ITEM 1. BUSINESS.
VICORP Restaurants, Inc., the registrant, is referred to herein as "VICORP" or the "Company". The Company was incorporated in 1959 and is headquartered in Denver, Colorado.
VICORP operates family style restaurants primarily under the names "Bakers Square" and "Village Inn" and franchises restaurants under the Village Inn name. At October 31, 1996, VICORP operated 253 restaurants in 13 states, of which, 154 were Bakers Squares, 98 were Village Inns and one was a different concept. On that date, there were 108 franchised Village Inn restaurants in 21 states. The Company has a pie manufacturing division supporting its restaurants, which operates under the name VICOM. VICOM has three production facilities.
Company Operations
During fiscal 1996, the Company closed 11 restaurants. The closures largely resulted from a decision in 1996 to substantially discontinue the Angel's concept and a 1994 plan to close and dispose of undesirable locations. The Company did not open any new restaurants in fiscal 1996. While the Company plans to resume growth of Company-operated restaurants, the Company's principal focus in fiscal 1997 will be on improving existing operations.
Both of the Company's restaurant concepts serve breakfast, lunch and dinner with a guest check average between $4 and $7. Village Inn is primarily known for its breakfast foods while Bakers Square emphasizes lunch and dinner and features fresh baked pies as signature items, for internal consumption or for carryout. Each Company-operated restaurant offers a relatively standard core menu. The standard menus are supplemented with daily and monthly specials. Daily specials are chosen at the discretion of the restaurant managers to provide specific locality appeal.
Store management typically consists of a general manager and two associate/assistant managers. This management team has primary responsibility for the efficient and profitable operation of their restaurant and are provided incentives to do so. Additionally, the Company employs area directors, who work closely with the restaurant general managers in helping them meet the Company's objectives. Each area director reports to a Vice President of Operations.
The Company believes the principal measure of success for its restaurants is the ability to provide each customer with a satisfying experience. Hiring and retaining the right people, making certain that employees are adequately trained to do their jobs, clearly communicating the specific results expected from each employee and providing relevant feedback of performance are central factors in ensuring customer satisfaction. Training programs are designed to meet these objectives and focus on outcome-based training, emphasizing the acquisition of basic skills and behavior that result in desired performance for specific positions.
Cost effective procurement of quality products is also critical to providing a satisfying customer experience. The Company makes centralized purchasing decisions for basic menu ingredients to gain favorable prices and ensure uniform quality specifications. Management does not anticipate any difficulty in obtaining food products of adequate quantity or quality at acceptable prices.
The Company utilizes advertising where market penetration allows. Expenditures for advertising were 2.0% of Company-operated restaurant sales in fiscal 1996.
All of the Company-operated restaurants utilize point-of-sale computer systems. These systems capture and record sales and payroll data which are transmitted daily to the Company's corporate office. These systems are supplemented with personal computer back office systems that provide analytical and reporting tools for restaurant managers.
Franchise Operations
The Village Inn restaurants franchised by the Company generally operate for an initial term of 20 years and require payments to the Company of an initial franchise fee of $25,000 and a continuing royalty fee of three percent of the franchisee's revenues. In support of its franchising activities, the Company employs field consultants who visit the franchise restaurants regularly to ensure that the franchisees maintain compliance with certain standards of operations and make recommendations for improvements. A Franchise Advisory Board, consisting of seven franchisees who are elected by their peers every two years, meets regularly with Company personnel to discuss facets of operations that affect the Company's franchise community.
During fiscal 1996, six new franchise restaurants were opened and four franchise restaurants were closed. The net number of Village Inn franchise restaurants in operation over the last five years has not changed significantly. However, as franchising provides a profitable revenue stream and at the same time leverages the strength of the Village Inn brand into new markets, the Company continues to pursue franchising opportunities with qualified applicants. Eight new franchise units are expected to open in fiscal 1997.
Trademarks and Service Marks
The Company has acquired the right to use the marks which it considers important to its business through various federal and state registrations. VICORP has no reason to believe that there are any conflicting rights that might materially impair the use of the Company's marks.
Working Capital Items
The Company is not required to maintain significant levels of working capital because its revenues are primarily derived from cash sales while restaurant inventories are purchased on credit and rapidly converted to cash.
Competition
The restaurant industry is highly competitive and is often affected by changes in taste and eating habits of the public, by local and national economic conditions affecting spending habits, and by population and traffic patterns. The Company competes directly or indirectly with all types of restaurants, from national and regional chains to local establishments. Some of its competitors are corporations much larger than the Company, having at their disposal greater capital resources and greater ability to withstand adverse business trends.
Research and Development
No material amount was spent on Company sponsored research and development activities during the last fiscal year. Additionally, no material amounts were spent by the Company on customer sponsored research activities relating to the development of new products, services or techniques or the improvement of existing products, services or techniques.
Regulation
The Company is subject to various federal, state and local laws affecting its business. Restaurants generally are required to comply with a variety of regulatory provisions relating to zoning of restaurant sites, sanitation, health and safety. With respect to the restaurants operated by the Company which serve alcoholic beverages, VICORP is governed by the laws regulating the sale of liquor, wine and beer.
The Company is subject to a substantial number of state laws regulating franchise operations and sales. Those laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises and, in certain cases, also apply substantive standards to the relationship between franchisor and franchisee. The Company also must adhere to the Federal Trade Commission regulations governing disclosure requirements in the sale of franchises.
Various federal and state labor laws govern the Company's relationship with its employees, including such matters as minimum wage requirements, overtime, and other working conditions. Environmental requirements have not had a material effect on the operations of the Company or those of its franchisees.
Employees
At October 31, 1996 the Company employed approximately 12,400 persons.
Executive Officers of the Company
The following sets forth certain data concerning the executive officers of the Company, all of whom are appointed on an annual basis. There is no family relationship between any of the executive officers.
Charles R. Frederickson has been a director of the Company since 1968, and Chairman of the Board since November 1986.
J. Michael Jenkins was appointed President in August 1994. From February 1992 until his appointment with the Company, he served as Chief Executive Officer and Chairman of the Board for El Chico Restaurants, Inc. Mr. Jenkins served as President and Chief Executive Officer of Metromedia Steakhouses, Inc. from May 1989 to February 1992.
James R. Burke was appointed President/Bakers Square in March 1996 after serving as Executive Vice President/Bakers Square since May 1995. From November 1992 to April 1995, he served as Vice President Operations/Village Inn. For approximately six years prior to that time, Mr. Burke served as Vice President of Operations for Sea Galley Restaurants.
Robert E. Kaltenbach was appointed President/Village Inn in December 1994 after serving as Vice President/Franchise Operations since July 1988.
Nicholas S. Galanos joined the Company in February 1995 as President/Angel's. In October 1995, he assumed the duties of Executive Vice President/Development. From September 1993 until February 1995, he served as Chief Executive Officer/ Chief Operating Officer for Champps Entertainment, Inc. Mr. Galanos served as Chief Operating Officer/Executive Vice President of T.G.I. Friday's Hospitality Worldwide, Inc. from October 1991 to September 1993.
Richard E. Sabourin was appointed Executive Vice President/Chief Financial Officer in August 1996. From 1989 to August 1996, Mr. Sabourin was employed by Bestop, Inc in various positions including President, Chief Operating Officer and Chief Executive Officer.
ITEM 2.
ITEM 2. PROPERTIES.
The following table provides information as of October 31, 1996 concerning the land and buildings at restaurant locations operated, leased to others or held for disposal by the Company.
Village Bakers Inn Square Other Total ------- ------ ----- ----- Company-operated restaurants: Properties owned in fee 7 53 -- 60 Buildings owned on leased land 5 9 -- 14 Leased locations 86 92 1 179 ------- ------ ----- ----- 98 154 1 253 ======= ====== ===== =====
Properties leased to others: Properties owned in fee 1 -- 4 5 Buildings owned on leased land -- -- 1 1 Leased locations 23 -- 23 46 ------- ------ ----- ----- 24 -- 28 52 ======= ====== ===== =====
Properties held for disposal: Properties owned in fee -- -- 7 7 Buildings owned on leased land -- -- -- -- Leased locations -- -- 19 19 ------- ------ ----- ----- -- -- 26 26 ======= ====== ===== =====
The restaurants operated by the Company are located primarily in Arizona, California, Florida, the Rocky Mountain region, and the upper Midwest. The Company considers its existing operating restaurant properties and equipment to be in good condition. For additional information concerning the Company's leases see Note 4 of Notes to Consolidated Financial Statements which is included in Item 8 of Part II.
The Company intends to lease, sublease or sell the 26 properties which are currently idle.
The Company owns its corporate office complex in Denver, Colorado. It also owns the land and buildings comprising its bakery facilities in Oak Forest, Illinois. It leases the land and buildings which comprise its bakery facilities in Santa Fe Springs, California and Mounds View, Minnesota.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
VICORP is a party to various judicial and administrative proceedings, all of which have risen in the ordinary course of business. None of the proceedings are deemed to be material in light of the amounts involved.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to the Company's security holders during the three month period ended October 31, 1996.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's common stock is traded in the over-the-counter market and is quoted on the National Association of Securities Dealers (NASDAQ) National Market System under the symbol "VRES". As of January 14, 1997, the Company had 517 shareholders of record. The following table sets forth for the periods indicated the high and low closing sales quotations per share of common stock as reported by NASDAQ:
Fiscal Quarter --------------------------------------- First Second Third Fourth --------------------------------------- High $ 11 3/4 $ 15 1/4 $ 14 1/4 $ 15 Low 9 3/4 10 1/8 11 1/2 12 3/4
High $ 18 $ 16 1/2 $ 15 3/4 $ 14 3/4 Low 15 1/2 14 13 1/2 10 1/2
The range of high and low closing sales quotations contained in the foregoing table reflects inter-dealer prices, without retail mark-up, mark- down or commissions, and may not represent actual transactions.
The Company has not paid cash dividends on its common stock since 1986. Future common stock dividend payments will be dependent upon operating results, loan agreement restrictions and other financial and business considerations.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
. An asset disposal charge of $5,800,000 was included in results of operations for 1996. . An asset disposal, impairment and restructuring charge of $23,000,000 and income of $1,918,000 from settlement of litigation were included in results of operations for 1994. . Fiscal 1993 consisted of 53 weeks while the remainder of the fiscal years presented consisted of 52 weeks. A restructuring charge of $1,300,000 was included in results of operations for 1993. . Pretax extraordinary debt extinguishment costs of $963,000 were included in results of operations for 1992. . The Company has not paid dividends on its common stock during the last five years.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following analysis should be read in conjunction with the Selected Financial Data (Item 6 of Part II) and the Consolidated Financial Statements (Item 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
TO OUR SHAREHOLDERS:
The preparation and integrity of the financial statements of VICORP Restaurants, Inc. are the responsibility of its management. This responsibility includes the selection of accounting procedures and practices which conform with generally accepted accounting principles considered appropriate in the circumstances. Informed judgments and estimates which the Company believes to be reasonable are required in the determination of certain data used in the accounting and reporting process.
The Company maintains a system of internal accounting controls designed to provide reasonable assurance that transactions are executed in accordance with management's authorization and properly recorded in all material respects. Adequate communication of Company policies to its employees, segregation of responsibilities for the authorization and execution of transactions, and proper accountability for the Company's assets are essential elements of the system.
Each year the Board of Directors appoints an Audit Committee comprised of directors who are not employees of the Company. The principal responsibilities of this Committee are to recommend an independent auditor for the Company and to periodically meet with representatives of the independent auditors and with management to obtain reasonable assurances that the auditors are properly discharging their responsibilities and that the Company's financial reporting to stockholders and others is adequate and appropriate.
Arthur Andersen LLP has conducted an independent examination in order to render their opinion on the Company's financial statements.
Charles R. Frederickson J. Michael Jenkins Richard E. Sabourin Chairman of the Board President and Executive Vice President/ Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF VICORP RESTAURANTS, INC.:
We have audited the accompanying consolidated balance sheets of VICORP Restaurants, Inc. (a Colorado corporation) and subsidiary as of October 31, 1996 and October 31, 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended October 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VICORP Restaurants, Inc. and subsidiary as of October 31, 1996 and October 31, 1995, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP Denver, Colorado, December 6, 1996.
VICORP Restaurants, Inc. CONSOLIDATED BALANCE SHEETS October 31, October 31, (in thousands) 1996 1995 ----------- ----------- ASSETS
Cash (Note 1) $ 1,406 $ 3,988 Receivables (Notes 1 and 2) 3,221 3,149 Inventories (Note 1) 6,517 8,597 Deferred income taxes (Notes 1 and 9) 5,000 5,000 Prepaid expenses and other (Note 1) 1,202 2,003 ----------- ----------- Total current assets 17,346 22,737 ----------- -----------
Property and equipment, net (Notes 1 and 3) 134,653 152,592 Deferred income taxes (Notes 1 and 9) 41,324 39,375 Long-term receivables (Notes 1 and 2) 2,541 3,032 Other assets (Note 1) 8,082 10,425 ----------- ----------- Total assets $ 203,946 $ 228,161 =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt and capitalized lease obligations (Notes 1, 4 and 5) $ 1,592 $ 6,116 Accounts payable, trade 11,131 16,526 Accrued compensation 5,686 5,542 Accrued taxes 6,941 7,998 Accrued insurance (Note 10) 4,524 5,656 Other accrued expenses 4,776 4,984 ----------- ----------- Total current liabilities 34,650 46,822
Long-term debt (Notes 1 and 5) 24,642 31,094 Capitalized lease obligations (Note 4) 8,943 11,085 Non-current accrued insurance (Note 10) 5,349 6,092 Other non-current liabilities and credits 8,093 9,970
Commitments and contingencies (Notes 4, 5 and 10)
Shareholders' equity (Note 6) 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, 9,055,026 and 9,044,026 shares issued 453 452 Paid-in capital 84,431 84,332 Retained earnings 37,385 38,314 ----------- ----------- Total shareholders' equity 122,269 123,098 ----------- ----------- Total liabilities and shareholders' equity $ 203,946 $ 228,161 =========== ===========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
VICORP operates family style restaurants primarily under the names "Bakers Square" and "Village Inn" and franchises restaurants under the Village Inn name. At October 31, 1996, VICORP operated 253 restaurants in 13 states, of which, 154 were Bakers Squares, 98 were Village Inns and one was a different concept. On that date, there were 108 franchised Village Inn restaurants in 21 states. The restaurants operated by the Company are located primarily in Arizona, California, Florida, the Rocky Mountain region, and the upper Midwest. The Company has a pie manufacturing division supporting its restaurants, which operates under the name VICOM. VICOM has three production facilities.
Basis of presentation
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Principles of consolidation
The consolidated financial statements include the accounts of VICORP Restaurants, Inc. and the accounts of its wholly-owned subsidiary through March 1996, the date of its dissolution. Prior to its dissolution, VICORP's subsidiary transfered all of its assets and liabilities to the Company. All significant intercompany transactions and accounts have been eliminated.
Fiscal year
In fiscal 1995, the Company switched its fiscal year end to the last day in October. Prior to that, the Company utilized a 52/53 week fiscal year which ended on the last Sunday in October.
Inventories
Inventories are valued at the lower of first-in, first-out cost or market value. Inventories consisted of the following (in thousands):
October 31, October 31, 1996 1995 ----------- ----------- Food at production facilities Raw materials $ 2,171 $ 2,828 Finished goods 2,067 3,252 ----------- ----------- 4,238 6,080
Food at restaurants 2,279 2,517 ----------- ----------- $ 6,517 $ 8,597 =========== ===========
Prepaid expenses
Prepaid expenses consist primarily of supplies, prepaid contract costs and restaurant preopening costs. Preopening costs are amortized over a one-year period following restaurant opening. At October 31, 1996 and 1995, no material amounts of preopening costs were reported as assets.
Depreciation and amortization
Depreciation and amortization of property and equipment are provided using principally the straight-line method at rates based upon estimated useful lives of the assets, ranging from 20 to 40 years for buildings and 3 to 15 years for equipment and improvements. Amortization of leasehold rights and excess of cost over net assets acquired in purchase transactions is provided using the straight-line method, primarily over the remaining lives of location leases or assets acquired, generally 5 to 25 years. Deferred loan fees ($300,000 and $0, net of amortization at October 31, 1996, and 1995, respectively) are included in other assets and are amortized over the 3 year loan commitment period using the straight-line method (Note 5).
Franchise revenues
Initial franchise fees are deferred when received and recognized as income when the franchisee has commenced operations and the Company has performed all material services and conditions related to the sale of the franchise. Continuing service fees, which are a percentage of the gross sales of franchised operations, are accrued as income when earned except for situations in which collectibility is in doubt. In those situations, continuing service fees and rental income are recognized when received, and gains on property sales are recorded using the cost recovery method.
Net franchise revenues consisted of the following (in thousands):
1996 1995 1994 ------------------------- Continuing service fees $ 4,216 $ 4,192 $ 3,968 Initial and renewal fees 169 167 166 Property rental income 206 269 319 Interest income on franchisee notes 247 293 263 Equipment sales income 42 50 64 Administrative expense (1,537) (1,249) (1,433) ------------------------- Franchise revenues $ 3,343 $ 3,722 $ 3,347 =========================
Advertising costs
The Company expenses the production costs of advertising the first time the advertising takes place. Costs of communicating advertising are expensed when incurred, generally when airtime or print media is used. Direct response advertising is seldom used by the Company and is expensed when incurred.
Advertising expense for 1996, 1995 and 1994 was $6,653,000, $11,106,000 and $14,043,000, respectively. At October 31, 1996 and 1995, no material amounts of advertising were reported as assets.
Fair value of financial instruments
The Company has notes receivable carried on its balance sheets at values approximating estimated fair market value. Because these instruments are not publicly traded, the Company estimates the value based on the respective facts and circumstances of each instrument. The fair value of the Company's long-term debt approximates carrying value because of its variable, market- based interest rate feature.
Income taxes
Based on enacted tax laws, deferred income tax assets and liabilities are recognized for the expected future income tax consequences of carryforwards and temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized.
Earnings per common and common equivalent share
Earnings per common and common equivalent share is based upon earnings attributable to common shareholders and the weighted average number of common and dilutive common equivalent shares for stock options outstanding during the year. Common equivalent shares for fiscal years 1996, 1995 and 1994 were anti-dilutive due to the net losses recorded in those years. The weighted average number of common and common equivalent shares used for the 1996, 1995 and 1994 calculations were as follows:
1996 1995 1994 --------- --------- --------- Weighted average common shares outstanding 9,049,501 9,246,439 9,656,094 Common equivalent shares outstanding -- -- -- --------- --------- --------- 9,049,501 9,246,439 9,656,094 ========= ========= =========
Statements of cash flows
The Company considers all highly liquid investments and debt instruments with original maturities of three months or less to be cash equivalents.
NOTE 2. RECEIVABLES
Receivables consisted of the following:
October 31, October 31, (in thousands) 1996 1995 ----------- ----------- Trade receivables $ 2,826 $ 3,391 Notes receivable 4,327 5,808 Discounts (687) (750) Allowance for doubtful accounts (704) (2,268) ----------- ----------- Receivables, net 5,762 6,181 Current portion 3,221 3,149 ----------- ----------- Long-term portion $ 2,541 $ 3,032 =========== ===========
The Company's receivables arose primarily from contracts and property transactions with its franchisees and other sublessees. The ability of these parties to honor their obligations is largely dependent on cash flows generated from their restaurant operations. The trade receivables are generally unsecured but the related contracts are cancelable if the debtor fails to perform. Under Company policy, the notes receivable are generally secured with security agreements on the property that gave rise to the transaction.
In November 1994, the Company settled a lawsuit against certain of its insurance carriers. The litigation arose in April 1992 when the Company claimed the defendants breached their contract of insurance by withholding payments to fund a $6,500,000 court approved settlement arising from prior litigation against the Company. The Company recorded income of $1,918,000 in the fourth quarter of 1994, representing the excess recovery over the net carrying value of the receivable. This receivable was collected in the first quarter of 1995.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
October 31, October 31, (in thousands) 1996 1995 ----------- ----------- Property and equipment used in operations Land $ 20,801 $ 21,982 Buildings and improvements 120,464 122,533 Equipment 107,477 104,856 Construction in progress 740 1,829 Restaurant property leased to others 4,505 4,339 Accumulated depreciation (128,608) (111,339) ----------- ----------- 125,379 144,200 ----------- ----------- Capitalized lease buildings 8,575 10,091 Accumulated amortization (4,017) (5,091) ----------- ----------- 4,558 5,000 ----------- ----------- Properties held for disposal, net 10,271 10,011 Allowance for loss on disposal (5,555) (6,619) ----------- ----------- Property and equipment, net $ 134,653 $ 152,592 =========== ===========
Depreciation and amortization expense charged to operations for property and equipment was $20,555,000 in 1996, $22,018,000 in 1995 and $25,509,000 in 1994.
At October 31, 1996, all of the Company's fee owned properties were free of mortgages, pledges or other liens.
NOTE 4. LEASES
The Company is the prime lessee under various land and building leases for restaurants operated by it and certain of its franchisees. Additionally, the Company leases certain bakery production facilities. The leases have initial terms generally ranging from 15 to 35 years and in certain instances, provide for renewal options ranging from 5 to 20 years. Some of the leases contain purchase options at the end of the lease terms. Many of the leases contain escalation clauses, either predetermined or based upon inflation. Most of the leases require additional (contingent) rental payments by the Company if sales volumes at the related restaurants exceed specified levels. Most of the agreements require payment of taxes, insurance and maintenance costs. The implicit interest rates range from 7.2% to 14.0% for capital leases.
The Company as prime lessee has entered into sublease agreements with franchisees and others on certain locations that are not operated by the Company. These leases generally have terms similar to the prime lease with the sublessee assuming the Company's obligations to pay taxes, insurance and maintenance costs.
Following is a summary as of October 31, 1996, of future minimum lease payments under capital and operating leases having an initial or remaining non-cancelable term of one year or more:
Lease and Capital Operating sublease (in thousands) leases leases rentals --------------------------------- 1997 $ 2,709 $ 14,546 $ (2,467) 1998 2,524 14,079 (2,324) 1999 2,371 13,478 (2,086) 2000 2,144 12,359 (1,913) 2001 1,953 11,584 (1,652) Later years 3,448 40,941 (4,889) -------------------------------- Total minimum lease payments 15,149 $ 106,987 $ (15,331) ====================== Less amount representing interest 4,692 ------- Present value of mininum lease payments 10,457 Current maturities of capitalized lease obligations 1,514 ------- Capitalized lease obligations $ 8,943 =======
Net rental expense consisted of the following:
(in thousands) 1996 1995 1994 ------------------------------- Restaurant land and buildings Minimum rentals $ 14,239 $ 14,714 $ 15,243 Contingent rentals 2,441 2,685 2,922 Equipment 742 1,346 3,293 ------------------------------- Rental expense 17,422 18,745 21,458 Less lease and sublease rental income 3,198 3,368 3,152 ------------------------------- Net rental expense $ 14,224 $ 15,377 $ 18,306 ===============================
NOTE 5. DEBT
Long-term debt consisted of the following:
October 31, October 31, (in thousands) 1996 1995 ------------------------- Advances under bank credit agreement $ 24,500 $ 35,250 Other long-term debt 220 324 ------------------------- 24,720 35,574 Current maturities 78 4,480 ------------------------- Long-term debt $ 24,642 $ 31,094 =========================
On October 31, 1996, the Company canceled its existing credit facility and entered into two new unsecured revolving credit agreements which together provide up to $40,000,000 for direct advances and letters of credit with a sublimit of $10,000,000 on letters of credit. The available commitments will be reduced by $10,000,000 on October 31, 1997 and $5,000,000 on October 31, 1998 and expire entirely on October 31, 1999 unless otherwise extended. Initial fees on the agreements totaled approximately $300,000. The Company is required to pay a quarterly agent's fee of $7,500, 3/8% per annum on unused commitments and 1 1/8% on issued letters of credit. Advances bear interest at the higher of the Federal Funds rate plus 1/2% or the lender's prime rate; or, the Company may elect to borrow at the lender's Eurodollar rate plus 1 1/2%. The Eurodollar and unused commitment rates are adjustable based on the Company's debt to capitalization ratio. During 1996, the largest aggregate outstanding balance under the Company's bank facilities was $40,000,000. The average balance outstanding was $32,995,000 and the average interest rate was 6.9%. At October 31, 1996, the Company had placed letters of credit totaling $4,916,000 in connection with its insurance programs and the interest rate charged on its outstanding advances was 8 1/4%.
The agreements contain various restrictive covenants which include, among others, maintenance of certain financial ratios, maintenance of a minimum balance of tangible net worth and limitations on annual capital expenditures, indebtedness, dividends, dispositions and acquisitions.
At October 31, 1996, principal amounts of long-term debt due during each of the five succeeding fiscal years were $78,000 in 1997, $4,570,000 in 1998, $20,072,000 in 1999, and none in both 2000 and 2001.
The Company incurred $4,014,000, $3,864,000 and $3,956,000 of interest charges in 1996, 1995 and 1994, respectively. Of these amounts, none, $9,000 and $89,000 were capitalized in each respective year.
NOTE 6. SHAREHOLDERS' EQUITY
The Company's authorized preferred stock consists of 5,000,000 $.10 par value shares to be issued in series. The rights of each series are to be determined by the Company's Board of Directors.
The Company has outstanding one right for each outstanding common share of the Company. When exercisable, each right will entitle its holder to buy 1/100th of a share of the Company's Series A Junior Participating Preferred Stock at an exercise price of $40. If, among other things, the Company is acquired in a merger or other business combination transaction, including one in which the Company is the surviving corporation, each right will entitle its holder to purchase, at the then current exercise price of the right, that number of shares of common stock of the surviving company which at the time of such transaction would have a market value of twice the exercise price of the right. The rights are exercisable only if, without the Company's prior consent, a party acquires, or obtains the right to acquire, 25% or more of the Company's outstanding voting securities or announces a tender offer which would result in such ownership. At the Company's option, the rights are redeemable at two cents per right at any time before a 25% position has been acquired and under limited circumstances thereafter. The rights expire May 26, 1997.
At various times since August 1992, the Company's Board of Directors has authorized the purchase of shares of the Company's common stock. At October 31, 1996, authorization to purchase an additional 300,500 common shares was available.
Under Colorado law, repurchased shares of capital stock are considered authorized and unissued shares and have the same status as shares which have never been issued.
Under the most restrictive covenants of the Company's bank credit agreement, approximately $2,100,000 of consolidated retained earnings were unrestricted at October 31, 1996, as to the declaration of cash dividends and the acquisition of the Company's common stock.
The following table summarizes shareholders' equity activity:
NOTE 7. STOCK OPTION, STOCK PURCHASE AND PROFIT-SHARING PLANS
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.
In 1994, the Company entered into a stock option agreement with J. Michael Jenkins, a Director, Chief Executive Officer and President of the Company. Under the agreement, Mr. Jenkins was granted an option to purchase 300,000 shares of the Company's stock. These options were canceled in 1996, and the Company entered into a new stock option agreement with Mr. Jenkins. Under the new agreement, Mr. Jenkins was granted an option to purchase 300,000 shares of the Company's stock at a price of $13.00. The options vest 100,000 in August 1996, 100,000 in October 1999 and 100,000 in October 2002 and are exercisable until August 2006, unless accelerated under certain conditions.
In August 1996, the Company entered into stock option agreements with Craig Held and Rick Sabourin, Executive Vice President/Chief Marketing Officer and Executive Vice President/Chief Financial Officer, respectively. Each individual was granted options to purchase 100,000 common shares. Mr. Held's employment with the Company was terminated in November 1996 and his options were canceled at that time. Mr. Sabourin's options have a grant price of $11.50 per share, vest evenly over a four year period and expire in August 2006, unless earlier canceled.
The following table summarizes stock option activity:
Shares Option price - ---------------------------------------------------------------------- Outstanding at October 31, 1993 (554,516 shares exercisable) 635,514 $ 5.63 - 26.00 Granted 338,809 14.25 - 30.17 Exercised (39,513) 5.63 - 14.75 Canceled (87,500) 5.63 - 23.50 - ---------------------------------------------------------------------- Outstanding at October 30, 1994 (508,336 shares exercisable) 847,310 5.63 - 30.17 Granted 19,882 15.25 - 17.00 Exercised (42,600) 5.63 - 15.00 Canceled (146,694) 9.88 - 25.50 - ---------------------------------------------------------------------- Outstanding at October 31, 1995 (356,607 shares exercisable) 677,898 5.63 - 30.17 Granted 534,000 11.50 - 14.88 Exercised (11,000) 5.63 - 9.88 Canceled (332,598) 5.63 - 30.17 - ---------------------------------------------------------------------- Outstanding at October 31, 1996 (459,140 shares exercisable) 868,300 $ 5.63 - 26.00 ======================================================================
In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock- Based Compensation". The SFAS, which would be effective for the Company's fiscal 1997, recommends a fair value based method of accounting for an employee stock option. However, companies may choose to continue to account for stock options using the intrinsic value based method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and provide proforma disclosures of net income and earnings per share as if the fair value based method had been applied. The Company anticipates it will continue to account for stock options using the intrinsic value based method, and thus SFAS No. 123 will not have any impact on its reported results.
In October 1996, the Company adopted an Employee Stock Purchase Plan under which any eligible employee who has completed 12 months of employment may contribute up to $25,000 of their annual earnings toward the quarterly purchase of the Company's common stock. The common stock will be purchased from the Company at 85% of the quarter-end market value. There are no charges or credits to income in connection with the plan. The Company has reserved 500,000 common shares for issuance under the plan which terminates on September 30, 2001. No common shares were issued in fiscal 1996 under this plan.
The Company also has an Outstanding Common Stock Purchase Plan under which eligible participants may elect to utilize incentive compensation that otherwise would be paid in cash to purchase the Company's common stock in the open market at prevailing prices. If the participant still owns these shares and is still employed by the Company after two years from the purchase of the common shares, then a cash bonus equal to 25% of the incentive compensation used to purchase the shares will be paid to the participant. The plan expires the earlier of October 31, 1999 or when 100,000 common shares have been purchased by plan participants. No material expense under this plan was incurred during the last three fiscal years.
The Company has an employees' profit-sharing plan, established under Section 401(k) of the Internal Revenue Code of 1986, which provides for annual contributions by the Company to be determined by the Board of Directors. The Company's annual contribution, if the Company is profitable (as defined in the plan), must be equal to at least 2% and may not exceed 15% of the aggregate compensation of the participants while participating. Any full- time employee 21 years of age or older who has completed one year of service with the Company is eligible to participate. Assets of the profit-sharing plan can be invested in the Company's common stock, or among several other alternatives. The Company's expenses related to contributions to the plan in 1996, 1995 and 1994 were $473,000, $455,000 and $829,000, respectively.
NOTE 8. ASSET DISPOSAL, IMPAIRMENT, RESTRUCTURING AND RELATED COSTS
In 1996, the Company recorded a $5,800,000 asset disposal charge related to a decision to close and dispose of most of its Angel's Diner restaurants. The Company had previously converted seven of its existing restaurants to the Angel's Diner format with the intent of utilizing that concept to invigorate underperforming locations. Based on the results of the test restaurants, the Company determined that this strategy did not have merit. One Angel's restaurant will continue to be operated and the remainder closed in the fourth quarter of fiscal 1996 with the intent to dispose of the properties through sale or sublease over the next fiscal year.
The asset disposal charge consisted of the following (in 000's):
Total net assets $ 6,628 Estimated net realizable value 1,957 ------- Reduction of disposal assets to net realizable value 4,671 Closure and carrying costs 1,129 ------- Total charge $ 5,800 =======
In 1994, a $23,000,000 charge was recorded principally related to a plan to close and dispose of 50 restaurants that had declining sales and profits and that were in trade areas no longer considered appropriate for the Company's operating concepts. The disposition plan also included a portion of the Company's manufacturing and distribution operations which were no longer economical to operate. The disposal charge consisted of estimates to reduce the carrying amounts of assets to net realizable value, accruals for closure and carrying costs, and losses on sublease dispositions where it was expected that sublease rentals would be lower than the Company's obligations under the prime lease.
Included in the 1994 charge was an impairment of assets of $2,287,000 for four restaurant properties with projected cash flows insufficient to recover remaining investments and a $1,291,000 restructuring charge related to the elimination of 27 administrative positions that were redundant or non- essential to ongoing operations.
As of the end of fiscal 1996, the Company had closed all the restaurants related to the above mentioned disposal plans. Additionally, in 1996 the Company closed two restaurants which were not included in the disposal plans. Both properties are owned in fee and neither property is expected to incur material disposition costs or losses. In 1995 the Company discontinued the internal distribution and warehousing of grocery products for its restaurants and closed its bakery facility in Phoenix, Arizona. In 1996, the Company closed its bakery facilities in Denver, Colorado and Orlando, Florida.
Operating results for the closed restaurants for the past three fiscal years were as follows (in thousands):
1996 1995 1994 --------------------------- Sales $ 6,409 $31,704 $42,503 Restaurant operating profit (loss) (1,035) (3,285) (958)
As of October 31, 1996, the Company had $9,031,000 of reserves remaining to provide for the disposal of 26 properties, including six closed prior to 1994. The reserves consisted of $5,806,000 to reduce the disposal property to net realizable value and $3,225,000 to provide for carrying costs and sublease losses. The Company believes that these reserves are adequate to cover the remaining costs and losses associated with the remaining disposal properties. During 1996, $2,500,000 of closure and carrying costs were charged against the established liability.
NOTE 9. INCOME TAXES
The total provisions for income taxes consisted of the following:
(in thousands) 1996 1995 1994 ------------------------------ Current Federal $ 75 $ -- $ 414 States 205 200 929 ------------------------------ 280 200 1,343 ----------------------------- Deferred Federal (2,063) (4,316) (3,613) States 113 (509) (1,801) ------------------------------ (1,950) (4,825) (5,414) ------------------------------ $ (1,670) $ (4,625) $ (4,071)
The components of the income tax provision were as follows:
(in thousands) 1996 1995 1994 --------------------------- Current Taxes on income before carryforwards $ 280 $ 200 $ 6,177 Less benefit of loss carryforwards utilized -- -- (4,834) --------------------------- $ 280 200 1,343 --------------------------- Deferred Tax effect of net change in temporary differences 858 3,866 (9,659) Utilization of (addition to) tax net operating loss carryforward (1,734) (7,609) 4,834 FICA tax credit (999) (780) (749) Targeted jobs tax credit and AMT credit (75) (302) -- Expiration of tax credit carryforwards -- -- 2,160 Change in valuation allowance -- -- (2,000) --------------------------- (1,950) (4,825) (5,414) --------------------------- Tax effect of deduction for exercised stock options credited to paid-in capital 16 93 89 --------------------------- Income tax benefit $(1,654) $(4,532) $(3,982) ===========================
The provisions for income taxes differ from the amounts computed by applying the federal income tax rate to income before income taxes as follows:
The Company had taxable loss for federal income tax purposes and book income (loss) before income taxes as follows:
(in thousands) 1996 1995 1994 ------------------------------- Federal taxable income (loss) $ (4,033) $ (17,588) $ 14,589 Book loss before income taxes (2,583) (9,064) (10,620)
Federal taxable income is generally less than book income before income taxes due to state income taxes, differences in depreciation rates, and employee stock option exercises. In 1994, such differences were more than offset by the asset disposal charge of $23,000,000 a majority of which was not deductible for tax purposes in that year.
The components of the net deferred tax assets were as follows:
(in thousands) 1996 1995 ------------------ Deferred tax assets Tax effect of net operating loss carryforwards $ 81,002 $ 79,268 Tax credit carryforwards 4,206 4,206 FICA tax credit 2,528 1,529 Alternative minimum tax credits 2,240 2,165 Accrued insurance claims not yet deductible 3,789 4,512 Leasing transactions 3,614 3,598 Property and equipment 356 543 Other 4,289 4,782 ------------------ 102,024 100,603 Valuation allowance (53,000) (53,000) ------------------ Deferred tax asset, net 49,024 47,603 ------------------ Deferred tax liability (2,700) (3,228) ------------------ Net deferred tax asset 46,324 44,375 Current portion 5,000 5,000 ------------------ Long-term portion $ 41,324 $ 39,375 ==================
As of October 31, 1996, the Company had federal net operating loss carryforwards totaling $211,833,000 which expire $71,186,000 in 1998, $112,880,000 in 1999, $6,146,000 in 2001, $17,588,000 in 2010 and $4,033,000 in 2011. The Company also has investment tax credit carryforwards of $3,506,000 expiring from 1997 through 2000. The Company has established a valuation allowance due to the uncertainty that the full amount of those credits and operating loss carryforwards will be applied against future taxable income. This allowance was reduced by $2,000,000 in 1994 due to the expiration of investment tax credits to which a portion of the allowance applied. While a continuation of the Company's 1996 taxable income level is not sufficient to realize the portion of the net deferred tax assets related to the operating loss carryforwards before the expiration periods, the Company feels that its 1996 operating results are not indicative of future performance. Historically, the Company had taxable income in excess of the amount necessary for realization and believes it will do so again in future years. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. Cumulative taxable income of approximately $60,000,000 for fiscal years 1997 through 1999 will be necessary to realize net deferred tax assets of approximately $20,000,000 for a majority of the net operating loss carryforwards before they expire. Future adjustments to the valuation allowance deemed appropriate due to changed circumstances will be recognized as a separate component of the provision for income taxes.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company retains a significant portion of certain insurable risks primarily in the medical, dental, workers' compensation, general liability and property areas. Traditional insurance coverage is obtained for catastrophic losses. Provisions for losses expected under these programs are recorded based upon the Company's estimates of liabilities for claims incurred, including those not yet reported. Such estimates utilize prior Company history and actuarial assumptions followed in the insurance industry. The Company has provided letters of credit totaling $4,916,000 in connection with certain of these insurance programs.
The Company is involved in various lawsuits and claims arising from the conduct of its business and has guaranteed certain indebtedness and leases of its franchisees and others. Management believes the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations.
At October 31, 1996, the Company had contractual commitments for restaurant construction of approximately $1,340,000.
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's quarterly results of operations are summarized as follows (in thousands, except per share data):
Quarter ended (a) ------------------------------------------------ January 31, April 30, July 31, October 31, 1996 1996 1996 1996 (92 days) (90 days) (92 days) (92 days) ------------------------------------------------ Revenue $ 89,281 $ 86,153 $ 86,445 $ 81,401 Restaurant operating income 4,156 6,440 8,400 9,217 Net income (loss) (916) 45 (1,532) (b) 1,474 Net income (loss) per common and dilutive common equivalent share (.10) .00 (.17) .16 ================================================
Quarter ended (a) ------------------------------------------------ February 19, May 14, August 6, October 31, 1995 1995 1995 1995 (112 days) (84 days) (84 days) (86 days) ------------------------------------------------ Revenues $124,033 $ 85,324 $ 83,216 $ 81,265 Restaurant operating income (loss)11,706 5,810 (1,063) (20) Net income (loss) 2,499 158 (3,978) (3,211) Net income (loss) per common and dilutive common equivalent share .26 .02 (.44) (.36) ================================================
(a) In fiscal 1995, the Company switched its year-end to the last day in October. In conjunction with that change, each fiscal quarter in 1996 consisted of three months. Previously, the Company's first fiscal quarter consisted of sixteen weeks and all other quarters consisted of twelve weeks. The Company determined that a significant amount of estimation would be required to restate quarterly 1995 operating results to correspond with the three month quarterly reporting. Therefore, restatements of results were not made and the interim results for fiscal years 1996 and 1995 are not comparable.
Restaurant sales in 1995 restated to a comparable time frame basis as 1996 were as follows:
Restated Reported Fiscal 1995 Fiscal 1995 ----------------------------- 1st Quarter $103,133,000 $123,041,000 2nd Quarter 89,893,000 84,433,000 3rd Quarter 90,492,000 82,275,000 4th Quarter 86,598,000 80,367,000 ----------------------------- $370,116,000 $370,116,000 =============================
(b) Includes pre-tax asset disposal charge of $5,800,000.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company will file a definitive proxy statement pursuant to Regulation 14A for its 1997 Annual Meeting of Shareholders. Such statement will be filed no later than 120 days after the close of the fiscal year covered by this Form 10-K. Except for certain information concerning executive officers of the Company which is included in Part I of this Form 10-K, the information called for by the above items will be included in such definitive proxy statement under "Election of Directors", "Certain Transactions", "Compensation of Directors and Executive Officers" and "Voting Securities and Principal Holders Thereof", which is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) The following Consolidated Financial Statements of VICORP Restaurants, Inc. are filed as part of this report:
Management's Report on Financial Statements.
Report of Independent Public Accountants.
Consolidated Balance Sheets - October 31, 1996 and October 31, 1995.
Consolidated Statements of Operations - Years ended October 31, 1996, October 31, 1995 and October 30, 1994.
Consolidated Statements of Cash Flows - Years ended October 31, 1996, October 31, 1995 and October 30, 1994.
Consolidated Statements of Shareholders' Equity - Years ended October 31, 1996, October 31, 1995 and October 30, 1994 as presented in Note 6 of Notes to Consolidated Financial Statements.
(a) (2) The following financial statement schedule for VICORP Restaurants, Inc., as listed in the Index below, is included herein beginning on page 28.
Report of Independent Public Accountants on Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts for the years ended October 31, 1996, October 31, 1995 and October 30, 1994.
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
(a) (3) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index on Page 30.
For the purpose of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's currently effective Registration Statements on Form S-8:
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to any statute, charter provisions, bylaws, contract, or other arrangements, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceedings) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(b) Reports on Form 8-K filed in fourth quarter of 1996:
None.
(c) Exhibits filed with this report are attached hereto.
(d) Financial statement schedules filed with this report follow:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of VICORP Restaurants, Inc. and subsidiary included in this form 10-K and have issued our report thereon dated December 6, 1996. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the attached index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Denver, Colorado, December 6, 1996.
VICORP Restaurants, Inc. Schedule II - VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended October 31, 1996 (in thousands)
(1) Charges to the accounts for purposes for which the reserves were created. Deductions to the allowance for doubtful accounts in 1994 includes $1,918,000 reversal of previously established allowance due to settlement of litigation in excess of the net receivable previously recognized for the claim. (2) Establishment of discounts on receivables. (3) Asset dispositions and write-offs of fully amortized assets. (4) Establishment of reserves by charges directly to income. (5) Recognition of deferred gains.
Year-end balances are reflected in the Consolidated Balance Sheets as follows:
October 31, October 31, 1996 1995 ----------- ----------- Deducted from current receivables $ 330 $ 1,067 Deducted from property and equipment 5,555 6,619 Deducted from long-term receivables 1,061 1,951 Deducted from other assets 6,289 5,907 ----------- ----------- $ 13,235 $ 15,544 =========== ===========
EXHIBIT INDEX
The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified below by an asterisk (*). For each such exhibit there is shown below the filing and exhibit number of the document in the previous filing. The registration statements were filed by the Company unless otherwise indicated. Exhibits which are not required for this report are omitted.
Exhibit Description of Document - ------- ----------------------- 3 - * (i) Articles of Incorporation, as Amended - Form 10-K for the year ended October 29, 1989. - *(ii) Bylaws - Form 10-K for the year ended October 29, 1989. 4 - * (i) Specimen Stock Certificate - Form 10-K for the year ended October 30, 1988. - *(ii) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of VICORP Restaurants, Inc. - Current Report of VICORP Restaurants, Inc. on Form 8-K dated May 26, 1987. - *(iii) Rights Agreement dated as of May 12, 1987 between VICORP Restaurants, Inc. and Bank of America National Trust & Savings Association as Rights Agent - Current Report of VICORP Restaurants, Inc. on Form 8-K dated May 26, 1987. 10 - Material Contracts *(i) Franchise Operating Agreement - Registration Statement 2-83326, Exhibit 10(b). (ii) U.S. $35,000,000 Credit Agreement dated October 31, 1996, between VICORP Restaurants, Inc. and NationsBank of Texas, N.A. and Colorado National Bank. (iii) U.S. $5,000,000 Credit Agreement dated October 31, 1996, between VICORP Restaurants,Inc. and NationsBank of Texas, N.A. (iv) Executive Compensation Plans and Arrangements *(a) 1982 Incentive Stock Option Plan - Registration Statement 2-78250, Exhibit 10(c). *(b) Amendment to 1982 Incentive Stock Option Plan - Form 10-Q for the quarter ended May 10, 1987, Exhibit 10(i). *(c) Amendment to 1982 Incentive Stock Option Plan - Form 10-Q for the quarter ended August 2, 1987, Exhibit 10. *(d) Amendment to 1982 Incentive Stock Option Plan - Form 10-Q for the quarter ended May 8, 1988, Exhibit 10. *(e) Amendment to 1982 Incentive Stock Option Plan - Form 10-K for the year ended October 25, 1992, Exhibit 10(ix). *(f) Amendment to 1982 Incentive Stock Option Plan dated April 11, 1995 - Form 10-K for the year ended October 31, 1995, Exhibit 10(x)(f). *(g) 1983 Non-Qualified Stock Option Plan - Registration Statement 2-83326, Exhibit 10(c). *(h) Amendment to 1983 Non-Qualified Stock Option Plan - Form 10-Q for the quarter ended May 10, 1987, Exhibit 10(ii). *(i) Amendment to 1983 Non-Qualified Stock Option Plan - Form 10-K for the year ended October 25, 1992, Exhibit 10(x). *(j) Amendment to 1983 Non-Qualified Stock Option Plan dated April 11, 1995 - Form 10-K for the year ended October 31, 1995, Exhibit 10(x)(j). *(k) VICORP Restaurants, Inc. Outstanding Stock Purchase Plan (1989) - Registration Statement 33-32608, Exhibit 4(h). *(l) VICORP Restaurants, Inc. Stock Purchase Plan - Registration Statement 333-11003 , Form S-8 dated August 28, 1996. *(m) Deferred Compensation Plan of VICORP Restaurants, Inc. dated May 1, 1996 - Form 10-Q/A for the quarter ended July 31, 1996, Exhibit 10(iii). *(n) Form Severance Agreement (Executive Officers excluding Frederickson and Jenkins) - Form 10-K for the year ended October 31, 1993, Exhibit 10(vi). *(o) Severance Agreement Charles R. Frederickson - Form 10-K for the year ended October 31, 1993, Exhibit 10(vi). *(p) Employment Agreement of J. Michael Jenkins dated August 26, 1994 - Form 10-K for year ended October 30, 1994, Exhibit 10 (vi)(n). *(q) Employment Agreement of Nicholas Galanos dated February 3, 1995 - Form 10-K for the year ended October 31, 1995, Exhibit 10(x) (s). *(r) Employment Agreement for Richard E. Sabourin dated July 25, 1996 - form 10-Q for the quarter ended July 31, 1996, Exhibit 10(ii)(b). *(s) Stock Option Agreement of Richard E. Sabourin dated August 19, 1996 - Form 10-Q for the quarter ended July 31, 1996, Exhibit 10(ii)(d). (t) Stock Option Agreement of J. Michael Jenkins dated August 19, 1996. 23 - Consents of Accountants 24 - Power of Attorney 27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 14th day of January, 1997.
VICORP Restaurants, Inc. (Registrant)
By /s/ Charles R. Frederickson ----------------------- Charles R. Frederickson, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on January 14, 1997 on behalf of the registrant and in the capacities indicated.
Signature Title --------- ----- /s/ Charles R. Frederickson Chairman of the Board ----------------------- (Charles R. Frederickson)
/s/ J. Michael Jenkins Director, President and Chief Executive ------------------ Officer (J. Michael Jenkins)
/s/ Richard E. Sabourin Executive Vice President/Chief Financial ------------------- Officer (Richard E. Sabourin) (Principal Financial and Accounting Officer)
/s/ Charles R. Frederickson ----------------------- (Charles R. Frederickson)*
* Charles R. Frederickson, as attorney-in-fact for Carole Lewis Anderson, Bruce B. Brundage, John C. Hoyt, Robert T. Marto, Dudley C. Mecum, Dennis B. Robertson, Hunter Yager, and Arthur Zankel, constituting a majority of the Board of Directors of the registrant.