<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: DECEMBER 18, 1995
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
SUMMIT FAMILY RESTAURANTS INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 87-0264039
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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 JANUARY 23, 1996 THERE
WERE 4,805,902 SHARES OF COMMON STOCK, $ .10 PAR VALUE, OUTSTANDING.
Exhibit Index is on Page 16 of this report.
This report contains 18 pages.
Page 1 of 18
<PAGE> 2
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include Summit
Family Restaurants Inc. and its wholly owned subsidiaries (collectively, the
"Company"). While the financial information in this report is unaudited, in the
opinion of management, all adjustments (which included only normal recurring
adjustments) necessary to present fairly the financial position and results of
operations as of and for the periods indicated have been recorded. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto for the year ended
September 25, 1995, included in the Company's annual report on form 10-K filed
with the Securities and Exchange Commission on December 21, 1995. The results of
operations for the twelve weeks ended December 18, 1995, are not necessarily
indicative of the results to be expected for the full year.
Page 2 of 18
<PAGE> 3
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 18, SEPTEMBER 25,
ASSETS 1995 1995
------ ------------ -------------
(UNAUDITED)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 964,000 $ 1,911,000
Receivables
Short-term portion of notes receivable 190,000 190,000
Other receivables 1,292,000 1,898,000
Inventories 1,520,000 1,411,000
Deferred taxes, net -- 76,000
Prepaid expenses 190,000 199,000
----------- -----------
Total current assets 4,156,000 5,685,000
----------- -----------
Property, buildings and equipment, at
cost, less accumulated
depreciation and amortization 45,736,000 46,797,000
----------- -----------
Real property and equipment under
capitalized leases, at cost, less
accumulated amortization 7,262,000 6,731,000
----------- -----------
Other assets
Notes receivable, net of current portion 2,509,000 2,696,000
Investment in HomeTown Buffet, Inc. - Note 4 1,316,000 6,999,000
Deposits and other - Note 5 1,394,000 827,000
----------- -----------
Total other assets 5,219,000 10,522,000
----------- -----------
Intangible assets, at cost, less
accumulated amortization
Lease acquisition costs 391,000 414,000
Other intangible assets 695,000 735,000
----------- -----------
Total intangible assets 1,086,000 1,149,000
----------- -----------
Total assets $63,459,000 $70,884,000
=========== ===========
</TABLE>
Page 3 of 18
<PAGE> 4
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND DECEMBER 18, SEPTEMBER 25,
STOCKHOLDERS' EQUITY 1995 1995
- -------------------- ------------ -------------
(UNAUDITED)
<S> <C> <C>
Current liabilities
Accounts payable - trade $ 5,775,000 $ 6,772,000
Accrued liabilities
Payroll and related taxes 2,843,000 3,334,000
Sales and property taxes 1,463,000 2,071,000
Rent and other 1,550,000 2,045,000
Current maturities of long-term debt 871,000 2,928,000
----------- -----------
Total current liabilities 12,502,000 17,150,000
----------- -----------
Long-term debt, net of current maturities
Capitalized real property leases 10,176,000 9,795,000
Notes payable 350,000 355,000
----------- -----------
Total long-term debt 10,526,000 10,150,000
----------- -----------
Deferred taxes, net 423,000 1,877,000
----------- -----------
Deferred compensation 1,572,000 1,580,000
----------- -----------
Commitments and contingencies
Stockholders' equity
Preferred stock, $1 par value;
1,000,000 shares authorized;
946,714 shares issued
and outstanding 947,000 947,000
Junior common stock, $.01 par value;
500,000 shares authorized; none outstanding -- --
Common stock, $.10 par value; 10,000,000 shares
authorized; 4,801,102 and 4,798,102 shares
issued 480,000 480,000
Additional paid-in capital 26,403,000 26,389,000
Unrealized gain on investment in HomeTown
Buffet, Inc., net of tax - Note 4 634,000 3,565,000
Retained earnings 9,972,000 8,746,000
----------- -----------
Total stockholders' equity 38,436,000 40,127,000
----------- -----------
Total liabilities and stockholders' equity $63,459,000 $70,884,000
=========== ===========
</TABLE>
Page 4 of 18
<PAGE> 5
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
----------------------------
DECEMBER 18, DECEMBER 19,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Total revenues $26,725,000 $27,263,000
Costs and expenses
Food costs 8,687,000 8,967,000
Labor costs 9,471,000 9,797,000
Occupancy and other expenses 6,584,000 6,537,000
General and administrative expenses 1,805,000 1,833,000
Depreciation and amortization 1,612,000 1,394,000
----------- -----------
Total costs and expenses 28,159,000 28,528,000
----------- -----------
Loss from operations (1,434,000) (1,265,000)
Interest and other income (expense)
Interest expense (281,000) (342,000)
Interest income 71,000 139,000
Gain on sale of HomeTown Buffet, Inc.
stock 3,959,000 --
Gains on sales of restaurants to
franchisees and other 11,000 --
----------- -----------
Total interest and other income
(expense) 3,760,000 (203,000)
----------- -----------
Income (loss) before income taxes 2,326,000 (1,468,000)
Income tax expense (benefit) - Note 6 1,100,000 (592,000)
----------- -----------
Net income (loss) $ 1,226,000 $ (876,000)
=========== ===========
Net income (loss) per common share $ 0.21 $ (0.18)
=========== ===========
Weighted average shares outstanding 5,816,293 4,788,759
</TABLE>
Page 5 of 18
<PAGE> 6
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
--------------------------------
DECEMBER 18, DECEMBER 19,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
Increase (Decrease)
In Cash and Cash Equivalents
Cash flows from operating activities
Net income (loss) $ 1,226,000 $ (876,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 1,612,000 1,394,000
Provision for losses 17,000 --
Gain on sale of HomeTown Buffet, Inc. stock (3,959,000) --
Change in operating assets and liabilities
Decrease in receivables 600,000 2,774,000
Increase in inventory (108,000) (335,000)
Increase in other assets (567,000) (191,000)
Decrease in accounts payable (997,000) (1,430,000)
Increase (decrease) in accrued liabilities (1,479,000) 642,000
Increase (decrease) in net deferred taxes 577,000 (592,000)
----------- -----------
Net cash provided (used) by operating activities (3,078,000) 1,386,000
----------- -----------
Cash flows from investing activities
Sale of short-term investments -- 1,960,000
Acquisition of property, buildings and equipment (312,000) (2,908,000)
Proceeds from sale of HomeTown Buffet, Inc. stock 4,756,000 --
Proceeds from sale of assets -- 630,000
Payments received on notes receivable 33,000 43,000
----------- -----------
Net cash provided (used) by investing activities 4,477,000 (275,000)
Cash flows from financing activities
Proceeds from issuance of common stock 12,000 --
Principal payments on long-term debt
and capital leases (2,358,000) (327,000)
----------- -----------
Net cash used by financing activities (2,346,000) (327,000)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (947,000) 784,000
Cash and cash equivalents at beginning
of period 1,911,000 5,303,000
----------- -----------
Cash and cash equivalents at end of period $ 964,000 $ 6,087,000
=========== ===========
</TABLE>
Page 6 of 18
<PAGE> 7
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
---------------------------
DECEMBER 18, DECEMBER 19,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
Supplemental disclosures of cash flow
information
Cash paid for interest $300,000 $ 344,000
======== =========
Supplemental schedule of noncash
investing and financing
Debt incurred for acquisition of
property, buildings and equipment $677,000 $ --
======== =========
During fiscal 1996 and 1995,
stores were sold to franchisees and
notes receivable were recorded in
exchange for equipment as follows:
Notes receivable $ -- $ 377,000
Gain deferred -- (245,000)
Cash received -- 98,000
-------- ---------
Net book value of equipment sold $ -- $ 230,000
======== =========
</TABLE>
Page 7 of 18
<PAGE> 8
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. FISCAL PERIODS
The Company utilizes a 52/53 week fiscal year which ends on the last Monday in
September. The third quarter of each year contains 16 weeks while the other
three quarters each contain 12 weeks.
2. PRESENTATION
Certain prior year amounts in the unaudited consolidated financial statements
have been reclassified to conform with the current year presentation.
3. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed using the weighted average number
of shares of stock and dilutive common stock equivalents outstanding during each
period.
4. INVESTMENT IN HOMETOWN BUFFET, INC.
On December 18, 1995, the estimated fair value of the Company's 130,000 shares
of HomeTown Buffet, Inc. ("HTBB") common stock was $10.125 per share or $1.3
million. On September 25, 1995, the estimated fair value of the Company's
528,220 shares of HTBB common stock was $13.25 per share or $7.0 million. The
unrealized gain (net of tax) of $0.6 million and $3.6 million at December 18,
1995 and September 25, 1995, respectively, is recorded as a separate component
of stockholders' equity.
5. DEPOSITS AND OTHER
Deposits and other assets at December 18, 1995, includes a $180,000 certificate
of deposit and $700,000 held in an escrow account, both of which serve as
partial security on $2.2 million of letters of credit. The letters of credit are
also secured by certain properties owned by the Company and by the remaining
130,000 shares of HTBB common stock. At September 25, 1995, deposits and other
assets includes a $180,000 certificate of deposit which served as partial
security on $2.2 million of letters of credit.
6. INCOME TAXES
Income tax expense for the twelve week period ended December 18, 1995, includes
an adjustment of $303,000 to fully reserve net deferred tax assets that may not
be realized in the future.
Page 8 of 18
<PAGE> 9
SUMMIT FAMILY RESTAURANTS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES AND SELECTED OPERATING DATA. The following table sets forth, for the
periods indicated, certain information regarding the Company's revenues and
selected operating data.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
---------------------------------
DECEMBER 18, DECEMBER 19,
1995 1994
---------------------------------
<S> <C> <C>
Total revenues $26,725,000 $27,263,000
Percentage change from prior period (2.0)% 12.5%
JB's Restaurants
----------------
Company owned units at end of quarter 79 84
Franchised units at end of quarter 25 22
Company restaurants transferred to franchisees 1 4
Company restaurants converted to Galaxy Diners -- 2
Average weekly sales per unit $ 16,913 $ 17,776
Percentage change from prior period (4.9) 2.9%
Same store sales percentage change
from prior period (6.5)% (0.4)%
Galaxy Diners (a)
-------------
Company owned units at end of quarter 6 3
Restaurants opened -- 2
Average weekly sales per unit $ 23,626 $ 36,141
HomeTown Buffets (a)
----------------
Units operated as a franchisee at end of quarter 16 14
Average weekly sales per unit $ 45,346 $ 47,501
Percentage change from prior period (4.5)% (4.2)%
</TABLE>
(a) Same store percentage change and/or percentage change from prior
period is not presented due to the relatively small number of
restaurants open for the full period.
The decrease in revenues for the twelve week period ended December 18, 1995, as
compared with the comparable period of the prior fiscal year, is primarily the
result of a 6.5% decline in JB's Restaurants same store sales partially offset
by an increase in the number of HomeTown Buffet restaurants and Galaxy Diners.
During the twelve week period ended December 18, 1995, the average sales per
JB's Restaurant decreased 4.9% reflecting a decrease in customer counts per unit
of 8.9% and an increase in the average customer purchase of 4.0%. Same store
sales for JB's Restaurants (sales from JB's Restaurants open during both the
fiscal 1996 and 1995 period) decreased 6.5% reflecting a decrease in customer
counts of 10.3% while the average customer purchase increased 3.8%.
Page 9 of 18
<PAGE> 10
COSTS AND EXPENSES; STATEMENT OF OPERATIONS DATA. The following table sets forth
costs as a percentage of revenues for the periods indicated as well as statement
of operations data:
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
----------------------------
DECEMBER 18, DECEMBER 19,
1995 1994
----------------------------
<S> <C> <C>
Total revenues 100.0% 100.0%
----- -----
Costs and expenses
Food costs 32.5 32.9
Labor costs 35.4 35.9
Occupancy and other expenses 24.7 24.0
General and administrative expenses 6.8 6.7
Depreciation and amortization 6.0 5.1
----- -----
Total costs and expenses 105.4 104.6
----- -----
Loss from operations (5.4) (4.6)
Interest and other income (expense)
Interest expense (1.1) (1.3)
Interest income 0.3 0.5
Gain on sale of HomeTown Buffet,
Inc. stock 14.8 --
Gains on sales of restaurants to
franchisees and other 0.1 --
----- -----
Total interest and other income
(expense) 14.1 (0.8)
----- -----
Income (loss) before income taxes 8.7 (5.4)
Income taxes (benefit) 4.1 (2.2)
----- -----
Net income (loss) 4.6% (3.2)%
===== =====
Effective income tax rate 47.3% 40.3%
===== =====
</TABLE>
FOOD COSTS. The decrease in food costs as a percentage of total revenues for the
twelve week period ended December 18, 1995, as compared with the comparable
period of the prior fiscal year, is primarily the result of improved food costs
in the JB's Restaurants resulting from the increased average customer purchase
and improved operational controls.
LABOR COSTS. The decrease in labor costs as a percentage of total revenues in
the twelve week period ended December 18, 1995, as compared with the comparable
period of the prior fiscal year, is primarily due to lower labor costs in the
HomeTown Buffet restaurants resulting from improved operational execution.
OCCUPANCY & OTHER EXPENSES. The increase in occupancy and other expenses as a
percentage of total revenues for the twelve week period ended December 18, 1995,
as compared with the comparable period of the prior fiscal year, is primarily
due to lower average restaurant sales.
DEPRECIATION AND AMORTIZATION. The increase in depreciation and amortization as
a percentage of total revenues in the twelve week period ended December 18,
1995, as compared with the comparable period of the prior fiscal year primarily
reflects depreciation associated with remodeled JB's Restaurants and Galaxy
Diner conversions and lower average restaurant sales.
INTEREST EXPENSE. The decrease in interest expense as a percentage of total
revenues for the twelve week period ended December 18, 1995, as compared with
the comparable period of the prior fiscal year is due primarily to lower
outstanding debt.
Page 10 of 18
<PAGE> 11
INTEREST INCOME. The decrease in interest income as a percentage of total
revenues for the twelve week period ended December 18, 1995, as compared with
the comparable period of the prior fiscal year is primarily a result of lower
cash and short-term investment balances.
GAIN ON SALE OF HOMETOWN BUFFET, INC. STOCK. During the twelve week period ended
December 18, 1995, the Company sold 398,220 shares of HomeTown Buffet, Inc.
stock resulting in a pre-tax gain of $3,959,000.
INCOME TAXES. The effective income tax rate of 47.3% of pre-tax income for the
twelve week period ended December 18, 1995, is higher than the 40.3% rate for
the comparable period of the prior fiscal year primarily due to an adjustment of
$303,000 to fully reserve net deferred tax assets that may not be realized in
the future.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter, the Company's primary source of working capital was the sale of
HTBB common stock. The Company requires capital principally for replacement of
equipment and maintenance of leasehold improvements and expects to fund these
capital requirements through cash on hand at the end of the quarter and
internally generated funds.
During the twelve week period ended December 18, 1995, cash and cash equivalents
were provided by the following sources:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
In Millions
----------------------------------------------------------------------------------------------------
<S> <C>
Net cash provided (used) by operations $(3.1)
Proceeds from the sale of HTBB common stock 4.8
----------------------------------------------------------------------------------------------------
Total Provided $ 1.7
----------------------------------------------------------------------------------------------------
During the same period, cash and cash equivalents were applied for the following uses:
----------------------------------------------------------------------------------------------------
In Millions
----------------------------------------------------------------------------------------------------
Capital expenditures $ 0.3
Principal payments on long-term debt and capital leases 2.3
----------------------------------------------------------------------------------------------------
Total used $ 2.6
----------------------------------------------------------------------------------------------------
</TABLE>
During the first quarter of fiscal year 1996, cash used exceeded cash provided
by $0.9 million due primarily to a reduction in accounts payable and other
accrued liabilities and the repayment of debt.
The current ratio at the end of the first quarter of fiscal year 1996 was
0.3:1.0 compared to 0.3:1.0 at the end of 1995. Management does not consider the
fact that the current ratio is less than one to be, itself, an indication of a
liquidity problem as the restaurant business has practically no receivables and
minimum inventories that typically turn faster than accounts payable to
suppliers.
As of September 25, 1995, the Company held 528,220 shares of HTBB common stock.
Between September 25, 1995, and December 18, 1995, the Company sold 398,220
shares of HTBB common stock generating net proceeds of $4.8 million resulting in
a pre-tax gain of $4.0 million. $2.1 million of these proceeds were used to
Page 11 of 18
<PAGE> 12
repay the Company's bank loans in full, $700,000 remains in escrow as partial
security against $2.0 million in letters of credit with the remaining $2.0
million retained by the Company. The letters of credit are secured by certain
properties owned by the Company, by the remaining 130,000 shares of HTBB common
stock and by the escrow account noted above. In addition, the Company has a
$180,000 certificate of deposit securing $180,000 in letters of credit.
In August 1994, the Company entered into a master lease agreement (the
"Agreement") to finance equipment for new HomeTown Buffet restaurants. The
Agreement, among other things, required the Company to maintain a minimum
tangible net worth of at least $40 million. On January 5, 1996, the master lease
agreement was amended to require a minimum tangible net worth of $33 million. In
exchange for this reduced covenant, the Company has deposited $365,000 with the
leasing company. This deposit is to be applied against payments due for the
final year of the lease subject to earlier release if certain financial
performance objectives are achieved.
The Company is required to open a minimum of 17 HomeTown Buffet restaurants by
June 30, 1996, in order to maintain its exclusive area development agreement
with HomeTown Buffet, Inc. In addition, the Company is required to open an
additional 5 HomeTown Buffet restaurants by December 31, 1996. Should the
Company not open the required number of HomeTown Buffet restaurants, the Company
would lose its exclusive area rights.
The Company currently has no plans to remodel any JB's Restaurants in 1996. The
Company continues to routinely repair and maintain the Company's restaurants.
Future Galaxy Diner conversions, JB's Restaurants remodels and new HomeTown
Buffet restaurants will be dependent upon the Company improving internal cash
flow and/or finding additional sources of capital including the potential sale
of assets. To the extent that these assets secure certain letters of credit, in
the event the assets are sold, the Company expects that it will maintain cash
collateral for the letters of credit in accordance with the Company's agreement
with the bank. If the Company's earnings do not improve or other sources of
financing are not obtained, the Company would not have the available financing
for capital spending beyond maintenance level capital additions.
On January 24, 1996, an Amended Agreement and Plan of Merger and Reorganization
(the "Merger Agreement") was executed between the Company and CKE Restaurants,
Inc., a Delaware corporation ("CKE"), pursuant to which the Company will merge
with a wholly-owned subsidiary of CKE with the Company being the surviving
entity. Consideration for the merger to be paid to the Company's shareholders
for each share of common stock and for each share of preferred stock will
consist of $2.77 in cash and .1738 shares of CKE common stock, provided that the
average CKE common stock price is between $15.00 per share and $17.00 per share
at the closing. If the average CKE common stock price is higher than $17.00 or
lower than $15.00 at the closing, the exchange ratio will be adjusted
accordingly. If the average CKE common stock price is below $13.25, the exchange
ratio may be adjusted at the option of CKE. If CKE elects to not adjust the
exchange ratio, Summit has the right to terminate the agreement. In addition,
the consideration may be increased if CKE enters into agreements to sell certain
assets and the total consideration to be received by CKE exceeds a specified
level. Any such increase would be allocated one-half to the cash portion of the
consideration and one-half to the common stock portion of the consideration. The
transaction is conditioned upon the Company's shareholders approving the
transaction and the usual and customary conditions to closing, including,
without limitation, accuracy of the parties' representations and warranties,
performance of the parties' covenants and obligations under the Merger Agreement
and obtaining proper consents of third parties as necessary.
Pursuant to certain change of control agreements, the Company may be obligated
to pay benefits to the President and seven Senior Vice Presidents in the event
of a significant change in ownership of the Company. The Merger Agreement
triggered a provision in the change of control agreements that requires the
Company to place in escrow accounts approximately $1.7 million. Payment of
benefits is made upon involuntary
Page 12 of 18
<PAGE> 13
termination of those individuals noted above between the signing of the Merger
Agreement and one year after consummation of the merger or upon the voluntary
termination of employment during the second 90 days following consummation of
the merger. The Company has not yet funded the escrow accounts.
SEASONALITY
The Company's business is seasonal in nature with the spring and summer quarters
being the highest volume periods. The Company's lowest volume periods typically
occur during the fall and winter fiscal quarters.
IMPACT OF INFLATION
Many of the Company's employees are paid hourly rates related to the federal and
state minimum wage laws. Accordingly, increases in the minimum wage could
materially increase the Company's labor costs. Currently, there are no further
scheduled increases in the federal minimum wage. 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.
Page 13 of 18
<PAGE> 14
SUMMIT FAMILY RESTAURANTS INC.
PART II: OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On January 24, 1996, the Company entered into a First Amendment to Agreement and
Plan of Merger and Reorganization with CKE Restaurants, Inc. (the "Amendment").
The Amendment amends the Agreement and Plan of Merger and Reorganization dated
November 30, 1995, between the Company and CKE Restaurants, Inc. (the
"Agreement"). The Agreement and the Amendment provide for the merger of the
Company with a wholly-owned subsidiary of CKE Restaurants, Inc. The execution of
the Amendment and certain of its terms were publicly announced on January 24,
1996, in a news release included as an Exhibit to this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are attached to this report:
<TABLE>
<CAPTION>
Exhibit Description
Number of Exhibit
------- -----------
<S> <C>
20.1 News Release dated January 25, 1996: "Summit Family Restaurants Inc. and CKE
Restaurants, Inc. Amend Merger Agreement"
27 Financial Data Schedule.
</TABLE>
(b) The Company filed a report on Form 8-K with the Securities and
Exchange Commission on December 6, 1995 to report that the
Company and CKE Restaurants, Inc. entered into an Agreement and
Plan of Merger and Reorganization dated November 30, 1995 (the
"Agreement"). The Form 8-K included as an exhibit a News
Release dated December 1, 1995, generally describing the
Agreement.
There were no other items to be reported under Part II of this report.
Page 14 of 18
<PAGE> 15
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.
SUMMIT FAMILY RESTAURANTS INC.
------------------------------
(Registrant)
Date January 31, 1996 By: /s/ David E. Pertl
---------------- ------------------------------
David E. Pertl
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
(A duly authorized officer)
By: /s/ Theodore Abajian
------------------------------
Theodore Abajian
Vice President and Controller
(Principal Accounting Officer)
Page 15 of 18
<PAGE> 16
SUMMIT FAMILY RESTAURANTS INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
Number of Exhibit Number
- ------- ----------- -------
<S> <C> <C>
20.1 News Release dated January 25, 1996: "Summit Family Restaurants Inc. and 18
CKE Restaurants, Inc. Amend Merger Agreement"
27 Financial Data Schedule 19
</TABLE>
Page 16 of 18
<PAGE> 1
EXHIBIT 20.1
NEWS RELEASE
FOR IMMEDIATE RELEASE: Thursday, January 25, 1996
CONTACT: David E. Pertl
Senior Vice President/CFO
(801) 463-5500
SUMMIT FAMILY RESTAURANTS INC. AND CKE RESTAURANTS, INC.
AMEND MERGER AGREEMENT
SALT LAKE CITY, UTAH -- Summit Family Restaurants Inc. (NASDAQ: SMFR) and CKE
Restaurants, Inc. (NYSE: CKR) today announced an amendment to the previously
announced merger agreement.
Under the terms of the amended merger agreement, CKE Restaurants will acquire
all of the outstanding common and preferred stock of Summit Family Restaurants
for a purchase price equal to $2.77 per share in cash and .1738 shares of CKE
common stock provided that the average CKE common stock price is between $15.00
per share and $17.00 per share at the closing. If the average CKE common stock
price is higher than $17.00 or lower than $15.00 at the closing, the exchange
ratio will be adjusted accordingly. If the average CKE common stock price is
below $13.25, the exchange ratio may be adjusted at the option of CKE. If CKE
elects to not adjust the exchange ratio, Summit has the right to terminate the
agreement. At the current average CKE common stock price of $15.70, the total
consideration would be $5.50 per share. This transaction will result in the
merger of Summit Family Restaurants into a newly formed subsidiary of CKE
Restaurants, with Summit being the surviving corporation. The merger, which is
subject to Summit Family Restaurants' shareholder approval is expected to close
by the end of April 1996.
Don McComas, president and chief executive officer of Summit Family Restaurants,
said, "After careful review the Board of Directors has concluded that the merger
consideration represents the best alternative for Summit's shareholders. The
merger will allow our shareholders to receive cash plus an ownership position in
CKE Restaurants, which in their most recent fiscal year have experienced an
extraordinary recovery in a difficult restaurant environment, with substantial
growth in both same-store sales and earnings."
William P. Foley, CKE Restaurants' chairman and chief executive officer, said,
"We remain excited and committed to completing a successful transaction that
will benefit both CKE Restaurants' and Summit Family Restaurants' shareholders."
Summit Family Restaurants operates restaurants under three concepts; 78 company
and 24 franchised family style JB's Restaurants; six Galaxy Diner restaurants;
and 16 HomeTown Buffet restaurants. CKE Restaurants, Inc. is the parent of Carl
Karcher Enterprises, Inc., which, along with its franchisees and licensees,
operates 668 Carl's Jr. quick-service restaurants, primarily located in
California, Nevada, Oregon, Arizona, Mexico and the Pacific Rim.
# # #
Page 17 of 18
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<LEGEND>
This schedule contains summary financial information extracted from the
registrant's balance sheet & statements of operations as of and for the twelve
week period ended December 18, 1995 and is qualified in its entirety by
reference to such financial statements, including the notes thereto.
</LEGEND>
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-26-1995
<PERIOD-END> DEC-18-1995
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947,000
<COMMON> 480,000
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<NET-INCOME> 1,226,000
<EPS-PRIMARY> 0.21
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