SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------------
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 1, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _____________ to _____________
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Commission File Number: 1-13044
COOKER RESTAURANT CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
OHIO 62-1292102
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2609 West End Avenue, Nashville, Tennessee 37203
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (561) 615-6000
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Indicate by check X whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days.
[X] [ ]
Yes No
6,491,429 Common Shares, without par value
----------------------------------------------------------------
(number of common shares outstanding as of the close of business
on August 17, 2001)
-1-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COOKER RESTAURANT CORPORATION AND SUBSIDIARIES (DEBTORS-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollar amounts in thousands)
July 1, December 31,
2001 2000
------------ ------------
ASSETS
------
Current Assets:
Cash and cash equivalents $ 4,405 $ 1,602
Inventory 953 1,365
Assets held for sale 23,970 30,606
Prepaid and other current assets 1,739 1,687
Income tax receivable 1,531 1,888
----------- -----------
Total current assets 32,598 37,148
Property and equipment, net 73,530 82,127
Other assets, net 2,508 1,663
----------- -----------
Total assets $ 108,636 $ 120,938
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 72,681 $ 86,339
Accounts Payable - 2,628
Post petition accounts payable 1,048
Accrued liabilities 5,829 14,763
Capital lease obligation, current 46 98
----------- -----------
Total current liabilities 79,604 103,828
Other liabilities 1,553 1,452
Pre-petition accounts payable 7,648 -
Debentures subject to compromise 12,547 -
Accrued liabilities subject to compromise 5,460 -
----------- -----------
Total liabilities 106,812 105,280
----------- -----------
Shareholders' equity:
Common shares-without par value:
authorized 30,000,000 shares;
issued 11,054,000 at July 1, 2001
and 10,548,000 December 31, 2000 57,301 62,211
Retained earnings (accumulated deficit) (11,981) 1,876
Deferred compensation (437)
Treasury stock, at cost, 4,056,000
and 4,562,000 shares at July 1, 2001
and December 31, 2000, respectively (43,059) (48,429)
----------- -----------
Total shareholders' equity 1,824 15,658
----------- -----------
Total liabilities and shareholders' equity $ 108,636 $ 120,938
=========== ===========
See accompanying notes to condensed consolidated financial statements
-2-
COOKER RESTAURANT CORPORATION AND SUBSIDIARIES (DEBTORS-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
2001 2000 2001 2000
-------- -------- -------- --------
Sales $ 30,460 $ 36,573 $ 67,848 $ 75,114
-------- -------- -------- --------
Cost of Sales:
Food and beverage 9,546 10,622 20,586 21,649
Labor 12,510 13,807 26,718 28,019
Restaurant operating expenses 7,103 7,664 15,360 15,129
Restaurant depreciation 967 1,531 1,895 3,162
General and administrative 2,407 2,067 5,108 4,580
Impairment of long-lived assets 5,443 - 5,937 -
Restructuring expenses 664 - 664 -
Gain on severance recovery - - - (810)
Loss on loan guaranty - - - 633
Interest expense 2,128 1,829 4,989 3,619
Amortization of loan fees - 105 271 182
Loss (gain) on sale of property
and equipment, net 204 - 112 222
Interest and other (income) expense, net (3) - 65 -
-------- -------- -------- --------
Loss before income taxes (10,509) (1,052) (13,857) (1,271)
Benefit for income taxes - (368) - (445)
-------- -------- -------- --------
Net loss $(10,509) $ (684) $(13,857) $ (826)
======== ======== ======== ========
Basic loss per common share:
Net loss $ (1.72) $ (0.11) $ (2.26) $ (0.14)
======== ======== ======== ========
Diluted loss per common share:
Net loss $ (1.72) $ (0.11) $ (2.26) $ (0.14)
======== ======== ======== ========
Weighted average number of common shares
outstanding - basic and diluted 6,121 5,986 6,121 5,986
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements
-3-
COOKER RESTAURANT CORPORATION AND SUBSIDIARIES (DEBTORS-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollar amounts in thousands)
Six Months Ended
July 1, July 2,
2001 2000
----------- -----------
Cash flows from operating activities:
Net loss $ (13,857) $ (826)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 2,354 3,434
Loss on loan guaranty - 633
Impairment charges 5,937 -
Restructuring charges 664
Loss (gain) on sale of property and equipment,net 112 222
Decrease ( increase) in current assets 717 (236)
Increase in other assets (845) (9)
Increase (decrease) in pre-petition liabilities 2 (2,305)
Increase in current post petition liabilities 1,048 -
Increase in other liabilities 171 436
----------- -----------
Net cash (used in) provided by operating activities (3,697) 1,349
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (2,216) (938)
Proceeds from sale of property and equipment 9,969 198
Restricted Cash Deposits - (141)
----------- -----------
Net cash provided by (used in) investing activities 7,753 (881)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings 950 10,250
Repayments of borrowings (2,133) (10,748)
Redemption of Debentures - (18)
Capital lease obligations (70) (49)
----------- -----------
Net cash used in financing activities (1,253) (565)
----------- -----------
Net increase (decrease) in cash and cash equivalents 2,803 (97)
Cash and cash equivalents, at beginning of period 1,602 1,428
----------- -----------
Cash and cash equivalents, at end of period $ 4,405 $ 1,331
=========== ===========
See accompanying notes to condensed consolidated financial statements
-4-
COOKER RESTAURANT CORPORATION AND SUBSIDIARIES (DEBTORS-IN-POSSESSION)
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
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, the accompanying
condensed consolidated financial statements contain all adjustments,
consisting of normal recurring accruals, necessary to present fairly the
financial position of the Cooker Restaurant Corporation and subsidiaries
("the Company"), after elimination of intercompany accounts and transactions,
at July 1, 2001, and the statements of operations for the three and six
months ended July 1, 2001 and cash flows for the six months ended July 1,
2001. The results of operations for the three months and six months ended
July 1, 2001, are not necessarily indicative of the operating results
expected for the fiscal year ended December 30, 2001. 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 December 31, 2000.
Certain amounts in the financial statements for the three months and six
months ended July 1, 2000 have been reclassified to conform to the 2001
presentation.
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business,
and in accordance with AICPA Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code", which
the Company adopted on May 25, 2001. As discussed in Note 8, the Company
violated certain debt covenants and as a result, the Company has classified
its debt as a current liability in the condensed consolidated balance sheet
as of July 1, 2001. The Company had obtained forbearance from certain of
its lenders that allowed the Company to suspend making principal and
interest payments for nine months (through May 25, 2001). During the
forbearance period the Company made payments of $7,836,000 of which
$2,133,000 was applied to principal, $5,653,00 to interest and $50,000 to
related bank fees.
On May 25, 2001, the Company filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code ('Bankruptcy Code") with the United States
Bankruptcy Court for the Southern District of Ohio, Eastern Division. The
Company is seeking relief in order to restructure its debt and to reorganize
its operations due to a decrease in liquidity and the reluctance of the
holders of its long-term debt (the "Banks") to extend the forbearance.
Pursuant to the provisions of the Bankruptcy Code, all actions to collect
upon any of The Company's liabilities as of the petition date or to enforce
pre-petition date contractual obligations were automatically stayed. Absent
approval from the Bankruptcy Court, the Company is prohibited from paying
pre-petition obligations. However, the Bankruptcy Court has approved payment
of certain pre-petition liabilities such as employee wages and benefits. The
Bankruptcy Court has also approved the retention of legal and financial
professionals. As a result, the Company has recently engaged special counsel
and reorganization consultants to assist the Company in its operations plans.
The Company is also taking measures that are intended to increase sales and
improve cash flows from operations. The Company is in possession of its
properties and assets and continues to manage its business as
debtor-in-possession subject to the supervision of the Bankruptcy Court. As
a debtor-in-possession, the Company has the right, subject to the Bankruptcy
Court approval to assume or reject any pre-petition executory contracts and
unexpired leases.
While operating as debtors-in-possession under the protection of the
Bankruptcy Code, and subject to the Bankruptcy Court approval or as otherwise
as permitted in the ordinary course of business, the Company may sell or
otherwise dispose of assets and liquidate or settle liabilities for amounts
other than those reflected in the consolidated financial statements. Further,
the amounts and classifications reported in the consolidated historical
financial statements do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be necessary as a
consequence of the Chapter 11 proceedings.
The accompanying consolidated financial statements do not purport to reflect
or provide for the consequences of the Company's bankruptcy proceedings. In
particular, such consolidated financial statements do not purport to show
(i) as to assets, their realizable value on a liquidation or sale basis or
their availability to satisfy liabilities, (ii) as to pre-petition
liabilities, the amounts that may be allowed for claims or contingencies,
or the status and priority thereof, (iii) as to shareholder accounts, the
effect of any changes that may be made in the capitalization of the Company
or (iv) as to operations, the effect of any changes that may be made in its
business.
-5-
As of the date of this report, the Company has not filed any reorganization
plans with the Bankruptcy Court. If management is unable to implement a
successful plan, the lenders, subject to the Bankruptcy Court approval, could
accelerate the repayment of the Company's debt, which would have a material
adverse effect on the Company's financial condition, results of operations
and liquidity. These conditions raise substantial doubt about the Company's
ability to continue as a going concern for a reasonable period of time. The
accompanying condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Note 2: Earnings Per Share
------------------
Basic earnings per share have been computed by dividing net loss by the
weighted average number of shares outstanding during the periods reported.
Diluted earnings per share have been computed assuming the exercise of stock
options, as well as their related income tax effects, unless their effect is
antidilutive.
Convertible subordinated debentures outstanding as of July 1, 2001, 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 the three months and six months ended July 1,
2001 and July 2, 2000, as the inclusion of the convertible subordinated
debentures would be antidilutive.
Options to purchase 868,000 and 1,379,000 shares of common stock at prices
ranging from $.84 to $21.75 per share and $2.625 to $17.75 per share, were
outstanding for a portion of the three months and six months ended July 1,
2001 and July 2, 2000, respectively, but were not included in the computation
of diluted EPS, as the inclusion would be antidilutive.
Effective May 14, 2001, the Company exchanged 482,386 shares of restricted
stock for options held to purchase 618,156 shares of the Company's common
stock. In connection with this exchange, which was limited to directors and
employees, the Company recorded deferred compensation expense of $437,000
which is being amortized over the four years vesting period of the restricted
stock.
Note 3: Impairment of long-lived assets
-------------------------------
During the six months ended July 1, 2001, the Company recorded impairment
charges totaling $5,937,000 on 22 of its restaurants, to record such assets
at their estimated fair value, less certain estimated selling costs. Included
in this amount are the net book values of certain leasehold improvements and
equipment relating to unexpired leases for 8 restaurants, which the Company
has rejected in accordance with the provisions of the Bankruptcy Code.
However, there is no guaranty that parties affected by such rejections will
not file pre-petition claims with the Bankruptcy Court in accordance with
bankruptcy procedures. (See "Note 10: Subsequent Event" regarding additional
restaurant closures after the end of the quarter ended July 1, 2001). Due
to the current situation regarding the Company's Term Debt, the Company
determined that the most prudent action would be to close these locations
and sell these properties and use the proceeds to pay down portions of the
Term Debt.
During the six months ended July 1, 2001, the Company closed 16 restaurants
and reclassed these stores as assets held for sale, sold 3 restaurants that
were previously classified as assets held for sale and revalued the estimated
fair value of 3 stores that were closed in fiscal 2000 and are currently
classified as held for sale. These assets were taken out of service at the
time the restaurants were closed and consequently no further depreciation was
recognized.
In addition, the Company has also accrued $664,000 to cover the estimated
carrying costs of the closed stores. These charges are for exit costs that
the Company was contractually obligated to prior to closing the stores that
will not benefit future operations.
-6-
Note 4: Derivative Financial Instruments
--------------------------------
The Company had only limited involvement with derivative financial
instruments and did not use them for trading purposes.
Interest rate swap agreements have been utilized to reduce the potential
impact of increases in interest rates on floating-rate long-term debt. At
December 31, 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 Company paid 6.25% on $27,500,000 of it's total LIBOR-based
floating rate debt, and received LIBOR from the counterparty (a major bank).
On January 4, 2001 the interest swap agreement was cancelled, and payment of
$187,000 was made to the counterparty. This amount was recorded as interest
expense in the three months ended April 1, 2001.
Note 5: Loss on Loan Guaranty
---------------------
During the third quarter of fiscal 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"), the former Chairman of the Board of the Company. The Loan was secured
by the Company's guaranty and 323,000 shares of the Company's common stock
owned by Mr. Seelbinder. During the fourth quarter of fiscal 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 was assessed by
the lender periodically based upon changes in the price of the Company's
common stock. During the third quarter of fiscal 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 fiscal 1999, the Company believed it was probable that a loss on
the loan guaranty had been incurred as of the end of the Company's fiscal
third quarter. The Company's best estimate of that loss was the cash
deposit made by the Company as of October 3, 1999.
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
$3,753,000. On March 8, 2000, the Bank sold Mr. Seelbinder's stock for
$666,000 in a private transaction and applied this amount to the loan.
The remaining balance of the loan of $3,087,000 was funded by the Company
as a result of the guaranty. Accordingly, in the first quarter of fiscal 2000
the Company 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 the Company has as the Bank's successors to collect
from Mr. Seelbinder, any amount due to Mr. Seelbinder under the settlement
agreement the Company entered into with him when he stepped down as Chairman
and Chief Executive Officer is to be paid to the Company and applied to the
amounts the Company paid pursuant to the guaranty.
On November 16, 2000, the Company entered into an agreement with
Mr. Seelbinder, which stipulates and defines certain repayment terms for
$2,737,000 due to the Company in conjunction with the loan guaranty. The
agreement simultaneously terminates the existing severance agreement between
the Company and Mr. Seelbinder and the vested and unvested Seelbinder
Options. In addition to the termination of the severance agreement, Mr.
Seelbinder agreed to resign from the Company's Board of Directors.
Note 6: Severance Recovery
------------------
During the third quarter of fiscal 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
fiscal 1999. 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.
-7-
On March 8, 2000, the date the Company was called upon by the Bank to honor
its guaranty, 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
its guaranty. Accordingly, the Company recorded a severance recovery of
approximately $907,000 in the accompanying consolidated statements of
operations. As a result, approximately $810,000 in accrued severance
liabilities were forfeited by Mr. Seelbinder and applied to the guaranty
amount as of the three months ended April 2, 2000. Approximately $910,000 in
accrued severance liabilities was forfeited by Mr. Seelbinder and applied to
the guaranty amount as of the year ended December 31, 2000.
On August 10, 2001, the Company filed a lawsuit to collect the full amount
owed from Mr. Seelbinder .
Note 7: Loss (Gain) on Disposal of property and equipment
-------------------------------------------------
In the first quarter of 2001, the Company recorded a gain on disposal of
fixed assets of $92,000. The gain was a result of the sale of the corporate
office building in West Palm Beach, FL. Properties in Boardman, OH and
Florence, KY were also sold in the first quarter of 2001. These properties
were sold for the assets' net book value. During the quarter ended July 1,
2001, the Company recorded a loss of $ 250,000 on the sale of its
properties in Grand Rapids and Troy, Michigan and recorded a gain of
$46,000 on the sale of its property at Palm Harbor, FL.
Note 8: Long term debt
--------------
Since the quarter ended October 1, 2000, the Company has not been in
compliance with certain covenants pertaining to its debt with Bank of
America, N.A. (as successor to NationsBank) and First Union National
Bank (collectively, the "Term Lenders"). Based on such non-compliance the
Term Lenders had the right to accelerate the repayment of the debt. In
addition to not being in compliance with certain covenants, the Company did
not make its full (interest and principal) payment due on July 3, 2000 nor
did it make its principal payments in accordance with the terms of the loan
due to the Term Lenders. As a result of the non-compliance the Company
accrued for additional interest, which included approximately $455,000 in
penalty interest, $206,000 in regular late fees, and $2,360,000 of
accelerated late fees, which are included in accrued liabilities in the
accompanying balance sheet at July 1, 2001. In addition, at July 1, 2001,
the Company, accrued an additional $355,000 in penalty interest as well as
$1,140,000 of interest as the Company was not current on the interest portion
of the Term Loan. The Company has not received a waiver from the Term
Lenders to cure the non-compliance. Accordingly, the Company has classified
the obligation to the Term Lenders as current in the condensed consolidated
balance sheets.
The Company received a six-month forbearance from the Term Lenders, effective
through March 31, 2001, pertaining to its principal and interest payments
during that time period, along with a second forbearance effective through
May 25, 2001. The forbearance allowed for the postponement of principal and
interest payments during the forbearance period. In January 2001, the Company
sold three properties, one of which was the West Palm Beach Corporate Office
Building. The majority of the sale proceeds were used to pay the interest
portion of the Term Loan. During the forbearance period the Company has made
$4,450,000 and $680,000 of primarily interest payments to the Term Lenders on
January 21, 2001 and April 20, 2001, respectively, including $50,000 of
related bank fees. In May 2001, the Company also sold its properties at
Grand Rapids, Troy and Palm Harbor .The proceeds were used to pay the
interest portion of the term loan and to finance its acquisition of the
Cool Springs store. The Company also retained the services of an
independent third party to assist the Company in obtaining other
long-term financing intended to replace its current debt agreement with the
lenders.
Since the quarter ended October 1, 2000, the Company also has not been in
compliance with certain covenants pertaining to its term debt with the CIT
Group ("CIT"). Based on such non-compliance with certain covenants, CIT was
entitled, at their discretion, to exercise certain remedies including
acceleration of repayment. The Company has not received a waiver from CIT to
cure the non-compliance. Because the Company did not receive a waiver from
CIT for the current non-compliance or for future periods, its obligation to
CIT has been classified as a current liability in the condensed consolidated
balance sheets.
-8-
Additionally, Bank of America, N.A., as the agent for holders of its senior
credit facility, notified First Union, the trustee under its 6 3/4%
Convertible Subordinated Debentures, that the Company was in default under
its senior credit facility and that no payments could be made by the Company,
or received by the trustee, with respect to the 6 3/4% Convertible
Subordinated Debentures. Such notification was within their rights as the
agent for holders of the Company's senior credit facility. This notice
blocked the Company's ability to pay the scheduled interest payments under
the debentures as well as any payments of principal, any redemption payments
or change of control purchase payments. The failure to make these payments,
as required, and the existence of a default under the senior credit facility,
constitutes a default under the terms of the 6 3/4% Convertible
Subordinated Debentures and certain other of the Company's credit
arrangements. The Company has classified the obligation to the holders of
the 6 3/4% Convertible Subordinated Debentures as a current liability in the
condensed consolidated balance sheets.
In June 2001, the company borrowed $1,000,000 from a stockholder of the
Company with a maturity date of September 4, 2001 which is secured by
two parcels of real property. The proceeds of $950,000 net of prepaid
interest of $30,000 and prepaid loan fee of $10,000 will be used as
working capital.
Note 9: Contingencies
-------------
The case of Rebecca Conway v. Cooker Restaurant Corporation was filed in the
Courts of Common Pleas, Cuyahoga County, Ohio in October 2000. This suit is
a result of an after hours, non-Cooker sanctioned, function which resulted in
the termination of four Cooker managers and five Cooker crewmembers. One of
the terminated crewmembers, the plaintiff, is alleging inappropriate and
unwelcome behavior of others toward the plaintiff the night in question.
The suit names the Company, two Cooker managers and two crewmembers as
defendants with six counts against each; sexual harassment, retaliatory
suspension and discharge, assault, battery, invasion of privacy, and
intentional infliction of emotional distress. For each defendant and each
count the plaintiff is seeking $25,000 and undetermined amounts defined as
"such further relief as the court deems necessary and proper"and attorney
fees via a jury trial. The lawsuit has been stayed pending the bankruptcy
filing by the Company. The Company intends to vigorously defend the lawsuit,
but there can be no assurance that the Company will ultimately prevail.
Because the case is in its early stages the Company has not yet determined
the impact, if any, upon the financial statements.
The Company is a party to various other claims and legal actions arising in
the ordinary course of business. In the opinion of management based on
advice from counsel, the ultimate disposition of these matters will not
have a material adverse effect on the Company's financial position, results
of operations or liquidity.
Note 10: Subsequent Event
----------------
On August 5, 2001, the Company closed an additional seven restaurants and
will classify these restaurants during the third quarter as assets held for
sale. As a result of management's decision to close and sell these
restaurants, The Company will evaluate the recoverability of its investment
at these locations based on estimated fair market values less estimated
selling costs. Any resulting impairment charges will be reflected in the
Company's financial statements for the third quarter of fiscal 2001. It is
management's intention to use all or most of the proceeds from the sale of
these restaurants to pay down the term loan.
-9-
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
From time to time, the Registrant 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 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.
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 reorganization 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 that 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 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.
-10-
Results of Operations
- ---------------------
The following table sets forth as a percentage of sales certain items
appearing in the Registrant's statements of operations.
COOKER RESTAURANT CORPORATION AND SUBSIDIARIES (DEBTORS-IN-POSSESSION)
RESULTS OF OPERATIONS
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
2001 2000 2001 2000
-------- -------- -------- --------
Sales 100.0% 100.0% 100.0% 100%
-------- -------- -------- --------
Cost of Sales:
Food and beverage 31.3% 29.0% 30.3% 28.8%
Labor 41.1% 37.8% 39.4% 37.3%
Restaurant operating expenses 23.3% 21.0% 22.6% 20.2%
Restaurant depreciation 3.2% 4.2% 2.8% 4.2%
Amortization of loan fees 0.0% 0.3% 0.4% 0.2%
General and administrative 7.8% 5.7% 7.5% 6.1%
Loss on loan guaranty 0.0% 0.0% 0.0% 0.8%
Impairment of long-lived assets 17.9% 0.0% 8.8% 0.0%
Restructuring expenses 2.2% 0.0% 1.0% 0.0%
Interest expense 7.0% 5.0% 7.0% 4.9%
Gain on severance recovery 0.0% 0.0% 0.0% -1.1%
Loss (gain) on sale of property
and equipment 0.7% 0.0% 0.4% 0.3%
Interest and other (income) expense, net 0.0% 0.0% 0.2% 0.0%
-------- -------- -------- --------
134.5% 102.99% 120.4% 101.7%
Loss before income taxes -34.5% -3.0% -20.4% -1.7%
Benefit for income taxes 0.0% -1.0% 0.0% -0.6%
-------- -------- -------- --------
Net loss -34.5% -2.0% -20.4% -1.1%
======== ======== ======== ========
Sales
- -----
Sales for the second quarter of fiscal 2001 decreased 16.7%, or $6,113,000,
to $30,460,000 compared to sales of $36,573,000 for the second quarter of
fiscal 2000. For the six months ended July 1, 2001 sales decreased by 9.7%,
or $7,266,000 to $67,848,000 from $75,114,000. The decrease for the three
and six months ended July 1, 2001 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 second quarter
of 2001, the Registrant operated 50 restaurants, compared to 65 at the end of
the second quarter of 2000. Same store sales were down 13.6% for the three
months ended July 1, 2001 from the three months ended July 2, 2000. In
addition, the average check was $11.85 as compared to $11.87 for the second
quarter of 2000. To address the decrease in sales, the Registrant has
increased its staffing at its restaurants, revised its standard national
menu to a regional menu, changed key operations executives and implemented
other procedures to emphasize customer service.
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Food and beverage
- -----------------
The cost of food and beverage for the second quarter of 2001 was $9,546,000
as compared to $10,622,000 for the second quarter of 2000. The decrease of
$1,076,000 is primarily due to the decrease in the number of restaurants
which was partially offset by slight increases in food cost and decreased
sales for the quarter compared to last year. As a percentage of sales, the
cost of food and beverage was 31.3% for the second quarter of 2001, as
compared to 29.0% for the second quarter of 2000. The increase in 2001 is
due primarily to increased prices for produce and beef, menu changes, as
well as an industry supply problem which occurred when one of the industry's
major suppliers filed for bankruptcy in 2000. Disruptions in scheduled
deliveries, as a result of this supply problem necessitated certain
purchases from other outside sources at less favorable prices.
The cost of food and beverage for the six months ended July 1, 2001 was
$20,586,000 as compared to $21,649,000 for the six months ended July 2, 2000.
The decrease of $1,063,000 was primarily due to lesser number of operating
restaurants during 2001 and a decrease in sales for the current six months.
As a percentage of sales, the cost of food and beverage was 30.3% in the
current period as compared to 28.8% for the prior year period. The increase
in 2001 is due to the increased prices and the industry supply problem as
noted above. To address the increase in food and beverage cost as a
percentage of sales The Company has implemented a computerized food and
inventory cost control system.
Labor
- -----
Labor costs for the second quarter of 2001 were $12,510,000 as compared to
$13,807,000 for the second quarter of 2000. Labor costs as a percentage of
sales for the second quarter of 2001 were 41.1% as compared to 37.8% for the
second quarter of 2000. The percentage increase is due primarily to decreased
same-store sales for the quarter as well as increased staffing levels at the
restaurants. The Registrant has focused on increasing staffing levels at the
restaurants in an effort to provide better service to the guests. Manager
and cook costs also increased as a percentage of sales during the
comparable periods.
Labor costs for the six months ended July 1, 2001 were $26,718,000 as
compared to $28,019,000 for the six months ended July 2, 2000. The decrease
of $1,301,000 is primarily due to the reduction in the number of operating
restaurants in 2001 as compared to 2000. As a percentage of sales, labor
costs for the six months in 2001 was 39.4% as compared to 37.3% in 2000.
This is primarily due to a decline in same-store sales in 2001 and the
increased staffing levels at the restaurants.
Restaurant operating expenses
- -----------------------------
Restaurant operating expenses for the second quarter of 2001 were $7,103,000
as compared to $7,664,000 for the second quarter of 2000. The decrease of
$561,000 was primarily due to a decrease in the number of operating
restaurants, which was slightly offset by increases in public relations,
utilities and occupancy costs. Restaurant operating expenses as a percentage
of sales for the three months ended July 1, 2001 were 23.3%, as compared to
21.0% for the comparable period in the prior year.
Restaurant operating expenses for the six months ended July 1, 2001 were
$15,360,000 as compared to $15,129,000 for the same period in 2000. This
increase was due to increases in the costs of utilities, public relations,
contract services and other related expenses which were partially offset by
the closing of 16 restaurants during the six months period in 2001.
Restaurant expenses as a percentage of sales for the first six months of 2001
were 22.6% as compared to 20.2% for the same period in 2000.
Restaurant depreciation
- -----------------------
Restaurant depreciation expense for the second quarter of 2001 was $967,000,
as compared to $1,531,000 for the comparable period in the prior year. The
decrease of $564,000 for the second quarter of 2001 is due primarily to the
closing of and reclassification of 22 restaurants from property and equipment
to assets held for sale, during the last twelve months. Assets held for sale
are stated at the lower of cost or estimated fair value less costs to sell
and include 21 properties held for sale at July 1, 2001.
Restaurant depreciation for the six months ended July 1, 2001, was $1,895,000
as compared to $3,162,000 for the same period in 2000. This was mainly due to
the reduction in the number of operating restaurants in 2001 as compared to
2000. In accordance with Statement of Financial Accounting Standard ("SFAS")
No. 121, Accounting for the Impairment of Long-lived Assets and Long-lived
Assets to be Disposed of, the Registrant does not recognize depreciation or
amortization expense during the period in which the assets are being held
for sale.
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General and administrative expenses
- -----------------------------------
General and administrative expenses for the second quarter of 2001 were
$2,407,000 as compared to $2,067,000 for the second quarter of 2000. The
increase of $340,000 is due primarily to increases in wages and other
benefit costs of $82,000, consultant and legal expenses of $196,000, rental
expense of $77,000, estimated selling costs of a piece of real property and
other related expenses of $113,000 which was partially offset by decrease
in bonus expense of $189,000.
General and administrative expenses for the six months ended July 1, 2001
were $5,030,000 as compared to $4,580,000. The increase of $450,000 was
primarily due to increases as stated above.
Impairment of long-lived assets
- -------------------------------
Impairment charges for the three months ended July 1, 2001 were $5,443,000
as compared to $0 for the same period in 2000. The impairment charges were
made on 19 of its restaurants to record such assets at their estimated fair
value. Included in this amount are the net book values of certain leasehold
improvements and equipment relating to unexpired leases for 8 restaurants
which the Company has rejected as of July 1, 2001, in accordance with the
provisions of the Bankruptcy Code..
The impairment charges for the six months ended July 1, 2001 included those
above as well as $494,000 of impaired charges on three restaurants in the
first quarter which were subsequently sold in May 2001.
Due to the current situation regarding the Company's Term Debt, the Company
determined that the most prudent action would be to sell the owned properties
and use all or most of the proceeds to pay down portions of the Term Debt.
The Company wrote the properties down to fair value, less certain estimated
selling costs.
Restructuring charges
- ---------------------
During the three months ended July 1, 2001, the Company accrued $664,000
to cover the estimated carrying costs of the closed stores. These charges
include estimated lease payments, utilities, insurance and real estate taxes
for a period of six months for owned locations and three months for leased
locations.
Loss on loan guaranty
- ---------------------
Loss on loan guaranty for the first half of 2001 was $0, as compared to
$633,000 for the comparable period in the prior year. During the first
quarter of 2000, the Registrant recorded a loss on loan guaranty of $633,000.
In 1994, the Board of Directors approved a guaranty by the Company of a loan
of $5,000,000 to G. Arthur Seelbinder, the former Chairman of the Board 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
323,000 shares of common stock owned by Mr. Seelbinder and a cash deposit
from the Company 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 $3,753,000. On March 8, 2000,
the Bank sold Mr. Seelbinder's stock for $666,000 in a private transaction,
and applied this amount to the loan. The remaining balance of the loan of
$3,087,000 was funded by the Company as a result of its guaranty.
Accordingly, the Company 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.
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Severance recovery
- ------------------
Severance recovery for the first half of 2001 was $0, as compared to
$810,000 for the comparable period in the prior year. During the third
quarter of 1999, the Registrant recorded severance charges of $1,300,000.
These charges represented an accrual for the severance agreement reached
between the Registrant and its former Chairman and Chief Executive Officer,
G. Arthur Seelbinder. The amounts were for past services rendered to the
Registrant, and therefore the Registrant accrued for the full amount of the
severance package during the third quarter of 1999. Of the amount charged,
$212,000 represented the write-off of certain amounts owed to the Registrant
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 Registrant was called upon by the Bank to honor its
guaranty of Mr. Seelbinder's loan as described in Note 5 to the condensed
consolidated 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 Registrant 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.
Interest expense
- ----------------
Interest expense in the second quarter of 2001 was $2,128,000 as compared to
$1,934,000 in the first quarter of 2000. The increase of $194,000 is due to
the status of the Registrant's Term Loan.
Interest expense for the six months ended July 1, 2001 was $5,260,000 as
compared to $3,801,000 for the same period in 2000. This was due to the
increase in LIBOR-based interest rate and the accrued interest penalty (see
Note 8 of Notes to Condensed Consolidated Financial Statements)
Loss (Gain) on sale of property and equipment, net
In the second quarter of 2001, The Company recorded a loss of $204,000 which
includes a gain on disposal of fixed assets of $46,000 and a loss on
disposal of fixed assets of $250,000. The gain in 2001 was a result of the
sale of one of the Company's restaurants in Florida and the loss was a result
of the sale of two of its restaurants in Michigan. The loss of $112,000 for
the six months ended July 1, 2001 includes the above net loss and the net
gain of $92,000 on the sale of The Company's corporate office and two of
its properties in the first quarter of 2001.
Benefit for income taxes
- -------------------------
The Company did not record a tax benefit in the second quarter of 2001, which
was primarily due to the increase in the valuation allowance on the deferred
tax assets. SFAS No. 109 requires that the deferred tax assets be reduced
by a valuation allowance to the extent that it is "more likely than not" that
the asset will be realized. During the fourth quarter of 2000, the
Registrant established a valuation allowance to eliminate the deferred tax
asset since it was more likely than not that the tax asset would be realized.
Liquidity and Capital Resources
- -------------------------------
The Company's principal capital requirements are for working capital and
improvements to existing restaurants. Prior to its filing for Bankruptcy
protection, the majority of the Company's financing for operations and
working capital was 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. 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 December
31, 2000, the Company had borrowed $13,425,000 against the Revolver and the
outstanding balance of the Term Loans was approximately $60,367,000.
-14-
Pursuant to the terms of the original agreement, the Company was required to
make principal and interest payments of approximately $345,000 to First
Union on $22,500,000 of its Term Loan and monthly principal payments of
$166,670, plus applicable interest, to NationsBank on $30,000,000 of its
Term Loan balance. Such payments were scheduled to continue until March 24,
2004, upon which date, all remaining amounts, principal and interest, under
the Term Loan and the Revolver were to be due in full. Additionally, the
Company was required to make monthly payments of $267,639, including
principal and interest, to CIT. Such payments were scheduled to continue
until September 30, 2003, at which time all remaining amounts under the
agreement with CIT were to be due in full.
Since the quarter ended October 1, 2000, the Company has not been in
compliance with certain covenants pertaining to its debt with Bank of
America, N.A. (as successor to NationsBank) and First Union National Bank
(collectively, the "Term Lenders"). Based on such non-compliance, the Term
Lenders were entitled, at their discretion, to exercise certain remedies
including acceleration of repayment. In addition to not being in compliance
with certain covenants, the Registrant did not make its full (interest and
principal) payment due on July 3, 2000. The Company has not received a
waiver from the Term Lenders to cure the non-compliance. Accordingly, the
Company has classified the obligation to the Term Lenders as current in
the condensed consolidated balance sheets.
The Company received a six-month forbearance from the Term Lenders, effective
through March 31, 2001, pertaining to its principal and interest payments
during that time period, along with a second forbearance effective through
May 25, 2001. The forbearance allowed for the postponement of principal and
interest. During the forbearance period the Company has made $4,450,000,
$680,000 and $2,109,000 of mostly interest payments to the Term Lenders on
January 21, 2001, April 20, 2001 and May 22, 2001 respectively, including
$50,000 of related bank fees. The Company negotiated with the lenders for a
possible extension of the standstill agreement for a period of 12 months, to
allow the Company time to secure new financing. The lenders were unwilling to
grant such a standstill agreement, hence, the Company chose to seek
protection under the Bankruptcy Code. Accordingly, on May 25, 2001 the
Company filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code with the United States Bankruptcy Court for the Southern
District of Ohio, Eastern Division. . As a result, the Company has engaged
special counsel and reorganization consultants to assist the Registrant in
its operations plans.
Since the quarter ended October 1, 2000, the Company also has not been in
compliance with certain covenants pertaining to its term debt with the CIT
Group ("CIT"). Based on such non-compliance with certain covenants, CIT was
entitled, at their discretion, to exercise certain remedies including
acceleration of repayment. The Company has not received a waiver from CIT
to cure the non-compliance. Because the Company did not receive a waiver
from CIT for the current non-compliance or for future periods, its obligation
to CIT has been classified as a current liability.
Additionally, Bank of America, N.A., as the agent for holders of its senior
credit facility, notified First Union National Bank of North Carolina, the
trustee under its 6 3/4 % Convertible Subordinated Debentures, that the
Company was in default under its senior credit facility and that no payments
could be made by the Company, or received by the trustee, with respect to the
6 3/4 % Convertible Subordinated Debentures. Such notification was within
their rights as the agent for holders of the Company's senior credit
facility. This notice blocked the Company's ability to pay the scheduled
interest payments under the debentures as well as any payments of principal,
any redemption payments or change of control purchase payments. The failure
to make these payments, as required, and the existence of a default under the
senior credit facility, constitutes a default under the terms of the 6 3/4 %
Convertible Subordinated Debentures and certain other of the Company's credit
arrangements. As of December 31, 2000 and July 1, 2001, the Company
classified the obligation to the holders of the 6 3/4% Convertible
Subordinated Debentures as a current liability.
In January 2001, the Company sold the 32,000 square foot office building in
West Palm Beach, Florida, where its executive offices were located, to an
unrelated third party. The Company then entered into a three-year term
leaseback agreement for the West Palm Beach Corporate Office. The lease term
runs through May 2003. Additionally in the first quarter of 2001, properties
in Boardman, OH and Florence, KY were sold to unrelated third parties.
Further, the Company closed two restaurants, one in Evansville, IN and one
in West Palm Beach, FL in the first quarter of fiscal 2001.
The Company does not intend to open any new restaurants in 2001. Total cash
expenditures for restaurant expansion and improvements are projected to be
approximately $1,800,000 for fiscal 2001.
-15-
On May 22, 2001, the Registrant sold its properties at Grand Rapids and
Troy, Michigan for $1,400,000 and $1,500,000 respectively and its property
in Palm Harbor, Florida for $1,700,000 to an unrelated party. The Registrant
then entered into a long-term leaseback agreement for both Grand Rapids and
Troy. The Grand Rapids and Troy properties were part of the Term Loan's
collateral and as such, Bank of America received 70% of the net proceeds
which was applied mostly to interest and penalty with the sum of $817,000
applied to principal. The proceeds from the sale of Palm Harbor were used to
acquire the property in Cool Springs, Tennessee that the Company was
operating under a lease.
During the second quarter of 2001, the Registrant closed 14 of its
restaurants and reclassed them as assets held for sale. These properties
are carried at the lesser of net book value or fair market value less
selling costs. It is management's intention to sell these properties and to
use part or all of the proceeds to repay the term loan. To offset the
shortfall in working capital resulting from the net reduction in cash flows
from the closing of restaurants, and restrictions as a result of its
Chapter 11 petition, the Company has obtained Debtor -in-Possession financing
of $1,000,000 from a stockholder of the Company. The loan which is secured
by two parcels of real property and matures on September 4, 2001 was received
net of $30,000 prepaid interest and $10,000 prepaid loan fee.
In addition in July 2001, the Company has received an income tax refund of
$1,500,000, which will also be used to finance its working capital.
Further, in 2001, the Company completed the process of implementing a new
regional menu in all of its locations. The menu features new recipes, new
presentations and larger portions, as well as new items. The Company believes
that the changes to the menu, as well as the focus on guest service, will
have the impact of increasing sales and operating margins, as well as
operating cash flows.
There can be no assurance that the steps the Company is taking to increase
sales from the remaining restaurants will have the desired effect. Nor can
there be any assurance that the Company's efforts to sell closed store
properties, restructure its debt and reorganize its operations through the
bankruptcy court will be successful. In such event, the Company may
experience negative cash flows in the future.
The Company's condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. If management's
plans described above are not successful, subject to the bankruptcy court
approval, the lenders could exercise their right to accelerate the repayment
of the Company's debt, which would have a material adverse effect on the
Company's financial condition, results of operations and liquidity. These
conditions may indicate that the Company may be unable to continue as a
going concern for a reasonable period of time. The Company's consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
-16
Item 3. Quantitative and Qualitative Disclosures about Market Risk
---------------------------------------------------------
There has been no substantial change in the fair value of the fixed and
floating debt, since December 31, 2000.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings.
------------------
On May 25, 2001, the Company filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court
for the Southern District of Ohio, Eastern Division.
No material developments occurred during the fiscal quarter ended July 1,
2001 with respect to any material pending legal proceedings.
Routine Proceedings
The Company is a party to various other claims and legal actions arising in
the ordinary course of business. In the opinion of management based on
advice of counsel, the ultimate disposition of these matters will not have
a material adverse effect on the Company's financial position, results of
operations or liquidity.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
Since the quarter ended October 1, 2000, the Company has not been in
compliance with certain covenants pertaining to its debt with Bank of
America, N.A. (as successor to NationsBank) and First Union National Bank
(collectively, the "Term Lenders"). Based on such non-compliance, the Term
Lenders were entitled, at their discretion, to exercise certain remedies
including acceleration of repayment. In addition to not being in compliance
with certain covenants, the Company did not make its full (interest and
principal) payment due on July 3, 2000 and it has not made any of its
principal payments due to the Term Lenders since the partial payment made on
July 3, 2000. The Company has not received a waiver from the Term Lenders
to cure the non-compliance. Accordingly, the Company has classified the
obligation to the Term Lenders as current for the quarter ended July 1, 2001.
The Company received a six-month forbearance from the Term Lenders, effective
through March 31, 2001, pertaining to its principal and interest payments
during that time period, along with a second forbearance effective through
May 25, 2001. The forbearance allowed for the postponement of principal and
interest payments. During the forbearance period the Company has made
payments to the Term Lenders totaling $7,239,000 of which $2,133, 000 was
applied to principal, $5,056,000 to interest and $50,00 to related bank
fees.
Since the quarter ended October 1, 2000, the Company also has not been in
compliance with certain covenants pertaining to its term debt with the CIT
Group ("CIT"). Based on such non-compliance with certain covenants, CIT
was entitled, at their discretion, to exercise certain remedies including
acceleration of repayment. The Company has not received a waiver from CIT to
cure the non-compliance. Because the Company did not receive a waiver from
CIT for the current non-compliance or for future periods, its obligation to
CIT has been classified as a current liability.
Additionally, Bank of America, N.A., as the agent for holders of its senior
credit facility, notified First Union National Bank of North Carolina, the
trustee under its 6 3/4 % Convertible Subordinated Debentures, that the
Company was in default under its senior credit facility and that no payments
could be made by the Company, or received by the trustee, with respect to the
6 3/4 % Convertible Subordinated Debentures. Such notification was within
their rights as the agent for holders of the Company's senior credit
facility. This notice blocked the Company's ability to pay the scheduled
interest payments under the debentures as well as any payments of principal,
any redemption payments or change of control purchase payments. The failure
to make these payments, as required, and the existence of a default under
the senior credit facility, constitutes a default under the terms of the
6 3/4 % Convertible Subordinated Debentures and certain other of the
Registrant's credit arrangements. As of December 31, 2000 and July 1, 2001,
the Company classified the obligation to the holders of the 6 3/4%
Convertible Subordinated Debentures as a current liability.
-17-
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
The Company conducted its 2001 Annual Shareholders' Meeting on April 30,
2001. The matters voted on and the results of the items submitted to a
vote of the shareholders are stated below:
Election of two directors for a term of three years to the Board of Directors:
Director Nominee Votes Cast For Votes Withheld
Robin V. Holderman 5,405,115 55,010
Brad Saltz 5,408,061 52,064
The names of the directors whose term of office as a director continued
after the meeting are: Henry R. Hillenmeyer, D. Shannon LeRoy, David T.
Kollat, Harvey M. Palash, and Daniel A. Clay.
Item 5. Other Information.
------------------
None
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are filed as part of this report.
(10) Material Contracts (*Management contract or compensatory plan or
arrangement.)
10.1 Cooker Restaurant Corporation 2001 Restricted Stock Plan,
incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-8 (File No. 333-58260)*
10.2 Second Standstill Agreement dated April 19, 2001 between the
Registrant and First Union National Bank and Bank of America,
N.A. (formerly NationsBank of Tennessee, N.A), both national
banking associations (incorporated by reference to Exhibit 10.2
of the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended April 1, 2001; Commission File
No. 1-13044)*
(b) Reports on Form 8-K during the fiscal quarter ended July 1, 2001
Current Report on Form 8-K filed May 29, 2001, relating to filing of
bankruptcy petition.
Current Report on Form 8-K filed June 15, 2001, relating to debtor-in-
possession financing.
-18-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COOKER RESTAURANT CORPORATION
(The "Registrant")
Date: August 20, 2001
---------------
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)
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