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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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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: March 30, 1997
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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 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
10,035,000 COMMON SHARES, WITHOUT PAR VALUE
(Number of Common Shares outstanding as of the close of business
on May 9, 1997)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COOKER RESTAURANT CORPORATION
CONDENSED BALANCE SHEET
MARCH 30, 1997 AND DECEMBER 29, 1996
(UNAUDITED)
March 30, December 29,
1997 1996
--------- ------------
ASSETS (In Thousands)
Current assets:
Cash and cash equivalents $ 2,883 $ 2,009
Inventory 1,272 1,128
Land held for sale 1,201 1,560
Preoperational costs 1,042 749
Prepaid and other current assets 953 585
--------- ---------
Total current assets 7,351 6,031
Property and equipment 112,650 107,010
Other assets 1,552 1,592
--------- ---------
$ 121,553 $ 114,633
========= =========
LIABILITIES
Current liabilities
Notes Payable $ 3,075 $ 4,613
Accounts payable 3,239 3,845
Accrued liabilities 5,249 6,030
Income taxes payable 1,590 991
--------- ---------
Total current liabilities 13,153 15,479
Long-term debt 25,090 16,822
Deferred income taxes 582 582
--------- ---------
Total Liabilities 38,825 32,883
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Shareholder's equity
Common shares-without par value: authorized 30,000,000
shares; issued 10,548,000 and 10,548,000 at March 30,
1997 and December 29, 1996, respectively 63,583 63,583
Retained earnings 25,677 24,316
Treasury stock at cost, 513,000 and 513,000 shares at
March 30, 1997 and December 29, 1996, respectively (6,532) (6,149)
--------- ---------
Total shareholder's equity 82,728 81,750
--------- ---------
$ 121,553 $ 114,633
========= =========
See accompanying notes to condensed financial statements.
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COOKER RESTAURANT CORPORATION
CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 30, 1997 AND MARCH 31, 1996
(UNAUDITED)
Three Months Ended
March 30, March 31,
1997 1996
--------- ---------
(In Thousands Except Per Share Data)
Sales $32,507 $25,486
------- -------
Cost of sales:
Food and beverages 9,259 7,167
Labor 11,169 8,817
Restaurant operating expenses 5,456 4,312
Restaurant depreciation and amortization 1,429 1,004
------- -------
27,313 21,300
------- -------
Restaurant operating income 5,194 4,186
------- -------
Other expenses (income):
General and administrative 1,735 1,485
Net interest expense 259 576
------- -------
1,994 2,061
------- -------
Income before income taxes 3,200 2,125
Provision for income taxes 1,136 765
------- -------
Net income $ 2,064 $ 1,360
======= =======
Earnings per common share $ 0.20 $ 0.18
======= =======
Weighted average number of common shares
and common equivalent shares outstanding $10,362 $ 7,556
======= =======
See accompanying notes to condensed financial statements.
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COOKER RESTAURANT CORPORATION
CONDENSED STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED
MARCH 30, 1997 AND MARCH 31, 1996
(UNAUDITED)
Three Months Ended
March 30, March 31,
1997 1996
-------- --------
(In Thousands)
Cash flows from operating activities:
Net income $ 2,064 $ 1,360
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,501 1,128
Loss on sale of property 51 --
Increase in current assets (1,171) (316)
Decrease in other assets 39 33
Increase (decrease) in current liabilities (787) 402
-------- --------
Net cash provided by operating activities 1,697 2,607
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (6,776) (10,616)
Cash proceeds from sale of property
and equipment 309 --
-------- --------
Net cash used in investing activities (6,467) (10,616)
-------- --------
Cash flows from financing activities:
Payment on note payable (1,538) --
Proceeds from borrowings 8,291 8,648
Repurchase of debentures (23) (450)
Exercise of stock options -- 12
Purchases of treasury stock (383) --
Dividends paid (703) (429)
-------- --------
Net cash provided by financing activities 5,644 7,781
-------- --------
Net increase (decrease) in cash and cash equivalents 874 (228)
Cash and cash equivalents at beginning of period 2,009 1,299
-------- --------
Cash and cash equivalents at end of period $ 2,883 $ 1,071
======== ========
See accompanying notes to condensed financial statements.
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Note 1: Basis of Presentation.
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
accompanying financial statements contain all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position of the
Company at March 30, 1997 and the statements of income and cash flows for the
three months ended March 30, 1997. The results of operations for the three
months ended March 30, 1997 are not necessarily indicative of the operating
results expected for the fiscal year ended December 28, 1997. 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 29, 1996.
Note 2: Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share has been determined by
dividing net income by the weighted average number of shares of common stock
and common stock equivalents outstanding during the respective period unless
their effect was antidilutive.
Note 3: New Accounting Pronouncement
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("Statement 128"). Statement 128 is effective for
financial statements issued for periods ending after December 15, 1997.
Statement 128 establishes standards for computing and presenting earning per
share ("EPS"), simplifies the standards previously found in APB No. 15,
"Earnings Per Share", and makes them comparable to international EPS standards.
The Company will begin disclosing EPS in accordance with Statement 128
beginning with the year ended December 28, 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
From time to time, the Company may make certain statements that
contain "forward-looking" information (as defined in the Private Securities
Litigation Reform Act of 1995). Words such as "believe", "anticipate",
"estimate", "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 a 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. Should
one or more of these risks or uncertainties materialize, or should any of the
underlying assumptions prove incorrect, actual results of current and future
operations may vary materially from those anticipated, estimated or projected.
RESULTS OF OPERATION
The following table sets forth as a percentage of sales certain items
appearing in the Company's statements of income.
RESULTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 30, March 31,
1997 1996
--------- ---------
Sales 100.0% 100.0%
------ ------
Cost of sales:
Food and beverages 28.5 28.1
Labor 34.3 34.6
Restaurant operating expenses 16.8 16.9
Restaurant depreciation and amortization 4.4 4.0
------ ------
84.0 83.6
------ ------
Restaurant operating income 16.0 16.4
------ ------
Other expenses (income):
General and administrative 5.3 5.8
Net interest expense 0.8 2.3
------ ------
6.1 8.1
------ ------
Income before income taxes 9.9 8.3
Provision for income taxes 3.5 3.0
------ ------
Net income 6.3% 5.3%
====== ======
Sales for the first quarter of fiscal 1997 increased 28% to $32,507,000
from $25,486,000 in the first quarter last year. Most of the sales increase is
from the fourteen stores that have opened during the prior twelve months.
Same-store sales (which excludes 18 of 52 units open at the end of the quarter)
were down .8%. The average weekly sales for all 52 stores opened as of the end
of the quarter this year were down only .5% from the average of all stores
opened as of the end of the first quarter last year. The decline in sales at
our four Florida stores accounts for virtually all of our same-store sales
decline.
Ingredient costs were fairly stable throughout the quarter. However,
menu changes implemented at the beginning of the first quarter this year altered
the mix of items sold and resulted in food and beverage cost increasing 40 basis
points from last year to 28.5%. These same menu changes, however, also resulted
in a dollar margin increase (after cost of goods sold) of 2.5% per guest.
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Labor cost declined in the first quarter to 34.3% from 34.6% last year.
The reduction in labor cost as a percentage of sales is due to lower management
salaries resulting from the increase of newly hired managers with starting
salaries generally below that of longer term managers.
Operating expenses for the first quarter declined to 16.8% from 16.9%
last year. The store operating expense dollar cost per store was also down 1%
from last year, with most operating expense major categories declining slightly
with the only exception being utility dollar cost per store which increased 9%
over last year.
Restaurant depreciation and amortization expense as a percentage of
sales in the first quarter was 4.4%, 40 basis points higher than last year. The
increase is due to the new stores, which generally have a higher initial
investment than most of the older stores. Additionally, pre-opening expense
dollars were $175,000 more than last year (as a percent of sales - 40 basis
points). The cost of openings continues to decline, however, the number of units
with amortization of operating costs during the quarter increased to sixteen
this year versus five last year. The Company's policy is to capitalize certain
costs prior to opening, and then amortize them over the first twelve months of
operations.
General and administrative expense for the quarter at 5.3% of sales was
50 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 17%
higher than last year. The additional spending is the result of increased
management training corresponding to the increased new store opening rate, the
addition of new Operations positions, and a $50,000 loss on the sale of land
held for sale.
Net interest for the first quarter of $259,000 was $317,000 less than
last year. The reduction in interest is a result of both lower interest rates
and lower outstanding long term debt resulting from a secondary stock offering
completed during the second quarter of 1996.
The provision for income taxes as a percentage of income before taxes
remained unchanged from last year at 36%.
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 $9,495,000, $12,644,000 and $1,697,000 for 1995,
1996 and the three months ended March 30, 1997, respectively. The Credit
Agreement provides for a $33,000,000 line of credit and, as of March 30, 1997,
the Company had outstanding borrowings of $9,000,000 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 was used to fund the development of new Restaurants and for
general corporate purposes.
Capital expenditures were $17,200,000, $34,997,000 and $6,776,000 for
1995, 1996 and the three months ended March 30, 1997, respectively. The Company
has opened five Restaurants in the first three months of 1997, and intends to
open seven additional Restaurants in the remainder of 1997 and 14 to 16
Restaurants in 1998. 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 1998. 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.
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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 1995 and 1996, 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 1995, 1996 and three
months ended March 30, 1997, the Company redeemed $30,000, $207,000 and $23,000,
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, 1995,
1996 and 1997 were made with funds obtained from loans under the Credit
Agreement.
In 1994, the Board of Directors approved a guaranty by the Company of a
loan of $5,000,000 to G. Arthur Seelbinder, the Chairman of the Board, which was
secured by a pledge of 570,000 Common Shares owned by the Chairman. In the first
quarter of 1997, the loan was acquired by The Chase Manhattan Bank of New York.
The loan has a term of one year, bears interest at the Bank's prime rate or
LIBOR plus 2%, continues to be secured by 570,000 Common Shares of the Company
and is guaranteed by the Company in the principal amount up to $6,250,000
including capitalized interest. Mr. Seelbinder also agreed to apply his share of
the net proceeds of the sale of his residence, in excess of the mortgage
thereon, to reduce the principal and interest outstanding on the indebtedness
and did so in April, 1997. 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. On March 4, 1997, Mr. Seelbinder exercised options
to purchase 100,000 Common Shares, sold the shares in a block transaction
through a broker at $11.50 per share, the then current trading price on the New
York Stock Exchange, and the Company purchased 100,000 Common Shares in a block
transaction through the same broker at the same time. The transaction was
approved by the Board of Directors in advance. The gain on the transaction is
taxable to Mr. Seelbinder and deductible by the Company. $438,000 of the
proceeds of this transaction after payment of the option exercise price and
withholding taxes were used to reduce the principal of the guaranteed loan. At
May 1, 1997, the amount of the loan including capitalized and accrued interest
was $4,956,265 and the undiscounted fair market value of the pledged shares was
approximately $5,272,500. The loan is scheduled to mature in the first quarter
of 1998. The guaranty secures the loan until it is repaid or refinanced without
a guaranty. The Company expects that 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 1997; 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. Mr. Seelbinder paid a guaranty fee of 1/4 percent of the
principal amount of the loan to the Company at the time the loan was guaranteed
and will also pay such fee on each anniversary of the guaranty as long as it is
outstanding.
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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.
Exhibit 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. 0-16806).
Exhibit 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).
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4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES.
Exhibit 4.1
See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated Articles of
Incorporation of the Registrant (see Exhibit 3.1 above).
Exhibit 4.2
See Articles One, Four, Seven and Eight of the Amended and Restated Code of
Regulations of the Registrant (see Exhibit 3.2 above).
Exhibit 4.3
Rights Agreement dated as of February 1, 1990 between the Registrant and
National City Bank (incorporated by reference to Exhibit 1 of the Registrant's
Form 8-A filed with the Commission on February 9, 1990; Commission File No.
0-16806).
Exhibit 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).
Exhibit 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).
Exhibit 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).
Exhibit 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
(incorporated by reference to Exhibit 10.4 of the Registrant's annual report on
Form 10-K for the fiscal year ended December 31, 1995; Commission File No.
0-16806).
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Exhibit 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 No. 0-16806).
10. MATERIAL CONTRACTS.
Exhibits 10.1-10.11
Reserved.
Exhibit 10.12
Amended and Restated Guaranty between Registrant and Chase Manhattan Bank dated
January 31, 1997 (incorporated by reference to Exhibit 10.12 to the Registrant's
annual report on Form 10-K for the fiscal year ended December 29, 1996;
Commission File No. 1-13044 (the "1996 Form 10-K")).
Exhibit 10.13
Letter dated February 3, 1997 from G. Arthur Seelbinder to the Registrant
(incorporated by reference to Exhibit 10.13 to the 1996 Form 10-K).
27. FINANCIAL DATE SCHEDULE
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
(b) REPORTS ON FORM 8-K.
No report on Form 8-K was filed by Registrant during the fiscal quarter ended
March 30, 1997.
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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
(The "Registrant")
Date: May 13, 1997
By: /s/ G. Arthur Seelbinder
---------------------------------------------------
G. Arthur Seelbinder
Chairman of the Board, Chief Executive Officer, and
Director
(principal executive officer)
By: /s/ David C. Sevig
---------------------------------------------------
David C. Sevig
Vice President - Chief Financial Officer
(principal financial and accounting officer)
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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COOKER RESTAURANT CORPORATION
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FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
MARCH 31, 1997
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EXHIBITS
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- --------------------------------------------------------------------------------
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Exhibit 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. 0-16806).
Exhibit 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).
Exhibit 4.1
See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated Articles of
Incorporation of the Registrant (see Exhibit 3.1 above).
Exhibit 4.2
See Articles One, Four, Seven and Eight of the Amended and Restated Code of
Regulations of the Registrant (see Exhibit 3.2 above).
Exhibit 4.3
Rights Agreement dated as of February 1, 1990 between the Registrant and
National City Bank (incorporated by reference to Exhibit 1 of the Registrant's
Form 8-A filed with the Commission on February 9, 1990; Commission File No.
0-16806).
Exhibit 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).
Exhibit 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).
Exhibit 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).
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Exhibit 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
(incorporated by reference to Exhibit 10.4 of the Registrant's annual report on
Form 10-K for the fiscal year ended December 31, 1995, Commission File No.
0-16806).
Exhibit 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 No. 0-16806).
Exhibits 10.1-10.11
Reserved.
Exhibit 10.12
Amended and Restated Guaranty between Registrant and Chase Manhattan Bank dated
January 31, 1997 (incorporated by reference to Exhibit 10.12 to the Registrant's
annual report on Form 10-K for the fiscal year ended December 29, 1996;
Commission File No. 1-13044 (the "1996 Form 10-K")).
Exhibit 10.13
Letter dated February 3, 1997 from G. Arthur Seelbinder to the Registrant
(incorporated by reference to Exhibit 10.13 to the 1996 Form 10-K).
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
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