<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------
FORM 10-Q
[X] QUARTERLY REPORT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
------------------
COMMISSION FILE NUMBER: 1-13044
COOKER RESTAURANT CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 62-1292102
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
5500 Village Boulevard, West Palm Beach, Fl. 33407
(Address of principal executive offices) (zip code)
(407) 615-6000
Registrant's telephone number, including area code
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.
[X] [ ]
Yes No
7,151,222 COMMON SHARES, WITHOUT PAR VALUE
(Number of Common Shares outstanding as of the close of business
on March 31, 1996)
<PAGE> 2
Part I.
Item 1. Financial Statements.
COOKER RESTAURANT CORPORATION
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1995 1996
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 1,299 $ 1,071
Inventory.......................................................... 914 918
Preoperational costs............................................... 302 271
Prepaid expenses and other current assets.......................... 511 610
------------ ---------
Total current assets....................................... 3,026 2,870
Property and equipment............................................... 78,127 87,884
Other assets......................................................... 2,028 1,742
------------ ---------
$ 83,181 $92,496
========== =======
LIABILITIES
Current liabilities:
Accounts payable................................................... $ 2,421 $ 1,812
Accrued liabilities................................................ 5,543 5,848
Income taxes payable............................................... 783 1,287
Deferred income taxes.............................................. 79 79
------------ ---------
Total current liabilities.................................. 8,826 9,026
Long-term debt....................................................... 35,976 44,174
Deferred income taxes................................................ 433 433
------------ ---------
Total liabilities.......................................... 45,235 53,633
------------ ---------
Shareholders' equity:
Common shares -- without par value; authorized, 30,000,000 shares;
issued 7,663,000 and 7,664,000 at December 31, 1995 and March
31, 1996, respectively.......................................... 26,082 26,068
Retained earnings.................................................. 18,013 18,944
Treasury stock at cost, 513,000 and 513,000 shares at December 31,
1995 and March 31, 1996, respectively........................... (6,149) (6,149)
------------ ---------
37,946 38,863
------------ ---------
$ 83,181 $92,496
========== =======
</TABLE>
<PAGE> 3
COOKER RESTAURANT CORPORATION
STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
---------------------
APRIL 2, MARCH 31,
1995 1996
------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Sales................................................................. $22,899 $25,486
------- ---------
Cost of sales:
Food and beverages................................................. 6,457 7,167
Labor.............................................................. 8,116 8,817
Restaurant operating expenses...................................... 3,677 4,312
Restaurant depreciation and amortization........................... 1,093 1,004
------- ---------
19,343 21,300
------- ---------
Restaurant operating income........................................... 3,556 4,186
------- ---------
Other expenses (income):
General and administrative......................................... 1,261 1,517
Interest expense................................................... 499 544
Gain on sale of property........................................... (2) --
Interest and other income.......................................... (8) --
------- ---------
1,750 2,061
------- ---------
Income before income taxes............................................ 1,806 2,125
Provision for income taxes............................................ 801 765
------- ---------
Net income............................................................ $ 1,005 $ 1,360
======= =======
Earnings per common share............................................. $ 0.14 $ 0.18
======= =======
Weighted average number of common shares and common equivalent shares
outstanding........................................................ 7,236 7,556
======= =======
</TABLE>
<PAGE> 4
COOKER RESTAURANT CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
----------------------
APRIL 2, MARCH 31,
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net Income......................................................... $ 1,005 $ 1,360
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................... 1,211 1,128
(Increase) in current assets.................................... (23) (316)
(Increase) decrease in deposits and other assets................ (48) 33
Increase in current liabilities................................. 637 402
------- --------
Net cash provided by operating activities....................... 2,782 2,607
------- --------
Cash flows from investing activities:
Purchase of property and equipment................................. (1,039) (10,616)
------- --------
Cash flows from financing activities:
Proceeds from (repayment on) borrowings............................ (255) 8,648
Repurchase of debentures........................................... (643) (400)
Redemption of debentures........................................... -- (50)
Exercise of stock options.......................................... -- 12
Dividends paid..................................................... (380) (429)
------- --------
Net cash provided by (used in) financing activities............. (1,278) 7,781
------- --------
Net increase (decrease) in cash and cash equivalents................. 465 (228)
Cash and cash equivalents at beginning of period..................... 2,087 1,299
Cash and cash equivalents at end of period........................... $ 2,552 $ 1,071
======= ========
</TABLE>
<PAGE> 5
Note 1: Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included.
<PAGE> 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.
GENERAL
The Company operates 40 restaurants (the "Restaurants") in ten states in
the Midwest, East and Southeast regions of the United States, and intends to
open six additional Restaurants during the remainder of 1996 and 11 to 13
Restaurants in 1997. Although the Company historically has been able to open
its Restaurants in a timely and cost-effective manner, there can no assurance
that new Restaurants can be opened on anticipated opening dates or at
anticipated cost levels in the future.
A new Restaurant is included in the same store sales calculation at the
beginning of the first quarter following the Restaurant's first full five
quarters of operation. At March 31, 1996, there were 33 Restaurants included in
the calculation of same store sales.
The Company's labor costs per Restaurant traditionally have been higher
than those of its competitors due to the Company's strategy of striving to
provide superior service to its customers. During 1993 and 1994, labor costs as
a percentage of sales increased to a level higher than had been experienced in
the past. As a result of changes initiated by new management, the Company's
labor costs as a percentage of sales decreased from 37.3% in 1994 to 34.9% in
1995 by reducing the average number of managers per Restaurant from
approximately 8.3 to 5.5.
Pre-opening costs consist primarily of costs for employee training and
relocation and supplies incurred in connection with the opening of a new
Restaurant. These costs are accumulated to the date that the Restaurant is
opened and are amortized on a straight-line basis over one year from the date of
opening. Prior to 1993, pre-opening costs were amortized on a straight-line
basis over three years. At January 1, 1996, the unamortized portion of
pre-opening costs for new Restaurants was $302,000, all of which will be charged
against earnings during 1996.
RESULTS OF OPERATIONS
The operating results of the Company expressed as a percentage of sales
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
APRIL 2, MARCH 31,
1995 1996
-------- ---------
<S> <C> <C>
Sales............................................ 100.0% 100.0%
-------- -------
Cost of sales:
Food and beverages............................. 28.2 28.1
Labor.......................................... 35.4 34.6
Restaurant operating expenses.................. 16.1 16.9
Restaurant depreciation and amortization....... 4.8 4.0
-------- -------
84.5 83.6
-------- -------
Restaurant operating income...................... 15.5 16.4
-------- -------
Other (income) expenses:
General and administrative..................... 5.5 6.0
Interest expense............................... 2.1 2.1
Gain on sale of property....................... -- --
Interest and other income...................... -- --
-------- -------
7.6 8.1
-------- -------
Income before income taxes....................... 7.9 8.3
Provision for income taxes....................... 3.5 3.0
-------- -------
Net income....................................... 4.4% 5.3%
======= =======
- ---------------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED APRIL 2, 1995
Sales increased $2,587,000, or 11.3%, from $22,899,000 for the three months
ended April 2, 1995 to $25,486,000 for the three months ended March 31, 1996.
The increase was due primarily to sales at new Restaurants opened after April 2,
1995. The openings included Gainesville, Florida, Sylvania (Toledo), Ohio, and
Solon (Cleveland), Ohio opened in 1995 and Hamilton Road (Columbus), Ohio and
Murfreesboro (Nashville), Tennessee opened in 1996. Same store sales decreased
0.9% for the three months ended March 31, 1996 from the comparable period in
1995, primarily as a result of severe winter weather in January. However, same
store sales increased in both February and March and average sales for all
stores increased 2.1% for the three months ended March 31, 1996.
Restaurant operating income increased $630,000, or 17.7%, from $3,556,000
for the three months ended April 2, 1995 to $4,186,000 for the three months
ended March 31, 1996. Restaurant operating income as a percentage of sales
increased from 15.5% for the three months ended April 2, 1995 to 16.4% for the
three months ended March 31, 1996. The increase was primarily the result of
continued lower labor expenses and lower amortization of pre-opening expenses.
The cost of food and beverages as a percentage of sales decreased from
28.2% for the three months ended April 2, 1995 to 28.1% for the three months
ended March 31, 1996. The decrease was the result of minor changes in the mix of
menu items sold in 1996.
Labor costs as a percentage of sales decreased from 35.4% for the three
months ended April 2, 1995 to 34.6% for the three months ended March 31, 1996.
The reduction was due to changes in store management staffing implemented during
1995.
11
<PAGE> 7
Restaurant operating expenses as a percentage of sales increased from 16.1%
for the three months ended April 2, 1995 to 16.9% for the three months ended
March 31, 1996. The increase was primarily attributable to increased repair and
maintenance, snow removal, utilities and property taxes.
Restaurant depreciation and amortization of store pre-opening expenses as a
percentage of sales decreased from 4.8% for the three months ended April 2, 1995
to 4.0% for the three months ended March 31, 1996. This decrease was due to
lower amortization of pre-opening expenses which resulted from the slowdown in
the number of new Restaurants opened in 1995.
General and administrative expenses as a percentage of sales increased from
5.5% for the three months ended April 2, 1995 to 6.0% for the three months ended
March 31, 1996. This increase resulted from higher labor and related training
expenses for the increased number of manager trainees in 1996. During the three
months ended April 2, 1995, the Company slowed its new Restaurant opening rate
and reduced the number of managers per Restaurant. During the three months ended
March 31, 1996, the Company significantly increased its hiring of management
trainees in anticipation of an accelerated opening schedule.
The provision for income taxes as a percentage of income before income
taxes decreased from 44.4% for the three months ended April 2, 1995 to 36.0% for
the three months ended March 31, 1996. The provision for the three months ended
April 2, 1995 was higher due to the inclusion of the Company's estimate of
additional liabilities for prior years.
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements arise from the development and
opening of new Restaurants. The Company's primary sources of working capital are
cash flow from operations and borrowings under the Company's revolving/term loan
(the "Credit Agreement"). The Company's cash flow from operations was
$6,203,000, $7,571,000, $9,495,000 and $2,607,000 for 1993, 1994, 1995 and the
three months ended March 31, 1996, respectively. The Credit Agreement provides
for a $33,000,000 line of credit and, as of March 31, 1996, the Company had
outstanding borrowings of $26,754,000 under the Credit Agreement. On May 13,
1996, the Company completed a public offering of 2,875,000 Common Shares (the
"Offering"). The Company intends to use the net proceeds from the Offering,
which were approximately $37.8 million to reduce outstanding borrowings under
the Credit Agreement (which was approximately $29 million on May 13, 1996), to
finance the development of new Restaurants and for general corporate purposes.
Capital expenditures were $23,627,000, $11,318,000, $17,200,000 and
$10,616,000 for 1993, 1994, 1995 and the three months ended March 31, 1996,
respectively. The Company has opened three Restaurants to date in 1996, and
intends to open six additional Restaurants in the remainder of 1996 and 11 to 13
Restaurants in 1997. Total capital expenditures are estimated to be
approximately $18,500,000 in 1996 and approximately $30,000,000 in 1997. The
Company believes that cash flow from operations, borrowings from the Credit
Agreement and proceeds from the Offering will be sufficient to fund the planned
expansion as well as the ongoing maintenance and remodeling of existing
Restaurants through 1997. The Company's ability to expand will depend on a
number of factors, including the selection and availability of suitable
locations, hiring and training sufficiently skilled management and personnel,
adequate financing, constructing or acquiring Restaurants at a reasonable cost
and other factors, some of which are beyond the control of the Company. While
the Company has in the past successfully opened new Restaurants, there can be no
assurance that the Company will be able to continue to open new Restaurants or
that, if opened, those Restaurants can be operated profitably.
In 1992, the Company issued its Convertible Debentures in the principal
amount of $23,000,000 in a public offering. Under the terms of the Indenture
pursuant to which the Convertible Debentures were issued,
<PAGE> 9
the Company is required to redeem up to $1,150,000 principal amount on November
1 of each year if timely request is made by holders. In 1994 and 1995, the
Company redeemed $1,150,000 and $1,150,000, respectively, of the Convertible
Debentures as a result of requests by holders. In addition, the Company is
required to redeem up to $25,000 per deceased holder during each fiscal year. In
1994, 1995 and the three months ended March 31, 1996, the Company redeemed
$50,000, $30,000, and $50,000, respectively, of the Convertible Debentures by
reason of the death of holders. In 1994, the Company purchased $2,500,000
principal amount of the Convertible Debentures on the open market at a market
price of $1,618,000, in 1995 purchased $250,000 principal amount at a market
price of $222,000 and in the first quarter of 1996, purchased $400,000 principal
amount at $363,000. All of the redemptions and purchases of Convertible
Debentures during 1994 and 1995 were made with funds obtained from loans under
the Credit Agreement.
In March 1994, the Company entered into a guaranty agreement with First
Union National Bank of Tennessee ("First Union") pursuant to which the Company
guaranteed the payment of a $5,000,000 loan to G. Arthur Seelbinder, Chairman of
the Board and Chief Executive Officer of the Company. First Union also is the
lender to the Company under the Credit Agreement. In 1995, the Company requested
that Mr. Seelbinder refinance the $5,000,000 loan with a bank that was not a
lender to the Company. In July 1995, Mr. Seelbinder refinanced the loan with
NationsBank of Tennessee N.A. ("NationsBank") and incurred refinancing costs of
approximately $42,000, which were paid by the Company. As a condition to the
refinancing, NationsBank required that the Company reaffirm its guaranty of the
$5,000,000 loan to Mr. Seelbinder. The NationsBank loan bears interest at a per
annum rate equal to 0.25% over the prime rate of interest charged by NationsBank
from time to time and is due and payable on August 1, 1997. Mr. Seelbinder
pledged 570,000 of his Common Shares to NationsBank as collateral for the
$5,000,000 loan and as collateral for three additional loans aggregating
$2,975,000 in principal amount made to Mr. Seelbinder by NationsBank. The loan
agreement between Mr. Seelbinder and NationsBank provides that if there were a
default with respect to any of the four loans or a default by the Company under
the Credit Agreement, NationsBank would be able to declare all four loans
immediately due and payable. The guaranty agreement provides that the Bank will
apply the proceeds from the sale of the pledged shares first to the $5,000,000
loan guaranteed by the Company. The guaranty agreement also provides that in the
event the Bank is unable to liquidate the pledged shares within 120 days after
the occurrence of a default, the Company will pay the unsatisfied portion of the
$5,000,000 note. Mr. Seelbinder agreed to pay the Company an annual fee in the
amount of 0.25% of the principal amount of the loan during each year that the
Company's guaranty is outstanding.
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1. Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 28.2 of
Registrant's quarterly report on Form 10-Q for the quarterly
period ended March 29, 1992; Commission File Number
0-16806).
3.2. Amended and Restated Code of Regulations of the Registrant
(incorporated by reference to Exhibit 4.5 of the
Registrant's quarterly report on Form 10-Q for the fiscal
quarter ended April 1, 1990; Commission File No. 0-16806).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS.
4.1. See Articles FOURTH, FIFTH and SIXTH of the Amended and
Restated Articles of Incorporation of the Registrant (see
3.1 above).
4.2. See Articles One, Four, Seven and Eight of the Amended and
Restated Code of Regulations of the Registrant (see 3.2
above).
4.3. Rights Agreement dated as of February 1, 1990 between the
Registrant and National City Bank (incorporated by
reference to Exhibit 1 of the Registrant's Form 8-A filed
with the Commission on February 9, 1990; Commission File No.
0-16806).
<PAGE> 11
4.4. Amendment to Rights Agreement dated as of November 1, 1992
between the Registrant and National City Bank (incorporated
by reference to Exhibit 4.4 of Registrant's annual report on
Form 10-K for the fiscal year ended January 3, 1993 (the
"1992 Form 10-K"); Commission File No. 0-16806).
4.5. Letter dated October 29, 1992 from the Registrant to First
Union National Bank of North Carolina (incorporated by
reference to Exhibit 4.5 to the 1992 Form 10-K).
4.6. Letter dated October 29, 1992 from National City Bank to the
Registrant (incorporated by reference to Exhibit 4.6 to the
1992 Form 10-K).
4.7. See Section 7.4 of the Amended and Restated Loan Agreement
dated December 22, 1995 between Registrant and First Union
National Bank of Tennessee (incorporated by reference to
Exhibit 10.4 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1995,
Commission File No. 1-13044).
4.8. Indenture dated as of October 28, 1992 between Registrant
and First Union National Bank of North Carolina, as Trustee
(incorporated by reference to Exhibit 2.5 of Registrant's
Form 8-A filed with the Commission on November 10, 1992;
Commission File Number 0-16806).
(10) MATERIAL CONTRACTS
10.1. Purchase and Sale Agreement dated October 20, 1995 between
GMRI, Inc. and Registrant (incorporated by reference to
Exhibit 99.1 of the Registrant's Current Report on Form 8-K
dated January 4, 1996 (the "January 1996 8-K"); Commission
File No. 1-13044).
10.2. First Amendment to Purchase and Sale Agreement dated October
__, 1995 between GMRI, Inc. and Registrant (incorporated by
reference to Exhibit 99.2 of the January 1996 8-K;
Commission File No. 1-13044).
10.3 The Registrant's 1996 Officers' Stock Option Plan.
(incorporated by reference to Exhibit 10.10 of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 1-13044).
(27) FINANCIAL DATA SCHEDULE.
27.1. Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
A current report on Form 8-K dated January 4, 1996 was filed by the
Registrant reporting under Item 2 (Aquisition or Disposition of Assets)
reporting the purchase of six properties from Darden Restaurants during the
first quarter of fiscal 1996.
<PAGE> 12
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.
COOKER RESTAURANT CORPORATION
(Registrant)
Date: May 13, 1996
By: /s/ G. Arthur Seelbinder
----------------------------------
G. Arthur Seelbinder
Chairman of the Board and Chief Executive Officer
By: /s/ David C. Sevig
-----------------------------------
David C. Sevig
Vice President - Chief Financial Officer
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit: Page No.
<S> <C> <C>
3.1. Amended and Restated Articles of Incorporation of the Registrant *
3.2. Amended and Restated Code of Regulations of the Registrant *
4.1. See Article Fourth, Fifth and Sixth of the Amended and Restated Articles of See 3.1. above
Incorporation of the Registrant
4.2. See Articles One, Four, Seven and Eight of the Amended and Restated Code of See 3.2. above
Regulations of the Registrant
4.3. Rights Agreement dated as of February 1, 1990 between the Registrant and *
National City Bank
4.4. Amendment to Rights Agreement dated as of November 1, 1992 between the *
Registrant and National City Bank
4.5. Letter dated October 29, 1992 from the Registrant to First Union National *
Bank of North Carolina
4.6. Letter dated October 29, 1992 from National City Bank to the Registrant *
4.7. See Section 7.4 of the Amended and Restated Loan Agreement dated December 22, *
1995 between Registrant and First Union National Bank of Tennessee
4.8. Indenture dated as of October 28, 1992 between Registrant and First Union *
National Bank of North Carolina, as Trustee
10.1. Purchase and Sale Agreement dated October 20, 1995 between GMRI, Inc. and *
Registrant
10.2. First Amendment to Purchase and Sale Agreement dated October __, 1995 between *
GMRI, Inc. and Registrant
10.3. The Registrant's 1996 Officers' Stock Option Plan *
27.1 Financial Data Schedule
*Incorporated by reference
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000832412
<NAME> COOKER RESTAURANT CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1071000
<SECURITIES> 0
<RECEIVABLES> 113000
<ALLOWANCES> 0
<INVENTORY> 918000
<CURRENT-ASSETS> 2870000
<PP&E> 87884000
<DEPRECIATION> 14197000
<TOTAL-ASSETS> 92496000
<CURRENT-LIABILITIES> 9026000
<BONDS> 44174000
0
0
<COMMON> 26068000
<OTHER-SE> 12795000
<TOTAL-LIABILITY-AND-EQUITY> 92496000
<SALES> 25486000
<TOTAL-REVENUES> 25486000
<CGS> 21300000
<TOTAL-COSTS> 21300000
<OTHER-EXPENSES> 2061000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 544000
<INCOME-PRETAX> 2125000
<INCOME-TAX> 765000
<INCOME-CONTINUING> 1360000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1360000
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0
</TABLE>
