[DESCRIPTION]COOKER RESTAURANT CORPORATION FORM 10-K
<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 July 4, 1999
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _____________ to _____________
_____________
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 requirements for the past 90 days.
|x| | |
Yes No
5,986,000 Common Shares, without par value
(number of common shares outstanding as of the close of business
on August 13, 1999)
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(In Thousands)
<TABLE>
July 4, January 3,
ASSETS 1999 1999
-------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,092 $ 2,520
Inventory 1,481 1,650
Land held for sale 56 55
Prepaid and other current assets 1,422 1,005
-------- ----------
Total current assets 5,051 5,230
Property and equipment 142,374 144,025
Restricted Cash 1,822 1,600
Other assets 2,352 2,412
Total assets $151,599 $ 153,267
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 6,785 $ 6,015
Accounts payable 3,188 3,357
Accrued liabilities 5,980 7,327
Income taxes payable 396 -
-------- ----------
Total current liabilities 16,349 16,699
Long-term debt 81,248 82,385
Deferred income taxes 3,346 3,406
Other liabilities 235 625
-------- ----------
Total liabilities $101,178 $ 103,115
Shareholders' equity:
Common Shares-without par value: authorized
30,000,000 shares; issued 10,548,000 at
July 4, 1999 and January 3, 1999 62,416 62,460
Retained earnings 36,601 34,895
Treasury stock, at cost, 4,562,000 and
4,371,000 shares at July 4, 1999 and
January 3, 1999, respectively (48,596) (47,203)
-------- ----------
Total shareholders' equity 50,421 50,152
Commitments and contingencies
$151,599 $ 153,267
======== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 3
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In Thousands Except Per Share Data)
<TABLE>
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 38,738 $ 39,955 $ 80,928 80,389
Cost of Sales:
Food and beverage 10,965 11,495 22,876 22,917
Labor 13,635 13,930 28,469 27,784
Restaurant operating expenses 6,702 7,349 14,330 14,332
Restaturant depreciation 1,660 1,556 3,293 3,020
General and administrative 2,468 2,387 5,490 4,942
Interest expense, net 1,551 739 3,155 1,326
-------- -------- -------- --------
36,981 37,456 77,613 74,321
Income before income taxes 1,757 2,499 3,315 6,068
Provision for income taxes 528 659 995 1890
-------- -------- -------- --------
Net income $ 1,229 $ 1,840 $ 2,320 4,178
======== ======== ======== ========
Basic earnings per share $ 0.21 $ 0.18 $ 0.38 $ 0.41
======== ======== ======== ========
Diluted earnings per share $ 0.20 $ 0.18 $ 0.38 $ 0.41
======== ======== ======== ========
Weighted average number of common
shares outstanding - basic 5,986 10,130 6,036 10,076
Weighted average number of common
shares outstanding - diluted 6,064 10,326 6,142 10,253
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 4
COOKER RESTAURANT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In Thousands)
<TABLE>
Six Months Ended
July 4, June 28,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,320 $ 4,178
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,550 3,249
Deferred income taxes (60) -
Loss on sale of property 4 1
(Increase) decrease in current assets (248) 279
Decrease (increase) in other assets 60 (132)
Increase (decrease) in current liabilities (1,120) 357
Decrease in other liabilities (297) -
-------- --------
Net cash provided by operating activities 4,209 7,932
Cash flows from investing activities:
Purchases of property and equipment (5,111) (8,879)
Proceeds from sale of property and equipment 3,085 7
Restricted Cash Deposits (222) -
-------- --------
Net cash used in investing activities (2,248) (8,872)
Cash flows from financing activities:
Proceeds from notes payable - 425
Proceeds from borrowings 14,250 -
Repayments of borrowings (14,591) -
Redemption of debentures (25) -
Exercise of stock options 49 1,121
Purchases of treasury stock (1,365) -
Capital lease obligations (93) (85)
Dividends paid (614) (702)
-------- --------
Net cash (used in) provided by financing
activities (2,389) 759
Net decrease in cash and cash equivalents (428) (181)
Cash and cash equivalents, at beginning of period 2,520 4,685
-------- --------
Cash and cash equivalents, at end of period $ 2,092 $ 4,504
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 5
COOKER RESTAURANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 4, 1999 and June 28, 1998
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 July 4, 1999, and the statements of income and cash flows for
the three and six months ended July 4, 1999. The results of operations for the
three and six months ended July 4, 1999, are not necessarily indicative of the
operating results expected for the fiscal year ended January 2, 2000. 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 January 3, 1999.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
Note 2: Earnings Per Share
The difference between the basic and diluted weighted-average number of
shares outstanding for the three and six months ended July 4, 1999 and June 28,
1998, represents the dilutive effect of certain stock options.
Convertible subordinated debentures outstanding as of July 4, 1999, are
convertible into 636,058 shares of common stock at $21.5625 per share and are
due October 2002. These were not included in the computation of diluted EPS for
each of the quarter ended July 4, 1999, as the inclusion of the convertible
subordinated debentures would be antidilutive.
Options to purchase 597,642 and 886,115 shares at prices ranging from
$6.50 to $21.75 per share and $10.375 to $21.75 per share, were outstanding for
the six months ended July 4, 1999, and June 28, 1998, 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 July 4, 1999 and June 28, 1998, respectively. The options expire
between October 1999 and May 2008 for the six months ended July 4, 1999 and
between October 1999 and May 2008 for the six months ended June 28, 1998.
Note 3: Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS. No 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"), subsequently amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of Effective Date
of FASB Statement 133 and Amendment of FASB Statement 133." This statement,
as amended, 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
fair value of a recognized asset, (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 the
changes in the fair value of a derivative (this is, gains and losses)
depends on the intended use of the derivative and the resulting designation.
This statement, as amended, shall be effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. The Company has not
determined the effect of the adoption of SFAS No. 133, as amended, on the
Company's results of operations or statement of financial position.
Note 4: Derivative Financial Instruments
The fair value of the interest rate swap agreement approximated
($214,396) at July 4, 1999. The fair value is estimated using option pricing
models that value the potential for swaps to become in-the-money (liability)
through changes in interest rates during the remaining term of the agreement.
<PAGE> 6
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," "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
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 Company earned $0.20 per diluted share for the quarter ended July 4,
1999 as compared to $0.18 per diluted share for the quarter ended June 28,
1998. The weighted-average number of shares outstanding (diluted) for the
quarter ended July 4, 1999, was approximately 4,000,000 less than the comparable
period in fiscal 1998 as a result of the share buyback completed in October of
1998.
The following table sets forth as a percentage of sales certain items appearing
in the Company's statements of income.
COOKER RESTAURANT CORPORATION
RESULTS OF OPERATIONS
(UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales:
Food and beverage 28.3% 28.8% 28.3% 28.5%
Labor 35.2% 34.9% 35.2% 34.6%
Restaurant operating expenses 17.3% 18.4% 17.7% 17.8%
Restaturant depreciation 4.3% 3.9% 4.0% 3.8%
General and administrative 6.4% 6.0% 6.8% 6.1%
Interest expense, net 4.0% 1.8% 3.9% 1.6%
------- ------- ------- -------
95.5% 93.8% 95.9% 92.4%
Income before income taxes 4.5% 6.2% 4.1% 7.6%
Provision for income taxes 1.4% 1.6% 1.2% 2.4%
------- ------- ------- -------
Net income 3.1% 4.6% 2.9% 5.2%
======= ======= ======= =======
</TABLE>
Sales for the second quarter of fiscal 1999 decreased 3.0%, or $1,217,000,
to $38,738,000 compared to sales of $39,955,000 for the second quarter of fiscal
1998. Sales for the six months ended July 4, 1999 increased 1.0%, or $539,000,
to $80,928,000 compared to sales of $80,389,000 for the six months ended June
28, 1998. The increase for the six months ended July 4, 1999, is due to the
opening of new Restaurants. Same store sales were down 4.9% for the quarter
ended July 4, 1999. Second quarter average unit volumes per operating week of
$43,821 were down 9.5% from last year. The average check of $11.68 was up 3.6%
from the second quarter last year.
<PAGE> 7
The cost of food and beverage for the second quarter of 1999 was
$10,965,000 as compared to $11,495,000 for the second quarter of 1998. The
decrease of $530,000 is primarily due to decreased sales for the quarter
compared to last year. The cost of food and beverage for the six months ended
July 4, 1999, was $22,876,000 as compared to $22,917,000 for the six months
ended June 28, 1998. As a percent of sales, the cost of food and beverage was
28.3% for the second quarter of 1999, as compared to 28.8% for the second
quarter of 1998. For the six month period, the cost of food and beverage as a
percent of sales was 28.3% for 1999, as compared to 28.5% for the same period
in 1998. The improvement in 1999 is due primarily to the a menu price increase
in the fourth quarter of 1998, as well as lower produce prices for the period
in 1999 as compared to 1998.
Labor costs for the second quarter of 1999 were $13,635,000 as compared to
$13,930,000 for the second quarter of 1998. The decrease of $295,000 is
primarily due to the decrease in sales and average unit volume during the
comparable period, which resulted in lower demand for labor hours. Labor costs
as a percent of sales for the second quarter of 1999 were 35.2% as compared to
34.9% for the quarter ended June 28, 1998. The increase is due mainly to
decreased same-store sales for the quarter as well as increased manager costs.
Labor costs for the six months ended July 4, 1999, were $28,469,000 as compared
to $27,784,000 for the comparable period in the prior year. The increase of
$685,000 is due primarily to the increased number of stores in operation during
the period. Labor costs as a percent of sales for the six month period in 1999
were 35.2% as compared to 34.6% for the same period last year. The increase is
primarily due to decreased same-store sales for the period, as well as increased
manager costs.
Restaurant operating expenses for the second quarter of 1999 were
$6,702,000 as compared to $7,349,000 for the second quarter of 1998. The
decrease of $647,000 was primarily due to a decrease in public relations,
administrative and contract service expenses, slightly offset by an increase in
utilities costs. For the six month period, restaurant operating expenses totaled
$14,330,000 as compared to $14,332,000 for the comparable period last year.
Restaurant operating expenses as a percent of sales for the three and six months
ended July 4, 1999, were 17.3% and 17.7%, respectively, as compared to 18.4% and
17.8% for the comparable periods in the prior year.
Restaurant depreciation expense for the second quarter and six months ended
July 4, 1999, was $1,660,000 and $3,293,000, respectively, as compared to
$1,556,000 and $3,020,000 for the comparable periods last year. The increase of
$104,000 and $273,000 for the three and six month period ended July 4, 1999,
respectively, is due to the opening of additional stores since the comparable
periods in the prior year.
General and administrative expenses for the second quarter of 1999 were
$2,468,000 as compared to $2,387,000 for the second quarter of 1998. The
increase of $81,000 is due mainly to an increase in marketing expense of
$326,000, offset by a decrease in labor costs of $268,000. General and
administrative expenses for the six months ended July 4, 1999, were
$5,490,000 as compared to $4,942,000 for the same period last year. The
increase of $548,000 is due primarily to increased marketing costs of $724,000,
offset by decreased labor costs of $152,000. General and administrative
expenses as a percent of sales for the three and six months ended July 4, 1999,
were 6.4% and 6.8%, respectively, as compared to 6.0% and 6.1% for the
comparable periods in the prior year.
The provision for income taxes for the three and six months ended July
4, 1999, as a percentage of income before taxes was 30.1% and 30.0%,
respectively, as compared to 26.4% and 31.1% for the comparable periods in the
prior year. The increase for the second quarter is primarily due to a reversal
of a liability in the prior year for a previous year's tax audit assessment
that did not reoccur in the current year. The decrease for the six month period
is primarily due to a restructuring of state and local tax reporting.
Net interest expense for the second quarter of 1999 was $1,551,000 as
compared to $739,000 in the second quarter of 1998. Net interest expense for
the six months ended July 4, 1999, was $3,155,000 as compared to $1,326,000 for
the same period in the prior year. The increases of $812,000 and $1,829,000
forthe three and six month periods, respectively, are due to the additional
debt acquired in conjunction with the buyback of approximately 4,000,000 of the
Company's Common Stock completed in the fourth quarter of 1998.
<PAGE> 8
Liquidity and Capital Resources
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 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 level of competition from current
competitors and potential new competition, and (g) changes in the level 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'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 amounts
available under the Revolver.
During 1998, the Company entered into a new term Loan agreement with
NationsBank of Tennessee and First Union National Bank (the "Term Loan") and a
term Loan with the CIT/Equipment Financing Group, Inc. (collectively the
"Lenders") in conjunction with its repurchase of common stock pursuant to the
Tender Offer (the "Offer") which was completed on October 5, 1998. The Company
borrowed $70,500,000 under the two term loan agreements with the Lenders, and
established a $10,000,000 Revolving Line of Credit (the "Revolver") with
NationsBank of Tennessee. As of July 4, 1999, the Company had borrowed
$6,500,000against the Revolver and the outstanding balance of the Term Loans
was approximately $67,819,000. Repayments of principal and interest on these
loans are expected to be financed through normal operating cash flows
generated by the Company.
At the time of the original closing of the Company's $52,500,000 Term
loan with First Union National Bank and NationsBank of Tennessee, N.A.,
(collectively, the "Banks"), and its $10,000,000 Revolver with NationsBank of
Tennessee, N.A., the Company was awaiting appraisals on certain of its
properties to be held as collateral for the Term Loan and Revolver. As a
result, the Banks required the Company to enter into a second closing (the
"Second Closing") pending the receipt of these appraisals. At the time of the
Second Closing, the amount of total indebtedness to the Banks, including the
Term Loan and the Revolver, cannot exceed the lesser of $62,500,000 or
seventy percent of the appraised value of the properties pledged as
collateral. As of the date of this filing, the Company has not yet completed
this previously disclosed Second Closing with the Banks. Pursuant to the terms
of the original agreement, the Company began making principal and interest
payments of approximately $345,000 to First Union on $22,500,000 of its Term
Loan and principal payments of $166,670, plus applicable interest, to
NationsBank on $30,000,000 of its Term Loan balance, beginning on May 1,
1999. Such payments will continue until March 24, 2004, upon which date, all
remaining amounts, principal and interest, under the Term Loan and the
Revolver will be due in full. The Company anticipates that the Second Closing
will be completed by the end of the third quarter. No substantive changes are
expected to be made to the original agreement dated September 24, 1998, as a
result of the Second Closing.
During the three months ended July 4, 1999, the Company did not open any
additional units. The Company has opened two new restaurants in the first six
months of 1999. Capital expenditures for new restaurants, as well as the
refurbishing and remodeling of existing units totaled $5,111,000 for the six
months ended July 4, 1999, and were funded by cash flows of $4,209,000 from
operations, and the Company's available cash balances, including amounts drawn
against the Revolver. The Company intends to open an additional 3 restaurants
in 1999 for a total of 5 new restaurants. Total cash expenditures for the
1999 expansion are estimated to be approximately $7.5 million. The Company
believes that cash flows from operations together with available borrowings
under the Revolver will be sufficient to fund the planned expansion, ongoing
maintenance and remodeling of existing restaurants as well as other working
capital requirements.
<PAGE> 9
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 July 4, 1999, 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 $27,500,000 of
its floating LIBOR debt (included in the $52,500,000 Term Loan and the
$10,000,000 Revolver) exceed 6.25 percent through the termination date. No
amounts were received by the Company during the quarter ended July 4, 1999.
The fair value of the interest rate swap agreement was approximately
($214,396) at July 4, 1999. 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 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 "Loan"), 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 from the Bank bears interest at the Bank's prime rate or LIBOR plus 2%,
and is secured by 323,007 Common Shares owned by Mr. Seelbinder 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, 2000.
As of July 12, 1999, the amount of the Loan outstanding, including
capitalized and accrued interest, was $3,560,534 and the undiscounted fair
market value of the pledged shares was $1,726,069, based upon a market price
of $5.625 per common share. The guaranty secures the loan until it is paid or
refinanced without a guaranty. The Company would fund any obligation it
incurs under the terms of its guaranty from additional borrowing under its
Revolver. 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.
Because the value of the shares pledged to secure the Loan subsequent
to the Offer was less than the amount required under the terms of the Loan, the
Bank required the Company to make a cash deposit in such amount to satisfy the
collateral shortfall as a result of the decreased price of the Company's
common stock. The Bank, the Company and Mr. Seelbinder reached a preliminary
agreement concerning such deposit under which Mr. Seelbinder paid $150,000 to
the Bank, the Bank extended their maturity of the Loan to January 31, 2000, the
Company made an initial cash deposit of approximately $1,600,000 in the Bank
which will be revalued monthly, and Mr. Seelbinder will reimburse the Company
for the amount by which the interest on the deposit is less than the interest
the Company pays for funds under its Term Loan and Revolver. This use of the
Company's funds will not materially affect its working capital or its ability
to implement its capital expenditure plan or make improvements and betterments
on its property. Subsequent to the initial cash deposit, the Company has made
additional deposits totaling approximately $185,000 based upon changes in the
price of Company's Common Stock. Mr. Seelbinder has also informed the Company
that 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 or that the deposit will be returned to the Company.
<PAGE> 10
Year 2000
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. The majority of
the Company's systems are purchased from outside vendors. The Company is
currently in the process of assessing whether it will be required to modify or
replace significant portions of its software so that its computer systems will
properly utilize dates beyond December 31, 1999. Those installed systems which
are not currently able to fully function in the Year 2000 either have new
versions available which are Year 2000 compliant, or the vendor has committed to
a Year 2000 compliant release in sufficient time to allow installation and
testing prior to critical cutover dates. The Company has completed its inventory
of computer information technology and non-information technology hardware
systems to assess Year 2000 compliance. In addition to the Company's internal
systems and hardware, the Company is currently assessing the Year 2000 readiness
of its vendors. As a part of this assessment, the Company is asking each major
vendor to inform the Company of its (the vendor's) Year 2000 readiness and
initiatives. Currently, the Company purchases approximately 95% of its food
products from one vendor. The Company is receiving monthly updates from this
significant vendor regarding its Year 2000 readiness. The Company has
identified each additional major vendor from whom it will request a report
regarding its Year 2000 readiness. Letters and questionnaires have been drafted
which are specific to the type of vendor (i.e. food, equipment, financial,
utility, etc.) and the Company is in the process of mailing out all necessary
requests for information. To the extent that Company's vendors do not provide
the Company with satisfactory evidence of their readiness for the Year 2000
issue, contingency plans will be developed. Currently, the Company does not
have a formal contingency plan in place, however, a Year 2000 Committee has
been formed and is in the process of developing a Company-wide Year 2000
contingency plan.
As of July 4, 1999, the Company has received responses from
approximately 25% of its vendors regarding their Year 2000 readiness.
Additionally, the Company has completed its Year 2000 upgrade of both the
Point-of-Sale system and back-of-the-house systems and software in two of its
restaurants. The Company began its company-wide upgrade of these systems in
July. The upgrade is expected to be completed by the end of November.
The Company has developed a plan to address the possible exposures related
to the impact on its computer systems of the Year 2000 problem. The plan
provides for the conversion efforts to be completed on all critical systems by
the end of 1999. The Company expects that the maximum cost which could be
incurred in conjunction with the testing and remediation of all hardware and
software systems and applications would be approximately $500,000 through
completion in fiscal year 1999, of which, approximately $31,000 has been
incurred to date. Such costs have been and will be funded by the Company's
operating cash flows.
The cost of the Company's plan to address the Year 2000 issue and the
anticipated date on which the Company plans to complete the necessary Year
2000 conversion efforts are based on management's best estimates, which were
derived from numerous assumptions of future events, including the availability
of resources, vendor remediation plans, and other factors. As a result, there
can be no assurance that the Company, or other companies with whom the
Company conducts business, will successfully address the Year 2000 problem in
a timely manner, or at all, or that the Year 2000 problem will not have a
material adverse effect on the Company's business or operations. The Company
believes that the most reasonably likely worst-case scenario resulting from
noncompliance with the Year 2000 by the Company or other third parties would
be the temporary shutdown of some or all of the Company's restaurants due to
the lack of gas, electricity, or supplies from certain key vendors. Such a
shut down, if it were to occur for any substantial period of time, would
result in the loss of sales revenue to the Company. Additionally, certain
fixed expenses of the Company would still be incurred during this time. As
such, a situation such as that described herein could have a material adverse
effect on the Company's results of operations.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), subsequently amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities
- -- Deferral of Effective Date of FASB Statement 133 and Amendment of FASB
Statement 133." This statement, as amended, 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 fair value of a recognized asset, (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 the
changes in the fair value of a derivative (this is, gains and losses) depends
on the intended use of the derivative and the resulting designation. This
statement, as amended, shall be effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company has not determined
the effect of the adoption of SFAS No. 133, as amended, on the Company's
results of operations or statement of financial position.
<PAGE> 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company has performed a sensitivity analysis on its fixed and floating
long term debt at July 4, 1999. The results of this sensitivity analysis
indicated that there has been no substantial change in the analysis as
performed at the end of the fiscal quarter ended April 4, 1999.
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.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are files 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 for 10-Q for
the fiscal quarter ended July 28, 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 for 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).
<PAGE> 12
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).
Exhibit 4.7
See sections 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
From 10-K for the fiscal year ended December 31, 1995; Commission File
No. 0-16806).
10. Material Contracts.
None
27. Financial Data Schedules.
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
(B) Reports on From 8-K
No report on Form 8-K was filed by the Registrant during the fiscal quarter
ended July 4, 1999.
<PAGE> 13
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 18, 1999
By: /s/ G. Arthur Seelbinder
-------------------------
G. Arthur Seelbinder
Chairman of the Board of Directors, Chief
Executive Officer, and Director
(principal executive officer and duly
authorized officer)
By: /s/ Mark W. Mikosz
-------------------------
Mark W. Mikosz
Vice President - Chief Financial Officer
(principal financial and accounting officer)
<PAGE> 14
_______________________________________________________________________________
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
COOKER RESTAURANT CORPORATION
________________________
FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
JULY 4, 1999
_________________________
EXHIBITS
_________________________
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE> 15
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 for 10-Q for
the fiscal quarter ended July 28, 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 for 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).
Exhibit 4.7
See sections 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 From 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 the 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).
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> JUL-04-1999
<CASH> 2,092,000
<SECURITIES> 0
<RECEIVABLES> 689,000
<ALLOWANCES> 0
<INVENTORY> 1,481,000
<CURRENT-ASSETS> 5,051,000
<PP&E> 173,395,000
<DEPRECIATION> 31,021,000
<TOTAL-ASSETS> 151,599,000
<CURRENT-LIABILITIES> 16,349,000
<BONDS> 81,248,000
0
0
<COMMON> 62,416,000
<OTHER-SE> (11,995,000)
<TOTAL-LIABILITY-AND-EQUITY> 151,599,000
<SALES> 80,928,000
<TOTAL-REVENUES> 80,928,000
<CGS> 65,675,000
<TOTAL-COSTS> 65,675,000
<OTHER-EXPENSES> 5,490,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,265,000
<INCOME-PRETAX> 3,315,000
<INCOME-TAX> 995,000
<INCOME-CONTINUING> 2,320,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,320,000
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
</TABLE>
