-----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, WgFkRgRreqr144asKU1MgPNhp3F6/L1mZkV+XJ1sscAntOlykAUWW8lk65BZOCWg IZsMTYGolTABkvmnPhmIRA== 0000950144-00-007007.txt : 20000518 0000950144-00-007007.hdr.sgml : 20000518 ACCESSION NUMBER: 0000950144-00-007007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000402 FILED AS OF DATE: 20000517 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: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08766 FILM NUMBER: 638969 BUSINESS ADDRESS: STREET 1: 3401 WEST END AVE STREET 2: P O BOX 24300 CITY: NASHVILLE STATE: TN ZIP: 37203 BUSINESS PHONE: 6152691900 MAIL ADDRESS: STREET 1: 3401 WEST END AVE STREET 2: SUITE 260 CITY: NASHVILLE STATE: TN ZIP: 37203 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. ALEXANDER'S CORPORATION 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 April 2, 2000 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 (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 - 6,851,950 shares at May 15, 2000. Page 1 of 14 pages. 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)
APRIL 2 January 2 2000 2000 -------- -------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ........................................ $ 655 $ 933 Accounts and notes receivable, including current portion of direct financing leases ........................................ 120 103 Inventories ...................................................... 629 703 Prepaid expenses and other current assets ........................ 485 422 -------- -------- TOTAL CURRENT ASSETS ............................................. 1,889 2,161 OTHER ASSETS ........................................................ 891 844 PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation and amortization of $15,424 and $14,495 at April 2, 2000, and January 2, 2000, respectively ................. 62,280 62,142 DEFERRED CHARGES, less amortization ................................. 466 488 -------- -------- $ 65,526 $ 65,635 ======== ========
-2- 3
APRIL 2 January 2 2000 2000 -------- -------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ................................................. $ 1,709 $ 2,254 Accrued expenses and other current liabilities ................... 4,594 3,630 Unearned revenue ................................................. 1,277 1,691 Current portion of long-term debt and obligations under capital leases ................................................. 22 995 -------- -------- TOTAL CURRENT LIABILITIES ...................................... $ 7,602 8,570 LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion classified as current ..................... 18,790 18,128 OTHER LONG-TERM LIABILITIES ......................................... 1,280 1,097 STOCKHOLDERS' EQUITY Common Stock, par value $.05 per share: Authorized 10,000,000 shares; issued and outstanding 6,851,950 and 6,772,209 shares at April 2, 2000, and January 2, 2000, respectively ............... 342 339 Preferred Stock, no par value: Authorized 1,000,000 shares; none issued ......................................................... -- -- Additional paid-in capital ....................................... 34,756 34,733 Retained earnings ................................................ 4,445 3,940 -------- -------- 39,543 39,012 Note receivable - Employee Stock Ownership Plan .................. (686) (686) Employee receivables - 1999 Loan Program ......................... (1,003) (486) -------- -------- TOTAL STOCKHOLDERS' EQUITY ..................................... 37,854 37,840 -------- -------- $ 65,526 $ 65,635 ======== ========
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 ---------------------- APRIL 2 April 4 2000 1999 -------- -------- Net sales ................................................. $ 22,208 $ 19,208 Costs and expenses: Cost of sales .......................................... 6,939 6,094 Restaurant labor and related costs ..................... 7,253 6,373 Depreciation and amortization of restaurant property and equipment ............................................ 966 920 Other operating expenses ............................... 3,837 3,525 -------- -------- Total restaurant operating expenses .................. 18,995 16,912 General and administrative expenses ....................... 2,071 1,703 Pre-opening expense ....................................... 59 -- -------- -------- Operating income .......................................... 1,083 593 Other income (expense): Interest expense, net .................................. (381) (451) Gain on purchase of debentures ......................... 29 90 Other, net ............................................. (30) 45 -------- -------- Total other expense .................................. (382) (316) -------- -------- Income before income taxes ................................ 701 277 Income tax provision ...................................... 196 33 -------- -------- Net income ................................................ $ 505 $ 244 ======== ======== Basic earnings per share .................................. $ .07 $ .04 ======== ======== Diluted earnings per share ................................ $ .07 $ .04 ======== ========
See notes to consolidated condensed financial statements. -4- 5 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED IN THOUSANDS)
Three Months Ended -------------------- APRIL 2 April 4 2000 1999 ------- ------- Net cash provided by operating activities .............. $ 1,894 $ 325 Net cash used by investing activities: Purchase of property and equipment .................. (1,302) (573) Other investing activities .......................... (68) (45) ------- ------- (1,370) (618) Net cash (used) provided by financing activities: Payments on debt and obligations under capital leases (979) (1,433) Proceeds under bank line of credit agreement ........ 6,982 6,776 Payments under bank line of credit agreement ........ (6,314) (9,882) Purchase of stock for 1999 Loan Program ............. (517) -- Sale of stock and exercise of stock options ......... 26 4,102 ------- ------- (802) (437) Decrease in cash and cash equivalents .................. (278) (730) Cash and cash equivalents at beginning of period ....... 933 1,022 ------- ------- Cash and cash equivalents at end of period ............. $ 655 $ 292 ======= =======
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 2000 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 April 2, 2000, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. 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 2, 2000, as amended. NOTE B - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
(In thousands, except per share amounts) Quarter Ended ------------------ APRIL 2 April 4 2000 1999 ------ ------ NUMERATOR: Net income (numerator for basic earnings per share) ................ $ 505 $ 244 Effect of dilutive securities ...................................... -- -- ------ ------ Net income after assumed conversions (numerator for diluted earnings per share) ...................................................... $ 505 $ 244 ====== ====== DENOMINATOR: Weighted average shares (denominator for basic earnings per share).. 6,828 5,600 Effect of dilutive securities: Employee stock options ........................................ 147 173 ------ ------ Adjusted weighted average shares and assumed conversions (denominator for diluted earnings per share) .................... 6,975 5,773 ====== ====== Basic earnings per share ........................................... $ .07 $ .04 ====== ====== Diluted earnings per share ......................................... $ .07 $ .04 ====== ======
-6- 7 In situations where the exercise price of outstanding options is greater than the average market price of common shares, such options are excluded from the computation of diluted earnings per share because of their antidilutive impact. For the quarter ended April 2, 2000, options to purchase 219,000 shares of common stock at prices ranging from $3.81 to $11.69 were excluded from the computation of diluted earnings per share due to their antidilutive effect. For the quarter ended April 4, 1999, a total of 224,000 such options were excluded, at exercise prices ranging from $4.97 to $11.69. -7- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, (i) the percentages which the items in the Company's Consolidated Statements of Income bear to total net sales, and (ii) other selected operating data:
Quarter Ended ------------------------- APRIL 2 April 4 2000 1999 --------- --------- Net sales ................................................... 100.0% 100.0% Costs and expenses: Cost of sales .......................................... 31.2 31.7 Restaurant labor and related costs ..................... 32.7 33.2 Depreciation and amortization of restaurant property and equipment .......................................... 4.3 4.8 Other operating expenses ............................... 17.3 18.4 --------- --------- Total restaurant operating expenses ................ 85.5 88.0 General and administrative expenses ......................... 9.3 8.9 Pre-opening expense ......................................... 0.3 -- --------- --------- Operating income ............................................ 4.9 3.1 Other income (expense): Interest expense, net .................................. (1.7) (2.3) Other, net ............................................. -- 0.7 --------- --------- Total other income (expense) ....................... (1.7) (1.6) Income before income taxes .................................. 3.2 1.4 Income tax provision ........................................ (0.9) (0.2) --------- --------- Net income .................................................. 2.3% 1.3% ========= ========= Restaurants open at end of period ........................... 21 20 Weighted average weekly sales per restaurant: All restaurants ........................................ $ 81,300 $ 73,900 Same store restaurants ................................. $ 80,800 $ 73,900
-8- 9 NET SALES Net sales increased 15.6% for the first quarter of 2000, as compared to the same period of 1999, due primarily to increased same store sales and the opening of a new restaurant in November, 1999. Same store sales, which include comparable sales for the 20 restaurants open for more than 12 months, averaged $80,800 per week for the first quarter of 2000, an increase of 9.3% compared to a weekly average of $73,900 in the corresponding period of the prior year. Management estimates that menu prices were approximately 4% higher in the first quarter of 2000 than during the same period of 1999 and that guest counts on a same store basis were approximately the same as for the same period of the prior year. In addition to adjusting menu prices, the Company repositioned its menu near the end of the third quarter of 1999 to place more emphasis on its premium offerings and daily feature items, while de-emphasizing certain lower priced menu items. As a result of these changes and continued emphasis on a number of guest service initiatives begun in 1997, same store sales increased by 8.6% in the fourth quarter of 1999 as compared to the same period of 1998, and effectively positioned the Company to realize the increases during the first quarter of 2000 noted above. COSTS AND EXPENSES Restaurant costs and expenses decreased in all categories as a percent of sales during the first quarter of 2000 compared to the first quarter of 1999, with the total of 85.5% of sales comparing favorably to 88.0% of sales during the corresponding period of 1999. Reduced cost of sales, which includes food and alcoholic beverage costs, coupled with efficiencies in labor and other operating expenses achieved at higher sales volumes and management's emphasis on expense control, were the primary factors responsible for the improvements achieved during the first quarter of 2000. Management remains optimistic about the prospects for J. Alexander's and continues to believe that the primary issue faced by the Company in maintaining consistent profitability is the improvement of sales in several of its restaurants, and particularly certain of its newer restaurants. It believes that actions taken to date, including guest service initiatives which were implemented two years ago and the menu repositioning implemented in the third quarter of 1999, together with continued emphasis on increasing sales and profits, are having and will continue to have a positive impact on the Company's sales and financial performance for 2000 and that the Company will be profitable in 2000. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative costs, which include supervisory costs as well as management training costs and all other costs above the restaurant level, totaled 9.3% of sales for the first quarter of 2000, up slightly from 8.9% of sales for the same period of 1999. Management expects general and administrative expenses for the remainder of fiscal 2000 to approximate, on a quarterly basis, the amount recorded for the quarter ended April 2, 2000. -9- 10 PRE-OPENING EXPENSE The Company expenses pre-opening costs as incurred. Pre-opening expense of $59,000 was incurred during the first quarter of 2000 in connection with the Company's next new restaurant which is planned to open in July 2000. Additional pre-opening costs will be recorded in connection with this restaurant in the second and third quarters of 2000, with a significant portion of these amounts being incurred in the third quarter when the restaurant will open. There was no pre-opening expense recorded during the first quarter of 1999. OTHER INCOME (EXPENSE) Net interest expense decreased by $70,000 during the first quarter of 2000 as compared to the corresponding period in 1999 due primarily to the impact of reduced balances associated with the Company's convertible subordinated debentures and a reduction in the Company's line of credit after applying proceeds from sales of stock in March and June, 1999, to the outstanding balance on the line. In connection with the annual sinking fund requirement associated with its Convertible Subordinated Debentures, the Company has periodically purchased bonds at a discount in the open market, resulting in a gain to the Company. Such gains totaled $90,000 in the prior year period as compared to $29,000 during the first quarter of 2000. INCOME TAXES The Company was subject to alternative minimum tax during 1999 and is projected to be in a similar position for fiscal 2000. For the first quarter of 1999, the Company's effective tax rate was 12%. This amount differed from the federal statutory rate of 34% primarily due to a provision for certain expiring federal net operating loss and credit carryforwards, nondeductible expenses and state income taxes, offset by a decrease in the valuation allowance and the benefit of alternative minimum tax net operating loss carryforwards and FICA tip credits generated during 1999. For the first quarter of 2000, a similar analysis yielded an effective rate of 28%, with the higher amount reflecting the impact of the Company's utilization of all alternative minimum tax net operating loss carryforwards during fiscal 1999. Net deferred tax assets are fully reserved by a valuation allowance. LIQUIDITY AND CAPITAL RESOURCES The Company had cash flow from operations totaling $1,894,000 and $325,000 during the first quarters of 2000 and 1999, respectively. Cash and cash equivalents decreased from $933,000 at year end 1999 to $655,000 at April 2, 2000. The Company's primary need for capital is expected to continue to be capital expenditures for the development and maintenance of its J. Alexander's restaurants. In addition, the Company has an annual sinking fund requirement of $1,875,000 in connection with its outstanding Convertible Subordinated Debentures. At April 2, 2000, the 2000 sinking fund obligation had been met through the purchase of bonds in the open market. The Company has met its recent capital needs and maintained liquidity primarily by use of cash flow from operations and use of its bank line of credit discussed below. -10- 11 For 2000, the Company plans to construct and open one restaurant on leased land in the Cincinnati, Ohio market. Management estimates that the cost to complete the Cincinnati restaurant and for capital maintenance for existing restaurants will be approximately $4 million for 2000. In addition, the Company may incur capital expenditures for the purchase of property and/or construction of restaurants for locations to be opened in fiscal 2001. Any such expenditures are dependent upon the timing and success of management's efforts to locate acceptable sites and are not expected to exceed $2 million. While a working capital deficit of $5,713,000 existed as of April 2, 2000, the Company does not believe this deficit impairs the overall financial condition of the Company. Certain of the Company's expenses, particularly depreciation and amortization, do not require current outlays of cash. Also, requirements for funding accounts receivable and inventories are relatively insignificant; thus virtually all cash generated by operations is available to meet current obligations. In 1999, the Company's Board of Directors established a loan program designed to enable eligible employees to purchase shares of the Company's common stock. Under the program participants may borrow an amount equal to the full price of common stock purchased. The plan authorized $1 million in loans to employees. Purchases of stock under the plan totaled $486,000 during 1999, with the remainder of the authorized amount being purchased by February 2000. The employee loans, which are reported as a deduction from stockholders' equity, are payable on December 31, 2006, unless repaid sooner pursuant to the terms of the plan. The Company maintains a bank line of credit of $20 million which is expected to be used as needed for funding of capital expenditures and to provide liquidity for meeting working capital or other needs. At April 2, 2000, borrowings outstanding under this line of credit were $8,687,000. In March of 2000, the term of the line of credit was extended by one year through July 1, 2001. The amended line of credit agreement contains covenants which require the Company to achieve specified results of operations and specified levels of senior debt to EBITDA (earnings before interest, taxes, depreciation and amortization) and to maintain certain other financial ratios. The Company was in compliance with these covenants at April 2, 2000 and, based on a current assessment of its business, believes it will continue to comply with these covenants through July 1, 2001. The credit agreement also contains certain limitations on capital expenditures and restaurant development by the Company (generally limiting the Company to the development of two new restaurants per year) and restricts the Company's ability to incur additional debt outside the bank line of credit. The interest rate on borrowings under the line of credit is currently based on LIBOR plus a spread of two to three percent, depending on the ratio of senior debt to EBITDA. The line of credit includes an option to convert outstanding borrowings to a term loan prior to July 1, 2001. FORWARD-LOOKING STATEMENTS Certain information contained in this Form 10-Q, particularly information regarding future economic performance and finances, development plans, and objectives of management is -11- 12 forward-looking information that involves risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements. Factors which could affect actual results include, but are not limited to, the Company's ability to increase sales in certain of its restaurants, particularly its newer restaurants; the Company's ability to recruit and train qualified restaurant management personnel; competition within the casual dining industry, which is very intense; changes in business and economic conditions; changes in consumer tastes; and government regulations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the disclosures set forth in Item 7a of the Company's Annual Report on Form 10-K, as amended, for the year ended January 2, 2000. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit (27) Financial Data Schedule (for SEC use only) (b) No reports on Form 8-K were filed for the quarter ended April 2, 2000. -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 (Principal Executive Officer) /s/ R. Gregory Lewis ----------------------------------------------- R. Gregory Lewis Vice-President and Chief Financial Officer (Principal Financial Officer) Date: May 16, 2000 -13- 14 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Page No. - ----------- -------- (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 APRIL 2, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-03-2000 APR-02-2000 655 0 120 0 629 1,889 77,704 15,424 65,526 7,602 18,790 0 0 342 37,512 65,526 22,208 22,208 6,939 14,192 4,803 0 381 701 196 505 0 0 0 505 .07 .07
-----END PRIVACY-ENHANCED MESSAGE-----