-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JGarmrJbPRyin/iye1+k2IMfsdTSTFKhqU7F5TQBF6gsHqTB6v89Nq/sUtGjboM6 Ig9v7teCGkzeQpKUd+2hgQ== 0000892569-96-002062.txt : 19961017 0000892569-96-002062.hdr.sgml : 19961017 ACCESSION NUMBER: 0000892569-96-002062 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961001 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961016 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CKE RESTAURANTS INC CENTRAL INDEX KEY: 0000919628 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 330602639 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11313 FILM NUMBER: 96644235 BUSINESS ADDRESS: STREET 1: 1200 N HARBOR BLVD CITY: ANAHEIM STATE: CA ZIP: 92801 BUSINESS PHONE: 7147745796 8-K 1 FORM 8-K DATED OCTOBER 1, 1996 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- FORM 8-K CURRENT REPORT --------------------------- Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 1, 1996 ------------------------------- CKE RESTAURANTS, INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-13192 33-0602639 - ------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 1200 North Harbor Boulevard, Anaheim, California 92801 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (714) 774-5796 ---------------------------- Not Applicable - ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On October 1, 1996, CKE Restaurants, Inc. (the "Company") acquired an 80.0% equity interest in Casa Bonita Incorporated ("Casa Bonita"). Casa Bonita currently owns and operates 108 Taco Bueno quick-service restaurants located in Texas (primarily in the Dallas/Ft. Worth area) and Oklahoma (primarily in the Tulsa and Oklahoma City areas). Casa Bonita also owns and operates two Casa Bonita restaurants and three Crystal's Pizza and Spaghetti Restaurants. At the present time, the Company intends to continue operating the restaurants owned and operated by Casa Bonita. The acquisition was effected by the purchase by CBI Restaurants, Inc. ("CBI"), a newly-formed corporation in which the Company holds an 80.0% equity interest, of all of the outstanding capital stock of Casa Bonita from Casa Bonita Holdings, Inc., which is an indirect subsidiary of Unigate PLC, a publicly-held London Stock Exchange Company based in the United Kingdom. The total purchase price paid by CBI for Casa Bonita was $42.0 million, which was paid in cash and is subject to adjustment. The acquisition was financed in part by loans to CBI of $9.0 million from the Company, $8.0 million from Fidelity National Financial, Inc. ("Fidelity") and $5.0 million from Giant Group, Ltd. The balance of the purchase price, $20.0 million, was financed through the Company's investment of $16.0 million in cash for an 80.0% equity interest in CBI, and Fidelity's investment of $4.0 million in cash for the remaining 20.0% equity interest in CBI. The Company's investments in CBI were funded out of borrowings under the Company's revolving credit facility. William P. Foley II, the Company's Chief Executive Officer and Chairman of the Board, serves as the Chairman of the Board and Chief Executive Officer of Fidelity. In addition, Daniel D. (Ron) Lane, the Company's Vice Chairman of the Board, and Frank P. Willey, a director of the Company, serve as directors of Fidelity. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired. Independent Auditors' Report Consolidated Balance Sheets as of June 24, 1996 (unaudited), April 1, 1996 and April 3, 1995 Consolidated Statements of Earnings for the twelve weeks ended June 24, 1996 (unaudited) and June 26, 1995 (unaudited) and for the years ended April 1, 1996 and April 3, 1995 Consolidated Statements of Stockholder's Equity for the twelve weeks ended June 24, 1996 (unaudited) and for the years ended April 1, 1996 and April 3, 1995 Consolidated Statements of Cash Flows for the twelve weeks ended June 24, 1996 (unaudited) and June 26, 1995 (unaudited) and for the years ended April 1, 1996 and April 3, 1995 Notes to Consolidated Financial Statements (b) Pro Forma Financial Information. Unaudited Pro Forma Combined Condensed Balance Sheet as of August 12, 1996 Unaudited Pro Forma Combined Condensed Statement of Operations for the fiscal year ended January 31, 1996 Unaudited Pro Forma Combined Condensed Statement of Operations for the 28 weeks ended August 12, 1996 Notes to Unaudited Pro Forma Combined Condensed Financial Data 2 3 (c) Exhibits. Exhibit Number 10.1 Stock Purchase Agreement, dated as of August 27, 1996, by and between the Registrant and Casa Bonita Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Registrants's Current Report on Form 8-K dated August 27, 1996). * 23.1 Consent of KPMG Peat Marwick LLP. 99.1 Press Release dated October 2, 1996. 99.2 Financial Statements described in Item 7(a) above. 99.3 Financial Statements described in Item 7(b) above. - --------------- * Schedules omitted. The Registrant shall furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule upon request. 3 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CKE RESTAURANTS, INC. Date: October 15, 1996 By: /s/ JOSEPH N. STEIN -------------------- Joseph N. Stein, Senior Vice President and Chief Financial Officer 4 5 EXHIBIT INDEX The following exhibits are attached hereto and incorporated herein by reference: SEQUENTIALLY EXHIBIT NUMBER DESCRIPTION NUMBERED PAGE - -------------- ----------- ------------- 10.1 Stock Purchase Agreement, dated as of August 27, 1996, by and between the Registrant and Casa Bonita Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Registrants' Current Report as Form 8-K dated August 27, 1996). * 23.1 Consent of KPMG Peat Marwick LLP. 99.1 Press Release dated October 2, 1996. 99.2 Financial Statements described in Item 7(a) above. 99.3 Financial Statements described in Item 7(b) above. - --------------- * Schedules omitted. The Registrant shall furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule upon request. EX-23.1 2 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors of CKE Restaurants, Inc. and Subsidiaries We consent to the incorporation by reference in the Registration Statements (Nos. 33-56313, 33-55337, 333-12399, 333-12401, 33-53089, 33-31190 and 2-86142) on Form S-8 of CKE Restaurants, Inc. of our report dated September 23, 1996 (except as to notes 4 and 11 which are as of October 1, 1996) relating to the consolidated balance sheets of Casa Bonita Incorporated and Subsidiaries as of April 1, 1996 and April 3, 1995 and the related consolidated statements of earnings, stockholder's equity and cash flows for the years then ended. /s/ KPMG PEAT MARWICK LLP October 16, 1996 Dallas, Texas EX-99.1 3 PRESS RELEASE DATED OCTOBER 2, 1996 1 EXHIBIT 99.1 NEWS RELEASE FOR: CKE Restaurants, Inc. CONTACT: Suzi Brown Public Relations Manager (714) 490-3686 FOR IMMEDIATE RELEASE CKE RESTAURANTS, INC. ANNOUNCES ACQUISITION OF CASA BONITA INCORPORATED AND SEMI-ANNUAL CASH DIVIDEND ANAHEIM, Calif. -- October 2, 1996 -- CKE Restaurants, Inc. (NYSE:CKR) announced that on October 1, 1996 it completed its acquisition of Casa Bonita Incorporated from a subsidiary of Unigate PLC, a publicly held London Stock Exchange company based in the United Kingdom. Under the purchase agreement, CKE assigned its rights to a new entity, CBI Restaurants, Inc., of which CKE will hold an 80 percent interest in the Casa Bonita Incorporated restaurant concepts. CBI Restaurants, Inc. paid $42 million in cash for Casa Bonita Incorporated's 109 Taco Bueno quick-service Mexican restaurants, two Casa Bonita theme restaurants and three Crystal's pizzerias. This acquisition was financed by short-term loans to CBI Restaurants, Inc. of $9 million from CKE, $8 million from Fidelity National Financial, Inc., and $5 million from GIANT GROUP, LTD. The balance of the purchase price, which is equal to $20 million, will form the equity of CBI Restaurants, of which CKE will maintain an 80 percent ownership interest and Fidelity National Financial, Inc. will hold the remaining 20 percent stake. CKE, through CBI Restaurants, Inc., will be responsible for operating the restaurants. --MORE-- 2 CKE Restaurants Page 2 Tom Thompson, president and chief operating officer of CKE Restaurants, commented, "I'm extremely excited about the acquisition of Casa Bonita Incorporated and am looking forward to working with a strong management team led by Frank Morales, executive vice president. We believe the Taco Bueno chain provides significant growth opportunity, as demonstrated by their year-to-date same store sales growth of 8 percent and outstanding store level margins, currently at 18 percent. The purchase of Casa Bonita Incorporated also presents CKE Restaurants with an opportunity to expand into Texas and Oklahoma." CKE also announced that its board of directors has declared a $.04 per share semi-annual dividend, payable on October 25, 1996, to stockholders of record on October 11, 1996. CKE Restaurants, Inc. is the parent of Carl Karcher Enterprises, Inc., and Summit Family Restaurants Inc. Carl Karcher Enterprises, along with its franchisees and licensees, operates approximately 665 Carl's Jr. and 27 Rally's quick-service restaurants, primarily located in California, Nevada, Oregon, Arizona, Mexico and the Pacific Rim. Summit Family Restaurants Inc. has restaurant operations in nine western states including 76 company-operated and 24 franchised JB's Restaurants, 6 Galaxy Diner restaurants and 16 HomeTown Buffet restaurants. # # # EX-99.2 4 FINANCIAL STATEMENTS DESCRIBED IN ITEM 7(A) 1 EXHIBIT 99.2 CASA BONITA INCORPORATED AND SUBSIDIARIES Consolidated Financial Statements April 1, 1996 and April 3, 1995 (With Independent Auditors' Report Thereon) 2 INDEPENDENT AUDITORS' REPORT The Board of Directors Casa Bonita Incorporated: We have audited the accompanying consolidated balance sheets of Casa Bonita Incorporated and subsidiaries as of April 1, 1996 and April 3, 1995 and the related consolidated statements of earnings, stockholder's equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Casa Bonita Incorporated and subsidiaries as of April 1, 1996 and April 3, 1995 and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Dallas, Texas September 23, 1996, except as to notes 4 and 11 which are as of October 1, 1996 3 CASA BONITA INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets June 24, 1996 (unaudited), April 1, 1996 and April 3, 1995 (In thousands, except share and per share data) ASSETS June 24, 1996 (unaudited) April 1, 1996 April 3, 1995 ------------- ------------- ------------- Current assets: Cash $ 993 $ 1,338 $ 1,145 Receivables: Trade accounts 76 18 109 Affiliates, net (notes 4 and 10) 16,981 14,800 11,128 Inventories 707 714 742 Prepaid expenses and other current assets 114 179 156 Deferred income taxes (note 7) 1,328 1,328 1,368 ------- ------- ------- Total current assets 20,199 18,377 14,648 Property and equipment, net (note 2) 35,124 35,804 39,118 Deferred income taxes (note 7) 327 327 117 Other assets (note 6) 456 457 386 ------- ------- ------- $56,106 $54,965 $54,269 ======= ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current installments: Long-term debt (note 4) $ 262 $ 262 $ 236 Capital lease obligations (note 8) 135 130 114 Accounts payable 1,613 1,038 1,673 Accrued liabilities (note 3) 4,337 4,496 5,618 Reserve for restaurant closures (note 5) 1,393 1,396 421 Income taxes payable 1,290 1,066 401 ------- ------- ------- Total current liabilities 9,030 8,388 8,463 Long-term debt, less current installments (note 4) 31,326 31,326 31,588 Capital lease obligations, less current installments (note 8) 1,233 1,267 1,399 Other long-term liabilities (note 5) 421 421 355 ------- ------- ------- Total liabilities 42,010 41,402 41,805 ------- ------- ------- Stockholder's equity: Common stock, $.01 par value. Authorized 10,000,000 shares; issued and outstanding 434,480 shares 4 4 4 Additional paid-in capital 7,778 7,778 7,778 Retained earnings 6,314 5,781 4,682 ------- ------- ------- Total stockholder's equity 14,096 13,563 12,464 Commitments and contingencies (notes 8 and 9) ------- ------- ------- $56,106 $54,965 $54,269 ======= ======= =======
See accompanying notes to consolidated financial statements. 4 CASA BONITA INCORPORATED AND SUBSIDIARIES Consolidated Statements of Earnings 12 week periods ended June 24, 1996 (unaudited) and June 26, 1995 (unaudited) and the years ended April 1, 1996 and April 3, 1995 (In thousands)
June 24, 1996 June 26, 1995 (unaudited) (unaudited) April 1, 1996 April 3, 1995 ------------- ------------- ------------- ------------- Revenues $19,927 $18,875 $80,381 $80,763 ------- ------- ------- ------- Restaurant costs and expenses: Cost of sales 5,649 5,242 22,392 22,452 Operating expenses 10,847 10,364 43,507 43,785 Depreciation, amortization and accretion 964 1,056 4,419 4,686 Provision for restaurant closures (note 5) -- -- 1,275 421 ------- ------- ------- ------- Total restaurant costs and expenses 17,460 16,662 71,593 71,344 ------- ------- ------- ------- General and administrative expenses (note 10) 923 988 4,409 4,383 ------- ------- ------- ------- Operating income 1,544 1,225 4,379 5,036 Interest expense (notes 2 and 4) 692 739 3,180 3,027 Other income, net (note 10) (8) (16) (409) (226) ------- ------- ------- ------- Earnings before income taxes 860 502 1,608 2,235 Income tax expense (note 7) 327 205 509 829 ------- ------- ------- ------- Net earnings $ 533 $ 297 $ 1,099 $ 1,406 ======= ======= ======= =======
See accompanying notes to consolidated financial statements. 5 CASA BONITA INCORPORATED AND SUBSIDIARIES Consolidated Statements of Stockholder's Equity 12 week period ended June 24, 1996 (unaudited) and the years ended April 1, 1996 and April 3, 1995 (In thousands)
ADDITIONAL TOTAL COMMON PAID-IN RETAINED STOCKHOLDER'S STOCK CAPITAL EARNINGS EQUITY ------ ---------- -------- ------------- Balance at March 28, 1994 $ 4 $7,778 $3,276 $11,058 Net earnings -- -- 1,406 1,406 --- ------ ------ ------- Balance at April 3, 1995 4 7,778 4,682 12,464 Net earnings -- -- 1,099 1,099 --- ------ ------ ------- Balance at April 1, 1996 4 7,778 5,781 13,563 Net earnings (unaudited) -- -- 533 533 --- ------ ------ ------- Balance at June 24, 1996 (unaudited) $ 4 $7,778 $6,314 $14,096 === ====== ====== =======
See accompanying notes to consolidated financial statements. 6 CASA BONITA INCORPORATED AND SUBSIDIARIES Consolidated Statements of Cash Flows 12 weeks ended June 24, 1996 (unaudited) and June 26, 1995 (unaudited) and the years ended April 1, 1996 and April 3, 1995 (In thousands)
June 24, 1996 June 26, 1995 (unaudited) (unaudited) April 1, 1996 April 3, 1995 ------------- ------------- ------------- ------------- Cash flows from operating activities: Net earnings $ 533 $ 297 $ 1,099 $ 1,406 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, amortization and accretion 964 1,056 4,419 4,686 Gain on disposition of assets -- -- (362) (26) Provision for restaurant closures -- -- 1,275 421 Deferred income taxes -- (719) 171 683 Changes in assets and liabilities: Receivables -- trade (58) (42) 91 134 Inventories 7 4 28 (29) Prepaid expenses and other current assets 65 (19) (23) 318 Other assets 1 1 (71) 424 Accounts payable 575 (122) (635) (1,277) Accrued liabilities (159) 364 (1,122) (1,569) Income taxes 224 (386) 665 (1,528) Other long-term liabilities (3) (4) 66 355 ------- ------ ------- ------- Net cash provided by operating activities 2,149 430 5,601 3,998 ------- ------ ------- ------- Cash flows from investing activities: Additions to property and equipment (284) (411) (1,390) (3,968) Proceeds from sales of assets -- -- 5 129 ------- ------ ------- ------- Net cash used in investing activities (284) (411) (1,385) (3,839) ------- ------ ------- ------- Cash flows from financing activities: Payments of long-term debt obligations -- -- (236) (213) Payments of capital lease obligations (29) (28) (115) (228) Advances (to) from affiliate (2,181) (1) (3,672) 167 ------- ------ ------- ------- Net cash used in financing activities (2,210) (29) (4,023) (274) ------- ------ ------- ------- Net increase (decrease) in cash (345) (10) 193 (115) Cash at beginning of year 1,338 1,145 1,145 1,260 ------- ------ ------- ------- Cash at end of year $ 993 $1,135 $ 1,338 $ 1,145 ======= ====== ======= ======= Supplemental cash flow information: Interest paid, net of amount capitalized $ 1,963 $1,800 $ 3,039 $ 2,555 ======= ====== ======= ======= Income taxes paid, net of refunds $ -- $ -- $ 792 $ 1,735 ======= ====== ======= =======
See accompanying notes to consolidated financial statements. 7 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements April 1, 1996 and April 3, 1995 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Casa Bonita Incorporated and subsidiaries (collectively, the Company). All significant intercompany transactions and balances have been eliminated in consolidation. The Company is a subsidiary of Casa Bonita Holdings, Inc. (CBHI - formerly Black-eyed Pea Holdings, Inc.), which is wholly owned by Casa Bonita Restaurants, Inc. (CBRI) and operates 115 restaurants as of April 1, 1996, primarily located in Texas and Oklahoma. DEFINITION OF FISCAL YEAR The Company's fiscal year ends on the Monday closest to March 31. Fiscal years 1996 and 1995 are comprised of fifty-two and fifty-three weeks, respectively. INVENTORIES Inventories, consisting mainly of food, beverages and supplies, are stated at the lower of cost (first-in, first-out method) or market. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation and amortization is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated useful lives (see note 2), principally on a straight-line basis for financial reporting purposes, while accelerated methods are used for tax purposes. Leasehold improvements are amortized over the lives of the respective leases or the service lives of the improvements, whichever is shorter. Lease renewal option periods are included in determining leasehold improvement useful lives when, in management's opinion, such renewal options will be exercised. Leasehold interests are amortized on a straight-line basis over the remaining life of the leases. Repairs and maintenance are charged to operations as incurred. Remodeling costs are generally capitalized. PREOPENING COSTS Labor costs and costs of hiring and training personnel and certain other costs relating to the opening of new restaurants are expensed as incurred. INCOME TAXES The Company files a consolidated U.S. federal income tax return with CBRI and its subsidiaries. The Company computes federal income taxes on a separate return basis. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax 1 8 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ADVERTISING EXPENSES The Company expenses advertising production costs and media costs as incurred. Advertising expenses were approximately $4,917,000 and $4,437,000 during fiscal years 1996 and 1995, respectively. USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements as of June 24, 1996 and for the 12 week periods ended June 24, 1996 and June 26, 1995 are unaudited. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain information and footnote disclosure normally included in the consolidated financial statements have been condensed or omitted from the interim consolidated financial statements. The results for the interim period ended June 24, 1996 are not necessarily indicative of the results to be obtained for the full year. (2) PROPERTY AND EQUIPMENT A summary of property and equipment and the range of useful lives used in the calculation of depreciation and amortization follows (in thousands):
USEFUL LIFE RANGE APRIL 1, 1996 APRIL 3, 1995 ----------------- --------------- ------------- Land $14,606 $ 14,606 Buildings and leasehold improvements 5 to 20 years 56,995 57,449 Equipment, furniture and fixtures 2 to 15 years 24,069 24,904 Leasehold interest 5 to 20 years 3,965 3,965 Construction-in-progress 24 31 Furniture and equipment held for future restaurants 24 26 ------------- ------------- 99,683 100,981 Less accumulated depreciation and amortization 63,879 61,863 ------------- ------------- $35,804 $ 39,118 ============= =============
Leasehold interests represent the present value of favorable operating lease terms at the dates certain subsidiaries were acquired. Capitalized interest related to construction-in-progress was approximately $77,000 in fiscal year 1995 (none in fiscal year 1996). 2 9 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (3) ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands):
APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Labor and related costs $1,700 $1,652 Insurance 1,982 3,311 Sales taxes 423 193 Other 391 462 ------------- ------------- $4,496 $5,618 ============= =============
(4) LONG-TERM DEBT A summary of long-term debt follows (in thousands):
APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Note payable to CBHI, at 11% interest, originally payable in 20 annual installments of principal and interest through maturity date, March 20, 2012 $ 9,030 $ 9,266 Note payable to CBHI, interest payable at prime rate (8.25% at April 1, 1996), principal and interest originally payable at maturity, April 1, 1997 22,558 22,558 ------------- ------------- 31,588 31,824 Less current installments 262 236 ------------- ------------- $31,326 $31,588 ============= =============
In connection with the sale of the Company (see note 11), both of the above notes were contributed to the Company after offsetting the affiliate receivable. Interest incurred on the notes payable to CBHI was approximately $2,995,000 in fiscal year 1996 and $2,863,000 in fiscal year 1995. The accrued interest on these notes was approximately $1,983,000 and $1,821,000 at April 1, 1996 and April 3, 1995, respectively, and such amounts are netted against receivables due from affiliates in the consolidated balance sheets. The fair values of the notes payable to CBHI are estimated based on the amount of future cash flows discounted using the Company's current borrowing rate for loans of comparable maturity. The estimated fair value of the note payable to CBHI maturing on March 20, 2012 3 10 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued approximates $10,586,000 at April 1, 1996. The carrying amount of the $22,558,000 note payable to CBHI approximates estimated fair value at April 1, 1996. The carrying values of other financial instruments including cash, receivables and payables approximate fair values because of the short maturity of those instruments. (5) RESERVE FOR RESTAURANT CLOSURES The Company periodically evaluates for closure restaurants which are generally unprofitable and, in the opinion of management, are unlikely to become profitable or meet earnings expectations. Upon making this determination and committing the Company to a closure plan for such restaurants, a reserve for restaurant closures is recorded to recognize the estimated exit costs associated with the planned closings, including the write-off of net assets (net of estimated salvage value), operating costs from the estimated closing date through the estimated date of disposition, and other qualifying disposal costs. The reserve for restaurant closures is presented as a current liability as determined by Company management based on projected restaurant closure dates and costs to be incurred. During the year ended April 1, 1996, the Company charged to operations $1,275,000 to provide for costs of closing two Taco Buenos, one Rigatony's and one Crystal's restaurant. For the year ended April 1, 1996, revenues for the restaurants identified for closure approximate $1,823,000. During the year ended April 3, 1995, the Company charged to operations $421,000 to provide for the costs of closing one Taco Bueno and one Crystal's restaurants. (6) EMPLOYEE RETIREMENT PLANS CBHI has a qualified defined contribution retirement plan covering eligible employees of CBHI and subsidiaries who have reached the age of twenty-one and completed one year of service. On April 1, 1990, CBHI and subsidiaries adopted a nonqualified defined contribution retirement plan for highly compensated employees (HCE Plan), as defined. Under these plans, the Company makes discretionary contributions each year. Expense charged in the form of contributions by the Company for these plans for the years ended April 1, 1996 and April 3, 1995 aggregated approximately $146,000 and $242,000, respectively. The Company has a Rabbi Trust to fund HCE Plan benefits and accrued benefits are included in other long-term liabilities. As of April 1, 1996 and April 3, 1995, assets of the trust aggregated approximately $324,000 and $258,000 and are included in other assets, respectively. Assets of the trust are primarily invested in equities and fixed income instruments. On April 1, 1990, a subsidiary of CBRI adopted a nonqualified defined benefit plan (SERP Plan) in order to supplement retirement benefits of specified employees. The benefits are based on years of service and the employees' average annual earnings, as defined, and are reduced by certain other retirement benefits. The net periodic pension cost is funded on an annual basis. The Company's allocated portion of the net periodic pension expense (income) was approximately $(6,000) and $70,000 in fiscal years 1996 and 1995, respectively. An allocated curtailment gain of approximately $60,000 in 1996 (none in 1995) is reflected in net periodic pension income for fiscal year 1996. In addition to the above retirement benefits, the Company provides certain health care and life insurance benefits to certain active employees. Postretirement benefits are not provided by the Company. The health care benefits in excess of certain limits and the life insurance benefits are insured. The Company recognizes the cost of providing these benefits by expensing 4 11 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued the insurance premiums and estimated costs of claims incurred. The cost of providing these benefits for the Company's active employees was approximately $1,329,000 in fiscal year 1996 and $622,000 in fiscal year 1995. At April 1, 1996, there were approximately 369 active full-time employees receiving the benefits. (7) INCOME TAXES Components of income tax (benefit) expense are as follows (in thousands):
YEARS ENDED ---------------------------- APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Current: Federal $ 669 $1,488 State 11 24 Deferred - federal (171) (683) ------------ ------------ Total $ 509 $ 829 ============ ============
Actual income tax expense differs from the "expected" income tax expense (computed by applying the U.S. federal corporate tax rate of 35% to earnings before income taxes for the years ended April 1, 1996 and April 3, 1995) as follows (in thousands):
YEARS ENDED ---------------------------- APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Computed "expected" income tax expense $563 $782 State income taxes, net of federal benefit 7 16 Targeted jobs tax credit -- (80) FICA tax on tips credit (20) (20) Other, net (41) 131 ------------ ------------ Actual income tax expense $509 $829 ============ ============
The tax effects of the primary temporary differences giving rise to the deferred federal income tax assets and liabilities are as follows (in thousands):
APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Deferred tax assets: Reserve for self-insurance in excess of claims paid $ 684 $1,157 Deferred lease liabilities 688 698 Provision for restaurant closures 577 147 Vacation accrual 128 121 Accrued pension and profit sharing 161 147 ------------- ------------- Total deferred tax assets $2,238 $2,270 ============= =============
5 12 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Deferred tax liabilities: Basis in property and equipment $ 458 $ 673 Miscellaneous items 125 112 ------------- ------------- Total deferred tax liabilities 583 785 ------------- ------------- Net deferred tax asset $1,655 $1,485 ============= =============
Included in the consolidated balance sheets (in thousands):
APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Current deferred tax asset $1,328 $1,368 Noncurrent deferred tax asset 327 117 ------------- ------------- Net deferred tax asset $1,655 $1,485 ============= =============
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the Company's deferred tax assets (in excess of deferred tax liabilities) is dependent upon the generation of future taxable income. Management believes the Company will continue to generate taxable income in the future and, accordingly, management has concluded on a more likely than not basis that net deferred tax assets will be realized. (8) LEASES At April 1, 1996, the Company operates 44 restaurants which are leased under operating leases and 9 under capital leases. Administrative offices (see note 10) and certain equipment are also leased. CAPITAL LEASES The Company leases certain property under various leases which are classified as capital leases. These leases cover initial periods of three to twenty years and substantially all of these leases contain renewal options of five to ten years. Property under capital leases included in property and equipment by major class is as follows (in thousands):
APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Buildings and leasehold improvements $2,120 $2,220 Less accumulated depreciation and amortization 1,384 1,391 ------------- ------------- $ 736 $ 829 ============= =============
6 13 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued OPERATING LEASES The Company leases certain restaurant facilities, administrative offices, and certain equipment under operating leases covering initial periods of three to twenty years and substantially all of real property leases contain renewal options of five to ten years. In addition to fixed lease obligations, the Company pays a percentage of sales for various restaurants and additional costs for property taxes and certain other expenses. A summary of rental expense for all operating leases follows (in thousands):
YEARS ENDED ---------------------------- APRIL 1, 1996 APRIL 3, 1995 ------------- ------------- Minimum rentals $1,299 $1,353 Contingent rentals 96 94 ------ ------ $1,395 $1,447 ====== ======
COMMITMENTS The present value of capital lease payments and the future minimum lease payments under operating leases with an initial or remaining noncancellable lease term in excess of one year at April 1, 1996 are as follows (in thousands):
CAPITAL LEASES OPERATING LEASES -------------- ---------------- Fiscal year: 1997 $ 298 $1,387 1998 298 1,244 1999 299 1,209 2000 274 1,041 2001 188 929 Later years 1,223 3,268 ------------ -------------- Total minimum lease payments 2,580 $9,078 ============== Less amounts representing interest 1,183 ------------ Present value of minimum lease payments 1,397 Less current installments 130 ------------ $1,267 ============
7 14 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (9) CONTINGENCIES The Company is engaged in various legal proceedings and has certain unresolved claims pending. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. Management of the Company, based upon consultation with legal counsel, is of the opinion that there are no matters pending or threatened which are expected to have a material adverse effect on the Company's consolidated financial condition, results of operations or liquidity. (10) TRANSACTIONS WITH AFFILIATES The Company's corporate administrative functions, including accounting and data processing, are combined with the administrative functions of an affiliate. The cost of these administrative functions is allocated to the companies in proportion to the budgeted net revenues of each company. Management believes this allocation method is reasonable; however, such allocated costs may not necessarily be indicative of the cost of obtaining such services if the Company operated on a stand alone basis. General and administrative expenses include approximately $3,907,000 in fiscal year 1996 and $3,905,000 in fiscal year 1995 of these allocated expenses. Included in these allocated expenses is office rent expense which approximated $675,000 in fiscal year 1996 and $621,000 in fiscal year 1995. The Company participates in a cash sharing arrangement with affiliates, whereby cash is combined for investing or borrowing purposes. This arrangement resulted in a net affiliates receivable (net of accrued interest) for the Company at April 1, 1996 and April 3, 1995. Funding activities under this arrangement bear interest at the prime rate. The Company recorded interest income on a net basis of approximately $151,000 in fiscal year 1996 and $98,000 in fiscal year 1995 under this arrangement (included in other income, net in the consolidated statements of operations). Effective April 1, 1994, the board of directors of CBRI adopted the 1994 Stock Appreciation Rights Plan (the Plan). The Plan provides for the granting of stock appreciation rights (SARs) to key employees of CBRI and subsidiaries subject to certain conditions and limitations, as defined by the Plan. The Plan provides, in the aggregate, a maximum of 1,780,000 SARs. SARs permit the option holder to surrender an exercisable SAR for an amount equal to the excess of the value assigned to a share of common stock of CBRI over the value assigned to the SAR as of the grant date. The value of a share of common stock of CBRI is to be determined by an independent valuation two times per fiscal year. A summary of SAR activity follows (in thousands): 8 15 CASA BONITA INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued
NUMBER OF SARS --------- Issued 1,422 Forfeited (122) ----- Outstanding at April 3, 1995 1,300 Issued 190 Forfeited (7) ----- Outstanding at April 1, 1996 1,483 =====
The outstanding SARs vest equally on each of the first four anniversaries of the date of grant, and 677,000 are vested at April 1, 1996. All SARs which have not been exercised will expire ten years from the date of grant. No expense was incurred or allocated to the Company for the Plan during fiscal years 1996 and 1995 as the value assigned to a share of common stock of CBRI during such fiscal years did not exceed the value assigned to the SARs as of the respective grant dates. (11) SALE OF COMPANY On August 27, 1996, CBHI entered into a Stock Purchase Agreement (the Agreement) with CKE Restaurants, Inc., an unrelated third party, to sell CBHI's interest in the Company. The final closing of the sale occurred on October 1, 1996 at which time CBI Restaurants, Inc., a newly-formed corporaton in which CKE Restaurants, Inc. holds an 80.0% equity interest, exchanged $42 million cash for CBHI's interest in the Company. Any obligation associated with the SAR's will not be transferred to CBI Restaurants, Inc. The terms of the Agreement will substantially affect the Company's current affiliate debt and cash sharing arrangements as well as the availability of existing corporate administrative facilities shared by the Company. 9 EX-99.3 5 FINANCIAL STATEMENTS DESCRIBED IN ITEM 7(B) 1 EXHIBIT 99.3 UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA The following Unaudited Pro Forma Combined Condensed Financial Statements are based upon the consolidated financial statements of the Company and are adjusted to give effect to the acquisitions of Casa Bonita Incorporated and subsidiaries ("Casa Bonita") and Summit Family Restaurants Inc. and subsidiaries ("Summit") by the Company (the "Acquisitions"). The Company acquired an 80.0% equity interest in Casa Bonita on October 1, 1996. Casa Bonita currently operates 108 Taco Bueno restaurants located in Texas and Oklahoma. The acquisition was effected by CBI Restaurants, Inc. ("CBI"), a newly-formed corporation in which the Company holds an 80.0% equity interest. CBI paid $42.0 million in cash, which was financed by short-term loans of $9.0 million from the Company, $8.0 million from Fidelity National Financial, Inc. ("Fidelity"), and $5.0 million from Giant Group, Ltd. The balance of the purchase price, $20.0 million, was financed through the Company's investment of $16.0 million in cash for an 80.0% interest in CBI, and Fidelity's investment of $4.0 million in cash for the remaining 20.0% interest in CBI. The Company's investments in CBI were funded out of borrowings in the principal amount of $25.0 million under the Company's credit facility. On July 15, 1996, the Company acquired Summit for a total purchase price of $29.1 million, of which $17.7 million was paid in cash and the balance was paid by the issuance of 501,388 shares of the Company's Common Stock. The Unaudited Pro Forma Combined Condensed Balance Sheet as of August 12, 1996 gives effect to the Casa Bonita acquisition as if it had occurred on such date and was prepared based upon the consolidated balance sheets of the Company (including Summit) as of August 12, 1996 and of Casa Bonita as of June 24, 1996. The Unaudited Pro Forma Combined Condensed Statements of Operations for the fiscal year ended January 31, 1996 and for the 28 weeks ended August 12, 1996 give effect to the Acquisitions as if they had occurred at the beginning of each period presented. The Unaudited Pro Forma Combined Condensed Statement of Operations for the fiscal year ended January 31, 1996 was prepared based upon the consolidated statements of operations of the Company for the fiscal year ended January 31, 1996, of Summit for the 52 weeks ended March 11, 1996 and of Casa Bonita for the fiscal year ended April 1, 1996. The Unaudited Pro Forma Combined Condensed Statement of Operations for the 28 weeks ended August 12, 1996 was prepared based upon the consolidated statements of operations of the Company for the 28 weeks ended August 12, 1996, of Summit for the 26 weeks ended July 15, 1996 and of Casa Bonita for the 28 weeks ended June 24, 1996. The Company's fiscal year is the 52- or 53-week period ending on the last Monday of January in each year. For clarity of presentation, the fiscal year of the Company presented herein is as if the fiscal year ended on January 31. The Unaudited Pro Forma Combined Condensed Financial Statements are provided for comparative purposes only and are not necessarily indicative of the results of operations or financial position of the combined companies that would have occurred had the Acquisitions occurred at the beginning of the periods presented or on the date indicated, nor are they necessarily indicative of future operating results or financial position. The unaudited pro forma adjustments are based upon currently available information and upon certain assumptions that management of the Company believes are reasonable under the circumstances. The Acquisitions were or will be accounted for using the purchase method of accounting. Accordingly, the Company's cost to acquire Summit and Casa Bonita were or will be allocated to the assets acquired and liabilities assumed according to their respective fair values. The allocation is dependent upon certain valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase allocation adjustments made in connection with the preparation of the Unaudited Pro Forma Combined Condensed Financial Statements are preliminary, and have been made solely for the purpose of preparing such Unaudited Pro Forma Combined Condensed Financial Statements. The Unaudited Pro Forma Combined Condensed Financial Statements do not reflect certain cost savings that the Company expects to be realized primarily through elimination of certain duplicative administrative costs. No assurances can be made as to the amount of cost savings, if any, that actually will be realized. 2 CKE RESTAURANTS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF AUGUST 12, 1996 (IN THOUSANDS)
HISTORICAL ------------------------------------- PRO FORMA CKE AT CASA BONITA ACQUISITION 8/12/96 AT 6/24/96 COMBINED ADJUSTMENTS PRO FORMA ------- ----------- -------- ----------- --------- ASSETS Cash and cash equivalents..... $ 18,333 $ 993 $ 19,326 $ -- $ 19,326 Accounts receivable........... 7,025 76 7,101 -- 7,101 Related party notes receivable 1,360 16,981 18,341 (16,981)(d) 1,360 Inventories................... 7,973 707 8,680 -- 8,680 Deferred income taxes, net.... 15,088 1,328 16,416 -- 16,416 Other current assets and prepaid expenses........... 7,193 114 7,307 -- 7,307 --------- -------- --------- -------- --------- Total current assets.... 56,972 20,199 77,171 (16,981) 60,190 Property and equipment, net... 169,077 34,409 203,486 8,750(g) 212,236 Property under capital leases, net................ 34,257 715 34,972 -- 34,972 Long-term investments......... 26,041 -- 26,041 -- 26,041 Notes receivable.............. 7,713 -- 7,713 -- 7,713 Related party notes receivable 715 -- 715 -- 715 Other assets.................. 11,682 783 12,465 5,647(h) 18,112 --------- -------- --------- -------- --------- Total assets............ $ 306,457 $ 56,106 $ 362,563 $ (2,584) $ 359,979 ========= ======== ========= ======== ========= LIABILITIES Current portion of long-term debt.................... $ 3,486 $ -- $ 3,486 $ 13,000(f) $ 16,486 Current portion of capital lease obligations....... 4,666 135 4,801 -- 4,801 Accounts payable.............. 22,611 1,613 24,224 -- 24,224 Other current liabilities..... 48,488 7,020 55,508 1,100(h) 56,608 --------- -------- --------- -------- --------- Total current liabilities 79,251 8,768 88,019 14,100 102,119 Long-term debt................ 30,230 -- 30,230 25,000(e) 55,230 Capital lease obligations..... 48,171 1,233 49,404 -- 49,404 Related party notes payable... -- 31,588 31,588 (31,588)(d) -- Other long-term liabilities... 25,279 421 25,700 -- 25,700 --------- -------- --------- -------- --------- Total liabilities....... 182,931 42,010 224,941 7,512 232,453 Minority interest............. -- -- -- 4,000(j) 4,000 STOCKHOLDERS' EQUITY.......... 123,526 14,096 137,622 (14,096)(c) 123,526 --------- -------- --------- -------- --------- Total liabilities and stockholders' equity.... $ 306,457 $ 56,106 $ 362,563 $ (2,584) $ 359,979 ========= ======== ========= ======== =========
See accompanying notes to unaudited pro forma combined condensed financial statements. 2 3 CKE RESTAURANTS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED JANUARY 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL --------------------------------------- CKE SUMMIT CASA BONITA FISCAL YEAR 52 WEEKS FISCAL YEAR PRO FORMA ENDED ENDED ENDED ACQUISITION 1/31/96 3/11/96 4/1/96 COMBINED ADJUSTMENTS PRO FORMA ----------- ------- ----------- -------- ----------- --------- TOTAL REVENUES.......................... $ 465,437 $ 120,897 $ 80,381 $ 666,715 $ -- $ 666,715 OPERATING COSTS AND EXPENSES: Company-operated restaurants: Food and packaging................. 121,029 39,563 22,392 182,984 -- 182,984 Payroll and other employee benefits......................... 109,942 41,977 23,457 175,376 (1,600)(a) 173,776 Occupancy and other operating expenses........................ 82,095 32,208 20,711 135,014 103 (g) 135,117 Franchised and licensed restaurants........................ 68,839 194 -- 69,033 -- 69,033 Advertising expenses................. 19,940 3,316 5,033 28,289 -- 28,289 General and administrative expenses.. 37,857 9,845 4,409 52,111 265(b)(h) 52,376 ---------- --------- ----------- ----------- ----------- --------- Total operating costs and expenses..................... 439,702 127,103 76,002 642,807 (1,232) 641,575 ---------- --------- ----------- ----------- ----------- --------- Operating income (loss)................. 25,735 (6,206) 4,379 23,908 1,232 25,140 Interest expense........................ (10,004) (1,375) (3,180) (14,559) (55)(d)(e)(f) (14,614) Gain on sale of long-term investment.... -- 3,959 -- 3,959 -- 3,959 Other income, net....................... 2,222 400 409 3,031 (151)(d) 2,880 ---------- --------- ----------- ----------- ----------- --------- Income (loss) before income taxes....... 17,953 (3,222) 1,608 16,339 1,026 17,365 Income tax expense (benefit)............ 7,001 900 509 8,410 (1,464)(i) 6,946 ---------- --------- ----------- ----------- ----------- --------- Net income (loss) before minority interest.................... 10,952 (4,122) 1,099 7,929 2,490 10,419 Minority interest....................... -- -- -- -- (370)(j)(k) (370) ---------- --------- ----------- ----------- ----------- --------- Net income (loss)....................... $ 10,952 $ (4,122) $ 1,099 $ 7,929 $ 2,120 $ 10,049 ========== ========= =========== =========== =========== ========= Net income per share.................... $ 0.59 $ 0.52 ========== ========= Common and common equivalent shares used in computing per share amounts....... 18,679 19,181 ========== =========
See accompanying notes to unaudited pro forma combined condensed financial statements. 3 4 CKE RESTAURANTS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE 28 WEEKS ENDED AUGUST 12, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL ------------------------------------ CKE SUMMIT CASA BONITA 28 WEEKS 26 WEEKS 28 WEEKS PRO FORMA ENDED ENDED ENDED ACQUISITION 8/12/96 7/15/96 6/24/96 COMBINED ADJUSTMENTS PRO FORMA -------- --------- -------- -------- ------------ --------- TOTAL REVENUES........................ $ 281,057 $ 68,732 $ 43,806 $393,595 $ -- $ 393,595 OPERATING COSTS AND EXPENSES: Company-operated restaurants: Food and packaging............... 73,967 22,150 12,366 108,483 -- 108,483 Payroll and other employee benefits...................... 65,012 23,662 13,081 101,755 (1,600)(a) 100,155 Occupancy and other operating expenses...................... 48,736 18,981 10,704 78,421 56 (g) 78,477 Franchised and licensed restaurants...................... 39,155 130 -- 39,285 -- 39,285 Advertising expenses............... 13,470 389 2,855 16,714 -- 16,714 General and administrative expenses 20,549 6,060 2,214 28,823 142 (b)(h) 28,965 ---------- --------- --------- -------- ----------- --------- Total operating costs and expenses................... 260,889 71,372 41,220 373,481 (1,402) 372,079 Operating income (loss)............... 20,168 (2,640) 2,586 20,114 1,402 21,516 Interest expense...................... (4,744) (711) (1,649) (7,104) (88)(d)(e)(f) (7,192) Other income, net..................... 1,850 242 93 2,185 (107)(d) 2,078 ---------- --------- --------- -------- ----------- --------- Income (loss) before income taxes..... 17,274 (3,109) 1,030 15,195 1,207 16,402 Income tax expense (benefit).......... 6,749 (200) 430 6,979 (418)(i) 6,561 ---------- --------- --------- -------- ----------- --------- Net income (loss) before minority interest.................. 10,525 (2,909) 600 8,216 1,625 9,841 Minority interest..................... -- -- -- -- (191)(j)(k) (191) ---------- --------- --------- -------- ----------- --------- Net income (loss)..................... $ 10,525 $ (2,909) $ 600 $ 8,216 $ 1,434 $ 9,650 ========== ========= ========= ======== =========== ========= Net income per share.................. $ 0.55 $ 0.49 ========== ========= Common and common equivalent shares used in computing per share amounts...................... 19,220 19,638 ========== =========
See accompanying notes to unaudited pro forma combined condensed financial statements. 4 5 NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA (IN THOUSANDS) Summit Pro Forma Acquisition Adjustments (a) To exclude $1,600 of change of control and severance costs for employees of Summit who have been terminated and which are included in Summit's results of operations for the 52 weeks ended March 11, 1996 and the 26 weeks ended July 15, 1996, respectively, as a non-recurring charge. (b) To record the impact to goodwill amortization expense of $77 and $41 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively, for the recording of $2,300 of excess of consideration paid over fair value of net assets acquired (included in the August 12, 1996 Unaudited Pro Forma Combined Condensed Balance Sheet) amortized over thirty years. Casa Bonita Pro Forma Acquisition Adjustments (c) The Unaudited Pro Forma Combined Condensed Balance Sheet has been adjusted to eliminate the stockholder's equity of Casa Bonita. (d) To eliminate the related party note receivable of $16,981 and notes payable of $31,588 cancelled prior to the acquisition as well as to exclude the related interest income of $151 and $107 and the related interest expense of $2,995 and $1,554 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively. (e) To record long-term borrowings by the Company of $25,000 which bear interest at 7.0% per annum and to record interest expense of $1,750 and $942 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively. (f) To record short-term borrowings by CBI of $13,000 which bear interest at 10.0% per annum and to record interest expense of $1,300 and $700 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively. (g) To increase land by $5,688 and buildings by $3,062 to their respective estimated fair values, and to record the impact to depreciation expense of $103 and $56 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively, for the estimated increase in the building value depreciated over thirty years. (h) To record $5,647 for the excess of consideration paid over the fair value of net assets acquired and reserve $1,100 for estimated store closure reserves ($800) and relocation costs ($300), and to record the goodwill amortization of $188 and $101 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively, amortized over thirty years. (i) To record the income tax effects of the pro forma adjustments and consolidation of the entities so as to affect a pro forma tax rate of 40.0%. (j) To record the 20.0% minority interest investment in Casa Bonita ($4,000) and the minority interest in Casa Bonita's historical net income ($220 and $120 for the fiscal year ended January 31, 1996 and the 28 weeks ended August 12, 1996, respectively). (k) To record the 20.0% minority interest for adjustments (d), (f), (g) and (h) above, tax effected at 40.0%. 5 -----END PRIVACY-ENHANCED MESSAGE-----