UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 7, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-12343
VICORP Restaurants, Inc.
(Exact name of registrant as specified in its charter)
COLORADO 84-0511072
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
400 West 48th Avenue, Denver, Colorado 80216
(Address of principal executive offices)
(Zip Code)
(303) 296-2121
(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 (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.
Yes X No
The registrant had 9,548,326 shares of its $.05 par value Common Stock
outstanding as of September 13, 1994.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
August 7, October 31,
1994 1993
__________ __________
(unaudited)
ASSETS
Current assets
Cash $ 6,503 $ 5,288
Receivables 2,835 4,326
Inventories 8,149 10,873
Deferred income taxes 6,700 8,059
Prepaid expenses and other 3,461 3,110
__________ __________
Total current assets 27,648 31,656
__________ __________
Property and equipment, net of accumulated
depreciation of $ 118,942 and $ 105,714 175,752 177,720
Deferred income taxes 23,867 26,077
Long-term receivables (Note 4) 7,613 7,150
Other assets 11,346 11,428
__________ __________
Total assets $ 246,226 $ 254,031
========== ==========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
August 7, October 31,
1994 1993
__________ __________
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt and
capitalized lease obligations $ 1,650 $ 1,738
Accounts payable, trade 13,667 20,669
Accrued compensation 7,339 6,229
Accrued taxes 11,291 9,212
Accrued insurance 5,854 6,830
Other accrued expenses 4,127 5,566
_________ _________
Total current liabilities 43,928 50,244
_________ _________
Long-term debt (Note 2) 22,823 23,643
Capitalized lease obligations 14,706 16,365
Non-current accrued insurance 8,690 8,433
Other non-current liabilities and credits 6,647 7,028
Commitments and contingencies (Note 4)
Shareholders' equity (Note 3)
Series A Junior Participating Preferred
Stock, $.10 par value, 200,000 shares
authorized, no shares issued --- ---
Common stock, $.05 par value, 20,000,000
shares authorized, 10,450,364 and
10,433,751 shares issued 523 522
Paid-in capital 109,040 108,864
Retained earnings 57,046 49,484
Treasury stock, at cost (924,938 and
522,188 common shares) (17,177) (10,552)
__________ __________
Total shareholders' equity 149,432 148,318
__________ __________
Total liabilities and shareholders' equity $ 246,226 $ 254,031
========== ==========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Forty
weeks ended weeks ended
_______________________ ______________________
August 7, August 1, August 7, August 1,
1994 1993 1994 1993
__________ ___________ __________ _________
(unaudited)
<S> <C> <C> <C> <C>
Revenues
Restaurant operations $ 92,827 $ 96,190 $ 319,066 $ 324,707
Franchise operations 690 645 2,126 2,069
__________ __________ __________ _________
Total revenues 93,517 96,835 321,192 326,776
__________ __________ __________ _________
Costs and expenses
Restaurant operations
Food 27,274 29,215 94,692 96,589
Labor 29,129 28,810 98,851 96,506
Other operating 27,931 27,315 93,450 90,502
General and administrative 6,262 5,316 19,760 18,684
Interest 817 926 2,940 2,983
Other (income) expense, net (321) (109) (600) (467)
__________ __________ _________ _________
Total costs and expenses 91,092 91,473 309,093 304,797
__________ __________ _________ _________
Income before income
tax expense 2,425 5,362 12,099 21,979
Income tax expense 910 2,118 4,537 8,682
__________ __________ _________ _________
Net income $ 1,515 $ 3,244 $ 7,562 $ 13,297
========== ========== ========= =========
Earnings per common and
dilutive common
equivalent share $ .16 $ .32 $ .77 $ 1.29
========== ========== ========= =========
Weighted average common
shares and dilutive
common share equivalents 9,687 10,254 9,869 10,347
========== ========== ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Forty weeks ended
_______________________
August 7, August 1,
1994 1993
_________ _________
(unaudited)
OPERATIONS
Net income $ 7,562 $ 13,297
Reconciliation to cash provided by operations
Depreciation and amortization 19,982 18,064
Deferred income tax provision 3,569 5,384
Loss on disposition of assets 1,359 1,091
Other, net (290) 1,595
_________ _________
32,182 39,431
Change in assets and liabilities
Trade receivables 918 487
Inventories 2,724 1,014
Accounts payable, trade (7,002) (2,932)
Other current assets and liabilities 49 (3,157)
Non-current accrued insurance 257 1,277
_________ _________
Cash provided by operations 29,128 36,120
_________ _________
INVESTING ACTIVITIES
Purchase of property and equipment (19,186) (25,695)
Purchase of other assets (534) (530)
Disposition of property (9) (333)
Additions to long-term receivables (1,088) ---
Collections of non-trade receivables 1,239 449
_________ _________
Cash used for investing activities (19,578) (26,109)
_________ _________
FINANCING ACTIVITIES
Issuance of debt 7,750 5,000
Payment of debt and capitalized lease
obligations (9,834) (8,217)
Purchase of treasury shares (6,625) (4,543)
Other, net 374 347
_________ _________
Cash used for financing activities (8,335) (7,413)
_________ _________
Increase in cash 1,215 2,598
Cash at beginning of period 5,288 4,840
_________ _________
Cash at end of period $ 6,503 $ 7,438
========= =========
SUPPLEMENTAL INFORMATION
Cash paid during the period for
Interest (net of amount capitalized) $ 2,962 $ 2,907
Income taxes 1,126 1,942
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. The consolidated financial statements should be read in conjunction with
the annual report to shareholders for the year ended October 31, 1993.
The unaudited financial statements for the twelve and forty weeks ended
August 7, 1994 and August 1, 1993 contain all adjustments which, in the
opinion of management, were necessary for a fair statement of the results
for the interim periods presented. All of the adjustments included were
of a normal and recurring nature.
2. As of August 7, 1994, the Company had $ 22,500,000 of borrowings and
$ 13,500,000 of letters of credit placed under its bank credit facility.
3. During the first three quarters of 1994, the Company purchased 402,600
shares of its common stock for $6,625,000 pursuant to authorization from
its Board of Directors. On June 24, 1994, the Board authorized
acquisition of an additional 500,000 common shares and at September 12,
1994 authorization to purchase an additional 547,400 common shares was
available.
4. The Company's insurance carriers are disputing the extent of coverage in
regard to a $6,500,000 lawsuit settlement made in June 1992. The
Company has undertaken legal action against the carriers to recover actual
and exemplary damages, costs and attorneys' fees.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's quarterly financial information is subject to seasonal
fluctuation. Also, the quarterly periods ended February 20, 1994 and
February 14, 1993 were comprised of sixteen weeks each, while the remainder
of the Company's quarterly periods are comprised of twelve weeks, except for the
fourth quarter of 1993 which was thirteen weeks. As a result, the financial
information for the periods presented is not indicative of results that may
be achieved on an annual basis.
RESTAURANT OPERATIONS
The following table sets forth certain operating information for the Company's
primary restaurant groups. It does not include the results of operations of
certain other restaurants not within the primary groups.
<TABLE>
<CAPTION>
Twelve weeks ended Forty weeks ended
________________________ ________________________
August 7, August 1, August 7, August 1,
1994 1993 1994 1993
_____________ ______________ ____________ _____________
<S> <C> <C> <C> <C>
BAKERS SQUARE
Midwest
Restaurant sales $ 36,295,000 $ 37,514,000 $ 124,655,000 $ 124,328,000
Operating margin 11.9% 15.4% 12.8% 17.0%
California
Restaurant sales $ 22,190,000 $ 24,785,000 $ 78,618,000 $ 85,194,000
Operating margin 5.8% 4.7% 5.8% 7.7%
VILLAGE INN
West
Restaurant sales $ 27,444,000 $ 27,887,000 $ 92,352,000 $ 92,916,000
Operating margin 11.5% 14.8% 12.3% 13.5%
Florida
Restaurant sales $ 5,279,000 $ 5,396,000 $ 20,291,000 $ 19,857,000
Operating margin (2.3)% (1.8)% 2.3% 5.2%
COMBINED
Restaurant sales $ 91,208,000 $ 95,582,000 $ 315,916,000 $ 322,295,000
Operating margin 9.5% 11.5% 10.3% 12.8%
</TABLE>
Overall sales decreased 3.5% for the third quarter and 1.7% for the first three
quarters of 1994 in comparison to the same prior year periods. The decreases
occurred despite the addition of ten new restaurants since the third quarter
of 1993 and the full period inclusion in 1994 of ten restaurants opened during
the first forty weeks of 1993. Comparable restaurant sales decreased 7.3%
and 6.4% in the quarter and first forty weeks, respectively, reflective of lower
customer counts. The decreases were concentrated in the Bakers Square group,
which had not effectively responded to competition and changing customer
preferences. This led to significant organization changes during 1994 and a
program to reposition the concept. The disruptive effects of these changes,
coupled with differences in the timing and weights of media advertising, further
exacerbated the declines. The changes however, are expected to reverse the
negative customer counts and sales trends. The testing of Bakers Square's new
"Bake Shop" format commenced late in the third quarter.
Restaurant operating income decreased both in total and as a percentage of
sales. The effect of lower comparable sales on labor and fixed costs was
principally responsible for the lower restaurant operating income. Partially
offsetting this was incremental profits from operating new restaurants, reduced
insurance expense and lower marketing costs for Bakers Square.
On June 27, 1994, Robert S. Benson resigned as President of the Company. On
August 26, 1994, J. Michael Jenkins agreed to join the Company as President,
Co-Chief Executive Officer and a member of the Board of Directors. Mr. Jenkins
has over 25 years experience in the restaurant business and most recently served
as Chairman of the Board and Chief Executive Officer for El Chico Restaurants,
Inc. In addition to an initial annual salary of $350,000, Mr. Jenkins' five-
year employment contract with VICORP provides for a sign-up bonus of $1,000,000,
annual incentive pay tied to improvement in earnings before interest and taxes,
and the option to purchase 300,000 common shares of the Company granted evenly
over a five-year period at rising exercise prices and vesting in total in 1999.
OTHER REVENUES AND EXPENSE
General and administrative expense increased in the third quarter and first
forty weeks in comparison to last year primarily due to severance expenses,
insurance litigation costs and lower capitalization of overhead costs as a
result of slowdown in construction activity. General and administrative costs
in the Company's 1994 fourth quarter will include the sign-up bonus paid to the
new president and additional costs related to the insurance litigation.
The effective income tax rate used for financial reporting purposes was 37.5% in
1994 compared with 39.5% for the same periods last year. The 1994 rate was
lower due primarily to the FICA tipped income tax credit which took effect
January 1, 1994. This credit more than offset the effect of an increase in the
top federal rate from 34% to 35% resulting from the Omnibus Budget
Reconciliation Act of 1993 enacted in August of 1993.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the decrease in net income, cash provided by operations decreased
19.4% from 1993. Cash from operations was still adequate to fund all capital
expenditures, stock repurchases and pay down debt by $ 2,084,000.
As of August 7, 1994, $22,500,000 was outstanding under the Company's bank
credit facility and approximately $39,000,000 was available for additional
direct advances, subject to limitations on combined direct advances and letters
of credit. Net repayments of $750,000 were made under this line during the first
forty weeks of 1994.
Through the first three quarters of 1994, the Company purchased 402,600 shares
of its common stock for $6,625,000 under authorizations granted by its Board.
On June 24, 1994, the Board authorized acquisition of an additional 500,000
common shares and total authorization for the purchase of 547,400 common shares
remains available. Future purchases with respect to this authorization may be
made from time to time in the open market or through privately negotiated
transactions and will be dependent upon various business and financial
considerations.
Capital expenditures approximating $8,000,000 are expected during the remainder
of the fiscal year. Cash provided by operations and the unused portion of the
Company's bank credit facility are expected to be adequate to fund these
expenditures and any cash outlays for the purchase of the Company's common stock
as authorized by the Board.
PART II
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(15) Letter regarding unaudited interim financial information.
(27) Financial data schedule.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of VICORP Restaurants, Inc. :
We have reviewed the accompanying condensed consolidated balance sheet of
VICORP Restaurants, Inc. (a Colorado corporation) and subsidiary as of August 7,
1994, and the related condensed consolidated statements of operations for the
twelve and forty week periods ended August 7, 1994 and August 1, 1993, and the
condensed consolidated statements of cash flows for the forty week periods ended
August 7, 1994 and August 1, 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of VICORP Restaurants, Inc. and
subsidiary as of October 31, 1993, (not presented herein), and, in our report
dated December 9, 1993, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of October 31, 1993, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
ARTHUR ANDERSEN LLP
Denver, Colorado,
September 2, 1994.
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.
VICORP Restaurants, Inc.
________________________
(Registant)
September 16, 1994 s/s Charles R. Frederickson
Charles R. Frederickson, Chairman of the Board
and Chief Executive Officer
September 16, 1994 s/s Dennis L. Kuper
Dennis L. Kuper, Executive Vice President of Finance
EXHIBIT 15
September 13, 1994
VICORP Restaurants, Inc. :
We are aware that VICORP Restaurants, Inc. has incorporated by reference into
the Company's previously filed Registration Statements File No. 33-26650,
33-32608, 33-34447, 33-48205 and 33-49166, its Form 10-Q for the quarter ended
August 7, 1994, which includes our report dated September 2, 1994, covering the
unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933, that report is not considered a part
of the registration statement prepared or certified by our firm or a report
prepared or certified by our firm within the meaning of Sections 7 and 11 of
the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
VICORP RESTAURANTS, INC. CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF
OPERATIONS AS OF AUGUST 7, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 703799
<NAME> VICORP RESTAURANTS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> OCT-31-1993
<PERIOD-END> AUG-07-1994
<CASH> 6,503
<SECURITIES> 0
<RECEIVABLES> 2,835
<ALLOWANCES> 0
<INVENTORY> 8,149
<CURRENT-ASSETS> 27,648
<PP&E> 294,694
<DEPRECIATION> 118,942
<TOTAL-ASSETS> 246,226
<CURRENT-LIABILITIES> 43,928
<BONDS> 37,529
<COMMON> 523
0
0
<OTHER-SE> 148,909
<TOTAL-LIABILITY-AND-EQUITY> 246,226
<SALES> 319,066
<TOTAL-REVENUES> 321,192
<CGS> 94,692
<TOTAL-COSTS> 94,692
<OTHER-EXPENSES> 192,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,940
<INCOME-PRETAX> 12,099
<INCOME-TAX> 4,537
<INCOME-CONTINUING> 7,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,562
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
