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: July 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 July 2, 1995)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEET
(unaudited)
July 2 January 1
1995 1995
ASSETS
Current assets:
Cash 1,236,947 $ 1,855,676
Accounts receivable 441,306 314,903
Inventory 862,492 829,998
Preoperational costs 267,328 677,723
Prepaid expenses and other current assets 458,712 662,345
---------- -----------
Total current assets 3,266,785 4,340,645
Property and equipment, net 68,456,861 64,481,038
Other assets 1,794,804 2,036,691
--------- ---------
Total Assets $73,518,450 $70,858,374
========== ==========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,874,435 $ 7,036,230
Income taxes
738,026 718,941
---------- -----------
Total current liabilities 7,612,461 7,755,171
Long-term debt 29,653,000 28,600,000
Deferred income taxes 594,857 594,857
----------- -----------
Total liabilities 37,860,318 36,950,028
----------- -----------
Shareholders' equity
Common shares 26,003,475 26,003,475
Retained earnings 15,688,873 13,939,087
Treasury stock (6,034,216) (6,034,216)
---------- ----------
Total shareholders' equity 35,658,132 33,908,346
---------- ----------
Total liabilities and shareholders' equity $73,518,450 $70,858,374
========== ==========
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STATEMENT OF INCOME
(unaudited)
Three Months Ended Six Months Ended
---------------------------- ---------------------------
July 2 July 3 July 2 July 3
1995 1994 1995 1994
Sales $22,694,392 $20,830,024 $45,593,231 $40,950,570
---------- ---------- ---------- ----------
Cost of sales:
Food and beverages 6,520,786 6,056,979 12,977,660 11,853,534
Labor 7,883,485 7,956,562 15,999,681 15,448,139
Restaurant operating expenses 3,746,689 3,435,200 7,424,155 6,607,829
Restaurant depreciation/amortization 996,535 1,223,101 2,089,168 2,409,799
---------- --------- ----------- -----------
19,147,495 18,671,842 38,490,664 36,319,301
---------- ---------- ---------- ----------
Restaurant operating income 3,546,897 2,158,182 7,102,567 4,631,269
----------- --------- ---------- ----------
Other expenses (income):
General and administrative 1,344,429 919,206 2,603,781 2,077,419
Interest expense 484,304 439,751 983,198 781,024
Interest and other income (5,017) (14,965) (13,724) (44,417)
--------- --------- --------- ---------
1,823,716 1,343,992 3,573,255 2,814,026
--------- --------- --------- ---------
Income before income taxes 1,723,181 814,190 3,529,312 1,817,243
Income taxes 621,000 260,638 1,422,000 611,238
--------- --------- --------- ---------
Net income $1,102,181 $ 553,552 $2,107,312 $1,206,005
========= ========= ========= =========
Earnings per common share $ .15 $ .08 $ .29 $ .17
========= ========= --------- ---------
Weighted average of common shares
outstanding 7,359,682 7,216,116 7,297,983 7,305,981
========= ========= ========= =========
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STATEMENT OF CASH FLOW
(unaudited)
Six Months Ended
--------------------------------
July 2 July 3
1995 1994
Cash flows from operating activities:
Cash received from customers $45,474,397 $42,046,363
Cash paid to suppliers (38,462,651) (37,186,347)
Interest received 13,723 51,458
Interest paid (600,177) (1,169,139)
Income taxes paid (1,396,569) (830,106)
----------- -----------
Net cash from operations 5,028,723 2,912,229
Cash flows from investing activities:
Purchases of property and equipment (5,700,380) (7,054,062)
Cash flows from financing activities:
Payment of dividends (357,572) (366,490)
Proceeds from borrowings 1,053,000 8,000,000
Proceeds from issuance of common stock -0- (71,394)
Purchase of treasury stock -0- (4,687,529)
Repurchase of debentures (642,500) -0-
--------- -----------
Net cash provided by financing activities 52,928 2,874,587
Net (decrease) in cash (618,729) (1,267,246)
Cash at beginning of period 1,855,676 3,046,679
--------- ---------
Cash at end of period 1,236,947 1,779,433
========= =========
Reconciliation of net income to net cash provided by operating
activities:
Net income 2,107,312 1,206,005
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,329,192 2,571,566
Loss on disposal of fixed assets 12,271 -0-
(Increase) decrease in current assets (133,503) 947,202
(Increase) decrease in deposits and other assets (90,607) (894,424)
Increase (decrease) in current liabilities 804,058 (918,120)
--------- ---------
Net cash provided by operating activities $5,028,723 2,912,229
========= =========
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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 Six Months Ended
----------------------- -----------------------
07/02/95 07/03/94 07/02/95 07/03/95
-------- -------- -------- --------
Sales 100.0 100.0 100.0 100.0
Cost of Sales
Food and Beverages 28.7 29.1 28.5 28.9
Labor 34.8 38.2 35.1 37.7
Restaurant Operating Expenses 16.5 16.5 16.3 16.2
Restaurant Depreciation/Amortization 4.4 5.8 4.6 5.9
Subtotal 84.4 89.6 84.4 88.7
Restaurant Operating Income 15.6 10.4 15.6 11.3
Other (Income) Expenses:
General and Administrative 6.0 4.4 5.8 5.1
Interest Expense 2.1 2.1 2.2 1.9
Interest and Other Income (0.1) (0.1) (0.1) (0.1)
Total other 8.0 6.4 7.9 6.9
Earnings Before Income Taxes 7.6 4.0 7.7 4.4
Income Taxes 2.7 1.3 3.1 1.5
Earnings After Taxes 4.9 2.7 4.6 2.9
Sales for the second quarter of fiscal 1995 increased 9.0% to $22,694,392
compared to sales of $20,830,024 for the second quarter of fiscal 1994. For
the first half sales increased 11.4% to $45,593,231 compared to sales of
$40,950,570 for the comparable period last year. The increase in sales for
both the second quarter and first half was due primarily to the additional
stores opened this year. Comparable store sales for both the quarter and half
were higher than last year by less than 1%.
Food and beverage cost as a percent of sales decreased to 28.7% for the
second quarter of 1995 from 29.1% for the comparable period last year. For the
first half food and beverage cost as a percent of sales decreased to 28.5% from
28.9% for the comparable period in fiscal 1994. This improvement reflects the
benefit from food preparation efficiencies implemented late in 1994, offset
somewhat by higher second quarter produce prices.
Labor costs showed significant improvement, declining in the second quarter
as a percent of sales to 34.8% from 38.2% in last year's second quarter. First
half labor cost as a percent of sales at 35.1% is down from 37.7% for the
comparable period last year. These savings were the result of changes made to
more closely match the hourly employee and management staffing to sales volume.
Operating expense for the second quarter as a percent of sales at 16.5% was
the same as the second quarter last year. Operating expense for the first six
months this year as a percent of sales was 16.3%. This was up from 16.2% for
the comparable period last year. This increase was due to higher repair and
maintenance. As the average age of the Company's units continues to grow,
additional costs are required to keep the facilities in top working condition.
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Restaurant depreciation and amortization as a percent of sales in the
second quarter was 4.4%, down 1.4 percentage points from the 5.8% for the
comparable period last year. First half restaurant depreciation and
amortization as a percent of sales was 4.6% down 1.3 percentage points from the
5.9% for the comparable period last year. The Company's policy is to
capitalize certain costs incurred prior to opening. These costs are then
amortized over the first twelve months of operations. This year's expense
includes amortization related to five units during the second quarter and six
units year to date. Last year's costs include amortization related to nine
units in the second quarter and ten units during the comparable year to date
period.
Interest expense for the second quarter as a percent of sales at 2.1% was
the same as the comparable period last year. Interest expense for the first
half as a percent of sales increased to 2.2% from 1.9% for the comparable
period last year. The increased interest expense for the first half of 1995
was the result of the Company's larger average outstanding debt balance this
year compared to the first half of last year.
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 six
months of 1995 totaled $5,029,000 and the Company increased its borrowings
under the revolving term note by $1,053,000 leaving the outstanding balance at
July 2, 1995 at $10,368,000.
The Company opened a unit in Gainesville, Florida during May, purchased an
additional Florida site in June and is expected to open an additional three
units during the third and fourth quarters. Capital expenditures for the above
units and the refurbishing and remodeling of existing units totaled $5,700,000
during the first six months of 1995. These expenditures were funded by cash
flows from operations and additional borrowings from the revolving term note.
The Company believes that cash flows from operations, together with borrowings
from the revolving term note will be sufficient to fund the remaining 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. In the third quarter of 1995 the loan was acquired by NationsBank of
Tennessee and its maturity was extended for an additional 24 months. 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 July 25, 1995, the undiscounted fair market value of the pledged shares was
approximately $6,483,750. The loan is scheduled to mature in the third quarter
of 1997. 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 or 1996; 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.
(a) An annual meeting of the shareholders of the Registrant was held on
April 24, 1995.
(b) The Class A directors elected at the annual meeting to serve
for a term of three years were David L. Hobson, Robin V.
Holderman and G. Arthur Seelbinder; the Class B directors
elected at the annual meeting to serve for a term of two
years were Glenn W. Cockburn, David T. Kollat and Joseph E.
Madigan; and the Class C directors elected at the annual
meeting to serve for a term of one year were Henry R.
Hillenmeyer, Margaret T. Monaco and Phillip L. Pritchard.
These individuals constitute all directors of the Registrant.
(c) The matters voted upon at the annual meeting and the results
of the voting are set forth below.
(i) The shareholders voted 6,609,878 shares in
favor and withheld authority on 48,054 votes
with respect to the election of David L.
Hobson as a Class A director of the
Registrant.
(ii) The shareholders voted 6,611,460 shares in
favor and withheld authority on 46,472 votes
with respect to the election of Robin V.
Holderman as a Class A director of the
Registrant.
(iii) The shareholders voted 6,608,697 shares in
favor and withheld authority on 49,235 votes
with respect to the election of G. Arthur
Seelbinder as a Class A director of the
Registrant.
(iv) The shareholders voted 6,611,763 shares in
favor and withheld authority on 46,169 votes
with respect to the election of Glenn W.
Cockburn as a Class B director of the
Registrant.
(v) The shareholders voted 6,611,610 shares in
favor and withheld authority on 46,322 votes
with respect to the election of David T.
Kollat as a Class B director of the
Registrant.
(vi) The shareholders voted 6,611,326 shares in
favor and withheld authority on 46,606 votes
with respect to the election of Joseph E.
Madigan as a Class B director of the
Registrant.
(vii) The shareholders voted 6,611,480 shares in
favor and withheld authority on 46,452 votes
with respect to the election of Henry R.
Hillenmeyer as a Class C director of the
Registrant.
(viii) The shareholders voted 6,607,998 shares in
favor and withheld authority on 49,934 votes
with respect to the election of Margaret T.
Monaco as a Class C director of the
Registrant.
(ix) The shareholders voted 6,607,114 shares in
favor and withheld authority on 50,818 votes
with respect to the election of Phillip L.
Pritchard as a Class C director of the
Registrant.
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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).
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 Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended
September 29, 1991, Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended
July 4, 1993 and Exhibit 10.4 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1995).
4.8 Indenture dated as of October 28, 1992 between the Registrant
and First Union National Bank of North Carolina, as Trustee
(incorporated by reference to Exhibit 2.5 of Registrant's Form
8-A filed with the Commission on November 10, 1992; Commission
File Number 0-16806).
10. MATERIAL CONTRACTS.
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10.5. Reaffirmation and Amendment to Guaranty and Suretyship
Agreement between Cooker Restaurant Corporation and
NationsBank of Tennessee, N.A. dated July 24, 1995.
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 July 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: August 15, 1995
By: /s/ G. Arthur Seelbinder
_____________________________________
G. Arthur Seelbinder
Chairman of the Board and Chief
Executive Officer
By: /s/ David C. Sevig
_____________________________________
David C. Sevig
Vice President - Chief Financial
Officer
12
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
between Registrant and First Union National Bank of Tennessee, as
amended (Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended September 29, 1991, Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended July 4, 1993 and Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1995). *
4.8 Indenture dated as of October 28, 1992 between Registrant and First
Union National Bank of North Carolina, as Trustee. *
10.5 Reaffirmation and Amendment to Guaranty and Suretyship Agreement
between Cooker Restaurant Corporation and NationsBank of Tennessee,
N.A. dated July 24, 1995.
27.1 Financial Data Schedule (submitted electronically for SEC information
only).
<FN>
*Incorporated by reference.