<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the second quarter ended June 30, 1995
GIANT GROUP, LTD.
150 El Camino Drive, Suite 303, Beverly Hills, California 90212
Registrant's telephone number: (310) 273-5678
Commission File Number: 1-4323
I.R.S. Employer Identification Number: 23 - 0622690
State of Incorporation: Delaware
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 proceeding 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
---
On August 8, 1995, the latest practicable date, there were 5,120,249 shares of
Common Stock Outstanding.
Page 1 of 12
<PAGE> 2
GIANT GROUP, LTD.
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements --------
Consolidated Statements of Operations - Three and Six-Month Periods Ended June 30, 1995 and 1994...... 3
Consolidated Balance Sheets - June 30, 1995 and December 31, 1994..................................... 4
Consolidated Statements of Cash Flows - Six-Month Periods Ended June 30, 1995 and 1994................ 5
Notes to Consolidated Financial Statements............................................................ 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 9-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................................................... 11
Item 6. Exhibits and Reports on Form 8-K...................................................................... 11
(a) Exhibits.......................................................................................... 11
(b) Reports on Form 8-K............................................................................... 11
Signature ..................................................................................................... 12
</TABLE>
2
<PAGE> 3
GIANT GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six-month periods ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three-Months Ended June 30 Six-Months Ended June 30
-------------------------- ------------------------
1995 1994 (1) 1995 1994 (1)
--------- ------------- ------- ------------
($ In thousands)
<S> <C> <C> <C> <C>
Revenue:
Investment income $ 906 $ 135 $ 2,013 $ 461
Other income 9 3 12 8
------ ------ ------- -------
Total revenue 915 138 2,025 469
------ ------ ------- -------
Costs and expenses:
General and administrative 1,032 982 1,952 1,898
Interest expense 41 1,165 84 2,400
Loss on sale of investments - 448 - 1,062
Depreciation 92 101 182 198
------ ------ ------- -------
1,165 2,696 2,218 5,558
------ ------ ------- -------
Equity in loss of affiliate (611) (490) (2,282) (1,340)
Loss before continuing operations
before income taxes (861) (3,048) (2,475) (6,429)
Income tax credit - (1,037) - (2,186)
------ ------ ------- -------
Loss from continuing operations (861) (2,011) (2,475) (4,243)
Income from discontinued operations,
net of income taxes - 3,456 - 3,059
------ ------ ------- -------
Net income (loss) ($861) $1,445 ($2,475) ($1,184)
====== ====== ======= =======
Primary earnings per common share:
Loss from continuing operations ($0.17) ($0.31) ($0.48) ($0.82)
Income from discontinued operations, net - 0.54 - 0.59
------ ------ ------- -------
Net income (loss) ($0.17) $ 0.23 ($0.48) ($0.23)
====== ====== ======= =======
Fully diluted earnings per common share:
Loss from continuing operations ($0.17) ($0.23) ($0.48) ($0.82)
Income from discontinued operations, net - 0.45 - 0.59
------ ------ ------- -------
Net income (loss) ($0.17) $ 0.22 ($0.48) ($0.23)
====== ====== ======= =======
(Shares in thousands)
Weighted average common shares:
Primary 5,120 6,463 5,150 5,180
Fully diluted 5,120 8,691 5,150 5,180
</TABLE>
(1) Reclassified to conform with the 1995 presentation.
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
GIANT GROUP, LTD
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 Dec. 31, 1994
------------- -------------
(Unaudited)
($ in thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $29,055 $ 23,472
Marketable securities 17,859 47,501
Prepaid expenses and other current assets 800 690
------- --------
Total current assets 47,714 71,663
Investment in affiliate 23,215 25,497
Property, plant and equipment, net 3,431 3,570
Other assets - 165
------- --------
Total assets $74,360 $100,895
======= ========
LIABILITIES
Current liabilties
Short-term borrowings $ - $ 1,917
Accounts payable and accrued expenses 414 1,251
Income taxes payable 3,469 25,435
Current maturities of long-term debt 212 193
------- --------
Total current liabilties 4,095 28,796
Long-term debt, net of current maturities 1,559 1,623
Deferred income taxes 955 534
------- --------
Total liabilties 6,609 30,953
------- --------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value;
authorized 12,500,000 shares, issued 6,966,000 shares 69 69
Capital in excess of par value 33,508 33,508
Unrealized holding gains on marketable securities 632 -
Retained earnings 49,653 52,128
------- --------
83,862 85,705
Less common stock in treasury; 1,846,000 shares
at June 30 and 1,786,000 at December 31, at cost 16,111 15,763
------- --------
Total shareholders' equity 67,751 69,942
------- --------
Total liabilities and shareholders' equity $74,360 $100,895
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
GIANT GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six-month periods ended June 30, 1995 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------- --------
($ In thousands)
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Operations:
Net loss ($2,475) ($1,184)
Adjustments to reconcile net loss to net cash used by
continuing operations:
Loss from discontinued operations - (3,059)
Depreciation 182 199
Loss on sale of investments - 1,062
Equity in loss of affiliate 2,282 1,340
Amortization of deferred charges and other - 100
Changes in operating assets and liabilties:
Prepaid expenses and other current assets (110) -
Other assets 165 (242)
Accounts payable and accrued expenses (837) (231)
Income tax payable 272 -
-------- -------
Net cash used by continuing operations (521) (2,015)
Net cash provided by discontinued operations - 2,290
-------- -------
Net cash provided (used) by operating activities (521) 275
-------- -------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Sales of marketable securities, net of purchases 30,695 15,577
Tax payments relating to discontinued operations (22,238)
Purchase of property, plant and equipment:
Continuing operations (43) (648)
Discontinued operations - (3,670)
Restricted investments - discontinued operations - (1,462)
-------- -------
Net cash provided by investing activities 8,414 9,797
-------- -------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Proceeds (repayment) of short-term borrowings:
Continuing operations (1,917) (14,273)
Discontinued operations - 2,700
Purchase of treasury stock (348) -
Repayment of long-term debt:
Continuing operations (45) (86)
Discontinued operations - (802)
-------- -------
Net cash (used) by financing activities (2,310) (12,461)
-------- -------
Increase (decrease) in cash and cash equivalents 5,583 (2,389)
Cash and cash equivalents:
Beginning of period 23,472 4,123
-------- -------
End of period $ 29,055 $ 1,734
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of June 30,
1995, the results of operations and the cash flows for the six-months ended
June 30, 1995 and 1994. These results have been determined on the basis of
generally accepted accounting principles and practices applied consistently
with those used in the preparation of the Company's 1994 Annual Report on
Form 10-K. Certain 1994 amounts have been reclassified to conform to the
1995 presentation. Operating results for the six-months ended June 30,
1995 are not necessarily indicative of the results that may be expected for
the full year. It is suggested that the accompanying consolidated financial
statements be read in conjunction with the financial statements and notes
in the Company's 1994 Annual Report on Form 10-K.
The results of operations and related cash flows for the three and six
months ended June 30, 1994 have been restated to reflect the sale of the
Company's wholly owned subsidiary as described in footnote 5.
2. Cash Equivalents
For the purpose of the consolidated statements of cash flows, short-term
investments purchased with an original maturity date of three months or
less are considered to be cash equivalents. Cash equivalents are recorded
at market value and consist of short-term U.S. Government obligations.
3. Marketable Securities
In 1994, the Company adopted Statement of Financial Accounting Standards
No.115, "Accounting for Certain Investments in Debt and Equity Securities".
No adjustment was required to reflect the adoption of the new standard.
Investments in marketable equity securities, U.S. Government obligations
and corporate bonds are considered available for sale. These investments
are carried at market and adjustments for unrealized holding gains and
losses, net of deferred taxes, are reported as a separate component of
shareholders' equity.
The amortized cost of debt securities classified as available for sale is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such interest and amortization is included in investment income.
The cost of securities sold is based on the specific identification method.
6
<PAGE> 7
GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Investments in Affiliates
Summarized unaudited financial information for Rally's Hamburgers, Inc.,
the Company's 48% (1995) and 38% (1994) owned affiliate, is as follows:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
July 2, 1995 July 3, 1994 July 2, 1995 July 3, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
($ in thousands)
Revenues $49,843 $48,464 $92,313 $91,269
Operating income 1,205 884 212 407
Net loss (1,244) (931) (4,753) (2,793)
Company's share of net loss $ (611) $ (490) $(2,282) $(1,340)
</TABLE>
In 1994, the Company's share of the net loss included the amortization
of excess purchase cost.
5. Discontinued Operations
On October 6, 1994, KCC Delaware, a wholly owned subsidiary of the
Company, sold 100% of the stock of its wholly owned subsidiary Giant
Cement Holding, Inc. (GCHI) through an initial public offering. The net
proceeds of this transaction were $125,822,000 (net of $2,000,000
contributed to GCHI on the date of sale) resulting in a gain of
$76,990,000 before income taxes of $28,767,000. At June 30, 1995 and
December 31, 1994, a receivable of $17,000 and $200,000 respectively,
related to income tax liabilities of GCHI, payable to the Company
pursuant to their Tax Sharing Agreement, is included in other current
assets.
GCHI was engaged in the manufacture and sale of portland and masonry
cements and construction aggregates, and its operating results for the
three and six-month periods ended June 30, 1994 have been included as
discontinued operations in the accompanying consolidated statements of
operations and cash flows.
Total operating revenue and operating income attributable to GCHI for
the three and six-month periods ended June 30, 1994 included in
discontinued operations was $27,264,000 and $5,697,000 and $42,777,000
and $5,154,000, respectively.
6. Earnings per Share
Primary and fully diluted earnings per common share is based upon the
weighted-average common shares outstanding during the respective
periods, adjusted for the dilutive effect of outstanding common stock
options and in 1994, convertible debt. Except for the three-months ended
June 30, 1994, no adjustments for the dilutive effect of the common
stock options and convertible debt were made.
7
<PAGE> 8
GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. Statement of Cash Flow Information
Supplemental disclosures of cash flow information for the six-months
ended June 30:
<TABLE>
<CAPTION>
($ in Thousands) 1995 1994
---- ----
<S> <C> <C>
Cash paid during the periods for:
Interest $ 84 $2,329
Income Taxes 22,364 85
</TABLE>
Supplemental schedule of non-cash investing activity for the six-months ended
June 30, 1995:
($ in Thousands)
The net appreciation of the Company's marketable securities
resulted in the recording of the following non-cash
transactions:
<TABLE>
<S> <C>
Marketable Securities $1,053
======
Deferred Taxes $ 421
Unrealized Holding Gains 632
------
$1,053
======
</TABLE>
8. Related Party Transactions
In February 1995, the Company purchased $10,400,000 principal amount of
Rally's 9.875% Senior Notes Due 2000 ("Senior Notes") at an aggregate
purchase price of $4,796,000. Investment income for the three and
six-month periods ended June 30, 1995 includes $373,000 and $610,000
respectively, relating to the Senior Notes.
9. Contingent Liabilities
In January 1994, class action lawsuits were filed on behalf of the
shareholders of Rally's Hamburgers, Inc. in the United States District
Court, Western District of Kentucky, against Rally's, Burt Sugarman
and the Company, and certain of Rally's other officers and directors.
The Complaints allege violations of the Securities Exchange Act of
1934, among other claims with respect to Rally's common stock and seeks
unspecified damages. On April 15, 1994, Rally's filed a Motion to
Dismiss and Motion to Strike. On April 5, 1995 the court struck
certain provisions of the Complaint but denied Rally's Motion to
Dismiss. In addition, the Court denied plaintiffs' motion for class
certification; the plaintiffs' have renewed this motion, and defendants
intend to oppose class certification. Management is unable to predict
the outcome of this matter at the present time or whether or not
certain available insurance coverages will apply. Rally's and the
Company intend to defend themselves vigorously in this matter.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Revenues for the three and six-month periods ended June 30, 1995 and
1994 increased to $915,000 from $138,000 and $2,025,000 from $469,000,
respectively. The increase resulted from a higher level of investments
in cash equivalents and marketable securities in 1995, due to the sale
of the Company's cement operations in October 1994 and the investment
of the proceeds. However, revenues for the second quarter decreased
$195,000 due to higher investments in equity securities compared to
interest bearing short-term U.S. Government obligations.
For the three and six months ended June 30, 1995 and 1994, interest
costs decreased to $41,000 from $1,165,000 and to $84,000 from
$2,400,000, respectively, primarily as the result of the prepayment in
November 1994 of the Company's 7% Convertible Subordinated Debentures
and 14.5% Subordinated Notes.
For the three and six-months ended June 30, equity in losses in
Rally's, the Company's owned affiliate (1995 - 48% and 1994 - 38%),
increased to $611,000 and $2,282,000 in 1995 from $490,000 and
$1,340,000 in 1994 as a result of the increase in Rally's losses.
The Company did not record a tax benefit in the first quarter of 1995
due to the equity in the loss of its affiliate, Rally's. These losses
would have to be realized through the sale of Rally's common stock or
future Rally's earnings in order for the Company to realize a tax
benefit. The federal income tax benefits for the six months ended June
30, 1994 were recorded at an estimated annual rate of 34%.
Liquidity and Capital Resources
The primary source of cash and equivalents has historically been
generated from operations of the Company's cement business. Since the
sale of the Company's cement operations, liquidity has been provided
through investments and interest income from cash equivalents and
marketable securities.
Net cash used in operations for the six months ended June 30, 1995 was
$521,000 compared to cash provided by operations of $275,000 in the six
months of 1994. The cash use in the first six months of 1995 was
primarily to fund the operations of the Company and pay expenses which
were accrued from the 1994 sale of the cement operations.
Cash provided by investing activities was $8,414,000 for the six months
ended June 30, 1995 compared to cash provided by investing in 1994 of
$9,797,000. The cash generated by investing activities in 1995 was due
to the sales, net of purchases, of marketable securities offset by the
payment of income taxes in the amount of $22,238,000 relating to the
profit on the sale of the Company's cement business. The remaining
proceeds were used to purchase cash equivalents and marketable
securities.
9
<PAGE> 10
Net cash used by financing activities was $2,310,000 for the six months
ended June 30, 1995 compared to net cash used by financing activities
in 1994 of $12,461,000. The cash used in 1995 by financing activities
was for the repayment of short-term borrowings and the purchase of
treasury stock.
The Company continues to investigate and research investment
opportunities to redeploy the cash generated by the sale of the cement
operations. As previously stated, the Company's desire is to acquire
or invest in a company that will provide growth with a stability of
earnings and cash flow. Numerous investment opportunities have been
reviewed and analyzed by the Company's management. Management
continues to make redeployment of its cash a priority.
The Company is disappointed in the performance of its Rally's
Hamburgers, Inc. investment. While Rally's management is working hard
to return the company to profitability, there is no assurance that
performance will improve over the near term or whether any further
write down in the Company's investment will be necessary in the future.
The Company believes its existing cash and investments are sufficient
to meet its working capital needs for the foreseeable future.
10
<PAGE> 11
GIANT GROUP, LTD.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal matters, see Note 9 of the Notes to
Consolidated Financial Statements on page 8 of this Form 10-Q and see
Item 3 "Legal Proceedings" as reported in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
(a) On May 12, 1995, the Company held its 1995 Annual Meeting of
Stockholders.
(b) Not Applicable.
(c) The stockholders approved the following matters:
(1) A vote was conducted by ballot on the election of directors for
the forthcoming year, and the nominees listed below received the vote
of the holders of the number of shares of Common Stock as set forth
below:
<TABLE>
<CAPTION>
Nominee For Withhold Authority
------- --- ------------------
<S> <C> <C>
Burt Sugarman 4,093,421 490,889
Terry Christensen 4,138,653 445,657
David Gotterer 4,138,459 445,851
Robert Wynn 4,137,947 446,363
</TABLE>
(2) Coopers & Lybrand was ratified as the Company's independent
auditors for fiscal 1995 (4,278,609 shares for, 301,190 against, 4,511
abstain).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Earnings per share.
(b) Reports on Form 8-K
During the quarter ended June 30, 1995, the Company did not file any
reports on Form 8-K.
Items 2,3 and 5 are not applicable.
11
<PAGE> 12
SIGNATURE
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 thereunto duly authorized.
GIANT GROUP, LTD. - Registrant
By:/s/ Cathy L. Wood
---------------------------
Cathy L. Wood
Vice President & Treasurer
Chief Financial Officer
Date: August 8, 1995
12
<PAGE> 13
EXHIBIT INDEX
Exhibit 11 - Earnings per share.
Exhibit 27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 11
GIANT GROUP, LTD.
Earnings per share
Three months ended June 30, 1994 *
<TABLE>
<CAPTION>
Earnings per share
Primary Fully Diluted
------- -------------
($ In thousands)
<S> <C> <C>
Income from discontinued operations, net of tax $3,456 $3,456
Add:
Interest expense reduction, net of tax (3) 62 62
Interest expense on subordinated debentures, net of tax 396
------ ------
$3,518 $3,914
====== ======
Net income $1,445 $1,445
Add:
Interest expense reduction, net of tax (3) 62 62
Interest expense on subordinated debentures, net of tax 396
------ ------
$1,507 $1,903
====== ======
(Shares in thousands)
Weighted average number of common shares outstanding ** 6,463 (1) 8,691 (1) (2)
Earnings per share:
Income from discontinued operations, net of tax $0.54 $0.45
Net income $0.23 $0.22
</TABLE>
* For all periods and captions not shown, the loss per share, assuming full
dilution is considered to be the same as primary since the effect of the
common stock equivalents would be antidilutive.
** Actual common shares at June 30, 1994 was 5,180,000.
(1) Includes incremental common shares issuable upon exercise of outstanding
options, if dilutive.
(2) Includes common shares issuable upon conversion of the 7% convertible
subordinated debentures.
(3) Reduction of interest expense, net of tax, on the Company's 14 1/2%
Subordinated Notes assumed retired with the option exercise proceeds in
excess of that amount required to retire 20% of the Company's outstanding
stock.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 29,055,000
<SECURITIES> 17,859,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,714,000
<PP&E> 5,046,000
<DEPRECIATION> 1,615,000
<TOTAL-ASSETS> 74,360,000
<CURRENT-LIABILITIES> 4,095,000
<BONDS> 1,771,000
<COMMON> 69,000
0
0
<OTHER-SE> 67,682,000
<TOTAL-LIABILITY-AND-EQUITY> 74,360,000
<SALES> 0
<TOTAL-REVENUES> 2,025,000
<CGS> 0
<TOTAL-COSTS> 2,218,000
<OTHER-EXPENSES> 2,282,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,000
<INCOME-PRETAX> (2,475,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,475,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,475,000)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</TABLE>
