<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION l3 OR l5(d) OF THE SECURITIES EXCHANGE
ACT OF l934
For quarterly period ended March 31, 1996
-----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ________________________
Commission file number 1-8766
----------------------------------------------------------
VOLUNTEER CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TENNESSEE 62-0854056
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3401 West End Avenue, Suite 260, P.O. Box 24300, Nashville, Tennessee 37202
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(615) 269-1900
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section l3 or l5(d) of the Securities Exchange
Act of l934 during the preceding l2 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. Yes X No
--- ---
Comon Stock Outstanding - 5,308,160 shares at May 14, 1996.
Page 1 of 15 pages.
Exhibit Index on page 15.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
MARCH 31 December 31
1996 l995
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,965 $ 2,234
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . - 505
Accounts and notes receivable, including current portion of direct
financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 313
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822 848
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,411 1,541
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . 518 484
------- -------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,938 5,925
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173 1,091
PROPERTY AND EQUIPMENT, at cost, less allowances for
depreciation and amortization of $20,837 and $20,661 at March 31,
1996 and December 31, 1995, respectively . . . . . . . . . . . . . . . . . . 50,131 46,915
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,995 3,995
DEFERRED CHARGES, less amortization . . . . . . . . . . . . . . . . . . . . . . . . 2,162 2,214
------- -------
$62,399 $60,140
======= =======
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
MARCH 31 December 31
1996 1995
(Unaudited)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,362 $ 3,704
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . 4,100 4,151
Current portion of long-term debt and obligations under capital leases . . . 295 297
------- -------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 6,757 8,152
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL
LEASES, net of portion classified as current . . . . . . . . . . . . . . . . 21,773 18,512
DEFERRED COMPENSATION AND OTHER DEFERRED CREDITS . . . . . . . . . . . . . . . . . 533 501
STOCKHOLDERS' EQUITY
Common Stock, par value $.05 per share: Authorized l0,000,000
shares; issued and outstanding 5,284,139 and 5,276,972 shares at
March 31, 1996 and December 31, 1995, respectively . . . . . . . . . . . . 264 264
Preferred Stock, no par value: Authorized 1,000,000 shares; none issued . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 29,254 29,199
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,846 4,540
------- -------
34,364 34,003
Note receivable - Employee Stock Ownership Plan . . . . . . . . . . . . . . . (1,028) (1,028)
------- -------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . 33,336 32,975
COMMITMENTS AND CONTINGENCIES ------- -------
$62,399 $60,140
======= =======
</TABLE>
See note to consolidated condensed financial statements.
-3-
<PAGE> 4
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
MARCH 31 April 2
1996 1995
-------- --------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,687 $18,100
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,646 6,263
Restaurant labor and related costs . . . . . . . . . . . . . . . . . . . . . 6,469 5,377
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 890 671
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 506
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 4,264 3,334
------- -------
Total restaurant operating expenses . . . . . . . . . . . . . . . . . . . 19,771 16,151
------- -------
Income from restaurant operations . . . . . . . . . . . . . . . . . . . . . . . . . 1,916 1,949
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,151 1,048
------- -------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 901
------- -------
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (367) (384)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 206
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 29
------- -------
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . (295) (149)
------- -------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 752
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 64
------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306 $ 688
======= =======
Earnings per share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .06 $ .13
======= =======
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .06 $ .13
======= =======
Weighted average number of shares:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,448 5,388
======= =======
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,448 5,396
======= =======
</TABLE>
See note to consolidated condensed financial statements.
-4-
<PAGE> 5
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------
MARCH 31 April 2
1996 1995
-------- --------
<S> <C> <C>
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . $ 837 $ 1,434
Net cash used by investing activities:
Maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . 505 1,000
Purchase of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . - (985)
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . (4,826) (4,654)
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . (61) (61)
------- -------
(4,382) (4,700)
Net cash used by financing activities:
Payments on debt and obligations under capital leases . . . . . . . . . . . . (129) (139)
Borrowings on line of credit . . . . . . . . . . . . . . . . . . . . . . . . 3,350 -
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . 55 43
------- -------
3,276 (96)
Decrease in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . (269) (3,362)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . 2,234 14,802
------- -------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . . . . $ 1,965 $11,440
======= =======
</TABLE>
See note to consolidated condensed financial statements.
-5-
<PAGE> 6
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Certain reclassifications have been made in
the prior year's consolidated condensed financial statements to comform to the
1996 presentation. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 29, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended December 31,
1995.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Volunteer Capital Corporation operated 58 franchised Wendy's Old
Fashioned Hamburgers restaurants and nine proprietary J. Alexander's
full-service, casual dining restaurants at March 31, 1996.
Income before income taxes decreased by $282,000, or 38% , for the
first quarter of 1996 as compared to the same period during the previous year.
Restaurant operating profit decreased by $342,000 in the Wendy's division, more
than offsetting a $309,000 increase in restaurant operating profit posted by
the J. Alexander's division. The resulting $33,000 net decrease in restaurant
operating profit, as well as $172,000 of increased net interest expense
(interest expense less interest income) and a $103,000 increase in general and
administrative expenses, were the primary factors contributing to the decline
in income before income taxes noted above.
Net income decreased by $382,000, or 56%, for the first quarter of
1996 as compared to the same period in 1995. Due to the Company's having
recognized all of its deferred tax assets in the fourth quarter of 1995,
earnings for the quarter ended March 31, 1996 were taxed at an effective rate
of 35% as compared with an 8.5% effective tax rate during the first quarter of
1995.
WENDY'S RESTAURANT OPERATIONS
Results of the Wendy's restaurant operations before allocation of
other income, corporate overhead and net interest expense for the quarters
ended March 31, 1996, and April 2, 1995, were as follows:
<TABLE>
<CAPTION>
Quarter Ended
MARCH 31, 1996 April 2, 1995
------------------------- ------------------------
AMOUNT % OF Amount % of
(IN THOUSANDS) SALES (in thousands) Sales
-------------- ------ -------------- -------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . $12,539 100.0% $12,656 100.0%
Restaurant costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 4,405 35.1 4,404 34.8
Labor and related costs . . . . . . . . . . . . . . . . . 3,704 29.5 3,639 28.8
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . 515 4.1 458 3.6
Royalties . . . . . . . . . . . . . . . . . . . . . . . . 502 4.0 506 4.0
Other operating expenses . . . . . . . . . . . . . . . . 2,399 19.1 2,293 18.1
------- ----- ------- -----
11,525 91.9 11,300 89.3
------- ----- ------- -----
Restaurant operating income . . . . . . . . . . . . . . . . . $ 1,014 8.1% $ 1,356 10.7%
======= ===== ======= =====
</TABLE>
The Company operated 58 Wendy's restaurants at March 31, 1996 and 55
Wendy's restaurants at April 2, 1995.
-7-
<PAGE> 8
Total sales in the Wendy's division decreased by .9% in the first
quarter of 1996 as compared to the same period in 1995. Weighted average per
unit sales of restaurants open for all of the first quarter of both 1996 and
1995 decreased by 5.8% to $220,000 per unit. The Company estimates that menu
prices, after considering promotional discounts, increased by approximately
1.5% during the first quarter of 1996 as compared to the same period of 1995.
Management has consistently focused its efforts for a number of years
on several key areas in which it believes the Company, as a franchisee, can
most directly influence sales trends and operating results. These include
emphasis on quality of operations and guest service, consistent marketing
efforts, competitive menu pricing and maintenance and enhancement of
facilities. While severe and extended winter weather had a negative impact on
the Company's Wendy's operations during the first quarter of 1996 management
estimates that this factor accounted for only approximately 25% of the decline
in same store sales. Management believes that continued competition in the
quick-service restaurant industry in general and intense retail price
competition by other major hamburger chains in particular have continued to be
the most significant factors adversely impacting weighted average sales per
unit, continuing a trend that began in mid-1994. The Wendy's division results
are directly affected by major competition among the big four hamburger chains
(McDonald's, Burger King, Wendy's and Hardee's). The Company believes that
most of its competitive sales problems are in direct relationship to the Burger
King $.99 Whopper campaign that was present throughout most of 1995 and various
value promotions employed by McDonald's. Nationally, the Wendy's system
suffered an overall 5.6% decline in average net sales per restaurant during the
first quarter of 1996.
The development of new Wendy's restaurants by other franchisees in
certain of the Company's market areas, and to a lesser degree the opening of
new restaurants by the Company near its existing restaurants, have also
negatively affected the Company's sales in certain locations. Sales declines
have been most pronounced in the Company's North and South Carolina markets,
which represent 42 of its 58 Wendy's units. A number of programs and products
have been targeted at these markets by the Company in an attempt to reverse the
declining sales trends. In addition, the Company has initiated major
remodeling projects at a number of its restaurants and believes the remodeling
program is essential to maintaining a strong competitive position in these
markets. Management continues to believe that aggressive core product
discounting is counterproductive because of its negative impact on margins.
The Company's same store sales trends have remained down through
April, and management believes sales trends could remain under considerable
pressure for an indefinite period, especially if major competitors continue to
aggressively discount their products.
Cost of sales, which includes the cost of food and paper supplies,
increased as a percentage of sales in the Wendy's division for the first
quarter of 1996 as compared to the same period in 1995, primarily due to the
increased cost of paper supplies. Ground beef costs remained favorable in the
1996 period, but were somewhat offset by higher produce costs as compared to
the 1995 period.
Restaurant labor and related costs increased as a percentage of net
sales for the first quarter of 1996, as the effect of higher wages and the
decline in weighted average sales per unit more than offset reduced workers'
compensation insurance expense.
Other operating expenses increased as a percentage of sales for the
first quarter of 1996 as compared to the same period in the prior year,
reflecting increases in rent associated with new unit development, repair and
maintenance expense and utilities. These factors, when coupled with the impact
of the decline in same store sales, more than offset a decrease in local
advertising expenditures.
-8-
<PAGE> 9
J. ALEXANDER'S RESTAURANT OPERATIONS
The Company operated nine J. Alexander's restaurants at March 31,
1996, compared with six at April 2, 1995. A tenth J. Alexander's restaurant
opened April 29, 1996 in Cleveland, Ohio.
J. Alexander's sales and operating income, before allocation of other
income, corporate overhead and net interest expense, for the quarters ended
March 31, 1996, and April 2, 1995, were as follows:
<TABLE>
<CAPTION>
Quarter Ended
MARCH 31, 1996 April 2, 1995
------------------------- -------------------------
AMOUNT % OF Amount % of
(IN THOUSANDS) SALES (in thousands) Sales
-------------- ------ -------------- ------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,148 100.0% $5,444 100.0%
Restaurant costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 3,241 35.4 1,859 34.2
Labor and related costs . . . . . . . . . . . . . . . . . 2,765 30.2 1,738 31.9
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . 375 4.1 213 3.9
Other operating expenses . . . . . . . . . . . . . . . . 1,865 20.4 1,041 19.1
------ ----- ------ -----
8,246 90.1 4,851 89.1
------ ----- ------ -----
Restaurant operating income . . . . . . . . . . . . . . . . . $ 902 9.9% $ 593 10.9%
====== ===== ====== =====
</TABLE>
Net sales for the J. Alexander's division increased 68% in the first
quarter of 1996 compared to the same period of 1995, due primarily to the
opening of new restaurants. In addition, same store sales, which include
comparable sales for all restaurants open for more than 12 months, averaged
$82,200 per week during the first quarter of 1996, an 8.4% increase from
$75,800 during the first quarter of 1995. The Company estimates that menu
prices increased approximately 4.5% in the first quarter of 1996, as compared to
the corresponding period in 1995, and believes that the sales increases noted
above reflect the continued acceptance and recognition by consumers of the high
level of food quality and service which J. Alexander's provides its guests.
Cost of sales increased as a percentage of sales for the first quarter
of 1996 as compared to the same period of the prior year. Management believes
this increase is partially attributed to a product mix shift to higher food
cost items following the rollout of a new menu in August, 1995. This factor,
coupled with increases in certain raw product costs and higher costs associated
with start-up operations at the Toledo and Overland Park restaurants, which
opened during the fourth quarter of 1995, more than offset the favorable effect
of increased menu prices.
Restaurant labor and related costs decreased as a percentage of sales
during the first quarter of 1996 as compared to the first quarter of 1995, as
favorable experience relative to workers' compensation insurance and the
favorable effect of increased menu prices more than offset higher costs
associated with the start-up of operations at the Toledo and Overland Park
restaurants.
-9-
<PAGE> 10
Other operating expenses increased as a percentage of sales during the
first quarter of 1996 as compared to the same period of 1995, as additional
rent expense related to the Ft. Lauderdale and Toledo restaurants and increases
in amortization of pre-opening costs, repair and maintenance expense, utilities
and relocation expenses more than offset the favorable effects of increased
menu prices and operating efficiencies achieved at higher sales levels.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, which include certain costs
related to both the Wendy's and J. Alexander's operations, totaled 5.3% of net
sales for the first quarter of 1996 as compared to 5.8% of net sales for the
1995 period, primarily representing efficiencies achieved at higher sales
levels.
INTEREST EXPENSE AND INTEREST INCOME
Interest expense decreased by $17,000 during the first quarter of 1996
as compared to the corresponding period in 1995, principally due to an increase
in interest expense capitalized in connection with new restaurant development.
Interest income decreased by $189,000 during the first quarter of 1996 as
compared to the same period in 1995 due to decreased investment balances
resulting primarily from the development of new restaurants.
INCOME TAXES
Under the provisions of Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes," the Company has significant deferred tax
assets relating primarily to approximately $10 million of net operating loss
carryforwards and $2 million of tax credit carryforwards available to reduce
future federal income taxes. Realization of the deferred tax assets is
dependent principally on future earnings from existing and new restaurants.
Prior to 1995, a valuation allowance reflecting the uncertainties associated
with future earnings was established. Since December 31, 1995, no such
allowance has been deemed necessary.
As a result of utilization of its net operating loss carryforwards,
the Company has not historically provided for or paid federal or state income
taxes that approximate statutory rates. Due to the Company's having recognized
all of its deferred tax assets in the fourth quarter of 1995, earnings for the
quarter ended March 31, 1996 were taxed at an effective rate of 35% as compared
with an 8.5% effective tax rate during the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities represents a primary source of
liquidity for the Company and is also expected to be a resource for meeting
future capital needs. The Company's cash flow from operations totaled $837,000
during the first quarter of 1996, a decrease of $597,000 as compared to the
corresponding period in 1995.
The Company's primary investing activity has historically been capital
expenditures for the development and maintenance of its restaurants. Capital
expenditures totaled $4,155,000 during the first quarter of 1996.
During the 1996 quarter, capital expenditures of $244,000 for the
Wendy's division included facilities upgrades and miscellaneous equipment
replacements. Capital expenditures for J. Alexander's restaurants were
$3,767,000 and consisted primarily of development costs for new restaurants in
Cleveland, Ohio; Plantation, Florida; Troy, Michigan; and Chattanooga,
Tennessee; and facilities upgrades at the Franklin, Tennessee and Dayton, Ohio
restaurants.
-10-
<PAGE> 11
Management expects the primary needs for capital resources in the
future will be for the development of new J. Alexander's restaurants and for
the maintenance of existing restaurants. Management may also consider
acquisitions of additional restaurants similar to J. Alexander's. The
Company's planned capital expenditures for 1996 total approximately $23,500,000.
The Company's tenth J. Alexander's restaurant opened April 29, 1996 in
Cleveland, Ohio and management anticipates opening additional units in
Plantation, Florida; Troy, Michigan; Chattanooga, Tennessee; and Memphis,
Tennessee during the remainder of 1996. Three of the units are scheduled to
open during the third quarter, while the Memphis restaurant is expected to open
in the fourth quarter. The initial cost of developing new J. Alexander's
restaurants, including the cost of land, has ranged from $2,300,000 to
$3,900,000, excluding pre-opening costs. While the cost of land has been a
significant variable in development cost, costs related to site preparation and
buildings have also varied considerably. Management is presently developing
additional building images for J. Alexander's and expects that the cost of
additional new units, including the cost of land, will be within the range of
$3,000,000 to $3,800,000. The initial capital investment required for opening
a new J. Alexander's restaurant would be significantly lower than indicated
above, however, if property is leased rather than purchased. Management
estimates that pre-opening costs will be approximately $250,000 for each
restaurant.
With respect to building additional Wendy's restaurants, management
seeks investments that strategically enhance operations and offer cash returns
that exceed the company's long-term after-tax weighted average cost of capital,
estimated by management to be approximately 14%. With a build-out cost of
$900,000 to $1,000,000 (assuming the land for the restaurant is purchased), and
considering the restrictions placed upon the Company's Wendy's division as a
franchisee (both financial as well as operating), the Company is having
difficulty locating sites which meet its investment criteria. For that reason,
the Company does not presently anticipate developing any additional Wendy's
restaurants in 1996. It is expected that because of their age, up to
$3,000,000 of capital expenditures will be required annually to maintain and
improve the Company's existing Wendy's restaurants for 1996 and 1997.
The Company does not have significant capital needs for purposes other
than restaurant development. Maturities of long-term debt through 1997 are
relatively small because the Company has previously purchased in the market a
sufficient amount of its convertible subordinated debentures to meet sinking
fund requirements on that issue through that date. Even though working capital
showed a deficit of $1,819,000 at March 31, 1996, requirements for funding
accounts receivable and inventories are relatively small and the Company does
not have significant working capital needs. The Company obtained a $30,000,000
line of credit during the third quarter of 1995 and began using a portion of
this line to fund restaurant development during the first quarter of 1996.
Management anticipates this credit line, together with internal cash flow, will
be adequate to fund the Company's development program for 1996 and part, if not
all, of 1997. Management will also be reviewing additional alternatives
throughout 1996 which it believes could be available for financing its
development plan.
-11-
<PAGE> 12
Volunteer Capital Corporation and Subsidiaries
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Quarter Ended
-------------
MARCH 31 April 2
1996 1995
---- ----
<S> <C> <C>
Earnings per common and dilutive common equivalent share
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306,000 $ 688,000
========= =========
Adjustment of shares outstanding:
Actual weighted average shares outstanding . . . . . . . . . . . . . . . . 5,277,000 5,244,000
Net additional shares issuable, based on the treasury stock method . . . . 171,000 144,000
--------- ---------
Adjusted shares outstanding . . . . . . . . . . . . . . . . . . . . . . . 5,448,000 5,388,000
========= =========
Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .06 $ .13
========= =========
Earnings per common share, assuming full dilution
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306,000 $ 688,000
========= =========
Adjustment of shares outstanding:
Actual weighted average shares outstanding . . . . . . . . . . . . . . . . 5,277,000 5,244,000
Net additional shares issuable, based on the treasury stock method . . . . 171,000 152,000
--------- ---------
Adjusted shares outstanding . . . . . . . . . . . . . . . . . . . . . . . 5,448,000 5,396,000
========= =========
Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .06 $ .13
========= =========
</TABLE>
Note: The computations of earnings per common and dilutive common equivalent
share and earnings per common share, assuming full dilution, are based
on the weighted average number of common shares outstanding each
period after considering the effect of stock options using the
treasury stock method. Shares issuable upon the conversion of
convertible subordinated debentures have not been included as the
effect of their inclusion would be antidilutive.
-12-
<PAGE> 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual meeting held May 14, 1996.
(b) Pursuant to Instruction 3 to Item 4, no response is
required to this item.
(c) At the Annual Meeting conducted May 14, 1996, the
shareholders voted on the election of directors. A
summary of the vote is as follows:
<TABLE>
<CAPTION>
Beasley Duncan Fritts Stout Tobias Wilt
------- ------ ------ ----- ------ ----
<S> <C> <C> <C> <C> <C> <C>
For 4,316,598 4,316,845 4,316,845 4,316,845 4,316,845 4,316,845
Withhold Authority 25,083 24,836 24,836 24,836 24,836 24,836
</TABLE>
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (11) Computation of Earnings Per Share is filed
with Part I of this Form 10-Q.
Exhibit (27) Financial Data Schedule (SEC use only)
(b) One report, dated March 29, 1996, on Form 8-K was filed during
the quarter ending March 31, 1996, pursuant to Item 5 of that
form. No financial statements were filed as part of that
report.
-13-
<PAGE> 14
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.
VOLUNTEER CAPITAL CORPORATION
/s/ Lonnie J. Stout II
-------------------------------------------------
Lonnie J. Stout II
Chairman, President and Chief Executive Officer
/s/ R. Gregory Lewis
-------------------------------------------------
R. Gregory Lewis
Vice-President and Chief Financial Officer
Date: May 14, 1996
-14-
<PAGE> 15
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C> <C>
(11) Computation of Earnings per Share 12
(27) Financial Data Schedule (For SEC Use Only)
</TABLE>
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF, AND FOR THE THREE MONTHS ENDED MARCH
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,965
<SECURITIES> 0
<RECEIVABLES> 222
<ALLOWANCES> 0
<INVENTORY> 822
<CURRENT-ASSETS> 4,938
<PP&E> 70,968
<DEPRECIATION> 20,837
<TOTAL-ASSETS> 62,399
<CURRENT-LIABILITIES> 6,757
<BONDS> 21,773
0
0
<COMMON> 264
<OTHER-SE> 33,072
<TOTAL-LIABILITY-AND-EQUITY> 62,399
<SALES> 21,687
<TOTAL-REVENUES> 21,687
<CGS> 7,646
<TOTAL-COSTS> 14,115
<OTHER-EXPENSES> 5,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367
<INCOME-PRETAX> 470
<INCOME-TAX> 164
<INCOME-CONTINUING> 306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 306
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
