<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K/A
CURRENT REPORT
----------
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 24, 1998
--------------------------------
STAR BUFFET, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-23099 84-1430786
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
440 Lawndale Drive, Salt Lake City, Utah 84115-2917
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (801) 463-5500
-----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 24, 1998, Star Buffet, Inc. (the "Company"), through its
wholly-owned subsidiary Summit Family Restaurants Inc. ("Summit"), acquired
substantially all of the assets of 12 JB's Restaurants for $4,265,000 in cash
from JB's Restaurants, Inc., a wholly-owned subsidiary of CKE Restaurants, Inc.,
pursuant to the terms of an Asset Purchase Agreement dated as of February 10,
1998.
A Form 8-K was filed on March 9, 1998 reporting this transaction. This
amended Current Report is being filed to submit audited financial statements for
the 12 JB's Restaurants and the pro forma combined financial information, all as
required pursuant to Item 7.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Business Acquired. The financial statements
required by Item 7(a) are attached herewith as Exhibit 99.1.
(b) Pro Forma Financial Information. The unaudited pro forma condensed
combined financial statements prepared in accordance with Regulation
S-X and required to be filed pursuant to this Item 7(b), including the
notes thereto, are qualified in their entirety by reference to, and
should be read in conjunction with, the historical consolidated
financial statements of the Company, including the notes thereto, and
the historical financial statements of JB's Restaurants, Inc. attached
herewith as Exhibit 99.1. The unaudited pro forma condensed combined
financial statements are attached herewith as Exhibit 99.2.
The unaudited pro forma condensed combined balance sheet combines the
historical consolidated balance sheet of the Company and the historical
balance sheet of the segment of the 12 JB's restaurants acquired by the
Company (the "Segment") as if the acquisition had been effective on
December 31, 1997. The pro forma condensed combined statement of income
for the year ended December 31, 1997 combines the historical
consolidated statement of income for the Company and the historical
statement of income for the Segment as if the acquisition had been
effective on January 1, 1997.
The acquisition reflected in the pro forma financial statements will be
accounted for as a purchase. Under this method of accounting, assets
and liabilities of the Segment will be adjusted to their estimated fair
value and combined with the recorded values of the assets and
liabilities of the Company. For purposes of the pro forma financial
statements, it has been assumed that the net book value of the
Segment's assets minus liabilities approximates fair value.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or the
financial position that would
<PAGE> 3
have occurred if the acquisition had been consummated at the beginning
of the period presented, nor is it necessarily indicative of future
operating results or financial position.
(c) Exhibits.
Exhibit
Number
- -------
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Financial Statements of JB's Restaurants listed in Item 7(a) above.
99.2 Selected Pro Forma Financial Data described in Item 7(b) above.
<PAGE> 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.
STAR BUFFET, INC.
Date: May 8, 1998 By: /S/ Robert Wheaton
-------------------------------
Robert Wheaton
Chief Executive Officer
<PAGE> 5
EXHIBIT INDEX
The following exhibits are attached hereto and incorporated herein by
reference:
Exhibit Sequentially
Number Description Numbered Page
- ------- ----------- -------------
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Financial Statements of JB's Restaurants listed in
Item 7(a) above.
99.2 Selected Pro Forma Financial Data described in
Item 7(b) above.
<PAGE> 1
Exhibit 23.1
Consent of Independent Public Accountants
The Board of Directors
Star Buffet, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-46939 and 333-50767) on Form S-8 of Star Buffet, Inc. of our report dated
May 7, 1998, relating to the statements of assets acquired and liabilities to be
assumed of the Segment of twelve JB's Restaurants Sold to Star Buffet, Inc.
(Successor Company) as of January 26, 1998 and January 27, 1997, and the related
statements of revenues and expenses for the fifty-two week period ended January
26, 1998 and twenty-eight week period ended January 27, 1997 (Successor Period)
and the statements of revenues and expenses for the forty-two week period ended
July 15, 1996 (Predecessor Company), which report appears in the January 26,
1998 annual report on Form 8-K/A of Star Buffet, Inc. Our report refers to a
business combination accounted for as a purchase that occurred on July 16, 1996,
the result of which renders the financial information for the periods before and
after the acquisition not comparable.
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
May 11, 1998
<PAGE> 1
EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
JB'S FAMILY RESTAURANTS, INC. ----
SEGMENT AUDIT - 12 STORES (SEE NOTE 1)
<S> <C>
Independent Auditors' Report..................................................... F-1
Statements of Assets to be Acquired and Liabilities to be Assumed as of
January 26, 1998 and January 27, 1997.......................................... F-3
Statements of Revenues and Expenses for the 52 weeks ended January 26, 1998,
the 28 weeks ended January 27, 1997, and the 42 weeks ended July 15, 1996...... F-4
Notes to Financial Statements.................................................... F-5
</TABLE>
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
JB's Family Restaurants, Inc.
We have audited the accompanying financial statements of a segment of 12 JB's
family restaurants sold to Star Buffet, Inc. (see Note 1) as listed in the
accompanying index. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements were prepared
solely to present the assets to be acquired and the liabilities to be assumed
pursuant to the purchase agreement between Star Buffet, Inc. and JB's Family
Restaurants, Inc. and are not intended to be a complete presentation of the
assets and liabilities of the segment of 12 JB's Restaurants sold to Star
Buffet, Inc.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the segment of 12 JB's family
restaurants sold to Star Buffet, Inc. as of January 26, 1998 and January 27,
1997, and the results of its operations for the 52 weeks ended January 26, 1998,
the 28 weeks ended January 27, 1997, and the 42 weeks ended July 15, 1996 in
conformity with generally accepted accounting principles.
As described in Note 1 to the Financial Statements, effective July 15, 1996, CKE
Restaurants, Inc. acquired all of the outstanding stock of Summit Family
Restaurants, Inc. in a business combination accounted for as a purchase. As a
result of the acquisition, the financial information for the periods after the
acquisition is presented on a different cost basis than that for the periods
before the acquisition and, therefore, is not comparable.
KPMG Peat Marwick, LLP
Salt Lake City, Utah
May 7, 1998
F-1
<PAGE> 3
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET INC. (see Note 1)
STATEMENTS OF ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 160,000 $ 267,000
Accounts receivable............................................ 22,000 86,000
Inventories.................................................... 91,000 98,000
Other current assets and prepaid expenses...................... 23,000 14,000
---------- ----------
Total current assets....................................... 296,000 465,000
Property and equipment, net..................................... 3,350,000 3,065,000
Property under capital leases, net.............................. 170,000 186,000
Costs in excess of net assets acquired.......................... 108,000 117,000
Other assets.................................................... 29,000 510,000
---------- ----------
Total assets ................................................... 3,953,000 4,343,000
---------- ----------
Current liabilities:
Current portion of long-term debt.............................. 11,000 17,000
Current portion of capital lease obligations................... 19,000 15,000
Accounts payable............................................... 387,000 612,000
Other current liabilities...................................... 777,000 526,000
---------- ----------
Total current liabilities.................................. 1,194,000 1,170,000
---------- ----------
Long-term debt, excluding current portion....................... 101,000 120,000
Capital lease obligations, excluding current portion............ 143,000 171,000
Other long term liabilities..................................... 66,000 66,000
Total liabilities............................................... 1,504,000 1,527,000
---------- ----------
Net assets...................................................... $2,449,000 $2,816,000
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 4
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET INC. (SEE NOTE 1)
STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
Successor Predecessor
------------------------------------- | --------------
52 Weeks Ended 28 Weeks Ended | 42 Weeks Ended
January 26, 1998 January 27, 1997 | July 15, 1996
---------------- ---------------- | --------------
<S> <C> <C> | <C>
Revenues: |
Company-operated restaurants: |
JB's Restaurants....... $11,969,000 $6,042,000 | $9,489,000
|
Franchised and licensed restaurants: |
JB's Restaurants....... -- 55,000 | 63,000
------------ ---------- | ----------
|
Total revenues....... 11,969,000 6,097,000 | 9,552,000
------------ ---------- | ----------
|
Operating costs and expenses: |
Restaurant operations: |
Food and packaging..... 3,856,000 1,923,000 | 3,047,000
Payroll and other |
employee benefits.... 4,536,000 2,311,000 | 3,534,000
Occupancy and other operating |
expenses............. 2,193,000 1,248,000 | 1,878,000
------------ ---------- | ----------
10,585,000 5,482,000 | 8,459,000
|
Franchised and licensed |
restaurants........... 14,000 17,000 | 46,000
Advertising expenses..... 119,000 78,000 | 195,000
General and administrative |
expenses.............. 463,000 101,000 | 838,000
------------ ---------- | ----------
|
Total operating costs |
and expenses.... 11,181,000 5,678,000 | 9,538,000
------------ ---------- | ----------
|
Operating income ......... 788,000 419,000 | 14,0000
|
Interest expense.......... (56,000) (21,000) | (37,000)
|
Other income, net......... 12,000 7,000 | 9,000
------------ ---------- | ----------
|
Income (loss) before income |
taxes.................... 744,000 405,000 | (14,000)
Income tax expense (benefit) 298,000 162,000 | (6,000)
------------ ---------- | ----------
|
Net income (loss)......... $ 446,000 $ 243,000 | $ (8,000)
============ ========== | ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 5
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
A summary of certain significant accounting policies not disclosed
elsewhere in the footnotes to the financial statements is set forth below.
Description of Business
JB's Family Restaurants, Inc. (JBRI) owns, operates and franchises the
JB's restaurant concept. As of January 26, 1998, the system included 94
restaurants, of which 74 were operated by JBRI and 20 were operated by
franchisees. JBRI also operates six Galaxy Diner restaurants. As of February 24,
1998, Star Buffet, Inc. ("Star") acquired the assets and assumed some of the
liabilities of 12 of the 74 JB's restaurants owned by JBRI. The accompanying
Statements of Assets to be Acquired and Liabilities to be Assumed and Statements
of Revenues and Expenses reflect the net assets and operations of the segment of
12 stores to be acquired. These 12 restaurants (hereinafter referred to as the
"Segment") exist in five western states mostly in Utah and Montana. Assets and
liabilities of JBRI that were not acquired or assumed and have no continuing
significance to the Segment have been omitted from the Statements of Assets to
be Acquired and Liabilities to be Assumed.
The business and operations of JBRI have undergone several changes in
ownership in the past two years. On July 15, 1996, Summit Family Restaurants
Inc. (Summit), JBRI's predecessor, was acquired by CKE Restaurants, Inc. (CKE).
Summit was the parent corporation of HTB Restaurants, Inc. (HTB) which operated
16 HomeTown Buffet restaurants as a franchisee of HomeTown Buffet, Inc. On
September 22, 1997, Summit transferred selected assets and liabilities which
included its JB's Restaurant system and Galaxy Diner restaurants to JBRI, a
newly formed subsidiary of CKE. Concurrent with this transfer, CKE contributed
all of the issued and outstanding shares of capital stock of Summit in exchange
for 2,600,000 shares of Common Stock of Star Buffet, Inc. and thereby
transferred all of the net assets of HTB to Star at its book value for
$8,507,000. Because of these changes in ownership the Segment's financial
statements and accompanying notes include results of operations of the Segment
prior to CKE's acquisition (Predecessor) and after its acquisition by CKE
(Successor).
"Predecessor" means the 12 JB's Restaurants owned by Summit for all
periods prior to July 16, 1996.
"Successor" means the 12 JB's Restaurants owned by Summit (as a
subsidiary of CKE) for the period July 16, 1996 through September 22, 1997 and
the 12 JB's Restaurants owned by JBRI (as a subsidiary of CKE) for all periods
from and after September 23, 1997.
Fiscal Year
The Segment utilizes a 52/53 week fiscal year which ends on the last
Monday in January. The Predecessor had a 52/53 week fiscal year which ended on
the last Monday in September.
Cash and Cash Equivalent
The Successor participates in a cash management program with CKE
whereby excess cash is distributed to CKE from time to time. The portion of
total cash distributed to CKE allocable to the Segment was $750,000 and $375,000
for the 52 week period ended January 26, 1998, and the 28 week period ended
January 27, 1997.
Cash equivalents consist of short-term liquid assets with original
maturities of 3 months or less.
F-4
<PAGE> 6
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS
Inventories
Inventories consist of food, beverages and restaurant supplies and are
valued at the lower of cost, determined by the first-in first-out method, or
market.
Property and Equipment
Property and equipment and real property under capitalized leases are
carried at cost, less accumulated depreciation and amortization. Depreciation
and amortization are provided using the straight-line method over the following
useful lives: buildings and leaseholds -- lesser of lease life or 20 years;
equipment -- 5 to 8 years; capitalized leases -- lesser of lease life or 20
years.
Pre-Opening Costs
Pre-opening costs, which represent expenses incurred for hiring and
training personnel relating to new restaurants and expenses for promotion of new
store openings, are capitalized and amortized over the restaurant's first year
of operation.
Franchising Revenues and Expenses
Prior to January 1997, one of the 12 restaurants was operated by a
franchisee of JBRI. Franchise royalty revenues and all franchising costs are
recognized on the accrual basis.
Advertising costs
Advertising costs are expensed when incurred.
Costs in excess of net assets acquired
Costs in excess of net assets acquired represent expenses incurred by
CKE upon its acquisition of Summit. These costs are amortized over 40 years.
Amortization expense for costs in the 52 weeks ended January 26, 1998; the 28
weeks ended January 27, 1997 and the 42 weeks ended July 15, 1996 is $13,000;
$6,000 and $18,000 respectively. Accumulated amortization as of January 26,
1998 and January 27, 1997 was $19,000 and $6,000 respectively.
Income Taxes
Income tax expense for the segment is estimated at 40% of net income.
Estimations & Allocation of Expenses
The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Management
believes this methodology is reasonable.
F-5
<PAGE> 7
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
----------- -----------
<S> <C> <C>
Income tax receivable ....................... $ -- $ 44,000
Trade receivables ........................... 6,000 39,000
Other ....................................... 25,000 26,000
Allowance for doubtful accounts ............. (9,000) (23,000)
-------- -------
Total accounts receivable ............. $ 22,000 $ 86,000
======== ========
</TABLE>
NOTE 3 -- OTHER CURRENT LIABILITIES
Other current liabilities consists of the following:
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
----------- -----------
<S> <C> <C>
Accrued payroll....................... $100,000 $119,000
Accrued workers' compensation expense. 114,000 79,000
Insurance loss reserve................ 70,000 43,000
Accrued sales tax .................... 120,000 55,000
Other................................. 373,000 230,000
-------- --------
$777,000 $526,000
======== ========
</TABLE>
NOTE 4 -- PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
---------- -----------
<S> <C> <C>
Property and equipment:
Land............................... $ 907,000 $ 707,000
Buildings and leasehold
improvements...................... 4,278,000 4,162,000
Equipment, furniture and fixtures.. 3,973,000 3,645,000
---------- ----------
.................................. 9,158,000 8,514,000
Less accumulated depreciation and
amortization....................... 5,808,000 5,449,000
---------- ----------
$3,350,000 $3,065,000
========== ==========
</TABLE>
Depreciation and amortization expense for the 52 weeks ending January
26, 1998; the 28 weeks ending January 27, 1997; and the 42 weeks ending July 15,
1996 was $376,000; $311,000 and $537,000 respectively.
F-6
<PAGE> 8
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- PROPERTY UNDER CAPITAL LEASES
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
----------- -----------
<S> <C> <C>
Real property under capital
leases ........................... $ 612,000 $ 612,000
Less accumulated amortization..... 442,000 426,000
---------- ----------
$ 170,000 $ 186,000
========== ==========
</TABLE>
NOTE 6 -- OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
----------- -----------
<S> <C> <C>
Amount due from franchisee............................ $ -- $480,000
Security deposits...................................... 29,000 30,000
-------- --------
Total other assets............................. $ 29,000 $510,000
======== ========
</TABLE>
The amount due from franchisee represents amounts incurred by JBRI for
leasehold improvements at one of the 12 stores which was owned by a franchisee.
The franchisee defaulted on the agreement to repay these amounts and the
restaurant was repossessed by JBRI in 1998. The remaining balance of the amount
due was reclassified to property and equipment consistent with its nature.
NOTE 7 -- LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 27,
1998 1997
----------- -----------
<S> <C> <C>
Notes payable to financial institutions
payable in monthly and annual
installments through 2002, interest
at 10%; unsecured or secured
by land, buildings and equipment $112,000 $137,000
Less current maturities........... 11,000 17,000
-------- --------
$101,000 $120,000
======== ========
</TABLE>
Annual aggregate maturities of long-term debt, are as follows: $11,000
in 1999; $57,000 in 2000 $42,000 in 2001; and 2,000 in 2002.
F-7
<PAGE> 9
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
NOTE 8 -- LONG-TERM LEASES
The Segment occupies one of its restaurants under a long-term lease
expiring in 2004. Most restaurant leases have renewal options for terms of five
to twenty years, and substantially all require the payment of real estate taxes
and insurance. Certain of the leases provide for rent to be the greater of a
stipulated minimum rent or a specified percentage of sales.
Rent expense for the 52 weeks ended January 26, 1998, the 28 weeks
ended January 27, 1997, and the 42 weeks ended July 15, 1996 was $475,000,
$384,000, and $414,000, respectively. Contingent rentals, measured as a
percentage of sales, included in rent expense for the same periods were $68,000,
$54,000, and $72,000, respectively.
Future aggregate minimum rental payments on noncancellable leases as of
January 26, 1998, exclusive of taxes, insurance and percentage rentals based on
sales are as follows:
<TABLE>
<CAPTION>
Year Ended..................... CAPITAL OPERATING
--------- ----------
<S> <C> <C>
1999......................................... $ 37,000 $ 346,000
2000......................................... 37,000 324,000
2001......................................... 37,000 308,000
2002......................................... 37,000 300,000
2003......................................... 37,000 300,000
Aggregate thereafter............................. 15,000 1,382,000
--------- ----------
Total minimum lease payments......... 200,000 $2,960,000
==========
Less amount representing interest............ 38,000
---------
Present value of minimum lease payments...... 162,000
Less current portion......................... 19,000
---------
Long-term obligation......................... $ 143,000
=========
</TABLE>
NOTE 9 -- EMPLOYEE BENEFIT PLANS
Employee Stock Ownership Plan
The Predecessor had an employee stock ownership plan to which it
contributed funds as authorized by the Board of Directors. This plan was
terminated on October 15, 1996. The plan had the authority to purchase shares of
Summit's common stock. All employees of the Segment who had one year of service
and were over age 21 participated in the plan.
Participant vesting began with the third year of participation in the
plan at the rate of 20 percent per year. Funds contributed to the plan were used
to retire debt previously incurred, to pay participants who are entitled to
benefits under the plan and to purchase shares of Summit's common stock. As of
January 26, 1998, $42,000 remains in the plan which will be distributed to plan
participants in calendar 1998.
401 (k) Plan
Summit has a 401 (k) plan covering employees of the Segment who have
attained age 21 and completed one year of service. The plan allows participants
to allocate up to 10% of their annual compensation before taxes for investment
in several investment alternatives. There have been no contributions to the plan
since September of 1995.
F-8
<PAGE> 10
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
Stock Incentive Plans
In connection with the acquisition of Summit, CKE assumed the options
outstanding under Summit's existing option plans: the 1984 Incentive Stock
Option Plan, the 1987 Nonqualified Stock Option Plan, the 1987 Employee
Incentive Stock Option Plan and the 1992 Stock Option Plan. Pursuant to the
terms of the acquisition, options under these plans became fully vested on July
15, 1996. The options granted in accordance with these four plans generally had
a term of five to ten years. Under these plans, there were 24,069 stock options
outstanding at January 26, 1998 with exercise prices ranging from $13.24 to
$23.45 per share. No further shares may be granted under these plans.
During fiscal year 1998, CKE granted options to certain employees of
JBRI and Summit under CKE's 1994 stock incentive plans. As of January 26, 1998,
6,600 stock options were outstanding with an exercise price of $12.88.
Stock Purchase Plan
CKE operates an Employee Stock Purchase Plan ("ESPP"). Under the terms
of the ESPP and subsequent amendments, eligible employees may voluntarily
purchase, at current market prices, up to 750,000 shares of CKE's common stock
through payroll deductions. Pursuant to the ESPP, employees of the Segment may
contribute an amount between 3% and 15% of their base salary. CKE contributes
varying amounts as specified in the ESPP. Segment employees became eligible for
the plan January 28, 1997. CKE has made no contributions to the plan on behalf
of Segment employees.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
The Segment is engaged in ordinary and routine litigation incidental to
its business. Management does not anticipate that any amounts which it may be
required to pay by reason thereof will have a material effect on the Segment's
Statements of Revenues and Expenses or Net Assets to be Acquired.
F-9
<PAGE> 1
EXHIBIT 99.2
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements were
prepared to give effect to the acquisition of the Segment of 12 JB's Restaurants
acquired by Star Buffet using the purchase method of accounting and assumptions
described in the accompanying notes. The unaudited pro forma combined balance
sheet is based upon the balance sheets of Star Buffet, Inc. and the Segment of
12 JB's Restaurants as of January 26, 1998 as if the acquisition had occurred on
January 26, 1998. The unaudited pro forma combined statement of operations is
based on the statements of operations of Star Buffet, Inc. and the Segment of 12
JB's Restaurants acquired by Star Buffet for the year ended January 26, 1998
assuming the acquisition had occurred on January 27, 1997.
For purposes of the pro forma combined financial statements, it has
been assumed that the net book value of the Segment's assets minus liabilities
approximates fair market value.
The pro forma combined financial statements should be read in conjunction with
the accompanying financial statements for the segment of 12 JB's restaurants
sold to Star Buffet, Inc. and the consolidated historical financial statements
of Star Buffet, Inc., including the respective notes thereto, which are
incorporated by reference. The pro forma information is presented for
comparative purposes only and is not necessarily indicative of the combined
financial position or results of operations in the future. The pro forma
information is also not necessarily indicative of the combined financial
position or results of operations which would have been realized had the
acquisition been consummated during the period or as of the date for which the
pro forma financial statements are presented.
1
<PAGE> 2
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET INC.
PRO FORMA BALANCE SHEET AS OF JANUARY 26, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STAR BUFFET 12 JB'S PRO FORMA FOOTNOTE PRO FORMA
ASSETS ADJUSTMENTS REFERENCE
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH & CASH EQUIVALENTS $15,387,000 $ 160,000 $(4,828,000) B $10,575,000
(144,000) E
ACCOUNTS RECEIVABLE 336,000 22,000 (13,000) E 345,000
TOTAL INVENTORIES 493,000 91,000 - 584,000
DEFERRED TAX ASSET, NET 110,000 - - 110,000
OTHER CURRENT ASSETS 204,000 23,000 (21,000) E 691,000
485,000 B
---------------------------------------------------------------
TOTAL CURRENT ASSETS 16,530,000 296,000 (4,353,000) 12,305,000
PROPERTY AND EQUIPMENT, NET 15,077,000 3,350,000 - 18,427,000
CAPITAL LEASES, NET 2,287,000 170,000 - 2,457,000
NOTES RECEIVABLE 3,235,000 - - 3,235,000
TOTAL OTHER ASSETS 2,167,000 29,000 - 2,196,000
COSTS IN EXCESS OF NET ASSETS, ACQ. 1,673,000 108,000 (108,000) C 2,714,000
1,041,000 C
TOTAL ASSETS $40,969,000 $3,953,000 $(3,588,000) $41,334,000
===============================================================
LIABILITIES & EQUITY
DEBT-CURRENT $ - $ 11,000 $ - $ 11,000
CAPITAL LEASE OBLIGATIONS-C.P. 259,000 19,000 - 278,000
ACCOUNTS PAYABLE 2,212,000 387,000 (387,000) E 2,212,000
INCOME TAXES PAYABLE - - - -
OTHER CURRENT LIABILITIES 3,852,000 777,000 (680,000) E 3,949,000
---------------------------------------------------------------
TOTAL CURRENT LIABILITIES 6,323,000 1,194,000 (1,067,000) 6,450,000
TOTAL L-T DEBT - 101,000 (6,000) E 95,000
CAPITAL LEASE OBLIGATIONS 2,109,000 143,000 - 2,252,000
OTHER LONG-TERM LIABILITIES - - - -
COMMON STOCK 5,000 - - 5,000
PAID-IN CAPITAL 31,768,000 - - 31,768,000
INTERCOMPANY LIABILITIES - - - -
RETAINED EARNINGS 764,000 2,515,000 (2,515,000) 764,000
---------------------------------------------------------------
TOTAL STOCKHOLDERS EQUITY 32,537,000 2,515,000 (2,515,000) 32,537,000
---------------------------------------------------------------
TOTAL LIABILITIES & EQUITY $40,969,000 $3,953,000 $(3,588,000) $41,334,000
===============================================================
</TABLE>
2
<PAGE> 3
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET
PRO FORMA STATEMENT OF OPERATIONS FOR FY 98
(UNAUDITED)
<TABLE>
<CAPTION>
Star Buffet 12 JB's PRO FORMA FOOTNOTE Pro Forma
January 26, January 26, ADJUSTMENTS REFERENCE January 26,
1998 1998 1998
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $54,659,000 $11,969,000 $ - $66,628,000
Costs and expenses:
Food costs 18,024,000 3,856,000 (142,000) D 21,738,000
Labor costs 17,301,000 4,536,000 28,000 D 21,865,000
Occupancy and other expenses 10,829,000 2,193,000 261,000 D 13,283,000
Franchised and licensed
restaurants 14,000 (14,000) D
Advertising 119,000 (119,000) D
General and administrative 2,291,000 463,000 (403,000) D 2,351,000
expenses
Depreciation and amortization 2,109,000 - 389,000 D 2,498,000
17,000 C
---------------------------------------------------------------
Total costs and expenses 50,554,000 11,181,000 17,000 61,735,000
---------------------------------------------------------------
Income from operations 4,105,000 788,000 (17,000) 4,876,000
Interest expense (200,000) (56,000) - (256,000)
Interest income 321,000 - (285,000) F 36,000
Other Income 272,000 12,000 - 284,000
---------------------------------------------------------------
Income before income taxes 4,498,000 744,000 (302,000) 4,940,000
Income tax expense (benefit) 1,799,000 298,000 (121,000) 1,976,000
---------------------------------------------------------------
Net income $ 2,699,000 $ 446,000 $(181,000) $ 2,964,000
===============================================================
Net income per common share - basic $ 0.77 N/A $ - $ 0.84
Weighted average shares - basic 3,515,000 - - 3,515,000
Net income per common share - $ 0.77 N/A $ - $ 0.84
Weighted avg diluted shares 3,528,000 - - 3,528,000
</TABLE>
3
<PAGE> 4
SEGMENT OF 12 JB'S RESTAURANTS SOLD TO STAR BUFFET, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A: BASIS OF PRESENTATION
The unaudited pro forma condensed combined balance sheet combines the historical
consolidated balance sheet of Star Buffet, Inc. (Star) and the historical
Statement of Assets to be Acquired and Liabilities to be Assumed of the segment
of the 12 JB's restaurants acquired by Star (the Segment) as if the acquisition
had been effective on January 26, 1998. The pro forma condensed combined
statement of income for the year ended January 26, 1998 combines the historical
consolidated statement of income for Star and the historical statement of income
for the Segment as if the acquisition had been effective on January 27, 1997.
The acquisition reflected in the unaudited pro forma financial statements will
be accounted for as a purchase. Under this method of accounting, assets and
liabilities of the Segment will be adjusted to their estimated fair value and
combined with the recorded values of the assets and liabilities of Star. For
purposes of the pro forma financial statements, it has been assumed that the net
book value of the Segment's assets minus liabilities approximates fair value.
This allocation could change significantly at the time the estimated fair value
of such assets and liabilities is determined.
NOTE B: PURCHASE PRICE
The purchase price for the net assets acquired was $4.34 million with an
additional $485 thousand paid as a prepaid royalty fee. The funds used for the
acquisition were part of the proceeds of the Initial Public Offering of Star on
September 30, 1997. The total funds paid have been used to reduce the cash
balance on the pro forma balance sheet.
NOTE C: GOODWILL
The purchase price for the net assets of the Segment was $ 1,041,000 in excess
of the fair market value resulting in goodwill. These costs are amortized over
40 years.
NOTE D: FORMAT DIFFERENCE BETWEEN STAR BUFFET, INC. AND SEGMENT FINANCIAL
STATEMENTS
The presentation of the statement of operations for the 12 JB's in the pro forma
statement of operations for 1998 is in a different format than the statement of
operations for Star Buffet. Part of the pro forma adjustments includes amounts
to make the format of the statement of operations for the 12 JB's consistent
with the format of the statement of operations for Star Buffet, Inc.
NOTE E: ADJUSTMENT FOR DIFFERENCE DUE TO ASSETS NOT ACQUIRED AND
LIABILITIES NOT ASSUMED
The acquisition took place on February 24, 1998. Adjustments have been made to
reflect assets not acquired and liabilities not assumed.
NOTE F: INTEREST INCOME
The adjustment to interest income represents the reduction in interest earned on
the funds to acquire the 12 JB's Restaurants at January 27, 1997. Interest on
the funds used to acquire the 12 JB's Restaurants was based on Star's
investments in commercial paper yielding approximately 6%.
4
