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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) . . . . . . .September 20, 1996
RALLY'S HAMBURGERS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-17980 62-1210077
- ---------------- ---------------------- ----------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
10002 Shelbyville Road, Suite 150
Louisville, Kentucky 40223
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(Address of principal executive offices)
Registrant's telephone number, including area code . . . . . . . (502) 245-8900
Not applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
In April 1996, the NASDAQ Stock Market, Inc. informed Rally's
Hamburgers, Inc., a Delaware Corporation (the "Company"), that it was reviewing
the eligibility of the Company for continued quotation of its stock on the
NASDAQ National Market System ("NNS"). Rule 4450 (a)(3) of the National
Association of Securities Dealers, Inc., provides that an issuer of a NNS
security must have net tangible assets (total assets minus liabilities and
goodwill) of at least $4 million if the issuer has sustained losses from
continuing operations and/or net losses in three of its four most recent fiscal
years (the "Net Tangible Asset Test"). As of the end of the 1995 fiscal year,
the Company had net tangible assets in the net negative amount of $4,598,000,
and had incurred net losses in its last three fiscal years.
On June 13, 1996, a NASDAQ Qualifications Hearing Panel (the "Panel")
granted the Company a temporary waiver of the Net Asset Test through September
30, 1996. The Panel required that the Company make a public filing with the
Securities and Exchange Commission on or before September 30, 1996, which filing
must contain a pro forma balance sheet with a historical basis not older than 45
days and a corresponding statement of operations, and must further evidence
compliance with the Net Tangible Asset Test. This report is filed in compliance
with such requirement of the Panel.
Attached hereto as Exhibit 99.1 is a pro forma balance sheet as of
August 25, 1996, and a pro forma statement of operations for the eight periods
ended August 25, 1996.
Item 7. Financial Statements and Exhibits
The following exhibit is filed as a part of this report.
Exhibit Description
99.1 Pro forma balance sheet as of August 25, 1996,
and pro forma statement of operations for the
eight periods ended August 25, 1996
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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.
Date: September 30, 1996 RALLY'S HAMBURGERS, INC.,
a Delaware corporation
by: /s/ Michael E. Foss
------------------------------------
Michael E. Foss
Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
pro forma statement of operations for the eight
periods ended August 25, 1996
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EXHIBIT 99.1
RALLY'S HAMBURGERS, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As of August 25, 1996
Pro Forma
Adjustments
Historical (Note 3) Pro Forma
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<S> <C> <C> <C>
Current assets $ 7,106,000 $ 10,308,000 A $ 15,314,000
(2,100,000) B
Assets held for sale 2,445,000 2,445,000
Property and equipment, net 72,365,000 72,365,000
Other assets 31,249,000 31,249,000
================ ==================== =================
Total assets $ 113,165,000 $ 8,208,000 $ 121,373,000
================ ==================== =================
Accrued liabilities $ 15,230,000 $ (2,100,000) B $ 13,130,000
Other current liabilities 11,182,000 11,182,000
Senior Notes 62,502,000 62,502,000
Other long term debt 5,015,000 5,015,000
Obligations under capital leases 5,531,000 5,531,000
Other liabilities 6,695,000 6,695,000
---------------- -------------------- -----------------
Total liabilities 106,155,000 (2,100,000) 104,055,000
Stockholders' equity 7,010,000 10,308,000 A 17,318,000
================ ==================== =================
Total liabilities and stockholders' equity $ 113,165,000 $ 8,208,000 $ 121,373,000
================ ==================== =================
The accompanying notes are an integral part of this pro forma balance sheet.
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RALLY'S HAMBURGERS, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Eight Periods Ended August 25, 1996
Pro Forma
Adjustments
Historical (Note 3) Pro Forma
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<S> <C> <C> <C>
Revenues:
Restaurant sales $ 109,881,000 $ $ 109,881,000
--
Franchise revenues and fees 3,907,000 -- 3,907,000
Other 140,000 -- 140,000
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Total revenues 113,928,000 -- 113,928,000
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Costs and expenses:
Restaurant costs of sales 38,869,000 -- 38,869,000
Restaurant operating expenses exclusive of
depreciation and amortization and other
operating expenses shown separately below 51,095,000 -- 51,095,000
General and administrative expenses 10,278,000 -- 10,278,000
Advertising and promotion expenses 6,011,000 -- 6,011,000
Depreciation and amortization 7,061,000 -- 7,061,000
Other charges 754,000 -- 754,000
----------------- ---------------- ----------------
Total costs and expenses 114,068,000 -- 114,068,000
----------------- ---------------- ----------------
Loss from operations (140,000) -- (140,000)
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Other income (expense):
Interest expense (5,829,000) 100,000 C (5,729,000)
Interest income 395,000 -- 395,000
Other (24,000) -- (24,000)
----------------- ---------------- ----------------
Total other (expense) (5,458,000) 100,000 (5,358,000)
----------------- ---------------- ----------------
Income (loss) before income taxes and extraordinary item
(5,598,000) 100,000 C (5,498,000)
Benefit for income taxes (1,386,000) -- (1,386,000)
----------------- ---------------- ----------------
Net income (loss) before extraordinary item $ (4,212,000) $ 100,000 $ (4,112,000)
================= ================ ================
Net loss per share before extraordinary item $ (.20)
================
Weighted average shares outstanding 20,598,000
================
The accompanying notes are an integral part of this pro forma financial statement.
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RALLY'S HAMBURGERS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies--Basis of Presentation -
The accompanying historical financial statements have been prepared by
Rally's Hamburgers, Inc. without audit pursuant to a request from a Nasdaq
Qualifications Hearing Panel of The NASDAQ Stock Market, Inc. ("NASDAQ"). The
request was for pro forma information with a historical basis not older than 45
days indicating compliance with the continuing listing requirements promulgated
by that body for continued listing on the National Market System ("NNM").
Although generally consistent with the rules and regulations of the Securities
and Exchange Commission ("SEC") regarding pro forma financial information, the
statements have been prepared intra-quarter based on the latest available
historical balance sheet (as of August 25, 1996) and the year to date statement
of operations (through August 25, 1996) to satisfy the age parameter specified
by NASDAQ. Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted pursuant to SEC rules and regulations,
although the Company believes the disclosures made are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the historical financial statements and notes thereto
contained in the Company's annual and quarterly filings on Forms 10-K and
10-Q, respectively. Forward looking statements contained herein should be
read in conjunction with the cautionary statements contained in the 10-K.
On January 29, 1996, the Company repurchased, in two transactions, at a
price of $678.75 per $1,000 principal amount, $22 million face value of its 9
7/8% Senior Notes due in the year 2000 from GIANT GROUP, LTD. ("GIANT"). The
repurchase resulted in an extraordinary gain, net of taxes of $1.8 million, of
$4.5 million or $.29 per share. This gain enabled the Company to utilize net
operating loss carry forwards and record a tax benefit during the period of $1.8
million, which is included in Net loss before extraordinary item. The
extraordinary gain has been appropriately excluded from the accompanying
unaudited pro forma condensed statement of operations.
2. Introduction to Pro Forma Information -
In April 1996, NASDAQ informed the Company that it was reviewing the
eligibility of the Company for continued quotation of its stock on the NNM.
There are five criteria that must be substantially met for continued quotation
on the NNM. While the Company then exceeded the requirements on four of the five
tests, it did not meet the test for net tangible assets, which excludes
goodwill. Rule 4450(a)(3) of the National Association of Securities Dealers,
Inc. ("NASD") provides that an issuer of a NNM security must have net tangible
assets (total assets minus liabilities and goodwill) of at least $4 million if
the issuer has sustained losses from continuing operations and/or net losses in
three of its four most recent fiscal years (the "Net Tangible Asset Test"). The
Company has incurred net losses in its last three fiscal years. As of the end of
the 1995 fiscal year, the Company had net tangible assets in the net negative
amount of approximately $4,598,000.
On June 6, 1996 the Company had a hearing before a Nasdaq
Qualifications Hearing panel (the "Panel") with regard to the Company's request
for an exception to the Net Tangible Asset Test. On June 13, 1996, the Panel
granted the Company a conditional exception to the Net Tangible Assets Test
based upon its finding that the Company presented a plan of compliance that was
then in progress, which had a high likelihood of successful completion, and
which could be completed in a reasonable period of time. The Panel determined
that the Company must make a public filing with the SEC and NASDAQ on or before
September 30, 1996, which filing must contain a pro forma balance sheet with a
historical basis not older than 45 days and a corresponding statement of
operations and must further evidence compliance with the Net Tangible Asset
Test, and with all other requirements for listing on the NNM. The Company's plan
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RALLY'S HAMBURGERS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS--CONTINUED
for remedying the net tangible asset deficiency, as well as providing additional
working capital for new store construction, refurbishment of some existing
restaurants as well as for other general corporate purposes, including the
reduction of outstanding indebtedness, included completion of a Shareholders'
Rights Offering (the "Rights Offering").
The Rights Offering contemplated in the Plan was sold only via the
Company's Prospectus dated September 5, 1996, such sale expiring on September
20, 1996. The Offering raised gross proceeds of $10.8 million. The expected net
proceeds of the Offering and the expected liquidation of existing debt of
approximately $2 million have been included in the accompanying unaudited pro
forma consolidated condensed balance sheet and statement of operations. The
Company believes that the pro forma consolidated condensed financial statements
herein demonstrate compliance with the Net Tangible Asset Test.
3. Explanation of Pro Forma Adjustments -
The Pro Forma adjustments to the accompanying historical financial
statements are described below:
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<S> <C> <C>
Adjustment Description Debit (Credit)
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A. Issuance of shares of Common Stock sold in the Rights Offering:
Proceeds from issuance of Common Stock at a price of $2.25 per
share, net of estimated offering expenses of $550,000 $10,308,000
Common stock (482,000)
Additional paid-in capital (9,826,000)
B. Uses of cash:
Payment of debt 2,100,000
Uses of cash (2,100,000)
C. To eliminate interest expense on debt retired with the proceeds from the issuance of
Common Stock in the Rights Offering.
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The Company anticipates that the remaining net proceeds from the Rights
Offering will be used to build new restaurants, refurbish certain existing
restaurants and for other general corporate purposes. However, no adjustments
have been made in these pro forma statements to reflect any anticipated uses of
the proceeds other than the planned payment of debt.
