Case Study: Frisch's Restaurants, Inc. and Subsidiaries

C 9-4. Frischs Restaurants, Inc and Subsidiaries

Selected data from the 2010 annual report of Frischs Restaurants, Inc. are given as per the consolidated balance sheet and the consolidated statement of earnings (Gibson, 2013).

Required:

a. Compute the following for 2010 and 2009:

1. Degree of financial leverage

2. Price/earnings ratio

3. Percentage of earnings retained

4. Dividend yield

5. Common stock-authorized

6. Common stock-issued

7. Treasury stock

8. Common stock outstanding

9. Book value per share

b. Comment on the ratios computed under (a)

c. 1. Identify special items on the income statement for the years 2010 and 2009.

2. How would these special items be removed from net earnings?

CASE 9-4 FAMILY STYLE Selected data from the 2010 annual report of Frisch's Restaurants, Inc. follow: FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES* CONSOLIDATED BALANCE SHEET (In Part) June 1,2010 June 2, 2009 Shareholders' Equity Capital stock Preferred stock-authorized, 3,000,000 shares without par value; none issued Common stock-authorized, 12,000,000 shares without par value; issued 7,585,764 and 7,582,347 shares-stated value-$1 7,585,764 7,582,347 (continuea) *"The registrant, Frisch's Restaurants, Inc. (together with its wholly owned subsidiaries, referred to as the "Com- pany" or the "Registrant"), is a regional company that operates full service family-style restaurants under the name Frisch's Big Boy." 10-K Source: Frisch's Restaurants, Inc. 2010 10-K CASE 9-4 CONTINUED) June 1, 2010 June 2, 2009 64,721,328 72,303,67.5 (7,856,427) 6,634,422) 82,306,488 75,672,066 (34,559,851)(33,598,597) 114,377,144 $189,252,646 $176,975,948 Additional contributed capital 65,222,878 72,808,64.2 Accumulated other comprehensive loss Retained earnings 89,701,652 81,845,225 Less cost of treasury stock (2,525,174 and 2,482,233 shares) Total shareholders' equity Total liabilities and shareholders' equity 120,094,016 FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS Three years ended June 1,2010 2010 2009 2008 $292,872,174$297,860,951 $299,562,346 Sales Cost of sales Food and paper Payroll and related Other operating costs Gross profit Administrative and advertising Franchise fees and other revenue Gains on sale of assets Litigation settlement Impairment of long-lived assets Operating profit Interest expense Earnings before income taxes 99,651,072 97,918,797 64,987,881 262,557,750 30,314,424 15,127,522 (1,266,368) 105,859,982 97,678,114 66,082,244 269,620,340 28,240,611 14,637,94.3 (1,281,940) (1,163,173) (889,579) 106,895,380 98,347,394 66,382,911 271,625,685 27,936,661 14,130,762 (1,277,707) (524,354) 16,453,270 1,748,542 14,704,728 16,937,360 2,000,442 14,936,918 4,660,093 10,947,867 2,359,369 8,588,498 Income taxes Current Federal Less tax credits State and municipal 5,469,816 (904,475) 582,012 (2,505,066) 2,642,287 $ 9,998,931$ 10,720,855$ 5,946,211 6,035,179 (951,592) 579,963 (957,753) 4,705,797 4,626,721 (1,010,762) 406,403 193,701 4,216,063 Deferred NET EARNINGS Earnings per share (EPS) of common stock: Total income taxes 1.96 $ 1.93 $ Basic net earnings per share 2.10$ 2.08 $ 1.16 1.14 Diluted net earnings per share Fiscal years 2010 and 2009 each contained 52 weeks consisting of 364 days. Fiscal year 2008 contained 53 weeks consisting of 371 days. Other selected data: Year Ended June 2, 2009 $ 28.00 $2,449,347 $0.48 June 1,2010 1. Market price per common share 2. Dividends paid in total 3. Dividends paid per share $20.87 $2,603,767 $ 0.51