<PAGE> 1
SECURITIES AND 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: June 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
-------------- --------------
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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, FLORIDA 33407
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (561) 615-6000
Indicate by check X 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
10,159,000 COMMON SHARES, WITHOUT PAR VALUE
(Number of Common Shares outstanding as of the close of business
on July 31, 1998)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
June 28, December 28,
1998 1997
-------- ------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,504 $ 4,685
Inventory 1,496 1,509
Land held for sale 55 55
Prepaid and other current assets 791 1,057
-------- --------
Total current assets 6,846 7,306
Property and equipment 139,812 134,190
Other assets 1,558 1,425
-------- --------
$148,216 $142,921
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities long-term debt $ 3,300 $ --
Notes payable 425 --
Accounts payable 4,207 4,668
Accrued liabilities 6,810 6,857
Income taxes payable 848 61
-------- --------
Total current liabilities 15,590 11,586
Long-term debt 39,115 42,415
Deferred income taxes 1,813 1,813
Other liabilities 629 635
-------- --------
Total liabilities 57,147 56,449
-------- --------
Shareholders' equity:
Common shares-without par value: authorized 30,000,000
shares; issued 10,548,000 and 10,548,000 at June 28,
1998 and December 28, 1997, respectively 62,555 63,039
Retained earnings 33,047 29,570
Treasury stock at cost, 389,000 and 526,000 shares at
June 28, 1998 and December 28, 1997, respectively (4,533) (6,137)
-------- --------
Total shareholder's equity 91,069 86,472
-------- --------
$148,216 $142,921
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
<TABLE>
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- -------- -------- --------
(In Thousands Except Per (In Thousands Except Per
Share Data) Share Data)
<S> <C> <C> <C> <C>
Sales $39,955 $33,221 $80,389 $65,728
------- ------- ------- -------
Cost of sales:
Food and beverage 11,495 9,574 22,917 18,833
Labor 13,930 11,408 27,784 22,577
Restaurant operating expenses 7,349 5,657 14,332 11,113
Restaurant depreciation 1,556 1,060 3,020 2,124
General and administrative 2,387 1,730 4,942 4,123
Interest expense, net 739 416 1,326 675
------- ------- ------- -------
37,456 29,845 74,321 59,445
------- ------- ------- -------
Income before income taxes and cumulative effect of a
change in accounting principle 2,499 3,376 6,068 6,283
Provision for income taxes before cumulative effect of
a change in accounting principle 659 1,157 1,890 2,153
------- ------- ------- -------
Income before cumulative effect of a change
in accounting principle 1,840 2,219 4,178 4,130
Cumulative effect of a change in accounting for preoperational
costs (less tax of $253) -- -- -- 496
------- ------- ------- -------
Net income $ 1,840 $ 2,219 $ 4,178 $ 3,634
======= ======= ======= =======
Basic earnings per share:
Income before cumulative effect of change in
accounting principle $ 0.18 $ 0.22 $ 0.41 $ 0.41
Cumulative effect of change in accounting for
preoperational costs -- -- -- (0.05)
------- ------- ------- -------
Net income $ 0.18 $ 0.22 $ 0.41 $ 0.36
======= ======= ======= =======
Diluted earnings per share:
Income before cumulative effect of change in
accounting principle $ 0.18 $ 0.22 $ 0.41 $ 0.40
Cumulative effect of change in accounting for
preoperational costs -- -- -- (0.05)
------- ------- ------- -------
Net income $ 0.18 $ 0.22 $ 0.41 $ 0.35
======= ======= ======= =======
Weighted average number of common shares outstanding - basic 10,130 10,019 10,076 10,027
Weighted average number of common shares outstanding - diluted 10,326 10,208 10,253 10,257
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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<TABLE>
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
<CAPTION>
Six Months Ended
June 28, June 29,
1998 1997
-------- --------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,178 $ 3,634
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in accounting principle -- 496
Depreciation and amortization 3,249 2,446
Deferred income taxes -- 253
Loss (gain) on sale of property 1 (53)
Decrease (increase) in current assets 279 (511)
(Increase) decrease in other assets (132) 76
Increase (decrease) in current liabilities 357 (872)
------- --------
Net cash provided by operating activities 7,932 5,469
------- --------
Cash flows from investing activities:
Purchases of property and equipment (8,879) (14,733)
Proceeds from sale of property and equipment 7 1,486
------- --------
Net cash used in investing activities (8,872) (13,247)
Cash flows from financing activities:
Proceeds from note payable 425 --
Payment on note payable -- (4,613)
Proceeds from borrowings -- 14,344
Redemption of debentures -- (48)
Exercise of stock options 1,121 --
Purchases of treasury stock -- (585)
Capital lease obligations (85) --
Dividends paid (702) (702)
------- --------
Net cash provided by financing activities 759 8,396
------- --------
Net (decrease) increase in cash and cash equivalents (181) 618
Cash and cash equivalents, at beginning of period 4,685 2,009
Cash and cash equivalents, at end of period $ 4,504 $ 2,627
======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
COOKER RESTAURANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1998 and June 29, 1997
(Unaudited)
Note 1: Basis of Presentation.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying condensed consolidated financial statements contain
all adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position of the Cooker Restaurant Corporation and
subsidiaries (the "Company"), after elimination of intercompany accounts and
transactions, at June 28, 1998 and the statements of income and cash flows for
the three months ended June 28, 1998. The results of operations for the three
months ended June 28, 1998 are not necessarily indicative of the operating
results expected for the fiscal year ended January 3, 1999. These financial
statements should be read in conjunction with the financial statements and notes
thereto contained in the Company's annual report on Form 10-K for the fiscal
year ended December 28, 1997.
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
Note 2: Earnings Per Share.
In December 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which establishes
new guidelines for the calculation of earnings per share. Basic earnings per
share have been computed by dividing net income by the weighted average number
of shares outstanding during the year. Diluted earnings per share have been
computed assuming the exercise of stock options, as well as their related income
tax effects. Earnings per share for all prior periods have been restated to
reflect the provisions of this statement.
Convertible subordinated debentures outstanding as of June 28, 1998 are
convertible into 691,710 shares of common stock at $21.5625 per share and are
due October 2002, were not included in the computation of diluted EPS for each
quarters ended June 29, 1997 and June 28, 1998 as the inclusion of the
convertible subordinated debentures would be antidilutive.
Options to purchase 886,115 and 832,715 shares at prices ranging from $10.375 to
$21.75 per share and $10.875 to $21.75 per share, were outstanding for the six
months ended June 28, 1998 and June 29, 1997, respectively, but were not
included in the computation of diluted EPS because the options' exercise prices
were greater than the average market price of the common shares for the six
months ended June 28, 1998 and June 29, 1997 respectively. The options expire
between October 1999 and May 2008 for the six months ended June 28, 1998 and
between October 1999 and January 2007 for the six months ended June 29, 1997.
Note 3: Recent Accounting Pronouncements.
Effective December 29, 1997, the Company adopted the Financial Accounting
Standard Board ("FASB") No. 130 "Reporting Comprehensive Income" and No. 131 -
"Disclosure about Segments of an Enterprise and Related Information." The
adoption of these pronouncements did not have a significant impact on the
Company's consolidated financial position, results of operations or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). This Statement establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation,
an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The accounting for changes
in the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. This Statement
shall be effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. The Company has not determined the effect of the adoption of
SFAS No. 133 on the Company's results of operations or statement of financial
position.
Note 4: ESOP Plan Termination.
During the second quarter the Board of Directors approved the termination of the
Cooker Restaurant Corporation Employee Stock Ownership Plan (the "Plan"). The
effective date of the termination was June 30, 1998. The Plan
5
<PAGE> 6
termination did not have a significant impact on the Company's consolidated
financial position, results of operations or cash flows.
Note 5: Derivative Financial Instruments.
The fair value of the interest swap agreement approximated ($447,000) at
June 28, 1998. The fair value is estimated using option pricing models that
value the potential for the swaps to become in-the-money (liability) through
changes in interest rates during the remaining term of the agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "believe," "anticipate," "estimate,"
"project," and similar expressions are intended to identify such forward-looking
statements. Forward-looking statements may be made by management orally or in
writing, including, but not limited to, in press releases, as part of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and as part of other sections of this Report or other filings.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their respective dates, and are subject to
certain risks, uncertainties and assumptions. These statements are based on
management's present assumptions as to future trends, including economic trends,
prevailing interest rates, the availability and cost of raw materials, the
availability of the capital resources necessary to complete the Company's
expansion plans, government regulations, especially regulations regarding taxes,
labor and alcoholic beverages, competition, consumer preferences and similar
factors. Changes in these factors could affect the validity of such assumptions
and could have a materially adverse effect on the Company's business.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of sales certain items
appearing in the Company's statements of income.
<TABLE>
COOKER RESTAURANT CORPORATION
RESULTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- -------- -------- --------
(IN PERCENT)
<S> <C> <C> <C> <C>
Sales 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of sales:
Food and beverage 28.8 28.8 28.5 28.7
Labor 34.9 34.3 34.6 34.3
Restaurant operating expenses 18.4 17.0 17.8 16.9
Restaurant depreciation 3.9 3.2 3.8 3.2
General and administrative 6.0 5.2 6.1 6.3
Interest Expense, net 1.8 1.3 1.6 1.0
----- ----- ----- -----
93.8 89.8 92.4 90.4
----- ----- ----- -----
Income before income taxes and cumulative effect of a
change in accounting principle 6.2 10.2 7.6 9.6
Provision for income taxes before cumulative effect of
a change in accounting principle 1.6 3.5 2.4 3.3
----- ----- ----- -----
Income before cumulative effect of a change
in accounting principle 4.6 6.7 5.2 6.3
Cumulative effect of a change in accounting for
preoperational costs (less tax of $253) -- -- -- 0.8
----- ----- ----- -----
Net income 4.6 6.7 5.2 5.5
===== ===== ===== =====
</TABLE>
6
<PAGE> 7
Sales for the second quarter of fiscal 1998 increased 20.3% to $39,955,000
compared to sales of $33,221,000 for the second quarter of fiscal 1997. For the
first half, sales increased 22% to $80,389,000 compared to sales of $65,728,000
last year. The increases for both the second quarter and the first half are due
primarily to the opening of new Restaurants. Same store sales were down 1.8% for
the quarter. Second quarter average unit volumes per operating week of $48,431
were down 1.3% from last year. The check average of $11.32 was up 4.7% from last
year.
The second quarter and the first half cost of goods sold as a percentage of
sales were even and down 20 basis points respectively from the same period last
year to 28.8% for the second quarter and 28.5% for the first half. This was
achieved despite an increase in produce costs in the second quarter.
Labor cost as a percentage of sales for the second quarter was up slightly
from last year while actual dollar labor cost per operating week for the second
quarter was unchanged from last year. Labor cost for the first half of fiscal
1998 increased from 34.3% to 34.6%.
Restaurant operating expense for the second quarter increased to 18.4% as a
percent of sales. Areas showing increased spending were travel and utilities,
due to additional store openings, and marketing. Restaurant operating expense
for the six month period increased from 16.9% in 1997 to 17.8% in 1998. The
increases again came from utilities and marketing.
General and administrative expenses for the second quarter of 6.0% were 80
basis points above last year; first half expense of 6.1% were 20 basis points
lower than last year. The increase in the second quarter was due to increases in
travel and wages due to new store openings as well as for marketing costs
associated with advertising testing.
The provision for income taxes in the second quarter as a percentage of
income before taxes decreased to 26.4% due in part to a restructuring of state
and local tax reporting but mainly to a reduced liability in the amount of
$175,000 for a prior year audit. The first half provision for income taxes
as a percentage of income before taxes was 31.1% compared to 34.3% in the
prior year.
Net interest expense for the second quarter of 1.8% was 50 basis points
more than last year. For the first half net interest expense of 1.6% was 60
basis points higher than last year. The increase in net interest expense in the
second quarter and first half are the result of increased borrowings on our line
of credit as compared to last year.
LIQUIDITY AND CAPITAL RESOURCES
On August 11, 1998, the Company announced that it intended to commence a
Dutch Auction tender offer (the "Offer") to purchase for cash up to 4,000,000
shares of its issued and outstanding common stock, without par value, at a
purchase price of not greater than $12.00 nor less than $10.50 per share. On or
about August 12, 1998, the Company expects to file with the Securities and
Exchange Commission an Issuer Tender Offer Statement on Schedule 13E-4 (the
"Statement") relating to the Offer. The Offer is conditioned upon the Company
having obtained sufficient financing to fund the purchase of shares tendered in
the Offer and certain other conditions set forth in the Offer to Purchase filed
as an exhibit to the Statement. The Offer is not conditioned upon any minimum
number of shares being tendered.
The amount required to fund the purchase of shares tendered in the Offer
(assuming a purchase price of $12 per share) and pay related taxes, fees and
expenses of such transactions is estimated to be approximately $52 million. The
Company intends to finance the Offer and to pay related taxes, fees and
expenses, by entering into sale-leaseback transactions (the "Sale-Leaseback
Transactions") with respect to certain real estate properties where the
Company's restaurants are located (each a "Property" and collectively the
"Properties"), which are currently owned by the Company or by its affiliate,
Southern Cooker, Limited Partnership, an Ohio limited partnership. On August 11,
1998, the Company received a written waiver (the "Waiver Letter") from First
Union National Bank of Tennessee ("First Union") under the Company's revolving
term loan facility consenting to the Company's entering into Sale-Leaseback
Transactions involving up to 25 Properties for up to $57,500,000 of proceeds and
using such proceeds to finance the Offer. On August 7, 1998, the Company
received a written commitment letter (the "Commitment Letter") from CNL Fund
Advisors, Inc. ("CNL") for the purchase by CNL of up to 30 Properties for an
aggregate purchase price of up to $70 million, and the subsequent lease back to
the Company of each such Property on the terms and conditions described in the
Commitment Letter. Under the Commitment Letter, in the event that the Company
acquires less than 4,000,000 shares as a result of the Offer, the Company would
have the right to consummate Sale-Leaseback Transactions with respect to such
lesser number of Properties as would be required to consummate the purchase of
shares pursuant to the Offer and to pay related taxes, fees and expenses. The
Offer is conditioned upon the closing of a sufficient number of Sale-Leaseback
Transactions to (i) finance the Offer, and (ii) pay related taxes, fees and
expenses. If Sale-Leaseback Transactions have not been consummated on or prior
to September 10, 1998 (the "Expiration Date") in an amount sufficient to finance
the Company's purchase of shares tendered pursuant to the Offer and to pay
related taxes, fees and expenses, the Company intends to extend the Expiration
Date from time to time for a period not to extend beyond December 15, 1998 until
such Sale-Leaseback Transactions have been consummated and the other conditions
to the Offer have been satisfied or waived.
Pursuant to the terms of and subject to the conditions set forth in the
Commitment Letter, CNL has agreed (i) to purchase the Properties from the
Company and (ii) to enter into lease agreements (each a "Lease") with the
Company with respect to such Properties. The Commitment Letter provides that
each Lease will have an initial term of fifteen years, and that the Company will
have the option to renew each Lease for two successive five year terms. The
annual minimum rent for the initial term of each Lease will be 9.98% of the
purchase price for such Property; the annual minimum rents applicable during the
first and second optional renewal terms will be 11% and 12.1%, respectively, of
the Purchase Price for such Property.
The closing of each Sale-Leaseback Transaction is subject to certain
conditions, including (i) the satisfactory completion by CNL of its due
diligence investigation with respect to, among other things, title, surveys,
environmental and other matters relating to the Properties, (ii) the absence of
any material adverse change in the financial condition of the Company and the
non-occurrence of any event which may, in the reasonable judgment of CNL, have a
material adverse effect upon the Company, and (iii) the execution and delivery
to CNL of definitive documentation for the purchase and sale of the relevant
Property and a Lease for such Property.
Copies of the Commitment Letter and the Waiver Letter have been filed as
exhibits to the Statement. Reference is made to such exhibits for a more
complete description of the Sale-Leaseback Transactions.
Excluding the Offer, the Company's principal capital requirements are for
working capital, new restaurant openings and improvements to existing
restaurants. The majority of the Company's financing for operations, expansion
and working capital is provided by internally generated cash flows from
operations and borrowings under a revolving term loan agreement with First
Union, which provides a $33,000,000 line of credit through June 30, 1999, with
maximum quarterly principal payments of $1,650,000 due January 4, 1999 and April
1, 1999 and the remaining outstanding balance due June 30, 1999.
During the six months ended June 28, 1998, the Company opened four new
units. Capital expenditures for these new units and the refurbishing and
remodeling of existing units totaled $8,879,000 and were funded by cash flows of
$7,932,000 from operations, and the Company's available cash balances. The
Company intends to open an additional 4 restaurants in 1998 for a total of 8 new
restaurants. The Company had previously planned to open a total of 12
restaurants in 1998, but in January, 1998, after reviewing the results of 1997,
including lower earnings per share in 1997 as compared to 1996 and a consequent
decline in Common Share prices, the Board of Directors determined to delay the
opening of 4 restaurants in order to allow senior management to focus their
efforts on rebuilding average unit volumes and Shareholder value. Total cash
expenditures for the 1998 expansion are estimated to be approximately $14.5
million. The Company believes that cash flow from operations together with
borrowings under the revolving term loan agreement will be sufficient to fund
the planned expansion, ongoing maintenance and remodeling of existing
restaurants as well as other working capital requirements. As of June 28, 1998,
the Company had borrowed $27,500,000 of the $33,000,000 available under its
revolving term loan agreement.
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The Company's operations are subject to factors outside its control. Any
one, or combination, of these factors could materially affect the results of the
Company's operations. These factors include: (a) changes in the general economic
conditions in the United States, (b) changes in prevailing interest rates, (c)
changes in the availability and cost of raw materials, (d) changes in the
availability of the capital resources necessary to complete the Company's
expansion plans; (e) changes in Federal and State regulations or interpretations
of existing legislation, especially concerning taxes, labor and alcoholic
beverages, (f) changes in the levels of competition from current competitors and
potential new competition, and (g) changes in the levels of consumer spending
and customer preferences. The foregoing should not be construed as an exhaustive
list of all factors which could cause actual results to differ materially from
those expressed in forward-looking statements made by the Company.
Forward-looking statements made by or on behalf of the Company are based on a
knowledge of its business and the environment in which it operates, but because
of the factors listed above, actual results may differ from those anticipated
results described in those forward-looking statements. Consequently, all of the
forward-looking statements made are qualified by these cautionary statements and
there can be no assurance that the actual results or developments anticipated by
the Company will be realized or, even if substantially realized, that they will
have the expected consequences to or effects on the Company or its business or
operations.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risk. Interest rate swap agreements are used to
reduce the potential impact of increases in interest rates on floating-rate
long-term debt. At June 28, 1998, the Company was party to an interest rate swap
agreement with a termination date of September 28, 2001. The agreement entitles
the Company to receive from the counterparty (a major bank), the amounts, if
any, by which the Company's interest payments on its $27,500,000 line of credit
(included in the $33,000,000 line of credit) exceed 6.25 percent through the
termination date. No amounts were received by the Company during the quarter
ended June 28, 1998.
The fair value of the interest swap agreement approximated ($447,000) at
June 28, 1998. The fair value is estimated using option pricing models that
value the potential for the swaps to become in-the-money (liability) through
changes in interest rates during the remaining term of the agreement.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate swap agreements. The Company
anticipates, however, that counterparties will be able to fully satisfy their
obligations under the contracts. The Company does not obtain collateral to
support financial instruments but monitors the credit standing of the
counterparties.
In 1994, the Board of Directors approved a guaranty by the Company of a
loan of $5,000,000 to G. Arthur Seelbinder, the Chairman of the Board. In
January, 1997, the Board approved a refinancing of the loan with The Chase
Manhattan Bank of New York (the "Bank"). As refinanced and extended the loan
(the "Loan") from the Bank bears interest at the Bank's prime rate or LIBOR plus
2%, is secured by 570,000 Common Shares and is guaranteed by the Company in the
principal amount up to $6,250,000 including capitalized interest. Pursuant to
the loan agreement between Mr. Seelbinder and the Bank, any reduction of the
principal amount outstanding under the Loan shall not entitle Mr. Seelbinder to
the advancement of additional funds under the Loan. The guaranty provides that
the Bank will sell the pledged shares and apply the proceeds thereof to the Loan
prior to calling on the Company for its guaranty. The term of the Loan has been
extended until January 31, 1999. At July 31, 1998, the amount of the Loan
outstanding, including capitalized and accrued interest, was approximately
$5,449,000 and the undiscounted fair market value of the pledged shares was
approximately $4,845,000. The guaranty secures the Loan until it is repaid or
refinanced without a guaranty. The Company would fund any obligation it incurs
under the terms of its guaranty from additional borrowings under its revolving
term loan agreement. There can be no assurance that the Loan will be repaid or
refinanced at January 31, 1999 on terms that will not result in continuing the
guaranty or in a material payment. Mr. Seelbinder agreed to pay to the Company a
guaranty fee each year that the guaranty remains outstanding beginning on March
9, 1994, the date the Company first issued its guaranty of the loan. The amount
of the guaranty fee is 1/4 percent of the outstanding principal amount of the
guaranteed loan on the date that the guaranty fee becomes due. Mr. Seelbinder
has agreed to use at least one-half of any incentive bonus paid to him by the
Company to pay principal and interest on the Loan beginning with any incentive
bonus paid for fiscal year
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<PAGE> 9
1998. Mr. Seelbinder has also agreed to make payments on the Loan in amounts
sufficient to ensure that the Loan balance on January 31, 1999 does not exceed
90 percent of the Loan balance on January 31, 1998. Mr. Seelbinder has informed
the Company that he intends to tender up to 570,000 shares (or approximately 77%
of the shares he currently owns) in the Offer and to use the after tax proceeds
thereof to repay a portion of the Loan. Because the value of the shares pledged
to secure the Loan at July 31, 1998 and on the date of this filing was, and
after the consummation of the Offer may be, less than the amount required under
the terms of the Loan, the Bank has the right to require Mr. Seelbinder to
provide more collateral or to pay down the Loan. The Bank has not indicated to
Mr. Seelbinder or the Company that it intends to take this action, but there can
be no assurance that the Bank will not do so. Mr. Seelbinder has also informed
the Company that following the consummation of the Offer and the repayment of a
portion of the Loan, he intends to discuss with the Bank or other financing
sources the refinancing of the balance of the Loan. There can be no assurance
that such refinancing will occur or that, if the Loan is refinanced, the
guaranty will not remain outstanding. Although there can be no assurance that
the Company will not be required to make a payment under the guaranty, the
Company believes that any such payment, if required to be made, would not have a
material adverse effect on the Company's financial position or results of
operations.
Effective December 29, 1997, the Company adopted the Financial Accounting
Standard Board ("FASB") No. 130 "Reporting Comprehensive Income" and No. 131 -
"Disclosure about Segments of an Enterprise and Related Information." The
adoption of these pronouncements did not have a significant impact on the
Company's consolidated financial position, results of operations or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). This Statement establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation,
an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The accounting for changes
in the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. This Statement
shall be effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. The Company has not determined the effect of the adoption of
SFAS No. 133 on the Company's results of operations or statement of financial
position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
An annual meeting of the shareholders of the Registrant was held on May
4, 1998.
The matters voted on at the annual meeting and the results of the
voting are set forth below:
(i) Election of David L. Hobson as a director for a term of three
years: 7,128,316 shares for, and 27,639 shares withheld
authority.
(ii) Election of Robin V. Holderman as a director for a term of
three years: 7,133,863 shares for, and 22,092 shares withheld
authority.
(iii) Election of G. Arthur Seelbinder as a director for a term of
three years: 7,129,813 shares for, and 26,142 shares withheld
authority.
ITEM 5. OTHER INFORMATION.
The Securities and Exchange Commission (the "Commission") recently
amended certain rules under the Securities Exchange Act of 1934 regarding the
use of a company's discretionary proxy voting authority with respect to
stockholder proposals submitted to the company for consideration at the
company's next annual meeting.
Pursuant to amended Rules 14a-5(e)(2) and 14a-4(c)(1), stockholder proposals
submitted to the Company outside the processes of Rule 14a-8 (i.e., the
procedures for placing a stockholder's proposal in the Company's proxy
materials) with respect to the Company's 1999 annual meeting of stockholders
will be considered untimely if received by the Company after February 20, 1999.
Accordingly, the proxy with respect to the Company's 1999 annual meeting of
shareholders will confer discretionary authority to vote on any stockholder
proposals received by the Company after such date.
9
<PAGE> 10
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.
Exhibit 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 fiscal quarter ended March 29, 1992; Commission File No. 0-16806).
Exhibit 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, INCLUDING
INDENTURES.
Exhibit 4.1
See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated Articles of
Incorporation of the Registrant (see Exhibit 3.1 above).
Exhibit 4.2
See Articles One, Four, Seven and Eight of the Amended and Restated Code of
Regulations of the Registrant (see Exhibit 3.2 above).
Exhibit 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).
Exhibit 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).
Exhibit 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).
10
<PAGE> 11
Exhibit 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).
Exhibit 4.7
See Section 7.4 of the Amended and Restated Loan Agreement dated December 22,
1995 between the Registrant and First Union National Bank of Tennessee
(incorporated by reference to Exhibit 10.4 of the Registrant's annual report on
Form 10-K for the fiscal year ended December 31, 1995; Commission File No.
0-16806).
Exhibit 4.8
Indenture dated as of October 28, 1992 between the 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 No. 0-16806).
27. FINANCIAL DATA SCHEDULES.
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
(B) REPORTS ON FORM 8-K.
No report on Form 8-K was filed by Registrant during the fiscal quarter ended
June 28, 1998.
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
(The "Registrant")
Date: August 12, 1998
By: /s/ G. Arthur Seelbinder
-----------------------------------------------
G. Arthur Seelbinder
Chairman of the Board, Chief Executive Officer,
and Director
(principal executive officer)
By: /s/ Mark W. Mikosz
-----------------------------------------------
Mark W Mikosz
Vice President - Chief Financial Officer
(principal financial and accounting officer)
11
<PAGE> 12
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
COOKER RESTAURANT CORPORATION
-----------------
FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
JUNE 28, 1998
-----------------
EXHIBITS
-----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12
<PAGE> 13
Exhibit 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 fiscal quarter ended March 29, 1992; Commission File No. 0-16806).
Exhibit 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).
Exhibit 4.1
See Articles FOURTH, FIFTH and SIXTH of the Amended and Restated Articles of
Incorporation of the Registrant (see Exhibit 3.1 above).
Exhibit 4.2
See Articles One, Four, Seven and Eight of the Amended and Restated Code of
Regulations of the Registrant (see Exhibit 3.2 above).
Exhibit 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).
Exhibit 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).
Exhibit 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).
Exhibit 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).
13
<PAGE> 14
Exhibit 4.7
See Section 7.4 of the Amended and Restated Loan Agreement dated December 22,
1995 between the Registrant and First Union National Bank of Tennessee
(incorporated by reference to Exhibit 10.4 of the Registrant's annual report on
Form 10-K for the fiscal year ended December 31, 1995, Commission File No.
0-16806).
Exhibit 4.8
Indenture dated as of October 28, 1992 between the 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 No. 0-16806).
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
14
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