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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934. For the fiscal year ended December 31, 2000.
or
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ______________ to
______________.
Commission file number 1-8766
J. ALEXANDER'S CORPORATION
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(Exact name of Registrant as specified in its charter)
Tennessee 62-0854056
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
P.O. Box 24300
3401 West End Avenue
Nashville, Tennessee 37203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615)269-1900
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Securities registered pursuant to Section 12(b) of the Act:
Title of Class: Name of each exchange on which registered:
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Common stock, par value $.05 per share. American Stock Exchange
Series A junior preferred stock purchase rights. American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the last sales price on the American
Stock Exchange of such stock as of March 27, 2001, was $9,429,395, assuming that
(i) all shares beneficially held by members of the Company's Board of Directors
are shares owned by "affiliates," a status which each of the directors
individually disclaims and (ii) all shares held by the Trustee of the J.
Alexander's Corporation Employee Stock Ownership Plan are shares owned by an
"affiliate".
The number of shares of the Company's Common Stock, $.05 par value,
outstanding at March 27, 2001, was 6,859,316.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2001 Annual Meeting of
Shareholders to be held May 15, 2001, are incorporated by reference into Part
III.
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PART I
ITEM 1. BUSINESS
J. Alexander's Corporation (the "Company") operates as a proprietary
concept 22 J. Alexander's full-service, casual dining restaurants located in
Tennessee, Ohio, Florida, Kansas, Alabama, Michigan, Illinois, Colorado, Texas,
Kentucky and Louisiana. During 2000, the Company opened one new restaurant in
Cincinnati, Ohio. J. Alexander's is a traditional restaurant with an American
menu that features prime rib of beef; hardwood-grilled steaks, seafood and
chicken; pasta; salads and soups; assorted sandwiches, appetizers and desserts;
and a full-service bar.
Prior to 1997, the Company was also a franchisee of Wendy's
International, Inc. ("Wendy's International"). However, in November 1996, the
Company sold 52 of its 58 Wendy's Old Fashioned Hamburgers restaurants ("Wendy's
Restaurants") to Wendy's International. The six restaurants not acquired by
Wendy's International in November 1996 were sold or closed.
Unless the context requires otherwise, all references to the Company
include J. Alexander's Corporation and its subsidiaries.
J. ALEXANDER'S RESTAURANT OPERATIONS
General. J. Alexander's is a quality casual dining restaurant with a
contemporary American menu. J. Alexander's strategy is to provide a broad range
of high-quality menu items that are intended to appeal to a wide range of
consumer tastes and which are served by a courteous, friendly and well-trained
service staff. The Company believes that quality food, outstanding service and
value are critical to the success of J. Alexander's.
Each restaurant is generally open from 11:00 a.m. to 11:00 p.m. Monday
through Thursday, 11:00 a.m. to 12:00 midnight on Friday and Saturday and 11:00
a.m. to 10:00 p.m. on Sunday. Entrees available at lunch and dinner generally
range in price from $5.95 to $26.00. The Company estimates that the average
check per customer for fiscal 2000, excluding alcoholic beverages, was $15.62.
J. Alexander's net sales during fiscal 2000 were $87.5 million, of which
alcoholic beverage sales accounted for approximately 14.5%.
The Company opened its first J. Alexander's restaurant in Nashville,
Tennessee in May 1991. Since that time, the Company opened two restaurants in
1992, two restaurants in 1994, four restaurants in 1995, five restaurants in
1996, four restaurants in 1997, two restaurants in 1998 and one restaurant
during each of 1999 and 2000. The Company plans to open two J. Alexander's
restaurants during 2001 in Boca Raton, Florida and Atlanta, Georgia.
Menu. The J. Alexander's menu is designed to appeal to a wide variety
of tastes and features prime rib of beef; hardwood-grilled steaks, seafood and
chicken; pasta; salads and soups; and assorted sandwiches, appetizers and
desserts. As a part of the Company's commitment to quality, soups, sauces,
salsa, salad dressings and desserts are made daily from scratch; steaks, chicken
and seafood are grilled over genuine hardwood; all steaks are U.S.D.A.
Midwestern, Corn-fed Choice Beef, aged a minimum of 21 days; and imported
Italian pasta, topped with fresh grated parmesan cheese, is used. Emphasis on
quality is present throughout the entire J. Alexander's menu. Desserts such as
chocolate cake and carrot cake are prepared in-house, and each restaurant bakes
its featured croissants.
Guest Service. Management believes that prompt, courteous and efficient
service is an integral part of the J. Alexander's concept. The management staff
of each restaurant are referred to as "coaches" and the other employees as
"champions". The Company seeks to hire coaches who are committed to the
principle that quality products and service are key factors to success in the
restaurant industry. Each J. Alexander's restaurant typically employs four to
five fully-trained concept coaches and two kitchen coaches. Many of the coaches
have previous experience in full-service restaurants and all complete an
intensive J. Alexander's development program, generally lasting for 19 weeks,
involving all aspects of restaurant operations.
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Each J. Alexander's has approximately 40 to 60 service personnel, 25 to
30 kitchen employees, 8 to 10 host persons and 6 to 8 pubkeeps. The Company
places significant emphasis on its initial training program. In addition, the
coaches hold training breakfasts for the service staff to further enhance their
product knowledge. Management believes J. Alexander's restaurants have a low
table to server ratio, which is designed to provide better, more attentive
service. The Company is committed to employee empowerment, and each member of
the service staff is authorized to provide complimentary entrees in the event
that a guest has an unsatisfactory dining experience or the food quality is not
up to the Company's standards. Further, all members of the service staff are
trained to know the Company's product specifications and to alert management of
any potential problems.
Quality Assurance. A key position in each J. Alexander's restaurant is
the quality control coordinator. This position is staffed by a coach who
inspects each plate of food before it is served to a guest. The Company believes
that this product inspection by a member of management is a significant factor
in maintaining consistent, high food quality in its restaurants.
Another important component of the quality assurance system is the
preparation of taste plates. Certain menu items are taste-tested daily by a
coach to ensure that only the highest quality food is served in the restaurant.
The Company also uses a service evaluation program to monitor service staff
performance, food quality and guest satisfaction.
Restaurant and Site Selection. The J. Alexander's restaurants built
from 1992 through a portion of 1996 have generally been freestanding structures
that contain approximately 7,400 square feet and seat approximately 230 people.
The exterior of these restaurants typically combines brick, fieldstone and
copper with awnings covering the windows and entrance. The restaurants'
interiors are designed to provide a comfortable dining experience and feature
high ceilings, wooden trusses with exposed pipes and an open kitchen immediately
adjacent to the reception area. Consistent with the Company's intent to develop
different looks for different markets, the last three restaurants opened in 1996
represented a departure from the "warehouse" style building described above. The
J. Alexander's in Troy, Michigan is located inside the prestigious Somerset
Collection mall and features a very upscale, contemporary design. The
Chattanooga, Tennessee J. Alexander's features a stucco style exterior and
includes a number of other unique design features as the result of being
converted from another freestanding restaurant building acquired by the Company.
Beginning with the Memphis, Tennessee restaurant opened in December 1996, a
number of J. Alexander's restaurants have been built based on a building design
intended to provide a high level of curb appeal using exterior craftsman-style
architecture with unique natural materials such as stone, stained woods and
weathering copper. The Company developed a new building design in conjunction
with its entry into the Baton Rouge market during 1998 and utilized a similar
building for its restaurants in West Bloomfield, Michigan and Cincinnati, Ohio.
This latest building design features interior finishes and materials which
reflect the blend of international and Craftsman architecture. Elements such as
steel, concrete, stone and glass are subtly incorporated to give a contemporary
feel to the space and provide an overall comfortable ambiance.
With respect to the Boca Raton, Florida restaurant and the Atlanta,
Georgia restaurant scheduled to open in 2001, the exterior style will maintain
the Wrightian architectural style of the more recent J. Alexander's designs. The
buildings will feature a high central-barreled roof and exposed structural steel
system over an open, symmetrical plan. Angled window wall projections from the
dining room provide a focus into the interior and create an anchor for the
building. A garden seating area for waiting is provided by the patio and open
trellis adjacent to the entrance, integrating the building into the adjacent
landscape.
Management estimates that capital expenditures for completion of the
Boca Raton, Florida restaurant which will be located on leased land and opened
in the summer of 2001; the purchase of land and construction of a restaurant in
Atlanta, Georgia which will open in the fall of 2001; and for other additions
and improvements to existing restaurants will total approximately $8.5 million
in 2001. In addition, the Company is actively seeking locations for additional
restaurants to be opened in 2002. If a satisfactory location is found and
successfully negotiated, any amounts expended in 2001 for this location,
including land acquisition if the site were purchased, would be in addition to
the amounts discussed above. Excluding the cost of land acquisition, the Company
estimates that the cash investment for site preparation and for constructing and
equipping a J. Alexander's restaurant is currently approximately $3.0 to $3.2
million. While the Company generally prefers to own its sites because of the
long-term value of owning these assets, all restaurants opened since 1997 have
been located on leased land. The cost of land for three restaurants opened in
1997 and for land purchased in March, 2001, for the Atlanta, Georgia restaurant
has ranged from $800,000 to $1,200,000. However, because of the Company's
current development
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strategy which focuses on markets with high population densities and household
incomes, it is likely that future property acquisitions will be at or above the
upper end of this range.
The Company is actively seeking to acquire additional sites for new J.
Alexander's restaurants primarily in the midwestern and the southeastern areas
of the United States. The timing of restaurant openings depends upon the
selection and availability of suitable sites and other factors. The Company has
no current plans to franchise J. Alexander's restaurants.
The Company believes that its ability to select high profile restaurant
sites is critical to the success of the J. Alexander's operations. Once a
prospective site is identified and preliminary site analysis is performed and
evaluated, members of the Company's senior management team visit the proposed
location and evaluate the particular site and the surrounding area. The Company
analyzes a variety of factors in the site selection process, including local
market demographics, the number, type and success of competing restaurants in
the immediate and surrounding area and accessibility to and visibility from
major thoroughfares. The Company also obtains an independent market analysis to
verify its own conclusion that a potential restaurant site meets the Company's
criteria. The Company believes that this site selection strategy results in
quality restaurant locations.
SERVICE MARK
The Company has registered the service mark J. Alexander's Restaurant
with the United States Patent and Trademark Office and believes that it is of
material importance to the Company's business.
COMPETITION
The restaurant industry is highly competitive. The Company believes
that the principal competitive factors within the industry are site location,
product quality, service and price; however, menu variety, attractiveness of
facilities and customer recognition are also important factors. The Company's
restaurants compete not only with numerous other casual dining restaurants with
national or regional images, but also with other types of food service
operations in the vicinity of each of the Company's restaurants. These include
other restaurant chains or franchise operations with greater public recognition,
substantially greater financial resources and higher total sales volume than the
Company. The restaurant business is often affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns and the type, number and location of competing restaurants.
PERSONNEL
As of December 31, 2000, the Company employed approximately 2,175
persons. The Company believes that its employee relations are good. It is not a
party to any collective bargaining agreements.
GOVERNMENT REGULATION
Each of the Company's restaurants is subject to various federal, state
and local laws, regulations and administrative practices relating to the sale of
food and alcoholic beverages, and sanitation, fire and building codes.
Restaurant operating costs are also affected by other governmental actions that
are beyond the Company's control, which may include increases in the minimum
hourly wage requirements, workers' compensation insurance rates and unemployment
and other taxes. Difficulties or failures in obtaining the required licenses or
approvals could delay or prevent the opening of a new restaurant.
Alcoholic beverage control regulations require each of the Company's J.
Alexander's restaurants to apply for and obtain from state authorities a license
or permit to sell liquor on the premises and, in some states, to provide service
for extended hours and on Sundays. Typically, licenses must be renewed annually
and may be revoked or suspended for cause at any time. The failure of any
restaurant to obtain or retain any required liquor licenses would adversely
affect the restaurant's operations. In certain states, the Company may be
subject to "dram-shop" statutes, which generally provide a person injured by an
intoxicated person the right to recover damages from the establishment which
wrongfully served alcoholic beverages to the intoxicated person. Of the eleven
states where J. Alexander's operates, ten have dram-shop statutes or recognize a
cause of action for damages relating to sales of
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liquor to obviously intoxicated persons and/or minors. The Company carries
liquor liability coverage with an aggregate limit of $2 million and a limit per
"common cause" of $1 million as part of its comprehensive general liability
insurance.
The Americans with Disabilities Act ("ADA") prohibits discrimination on
the basis of disability in public accommodations and employment. The ADA became
effective as to public accommodations in January 1992 and as to employment in
July 1992. Construction and remodeling projects since January 1992 have taken
into account the requirements of the ADA. While no further expenditures relating
to ADA compliance in existing restaurants are anticipated, the Company could be
required to further modify its restaurants' physical facilities to comply with
the provisions of the ADA.
RISK FACTORS
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is including the following
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in forward
looking statements of the Company made by, or on behalf of, the Company.
The Company Faces Challenges in Opening New Restaurants. The Company's
continued growth depends on its ability to open new J. Alexander's restaurants
and to operate them profitably, which will depend on a number of factors,
including the selection and availability of suitable locations, the hiring and
training of sufficiently skilled management and other personnel and other
factors, some of which are beyond the control of the Company. In addition, it
has been the Company's experience that new restaurants generate operating losses
while they build sales levels to maturity. The Company currently operates
twenty-two J. Alexander's restaurants, of which four have been open for less
than three years. Because of the Company's relatively small J. Alexander's
restaurant base, an unsuccessful new restaurant could have a more adverse effect
on the Company's results of operations than would be the case in a restaurant
company with a greater number of restaurants.
The Company Faces Intense Competition. The restaurant industry is
intensely competitive with respect to price, service, location and food quality,
and there are many well-established competitors with substantially greater
financial and other resources than the Company. Some of the Company's
competitors have been in existence for a substantially longer period than the
Company and may be better established in markets where the Company's restaurants
are or may be located. The restaurant business is often affected by changes in
consumer tastes, national, regional or local economic conditions, demographic
trends, traffic patterns and the type, number and location of competing
restaurants.
The Company May Experience Fluctuations in Quarterly results. The
Company's quarterly results of operations are affected by timing of the opening
of new J. Alexander's restaurants, and fluctuations in the cost of food, labor,
employee benefits, and similar costs over which the Company has limited or no
control. The Company's business may also be affected by inflation. In the past,
management has attempted to anticipate and avoid material adverse effects on the
Company's profitability from increasing costs through its purchasing practices
and menu price adjustments, but there can be no assurance that it will be able
to do so in the future.
Government Regulation and Licensing May Delay New Restaurant Openings
or Affect Operations. The restaurant industry is subject to extensive state and
local government regulation relating to the sale of food and alcoholic
beverages, and sanitation, fire and building codes. Termination of the liquor
license for any J. Alexander's restaurant would adversely affect the revenues
for the restaurant. Restaurant operating costs are also affected by other
government actions that are beyond the Company's control, which may include
increases in the minimum hourly wage requirements, workers' compensation
insurance rates and unemployment and other taxes. If the Company experiences
difficulties in obtaining or fails to obtain required licensing or other
regulatory approvals, this delay or failure could delay or prevent the opening
of a new J. Alexander's restaurant. The suspension of, or inability to renew, a
license could interrupt operations at an existing restaurant, and the inability
to retain or renew such licenses would adversely affect the operations of the
new restaurants.
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EXECUTIVE OFFICERS OF THE COMPANY
The following list includes names and ages of all of the executive
officers of the Company indicating all positions and offices with the Company
held by each such person and each such person's principal occupations or
employment during the past five years. All such persons have been appointed to
serve until the next annual appointment of officers and until their successors
are appointed, or until their earlier resignation or removal.
Name and Age Background Information
Ronald E. Farmer, 54 Vice-President of Development since May 1996;
Director of Development from October, 1993 to May,
1996; President of Dinelite Corporation, a franchisee
of Po Folks Restaurants, from 1987 to 1993.
R. Gregory Lewis, 48 Chief Financial Officer since July 1986; Vice
President of Finance and Secretary since August 1984.
J. Michael Moore, 41 Vice-President of Human Resources and Administration
since November 1997; Director of Human Resources and
Administration from August 1996 to November 1997;
Director of Operations of Pioneer Music Group, a
Nashville-based record label, April 1996 to August
1996; Director of Operations, J. Alexander's
Restaurants, Inc. from March 1993 to April 1996.
Mark A. Parkey, 38 Vice-President since May 1999; Controller of the
Company since May 1997; Director of Finance from
January 1993 to May 1997.
Lonnie J. Stout II, 54 Chairman since July 1990; Director, President and
Chief Executive Officer since May 1986.
ITEM 2. PROPERTIES
As of December 31, 2000, the Company had 22 J. Alexander's casual dining
restaurants in operation and had executed a ground lease for the restaurant to
be built in Boca Raton, Florida. The following table gives the locations of, and
describes the Company's interest in, the land and buildings used in connection
with the above:
Site Leased
Site and Building and Building Space
Owned by the Owned by the Leased to the
Company Company Company Total
------- ------- ------- -----
J. Alexander's Restaurants:
Alabama 1 0 0 1
Colorado 1 0 0 1
Florida 2 2 0 4
Illinois 1 0 0 1
Kansas 1 0 0 1
Michigan 1 1 1 3
Ohio 3 2 0 5
Tennessee 3 0 1 4
Texas 0 1 0 1
Kentucky 0 1 0 1
Louisiana 0 1 0 1
- - - -
Total 13 8 2 23
== = = ==
(a) In addition to the above, the Company leases two of its former Wendy's
properties which are in turn leased to others.
(b) See Item 1 for additional information concerning the Company's restaurants.
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All of the Company's J. Alexander's restaurant lease agreements may be
renewed at the end of the initial term (generally 15 to 20 years) for periods of
five or more years. Certain of these leases provide for minimum rentals plus
additional rent based on a percentage of the restaurant's gross sales in excess
of specified amounts. These leases usually require the Company to pay all real
estate taxes, insurance premiums and maintenance expenses with respect to the
leased premises.
Corporate offices for the Company are located in leased office space in
Nashville, Tennessee.
ITEM 3. LEGAL PROCEEDINGS
In February, 2000, a lawsuit was filed against a subsidiary of the
Company claiming that it acted in a discriminatory manner by enforcing the
Company's policy prohibiting live music when a party of guests sought to bring
live music into one of its restaurants. Most of the discovery in this case has
been completed and a trial is scheduled for April of 2001. The plaintiffs in
this action claim the Company's policy against live music was targeted at them
as a result of their ethnic background and seek unspecified damages. The
Company's insurance company is currently providing a defense but has reserved
the right to deny coverage for the claim. The Company believes it has a
meritorious defense and is defending the case vigorously. However, the final
outcome of this litigation is not currently predictable.
In addition to the litigation noted above, the Company is from time to
time subject to routine litigation incidental to its business. The Company
believes that the results of the above noted litigation and other pending legal
proceedings will not have a materially adverse effect on the Company's financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Effective January 2, 2001, the common stock of J. Alexander's
Corporation is listed on the American Stock Exchange under the symbol JAX. Prior
to that date, the Company's common stock traded on the New York Stock Exchange.
The approximate number of record holders of the Company's common stock at
December 31, 2000, was 1,600. The following table summarizes the price range of
the Company's common stock for each quarter of 2000 and 1999, as reported from
price quotations from the New York Stock Exchange:
2000 1999
---- ----
Low High Low High
--- ---- --- ----
1st Quarter $3.00 $4.75 $3.56 $4.56
2nd Quarter 3.75 5.25 3.50 4.56
3rd Quarter 3.13 4.13 2.88 3.81
4th Quarter 1.88 3.31 1.94 3.25
The Company has never paid cash dividends on its common stock. The
Company intends to retain earnings to invest in the Company's business. Payment
of future dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected financial data for each of
the years in the five-year period ended December 31, 2000:
Years Ended
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December 31 January 2 January 3 December 28 December 29
(Dollars in thousands, except per share data) 2000 2000 19991 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
OPERATIONS
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Net sales $ 87,511 78,454 74,200 57,138 90,879
General and administrative expenses $ 7,206 7,124 5,815 5,793 7,100
Pre-opening expense $ 383 264 660 1,580 1,503
Net income (loss) $ 481 (332) (1,485)(2) (5,991)(3) 7,208(5)
Depreciation and amortization $ 4,299 4,041 4,067 3,138 (4) 4,674
Cash flow from operations $ 5,836 4,465 4,149 (2,150) 3,393
Capital expenditures $ 4,814 4,884 4,914 16,619 22,589
FINANCIAL POSITION
- ------------------
Cash and investments $ 1,057 933 1,022 134 12,549
Property and equipment, net $62,590 62,142 61,440 60,573 47,016
Total assets $66,370 65,635 65,120 64,421 66,827
Long-term obligations $16,771 18,128 21,361 20,231 15,930
Stockholders' equity $38,001 37,840 33,731 34,995 40,461
PER SHARE DATA
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Basic earnings (loss) per share $ .07 (.05) (.27) (1.11) 1.36
Diluted earnings (loss) per share $ .07 (.05) (.27) (1.11) 1.26
Stockholders' equity $ 5.55 5.59 6.21 6.45 7.60
Market price at year end $ 2.31 3.13 4.00 4.81 8.50
J. ALEXANDER'S RESTAURANT DATA
- ------------------------------
Net sales $ 87,511 78,454 74,200 57,138 42,105
Weighted average annual sales per unit $ 4,087 3,892 3,809 3,772 3,885
Units open at year end 22 21 20 18 14
(1) Includes 53 weeks of operations, compared to 52 weeks for all other years
presented.
(2) Includes pre-tax gain of $264 related to the Company's divestiture of its
Wendy's restaurants in 1996.
(3) Includes an $885 charge to earnings to reflect the cumulative effect of the
change in the Company's accounting policy for pre-opening costs to expense
them as incurred. Also includes deferred tax expense of $2,393 related to an
adjustment of the Company's beginning of the year valuation allowance for
deferred taxes in accordance with Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" and a pre-tax gain of $669
related to the Company's divestiture of its Wendy's restaurants in 1996.
(4) Excludes pre-opening expense which was expensed as incurred effective with
the beginning of fiscal 1997.
(5) Includes pre-tax gain of $9,400 related to the Company's divestiture of its
Wendy's restaurants during 1996.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
J. Alexander's Corporation (the Company) owns and operates upscale,
high-volume, casual dining restaurants which offer a contemporary American menu
and place a special emphasis on food quality and professional service. At
December 31, 2000, the Company owned and operated 22 J. Alexander's restaurants
in 11 states.
For fiscal year 2000, the Company posted its first annual profit since
the divestiture of its Wendy's operations in 1996. Net income for the year was
$481,000 compared to a net loss of $332,000 in 1999, an increase of $813,000.
Pre-tax results for the year improved approximately $1.2 million due primarily
to higher operating income generated as a result of both higher sales and
increased restaurant operating margin. The pre-tax increase was partially offset
by the inclusion of a higher income tax provision which was required in 2000 as
compared to 1999.
The Company's net loss of $332,000 in fiscal 1999 represented an
improvement of approximately $1.2 million from the net loss of $1,485,000
incurred in 1998. This improvement was due primarily to an increase in operating
income of approximately $700,000 and a reduction in interest expense of
approximately $400,000. In addition, the Company realized a gain of $166,000 on
the early retirement of a portion of its Convertible Debentures purchased to
meet sinking fund requirements. Results for 1998 included a pre-tax gain of
$264,000 related to the 1996 divestiture of the Company's Wendy's restaurant
operations.
The following table sets forth, for the fiscal years indicated, (i) the
percentages which the items in the Company's Consolidated Statements of
Operations bear to total net sales, and (ii) other selected operating data:
Fiscal Year
2000 1999 1998
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 32.0 32.6 34.2
Restaurant labor and related costs 33.8 33.5 33.2
Depreciation and amortization of restaurant property
and equipment 4.6 4.7 5.1
Other operating expenses 18.1 18.3 18.4
------- ------- -------
Total restaurant operating expenses 88.5 89.1 91.0
General and administrative expenses 8.2 9.1 7.8
Pre-opening expense .4 .3 .9
Gain on Wendy's disposition - - .4
------- ------- -------
Operating income 2.8 1.5 .7
Other income (expense):
Interest expense, net (1.8) (2.0) (2.7)
Gain on purchase of debentures .1 .2 -
Other, net (.1) (.1) -
------- ------- -------
Total other expense (1.8) (1.9) (2.7)
Income (loss) before income taxes 1.0 (.4) (2.0)
Income tax provision (.5) - -
------- ------- -------
Net income (loss) .5% (.4)% (2.0)%
======= ======= =======
Restaurants open at end of year 22 21 20
Weighted average weekly sales per restaurant $78,600 $74,900 $73,200
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NET SALES
Net sales increased by approximately $9.0 million, or 11.5%, to $87.5
million in fiscal year 2000 from $78.5 million in 1999. The $78.5 million of
sales recorded in 1999 represents an increase of $4.3 million, or 5.7%, over
$74.2 million of sales reported in 1998. These increases were due to the opening
of new restaurants and to increases of 4.9% in weighted average weekly sales per
restaurant in 2000 and 2.3% in 1999. Fiscal 1998 contained 53 weeks of
operations compared to 52 weeks for both 1999 and 2000.
Same store sales, which include comparable results for all restaurants
open for more than 12 months, increased 3.7% to $77,700 per week in 2000 on a
base of 21 restaurants. Same store sales for 1999 averaged $76,300 per week, on
a base of 20 restaurants, representing an increase of 4.1% over 1998. Management
estimates the average check per guest, excluding alcoholic beverage sales, was
$15.62 for 2000, representing an increase of approximately 8% over 1999. Menu
prices for 2000 increased an estimated 3.5% compared to 1999. Management
estimates that the average check per guest in 1999 totaled $14.43, representing
a 6% increase over 1998. Menu prices for 1999 increased by an estimated 5%
compared to 1998. The Company estimates that guest counts on a same store basis
decreased by 4.6% in 2000 and increased by approximately 2% in 1999.
Near the end of the third quarter of 1999, in order to increase sales
and improve profitability, the Company repositioned its menu to place more
emphasis on its premium menu offerings and daily feature items, while
de-emphasizing certain lower priced menu items. As a result of these changes and
a number of other guest service improvement initiatives begun in 1997, same
store sales increased significantly, growing by 8.6% in the fourth quarter of
1999 and 9.3% in the first quarter of 2000. As the 2000 year progressed, the
growth in same store sales decreased on a comparative basis, with same store
sales declining in the fourth quarter of 2000. Guest counts were also down on a
same store basis for the last three quarters of 2000. The guest count and sales
declines were more significant in the Company's small and mid-market locations
(those with populations of less than 1.5 million people), where same store sales
for the year were flat as compared to a same store sales increase of 7.5% in
larger markets. Management believes that increases in check averages resulting
from the menu changes made in late 1999 proved to be excessive for the size and
economic characteristics of the small and mid-market locations. Beginning in the
fourth quarter of 2000 the Company revised its menus and feature programs in
certain of the restaurants in these markets in order to reduce guest check
averages and improve guest count trends. Guest counts for the Company were up
slightly for the first two months of 2001 and while same store sales for that
period remained down slightly, management currently anticipates that same store
sales will increase in the last half of the year.
RESTAURANT COSTS AND EXPENSES
Total restaurant operating expenses decreased to 88.5% for 2000 from
89.1% in 1999 and 91.0% in 1998, with restaurant operating margins increasing to
11.5% in 2000 from 10.9% in 1999 and 9.0% in 1998. The largest factor
contributing to the operating expense decreases in both 2000 and 1999 was the
decrease in cost of sales resulting from management's continued emphasis on
increased efficiencies in this area and the menu price increases noted above.
These improvements, combined with overall improvements in financial performance
of the Company's same store base of restaurants each year as the sales and
efficiency of those restaurants has increased, more than offset the higher costs
associated with the opening of new restaurants. Another factor contributing to
the improvement in 1999 was the Company's decision to change the estimated
useful life of its buildings from 25 to 30 years and the estimated life of
leasehold improvements to include an amortization period based on the lesser of
the lease term, generally including renewal options, or the useful life of the
asset. The effect of these changes, which were implemented as of January 4,
1999, was to decrease restaurant operating expenses for 1999 by $333,000, or .4%
of sales.
Management believes that continuing to increase sales volumes in the
Company's restaurants is a significant factor in continuing to improve the
Company's profitability. Beginning in 1998, the Company lowered its new
restaurant development plans to allow management to focus intently on improving
sales and profits in its existing restaurants while maintaining operational
excellence. Also, in 1997 the Company established criteria for its locations
calling for higher population densities and higher household incomes than were
met by certain of its previous locations. The West Bloomfield, Michigan
restaurant opened in late 1999 and the Cincinnati, Ohio restaurant opened in
mid-2000 are the first restaurants to be opened under these more stringent
criteria. These restaurants posted average weekly sales of over $92,000 per
week, which is significantly above the Company's
10
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average sales volume for all restaurants, and combined restaurant operating
income of approximately $400,000 for 2000. Further, an indication of the
importance of higher income levels to the success of J. Alexander's restaurants
is that the Company's restaurants located in markets with median household
incomes of $65,000 or more averaged approximately $87,000 per week for 2000,
while restaurants located in markets with incomes below that level averaged
approximately $71,000 per week. Management believes that the change in
development criteria, together with continued emphasis on increasing sales and
profits, particularly in its restaurants not located in higher income and/or
higher population density markets, will continue to have a positive impact on
the Company's sales and financial performance.
The Company expects to experience increases in certain restaurant costs
and expenses in 2001. These include particularly beef costs, utility costs and
insurance and benefit costs. Management expects to offset these cost increases
through a modest increase in menu prices and through cost control and reduction
of other expenses. To the extent sales are impacted as a result of menu price
increases or for other reasons, these cost increases could make it difficult for
the Company to achieve significant, if any, improvement in operating margin.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, which include supervisory costs as
well as management training costs and all other costs above the restaurant
level, increased only slightly in fiscal 2000 compared to 1999. Decreases in
management training, relocation and procurement costs, which comprise
approximately 20% of total general and administrative expenses, and certain
other employee benefit related expenses contributed to the modest increase in
total general and administrative expenses for 2000 by partially offsetting
increases in other expenses related to the growth of the Company. As a
percentage of sales, general and administrative expenses decreased to 8.2% in
2000 from 9.1% in 1999 due to the relatively small increase in expenditures and
the higher sales levels achieved.
General and administrative expenses increased by $1,309,000, or 22.5%,
in 1999 compared to 1998. As a percentage of sales these expenses increased to
9.1% in 1999 from 7.8% in 1998. These increases were due primarily to lower than
normal general and administrative expenses in 1998 which resulted from favorable
experience under both the Company's workers' compensation program and its
self-insured group medical insurance program which allowed the Company to reduce
its level of accruals and expense related to those programs for 1998. An
increase in management training costs also contributed to higher general and
administrative costs during 1999.
General and administrative expenses as a percentage of sales for 2001
are expected to increase slightly as compared to 2000.
PRE-OPENING EXPENSE
Because the Company expenses all pre-opening costs as incurred,
pre-opening expenses were lower in 2000 and 1999, when only one restaurant was
opened in each year, than in 1998 when two restaurants were opened.
OTHER INCOME AND EXPENSE
Net interest expense increased only slightly in 2000 compared to 1999.
Interest expense decreased by $416,000 in 1999 compared to 1998 due primarily to
reductions in the outstanding balance of the Company's Convertible Subordinated
Debentures and a reduction in the Company's line of credit resulting from
applying proceeds from sales of stock in March and June, 1999, to the
outstanding balance on the line.
"Other, net" expense of $81,000 for 2000 and $93,000 for 1999 was the
result of expenses associated with the write-offs of facilities and equipment
replaced in connection with various capital maintenance projects which more than
offset miscellaneous income categories.
INCOME TAXES
Under the provisions of SFAS No. 109 "Accounting for Income Taxes", the
Company had gross deferred tax assets of $4,512,000 and $4,726,000 and gross
deferred tax liabilities of $593,000 and $616,000 at December 31, 2000 and
January 2, 2000, respectively. The deferred tax assets at December 31, 2000
relate primarily to
11
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$1,894,000 of net operating loss carryforwards and $3,183,000 of tax credit
carryforwards available to reduce future federal income taxes.
The recognition of deferred tax assets depends on the likelihood of
taxable income in future periods in amounts sufficient to realize the assets.
The deferred tax assets must be reduced through use of a valuation allowance to
the extent future income is not likely to be generated in such amounts. Due to
the losses incurred in 1997 through 1999 and because the Company operates with a
high degree of financial and operating leverage, with a significant portion of
operating costs being fixed or semi-fixed in nature, management has been unable
to conclude that it is more likely than not that its existing deferred tax
assets will be realized and has maintained a valuation allowance for 100% of its
net deferred tax assets since 1997.
The valuation allowance related to the Company's deferred tax assets
totaled $3,919,000 and $4,110,000 at December 31, 2000 and January 2, 2000,
respectively. Approximately $11,250,000 of future taxable income would be needed
to realize the Company's tax credit and net operating loss carryforwards at
December 31, 2000. These carryforwards generally expire in the years 2001
through 2020. Approximately $465,000 of taxable income would be needed to
realize the carryforwards which expire in 2001 and $210,000 to use those which
expire in 2002.
The provision for income taxes for 2000 results from federal
alternative minimum tax (AMT) and state income taxes payable. In 1999, the
Company was able to reduce its AMT liability by the use of AMT net operating
loss carryforwards. These carryforwards were all utilized in 1999, however, and
were not available for 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital for the past three years has
been for the development and maintenance of its J. Alexander's restaurants. In
addition, beginning in 1998, the Company has been required to meet an annual
sinking fund requirement of $1,875,000 in connection with its outstanding
Convertible Subordinated Debentures. The Company has met its capital needs and
maintained liquidity primarily by use of cash flow from operations, use of its
bank line of credit and through other sources discussed below.
Capital expenditures totaled $4,814,000, $4,884,000 and $4,914,000 for
2000, 1999 and 1998, respectively, and were primarily for the development of new
J. Alexander's restaurants. Cash flow from operations exceeded capital
expenditures in 2000 and also represented 91% and 84% of capital expenditures
for 1999 and 1998, respectively. The remaining capital expenditures along with
other needs for the 1999 and 1998 years were funded by use of the Company's line
of credit and, for 1999, by the sale of common stock as discussed below.
In 2001, the Company plans to construct and open two restaurants, one
of which will be on leased land with the other to be on purchased property.
Management estimates that the cost to build these restaurants and for capital
maintenance for existing restaurants will be approximately $8.5 million for
2001. In addition, the Company may incur capital expenditures for the purchase
of property and/or construction of restaurants for locations to be opened in
2002. Any such expenditures are dependent upon the timing and success of
management's efforts to locate acceptable sites and are not expected to exceed
$2 million.
While a working capital deficit of $7,623,000 existed as of December
31, 2000, the Company does not believe this deficit impairs the overall
financial condition of the Company. Certain of the Company's expenses,
particularly depreciation and amortization, do not require current outlays of
cash. Also, requirements for funding accounts receivable and inventories are
relatively insignificant; thus virtually all cash generated by operations is
available to meet current obligations. As of December 31, 2000, debentures in
the principal amount of $556,000 had been purchased by the Company for use
toward satisfying the annual sinking fund requirement of $1,875,000 for this
issue for 2001.
In 1999, the Company's Board of Directors established a loan program
designed to enable eligible employees to purchase shares of the Company's common
stock. Under the program participants were allowed to borrow an amount equal to
the full price of common stock purchased. The plan authorized $1 million in
loans to employees. Purchases of stock under the plan totaled $486,000 during
1999, with the remainder purchased in 2000. The employee loans, which are
reported as a deduction from stockholders' equity, are payable on December 31,
2006, unless repaid sooner pursuant to terms of the plan.
12
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The Company maintains a bank line of credit of $20 million which is
expected to be used as needed for funding of capital expenditures and to provide
liquidity for meeting working capital or other needs. At December 31, 2000,
borrowings outstanding under this line of credit were $9,265,000. In March of
2000, the term of the line of credit was extended by one year through July 1,
2001. The amended line of credit agreement contains covenants which require the
Company to achieve specified results of operations and specified levels of
senior debt to EBITDA (earnings before interest, taxes, depreciation and
amortization) and to maintain certain other financial ratios. The Company was in
compliance with these covenants at December 31, 2000 and, based on a current
assessment of its business, believes it will continue to comply with these
covenants through July 1, 2001. The credit agreement also contains certain
limitations on capital expenditures and restaurant development by the Company
(generally limiting the Company to the development of two new restaurants per
year) and restricts the Company's ability to incur additional debt outside the
bank line of credit. The interest rate on borrowings under the line of credit is
currently based on LIBOR plus a spread of two to three percent, depending on the
ratio of senior debt to EBITDA. The line of credit includes an option to convert
outstanding borrowings to a term loan prior to July 1, 2001. In the event of
such a conversion, the principal would be repaid in 84 equal monthly
installments. Because the line of credit is scheduled to mature within six
months of December 31, 2000, $662,000, representing six months' principal
payments if the total credit line balance were converted to a term loan, has
been reflected as a current liability in the December 31, 2000 balance sheet.
Management intends to seek an extension of the existing line of credit prior to
its scheduled expiration on July 1, 2001, and believes that such an extension,
or other suitable financing arrangement, will be available to meet the Company's
financing needs.
In March 1999 the Company developed a plan for raising additional
equity capital to further strengthen its financial position and, as part of this
plan, completed a private sale of 1,086,266 shares of common stock to Solidus,
LLC, an affiliate of one of the directors of the Company, for approximately $4.1
million. In addition, on June 21, 1999, the Company completed a rights offering
wherein shareholders of the Company purchased an additional 240,615 shares of
common stock at a price of $3.75 per share, which was the same price per share
as stock sold in the private sale. The private sale and the rights offering
raised total net proceeds to the Company of approximately $4.8 million which
were used to repay a portion of the debt outstanding under the Company's bank
line of credit. The Company believes that raising additional equity capital and
repaying a portion of its outstanding debt benefited the Company by reducing its
debt to equity ratio and reducing interest expense and that it will provide
greater flexibility to the Company in providing for future financing needs.
IMPACT OF ACCOUNTING CHANGES
There are no pending accounting pronouncements that, when adopted, are
expected to have a material effect on the Company's results of operations or its
financial condition.
IMPACT OF INFLATION AND OTHER FACTORS
Virtually all of the Company's costs and expenses are subject to normal
inflationary pressures and the Company is continually seeking ways to cope with
their impact. By owning a number of its properties, the Company avoids certain
increases in occupancy costs. New and replacement assets will likely be acquired
at higher costs but this will take place over many years. In general, the
Company tries to offset increased costs and expenses through additional
improvements in operating efficiencies and by increasing menu prices over time,
as permitted by competition and market conditions.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The foregoing discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto. All references are to fiscal years unless
otherwise noted. The forward-looking statements included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
relating to certain matters involve risks and uncertainties, including
anticipated financial performance, business prospects, anticipated capital
expenditures, financing arrangements and other similar matters, which reflect
management's best judgment based on factors currently known. Actual results and
experience could differ materially from the anticipated results or other
13
14
expectations expressed in the Company's forward-looking statements as a result
of a number of factors. Forward-looking information provided by the Company
pursuant to the safe harbor established under the Private Securities Litigation
Reform Act of 1995 should be evaluated in the context of these factors. In
addition, the Company disclaims any intent or obligation to update these
forward-looking statements.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosure About Interest Rate Risk. The Company is subject to market
risk from exposure to changes in interest rates based on its financing and cash
management activities. The Company utilizes a mix of both fixed-rate and
variable-rate debt to manage its exposures to changes in interest rates. (See
Notes E and F to the Consolidated Financial Statements appearing elsewhere
herein.) The Company does not expect changes in interest rates to have a
material effect on income or cash flows in fiscal 2001, although there can be no
assurances that interest rates will not significantly change.
Commodity Price Risk. Many of the food products purchased by the
Company are affected by commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside the control of the Company. Essential supplies
and raw materials are available from several sources and the Company is not
dependent upon any single source of supplies or raw materials. The Company's
ability to maintain consistent quality throughout its restaurant system depends
in part upon its ability to acquire food products and related items from
reliable sources. When the supply of certain products is uncertain or prices are
expected to rise significantly, the Company may enter into purchase contracts or
purchase bulk quantities for future use. The Company has purchase commitments
for terms of one year or less for food and supplies with a variety of vendors.
Such commitments generally include a pricing schedule for the period covered by
the agreements. The Company has established long-term relationships with key
beef and seafood vendors and brokers. Adequate alternative sources of supply are
believed to exist for substantially all products. While the supply and
availability of certain products can be volatile, the Company believes that it
has the ability to identify and access alternative products as well as the
ability to adjust menu prices if needed. Significant items that could be subject
to price fluctuations are beef, seafood, produce, pork and dairy products among
others. The Company believes that any changes in commodity pricing which cannot
be adjusted for by changes in menu pricing or other product delivery strategies
would not be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX OF FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report 15
Consolidated statements of operations - Years ended December 31, 2000,
January 2, 2000 and January 3, 1999 16
Consolidated balance sheets - December 31, 2000 and January 2, 2000 17
Consolidated statements of cash flows - Years ended December 31, 2000,
January 2, 2000 and January 3, 1999 18
Consolidated statements of stockholders' equity - Years ended December 31, 2000,
January 2, 2000 and January 3, 1999 19
Notes to consolidated financial statements 20-29
The following consolidated financial statement schedule of J. Alexander's
Corporation and subsidiaries is included in Item 14(d):
Schedule II-Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
14
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Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
J. Alexander's Corporation
We have audited the accompanying consolidated balance sheets of J.
Alexander's Corporation and subsidiaries as of December 31, 2000 and January 2,
2000, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
December 31, 2000. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 consolidated financial position of J.
Alexander's Corporation and subsidiaries at December 31, 2000 and January 2,
2000, and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/Ernst & Young LLP
Nashville, Tennessee
February 27, 2001
15
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J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
-----------
DECEMBER 31 January 2 January 3
2000 2000 1999
---- ---- ----
Net sales $ 87,511,000 $ 78,454,000 $ 74,200,000
Costs and expenses:
Cost of sales 28,002,000 25,568,000 25,410,000
Restaurant labor and related costs 29,565,000 26,289,000 24,663,000
Depreciation and amortization of restaurant
property and equipment 4,040,000 3,688,000 3,758,000
Other operating expenses 15,828,000 14,323,000 13,659,000
------------ ------------ ------------
Total restaurant operating expenses 77,435,000 69,868,000 67,490,000
------------ ------------ ------------
General and administrative expenses 7,206,000 7,124,000 5,815,000
Pre-opening expense 383,000 264,000 660,000
Gain on Wendy's disposition -- -- 264,000
------------ ------------ ------------
Operating income 2,487,000 1,198,000 499,000
------------ ------------ ------------
Other income (expense):
Interest expense, net (1,590,000) (1,570,000) (1,986,000)
Gain on purchase of debentures 75,000 166,000 --
Other, net (81,000) (93,000) 2,000
------------ ------------ ------------
Total other expense (1,596,000) (1,497,000) (1,984,000)
------------ ------------ ------------
Income (loss) before income taxes 891,000 (299,000) (1,485,000)
Income tax provision (410,000) (33,000) --
------------ ------------ ------------
Net income (loss) $ 481,000 $ (332,000) $ (1,485,000)
============ ============ ============
Basic earnings (loss) per share $ .07 $ (.05) $ (.27)
============ ============ ============
Diluted earnings (loss) per share $ .07 $ (.05) $ (.27)
============ ============ ============
See notes to consolidated financial statements.
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J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31 January 2
2000 2000
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,057,000 $ 933,000
Accounts and notes receivable, including current portion of
direct financing leases, net of allowances for possible losses 112,000 103,000
Inventories at lower of cost (first-in, first-out method) or market 741,000 703,000
Prepaid expenses and other current assets 592,000 422,000
------------ ------------
TOTAL CURRENT ASSETS 2,502,000 2,161,000
OTHER ASSETS 836,000 844,000
PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation
and amortization 62,590,000 62,142,000
DEFERRED CHARGES, less accumulated amortization of $1,217,000 and
$1,116,000 at December 31, 2000, and January 2, 2000, respectively 442,000 488,000
------------ ------------
$ 66,370,000 $ 65,635,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,825,000 $ 2,254,000
Accrued expenses and other current liabilities 3,346,000 3,630,000
Unearned revenue 1,961,000 1,691,000
Current portion of long-term debt and obligations under capital leases 1,993,000 995,000
------------ ------------
TOTAL CURRENT LIABILITIES 10,125,000 8,570,000
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion
classified as current 16,771,000 18,128,000
OTHER LONG-TERM LIABILITIES 1,473,000 1,097,000
STOCKHOLDERS' EQUITY
Common Stock, par value $.05 per share: Authorized 10,000,000
shares; issued and outstanding 6,851,816 and 6,772,209 shares at
December 31, 2000, and January 2, 2000, respectively 343,000 339,000
Preferred Stock, no par value: Authorized 1,000,000 shares; none issued -- --
Additional paid-in capital 34,867,000 34,733,000
Retained earnings 4,421,000 3,940,000
------------ ------------
39,631,000 39,012,000
Note receivable - Employee Stock Ownership Plan (686,000) (686,000)
Employee receivables - 1999 Loan Program (944,000) (486,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 38,001,000 37,840,000
------------ ------------
Commitments and Contingencies
$ 66,370,000 $ 65,635,000
============ ============
See notes to consolidated financial statements.
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J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
-----------
DECEMBER 31 January 2 January 3
2000 2000 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 481,000 $ (332,000) $ (1,485,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of property and equipment 4,198,000 3,919,000 3,936,000
Amortization of deferred charges 101,000 121,000 131,000
Employee Stock Ownership Plan expense -- 134,000 123,000
Gain on Wendy's disposition -- -- (264,000)
Stock awards - 1999 Loan Program 61,000 -- --
Other, net 179,000 274,000 125,000
Changes in assets and liabilities:
(Increase) decrease in accounts and notes receivable -- (64,000) 502,000
(Increase) decrease in inventories (38,000) 97,000 (111,000)
(Increase) decrease in prepaid expenses and
other current assets (170,000) (98,000) 63,000
Increase in deferred charges (55,000) (40,000) (27,000)
Increase in accounts payable 667,000 34,000 29,000
Increase (decrease) in accrued expenses and other
current liabilities (284,000) (274,000) 1,037,000
Increase in unearned revenue 270,000 324,000 15,000
Increase in other long-term liabilities 426,000 370,000 75,000
------------ ------------ ------------
Net cash provided by operating activities 5,836,000 4,465,000 4,149,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,910,000) (4,788,000) (5,040,000)
Proceeds from sale of Wendy's restaurant operations -- -- 228,000
Other, net (12,000) 82,000 328,000
------------ ------------ ------------
Net cash used by investing activities (4,922,000) (4,706,000) (4,484,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds under bank line of credit agreement 33,851,000 28,640,000 28,961,000
Payments under bank line of credit agreement (32,605,000) (29,891,000) (25,914,000)
Payments on long-term debt and obligations
under capital leases (1,605,000) (2,904,000) (1,922,000)
Purchase of stock for 1999 Loan Program (515,000) (486,000) --
Decrease in notes receivable for 1999 Loan Program 57,000 -- --
Sale of stock and exercise of stock options 27,000 4,793,000 98,000
------------ ------------ ------------
Net cash (used) provided by financing activities (790,000) 152,000 1,223,000
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 124,000 (89,000) 888,000
Cash and cash equivalents at beginning of year 933,000 1,022,000 134,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,057,000 $ 933,000 $ 1,022,000
============ ============ ============
See notes to consolidated financial statements.
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J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Note
Receivable- Employee
Employee Receivables-
Additional Stock 1999 Total
Outstanding Common Paid-In Retained Ownership Loan Stockholders'
Shares Stock Capital Earnings Plan Program Equity
------ ----- ------- -------- ---- ------- ------
BALANCES AT
DECEMBER 28, 1997 5,421,538 $272,000 $29,909,000 $ 5,757,000 $(943,000) $ -- $ 34,995,000
Exercise of stock options,
including tax benefits 9,797 -- 98,000 -- -- -- 98,000
Reduction of note receivable-
Employee Stock Ownership
Plan -- -- -- -- 123,000 -- 123,000
Net loss -- -- -- (1,485,000) -- -- (1,485,000)
--------- -------- ----------- ----------- --------- --------- ------------
BALANCES AT
JANUARY 3, 1999 5,431,335 272,000 30,007,000 4,272,000 (820,000) -- 33,731,000
Stock sold in private trans-
action and through rights
offering 1,326,881 66,000 4,697,000 -- -- -- 4,763,000
Exercise of stock options 13,993 1,000 29,000 -- -- -- 30,000
Reduction of note receivable-
Employee Stock Ownership
Plan -- -- -- -- 134,000 -- 134,000
Purchase of stock-1999
Loan Program -- -- -- -- -- (486,000) (486,000)
Net loss -- -- -- (332,000) -- -- (332,000)
--------- -------- ----------- ----------- --------- --------- ------------
BALANCES AT
JANUARY 2, 2000 6,772,209 339,000 34,733,000 3,940,000 (686,000) (486,000) 37,840,000
Exercise of stock options 49,109 2,000 25,000 -- -- -- 27,000
Purchase of stock-1999
Loan Program -- -- -- -- -- (515,000) (515,000)
Reduction of Employee
Receivables - 1999
Loan Program -- -- -- -- -- 57,000 57,000
Stock Awards - 1999
Loan Program 30,498 2,000 109,000 -- -- -- 111,000
Net income -- -- -- 481,000 -- -- 481,000
--------- -------- ----------- ----------- --------- --------- ------------
BALANCES AT
DECEMBER 31, 2000 6,851,816 $343,000 $34,867,000 $ 4,421,000 $(686,000) $(944,000) $ 38,001,000
========= ======== =========== =========== ========= ========= ============
See notes to consolidated financial statements.
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of J. Alexander's Corporation and its wholly-owned subsidiaries (the
Company). The Company owns and operates 22 J. Alexander's restaurants in eleven
states throughout the United States. Prior to 1997, the Company also owned and
operated 58 Wendy's Old Fashioned Hamburgers restaurants as a franchisee of
Wendy's International, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain reclassifications
have been made in the prior years' consolidated financial statements to conform
to the 2000 presentation.
FISCAL YEAR: The Company's fiscal year ends on the Sunday closest to December 31
and each quarter typically consists of thirteen weeks. Fiscal 1998 included 53
weeks compared to 52 weeks for fiscal years 2000 and 1999. The fourth quarter of
1998 included 14 weeks.
CASH EQUIVALENTS: Cash equivalents consist of highly liquid investments with an
original maturity of three months or less when purchased.
PROPERTY AND EQUIPMENT: Depreciation and amortization are provided on the
straight-line method over the following estimated useful lives: buildings - 30
years, restaurant and other equipment - two to 10 years, and capital leases and
leasehold improvements - lesser of life of assets or terms of leases, generally
including renewal options.
DEFERRED CHARGES: Costs in excess of net assets acquired are being amortized
over 40 years using the straight-line method. Debt issue costs are amortized
principally by the interest method over the life of the related debt.
INCOME TAXES: The Company accounts for income taxes under the liability method
required by Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes". SFAS No. 109 requires that deferred tax assets
and liabilities be established based on the difference between the financial
statement and income tax bases of assets and liabilities measured at tax rates
that will be in effect when the differences reverse.
EARNINGS PER SHARE: In 1997, the Financial Accounting Standards Board issued
SFAS No. 128 "Earnings Per Share". SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented to
conform to the requirements of SFAS No. 128.
REVENUE RECOGNITION: Restaurant revenues are recognized when food and service
are provided. Unearned revenue consists of gift certificates sold, but not
redeemed.
PRE-OPENING COSTS: In 1998, the American Institute of Certified Public
Accountants issued a new accounting standard under Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities". The requirements under this
standard are that pre-opening costs are to be expensed as incurred and are
consistent with the Company's policy which was adopted December 30, 1996. Thus,
adoption of this standard had no impact on the Company's financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were
used by the Company in estimating its fair value disclosures for financial
instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates fair value.
Long-term debt: The carrying amount of the Company's borrowings with
variable interest rates approximates their fair value. The fair value of the
Company's convertible subordinated debentures was determined
20
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based on quoted market prices (see Note E). Due to the immaterial amounts
involved, fair value of other fixed rate long-term debt was estimated to
approximate its carrying amount.
Contingent liabilities: In connection with the sale of its Mrs.
Winner's Chicken & Biscuit restaurant operations and the disposition of its
Wendy's restaurant operations, the Company remains secondarily liable for
certain real and personal property leases. The Company does not believe it is
practicable to estimate the fair value of these contingencies and does not
believe any significant loss is likely.
DEVELOPMENT COSTS: Certain direct and indirect costs are capitalized as building
costs in conjunction with acquiring and developing new J. Alexander's restaurant
sites and amortized over the life of the related building. Development costs of
$200,000, $203,000 and $292,000 were capitalized during 2000, 1999 and 1998,
respectively.
SELF-INSURANCE: The Company is generally self-insured, subject to stop-loss
limitations, for losses and liabilities related to its group medical plan.
Losses are accrued based upon the Company's estimates of the aggregate liability
for claims incurred using certain estimation processes applicable to the
insurance industry and, where applicable, based on Company experience.
ADVERTISING COSTS: The Company charges costs of advertising to expense at the
time the costs are incurred. Advertising expense was $42,000, $70,000 and
$289,000 in 2000, 1999 and 1998, respectively.
STOCK BASED COMPENSATION: The Company accounts for its stock compensation
arrangements in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" and, accordingly, typically
recognizes no compensation expense for such arrangements.
USE OF ESTIMATES IN FINANCIAL STATEMENTS: Judgment and estimation are utilized
by management in certain areas in the preparation of the Company's financial
statements. Some of the more significant areas include the valuation allowance
relative to the Company's deferred tax assets and reserves for self-insurance of
group medical claims. Management believes that such estimates have been based on
reasonable assumptions and that such reserves are adequate.
IMPAIRMENT: SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of", requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Accordingly, when indicators
of impairment are present with respect to an individual restaurant, the Company
periodically evaluates the carrying value of that restaurant's property and
equipment and intangibles.
COMPREHENSIVE INCOME: In 1998, the Company adopted a new disclosure
pronouncement, SFAS No. 130, "Reporting Comprehensive Income". The Company has
no items of comprehensive income and, accordingly, adoption of the Statement has
had no effect on the consolidated financial statements.
BUSINESS SEGMENTS: In 1998, the Company also adopted another new disclosure
pronouncement, SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information". SFAS No. 131 requires companies to report selected segment
information when certain size tests are met. Management has determined that the
Company operates in only one segment.
NOTE B - SALE OF STOCK
On March 22, 1999, the Company completed a private sale of 1,086,266
shares of common stock to Solidus, LLC ("Solidus") for approximately $4.1
million. E. Townes Duncan, a director of the Company, is a minority owner of and
manages the investments of Solidus. In addition, on June 21, 1999 the Company
completed a rights offering wherein shareholders of the Company purchased an
additional 240,615 shares of common stock at a price of $3.75 per share, which
was the same price per share as stock sold in the private sale. The net proceeds
to the Company from the private sale noted above and the rights offering were
approximately $4.8 million, which was used to repay a portion of the debt
outstanding under the Company's revolving credit facility.
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NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
YEARS ENDED
------------------------------------------------------
DECEMBER 31 January 2 January 3
2000 2000 1999
------------ ------------ ------------
NUMERATOR:
Net income (loss) [numerator for basic earnings (loss)
per share] $ 481,000 $ (332,000) $ (1,485,000)
Effect of dilutive securities -- -- --
------------ ------------ ------------
Net income (loss) after assumed conversions [numerator
for diluted earnings (loss) per share] $ 481,000 $ (332,000) $ (1,485,000)
============ ============ ============
DENOMINATOR:
Weighted average shares [denominator for basic earnings
(loss) per share] 6,846,000 6,428,000 5,426,000
Effect of dilutive securities 130,000 -- --
------------ ------------ ------------
Adjusted weighted average shares and assumed conversions
[denominator for diluted earnings (loss) per share] 6,976,000 6,428,000 5,426,000
============ ============ ============
Basic earnings (loss) per share $ .07 $ (.05) $ (.27)
============ ============ ============
Diluted earnings (loss) per share $ .07 $ (.05) $ (.27)
============ ============ ============
In situations where the exercise price of outstanding options is
greater than the average market price of common shares, such options are
excluded from the computation of diluted earnings per share because of their
antidilutive impact. A total of 309,000 options were excluded from the
computation of diluted earnings per share in 2000. Due to net losses in 1999 and
1998, all options outstanding during these periods were excluded from the
computation of diluted earnings per share.
NOTE D - PROPERTY AND EQUIPMENT
Balances of major classes of property and equipment are as follows:
DECEMBER 31 January 2
2000 2000
------------ ------------
Land $ 13,126,000 $ 13,126,000
Buildings 30,176,000 29,314,000
Buildings under capital leases 276,000 276,000
Leasehold improvements 20,284,000 18,088,000
Restaurant and other equipment 16,816,000 15,556,000
Construction in progress (estimated cost to complete at
December 31, 2000, $3,084,000) 326,000 277,000
------------ ------------
81,004,000 76,637,000
Less allowances for depreciation and amortization (18,414,000) (14,495,000)
------------ ------------
$ 62,590,000 $ 62,142,000
============ ============
Effective as of January 4, 1999, the Company changed the estimated
useful life of its buildings from 25 years to 30 years. Also, the estimated life
of leasehold improvements was changed to include an amortization period based on
the lesser of the lease term, generally including renewal options, or the useful
life of the asset, including the longer 30 year life for structures. The effect
of these changes was to decrease the net loss reported for 1999 by $333,000,
representing a decrease to the diluted loss per share of $.05 for 1999.
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NOTE E - LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
Long-term debt and obligations under capital leases at December 31,
2000, and January 2, 2000, are summarized below:
DECEMBER 31, 2000 January 2, 2000
----------------------------- -----------------------------
CURRENT LONG-TERM Current Long-Term
----------- ----------- ----------- -----------
Convertible Subordinated Debentures, 8.25%, due 2003 $ 1,319,000 $ 8,125,000 $ 973,000 $10,000,000
Bank credit agreement, at variable interest rates ranging
from 7.82% to 8.82%, available through July 1, 2001 662,000 8,603,000 -- 8,019,000
Obligation under capital lease, 11.50% interest,
payable through 2004 12,000 43,000 22,000 109,000
----------- ----------- ----------- -----------
$ 1,993,000 $16,771,000 $ 995,000 $18,128,000
=========== =========== =========== ===========
Aggregate maturities of long-term debt, including required sinking fund
payments and assumed conversion of the line of credit facility, for the five
years succeeding December 31, 2000, are as follows: 2001 - $1,993,000; 2002 -
$3,212,000; 2003 - $7,589,000 ; 2004 - $1,339,000; 2005 - $1,324,000.
The Convertible Subordinated Debentures due 2003 are convertible into
common stock of the Company at any time prior to maturity at $17.75 per share,
subject to adjustment in certain events. At December 31, 2000, 532,056 shares of
common stock were reserved for issuance upon conversion of the outstanding
debentures. The debentures are redeemable upon not less than 30 days' notice at
the option of the Company, in whole or in part, at 100% of the principal amount,
together with accrued interest to the redemption date. The effective interest
rate on the debentures is 8.68%. The Debenture Indenture requires minimum annual
sinking fund payments of $1,875,000 through 2002.
The Company maintains an unsecured bank line of credit agreement for up
to $20,000,000 of revolving credit for the purpose of financing capital
expenditures. Borrowings outstanding under this line of credit totaled
$9,265,000 and $8,019,000 at December 31, 2000 and January 2, 2000,
respectively. In March 2000, the term of the line of credit was extended by one
year through July 1, 2001. The amended credit agreement contains covenants which
require the Company to achieve specified results of operations and specified
levels of senior debt to EBITDA (earnings before interest, taxes, depreciation
and amortization) and to maintain certain other financial ratios. It also
contains certain limitations on capital expenditures and restaurant development
by the Company (generally limiting the Company to the development of two new
restaurants per year) and restricts the Company's ability to incur additional
debt outside the bank line of credit. The interest rate on borrowings under the
line of credit is based on LIBOR plus two to three percent, depending on certain
financial ratios achieved by the Company. All amounts outstanding under the line
become due on July 1, 2001, unless the Company exercises its option to convert
outstanding borrowings to a term loan prior to that time. In the event of such a
conversion, the principal would be repaid in 84 equal monthly installments.
Because the line of credit is scheduled to mature within six months of December
31, 2000, $662,000 - representing six months' principal payments if the total
credit line balance were converted to a term loan - has been reflected as a
current liability as of December 31, 2000.
Cash interest payments amounted to $1,652,000, $1,606,000 and
$2,011,000, in 2000, 1999 and 1998, respectively. Interest costs of $67,000,
$48,000 and $96,000 were capitalized as part of building and leasehold costs in
2000, 1999, and 1998, respectively.
The carrying value and estimated fair value of the Company's
Convertible Subordinated Debentures were $9,444,000 and $8,688,000,
respectively, at December 31, 2000.
NOTE F - LEASES
At December 31, 2000, the Company was lessee under both ground leases
(the Company leases the land and builds its own buildings) and improved leases
(lessor owns the land and buildings) for restaurant locations. These leases are
generally operating leases.
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Real estate lease terms are generally for 15 to 20 years and, in many
cases, provide for rent escalations and for one or more five-year renewal
options. The Company is generally obligated for the cost of property taxes,
insurance and maintenance. Certain real property leases provide for contingent
rentals based upon a percentage of sales. In addition, the Company is lessee
under other noncancellable operating leases, principally for office space.
Accumulated amortization of buildings under capital leases totaled
$257,000 at December 31, 2000 and $243,000 at January 2, 2000. Amortization of
leased assets is included in depreciation and amortization expense.
Total rental expense amounted to:
Years Ended
------------ -------------------------------------------
DECEMBER 31 January 2 January 3
2000 2000 1999
------------ ------------ ------------
Minimum rentals under operating leases $ 1,951,000 $ 1,768,000 $ 1,566,000
Contingent rentals 72,000 67,000 69,000
Less: Sublease rentals (131,000) (199,000) (260,000)
------------ ------------ ------------
$ 1,892,000 $ 1,636,000 $ 1,375,000
============ ============ ============
At December 31, 2000, future minimum lease payments under capital
leases and noncancellable operating leases (including renewal options) with
initial terms of one year or more are as follows:
Capital Operating
Leases Leases
-------- -----------
2001 $ 18,000 $ 1,628,000
2002 18,000 1,720,000
2003 18,000 1,753,000
2004 14,000 1,563,000
2005 - 1,435,000
Thereafter - 33,377,000
-------- -----------
Total minimum payments 68,000 $41,476,000
-------- ===========
Less imputed interest (13,000)
--------
Present value of minimum rental payments 55,000
Less current maturities at December 31, 2000 (12,000)
--------
Long-term obligations at December 31, 2000 $ 43,000
========
Minimum future rentals receivable under subleases for operating leases
at December 31, 2000, amounted to $600,000.
NOTE G - INCOME TAXES
At December 31, 2000, the Company had net operating loss carryforwards
of $1,894,000 for income tax purposes that expire in the years 2001 through
2019. Tax credit carryforwards (consisting of investment and jobs tax credits
which expire in 2001, FICA tip credits which expire in the years 2009 through
2020 and alternative minimum tax credits which may be carried forward
indefinitely) of $3,183,000 are also available to reduce future federal income
taxes.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of December
31, 2000, and January 2, 2000, are as follows:
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DECEMBER 31 January 2
2000 2000
------------ ------------
Deferred tax liabilities:
Tax over book depreciation $ 91,000 $ 114,000
Other - net 502,000 502,000
------------ ------------
Total deferred tax liabilities 593,000 616,000
------------ ------------
Deferred tax assets:
Capital/finance leases 11,000 3,000
Deferred compensation accruals 257,000 225,000
Self-insurance accruals 55,000 58,000
Net operating loss carryforwards 644,000 1,053,000
Tax credit carryforwards 3,183,000 3,079,000
Other - net 362,000 308,000
------------ ------------
Total deferred tax assets 4,512,000 4,726,000
Valuation allowance for deferred tax assets (3,919,000) (4,110,000)
------------ ------------
593,000 616,000
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
SFAS No. 109 establishes procedures to measure deferred tax assets and
liabilities and assess whether a valuation allowance relative to existing
deferred tax assets is necessary. Since the fourth quarter of 1997, management
has concluded that, based upon results of operations during the periods in
question and its near-term forecast of future taxable earnings, a valuation
allowance was appropriate relative to its deferred tax assets. At December 31,
2000, the Company had no net deferred tax assets and a valuation allowance of
$3,919,000.
Significant components of the income tax provision (benefit) are as
follows:
Years Ended
DECEMBER 31 January 2 January 3
2000 2000 1999
---------- ----------- ---------
Currently payable:
Federal $340,000 $ 31,000 $(94,000)
State 70,000 2,000 94,000
-------- -------- --------
Total 410,000 33,000 --
Deferred -- -- --
-------- -------- --------
Income tax provision $410,000 $ 33,000 $ --
======== ======== ========
The Company's consolidated effective tax rate differed from the federal
statutory rate as set forth in the following table:
Years Ended
DECEMBER 31 January 2 January 3
2000 2000 1999
----------- ----------- ----------
Tax expense (benefit) computed at federal statutory rate (34%) $ 303,000 $ (102,000) $ (505,000)
State income taxes, net of federal benefit 46,000 1,000 63,000
Non-deductible expenses 13,000 160,000 156,000
Effect of net operating loss carryforwards and tax credits 239,000 259,000 (244,000)
Valuation of deferred tax assets (191,000) (285,000) 530,000
---------- ---------- ----------
Income tax provision $ 410,000 $ 33,000 $ --
========== ========== ==========
The Company made net income tax payments of $492,000 and $180,000 in
2000 and 1999, respectively. The Company received net income tax refunds of
$814,000 in 1998.
NOTE H - STOCK OPTIONS AND BENEFIT PLANS
Under the Company's 1994 Employee Stock Incentive Plan, officers and
key employees of the Company may be granted options to purchase shares of the
Company's common stock. Options to purchase the Company's common stock also
remain outstanding under the Company's 1985 Stock Option Plan and 1990 Stock
Option Plan for Outside Directors, although the Company no longer has the
ability to issue additional shares under these plans.
25
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A summary of options under the Company's option plans is as follows:
Weighted
Average
Exercise
Options Shares Option Prices Price
- ------- -------- --------------- --------
Outstanding at December 28, 1997 664,650 $1.38- $13.00 $6.75
Issued 355,220 2.75- 4.97 2.79
Exercised (10,000) 2.00 2.00
Expired or canceled (331,050) 4.94- 13.00 7.45
-------- --------------- -----
Outstanding at January 3, 1999 678,820 1.38- 11.69 4.40
Issued 189,000 2.25- 4.06 2.30
Exercised (14,000) 1.75- 3.81 2.13
Expired or canceled (43,300) 3.81- 11.69 4.60
-------- --------------- -----
Outstanding at January 2, 2000 810,520 1.38- 11.69 3.95
Issued 44,750 3.44- 3.88 3.56
Exercised (75,750) 1.50- 2.75 1.51
Expired or canceled (17,890) 1.75- 3.44 2.77
-------- --------------- -----
Outstanding at December 31, 2000 761,630 $1.38- $11.69 $4.27
======== =============== =====
Options exercisable and shares available for future grant are as
follows:
DECEMBER 31 January 2 January 3
2000 2000 1999
----------- --------- ---------
Options exercisable 577,584 344,004 221,171
Shares available for grant 245,206 190,564 123,014
The following table summarizes information about stock options
outstanding at December 31, 2000:
Options Outstanding Options Exercisable
----------------------------------- ---------------------------------
Number Number
Outstanding at Weighted Weighted Exercisable at Weighted
Range of December 31 Average Remaining Average Exercise December 31 Average
Exercise Prices 2000 Contractual Life Price 2000 Exercise Price
- --------------- -------------- ----------------- ---------------- -------------- --------------
$1.38- $2.59 188,500 8.5 years $2.54 188,500 $2.54
2.75- 3.44 341,630 7.9 years 2.81 207,253 2.75
3.81- 5.69 71,500 7.3 years 5.21 58,500 5.50
7.38- 11.69 160,000 4.1 years 9.02 123,331 8.80
- --------------- ------- ----- ------- ----
$1.38- $11.69 761,630 $4.27 577,584 $4.25
=============== ======= ===== ======= =====
Options exercisable at January 2, 2000 and January 3, 1999 had weighted
average exercise prices of $4.75 and $5.23, respectively.
In 1995, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock Based Compensation". This standard defines a fair value
based method of accounting for an employee stock option or similar equity
instrument. This statement gives entities a choice of recognizing related
compensation expense by adopting the new fair value method or continuing to
measure compensation using the intrinsic value approach under Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock Issued to
Employees", the former standard. The Company has elected to follow APB No. 25
and related Interpretations in accounting for its stock compensation plans
because, as discussed below, the alternative fair value accounting provided for
under SFAS No. 123 requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB No. 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
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27
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 2000, 1999 and 1998, respectively: risk-free interest rates of
6.51%, 5.94% and 4.62%; no annual dividend yield; volatility factors of .4917,
.4500 and .3795 based on monthly closing prices since August, 1990; and an
expected option life of 10 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma information follows:
Years Ended
-------------------------------------------------------
DECEMBER 31 January 2 January 3
2000 2000 1999
----------- ---------- ------------
Pro forma net income (loss) $ 60,000 $ (688,000) $ (2,076,000)
Pro forma income (loss) per share
Basic $ .01 $ (.11) $ (.38)
Diluted $ .01 $ (.11) $ (.38)
The weighted average fair value per share for options granted during
2000, 1999 and 1998 was $2.48, $1.50 and $1.61, respectively.
The Company has an Employee Stock Purchase Plan under which 75,547
shares of the Company's common stock are available for issuance. No shares have
been issued under the plan since 1997.
The Company has a Salary Continuation Plan which provides retirement
and death benefits to certain key employees. The expense recognized under this
plan was $130,000, $94,000 and $59,000 in 2000, 1999 and 1998, respectively.
The Company has a Savings Incentive and Salary Deferral Plan under
Section 401(k) of the Internal Revenue Code which allows qualifying employees to
defer a portion of their income on a pre-tax basis through contributions to the
plan. All Company employees with at least 1,000 hours of service during the
twelve month period subsequent to their hire date, or any calendar year
thereafter, and who are at least 21 years of age are eligible to participate.
For each dollar of participant contributions, up to 3% of each participant's
salary, the Company makes a minimum 10% matching contribution to the plan. The
Company's matching contribution for 2000 totaled $38,000, or 25% of eligible
participant contributions. For 1999 and 1998, the Company's matching
contribution expense was $36,000 and $29,000, respectively.
In 1999, the Company established the 1999 Loan Program (Loan Program)
to allow eligible employees to make purchases of the Company's common stock.
Under the terms of the Loan Program, all full-time employees as well as
part-time employees who had at least five years of employment with the Company
were eligible to borrow amounts ranging from a minimum of $10,000 to a maximum
of 100% of their annual salary. Borrowings in excess of the maximum were allowed
upon approval by the Compensation Committee or the officers of the Company, as
applicable. Such borrowings were to be used exclusively to purchase shares of
the Company's common stock and accrue interest at the rate of 3% annually from
the date of the last purchase of shares under the program until paid in full.
Interest is payable quarterly until December 31, 2006 at which time there will
be a balloon payment of the unpaid interest and the entire principal amount due.
In the event that a participant receives bonus compensation from the Company,
30% of any such bonus is to be applied to the outstanding principal balance of
the note. Further, a participant's loan may be declared due and payable upon
termination of a participant's employment or
27
28
failure to make any payment when due, as well as under other circumstances set
forth in the program documents. The maximum aggregate amount of loans authorized
was $1,000,000. As of December 31, 2000, notes receivable under the Loan Program
totaled $944,000. This amount has been reported as a reduction from the
Company's stockholders' equity.
In addition to shares purchased in the manner described above,
participants in the Loan Program received a stock bonus award of one share of
common stock for every 20 shares of common stock purchased under the program.
Participants in the Loan Program also received an award of one share of
restricted common stock for every 20 shares of common stock purchased under the
program. Both the stock bonus award and the restricted stock award were issued
pursuant to the Company's 1994 Employee Stock Incentive Plan, with the
restricted stock award scheduled to vest at the rate of 20% of the number of
shares awarded on each of the second through sixth anniversaries of the date of
the last purchase of shares under the Loan Program, or February 18, 2000.
For purposes of computing earnings per share, the shares purchased
through the Loan Program are included as outstanding shares in the weighted
average share calculation.
NOTE I - EMPLOYEE STOCK OWNERSHIP PLAN
In 1992, the Company established an Employee Stock Ownership Plan
(ESOP) which purchased 457,055 shares of Company common stock from the Massey
Company, a trust created by the late Jack C. Massey, the Company's former Board
Chairman, and the Jack C. Massey Foundation at $3.75 per share for an aggregate
purchase price of $1,714,000. The Company funded the ESOP by loaning it an
amount equal to the purchase price, with the loan secured by a pledge of the
unallocated stock held by the ESOP. The note receivable from the ESOP has been
reported as a reduction from the Company's stockholders' equity.
The Company has made a contribution to the ESOP each year since the
ESOP was established allowing the ESOP to make its scheduled loan repayments to
the Company, with the exception of 1996, when no contributions were made, and
2000, when only the interest component of the contribution was made.
Contributions made to the ESOP resulted in net compensation expense of $135,000
and $123,000 for 1999 and 1998, respectively, with corresponding reductions in
the ESOP note receivable. The terms of the ESOP note, as amended, call for
interest to be paid at an annual rate of 8% and for repayment of the ESOP note's
remaining principal in annual amounts ranging from $152,000 to $192,000 over the
period 2002 through 2005.
All Company employees with at least 1,000 hours of service during the
twelve month period subsequent to their hire date, or any calendar year
thereafter, and who are at least 21 years of age are eligible to participate.
The ESOP generally requires five years of service with the Company in order for
an ESOP participant's account to vest. Allocation of stock is made to
participants' accounts as the ESOP's loan is repaid and is in proportion to each
participant's compensation for each year. Shares allocated under the ESOP were
316,416 and 305,424 at December 31, 2000 and January 2, 2000, respectively.
For purposes of computing earnings per share, the shares originally
purchased by the ESOP are included as outstanding shares in the weighted average
share calculation.
NOTE J - SHAREHOLDER RIGHTS PLAN
The Company's Board of Directors has adopted a shareholder rights plan
to protect the interests of the Company's shareholders if the Company is
confronted with coercive or unfair takeover tactics by encouraging third parties
interested in acquiring the Company to negotiate with the Board of Directors.
The shareholder rights plan is a plan by which the Company has
distributed rights ("Rights") to purchase (at the rate of one Right per share of
common stock) one-hundredth of a share of no par value Series A Junior Preferred
(a "Unit") at an exercise price of $12.00 per Unit. The Rights are attached to
the common stock and may be exercised only if a person or group acquires 20% of
the outstanding common stock or initiates a tender or exchange offer that would
result in such person or group acquiring 10% or more of the outstanding common
stock. Upon such an event, the Rights "flip-in" and each holder of a Right will
thereafter have the right to receive, upon exercise, common stock having a value
equal to two times the exercise price. All Rights beneficially owned by the
28
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acquiring person or group triggering the "flip-in" will be null and void.
Additionally, if a third party were to take certain action to acquire the
Company, such as a merger or other business combination, the Rights would
"flip-over" and entitle the holder to acquire shares of the acquiring person
with a value of two times the exercise price. The Rights are redeemable by the
Company at any time before they become exercisable for $0.01 per Right and
expire May 16, 2004. In order to prevent dilution, the exercise price and number
of Rights per share of common stock will be adjusted to reflect splits and
combinations of, and common stock dividends on, the common stock.
During 1999, the shareholder rights plan was amended by altering the
definition of "acquiring person" to specify that Solidus, LLC and its affiliates
shall not be or become an acquiring person as the result of its acquisition of
Company common stock in excess of 20% or more of Company common stock
outstanding (See Note B - Sale of Stock).
NOTE K - COMMITMENTS AND CONTINGENCIES
As a result of the disposition of its Wendy's operations in 1996, the
Company remains secondarily liable for certain real property leases with
remaining terms of one to fifteen years. The total amount of lease payments
remaining on these leases at December 31, 2000 was approximately $3.7 million.
In connection with the sale of its Mrs. Winner's Chicken & Biscuit restaurant
operations in 1989 and certain previous dispositions, the Company remains
secondarily liable for certain real and personal property leases with remaining
terms of one to five years. The total amount of lease payments remaining on
these leases at December 31, 2000, was approximately $1.4 million. Additionally,
in connection with the previous disposition of certain other Wendy's restaurant
operations, primarily the southern California Wendy's restaurants in 1982, the
Company remains secondarily liable for certain real property leases with
remaining terms of one to six years. The total amount of lease payments
remaining on these leases as of December 31, 2000, was approximately $600,000.
In February, 2000, a lawsuit was filed against a subsidiary of the Company
claiming that it acted in a discriminatory manner by enforcing the Company's
policy prohibiting live music when a party of guests sought to bring live music
into one of its restaurants. Most of the discovery in this case has been
completed and a trial is scheduled for April of 2001. The plaintiffs in this
action claim the Company's policy against live music was targeted at them as a
result of their ethnic background and seek unspecified damages. The Company's
insurance company is currently providing a defense but has reserved the right to
deny coverage for the claim. The Company believes it has a meritorious defense
and is defending the case vigorously. However, the final outcome of this
litigation is not currently predictable.
In addition to the litigation noted above, the Company is from time to
time subject to routine litigation incidental to its business. The Company
believes that the results of the above noted litigation and other pending legal
proceedings will not have a materially adverse effect on the Company's financial
condition.
NOTE L - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities included the following:
DECEMBER 31 January 2
2000 2000
----------- ----------
Taxes, other than income taxes $1,818,000 $1,584,000
Salaries and wages 446,000 584,000
Insurance 220,000 249,000
Interest 66,000 82,000
Other 796,000 1,131,000
---------- ----------
$3,346,000 $3,630,000
========== ==========
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QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the quarterly results of operations for
the years ended December 31, 2000 and January 2, 2000 (in thousands, except per
share amounts):
2000 Quarters Ended
----------------------------------------------------------------------
April 2 July 2 October 1 December 31
------- -------- --------- -----------
Net sales $22,208 $ 21,241 $ 21,621 $ 22,441
Net income (loss) $ 505 $ 110 $ (322) $ 188
Basic earnings (loss) per share $ .07 $ .02 $ (.05) $ .03
Diluted earnings (loss) per share $ .07 $ .02 $ (.05) $ .03
1999 Quarters Ended
---------------------------------------------------------------------
April 4 July 4 October 3 January 2
------- -------- --------- ---------
Net sales $19,208 $ 18,762 $ 19,041 $ 21,443
Net income (loss) $ 244 $ (166) $ (820) $ 410
Basic earnings (loss) per share $ .04 $ (.03) $ (.12) $ .06
Diluted earnings (loss) per share $ .04 $ (.03) $ (.12) $ .06
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item with respect to directors of
the Company is incorporated herein by reference to the "Proposal No. 1: Election
of Directors" section and the "Section 16(a) Beneficial Ownership Reporting
Compliance" section of the Company's Proxy Statement for the 2001 Annual Meeting
of Shareholders to be held May 15, 2001. (See also "Executive Officers of the
Company" under Part I of this Form 10-K.)
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by
reference to the "Executive Compensation" section of the Company's Proxy
Statement for the 2001 Annual Meeting of Shareholders to be held May 15, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated herein by
reference to the "Security Ownership of Certain Beneficial Owners and
Management" section of the Company's Proxy Statement for the 2001 Annual Meeting
of Shareholders to be held May 15, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required under this item is incorporated herein by
reference to the "Certain Relationships and Related Transactions" section of the
Company's Proxy Statement for the 2001 Annual Meeting of Shareholders to be held
May 15, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) See Item 8.
(a)(2) The information required under Item 14, subsection (a)(2) is
set forth in a supplement filed as part of this report
beginning on page F-1.
(a)(3) Exhibits:
(3)(a)(1) Charter (Exhibit 3(a) of the Registrant's Report on Form 10-K
for the year ended December 30, 1990, is incorporated herein
by reference).
(3)(a)(2) Amendment to Charter dated February 7, 1997 (Exhibit
(3)(a)(2) of the Registrant's Report on Form 10-K for the year
ended December 29, 1996 is incorporated herein by reference).
(3)(b) Restated Bylaws as currently in effect. (Exhibit 3(b) of the
Registrant's Report on Form 10-K for the year ended January 3,
1999 is incorporated herein by reference).
(4)(a) Form of Indenture dated as of May 19, 1983, between the
Registrant and First American National Bank of Nashville,
Trustee (Exhibit 4 of the Registrant's quarterly report on
Form 10-Q for the quarter ended June 30, 1983, is incorporated
herein by reference).
(4)(b) Rights Agreement dated May 16, 1989, by and between Registrant
and NationsBank (formerly Sovran Bank/Central South) including
Form of Rights Certificate and Summary of Rights (Exhibit 3 to
the Report on Form 8-K dated May 16, 1989, is incorporated
herein by reference).
(4)(c) Amendments to Rights Agreement dated February 22, 1999, by and
between the Registrant and SunTrust Bank. (Exhibit 4(c) of the
Registrant's Report on Form 10-K for the year ended January 3,
1999 is incorporated herein by reference).
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(4)(d) Amendment to Rights Agreement dated March 22, 1999, by and
between the Registrant and SunTrust Bank. (Exhibit 4(d) of the
Registrant's Report on Form 10-K for the year ended January 3,
1999 is incorporated herein by reference).
(4)(e) Stock Purchase and Standstill Agreement dated March 22, 1999,
by and between the Registrant and Solidus, LLC. (Exhibit 4(e)
of the Registrant's Report on Form 10-K for the year ended
January 3, 1999 is incorporated herein by reference).
(10)(a) Employee Stock Ownership Plan (Exhibit 1 to the Registrant's
Report on Form 8-K dated June 25, 1992, is incorporated herein
by reference).
(10)(b) Employee Stock Ownership Trust Agreement dated June 25, 1992
between Registrant and Third National Bank in Nashville.
(Exhibit 2 to the Registrant's Report on Form 8-K dated June
25, 1992, is incorporated herein by reference).
(10)(c) Pledge and Security Agreement dated June 25, 1992, by and
between Registrant and Third National Bank in Nashville as the
Trustee for the Volunteer Capital Corporation Employee Stock
Ownership Trust (Exhibit 5 to the Registrant's Report on Form
8-K dated June 25, 1992, is incorporated herein by reference).
(10)(d) Amendment to Employee Stock Ownership Plan, dated June 29,
1994 (incorporated by reference to the Registrant's Annual
Report on Form 10-K filed April 3, 2000).
(10)(e) Amendment to Employee Stock Ownership Plan, dated February 17,
1998 (incorporated by reference to the Registrant's Annual
Report on Form 10-K filed April 3, 2000).
(10)(f) Amendment to Employee Stock Ownership Plan, dated December 30,
1998 (incorporated by reference to the Registrant's Annual
Report on Form 10-K filed April 3, 2000).
(10)(g) Asset Purchase Agreement dated October 25, 1996 by and between
VCE Restaurants, Inc., Volunteer Capital Corporation and
Wendy's International, Inc. (Exhibit 10.1 of the Registrant's
quarterly report on Form 10-Q for the quarter ended September
29, 1996 is incorporated herein by reference).
(10)(h) $30,000,000 Loan Agreement dated August 29, 1995 by and
between Volunteer Capital Corporation, VCE Restaurants, Inc.,
Total Quality Management, Inc. and NationsBank of Tennessee,
N.A. (Exhibit 10.1 of the Registrant's quarterly report on
Form 10-Q for the quarter ended October 1, 1995 is
incorporated herein by reference).
(10)(i) Amendment to Loan Agreement dated March 27, 1998, by and
between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and NationsBank of Tennessee, N.A. (Exhibit
(10)(h) of the Registrant's Report on Form 10-K for the year
ended December 28, 1997 is incorporated herein by reference).
(10)(j) Line of Credit Note dated March 27, 1998, by and between J.
Alexander's Corporation, J. Alexander's Restaurants, Inc. and
NationsBank of Tennessee, N.A. (Exhibit (10)(i) of the
Registrant's Report on Form 10-K for the year ended December
28, 1997 is incorporated herein by reference).
(10)(k) Renewal of Line of Credit Note dated March 30, 2000, by and
between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and Bank of America, N.A. (successor to
NationsBank of Tennessee, N.A.) (incorporated by reference to
the Registrant's Annual Report on Form 10-K filed April 3,
2000).
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(10)(l) Second Amendment to Loan Agreement dated March 30, 2000, by
and between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and Bank of America, N.A. (successor to
NationsBank of Tennessee, N.A.) (incorporated by reference to
the Registrant's Annual Report on Form 10-K filed April 3,
2000).
(10)(m)* Written description of Salary Continuation Plan (description
of Salary Continuation Plan included in the Registrant's Proxy
Statement for Annual Meeting of Shareholders, May 10, 1994, is
incorporated herein by reference).
(10)(n)* Form of Severance Benefits Agreement between the Registrant
and Messrs. Stout and Lewis (Exhibit (10)(j) of the
Registrant's Report on Form 10-K for the year ended December
31, 1989, is incorporated herein by reference).
(10)(o)* 1985 Stock Option Plan (incorporated by reference to pages 15
through 20 of the Registrant's Proxy Statement for Annual
Meeting of Shareholders, May 8, 1985, and Exhibit A to the
Registrant's Proxy Statement for Annual Meeting of
Shareholders, May 11, 1993.)
(10)(p)* 1990 Stock Option Plan for Outside Directors (Exhibit A of the
Registrant's Proxy Statement for Annual Meeting of
Shareholders, May 8, 1990, is incorporated herein by
reference).
(10)(q)* 1994 Employee Stock Incentive Plan (incorporated by reference
to Exhibit 4(c) of Registration Statement No. 33-77476).
(10)(r)* Amendment to 1994 Employee Stock Incentive Plan (Appendix A of
the Registrant's Proxy Statement for Annual Meeting of
Shareholders, May 20, 1997, is incorporated herein by
reference).
(10)(s)* 1999 Loan Program (incorporated herein by reference to Exhibit
A of Registration Statement on Form S-8, Registration No.
333-91431).
(10)(t)* Second Amendment to 1994 Employee Stock Incentive Plan
(Appendix A of the Registrant's Proxy Statement on Schedule
14-A for 2000 Annual Meeting of Shareholders (filed April 3,
2000) is incorporated herein by reference).
(10)(u) Amended and Restated Secured Promissory Note dated
November 30, 2000 from the J. Alexander's Corporation
Employee Stock Ownership Trust to Registrant.
(21) List of subsidiaries of Registrant.
(23) Consent of Independent Auditors.
*Denotes executive compensation plan or arrangement.
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34
(b) Reports on Form 8-K:
During the quarter ended December 31, 2000, the Company filed no
reports on Form 8-K.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules - The response to this portion of Item 14
is submitted as a separate section of this report.
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35
SIGNATURES
Pursuant to the requirements of Section 13 and 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.
J. ALEXANDER'S CORPORATION
Date: 3/27/01 By: /s/Lonnie J. Stout II
-------------------------------------------
Lonnie J. Stout II
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Capacity Date
---- -------- ----
/s/Lonnie J. Stout II Chairman, President, Chief Executive Officer 3/27/01
- ------------------------------------ and Director (Principal Executive Officer) -------
Lonnie J. Stout II
/s/R. Gregory Lewis Vice President and Chief Financial Officer 3/27/01
- ------------------------------------ (Principal Financial Officer) -------
R. Gregory Lewis
/s/Mark A. Parkey Vice President and Controller 3/27/01
- ------------------------------------ (Principal Accounting Officer) -------
Mark A. Parkey
/s/E. Townes Duncan Director 3/27/01
- ------------------------------------ -------
E. Townes Duncan
/s/Garland G. Fritts Director 3/27/01
- ------------------------------------ -------
Garland G. Fritts
/s/J. Bradbury Reed Director 3/27/01
- ------------------------------------ -------
J. Bradbury Reed
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36
ANNUAL REPORT ON FORM 10-K
ITEM 14(A)(2), (C) AND (D)
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FISCAL YEAR ENDED DECEMBER 31, 2000
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
NASHVILLE, TENNESSEE
F-1
37
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------- ----------- ----------------------------- ---------- ----------
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions- at End
Description of Period Expenses Describe Describe of Period
- ---------------------------------------------- ----------- ---------- -------------- ---------- ----------
Year ended December 31, 2000:
Valuation allowance for deferred tax assets $4,110,000 $(191,000) $0 $0 $3,919,000
Year ended January 2, 2000:
Valuation allowance for deferred tax assets $4,395,000 $(285,000) $0 $0 $4,110,000
Year ended January 3, 1999:
Valuation allowance for deferred tax assets $3,865,000 $ 530,000 $0 $0 $4,395,000
F-2
38
J. ALEXANDER'S CORPORATION
EXHIBIT INDEX
Reference Number
per Item 601 of
Regulation S-K Description
- ---------------- -----------
(10)(u) Amended and Restated Secured Promissory Note dated
November 30, 2000 from the J. Alexander's Corporation
Employee Stock Ownership Trust to Registrant
(21) List of subsidiaries of Registrant.
(23) Consent of Ernst & Young LLP, independent auditors