<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: May 19, 1997
(Date of earliest event reported)
[LOGO FOR KOO KOO ROO]
KOO KOO ROO, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-19548 22-3132583
(State or other jurisdiction of (Commission (IRS Employer Identification #)
incorporation or organization) File Number)
</TABLE>
11075 SANTA MONICA BOULEVARD
SUITE 225
LOS ANGELES, CA 90025
(Address of principal executive office, including zip code)
(310) 479-2080
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 19, 1997, Koo Koo Roo, Inc. (the "Registrant" or the "Company")
consummated the acquisition of fourteen (14) Hamburger Hamlet restaurants for a
purchase price of $11.7 million, consisting of $9.7 million in cash from the
Registrant's existing working capital and 150,000 shares of common stock, $.01
par value per share (the "Common Stock"), plus fees and expenses of
approximately $700,000. The Company also assumed $250,000 in debt and assumed
real property leases related to the acquired restaurants. The assets purchased
with respect to the acquired restaurants include; equipment, two real estate
parcels, lease deposits, inventory, intellectual property rights, licenses,
restaurant cash funds, administrative material and equipment, records and
documents, and all personal property used in the operation of the restaurants.
The restaurants were purchased from a selling group unaffiliated with
the Registrant comprised of Hamburger Hamlet Restaurants, Inc. and subsidiaries
(collectively, the "Sellers"). The Registrant will account for the acquisition
using the purchase method of accounting.
Pursuant to the terms of the definitive purchase agreement, dated
March 6, 1997, between the Registrant and the Sellers (the "Purchase
Agreement"), the purchase price is subject to adjustment with respect to that
portion of the purchase price paid in shares of the Registrant's Common Stock.
The Purchase Agreement provides that if the market value of the Common Stock is
less than $11.67 per share at a date 18 months after the consummation of the
acquisition (as adjusted for customary antidilutive adjustments, if any, during
such period), the Registrant will either pay cash or issue additional shares of
Common Stock to the Sellers, at the Registrant's option, such that the aggregate
value of such cash or additional shares of Common stock, together with 150,000
shares of Common Stock originally issued in connection with the acquisition,
shall equal $1,750,000, subject to certain limitations in the event the Sellers
transfer during such 18-month period any of the initial 150,000 shares of Common
Stock.
Prior to the transaction described above there were no material
relationships between the Sellers and the Registrant or any of its affiliates,
any director or officer of the Company, or any associate of any such director or
officer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
See the index at Page F-1 of this report for the financial statements of
the Hamburger Hamlet Restaurants for the year ended December 31, 1996
(audited) and the three months ended March 31, 1997 and 1996 (unaudited).
(b) PRO FORMA FINANCIAL INFORMATION
See the index at Page F-1 of this report for the pro forma financial
information of Koo Koo Roo, Inc. and subsidiaries for the year ended
December 31, 1996 and the three months ended March 31, 1997.
(c) EXHIBITS
None
2
<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.
KOO KOO ROO, INC.
By: /s/ Robert F. Kautz
-----------------------
Robert F. Kautz
President and
Chief Financial Officer
Dated: June 3, 1997
3
<PAGE>
FINANCIAL STATEMENTS
INDEX
-----
<TABLE>
<S> <C>
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF KOO KOO ROO, INC.
Introduction........................................................................ F-2
Pro Forma Condensed Combined Statements of Operations for the year ended
December 31, 1996 and three months ended March 31, 1997.......................... F-3
Pro Forma Condensed Combined Balance Sheet as of March 31, 1997..................... F-4
Notes to Pro Forma Condensed Combined Financial Statements.......................... F-5
FINANCIAL STATEMENTS OF THE HAMBURGER HAMLET RESTAURANTS
Report of Independent Certified Public Accountants.................................. F-6
Combined Statement of Net Assets as of December 31, 1996 and
March 31, 1997 (unaudited)....................................................... F-7
Combined Statements of Revenues and Expenses for the year ended December 31, 1996
and for the three months ended March 31, 1997 and 1996 (unaudited)............... F-8
Notes to Combined Financial Statements.............................................. F-9
</TABLE>
F-1
<PAGE>
KOO KOO ROO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
INTRODUCTION
------------
On May 19, 1997, Koo Koo Roo, Inc. (the "Company") consummated the acquisition
of fourteen (14) Hamburger Hamlet restaurants (the "Hamburger Hamlet
Restaurants") for a purchase price of $11.7 million, consisting of $9.7 million
in cash from the Registrant's existing working capital and 150,000 shares of
common stock, $.01 par value per share (the "Common Stock"), plus fees and
expenses of approximately $700,000. The Company also assumed $250,000 in debt
and assumed real property leases related to the Hamburger Hamlet Restaurants.
The assets of the Hamburger Hamlet Restaurants include; equipment, two real
estate parcels, lease deposits, inventory, intellectual property rights,
licenses, restaurant cash funds, administrative material and equipment, records
and documents, and all personal property used in the operation of the Hamburger
Hamlet Restaurants.
The Hamburger Hamlet Restaurants were purchased from a selling group
unaffiliated with the Registrant comprised of Hamburger Hamlet Restaurants, Inc.
and subsidiaries (collectively, the "Sellers"). The Registrant will account for
the acquisition using the purchase method of accounting with the assets acquired
and liabilities assumed recorded at fair values, and the results of the
Hamburger Hamlet Restaurants included in the Company's consolidated financial
statements from the date of acquisition.
Pursuant to the terms of the definitive purchase agreement, dated March 6,
1997, between the Registrant and the Sellers (the "Purchase Agreement"), the
purchase price is subject to adjustment with respect to that portion of the
purchase price paid in shares of the Registrant's Common Stock. The Purchase
Agreement provides that if the market value of the Common Stock is less than
$11.67 per share at a date 18 months after the consummation of the acquisition
(as adjusted for customary antidilutive adjustments, if any, during such
period), the Registrant will either pay cash or issue additional shares of
Common Stock to the Sellers, at the Registrant's option, such that the aggregate
value of such cash or additional shares of Common stock, together with 150,000
shares of Common Stock originally issued in connection with the acquisition,
shall equal $1,750,000, subject to certain limitations in the event the Sellers
transfer during such 18-month period any of the initial 150,000 shares of Common
Stock.
The accompanying unaudited pro forma condensed combined financial statements
illustrate the effects of the acquisition on the Company's financial position
and results of operations. The pro forma condensed combined balance sheet as of
March 31, 1997 is based on the historical balance sheets of the Company and the
Hamburger Hamlet Restaurants as of that date and assumes the acquisition took
place on that date. The pro forma condensed combined statements of operations
for the year ended December 31, 1996 and the three months ended March 31, 1997
are based on the historical statements of operations of the Company and the
Hamburger Hamlet Restaurants for those periods. The pro forma condensed combined
statements of operations assume the acquisition took place on January 1, 1996
and 1997 for the respective periods. The pro forma condensed combined financial
statements may not be indicative of the actual results of the acquisition. In
particular, the pro forma condensed combined financial statements are based on
management's current estimate of the allocation of the purchase price, the
actual allocation of which may differ.
The accompanying condensed combined pro forma financial statements should be
read in connection with the historical financial statements of the Company and
the Hamburger Hamlet Restaurants.
F-2
<PAGE>
KOO KOO ROO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(In thousands except share data)
<TABLE>
<CAPTION>
HAMBURGER
HAMLET PRO FORMA PRO FORMA
YEAR ENDED DECEMBER 31, 1996 KOO KOO ROO RESTAURANTS ADJUSTMENTS COMBINED
- ---------------------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 39,802 $ 30,059 $ 69,861
Cost of sales (27,488) (18,868) (46,356)
----------- ----------- ---------
Gross profit 12,314 11,191 23,505
Operating expenses (22,021) (12,119) 728(2)
553(3) (32,859)
----------- ----------- ---------
Loss before minority interest (9,707) (928) (9,354)
Minority share of net loss 422 - 422
----------- ----------- ---------
Net loss (9,285) (928) (8,932)
Dividends on preferred stock (3,048) - (3,048)
----------- ----------- ---------
Net loss attributable to common stockholders $ (12,333) $ (928) $ (11,980)
=========== =========== =========
Per common share:
Net loss $ (0.60)
Dividends on preferred stock (0.20)
---------
Net loss per common share $ (0.80)
==========
Weighted average number of common shares 15,028,400
==========
THREE MONTHS ENDED MARCH 31, 1997
- ---------------------------------
Revenues $ 12,348 $ 7,023 $ 19,371
Cost of sales (8,509) (4,423) (12,932)
----------- ----------- ---------
Gross profit 3,839 2,600 6,439
Operating expenses (7,363) (2,550) 67(2)
83(3) (9,763)
----------- ----------- ---------
Loss before minority interest and joint ventures (3,524) 50 (3,324)
Equity in net loss of joint ventures (135) - (135)
Minority share of net loss 164 - 164
----------- ----------- ---------
Net income (loss) (3,495) 50 (3,295)
Dividends on preferred stock (723) - (723)
----------- ----------- ---------
Net income (loss) applicable to common stockholders $ (4,218) 50 $ (4,018)
=========== =========== =========
Per common share:
Net loss $ (0.20)
Dividends on preferred stock (0.05)
---------
Net loss per common share $ (0.25)
=========
Weighted average number of common shares 16,305,835
==========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-3
<PAGE>
KOO KOO ROO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1997
(In thousands)
<TABLE>
<CAPTION>
HAMBURGER
HAMLET PRO FORMA PRO FORMA
ASSETS KOO KOO ROO RESTAURANTS ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Cash, cash equivalents and marketable securities $ 29,065 $ 35 $ (10,400) (1) $ 18,700
Receivables 2,143 - 2,143
Inventories 917 236 1,153
Prepaid expenses 668 - 668
Property and equipment 32,997 8,796 (2,670) (1) 39,123
Investments in / advances to related entities 1,949 - 1,949
Cost in excess of fair value of net assets acquired 2,423 (1) 2,423
Intangibles and other assets 6,386 112 (32) (1)
3,500 (1) 9,966
-------- ---------- --------
$ 74,125 $ 9,179 $ 76,125
======== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 4,276 - 4,276
Accrued expenses 1,112 - 1,112
Other accrued liabilities 1,493 250 1,743
Long-term debt 1,615 - 1,615
Minority interest 66 - 66
STOCKHOLDERS' EQUITY -
Preferred stock 12 - 12
Common stock 166 - 2 (1) 168
Additional paid-in capital 100,806 - 1,748 (1) 102,554
Accumulated deficit (34,825) - (34,825)
Equity in net assets acquired - 8,929 (8,929) (1) -
Treasury stock (2) - (2)
Unearned compensation (594) - (594)
-------- ---------- --------
Total stockholders' equity 65,563 8,929 67,313
-------- ---------- --------
$ 74,125 $ 9,179 $ 76,125
======== ========== ========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-4
<PAGE>
KOO KOO ROO, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
NOTE A - The pro forma adjustments to the condensed combined balance sheet are
as follows:
(1) To record the acquisition of the Hamburger Hamlet Restaurants and the
allocation of the purchase price on the basis of the fair values of
the assets acquired and liabilities assumed. The components of the
purchase price and its allocation to the assets and liabilities of the
Hamburger Hamlet Restaurants acquired estimated are as follows:
<TABLE>
<S> <C>
Components of purchase price:
Cash payment to Sellers.............. $ 9,700,000
Acquisition costs.................... 700,000
-----------
Cash portion...................... 10,400,000
Shares of common stock............... 1,750,000
-----------
Total purchase price.............. 12,150,000
Allocation of purchase price:
Equity of net assets acquired........ (8,929,000)
Decrease in property and equipment... 2,670,000
Decrease in liquor licenses.......... 32,000
Leasehold interest................... (3,500,000)
-----------
Cost in excess of net assets acquired.... $ 2,423,000
===========
</TABLE>
NOTE B - The pro forma adjustments to the condensed combined statements of
operations are as follows:
(2) To record reductions in general and administrative expenses to adjust
salaries and wages for personnel being retained by the Company in
connection with the acquisition as well as other costs reductions as
follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1996 March 31, 1997
------------ --------------
<S> <C> <C>
Salaries and wages................... $515,000 $ 40,000
Rent expense......................... 126,000 21,000
Other................................ 87,000 6,000
-------- --------
Net reduction........................ $728,000 $ 67,000
======== ========
</TABLE>
(3) To record adjustments to depreciation and amortization expense based
on the fair value of the depreciable assets acquired and amortization
of the excess of the fair value over net assets acquired as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1996 March 31, 1997
------------ --------------
<S> <C> <C>
Depreciable assets:
Historical depreciation.................. $ 1,690,000 $ 367,000
Depreciation based on acquisition cost... (1,021,000) (255,000)
----------- ---------
Decrease in depreciation................... 669,000 112,000
Amortization of excess of fair value
over net assets acquired................. (116,000) (29,000)
----------- ---------
Net reduction in depreciation and
amortization............................. $ 553,000 $ 83,000
=========== =========
</TABLE>
F-5
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Hamburger Hamlet Restaurants
Los Angeles, California
We have audited the accompanying combined statement of net assets of The
Hamburger Hamlet Restaurants as of December 31, 1996 and the related combined
statements of revenues and expenses for the year ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined net assets of The Hamburger
Hamlet Restaurants as of December 31, 1996 and the results of their combined
operations for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
Los Angeles, California
March 21, 1997
F-6
<PAGE>
THE HAMBURGER HAMLET RESTAURANTS
COMBINED STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------- -----------
(Unaudited)
<S> <C> <C>
Cash $ 14,000 $ 35,000
Inventories 243,000 236,000
Property and equipment, net of
accumulated depreciation (Note 3) 9,095,000 8,796,000
Intangibles (Note 4) 112,000 112,000
----------- ----------
9,464,000 9,179,000
Liabilities assumed (Note 2) (250,000) (250,000)
----------- ----------
Net assets $ 9,214,000 $8,929,000
=========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE>
THE HAMBURGER HAMLET RESTAURANTS
COMBINED STATEMENTS REVENUES AND EXPENSES
<TABLE>
<CAPTION>
Year Ended Three Months Ended March 31,
December 31, ------------------------------
1996 1997 1996
------------- -------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $30,059,000 $7,023,000 $7,051,000
----------- ---------- ----------
Costs and expenses:
Food and beverage costs 8,498,000 1,947,000 2,009,000
Labor and related costs 10,370,000 2,476,000 2,454,000
Operating expenses, including occupancy 6,799,000 1,562,000 1,516,000
General and administrative expenses 3,630,000 621,000 929,000
Depreciation and amortization 1,690,000 367,000 399,000
----------- ---------- ----------
Total costs and expenses 30,987,000 6,973,000 7,307,000
----------- ---------- ----------
Excess of revenues over expenses (expenses over revenues) $ (928,000) $ 50,000 $ (256,000)
=========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE>
THE HAMBURGER HAMLET RESTAURANTS
NOTES TO COMBINED FINANCIAL STATEMENTS
Information with Respect to the Three Months
Ended March 31, 1997 is Unaudited
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying statements of net assets and revenues and expenses
relate to fourteen (14) Hamburger Hamlet Restaurants (the "Hamburger Hamlet
Restaurants"). The Hamburger Hamlet Restaurants operate full-service casual
dining restaurants. On March 21, 1997, Hamburger Hamlet, Inc. and subsidiaries
signed an agreement to sell the net assets of the Hamburger Hamlet Restaurants
to Koo Koo Roo, Inc., a public company. The combined statement of net assets at
December 31, 1996 include certain assets of the restaurant business to be
acquired by Koo Koo Roo, Inc. pursuant to an asset acquisition agreement dated
March 21, 1997 (Note 2). The combined statement of the net assets does not
include assets and liabilities of the business that are not intended to be
transferred to the purchaser under the terms of the asset acquisition agreement.
Accordingly, statements of cash flows are not included or applicable to the
business being sold.
During the period covered by the financial statements, the Hamburger
Hamlet Restaurants were operated as an integral part of Hamburger Hamlet, Inc.'s
overall operations and separate financial statements were not prepared. The
accompanying financial statements include historical revenues and expenses of
the Hamburger Hamlet Restaurants plus allocated corporate overhead costs as
described herein, which are not necessarily indicative of the costs and expenses
which would have resulted if the business had been operated as a separate
company. Corporate overhead general and administrative expenses include only
those costs that relate directly or indirectly to the operation of the Hamburger
Hamlet Restaurants. Costs such as bankruptcy costs and loss on the sale of other
properties not acquired have been excluded. The financial statements have been
prepared to substantially comply with rules and regulations of the Securities
and Exchange Commission for businesses acquired.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the following
Hamburger Hamlet Restaurants being acquired:
LOS ANGELES COUNTY, CA:
Sunset Boulevard
Beverly Drive
Sherman Oaks
Brentwood
Agoura Hills
Pasadena
Hollywood
Sepulveda Boulevard
Valencia
RIVERSIDE COUNTY, CA:
Palm Springs
WASHINGTON DC BELTWAY AREA:
Bethesda
Gaithersburg
Crystal City
Portner's
F-9
<PAGE>
THE HAMBURGER HAMLET RESTAURANTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Information with Respect to the Three Months
Ended March 31, 1997 is Unaudited
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories consisting primarily of food and beverages are stated at
the lower of cost or market. Cost is determined on the first-in, first-out
(FIFO) basis.
EQUIPMENT AND DEPRECIATION
Equipment is recorded at cost and is depreciated over estimated useful
lives of 5 to 15 years using the straight-line method. Leasehold improvements
are recorded at cost and are amortized over the lesser of the estimated useful
lives of the property or the lease term using the straight-line method.
LEASE ACQUISITION COSTS
Lease acquisition costs are being amortized over the term of each
respective lease beginning with the opening month.
REVENUE RECOGNITION
Revenue from restaurants is recognized in the period for which related
food and beverage products are sold.
INTERIM FINANCIAL INFORMATION
The financial data as of March 31, 1997 and for the three month periods
ended March 31, 1997 and 1996 is unaudited but includes all adjustments
(consisting only of normal recurring accruals) that management considers
necessary for a fair presentation of the financial position at such date and the
results of operations for those periods. Operating results for the three months
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending December 31, 1997.
NOTE 2 - ACQUISITION OF NET ASSETS
On March 21, 1997, Koo Koo Roo, Inc., a public company, entered into an
purchase agreement to acquire the Hamburger Hamlet Restaurants for a total
consideration of $11.7 million, consisting of $9.7 million in cash, 150,000
shares of restricted common stock valued at $1,750,000 and assumption of
$250,000 in debt as well as assumption of the related real property leases. The
purchase agreement was approved by the bankruptcy court on April 18, 1997. The
acquisition was completed on May 19, 1997. Ten restaurants are located in
California and four in the Washington, DC Beltway area. The Company financed the
acquisition with cash on hand, although a debt package is presently being
negotiated but has not been committed.
F-10
<PAGE>
THE HAMBURGER HAMLET RESTAURANTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Information with Respect to the Three Months
Ended March 31, 1997 is Unaudited
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------- ------------
<S> <C> <C>
Land $ 238,000 $ 238,000
Leasehold improvements 9,078,000 9,082,000
Equipment 7,819,000 7,880,000
----------- -----------
17,135,000 17,200,000
Accumulated depreciation
and amortization (8,040,000) (8,404,000)
----------- -----------
Net Property and equipment $ 9,095,000 $ 8,796,000
=========== ===========
</TABLE>
NOTE 4 - INTANGIBLES
Intangibles consists of fourteen liquor licenses included in the
acquisition described in Note 2 above.
NOTE 5 - COMMITMENTS
The Hamburger Hamlet Restaurants are leased under long-term operating
leases. Future minimum lease payments under noncancellable operating leases as
of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 (nine months) $1,202,000
1998 1,603,000
1999 1,453,000
2000 1,410,000
2001 1,367,000
Thereafter 6,651,000
</TABLE>
In addition to the above amounts, the leases generally contain
inflation escalation clauses and requirements for the payment of property taxes,
insurance and maintenance expenses, and security deposits and certain leases
call for additional payments based on sales volume. Rent expense amounted to
$2,310,000 for the year ended December 31, 1996 and $539,000 for the three
months ended March 31, 1997.
F-11
