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 February 19, 1995
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)
Not Applicable
(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 9,520,759 shares of its $.05 par value Common Stock
outstanding as of March 22, 1995.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
February 19, October 30,
1995 1994
------------ -----------
(unaudited)
ASSETS
Current assets
Cash $ 4,598 $ 6,123
Receivables 3,393 9,801
Inventories 7,948 10,585
Deferred income taxes 6,000 6,000
Prepaid expenses and other 3,037 2,592
------------ -----------
Total current assets 24,976 35,101
------------ -----------
Property and equipment, net 160,035 165,802
Deferred income taxes 32,391 33,550
Other assets 14,781 14,570
------------ -----------
Total assets $ 232,183 $ 249,023
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt
and capitalized lease obligations $ 1,748 $ 1,796
Accounts payable, trade 12,857 19,246
Accrued compensation 4,563 5,965
Accrued taxes 9,160 9,979
Accrued insurance 6,860 6,537
Other accrued expenses 4,945 6,930
------------ -----------
Total current liabilities 40,133 50,453
------------ -----------
Long-term debt (Note 2) 20,500 28,573
Capitalized lease obligations 13,379 13,981
Non-current accrued insurance 7,907 7,750
Other non-current liabilities and credits 12,760 13,400
Commitments and contingencies
Shareholders' equity
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, 9,519,759 and 9,509,426
shares issued and outstanding 476 476
Paid-in capital 91,683 91,544
Retained earnings 45,345 42,846
------------ -----------
Total shareholders' equity 137,504 134,866
------------ -----------
Total liabilities and shareholders' equity $ 232,183 $ 249,023
============ ===========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Sixteen weeks ended
----------------------------
February 19, February 20,
1995 1994
------------ ------------
(unaudited)
Revenues
Restaurant operations $ 123,041 $ 129,959
Franchise operations 992 867
------------ ------------
Total revenues 124,033 130,826
------------ ------------
Costs and expenses
Restaurant operations
Food 39,651 39,445
Labor 37,877 38,422
Other operating 33,807 35,749
General and administrative 7,802 10,254
Interest 1,168 1,204
Other (income) expense, net (270) (39)
------------ ------------
Total costs and expenses 120,035 125,035
------------ ------------
Income before income tax expense 3,998 5,791
Income tax expense 1,499 2,171
------------ ------------
Net income $ 2,499 $ 3,620
============ ============
Earnings per common and dilutive
common equivalent share $ .26 $ .36
============ ============
Weighted average common shares and
dilutive common share equivalents 9,656 10,049
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Sixteen weeks ended
----------------------------
February 19, February 20,
1995 1994
------------ ------------
(unaudited)
OPERATIONS
Net income $ 2,499 $ 3,620
Reconciliation to cash provided by operations
Depreciation and amortization 7,067 7,838
Deferred income tax provision 1,160 1,708
Loss on disposition of assets 247 508
Other, net (21) (65)
------------ -----------
10,952 13,609
Change in assets and liabilities
Trade receivables 334 (62)
Inventories 2,612 3,817
Accounts payable, trade (6,389) (6,285)
Other current assets and liabilities (4,361) (3,293)
Non-current accrued insurance 157 (70)
------------ -----------
Cash provided by operations 3,305 7,716
------------ -----------
INVESTING ACTIVITIES
Purchase of property and equipment (1,816) (10,319)
Purchase of other assets (84) (376)
Disposition of property (539) (384)
Additions to non-trade receivables -- (1,088)
Collection of non-trade receivables 6,100 674
------------ -----------
Cash provided by (used for) investing activities 3,661 (11,493)
------------ -----------
FINANCING ACTIVITIES
Issuance of debt 12,500 7,750
Payment of debt and capitalized lease obligations (21,114) (574)
Purchase of common stock -- (2,855)
Other, net 123 36
------------ -----------
Cash provided by (used for) financing activities (8,491) 4,357
------------ -----------
Increase (decrease) in cash (1,525) 580
Cash at beginning of period 6,123 5,288
------------ -----------
Cash at end of period $ 4,598 $ 5,868
============ ===========
Supplemental information
Cash paid during the period for
Interest (net of amount capitalized) $ 1,168 $ 1,127
Income taxes 456 560
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 30, 1994. The
unaudited financial statements for the sixteen weeks ended February 19, 1995
and February 20, 1994 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 February 19, 1995, the Company had $20,250,000 of borrowings
outstanding and $9,421,000 of letters of credit placed under its bank credit
facility.
3. In the fourth quarter of 1994, the Company adopted a plan to dispose of 50
restaurant locations in trade areas that are no longer considered appropriate
for the Company's existing concepts. As part of the disposal plan, the
carrying value of those restaurants' assets were written down to net
realizable values. The Company also accrued for expected carrying costs
pending disposition and sublease disposition losses. As of February 19,
1995, the Company had closed 14 of those locations, of which five stores were
disposed through sublease arrangements. The remaining 36 restaurants will
continue to be operated until a satisfactory sale or sublease can be
negotiated or until individual restaurant unit economics dictate closure.
Operating results for the 50 locations for the first quarters of fiscal 1995
and 1994 were as follows:
Quarter ended Quarter ended
February 19, 1995 February 20, 1994
----------------- -----------------
Sales $ 9,837,000 $ 12,312,000
Store operating profit(loss) (27,000) 124,000
During the first quarter of 1995, $451,000 of closure related costs and
$710,000 of severance were charged against the liability established for
such costs.
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 February
19, 1995, and the related condensed consolidated statements of operations for
the sixteen week periods ended February 19, 1995 and February 20, 1994, and the
condensed consolidated statements of cash flows for the sixteen week periods
ended February 19, 1995 and February 20, 1994. 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 30, 1994, (not presented herein), and, in our report
dated December 6, 1994, 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 30, 1994, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 24, 1995.
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 19, 1995 and February
20, 1994 were comprised of sixteen weeks each, while the remainder of the
Company's quarterly periods are comprised of twelve weeks each. 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 information for the Company's two primary
operating concepts and the Company as a whole.
Sixteen weeks ended
--------------------------------
February 19, February 20,
1995 1994
------------ ------------
VILLAGE INN
Restaurant sales $ 41,895,000 $ 45,674,000
Store operating profit percentage 13.8% 13.1%
Restaurants at quarter-end 106 126
BAKERS SQUARE
Restaurant sales $ 77,230,000 $ 83,766,000
Store operating profit percentage 7.8% 12.4%
Restaurants at quarter-end 182 192
CONSOLIDATED
Restaurant sales $123,041,000 $129,959,000
Food cost percentage 32.2% 30.4%
Labor cost percentage 30.8% 29.6%
Other operating cost percentage 27.5% 27.5%
Store operating profit percentage 9.5% 12.6%
Consolidated restaurant sales decreased 5.3% during the first quarter of 1995
compared to the first quarter of 1994. The sales decrease was primarily due to
a 4.0% decrease in comparable sales. Additionally, the Company operated
approximately twelve fewer equivalent restaurants in 1995's first quarter
compared to the same quarter in 1994 due to restaurant closures and
dispositions. The comparable sales decrease occurred entirely in the Bakers
Square division, where customer counts decreased for the fourteenth straight
quarter. The declines were the result of various operational, demographic and
competitive issues which lead to substantial organizational changes in 1994 and
the decision to dispose of 50 restaurants as discussed below. Management is
focused on increasing customer counts. This requires actions that include
higher expense for both food and labor. Also, Bakers Square lowered its menu
prices in the second quarter of 1995. The comparable sales decrease occurred
despite severe winter weather in the Midwest and an earthquake in California
during the first quarter of 1994. Menu price changes did not materially effect
the first quarter sales comparison.
Store operating profit decreased both in total and as a percentage of sales.
Higher food and labor cost resulted from the changes discussed above and modest
inflationary increases coupled with no menu price increases. Also, lower
comparable sales in relationship to the fixed portion of labor costs and other
fixed costs contributed to the decrease. These items were partially offset by
lower depreciation expense as a result of asset dispositions.
James F. Caruso resigned as President of the Bakers Square division on February
16, 1995. His duties were assumed by J. Michael Jenkins, President of the
Company. Nicholas P. Galanos joined the Company as the President of the Angel's
Diner division on February 1, 1995.
ASSET DISPOSALS
As of February 19, 1995, the Company had closed 14 of the 50 restaurants
scheduled for disposition under a plan adopted in fiscal 1994. Five of the
closed units have been disposed of through sublease. The remaining 36 locations
will remain open until a satisfactory sale or sublease can be arranged, or until
unit economics dictate closure. The following table details sales and operating
results for the 50 restaurants for the first quarters of fiscal 1995 and 1994.
The table also segregates those restaurants which are closed and therefore only
operated for a partial quarter in 1995 but a full quarter in 1994 and those that
remain open and operated for the full quarter in both fiscal 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
---------------------------- --------------------------
Operating Operating
Sales Profit (Loss) Sales Profit (Loss)
----------- ------------- ----------- -------------
Village Inn
<S> <C> <C> <C> <C>
Stores closed at February 19, 1995 $ 359,000 $ (57,000) $ 1,701,000 $ (26,000)
Stores open at February 19, 1995 2,598,000 83,000 2,738,000 7,000
----------- ------------- ----------- -------------
Total $ 2,957,000 $ 26,000 $ 4,439,000 $ (19,000)
Bakers Square
Stores closed at February 19, 1995 $ 866,000 $ (91,000) $ 1,330,000 $ (61,000)
Stores open at February 19, 1995 6,014,000 38,000 6,543,000 204,000
----------- ------------- ----------- -------------
Total $ 6,880,000 $ (53,000) $ 7,873,000 $ 143,000
</TABLE>
During the third quarter of fiscal 1995, the Company plans to discontinue
internal distribution and warehousing of grocery products to its restaurants.
At that time, the Company will begin utilizing an external distribution company
for those services. Management does not anticipate that significant changes in
delivered product costs will result from the change, however, food inventories
should be reduced by approximately $2.5 to $3.0 million.
OTHER REVENUES AND EXPENSE
General and administrative expense decreased largely as the result of
administrative office consolidations, staff reductions and reduced incentive and
legal expenses. As a percent of revenues, general and administrative costs were
6.3% in 1995 compared to 7.8% in the comparable period last year.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash provided by operations decreased 57% in the first quarter of 1995 compared
to the same period in 1994 primarily due to lower operating income, the payment
of severance expenses and the fact that the Company reduced year-end inventories
by $2.6 million in 1995 versus $3.8 million in 1994.
As of February 19, 1995, $20,250,000 of advances were outstanding under the
Company's bank credit facility and approximately $45,300,000 was available for
additional direct advances, subject to limitations on combined direct advances
and letters of credit. The Company reduced its outstanding bank advances by
$8,000,000 in the first quarter of 1995 principally due to collection of an
insurance receivable.
As of February 19, 1995, authorizations granted by the Board for the purchase of
508,500 common shares of the Company's common stock remained available. No
shares were purchased in the first quarter of 1995. Future purchases with
respect to the authorizations 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 for the first quarter of 1995 were significantly lower than
those incurred during the first quarter of 1994 because of the Company's near-
term focus on service enhancing initiatives rather than remodel and growth
activities. Capital expenditures approximating $15,000,000 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 - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
(10) Employment Severance and Release Agreement - James F. Caruso.
(15) Letter regarding unaudited interim financial information.
(27) Financial data schedule.
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.
------------------------
(Registrant)
March 27, 1995 /s/ J. Michael Jenkins
----------------------
J. Michael Jenkins, President and Co-Chief
Executive Officer
March 27, 1995 /s/ Dennis L. Kuper
-------------------
Dennis L. Kuper, Executive Vice President of Finance
<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 FEBRUARY 19, 1995 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> 3-MOS
<FISCAL-YEAR-END> OCT-29-1995
<PERIOD-END> FEB-19-1995
<CASH> 4,598
<SECURITIES> 0
<RECEIVABLES> 3,393
<ALLOWANCES> 0
<INVENTORY> 7,948
<CURRENT-ASSETS> 24,976
<PP&E> 287,279
<DEPRECIATION> 127,244
<TOTAL-ASSETS> 232,183
<CURRENT-LIABILITIES> 40,133
<BONDS> 33,879
<COMMON> 476
0
0
<OTHER-SE> 137,028
<TOTAL-LIABILITY-AND-EQUITY> 232,183
<SALES> 123,041
<TOTAL-REVENUES> 124,033
<CGS> 39,651
<TOTAL-COSTS> 39,651
<OTHER-EXPENSES> 71,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,168
<INCOME-PRETAX> 3,998
<INCOME-TAX> 1,499
<INCOME-CONTINUING> 2,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,499
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
EXHIBIT 15
March 24, 1995
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
February 19, 1995, which includes our report dated March 24, 1995, 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
EXHIBIT 10
February 16, 1995
James F. Caruso
173 Marion Street
Denver, Colorado 80218
Re: Employment Severance and Release Agreement
Dear Mr. Caruso:
The purpose of this letter is to put into written form the agreement with
respect to your termination of employment with VICORP Restaurants, Inc.
("VICORP"). The agreement is:
EMPLOYMENT: You will be relieved of any further duties with VICORP on February
16, 1995. Your status as an employee shall terminate on February 17, 1995.
SALARY: VICORP shall pay you your base salary through February 17, 1995, plus
any accrued and unused vacation through that date. Federal and state with-
holding and other authorized deductions shall be taken from those amounts. Such
payments shall be made to you by no later than February 17, 1995.
BENEFITS: Your entitlement to participate in the benefits offered by VICORP
shall cease as of February 17, 1995. Any rights accrued under those plans to
the date of termination shall be governed by the provisions of the respective
plans. Notwithstanding that fact, however, you will be provided continuation
rights with respect to medical and dental benefits as required under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").
STOCK OPTIONS: VICORP confirms your right to exercise until May 18, 1995 any
options which were granted to you to purchase VICORP's common stock and which
were vested as of February 17, 1995. In no event, however, shall any granted
but unvested options vest subsequent to February 17, 1995.
SEVERANCE: VICORP shall pay to you $201,666, less appropriate federal and state
withholding, as severance pay in recognition of your service to VICORP. The
payment shall be made to you in a lump sum payment immediately after the expira-
tion of the revocation period provided for in this agreement.
CONFIDENTIAL INFORMATION: In the course of your employment, you have been
exposed to trade secrets and other information which is of vital importance to
VICORP's business. All information, whether written or not, regarding VICORP's
business, is confidential. You agree that you will not, directly or indirectly
at any time disclose any trade secrets or confidential information of VICORP
which you have obtained during the course of your employment with VICORP.
Nothing in this agreement shall prevent you from using your general knowledge,
skill and experience in gainful employment by a third party subsequent to your
termination from VICORP.
RETURN OF DOCUMENTS: You have agreed to immediately return to VICORP any and
all keys, charge cards, company documents, and any and all other items of VICORP
which are in your possession.
CONTINUED ASSISTANCE: You have agreed to continue to cooperate with VICORP as
needed with regard to any legal action which may necessitate your involvement
and which arose during your tenure with VICORP. Any out-of-pocket expenses
incurred by you in connection with your involvement shall be paid by VICORP.
OUT-PLACEMENT ASSISTANCE: You will be eligible to receive the three-month out-
placement package at the Company's expense through the firm of AIM/Enterchange.
MUTUAL RELEASE: Except for any obligations described in this letter, you hereby
release VICORP and its officers, directors, shareholders, and employees; and
VICORP hereby releases you from any and all claims, agreements, promises,
actions, and obligations that each may have against the other arising out of the
employment relationship. This release covers claims and obligations, even if
they are unknown at this time, including but not limited to any contract or tort
claims and any claims based on rights under the Age Discrimination in Employment
Act of 1967, 29 U.S.C. 621. VICORP and you also agree as to any such claim
neither VICORP nor you will start or pursue any complaint or proceeding against
the other before any court, tribunal or governmental agency. In consideration
for the foregoing release, VICORP shall pay to you $18,333 at the expiration of
the revocation period defined below.
MISCELLANEOUS: You are entering into this agreement freely and voluntarily and
acknowledge that you have been advised of your right to consult legal counsel
and that you have had an opportunity to do so. In the event any term of this
agreement is unenforceable, then such unenforceable term would be altered so as
to be enforceable. If that is not possible, then it will be deleted from this
agreement and the remaining part of the agreement will remain in effect. This
agreement constitutes the entire agreement between the parties with respect to
this matter and supercedes any prior agreements, whether oral or written. Any
change or modification of this agreement to be valid must be in writing signed
by each of us and the terms and provisions of this agreement shall be binding
upon our respective successors, assigns, heirs, executors, administrators, and
representatives.
REVOCATION PERIOD: You (a) shall have a period of twenty-one (21) days from the
date of delivery of this agreement to accept the agreement, and (b) shall have
seven (7) days following your execution of this agreement during which you may
revoke the agreement by providing VICORP written notice of your revocation. If
this agreement is not revoked by you during said seven (7) day period, it shall
be deemed accepted. The provisions of this agreement relating to severance,
outplacement assistance, and mutual release shall not be effective or enforce-
able until the revocation period has expired; all other provisions shall be
effective as of February 17, 1995.
Sincerely,
/s/ J. Michael Jenkins
----------------------
J. Michael Jenkins Accepted and agreed to
President
/s/ James F. Caruso
__________________________
James F. Caruso
17 February 1995
---------------------
Date
