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: September 29, 1996
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)
5500 VILLAGE BOULEVARD, WEST PALM BEACH, FLORIDA 33407
(Address of principal executive offices) (zip code)
(561) 615-6000
Registrant's telephone number, including area code
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ x ] Yes [ ] No
10,034,000 COMMON SHARES, WITHOUT PAR VALUE
(Number of Common Shares outstanding as of the close of business
on October 31, 1996)
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEET
(UNAUDITED)
September 29, December 31,
1996 1995
------------ ------------
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents $ 5,356 $ 1,299
Inventory 1,027 914
Preoperational costs 630 302
Prepaid and other current assets 825 511
--------- ---------
Total current assets 7,838 3,026
Property and equipment 104,335 78,127
Other assets 1,634 2,028
--------- ---------
$ 113,807 $ 83,181
========= =========
LIABILITIES
Current liabilities
Accounts payable $ 9,592 2,421
Accrued liabilities 4,858 5,543
Income taxes payable 1,631 783
Deferred income taxes 79 79
--------- ---------
Total current liabilities 16,160 8,826
Long-term debt 17,332 35,976
Deferred income taxes 433 433
--------- ---------
Total Liabilities 33,925 45,235
--------- ---------
Shareholders' equity
Common shares-without par value: authorized
30,000,000 shares; issued 10,548,000 and
7,663,000 at September 29, 1996 and
December 31, 1995, respectively 63,561 26,082
Retained earnings 22,470 18,013
Treasury stock at cost, 513,000 and 513,000
shares at September 29, 1996 and
December 31, 1995, respectively (6,149) (6,149)
--------- ---------
Total shareholders' equity 79,882 37,946
--------- ---------
$ 113,807 $ 83,181
========= =========
-1-
3
STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
1996 1995 1996 1995
----------- ----------- ------------ ------------
(In Thousands Except Per Share Data)
Sales $29,183 $22,758 $81,587 $68,351
------- ------- ------- -------
Cost of sales:
Food and beverages 8,320 6,538 23,134 19,516
Labor 10,057 7,903 28,191 23,903
Restaurant operating expenses 4,804 3,759 13,612 11,183
Restaurant depreciation and amortization 1,281 943 3,368 3,032
------- ------- ------- -------
24,462 19,143 68,305 57,634
------- ------- ------- -------
Restaurant operating income 4,721 3,615 13,282 10,717
------- ------- ------- -------
Other expenses (income):
General and administrative 1,605 1,479 4,611 4,083
Net interest expense 182 403 1,038 1,372
------- ------- ------- -------
1,787 1,882 5,649 5,455
------- ------- ------- -------
Income before income taxes 2,934 1,733 7,633 5,262
Provision for income taxes 1,056 624 2,748 2,046
------- ------- ------- -------
Net income $ 1,878 $ 1,109 $ 4,885 $ 3,216
======= ======= ======= =======
Earnings per common share $ 0.18 $ 0.15 $ 0.54 $ 0.44
======= ======= ======= =======
Weighted average number of common shares and
common equivalent shares outstanding 10,410 7,507 9,058 7,368
======= ======= ======= =======
-2-
4
STATEMENT OF CASH FLOW
(UNAUDITED)
Nine Months Ended
Sept. 29, Oct. 1,
1996 1995
-------- --------
(In Thousands)
Cash flows from operating activities:
Net Income $ 4,885 $ 3,216
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,739 3,399
Loss on sale of property 51 19
(Increase) in preoperational costs (1,011) (184)
(Increase) decrease in other current assets 45 (66)
Decrease in other assets 16 83
Increase in current liabilities 963 4
-------- --------
Net cash provided by operating activities 8,688 6,471
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (29,746) (8,154)
Sale of property and equipment 532 0
-------- --------
(29,214) (8,154)
Cash flows from financing activities:
Proceeds from (repayment on) borrowings (11,956) 1,324
Repurchase of debentures (400) (643)
Redemption of debentures (138) --
Exercise of stock options 64 27
Proceeds from secondary offering 37,442 --
Dividends paid (429) (358)
-------- --------
Net cash provided by financing activities 24,583 350
-------- --------
Net increase (decrease) in cash and cash equivalents 4,057 (1,333)
Cash and cash equivalents at beginning of period 1,299 2,087
Cash and cash equivalents at end of period $ 5,356 $ 754
======== ========
-3-
5
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.
-4-
6
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 operation.
RESULTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
1996 1995 1996 1995
----------- ----------- ------------ ------------
Sales 100.0% 100.0% 100.0% 100.0%
------ ----- ----- -----
Cost of sales:
Food and beverages 28.5 28.7 28.4 28.5
Labor 34.4 34.7 34.5 35.0
Restaurant operating expenses 16.5 16.5 16.7 16.4
Restaurant depreciation and amortization 4.4 4.2 4.1 4.4
----- ----- ----- -----
83.8 84.1 83.7 84.3
----- ----- ----- -----
Restaurant operating income 16.2 15.9 16.3 15.7
----- ----- ----- -----
Other expenses (income):
General and administrative 5.5 6.5 5.6 6.0
Net interest expense 0.6 1.8 1.3 2.0
----- ----- ----- -----
6.1 8.3 6.9 8.0
----- ----- ----- -----
Income before income taxes 10.1 7.6 9.4 7.7
Provision for income taxes 3.7 2.7 3.4 3.0
----- ----- ----- -----
Net income 6.4% 4.9% 6.0% 4.7%
===== ===== ===== =====
Sales for the third quarter of fiscal 1996 increased 28% to $29,183,000
compared to sales of $22,758,000 for the third quarter of fiscal 1995. For the
first nine months sales increased 19% to $81,587,000 compared to sales of
$68,351,000 for the comparable period last year. The increases are due to the
opening of new stores. Sales at new stores opened this year continued to be well
above the sales at same stores resulting in third quarter all store average
weekly sales that were 2% above last year, while same store average weekly sales
were down 3% (same store sales comparisons exclude 25% of the stores open during
the quarter). For the first nine months all store average weekly sales were up
2%, same store sales were down 1%.
Dairy products and pork prices were higher during the third quarter
this year compared to last year. However, menu changes implemented at the
beginning of the third quarter this year altered the mix of items sold and
resulted in food and beverage cost declining 20 basis points from last year to
28.5%.
Labor cost declined in the third quarter to 34.4% of sales from 34.7%
last year. For the first nine months labor cost was 34.5% of sales compared to
35.0% for the same period last year. The reduction in labor cost as a percent of
sales is primarily the result of higher average unit sales as actual labor cost
in dollars per store was 1% higher than last year for both the third quarter and
first nine months.
Operating expense for the third quarter of 16.5% of sales was the same
as the third quarter last year. For the first nine months operating expense of
16.7% was 30 basis points higher than the comparable period last year. The year
to date increase was primarily the result of higher repairs and maintenance
expense earlier in the year.
-5-
7
Restaurant depreciation and amortization expense as a percentage of
sales in the third quarter was 4.4%, 20 basis points higher than last year.
This increase is due to higher amortization of new store pre-opening expenses
resulting from an increase in the number of new stores opened during the past
twelve months (10 stores this year vs. 4 last year). For the first nine months
restaurant depreciation and amortization of 4.1% of sales was 30 basis points
lower than the comparable period last year. The decrease for the first nine
months as opposed to the increase for the third quarter is because most of the
new stores opened late in the second quarter. The Company's policy is to
capitalize certain costs prior to opening. These costs are then amortized over
their first twelve months of operations.
General and administrative expense for the quarter at 5.5% of sales was
100 basis points less than last year. For the first nine months general and
administrative expense of 5.6% was 40 basis points less than last year. The
reduction in costs as a percent of sales is primarily the result of higher
sales. Actual dollar expense was 9% higher for the quarter and 13% higher year
to date. Most of the additional spending is due to an increase in the number of
trainees this year. This increase is the result of the acceleration in the rate
of new store openings.
Net interest for the third quarter of $182,000 was $221,000 less than
last year. Net interest expense for the year to date of $1,038,000 was $334,000
less than last year. The reduction in interest expense is the result of lower
long term debt this year.
The provision for income taxes as a percentage of income before taxes
was 36.0% for both the third quarter and the first nine months. Last year's
rates were 36.0% for the third quarter and 38.9% for the first nine months.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements arise from the development
and opening of new Restaurants. The Company's primary sources of working capital
are cash flow from operations, borrowings under the Company's revolving/term
loan (the "Credit Agreement") and the sale of equity securities. The Company's
cash flow from operations were $7,571,000, $9,495,000 and $8,688,000 for 1994,
1995 and the nine months ended September 29, 1996, respectively. The Credit
Agreement provides for a $33,000,000 line of credit and, as of September 29,
1996, the Company had no outstanding borrowings under the Credit Agreement. On
May 13, 1996, the Company completed a public offering of 2,875,000 Common Shares
(the "Offering") and received net proceeds of $37,442,000. The Company used
$28.5 million of the net proceeds from the Offering to reduce outstanding
borrowings under the Credit Agreement. The remainder was invested in short term
treasuries and will be used to fund the development of new Restaurants and for
general corporate purposes.
Capital expenditures were $11,318,000, $17,200,000 and $29,746,000 for
1994, 1995 and the nine months ended September 29, 1996, respectively. The
Company has opened eight Restaurants in the first nine months of 1996, and
intends to open three additional Restaurants in the remainder of 1996 and 11 to
13 Restaurants in 1997. The Company believes that cash flow from operations,
borrowings from the Credit Agreement and proceeds from the Offering will be
sufficient to fund the planned expansion as well as the ongoing maintenance and
remodeling of existing Restaurants through 1997. The Company's ability to expand
will depend on a number of factors, including the selection and availability of
suitable locations, hiring and training sufficiently skilled management and
personnel, adequate financing, construction or acquiring Restaurants at a
reasonable cost and other factors, some of which are beyond the control of the
Company. While the Company has in the past successfully opened new Restaurants,
there can be no assurance that the Company will be able to continue to open new
Restaurants or that, if opened, those Restaurants can be operated profitably.
In 1992, the Company issued its Convertible Debentures in the principal
amount of $23,000,000 in a public offering. Under the terms of the Indenture
pursuant to which the Convertible Debentures were issued, the Company is
required to redeem up to $1,150,000 principal amount on November 1 of each year
if timely request is made by holders. In 1994 and 1995, the Company redeemed
$1,150,000 and $1,150,000, respectively, of the Convertible Debentures as a
result of requests by holders. In addition, the Company is required to redeem up
to $25,000 per deceased holder during each fiscal year. In 1994, 1995 and nine
months ended September 29, 1996, the Company redeemed $50,000, $30,000, and
$138,000, respectively, of the Convertible Debentures by reason of the death of
holders. In 1994, the Company purchased $2,500,000 principal amount of the
Convertible Debentures on the open market at a market price of $1,618,000, in
1995 purchased $250,000 principal amount at a market price of $222,000 and in
the first quarter of 1996, purchased $400,000 principal amount at a market price
of $363,000. All of the redemptions and purchases of Convertible Debentures
during 1994 and 1995 were made with funds obtained from loans under the Credit
Agreement.
-6-
8
During the first quarter of 1994, the Company entered into a guaranty
agreement with First Union National Bank of Tennessee pursuant to which the
Company guaranteed the payment of a $5,000,000 loan to G. Arthur Seelbinder,
Chairman of the Board and Chief Executive Officer of the Company. First Union
also is the lender to the Company under the Credit Agreement. In 1995, the
Company requested that Mr. Seelbinder refinance the $5,000,000 loan with a bank
that was not a lender to the Company. In July 1995, Mr. Seelbinder refinanced
the loan with NationsBank of Tennessee N.A. and incurred refinancing costs of
approximately $42,000, which were paid by the Company. As a condition to the
refinancing, NationsBank required that the Company reaffirm its guaranty of the
loan. The NationsBank loan bears interest at a per annum rate equal to 0.25%
over the prime rate of interest charged by NationsBank from time to time and is
due and payable on August 1, 1997. Mr. Seelbinder pledged 570,000 of his Common
Shares to NationsBank as collateral for the $5,000,000 loan and as collateral
for three additional loans aggregating $2,975,000 in principal amount. The loan
agreement between Mr. Seelbinder and NationsBank provides that if there were a
default with respect to any of the four loans or a default by the Company under
the Credit Agreement, NationsBank would be able to declare all four loans
immediately due and payable. The guaranty agreement provides that the Bank will
apply the proceeds from the sale of the pledged shares first to the $5,000,000
loan guaranteed by the Company. The guaranty agreement also provides that in the
event the Bank is unable to liquidate the pledged shares within 120 days after
the occurrence of a default, the Company will pay the unsatisfied portion of the
$5,000,000 note. Mr. Seelbinder agreed to pay the Company an annual fee in the
amount of 0.25% of the principal amount of the loan during each year that the
Company's guaranty is outstanding. At October 31, 1996, the balance of the
$5,000,000 loan, including accrued interest, was $5,438,923 and the
undiscounted fair market value of the pledged shares was approximately
$6,270,000. 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 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.
-7-
9
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).
-8-
10
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 Amended and Restated Loan Agreement dated
December 22, 1995 between the Registrant and First Union National
Bank of Tennessee, as amended (see Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995; Commission File No. 1-13044).
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).
27. FINANCIAL DATA SCHEDULE
27.1. Financial Data Schedule (submitted electronically for SEC
information only).
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by Registrant during the fiscal quarter
ended September 29, 1996.
-9-
11
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: November 11, 1996
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 Amended and Restated Loan Agreement dated
December 22, 1995 between Registrant and First Union National Bank of
Tennessee, as amended (see Exhibit 10.4 to the Registrant's Annual *
Report on Form 10-K for the fiscal year ended December 31, 1995;
Commission File No. 1-13044).
4.8 Indenture dated as of October 28, 1992 between Registrant and First
Union National Bank of North Carolina, as Trustee. *
27.1 Financial Data Schedule (submitted electronically for SEC information
only).
<FN>
*Incorporated by reference.