UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 2000
OR
[ ] TRANSITION REPORT UNDER 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 (IRS Employer
of incorporation or organization) Identification No.)
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
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Name of each exchange on which registered:
Common Stock, without par value The New York Stock Exchange
Rights to Purchase Class A Junior
Participating Preferred Trades with the Common Shares
Shares, without par value
Securities registered under Section 12(g) of the Exchange Act:
6 3/4 % Convertible Subordinated Debentures Due 2002
(Title of Class)
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 in response
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 to Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Common Shares held by non-affiliates of
the registrant, as of February 28, 2000, was $13,299,000.
The number of Common Shares outstanding on February 20, 2000, was
5,985,000.
Documents Incorporated By Reference: certain portions of the
registrant's Definitive Proxy Statement relating to the Annual
Meeting of Shareholders on May 1, 2000 are incorporated by reference
into Part III of this Form 10-K.
COOKER RESTAURANT CORPORATION
FORM 10-K
INDEX
PART I...................................................................... 3
Item 1. Business......................................................... 3
Item 2. Properties....................................................... 7
Item 3. Legal Proceedings................................................ 8
Item 4. Submission of Matters to a Vote of Security Holders.............. 8
PART II.....................................................................10
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..............................................10
Item 6. Selected Financial Data..........................................11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.......17
Item 8. Financial Statements and Supplementary Data......................17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..............................17
PART III....................................................................17
Item 10. Directors and Executive Officers of the Registrant...............17
Item 11. Executive Compensation...........................................18
Item 12. Security Ownership of Certain Beneficial Owners and
Management.......................................................18
Item 13. Certain Relationships and Related Transactions...................18
PART IV.....................................................................18
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.........................................................18
SIGNATURES..................................................................22
Page 2
PART I
Item 1. Business.
General
At February 28, 2000, the Registrant owned and operated 66 full-
service "Cooker" restaurants located in Florida, Georgia, Indiana,
Kentucky, Michigan, North Carolina, Ohio, Tennessee and Virginia.
Restaurants average approximately 7,900 square feet and 255 seats,
and are designed to provide traditional and comfortable dining
experiences rather than a theme atmosphere or menu. The Registrant
provides an attractive value to customers by offering a moderately-
priced, full menu of high quality food served in generous portions.
The menu includes appetizers, soups, salads, chicken, fish, beef and
pasta entrees, sandwiches, burgers and desserts, most of which are
created from original recipes and prepared from scratch using fresh
ingredients. Entree selections generally range in price from $5.49
to $15.99 and, in 1999, the average check per person was
approximately $11.76. The Registrant is committed to providing
prompt, friendly and efficient customer service as reflected by its
"100% Satisfaction Guarantee" policy and by its having what the
Registrant believes is a higher ratio of service personnel to
customers and a greater number of managers per Restaurant than many
of its competitors.
The Cooker Concept
The key features of the Cooker concept include the following:
"100% Satisfaction Guarantee." The Registrant is committed to
providing high quality food, friendly and efficient service and
comfortable, clean surroundings. Restaurant managers visit tables to
make sure every customer is satisfied with the Cooker experience. If
a customer is not satisfied with any part of the visit, particularly
the food and service, the Restaurant staff is authorized to provide
that customer with a free meal.
Original Recipes Made From Scratch. Cooker provides an attractive
value to customers by offering a moderately- priced, full menu of
high quality food served in generous portions. Most of the items on
Cooker's menu are created from original recipes and prepared from
scratch using fresh ingredients, which the Registrant believes
results in more flavorful food. The menu is re-evaluated in June and
December of each year when the least popular items from each category
(appetizers, entrees and desserts) are removed from the menu and
replaced with new items created by the Registrant's culinary team.
Each menu item is researched and tested in the Registrant's test
kitchen and in Restaurants to ensure customer acceptance.
Commitment to Staffing. The Registrant's commitment to meeting
the highest standards of customer service is reflected in having what
the Registrant believes is a higher ratio of service personnel to
customers and having a greater number of managers per Restaurant than
many of its competitors. The Registrant believes that higher
staffing levels permit its staff to interact with customers,
resulting in an enhanced dining experience. This strategy results in
repeat customer visits, as well as "word-of-mouth" advertising by
current customers that attracts new customers.
Timeless Atmosphere. The Restaurants are designed to create a
traditional and comfortable atmosphere suitable for any occasion.
This atmosphere is enhanced by friendly service and a menu that
appeals to a broad segment of the population and encourages customers
to visit the Restaurants more often. Unlike many casual dining
restaurants that center around a "theme," the Registrant believes its
Restaurants are not as sensitive to changing customer preferences and
trends.
Dedicated Employees. The Registrant hires its personnel only
after extensive interviews, and seeks to recruit employees who share
the Registrant's commitment to high standards of customer service.
Each new non-management employee is initially trained for a minimum
of seven to ten days or longer if hired for a new Restaurant.
Regardless of their background, new management personnel initially
undergo 90 to 120 days of training that includes gaining exposure to
all areas of Restaurant operations and attending training classes at
the Registrant's headquarters. The Registrant encourages a sense of
personal commitment from its employees at every level by providing
extensive training, employee development and competitive
compensation. Management believes its personnel policies result in a
low rate of employee turnover.
Menu
Cooker provides an attractive value to customers by offering a
moderately-priced, full menu of high quality food and beverage items
served in generous portions. The menu features 66 dishes including
appetizers, soups, salads, chicken, fish, beef and pasta entrees,
sandwiches, burgers and desserts. Most of the items on the menu are
created from original recipes and prepared from scratch using fresh
ingredients, which the Registrant believes results in more flavorful
food. Lunch and dinner entrees generally range in price from $5.49
to $16.99 and in 1999 lunch accounted for approximately 37% of sales.
The average check per person in 1999 was approximately $11.76. Each
Restaurant offers alcoholic beverages including liquor, wine and
beer, which constituted approximately 10.4% of sales in 1999. The
Registrant re-evaluates its menu in June and December of each year,
and the least popular items from each category are removed from the
menu and replaced with new items created by the Registrant's culinary
team. Each menu item and recipe is researched and tested in the
Registrant's test kitchen and in the Restaurants to ensure customer
acceptance.
Page 3
Design
The Restaurants are designed to be comfortable and functional,
with a decor that includes materials such as mahogany, slate, marble
and tile. The average Restaurant is approximately 7,900 square feet
(of which approximately 40% is devoted to kitchen and services areas)
with seating for approximately 255 customers. Most of the
Restaurants opened in 1999 have in excess of 8,000 square feet and
seat approximately 260 customers. The majority of the seating is in
booths, which enhances customer privacy and comfort. Each Restaurant
also has a separate bar area which has stool and booth seating. The
Registrant believes that the typical Restaurant kitchen is
comparatively large by industry standards and is designed for quality
and speed of food preparation. These kitchens permit the Registrant
to be flexible in the types of food items which can be prepared and
to adapt to changing customer tastes and preferences.
Development and Expansion
The Registrant is an Ohio corporation which was the surviving
corporation of the merger of affiliated corporations in 1988. At
that time, the Registrant operated six restaurants. By 1990, the
Registrant increased its total number of Restaurants to 10. The
following table sets forth the Registrant's unit growth since 1990:
Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Restaurants Open at
Start of Year 10 12 15 20 29 35 37 47 60 67
- -------------------------------------------------------------------------------------
Restaurants Opened
During Year 2 3 5 9 6 3* 11* 13 7 5**
- -------------------------------------------------------------------------------------
___________________
* The Registrant closed one Restaurant in Florence, Kentucky in 1995
and one in Palm Harbor, Florida in 1996. Both locations have been
leased to third parties.
** The Registrant closed 7 restaurants in 1999 in Bethesda, MD;
Tampa, FL; Atlanta, GA (2); Saginaw, MI; Boardman, OH; and
Louisville, KY. The restaurant in Bethesda was sold to an
unrelated third party. The Registrant is currently exploring lease
and sale arrangements on the other 6 properties.
The Registrant has opened 1 Restaurant to date in 2000. The Registrant
currently does not plan to close any Restaurants during 2000.
The Registrant does not intend to open any additional Restaurants
in 2000. Any further expansion will be dependent on, among other
things, the Registrant's future operations, the availability of
capital, desirable site locations, the ability to attract qualified
employees, securing appropriate local government approvals, and
future economic conditions. The Registrant has no commitments to
develop Restaurants after 2000.
The Registrant either owns or leases the sites for its existing
facilities, although the Registrant prefers to own the property.
Restaurant Operations
Management and Employees. The Registrant currently has 12
regional managers who are each responsible for supervising between 4
and 6 Restaurants and continuing the development of their management
teams. Through regular visits to the Restaurants, the regional
managers ensure that the Registrant's concept, strategy and standards
of quality are being adhered to in all aspects of restaurant
operations. Each of the Restaurants typically has one general
manager, one assistant general manager, one kitchen manager and
between two and four assistant managers. The general manager of each
Restaurant has primary responsibility for the day-to-day operations
of the entire Restaurant and is responsible for maintaining the
standards of quality and performance established by the Registrant.
The average number of management employees in each restaurant is 5.2
and the average number of hourly employees in each Restaurant is
approximately 80. Management believes that its success is in part
attributable to its high level of service and interaction between its
employees and guests.
The Registrant seeks to attract and retain high quality managers
and hourly employees by providing attractive financial incentives and
flexible working schedules. Financial incentives provided to attract
high quality managers include competitive salaries, bonuses and stock
options based upon position, seniority and performance criteria.
Also, management believes that the Registrant attracts qualified
managers by providing a higher overall quality of life characterized
by a five-day work schedule.
Training and Development. The Registrant hires its personnel only
after extensive interviews, and seeks to recruit employees who share
the Registrant's commitment to high standards of customer service.
Each new non-management employee is initially trained for a minimum
of 7 to 10 days or longer if hired for a new Restaurant. Regardless
of their background, new management personnel initially undergo 90 to
120 days of training that includes gaining exposure to all areas of
Restaurant operations and attending training classes at the
Registrant's headquarters. The Registrant encourages a sense of
personal commitment from its employees at every level by providing
extensive training, employee development and competitive
compensation.
Page 4
Restaurant Reporting Systems. The Registrant uses integrated
management information systems that include a point-of-sale system to
facilitate the movement of food and beverage orders between the
customer areas and kitchen operations, control cash, handle credit
card authorizations, and gather data on sales by menu item and hours
worked by employees. In addition, Restaurant systems have been
developed to record accounts payable and inventories. Sales, cash
control, and summary payroll data are transferred to the Registrant's
headquarters nightly. Payroll, accounts payable and inventory data
are transferred to the Registrant's headquarters weekly. These
Restaurant information systems provide data for posting directly to
the Registrant's general ledger, to other account subsystems and to
other systems developed to evaluate Restaurant performance.
The Restaurant system also provides hourly, daily and weekly
reports for each Restaurant manager to evaluate current performance
and to plan for future staffing and food production needs. The
headquarters' systems also provide a variety of management reports
comparing current results to prior periods and predetermined
operating budgets. The results are reported to and reviewed with
Registrant management by accounting personnel. Included among the
reports produced are (i) daily reports of revenue and labor cost by
Restaurant, (ii) weekly summary profit and loss statements by
Restaurant and an analysis of sales by menu item, and (iii) monthly
detailed profit and loss statements by Restaurant as well as
analytical reports on a variety of Restaurant performance
characteristics.
Purchasing. Purchasing specifications are determined by the
Registrant's corporate offices. Each Restaurant's management team
determines the daily quantities of food items needed and orders such
quantities from major suppliers at prices often negotiated directly
with the Registrant's corporate offices. The Registrant purchases
its food products and supplies from a variety of national, regional
and local suppliers. The Registrant is not dependent upon any one
supplier and has not experienced significant delays in receiving its
food and beverage inventories, restaurant supplies or equipment.
Management believes that the diversity of the Registrant's menu
enables its overall food costs to be less dependent upon the price of
a particular product. The Registrant also tests various new products
in an effort to obtain the highest quality products possible and to
be responsive to changing customer tastes.
Advertising and Marketing. The Registrant relies primarily on
"word of mouth" advertising to attract customers to its Restaurants.
Management believes the "100% Satisfaction Guarantee," made-from-
scratch menu items and focus on high-quality service generates a high
level of repeat customers and new customer visits. The Registrant
did test the use of radio and television advertising in certain
select markets during 1999. The Registrant will continue testing
television advertising in 2000 and will also begin testing billboard
advertising in select markets; however, the Registrant will continue
to have the primary focus of its limited advertising expenses on
local promotions and public relations efforts.
Hours of Operation. The Restaurants generally offer food service
from 11:00 a.m. to 10:30 p.m., Sunday through Thursday, and 11:00
a.m. to midnight on Friday and Saturday. All menu items (other than
alcoholic beverages) are available for carry-out.
Competition
The restaurant and food service industry is highly competitive and
fragmented. There are numerous restaurants and other food service
operations that compete directly and indirectly with the Registrant.
Many competitors have been in existence longer, have a more
established market presence and have significantly greater financial,
marketing and other resources and higher total sales volume and
profits than does the Registrant. In addition to other restaurant
companies, the Registrant competes with numerous other businesses for
suitable locations for its Restaurants.
The restaurant industry may be adversely affected by changes in
consumer tastes, discretionary spending priorities, national,
regional or local economic conditions, demographic trends, consumer
confidence in the economy, traffic patterns, weather conditions,
employee availability and the type, number and location of competing
restaurants. Changes in any of these factors could adversely affect
the Registrant. In addition, factors such as inflation and increased
food, liquor, labor and other costs could adversely affect the
Registrant.
Government Regulations
The Registrant's business is subject to various federal, state and
local government regulations, including those relating to the sale of
food and alcoholic beverages. The failure to maintain food and liquor
licenses could have a material adverse effect on the Registrant's
operating results. In addition, Restaurant operating costs are
affected by increases in the minimum hourly wage, unemployment tax
rates, sales taxes and similar costs over which the Registrant has no
control. Since many of the Registrant's employees are paid at rates
based on the federal minimum wage, increases in the minimum wage may
result in an increase in the Registrant's labor costs. Some states
have set minimum wage requirements higher than the federal level.
The Registrant is subject to "dram shop" statutes in certain states
which generally provide a person injured by an intoxicated person
with the right to recover damages from an establishment that served
alcoholic beverages to the intoxicated person. Difficulties or
failure in obtaining required licenses and approvals will result in
delays in, or cancellation of, the opening of new Restaurants. No
assurance can be given that the Registrant will be able to maintain
existing approvals or obtain such further approvals at other
locations. The development and construction of additional
Restaurants will be subject to compliance with applicable zoning,
land use and environmental regulations. There can be no assurance
that the Registrant will be able to obtain necessary variances or
other approvals on a cost effective and timely basis in order to
construct and develop Restaurants in the future.
Page 5
Employees
At February 28, 2000, the Registrant had 5,650 employees, of whom
5,245 were Restaurant employees, 364 were Restaurant management
personnel, and 41 were corporate staff personnel. None of the
Registrant's employees is represented by a labor union or a
collective bargaining unit. The Registrant considers relations with
its employees to be satisfactory.
Marks
The Registrant has registered the service mark "Cooker Bar and
Grille" and Design with the United States Patent and Trademark
Office. The Registrant previously registered the service mark "The
Southern Cooker - Home Style Restaurant & Bar" and Design with the
United States Patent and Trademark Office but did not renew the
registration when its initial term expired. The Registrant also uses
the word Cooker as a service mark in combination with words and
designs other than those used in the registered marks. Other
providers of restaurant services use trade names that include the
word "cooker." Some of these users may resist the Registrant's use
of its marks, as it expands into new territories. However, in view
of the extensive third party use of such trade names, management
believes that the Registrant should be in a reasonably good position
to resist adverse claims. This same extensive third party use means,
however, that the Registrant may in the future have difficulty
blocking use by others of marks incorporating the word "cooker." It
is possible for prior users to develop rights in such marks in their
geographic territories and it would be difficult for the Registrant
to limit such use, even though the Registrant has a federal
registration.
Page 6
Item 2. Properties.
At February 28, 2000, the Registrant operated 66 Restaurants. The
following chart shows each of their locations:
Metropolitan Area Location Metropolitan Area Location
- ---------------------------------------------------------------------------------------------------
Florida Ohio (continued)
Ft. Myers-Cape Coral Ft. Myers Cincinnati Paxton Road
Gainesville Gainesville Cincinnati Springdale
Melbourne-Titusville-Palm Bay Melbourne Cleveland Rockside
Orlando Altamonte Springs Cleveland Beachwood
Orlando East Colonial Cleveland Cuyahoga Falls
Tallahassee Tallahassee Cleveland Mentor
West Palm Beach Boynton Beach Cleveland Westlake
West Palm Beach Villages Cleveland Solon
Cleveland Middleburg Heights
Georgia Columbus Bethel Road
Atlanta Alpharetta Columbus Cleveland Avenue
Atlanta Wildwood Columbus East Main Street
Augusta Augusta Columbus Hamilton Road
Columbus Lane Avenue
Indiana Columbus Morse Road
Evansville Evansville Columbus North High Street
Indianapolis Keystone Dayton Beaver Creek
Indianapolis Willow Lake Dayton Miamisburg-Centerville
Dayton Vandalia
Kentucky Dublin Dublin
Lexington Lexington Toledo Toledo
Lexington Harrodsburg Toledo Sylvania
Michigan Pennsylvania
Detroit Ann Arbor Pittsburgh Monroeville
Detroit Auburn Hills
Detroit Canton Tennessee
Detroit Livonia Chattanooga Chattanooga
Detroit Novi Green Hills Green Hills
Detroit Sterling Heights Johnson City Johnson City
Detroit Troy Knoxville Knoxville
Grand Rapids Grand Rapids Memphis Memphis
Memphis Regalia Center
North Carolina Nashville Hermitage
Charlotte Southpark Nashville Murfreesboro
Raleigh-Durham-Chapel Hill Raleigh Nashville Parkway
Charlotte Ballantyne Nashville Rivergate
Nashville West End
Ohio
Akron Fairlawn Virginia
Cincinnati Beechmont Norfolk Chesapeake
Cincinnati Governor's Hill Washington, D.C. Fairfax
The Registrant leases 26 Restaurants from unaffiliated lessors
with base terms ranging from 7 to 40 years, that include options to
extend such leases exercisable by the Registrant. See Note 13 to the
Financial Statements for information relating to the lease
commitments. The Registrant owns the remaining Restaurants, all 48
of which secure the Term and Revolving Loan agreement with First
Union National Bank and NationsBank of Tennessee. Closed Restaurants
still owned or leased by the Registrant are included in this total.
Page 7
The Registrant owns a 32,000 square foot office building in West
Palm Beach, Florida where its executive offices are located.
Currently the Registrant leases 50 percent of that facility to an
unaffiliated lessee. The lease term runs through May, 2003. The
office building is pledged as collateral under the Term and Revolving
loan agreement, as amended. The Registrant closed a restaurant in
Florence, Kentucky in 1995 and a restaurant in Palm Harbor, Florida
in 1996 and is currently leasing the sites to unaffiliated third
parties. The Registrant closed 7 restaurants in 1999 in Bethesda, MD;
Tampa, FL; Atlanta, GA (2); Saginaw, MI; Boardman, OH; and
Louisville, KY. The restaurant in Bethesda was sold to an unrelated
third party. The Registrant is currently exploring lease and sale
arrangements on the other 6 properties.
Item 3. Legal Proceedings.
The case of Burnette, et al. v. Cooker Restaurant Corporation was
filed in the United States District Court, Middle District of
Florida, Tampa Division, on March 26, 1999. Plaintiffs allege
violations of the wage and hour laws of the Fair Labor Standards Act
with respect to themselves and all others similarly situated.
Plaintiffs seek overtime pay, back pay, and attorneys fees. No
specific monetary damages have been alleged in the complaint.
Plaintiffs have filed a motion to facilitate notice of the lawsuit to
all current and previous employees (for a period of three years prior
to the filing of the lawsuit) to allow them to join the lawsuit as
plaintiffs. Cooker intends to vigorously oppose the sending of
notice and vigorously defend the lawsuit, but there can be no
assurance that it will ultimately prevail.
On September 17, 1999, certain of the plaintiffs in the Burnette
action described above, as well as other plaintiffs, filed a class
action in the United States District Court, Middle District of
Florida, entitled Clemmons, et al. V. Cooker Restaurant Corporation.
Plaintiffs allege that Cooker has discriminated on the basis of race
in the hiring and promotion of employees. Plaintiffs seek injunctive
relief, attorneys fees, back pay and lost benefits, and
reinstatement. No specific monetary damages have been alleged in the
complaint. No class has been certified and the case is still in its
preliminary stage. There has been no discovery conducted to date. A
motion to dismiss the complaint is pending. Cooker intends to
vigorously defend the lawsuit, but there can be no assurance that it
will ultimately prevail.
Routine Proceedings
The Registrant is a party to routine litigation incidental to its
business, including ordinary course employment litigation.
Management does not believe that the resolution of any or all of such
routine litigation is likely to have a material adverse effect on the
Registrant's financial condition or results of operation.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Supplemental Item. Executive Officers of the Registrant.
Set forth below is information regarding the executive officers of
the Registrant as of January 2, 2000:
Name Office Age
_____________________________ ________________________________ ______
Henry R. Hillenmeyer Chairman of the Board and Chief
Executive Officer 56
Glen W. Cockburn Senior Vice President-Operation 44
Mark W. Mikosz Vice President and Chief Financial
Officer 51
Margaret A. Epperson Secretary 54
HENRY R. HILLENMEYER, age 56, has been Chairman of the Board and
Chief Executive Officer of the Registrant since August 1999; and has
served as a director of the Registrant since 1994. Prior to joining
Cooker, Mr. Hillenmeyer spent 15 years with Southern Hospitality
Corporation, a 35-unit Wendy's franchisee based in Nashville,
Tennessee, in a number of titles, but most recently as its Chairman,
President and director until the Registrant was sold in 1994.
Southern Hospitality Corporation was created by the merger in 1980 of
Wendy's of Nashville, Inc. into Ireland's Restaurants, Inc. In 1986,
Southern Hospitality Corporation sold its three full service
restaurant concepts, including Cooker, to a group including Glenn W.
Cockburn, Senior Vice President of Cooker, and G. Arthur Seelbinder,
the former CEO of Cooker. Cooker Bar and Grille emerged from the
three concepts to become the focus of the Registrant's operations.
Mr. Hillenmeyer has also served as Chairman and CEO of
Careerhighway.Com (formerly Skillsearch Corporation), an internet
recruitment company, from 1995 until February 18, 2000. Mr.
Hillenmeyer is a former Chairman of the Board of Junior Achievement
of Middle Tennessee, Inc. He earned a B.A. degree in Economics from
Yale University.
GLENN W. COCKBURN, age 44, is a founder of the Registrant. He has
been a director of the Registrant since 1989. In 1991, he was elected
Senior Vice President - Operations of the Registrant. He was Vice
President - Food Services of the Registrant from 1988 to
Page 8
1991 and was Vice President of Food Operations of Cooker Corporation from
1986 to 1988 when it was merged into the Registrant. He is a graduate of the
Culinary Institute of America in Hyde Park, New York.
MARK W. MIKOSZ, age 51, has been Vice President - Chief Financial
Officer of the Registrant since June 1998. Prior to joining the
Registrant, Mr. Mikosz was with Roundy's Inc. from 1989 through 1994
where he served in various capacities, including Vice President of
Finance, Vice President of Marketing, Division President, and
Corporate Director of Financial and Retail Services. Mr. Mikosz has
been in the food industry since 1972.
MARGARET A. EPPERSON, age 54, has been Secretary and Treasurer
ofthe Registrant since 1986.
Page 9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Registrant's common shares are traded on the New York Stock
Exchange ("NYSE") under the symbol "CGR". The prices set forth below
reflect high and low sale prices for common shares in each of the
quarters of 1999 and 1998 as reported by the NYSE.
1999 High Low
1st Quarter $7-5/8 $5-3/16
2nd Quarter $6-5/8 $5-1/2
3rd Quarter $6-1/4 $3-3/4
4th Quarter $4-1/16 $2-1/2
1998 High Low
1st Quarter $9-7/8 $8-3/16
2nd Quarter $12-1/8 $9-3/8
3rd Quarter $10-7/16 $8-3/8
4th Quarter $9-3/4 $5-1/2
On February 28, 2000, the Registrant had approximately 2,100
shareholders of record.
In January 2000, the Registrant determined not to pay an annual
dividend for fiscal 1999. Previously, the Registrant declared and
paid an annual cash dividend of $.10 per common share for fiscal 1998
and of $.07 per common share for fiscal 1997, in each case, in
February of the following year. Under the Registrant's loan
agreements, dividends may be declared in any fiscal year providing
such dividends do not cause the Registrant to be in default on the loans.
Page 10
Item 6. Selected Financial Data.
The selected financial data presented below should be read in
conjunction with the Registrant's Consolidated Financial Statements,
the related notes and independent auditors' reports, which refers to
a change in accounting for preoperational costs, and Management's
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this filing.
(in thousands, except per share data)
Fiscal Year (b)
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------
Sales 153,290 160,546 135,458 110,273 91,678
Income before cumulative effect of a
change in accounting principle (3,274) 6,027 6,452 6,732 4,432
Cumulative effect of acocunting change,
net of tax (a) - - (496) - -
Net (loss) income (3,274) 6,027 5,956 6,732 4,432
================================================================================
Basic earnings per common share:
Income before cumulative effect of
change in accounting principle (0.54) 0.66 0.64 0.75 0.62
Cumulative effect of change in
accounting for preoperational costs - - (0.05) - -
Net (loss) income (0.54) 0.66 0.59 0.75 0.62
================================================================================
Diluted earnings per common share:
Income before cumulative effect of a
change in accounting principle (0.54) 0.65 0.63 0.72 0.61
Cumulative effect of change in
accounting for preoperational costs - - (0.05) - -
Net (loss) income (0.54) 0.65 0.58 0.72 0.61
================================================================================
Long-term obligations 81,222 82,712 42,917 16,822 35,975
Total assets 149,298 153,267 142,921 114,633 83,181
Dividends per share - 0.10 0.07 0.06 0.05
Proforma amounts assuming change in
accounting principle is applied
retroactively; (a)
Net income (3,274) 6,027 6,452 6,442 4,667
Earnings per share - basic (0.54) 0.66 0.64 0.72 0.65
Earnings per share - diluted (0.54) 0.65 0.63 0.69 0.64
(a) Effective December 30, 1996, the Registrant changed its method
of accounting for preoperational costs, costs for employee
training and relocation, and supplies incurred in the connection
with the opening of a restaurant to expense these costs as
incurred (see note 2 to the consolidated financial statements).
(b) The fiscal years ended on January 2, 2000, January 3, 1999,
December 28, 1997, December 29, 1996, and December 31, 1995,
respectively. The year ended January 3, 1999 consisted of 53
weeks. All other years consisted of 52 weeks.
Page 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with the Registrant's
Consolidated Financial Statements and the related notes thereto included
elsewhere herein.
Results of Operations
The following table sets forth as a percentage of sales certain
items appearing in the Registrant's statement of income.
Fiscal Year (a)
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
Sales 100.0% 100.0% 100.0%
----------------------------------------------------
Cost of Sales:
Food and beverage 28.5 28.7 28.6
Labor 35.4 35.0 34.5
Restaurant operating expenses 18.6 18.4 17.5
Restaurant depreciation 4.2 3.9 3.7
General and administrative 7.2 5.9 5.5
Preoperational costs 0.4 0.6 1.6
Restructuring charges 2.1 - 0.3
Loss on loan guaranty 1.6 - -
Severance charges 0.8 - -
Interest expense 4.5 2.5 1.3
Loss (gain) on sale of property - (0.1) (0.1)
Interest and other income (0.1) (0.2) (0.1)
----------------------------------------------------
103.2 94.7 92.8
(Loss) income before income taxes and
cumulative effect of a change in
accounting principle (3.2) 5.3 7.2
(Benefit) provision for income taxes
before cumulative effect of a change
in accounting principle (1.2) 1.6 2.5
----------------------------------------------------
(Loss) income before cumulative effect
of a change in accounting principle (2.0) 3.7 4.7
Cumulative effect of a change in
accounting for preoperational costs,
net of tax - - 0.4
----------------------------------------------------
Net (loss) income (2.0) 3.7 4.3
====================================================
(a) The fiscal years ended on January 2, 2000, January 3, 1999, and
December 28, 1997, respectively.
Forward Looking Information
Statements contained in the foregoing discussion and elsewhere in
this report that are not based on historical fact are considered
"forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. 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 the capital resources necessary
to complete the Registrant'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
Registrant's business.
1999 Compared with 1998
Sales
Sales for 1999 decreased 4.5%, or $7,256,000, to $153,290,000
compared to sales of $160,546,000 for 1998. The year ended January 2,
2000, had 52 weeks versus 53 weeks in fiscal 1998. The year-to- year
sales comparison for 52 weeks shows a sales decline of 2.6%.
Page 12
The decrease in 1999 is due to a decrease in the number of guests at the
restaurants, as well as restaurant closings, partially offset by new
restaurant openings. The Registrant opened five new restaurants in
1999 in Dublin, OH; Charlotte, NC (2); Middleburg Heights, OH; and
Fairlawn, OH. The Registrant closed seven restaurants in Bethesda,
MD; Tampa, FL; Saginaw, MI; Boardman, OH; Atlanta, GA (2); and
Louisville, KY. Additionally, one store was temporarily closed during
the final three months of 1999 for repairs as a result of structural
damage in the kitchen area. Same store sales were down 5.9% in 1999.
The average check in 1999 was $11.76 as compared to $11.34 in 1998.
Food and beverage
The cost of food and beverage in 1999 was $43,683,000 as compared
to $46,067,000 in 1998. The decrease of $2,384,000 is primarily due
to decreased sales in 1999 as compared to 1998. As a percent of
sales, the cost of food and beverage was 28.5% in 1999, as compared
to 28.7% in 1998. The improvement in 1999 is due primarily to a menu
price increase instituted at the end of the fourth quarter of 1998.
Labor
Labor costs in 1999 were $54,279,000 as compared to $56,252,000 in
1998. The decrease of $1,973,000 is primarily due to the decrease in
sales and average unit volume during the comparable period, which
resulted in lower demand for labor hours. Crew labor declined
$1,746,000 in 1999 as compared to 1998, and benefits decreased
$1,057,000 in 1999 as compared to 1998. Labor costs as a percent of
sales for 1999 were 35.4% as compared to 35.0% for 1998. The increase
is due mainly to decreased same-store sales for the year as well as
increased manager costs, which remain relatively fixed at the
individual restaurant level. Manager costs in 1999 increased $830,000
as compared to 1998 due to higher salaries and increased bonus costs.
Restaurant operating expenses
Restaurant operating expenses in 1999 were $28,511,000 as compared
to $29,519,000 in 1998. The decrease of $1,008,000 was primarily due
to decreases in public relations costs of $1,229,000, courier fees of
$262,000, administrative expenses of $191,000 and other miscellaneous
store expenses of $227,000, offset by increased occupancy costs,
including rent and property taxes and insurance, of $901,000.
Restaurant operating expenses as a percent of sales in 1999 were
18.6% as compared to 18.4% in 1998.
Restaurant depreciation
Restaurant depreciation expense in 1999, was $6,405,000 as compared
to $6,210,000 in 1998. The increase of $195,000 is due to the opening
of additional stores in 1999. While the Registrant did close seven
restaurants in 1999, only one unit, Bethesda, MD, was sold. Of the
remaining six units closed, five units are owned and are currently
being depreciated. The Registrant intends to lease these units to
third parties. The remaining unit was leased and the Company recorded
an impairment charge on this location which reduced the net book
value of the site to $0.
General and administrative expenses
General and administrative expenses in 1999 were $11,087,000 as
compared to $9,431,000 in 1998. The increase of $1,656,000 is due
mainly to a one-time charge taken by the Registrant in the third
quarter of 1999 of $943,000. Included in this charge was a reserve of
approximately $155,000 for a state tax audit, $361,000 to adjust the
Registrant's workers' compensation and health insurance reserves,
$250,000 in signing bonus for the Registrant's new CEO, Mr. Henry
Hillenmeyer, and $177,000 in other miscellaneous charges. The
remaining increase of $713,000 is due primarily to increases in wage
costs of $204,000, legal costs of 284,000, marketing costs of
$513,000, and a gain on the sale of land of approximately $222,000 in
1998 which did not reoccur in 1999, offset by a decrease in
relocation costs of $181,000, other miscellaneous expenses of
$120,000 and an increase in rental income of $209,000. General and
administrative expenses as a percent of sales in 1999 was 7.2% as
compared to 5.9% in 1998.
Preoperational costs
Preoperational costs in 1999 were $646,000 as compared to $896,000
in 1998. The decrease of $250,000 is due entirely to the decrease in
the number of store openings in 1999 as compared to 1998. The
Registrant opened five new restaurants in 1999 as compared to seven
opened in 1998.
Restructuring charges
Restructuring charges in 1999 were $3,208,000. Of these charges,
$150,000 represents costs incurred in the closing of the Registrant's
restaurants in Tampa, FL; Atlanta, GA (2); Saginaw, MI; Boardman, OH;
and Louisville, KY. The remaining $3,058,000 represents impairment
charges recorded on 7 of the Registrant's restaurants. Annually, or
more frequently if events or circumstances change, a determination is
made by management to ascertain whether property and equipment and
other intangibles have been impaired based upon the sum of future
undiscounted cash flows from operating activities. Based upon a
review of the Registrant's restaurants at the end of the third
quarter of 1999, as well as the decline in same store sales of 7.2%
for the third quarter and the decreases in customer counts and cash
flows at these locations, the Registrant determined that certain of
its long-lived assets were impaired. Accordingly, the Registrant
recorded a charge for the impairment of seven of its restaurant
locations in 1999.
Page 13
Loss on loan guaranty
During 1999, the Registrant recorded a reserve for loan guaranty
loss of $2,454,000. In 1994, the Board of Directors approved a
guaranty by the Registrant of a loan of $5,000,000 to G. Arthur
Seelbinder (the "Loan"), the former Chairman of the Board and current
Director of the Registrant. The Loan is secured by the Registrant's
guaranty and 323,007 shares of the Registrant's common stock owned by
Mr. Seelbinder. During the fourth quarter of 1998, the lender
required the Registrant to make a cash deposit in such amount to
satisfy the difference between the value of the shares pledged as
collateral for the loan and the face amount of the loan. The adequacy
of this deposit is assessed by the lender periodically based upon
changes in the price of the Registrant's common stock. During the
third quarter of 1999, Mr. Henry Hillenmeyer replaced Mr. Seelbinder
as Chairman and CEO of the Registrant. Based primarily upon the
significant change in Mr. Seelbinder's employment status, and the
value of Mr. Seelbinder's common stock at the end of the
Registrant's fiscal 1999 third quarter, the Registrant believed that
it was, and still is, probable that a loss on the loan guaranty has
been incurred as of the end of the Registrant's fiscal 1999 third
quarter. The Registrant's best estimate of that loss is $2,454,000.
The Registrant will continue to monitor this reserve on an ongoing
basis based upon changes in the price of the Registrant's common
stock and the agreement with the lender. The term of this loan has
been extended until March 1, 2000.
Severance charges
Severance charges in 1999 were $1,300,000. These charges represent
the value of the severance agreement reached between the Registrant
and its former Chairman and Chief Executive Officer, G. Arthur
Seelbinder. Of this amount, $212,000 represents the write-off of
certain amounts owed to the Registrant by Mr. Seelbinder, and
$1,088,000 represents an accrual for amounts to be received by Mr.
Seelbinder over the duration of the agreements in consideration for
past services rendered to the Registrant by Mr. Seelbinder.
Interest expense
Interest expense in 1999 was $6,828,000 as compared to $4,022,000
in 1998. The increase of $2,806,000 is due to the additional debt
incurred in conjunction with the buyback of approximately 4,000,000
shares of the Registrant's Common Stock completed in the fourth
quarter of 1998. As a result of the buyback, the Registrant acquired
an additional $43,000,000 in term debt financing, as well as a
$13,500,000 revolving line of credit facility.
(Benefit) provision for income taxes
The (benefit) provision for income taxes for 1999 and 1998, as a
percentage of (loss) income before taxes, was 35.0% and 30.1%,
respectively. The change in the effective tax rate in the current
year 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, resulting in a lower effective rate in 1998.
1998 Compared with 1997
Sales
Sales in 1998 of $160,546,000 were $25,088,000 (18.5%) more than
sales in 1997. The increase was primarily due to sales from new
restaurants opened during fiscal 1998 and from a full year of
operation for restaurants opened during 1997. The 1998 openings
included restaurants in: West Palm Beach and Tallahassee, Florida;
Lexington, Kentucky (2); Evansville, Indiana; Troy, Michigan;
Cuyahoga Falls, Ohio; Nashville and Knoxville, Tennessee; and
Augusta, Georgia. Same store sales for the year were down 1.2% from
the prior year primarily due to increased competition in the
Registrant's market areas.
Food and beverage
The food and beverage costs in 1998 of $46,067,000 increased to
28.7% of sales as compared to 28.6% in the prior year. The increase
was primarily due to higher poultry, dairy, and potato prices for the
latter part of the year. Other ingredient costs increases were offset
by price increases taken during the year.
Labor
Labor cost in 1998 of $56,252,000 increased to 35% of sales as
compared to 34.5% in the prior year. The increase was due mainly to
decreased sales for certain periods during the year, particularly the
third quarter, which were not offset by decreased staffing levels, as
well as increased bonus costs. Average hourly wage rate increase were
offset by slightly lower hours.
Restaurant operating expenses
Restaurant operating expenses in 1998 of $29,519,000 increased to
18.4% of sales as compared to 17.5% in the prior year. Areas showing
increased spending were utilities, marketing and administration, due
to additional store openings, continued marketing efforts, and a much
hotter than normal summer. In addition, percentages were affected by
decreased average unit volume for the latter half of the year.
Depreciation and amortization as a percent of sales increased 40
basis points over last year as a result of lower average unit sales
and higher expense levels at new units.
Page 14
General and administrative
General and administrative expense of $9,431,000 were $2,063,000
(28%) more than last year's $7,368,000. The majority of the increase
was due to increased marketing expenses incurred as a result of the
Registrant's expanded test-market media advertising during the year.
Preoperational costs
The decrease in preoperational expenses of $1,288,000 to $896,000
in 1998 versus $2,184,000 in 1997 was due to a decrease in the number
of stores opened in 1998 compared to 1997.
Interest expense
Interest expense increased $2,234,000 to $4,022,000 from the prior
year. During 1998, the Registrant entered into a new Term Loan
agreement with NationsBank of Tennessee and First Union National Bank
and a Term Loan with the CIT/Equipment Financing Group, Inc. in
conjunction with its repurchase of common stock pursuant to the
Tender Offer (the "Offer") which was completed on October 5, 1998.
The increase in interest expense was due to the additional financing
required to complete the Offer to purchase approximately 4,006,000
shares of the Registrant's common stock.
Provision for income taxes
The 1998 provision for income taxes decreased to 30.1% from 34.3%
in 1997. The decrease in the overall tax rate is the result a
reversal in the current year of a previously accrued tax liability
for an IRS examination in the amount of $335,000.
Liquidity and Capital Resources
The Registrant's operations are subject to factors outside its
control. Any one, or a combination of these factors, could materially
affect the results of the Registrant'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
Registrant'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 Registrant. Forward-looking statements made by or on
behalf of the Registrant 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 Registrant will be
realized or, even if substantially realized, that they will have the
expected consequences to or effects on the Registrant or its business
or operations.
The Registrant's principal capital requirements are for working
capital, new restaurant openings and improvements to existing
restaurants. The majority of the Registrant's financing for
operations, expansion and working capital is provided by internally
generated cash flows from operations and amounts available under the
Revolver (defined below).
During 1998, the Registrant 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 Registrant 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. Pursuant to certain renegotiations of the
Registrant's debt terms in December 1999, the amount available under
the Revolver was extended to $13,500,000. No other financial terms of
the original agreements with the lenders were changed as a result of
the negotiations. Of the $70,500,000 in term loans, $30,000,000 was
with NationsBank of Tennessee, $22,500,000 was with First Union
National Bank, and $18,000,000 was with the CIT/Equipment Financing
Group, Inc. As of January 2, 2000, the Registrant had borrowed
$10,500,000 against the Revolver and the outstanding balance of the
Term Loans was approximately $64,890,000. Pursuant to the terms of
the original agreement, the Registrant makes 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.
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. Additionally, the Registrant
makes monthly payments of $267,639, including principal and interest,
to CIT. Such payments will continue until September 30, 2003, at
which time all remaining amounts under the agreement with CIT will be
due in full.
Repayments of principal and interest on these loans are expected
to be financed through normal operating cash flows generated by the
Registrant.
Page 15
During the year ended January 2, 2000, the Registrant opened five
new restaurants. Capital expenditures for new restaurants, as well as
the refurbishing and remodeling of existing units, totaled
$8,525,000, and were funded by cash flows of $7,622,000 from
operations, and the balance from the Registrant's available cash
balances, including amounts drawn against the Revolver. The
Registrant has opened one Restaurant to date in 2000. The Registrant
currently has no plans to open any additional Restaurants in 2000.
The Registrant believes that cash flows from operations together with
available borrowings under the Revolver will be sufficient to fund
the ongoing maintenance and remodeling of existing restaurants as
well as other working capital requirements.
The Registrant 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
January 2, 2000, the Registrant was a party to an interest rate swap
agreement with a termination date of September 28, 2001. Per the
terms of the agreement, the Registrant pays 6.25% on $27,500,000 of
it's total LIBOR-based floating rate debt, and receives LIBOR from
the counterparty. The fair value of the interest swap agreement
approximated $118,000 at January 2, 2000.
The Registrant is exposed to credit losses in the event of
nonperformance by the counterparties to its interest rate swap
agreements. The Registrant 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
Registrant of a loan of $5,000,000 to G. Arthur Seelbinder (the
"Loan"), the former Chairman of the Board and current Director of the
Registrant. 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 Registrant 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 Registrant for its guaranty.
As of February 1, 2000, the amount of the Loan outstanding,
including capitalized and accrued interest, was $3,697,522 and the
undiscounted fair market value of the pledged shares was $746,953,
based upon a market price of $2.3125 per common share. The guaranty
secures the loan until it is paid or refinanced without a guaranty.
The Registrant would fund any obligation it incurs under the terms of
its guaranty from additional borrowing under its Revolver. Mr.
Seelbinder agreed to reimburse the Registrant for any interest
incurred on amounts drawn against the Revolver in excess of the
interest earned on the cash deposit with the Bank. Mr. Seelbinder has
not yet reimbursed the Registrant for this interest.
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 Registrant to make a cash
deposit in such amount to satisfy the collateral shortfall as a
result of the decreased price of the Registrant's common stock. The
Bank, the Registrant 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 Registrant made an initial cash deposit of
approximately $1,600,000 which will be revalued periodically, and Mr.
Seelbinder will reimburse the Registrant for the amount by which the
interest on the deposit is less than the interest the Registrant pays
for funds under its Term Loan and Revolver. This use of the
Registrant's funds, to date, has not materially affected its working
capital or its ability to implement its capital expenditure plan or
make improvements and betterments on its property. There can be no
assurance, however, that use of these funds or additional Registrant
funds will not limit these activities in the future. As of February
1, 2000, the cash deposit with the Bank totaled approximately
$2,988,000. Mr. Seelbinder has also informed the Registrant 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 Registrant. The term of the Loan and guaranty has
been extended until March 1, 2000.
Based primarily upon the significant change in Mr. Seelbinder's
employment status and the value of Mr. Seelbinder's common stock at
the end of the Registrant's 1999 fiscal third quarter, the Registrant
believed that it was, and still is, probable that a loss on the loan
guaranty had been incurred as of the end of the Registrant's 1999
fiscal third quarter. The Registrant's best estimate of that loss is
$2,454,000.
Accounting Changes
Effective December 30, 1996, the Registrant changed its method of
accounting for preoperational costs, costs for employee training and
relocation and supplies incurred in connection with the opening of a
restaurant to expense these costs as incurred. The Registrant
formerly capitalized these costs and amortized them over a one-year
period commencing from the date the restaurant was opened. The
change was based upon new accounting guidance. The accounting change
resulted in a one-time after-tax charge of $496,000 or $.05 per share
(diluted) and is presented on the statement of operations as the
cumulative effect of a change in accounting for preoperational costs.
Page 16
Recent 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, liability or firm commitment (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 Registrant has
not determined the effect of the adoption of SFAS No. 133, as
amended, on the Registrant's results of operations or statement of
financial position.
Year 2000 Issues
In conjunction with the Registrant's efforts to ensure that its
information and non-information technology systems were Year 2000
compliant, the Registrant incurred total expenses of approximately
$25,000 in fiscal 1999 to achieve Year 2000 compliance. These costs
were related to necessary hardware and software upgrades to certain
systems. As a result of these upgrades, the Registrant has
experienced no significant system failures or other adverse
consequences to date due to Year 2000 compliance. The Registrant
continues to monitor its systems and those of its vendors and
suppliers for any unanticipated Year 2000 issues that may not yet
have manifested.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk Management
The Registrant continually monitors and considers methods to
manage the rate sensitivity of its financial instruments (principally
debt). Such monitoring processes are designed to minimize the impact
of sudden and sustained changes in interest rates which could have a
material effect on the cash flows, earnings, or fair value of the
Registrant's financial instruments. Interest rate risk exposure is
measured using interest rate sensitivity analysis to determine the
effect on the Registrant's derivative and other fixed rate financial
instruments in the event of hypothetical changes in interest rates.
For the Registrant's variable rate financial instruments, the
analysis is performed to determine the effect on the cash flows of
the instrument. Such hypothetical changes reflect management's best
estimate of reasonably possible, near-term changes. Based upon such,
actual values may differ from those projections calculated by the
Registrant.
Cash Flow Analysis
The Registrant has a term loan in the amount of $49,533,000 with
First Union National Bank and NationsBank of Tennessee, N.A. The
interest on this loan is based upon the London Interbank Offering
Rate (LIBOR), plus an applicable margin based upon certain criteria.
For this variable rate debt, the Registrant performed an analysis to
determine the effect of an immediate 1% point increase on the cash
flows of the instruments. Based upon the analysis, such an increase
in the interest rate applicable to this loan would result in an
aggregate increase in payments of interest per the stated terms of
$278,000 in fiscal year 2000. The Registrant also has a revolving
loan agreement which allows the Registrant to borrow up to
$13,500,000 with interest terms identical to the terms of the above
loan. The analysis performed by the Registrant indicated that an
increase in the applicable interest rate of 1% would result in
additional aggregated cash payments of interest of approximately
$105,000 based upon the balance of the Revolver outstanding at
January 2, 2000, of $10,500,000.
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Registrant, and the related notes,
together with the reports of Deloitte & Touche LLP dated January 28, 2000, and
KPMG LLP dated January 27, 1999 are set forth at pages F-1 through F-21
attached hereto.
The supplementary data of the Registrant is contained in note 15
of the notes to the financial statements set forth at page F-21
attached hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
In its Form 8-K dated October 22, 1999, the Registrant announced
the resignation of KPMG LLP, its principal accountants, effective
October 18, 1999. In its Form 8-K dated October 29, 1999, the
Registrant announced the engagement of Deloitte & Touche LLP as its
principal accountants.
Page 17
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information regarding the Registrant's directors is set forth at
"ELECTION OF DIRECTORS; Nominees for Election as Directors, Directors
Whose Terms Continue Until the 2001 Annual Meeting and Directors
Whose Terms Continue Until the 2002 Annual Meeting" in the
Registrant's Proxy Statement for its 2000 Annual Meeting of
Shareholders (the "2000 Proxy Statement") which information is
incorporated herein by reference. Information regarding the
Registrant's executive officers is set forth in PART I of this report
at "Supplemental Item. Executive Officers of the Registrant."
Item 11. Executive Compensation.
The information required by this item is set forth at "COMPENSATION
OF MANAGEMENT" in the 2000 Proxy Statement which information is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is set forth at "SECURITY
OWNERSHIP OF PRINCIPAL SHAREHOLDERS, DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS" in the 2000 Proxy Statement which information is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is set forth at "COMPENSATION
OF MANAGEMENT" in the 2000 Proxy Statement which information is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Finacial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this Form 10-K.
(1) Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheet as of January 2, 2000, and January 3,
1999
Consolidated Statement of Income for the Fiscal Years Ended January
2, 2000, January 3, 1999, and December 28, 1997
Consolidated Statement of Changes in Shareholders' Equity for the
Fiscal Years Ended January 2, 2000, January 3, 1999, and December
28, 1997
Consolidated Statement of Cash Flows for the Fiscal Years Ended
January 2, 2000, January 3, 1999, and December 28, 1997
Notes to Consolidated Financial Statements for the Fiscal Years
Ended January 2, 2000, January 3, 1999, and December 28, 1997
(3) The following exhibits are filed as part of this Form 10-K.
(3) Articles of Incorporation and By-Laws.
3.1 Amended and Restated Articles of Incorporation of the Registrant
(incorporated by reference to Exhibit 28.2 of Registrant's quarterly
report on Form 10-Q for the quarterly period ended March 29, 1992;
Commission File Number 0-16806).
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 Form 10-Q for the fiscal quarter ended
April 1, 1990; Commission File No. 0-16806).
(4) Instruments Defining the Rights of Security Holders.
4.1 See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated
Articles of Incorporation of the Registrant (see 3.1 above).
Page 18
4.2 See Articles One, Four, Seven and Eight of the Amended and
Restated Code of Regulations of the Registrant (see 3.2 above).
4.3 Rights Agreement, dated as of January 16, 2000, between the
Registrant and First Union National Bank (incorporated by
reference to Exhibit 2 of the Registrant's Form 8-A filed with
the Commission on January 12, 2000; Commission File No. 1-13044).
4.4 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; Commission File No. 0-16806).
4.5 See Section 7.4 of the Amended and Restated Loan Agreement
dated December 22, 1995 between Registrant and First Union
National Bank of Tennessee. (see 10.4 below).
4.6 Indenture dated as of October 28, 1992 between Registrant and
First Union National Bank of North Carolina, as Trustee
(incorporated by reference to Exhibit 2.5 of Registrant's
Form 8-A filed with the Commission on November 10, 1992;
Commission File Number 0-16806).
(10) Material Contracts (*Management contract or compensatory
plan or arrangement.)
10.1-
10.3 Reserved.
10.4 Amended and Restated Loan Agreement dated December 22, 1995
between Registrant and First Union National Bank of
Tennessee (incorporated by reference to Exhibit 10.4 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "1995 Form 10-K"), Commission File No. 0-16806).
10.5 Underwriting Agreement dated May 7, 1996 with Montgomery Securities
and Equitable Securities Corporation (incorporated by reference to
Exhibit 10.1 to the Registrant's quarterly report on Form 10-Q for
the quarter ended June 30, 1996 (the "June 1996 Form 10-Q"),
Commission File No. 0-16806).
10.6 Form of Contingent Employment Agreement and schedule of executed
Agreements (incorporated by reference to Exhibit 10.5 of the 1995
Form 10-K; Commission File No. 0-16806).*
10.7 The Registrant's 1988 Employee Stock Option Plan and 1992 Employee
Stock Option Plan, Amended and Restated April 22, 1996, (incorporated
by reference to Exhibit 10.2 to the June 1996 Form 10-Q,
Commission File No. 0-16806).*
10.8 The Registrant's 1988 Directors Stock Option Plan, as amended and
restated. (incorporated by reference to Exhibit 10.8 to the
Registrant's annual report on Form 10-K for the fiscal year ended
December 29, 1996 (the "1996 Form 10-K");
Commission File No. 0-13044).*
10.9 The Registrant's 1992 Directors Stock Option Plan, as amended
and restated. (incorporated by reference to Exhibit 10.9 to
the 1996 Form 10-K; Commission File No. 0-13044).*
10.10 The Registrant's 1996 Officers' Stock Option Plan (incorporated by
reference to Exhibit 10.10 of the 1995 Form 10-K;
Commission File No. 0-16806). *
10.11 Reaffirmation and Amendment to Guaranty and Suretyship Agreement
between Registrant and NationsBank of Tennessee, N.A. dated July 24,
1995 (incorporated by reference to Exhibit 10.5 of the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1995; Commission File No. 1-13044).
10.12 Amended and Restated Guaranty between Registrant and Chase Manhattan
Bank dated January 31, 1997 (incorporated by reference to Exhibit 10.12
to the 1996 Form 10-K; Commission File No. 0-13044).
10.13 Letter dated February 3, 1997 from G. Arthur Seelbinder to the
Registrant (incorporated by reference to Exhibit 10.13 to the 1996
Form 10-K; Commission File No. 0-13044).
10.14 Letter dated January 30, 1998 from G. Arthur Seelbinder to the
Registrant (incorporated by reference to Exhibit 10.14 to the 1997
Form 10-K; Commission File No. 0-13044).
10.15 Second Amendment to Amended and Restated Loan Agreement dated as of
January 1,1998 between the Registrant and First Union National Bank,
a national banking association, as successor in interest to First
Union National Bank of Tennessee (incorporated by reference to Exhibit
10.15 to the 1997 Form 10-K; Commission File No. 0-13044).
Page 19
10.16 Fourth Amendment to Revolving/Term Loan Note dated as of January 1, 1998
between the Registrant and First Union National Bank, a national banking
association, as successor in interest to First Union National Bank of
Tennessee (incorporated by reference to Exhibit 10.16 to the 1997 Form
10-K; Commission File No. 0-13044).
10.17 Reaffirmation of Amended and Restated Guaranty made by the Registrant
on April20, 1998 to the Chase Manhattan Bank (incorporated by
reference to Exhibit 10.17 to the 1997 Form 10-K; Commission File
No. 0-13044).
10.18 Letter agreement dated March 26, 1998 between The Chase Manhattan Bank
and G. Arthur Seelbinder (incorporated by reference to Exhibit 10.18 to
the 1997 Form 10-K; Commission File No. 0-13044).
10.19 Amendment to Grid Time Promissory Note dated March 26, 1998 between
The Chase Manhattan Bank and G. Arthur Seelbinder (incorporated by
reference to Exhibit 10.19 to the 1997 Form 10-K;
Commission File No. 0-13044).
10.20 Loan Agreement dated September 24, 1998, between the Registrant and
First Union National Bank and NationsBank of Tennessee, N.A., both
national banking associations (incorporated by reference to Exhibit
10.20 of the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended September 27, 1998;
Commission File No. 1-13044).
10.21 Loan Agreement dated September 24, 1998, between the Registrant and
The CIT Group/Equipment Financing, Inc. (incorporated by reference to
Exhibit 10.21 of the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 27, 1998; Commission File No.
1-13044).
10.22 Letter dated September 17, 1998 from G. Arthur Seelbinder to the
Registrant (incorporated by reference to Exhibit (c)(10) to Amendment
No. 3 to the Registrant's Schedule 13E-4 filed on September 18, 1998;
Commission File No. 0-16806).
10.23 Letter agreement dated September 30, 1999 between the Registrant and
G. Arthur Seelbinder (incorporated by reference to Exhibit 10.23 of
the Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended October 3, 1999; Commission File No. 1-13044).*
10.24 Letter agreement dated August 19, 1999 between the Registrant
and Henry R. Hillenmeyer (incorporated by reference to
Exhibit 10.24 of the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended October 3, 1999;
Commission File No. 1-13044).*
10.25 Option Agreement dated August 19, 1999 between the Registrant
and Henry R. Hillenmeyer (incorporated by reference to
Exhibit 10.25 of the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended October 3, 1999;
Commission File No. 1-13044).*
(16) Letter regarding Change in Certifying Accountant.
16.1 Letter dated October 22, 1999 from KPMG LLP to the Securities
and Exchange Commission (incorporated by reference to Exhibit
16.1 to the Registrant's Current Report on Form 8-K dated
October 22, 1999; Commission File No. 1- 13044).
(21) Subsidiaries of Registrant.
21.1 Subsidiaries of Registrant.
(23) Consents of Experts and Counsel.
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP
(24) Powers of Attorney.
24.1 Powers of Attorney.
24.2 Certified resolution of the Registrant's Board of Directors
authorizing officers and directors signing on behalf of the
Registrant to sign pursuant to a power of attorney.
- ---------------------------
* Incorporated by reference.
Page 20
(27) Financial Data Schedule.
27.1 Financial Data Schedule (submitted electronically for SEC
information only).
(b) Reports on Form 8-K.
Report on Form 8-K dated October 22, 1999 reporting an Item 4 event.
Report on Form 8-K dated October 29, 1999 reporting an Item 4 event.
Page 21
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.
Dated: February 28, 2000
COOKER RESTAURANT CORPORATION
(the "Registrant")
By: /s/ Henry R. Hillenmeyer
----------------------------
Henry R. Hillenmeyer
Chairman of the Board,
Chief Executive Officer and Director
(principal executive officer)
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 February 28, 2000.
SIGNATURE TITLE
/s/Henry R. Hillenmeyer Chairman of the Board, Chief Executive Officer
- --------------------------- (principal executive officer)
Henry R. Hillenmeyer Officer and Director
/s/ Glenn W. Cockburn* Senior Vice President - Operations and Director
- ---------------------------
Glenn W. Cockburn
/s/ Mark W. Mikosz* Vice President - Chief Financial Officer
- --------------------------- (principal financial and accounting officer)
Mark W. Mikosz
/s/ Robin V. Holderman* Director
- ---------------------------
Robin V. Holderman
/s/ Lehr Jackson* Director
- ---------------------------
Lehr Jackson
/s/ David T. Kollat* Director
- ---------------------------
David T. Kollat
/s/ D. Shannon LeRoy* Director
- ---------------------------
D. Shannon LeRoy
/s/ Harvey Palash* Director
- --------------------------
Harvey Palash
/s/ Brad Saltz* Director
- --------------------------
Brad Saltz
/s/ G. Arthur Seelbinder* Director
- --------------------------
G. Arthur Seelbinder
*By: /s/ Henry R. Hillenmeyer
- ---------------------------
Henry R. Hillenmeyer
Attorney-in-Fact
Page 22
______________________________________________________________________________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
COOKER RESTAURANT CORPORATION
_______________________
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED:
JANUARY 2, 2000
_______________________
CONSOLIDATED FINANCIAL STATEMENTS
_______________________
______________________________________________________________________________
______________________________________________________________________________
COOKER RESTAURANT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report - KPMG LLP................................F-2
Independent Auditors' Report - Deloitte & Touche LLP...................F-3
Consolidated Balance Sheet as of January 2, 2000 and January 3, 1999...F-4
Consolidated Statements of Income for the fiscal years ended
January 2, 2000, January 3, 1999, and December 28, 1997................F-5
Consolidated Statements of Changes in Shareholders' Equity for
the fiscal years ended January 2, 2000, January 3, 1999, and
December 28, 1997......................................................F-6
Consolidated Statement of Cash Flows for the fiscal years ended
January 2, 2000, January 3, 1999, and December 28, 1997................F-7
Notes to Consolidated Financial Statements.............................F-8-F-21
F-1
Independent Auditors' Report
To the Board of Directors and Shareholders
Cooker Restaurant Corporation:
We have audited the accompanying consolidated balance sheet of
Cooker Restaurant Corporation and subsidiaries (the "Company") as of
January 3, 1999, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the years
in the two-year period ended January 3, 1999. 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 Cooker Restaurant Corporation and subsidiaries as of
January 3, 1999, and the results of their operations and their cash
flows for each of the years in the two-year period ended January 3,
1999 in conformity with generally accepted accounting principles.
As discussed in note 2 to the consolidated financial statements, the
Company changed its method of accounting for preoperational costs in
1997.
/s/KPMG LLP
KPMG LLP
January 27, 1999
Fort Lauderdale, Florida
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Director and Shareholders
Cooker Restaurant Corporation:
We have audited the accompanying balance sheet of Cooker Restaurant
Corporation as of January 2, 2000, and the related statements of
income, stockholders' equity, and cash flows for the year ended
January 2, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The
financial statements of the Company for the years ended January 3,
1999 and December 27, 1998 were audited by other auditors whose
report, dated January 27, 1999, expressed an unqualified opinion on
those statements.
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 Cooker Restaurant Corporation as of January 2, 2000, and
the results of its operations and its cash flows for the year ended
January 2, 2000 in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
January 28, 2000
F-3
COOKER RESTAURANT CORPORATION
Consolidated Balance Sheets
(Dollar amounts in thousands)
1999 1998
------------ ------------
ASSETS
-------------
Current Assets:
Cash and cash equivalents $ 1,428 $ 2,520
Inventory 1,326 1,650
Land held for sale 67 55
Prepaid and other current assets 1,402 763
Income tax receivable 675 242
------------ ------------
Total current assets 4,898 5,230
Property and equipment, net 138,644 144,025
Restricted cash 2,919 1,600
Other assets, net 2,837 2,412
------------ ------------
Total assets $ 149,298 $ 153,267
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 6,858 $ 6,015
Accounts payable 4,154 3,357
Accrued liabilities 8,585 7,154
Reserve for loan guaranty loss 2,454 0
Capital lease obligation, current 188 173
------------ ------------
Total current liabilities 22,239 16,699
Long-term debt 81,097 82,385
Capital lease obligation, long-term 125 327
Deferred income taxes 1,048 3,406
Other liabilities 0 298
------------ ------------
Total liabilities $ 104,509 $ 103,115
------------ ------------
Shareholders' equity:
Common shares-without par value:
authorized 30,000,000 shares; issued
10,548,000 at January 2, 2000 and
January 3, 1999 $ 62,211 $ 62,460
Retained earnings 31,007 34,895
Treasury stock, at cost, 4,562,000
and 4,371,000 shares at January 2, 2000
and January 3, 1999, respectively (48,429) (47,203)
------------ ------------
Total shareholders' equity 44,789 50,152
Commitments and contingencies ------------ ------------
Total liabilities and shareholders' equity $ 149,298 $ 153,267
============ ============
See accompanying notes to consolidated financial statements
F-4
COOKER RESTAURANT CORPORATION
Consolidated statements of income
(In thousands, except per share data)
Fiscal years ended January 2, 2000, January 3, 1999, and December 28, 1997
1999 1998 1997
-----------------------------------
Sales $ 153,290 160,546 135,458
Cost of Sales:
Food and beverage 43,683 46,067 38,762
Labor 54,279 56,252 46,711
Restaurant operating expenses 28,511 29,519 23,662
Restaurant depreciation 6,405 6,210 4,966
General and administrative 11,087 9,431 7,368
Preoperational costs 646 896 2,184
Restructuring charges 3,208 - 472
Loss on loan guaranty 2,454 - -
Severance charges 1,300 - -
Interest expense 6,828 4,022 1,788
Loss (gain) on sale of property 4 (223) (170)
Interest and other income (81) (256) (99)
-----------------------------------
158,324 151,918 125,644
(Loss) income before income taxes
and cumulative effect of a change
in accounting principle 5,034 8,628 9,814
(Benefit) provision for income taxes
before cumulative effect of a
change in accounting principle (1,760) 2,601 3,362
-----------------------------------
(Loss) income before cumulative
effect of a change in accounting
principle (3,274) 6,027 6,452
Cumulative effect of a change in
accounting for preoperational costs
(less tax of $253) - - 496
-----------------------------------
Net (loss) income $ 3,274 6,027 5,956
===================================
Basic earnings per common share:
(Loss) income before cumulative
effect of change in accounting
principle $ (0.54) 0.66 0.64
Cumulative effect of change in
accounting for preoperational costs - - (0.05)
-----------------------------------
Net (loss) income $ (0.54) 0.66 0.59
===================================
Diluted earnings per common share:
(Loss) income before cumulative
effect of change in accounting
principle $ (0.54) 0.65 0.63
Cumulative effect of change in
accounting for preoperational
costs - - (0.05)
-----------------------------------
Net (loss) income $ (0.54) 0.65 0.58
===================================
Pro forma amounts assuming change
in accounting principle is applied
retroactively:
Net (loss) Income $ 3,274 6,027 6,452
(Loss) earnings per share - basic $ (0.54) 0.66 0.64
(Loss) earnings per share - diluted $ (0.54) 0.65 0.63
See accompanying notes to consolidated financial statements
F-5
COOKER RESTAURANT CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(Dollar and share amounts in thousands)
Fiscal years ended January 2, 2000, January 3, 1999, and December 28, 1997
Common Shares Treasury Stock
-------------------- Retained ----------------------
Shares Amounts earnings Shares Amounts Total
------- --------- --------- --------- --------- --------
Balance, December 29, 1996 10,548 $ 63,583 $ 24,316 513 $ (6,149) $ 81,750
Shares repurchased - - - 122 (1,361) (1,361)
Issuance of common shares
under stock option plans - (751) - (109) 1,373 622
Tax benefits of stock options
exercised - 207 - - - 207
Dividends paid $.07 per share - (702) - - (702)
Net income - - 5,956 - - 5,956
------- --------- --------- --------- --------- --------
Balance, December 28, 1997 10,548 63,039 29,570 526 (6,137) 86,472
Shares repurchased - - - 4,006 (42,954) (42,954)
Issuance of common shares
under stock option plans - (771) - (161) 1,888 1,117
Tax benefits of stock options
exercised - 192 - - - 192
Dividends paid $.07 per share - - (702) - - (702)
Net income - - 6,027 - - 6,027
------- --------- --------- --------- --------- --------
Balance, January 3, 1999 10,548 62,460 34,895 4,371 (47,203) 50,152
Shares repurchased 233 (1,670) (1,670)
Issuance of common shares
under stock option plans (249) (42) 444 195
Dividends paid $.10 per share (614) (614)
Net (loss) income (3,274) (3,274)
------- --------- --------- --------- --------- --------
Balance, January 2, 2000 10,548 $ 62,211 $ 31,007 4,562 $ (48,429) $ 44,789
======= ========= ========= ========= ========= ========
See accompanying notes to consolidated financial statements
F-6
COOKER RESTAURANT CORPORATION
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
Fiscal years ended January 2, 2000, January 3, 1999, and December 28, 1997
January 2, January 3, December 28,
2000 1999 1997
----------- ---------- ------------
Cash flows from operating activities:
Net Income $ (3,274) $ 6,027 $ 5,956
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Cumulative effect of change in
accounting principle - - 496
Depreciation and amortization 6,965 6,533 5,470
Impairment charges 3,058 - 472
Loss on Loan Guaranty 2,454 - -
Deferred income taxes (2,358) 1,593 1,484
Loss (gain) on sale of property 4 (223) (170)
(Increase) decrease in:
Inventory 324 (141) (381)
Preoperational costs - - -
Prepaid expenses and other
current assets (639) 294 (530)
Other assets (425) (987) 225
Increase (decrease) in:
Accounts payable 797 (1,311) 823
Accrued liabilities and
capital lease obligations 1,446 470 654
Income taxes payable/
receivable (433) (303) (930)
Other liabilities (297) 165 133
----------- ---------- ------------
Net cash provided by operating
activities 7,622 12,117 13,702
----------- ---------- ------------
Cash flows from investing activities:
Purchases of property and equipment (8,525) (17,518) (33,109)
Proceeds from sale of property and
equipment 3,875 1,374 2,375
Restricted Cash Deposits (1,319) (1,600) -
----------- ---------- ------------
Net cash used in investing activities 5,969 17,744 30,734
----------- ---------- ------------
Cash flows from financing activities:
Proceeds from notes payable - 425 -
Payment on note payable - (425) (4,613)
Proceeds from borrowings 24,669 83,765 49,199
Repayments of borrowings (23,956) (36,605) (22,408)
Redemption of debentures (1,181) (1,175) (1,198)
Exercise of stock options 195 1,308 829
Purchases of treasury stock (1,670) (42,954) (1,361)
Capital lease obligations (188) (175) (38)
Dividends paid (614) (702) (702)
----------- ---------- ------------
Net cash (used in) provided by
financing activities (2,745) 3,462 19,708
----------- ---------- ------------
Net (decrease) increase in cash and cash
equivalents (1,092) (2,165) 2,676
Cash and cash equivalents, at beginning
of period 2,520 4,685 2,009
----------- ---------- ------------
Cash and cash equivalents, at end of
period $ 1,428 $ 2,520 $ 4,685
=========== ========== ============
See accompanying notes to consolidated financial statements
F-7
COOKER RESTAURANT CORPORATION
Consolidated Financial Statements
January 2, 2000 and January 3, 1999
(With Independent Auditors' Reports Thereon)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of the Business and Summary of Significant
Accounting Policies
Cooker Restaurant Corporation and subsidiaries (the "Company") owns
and operates 65 restaurants in Tennessee, Ohio, Indiana, Kentucky,
Michigan, Florida, Georgia, North Carolina, and Virginia which have
been developed under the Cooker concept.
(a) Principles of Consolidation
The consolidated financial statements include the financial
statements of Cooker Restaurant Corporation and its
majority-owned subsidiaries, CGR Management Corporation,
Southern Cooker Limited Partnership and Florida Cooker
Limited Partnership. All significant intercompany balances
and transactions have been eliminated in the consolidation.
(b) Fiscal Year
The Company's fiscal year ends on the Sunday closest to
December 31 of each year. Fiscal year 1999 consisted of 52
weeks, fiscal year 1998 consisted of 53 weeks, and fiscal
year 1997 consisted of 52 weeks.
(c) Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Cash and cash equivalents of $1,428,000 and
$2,520,000 at January 2, 2000 and January 3, 1999,
respectively, consist of the Company's cash accounts,
overnight repurchase agreements and credit card receivables
and short-term investments with a maturity of three months
or less. Credit card receivables are considered cash
equivalents because of the short collection period. The
carrying amount of cash equivalents approximates fair value.
(d) Inventories
Inventories consist primarily of food and beverages and are
stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
(e) Property and Equipment
Property and equipment are recorded at cost. Equipment
under capital leases are stated at the lower of the present
value of the minimum lease payments or the fair value of
the leased property. Depreciation is calculated on the
straight-line method over the estimated useful lives of the
assets. Equipment held under capital leases and leasehold
improvements are amortized using the straight-line method
over the shorter of the estimated useful life of the asset
or the remaining lease term.
Maintenance and repairs are charged directly to expense as
incurred. When property and equipment are sold or otherwise
disposed of, the related cost and accumulated depreciation
are removed from the accounts and the resulting gains or
losses are reported in operations.
Interest is capitalized primarily in connection with the
construction of new restaurants. Capitalized interest is
amortized over the estimated useful life of the asset.
Interest costs of $137,575 and $256,500 were capitalized in
fiscal 1999 and 1998, respectively.
Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of
Annually, or more frequently if events or circumstances
change, a determination is made by management to ascertain
whether property and equipment and other intangibles have
been impaired based upon the sum of future undiscounted
cash flows from operating activities. If the estimated net
cash flows are less than the carrying amount of such
assets, the Company will recognize an impairment loss in an
amount necessary to write down the assets to a fair value
as determined from expected future discounted cash flows.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based upon the decline in same-store sales experienced
during the quarter at certain locations, as well as the
decreases in customer counts and cash flows at these
locations, the Company determined that certain of its long-
lived assets were impaired. Accordingly, the Company
recorded a charge of approximately $3,058,000 for the
impairment of seven of its restaurant locations in the
fiscal year ended January 2, 2000. This amount is included
in "Restructuring charges" on the income statement. The
additional $150,000 of Restructuring charges recorded in
1999 represent the costs associated with the closing of six
Restaurant locations. The Company intends to hold and use
these Restaurants. No impairment charges were recorded on
the six Restaurants which were closed. No impairment charge
was recorded for the year ended January 3, 1999. For the
year ended December 28, 1997, the Company recorded an
impairment write down of $472,000 for two restaurant
locations.
(f) Deferred Financing Costs
Deferred financing costs are being amortized on a straight-
line basis which approximates the effective interest rate
implicit in the borrowing transaction. Amortization expense
was $175,000, $151,000, and $130,000 for the years ended
January 2, 2000, January 3, 1999, and December 28, 1997,
respectively.
(g) Prepaid Lease
Prepaid lease of $587,000, net of accumulated amortization
of $102,000, and $601,000, net of accumulated amortization
of $88,000, at January 2, 2000 and January 3, 1999,
respectively, represents prepayment of a long-term land
lease and is being amortized over the lease term.
(h) Self Insurance
The Company retains the risk, up to certain limits, for
workers' compensation and employee group health claims. A
liability for unpaid claims and the associated claim expenses,
including incurred but not reports losses, is actuarially
determined and reflected in the consolidated financial
statements as an accrued liability. The self-insured claims
liability includes incurred but not reported losses of
$284,000 and $36,000 at January 2, 2000 and January 3, 1999,
respectively. The determination of such claims and expenses
and the appropriateness of the related liability is
continually reviewed and updated.
(i) Income Taxes
The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standard ("SFAS") No.
109, Accounting for Income Taxes, which generally requires
recognition of deferred tax assets and liabilities for the
expected future tax benefits or consequences of events that
have been included in the consolidated financial statements
or tax returns. Under this method, deferred tax assets and
liabilities are determined based on differences between the
financial reporting and tax bases of assets and
liabilities, and are measured by applying enacted tax rates
and laws for the taxable years in which those differences
are expected to reverse. In addition, SFAS No. 109 requires
adjustment of previously deferred income taxes for changes
in tax rates under the liability method.
(i) Earnings Per Share
In December 1997, the Company adopted the provisions of
SFAS No. 128, Earnings Per Share, which establishes new
guidelines for the calculation of earnings per share. Basic
earnings per share have been computed by dividing net
income by the weighted average number of shares outstanding
during the year. Diluted earnings per share have been
computed assuming the exercise of stock options, as well as
their related income tax effects. Earnings per share for
all prior periods have been restated to reflect the
provisions of this statement.
Basic and diluted share data are as follows (in thousands):
1999 1998 1997
________ ________ ________
Weight-average shares outstanding-basic 6,011 9,145 10,024
Effect of dilutive securities: 4 191 263
Options ________ ________ ________
Diluted shares 6,051 9,336 10,287
======== ======== ========
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible subordinated debentures outstanding as of
January 2, 2000, are convertible into 582,725 shares of
common stock at $21.5625 per share and are due October
2002. In accordance with SFAS No. 128, these debentures are
included in diluted earnings per share under the "if-
converted" method unless the effect is antidilutive. The
converted shares were not included in the computation of
diluted EPS for each of the years in the three year period
ended January 2, 2000 as the inclusion of the convertible
subordinated debentures would be antidilutive.
Options to purchase 1,237,000 shares of common stock at
prices ranging from $4.03 to $21.75 per share, were
outstanding for the year ended January 2, 2000, 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 year ended
January 2, 2000. The options expire between October 2001
and May 2008.
Options to purchase 207,665 shares of common stock at
prices ranging from $10.375 to $21.75 per share, were
outstanding for the year ended January 3, 1999, 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 year ended
January 3, 1999. The options expire between October 2001
and May 2008.
Options to purchase 840,215 shares of common stock, at
prices ranging from $10.875 to $21.75 per share, were
outstanding for the year ended December 28, 1997, 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 year ended
December 28, 1997. The options expire between October 2001
and March 2007.
(j) Use of Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(k) Financial Instruments
The carrying amount of cash and cash equivalents, accounts
payable and other current liabilities approximates fair
value because of the short maturity of these instruments.
The carrying amount of the Company's Term Loan and Revolver
of $60,033,000, in total, approximates fair value as the
base interest charged on these loans is at the London
Inter-Bank Offering Rate ("LIBOR") and is reset to reflect
changes in LIBOR. The fair value of the convertible
subordinated debentures and the Company's loan with the CIT
Group/Equipment Financing, Inc. is estimated by discounting
future cash flows at rates offered to the Company for
similar types of borrowing arrangements. The carrying
amount and fair value of the debentures is $12,565,000 and
$9,155,000, respectively, at January 2, 2000, and
$13,740,000 and $12,306,000, respectively, at January 3,
1999. The carrying amount and fair value of the CIT loan is
$15,357,000 and $14,653,000, respectively, at January 2,
2000, and $17,489,000 and $17,110,000, respectively, at
January 3, 1999. The fair values of the debentures and the
CIT loan were determined based upon current borrowing rates
available to the Company for loans of similar types and
maturities.
(l) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price.
On January 1, 1996, the Company adopted the provisions of
SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-
based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123. See Note 11.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(m) 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, liability or firm
commitment, (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 (that 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.
(n) Reclassifications
Certain amounts in the 1998 and 1997 financial statements
have been reclassified to conform to the 1999 presentation.
(2) Preoperational Costs
Effective in the first quarter of 1997, the Company changed its
method of accounting for preoperational costs, costs for
employee training and relocation, and supplies incurred in
connection with the opening of a restaurant to expense these
costs as incurred. Previously, the Company capitalized these
costs and amortized them over one year, commencing from the date
the restaurant was opened.
(3) Property and Equipment, Net
Property and equipment, net, consists of the following:
2000 1999
----------- ------------
Land $ 40,330 $ 40,991
Buildings and leasehold improvements 96,792 94,165
Furniture, fixtures and equipment 33,648 32,882
Construction in progress 1,601 3,110
Capital lease 713 713
----------- ------------
173,084 171,861
Less accumulated depreciation and
amortization (34,440) (27,836)
Property and equipment $ 138,644 $ 144,025
=========== =============
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation and amortization expense of property and equipment
approximated $6,965,000, $6,533,000, and $5,470,000 for the
years ended January 2, 2000, January 3, 1999, and December 28,
1997, respectively. Depreciation on closed stores which have
been leased to third parties, as well as the Company's corporate
headquarters, is included in General and Administrative expenses
on the income statement.
(4) Other Assets
Other assets consist of the following:
January 2, January 3,
2000 1999
------------ ------------
Deferred financing costs, net of
accumulated amoritization of
$1,159,000 and $985,000 $ 1,779 $ 1,250
Prepaid lease, net of accumulated
amoritization of $102,000 and $88,000 587 601
Liquor licenses 302 290
Deposits 122 214
Other 47 57
------------- ------------
$ 2,837 2,412
============= ============
(5) Accrued Liabilities
Accrued liabilities consist of the following:
January 2, January 3,
2000 1999
------------ ------------
Salaries, wages and benefits $ 2,507 $ 2,763
Gift certificates payable 941 1,062
Sales tax payable 1,129 926
Property taxes 781 349
Insurance 956 867
Interest 717 824
Severance 945 -
Other 609 363
------------ ------------
$ 8,585 $ 7,154
============ ============
Severance liability of $945,000 represents the remaining value
of the severance charge recorded by the Company in the third
quarter of 1999. During the third quarter of 1999, the Company
recorded severance charges of $1,300,000. These charges
represent an accrual for the severance agreement reached between
the Company and its former Chairman and Chief Executive Officer,
G. Arthur Seelbinder, in the third quarter. The amounts granted
to Mr. Seelbinder in conjunction with this agreement represent
amounts to be paid for past services rendered to the Company,
and therefore the Company accrued for the full amount of the
severance package during the third quarter. Of the amount
charged, $212,000 represents the write-off of certain amounts
owed to the Company by Mr. Seelbinder and $1,088,000 represents
payments to be received by Mr. Seelbinder in conjunction with
his severance agreement.
(6) Reserve for Loss on Loan Guaranty
During the third quarter of 1999, the Company recorded a reserve
for loan guaranty loss of $2,454,000. 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"),
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the former Chairman of the Board and current Director of the Company.
The Loan is secured by the Company's guaranty and 323,007 shares of
the Company's common stock owned by Mr. Seelbinder. During the
fourth quarter of 1998, the lender required the Company to make
a cash deposit in such amount to satisfy the difference between
the value of the shares pledged as collateral for the loan and
the face amount of the loan. The adequacy of this deposit is
assessed by the lender periodically based upon changes in the
price of the Company's common stock. During the third quarter of
1999, Mr. Henry Hillenmeyer replaced Mr. Seelbinder as Chairman
and CEO of the Company. Based primarily upon the significant
change in Mr. Seelbinder's employment status, and the value of
Mr. Seelbinder's common stock collateral at the end of the third
quarter of 1999, the Company believes it is probable that a loss
on the loan guaranty has been incurred as of the end of the
Company's third quarter. The Company's best estimate of that
loss was the cash deposit made by the Company as of October 3,
1999. The Company will continue to monitor this reserve on an
ongoing basis based upon changes in the price of the Company's
common stock and the agreement with the lender. The term of the
loan and the guaranty has been extended until March 1, 2000.
(7) Long-Term Debt
Long-term debt consists of the following:
January 2, January 3,
2000 2000
------------ ------------
Nations Bank term loan $ 28,667 $ 30,000
First Union term loan 20,866 22,500
CIT Group/Equipment Financing, Inc.
term loan 15,357 17,660
Nations Bank revolving line of credit 10,500 4,500
Convertible subordinated debentures 12,565 13,740
------------ ------------
87,955 88,400
Less current maturities of
long-term debt 6,858 6,015
============ ============
Long-term debt, excluding
current maturities $ 81,097 $ 82,385
In conjunction with the repurchase of approximately 4,000,000
shares of the Company's common stock, pursuant to the Tender
Offer (the "Offer") completed in October 1998, the Company
entered into debt finance agreements with Nations Bank of
Tennessee, N.A. ("Nations Bank"), First Union National Bank
("First Union"), and The CIT Group/Equipment Financing, Inc.
("CIT"). The agreement with Nations Bank and First Union
provides for a credit facility of $62,500,000, of which
$52,500,000 is a term loan (the "Term Loan") with Nations Bank
and First Union and $10,000,000 is a revolving loan (the
"Revolver") with Nations Bank only. In December 1999, the amount
available under the Revolver was extended to $13,500,000. The
agreement is secured by 36 properties owned by the Company. The
outstanding balance of the Revolver at January 2, 2000 was
$10,500,000.
Under the terms of the agreement, the Term Loan will mature on
March 24, 2004. Interest on the Term Loan and Revolver is LIBOR
plus an applicable margin, which, per the terms of the
agreement, may vary between 1.0% and 4.0%, depending on the
Company's ratio of funded debt to Earnings before Interest,
Taxes, Depreciation, and Amortization (EBITDA). At January 2,
2000, the effective rate was 8.8%. Commencing May 1, 1999, the
Company began making principal and interest payments on the
Term Loan. The Company makes equal monthly payments of
approximately $345,000 on the First Union debt amount,
representing principal and interest, and principal payments of
approximately $167,000, plus interest, on the Nations Bank debt
through March 24, 2004, at which time, all remaining amounts,
principal and interest, on the Term Loan and the Revolver will
be due in full. In conjunction with its debt agreements with
NationsBank and First Union, the Company must comply with
certain restrictive covenants that include the right to declare
and pay cash dividends and the ability to obtain other debt
financing.
In addition to the loans from First Union and Nations Bank, the
Company entered into a loan agreement with CIT in the amount of
$18,000,000. This loan is secured by certain equipment owned by
the Company. Interest on the loan with CIT was fixed at LIBOR
plus 1.85%, or 6.54% at the time of the loan. Monthly payments
of approximately $268,000, including principal and interest,
began in October 1998, and will continue through September 2003,
at which time the remaining principal balance, plus accrued
interest, will be due in full.
The net proceeds from the above loans were used to purchase the
shares tendered as a result of the Offer, as well as for normal
capital requirements of the Company. Aggregate annual principal
payments for the Company's loans over the next five years are as
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
follows: $7,769,000 in 2000, $8,143,000 in 2001, $17,812,000 in
2002, $13,181,000 in 2003, and $30,550,000 in 2004 and
thereafter.
The convertible subordinated debentures (the "Debentures")
mature October 1, 2002, with interest payable quarterly at 6.75
percent. The Debentures are convertible at any time before
maturity, unless previously redeemed, into common shares of the
Company at a conversion price of $21.5625 per share, subject to
adjustment for stock splits. The Debentures are subordinated to
all existing and future senior indebtedness of the Company as
defined in the indenture agreement. The debentures are recorded
on the Company's balance sheet at par value.
At the Debenture holder's option, the Company is obligated to
redeem Debentures tendered during the period from August 1
through October 1 of each year, commencing August 1, 1994, at
100 percent of their principal amount (par) plus accrued
interest, subject to an annual aggregate maximum (excluding the
redemption option on the death of the holder) of $1,150,000.
During fiscal years 1999, and 1998, the Company redeemed the
annual aggregate maximum amount required by the holder's option.
The Company is also required to redeem debentures at 100 percent
of their principal plus accrued interest in the event of death
of a debenture holder up to a maximum of $25,000 per year per
deceased debenture holder. During fiscal years 1999 and 1998,
the Company redeemed debentures subject to this provision of
$25,000.
The Debentures are redeemable at any time on or after October 1,
1994 at the option of the Company, in whole or in part, at
declining premiums. In addition, upon the occurrence of certain
changes of control of the Company, the Company is obligated to
purchase Debentures at the holder's option at par plus accrued
interest.
(8) Derivative Financial Instruments
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 January 2, 2000, and January 3, 1999, the Company was a
party to an interest rate swap agreement with a termination date
of September 28, 2001. Per the terms of the agreement, the
Registrant pays 6.25% on $27,500,000 of it's total LIBOR-based
floating rate debt, and receives LIBOR from the counterparty (a
major bank).
The fair value of the interest swap agreement approximated
$118,000 and ($867,000) at January 2, 2000 and January 3, 1999,
respectively.
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.
(9) Shareholders' Equity
The Company has authorized 300,000 shares of Class A Junior
participating preferred shares, without par value and 4,700,000
Class B preferred shares, without par value, none of which have
been issued. Holders of Class A Junior participating preferred
shares are entitled to quarterly dividends equal to the greater
of $.05 or 100 times the aggregate per share amount of all cash
and noncash dividends and holders of Class B are entitled to
dividends before distribution to holders of common shares. Each
Class A Junior participating preferred share entitles the holder
to 100 votes on all matters submitted to vote by the
shareholders. Holders of Class B preferred shares are entitled
to one vote for each share on matters requiring approval. The
liquidating value for Class A Junior participating preferred
shares is $.10 per share, plus all accrued and unpaid dividends.
In January 2000, the board of directors approved a shareholder
rights plan, as amended, which provides that, in the event that
a third party purchases 15 percent or more of total outstanding
stock of the Company, a dividend distribution of one right for
each outstanding common share will be made. These rights expire
ten years from date of issuance, if not earlier, redeemed by the
Company, and entitle the holder to purchase, under certain
conditions, preferred shares or common shares of the Company.
This plan replaced the rights plan which was adopted by the
board of directors in January 1990 and expired in January 2000.
On October 5, 1998, the Company purchased 4,006,298 of its
common stock, without par value, at a price of $10.50 per share
Pursuant to the terms of the Issuer Tender Offer Statement on
Schedule 13-E4 (the "Offer"). The shares of stock purchased in
the Offer represented approximately 39% of the 10,159,354 shares
of common stock issued and outstanding immediately prior to the
Offer on August 11, 1998. The shares purchased are included in
Treasury Stock at January 2, 2000.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) Income Taxes
The components of the provision for income taxes are as follows:
January 2, January 3, December 28,
2000 1999 1997
----------- ------------ ------------
(in thousands)
Current Taxes:
Federal $ 473 $ 644 $ 1,535
State and local 125 364 333
----------- ------------ ------------
598 1,008 1,878
Deferred Taxes (2,358) 1,593 1,484
----------- ------------ ------------
Provision before cumulative effect
of change in accounting principle (1,760) 2,601 3,362
Benefit from cumulative effect of
change in accounting principle - - (253)
----------- ------------ ------------
Provision for income taxes $ (1,760) 2,601 3,109
=========== ============ ============
The provision for deferred income
taxes consists of the following:
January 2, January 3,
2000 1999
(in thousands)
----------- ------------
Accelerated depreciation $ 1,582 $ 2,744
Impairment of long-lived assets (1,379) 4
Loss on Loan Guaranty (1,037) -
Accrued health 7 (39)
Accrued vacation (49) (3)
Accrued bonuses (96) -
Other accrued expenses (14) (159)
Business credit carry forward (643) (954)
Accrued workmans' comp (257) -
Accrued severance (489) -
Other 17 -
----------- ------------
Total $ (2,358) $ 1,593
=========== ============
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the differences between income taxes
calculated at the federal statutory rate and the provision for
income taxes before extraordinary item is as follows:
January 2, January 3, December 28,
2000 1999 1997
------------ ------------ --------------
Income tax at statutory rates before
extraordinary item 34.0% 34.0% 34.0%
State and local income taxes,
net of federal tax benefit 2.6% 3.6% 4.0%
Reserve for tax examination 0.0% -3.9% -
Other nondeductible items -1.6% -3.6% -3.7%
------------ ------------ --------------
35.0% 30.1% 34.3%
============ ============ ==============
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are as follows:
January 2, January 3,
2000 1999
------------- --------------
(in thousands)
Accelerated depreciation $ 6,519 4,937
Impairment of long-lived assets (1,554) (175)
Accrued health (147) (154)
Accrued vacation (190) (141)
Other accrued expenses (104) (90)
Business credit carry forward (1,597) (954)
Loss on Loan Guaranty (1,037)
Accrued bonuses (96) -
Accrued workmans' comp (257) -
Accrued severance (489)
Other - (17)
------------- --------------
$ 1,048 3,406
============= ==============
The Internal Revenue Service (IRS) has completed its examination
of the Company's income tax returns for the years 1990 through
1993. During fiscal 1998, the Company paid a total of
approximately $265,000 in taxes and interest. Accordingly, the
Company reversed approximately $335,000 of a previously recorded
liability in 1998.
(11) Stock Option Plans
The Company has stock option plans adopted in 1988 ("1988 Plan")
and 1992 ("1992 Plan"), as amended. Under these plans, employees
and nonmanagement directors are granted stock options as
determined by a committee appointed by the board of directors at
an exercise price no less than fair market value at the date of
grant. Each option permits the holder to purchase one share of
common stock of the Company at the stated exercise price up to
ten years from the date of grant. Options vest at a rate of 25
percent per year or, if there is substantial change in control
of the Company, the options become fully vested and exercisable.
The Company has reserved 682,000 and 718,000 common shares for
issuance to employees and 73,332 and 200,000 for issuance to
nonmanagement directors under the 1988 Plan and 1992 Plan,
respectively. No further options can be granted under the 1988
Plan for employees and nonmanagement directors and under the
1992 Plan for employees. The granting of options under the 1992
Plan for nonmanagement directors expires April 13, 2002.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 1996, the board of directors and shareholders approved
the 1996 officer option plan (the "1996 Plan") which provides
for the grant of nonqualified options to officers and employee-
directors of the Company. The number of shares is limited to
fifteen percent of the issued and outstanding shares of common
stock, less shares subject to options issued to officers and
employee-directors. The recipients of the options granted under
the 1996 Plan, the number of shares to be covered by each
option, and the exercise price, vesting terms, if any, duration
and other terms of each option shall be determined by the
committee of the Company's board of directors. Each option
permits the holder to purchase one share of common stock of the
Company at the stated exercise price up to ten years from the
date of grant. The exercise price shall be determined by the
committee at the time of grant, but in no event shall the
exercise price be less than the fair market value of a share on
the date of grant. These options become vested over various
periods not to exceed four years from the date of grant or, if
there is substantial change in control of the Company, the
options become fully vested and exercised. The maximum number of
shares granted during any fiscal year by the Company shall be
500,000 to any one officer. The Plan expires April 22, 2006.
On December 14, 1998, the Company's Board of Directors offered
to exchange 880,000 outstanding stock options issued to officers
and employees in fiscal years 1996, 1997, and 1998 for 567,837
stock options at a new option price of $5.50 per share, the
closing market price on the date of the exchange offer. All
options subject to the exchange offer were exchanged for the new
options at the new price.
Changes in the number of shares under the stock option plans are
summarized as follows:
Weighted
average
Options Price exercise price
--------- ------------------- --------------
Balance at December 29, 1996 1,271,000 $ 4.040 -- 21.750 $ 8.77
Granted 373,000 10.370 -- 11.500 10.97
Canceled (19,000) 6.750 -- 11.620 10.95
Exercised (109,0001 4.030 -- 7.630 5.78
--------- ------------------- --------------
Balance at December 28, 1997 1,516,000 $ 4.030 -- 21.750 $ 9.48
Granted 326,000 8.500 -- 12.130 9.39
Surrendered (880,000) 12.130 -- 8.500 10.65
Converted 568,000 5.500 -- 5.500 5.50
Canceled (79,000) 6.000 -- 17.750 9.96
Exercised (162,000) 4.030 -- 8.750 6.89
--------- ------------------- --------------
Balance at January 3, 1999 1,289,000 $ 4.030 -- 21.750 $ 7.16
Granted 126,000 5.880 -- 5.880 5.88
Canceled (136,000) 4.410 -- 11.620 4.65
Exercised (42,000) 4.410 -- 6.750 7.78
--------- ------------------- --------------
Balance at January 2, 2000 1,237,000 $ 4.030 -- 21.750 $ 7.05
========= =================== ===============
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to the above stock options, the Company issued
299,300 stock options to Henry H. Hillenmeyer, the Chairman and
Chief Executive Officer of the Company, on August 19, 1999.
These options are non-qualified stock options and were not
issued pursuant to the above stock option plans. These options
were issued in conjunction with Mr. Hillenmeyer's Employment
Agreement dated August 19, 1999. The exercise price of these
options is $4.50, the stock price on the date of grant. The
options vest at the rate of 8,313 shares per month for 35 months
and 8,345 shares in the 36th month. The options expire on August
19, 2009. The granting of these options did not affect the
number of shares available for grant on under the Company's
stock option plans described above.
The Company applies APB Opinion No. 25 in accounting for its
Plan and, accordingly, no compensation cost has been recognized
for its stock options in the consolidated financial statements.
Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No.
123, the Company's net income would have been reduced to the pro
forma amounts indicated below:
1999 1998 1997
--------- ------- -------
(in thousands, except per share data)
Net Income: As reported $ (3,274) $ 6,027 $ 5,956
Pro forma $ (4,045) $ 5,179 $ 5,395
Diluted earnings per share: As reported $ (0.54) $ 0.65 $ 0.58
Pro forma $ (0.67) $ 0.55 $ 0.54
Pro forma net income reflects only options granted since January
1, 1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in
the pro forma net income amounts presented above because
compensation cost is reflected over the options' vesting period
of four years and compensation cost for options granted prior to
January 2, 1995 is not considered.
The per share weighted-average fair value of stock options
granted during 1999, 1998, and 1997 was $2.94, $4.80, and $5.04,
respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average
assumptions: dividend yield 0.0 percent, 1.05 percent, and .61
percent; risk-free interest rates of 6.58 percent, 4.54 percent,
and 6.5 percent; expected lives of 5 years, 7 years and 7 years,
and expected volatility of 47 percent, 35 percent, and 33
percent, respectively. The per share weighted-average fair value
of the stock options granted to Mr. Hillenmeyer during 1999
using the same assumptions above for 1999 was $2.25. At January
2, 2000, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $4.03-
$21.75 and 4.7 years, respectively. At January 2, 2000, January
3, 1999, and December 28, 1997, the number of options
exercisable was 827,844, 768,235, and 717,000, respectively,
and the weighted-average exercise price of those options was
$7.57, $7.73, and $8.50, respectively.
(12) Commitments and Contingencies
(a) Leases
The Company leases buildings for certain of its restaurants
under long-term operating leases which expire over the next
twenty-five years. In addition to the minimum rental for
these leases, the Company also pays, in certain instances,
additional rent based on a percentage of sales, and its pro
rata share of the lessor's direct operating expenditures.
Several of the leases provide for option renewal periods
and scheduled rent increases. Rental expense totaled
$3,054,000, $2,660,000, and $2,022,000, including
percentage rent of $197,000, $237,000, and $231,000, for
the fiscal years ended January 2, 2000, January 3, 1999,
and December 28, 1997, respectively.
During August 1997, the Company entered into an agreement
for the sale and leaseback of the point of sale terminal
system and software under a sale/leaseback arrangement. The
system was sold for $713,000. The transaction was accounted
for as a financing wherein the property with a net book
value of $713,000 remained on the books and continues to be
depreciated. A finance obligation representing the proceeds
was recorded and is reduced based on payments under the
lease. The lease had an initial term of four years and
requires annual rental payments of $210,000 in 2000 and
$125,000 in 2001.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum rental commitments for noncancelable
operating leases (with initial or remaining lease terms in
excess of one year) and future minimum capital lease
payments as of January 2, 2000 are as follows:
Capital Operating
Fiscal Year Ending Leases Leases
---------- ----------
2000 $ 210,000 2,957,000
2001 167,000 2,974,000
2002 - 3,044,000
2003 - 3,088,000
2004 - 3,111,000
Thereafter - 30,310,000
---------- ----------
Total minimum lease payments $ 377,000 48,484,000
Less amount representing ==========
interest 64,000
----------
Present value of net minimum
lease payments 313,000
Less current installments 188,000
----------
Capital lease obligation,
excluding current installments $ 125,000
==========
(b) Legal Matters
The case of Burnette, et al. v. Cooker Restaurant
Corporation was filed in the United States District Court,
Middle District of Florida, Tampa Division, on March 26,
1999. Plaintiffs allege violations of the wage and hour
laws of the Fair Labor Standards Act with respect to
themselves and all others similarly situated. Plaintiffs
seek overtime pay, back pay, and attorneys fees. No
specific monetary damages have been alleged in the
complaint. Plaintiffs have filed a motion to facilitate
notice of the lawsuit to all current and previous employees
(for a period of three years prior to the filing of the
lawsuit) to allow them to join the lawsuit as plaintiffs.
On September 17, 1999, certain of the plaintiffs in the
Burnette action described above, as well as other
plaintiffs, filed a class action in the United States
District Court, Middle District of Florida, entitled
Clemmons, et al. V. Cooker Restaurant Corporation.
Plaintiffs allege that Cooker has discriminated on the
basis of race in the hiring and promotion of employees.
Plaintiffs seek injunctive relief, attorneys fees, back pay
and lost benefits, and reinstatement. No specific monetary
damages have been alleged in the complaint. No class has
been certified and the case is still in its preliminary
stage. There has been no discovery conducted to date. A
motion to dismiss the complaint is pending.
Cooker believes that it has meritorious defenses to both of
these matters and is vigorously defending the suits. Because
the cases are in their early stages, the Company has not yet
determined the impact, if any, upon its financial statements.
The Company is a party to various claims and legal actions
arising in the ordinary course of business. In the opinion
of management, the ultimate disposition of these matters
will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.
(c) Employment Agreements
The Company and one of its officers have entered into
employment agreements which become effective upon a change
in control of the Company not approved by the board of
directors, as defined in the agreement and subject to
certain criteria. The agreement entitles the officers to a
base salary, bonus and benefits at not less than the rate
the officer was receiving prior to the change in control,
limits discharge except for cause, and provides for
severance payment equal to the maximum amount under IRS
regulations.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) Retirement Savings Plan
Effective January 1, 1997, the Company established a 401(k)
retirement savings plan for the benefit of substantially
all employees who have attained the age 21 and worked 1,000
hours. Employees may contribute between 1 to 15 percent of
eligible compensation. The Company's discretionary match is
based on the Company's performance. The Company's
contribution will vest 20 percent per year beginning after
the third year. The Company contributed $32,000 to the plan
in 1998.
(13) Supplemental Cash Flow Information
Cash paid for interest for fiscal 1999, 1998, and 1997 was
$6,935,000, $3,585,000, and $2,094,000, respectively. Cash paid
for taxes for fiscal 1999, 1998, and 1997 was $995,000,
$1,311,000, and $2,808,000, respectively.
(14) Related Parties
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 former Chairman of the Board and current Director
of the Company. 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 and the guaranty has been extended until March 1, 2000.
As of February 1, 2000, the amount of the Loan outstanding,
including capitalized and accrued interest, was $3,697,522 and
the undiscounted fair market value of the pledged shares was
$746,953, based upon a market price of $2.3125 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 reimburse the
Company for any interest incurred on amounts drawn against the
Revolver in excess of the interest earned on the cash deposit
with the Bank
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 periodically, 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. As of February 1,
2000, the cash deposit with the Bank totaled approximately
$2,988,000. 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.
Based primarily upon the significant change in Mr. Seelbinder's
employment status and the value of Mr. Seelbinder's common stock
at the end of the Company's 1999 fiscal third quarter, the
Company believed that it was, and still is, probable that a loss
on the loan guaranty had been incurred as of the end of the
Company's 1999 fiscal third quarter. The Company's best estimate
of that loss is $2,454,000. That loss was recorded in the
Company's 1999 fiscal third quarter.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) Quarterly Financial Date (Unaudited)
Quarterly financial data (unaudited) for fiscal year 1999 and
1998 are summarized as follows:
First Second Third Fourth
quarter quarter quarter quarter
(in thousands, except per share data)
1999
Sales 42,191 38,738 36,713 35,648
Income before income taxes 1,559 1,757 (8,352) 2
Net income 1,090 1,229 (5,594) 1
Earnings per share:
Basic 0.18 0.21 (0.93) -
Diluted 0.18 0.20 (0.93) -
1998
Sales $ 40,434 39,955 38,018 42,139
Income before income taxes 3,569 2,499 1,208 1,352
Net income 2,338 1,840 797 1,052
Earnings per share:
Basic $ 0.23 0.18 0.08 0.16
Diluted $ 0.23 0.18 0.08 0.16
F-21
_______________________________________________________________________________
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
COOKER RESTAURANT CORPORATION
_______________________
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED:
JANUARY 2, 2000
_______________________
EXHIBITS
_______________________
_______________________________________________________________________________
_______________________________________________________________________________
EXHIBIT INDEX
__________________
Exhibit Number of Pages Incorporated
Number Description in Original Document + By
Reference
3.1. Amended and Restated Articles
of Incorporation of the Registrant. 13 *
_____________
3.2. Amended and Restated Code of
Regulations of the Registrant. 12 *
_____________
4.1. See Articles FOURTH, FIFTH and
SIXTH of the Amended and Restated
Articles of Incorporation of the
Registrant (see 3.1 above). 13 *
_____________
4.2. See Articles One, Four, Seven and
Eight of the Amended and Restated
Code of Regulations of the
Registrant (see 3.2 above). 12 *
_____________
4.3. Rights Agreement dated as of
January 16, 2000 between the
Registrant and First Union
National Bank of North Carolina. 57 *
_____________
4.4.
Letter dated October 29, 1992 from
the Registrant to First Union
National Bank of North Carolina. 1 *
_____________
4.5. See Section 7.4 of the Amended and
Restated Loan Agreement dated
December 22, 1995 between
Registrant and First Union
National Bank of Tennessee (see
10.4 below). 31 *
_____________
4.6. Indenture dated as of October 28,
1992 between Registrant and First
Union National Bank of North
Carolina, as Trustee. 61 *
_____________
10.1.-
10.3. Reserved. _____________
10.4. Amended and Restated Loan
Agreement dated December 22, 1995
between Registrant and First Union
National Bank of Tennessee. 31 *
_____________
10.5. Underwriting Agreement dated May
7, 1996 with Montgomery Securities
and Equitable Securities Corporation. 28 *
_____________
10.6. Form of Contingent Employment
Agreement and schedule of executed
Agreements. 10 *
_____________
10.7. The Registrant's 1988 Employee
Stock Option Plan and 1992
Employee Stock Option Plan,
Amended and Restated April 22, 1996. 11 *
_____________
10.8. The Registrant's 1988 Directors
Stock Option Plan, as amended and
restated. 6 *
_____________
10.9. The Registrant's 1992 Directors
Stock Option Plan, as amended and
restated. 6 *
_____________
10.10. The Registrant's 1996 Officers'
Stock Option Plan. 10 *
_____________
10.11. Reaffirmation and Amendment to
Guaranty and Suretyship Agreement
between Registrant and NationsBank
of Tennessee, N.A. dated July 24,
1995. 2 *
_____________
10.12. Amended and Restated Guaranty
between Registrant and Chase
_____________
Manhattan Bank dated January 31, 7
1997. *
_____________
10.13. Letter dated February 3, 1997 from
G. Arthur Seelbinder to the Registrant. 1 *
_____________
10.14. Letter dated January 30, 1998 from
G. Arthur Seelbinder to the Registrant. 1 *
_____________
10.15 Second Amendment to Amended and
Restated Loan Agreement dated as of
January 1,1998 between the Registrant
and First Union National Bank, a
national banking association, as
successor in interest to First Union
National Bank of Tennessee. 7 *
_____________
10.16 Fourth Amendment to Revolving/Term
Loan Note dated as of January 1, 1998
between the Registrant and First Union
National Bank, a national banking
association, as successor in interest
to First Union National Bank of Tennessee. 1 *
_____________
10.17 Reaffirmation of Amended and
Restated Guaranty made by the
Registrant on April20, 1998 to the
Chase Manhattan Bank. 3 *
_____________
10.18 Letter agreement dated March 26,
1998 between The Chase Manhattan
Bank and G. Arthur Seelbinder.
2 *
_____________
10.19 Amendment to Grid Time Promissory
Note dated March 26, 1998 between
The Chase Manhattan Bank and G.
Arthur Seelbinder. 1 *
_____________
10.20 Loan Agreement dated September 24,
1998, between the Registrant and
First Union National Bank and
NationsBank of Tennessee, N.A.,
both national banking associations. 69 *
_____________
10.21 Loan Agreement dated September 24,
1998, between the Registrant and
The CIT Group/Equipment Financing, Inc. 8 *
_____________
10.22 Letter dated September 17, 1998
from G. Arthur Seelbinder to the
Registrant 1 *
_____________
10.23 Letter agreement dated September
30, 1999 between the Company and
G. Arthur Seelbinder 5 *
_____________
10.24 Letter agreement dated August 19,
1999 between the Company and Henry
R. Hillenmeyer 1 *
_____________
10.25 Option Agreement dated August 19,
1999 between the Company and Henry
R. Hillenmeyer 6 *
_____________
16.1 Letter dated October 22, 1999 from
KPMG LLP to the Securities and
Exchange Commission. 1 *
_____________
21.1 Subsidiaries of Registrant 1 **
_____________
23.1 Consent of KPMG LLP. 1 **
_____________
23.2 Consent of Deloitte & Touche LLP. 1 **
_____________
24.1. Powers of Attorney. 11 **
_____________
24.2. Certified resolution of the
Registrant's Board of Directors
authorizing officers and directors
signing on behalf of the Registrant to
sign pursuant to a power of attorney. 1 **
_____________
27.1. Financial Data Schedules
(submitted electronically for SEC
information only). 3 **
_____________
+ The Registrant will furnish a copy of any exhibit to a beneficial owner
of its securities or to any person from whom a proxy was solicited in
connection with the Registrant's most recent Annual Meeting of Shareholders
upon the payment of a fee of fifty cents ($.50) per page.
* Incorporated by reference.
** Filed herewit
Exhibit 21.1
SUBSIDIARIES OF COOKER RESTAURANT CORPORATION
Cooker Restaurant Corporation directly or indirectly owns all of
the outstanding interests in the following subsidiaries:
CGR Management Corporation, a Florida corporation
Florida Cooker LP, Inc., a Florida Corporation
Southern Cooker Limited Partnership, an Ohio limited partnership
Exhibit 23.1
Consent of Independent Certified Public Accountants
The Board of Directors
Cooker Restaurant Corporation
We consent to incorporation by reference in the registration
statements on Form S-8 (Nos. 33-45467, 33-46475, 33- 46965, 33-48396
and 33-48397) of Cooker Restaurant Corporation of our report dated
January 27, 1999, relating to the consolidated balance sheet of
Cooker Restaurant Corporation and subsidiaries as of January 3, 1999,
and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the two-
year period ended January 3, 1999, which report appears in the
January 2, 2000 annual report on Form 10-K of Cooker Restaurant
Corporation. Our report refers to a change in method of accounting
for preoperational costs in fiscal year 1997.
/s/KPMG LLP
Fort Lauderdale, Florida
February 25, 2000
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
_____________________________
The Board of Directors
Cooker Restaurant Corporation
We consent to the incorporation by reference in this Registration
Statement of Cooker Restaurant Corporation on Form S-8 (Nos. 33-
45467, 33-46475, 33- 46965, 33-48396, 33-48397 and 33-60403) of our
report dated January 28, 2000, relating to the consolidated balance
sheet of Cooker Restaurant Corporation and subsidiaries as of January
2, 2000, and the related consolidated statements of income, changes
in shareholders' equity and cash flows for the year then ended, which
report appears in the Annual Report on Form 10-K of Cooker Restaurant
Corporation.
/s/DELOITTE & TOUCHE LLP
West Palm Beach, Florida
February 25, 2000
Exhibit 24.1
POWER OF ATTORNEY
__________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 25th
day of January, 2000. ----
--------
/s/Glenn W. Cockburn
________________________
Glenn W. Cockburn
POWER OF ATTORNEY
__________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer to be his
agent and attorney-in-fact; with the power to act fully hereunder,
and with full power of substitution to act in the name and on behalf
of the undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which he shall deem necessary or proper in connection with
the filing of such Annual Report, and generally to act for and in the
name of the undersigned with respect to such filings as fully as
could the undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 25th
----
day of January, 2000.
--------
/s/Mark W. Mikosz
____________________
Mark W. Mikosz
POWER OF ATTORNEY
__________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 22nd
----
day of February, 2000.
---------
/s/Robin V. Holderman
_______________________
Robin V. Holderman
POWER OF ATTORNEY
___________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 1st
---
day of February, 2000.
---------
/s/David T. Kollat
____________________
David T. Kollat
POWER OF ATTORNEY
____________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th
----
day of January, 2000.
--------
/s/William Lehr Jackson
_________________________
William Lehr Jackson
POWER OF ATTORNEY
_____________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 21st
----
day of January, 2000.
--------
/s/Harvey M. Palash
_____________________
Harvey M. Palash
POWER OF ATTORNEY
____________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 14th
----
day of February, 2000.
---------
/s/G. Arthur Seelbinder
________________________
G. Arthur Seelbinder
POWER OF ATTORNEY
___________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 21st
----
day of January, 2000.
--------
/s/Brad Saltz
________________
Brad Saltz
POWER OF ATTORNEY
__________________
The undersigned who is a director or officer of Cooker Restaurant
Corporation, an Ohio corporation (the "Company");
Does hereby constitute and appoint Henry R. Hillenmeyer and Mark W.
Mikosz to be his agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with
full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the
Annual Report of the Company on Form 10-K for the fiscal year ended
January 2, 2000, and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other
documents which they shall deem necessary or proper in connection
with the filing of such Annual Report, and generally to act for and
in the name of the undersigned with respect to such filings as fully
as could the undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his
discretion the times when, the purposes for, and the names in which,
any power conferred upon him herein shall be exercised and the terms
and conditions of any instrument, certificate or document which may
be executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall
be governed by those laws of the State of Ohio that apply to
instruments negotiated, executed, delivered and performed solely
within the State of Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 21st
----
day of January, 2000.
--------
/s/D. Shannon LeRoy
____________________
D. Shannon LeRoy
Exhibit 24.2
SECRETARY'S CERTIFICATE
I, Margaret A. Epperson, certify that I am the duly elected,
qualified and acting Secretary of Cooker Restaurant Corporation, an
Ohio corporation (the "Corporation"), that I am authorized and
empowered to execute this Certificate on behalf of the Corporation
with respect to the Annual Report on Form 10-K and further certify
that the following is a true, complete and correct copy of a
resolution adopted by the Board of Directors of the Corporation on
January 24, 2000, which resolution has not been amended, modified or
rescinded:
RESOLVED, that each officer and director who may be
required to execute an annual report on Form 10-K or any
amendment or supplement thereto (whether on behalf of the
Corporation or as an officer or director thereof or
otherwise) be, and each of them hereby is, authorized to
execute a power of attorney appointing Henry R. Hillenmeyer
and Mark W. Mikosz and each of them severally, his true and
lawful attorneys and agents to execute in his name, place
and stead (in any such capacity) said Form 10-K and all
instruments or reports necessary or in connection
therewith, and to file the same with the Securities and
Exchange Commission, each of said attorneys and agents to
have the power to act with or without the other, to have
full power and authority to do and to perform in the name
and on behalf of each of said officers and directors, or
both, as the case may be, every act which is necessary or
advisable to be done as fully, and to all intents and
purposes, as any such officer or director might or could do
in person.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of
February, 2000. ----
/s/ Margaret A. Epperson
_____________________________
Margaret A. Epperson,Secretary