SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended April 2, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _____________ to _____________
_____________
Commission File Number: 1-13044
COOKER RESTAURANT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
OHIO 62-1292102
(State or Other Jurisdiction of (I.R.S. Employer
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
Indicate by check [ ] whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days.
[X] [ ]
Yes No
5,986,000 Common Shares, without par value
(number of common shares outstanding as of the close of business
on May 17, 2000)
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In Thousands)
<CAPTION
April 2, January 2,
2000 2000
--------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,290 $ 1,428
Inventory 1,394 1,326
Land held for sale 73 67
Income Taxes Receivable 1,102 675
Prepaid and other current assets 798 1,402
--------- ----------
Total current assets 5,657 4,898
Property and equipment 137,161 138,644
Restricted Cash - 2,919
Other Assets 2,939 2,837
--------- ----------
Total assets $ 145,757 $ 149,298
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 6,723 $ 6,858
Accounts payable 3,740 4,154
Accrued liabilities 8,384 8,773
Reserve for loan guaranty loss - 2,454
--------- ----------
Total current liabilities 18,847 22,239
Long-term debt 81,088 81,097
Deferred income taxes 1,048 1,048
Other liabilities 140 125
--------- ----------
Total liabilities $ 101,123 $ 104,509
========= ==========
Shareholders' equity:
Common shares-without par value:
authorized 30,000,000 shares;
issued 10,548,000 at April 2, 2000
and January 2, 2000 62,211 62,211
Retained earnings 30,852 31,007
Treasury stock, at cost, 4,562,000
shares at April 2, 2000 and
January 2, 2000 (48,429) (48,429)
--------- ----------
Total shareholders' equity 44,634 44,789
Commitments and contingencies - -
--------- ----------
Total liabilities and shareholders' equity $ 145,757 $ 149,298
========= ==========
See accompanying notes to condensed consolidated financial statements
2
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In Thousands Except Per Share Data)
Three Months Ended
April 2, April 4,
2000 1999
---------- -----------
Sales $ 38,541 $ 42,191
Cost of Sales:
Food and beverage 11,027 11,911
Labor 14,212 14,834
Restaurant operating expenses 7,466 7,628
Restaurant depreciation 1,630 1,634
General and administrative 2,513 3,021
Gain on severance recovery (810) -
Loss on loan guaranty 633 -
Loss on disposal of fixed assets 222 -
Interest expense, net 1,867 1,604
---------- -----------
38,760 40,632
(Loss) income before income taxes (219) 1,559
(Benefit) provision for income taxes (77) 469
Net (loss) income $ (142) $ 1,090
========== ===========
Basic (loss) earnings per share $ (0.02) $ 0.18
========== ===========
Diluted (loss) earnings per share $ (0.02) $ 0.18
========== ===========
Weighted average number of common
shares outstanding - basic 5,986 6,087
========== ===========
Weighted average number of common
shares outstanding - diluted 5,986 6,219
========== ===========
See accompanying notes to condensed consolidated financial statements
3
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
Three Months Ended
April 2, April 4,
2000 1999
---------- -----------
Cash flows from operating activities:
Net (loss) income $ (142) $ 1,090
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 1,764 1,762
Loss on loan guaranty 633 -
Deferred income taxes - (54)
Loss on disposal of property 222 4
Decrease (increase) in current assets 103 (319)
(Increase) decrease in other assets (102) 129
(Decrease) increase in current liabilities (803) 387
Increase (decrease) in other liabilities 64 (297)
---------- -----------
Net cash provided by operating activities 1,739 2,702
Cash flows from investing activities:
Purchases of property and equipment (759) (3,204)
Proceeds from sale of property and equipment 198 3,085
Restricted cash deposits (141) (154)
---------- -----------
Net cash used in investing activities (702) (273)
Cash flows from financing activities:
Proceeds from borrowings 5,500 5,250
Repayments of borrowings (5,626) (5,441)
Redemption of debentures - (25)
Exercise of stock options - 45
Purchases of treasury stock - (1,365)
Capital lease obligations (49) (46)
Dividends paid - (614)
---------- -----------
Net cash used in financing activities (175) (2,196)
Net increase in cash and cash equivalents 862 233
Cash and cash equivalents, at beginning of period 1,428 2,520
---------- -----------
Cash and cash equivalents, at end of period $ 2,290 $ 2,753
========== ===========
See accompanying notes to condensed consolidated financial statements
4
COOKER RESTAURANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial Statements have
been prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position of the Cooker Restaurant
Corporation and subsidiaries (the "Company"), after elimination of intercompany
accounts and transactions, at April 2, 2000, and the statements of income and
cash flows for the three months ended April 2, 2000. The results of operations
for the three months ended April 2, 2000, are not necessarily indicative of the
operating results expected for the fiscal year ended December 31, 2000. These
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's annual report on Form
10-K for the fiscal year ended January 2, 2000.
Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 presentation.
Note 2: Earnings Per Share
The difference between the basic and diluted weighted-average number of shares
outstanding for the three months ended April 4, 1999, represents the dilutive
effect of certain stock options.
Convertible subordinated debentures outstanding as of April 2, 2000 are
convertible into 581,890 shares of common stock at $21.5625 per share and are
due October 2002. These were not included in the computation of diluted
Earnings Per Share ("EPS") for the quarter ended April 2, 2000, as the
inclusion of shares into which the subordinated debentures are convertible
would be antidilutive.
Options to purchase 1,379,124 and 615,143 shares at prices ranging from $2.625
to $17.75 per share and $6.75 to $17.75 per share, were outstanding for the
three months ended April 2, 2000, and April 4, 1999, respectively, but were not
included in the computation of diluted EPS because the options' exercise prices
were greater than the average market price of the common shares for the three
months ended April 2, 2000 and April 4, 1999, respectively. The options expire
between April 2000 and January 2010 for the three months ended April 2, 2000
and between June 1999 and May 2008 for the three months ended April 4, 1999.
Note 3: Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS.
No 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"), subsequently amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the 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.
Note 4: Derivative Financial Instruments
The fair value of the interest rate swap agreement approximated $210,000 at
April 2, 2000.
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.
5
Note 5: 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 us of a loan of $5,000,000 to G. Arthur Seelbinder, the former
Chairman of the Board and a current Director, and his wife. In January 1997,
the Board approved a refinancing of the loan with The Chase Manhattan Bank of
New York (the "Bank"). The loan was secured by 323,007 common shares owned by
Mr. Seelbinder and a cash deposit from us of approximately $3,000,000. The term
of the loan and the guaranty were extended until March 1, 2000, at which time
the loan matured. As of March 1, 2000 the balance of the loan was $3,753,397.
On March 8, 2000, the Bank sold Mr. Seelbinder's stock for $666,202 in a
private transaction and applied this amount to the loan. The remaining balance
of the loan of $3,087,195 was funded by us as a result of our guaranty.
Accordingly, in the first quarter of 2000 we recorded an additional loss on the
guaranty of approximately $633,000, the difference between the amount due the
Bank and the reserve previously recorded. In addition to any rights we have as
the Bank's successors to collect from Mr. Seelbinder, any amount due to Mr.
Seelbinder under the settlement agreement we entered into with him when he
stepped down as Chairman and Chief Executive Officer are to be paid to us and
applied to the amounts we paid pursuant to the guaranty. See note 6.
Note 6: Severance recovery
During the third quarter of 1999, the Company recorded severance charges of
$1,300,000. These charges represented an accrual for the severance agreement
reached between the Company and its former Chairman and Chief Executive
Officer, G. Arthur Seelbinder. The amounts granted to Mr. Seelbinder in
conjunction with this agreement represented 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 represented the write-off of certain amounts owed to the
Company by Mr. Seelbinder and $1,088,000 represented payments to be received by
Mr. Seelbinder in conjunction with his severance agreement.
On March 8, 2000, the date the Company was called upon by the Bank to honor its
guaranty (see Note 5), the balance of the severance liability to Mr. Seelbinder
was approximately $910,000. In accordance with the agreement with Mr.
Seelbinder, this amount, less certain amounts representing federal withholding
liabilities, were applied to the amounts owed to the Company as a result of our
guaranty. As a result, approximately $810,000 in accrued severance liabilities
were forfeited by Mr. Seelbinder and applied to the guaranty amount.
Note 7: Loss on disposal of fixed assets
In the first quarter of 2000, the Company recorded a loss on disposal of fixed
assets of $222,000. The charge represented the book value of certain leasehold
improvements and equipment related to the Company's restaurant in Indianapolis,
IN, a leased site. In late fiscal 1999, the site incurred certain structural
damage in the kitchen. The Company closed the site, pending repair of the
damage. In March 2000, the Company reached an agreement with the site's
landlord, wherein the landlord refunded the prior three months' rent to the
Company, the Company removed certain kitchen equipment, supplies, computer
equipment and other furniture and fixtures, and the lease was terminated
without any further liability or obligation to the Company. At the time of the
agreement, the book value of the leasehold improvements and equipment was
approximately $277,000. The Company removed items with a net book value of
approximately $55,000 from the premises. Accordingly, the Company recorded a
loss on disposal of $222,000 in March 2000. The Company received no proceeds
for the items disposed.
Note 8: Contigencies
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 has vigorously opposed
the sending of notice and continues to 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. Discovery in this case is ongoing. 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.
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "believe," "anticipate," "project," and
similar expressions are intended to identify such forward-looking statements.
Forward-looking statements may be made by management orally or in writing,
including, but not limited to, in press releases, as part of this Management's
Discussion and Analysis of Financial Condition and Results of Operations and as
part of other sections of this Report or other filings. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their respective dates, and are subject to certain risks,
uncertainties and assumptions. These statements are based on management's
present assumptions as to future trends, including economic trends, prevailing
interest rates, the availability and cost of raw materials, the availability of
capital resources necessary to complete the Company's expansion plans,
government regulations, especially regulations regarding taxes, labor and
alcoholic beverages, competition, consumer preferences, and similar factors.
Changes in these factors could affect the validity of such assumptions and
could have a materially adverse effect on the Company's business.
Results of Operations
The following table sets forth as a percentage of sales certain items
appearing in the Company's statements of income.
COOKER RESTAURANT CORPORATION
RESULTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
April 2, April 4,
2000 1999
--------- --------
Sales 100.0% 100.0%
--------- --------
Cost of Sales:
Food and beverage 28.6% 28.2%
Labor 36.9% 35.2%
Restaurant operating expenses 19.4% 18.1%
Restaurant depreciation 4.2% 3.9%
General and administrative 6.5% 7.2%
Gain on severance recovery -2.1% 0.0%
Loss on loan guaranty 1.6% 0.0%
Loss on disposal of fixed assets 0.6% 0.0%
Interest expense, net 4.8% 3.8%
--------- --------
100.5% 96.4%
--------- --------
(Loss) income before income taxes -0.5% 3.6%
(Benefit) provision for income taxes -0.2% 1.1%
--------- --------
Net (loss) income -0.3% 2.5%
========= ========
Sales
- -----
Sales for the first quarter of fiscal 2000 decreased 8.6%, or $3,650,000, to
$38,541,000 compared to sales of $42,191,000 for the first quarter of fiscal
1999. The decrease for the three months ended April 2, 2000 is due to a
decrease in the number of guests at the restaurants as well as a decrease in
the number of stores operating during the comparable periods. At the end of the
first quarter of 2000, the Company operated 65 restaurants, compared to 68 at
the end of the first quarter of 1999. The Company opened one new restaurant
during the first quarter of 2000. Same store sales were down 8.4% for the three
months ended April 2, 2000. The average check of $12.11 was up 2.3% from the
first quarter of 1999. To address the decrease in sales the Company has
increased its staffing at the restaurants and implemented other procedures to
emphasize customer service.
7
Food and beverage
- -----------------
The cost of food and beverage for the first quarter of 2000 was $11,027,000 as
compared to $11,911,000 for the first quarter of 1999. The decrease of $884,000
is primarily due to decreased sales for the quarter compared to last year. As a
percentage of sales, the cost of food and beverage was 28.6% for the first
quarter of 2000, as compared to 28.2% for the first quarter of 1999. The
increase in 2000 is due primarily to increased prices for produce and beef,
offset slightly by a decrease in prices for poultry. The increase in certain
food costs was primarily a result of an industry supply problem which occurred
when one of the industry's major suppliers filed for bankruptcy. As a result of
the disruption in scheduled deliveries, certain items were purchased from other
outside sources, leading to an increase in costs.
Labor
- -----
Labor costs for the first quarter of 2000 were $14,212,000 as compared to
$14,834,000 for the first quarter of 1999. The decrease of $622,000 is
primarily due to decreased sales and a decrease in the number of units open and
operating during the period as compared to the prior year's period, which
resulted in lower demand for labor hours. Labor costs as a percentage of sales
for the first quarter of 2000 were 36.9% as compared to 35.2% for the quarter
ended April 4, 1999. The percentage increase is due primarily to decreased
same-store sales for the quarter as well as increased staffing levels at our
restaurants. The Company has focused on increasing staffing levels at the
restaurants in an effort to provide better service to the guests. Accordingly,
manager and cook costs increased as a percentage of sales during the comparable
periods.
Restaurant operating expenses
- -----------------------------
Restaurant operating expenses for the first quarter of 2000 were $7,466,000 as
compared to $7,628,000 for the first quarter of 1999. The decrease of $162,000
was primarily due to decreases in courier fees of $126,000, contract services
of $96,000, administrative expenses of $68,000, public relation costs of
$41,000, and supplies expenses of $40,000, partially offset by increases in
occupancy costs of $209,000. Restaurant operating expenses as a percentage of
sales for the three months ended April 2, 2000 were 19.4%, as compared to 18.1%
for the comparable period in the prior year.
Restaurant depreciation
- -----------------------
Restaurant depreciation expense for the first quarter of 2000 was $1,630,000,
as compared to $1,634,000 for the comparable period last year. The decrease of
$4,000 for the first quarter of 2000 is due primarily to the closing of 6
restaurants in the second half of 1999, offset slightly by the opening of 4 new
restaurants since the end of the first quarter of 1999.
General and administrative expenses
- -----------------------------------
General and administrative expenses for the first quarter of 2000 were
$2,513,000 as compared to $3,022,000 for the first quarter of 1999. The
decrease of $509,000 is due primarily to decreases in wage costs of $406,000,
decreases in preopening expenses of $56,000, decreases in travel and training
of $50,000, increases in advertising costs of $231,000, offset by an increase
in other income of $228,000, primarily due to the realization of a tax benefit
for fiscal 1999 as a result of the FICA Tip Credit. General and administrative
expenses as a percentage of sales for first quarter of 2000, were 6.5% as
compared to 7.2% for the comparable period in the prior year.
Gain on severance recovery
- --------------------------
For the first quarter of 2000, the Company recorded a gain on severance
recovery of $810,000. During the third quarter of 1999, the Company recorded
severance charges of $1,300,000. These charges represented an accrual for the
severance agreement reached between the Company and its former Chairman and
Chief Executive Officer, G. Arthur Seelbinder. The amounts were 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 represented the write-off of certain amounts owed to the
Company by Mr. Seelbinder and $1,088,000 represented payments to be received by
Mr. Seelbinder in conjunction with his severance agreement.
On March 8, 2000, the Company was called upon by the Bank to honor its guaranty
of Mr. Seelbinder's loan as described in Note 5 to the financial statements. On
that date, the balance of the severance liability to Mr. Seelbinder was
approximately $910,000. In accordance with the agreement with Mr. Seelbinder,
this amount, less certain amounts representing federal withholding liabilities
were applied to the amounts owed by him to the Company as a result of our
payment under the guaranty. As a result, approximately $810,000 in accrued
severance liabilities were forfeited by Mr. Seelbinder and applied to the
guaranty amount.
8
Loss on loan guaranty
- ---------------------
During the first quarter of 2000, the Company recorded a loss on loan guaranty
of $633,000. In 1994, the Board of Directors approved a guaranty by us of a
loan of $5,000,000 to G. Arthur Seelbinder, the former Chairman of the Board
and a current Director, and his wife. In January 1997, the Board approved a
refinancing of the loan with The Chase Manhattan Bank of New York (the "Bank").
The loan was secured by 323,007 common stock owned by Mr. Seelbinder and a cash
deposit from us of approximately $3,000,000. The term of the loan and the
guaranty were extended until March 1, 2000, at which time the loan matured. As
of March 1, 2000 the balance of the loan was $3,753,397. On March 8, 2000, the
Bank sold Mr. Seelbinder's stock for $666,202 in a private transaction, and
applied this amount to the loan. The remaining balance of the loan of
$3,087,195 was funded by us as a result of our guaranty. Accordingly, we
recorded an additional loss on the guaranty of approximately $633,000, the
difference between the amount due the Bank, and the $2,454,000 reserve
previously recorded.
Loss on disposal of fixed assets
- --------------------------------
In the first quarter of 2000, the Company recorded a loss on disposal of fixed
assets of $222,000. The charge represented the book value of certain leasehold
improvements and equipment related to the Company's restaurant in Indianapolis,
IN, a leased site. In late fiscal 1999, the site incurred certain structural
damage in the kitchen. The Company closed the site, pending repair of the
damage. In March 2000, the Company reached an agreement with the site's
landlord, wherein the landlord refunded the prior three months' rent to the
Company, the Company removed certain kitchen equipment, supplies, computer
equipment and other furniture and fixtures, and the lease was terminated
without any further liability or obligation to the Company. At the time of the
agreement, the book value of the leasehold improvements and equipment was
approximately $277,000. The Company removed items with a net book value of
approximately $55,000 from the premises. Accordingly, the Company recorded a
loss on disposal of $222,000 in March 2000. The Company received no proceeds
for the items disposed.
(Benefit) provision for income taxes
- ------------------------------------
The (benefit) provision for income taxes for the three months ended April 2,
2000, and April 4, 1999, as a percentage of (loss) income before taxes was
35.2% and 30.0%, respectively. The change in the effective tax rate in the
current year is primarily due to an increase in the benefit from the FICA Tip
Credit as a result of lower taxable income during the comparable periods.
Interest expense
- ----------------
Net interest expense for the first quarter of 2000 was $1,867,000 as compared
to $1,604,000 in the first quarter of 1999. The increase of $263,000 is due to
an increase in the amounts drawn against the Company's revolving line of
credit, as well as an increase in the interest rate on the Company's variable
rate LIBOR-based debt, which includes the revolving line of credit.
9
Liquidity and Capital Resources
The Company's operations are subject to factors outside its control. Any one,
or combination of these factors could materially affect the results of the
Company's operations. These factors include: (a) changes in the general
economic conditions in the United States, (b) changes in prevailing interest
rates, (c) changes in the availability and cost of raw materials and labor, (d)
changes in the availability of capital resources necessary to complete the
Company's expansion plans, (e) changes in Federal and State regulations or
interpretations of existing legislation, especially concerning taxes, labor and
alcoholic beverages, (f) changes in the level of competition from current
competitors and potential new competition, and (g) changes in the level of
consumer spending and customer preferences. The foregoing should not be
construed as an exhaustive list of all factors which could cause actual results
to differ materially from those expressed in forward-looking statements made by
the Company. Forward-looking statements made by or on behalf of the Company are
based on a knowledge of its business and the environment in which it operates,
but because of the factors listed above, actual results may differ from those
anticipated results described in those forward-looking statements.
Consequently, all of the forward-looking statements made are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company or its business or operations.
The Company's principal capital requirements are for working capital, new
restaurant openings and improvements to existing restaurants. The majority of
the Company's financing for operations, expansion and working capital is
provided by internally generated cash flows from operations and amounts
available under the Revolver (defined below).
During 1998, the Company entered into a new term loan agreement with
NationsBank of Tennessee and First Union National Bank (the "Term Loan") and a
term loan with the CIT/Equipment Financing Group, Inc. (collectively the
"Lenders") in conjunction with its repurchase of common stock pursuant to the
Tender Offer (the "Offer") which was completed on October 5, 1998. The Company
borrowed $70,500,000 under the two term loan agreements with the Lenders, and
established a $10,000,000 Revolving Line of Credit (the "Revolver") with
NationsBank of Tennessee. In December 1999, the amount available under the
Revolver was increased to $13,500,000. 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 April 2, 2000, the Company had borrowed $12,000,000 against the Revolver
and the outstanding balance of the Term Loans was approximately $63,264,000.
Repayments of principal and interest on these loans are expected to be financed
through normal operating cash flows generated by the Company.
During the three months ended April 2, 2000, the Company opened one additional
unit. Capital expenditures for the new restaurant, as well as the refurbishing
and remodeling of existing units totaled $759,000 for the three months ended
April 2, 2000, and were funded by cash flows of $1,739,000 from operations. The
Company intends to open one additional restaurant in 2000 for a total of 2 new
restaurants. Total cash expenditures for the 2000 expansion are estimated to
be approximately $2 million. The Company believes that cash flows from
operations together with available borrowings under the Revolver will be
sufficient to fund the planned expansion, ongoing maintenance and remodeling of
existing restaurants as well as other working capital requirements.
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 April 2, 2000, 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. The fair value of
the interest swap agreement approximated $210,000 at April 27, 2000.
The Company is exposed to credit losses in the event of nonperformance by the
counterparties to its interest rate swap agreements. The Company does not
obtain collateral to support financial instruments but monitors the credit
standing of the counterparties.
In 1994, the board of directors approved a guaranty by us of a loan of
$5,000,000 to G. Arthur Seelbinder, the former Chairman of the Board and a
current Director, and his wife. In January 1997, the Board approved a
refinancing of the loan with The Chase Manhattan Bank of New York (the "Bank").
The loan was secured by 323,007 common stock owned by Mr. Seelbinder and a cash
deposit from us of approximately $3,000,000. The term of the loan and the
guaranty were extended until March 1, 2000, at which time the loan matured. As
of March 1, 2000 the balance of the loan was $3,753,397.
10
On March 8, 2000, the Bank sold Mr. Seelbinder's stock for $666,202 in a
private transaction, and applied this amount to the loan. The remaining balance
of the loan of $3,087,195 was funded by us as a result of our guaranty. At that
time, the Company had already deposited approximately $3,047,000 in a
restricted account with the Bank. In addition to any rights we have to collect
from Mr. Seelbinder as the Bank's successors, any amount due to Mr. Seelbinder
under the settlement agreement we entered into with him when he stepped down as
Chairman and chief executive officer are to be paid to us and applied to the
amounts we paid on account of the guaranty. Our liability under the guaranty
was fully provided for between our existing cash deposit and amounts offset
against the settlement agreement. The payments we made should not have any
adverse consequences on our operations or financial statements.
Year 2000
In conjunction with the Company's efforts to ensure that its information and
non-information technology systems were Year 2000 compliant, the Company
continues to monitor its systems and those of its vendors and suppliers for any
unanticipated Year 2000 issues that may not yet have manifested. To date, no
material issues have arisen. The Company incurred costs of approximately
$25,000 in its Year 2000 compliance endeavors, all of which were incurred in
fiscal 1999.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), subsequently amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of Effective Date of FASB Statement 133 and Amendment of FASB
Statement 133." This statement, as amended, establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in fair value of a recognized asset, 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 Company has not
determined the effect of the adoption of SFAS No. 133, as amended, on the
Company's results of operations or statement of financial position.
11
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company has performed a sensitivity analysis on its fixed and floating long
term debt at April 2, 2000. The results of this sensitivity analysis indicated
that there has been no substantial change in the analysis as performed at the
end of the fiscal year ended January 2, 2000.
PART II - OTHER INFORMATION
Item 1. 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 has vigorously opposed
the sending of notice and continues to 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. Discovery in this case is ongoing. 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 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
12
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
27. Financial Data Schedules.
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
(b) Reports on Form 8-K during the fiscal quarter ended April 2, 2000
Report on Form 8-K dated January 19, 2000 reporting an Item 5 event.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COOKER RESTAURANT CORPORATION
(The "Registrant")
Date: May 17, 2000
By:_/s/ Henry R. Hillenmeyer______
Henry R. Hillenmeyer
Chairman of the Board of Directors,
Chief Executive Officer, and Director
(principal executive officer and duly authorized officer)
By:_/s/ Mark W. Mikosz__________
Mark W. Mikosz
Vice President - Chief Financial Officer
(principal financial and accounting officer)
14
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
COOKER RESTAURANT CORPORATION
________________________
FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
APRIL 2, 2000
_________________________
EXHIBITS
_________________________
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15
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
Exhibit 27.1