-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CqEnfcKn/8Im+X0Mrn5g1Khx7CH0UKuBw2sCnJD+xGXScAGmEUcMChIus74x7BdQ 4l2pbMp4u1wb97DdBqvatg== 0000950144-97-005747.txt : 19970515 0000950144-97-005747.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950144-97-005747 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALEXANDERS J CORP 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: 97604817 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: VOLUNTEER CAPITAL CORP / TN / DATE OF NAME CHANGE: 19920703 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 J. ALEXANDERS CORPORATION FORM 10-Q 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 March 30, 1997 ----------------------------------------------------- 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 ---------------------------------------------------------- J. ALEXANDER'S CORPORATION -------------------------- (Exact name of Registrant as specified in its charter) Tennessee 62-0854056 --------- ---------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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) Volunteer Capital Corporation - -------------------------------------------------------------------------------- (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 - 5,403,134 shares at May 13, 1997. Page 1 of 14 pages. Exhibit Index on page 14. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
MARCH 30 DECEMBER 29 1997 1996 ---- ---- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ................................. $ 8,342 12,549 Accounts and notes receivable, including current portion of direct financing leases ................................. 118 120 Inventories ............................................... 519 534 Deferred income taxes ..................................... 1,343 1,364 Prepaid expenses and other current assets ................. 265 369 Net assets held for disposal .............................. 310 618 ------- ------- TOTAL CURRENT ASSETS .................................... 10,897 15,554 OTHER ASSETS ................................................. 1,207 1,197 PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation and amortization of $5,244 and $4,567 at March 30, 1997, and December 29, 1996, respectively ....... 49,564 47,016 DEFERRED INCOME TAXES ........................................ 1,429 1,429 DEFERRED CHARGES, less amortization .......................... 1,492 1,631 ------- ------- $64,589 $66,827 ======= =======
-2- 3
MARCH 30 DECEMBER 29 1997 1996 ---- ---- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable .......................................................................... $ 3,982 $ 3,748 Accrued expenses and other current liabilities ............................................ 3,272 6,023 Current portion of long-term debt and obligations under capital leases .......................................................................... 56 54 -------- -------- TOTAL CURRENT LIABILITIES ............................................................... 7,310 9,825 LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion classified as current .............................................. 15,915 15,930 DEFERRED COMPENSATION AND OTHER DEFERRED CREDITS ............................................. 583 611 STOCKHOLDERS' EQUITY Common Stock, par value $.05 per share: Authorized 10,000,000 shares; issued and outstanding 5,397,846 and 5,322,507 shares at March 30, 1997, and December 29, 1996, respectively ..................................... 269 266 Preferred Stock, no par value: Authorized 1,000,000 shares; none issued .................................................................................. -- -- Additional paid-in capital ................................................................ 29,704 29,475 Retained earnings ......................................................................... 11,836 11,748 -------- -------- 41,809 41,489 Note receivable - Employee Stock Ownership Plan ........................................... (1,028) (1,028) -------- -------- TOTAL STOCKHOLDERS' EQUITY .............................................................. 40,781 40,461 $ 64,589 $ 66,827 ======== ========
See notes to consolidated condensed financial statements. -3- 4 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED MARCH 30 MARCH 31 1997 1996 -------- -------- Net sales ................................................................................................ $ 14,032 $ 21,687 Costs and expenses: Cost of sales ......................................................................................... 4,759 7,646 Restaurant labor and related costs .................................................................... 4,442 6,469 Depreciation and amortization of restaurant property and equipment .............................................................................. 642 890 Royalties ............................................................................................. -- 502 Other operating expenses .............................................................................. 2,475 3,388 -------- -------- Total restaurant operating expenses ................................................................. 12,318 18,895 -------- -------- Income from restaurant operations ........................................................................ 1,714 2,792 General and administrative expenses ...................................................................... 1,158 1,783 Amortization of pre-opening costs ........................................................................ 330 244 -------- -------- Operating income ......................................................................................... 226 765 -------- -------- Other income (expense): Interest expense ...................................................................................... (247) (367) Interest income ....................................................................................... 116 17 Other, net ............................................................................................ 22 55 -------- -------- Total other income (expense) ........................................................................ (109) (295) -------- -------- Income before income taxes ............................................................................... 117 470 Income tax provision ..................................................................................... 29 164 -------- -------- Net income ............................................................................................... $ 88 $ 306 ======== ======== Earnings per share: Primary ............................................................................................... $ .02 $ .06 ======== ======== Fully diluted ......................................................................................... $ .02 $ .06 ======== ======== Weighted average number of shares: Primary ............................................................................................... 5,495 5,448 ======== ======== Fully diluted ......................................................................................... 5,500 5,448 ======== ========
See notes to consolidated condensed financial statements. -4- 5 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED IN THOUSANDS)
Quarter Ended MARCH 30 MARCH 31 1997 1996 ------- ------- Net cash (used) provided by operating activities ............. $ (231) $ 837 Net cash used by investing activities: Purchase of property and equipment ........................ (4,206) (4,826) Proceeds from maturities and sales of investments ......... -- 505 Other investing activities ................................ 11 (61) ------- ------- (4,195) (4,382) Net cash provided by financing activities: Payments on debt and obligations under capital leases ..... (13) (129) Borrowings on line of credit .............................. -- 3,350 Other financing activities ................................ 232 55 ------- ------- 219 3,276 Decrease in cash and cash equivalents ........................ (4,207) (269) Cash and cash equivalents at beginning of period ............. 12,549 2,234 ------- ------- Cash and cash equivalents at end of period ................... $ 8,342 $ 1,965 ======= =======
See notes to consolidated condensed financial statements. -5- 6 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES NOTES 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 1997 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 three months ended March 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 1997. 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 December 29, 1996. NOTE B - SALE OF WENDY'S RESTAURANT OPERATIONS In November 1996, the Company sold 52 of its 58 Wendy's Old Fashioned Hamburgers restaurants to Wendy's International, Inc. for $28.3 million in cash plus the assumption of capitalized lease obligations and long-term debt totaling approximately $2.5 million. This transaction generated a pre-tax gain of $9.4 million. The six restaurants not sold as part of the November 1996 transaction had been sold or closed as of March 30, 1997. In accordance with Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity", the Company recorded expenses totaling $542,000 during the third quarter of 1996 relative to accrued termination benefits ($450,000) and accrued liabilities associated with the settlement of lease obligations. Management provided for 21 employees eligible for termination benefits as a result of the Company's exit from the Wendy's business. The Company recorded additional costs during the fourth quarter of 1996 including provisions for additional severance, insurance claims and other expenses and contingencies totaling approximately $1,849,000 which were included in the determination of the gain on the sale of the Wendy's restaurant operations. During the first quarter of 1997, the Company paid $526,000 related to the exit of the Wendy's business. At March 30, 1997, the Company maintains accruals related to the exit of the Wendy's business totaling $1,503,000. -6- 7 NOTE C - PRE-OPENING COSTS Costs of hiring and training personnel and certain other costs relating to a new J. Alexander's restaurant have historically been capitalized and amortized over the restaurant's initial months of operations. In the fourth quarter of 1996, the Company changed its period of amortization for these costs from 24 months to 12 months. Management does not anticipate the change will have a material impact on periods subsequent to fiscal 1996. -7- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW J. Alexander's Corporation operated 14 J. Alexander's full-service, casual dining restaurants at March 30, 1997. During the fourth quarter of 1996 the Company sold substantially all the assets of its 58 Wendy's Old Fashioned Hamburgers restaurants. The first quarter of 1997 represents the first full quarter reported by the Company since the divestiture of its Wendy's operations which generated restaurant operating income of $1,549,000 on sales of $12,539,000 during the first quarter of 1996. As a result of the divestiture, the Company's sales and income from restaurant operations were significantly reduced in the first three months of 1997 as compared to the same period in 1996. For the first three months of 1997, consolidated restaurant operating income decreased by $1,078,000 in the first quarter of 1997 as compared to the same period of the prior year, as the effect of the disposition of the Company's Wendy's restaurant operations more than offset an increase of $471,000, or 37.9%, in J. Alexander's restaurant operating income. While general and administrative expenses and net interest expense also decreased as a result of the Wendy's divestiture, these decreases were not large enough to offset the decrease in income from restaurant operations, and income before income taxes decreased by $353,000 for the quarter. Management reached the decision to sell the Wendy's operations because it believed focusing all of the Company's capital and resources exclusively on casual dining offers the greatest potential for long-term return for its shareholders. However, the divestiture is expected to have a negative impact on earnings until the lost revenue and operating income from the Wendy's operations can be replaced by the development of new J. Alexander's restaurants. J. ALEXANDER'S RESTAURANT OPERATIONS The Company operated fourteen J. Alexander's restaurants at March 30, 1997, compared with nine at March 31, 1996. Operating results for the Company's J. Alexander's restaurants, before allocation of other income, corporate overhead and net interest expense, for the three months ended March 30, 1997, and March 31, 1996, were as follows:
QUARTER ENDED MARCH 30, 1997 MARCH 31, 1996 -------------- -------------- AMOUNT % OF AMOUNT % OF (IN THOUSANDS) SALES (IN THOUSANDS) SALES -------------- -------- ------------- ------ Net sales........................................ $14,032 100.0 % $9,148 100.0% Restaurant costs and expenses: Cost of sales............................... 4,759 33.9 3,241 35.4 Labor and related costs..................... 4,442 31.7 2,765 30.2 Depreciation and amortization of restaurant property and equipment 642 4.6 375 4.1 Other operating expenses.................... 2,475 17.6 1,524 16.7 ------- ---- ----- ---- 12,318 87.8 7,905 86.4 ------ ---- ----- ---- Restaurant operating income...................... $ 1,714 12.2 % $1,243 13.6% ======= ==== ===== ====
-8- 9 Net sales for the J. Alexander's restaurants increased 54% for the first three months of 1997, as compared to the same period of 1996, due primarily to the opening of new restaurants. In addition, same store sales, which include comparable sales for all restaurants open for more than 12 months, averaged $81,900 per week during the first three months of 1997, reflecting an increase of 4.7% from $78,200 per week during the same period of the previous year. The same store sales trend, while remaining positive, softened somewhat in March and April, with the April increase being less than 1%. Average weekly sales for all J. Alexander's restaurants were $77,100 for the first three months of 1997, as compared to $78,200 for the corresponding period in 1996. Restaurant operating margins for the nine restaurants open for more than twelve months showed significant improvement to 17.4% in the first quarter of 1997 from 13.6% in the 1996 quarter. This improvement was primarily due to lower food and labor costs achieved as sales volumes increased and operations of the restaurants matured and became more efficient. Restaurant operating margins for all restaurants decreased from 13.6% in the first quarter of 1996 to 12.2% in the 1997 quarter due to the effect of new restaurants. In order to maximize the quality of guest service and successfully complete the extensive training and support of J. Alexander's staff, there is typically little or no advertising or promotion of new J. Alexander's restaurant openings. Management believes that this "quiet opening" approach enhances guest experiences and contributes significantly to increases in same store sales over a long period of time. Due to the slow building nature of sales and the emphasis placed on training and quality of operations during the opening months of operation, the financial performance of new restaurants typically trails that of more mature restaurants and the Company expects newly opened restaurants to experience operating losses in their initial months of operation. As a result, all operating cost categories, with the exception of food cost, increased as a percentage of sales for the three months ended March 30, 1997, as compared to the same period of the prior year due to the effect of the five new restaurants which have opened subsequent to the first quarter of 1996. Food costs decreased as a percentage of sales in the 1997 quarter due primarily to continued management emphasis on cost control in this area. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses, which include all costs above the restaurant level, totaled 8.3% of net sales for the first three months of 1997, as compared to 8.2% of net sales for the same period of the prior year. Actual general and administrative expenditures decreased by $625,000, or 35%, during the first quarter of 1997 as compared to the same period in 1996, primarily due to the disposition of the Company's Wendy's restaurant operations. General and administrative expenses directly related to the Wendy's operations totaled $724,000 during the first quarter of 1996. OTHER INCOME (EXPENSE) Interest expense decreased by $120,000 during the first quarter of 1997, as compared to the same period of the prior year, due primarily to elimination of long term obligations associated with Wendy's restaurant operations and the pay-off of all amounts outstanding under the Company's line of credit agreement with proceeds from the Wendy's disposition. -9- 10 Interest income increased by $99,000 during the 1997 quarter, as compared to the same period of 1996, due to increased investment balances resulting from the Wendy's disposition. INCOME TAXES Under the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes," the Company has significant deferred tax assets at March 30, 1997 relating primarily to approximately $2.7 million of net operating loss carryforwards and $1.8 million of tax credit carryforwards available to reduce future federal income taxes. Management believes that future taxable income will be sufficient to realize all of the Company's deferred tax assets and, therefore, no valuation allowance has been provided for these assets. 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 a deficit of $231,000 (including $526,000 of payments against accruals related to the Wendy's disposition) for the first quarter of 1997, as compared to $837,000 in the same period of the prior year. In addition, the Company had cash and cash equivalents of $8,342,000 at March 30, 1997. The Company's primary investing activity has historically been capital expenditures for the development and maintenance of its restaurants. Capital expenditures totaled $3,224,000 during the first quarter of 1997 and were primarily for the development of new J. Alexander's restaurants. Management expects the primary needs for capital resources in the future will be for the development of new J. Alexander's restaurants and for the maintenance of existing restaurants. Management may also consider acquisitions of additional restaurants similar to J. Alexander's. The Company plans to open five J. Alexander's restaurants in 1997, four of which are currently under construction in Tampa, Florida; Denver, Colorado; San Antonio, Texas; and Livonia, Michigan. The Company estimates that its capital expenditures for 1997 will total approximately $22,000,000. The Company maintains a $30,000,000 line of credit which is available for funding of capital expenditures and believes that this credit line together with existing cash and cash equivalents, and cash flow from operations, will be sufficient to fund the development of its J. Alexander's restaurants for all of 1997 and a portion of 1998. -10- 11 J. Alexander's Corporation and Subsidiaries EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
QUARTER ENDED MARCH 30 MARCH 31 1997 1996 ---------- ---------- Earnings per common and dilutive common equivalent share Net income .......................................................... $ 88,000 $ 306,000 ========= ========== Adjustment of shares outstanding: Actual weighted average shares outstanding ........................ 5,356,000 5,277,000 Net additional shares issuable, based on the treasury stock method ........................................... 139,000 171,000 ---------- ---------- Adjusted shares outstanding ....................................... 5,495,000 5,448,000 ========== ========== Per share amount .................................................... $ .02 $ .06 ========== ========== Earnings per common share, assuming full dilution Net income .......................................................... $ 88,000 $ 306,000 ========== ========== Adjustment of shares outstanding: Actual weighted average shares outstanding ........................ 5,356,000 5,277,000 Net additional shares issuable, based on the treasury stock method ........................................... 144,000 171,000 ---------- ---------- Adjusted shares outstanding ....................................... 5,500,000 5,448,000 ========== ========== Per share amount .................................................... $ .02 $ .06 ========== ==========
Note: The computations of earnings per common and dilutive common equivalent share and earnings per common share, assuming full dilution, 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. -11- 12 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) Special meeting of shareholders held February 7, 1997. (b) Not applicable. (c) At the Special Meeting conducted February 7, 1997, the shareholders voted on a proposal to amend the Company's charter to change the name of the Company to "J. Alexander's Corporation". A summary of the vote is as follows: For 4,102,807 Against 19,286 Abstentions 22,032 (d) Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit (11) Computation of Earnings Per Share is filed with Part I of this Form 10-Q. Exhibit (27) Financial Data Schedule (for SEC use only) (b) No further reports on Form 8-K were filed for the quarter ended March 30, 1997. -12- 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. J. ALEXANDER'S CORPORATION /s/Lonnie J. Stout II ----------------------------------------------- Lonnie J. Stout II Chairman, President and Chief Executive Officer /s/R. Gregory Lewis ---------------------------------------------- R. Gregory Lewis Vice-President and Chief Financial Officer Date: May 14, 1997 -13- 14 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO. - ----------- -------- (11) Computation of Earnings per Share 11 (27) Financial Data Schedules (For SEC Use Only)
-14- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-28-1997 DEC-30-1996 MAR-30-1997 8,342 0 118 0 519 10,897 54,808 5,244 64,589 7,310 15,915 0 0 269 40,512 64,589 14,032 14,032 4,759 9,201 3,117 0 247 117 29 88 0 0 0 88 .02 .02
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