<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MAY 18, 1998
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: 0-6054
STAR BUFFET, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 84-1430786
- -------------------------------------------------------------- ------------------------------------
<S> <C>
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
</TABLE>
440 LAWNDALE DRIVE,
SALT LAKE CITY, UT 84115
(Address of principal executive offices) (Zip Code)
(801) 463-5500
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. AS OF JUNE 22, 1998 THERE WERE
5,450,000 SHARES OF COMMON STOCK, $ .001 PAR VALUE, OUTSTANDING.
<PAGE> 2
STAR BUFFET, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of May 18, 1998 and January 26, 1998 3
Consolidated Statements of Operations for the sixteen weeks
ended May 18, 1998 and May 19, 1997 5
Consolidated Statements of Cash Flows for the sixteen weeks ended
May 18, 1998 and May 19, 1997 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE> 3
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MAY 18, JANUARY 26,
ASSETS 1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,275,000 $15,387,000
Current portion of notes and other receivables 3,326,000 336,000
Inventories 726,000 493,000
Deferred income taxes, net 110,000 110,000
Prepaid expenses 919,000 204,000
----------- -----------
Total current assets 13,356,000 16,530,000
----------- -----------
Property, buildings and equipment, at cost, less accumulated
depreciation 21,067,000 15,077,000
----------- -----------
Real property and equipment under capitalized leases, at cost, less
accumulated amortization 2,344,000 2,287,000
----------- -----------
Other assets:
Notes receivable, net of current portion 3,095,000 3,235,000
Deposits and other 2,600,000 2,167,000
----------- -----------
Total other assets 5,695,000 5,402,000
----------- -----------
Goodwill, less accumulated amortization 3,684,000 1,380,000
Other intangible assets, less accumulated amortization 302,000 293,000
----------- -----------
Total intangible assets 3,986,000 1,673,000
----------- -----------
Total assets $46,448,000 $40,969,000
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY MAY 18, JANUARY 26,
1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 3,571,000 $ 2,212,000
Payroll and related taxes 2,079,000 1,643,000
Sales and property taxes 1,587,000 1,178,000
Rent, licenses and other 538,000 822,000
Current maturities of obligations under capital leases 1,444,000 259,000
Other current liabilities 975,000 209,000
----------- -----------
Total current liabilities 10,194,000 6,323,000
----------- -----------
Capitalized lease obligations, net of current maturities 2,186,000 2,109,000
----------- -----------
Preferred stock, $.001 par value; authorized 1,500,000 shares; none
issued or outstanding -- --
Common stock, $.001 par value; authorized 18,500,000 shares; issued
and outstanding 5,450,000 and 5,450,000 shares 5,000 5,000
Additional paid-in capital 31,768,000 31,768,000
Retained earnings 2,295,000 764,000
----------- -----------
Total stockholders' equity 34,068,000 32,537,000
----------- -----------
Total liabilities and stockholders' equity $46,448,000 $40,969,000
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
-----------------------------------
MAY 18, MAY 19
1998 1997
------------ ------------
<S> <C> <C>
Total revenues $ 25,498,000 $ 16,581,000
Costs and expenses
Food costs 8,536,000 5,479,000
Labor costs 7,744,000 5,219,000
Occupancy and other expenses 5,050,000 3,077,000
General and administrative expenses 1,133,000 628,000
Depreciation and amortization 809,000 625,000
------------ ------------
Total costs and expenses 23,272,000 15,028,000
------------ ------------
Income from operations 2,226,000 1,553,000
Interest expense (66,000) (62,000)
Interest income 312,000 --
Other Income 79,000 --
------------ ------------
Income before income taxes 2,551,000 1,491,000
Income tax expense 1,020,000 596,000
------------ ------------
Net income $ 1,531,000 $ 895,000
============ ============
Net income per common share - basiC $ 0.28 $ 0.34
============ ============
Weighted average shares outstanding - basic 5,450,000 2,600,000
Net income per common share - diluted $ 0.28 $ 0.34
Weighted average shares outstanding - diluted 5,529,000 2,600,000
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
-----------------------------------
MAY 18, 1998 MAY 19, 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,531,000 $ 895,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 809,000 625,000
Amortization of royalty fee 111,000 --
Interest income (102,000) --
Change in operating assets and liabilities:
Receivables (422,000) (42,000)
Inventories (233,000) 22,000
Prepaid expenses (714,000) (98,000)
Deposits and other (141,000) 330,000
Deferred taxes -- 193,000
Accounts payable 1,359,000 (435,000)
Other accrued liabilities 1,327,000 140,000
------------ ------------
Net cash provided by operating activities 3,525,000 1,630,000
Cash flows used in investing activities:
Increase in notes receivable (2,565,000) --
Acquisition of restaurants (6,428,000) --
Acquisition of property, buildings and equipment (1,438,000) (1,547,000)
Sale of Short Term Investments -- 180,000
------------ ------------
Net cash used in investing activities (10,431,000) (1,367,000)
Cash flows from financing activities:
Payments to extinguish long term debt (120,000) --
Payments to parent company -- 19,000
Principal payment on capital leases (86,000) (75,000)
------------ ------------
Net cash used in financing activities (206,000) (56,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (7,112,000) 207,000
Cash and cash equivalents at beginning of period 15,387,000 353,000
Cash and cash equivalents at end of period $ 8,275,000 $ 560,000
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
-----------------------------------
MAY 18, 1998 MAY 19, 1997
---------- ---------------
<S> <C> <C>
Supplemental disclosures of cash flow Information:
Cash paid for interest $ 81,000 $ --
========== ===============
Cash paid for income taxes $ 773,000 $ --
========== ===============
Non cash investing and financing activities:
Exchange of receivables from Stacey's Buffet, Inc.
for three Stacey's Buffet Restaurants $1,004,000 --
Acquisition of BuddyFreddys assets with debt financing $1,200,000 --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 8
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE (A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts for Star Buffet, Inc., together with its direct and indirect wholly
owned subsidiaries Summit Family Restaurants Inc. ("Summit"), HTB Restaurants,
Inc. ("HTB"), Northstar Buffet, Inc. ("NSBI") and Star Buffet Management, Inc.
("SBMI") (collectively the "Company") and have been prepared in accordance with
generally accepted accounting principles, the instructions to Form 10-Q and
Article 10 of Regulation S-X. These financial statements should be read in
conjunction with the audited combined financial statements, and the notes
thereto, included in the Company's Annual Report on Form 10-K for the fiscal
year ended January 26, 1998. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the financial position and results of operations for the interim periods
presented have been reflected herein. Results of operations for such interim
periods are not necessarily indicative of results to be expected for the full
fiscal year or for any future periods. Certain reclassifications have been made
to the fiscal 1998 consolidated financial statements to conform to the fiscal
1999 presentation. The accompanying financial statements include the results of
operations and assets and liabilities directly related to the Company's
operations. Certain estimates, assumptions and allocations were made in
preparing such financial statements.
The operating results for the 16-week period ended May 18, 1998 include 16 weeks
of operations for each of the Company's 16 franchised HomeTown Buffet
restaurants, two Casa Bonita restaurants and seven JJ North's Grand Buffet
restaurants. The operating results for the 16 week period ended May 18, 1998
also include the results of operations for each of the acquisitions described in
Notes B, C and D of the Notes to Unaudited Consolidated Financial Statements in
this Quarterly Report on Form 10-Q from their respective dates of acquisition.
The operations for the 16-week period ended May 19, 1997 include 16 weeks of
operations for each of the Company's 16 franchised HomeTown Buffet restaurants
and two Casa Bonita restaurants, but do not include the operations for JJ
North's Grand Buffet restaurants, or the operations for other restaurants
acquired by the Company in the first quarter of fiscal 1999.
The Company utilizes a 52/53 week fiscal year which ends on the last Monday in
January. The first quarter of each year contains 16 weeks while the other three
quarters each contain 12 weeks.
NOTE (B) ACQUISITION OF CERTAIN STACEY'S RESTAURANTS AND TERMINATION OF
STRATEGIC ALLIANCE WITH STACEY'S BUFFET, INC.
On October 31, 1997, the Company entered into a strategic alliance (the
"Alliance") with Stacey's Buffet, Inc. ("Stacey's") whereby, among other things,
the Company agreed to provide certain services for 23 Stacey's restaurants and
make loans to Stacey's from time to time up to an aggregate principal amount of
$4,500,000. On February 13, 1998, the Company acquired three Stacey's
restaurants for $1,004,000 and the Company and Stacey's mutually agreed to
terminate the Alliance, including cancellation of any future obligations of the
Company to make loans to Stacey's. The Company paid the purchase price for the
three restaurants by the cancellation of Stacey's outstanding indebtedness to
the Company which was incurred as part of the Alliance. In connection with the
termination of the Alliance, the Company's warrants to purchase 1,342,422 shares
of Stacey's common stock were also terminated.
NOTE (C) ACQUISITION OF 12 JB'S RESTAURANTS
On February 24, 1998, the Company acquired twelve JB's Restaurants from JB's
Family Restaurants, Inc., a wholly-owned subsidiary of CKE Restaurants, Inc.
("CKE") for $4,265,000. CKE is a principal shareholder of
8
<PAGE> 9
the Company. At the time of acquisition, the Company prepaid royalty fees for
one year in the amount of $485,000. The Company will operate the restaurants
under franchise agreements with JB's Family Restaurants, Inc. until such time as
they are converted to the Company's small-format buffet concept. During the
first quarter of fiscal 1999, the Company completed two of such conversions and
expects to complete additional conversions during the remainder of fiscal 1999.
Selected unaudited pro forma combined results of operations for the 16-week
periods ended May 18, 1998 and May 19, 1997, assuming the acquisition of twelve
JB's had occurred on January 28, 1997, using actual restaurant-level margins and
general and administrative expenses prior to the acquisition, are presented as
follows:
<TABLE>
<CAPTION>
Sixteen Weeks Ended
---------------------------
May 18, May 19,
1998 1997
---------- -------
<S> <C> <C>
Total revenues $ 26,347 $20,217
Net income $ 1,517 $ 1,099
Net income per share - basic $ 0.27 -
Net income per share - diluted $ 0.27 -
</TABLE>
NOTE (D) OTHER ACQUISITIONS
During February 1998, the Company, in three separate transactions, acquired
three additional restaurants in the state of Florida. The aggregate purchase
price for these restaurants was $1,763,000. Two of the restaurants currently are
operated as Maggie's Buffet restaurants and the third restaurant, which was
closed in 1996, formerly operated as a Stacey's Buffet restaurant. The Company
plans to continue to operate the Maggie's Buffet restaurants under the Maggie's
concept and plans to convert the third restaurant to one of the Company's other
buffet concepts and re-open it during fiscal 1999.
On April 1, 1998, the Company acquired two buffet restaurants located in
Florida, which operate under the brand name of BuddyFreddys. The purchase price
was $1.6 million, subject to adjustment, of which, $400,000 was paid in cash at
closing and the remaining $1.2 million will be paid in equal monthly
installments of $100,000 beginning April 15, 1998 and continuing through March
15, 1999. In addition, the Company has loaned the seller $2.4 million. The loan
has a term of one year, is secured by the real property of the purchased
restaurants and bears interest at 8.5% for the first 90 days and 10.0% for the
remainder of the term. The Company plans to convert certain of its other
restaurants in the Florida market to the BuddyFreddys concept.
NOTE (E) RECENT DEVELOPMENTS
On June 5, 1998, the Company announced that it has entered into an agreement to
purchase four Holiday House Restaurants located in central Florida. The
acquisition is expected to close in July 1998.
9
<PAGE> 10
STAR BUFFET, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following Management's Discussion and Analysis should be read in conjunction
with the unaudited consolidated financial statements, and the notes thereto,
presented elsewhere in this Report. The addition of seven JJ North's Grand
Buffet restaurants, 12 JB's Restaurants and seven restaurants in Florida are the
principal reasons for the differences when comparing results of operations for
the 16-week period ended May 18, 1998 with the results of operations for the
16-week period ended May 19, 1997. Comparability of future periods may also from
time to time be affected by the implementation of the Company's acquisition and
strategic alliance strategies.
Consolidated net income for the 16-week period ended May 18, 1998 increased
$636,000 or 71.1% to $1,531,000 or $0.28 per share on a diluted basis as
compared with net income of $895,000 for the comparable prior year period. The
increase in net income is primarily due to the additional operations of recently
acquired restaurants since their respective dates of acquisition.
This Quarterly Report on Form 10-Q contains forward looking statements, which
are subject to known and unknown risks, uncertainties and other factors which
may cause the actual results, performance, or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; success
of integrating newly acquired under performing or unprofitable restaurants; the
impact of competitive products and pricing; success of operating initiatives;
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; changes in prevailing interest rates and the availability
of financing; food, labor, and employee benefits costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; implementation of the Company's acquisition and strategic alliance
strategy; the effect of the Company's accounting polices and other risks
detailed in the Company's Prospectus dated September 24, 1997 and other filings
with the Securities and Exchange Commission.
10
<PAGE> 11
COMPONENTS OF INCOME FROM OPERATIONS
Total revenues include a combination of food and beverage sales and are net of
applicable state and city sales taxes.
Food costs primarily consist of the costs of food and beverage items. Various
factors beyond the Company's control, including adverse weather and natural
disasters, may affect food costs. Accordingly, the Company may incur periodic
fluctuations in food costs. Generally, these temporary increases are absorbed by
the Company and not passed on to customers; however, management may adjust menu
prices to compensate for increased costs of a more permanent nature.
Labor costs include restaurant management salaries, bonuses, hourly wages for
unit level employees, various health, life and dental insurance programs,
vacations and sick pay and payroll taxes.
Occupancy and other expenses are primarily fixed in nature and generally do not
vary with restaurant sales volume. Rent, insurance, property taxes, utilities,
maintenance and advertising account for the major expenditures in this category.
General and administrative expenses include all corporate and administrative
functions that serve to support the existing restaurant base and provide the
infrastructure for future growth. Management, supervisory and staff salaries,
employee benefits, data processing, training and office supplies are the major
items of expense in this category. Pursuant to the terms of a Service Agreement
with CKE, a principal stockholder of the Company, CKE provides certain
multi-unit retail infrastructure support in exchange for an annual fee of
$375,000.
Other income represents management fee income resulting from the Company's
management agreement related to one JJ North's Grand Buffet restaurant.
The Company records depreciation on its property and equipment on a
straight-line basis over their estimated useful lives.
11
<PAGE> 12
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations as a
percentage of total revenues for the 16 weeks ended May 18, 1998 and May 19,
1997.
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
------------------------
MAY 18, MAY 19,
1998 1997
------- -------
<S> <C> <C>
Total revenues 100.0% 100.0%
------- -------
Costs and expenses
Food costs 33.5 33.0
Labor costs 30.4 31.5
Occupancy and other expenses 19.8 18.5
General and administrative expenses 4.4 3.8
Depreciation and amortization 3.2 3.8
------- -------
Total costs and expenses 91.3 90.6
------- -------
Income from operations 8.7 9.4
Interest expense (0.2) (0.4)
Interest income 1.2 --
Other Income 0.3 --
------- -------
Income before income taxes 10.0 9.0
Income tax expense (4.0) (3.6)
------- -------
Net income 6.0% 5.4%
======= =======
Effective income tax rate 40.0% 40.0%
======= =======
</TABLE>
Total revenues increased $8,917,000 or 53.8% from $16.6 million in the 16 weeks
ended May 19, 1997 to $25.5 million in the 16 weeks ended May 18, 1998. $8.5
million of such increase in revenues was attributable to the inclusion of the
results of the Company's recently acquired restaurants. $421,000 of such
increase was attributable to an increase in same-store sales in the Company's
HomeTown Buffet and Casa Bonita restaurants.
Food costs as a percentage of total revenues increased from 33.0% during the
16-week period ended May 19, 1997 to 33.5% during the 16 weeks ended May 18,
1998. The increase as a percentage of total revenues was primarily attributable
to the acquisition during the first quarter of fiscal 1999 of seven restaurants
located in Florida which operate with higher food costs as a percent of revenues
than the Company's other restaurants.
Labor costs as a percentage of total revenues decreased from 31.5% during the
16-week period ended May 19, 1997 to 30.4% during the 16-week period ended May
18, 1998. The decrease as a percentage of total revenues was primarily
attributable to reduced labor costs in the Company's HomeTown Buffet and Casa
Bonita restaurants.
12
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Occupancy and other expenses as a percentage of total revenues increased from
18.5% during the 16-week period ended May 19, 1997 to 19.8% during the 16-week
period ended May 18, 1998. The increase as a percentage of total revenues
primarily reflects the impact of acquired restaurants in Florida which operate
with higher occupancy and other expenses as a percentage of total revenues than
the Company's other restaurants.
General and administrative costs as a percentage of total revenues increased
from 3.8% during the 16-week period ended May 19, 1997 to 4.4% during the
16-week period ended May 18, 1998. The increase as a percentage of total
revenues was primarily attributable to the acquisition of restaurants generating
lower average unit sales volumes than the restaurants owned by the Company
during the period ended May 19, 1997.
Interest expense as a percentage of total revenues declined from 0.4% during the
16-week period ended May 19, 1997 to 0.2% during the 16-week period ended May
18, 1998. The decline as a percentage of total revenues was primarily
attributable to the increased revenue base resulting from the Company's
acquisitions.
Interest income of $312,000 for the 16-week period ended May 18, 1998 was
generated by the Company's cash and outstanding notes receivable balances during
the period. Prior to September 30, 1997, the Company's excess cash was used to
reduce inter-company liabilities between the Company and CKE and therefore no
interest income is reflected for the 16-week period ended May 19, 1997.
IMPACT OF INFLATION
The impact of inflation on the cost of food, labor, equipment and construction
could affect the Company's operations. Many of the Company's employees are paid
hourly rates related to the federal and state minimum wage laws. Recent
legislation increasing the federal minimum wage has resulted in higher labor
costs to the Company. In addition, the cost of food commodities utilized by the
Company are subject to market supply and demand pressures. Shifts in these costs
may have a significant impact on the Company's food costs. The Company
anticipates that increases in these costs can be offset through pricing and
other cost control efforts; however, there is no assurance that the Company
would be able to pass such costs on to its guests or if it were able to do so,
it could do so in a short period of time.
LIQUIDITY AND CAPITAL RESOURCES
The Company, historically financed operations through a combination of cash on
hand, cash provided from operations and, prior to the Company's initial public
offering in September 1997, borrowings available to its predecessor under bank
lines of credit.
As of May 18, 1998, the Company had $8.3 million in cash. Cash and cash
equivalents decreased by $7.1 million during the 16 weeks ended May 18, 1998.
Total cash provided by operations was approximately $3.5 million. The Company
used approximately $6.4 million to fund the acquisition of 20 restaurants, $2.6
million to fund loans related to acquired restaurants and $1.4 million to fund
capital improvements to existing and acquired restaurants.
The Company completed two conversions of JB's Restaurants to the small format
North's Star Buffet concept during the first quarter of fiscal 1999 and plans to
convert an additional three JB's Restaurants during the remainder of the fiscal
year. The average cost of these conversions is approximately $350,000 including
pre-opening costs.
The Company does not currently have a bank line of credit or other working
capital facility available to it. The Company intends to obtain a bank credit
facility to support its working capital requirements. Management anticipates
that the credit facility will contain customary affirmative and negative
covenants, including
13
<PAGE> 14
maintaining certain minimum working capital, net worth and financial ratios and
restrictions on the Company's ability to pay dividends on the Company's common
stock. There can be no assurance that the Company will be able to arrange a
credit facility when required or on terms acceptable to the Company.
The Company intends to expand its operations through the opening of new
restaurants and the acquisition of regional buffet chains. In addition, the
Company may expand through the purchase of existing restaurant sites which would
be converted to one of the Company's restaurant concepts. Management estimates
the cost of opening its prototype restaurant to be approximately $1.5 million to
$1.7 million, assuming leased real estate. In many instances, management
believes that existing restaurant locations can be acquired and converted to the
Company's prototype at a lower cost than new unit openings. These costs consist
primarily of exterior and interior appearance modifications and the addition of
certain kitchen and food service equipment. There can be no assurance that the
Company will be able to acquire additional restaurant chains or locations or, if
acquired, that these restaurants will have a positive contribution to the
Company's results of operations.
The Company believes that available cash and cash flow from operations will be
sufficient to satisfy its working capital, and capital expenditure requirements
for at least the next twelve months. The Company may require additional funds to
support its working capital requirements or for other purposes, including
acquisitions, and may seek to raise such additional funds through public or
private equity and/or debt financing or from other sources. There can be no
assurance, however, that changes in the Company's operating plans, the
unavailability of a credit facility, the acceleration of the Company's expansion
plans, lower than anticipated revenues, increased expenses, potential
acquisitions of other events will not cause the Company to seek additional
financing sooner than anticipated. There can be no assurance that additional
financing will be available on acceptable terms or at all.
14
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PART II: OTHER INFORMATION
ITEM 2. USE OF PROCEEDS OF INITIAL PUBLIC OFFERING
<TABLE>
<S> <C>
Amount of net offering proceeds used for:
Dividend to CKE $ 9,323,000
Payment to CKE for net assets of Casa Bonita 1,099,000
Loan to North's Restaurants, Inc. 3,565,000
Acquisition of restaurants 11,946,000
Loan to BuddyFreddys 2,400,000
Acquisition of furniture, fixtures and equipment 1,438,000
Remainder 1,002,000
-----------
$30,773,000
===========
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are attached to this report:
Exhibit Description
Number of Exhibit
10.14 Asset Purchase Agreement among Summit Family Restaurants
Inc. and JB's Family Restaurants, Inc., dated February 10,
1998 and is herein incorporated by reference.
11 Calculation of Earnings per Share
27.1 Financial Data Schedule (EDGAR version only)
(b) Current Reports on Form 8-K:
(i) A Current Report on Form 8-K dated February 24, 1998, as
amended May 12, 1998, was filed to report the Company's
acquisition of 12 JB's Restaurants from JB's Family
Restaurants, Inc.
There were no other items to be reported under Part II of this report.
15
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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. AND SUBSIDIARIES
July 2, 1998 By: /s/ Robert E. Wheaton
---------------------
Robert E. Wheaton
President and
Chief Executive Officer
16
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<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Description Sequentially
Number of Exhibit Numbered Page
- ------- ----------- -------------
<S> <C> <C>
10.14 Asset Purchase Agreement among Summit Family
Restaurants Inc. and JB's Family Restaurants, Inc.,
dated February 10, 1998 and is herein incorporated
by reference.
11 Calculation of Earnings per Share
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
17
<PAGE> 1
EXHIBIT 11
STAR BUFFET, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS
PER SHARE
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
------------------------------
MAY 18, MAY 19,
1998 1997
---------- ----------
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net Income $1,531,000 $ 895,000
---------- ----------
Weighted average number of common
shares outstanding during the period 5,450,000 2,600,000
---------- ----------
Basic Earnings per Share $ 0.28 $ 0.34
---------- ----------
DILUTED EARNINGS PER SHARE
Net Income $1,531,000 $ 895,000
---------- ----------
Weighted average number of common
shares outstanding during the period 5,450,000 2,600,000
Incremental common shares
attributable to exercise of stock options
79,107 --
---------- ----------
5,529,107 2,600,000
Diluted Earnings per Share $ 0.28 $ 0.34
---------- ----------
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS BALANCE SHEET & STATEMENTS OF OPERATIONS AS OF AND FOR THE SIXTEEN
WEEK PERIOD ENDED MAY 18, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JAN-25-1999
<PERIOD-START> JAN-27-1998
<PERIOD-END> MAY-18-1998
<CASH> 8,275,000
<SECURITIES> 0
<RECEIVABLES> 3,326,000
<ALLOWANCES> 0
<INVENTORY> 726,000
<CURRENT-ASSETS> 13,356,000
<PP&E> 21,067,000
<DEPRECIATION> 1,369,000
<TOTAL-ASSETS> 46,448,000
<CURRENT-LIABILITIES> 10,194,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 34,063,000
<TOTAL-LIABILITY-AND-EQUITY> 46,448,000
<SALES> 25,498,000
<TOTAL-REVENUES> 25,498,000
<CGS> 22,139,000
<TOTAL-COSTS> 23,272,000
<OTHER-EXPENSES> (391,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,000
<INCOME-PRETAX> 2,551,000
<INCOME-TAX> 1,020,000
<INCOME-CONTINUING> 1,531,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,531,000
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
