SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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):
MARCH 27, 1997
CARROLS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
<TABLE>
<CAPTION>
1-6553 16-0958146
<S> <C> <C>
(Commission File No.) (IRS Employer
Identification No.)
</TABLE>
968 James Street, Syracuse, New York 13203
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(315) 424-0513
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
As reported on Form 8-K dated March 27, 1997, filed April 11, 1997, the
Company acquired 24 Burger King restaurants (including one restaurant
under construction) on March 28, 1997 for an aggregate purchase price of
$21.1 million in cash, pursuant to two separate Purchase and Sale
Agreements, each dated as of January 15, 1997, by and between the
Company, Omega Food Services, Inc. and Harold W. Hobgood as Omega's
agent. As also reported in the 8-K, proceeds of approximately $30.4
million from an equity sale were received by the Company on March 27,
1997.
This Form 8-K/A includes the financial statements and pro forma financial
information required by Items 7 (a) and 7 (b) to Form 8-K.
<PAGE>
ITEM 7 -FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following audited financial statements are filed with this
report.
Omega Food Services, Inc. Financial
Statements for the year ended
December 31, 1996 . . . . . . . . . Page F-1 through F-10
(B) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements are filed with this report.
Pro Forma Consolidated Balance Sheet
(unaudited) at December 31, 1996. . .Page F-12 through F-13
Pro Forma Consolidated Statement of
Operations (unaudited) for the year ended
December 31, 1996 . . . . . . . . . . . . . . . .Page F-14
(C) EXHIBITS
None.
<PAGE>
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.
Dated: June 10, 1997
CARROLS CORPORATION
By: ______________________________
Name: Alan Vituli
Title: Chief Executive Officer
<PAGE>
OMEGA FOOD SERVICES, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
F-1
<PAGE>
Albert M. Daykin
Certified Public Accountant
Roswell, Georgia
The Board of Directors
Omega Food Services, Inc.
I have audited the accompanying balance sheet of Omega Food Services,
Inc. as of December 31, 1996, and the related statements of income,
retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements
based on my audit.
I have conducted my audit in accordance with generally accepted auditing
standards. These standards require that I 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. I believe that my audit
provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Omega Food Services,
Inc. as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
On March 28, 1997, Omega Food Services, Inc. sold substantially all of
its assets and ceased operations. As of May 6, 1997, the date of this
report, the Company has repaid all of its long-term debt and
substantially all of its other creditors and is in the process of
liquidating.
Albert M. Daykin
May 6, 1997
F-2
<PAGE>
OMEGA FOOD SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1996
A S S E T S
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C> <C>
Cash $ 104,095
Inventory of food, paper and
condiments at the lower of cost (FIFO)
or market 170,116
Prepaid expenses 135,796
Total current assets 410,007
PROPERTY AND EQUIPMENT, at cost
(pledged as collateral to notes payable)
payable)
Leasehold improvements $ 499,781
Restaurant equipment 5,197,084
Office equipment 100,148
Land 380,000
6,177,013
Less accumulated depreciation (Note 2) 3,863,233
Total property and equipment 2,313,780
OTHER ASSETS
Deposits 1,970
Franchise cost net of
amortization (Note 2) 3,811,840
Premium on leases net of
amortization (Note 2) 762,973
Goodwill 17,500
Total other assets 4,594,283
TOTAL ASSETS $7,318,070
</TABLE>
The accompanying notes are an integral part of this statement
F-3
<PAGE>
OMEGA FOOD SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Current maturities of long-term notes
payable $ 756,173
Note payable Nations Bank, interest due
monthly at 8.24% 350,000
Accounts payable 737,108
Accrued expenses 843,917
Total current liabilities 2,687,198
LONG-TERM DEBT
Note payable Nations Bank, principal
and interest at 7.6% due in monthly
payments of $76,916 through February,
2000 $2,593,858
Less current portion above 756,173
Total long-term debt 1,837,685
DEFERRED LEASE INCOME (Note 4) 21,017
COMMITMENTS (Note 7)
STOCKHOLDERS' INVESTMENT
Common stock 7,000
Additional paid in capital 2,019,000
Treasury stock (190,000)
Retained earnings:
Balance, beginning of year $1,139,239
Net income for the year
ended December 31, 1996 1,512,304
Dividends (Notes 2,6 & 8) (1,715,373)
936,170
Total stockholders' equity 2,772,170
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $7,318,070
</TABLE>
The accompanying notes are an integral part of this statement
F-4
<PAGE>
OMEGA FOOD SERVICES, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NET SALES $26,674,248
<S> <C>
COST OF SALES 8,356,870
Gross Profit 18,317,378
GENERAL AND ADMINISTRATIVE EXPENSES 16,574,313
1,743,065
OTHER INCOME AND EXPENSES
Deferred lease income (2,300)
Miscellaneous income (24,326)
Interest expense 257,387
NET INCOME $ 1,512,304
</TABLE>
The accompanying notes are an integral part of this statement
F-5
<PAGE>
OMEGA FOOD SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Net income $1,512,304
<S> <C>
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 675,289
Amortization of intangible assets 412,120
Amortization of deferred income (2,300)
Increase in prepaid expenses (132,807)
Decrease in accounts payable (209,334)
Increase in accrued expenses 79,827
Net cash from operating activities 2,335,099
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (255,030)
Increase in inventory (1,912)
Net cash used in investing activities (256,942)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line of Credit 350,000
Proceeds from long-term debt 3,175,000
Repayment of long-term debt (3,896,628)
Net cash provided by financing activities (371,628)
PAYMENT OF DIVIDENDS (1,715,373)
NET DECREASE IN CASH 8,844
CASH AT BEGINNING OF YEAR 112,939
CASH AT END OF YEAR $ 104,095
</TABLE>
The accompanying notes are an integral part of this statement
F-6
<PAGE>
OMEGA FOOD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. GENERAL
The financial statements present the financial position and results
of operation of Omega Food Services, Inc.
The company operated twenty-three Burger King restaurants under
franchise agreements with Burger King Corporation. These franchise
agreements provide for the payment of advertising fees and royalties to
Burger King Corporation. These fees and royalties are computed at 4% and
3.5% of sales. The franchise agreements expire between 1999 and 2013.
There is no option to renew these franchises or an obligation for Burger
King Corporation to grant a renewal of these franchises.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories -
Inventories are recorded at the lower of cost (FIFO) or market.
Depreciation -
For financial statement purposes, depreciation is computed using the
straight-line method and the declining balance method over the useful
life of the asset. For income tax purposes, the company is using both
the straight-line method and the modified accelerated cost recovery
method. Depreciation expense for the year ended December 31, 1996 is
$675,289.
Amortization -
For financial statement purposes, amortization is computed on
intangible assets using the straight-line method. Franchise costs are
amortized over 40 years or the life of the franchise. Premiums on leases
are amortized over the remaining term of the leases and the life of the
agreement. For income tax purposes, franchise costs incurred prior to
1991 are amortized over the life of the franchise or ten years, whichever
is less; and franchise costs incurred in 1991 and later years are
amortized over fifteen years. Amortization expense for the year ended
December 31, 1996 is $412,120.
F-7
<PAGE>
OMEGA FOOD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Income tax -
The company elected S Corporation tax status effective January 1,
1987. Therefore, there is no current provision for federal income tax.
The company's shareholders are taxed on their proportionate share of
the company's taxable income. $782,060 in dividends were paid to
reimburse the shareholders for this tax liability.
3. LONG-TERM DEBT
At December 31, maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year
ending
<S> <C>
DECEMBER 31 AMOUNT
1997
$756,173
1998
816,217
1999
880,518
2000
140,950
</TABLE>
4. DEFERRED LEASE INCOME
In 1987 the company constructed and then entered into a sale-
leaseback of a restaurant building. The profit on the sale was $41,357.
This profit is deferred and amortized in proportion to the gross rental
charged over the lease term.
5. RELATED PARTY TRANSACTIONS
The company has entered into an operating lease on the land and
building for the restaurant located in Travelers Rest, South Carolina
with Harold Hobgood and William Collins, who each own 33-1/3 percent of
the outstanding stock of the company. The minimum annual rent due under
the lease is $96,120 and contingent rent of 7 percent of sales is due if
it exceeds the annual rent. Rent paid pursuant to this lease in 1996 was
$104,714.
The company has entered into four operating leases on the land and
buildings for the restaurants located in Burnsville and Riverridge, North
Carolina, and Greenville and Pickens, South Carolina with Jacks Tingle,
Harold Hobgood and William Collins,
F-8
<PAGE>
OMEGA FOOD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
who each own 33-1/3 percent of the outstanding stock of the company. The
minimum annual rent is $77,850, $90,720, $86,400 and $89,425
respectively, and contingent rent of 7 percent of sales is due if it
exceeds the annual rent. Rent paid pursuant to these leases in 1996 was
$349,553.
6. CONTINGENCIES
The company has guaranteed $320,669 of the indebtedness of its
shareholders. $1,275,000 was borrowed by the shareholders from Nations
Bank in 1991 and contributed to capital. The funds were used to purchase
ten restaurants. The company distributes as dividends the monthly
payment of $20,676 to the shareholders.
7. COMMITMENTS
The company has entered into operating leases on each of its
restaurants. The company pays a percentage of sales as rent for the
lease term.
The following is a schedule of the future minimum rental payments
required as of December 31, 1996:
<TABLE>
<CAPTION>
Year
ending
<S> <C>
DECEMBER 31 AMOUNT
1997 $1,629,552
1998 $1,629,552
1999 $1,629,552
2000 $1,629,552
2001 $1,629,552
</TABLE>
For 1996, the rental expense was:
<TABLE>
<CAPTION>
Minimum $1,596,157
rent
<S> <C>
Contingent rent
421,690
$2,017,847
</TABLE>
F-9
<PAGE>
OMEGA FOOD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
8. DIVIDENDS
The company paid dividends of $1,715,373 which consisted of the
following:
<TABLE>
<CAPTION>
Shareholders'
tax on Company
<S> <C>
income (Note 2) $
782,060
Payments on Shareholders'
debt (Note 6)
248,112
Other distributions
685,201
$1,715,373
</TABLE>
F-10
<PAGE>
CARROLS CORPORATION
PRO FORMA CONSOLIDATED FINANCIAL DATA
(Unaudited)
The Pro Forma Consolidated Balance Sheet (unaudited) at December 31,
1996 reflects pro forma adjustments that were computed assuming the
acquisition and receipt of equity cash had occurred on December 31,
1996. The Pro Forma Consolidated Statement of Operations
(unaudited) reflects pro forma adjustments assuming the acquisition
and receipt of equity cash had occurred on January 1, 1996.
The unaudited pro forma consolidated financial statements have been
prepared by Registrant based upon assumptions deemed proper by it.
The unaudited pro forma consolidated financial statements presented
herein are shown for illustrative purposes only and are not
necessarily indicative of the future financial position or future
results of operations of Registrant, or of the financial position or
results of operations of Registrant that would have actually
occurred had the transaction been in effect as of the date or for
the periods presented.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the Registrant's (i) historical financial
statements, (ii) related notes and (iii) Management's Discussion and
Analysis of Financial Condition and Results of Operations.
F-11
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Carrols Pro Forma Pro Forma
AS REPORTED ADJUSTMENTS TOTAL
ASSETS:
Current assets:
Cash and cash equivalents $ 1,314,000 $ 1,314,000
Trade and other receivables 793,000 793,000
Inventories 2,163,000 $ 100,000 (a) 2,263,000
Prepaid real estate taxes 725,000 725,000
Deferred income taxes 3,264,000 3,264,000
Prepaid expenses and other current
assets 932,000 ________ 932,000
Total current assets 9,191,000 100,000 9,291,000
Property & equipment, at cost:
Land 9,066,000 9,066,000
Buildings and improvements 16,175,000 16,175,000
Leasehold improvements 38,816,000 38,816,000
Equipment 46,834,000 2,200,000(a) 49,034,000
Capital leases 14,548,000 __________ 14,548,000
125,439,000 2,200,000 127,639,000
Less: accumulated depreciation and
amortization (63,356,000) __________ (63,356,000)
Net property & equipment 62,083,000 64,283,000
Franchise rights, net 46,203,000 18,800,000(a) 65,003,000
Beneficial leases, net 6,907,000 6,907,000
Excess cost over fair value of assets
acquired, net 1,733,000 1,733,000
Deferred income taxes 6,637,000 6,637,000
Other assets 5,834,000 __________ 5,834,000
$138,588,000 $21,100,000 $159,688,000
</TABLE>
F-12
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Carrols Pro Forma Pro Forma
AS REPORTED ADJUSTMENTS TOTAL
LIABILITIES AND STOCKHOLDER'S
(DEFICIT)EQUITY:
Current liabilities:
Current portion of long-term debt $ 8,000 $ 8,000
Current portion of capital lease
obligations 574,000 574,000
Accounts payable 9,319,000 9,319,000
Accrued liabilities:
Taxes 2,334,000 2,334,000
Payroll and employee benefits 3,837,000 3,837,000
Interest 4,741,000 4,741,000
Other 3,382,000 __________ 3,382,000
Total current liabilities 24,195,000 24,195,000
Long-term debt, net of current portion 118,180,000 $21,100,000 (a) 108,880,000
(30,400,000)(b)
Capital lease obligations, net of current
portion 2,503,000 2,503,000
Deferred income - sale/leaseback of real
estate 2,154,000 2,154,000
Accrued postretirement benefits 1,522,000 1,522,000
Other liabilities 1,696,000 __________ 1,696,000
Total liabilities 150,250,000 (9,300,000) 140,950,000
Commitments and contingencies
Stockholder's (deficit) equity:
Common stock 10 10
Additional paid-in capital 1,411,990 30,400,000 (b) 31,811,990
Accumulated deficit (10,574,000) (10,574,000)
Less: Note receivable - redemption of
warrants (2,500,000) __________ (2,500,000)
Total stockholder's (deficit) equity (11,662,000) 30,400,000 18,738,000
$138,588,000 $21,100,000 $159,688,000
</TABLE>
(a) To reflect assets and debt related to the purchase of twenty-three
restaurants on March 28, 1997 financed with approximately
$21.1 million of long-term debt.
(b) Adjustment to reflect the net investment in equity of $30.4 million.
F-13
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Carrols Omega Pro Forma Pro Forma
AS REPORTED HISTORICAL ADJUSTMENTS TOTAL
Revenues:
Sales $240,809,000 $ 26,674,000 $267,483,000
Other income 316,000 ___________ _________ 316,000
241,125,000 26,674,000 267,799,000
Costs and expenses:
Cost of sales 68,031,000 8,357,000 76,388,000
Restaurant wages and
related expenses 70,894,000 7,417,000 78,311,000
Other restaurant
operating expenses 48,683,000 5,265,000 53,948,000
Depreciation and
amortization 11,015,000 1,087,000 $ 192,000 (c) 12,294,000
Administrative expenses 10,703,000 1,090,000 (286,000)(d) 11,507,000
Advertising expenses 10,798,000 1,689,000 12,487,000
Costs associated with
change in control 509,000 ___________ _________ 509,000
Total operating expenses 220,633,000 24,905,000 (94,000) 245,444,000
Operating income 20,492,000 1,769,000 94,000 22,355,000
Interest expense 14,209,000 257,000 (1,013,000)(e) 13,453,000
Income before taxes 6,283,000 1,512,000 1,107,000 8,902,000
Provision for taxes 3,100,000 ___________ 1,048,000 (f) 4,148,000
NET INCOME $ 3,183,000 $ 1,512,000 $ 59,000 $ 4,754,000
</TABLE>
(c) To remove acquired Company's depreciation and amortization and reflect
Carrols' estimated depreciation and amortization expense for acquired
equipment, franchise fees and lease acquisition costs.
(d) To eliminate expenses that will not be incurred by Carrols, principally
management fees and executive salaries.
(e) To remove the acquired Company's interest expense and reflect Carrols'
estimated net reduction in interest expense due to the long-term debt
reduction from the proceeds of the equity received offset by the purchase
price of the acquisition. Carrols annual 1996 average revolving debt
interest rate of 8.1% was used.
(f) To reflect tax expense as if the acquired Company was taxed as a C
corporation.
F-14
