1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
______________________________
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 2, 1995
______________________________
COMMISSION FILE NUMBER: 1-13044
COOKER RESTAURANT CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 62-1292102
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
1530 BETHEL ROAD, COLUMBUS, OHIO 43220
(Address of principal executive offices) (zip code)
(614) 457-8500
Registrant's telephone number, including area code
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 filing
requirements for the past 90 days.
/ X / Yes / / No
7,148,809 COMMON SHARES, WITHOUT PAR VALUE
(Number of Common Shares outstanding as of the close of business
on April 2, 1995)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEET
(unaudited)
April 2 January 1
1995 1995
ASSETS
Current assets:
Cash $ 2,195,745 $1,855,676
Accounts receivable 631,897 314,903
Inventory 782,510 829,998
Preoperational costs 352,118 677,723
Prepaid expenses and other current assets 502,165 662,345
----------- ----------
Total current assets 4,464,435 4,340,645
Property and equipment, net 64,656,210 64,481,038
Other assets 1,788,871 2,036,691
----------- ----------
$70,909,516 $70,858,374
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,065,832 $ 7,036,230
Income taxes 1,370,276 718,941
----------- ----------
Total current liabilities 7,436,108 7,755,171
Long-term debt 28,345,000 28,600,000
Deferred income taxes 594,857 594,857
------------ ----------
Total liabilities 28,939,857 29,194,857
------------ ----------
Shareholders' equity
Common shares 26,003,475 26,003,475
Retained earnings 14,564,292 13,939,087
Treasury stock (6,034,216) (6,034,216)
---------- ----------
34,533,551 33,908,346
---------- ----------
$70,909,516 $70,858,374
========== ==========
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STATEMENT OF INCOME
(unaudited)
Three Months Ended
-------------------------------
April 2 April 3
1995 1994
Sales $22,898,839 $20,120,546
----------- -----------
Cost of sales:
Food and beverages 6,456,874 5,796,555
Labor 8,116,196 7,491,577
Restaurant operating expenses 3,677,466 3,172,628
Restaurant depreciation/amortization 1,092,633 1,186,698
----------- -----------
19,343,169 17,647,458
----------- -----------
Restaurant operating income 3,555,670 2,473,088
----------- -----------
Other expenses (income):
General and administrative 1,259,352 1,158,213
Interest expense 498,894 341,273
Interest and other income (8,707) (29,452)
----------- -----------
1,749,539 1,470,034
----------- -----------
Income before income taxes 1,806,131 1,003,054
Income taxes 801,000 350,600
----------- -----------
Net income $ 1,005,131 $ 652,454
=========== ===========
Earnings per share $ 0.14 $ 0.09
=========== ===========
Weighted average common shares outstanding 7,236,284 7,397,845
=========== ===========
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STATEMENT OF CASH FLOWS
(unaudited)
Three Months Ended
----------------------------
April 2 April 3
1995 1994
Cash flows from operating activities:
Cash received from customers $ 22,747,224 $ 21,190,604
Cash paid to suppliers (19,796,874) (19,688,153)
Interest received 8,707 41,883
Interest paid (159,538) (729,393)
Income taxes paid (143,319) (107,145)
------------ ------------
Net cash provided by operating activities 2,656,200 707,796
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (1,038,660) (3,827,568)
------------ ------------
Cash flows from financing:
Payment of dividends (379,971) (377,123)
Payments on borrowings (255,000)
Proceeds from borrowings 6,500,000
Purchase of treasury stock (4,687,529)
Repurchase of debentures (642,500)
------------ ------------
Net cash provided by financing activities (1,277,471) 1,435,348
------------ ------------
Net increase (decrease) in cash 340,069 (1,684,424)
Cash at beginning of period 1,855,676 3,046,679
------------ ------------
Cash at end of period 2,195,745 1,362,255
============ ============
Reconciliation of net income to net cash provided from operating
activities:
Net income 1,005,131 652,453
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 1,211,017 1,302,806
(Increase) decrease in current assets (149,404) 678,165
Increase in deposits and other (48,332) (329,031)
Increase (decrease) in current liabilities 637,788 (1,596,597)
------------ ------------
Net cash provided by operating activities $ 2,656,200 $ 707,796
============ ============
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Note 1: Basis of Presentation.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of sales certain items
appearing in the Company's statements of operations.
Three Months Ended
----------------------------
04/02/95 04/03/94
-------- --------
Sales 100.0 100.0
Cost of Sales
Food and Beverages 28.2 28.8
Labor 35.4 37.2
Restaurant Operating Expenses 16.1 15.8
Restaurant Depreciation/Amortization 4.8 5.9
Total Cost of Sales 84.5 87.7
Restaurant Operating Income 15.5 12.3
Other (income) expenses:
General and Administrative 5.5 5.8
Interest Expense 2.2 1.7
Interest and Other Income (0.1) (0.2)
Total other 7.6 7.3
Earnings before Income Taxes 7.9 5.0
Income Taxes 3.5 1.8
Earnings After Taxes 4.4 3.2
Sales for the first quarter of 1995 increased $2,778,293 or 13.8% over
sales in the first quarter of 1994. The increase in sales was primarily
related to the six new units opened in 1994 as sales from existing units were
up less than 1%.
Total restaurant cost of sales as a percentage of sales improved to 84.5%
as compared to 87.7% in the first quarter of 1994. This reduction of costs of
3.2 percentage points was caused by improvement in three of the four cost of
sales expense categories.
The cost of food and beverages continued at very acceptable levels
declining to 28.2% of sales compared to 28.8% last year. Though showing
improvement in the first quarter, this line item is likely to deteriorate
during the second quarter as a result of a rise in the California produce
prices.
Labor costs showed the biggest improvement declining 1.8 percentage points
to 35.4% of sales compared to 37.2% last year. This significant improvement is
the result of modified labor staffing models which were developed in the last
two quarters of 1994. The new staffing models more closely match labor with
sales volumes and provide greater flexibility to manage labor over a wider
range of sales volumes than previously possible.
Restaurant operating expenses increased slightly from 15.8% of sales in
1994 to 16.1% in 1995. The major increase in this area was related to repair
and maintenance costs. As the average age of the Company's units continues to
grow, additional costs are required to keep the facilities in top working
condition.
Restaurant depreciation and amortization declined 1.1 percentage points to
4.8% of sales compared to 5.9% in 1994. This decline is primarily attributable
to the decrease in amortization of pre-operating expenses. The Company
presently
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amortizes the capitalized pre-operational costs of new stores over twelve
months. Accordingly, last year's numbers reflect the amortization of costs
associated with the nine units opened during 1993, while this year's numbers
reflect the costs of the six units opened in 1994.
General and administrative expenses decreased from 5.8% of sales in 1994 to
5.5% of sales in 1995. This reduction is primarily caused by economies
realized by the increasing number of units.
Interest expense increased from 1.7% of sales in 1994 to 2.2% in 1995.
This increase is caused by the Company's greater average outstanding debt
balance in the first quarter of 1995 compared to 1994. This line item is
expected to remain above 1994 levels for all of 1995.
Interest income decreased from 0.2% of sales in 1994 to 0.1% in 1995.
Interest income will remain an immaterial amount as long as the Company
continues with outstanding bank debt.
During March 1995, the Company closed its Florence, Kentucky unit. Sales
at this unit had remained below acceptable levels and management believed that
the human and financial resources associated with this unit could be more
productively utilized in opening a new unit in 1995. The property has been
leased and no losses are anticipated as a result of the closing.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are cash flows from
operations and borrowings under a revolving term note agreement which provides
a $16,300,000 line of credit. Cash flows from operations during the first
quarter totalled $2,656,200 and were used to reduce the Company's borrowings by
$255,000, fund capital expenditures and increase the Company's cash balance by
$340,000. At the end of the quarter, the Company's cash position increased to
$2,196,000 and its outstanding borrowings under the revolving term note were
reduced to $9,045,000.
The Company plans to open four to five new units in 1995. Capital
expenditures for these units and the refurbishing and remodeling of existing
units totalled $1,039,000 during the first quarter and were funded by cash
flows from operations. The Company believes that cash flows from operations
together with borrowings from the revolving term note will be sufficient to
fund the 1995 planned expansion as well as ongoing maintenance and remodeling
of existing units.
The Company completed a registered public offering of $23,000,000 in
October 1992 of 6 3/4% Convertible Subordinated Debentures Due 2002. During
December 1994, the Company repurchased $2,500,000 principal of these
convertible subordinated debentures in the open market for a discounted
purchase price of $1,617,500 with settlement dates in December 1994 and January
1995. The Company expended $642,500 in January to complete this repurchase
transaction. These debentures are subject to limited annual redemption by the
bondholders and to limited redemption on the death of a beneficial owner. The
annual redemption is capped at 5% of the original gross proceeds and occurs on
each November 1. Redemptions on death are subject to a cap of $25,000 per
holder per year. Pursuant to these two redemption options the Company expects
to redeem approximately an additional $1,200,000 in principal of the Debentures
during 1995. The Company believes that cash flows from operations and
additional borrowings from the revolving term note will be sufficient to fund
these expected principal reductions.
During the first quarter of 1994, the Board of Directors approved a
guaranty by the Company of a loan of $5,000,000 to the Chairman of the Board
from the First Union National Bank of Tennessee. The loan bears interest at
such Bank's prime rate plus 1/4%, had an initial term of 18 months and is
secured by a pledge of 570,000 Common Shares (owned by the Chairman) to the
Bank. The guaranty provides that the Bank will sell the pledged shares and
apply the proceeds thereof to the loan prior to calling on the Company for its
guaranty. At April 28, 1995, the undiscounted fair market value of the pledged
shares was approximately $4,490,000. The loan is scheduled to mature in the
third quarter of 1995. The guaranty secures the loan until it is repaid or
refinanced without a guaranty. The Company expects the Chairman will repay or
refinance the loan before its presently scheduled maturity. If the loan is
not so repaid or refinanced, the Company would fund any obligation it incurs
under the terms of its guaranty from additional borrowings under its line of
credit. The Company does not believe that it will be required to make any
material payment under the guaranty in 1995; however, there can be no assurance
that the loan will be repaid or refinanced on terms that will not result in
continuing the guaranty or in a material payment.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT.
3. ARTICLES OF INCORPORATION AND BY-LAWS.
3.1. Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 28.2 of
Registrant's quarterly report on Form 10-Q for the fiscal
quarter ended March 29, 1992; Commission File No. 16806).
3.2. Amended and Restated Code of Regulations of the Registrant
(incorporated by reference to Exhibit 4.5 of the Registrant's
quarterly report on Form 10-Q for the fiscal quarter ended
April 1, 1990; Commission File No. 0-16806).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES.
4.1 See Articles FOURTH, FIFTH and SIXTH of the Amended and
Restated Articles of Incorporation of Registrant (see 3.1
above).
4.2 See Articles One, Four, Seven and Eight of the Amended and
Restated Code of Regulations of Registrant (see 3.2 above).
4.3 Rights Agreement dated as of February 1, 1990 between
Registrant and National City Bank (incorporated by reference
to Exhibit 1 of Registrant's Form 8-A filed with the
Commission on February 9, 1990; Commission File Number
0-16806).
4.4 Amendment to Rights Agreement dated as of November 1, 1992
between the Registrant and National City Bank (incorporated by
reference to Exhibit 4.4 of Registrant's annual report on Form
10-K for the fiscal year ended January 3, 1993 (the "1992 Form
10-K"); Commission File No. 0-16806).
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4.5 Letter dated October 29, 1992 from the Registrant to First
Union National Bank of North Carolina (incorporated by
reference to Exhibit 4.5 to the 1992 Form 10-K).
4.6 Letter dated October 29, 1992 from National City Bank to the
Registrant (incorporated by reference to Exhibit 4.6 to the
1992 Form 10-K).
4.7 See Section 7.4 of the Loan Agreement dated as of August 26,
1991 between the Registrant and First Union National Bank of
Tennessee, as amended (see Exhibits 10.1, 10.2 and 10.4 below).
4.8 Indenture dated as of October 28, 1992 between the Registrant
and First Union National of North Carolina, as Trustee
(incorporated by reference to Exhibit 2.5 of Registrant's Form
8-A filed with the Commission on November 10, 1992; Commission
File Number 0-16806).
10. MATERIAL CONTRACTS.
10.1. Loan Agreement dated as of August 26, 1991 between the
Registrant and First Union National Bank of Tennessee
(incorporated by reference to Exhibit 4.1 to the Registrant's
quarterly report on Form 10-Q for the quarterly period ended
September 29, 1991; Commission File No. 0-16806).
10.2. First Amendment to Loan Agreement dated as of June 29, 1993
between the Registrant and First Union National Bank of
Tennessee (incorporated by reference to Exhibit 10.5 of the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended July 4, 1993 (the "2nd Quarter 1993 Form 10-Q");
Commission File No. 0-16806).
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10.3. Contingent Employment Agreement dated as of January 26, 1995
between Phillip L. Pritchard and the Registrant (incorporated
by reference to Exhibit 10.15 of the Registrant's annual
report on Form 10-K for the fiscal year ended January 1, 1995
(the "1994 Form 10-K"); Commission File No. 1-13044).
10.4. Second Amendment to Loan Agreement dated January 11, 1995
between Registrant and First Union National Bank of Tennessee
(incorporated by reference to Exhibit 10.17 of the 1994 Form
10-K).
27. FINANCIAL DATA SCHEDULE
27.1. Financial Data Schedule.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by Registrant during the fiscal quarter
ended April 2, 1995.
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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
(Registrant)
Date: May 12, 1995
By: /s/ G. Arthur Seelbinder
--------------------------------------------------------
G. Arthur Seelbinder
Chairman of the Board and Chief Executive Officer
By: /s/ Charles Ernst
--------------------------------------------------------
Charles Ernst
Controller and Chief Accounting Officer
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EXHIBIT INDEX
PAGE IN MANUALLY
EXHIBIT NO. DOCUMENT SIGNED ORIGINAL
- ----------- -------- ---------------
3.1 Amended and Restated Articles of Incorporation of the Registrant. *
3.2 Amended and Restated Code of Regulations of the Registrant. *
4.1 See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated
Articles of Incorporation of Registrant. See Exhibit 3.1
4.2 See Articles One, Four, Seven and Eight of the Amended and Restated
Code of Regulations of Registrant. See Exhibit 3.2
4.3 Rights Agreement dated as of February 1, 1990 between Registrant and
National City Bank. *
4.4 Amendment to Rights Agreement dated as of November 1, 1992 between
the Registrant and National City Bank. *
4.5 Letter dated October 29, 1992 from the Registrant to First Union
National Bank of North Carolina. *
4.6 Letter dated October 29, 1992 from National City Bank to the
Registrant. *
4.7 See Section 7.4 of the Loan Agreement dated as of August 26, 1991 see Exhibits 10.1, 10.2,
between Registrant and First Union National Bank of Tennessee, and 10.4 below
as amended.
4.8 Indenture dated as of October 28, 1992 between Registrant and First
Union National Bank of North Carolina, as Trustee. *
10.1 Loan Agreement dated as of August 26, 1991 between the Registrant and
First Union National Bank of Tennessee. *
10.2 First Amendment to Loan Agreement dated as of June 29, 1993 between
the Registrant and First Union National Bank of Tennessee. *
13
EXHIBIT INDEX
PAGE IN MANUALLY
EXHIBIT NO. DOCUMENT SIGNED ORIGINAL
- ----------- -------- ----------------
10.3 Contingent Employment Agreement dated as of January 26, 1995 between
Phillip R. Pritchard and Registrant *
10.4 Second Amendment to Loan Agreement dated January 11, 1995 between
Registrant and First Union National Bank of Tennessee. *
27.1 Financial Data Schedule (submitted electronically for SEC information
only).
<FN>
*Incorporated by reference.