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 January 31, 1998
----------------
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 9,138,304 shares of its $.05 par value Common
Stock outstanding as of March 10, 1998.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
January 31, October 31,
1998 1997
___________ ___________
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 3,827 $ 1,464
Receivables 2,668 4,105
Inventories 5,133 6,751
Deferred income taxes 5,000 5,000
Prepaid expenses and other 1,363 1,190
-------- -------
Total current assets 17,991 18,510
-------- -------
Property and equipment, net 125,746 128,915
Deferred income taxes 37,553 38,619
Long-term receivables 1,310 1,342
Other assets 7,487 7,604
________ ________
Total assets $190,087 $194,990
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt
and capitalized lease obligations $ 1,584 $ 1,585
Accounts payable, trade 12,289 14,083
Accrued compensation 4,377 4,119
Accrued taxes 8,763 8,276
Accrued insurance 4,220 4,429
Other accrued expenses 4,197 4,580
______ ______
Total current liabilities 35,430 37,072
______ ______
Long-term debt (Note 2) 7,577 12,172
Capitalized lease obligations 6,865 7,293
Non-current accrued insurance 2,093 2,327
Other non-current liabilities and
credits 5,839 6,207
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,
9,138,304 and 9,132,786, shares
issued and outstanding 458 458
Paid-in capital 85,250 85,177
Retained earnings 46,575 44,284
_______ _______
Total shareholders' equity 132,283 129,919
_______ _______
Total liabilities and shareholders'
equity $190,087 $194,990
======= =======
</TABLE>
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>
Three Three
Months Months
Ended Ended
___________ ___________
January 31, January 31,
1998 1997
___________ ___________
(unaudited)
<S> <C> <C>
Revenues
Restaurant operations $ 86,527 $ 83,102
Franchise operations 850 828
_______ _______
Total revenues 87,377 83,930
------- -------
Costs and expenses
Restaurant operations
Food 27,813 27,287
Labor 27,862 25,829
Other operating 21,536 21,308
General and administrative 6,144 6,047
________ _______
Operating profit 4,022 3,459
Interest expense 489 757
Other (income) expense, net (46) (151)
________ _______
Income before income tax expense 3,579 2,853
Income tax expense 1,288 1,027
________ _______
Net income $ 2,291 $ 1,826
======== =======
Basic and Diluted earnings per share $ .25 $ .20
======== =======
Weighted average common shares and
dilutive common share equivalents 9,236 9,159
======== =======
</TABLE>
The accompanying notes are an integral part of the financial
statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
----------- -----------
January 31, January 31,
1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
Operations
Net income $ 2,291 $ 1,826
Reconciliation to cash from operations
Depreciation and amortization 4,972 4,989
Deferred income tax provision 1,066 757
Loss on disposition of assets 76 32
Other, net (161) (120)
------- -------
8,244 7,484
Change in assets and liabilities
Trade receivables 1,362 1,464
Inventories 1,618 1,279
Accounts payable, trade (1,794) (2,144)
Other current assets and liabilities (20) (1,087)
Non-current accrued insurance (234) (478)
------- -------
Cash from operations 9,176 6,518
------- -------
Investing activities
Purchase of property and equipment (2,172) (1,370)
Purchase of other assets (101) (37)
Disposition of property 258 954
Collection of non-trade receivables 120 175
------- -------
Cash from investing activities (1,895) (278)
------- -------
Financing activities
Issuance of debt 0 0
Payment of debt and
capitalized lease obligations (5,069) (5,969)
Other, net 151 164
------- -------
Cash from financing activities (4,918) (5,805)
------- -------
Change in cash 2,363 435
Cash at beginning of period 1,464 1,406
------- -------
Cash at end of period $ 3,827 $ 1,841
======= =======
Supplemental information
Cash paid during the period for
Interest (net of amount capitalized) $ 532 $ 451
Income taxes 23 35
</TABLE>
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, 1997. The unaudited financial statements for
the three months ended January 31, 1998 and 1997 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 January 31, 1998, the Company had $7,500,000 of
borrowings outstanding and $4,300,000 of letters of credit
placed under its bank credit facility. On December 19, 1997,
the Company accepted an amended and restated credit agreement
which provides for both an increase in the available credit and
an extension of the maturity of the existing agreement. The
available credit limit has been restored to $40,000,000 in the
aggregate while retaining the sublimit of $10,000,000 on
letters of credit. The maturity date of the amended agreement
is February 28, 2001.
3. Basic earnings per share is calculated using the average
number of common shares outstanding. Diluted earnings per
share is computed on the basis of the average number of common
shares outstanding plus the effect of outstanding stock options
using the "treasury stock" method.
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
----------- -----------
January 31, January 31,
1998 1997
----------- -----------
(in thousands, except per share data)
<S> <C> <C>
Net income available to common shareholders(A) $ 2,291 $ 1,826
======== ========
Average outstanding:
Common Stock (B) 9,161 9,064
Stock options 75 95
-------- --------
Common stock and common stock equivalents (C) 9,236 9,159
======== ========
Earnings per share:
Basic (A/B) $ 0.25 $ 0.20
======== ========
Diluted (A/C) $ 0.25 $ 0.20
======== ========
</TABLE>
4. The Company has stock option plans which generally
provide for the granting of options to all employees and non-
employee directors of the Company at exercise prices not less
than the market value of the common stock on the date of the
grant. The options generally vest over three years and expire
ten years after the date of grant or three months after
employment termination, whichever occurs first.
The following table summarizes information about the stock
options outstanding and exercisable as of January 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Number
Average Weighted Exercisable Weighted
Remaining Average At Average
Range of Options Contractual Exercise January 31, Exercise
Exercise Prices Outstanding Life Price 1998 Price
- ---------------- ----------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$ 8.50-$11.50 140,000 6.23 years $11.12 65,000 $10.68
$12.25-$12.75 24,000 5.66 years $12.46 24,000 $12.46
$13.00 300,000 8.55 years $13.00 100,000 $13.00
$13.25-$17.00 131,017 4.14 years $15.98 125,017 $16.05
$20.00-$26.00 42,000 3.93 years $25.14 42,000 $25.14
------ ------
$ 8.50-$26.00 637,017 6.72 years $13.98 356,017 $15.04
======= =======
</TABLE>
5. 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. In the
third quarter of fiscal 1996, the Company recorded an asset
disposal charge related to a decision to close and dispose of
six of its Angel's Diners. As of the end of fiscal 1996, the
Company had closed all the restaurants related to both disposal
plans. Consequently, operating results for the first quarter
of fiscal 1997 and 1998 did not include any amounts for these
units. Forty-eight stores have been disposed through sublease,
assignment, lease termination or sale.
During the first quarter of 1998, $230,000 of closure and
carrying related costs were charged against the liability
established for such costs. As of January 31, 1998, the Company
had $4,794,000 of reserves remaining to provide for the
disposal of 14 closed properties and 14 subleased properties.
Units classified as subleased may return to closed status upon
sublease termination. The reserves consisted of $3,311,000 to
reduce the disposal property to net realizable value and
$1,483,000 to provide for expected carrying costs and sublease
losses.
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.
Restaurant operations
The following table sets forth certain operating information for
the Company's operating concepts and the Company as a whole.
<TABLE>
<CAPTION>
Three months Three months
ended ended
January 31, 1998 January 31, 1997
---------------- ----------------
<S> <C> <C>
Bakers Square
Restaurant sales $ 52,920,000 $ 50,435,000
Restaurant operating profit 3,600,000 3,354,000
Restaurant operating profit % 6.8% 6.7%
Divisional administrative costs 1,159,000 1,131,000
Divisional operating profit (loss) 2,441,000 2,223,000
Restaurants at quarter-end 150 152
Village Inn
Restaurant sales $ 33,607,000 $ 32,285,000
Restaurant operating profit 5,716,000 5,350,000
Restaurant operating profit % 17.0% 16.6%
Franchise income 850,000 828,000
Divisional administrative costs 1,108,000 776,000
Divisional operating profit 5,458,000 5,402,000
Restaurants at quarter-end 97 98
Angel's
Restaurant sales $ -- $ 382,000
Restaurant operating profit (loss) -- (26,000)
Restaurant operating profit % -- (6.8%)
Divisional administrative costs -- 7,000
Divisional operating profit (loss) -- (33,000)
Restaurants at quarter-end -- 1
Consolidated
Restaurant sales $ 86,527,000 $ 83,102,000
Food cost % 32.1% 32.8%
Labor cost % 32.2% 31.1%
Other operating cost % 24.9% 25.6%
Restaurant operating profit % 10.8% 10.4%
Restaurant operating profit 9,316,000 8,678,000
Franchise income 850,000 828,000
Divisional general and
administrative costs 2,267,000 1,914,000
------------ ------------
Divisional operating profit 7,899,000 7,592,000
------------ ------------
Unallocated general and
administrative costs 3,877,000 4,133,000
------------ ------------
Operating profit (loss) $ 4,022,000 $ 3,459,000
============ ============
</TABLE>
Consolidated restaurant sales increased $3.4 million, or 4.1%, in
the first quarter of fiscal 1998 compared to the first quarter of
1997. The sales increase resulted from strong year-to-year
comparable store sales and guest count comparisons.
During the first quarter of fiscal 1998, sales increased 6.0% and
guest counts increased 4.4% on a comparable same store basis.
Same store sales for Village Inn increased 5.1% and Bakers
Square's same store sales increased by 6.5%. Comparable guest
counts for Village Inn improved 4.9% and Bakers Square improved
4.0%. Restaurant remodel programs, advertising in key markets and
mild winter weather contributed to the growth.
Consolidated restaurant operating profit increased $.7 million, or
7.4%, and increased as a percentage of restaurant sales from 10.4%
to 10.8% in the first quarter of 1998 versus the first quarter of
1997. Both Village Inn and Bakers Square contributed to the
improvement, with Bakers Square's percentage improving from 6.7%
to 6.8% and Village Inn's from 16.6% to 17.0%. The improved
operating profit was due to increased sales and operating
efficiencies.
The following presents select quarterly trend data related to the
operations of Bakers Square and Village Inn:
<TABLE>
<CAPTION>
Bakers Square Village Inn
------------- -----------
Comparable Comparable
Comparable Store Store Comparable Store Store
Store Guest Operating Store Guest Operating
Sales Counts Margin Sales Counts Margin
----------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997:
1st Qtr (4.6%) (2.4%) 6.7% (0.2%) (0.2%) 16.6%
2nd Qtr (5.6%) (3.3%) 6.1% (1.5%) (1.0%) 16.8%
3rd Qtr (3.7%) (0.9%) 6.4% (0.1%) 1.5% 16.7%
4th Qtr 0.5% 0.9% 5.2% 3.1% 3.1% 17.0%
1998:
1st Qtr 6.5% 4.0% 6.8% 5.1% 4.9% 17.0%
</TABLE>
Other revenues and expense
__________________________
Franchise revenue increased in 1998's first quarter by $22,000.
The increase was largely the result of an expansion in the number
of operating stores plus a growth in royalties as a result of
higher franchise sales income.
General and administration expense decreased to 7.1% of revenues
in the first quarter of 1998 from 7.2% last year. The percentage
decrease results from increased revenues and implementing cost
containment measures.
Interest expense declined 35% or $268,000 for the first quarter of
1998 due to reduced credit line borrowings.
The Company's effective tax rate for the first quarter of 1998 was
36% representing statutory tax rates offset somewhat by the effect
of FICA tax credits.
Liquidity and capital resources
_______________________________
Operating cash flows increased $2.7 million in the first quarter
of 1998 versus 1997 first quarter. The increase resulted
primarily from improved operating results and reduced working
capital requirements.
As of January 31, 1998, $7,500,000 of advances were outstanding
under the Company's bank credit facility and approximately
$28,000,000 was available for additional direct advances, subject
to limitations on combined direct advances and letters of credit.
In the first quarter of 1998, the Company reduced its outstanding
borrowings by $4.6 million. On December 19, 1997, the Company
accepted an amended and restated credit agreement which provided
an available credit limit of $40,000,000. The agreement expires
on February 28, 2001.
During the first quarter of 1998, the Company disposed of two
properties, one through lease termination and one through
sublease. Also in that quarter, closure and carrying costs of
$230,000 were charged against the liability established for such,
and cash proceeds of $488,000 were realized from the disposition
of properties.
At January 31, 1998, the Company had 16 closed properties which
it was trying to sell or sublease. Four of those properties were
owned in fee and the rest were leased. The Company also had 15
subleased properties. The Company hopes to sell the fee
properties over the next year and $2.9 million of proceeds are
expected to be realized from their sale. The Company does not
anticipate significant proceeds from the disposition of the leased
properties. It is expected that the majority of the remaining
leased properties will be subleased over the next four to eighteen
months. Cash carrying costs of approximately $1,483,000 are
expected to be incurred through final disposition of those units.
The Company expects to sublease seven of the properties at rentals
lower than the Company's obligations under the prime leases.
Those sublease losses will be incurred over the remaining years of
the leases and the Company does not anticipate that the losses
will materially affect the Company's liquidity.
As of January 31, 1998, authorizations granted by the Board of
Directors for the purchase of 300,500 common shares of the
Company's common stock remained available. No shares were
purchased in the first quarter of 1998. 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 approximating $16.1 million are expected
during the remainder of the fiscal year. The level of planned
expenditures may be adjusted as circumstances indicate. Cash
provided by operations, the unused portion of the Company's bank
credit facility and other financing sources 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.
VICORP has guaranteed certain leases for approximately twenty-five
restaurant properties sold to others in 1986 and approximately
twenty restaurant leases of certain franchisees and others.
Minimum future rental payments remaining under these leases were
approximately $9.5 million as of October 31, 1997. These
guarantees are included in the definition of financial instruments
with off-balance-sheet risk of accounting loss; however, the
Company has not been required to make any payments with respect to
these guarantees and presently has no reason to believe any
payments will be required in the future. The Company believes it
is impracticable to estimate the fair value of these financial
guarantees (e.g., amounts the Company could pay to remove the
guarantees) because the Company has no present intention or need
to attempt settlement of any of the guarantees.
Outlook
_______
The minimum wage in California is scheduled to increase to $5.75
per hour in March 1998, and a number of other states have
indicated that they are considering raising their minimum wage
rate above the federal level. In addition, Congress is
considering raising the federal minimum wage over the next two
years. In order to partially offset this labor cost inflation,
some menu price increases are contemplated at this time.
The Company is evaluating various alternative investment
strategies for utilizing cash flow from operations. These
alternatives include, but may not be limited to, new Village Inn
restaurant properties, paydown of credit facility debt, repurchase
of common stock, and acquisition of restaurant concerns in the
family style segment.
Certain matters discussed in this report are "forward-looking
statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform
Act of 1995. These forward-looking statements can generally be
identified as such because the context of the statement will
include words such as the Company "believes," anticipates,"
"expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are
subject to certain risk and uncertainties which are described in
close proximity to such statements and which could cause actual
results to differ materially from those currently anticipated.
Shareholders, potential investors and other readers are urged to
consider these factors carefully in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements made
herein are only made as of the date of this report and the Company
undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
(10)Material Contracts.
(27) Financial data schedule.
(b) Reports on Form 8-K.
None.
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 12, 1998 By: /s/ J. Michael Jenkins
_________________________________
J. Michael Jenkins, President and
Chief Executive Officer
March 12, 1998 By: /s/ Richard E. Sabourin
______________________________
Richard E. Sabourin, Executive
Vice Preisdent/CFO
<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
JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 3,827
<SECURITIES> 0
<RECEIVABLES> 2,668
<ALLOWANCES> 0
<INVENTORY> 5,133
<CURRENT-ASSETS> 17,991
<PP&E> 282,668
<DEPRECIATION> 156,922
<TOTAL-ASSETS> 190,087
<CURRENT-LIABILITIES> 35,430
<BONDS> 14,442
0
0
<COMMON> 458
<OTHER-SE> 131,825
<TOTAL-LIABILITY-AND-EQUITY> 190,087
<SALES> 86,527
<TOTAL-REVENUES> 87,377
<CGS> 27,813
<TOTAL-COSTS> 27,813
<OTHER-EXPENSES> 49,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 489
<INCOME-PRETAX> 3,579
<INCOME-TAX> 1,288
<INCOME-CONTINUING> 2,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,291
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
