outside the Company and hourly employees considered for promotion to
management are required to complete two weeks of classroom training at the
Buffets Training Center. After their two weeks at the Training Center, they
continue their training for six weeks in a Certified Training Restaurant. This
eight-week program provides the basic operating skills and management functions
necessary to shift-manage a Company restaurant. The information covered
includes basic management skills, food
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production, labor management, operating programs and personnel management.
After completing their time in the Certified Training Restaurant, the
managers-in-training continue their development using a structured,
self-paced, Management Skills Training Manual in their assigned restaurant.
Advancement is tied to both current operational performance and
training. Individuals designated for promotion to General Manager attend a
General Manager two-week training program conducted at the Training Center.
This program focuses on advanced management skills with emphasis on team
building and performance accountability. General Managers being considered
for promotion to District Representative complete a one-week training program
for new District Representatives. This training is conducted at the
Company's Training Center and focuses on coaching and development,
performance management, advanced problem solving and action plans.
In addition to these programs, a series of field seminars are conducted
for all existing management covering topics from ServSafe, the Company's food
safety procedures, to management skills.
FOOD QUALITY AND SAFETY. The Company is dedicated to serving fresh,
appealing, highly varied and wholesome food to its guests. This has been
pivotal to maintaining high guest satisfaction and is a primary contributor
to the Company's past success. In recent years, other reputable food service
companies have had their businesses substantially impacted by food-borne
illness incidents, some of which involved third party food suppliers and
transporters outside of their reasonable control. The Company has
implemented rigorous standards, training and other programs to minimize the
risk of such occurrences in its operations. There can be no assurance,
however, that these will be fully effective in preventing all food-borne
illness transmission, or that new illnesses resistant to current precautions
will not develop in the future.
FRANCHISING AND JOINT VENTURES
OLD COUNTRY BUFFET FRANCHISES. There currently are five franchised Old
Country Buffet restaurants in Nebraska and Oklahoma, owned by two
franchisees. The Company's Old Country Buffet franchise agreements generally
have initial terms of 15 years and require the franchisee to pay an initial
fee of $25,000 and continuing royalties equal to four percent of the
franchisee's sales. The Company has an agreement with each franchisee
whereby the Company has options exercisable at various times over the next
several years to repurchase the Old Country Buffet restaurants developed by
such franchisee at a predetermined formula price based principally on
restaurant gross sales.
HOMETOWN BUFFET FRANCHISES. HomeTown Buffet has three franchisees: HTB
Restaurants, Inc. ("HTB Restaurants"), Chi-Chi's, Inc. ("Chi-Chi's") and
Carlton A. Hargrave, Inc. ("Hargrave").
HomeTown Buffet and HTB Restaurants were parties to a multiple unit
agreement providing for the exclusive development of up to 27 restaurants
over a period ending
7
December 31, 1997 in Arizona, Colorado, Idaho, Montana, Nevada, New Mexico,
Utah and Wyoming. Under this agreement, HTB Restaurants' exclusive right to
develop HomeTown Buffet restaurants in the states specified was contingent
upon HTB Restaurants meeting the development schedule set forth in the
agreement. HomeTown Buffet, having concluded that HTB Restaurants was in
breach of its obligation to develop restaurants under the agreement,
terminated the multiple unit agreement. HTB Restaurants made a demand to
arbitrate this matter. In January 1997, HomeTown prevailed in the
arbitration on this issue, and HTB Restaurants' exclusive development rights
under the agreement terminated. HTB Restaurants has, however, filed a motion
to have the decision of the arbitrator vacated or modified. See "Item 3.
Legal Proceedings" below.
With respect to each franchised restaurant, HTB Restaurants and HomeTown
Buffet enter into a separate franchise agreement. HTB Restaurants paid an
initial franchise fee for each new HomeTown Buffet restaurant opened and a
percentage royalty fee based on gross sales. Under its agreements with HTB
Restaurants, HomeTown Buffet has a right of first refusal with respect to the
sale of the HomeTown Buffet restaurants operated by HTB Restaurants and any
transfer of franchise rights granted by HomeTown to HTB Restaurants would
require HomeTown Buffet's consent, which may not unreasonably be withheld.
In May 1993, Chi-Chi's opened a HomeTown Buffet restaurant in Peabody,
Massachusetts. Chi-Chi's opened a second franchised unit in March 1994 in
Wichita, Kansas.
Hargrave operates a single franchised restaurant in Calexico,
California, which opened in December 1993. HomeTown Buffet served as general
contractor for the restaurant and in connection with the construction loaned
Hargrave approximately $150,000. The loan was fully paid in 1994. In April
1995 HomeTown Buffet made a loan to Hargrave in the principal amount of
$100,000 and an additional $100,000 in October 1995 under a promissory note
that permits Hargrave to borrow up to $200,000 in principal amount. The note
provides for interest to be paid at 1% above the announced reference rate of
US Bank of Oregon. All outstanding principal and interest on the note was
due on December 31, 1995 and remain due and payable at this time. HomeTown
Buffet agreed to defer Hargrave's franchise royalty payments, commencing
April 1995.
HomeTown Buffet's standard franchise agreement has a 15-year term (with
two five-year renewal options) and provides for a one-time payment to
HomeTown Buffet of an initial franchise fee and a continuing royalty fee at a
variable rate of between 2% and 4% of gross sales. HomeTown Buffet collects
weekly sales reports from its franchisees as well as periodic and annual
financial statements.
Each HomeTown Buffet franchisee is responsible for selecting the
location for its restaurant, subject to HomeTown Buffet approval. HomeTown
Buffet considers such factors as demographics, competition, traffic volume
and patterns, parking, site layout, size and other physical characteristics
in approving proposed sites. In addition, all site and building plans and
specifications must be approved by HomeTown Buffet.
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Franchisees must operate their HomeTown Buffet restaurants in compliance
with HomeTown Buffet's operating and recipe manuals. Franchisees are not
required to purchase food products or other supplies through HomeTown
Buffet's or the Company's suppliers. Each franchised restaurant is required
to at all times have a designated Manager and Assistant Manager who have
completed the required manager training program. For the opening of a
restaurant, HomeTown Buffet provides consultation and makes its personnel
generally available to a franchisee. In addition, HomeTown Buffet sends a
team of personnel to the restaurant for up to two weeks to assist the
franchisee and its managers in the opening, the initial marketing and
training effort as well as the overall operation of the restaurant.
HomeTown Buffet may terminate a franchise agreement for a number of
reasons, including a franchisee's failure to pay royalty fees when due,
failure to comply with applicable laws, or repeated failure to comply with
one or more requirements of the franchise agreement. Many state franchise
laws limit the ability of a franchisor to terminate or refuse to renew a
franchise. Generally, a franchisee may terminate a franchise agreement only
if HomeTown Buffet violates a material and substantial provision of the
agreement and fails to remedy the violation within a specified period. The
Company does not anticipate that the termination of any single franchise
agreement would have a materially adverse effect on its operations.
Termination by a multiple-unit franchisee of several franchise agreements for
various locations could, however, have a materially adverse effect on the
Company's operations.
JOINT VENTURES. The Company has taken advantage of joint venture
opportunities from time to time, principally as a means of entering new
geographic markets. In November 1988, the Company established Evergreen
Buffets, Inc., a majority owned joint venture subsidiary of the Company, to
develop and operate Old Country Buffet restaurants in Washington and Oregon.
The Company held 90% of the outstanding capital stock of this subsidiary and,
in December 1995, the Company purchased the outstanding capital stock of the
subsidiary held by the minority shareholder in exchange for 92,991 shares of
Company Common Stock and Evergreen Buffets, Inc. thereby became a wholly
owned subsidiary of the Company.
In October 1993, HomeTown Buffet formed two Joint Ventures: HTB
Ventures I, Inc. ("HTB I") and HTB Ventures II, Inc. ("HTB II"). HTB II was
terminated in April 1995 and HTB I was terminated in February 1996. The
Joint Ventures were initially established to provide HomeTown Buffet with a
means of attracting experienced management to help accelerate HomeTown's
expansion into the Midwest. HomeTown Buffet is sole owner of the two
restaurants that were operated by HTB II. Commencing February 29, 1996,
HomeTown Buffet became the sole owner of the ten restaurants that had been
operated by HTB I.
On March 7, 1997, the Company established Dinertainment, Inc. to develop
and operate restaurants that combine Italian-style buffet service with family
oriented games. Initial plans call for one location to be opened in 1997 in
the State of Ohio. The Company holds 80% of the outstanding capital stock of
the subsidiary.
The Company at present is not actively seeking to grant additional
franchises or enter into additional joint ventures relating to its Old Country
Buffets or HomeTown Buffet restaurants.
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COMPETITION
The food service industry is highly competitive. Menu, price, service,
convenience, location and ambiance are all important competitive factors,
with the relative importance of many such factors varying among different
segments of the consuming public.
By providing a wide variety of food and beverages at reasonable prices
in an attractive and informal environment, the Company seeks to appeal to a
broad range of value-oriented consumers. The Company believes that its
primary competitors in this industry segment are other buffet and cafeteria
restaurants, and traditional family and casual dining restaurants with full
menus and table service. The Company believes that its success to date has
been due to its particular approach combining pleasant ambiance, high food
quality, breadth of menu, cleanliness and reasonable prices with satisfactory
levels of service and convenience.
Sales are seasonal, with a lower percentage of annual sales occurring in
most of its current market areas during the winter months. Sales may also be
affected by unusual weather patterns or matters of public interest that
compete for the customers' attention.
ADVERTISING AND PROMOTION
To date the Company has relied primarily on customers' word-of-mouth
recommendations to promote its business. As a result, prior to 1993, annual
advertising costs never exceeded 1.1% of restaurant sales, such costs being
incurred primarily for menu cards, brochures and a limited amount of local
newspaper, radio and television advertising. Based on favorable results, the
Company increased its rate of expenditure on advertising to 1.3% of
restaurant sales in 1994, primarily for increased radio and television
advertising. The Company lowered its advertising spending to .9% of
restaurant sales in 1995 due to the decision in the fourth quarter of 1994 to
use those dollars in food and labor to better serve the guest. In 1996,
advertising costs represented 1.2% of restaurant sales. The Company expects
to spend approximately 1.4% of restaurant sales on advertising in 1997, which
expectation may be impacted by the effectiveness of such advertising and
production costs. The Company is prepared to increase its advertising
expenditures in the future if it determines that further increases are likely
to generate sufficient additional revenues. The Company believes its senior
citizen discount program has encouraged many senior citizens to eat at the
Company's restaurants.
REGULATION
The Company's restaurants must be constructed to meet federal, state and
local building and zoning requirements and must be operated in accordance
with state and local regulations relating to the preparation and serving of
food. The Company is also subject to various federal and state labor laws
which govern its relationships with its employees, including those relating
to minimum wages, overtime and other working conditions. Environmental
regulations have not had a material effect on the operations of the Company.
The Company to date has been successful in
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obtaining all necessary permits and licenses and complying with applicable
regulations, and does not expect to encounter any material difficulties in
the future with respect to these matters.
TRADEMARKS
In June 1985, the Company obtained a federal trademark registration
covering the words "Old Country Buffet." The Company has subsequently
obtained trademark protection for additional marks used in its business,
including the trademarks of HomeTown Buffet in connection with the Merger.
Generally, federal registration of a trademark gives the registrant the
exclusive use of the trademark in the United States in connection with the
goods or services associated with the trademark, subject to the common law
rights of any other person who began using the trademark (or a confusingly
similar mark) prior to the date of federal registration. Because of the
common law rights of such a pre-existing restaurant in certain portions of
Colorado, the Company's restaurants in that state use the name "Country
Buffet." The Company intends to take appropriate steps to develop and
protect its marks.
EMPLOYEES
As of February 26, 1997, the Company employed approximately 24,100
persons, including 40 supervisory and administrative, 1,590 managerial, and
22,470 restaurant employees. Approximately 66% of the Company's restaurant
employees work part-time. Relations with employees have been satisfactory
and no work stoppages due to labor disputes have occurred. The Company
anticipates that its work force will increase by more than 5% by the end of
1997, subject to unexpected turn-over levels, availability of qualified
personnel and changes in restaurant development plans.
RESTAURANT DEVELOPMENT
GENERAL. The Company opened 41 restaurants and closed eight in 1996 and
expects to open approximately 25 restaurants in 1997, of which ten were open
as of March 15, 1997. One restaurant was closed in Euclid, Ohio in 1997. As
of March 25, 1997, the Company has converted eight existing Old Country
Buffets restaurants to HomeTown Buffet restaurants.
The ability of the Company to open new restaurants depends on a number
of factors, including its ability to find suitable locations and negotiate
acceptable leases and land purchases, its ability to attract and retain a
sufficient number of qualified restaurant managers, and the availability of
capital. The Company actively and continuously attempts to identify and
negotiate leases and land purchases for additional new locations, and expects
that it will be able to achieve its intended development schedule for 1997,
though there is no assurance that this will be the case.
GEOGRAPHIC EXPANSION STRATEGY. The Company initially concentrated its
restaurant development in the Midwest, and then after several years expanded
to other regions of the country. The Merger strengthened the Company's
presence in California and other key markets.
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The Company currently operates in 34 states. The Company attempts to cluster
its restaurants in geographic areas to achieve economies of scale in costs of
supervision, marketing and purchasing.
SITE SELECTION CRITERIA. The primary criteria considered by the Company
in selecting new locations are a high level of customer traffic, convenience
to both lunch and dinner customers in demographic groups (such as families
and senior citizens) that tend to favor the Company's restaurants, and the
occupancy cost of the proposed restaurant. The Company has found that these
criteria frequently are satisfied by well-located strip shopping centers that
benefit from cotenancy with strong national retailers and visibility to high
traffic roads. All but 110 of the Company's current restaurants are located
in such centers. Thirty-five of the other 110 restaurants are located in
regional or other enclosed shopping malls and 75 are located in free-standing
structures. The Company will pursue free-standing locations only if the
projected return on investment falls within acceptable ranges. The Company
typically requires a population density of at least 100,000 within five miles
of each new location, and currently is concentrating its development efforts
on urban areas that can accommodate a number of Company restaurants. Because
Old Country Buffet or HomeTown Buffet restaurants typically draw a
significant volume of customers, and because of the Company's financial
strength, the Company often has been able to negotiate favorable lease terms.
RESTAURANT CONSTRUCTION. In an effort to better control costs and
improve quality, the Company is closely involved in the construction of its
restaurants, and also in the acquisition and installation of fixtures and
equipment. The Company generally acts as its own general contractor, using
restaurant designs prepared by the Company's own architectural staff. The
Company normally satisfies the equipment and other restaurant supply needs of
its new restaurants from inventory acquired directly from manufacturers and
stored at the Company's warehouse in Eden Prairie, Minnesota. Restaurants
located in shopping centers typically open approximately 11 weeks after
construction begins, while free-standing restaurants typically open
approximately 17 weeks after construction begins. The average cost to
develop a buffet restaurant located in a shopping center during fiscal 1996
was approximately $679,000 for leasehold improvements (net of landlord
contributions) and approximately $614,000 for equipment and furnishings.
Free-standing owned restaurants developed in 1996 entailed an average land
cost of $700,000 and a average building cost of $1,364,000. It is expected
the increased development of free-standing restaurants will increase the
average cost per unit and associated capital requirements in 1997.
ITEM 2. PROPERTIES
The Company's executive offices are located in approximately 36,000
square feet of leased space in Eden Prairie, Minnesota, for a term ending
October 31, 1998. The Company has the option to extend the lease or seek
other alternatives, including the development of a corporate headquarters in
Eagan, MN on a parcel of land purchased in 1995 for this potential use. The
Company also leases a 22,200 square foot warehouse and training center in
Eden Prairie, Minnesota for a term ending January 31, 1998. The lease has
four one-year options that the Company could exercise to extend the lease
through January 31, 2002. The Company owns a 72,000 square foot facility in
Marshfield, Wisconsin that it utilizes for the fabrication of cabinetry and
fixtures for its restaurants. Until 2001, the Company remains obligated
under certain leases
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related to approximately 32,000 square feet of office space in San Diego,
California, previously utilized by HomeTown Buffet, Inc. as its headquarters.
Over 19,000 square feet have been sublet to third parties and the Company
continues to utilize approximately 6,000 square feet for regional office
purposes.
Most of the Company's restaurants are located in leased facilities,
although the Company will consider land purchases for free-standing
restaurants in instances where a more acceptable return on investment
justifies the additional investment. Seventy-five restaurants are located in
free-standing buildings, 35 are located in regional or other enclosed
shopping malls, and the rest are located in strip or neighborhood shopping
centers. Most of the leases provide for a minimum annual rent and additional
rent calculated as a percentage of restaurant sales, generally 3% to 5%, if
the rents so calculated exceed the minimum. The initial terms of the
Company's leases generally range from ten to fifteen years, and the leases
usually have renewal options for additional periods of five to ten years.
The Company owns substantially all of the equipment, furniture and
fixtures in its restaurants. Leasehold improvements made by the Company in
leased premises usually become the property of the landlord upon expiration
or termination of the lease. To date, most of the Company's strip mall
landlords have agreed to bear a portion of the cost of leasehold improvements
by way of either rent concessions or cash contributions.
ITEM 3. LEGAL PROCEEDINGS
IN RE BUFFETS, INC. SECURITIES LITIGATION, United States District Court
for the District of Minnesota, Master No. 3-94-1447. This action is a
consolidation of four separate lawsuits. The first lawsuit was commenced by
ZSA Asset Allocation Fund and ZSA Equity Fund on or about November 7, 1994.
Three other substantially similar actions were filed shortly thereafter by
alleged shareholders Marc Kushner, Trustee for Service Lamp Corp. Profit
Sharing Plan, Jerrine Fernandes, and John J. Nuttall. By Pretrial Order No.
1, entered in early January 1995, the District Court ordered that the four
lawsuits be consolidated into the single pending action and that plaintiffs
serve and file a Consolidated Amended Class Action Complaint (the
"Complaint"), which was served on or about January 31, 1995. The Court
ordered the dismissal of the Complaint upon motion by the defendants, but
granted plaintiffs leave to replead. Plaintiffs filed their Second Amended,
Consolidated Class Action Complaint (the "Second Complaint") on December 11,
1995. Defendants moved to dismiss the Second Complaint. On September 11,
1996, the District Court dismissed the Second Complaint without prejudice,
with leave to plaintiffs to replead. On November 8, 1996, plaintiffs filed
their Third Amended, Consolidated Class Action Complaint (the "Third
Complaint"). Defendants have moved to dismiss the Third Complaint, but
defendants' motion has not yet been heard by the District Court.
The Third Complaint is against the Company and several of its current
and former officers and directors. In the Third Complaint, plaintiffs seek
to represent a putative class consisting of all persons and entities
(excluding defendants and certain others) who purchased shares of the
Company's Common Stock during the period commencing October 26, 1993 and
ending October 25, 1994 (the "Class Period"). The Third Complaint alleges
that the defendants made
13
misrepresentations and omissions of material fact during the Class Period
with respect to the Company's operations and restaurant development
activities, as a result of which the price of the Company's stock allegedly
was artificially inflated during the Class Period. The Third Complaint
further alleges that certain defendants made sales of Common Stock of the
Company during the Class Period while in possession of material undisclosed
information about the Company's operations and restaurant development
activities. The Third Complaint alleges that the defendants' conduct
violated the Securities Exchange Act of 1934 and seeks compensatory damages
in an unspecified amount, prejudgment interest, and an award of attorneys'
fees, costs and expenses.
Management of the Company believes that the action is without merit and
intends to defend it vigorously. Although the outcome of this proceeding
cannot be predicted with certainty, the Company's management believes that
while the outcome may have a material effect on earnings in a particular
period, the outcome should not have a material effect on the financial
condition of the Company.
ACTIONS INVOLVING HTB RESTAURANTS, INC., SUMMIT FAMILY RESTAURANTS,
INC., AND CKE RESTAURANTS, INC. On August 9, 1996, HTB Restaurants, Inc., a
franchisee of HomeTown Buffet, along with its parent entities, Summit Family
Restaurants, Inc. and CKE Restaurants, Inc. (the "Plaintiffs"), filed suit
against the Company and HomeTown Buffet in United States District Court for
the District of Utah, Central Division. The suit alleges, among other
things, that the Company and HomeTown Buffet illegally conspired to restrict
competition and to prevent the Plaintiffs from developing additional HomeTown
Buffet restaurants under the multiple unit agreement between HomeTown Buffet
and HTB Restaurants (the "Multiple Unit Agreement"). The continued viability
of the Multiple Unit Agreement, which provides HTB Restaurants with exclusive
HomeTown Buffet restaurant development rights in the states of Arizona,
Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming, was the
subject of an arbitration proceeding between HomeTown Buffet and HTB
Restaurants (see below). The suit includes claims against the Company and
HomeTown Buffet for violations of both federal and state antitrust laws,
claims for unfair business practices, and claims for tortious interference
with contract and economic relations. The suit also alleges claims against
HomeTown Buffet for breach of contract and breach of the covenant of good
faith and fair dealing and sought to enjoin the merger between the Company
and HomeTown. On September 19, 1996, the District Court denied Plaintiffs'
motion for preliminary injunctive relief. The Company and HomeTown Buffet
intend to vigorously defend the lawsuit.
HomeTown Buffet previously gave HTB Restaurants notice that it had
breached its obligation to develop restaurants under the Multiple Unit
Agreement and that, therefore, HTB Restaurants' exclusive development rights
thereunder could be terminated. HTB Restaurants and its parent company,
Summit Family Restaurants, Inc. (collectively, the "Claimants"), commenced
binding arbitration proceeding against HomeTown Buffet before the American
Arbitration Association. The Statement of Claim alleged that termination of
the Multiple Unit Agreement was wrongful or improper and requested that
HomeTown Buffet be precluded from terminating HTB Restaurants' exclusive
rights under the Multiple Unit Agreement and/or money damages of up to $20
million. HomeTown Buffet denied Claimants' allegations. The matter was
heard in
14
Salt Lake City, Utah in November and December 1996, and in January 1997,
before an arbitrator appointed by the American Arbitration Association. On
January 31, 1997, the arbitrator issued his Award and held that HomeTown
Buffet had not breached any of its obligations to Claimants or acted in bad
faith, and that therefore HomeTown Buffet was entitled to terminate the
Multiple Unit Agreement. The arbitrator also rejected the Claimants' request
for money damages. In February 1997, the Claimants filed a motion in the
United States District Court for the District of Utah, Central Division,
seeking to vacate or modify the Award of the arbitrator. HomeTown Buffet
intends to vigorously oppose the motion.
The Company and HomeTown believe that the suit is without merit, and
intend to vigorously defend the remaining claims under the lawsuit. Although
the outcome of this proceeding cannot be predicted with certainty the
Company's management believes that the outcome should not have a material
effect on the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year covered by this report.
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers are elected annually by the Board of Directors to
serve until the next annual meeting of the Board. The following table
contains information regarding the present executive officers, and all
persons chosen to become executive officers, of the Company.
Executive Principal Occupation and
Officer Business Experience
Name and Age Since For Last Five Years
- --------------------------------------------------------------------------------
Glenn D. Drasher (45) 1997 Executive Vice President of Marketing
of the Company since January 1997;
Executive Vice President of Country
Kitchen International, family dining
restaurants, June 1996 to January
1997; Vice President of Marketing of
Country Kitchen, September 1993 to
June 1996; Senior Vice President of
Marketing of Chi-Chi's, Inc., Mexican
casual restaurants, 1983 to September
1993.
15
Executive Principal Occupation and
Officer Business Experience
Name and Age Since For Last Five Years
- --------------------------------------------------------------------------------
David Goronkin (34) 1996 Executive Vice President of Operations
for the Company since September 1996;
Vice President of Operations of
HomeTown Buffet, May 1996 to September
1996; Director of Operations of
HomeTown Buffet, November 1994 to May
1996; various positions, HomeTown
Buffet, 1989 to November 1994.
Clark C. Grant (45) 1986 Executive Vice President of Finance
and Administration since December 1994
and Treasurer of the Company since May
1986; Vice President of Finance of the
Company, January 1991 to December 1994.
Roe H. Hatlen (53) 1983 Founder and Chairman and Chief Executive
Officer of the Company since December
1983; President of the Company, May
1989 to September 1992.
Thomas F. Hubbard (45) 1996 Executive Vice President of Real Estate
and Development of the Company since
September 1996; President of HomeTown
Development and Construction, Inc.
since 1995; Vice President of
Construction and Development for
HomeTown Buffet since 1992; Director
of Construction for HomeTown Buffet
from 1991 through 1992.
16
Executive Principal Occupation and
Officer Business Experience
Name and Age Since For Last Five Years
- --------------------------------------------------------------------------------
Kerry A. Kramp (41) 1996 President of the Company since September
1996; President of HomeTown Buffet
from December 1995 to September 1996
and its Chief Operating Officer since
May 1995; Vice President of Operations
of HomeTown Buffet from February 1992
to December 1995; Director of
Specialty Foods for Geo. A. Hormel
Company from 1988 to February 1992.
Jean C. Rostollan (45) 1991 Executive Vice President of Purchasing
since September 1996; Executive Vice
President of Development and
Purchasing, January 1995 to September
1996; Assistant Secretary of the
Company since February 1992; Vice
President of Purchasing and
Distribution of the Company, September
1992 to December 1994; Vice President
of Purchasing and Marketing of the
Company, January 1991 to August 1992.
C. Dennis Scott (50) 1996 Co-Founder of the Company; Vice Chairman
and Chief Operating Officer of the
Company since September 1996; Founder
of HomeTown Buffet; Director and Chief
Executive Officer of HomeTown Buffet
since 1989.
17
Executive Principal Occupation and
Officer Business Experience
Name and Age Since For Last Five Years
- --------------------------------------------------------------------------------
Michael C. Shrader (53) 1996 Vice President of Human Resources of the
Company since September 1996; Vice
President of Human Resources of
HomeTown Buffet, January 1996 to
September 1996; Director of Human
Resources of HomeTown Buffet, August
1995 to January 1996; Selection
Analyst, the Gallup Organization,
February 1995 to August 1995;
Self-employed business consultant,
March 1993 to February 1995; Vice
President of Human Resources of Red
Robin International, Inc., September
1987 to March 1993.
Rick H. White (39) 1993 Executive Vice President of Operations
of the Company since December 1994;
Vice President of Operations of the
Company, September 1992 to December
1994; Regional Director of the
Company, October 1990 to August 1992.
Neal L. Wichard (54) 1996 Senior Vice President of Real
Estate of the Company since September
1996; Vice Chairman of HomeTown
Buffet, October 1995 to September
1996; Secretary and Director of
HomeTown Buffet, July 1990 to
September 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information set forth under the caption "Market for the Company's
Common Stock and Related Stockholder Matters" on page 23 of the 1996 Annual
Report is incorporated herein by reference.
18
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information set forth under the caption, "Selected Consolidated Financial
Data" on page 4 of the 1996 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 5 through 9
of the Company's 1996 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Except for KPMG Peat Marwick LLP's opinion relating to the consolidated
financial statements of HomeTown Buffet and its subsidiaries as of January 3,
1996 and for the years ended December 28, 1994 and January 3, 1996, the
information required under this Item 8 is incorporated herein by reference to
pages 10 through 23 of the Company's 1996 Annual Report. KPMG Peat Marwick
LLP's opinion appears at page 25 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference to the sections captioned "Number and
Election of Directors," "Certain Information Regarding Board of Directors of the
Company" and "Beneficial Ownership Reporting" in the Proxy Statement for the
Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days of the close of the fiscal year ended January 1,
1997. For information concerning executive officers, see Item 4A of this Annual
Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference to the section captioned "Compensation of
Executive Officers" in the Proxy Statement for the Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120
days of the close of the fiscal year ended January 1, 1997; provided, however,
that the subsection thereof entitled "Compensation Committee Report on Executive
Compensation" is not incorporated herein by reference.
19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference to the similarly captioned section in the
Proxy Statement for the Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission within 120 days of the close of the fiscal
year ended January 1, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference to the section captioned "Certain
Transactions" in the Proxy Statement for the Annual Meeting of Shareholders to
be filed with the Securities and Exchange Commission within 120 days of the
close of the fiscal year ended January 1, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report.
1. Financial Statements
Consolidated Balance Sheets at January 3, 1996 and January 1,
1997*
Consolidated Statements of Operations for the Years Ended
December 28, 1994, January 3, 1996 and January 1, 1997*
Consolidated Statements of Stockholders' Equity for the Years
Ended December 28, 1994, January 3, 1996 and January 1, 1997*
Consolidated Statements of Cash Flows for the Years Ended
December 28, 1994, January 3, 1996, and January 1, 1997*
Notes to Consolidated Financial Statements*
Independent Auditors' Report of Deloitte & Touche LLP*
Independent Auditor's Report of KPMG Peat Marwick LLP (See page
25 of this Annual Report on Form 10-K)
- ----------------------
*Incorporated herein by reference to pages 10 through 23 of the
Company's 1996 Annual Report
2. Supplemental Financial Schedules
None
20
3. Exhibits
2 Agreement and Plan of Merger by and among the Company,
Country Delaware, Inc., and HomeTown Buffet (1)
3(a) Composite Amended and Restated Articles of Incorporation.
(2)
3(b) By-laws of the Company. (3)
3(c) Form of Rights Agreement, dated as of October 24, 1995
between the Company and the American Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agreement").
(4)
4(a) Indenture dated as of November 27, 1995 related to 7%
Convertible Subordinated Notes of HomeTown Buffet due
2002. (5)
4(b) First Supplemental Indenture dated as of September 20,
1996 among the Company, HomeTown Buffet and Wells Fargo
Bank, N.A. (6)
10(a) 1985 Stock Option Plan. (7)*
10(b) 1988 Stock Option Plan. (8)*
10(c) 1995 Stock Option Plan. (9)*
10(d) Second Amended and Restated Credit Agreement by and
between the Company and First Bank National Association.
(10)
10(e) Amendment No. 1 dated as of September 20, 1996 to Second
Amended and Restated Credit Agreement by and between the
Company and First Bank National Association. (11)
10(f) Management Bonus Program.*
10(g) 1991 HomeTown Buffet Stock Option Plan, as amended. (12)*
10(h) Consolidating Promissory Note issued by Kerry A. Kramp to
the Company and related Stock Pledge Agreement, each
dated December 31, 1996.*
10(i) Promissory Note issued by Thomas E. Hubbard to HomeTown
Buffet and related Pledge Agreement, each dated
November 9, 1993. (13)*
21
10(j) Promissory Note issued by Thomas E. Hubbard to HomeTown
Buffet and related Pledge Agreement, each dated
August 13, 1996.*
10(k) Promissory Note issued by Michael Shrader to HomeTown
Buffet and related Pledge Agreement, each dated August 7,
1996.*
10(l) Employment Agreement with Kerry A. Kramp dated
September 20, 1996. (14)*
10(m) Multiple Unit Agreement dated October 9, 1991 between HTB
Restaurants, Inc. and HomeTown, and amendments thereto.
(15)
10(n) Form of Franchise Agreement. (16)
10(o) Letter Agreement regarding severance obligations.*
11 Statement Regarding Computation of Per Share Earnings
(Loss).
13 Annual Report to Shareholders for the fiscal year ended
January 1, 1997.
21 Subsidiaries of the Company.
23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
- ----------------------------
* Management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
(1) Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K
dated June 3, 1996.
(2) Incorporated by reference to Exhibits to Registration Statement on Form S-3
dated June 2, 1993 (Registration No. 33-63694).
(3) Incorporated by reference to Exhibits to Annual Report on Form 10-K for
fiscal year ended December 29, 1993.
(4) Incorporated by reference to Exhibits to Report on Form 8-K, dated October
24, 1995.
22
(5) Incorporated by reference to Exhibit 4.6 to Registration Statement on Form
8-A dated November 7, 1996.
(6) Incorporated by reference to Exhibit 4.7 to Registration Statement on Form
8-A dated November 7, 1996.
(7) Incorporated by reference to Exhibits to Registration Statement on Form S-1
dated October 25, 1985 (Registration No. 33-171).
(8) Incorporated by reference to Exhibits to Annual Report on Form 10-K for
fiscal year ended December 30, 1992.
(9) Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q for
the quarter ended October 4, 1995.
(10) Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q
for the quarter ended April 24, 1996.
(11) Incorporated by reference to Exhibit 4.5 to Registration Statement on
Form 8-A dated November 7, 1996.
(12) Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for
the period ended April 24, 1996 (File No. 0-22402).
(13) Incorporated by reference to Exhibits to HomeTown Buffet's Registration
Statement on Form S-1, as amended, effective March 23, 1994 (Registration
No. 33-75810).
(14) Incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report
on Form 10-Q for the period ended October 9, 1996.
(15) Incorporated by reference from Exhibits to HomeTown Buffet's Registration
Statement on Form S-1, as amended, effective September 22, 1993
(Registration No. 33-67326). Confidential treatment for a portion of this
agreement has been granted to HomeTown by the Commission.
(16) Incorporated by reference from Exhibits to HomeTown Buffet's Registration
Statement on Form S-1, as amended, effective September 22, 1993
Registration No. 33-67326.
(b) Reports on Form 8-K.
The Company filed no current Reports on Form 8-K during the fourth quarter
of the fiscal year ended January 1, 1997.
23
ANNUAL REPORT AND PROXY STATEMENT
With the exception of the matters specifically incorporated herein by
reference to the Company's 1996 Annual Report to Shareholders or to the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
May 13, 1997, no other portions of the 1996 Annual Report to Shareholders or
Proxy Statement are deemed to be filed as part of this Annual Report on Form
10-K.
24
INDEPENDENT AUDITORS' REPORT
The Board of Directors
HomeTown Buffet, Inc.:
We have audited the consolidated balance sheet of HomeTown Buffet, Inc. and
subsidiaries as of January 3, 1996, and the related consolidated statements
of income, stockholders' equity (deficit), and cash flows for each of the
years in the two-year period ended January 3, 1996 (not presented herein).
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HomeTown
Buffet, Inc. and subsidiaries as of January 3, 1996, and the results of
their operations and their cash flows for each of the years in the two-year
period ended January 3, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
San Diego, California
February 16, 1996, except as to note 6 to the consolidated
financial statements which is as of March 8, 1996
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Buffets, Inc.
March 31, 1997 By /s/ Roe H. Hatlen
- --------------- --------------------------
Date Roe H. Hatlen
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/ Roe H. Hatlen Chairman of the Board March 31,1997
- ---------------------------- and Chief Executive
Roe H. Hatlen Officer (Principal
Executive Officer)
/s/ Clark C. Grant Executive Vice President March 31, 1997
- ---------------------------- of Finance and
Clark C. Grant Administration and
Treasurer
(Principal Financial
Officer)
/s/ Marguerite C. Nesset Vice President of March 31, 1997
- ---------------------------- Accounting and
Marguerite C. Nesset Controller (Principal
Accounting Officer)
/s/ C. Dennis Scott Vice Chairman of March 31, 1997
- ---------------------------- the Board, Chief Operating
C. Dennis Scott Officer and Director
/s/ Walter R. Barry, Jr. Director March 31, 1997
- ----------------------------
Walter R. Barry, Jr.
/s/ Christian F. Horn Director March 31, 1997
- ----------------------------
Christian F. Horn
/s/ Raymond A. Lipkin Director March 31, 1997
- ----------------------------
Raymond A. Lipkin
/s/ Alan S. McDowell Director March 31, 1997
- ----------------------------
Alan S. McDowell
/s/ David Michael Winton Director March 31, 1997
- ----------------------------
David Michael Winton
EXHIBIT INDEX
EXHIBITS
2 Agreement and Plan of Merger by and among
the Company, Country Delaware, Inc.,
and HomeTown Buffet . . . . . . . . . . . . . .Incorporated by Reference
3 (a) Composite Amended and Restated Articles
of Incorporation. . . . . . . . . . . . . . . .Incorporated by Reference
3(b) By-laws of the Company. . . . . . . . . . . . .Incorporated by Reference
3(c) Form of Rights Agreement, dated as of
October 24, 1995 between the Company
and the American Stock Transfer & Trust
Company, as Rights Agent (the "Rights
Agreement"). . . . . . . . . . . . . . . . . . Incorporated by Reference
4(a) Indenture dated as of November 27, 1995
related to 7% Convertible Subordinated Notes
of HomeTown Buffet due 2002 . . . . . . . . . .Incorporated by Reference
4(b) First Supplemental Indenture dated as of
September 20, 1996 among the Company,
HomeTown Buffet and Wells Fargo Bank, N.A . . .Incorporated by Reference
10(a) 1985 Stock Option Plan. . . . . . . . . . . . .Incorporated by Reference
10(b) 1988 Stock Option Plan. . . . . . . . . . . . .Incorporated by Reference
10(c) 1995 Stock Option Plan. . . . . . . . . . . . .Incorporated by Reference
10(d) Second Amended and Restated Credit
Agreement by and between the Company
and First Bank National Association . . . . . .Incorporated by Reference
10(e) Amendment No. 1 dated as of September 20, 1996
to Second Amended and Restated Credit
Agreement by and between the Company and
First Bank National Association . . . . . . . .Incorporated by Reference
10(f) Management Bonus Program. . . . . . . . . . . . . . Filed Electronically
10(g) 1991 HomeTown Buffet Stock Option Plan,
as amended. . . . . . . . . . . . . . . . . . .Incorporated by Reference
10(h) Promissory Note issued by Kerry A. Kramp to the
Company and related Stock Pledge Agreement,
each dated December 31, 1996. . . . . . . . . . . . Filed Electronically
10(i) Promissory Note issued by Thomas E. Hubbard to
HomeTown Buffet and related Pledge Agreement,
each dated November 9, 1993.. . . . . . . . . .Incorporated by Reference
10(j) Promissory Note issued by Thomas E. Hubbard to
HomeTown Buffet and related Pledge Agreement,
each dated August 13, 1996. . . . . . . . . . . . . Filed Electronically
10(k) Promissory Note issued by Michael Shrader to
HomeTown Buffet and related Pledge Agreement,
each dated August 7, 1996.. . . . . . . . . . . . . Filed Electronically
10(l) Employment Agreement with Kerry A. Kramp
dated September 20, 1996. . . . . . . . . . . .Incorporated by Reference
10(m) Multiple Unit Agreement dated October 9, 1991
between HTB Restaurants, Inc. and HomeTown,
and amendments thereto. . . . . . . . . . . . .Incorporated by Reference
10(n) Form of Franchise Agreement.. . . . . . . . . .Incorporated by Reference
10(o) Letter agreement regarding severance obligations . .Filed Electronically
11 Statement Regarding Computation of Per
Share Earnings (Loss). . . . . . . . . . . . . . . .Filed Electronically
13 Annual Report to Shareholders for the
fiscal year ended January 1, 1997 . . . . . . . . . Filed Electronically
21 Subsidiaries of the Company.. . . . . . . . . . . . Filed Electronically
23(a) Consent of Deloitte & Touche LLP. . . . . . . . . . Filed Electronically
23(b) Consent of KPMG Peat Marwick LLP. . . . . . . . . . Filed Electronically
27 Financial Data Schedule.. . . . . . . . . . . . . . Filed Electronically