-----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, QXNzhHFt9t/rWsrWABrV9egDurbypnQDC7EmXY/LA7iTvfQsedsc+qCTx6JCpJh7 KBZkkEWEO/hF31g1II+spQ== 0000703799-99-000023.txt : 19990524 0000703799-99-000023.hdr.sgml : 19990524 ACCESSION NUMBER: 0000703799-99-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990418 FILED AS OF DATE: 19990521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VICORP RESTAURANTS INC CENTRAL INDEX KEY: 0000703799 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 840511072 STATE OF INCORPORATION: CO FISCAL YEAR END: 1026 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12343 FILM NUMBER: 99632213 BUSINESS ADDRESS: STREET 1: 400 W 48TH AVE CITY: DENVER STATE: CO ZIP: 80216 BUSINESS PHONE: 3032962121 10-Q 1 SECOND QUARTER 10-Q UNITED STATES SECURITIES & EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 18, 1999 --------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________________________________ Commission file number 0-12343 ------- VICORP Restaurants, Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) COLORADO 84-0511072 ----------------------------- --------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 West 48th Avenue, Denver, Colorado 80216 -------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 296-2121 -------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------------- (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 ----- ----- The registrant had 8,907,824 shares of its $.05 par value Common Stock outstanding as of May 19, 1999. PART I - FINANCIAL INFORMATION Item 1. Financial Statements VICORP Restaurants, Inc. BALANCE SHEETS (in thousands)
April 18, November 1, 1999 1998 ---------- ----------- (unaudited) ASSETS Current assets Cash $ 10,880 $ 10,262 Receivables 2,086 3,655 Inventories 5,093 7,501 Deferred income taxes 3,617 3,617 Prepaid expenses and other 2,018 2,192 -------- -------- Total current assets 23,694 27,227 -------- -------- Property and equipment, net 133,909 128,648 Deferred income taxes 32,973 35,547 Long-term receivables 756 869 Other assets 7,804 7,379 -------- -------- Total assets $ 199,136 $ 199,670 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt and capitalized lease obligations $ 1,469 $ 1,711 Accounts payable, trade 22,043 21,847 Accrued compensation 3,732 6,013 Accrued taxes 9,436 8,629 Accrued insurance 3,585 3,354 Other accrued expenses 4,876 5,208 -------- -------- Total current liabilities 45,141 46,762 -------- -------- Long-term debt (Note 3) 36 87 Capitalized lease obligations 4,900 5,696 Non-current accrued insurance 2,498 3,199 Other non-current liabilities and credits 5,664 5,919 Commitments and contingencies -- -- Shareholders' equity Series A Junior Participating Preferred Stock, $.10 par value, 200,000 shares authorized, no shares issued -- -- Common stock, $.05 par value, 20,000,000 shares authorized, 9,063,321 and 9,067,699 shares issued and outstanding 447 455 Paid-in capital 81,685 84,148 Retained earnings 58,765 53,404 -------- -------- Total shareholders' equity 140,897 138,007 -------- -------- Total liabilities and shareholders' equity $ 199,136 $ 199,670 ======== ========
The accompanying notes are an integral part of the financial statements. VICORP Restaurants, Inc. STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data)
Twelve Three Twenty-four Six weeks months weeks months ended ended ended ended -------- -------- -------- -------- April 18, April 30, April 18, April 30, 1999 1998 1999 1998 -------- -------- -------- -------- Revenues Restaurant operations $ 81,090 $ 82,041 $ 164,467 $ 168,568 Franchise operations 764 905 1,480 1,755 ------- ------- -------- -------- Total revenues 81,854 82,946 165,947 170,323 ------- ------- -------- -------- Costs and expenses Restaurant operations Food 24,611 24,971 50,999 52,784 Labor 26,585 27,007 52,953 54,869 Other operating 20,120 21,404 40,306 42,940 General and administrative 6,739 6,333 12,957 12,477 ------- ------- ------- ------- Operating Profit 3,799 3,231 8,732 7,253 Interest expense 235 403 474 892 Other (income), net (104) (141) (185) (187) ------- ------- ------- ------- Income before income tax expense 3,668 2,969 8,443 6,548 Income tax expense 1,339 1,070 3,082 2,358 ------- ------- ------- ------- Net income $ 2,329 $ 1,899 $ 5,361 $ 4,190 ======= ======= ======= ======= Basic earnings per share $ .26 $ .21 $ .59 $ .46 ======= ======= ======= ======= Diluted earnings per share $ .26 $ .21 $ .59 $ .45 ======= ======= ======= ======= Weighted average common shares and dilutive common share equivalents 9,025 9,263 9,064 9,249 ======= ======= ======= =======
The accompanying notes are an integral part of the financial statements. VICORP Restaurants, Inc. STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Twenty-four Six Weeks Months ended ended April 18, April 30, 1999 1998 ---------- -------- Operations Net income $ 5,361 $ 4,190 Reconciliation to cash provided by operations Depreciation and amortization 8,799 9,874 Deferred income tax provision 2,574 2,090 Loss on disposition of assets 28 173 Other, net (280) (397) Change in assets and liabilities Trade receivables 669 1,554 Inventories 2,408 1,514 Accounts payable, trade 196 (2,664) Other current assets and liabilities (1,499) 997 Non-current accrued insurance (701) (496) ------- ------- Cash provided by operations 17,555 16,835 ------- ------- Investing activities Purchase of property and equipment (14,706) (7,228) Purchase of other assets (789) (177) Disposition of property 512 2,036 Collection of non-trade receivables 981 232 ------- ------ Cash (used for) investing activities (14,002) (5,137) ------- ------ Financing activities Issuance of debt -- -- Payment of debt and capitalized lease obligations (837) (11,247) Purchase of common stock (2,557) -- Issuance of common stock 86 134 Other, net 373 56 ------- ------ Cash used for financing activities (2,935) (11,057) ------- ------ Increase in cash 618 641 Cash at beginning of period 10,262 1,464 ------- ------ Cash at end of period $ 10,880 $ 2,105 ======= ====== Supplemental information Cash paid during the period for Interest (net of amount capitalized) $ 484 $ 940 Income taxes 597 144
The accompanying notes are an integral part of the financial statements. VICORP Restaurants, Inc. NOTES TO FINANCIAL STATEMENTS (unaudited) - ----------------------------------------- 1. The financial statements should be read in conjunction with the annual report to shareholders for the year ended November 1, 1998. The unaudited financial statements for the twenty-four weeks ended April 18, 1999 and the six months ended April 30, 1998 contain all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. All of the adjustments included are of a normal and recurring nature. 2. Effective fiscal 1999, the Company's fiscal year end will be the last Sunday in October. The Company has decided to adopt reporting on a 52/53 week fiscal year. In conjunction with that change, the Company's last fiscal quarter of 1999 will consist of sixteen weeks and all other quarters will consist of twelve weeks. Prior to that, the Company utilized a fiscal year which ended on the last day in October. Fiscal quarters in 1998 consisted of three months. The Company determined that a significant amount of estimation would be required to restate quarterly 1998 operating results to correspond with the twelve week quarterly reporting. Therefore, restatements of results were not made and the quarterly results for 1999 and 1998 are not comparable. The following table highlights the differences in time periods:
Fiscal 1999 Fiscal 1998 -------------------------------------- ------------------------------------- Time Period Days Time Period Days ----------- ---- ----------- ---- 1st Quarter Nov. 2, 1998 - Jan. 24, 1999 84 Nov. 1, 1997 - Jan. 31, 1998 92 2nd Quarter Jan. 25, 1999 - Apr. 18, 1999 84 Feb. 1, 1998 - Apr. 30, 1998 89 3rd Quarter Apr. 19, 1999 - July 11, 1999 84 May 1, 1998 - July 31, 1998 92 4th Quarter July 12, 1999 - Oct. 31, 1999 112 Aug. 1, 1998 - Nov. 1, 1998 93 --- --- 364 366 === ===
3. As of April 18, 1999, the Company had no borrowings outstanding and $1,850,000 of letters of credit placed under its bank credit facility. The maturity date of the Company's bank credit agreement is February 28, 2001. 4. Basic earnings per share is calculated using the average number of common shares outstanding. Diluted earnings per share is computed on the basis of the average number of common shares outstanding plus the effect of outstanding stock options using the "treasury stock" method.
Twelve Three Twenty-four Six Weeks Months Weeks Months Ended Ended Ended Ended -------- -------- -------- -------- April 18, April 30, April 18, April 30, 1999 1998 1999 1998 -------- -------- -------- -------- (in thousands, except per share data) Net income available to common shareholders (A) $ 2,329 $ 1,899 $ 5,361 $ 4,190 ======= ======= ======= ======= Weighted average common shares outstanding: Basic (B) 9,001 9,166 9,046 9,163 Dilutive stock options 24 97 18 86 ----- ----- ----- ----- Diluted (C) 9,025 9,263 9,064 9,249 ===== ===== ===== ===== Earnings per share: Basic (A/B) $ 0.26 $ 0.21 $ 0.59 $ 0.46 ===== ===== ===== ===== Diluted (A/C) $ 0.26 $ 0.21 $ 0.59 $ 0.45 ===== ===== ===== =====
5. The Company has stock option plans which generally provide for the granting of options to all employees and non-employee directors of the Company at exercise prices not less than the market value of the common stock on the date of the grant. The options generally vest over three years and expire ten years after the date of grant or three months after employment termination, whichever occurs first. The following table summarizes information about the stock options outstanding and exercisable as of April 18, 1999:
Options Outstanding Options Exercisable ------------------- ------------------------ Weighted Number Average Weighted Exercisable Weighted Remaining Average At Average Range of Options Contractual Exercise April 18, Exercise Exercise Prices Outstanding Life Price 1999 Price --------------- ----------- ----------- -------- ----------- -------- $11.50-$11.50 100,000 7.34 years $11.50 50,000 $11.50 $12.25-$12.25 14,000 8.00 years $12.25 14,000 $12.25 $14.25-$14.25 100,000 9.46 years $14.25 -- $00.00 $14.50-$17.00 122,000 2.85 years $16.12 122,000 $16.12 $18.25-$26.00 106,000 6.50 years $20.98 81,000 $21.82 ------- ------- $11.50-$26.00 442,000 6.40 years $15.69 267,000 $16.78 ======= =======
6. In the fourth quarter of 1994, the Company adopted a plan to dispose of 50 restaurant locations in trade areas that were no longer considered appropriate for the Company's existing concepts. As part of the disposal plan, the carrying value of those restaurants' assets were written down to net realizable values. The Company also accrued for expected carrying costs pending disposition and sublease disposition losses. In the third quarter of fiscal 1996, the Company recorded an asset disposal charge related to a decision to close and dispose of six of its Angel's Diners. As of the end of fiscal 1996, the Company had closed all the restaurants related to both disposal plans. Consequently, operating results for the second quarter of fiscal 1999 and 1998 did not include any amounts for these units. Fifty-four stores have been disposed of through conversion, sublease, assignment, lease termination or sale. During the first half of 1999, $178,000 of closure and carrying related costs were charged against the liability established for such costs. As of April 18, 1999, the Company had $3,667,000 of reserves remaining to provide for the disposal of three closed properties and eight subleased properties. Units classified as subleased may return to closed status upon sublease termination. The reserves consisted of $2,751,000 to reduce the disposal property to net realizable value and $916,000 to provide for expected carrying costs and sublease losses. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- The Company's quarterly financial information is subject to seasonal fluctuation. Also, the second quarters of 1998 and 1999 are not comparable because of differences in time periods presented (see Note 2 of Notes to the Financial Statements). The second quarter of 1998 consisted of three months or 89 days, while the second quarter of 1999 consisted of twelve weeks, or 84 days. The fiscal first half of 1998 consisted of six months, or 181 days while the fiscal first half of 1999 consisted of twenty-four weeks, or 168 days. Restaurant operations The following table sets forth certain operating information for the Company's operating concepts and the Company as a whole.
Second Quarter Year-to-Date ---------------------------- --------------------------- Twelve Three Twenty-four Six weeks ended months ended weeks ended months ended ----------- ------------ ----------- ------------ April 18, April 30, April 18, April 30, 1999 1998 1999 1998 ----------- ------------ ----------- ----------- Bakers Square Restaurant sales $ 48,752,000 $ 49,057,000 $ 99,801,000 $101,977,000 Restaurant operating profit 4,313,000 2,869,000 9,247,000 6,469,000 Restaurant operating profit % 8.8% 5.8% 9.3% 6.3% Divisional administrative costs 1,329,000 1,268,000 2,803,000 2,427,000 Divisional operating profit 2,984,000 1,601,000 6,444,000 4,042,000 Restaurants at quarter-end 150 150 Village Inn Restaurant sales $ 32,338,000 $ 32,984,000 $ 64,666,000 $ 66,591,000 Restaurant operating profit 5,461,000 5,790,000 10,962,000 11,506,000 Restaurant operating profit % 16.9% 17.6% 17.0% 17.3% Franchise income 764,000 905,000 1,480,000 1,755,000 Divisional administrative costs 980,000 1,182,000 2,073,000 2,290,000 Divisional operating profit 5,245,000 5,513,000 10,369,000 10,971,000 Restaurants at quarter-end 100 97 Consolidated Restaurant sales $ 81,090,000 $ 82,041,000 $164,467,000 $168,568,000 Food cost % 30.4% 30.4% 31.0% 31.3% Labor cost % 32.8% 32.9% 32.2% 32.6% Other operating cost % 24.8% 26.1% 24.5% 25.5% Restaurant operating profit % 12.1% 10.6% 12.3% 10.7% Restaurant operating profit 9,774,000 8,659,000 20,209,000 17,975,000 Franchise income 764,000 905,000 1,480,000 1,755,000 Divisional general and administrative costs 2,309,000 2,450,000 4,876,000 4,717,000 ---------- ---------- ---------- ---------- Divisional operating profit 8,229,000 7,114,000 16,813,000 15,013,000 ---------- ---------- ---------- ---------- Unallocated general and administrative costs 4,430,000 3,883,000 8,081,000 7,760,000 ---------- ---------- ---------- ---------- Operating profit $ 3,799,000 $ 3,231,000 $ 8,732,000 $ 7,253,000 ========== ========== ========== ==========
Consolidated restaurant sales decreased $950,000, or 1.2%, during the second fiscal quarter and decreased $4.1 million, or 2.4% for the first two quarters of fiscal 1999 compared to last year. The sales decrease was largely attributable to five and thirteen fewer days in the second quarter and first two quarters of 1999, respectively. During the second quarter of fiscal 1999, sales increased 3.1% and guest counts increased .2% on a comparable same store basis. Same store sales for Village Inn increased .8% and Bakers Square's same store sales increased by 4.7%. Comparable guest counts for Village Inn decreased .8% and Bakers Square improved 1.0%. Modest menu price increases, restaurant remodel programs, and continued improved execution at Bakers Square contributed to the improvement in sales. For the first half of fiscal 1999, comparable total store sales increased 3.7%, reflective of a 5.1% increase for Bakers Square and a 1.4% increase for Village Inn. Comparable total guest counts increased .1%, reflective of .8% increase for Bakers Square and .6% decrease for Village Inn. Consolidated restaurant operating profit increased by $1.1 million, or 12.9%, and increased as a percentage of restaurant sales from 10.6% to 12.1% in the second quarter of 1999 versus the second quarter of 1998. The second quarter of fiscal 1999 had five fewer days than the second quarter of fiscal 1998. Bakers Square contributed to the improvement with its percentage improving from 5.8% to 8.8%, while Village Inn decreased by .7 percentage points over the same quarter of 1998. The improved operating profit was due to higher sales and increased operating efficiencies. Consolidated restaurant operating profit increased by $2.2 million, or 12.4% and increased as a percentage of restaurant sales from 10.7% to 12.3% for the first two quarters of fiscal 1999 compared to 1998's first two quarters. The first two quarters of fiscal 1999 had thirteen fewer days than the first two quarters of fiscal 1998. Bakers Square contributed to the improvement with its percentage improving from 6.3% to 9.3%, while Village Inn decreased by .3 percentage points over the same quarter of 1998. This was largely due to higher sales and increased operating efficiencies in food, labor and other costs. The following presents select quarterly trend data related to the operations of Bakers Square and Village Inn:
Bakers Square Village Inn -------------------------------------- --------------------------------------- Comparable Comparable Comparable Store Store Comparable Store Store Store Guest Operating Store Guest Operating Sales Counts Margin Sales Counts Margin ---------- ---------- --------- ---------- ---------- --------- 1998: 1st Qtr 6.5% 4.0% 6.8% 5.1% 4.9% 17.0% 2nd Qtr 7.3% 4.8% 5.8% 3.7% 2.0% 17.6% 3rd Qtr 9.9% 4.8% 8.2% 5.1% 2.0% 17.6% 4th Qtr 9.7% 4.3% 7.1% 3.4% 1.6% 17.2% 1999: 1st Qtr 5.5% .5% 9.7% 2.0% (.4%) 17.0% 2nd Qtr 4.7% 1.0% 8.8% 0.8% (.8%) 16.9%
Other revenues and expense - -------------------------- Compared to 1998's second quarter, franchise revenue in 1999's second quarter decreased by $141,000. For the first two quarters of fiscal 1999, franchise revenue decreased by $275,000 compared to the first two quarters of 1998. Average daily franchise revenue decreased 10.6% in the second quarter of 1999 versus the same quarter last year largely due to increased franchise development costs. For the first half of 1999, average daily franchise revenue decreased 9.1%. As a percent of sales, general and administrative expense increased slightly in the second quarter of 1999 from the comparable 1998 second quarter. Actual general and administrative expense increased $406,000 during the second quarter and $480,000 year-to-date over the corresponding 1998 periods, due to higher divisional administrative costs, higher incentive compensation, increased head count and fees associated with the Company's Y2K system implementation and store manager training program investment. Year-to-date, general and administrative expense as a percent of revenues was 7.8% and 7.3% for 1999 and 1998, respectively. Interest expense declined 41.7%, or $168,000, for the second quarter and 46.9%, or $418,000, for the first two quarters of 1999 as compared to fiscal 1998 due to a substantial reduction in long-term debt. Average daily interest expense decreased 38.2% and 42.7% for the second quarter and year-to-date, respectively, over last year due to reduced credit line borrowings. The Company's effective tax rate for the second quarter and first half of 1999 was 36.5% representing statutory tax rates offset somewhat by the effect of FICA tax credits. Liquidity and capital resources - ------------------------------- Operating cash flows increased $720,000 in the first two quarters of 1999 versus the first two quarters of 1998. The increase resulted primarily from improved operating results and decreased working capital requirements. As of April 18, 1999, no advances were outstanding under the Company's bank credit facility and approximately $38.2 million was available for additional direct advances, subject to limitations on combined balances of direct advances and letters of credit. On December 19, 1997, the Company accepted an amended and restated credit agreement which provided an available credit limit of $40,000,000. The agreement expires on February 28, 2001. During the first two quarters of 1999, the Company disposed of seven properties, one through sale, two through sublease, four through lease termination. Also during that time, closure and carrying costs of $178,000 were charged against the liability established for such, and cash proceeds of $690,000 were realized from the disposition of properties. At April 18, 1999, the Company had ten closed properties remaining which it was trying to sell or sublease. Four of those properties were owned in fee and the rest were leased. The Company also had twelve subleased properties. The Company hopes to sell the fee properties over the next year and $1.3 million of proceeds are expected to be realized from their sale. The Company does not anticipate significant proceeds from the disposition of the leased properties. It is expected that the majority of the leased properties will be subleased over the next twelve to eighteen months. Cash carrying costs of approximately $900,000 are expected to be incurred over that period. The Company expects to sublease four of the properties at rentals lower than the Company's obligations under the prime leases. Those sublease losses will be incurred over the remaining years of the leases and the Company does not anticipate that the losses will materially affect the Company's liquidity. As of April 18, 1999, authorizations granted by the Board of Directors for the purchase of 520,075 common shares of the Company's common stock remained available. During the first half of fiscal 1999, 166,225 shares were purchased. Future purchases with respect to the authorizations may be made from time to time in the open market or through privately negotiated transactions and will be dependent upon various business and financial considerations. Capital expenditures approximating $17.3 million are expected during the remainder of the fiscal year. The level of planned expenditures may be reduced as a result of operating conditions. Cash provided by operations, the unused portion of the Company's bank credit facility and other financing sources are expected to be adequate to fund these expenditures and any cash outlays for the purchase of the Company's common stock as authorized by the Board. The Company completed a review of its computer systems during fiscal 1997, resulting in a decision to replace a large portion of the existing systems at a cost of approximately $12.5 million. Approximately $7.5 million of this amount was spent in fiscal 1998. The Company believes the new systems are Year 2000 compliant. As of January 4, 1999, the Company implemented systems which the Company believes are Year 2000 compliant at its corporate headquarters. These new ERP (Enterprise Resource Planning) systems have been designed to provide the infrastructure to support corporate and field-based systems. A system-wide rollout to all restaurants of a new back-of-house point-of-sale (POS) system, as well as a modification of front-of-house systems which the Company believes to be Year 2000 compliant, began in March 1999 with a targeted completion date of September 1, 1999. A pilot store test began in February, 1999. The Company is in the process of developing a contingency plan for restaurant operations should the initial store testing and the rollout fall behind schedule. The Company is currently conducting a review of its physical facilities in order to identify potential areas of embedded technology (heating, lighting, fixtures, and equipment, communications systems, waste treatment, emergency backup systems, etc.) that may not be Year 2000 compliant. The Company believes its exposure is limited in this area and is formulating plans to address any issues that may surface. With respect to third parties, the Company has been in contact with and is preparing written communications to send to all third parties considered critical to the Company's ongoing operations. Written communication will request written confirmation from mission critical third parties of reasonable assurance that plans are being developed to ensure Year 2000 readiness. Reasonable assurance will include verification that critical third-party vendors have a plan in place for review of Year 2000 readiness for their supplier base. To the extent that critical third-party vendors do not provide the Company with satisfactory evidence of readiness, contingency plans will be developed and implemented by the Company by December 31, 1999. The Company has sent written notice to franchisees regarding the need for Year 2000 readiness. Approximately one-half of the Company's franchise restaurants have plans in place to replace non-compliant restaurant-based systems with the Company's new Year 2000 ready POS system. All installations are targeted to be completed by October 1, 1999. The Company does not believe the costs related to the Year 2000 readiness project will be material to its financial position or results of operations. However, the cost of the project and the date on which the Company plans to complete the Year 2000 modifications are based on management's best estimates, which were made utilizing numerous assumptions including the continued availability of certain resources, third-party modification plans, and other factors. Unanticipated failures by vendors and franchisees, as well as the failure by the Company to execute its own remediation efforts, could have a material adverse effect on the cost of the project and its completion date. In addition, any such unforeseen occurrences, if combined with failures of other third parties or public services beyond the Company's control, could have a material adverse effect on the Company's financial condition or results of operations. Consequently, there can be no assurance that the forward-looking estimates contained herein will be achieved and the actual cost could differ materially from the projections contained herein. In the event they are needed, the Company's contingency plans, in management's estimate, will be in place by December 31, 1999. VICORP has guaranteed certain leases for approximately twenty-one restaurant properties sold to others in 1986 and approximately eighteen restaurant leases of certain franchisees and others. Certain of these guarantees may or may not continue to be in force. Minimum future rental payments remaining under these leases were approximately $7.3 million as of November 1, 1998. These guarantees are included in the definition of financial instruments with off-balance-sheet risk of accounting loss. Although the Company has been required to take possession of one of these properties, which has since been subleased, the Company has no reason to believe that any material liability exists, or will exist, regarding these guarantees. The Company believes it is impracticable to estimate the fair value of these financial guarantees (e.g., amounts the Company could pay to remove the guarantees) because the Company has no present intention or need to attempt settlement of any of the guarantees. Outlook - ------- The Company is evaluating various alternative investment strategies for utilizing cash flow from operations. These alternatives include, but may not be limited to, new Village Inn restaurant properties, acquisition of new computer systems, repurchase of common stock, and acquisition of restaurant concerns in the family style segment. Certain matters discussed in this report are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risk and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those currently anticipated. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this report and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Item 5. Other Information. Item 6: Exhibits and Reports on Form 8-K. (a) Exhibits (27) Financial data schedule. (b) Reports on Form 8-K. None. 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. VICORP Restaurants, Inc. ------------------------ (Registrant) May 21, 1999 By: /s/ Charles R. Frederickson --------------------------- Charles R. Frederickson Chairman of the Board, President and Chief Executive Officer May 21, 1999 By: /s/ Richard E. Sabourin ----------------------- Richard E. Sabourin Executive Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE - 2ND QTR
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VICORP RESTAURANTS, INC. BALANCE SHEETS AND STATEMENTS OF OPERATIONS AS OF APRIL 18, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS OCT-31-1999 APR-18-1999 10,880 0 2,086 0 5,093 23,694 305,926 172,017 199,136 45,141 4,936 0 0 447 140,450 199,136 164,467 165,947 50,999 50,999 93,259 0 474 8,443 3,082 5,361 0 0 0 5,361 .59 .59
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