-----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, P+xgapg4aGr9MoUZHGcWM16dMlf5KLs82eSQgZDyAdS6WDlVs3Xrp5BENO0qg4ML gvfZhNJUzKZxpsTldG72pw== 0000950144-99-006485.txt : 19990520 0000950144-99-006485.hdr.sgml : 19990520 ACCESSION NUMBER: 0000950144-99-006485 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990404 FILED AS OF DATE: 19990519 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: 99630302 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. 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 4, 1999 ------------- 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 - 6,531,601 shares at May 18, 1999. Page 1 of 16 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 4 January 3 1999 1999 -------- -------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ........................................ $ 292 $ 1,022 Accounts and notes receivable, including current portion of direct financing leases ........................................ 91 77 Inventories ...................................................... 795 800 Prepaid expenses and other current assets ........................ 501 324 -------- -------- TOTAL CURRENT ASSETS ........................................... 1,679 2,223 OTHER ASSETS ........................................................ 935 887 PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation and amortization of $11,969 and $11,053 at April 4, 1999, and January 3, 1999, respectively ................. 60,983 61,440 DEFERRED CHARGES, less amortization ................................. 566 570 -------- -------- $ 64,163 $ 65,120 ======== ========
-2- 3
APRIL 4 January 3 1999 1999 -------- -------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ................................................. $ 3,214 $ 3,491 Accrued expenses and other current liabilities ................... 3,254 3,893 Current portion of long-term debt and obligations under capital leases ................................................. 491 1,917 -------- -------- TOTAL CURRENT LIABILITIES ...................................... 6,959 9,301 LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion classified as current ..................... 18,248 21,361 OTHER LONG-TERM LIABILITIES ......................................... 877 727 STOCKHOLDERS' EQUITY Common Stock, par value $.05 per share: Authorized 10,000,000 shares; issued and outstanding 6,531,601 and 5,431,335 shares at April 4, 1999, and January 3, 1999, respectively ............... 327 272 Preferred Stock, no par value: Authorized 1,000,000 shares; none issued ......................................................... -- -- Additional paid-in capital ....................................... 34,056 30,007 Retained earnings ................................................ 4,516 4,272 -------- -------- 38,899 34,551 Note receivable - Employee Stock Ownership Plan .................. (820) (820) -------- -------- TOTAL STOCKHOLDERS' EQUITY ..................................... 38,079 33,731 -------- -------- $ 64,163 $ 65,120 ======== ========
See notes to consolidated condensed financial statements. -3- 4 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Quarter Ended ---------------------- APRIL 4 March 29 1999 1998 -------- -------- (Unaudited) Net sales ........................................................... $ 19,208 $ 17,512 Costs and expenses: Cost of sales .................................................... 6,094 6,192 Restaurant labor and related costs ............................... 6,373 5,965 Depreciation and amortization of restaurant property and equipment .................................................. 920 853 Other operating expenses ......................................... 3,525 3,364 -------- -------- Total restaurant operating expenses ............................ 16,912 16,374 General and administrative expenses ................................. 1,703 1,495 Pre-opening expense ................................................. -- 311 -------- -------- Operating income (loss) ............................................. 593 (668) Other income (expense): Interest expense ................................................. (451) (418) Other, net ....................................................... 135 (18) -------- -------- Total other expense ............................................ (316) (436) -------- -------- Income (loss) before income taxes ................................... 277 (1,104) Income tax provision ................................................ 33 -- -------- -------- Net income (loss) ................................................... $ 244 $ (1,104) ======== ======== Basic earnings (loss) per share ..................................... $ .04 $ (.20) ======== ======== Diluted earnings (loss) per share ................................... $ .04 $ (.20) ======== ========
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 ---------------------- APRIL 4 March 29 1999 1998 -------- -------- Net cash provided by operating activities ........................... $ 325 $ 1,034 Net cash (used) by investing activities: Purchase of property and equipment ............................... (573) (1,613) Other investing activities ....................................... (45) 72 -------- -------- (618) (1,541) Net cash (used) provided by financing activities: Payments on debt and obligations under capital leases ............ (1,433) (15) Proceeds under bank line of credit agreement ..................... 6,776 6,476 Payments under bank line of credit agreement ..................... (9,882) (5,172) Sale of stock and exercise of stock options ...................... 4,102 -- -------- -------- (437) 1,289 (Decrease) increase in Cash and Cash Equivalents .................... (730) 782 Cash and cash equivalents at beginning of period .................... 1,022 134 -------- -------- Cash and Cash Equivalents at End of Period .......................... $ 292 $ 916 ======== ========
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 1999 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 4, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending January 2, 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 3, 1999, 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 4 March 29 1999 1998 -------- -------- NUMERATOR: Net income (loss) (numerator for basic earnings per share) .......... $ 277 $ (1,104) Effect of dilutive securities ....................................... -- -- -------- -------- Net income (loss) after assumed conversions (numerator for diluted earnings per share) .................................... $ 277 $ (1,104) ======== ======== DENOMINATOR: Weighted average shares (denominator for basic earnings per share) ..................................................... 5,600 5,421 Effect of dilutive securities: Employee stock options ......................................... 173 -- -------- -------- Adjusted weighted average shares and assumed conversions (denominator for diluted earnings per share) ................... 5,773 5,421 ======== ======== Basic earnings (loss) per share ..................................... $ .04 $ (.20) ======== ======== Diluted earnings (loss) per share ................................... $ .04 $ (.20) ======== ========
-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. Due to the net loss incurred during the first three months 1998, all 662,650 outstanding options were excluded from the computation of diluted earnings per share. For the quarter ended April 4, 1999, options to purchase approximately 224,000 shares of common stock ranging in price from $4.97 to $11.69, were excluded from the computation of diluted earnings per share due to their antidilutive effect. NOTE C - SALE OF STOCK On March 22, 1999, the Company completed a private sale of 1,086,266 shares of common stock for approximately $4.1 million to Solidus, LLC ("Solidus"). E. Townes Duncan, a director of the Company, is a minority owner of and manages the investments of Solidus. In addition, the Company has commenced a rights offering pursuant to which shareholders of the Company on the record date for distribution of the rights will be given the opportunity to purchase up to 1,089,067 shares of common stock at a price of $3.75 per share, which is the same price per share as stock sold in the private sale. If the maximum number of shares are sold pursuant to the rights offering, the Company will receive net proceeds of approximately $3.9 million. Proceeds from the above transactions have been or will be used to repay borrowings outstanding under the Company's line of credit. Amounts repaid can be reborrowed in accordance with the terms of the line of credit agreement. NOTE D - PROPERTY AND EQUIPMENT Effective as of January 4, 1999, the Company changed the estimated useful life of its buildings from 25 years to 30 years. Also, the estimated life of leasehold improvements was changed to include an amortization period based on the lesser of the lease term, generally including renewal options, or the useful life of the asset, including the longer 30 year life for structures. The effect of these changes was to increase net income for the quarter ended April 4, 1999 by approximately $66,000, or $.01 per share. NOTE E - COMPREHENSIVE INCOME In 1998, the Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income". The Company has no items of comprehensive income and, accordingly, adoption of the Statement has had no effect on the consolidated financial statements. -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 Operations bear to total net sales, and (ii) other selected operating data:
Quarter Ended APRIL 4 March 29 1999 1998 --------- --------- Net sales ................................................... 100.0% 100.0% Costs and expenses: Cost of sales .......................................... 31.7 35.4 Restaurant labor and related costs ..................... 33.2 34.1 Depreciation and amortization of restaurant property and equipment .......................................... 4.8 4.9 Other operating expenses ............................... 18.4 19.2 --------- --------- Total restaurant operating expenses ................ 88.0 93.5 General and administrative expenses ......................... 8.9 8.5 Pre-opening expense ......................................... -- 1.8 --------- --------- Operating income (loss) ..................................... 3.1 (3.8) Other income (expense): Interest expense ....................................... (2.3) (2.4) Other, net ............................................. 0.7 (0.1) --------- --------- Total other expense ................................ (1.6) (2.5) Income (loss) before income taxes ........................... 1.4 (6.3) Income tax provision ........................................ (0.2) -- --------- --------- Net income (loss) ........................................... 1.3% (6.3)% ========= ========= Restaurants open at end of period ........................... 20 19 ========= ========= Weighted average weekly sales per restaurant: All restaurants ........................................ $ 73,900 $ 73,900 Same store restaurants ................................. $ 76,900 $ 74,100
-8- 9 NET SALES Net sales increased $1,696,000, or 9.7%, for the first quarter of 1999, as compared to the same period of 1998, due primarily to the opening of new restaurants. Same store sales, which include comparable sales for the 18 restaurants open for more than 12 months, averaged $76,900 for the first quarter of 1999, an increase of 3.8% over $74,100 averaged for the first quarter of 1998. The increase in same store sales during 1999 is primarily attributed to three separate menu price increases of approximately 3% each which were implemented in the months of March, May and July of 1998. Weighted average weekly sales for all restaurants totaled $73,900 for both the first quarter of 1999 as well as the corresponding period of the prior year. As noted in previous filings, management continues to believe that the primary issue faced by the Company in returning it to consistent profitability is the improvement of sales in several of its restaurants, particularly its newer restaurants. Management intends to accomplish this through a series of initiatives which began in 1997 when guest service support was increased in some of the Company's newer restaurants in order to ensure the highest quality of operations. Other actions taken include the implementation of operational systems designed to provide quicker service and increase table turns and the implementation during the fourth quarter of 1998 of an extensive profit improvement plan which included certain menu and procedural changes and which took advantage of significant purchasing opportunities. This plan resulted in significant food cost savings without sacrificing product quality, while also improving the quality and efficiency of operations. Management believes that all or virtually all of the Company's restaurants have the potential over time to reach satisfactory sales levels. COSTS AND EXPENSES Restaurant costs and expenses for all restaurants decreased to 88.0% of sales during the first quarter of 1999, as compared to 93.5% for the same period during 1998. This decrease was due to a reduction in restaurant costs and expenses in the same store group of 18 restaurants from 93.2% in the first quarter of 1998 to 85.8% during the first quarter of 1999, which more than offset higher costs associated with the two new restaurants opened during 1998. 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 in the same store group achieved during the 1999 period. Cost of sales for all restaurants decreased from 35.4% of sales in the 1998 quarter to 31.7% of sales in the 1999 period, primarily due to management's emphasis on increased efficiencies in this area, including the profit improvement plan discussed previously, and the menu price increases noted above. 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 8.9% of sales during the first quarter of 1999 as compared to 8.5% of sales during the corresponding period of 1998. Management anticipates that general and administrative costs will represent a higher percentage of sales during 1999 on a comparative basis due to favorable experience in 1998 associated with the Company's workers' compensation and self-insured group medical programs that is not expected to reoccur during 1999. -9- 10 PRE-OPENING EXPENSE The Company expenses pre-opening costs as incurred. As a result of the timing of new restaurant openings, there was no pre-opening expense during the first quarter of 1999. Pre-opening expense of $311,000 during the first quarter of 1998 related to the Louisville restaurant which opened in March, 1998. OTHER INCOME (EXPENSE) Interest expense increased by $33,000 during the first quarter of 1999 compared to the same period of 1998 due primarily to the use of the Company's line of credit to fund development of new restaurants and due to lower amounts of capitalized interest associated with new unit development. Other income increased $153,000 during the first quarter of 1999 compared to the same period during 1998, primarily due to a $90,000 gain associated with the Company's purchase of a portion of its outstanding convertible debentures. INCOME TAXES The Company has recorded a tax provision for the first quarter of 1999 using an 11.9% effective tax rate. This effective tax rate differs 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 FICA tip credits generated during 1999. No income tax benefit was recorded on the pre-tax loss for the first quarter of 1998, as management was unable to conclude that it was more likely than not that the carryforwards generated by this and previous losses would be realized. LIQUIDITY AND CAPITAL RESOURCES The Company had cash flow from operations totaling $325,000 and $1,034,000 during the first quarters of 1999 and 1998, respectively. Cash and cash equivalents decreased from $1,022,000 at year end 1998 to $292,000 at April 4, 1999. 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, on June 1, 1999, the Company has an annual sinking fund requirement of $1,875,000 in connection with its Convertible Subordinated Debentures, approximately $1.4 million of which will be satisfied through the delivery of bonds purchased in the open market during the first quarter of 1999. Management estimates that capital expenditures for 1999 for the West Bloomfield, Michigan restaurant which will be located on leased land and opened in 1999; for partial completion of the planned Cincinnati, Ohio restaurant (also to be located on leased land) for which construction is expected to begin in the fall of 1999 and will be completed in 2000; and for other additions and improvements to existing restaurants will total approximately $4.5 -10- 11 million. In addition, the Company is actively seeking a location for an additional restaurant to be opened in 2000. If a satisfactory location is found and successfully negotiated, any amounts expended in 1999 for this location, including land acquisition if the site were purchased, would be in addition to the amounts discussed above. While a working capital deficit of $5,280,000 existed as of April 4, 1999, the Company does not believe that this deficit impairs the overall financial condition of the Company because it expects cash flow from operations to be adequate to meet current obligations, including the scheduled sinking fund payment noted above. 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. The Company maintains a bank line of credit of $20 million which is expected to be used as needed for funding of capital expenditures through its expiration date of July 1, 2000 and which will also provide liquidity for meeting working capital or other needs. At April 4, 1999, borrowings outstanding under this line of credit were $6,164,000. The line of credit agreement contains certain covenants which require the Company to achieve 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 4, 1999 and, based on a current assessment of its business, believes it will continue to comply with those covenants through July 1, 2000. 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, 2000. In March 1999 the Company developed a plan for raising additional equity capital to further strengthen its financial position and, as part of this plan, completed a private sale of 1,086,266 shares of common stock to Solidus for approximately $4.1 million. The proceeds from this sale were used to reduce the Company's outstanding borrowings under its line of credit. In addition, the Company has commenced a rights offering pursuant to which shareholders of the Company on the record date for distribution of the rights will be given the opportunity to purchase up to 1,089,067 shares of common stock at a price of $3.75 per share, which is the same price per share as stock sold in the private sale. If the maximum number of shares are sold pursuant to the rights offering, the Company will receive net proceeds of approximately $3.9 million. Proceeds from the rights offering will be used to repay borrowings outstanding under the Company's line of credit. Amounts repaid can be reborrowed in accordance with the terms of the line of credit agreement. The Company believes that raising additional equity capital and repaying a portion of its outstanding debt will benefit the Company by reducing its debt to equity ratio and reducing interest expense and that it will provide greater flexibility to the Company in providing for future financing needs. -11- 12 IMPACT OF THE YEAR 2000 ISSUE INTRODUCTION. The term "Year 2000 issue" is a general term used to describe the various problems that may result from the improper processing of dates and date-sensitive calculations by computers and other machinery as the year 2000 is approached and reached. These problems generally arise from the fact that most of the world's computer hardware and software has historically used only two digits to identify the year in a date, often meaning that the computer will fail to distinguish dates in the "2000's" from dates in the "1900's". These problems may also arise from other sources as well, such as the use of special codes and conventions in software that make use of the date field. THE COMPANY'S STATE OF READINESS. The Company has completed its assessment of its internal information technology systems and its major information technology vendors and detailed plans have been developed to address system modifications required by September 30, 1999. Generally, the Company's information systems are relatively new systems based on personal computer, rather than mainframe, technology. As a result, the Company's remediation process consists primarily of replacing personal computers which are not Year 2000 compliant and installing upgrades from certain third party software vendors which the Company has been advised will make that software Year 2000 compliant. As indicated, the assessment phase with respect to information technology systems has been completed. With respect to remediation, all of the Company's personal computers have been tested for Year 2000 compliance, and replaced as necessary. Software upgrades are expected to be installed on or before August 31, 1999, with testing completed by September 30, 1999. The Company estimates that its Year 2000 readiness initiatives with respect to its information technology systems is approximately 60% complete. The Company is currently in the process of assessing its non-information technology systems that utilize embedded technology such as microcontrollers and reviewing them for Year 2000 compliance. The Company will continue to assess these systems and take appropriate action with respect to non-Year 2000 compliant systems of this nature where practicable. However, the Company does not believe that non-Year 2000 compliance of these systems will have a material effect on the Company's operations. The Company's information systems are generally not interfaced with third party vendors. However, to operate its business, the Company relies upon government agencies, utility companies, providers of telecommunication services, suppliers, and other third party service providers ("Material Relationships"), over which it can assert little control. The Company's ability to conduct its core business is dependent upon the ability of these Material Relationships to fix their Year 2000 issues to the extent they affect the Company. If the telecommunications carriers, public utilities and other Material Relationships do not appropriately rectify their Year 2000 issues, the Company's ability to conduct its core business may be materially impacted, which could result in a material adverse effect on the Company's financial condition. The Company has had discussions with a limited number of its Material Relationships regarding their Year 2000 readiness and plans to further query certain of its Material Relationships in order to obtain additional information from them. The Company believes that making these inquiries nearer year 2000 will allow it to receive the latest information from its Material Relationships -12- 13 regarding their state of readiness. The Company plans to complete its survey process prior to June 30, 1999, and will use information obtained from that process to further assess its risks and assist in the development of contingency plans prior to the end of 1999. COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES. The Company expenses costs associated with Year 2000 system changes as the costs are incurred except for system change costs that the Company would otherwise capitalize. To date, the Company has incurred costs of approximately $10,000 in connection with its Year 2000 compliance plan ("Year 2000 Plan") and estimates it will spend an additional $50,000 to $150,000 to complete its Year 2000 Plan. The financial impact of these expenses has not been material, and the Company does not expect future remediation costs to be material to the Company's consolidated financial position or results of operations. However, the Company is unable to estimate the costs that it may incur as a result of Year 2000 problems suffered by the parties with which it deals, such as Material Relationships, and there can be no assurance that the Company will successfully address the Year 2000 problems present in its own systems. RISKS PRESENTED BY YEAR 2000 PROBLEMS. The Company has begun the testing phase of its Year 2000 Plan. However, until testing is complete the Company cannot fully assess the risks of its Year 2000 issue. As a result of the testing process, the Company may identify areas of its business that are at risk of Year 2000 disruption. The absence of any such determination at this point represents only the current status of the implementation of the Company's Year 2000 Plan, and should not be construed to mean that there is no area of the Company's business which is at risk of a Year 2000 related disruption. As noted above, many of the Company's business critical Material Relationships may not appropriately address their Year 2000 issues, the result of which could have a material adverse effect on the Company's financial condition and results of operations. THE COMPANY'S CONTINGENCY PLANS. The Company's Year 2000 Plan calls for the development of contingency plans for areas of the business that are determined to be susceptible to substantial risk of a disruption resulting from a Year 2000 related event. Because the Company's remediation, testing and, with respect to Material Relationships, assessment phases are not complete, it has not fully assessed its risk from potential Year 2000 failures and has not yet developed detailed contingency plans specific to Year 2000 events for any specific area of business. The Company does, however, maintain contingency plans, outside of the scope of the Year 2000 issue, designed to address various other business interruptions. The Company is prepared for the possibility that the testing process may hereafter identify certain areas of business at risk. Consistent with its Year 2000 Plan, the Company will develop specific Year 2000 contingency plans, to the extent practicable, for such areas of business as and if such determinations are made. 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 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. -13- 14 Factors which could affect actual results include, but are not limited to, the Company's ability to increase sales in certain of its 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, filed with the Commission on May 14, 1999. PART II - OTHER INFORMATION Item 2. Sale of Unregistered Securities On March 22, 1999, Solidus purchased 1,086,266 shares of common stock from the Company for $4,073,497.50, or $3.75 per share. This sale to Solidus was exempt from registration requirements pursuant to Section 4(2) of the Securities Act of 1933. Item 4. Submission of Matters to a Vote of Security Holders (a) Annual meeting held May 6, 1999. (b) Pursuant to Instruction 3 to Item 4, no response is required to this item. (c) At the Annual Meeting conducted May 6, 1999, the shareholders voted on the Election of directors. A summary of the vote is as follows:
Beasley Duncan Fritts Stout Tobias --------- --------- --------- --------- --------- For 5,379,922 5,381,904 5,387,814 5,382,949 5,375,591 Against 37,796 35,814 29,904 34,769 42,127 Abstain 28,399 28,399 28,399 28,399 28,399
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 4, 1999. -14- 15 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 18, 1999 -15- 16 J. ALEXANDER'S CORPORATION AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Page No. - ------------- -------- (27) Financial Data Schedules (For SEC Use Only) -16- 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 4, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-02-2000 JAN-04-1999 APR-04-1999 292 0 91 0 795 1,679 72,952 11,969 64,163 6,959 18,248 0 0 327 37,752 64,163 19,208 19,208 6,094 12,467 4,445 0 451 277 33 244 0 0 0 244 .04 .04
-----END PRIVACY-ENHANCED MESSAGE-----