0000950144-95-002386.txt : 19950817
0000950144-95-002386.hdr.sgml : 19950817
ACCESSION NUMBER: 0000950144-95-002386
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 19950702
FILED AS OF DATE: 19950816
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: VOLUNTEER CAPITAL CORP / TN /
CENTRAL INDEX KEY: 0000103884
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812]
IRS NUMBER: 620854056
STATE OF INCORPORATION: TN
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08766
FILM NUMBER: 95564621
BUSINESS ADDRESS:
STREET 1: 3401 WEST END AVE
STREET 2: P O BOX 24300
CITY: NASHVILLE
STATE: TN
ZIP: 37202
BUSINESS PHONE: 6152691900
MAIL ADDRESS:
STREET 1: 3401 WEST END AVE
STREET 2: SUITE 260
CITY: NASHVILLE
STATE: TN
ZIP: 37202
FORMER COMPANY:
FORMER CONFORMED NAME: WINNERS CORP
DATE OF NAME CHANGE: 19890910
FORMER COMPANY:
FORMER CONFORMED NAME: VOLUNTEER CAPITAL CORP
DATE OF NAME CHANGE: 19820520
10-Q
1
VOLUNTEER CAPITAL CORP. FORM 10-Q 07-02-95
1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended July 2, 1995
-----------------------------------------------------
OR
[ ] 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 1-8766
---------------------------------------------------------
VOLUNTEER CAPITAL CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TENNESSEE 62-0854056
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3401 West End Avenue, Suite 260, P.O. Box 24300, Nashville, Tennessee 37202
--------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(615) 269-1900
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Common Stock Outstanding - 5,259,141 shares at August 11, 1995.
Page 1 of 15 pages.
Exhibit Index on page 15.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
JULY 2 January 1
1995 1995
----------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 9,584 $14,802
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Accounts and notes receivable, including current portion of direct
financing leases . . . . . . . . . . . . . . . . . . . . . . . . . 98 155
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661 577
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 699 699
Prepaid expenses and other current assets . . . . . . . . . . . . . . 385 215
------- -------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . 12,427 17,448
INVESTMENT SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 507 510
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,121 1,106
PROPERTY AND EQUIPMENT, at cost, less allowances for
depreciation and amortization of $19,511 and $18,115 at July 2,
1995, and January 1, 1995, respectively . . . . . . . . . . . . . . . 35,831 29,776
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 2,752 2,752
DEFERRED CHARGES, less amortization . . . . . . . . . . . . . . . . . . 1,790 1,714
------- -------
$54,428 $53,306
======= =======
-2-
3
JULY 2 January 1
1995 1995
----------- ---------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,047 $ 3,089
Accrued expenses and other current liabilities . . . . . . . . . . . 3,966 3,310
Current portion of long-term debt and obligations under capital leases 321 350
------- -------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . 6,334 6,749
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL
LEASES, net of portion classified as current . . . . . . . . . . . . 18,678 18,847
DEFERRED INCOME TAXES AND OTHER DEFERRED CREDITS . . . . . . . . . . . 431 406
STOCKHOLDERS' EQUITY
Common Stock, par value $.05 per share: Authorized 10,000,000
shares; issued and outstanding 5,258,641 and 5,240,481 shares at
July 2, 1995, and January 1, 1995, respectively . . . . . . . . . . 263 262
Preferred Stock, no par value: Authorized 1,000,000 shares; none
issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 28,797 28,718
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . . 1,125 (476)
------- -------
30,185 28,504
Note receivable - Employee Stock Ownership Plan . . . . . . . . . . . (1,200) (1,200)
------- -------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . 28,985 27,304
COMMITMENTS AND CONTINGENCIES
------- -------
$54,428 $53,306
======= =======
See note to consolidated condensed financial statements.
-3-
4
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six Months Ended Quarter Ended
--------------------- ---------------------
JULY 2 July 3 JULY 2 July 3
1995 1994 1995 1994
-------- -------- -------- --------
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,105 $ 31,942 $ 20,005 $ 16,998
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,279 11,150 7,016 5,902
Restaurant labor and related costs . . . . . . . . . . . . . . . . . 11,194 9,144 5,817 4,843
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . . . . . . . 1,413 1,056 742 563
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,069 1,024 563 538
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . 7,005 5,940 3,671 3,113
-------- -------- -------- --------
Total restaurant operating expenses . . . . . . . . . . . . . . . . 33,960 28,314 17,809 14,959
-------- -------- -------- --------
Income from restaurant operations . . . . . . . . . . . . . . . . . . . 4,145 3,628 2,196 2,039
General and administrative expenses . . . . . . . . . . . . . . . . . . 2,120 1,908 1,072 1,066
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,025 1,720 1,124 973
-------- -------- -------- --------
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (742) (822) (358) (412)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 405 170 213
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 24 58 -
-------- -------- -------- --------
Total other income (expense) . . . . . . . . . . . . . . . . . . . (279) (393) (130) (199)
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . 1,746 1,327 994 774
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . 145 92 81 51
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,601 $ 1,235 $ 913 $ 723
======== ======== ======== ========
Earnings per share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .30 $ .23 $ .17 $ .13
======== ======== ======== ========
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .29 $ .23 $ .17 $ .13
======== ======== ======== ========
Weighted average number of shares:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,407 5,381 5,422 5,379
======== ======== ======== ========
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,447 5,381 5,454 5,379
======== ======== ======== ========
See note to consolidated condensed financial statements.
-4-
5
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED IN THOUSANDS)
Six Months Ended
--------------------
JULY 2 July 3
1995 1994
------- -------
Net cash provided by operating activities . . . . . . . . . . . . . . . $ 3,620 $ 2,558
Net cash used by investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . (8,644) (4,446)
Other investing activities . . . . . . . . . . . . . . . . . . . . . (49) (44)
------- -------
(8,693) (4,490)
Net cash provided (used) by financing activities:
Payments on debt and obligations under capital leases . . . . . . . . (225) (221)
Other financing activities . . . . . . . . . . . . . . . . . . . . . 80 547
------- -------
(145) 326
Decrease in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . (5,218) (1,606)
Cash and cash equivalents at beginning of period . . . . . . . . . . . 14,802 17,755
------- -------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . $ 9,584 $16,149
======= =======
See note to consolidated condensed financial statements.
-5-
6
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Certain reclassifications have been made in
the prior year's consolidated condensed financial statements to conform to the
1995 presentation. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended July 2, 1995, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended January 1, 1995.
-6-
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Volunteer Capital Corporation operated 58 franchised Wendy's Old
Fashioned Hamburgers restaurants at July 2, 1995. In addition, the Company
operated six proprietary J. Alexander's full-service, casual dining
restaurants.
Income before income taxes increased by $419,000 (31.6%) and $220,000
(28.4%) for the first six months and second quarter of 1995 as compared to the
same periods of the previous year. Restaurant operating profit in the J.
Alexander's division increased by $802,000 and $446,000 for the six months and
quarter ended July 2, 1995, as compared to the 1994 periods, more than
offseting decreases of $285,000 and $289,000 in the Wendy's division during the
same periods. When coupled with a decline in other expense (net interest
expense plus other income) for the 1995 periods, the combined effect of these
items more than offset the planned increases in general and administrative
expenses incurred during the 1995 periods.
WENDY'S RESTAURANT OPERATIONS
Results of the Wendy's restaurant operations before allocation of
other income, corporate overhead and net interest expense for the six months
and second quarters ended July 2, 1995, and July 3, 1994, were as follows:
Six Months Ended
JULY 2, 1995 July 3,1994
----------------------- ---------------------
AMOUNT % OF Amount % of
(IN THOUSANDS) SALES (in thousands) Sales
-------------- ----- -------------- -----
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,719 100.0% $25,586 100.0%
Restaurant costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,325 34.9 8,875 34.7
Labor and related costs . . . . . . . . . . . . . . . . . . . . . . 7,660 28.7 7,085 27.7
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . . . . . . . 958 3.6 828 3.2
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,069 4.0 1,024 4.0
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . 4,835 18.1 4,617 18.1
------- ----- ------- -----
23,847 89.3 22,429 87.7
------- ----- ------- -----
Restaurant operating income . . . . . . . . . . . . . . . . . . . . . . $ 2,872 10.7% $ 3,157 12.3%
======= ===== ======= =====
-7-
8
Quarter Ended
JULY 2, 1995 July 3, 1994
----------------------- ---------------------
AMOUNT % OF Amount % of
(IN THOUSANDS) SALES (in thousands) Sales
-------------- ----- -------------- -----
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,063 100.0% $13,433 100.0%
Restaurant costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,921 35.0 4,598 34.3
Labor and related costs . . . . . . . . . . . . . . . . . . . . . . 4,021 28.6 3,669 27.3
Depreciation and amortization of restaurant
property and equipment. . . . . . . . . . . . . . . . . . . . . . . 500 3.5 429 3.2
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 4.0 538 4.0
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . 2,542 18.1 2,394 17.8
------- ----- ------- -----
12,547 89.2 11,628 86.6
------- ----- ------- -----
Restaurant operating income . . . . . . . . . . . . . . . . . . . . . . $ 1,516 10.8% $ 1,805 13.4%
======= ===== ======= =====
The Company operated 58 Wendy's restaurants at July 2, 1995, compared
with 53 at July 3, 1994 and 55 at January 1, 1995. The 1995 openings occurred
in Myrtle Beach, South Carolina (April 7), Greer, South Carolina (June 12) and
Baton Rouge, Louisiana (June 13).
Total sales in the Wendy's division increased 4.4% and 4.7% for the
first half and second quarter of 1995 as compared to the same periods in 1994.
These increases are due entirely to new units as sales of restaurants open for
all of the first half and second quarter of 1995 and 1994 decreased by 3.0% and
3.5%, respectively. The Company estimates that menu prices, after considering
promotional discounts, decreased by approximately 1.0% during the first half
and second quarter of 1995 as compared to the same periods in 1994. Management
believes that local and national marketing and promotional efforts, which have
generally been very effective for most of the past several years, competitive
menu pricing, continued emphasis on guest service and improvement in efficiency
of operations, and a continuing program of enhancements of guest service areas
in a number of restaurants have contributed, over the last several years, to
increasing and maintaining per unit sales averages. However, continued
competition in the quick-service restaurant industry in general and, more
recently, intense retail price competition by other major hamburger chains in
particular have continued to adversely impact the Company's weighted average
sales per unit, which declined in both the last half of 1994 and the first half
of 1995. The development of new Wendy's restaurants by other franchisees in
certain of the Company's market areas, and to a lesser degree the opening of
new restaurants by the Company near its existing restaurants, have also
negatively affected the Company's sales in certain locations. Sales declines
have been most pronounced in the Company's North and South Carolina markets,
which represent 42 of its 58 Wendy's units. A variety of programs and products
have been targeted at these markets in an attempt to reverse the declining
sales trends. Management continues to believe that aggressive core product
discounting is counterproductive because of its negative impact on margins. The
Company expects the competitive factors noted above will continue to affect the
performance of the Company's Wendy's units for at least the balance of 1995.
-8-
9
Cost of sales, which includes the cost of food and paper supplies,
increased as a percentage of sales in the Wendy's division for the first half
and second quarter of 1995 as compared to the same periods in 1994, as the
impact of decreased menu prices, the increased cost of lettuce resulting from
adverse weather in California during the early Spring, and the increased cost of
paper supplies more than offset the favorable impact of decreased costs of
ground beef and chicken during the 1995 periods.
Restaurant labor and related costs increased as a percentage of net
sales for the first half and second quarter of 1995, compared to the same
periods in 1994, principally reflecting the impact of decreased same store
sales, increased management staffing levels maintained since the end of the
second quarter of 1994 to improve the quality of service, wage increases and
the effect of decreased menu prices.
Other operating expenses as a percentage of sales increased during the
second quarter of 1995 compared to the 1994 period, as fixed costs (primarily
rent expense and amortization of pre-opening costs) related to the five
restaurants opened since the end of the second quarter of 1994 and the impact
of decreased same store sales more than offset a decrease in advertising costs.
For the first half of 1995, other operating expenses as a percentage of sales
were approximately the same as the 1994 period, as the second quarter net
increases noted above were offset by reduced expenditures related to repairs
and maintenance, utilities and property insurance during the first quarter of
1995 as compared to the 1994 quarter.
J. ALEXANDER'S RESTAURANT OPERATIONS
The Company operated six J. Alexander's restaurants at July 2, 1995
compared with four at July 3, 1994. The fifth J. Alexander's restaurant opened
on October 17, 1994 in Oak Brook, Illinois and the sixth opened February 13,
1995 in Ft. Lauderdale, Florida.
J. Alexander's divisional sales and restaurant operating income,
before allocation of other income, corporate overhead and net interest expense,
for the six months and second quarters ended July 2, 1995, and July 3, 1994,
were as follows:
Six Months Ended
JULY 2, 1995 July 3, 1994
----------------------- ---------------------
AMOUNT % OF Amount % of
(IN THOUSANDS) SALES (in thousands) Sales
-------------- ----- -------------- -----
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,386 100.0% $ 6,356 100.0%
Restaurant costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,954 34.7 2,275 35.8
Labor and related costs . . . . . . . . . . . . . . . . . . . . . . 3,534 31.0 2,059 32.4
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . . . . . . . 455 4.0 228 3.6
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . 2,170 19.1 1,323 20.8
------- ----- ------- -----
10,113 88.8 5,885 92.6
------- ----- ------- -----
Restaurant operating income . . . . . . . . . . . . . . . . . . . . . . $ 1,273 11.2% $ 471 7.4%
======= ===== ======= =====
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Quarter Ended
JULY 2, 1995 July 3,1994
---------------------- ---------------------
AMOUNT % OF Amount % of
(IN THOUSANDS) SALES (in thousands) Sales
-------------- ----- -------------- -----
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,942 100.0% $3,565 100.0%
Restaurant costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,095 35.3 1,304 36.6
Labor and related costs . . . . . . . . . . . . . . . . . . . . . . 1,796 30.2 1,174 32.9
Depreciation and amortization of restaurant
property and equipment . . . . . . . . . . . . . . . . . . . . . . 242 4.1 134 3.7
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . 1,129 19.0 719 20.2
------ ----- ------ -----
5,262 88.6 3,331 93.4
------ ----- ------ -----
Restaurant operating income . . . . . . . . . . . . . . . . . . . . $ 680 11.4% $ 234 6.6%
====== ===== ====== =====
Net sales for the J. Alexander's division increased 79% and 67% in the
first half and second quarter of 1995 compared to the same periods of 1994. For
the three restaurants open during the first half and second quarter of both
1995 and 1994, sales averaged $1,977,000 and $1,000,000, respectively, during
the 1995 periods representing increases of 4.6% and 4.2% from the corresponding
periods in 1994. Sales for the two J. Alexander's prototype units open during
all of the first half and second quarter of both 1995 and 1994 averaged
$2,204,000 and $1,115,000, respectively, during the 1995 periods, representing
increases of 3.9% and 3.0% from the corresponding periods in 1994. Included in
these increases is the impact of an estimated 3.8% menu price increase.
Cost of sales and labor and related costs decreased as a percentage of
sales for the first half and second quarter of 1995 compared to the same
periods of the prior year, as the Columbus restaurant which opened in 1994
continued to build sales during these periods. This factor, coupled with the
favorable effect of increased menu prices, more than offset higher costs
associated with the start-up of operations at the Ft. Lauderdale restaurant and
the still relatively new Oak Brook restaurant opened in the fourth quarter of
1994. The Company still expects newly opened restaurants to experience
operating losses in their initial months of operation prior to becoming
profitable.
Depreciation and amortization of restaurant property and equipment
increased as a percentage of sales during the first half and second quarter of
1995 compared to the same periods of 1994, principally reflecting the impact of
adding three new units since April 1994.
Other operating expenses decreased as a percentage of sales during the
first half and second quarter of 1995 compared to the same periods of 1994, as
reduced training costs, property insurance, and amortization of pre-opening
costs, the favorable effects of increased menu prices, and operating
efficiences achieved at higher sales levels more than offset additional rent
expense related to a ground lease and other operating expenses associated with
the opening of the Ft. Lauderdale restaurant.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, which include certain costs
related to both the Wendy's and J. Alexander's operations, totaled 5.6% and
5.4% of net sales for the first half and
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11
second quarter of 1995, as compared to 6.0% and 6.3% of net sales during the
same periods of the prior year, primarily reflecting higher sales levels.
Management anticipates that the growth rate for general and administrative
expenses during 1995 will be less than that of the Company's revenues.
INTEREST EXPENSE AND INTEREST INCOME
Interest expense decreased during the first half and second quarter of
1995 compared to the corresponding periods in 1994, principally due to an
increase in interest expense which was capitalized in connection with new
restaurant development in 1995. Interest income decreased during the first half
and second quarter of 1995 compared to the same periods in 1994, due to the net
effect of increased interest rates and decreased investment balances resulting
primarily from the development of new restaurants.
INCOME TAXES
Under the provisions of Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes," the Company has significant deferred tax
assets relating primarily to net operating loss carryforwards and tax credit
carryforwards available to reduce future federal income taxes. Realization of
the deferred tax assets is dependent principally on future earnings from
existing and new restaurants. Accordingly, a valuation allowance reflecting the
uncertainties associated with future earnings has been established.
Failure to achieve forecasted taxable income could affect the ultimate
realization of the net deferred tax assets. Because of various uncertainties
associated with the restaurant industry, there can be no assurance that there
could not be factors in the future which would result in a decline in taxable
income. The Company will continue to evaluate the realizability of its net
deferred tax assets quarterly and will make adjustments to the valuation
allowance if deemed appropriate.
As a result of utilization of its net operating loss carryforwards,
the Company did not provide for or pay federal or state income taxes that
approximate statutory rates during the first half and second quarter of 1995 or
the corresponding periods of 1994. The Company's effective tax rate increased
in the first six months and second quarter of 1995, as compared to the same
periods of the prior year, due to exhausting its remaining net operating loss
carryforwards in certain states.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities represents a primary source of
liquidity for the Company and is also expected to be a resource for meeting
future capital needs. The Company's cash flow from operations totaled
$3,620,000 during the first half of 1995, up $1,062,000 from the corresponding
period in 1994. In addition, the Company had cash and marketable securities of
$11,091,000 on hand at July 2, 1995. Working capital at July 2, 1995 totaled
$6,093,000 compared to $14,700,000 at July 3, 1994, the decrease primarily
reflecting the Company's capital expenditures during the last year.
The Company's primary investing activity has historically been capital
expenditures for the development and maintenance of its restaurants. Capital
expenditures totaled $7,781,000 during the first half of 1995. In the Wendy's
division, capital expenditures totaled $2,051,000 for the
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first half of 1995, relating primarily to the three new restaurants opened
during 1995, as well as selected facilities upgrades and miscellaneous
equipment replacements. Capital expenditures for J. Alexander's restaurants
were $5,659,000 and consisted primarily of completion of the restaurant in Ft.
Lauderdale, Florida, and acquisition of property and partial completion of
restaurants in Hoover, Alabama and Overland Park, Kansas.
Management expects the primary needs for capital resources in the
future will be for the development of new J. Alexander's and Wendy's
restaurants and for the maintenance of existing restaurants. Management may
also consider acquisitions of additional Wendy's restaurants and restaurants
similar to J. Alexander's and use of the Company's capital resources to enhance
shareholder value in other ways.
The Company expects to open a total of four J. Alexander's restaurants
in 1995. The Company's sixth J. Alexander's restaurant opened February 13,
1995, in Ft. Lauderdale, Florida and its seventh restaurant is expected to open
August 28, 1995 in Hoover, Alabama (a suburb of Birmingham). J. Alexander's
restaurants are also under construction in Overland Park, Kansas (a suburb of
Kansas City) and Toledo, Ohio. Both of these restaurants are scheduled to open
during the fourth quarter. The initial cost of developing the J. Alexander's
prototype restaurants has ranged from approximately $2,300,000 to $3,900,000,
excluding pre-opening costs. While the cost of land has been the most
significant variable in development cost, costs related to site preparation and
buildings have also varied considerably. Management estimates that pre-opening
costs will be approximately $250,000 for each restaurant. Additionally, the
Company may develop as many as three to five new Wendy's restaurants each year
at an estimated cost of $850,000 to $950,000 each. The initial capital
investment required for opening a new J. Alexander's or Wendy's restaurant
would be significantly lower than indicated above, however, if property is
leased rather than purchased. Finally, it is expected that because of their
age, $2,000,000 or more of capital expenditures will be required in both 1995
and 1996 to maintain and improve the Company's existing Wendy's restaurants.
The Company does not have significant capital needs for purposes other
than restaurant development. Maturities of long-term debt through 1997 are
relatively small because the Company has previously purchased in the market a
sufficient amount of its convertible subordinated debentures to meet sinking
fund requirements on that issue through that date. Further, since requirements
for funding accounts receivable and inventories are relatively small, the
Company does not have significant working capital needs. For these reasons, the
Company expects that funds on hand combined with cash flow from operations will
be available primarily to fund its development and capital expenditure plans
and should be adequate to do so for 1995. The Company expects to continue its
restaurant development program beyond 1995 and believes that outside sources of
capital will be needed to fund a portion of this expansion. Management is
presently evaluating alternatives which it believes to be available for
financing this development.
-12-
13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (11) Computation of Earnings Per Share.
Exhibit (27) Financial Data Schedules (For SEC Use Only).
(b) No reports on Form 8-K were filed for the quarter ended July
2, 1995.
-13-
14
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.
VOLUNTEER CAPITAL CORPORATION
/s/ R. Gregory Lewis
------------------------------------------
R. Gregory Lewis
Vice-President and Chief Financial Officer
Date: August 15, 1995
-14-
15
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
-----------
(11) Computation of Earnings per Share
(27) Financial Data Schedules (For SEC Use Only)
-15-
EX-11
2
COMPUTATION OF EARNINGS PER SHARE
1
Volunteer Capital Corporation and Subsidiaries
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Six Months Ended Quarter Ended
---------------- -------------
JULY 2 July 3 JULY 2 July 3
1995 1994 1995 1994
---- ---- ---- ----
Earnings per common and dilutive common equivalent share
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,601,000 $1,235,000 $ 913,000 $ 723,000
========== ========== ========== ==========
Adjustment of shares outstanding:
Actual weighted average shares outstanding . . . . . . . . . . . . 5,254,000 5,141,000 5,261,000 5,162,000
Net additional shares issuable, based on the treasury
stock method . . . . . . . . . . . . . . . . . . . . . . . . . . 153,000 240,000 161,000 217,000
---------- ---------- ---------- ----------
Adjusted shares outstanding . . . . . . . . . . . . . . . . . . . . 5,407,000 5,381,000 5,422,000 5,379,000
========== ========== ========== ==========
Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . $ .30 $ .23 $ .17 $ .13
========== ========== ========== ==========
Earnings per common share, assuming full dilution
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,601,000 $1,235,000 $ 913,000 $ 723,000
========== ========== ========== ==========
Adjustment of shares outstanding:
Actual weighted average shares outstanding . . . . . . . . . . . . 5,254,000 5,141,000 5,261,000 5,162,000
Net additional shares issuable, based on the treasury
stock method . . . . . . . . . . . . . . . . . . . . . . . . . . 193,000 240,000 193,000 217,000
---------- ---------- ---------- ----------
Adjusted shares outstanding . . . . . . . . . . . . . . . . . . . . 5,447,000 5,381,000 5,454,000 5,379,000
========== ========== ========== ==========
Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . $ .29 $ .23 $ .17 $ .13
========== ========== ========== ==========
Note: The computations of earnings per common and dilutive common equivalent
share are based on the weighted average number of common shares
outstanding each period after considering the effect of stock options
using the treasury stock method. Shares issuable upon the conversion
of convertible subordinated debentures have not been included as the
effect of their inclusion would be antidilutive.
EX-27
3
FINANCIAL DATA SCHEDULE
5
1,000
6-MOS
DEC-31-1995
JAN-02-1995
JUL-02-1995
9,584
1,000
98
0
661
12,427
55,342
19,511
54,428
6,334
18,678
263
0
0
28,722
54,428
38,105
38,105
13,279
24,473
9,487
0
742
1,746
145
1,601
0
0
0
1,601
.30
.29