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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
July 24, 1996
RALLY'S HAMBURGERS, INC.
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(Exact Name of Registrant as specified in Charter)
Delaware 0-17980 62-1210077
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
10002 Shelbyville Road, Suite 150, Louisville, Kentucky 40223
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(Address of principal executive offices) (Zip Code)
(502) 245-8900
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS
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On July 24, 1996, Rally's Hamburgers, Inc. issued a press release with
respect to its operating results for the second quarter of fiscal 1996. A copy
of such press release is attached hereto as Exhibit 99.1 and incorporated herein
by reference.
Item 7. EXHIBITS
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99.1 Press Release dated July 24, 1996.
2
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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.
RALLY'S HAMBURGERS, INC.
July 26, 1996 By: /s/ Michael E. Foss
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Michael E. Foss
Senior Vice President and
Chief Financial Officer
3
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EXHIBIT 99.1
RALLY'S REPORTS PROFIT FOR SECOND QUARTER
LOUISVILLE, Ky., July 24 /PRNewswire/ -- Rally's Hamburgers, Inc. (Nasdaq:
RLLY) announced net income of $111,000 or $.01 per share for the second quarter
ended June 30, 1996. This represents a $1.4 million improvement over the
comparable quarter of the prior year in which the Company lost $1.2 million or
$.08 per share. For the six months ended June 30, 1996, the Company recorded
earnings of $949,000 or $.06 per share compared with a net loss of $4.8 million
or $.30 per share for the prior year period. First quarter and year to date
earnings were favorably impacted by an extraordinary gain, net of tax of $4.5
million or $.29 per share from the early extinguishment of debt.
The Company attributes the year over year improvement in second quarter
results to the impact of the prior closure and/or writedown of poor performing
stores, reduced general and administrative and interest expenses, the initial
impact of cost reduction strategies aimed at reducing food, paper and labor
costs and lower advertising expenses. Total revenues declined by $2.5 million,
to $47.4 million, in the quarter due primarily to a lower number of systemwide
units in operation and to same store sales declines of 1% for Company units and
5% systemwide.
Donald E. Doyle, President and Chief Executive Officer, stated, "This is
our first profitable quarter, excluding extraordinary gains, since the second
quarter of 1993. While the situation at Rally's is clearly challenging and much
remains to be done, I am encouraged by our accomplishments to date and the
outlook for the Company going forward."
"We have made progress on several fronts, including the establishment of a
strategic partnership with the Carl's Jr. chain in California. The first major
benefit of this partnership was the implementation of a management agreement
with Carl's to operate 28 Rally's Company-owned stores in California and Arizona
beginning July 1st. This agreement will provide an immediate positive effect on
our cash flow and allow us to concentrate our efforts in more fully developed
Rally's markets."
"We have taken several actions to improve same store sales growth,
including the appointment of a new advertising agency. Our new ad agency,
Mendelsohn - Zien, is also the agency for the Carl's Jr. chain and has developed
innovative, successful advertising for Carl's that has resulted in unparalleled
same store sales growth for them. I remain very optimistic about the strength of
the Rally's brand and its overall customer appeal and our ability to return to
positive same store sales growth."
Doyle added, "We believe that sustainable improvement in operating earnings
will be driven by fundamental changes in our store level economics. We initiated
important changes designed to drive such improvement. Changes in our overall
procurement program such as renegotiating contracts, selecting alternative
vendors, and making low risk specification changes began influencing our results
by the end of the second quarter. We have identified and implemented specific
changes in staffing levels and labor deployment in the stores which are yielding
significant savings in management and crew labor. These cost reduction actions,
which began late in the second quarter, should favorably influence ongoing cost
performance. The recently announced rights offering, which we expect to complete
by late August, is an important
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additional step which will allow us to modestly accelerate new store development
as well as fund other important initiatives."
The Company ended its second quarter with cash and cash equivalent balances
of approximately $2.7 million essentially flat with the prior quarter after
outlays in the quarter of more than $5 million related to principal and interest
payments on the Company's debt. The Company expects to begin its previously
announced shareholder rights offering within the next week and, while no
assurances can be given as to whether the offering will be fully subscribed, is
optimistic regarding the potential of the offering to improve its overall
liquidity. If fully subscribed, the offering will generate gross proceeds of
over $10 million and an additional $10 million in new capital if the related
common stock warrants are eventually exercised over their four year life.
As of July 23, 1996, the system opened 14 restaurants during the year, of
which 3 were Company-owned and 11 were franchised. The Company closed 3 units
and franchise operators closed 10 units during the year. As of July 23, 1996,
there were 482 Rally's Hamburgers restaurants operating in 19 states.
A registration statement relating to the securities to be offered and sold
in the rights offering has been filed with the Securities and Exchange
Commission but has not yet become effective. The securities to be offered and
sold in the rights offering may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This release
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer
solicitation or sale would be unlawful prior to registration or qualification
under the laws of any such State.
Statements in this release which are not historical facts are "forward
looking" statements and "Safe Harbor" Statements under the Private Securities
Litigation Reform Act of 1995 that involve risks and/or uncertainties, including
but not limited to the impact of continued discounting by the Company's
substantial competitors, success of the Company's advertising and promotion
programs, consumer acceptance of the Company's products, increases in operating
costs, availability of adequate numbers of hourly paid employees, decreases in
the availability of affordable capital resources and other risks documented in
the Company's Securities and Exchange Commission filings.
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RALLY'S HAMBURGERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (A)
(in thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES
Restaurant sales $45,771 $47,861 $86,279 $88,595
Franchise revenues
and fees 1,586 1,982 2,990 3,718
Total revenues 47,357 49,843 89,269 92,313
COSTS AND EXPENSES
Restaurant costs
of sales 16,064 16,127 30,865 30,081
Restaurant operating
expenses exclusive
of depreciation
and amortization and
other operating
expenses shown
separately below 20,260 20,901 40,389 39,631
General & administrative
expenses 3,917 4,466 8,000 9,012
Advertising and
promotion expenses 2,067 3,571 4,915 6,373
Depreciation and
amortization 2,614 3,573 5,302 7,004
Other charges 22 -- 754 --
Total costs and
expenses 44,944 48,638 90,225 92,101
Income (loss) from
operations 2,413 1,205 (956) 212
OTHER INCOME (EXPENSE)
Interest expense (2,146) (2,684) (4,459) (5,275)
Interest income 34 199 379 293
Other (4) 96 (33) 137
Total other (2,116) (2,389) (4,113) (4,845)
Net income (loss) before tax
and extraordinary items 297 (1,184) (5,069) (4,633)
PROVISION (BENEFIT) FOR
INCOME TAXES 186 60 (1,496) 120
Net income (loss) before
extraordinary items 111 (1,244) (3,573) (4,753)
EXTRAORDINARY ITEMS
(net of tax of $1,817) -- -- 4,522 --
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 111 $(1,244) $ 949 $(4,753)
Income (loss) per
common share:
Income (loss) before
extraordinary item $ 0.01 $ (0.08) $ (0.23) $ (0.30)
Extraordinary item -- -- 0.29 --
Net income (loss) $ 0.01 $ (0.08) $ 0.06 $ (0.30)
Weighted average shares
outstanding 15,934 15,589 15,802 15,600
</TABLE>
(A) Unaudited, subject to year-end review.
RALLY'S HAMBURGERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
JUNE 30, 1996 AND DECEMBER 31, 1995
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 (A) 1995
<S> <C> <C>
ASSETS
Current assets $ 7,656 $ 22,182
Assets held for sale - long term 2,445 3,517
Property and equipment, net 73,354 78,683
Notes receivable, less current portion 393 676
Intangibles and other assets 31,079 32,334
Total assets $114,927 $137,392
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 27,036 $ 42,276
Long-term debt 67,623 74,783
Obligations under capital leases,
less current potion 5,603 5,631
Other liabilities 7,016 8,030
Total liabilities 107,278 130,720
Shareholders' equity 7,649 6,672
Total liabilities and shareholders'
equity $114,927 $137,392
</TABLE>
(A) Unaudited, subject to year-end review.
- -0- 7/24/96
/CONTACT: Donald E. Doyle, 502-245-8900/
