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 July 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 9,278,898 shares of its $.05 par value Common
Stock outstanding as of September 3, 1998.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VICORP Restaurants, Inc.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 10,136 $ 1,464
Receivables 1,501 4,105
Inventories 5,499 6,751
Deferred income taxes 5,000 5,000
Prepaid expenses and other 1,086 1,190
------- -------
Total current assets 23,222 18,510
------- -------
Property and equipment, net 124,923 128,915
Deferred income taxes 35,317 38,619
Other assets 8,406 8,946
------- -------
Total assets $ 191,868 $ 194,990
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt and
capitalized lease obligations $ 1,534 $ 1,585
Accounts payable, trade 14,940 14,083
Accrued compensation 5,046 4,119
Accrued taxes 8,698 8,276
Accrued insurance 4,571 4,429
Other accrued expenses 5,256 4,580
------ ------
Total current liabilities 40,045 37,072
------ ------
Long-term debt (Note 2) 81 12,172
Capitalized lease obligations 6,184 7,293
Non-current accrued insurance 1,988 2,327
Other non-current liabilities and credits 5,067 6,207
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, 9,258,898 and 9,132,786
shares issued and outstanding 464 458
Paid-in capital 86,778 85,177
Retained earnings 51,261 44,284
------- -------
Total shareholders' equity 138,503 129,919
------- -------
Total liabilities and shareholders' equity $ 191,868 $ 194,990
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Three Nine Nine
months months months months
ended ended ended ended
------- ------- ------- -------
July 31, July 31, July 31, July 31,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Restaurant operations $ 87,318 $ 80,718 $ 255,886 $ 242,389
Franchise operations 861 857 2,616 2,432
------ ------ ------- -------
Total Revenues 88,179 81,575 258,502 244,821
Costs and expenses
Restaurant operations
Food 26,329 25,313 79,113 76,987
Labor 28,565 26,302 83,434 77,321
Other operating 22,018 20,705 64,958 62,768
General and administrative 6,579 5,836 19,056 17,686
------ ------ ------ ------
Operating Profit 4,688 3,419 11,941 10,059
Interest expense 320 590 1,212 2,006
Other (income) expense, net (71) (141) (258) (479)
----- ----- ------ -----
Income before income tax expense 4,439 2,970 10,987 8,532
Income tax expense 1,652 1,068 4,010 3,071
----- ----- ------ -----
Net income $ 2,787 $ 1,902 $ 6,977 $ 5,461
====== ===== ====== =====
Basic earnings per share $ .30 $ .21 $ .76 $ .60
====== ====== ====== =====
Diluted earnings per share $ .30 $ .21 $ .75 $ .60
====== ====== ====== =====
Weighted average common
shares and dilutive common
shares equivalent 9,262 9,129 9,253 9,114
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Nine
Months Months
ended ended
July 31, July 31,
1998 1997
-------- --------
<S> <C> <C>
Operations
Net income $ 6,977 $ 5,461
Reconciliation to cash provided
by operations
Depreciation and amortization 14,702 14,653
Deferred income tax provision 3,302 2,222
Loss on disposition of assets 217 141
Other, net (389) (332)
------- -------
24,809 22,145
Change in assets and liabilities
Trade receivables 1,857 1,314
Inventories 1,252 1,483
Accounts payable, trade 857 (1,189)
Other current assets and liabilities 2,224 94
Non-current accrued insurance (339) (1,316)
------ ------
Cash provided by operations 30,660 22,531
------ ------
Investing activities
Purchase of property and equipment (12,949) (9,098)
Purchase of other assets (96) (276)
Disposition of property 1,398 917
Collection of non-trade receivables 1,280 702
------- ------
Cash (used for) investing activities (10,367) (7,755)
------- ------
Financing activities
Issuance of debt 300 --
Payment of debt and capitalized
lease obligations (13,607) (14,731)
Issuance of common stock 1,606 400
Other, net 80 440
------- -------
Cash used for financing activities (11,621) (13,891)
------- -------
Increase in cash 8,672 885
Cash at beginning of period 1,464 1,406
------ -----
Cash at end of period $ 10,136 $ 2,291
====== =====
Supplemental information
Cash paid during the period for
Interest (net of amount capitalized) $ 1,276 $ 2,013
Income taxes 292 359
</TABLE>
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -----------------------------------------
1. The 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 nine months
ended July 31, 1998 and July 31, 1997 contain all adjustments
which, in the opinion of management, are necessary for a fair
statement of the results for the interim periods presented. All
of the adjustments included are of a normal and recurring nature.
2. As of July 31, 1998, the Company had no borrowings outstanding
and $4,300,000 of letters of credit placed under its bank
credit facility. The Company's bank credit agreement expires on
February 28, 2001, but may be extended by the bank for one year.
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 Nine Nine
Months Months Months Months
Ended Ended Ended Ended
------- ------- ------- -------
July 31, July 31, July 31, July 31,
1998 1997 1998 1997
------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income available to
common shareholders(A) $ 2,787 $ 1,902 $ 6,977 $ 5,461
===== ===== ===== =====
Average outstanding:
Common Stock (B) 9,231 9,115 9,186 9,085
Stock options 31 14 67 29
----- ----- ----- -----
Common stock and common stock
equivalents (C) 9,262 9,129 9,253 9,114
===== ===== ===== =====
Earnings per share:
Basic (A/B) $ 0.30 $ 0.21 $ 0.76 $ 0.60
===== ===== ===== =====
Diluted (A/C) $ 0.30 $ 0.21 $ 0.75 $ 0.60
===== ===== ===== =====
</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 July 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------- ---------------------
Weighted Number
Average Weighted Exercisable Weighted
Remaining Average At Average
Range of Options Contractual Exercise July 31, Exercise
Exercise Prices Outstanding Life Price 1998 Price
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$10.50-$10.500 32,000 0.12 years $10.50 32,000 $10.50
$11.50-$11.500 100,000 8.05 years $11.50 25,000 $11.50
$12.25-$15.875 78,000 6.35 years $14.67 76,000 $14.68
$17.00-$18.250 124,000 5.51 years $17.65 86,500 $17.38
$20.00-$26.000 42,000 3.44 years $25.14 42,000 $25.14
------- -------
$10.50-$26.000 376,000 5.67 years $15.62 261,500 $16.44
======= =======
</TABLE>
5. In the fourth quarter of 1994, the Company adopted a plan to dispose of
50 restaurant locations in trade areas that were no longer considered
appropriate for the Company's existing concepts. As part of the disposal
plan, the carrying value of those restaurants' assets was written down to
net realizable value. 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
third quarter of fiscal 1997 and 1998 did not include any amounts for
these units. Fifty stores have been disposed of through sublease, lease
termination or sale. One store was converted and opened as a Village Inn
restaurant.
During the first three quarters of 1998, $527,000 of closure and carrying
costs were charged against the liability established for such costs. As
of July 31, 1998, the Company had $3,842,000 of reserves remaining to
provide for the disposal of 15 closed properties and 11 subleased
properties. Units classified as subleased may return to closed status
upon sublease termination. The reserves consisted of $2,656,000 to
reduce the disposal property to net realizable value and $1,186,000 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>
Third Quarter Year-to-Date
-------------------------- --------------------------
Three Three Nine Nine
months ended months ended months ended months ended
------------ ------------ ------------ ------------
July 31, July 31, July 31, July 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Bakers Square
Restaurant sales $ 52,814,000 $ 48,347,000 $154,791,000 $144,962,000
Restaurant operating
profit 4,326,000 3,072,000 10,795,000 9,256,000
Restaurant operating
profit % 8.2% 6.4% 7.0% 6.4%
Divisional
administrative costs 1,385,000 1,191,000 3,812,000 3,576,000
Divisional operating
profit 2,941,000 1,881,000 6,983,000 5,680,000
Restaurants at quarter-end 150 150
Village Inn
Restaurant sales $ 34,504,000 $ 32,118,000 $101,095,000 $ 96,363,000
Restaurant operating
profit 6,080,000 5,354,000 17,586,000 16,076,000
Restaurant operating
profit % 17.6% 16.7% 17.4% 16.7%
Franchise income 861,000 857,000 2,616,000 2,432,000
Divisional
administrative costs 1,217,000 966,000 3,507,000 2,622,000
Divisional operating
profit 5,724,000 5,245,000 16,695,000 15,886,000
Restaurants at quarter-end 98 96
Angel's
Restaurant sales $ -- $ 253,000 $ -- $ 1,064,000
Restaurant operating
profit (loss) -- (28,000) -- (19,000)
Restaurant operating
profit % -- (11.1)% -- (1.8)%
Divisional
administrative costs -- 4,000 -- 11,000
Divisional operating
profit (loss) -- (32,000) -- (30,000)
Restaurants at quarter-end 0 0
Consolidated
Restaurant sales $ 87,318,000 $ 80,718,000 $255,886,000 $242,389,000
Food cost % 30.2% 31.4% 30.9% 31.8%
Labor cost % 32.7% 32.6% 32.6% 31.9%
Other operating cost % 25.2% 25.7% 25.4% 25.9%
Restaurant operating
profit % 11.9% 10.4% 11.1% 10.4%
Restaurant operating
profit 10,406,000 8,398,000 28,381,000 25,313,000
Franchise income 861,000 857,000 2,616,000 2,432,000
Divisional general and
administrative costs 2,602,000 2,161,000 7,319,000 6,209,000
---------- ---------- ---------- ----------
Divisional operating
profit 8,665,000 7,094,000 23,678,000 21,536,000
---------- ---------- ---------- ----------
Unallocated general and
administrative costs 3,977,000 3,675,000 11,737,000 11,477,000
---------- ---------- ---------- ----------
Operating profit 4,688,000 3,419,000 11,941,000 10,059,000
========== ========== ========== ==========
</TABLE>
Consolidated restaurant sales increased $6.6 million, or 8.2%, during the
third fiscal quarter and increased $13.5 million, or 5.6% for the first three
quarters of fiscal 1998 compared to last year. The sales increase resulted
from strong year-to-year comparable store sales and guest count comparisons
as well as two new Village Inn restaurants.
During the third quarter of fiscal 1998, consolidated sales increased 8.0%
and guest counts increased 3.5% on a comparable same store basis. Same store
sales for Village Inn increased 5.1% and Bakers Square's same store sales
increased by 9.9%. Comparable guest counts for Village Inn increased 2.0%
and Bakers Square increased 4.8%.
For the first three quarters of fiscal 1998, comparable total store sales
increased 6.6%, reflective of a 7.9% increase for Bakers Square and a 4.7%
increase for Village Inn. Comparable guest counts increased 3.8%, reflective
of a 4.6% increase for Bakers Square and a 3.0% increase for Village Inn.
The Company continues to focus on increasing the guest counts at its Bakers
Square concept. Bakers Square Midwest units were remodeled in a significant
campaign to enhance the dining experience. In addition, both tactical
marketing programs and special incentive programs in the local restaurants
have been expanded to increase customer awareness and improve service levels.
Consolidated restaurant operating profit increased by $2.0 million,
increasing as a percentage of restaurant sales from 10.4% to 11.9% for the
third quarter of 1997 versus the third quarter of 1998. Bakers Square's
restaurant operating profit percentage increased by 1.8 percentage points
while Village Inn's increased by .9 percentage points over the same quarter
of 1997.
Consolidated restaurant operating profit increased by $3.1 million for the
first three quarters of fiscal 1998 compared to 1997's first three quarters
largely due to top-line growth and operating efficiencies in food and other
costs.
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%
2nd Qtr 7.3% 4.8% 5.8% 3.7% 2.0% 17.6%
3rd Qtr 9.9% 4.8% 8.2% 5.1% 2.0% 17.6%
</TABLE>
Other revenues and expense
- --------------------------
Compared to 1997's third quarter, franchise revenue in 1998's third quarter
increased by $4,000. For the first three quarters of fiscal 1998, franchise
revenue increased by $184,000 compared to the first three quarters of 1997.
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.
As a percent of sales, general and administrative expense increased slightly
in the third quarter of 1998 from the comparable 1997 third quarter. Actual
general and administrative expense increased $743,000 during the third
quarter and $1,370,000 year-to-date over the corresponding 1997 periods. The
quarter and year-to-date increases were largely the result of higher divisional
administrative costs driven by higher incentive compensation payments and
expenses associated with manager training programs. Year-to-date, general
and administrative expense as a percent of revenues was 7.4% and 7.2% for
1998 and 1997, respectively.
Interest expense declined 46%, or $270,000, for the third quarter and 40%, or
$794,000, for the first three quarters of 1998 as compared to fiscal 1997 due
to a substantial reduction in long-term debt.
The Company's effective tax rate for the first three quarters of 1998 was
36.5% representing statutory tax rates offset somewhat by the effect of FICA
tax credits.
Liquidity and capital resources
- -------------------------------
Operating cash flows increased $8.1 million in the first three quarters of
1998 versus the first three quarters of 1997. The increase resulted
primarily from improved operating results and reduced working capital
requirements.
As of July 31, 1998, no advances were outstanding under the Company's bank
credit facility and approximately $35,700,000 was available for additional
direct advances, subject to limitations on combined balances of direct
advances and letters of credit. In the first three quarters of 1998, the
Company reduced its outstanding borrowings by $12.1 million. The Company's
bank credit agreement expires on February 28, 2001, but may be extended by
the bank for one year.
During the first three quarters of 1998, the Company disposed of eight
properties, four through sale, one through sublease, three through lease
termination. Two subleased units were returned to the Company during the
first three quarters of 1998. Also, during that time, closure and carrying
costs of $527,000 were charged against the liability established for such,
and cash proceeds of $1,925,000 were realized from the disposition of
properties.
At July 31, 1998, the Company had 16 closed properties remaining
which it was trying to sell or sublease. Three of those properties were
owned in fee and the rest were leased. The Company also had 12 subleased
properties. The Company hopes to sell the fee properties over the next year
and $1.0 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 leased
properties will be subleased over the next twelve to eighteen months. Cash
carrying costs of approximately $1.2 million are expected to be incurred over
that period. The Company expects to sublease nine 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 July 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 three quarters 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 $9.0 million are expected during the
remainder of the fiscal year. The level of planned expenditures may be
reduced as a result of operating conditions. 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.
The Company completed a review of its computer system during 1997 resulting
in a decision to replace the existing system at a cost of $10.5 million to
$12.5 million. The Company is currently in the process of conversion to
these new systems and expects the major components to be implemented in early
1999 with the entire project completed by the third quarter of 1999. The new
systems are Year 2000 compliant. A contingency plan for modification of
existing systems is being developed in the event conversion to the system is
not completed before the end of 1999. The Company continues to assess the
impact of Year 2000 issues with respect to third parties.
VICORP has guaranteed certain leases for approximately twenty-five (25)
restaurant properties sold to others in 1986 and approximately twenty (20)
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 Company has switched its fiscal year end for 1998 to November 1.
Subsequent fiscal years will end on the last Sunday of October.
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, acquisition of new
computer systems, 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.
Item 5: Other Information.
If a shareholder desires to bring a proposal before the Company's next annual
meeting which is not timely submitted for inclusion in the proxy statement,
and the shareholder fails to notify the Company by January 13, 1999, of such
proposal, the management proxies may use their discretionary voting authority
when the proposal is raised at the annual meeting without any discussion of
the matter in the proxy statement.
Patricia Luzier resigned as Senior Vice President Human Resources on July 17,
1998. Jay Trungale was appointed President of the Bakers Square Division on
August 13, 1998.
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)
September 8, 1998 By: /s/ Charles R. Frederickson
----------------------------
Charles R. Frederickson,
Chairman of the Board,
President and Chief
Executive Officer
September 8, 1998 By: /s/ Richard E. Sabourin
-----------------------
Richard E. Sabourin,
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VICORP
RESTAURANTS, INC. BALANCE SHEETS AND STATEMENTS OF OPERATIONS AS OF JULY 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 10,136
<SECURITIES> 0
<RECEIVABLES> 1,501
<ALLOWANCES> 0
<INVENTORY> 5,499
<CURRENT-ASSETS> 23,222
<PP&E> 288,356
<DEPRECIATION> 163,433
<TOTAL-ASSETS> 191,868
<CURRENT-LIABILITIES> 40,045
<BONDS> 6,265
0
0
<COMMON> 464
<OTHER-SE> 138,039
<TOTAL-LIABILITY-AND-EQUITY> 191,868
<SALES> 255,886
<TOTAL-REVENUES> 258,502
<CGS> 79,113
<TOTAL-COSTS> 79,113
<OTHER-EXPENSES> 148,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,212
<INCOME-PRETAX> 10,987
<INCOME-TAX> 4,010
<INCOME-CONTINUING> 6,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,977
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.75
</TABLE>
SEVERANCE AGREEMENT
AGREEMENT made as of the _____day of _____________,
______, by and between VICORP Restaurants, Inc., Denver,
Colorado (the "Company") and _______________________ (the
"Employee").
WHEREAS, the Board of Directors of the Company (the
"Board") desires to foster the continuous employment of the
Employee and has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of the Employee to his duties free from
distractions which could arise in the event of a threatened
Change in Control of the Company;
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the Company and the Employee
agree as follows:
1. Overriding Intent: This Agreement shall confer no
rights or obligations upon the Company or the Employee until
both of the following occurs, first a Change of Control has
in fact occurred, and second after but within two (2) years
of the Change of Control the Employee is terminated other
than a) for Cause, Death, Disability, or Retirement; or b)
the Employee terminates for Good Reason.
2. Term of Agreement. This Agreement shall commence as of
the date first written above and shall continue in effect until
December 31, 1999, provided, however, in the event a Change
in Control shall occur prior to the date of the termination
of this Agreement the Company's obligations hereunder shall
not terminate prior to the expiration of the two (2) years
after a Change in Control shall have occurred. Any termination
of this Agreement shall not affect any obligation of the Company
which remains as of such termination.
3. Termination Benefits.
A. If, within two (2) years following a Change in Control which
occurs during the term of this Agreement, a Notice of Termination as
hereinafter defined shall be tendered, the Employee shall be entitled
to the following compensation and benefits (in addition to any compensation
and benefits provided for under any of the Company's employee benefit
plans, policies, and practices):
(1) If the Employee's employment with the Company shall be terminated
a) by reason of the Employee's Disability or Retirement, b) by reason of
the Employee's death, or c) by the Employee other than for Good Reason,
the Company shall pay the Employee his full base salary through the Date
of Termination, plus any bonuses or incentive compensation which pursuant
to the terms of any compensation or benefit plan have been earned or have
become payable as of the Date of Termination, but which have not yet been
paid.
(2) If the Employee's employment with the Company shall be terminated
for Cause, the Company shall pay the Employee his full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
the Employee under this Agreement.
(3) If the Employee's employment with the Company shall be terminated,
a) by the Company other than for Cause, Death, Disability or Retirement, or
b) by the Employee for Good Reason within one (1) year of the Change of
Control:
(a) the Company shall, within the earlier of five (5)
days after the Date of Termination or the time prescribed by the applicable
wage and hour laws, pay the Employee his full base salary through the Date
of Termination at the greater of the rate in effect at the time the Change
in Control occurs or when the Notice of Termination is given, plus any
bonuses or incentive compensation which pursuant to the terms of any
compensation or benefit plan have been earned or have become payable as of
the Date of Termination, but which have not yet been paid; and
(b) the Company shall, within the earlier of five (5)
days after the Date of Termination or the time prescribed by the applicable
wage and hour laws, pay the Employee a lump sum cash payment equal to one
and one half (1.5) times the sum of (x) the Employee's annual base salary
at the greater of the rate in effect at the time of the Change in Control
or the date the Notice of Termination is given, and (y) the amount equal
to the bonus compensation to which the Employee was entitled during the
most recent full fiscal year which the Employee earned bonus compensation;
and
(c) the Company shall continue to provide for the Employee
and his dependents, for eighteen (18) months following his Date of
Termination, medical, hospitalization, and dental benefits comparable to
those provided by the Company to the Employee and his dependents
immediately prior to the Change in Control, provided that any coverage
provided pursuant to this subsection (c) shall terminate or be reduced to
the extent that the Employee obtains medical, hospitalization, or dental
benefits coverage from any other employer during such eighteen (18) month
period. The benefits provided under this subsection (c) shall not be less
favorable to the Employee in terms of coverages, deductibles and the cost
to him, if any, than such benefits as of the date of the Change in Control;
and
(d) all stock options granted to the Employee shall
immediately be exercisable in full.
(4) If the Employee's employment with the Company shall be terminated,
a) by the Company other than for Cause, Death, Disability, or Retirement, or
b) by the Employee for Good Reason after one (1) year of the Change of
Control and before two (2) years of the Change of Control:
(a) the Company shall, within the earlier of five (5) days
after the Date of Termination or the time prescribed by the applicable wage
and hour laws, pay the Employee his full base salary through the Date of
Termination at the greater of the rate in effect at the time the Change in
Control occurs or when the Notice of Termination is given, plus any bonuses
or incentive compensation which pursuant to the terms of any compensation
or benefit plan have been earned or have become payable as of the Date of
Termination, but which have not yet been paid; and
(b) the Company shall pay, within the earlier of five (5) days
after the Date of Termination or the time prescribed by the applicable wage
and hour laws, pay the Employee a lump sum cash payment equal to the sum of
(x) the Employee's annual base salary at the greater of the rate in effect
at the time of the Change in Control or the date the Notice of Termination
is given and (y) the amount equal to the bonus compensation to which the
Employee was entitled during the most recent full fiscal year which the
Employee earned bonus compensation; and
(c) the Company shall continue to provide for the Employee and
his dependents, for a period of eighteen (18) months following his Date of
Termination, medical, hospitalization, and dental benefits comparable to
those provided by the Company to the Employee and his dependents
immediately prior to the Change in Control, provided that any coverage
provided pursuant to this subsection (c) shall terminate or be reduced to
the extent that the Employee obtains medical, hospitalization, or dental
benefits coverage from any other employer during such eighteen (18) month
period. The benefits provided under this subsection (c) shall not be less
favorable to the Employee in terms of coverage, deductibles and the cost
to him, if any, than such benefits as of the date of the Change in Control;
and
(d) all stock options granted to the Employee shall
immediately be exercisable in full.
B. The severance pay and benefits provided for in subsection 3A(3)
and (4) shall be in lieu of any other severance pay and benefits to which
the Employee may be entitled under any Company severance plan, program, or
arrangement.
C. The Employee shall not be required to mitigate the amount of any
payment provided for in subsection 3A(3) or (4) by seeking other employment
or otherwise, nor shall the amount of any payment provided for in subsection
3A(3)(a), 3A(4)(a), or 3A(3)(b), 3A(4)(b) be reduced by any compensation
earned by the Employee as the result of employment by another employer after
the termination, or otherwise.
D. For purposes of this Agreement,
(1) a "Change in Control" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act") as of the date of this Agreement; provided that, without
limitation a "Change in Control" shall be deemed to occur a) when any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act,
other than an employee benefit plan established or maintained by the Company
or any of their respective affiliates, is or becomes the beneficial owner
(as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities; b) upon
the first purchase of the Company's common stock pursuant to a tender or
exchange offer (other than a tender or exchange offer made by the Company or
an employee benefit plan established or maintained by the Company or any of
their respective affiliates); c) upon the approval by the Company's
stockholders of (i) a merger or consolidation of the Company with or into
another corporation (other than a merger or consolidation in which the
Company is the surviving corporation and which does not result in any capital
reorganization or reclassification or other change in the Company's then
outstanding shares of common stock), (ii) a sale or disposition of all or
substantially all of the Company's assets or (iii) a plan of liquidation or
dissolution of the Company or, (iv) if individuals who, as of the date of
this Agreement, constitute the Board of Directors of the Company (each a
"Continuing Director") cease for any reason to constitute at least two-thirds
thereof, provided however, that any individual whose election or for
nomination for election by the Company's stockholders as a director of the
Company was approved by a vote of at least two-thirds of the Continuing
Director shall be considered a Continuing Director for the purpose of this
Section 2D(1)(iv).
(2) "Disability" shall mean a physical or mental illness which impairs
the Employee's ability to substantially perform his duties as an Employee
and as a result of which the Employee becomes eligible for disability
benefits under the Company's long-term disability plan (or, if the Company
has no such plan in effect, which impairs the Employee's ability to
substantially perform his duties and/or this Agreement for a period of one
hundred eighty (180) consecutive days).
(3) "Retirement" shall mean the voluntary termination of the Employee's
employment after having attained age sixty-five (65) or such other age as
shall have been fixed in any retirement arrangement established by the
Company with the Employee's consent.
(4) A termination for "Cause" is a termination by reason of the Board's
good faith determination that the Employee: a) willfully and continually
failed to substantially perform his duties with the Company (other than a
failure resulting from the Employee's Disability) after a written demand for
substantial performance has been delivered to the Employee by the Board or
the Chief Executive Officer, which demand specifically identifies the manner
in which the Board or the Chief Executive Officer believes that the Employee
has not substantially performed his duties and gives the Employee a
reasonable opportunity to cure the deficiencies in the Employee's
performance as identified in the demand, or b) has willfully engaged in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. No act, or failure to act, on the Employee's
part shall be considered "willful" unless he has acted or failed to act,
with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Cause unless there shall have been delivered to the Employee
a copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the Continuing Directors of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to the Employee and
an opportunity for the Employee, together with his counsel, to be heard
before the Board), finding that in the good faith opinion of the Board the
Employee was guilty of conduct set forth above in the first sentence of this
subsection 3D(4) and specifying the particulars thereof in detail.
(5) "Good Reason" shall mean the occurrence after a Change in Control
of any of the following events without the Employee's express written
consent:
(a) any change in the Employee's title, authorities,
responsibilities (including reporting responsibilities) which, in the
Employee's reasonable judgment, represents a demotion from his status,
title, position, or responsibilities (including reporting
responsibilities) as in effect immediately prior to the Change in
Control; the assignment to him of any duties or work responsibilities
which, in his reasonable judgment, are inconsistent with such status,
title, position or responsibilities; or any removal of the Employee from
or failure to reappoint or reelect him to any of such positions, except
in connection with the termination of his employment for Death,
Disability, Retirement or Cause or by the Employee other than for Good
Reason;
(b) a reduction by the Company in the Employee's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time;
(c) the relocation of the Company's offices to a location
more than fifty (50) miles from the location at which the Employee
performed his duties prior to the Change in Control and the Company's
requiring the Employee to be based at such new location;
(d) the adverse and substantial alteration of the nature and
quality of the office space within which the Employee performed his
duties prior to a Change in Control, including the size and location
thereof, as well as in the secretarial and administrative support
provided to the Employee;
(e) the failure by the Company to continue in effect any
incentive, bonus, or other compensation plan in which the Employee
participates, including but not limited to the Company's stock option
and annual incentive plans, unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue the Employee's
participation therein, or any action by the Company which would directly
or indirectly materially reduce his participation therein or reward
opportunities thereunder;
(f) the failure by the Company to continue in effect any
employee benefit plan (including any medical, hospitalization, life
insurance, dental, or disability benefit plan) in which the Employee
participated, or any material fringe benefit or perquisite, including
vacation, enjoyed by the Employee at the time of the Change in Control,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan or benefit,
or the failure by the Company to continue the Employee's participation
therein, or any action by the Company which would directly or indirectly
materially reduce his participation therein or reward opportunities
thereunder;
(g) any material breach by the Company of any provision of
this Agreement;
(h) the failure of the Company to obtain a satisfactory
agreement from any successor or assign of the Company to assume and
agree to perform this Agreement, as contemplated in Section 7 hereof; or
(i) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 4 below (and, if applicable, subsection 3D(4)
above); and for purposes of this Agreement, no such purported termination
shall be effective.
The Employee's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to a Disability.
4. Notice of Termination. Any purported termination by the Company or
by the Employee shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 4 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Employee's employment under the provision so
indicated. For purposes of this Agreement, no such purported termination
shall be effective without such Notice of Termination.
5. Date of Termination. "Date of Termination" shall mean:
A. If the Employee's employment is terminated for Disability thirty
(30) days after Notice of Termination is given (provided that the Employee
shall not have returned to the performance of his duties on a full-time basis
during such thirty (30) day period); and
B. If the Employee's employment is terminated for any other reason, the
date specified in the Notice of Termination (which, in the case of a
termination for Cause shall not be less than thirty (30) days, and in the
case of a termination for Good Reason shall not be more than sixty (60) days,
from the date such Notice of Termination is given); provided that if within
thirty (30) days after any Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement
of the parties, or by the final decision of the arbitrator pursuant to
Section 10 hereof. Notwithstanding the pendency of any such dispute, the
Company will continue to pay the Employee his full base salary and will
continue the Employee as a participant in all compensation, incentive, bonus,
pension, profit sharing, medical, hospitalization, dental, life insurance, and
disability benefit plans in which he was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Section.
6. Limitation. Notwithstanding any other provision contained in this
Agreement, if the aggregate present value of all payments made or payable to
the Employee, whether pursuant to this Agreement or otherwise, which
constitute "parachute payments" (within the meaning of Section 280G(b)(2)(A)
of the Internal Revenue Code of 1986 (the "Code")) equals or exceeds three
(3) times the Employee's "base amount" (within the meaning of Section 280G of
the Code), then the amounts otherwise payable pursuant to this Agreement
shall be reduced, but not below zero, so that the aggregate present value of
the Employee's "parachute payments" does not equal or exceed three (3) times
the Employee's "base amount." If the application of the preceding sentence
should require a reduction in benefits under this Agreement, such reduction
shall be implemented first, by reducing any non-cash benefits to the extent
necessary and, second, by reducing any cash benefits to the extent necessary.
In each case, the reductions shall be made starting with the latest payment
or benefit. All determinations as to what amounts paid or payable to the
Employee constitute "parachute payments" and the present value thereof shall
be made in accordance with Section 280G of the Code and any rulings and
regulations promulgated thereunder and shall be made within thirty (30) days
after the Date of Termination by the Company's independent auditors.
7. Successors; Binding Agreement.
A. The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
or assignment had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor or assign to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
B. This Agreement will inure to the benefit of and be enforceable by
the Employee's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If the Employee
should die while any amounts would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Employee's devisee, legatee, or other designee or if there is no such
devisee, legatee, or designee, to the Employee's estate.
8. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by
the Employee as a result of: a) the termination of Employee's employment
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination of employment whether or not such contest or
dispute is resolved in the Employee's favor), or b) the Employee seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Employee
is or may be entitled to receive benefits.
9. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to:
Employee at:
Company at: Board of Directors
400 West 48th Avenue
Denver, Colorado 80216
with a copy to: The Secretary of the Company
400 West 48th Avenue
Denver, Colorado 80216
or to such other address as either party may have furnished to the other in
writing in accordance herewith. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of
address shall be effective only upon receipt.
10. Formal Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by final
and binding arbitration pursuant to the Commercial Arbitration Rules
("Rules") of the American Arbitration Association ("AAA"). The arbitration
shall be conducted in Denver, Colorado, with a single arbitrator selected by
both parties in accordance with the AAA Rules. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The completion of binding arbitration shall be a condition
precedent to the commencement of any civil action in any court of competent
jurisdiction to enter the final decision of the arbitrator.
11. Miscellaneous. This Agreement is not a contract of employment and,
except as provided at Section 4, shall not affect the right of either the
Employee or the Company to terminate the employment of the Employee with the
Company at any time. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreement or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Colorado without giving effect to
the conflicts of the laws principles thereof.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Employee has executed this Agreement
as of the day and year first above written.
VICORP RESTAURANTS, INC.
ATTEST:
By:____________________________________
Title:_________________________________
____________________________________
Secretary
EMPLOYEE:
_____________________________________
*
WITNESS:
____________________________________
This is Page 9 of an 9-page Severance Agreement between VICORP
Restaurants, Inc., and * dated ___________________.
