[DESCRIPTION]COOKER RESTAURANT CORPORATION FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 ____________________ 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 July 4, 1999 | | 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: 1-13044 COOKER RESTAURANT CORPORATION (Exact Name of Registrant as Specified in its Charter) OHIO				 62-1292102 (State or Other Jurisdiction of	 (I.R.S. Employer Identification No.) Incorporation or Organization) 5500 Village Boulevard, West Palm Beach, Florida 33407 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code:	 (561) 615-6000 Indicate by check |x| 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 requirements for the past 90 days. |x| | | Yes		 No 5,986,000 Common Shares, without par value (number of common shares outstanding as of the close of business on August 13, 1999) 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. COOKER RESTAURANT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (In Thousands) July 4, January 3, ASSETS		 1999		1999 -------- ---------- Current Assets: Cash and cash equivalents	 $ 2,092	 $	 2,520 Inventory		 1,481		 1,650 Land held for sale		 56		 55 Prepaid and other current assets		 1,422		 1,005 -------- ---------- Total current assets		 5,051		 5,230 Property and equipment		 142,374		144,025 Restricted Cash		 1,822		 1,600 Other assets		 2,352		 2,412 Total assets	 $151,599	 $	153,267 				 ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt	 $ 6,785	 $	 6,015 Accounts payable		 3,188		 3,357 Accrued liabilities		 5,980		 7,327 Income taxes payable		 396		 - -------- ---------- Total current liabilities		 16,349		 16,699 Long-term debt		 81,248		 82,385 Deferred income taxes		 3,346		 3,406 Other liabilities		 235		 625 -------- ---------- Total liabilities	 $101,178	 $	103,115 Shareholders' equity: Common Shares-without par value: authorized 30,000,000 shares; issued 10,548,000 at July 4, 1999 and January 3, 1999	 62,416		 62,460 Retained earnings		 36,601		 34,895 Treasury stock, at cost, 4,562,000 and 4,371,000 shares at July 4, 1999 and January 3, 1999, respectively		 (48,596)		(47,203) 				 -------- ---------- Total shareholders' equity		 50,421		 50,152 Commitments and contingencies 	 $151,599	 $	153,267 ======== ========== See accompanying notes to condensed consolidated financial statements 3 COOKER RESTAURANT CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In Thousands Except Per Share Data) Three Months Ended Six Months Ended 		 July 4,	June 28, July 4, June 28, 		 1999 1998	 1999	 1998 -------- -------- -------- -------- Sales	 $ 38,738	$ 39,955 $ 80,928	 80,389 Cost of Sales: Food and beverage		 10,965	 11,495 22,876	 22,917 Labor		 13,635	 13,930 28,469	 27,784 Restaurant operating expenses 6,702	 7,349 14,330	 14,332 Restaturant depreciation	 1,660	 1,556	3,293	 3,020 General and administrative	 2,468	 2,387	5,490	 4,942 Interest expense, net	 1,551	 739	3,155	 1,326 -------- -------- -------- -------- 		 36,981	 37,456 77,613	 74,321 Income before income taxes	 1,757	 2,499	3,315	 6,068 Provision for income taxes		528	 659	 995	 1890 -------- -------- -------- -------- Net income	 $ 1,229	$ 1,840 $	2,320	 4,178 ======== ======== ======== ======== Basic earnings per share	 $ 0.21	$ 0.18 $	 0.38 $ 0.41 ======== ======== ======== ======== Diluted earnings per share	 $ 0.20	$ 0.18 $	 0.38 $ 0.41 ======== ======== ======== ======== Weighted average number of common shares outstanding - basic	 5,986 	 10,130 	6,036 	 10,076 Weighted average number of common shares outstanding - diluted	 6,064 	 10,326 	6,142 	 10,253 See accompanying notes to condensed consolidated financial statements 4 COOKER RESTAURANT CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) 		 Six Months Ended 		 July 4, June 28, 		 1999 	 1998 -------- -------- Cash flows from operating activities: Net Income 	 $ 2,320 $ 4,178 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 		 3,550 3,249 Deferred income taxes 		 (60)	 - Loss on sale of property 		 4 	 1 (Increase) decrease in current assets 		 (248)	 279 Decrease (increase) in other assets 		 60 	(132) Increase (decrease) in current liabilities 	 (1,120)	 357 Decrease in other liabilities 		 (297)	 - -------- -------- Net cash provided by operating activities 	 4,209 7,932 Cash flows from investing activities: Purchases of property and equipment 		 (5,111) (8,879) Proceeds from sale of property and equipment 	 3,085 	 7 Restricted Cash Deposits 		 (222)	 - -------- -------- Net cash used in investing activities 		 (2,248) (8,872) Cash flows from financing activities: Proceeds from notes payable 		 - 	 425 Proceeds from borrowings 		 14,250 	 - Repayments of borrowings 		 (14,591) - Redemption of debentures 		 (25)	 - Exercise of stock options 		 49 1,121 Purchases of treasury stock 		 (1,365)	 - Capital lease obligations 		 (93)	 (85) Dividends paid 		 (614)	(702) -------- -------- Net cash (used in) provided by financing activities 		 (2,389)	 759 Net decrease in cash and cash equivalents 		 (428)	(181) Cash and cash equivalents, at beginning of period 	 2,520 4,685 -------- -------- Cash and cash equivalents, at end of period 	 $ 2,092 $ 4,504 ======== ======== See accompanying notes to condensed consolidated financial statements 5 COOKER RESTAURANT CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 4, 1999 and June 28, 1998 Note 1: Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Cooker Restaurant Corporation and subsidiaries (the "Company"), after elimination of intercompany accounts and transactions, at July 4, 1999, and the statements of income and cash flows for the three and six months ended July 4, 1999. The results of operations for the three and six months ended July 4, 1999, are not necessarily indicative of the operating results expected for the fiscal year ended January 2, 2000. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report on Form 10-K for the fiscal year ended January 3, 1999. Certain amounts in the 1998 financial statements have been reclassified to conform to the 1999 presentation. Note 2: Earnings Per Share The difference between the basic and diluted weighted-average number of shares outstanding for the three and six months ended July 4, 1999 and June 28, 1998, represents the dilutive effect of certain stock options. Convertible subordinated debentures outstanding as of July 4, 1999, are convertible into 636,058 shares of common stock at $21.5625 per share and are due October 2002. These were not included in the computation of diluted EPS for each of the quarter ended July 4, 1999, as the inclusion of the convertible subordinated debentures would be antidilutive. Options to purchase 597,642 and 886,115 shares at prices ranging from $6.50 to $21.75 per share and $10.375 to $21.75 per share, were outstanding for the six months ended July 4, 1999, and June 28, 1998, respectively, but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares for the six months ended July 4, 1999 and June 28, 1998, respectively. The options expire between October 1999 and May 2008 for the six months ended July 4, 1999 and between October 1999 and May 2008 for the six months ended June 28, 1998. Note 3: Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS. No 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), subsequently amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of Effective Date of FASB Statement 133 and Amendment of FASB Statement 133." This statement, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in fair value of a recognized asset, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The accounting for the changes in the fair value of a derivative (this is, gains and losses) depends on the intended use of the derivative and the resulting designation. This statement, as amended, shall be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company has not determined the effect of the adoption of SFAS No. 133, as amended, on the Company's results of operations or statement of financial position. Note 4: Derivative Financial Instruments The fair value of the interest rate swap agreement approximated ($214,396) at July 4, 1999. The fair value is estimated using option pricing models that value the potential for swaps to become in-the-money (liability) through changes in interest rates during the remaining term of the agreement. 6 2. Management's Discussion and Analysis of Financial Condition and Results of Operations From time to time, the Company may make certain statements that contain "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995). Words such as "believe," "anticipate," "project," and similar expressions are intended to identify such forward-looking statements. Forward-looking statements may be made by management orally or in writing, including, but not limited to, in press releases, as part of this Management's Discussion and Analysis of Financial Condition and Results of Operations and as part of other sections of this Report or other filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates, and are subject to certain risks, uncertainties and assumptions. These statements are based on management's present assumptions as to future trends, including economic trends, prevailing interest rates, the availability and cost of raw materials, the availability of capital resources necessary to complete the Company's expansion plans, government regulations, especially regulations regarding taxes, labor and alcoholic beverages, competition, consumer preferences, and similar factors. Changes in these factors could affect the validity of such assumptions and could have a materially adverse effect on the Company's business. Results of Operations The Company earned $0.20 per diluted share for the quarter ended July 4, 1999 as compared to $0.18 per diluted share for the quarter ended June 28, 1998. The weighted-average number of shares outstanding (diluted) for the quarter ended July 4, 1999, was approximately 4,000,000 less than the comparable period in fiscal 1998 as a result of the share buyback completed in October of 1998. The following table sets forth as a percentage of sales certain items appearing in the Company's statements of income. COOKER RESTAURANT CORPORATION RESULTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended 		 July 4,	June 28, July 4, June 28, 		 1999	 1998	 1999	 1998 ------- ------- ------- ------- Sales		 100.0%	 100.0%	 100.0% 100.0% Cost of Sales: Food and beverage		 28.3%	 28.8%	 28.3% 28.5% Labor		 35.2%	 34.9%	 35.2% 34.6% Restaurant operating expenses	17.3%	 18.4%	 17.7% 17.8% Restaturant depreciation		 4.3%	 3.9%	 4.0% 3.8% General and administrative		 6.4%	 6.0%	 6.8% 6.1% Interest expense, net		 4.0%	 1.8%	 3.9% 1.6% ------- ------- ------- ------- 		 95.5%	 93.8%	 95.9% 92.4% Income before income taxes		 4.5%	 6.2%	 4.1% 7.6% Provision for income taxes		 1.4%	 1.6%	 1.2% 2.4% ------- ------- ------- ------- Net income		 3.1%	 4.6%	 2.9% 5.2% ======= ======= ======= ======= Sales for the second quarter of fiscal 1999 decreased 3.0%, or $1,217,000, to $38,738,000 compared to sales of $39,955,000 for the second quarter of fiscal 1998. Sales for the six months ended July 4, 1999 increased 1.0%, or $539,000, to $80,928,000 compared to sales of $80,389,000 for the six months ended June 28, 1998. The increase for the six months ended July 4, 1999, is due to the opening of new Restaurants. Same store sales were down 4.9% for the quarter ended July 4, 1999. Second quarter average unit volumes per operating week of $43,821 were down 9.5% from last year. The average check of $11.68 was up 3.6% from the second quarter last year. 7 The cost of food and beverage for the second quarter of 1999 was $10,965,000 as compared to $11,495,000 for the second quarter of 1998. The decrease of $530,000 is primarily due to decreased sales for the quarter compared to last year. The cost of food and beverage for the six months ended July 4, 1999, was $22,876,000 as compared to $22,917,000 for the six months ended June 28, 1998. As a percent of sales, the cost of food and beverage was 28.3% for the second quarter of 1999, as compared to 28.8% for the second quarter of 1998. For the six month period, the cost of food and beverage as a percent of sales was 28.3% for 1999, as compared to 28.5% for the same period in 1998. The improvement in 1999 is due primarily to the a menu price increase in the fourth quarter of 1998, as well as lower produce prices for the period in 1999 as compared to 1998. Labor costs for the second quarter of 1999 were $13,635,000 as compared to $13,930,000 for the second quarter of 1998. The decrease of $295,000 is primarily due to the decrease in sales and average unit volume during the comparable period, which resulted in lower demand for labor hours. Labor costs as a percent of sales for the second quarter of 1999 were 35.2% as compared to 34.9% for the quarter ended June 28, 1998. The increase is due mainly to decreased same-store sales for the quarter as well as increased manager costs. Labor costs for the six months ended July 4, 1999, were $28,469,000 as compared to $27,784,000 for the comparable period in the prior year. The increase of $685,000 is due primarily to the increased number of stores in operation during the period. Labor costs as a percent of sales for the six month period in 1999 were 35.2% as compared to 34.6% for the same period last year. The increase is primarily due to decreased same-store sales for the period, as well as increased manager costs. Restaurant operating expenses for the second quarter of 1999 were $6,702,000 as compared to $7,349,000 for the second quarter of 1998. The decrease of $647,000 was primarily due to a decrease in public relations, administrative and contract service expenses, slightly offset by an increase in utilities costs. For the six month period, restaurant operating expenses totaled $14,330,000 as compared to $14,332,000 for the comparable period last year. Restaurant operating expenses as a percent of sales for the three and six months ended July 4, 1999, were 17.3% and 17.7%, respectively, as compared to 18.4% and 17.8% for the comparable periods in the prior year. Restaurant depreciation expense for the second quarter and six months ended July 4, 1999, was $1,660,000 and $3,293,000, respectively, as compared to $1,556,000 and $3,020,000 for the comparable periods last year. The increase of $104,000 and $273,000 for the three and six month period ended July 4, 1999, respectively, is due to the opening of additional stores since the comparable periods in the prior year. General and administrative expenses for the second quarter of 1999 were $2,468,000 as compared to $2,387,000 for the second quarter of 1998. The increase of $81,000 is due mainly to an increase in marketing expense of $326,000, offset by a decrease in labor costs of $268,000. General and administrative expenses for the six months ended July 4, 1999, were $5,490,000 as compared to $4,942,000 for the same period last year. The increase of $548,000 is due primarily to increased marketing costs of $724,000, offset by decreased labor costs of $152,000. General and administrative expenses as a percent of sales for the three and six months ended July 4, 1999, were 6.4% and 6.8%, respectively, as compared to 6.0% and 6.1% for the comparable periods in the prior year. The provision for income taxes for the three and six months ended July 4, 1999, as a percentage of income before taxes was 30.1% and 30.0%, respectively, as compared to 26.4% and 31.1% for the comparable periods in the prior year. The increase for the second quarter is primarily due to a reversal of a liability in the prior year for a previous year's tax audit assessment that did not reoccur in the current year. The decrease for the six month period is primarily due to a restructuring of state and local tax reporting. Net interest expense for the second quarter of 1999 was $1,551,000 as compared to $739,000 in the second quarter of 1998. Net interest expense for the six months ended July 4, 1999, was $3,155,000 as compared to $1,326,000 for the same period in the prior year. The increases of $812,000 and $1,829,000 forthe three and six month periods, respectively, are due to the additional debt acquired in conjunction with the buyback of approximately 4,000,000 of the Company's Common Stock completed in the fourth quarter of 1998. 8 Liquidity and Capital Resources The Company's operations are subject to factors outside its control. Any one, or combination of these factors could materially affect the results of the Company's operations. These factors include: (a) changes in the general economic conditions in the United States, (b) changes in prevailing interest rates, (c) changes in the availability and cost of raw materials, (d) changes in the availability of capital resources necessary to complete the Company's expansion plans, (e) changes in Federal and State regulations or interpretations of existing legislation, especially concerning taxes, labor and alcoholic beverages, (f) changes in the level of competition from current competitors and potential new competition, and (g) changes in the level of consumer spending and customer preferences. The foregoing should not be construed as an exhaustive list of all factors which could cause actual results to differ materially from those expressed in forward-looking statements made by the Company. Forward-looking statements made by or on behalf of the Company are based on a knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results may differ from those anticipated results described in those forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. The Company's principal capital requirements are for working capital, new restaurant openings and improvements to existing restaurants. The majority of the Company's financing for operations, expansion and working capital is provided by internally generated cash flows from operations and amounts available under the Revolver. During 1998, the Company entered into a new term Loan agreement with NationsBank of Tennessee and First Union National Bank (the "Term Loan") and a term Loan with the CIT/Equipment Financing Group, Inc. (collectively the "Lenders") in conjunction with its repurchase of common stock pursuant to the Tender Offer (the "Offer") which was completed on October 5, 1998. The Company borrowed $70,500,000 under the two term loan agreements with the Lenders, and established a $10,000,000 Revolving Line of Credit (the "Revolver") with NationsBank of Tennessee. As of July 4, 1999, the Company had borrowed $6,500,000against the Revolver and the outstanding balance of the Term Loans was approximately $67,819,000. Repayments of principal and interest on these loans are expected to be financed through normal operating cash flows generated by the Company. At the time of the original closing of the Company's $52,500,000 Term loan with First Union National Bank and NationsBank of Tennessee, N.A., (collectively, the "Banks"), and its $10,000,000 Revolver with NationsBank of Tennessee, N.A., the Company was awaiting appraisals on certain of its properties to be held as collateral for the Term Loan and Revolver. As a result, the Banks required the Company to enter into a second closing (the "Second Closing") pending the receipt of these appraisals. At the time of the Second Closing, the amount of total indebtedness to the Banks, including the Term Loan and the Revolver, cannot exceed the lesser of $62,500,000 or seventy percent of the appraised value of the properties pledged as collateral. As of the date of this filing, the Company has not yet completed this previously disclosed Second Closing with the Banks. Pursuant to the terms of the original agreement, the Company began making principal and interest payments of approximately $345,000 to First Union on $22,500,000 of its Term Loan and principal payments of $166,670, plus applicable interest, to NationsBank on $30,000,000 of its Term Loan balance, beginning on May 1, 1999. Such payments will continue until March 24, 2004, upon which date, all remaining amounts, principal and interest, under the Term Loan and the Revolver will be due in full. The Company anticipates that the Second Closing will be completed by the end of the third quarter. No substantive changes are expected to be made to the original agreement dated September 24, 1998, as a result of the Second Closing. During the three months ended July 4, 1999, the Company did not open any additional units. The Company has opened two new restaurants in the first six months of 1999. Capital expenditures for new restaurants, as well as the refurbishing and remodeling of existing units totaled $5,111,000 for the six months ended July 4, 1999, and were funded by cash flows of $4,209,000 from operations, and the Company's available cash balances, including amounts drawn against the Revolver. The Company intends to open an additional 3 restaurants in 1999 for a total of 5 new restaurants. Total cash expenditures for the 1999 expansion are estimated to be approximately $7.5 million. The Company believes that cash flows from operations together with available borrowings under the Revolver will be sufficient to fund the planned expansion, ongoing maintenance and remodeling of existing restaurants as well as other working capital requirements. 9 The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined interest rate risk. Interest rate swap agreements are used to reduce the potential impact of increases in interest rates on floating-rate long-term debt. At July 4, 1999, the Company was party to an interest rate swap agreement with a termination date of September 28, 2001. The agreement entitles the Company to receive from the counterparty (a major bank), the amounts, if any, by which the Company's interest payments on $27,500,000 of its floating LIBOR debt (included in the $52,500,000 Term Loan and the $10,000,000 Revolver) exceed 6.25 percent through the termination date. No amounts were received by the Company during the quarter ended July 4, 1999. The fair value of the interest rate swap agreement was approximately ($214,396) at July 4, 1999. The fair value is estimated using option pricing models that value the potential for the swaps to become in-the-money (liability) through changes in interest rates during the remaining term of the agreement. The Company is exposed to credit losses in the event of nonperformance by the counterparties to its interest rate swap agreements. The Company does not obtain collateral to support financial instruments but monitors the credit standing of the counterparties. In 1994, the Board of Directors approved a guaranty by the Company of a loan of $5,000,000 to G. Arthur Seelbinder (the "Loan"), the Chairman of the Board. In January 1997, the Board approved a refinancing of the loan with The Chase Manhattan Bank of New York (the "Bank"). As refinanced and extended, the Loan from the Bank bears interest at the Bank's prime rate or LIBOR plus 2%, and is secured by 323,007 Common Shares owned by Mr. Seelbinder and is guaranteed by the Company in the principal amount up to $6,250,000, including capitalized interest. Pursuant to the loan agreement between Mr. Seelbinder and the Bank, any reduction of the principal amount outstanding under the Loan shall not entitle Mr. Seelbinder to the advancement of additional funds under the Loan. The guaranty provides that the Bank will sell the pledged shares and apply the proceeds thereof to the Loan prior to calling on the Company for its guaranty. The term of the Loan has been extended until January 31, 2000. As of July 12, 1999, the amount of the Loan outstanding, including capitalized and accrued interest, was $3,560,534 and the undiscounted fair market value of the pledged shares was $1,726,069, based upon a market price of $5.625 per common share. The guaranty secures the loan until it is paid or refinanced without a guaranty. The Company would fund any obligation it incurs under the terms of its guaranty from additional borrowing under its Revolver. Mr. Seelbinder agreed to pay to the Company a guaranty fee each year that the guaranty remains outstanding beginning on March 9, 1994, the date the Company first issued its guaranty of the Loan. The amount of the guaranty fee is 1/4 percent of the outstanding principal amount of the guaranteed loan on the date that the guaranty fee becomes due. Because the value of the shares pledged to secure the Loan subsequent to the Offer was less than the amount required under the terms of the Loan, the Bank required the Company to make a cash deposit in such amount to satisfy the collateral shortfall as a result of the decreased price of the Company's common stock. The Bank, the Company and Mr. Seelbinder reached a preliminary agreement concerning such deposit under which Mr. Seelbinder paid $150,000 to the Bank, the Bank extended their maturity of the Loan to January 31, 2000, the Company made an initial cash deposit of approximately $1,600,000 in the Bank which will be revalued monthly, and Mr. Seelbinder will reimburse the Company for the amount by which the interest on the deposit is less than the interest the Company pays for funds under its Term Loan and Revolver. This use of the Company's funds will not materially affect its working capital or its ability to implement its capital expenditure plan or make improvements and betterments on its property. Subsequent to the initial cash deposit, the Company has made additional deposits totaling approximately $185,000 based upon changes in the price of Company's Common Stock. Mr. Seelbinder has also informed the Company that he intends to discuss with the Bank or other financing sources the refinancing of the balance of the Loan. There can be no assurance that such refinancing will occur or that, if the Loan is refinanced, the guaranty will not remain outstanding or that the deposit will be returned to the Company. 10 Year 2000 The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. The majority of the Company's systems are purchased from outside vendors. The Company is currently in the process of assessing whether it will be required to modify or replace significant portions of its software so that its computer systems will properly utilize dates beyond December 31, 1999. Those installed systems which are not currently able to fully function in the Year 2000 either have new versions available which are Year 2000 compliant, or the vendor has committed to a Year 2000 compliant release in sufficient time to allow installation and testing prior to critical cutover dates. The Company has completed its inventory of computer information technology and non-information technology hardware systems to assess Year 2000 compliance. In addition to the Company's internal systems and hardware, the Company is currently assessing the Year 2000 readiness of its vendors. As a part of this assessment, the Company is asking each major vendor to inform the Company of its (the vendor's) Year 2000 readiness and initiatives. Currently, the Company purchases approximately 95% of its food products from one vendor. The Company is receiving monthly updates from this significant vendor regarding its Year 2000 readiness. The Company has identified each additional major vendor from whom it will request a report regarding its Year 2000 readiness. Letters and questionnaires have been drafted which are specific to the type of vendor (i.e. food, equipment, financial, utility, etc.) and the Company is in the process of mailing out all necessary requests for information. To the extent that Company's vendors do not provide the Company with satisfactory evidence of their readiness for the Year 2000 issue, contingency plans will be developed. Currently, the Company does not have a formal contingency plan in place, however, a Year 2000 Committee has been formed and is in the process of developing a Company-wide Year 2000 contingency plan. As of July 4, 1999, the Company has received responses from approximately 25% of its vendors regarding their Year 2000 readiness. Additionally, the Company has completed its Year 2000 upgrade of both the Point-of-Sale system and back-of-the-house systems and software in two of its restaurants. The Company began its company-wide upgrade of these systems in July. The upgrade is expected to be completed by the end of November. The Company has developed a plan to address the possible exposures related to the impact on its computer systems of the Year 2000 problem. The plan provides for the conversion efforts to be completed on all critical systems by the end of 1999. The Company expects that the maximum cost which could be incurred in conjunction with the testing and remediation of all hardware and software systems and applications would be approximately $500,000 through completion in fiscal year 1999, of which, approximately $31,000 has been incurred to date. Such costs have been and will be funded by the Company's operating cash flows. The cost of the Company's plan to address the Year 2000 issue and the anticipated date on which the Company plans to complete the necessary Year 2000 conversion efforts are based on management's best estimates, which were derived from numerous assumptions of future events, including the availability of resources, vendor remediation plans, and other factors. As a result, there can be no assurance that the Company, or other companies with whom the Company conducts business, will successfully address the Year 2000 problem in a timely manner, or at all, or that the Year 2000 problem will not have a material adverse effect on the Company's business or operations. The Company believes that the most reasonably likely worst-case scenario resulting from noncompliance with the Year 2000 by the Company or other third parties would be the temporary shutdown of some or all of the Company's restaurants due to the lack of gas, electricity, or supplies from certain key vendors. Such a shut down, if it were to occur for any substantial period of time, would result in the loss of sales revenue to the Company. Additionally, certain fixed expenses of the Company would still be incurred during this time. As such, a situation such as that described herein could have a material adverse effect on the Company's results of operations. New Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), subsequently amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - -- Deferral of Effective Date of FASB Statement 133 and Amendment of FASB Statement 133." This statement, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in fair value of a recognized asset, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The accounting for the changes in the fair value of a derivative (this is, gains and losses) depends on the intended use of the derivative and the resulting designation. This statement, as amended, shall be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company has not determined the effect of the adoption of SFAS No. 133, as amended, on the Company's results of operations or statement of financial position. 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company has performed a sensitivity analysis on its fixed and floating long term debt at July 4, 1999. The results of this sensitivity analysis indicated that there has been no substantial change in the analysis as performed at the end of the fiscal quarter ended April 4, 1999. PART II - OTHER INFORMATION Item 1. Legal Proceedings. 	None. Item 2. Changes in Securities and Use of Proceeds. 	None. Item 3. Defaults Upon Senior Securities 	None. Item 4. Submission of Matters to a Vote of Security Holders. 	None. Item 5. Other Information. 	None. Item 6. Exhibits and Reports on Form 8-K. (a)	 The following exhibits are files as part of this report. 3.	 Articles of Incorporation and By-Laws. Exhibit 3.1 Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to exhibit 28.2 of Registrant's quarterly report on for 10-Q for the fiscal quarter ended July 28, 1992; Commission File No. 0-16806). Exhibit 3.2 Amended and Restated Code of Regulations of the Registrant (incorporated by reference to exhibit 4.5 of the Registrant's quarterly report on for 10-Q for the fiscal quarter ended April 1, 1990; Commission File No. 0-16806). 4. Instruments Defining the Rights of Security Holders, Including Indentures. Exhibit 4.1 See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated Articles of Incorporation of the Registrant (see Exhibit 3.1 above). Exhibit 4.2 See Articles One, Four, Seven and Eight of the Amended and Restated Code of Regulations of the Registrant (see Exhibit 3.2 above). 12 Exhibit 4.3 Rights Agreement dated as of February 1, 1990, between the Registrant and National City Bank (incorporated by reference to Exhibit 1 of the Registrant's Form 8-A filed with the Commission on February 9, 1990; Commission File No. 0-16806). Exhibit 4.4 Amendment to Rights Agreement dated as of November 1, 1992, between the Registrant and National City Bank (incorporated by reference to exhibit 4.4 of Registrant's annual report on Form 10-K for the fiscal year ended January 3, 1993 (the "1992 Form 10-K"); Commission File No. 0-16806). Exhibit 4.5 Letter dated October 29, 1992, from the Registrant to First Union National Bank of North Carolina (incorporated by reference to Exhibit 4.5 to the 1992 form 10-K). Exhibit 4.6 Letter dated October 29, 1992, from National City Bank to the Registrant (incorporated by reference to Exhibit 4.6 to the 1992 form 10-K). Exhibit 4.7 See sections 7.4 of the Amended and Restated Loan Agreement dated December 22, 1995 between the Registrant and First Union National Bank of Tennessee (incorporated by reference to Exhibit 10.4 of the Registrant's annual report on From 10-K for the fiscal year ended December 31, 1995; Commission File No. 0-16806). 10. Material Contracts. None 27.	 Financial Data Schedules. Exhibit 27.1 Financial Data Schedule (submitted electronically for SEC information only). (B) Reports on From 8-K No report on Form 8-K was filed by the Registrant during the fiscal quarter ended July 4, 1999. 13 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. 		 COOKER RESTAURANT CORPORATION 			 (The "Registrant") Date: August 18, 1999 By:		 /s/ G. Arthur Seelbinder ------------------------- G. Arthur Seelbinder Chairman of the Board of Directors, Chief Executive Officer, and Director (principal executive officer and duly authorized officer) By:		 /s/ Mark W. Mikosz ------------------------- Mark W. Mikosz Vice President - Chief Financial Officer (principal financial and accounting officer) 14 _______________________________________________________________________________ _______________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________ COOKER RESTAURANT CORPORATION ________________________ FORM 10-Q QUARTERLY REPORT FOR THE FISCAL QUARTER ENDED: JULY 4, 1999 _________________________ EXHIBITS _________________________ _______________________________________________________________________________ _______________________________________________________________________________ 15 Exhibit 3.1 Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to exhibit 28.2 of Registrant's quarterly report on for 10-Q for the fiscal quarter ended July 28, 1992; Commission File No. 0-16806). Exhibit 3.2 Amended and Restated Code of Regulations of the Registrant (incorporated by reference to exhibit 4.5 of the Registrant's quarterly report on for 10-Q for the fiscal quarter ended April 1, 1990; Commission File No. 0-16806). Exhibit 4.1 See Articles Fourth, Fifth and Sixth of the Amended and Restated Articles of Incorporation of the Registrant (see Exhibit 3.1 above). Exhibit 4.2 See Articles One, Four, Seven and Eight of the Amended and Restated Code of Regulations of the Registrant (see Exhibit 3.2 above). Exhibit 4.3 Rights Agreement dated as of February 1, 1990, between the Registrant and National City Bank (incorporated by reference to Exhibit 1 of the Registrant's Form 8-A filed with the Commission on February 9, 1990; Commission File No. 0-16806). Exhibit 4.4 Amendment to Rights Agreement dated as of November 1, 1992, between the Registrant and National City Bank (incorporated by reference to exhibit 4.4 of Registrant's annual report on Form 10-K for the fiscal year ended January 3, 1993 (the "1992 Form 10-K"); Commission File No. 0-16806). Exhibit 4.5 Letter dated October 29, 1992, from the Registrant to First Union National Bank of North Carolina (incorporated by reference to Exhibit 4.5 to the 1992 form 10-K). Exhibit 4.6 Letter dated October 29, 1992, from National City Bank to the Registrant (incorporated by reference to Exhibit 4.6 to the 1992 form 10-K). Exhibit 4.7 See sections 7.4 of the Amended and Restated Loan Agreement dated December 22, 1995 between the Registrant and First Union National Bank of Tennessee (incorporated by reference to Exhibit 10.4 of the Registrant's annual report on From 10-K for the fiscal year ended December 31, 1995; Commission File No. 0-16806). Exhibit 4.8 Indenture dated as of October 28, 1992, between the Registrant and First Union National Bank of North Carolina, as Trustee (incorporated by reference to Exhibit 2.5 of the Registrant's Form 8-A filed with the Commission on November 10, 1992; Commission File No. 0-16806). Exhibit 27.1 Financial Data Schedule (submitted electronically for SEC information only).