<PAGE> 1
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) October 1, 1996
-------------------------------
CKE RESTAURANTS, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-13192 33-0602639
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1200 North Harbor Boulevard, Anaheim, California 92801
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 774-5796
----------------------------
Not Applicable
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 1, 1996, CKE Restaurants, Inc. (the "Company") acquired an
80.0% equity interest in Casa Bonita Incorporated ("Casa Bonita"). Casa Bonita
currently owns and operates 108 Taco Bueno quick-service restaurants located in
Texas (primarily in the Dallas/Ft. Worth area) and Oklahoma (primarily in the
Tulsa and Oklahoma City areas). Casa Bonita also owns and operates two Casa
Bonita restaurants and three Crystal's Pizza and Spaghetti Restaurants. At the
present time, the Company intends to continue operating the restaurants owned
and operated by Casa Bonita.
The acquisition was effected by the purchase by CBI Restaurants, Inc.
("CBI"), a newly-formed corporation in which the Company holds an 80.0% equity
interest, of all of the outstanding capital stock of Casa Bonita from Casa
Bonita Holdings, Inc., which is an indirect subsidiary of Unigate PLC, a
publicly-held London Stock Exchange Company based in the United Kingdom. The
total purchase price paid by CBI for Casa Bonita was $42.0 million, which was
paid in cash and is subject to adjustment. The acquisition was financed in part
by loans to CBI of $9.0 million from the Company, $8.0 million from Fidelity
National Financial, Inc. ("Fidelity") and $5.0 million from Giant Group, Ltd.
The balance of the purchase price, $20.0 million, was financed through the
Company's investment of $16.0 million in cash for an 80.0% equity interest in
CBI, and Fidelity's investment of $4.0 million in cash for the remaining 20.0%
equity interest in CBI. The Company's investments in CBI were funded out of
borrowings under the Company's revolving credit facility. William P. Foley II,
the Company's Chief Executive Officer and Chairman of the Board, serves as the
Chairman of the Board and Chief Executive Officer of Fidelity. In addition,
Daniel D. (Ron) Lane, the Company's Vice Chairman of the Board, and Frank P.
Willey, a director of the Company, serve as directors of Fidelity.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
Independent Auditors' Report
Consolidated Balance Sheets as of June 24, 1996 (unaudited),
April 1, 1996 and April 3, 1995
Consolidated Statements of Earnings for the twelve weeks ended June
24, 1996 (unaudited) and June 26, 1995 (unaudited) and for the
years ended April 1, 1996 and April 3, 1995
Consolidated Statements of Stockholder's Equity for the twelve weeks
ended June 24, 1996 (unaudited) and for the years ended
April 1, 1996 and April 3, 1995
Consolidated Statements of Cash Flows for the twelve weeks ended
June 24, 1996 (unaudited) and June 26, 1995 (unaudited) and for
the years ended April 1, 1996 and April 3, 1995
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
Unaudited Pro Forma Combined Condensed Balance Sheet as of August 12,
1996
Unaudited Pro Forma Combined Condensed Statement of Operations
for the fiscal year ended January 31, 1996
Unaudited Pro Forma Combined Condensed Statement of Operations
for the 28 weeks ended August 12, 1996
Notes to Unaudited Pro Forma Combined Condensed Financial Data
2
<PAGE> 3
(c) Exhibits.
Exhibit Number
10.1 Stock Purchase Agreement, dated as of August 27, 1996, by and
between the Registrant and Casa Bonita Holdings, Inc.
(incorporated by reference to Exhibit 10.1 to the Registrants's
Current Report on Form 8-K dated August 27, 1996). *
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Press Release dated October 2, 1996.
99.2 Financial Statements described in Item 7(a) above.
99.3 Financial Statements described in Item 7(b) above.
- ---------------
* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.
3
<PAGE> 4
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.
CKE RESTAURANTS, INC.
Date: October 15, 1996 By: /s/ JOSEPH N. STEIN
--------------------
Joseph N. Stein,
Senior Vice President and
Chief Financial Officer
4
<PAGE> 5
EXHIBIT INDEX
The following exhibits are attached hereto and incorporated herein by
reference:
SEQUENTIALLY
EXHIBIT NUMBER DESCRIPTION NUMBERED PAGE
- -------------- ----------- -------------
10.1 Stock Purchase Agreement, dated as of August
27, 1996, by and between the Registrant and
Casa Bonita Holdings, Inc. (incorporated by
reference to Exhibit 10.1 to the Registrants'
Current Report as Form 8-K dated August 27,
1996). *
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Press Release dated October 2, 1996.
99.2 Financial Statements described in Item 7(a)
above.
99.3 Financial Statements described in Item 7(b)
above.
- ---------------
* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of
CKE Restaurants, Inc. and Subsidiaries
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56313, 33-55337, 333-12399, 333-12401, 33-53089, 33-31190 and 2-86142)
on Form S-8 of CKE Restaurants, Inc. of our report dated September 23, 1996
(except as to notes 4 and 11 which are as of October 1, 1996) relating to
the consolidated balance sheets of Casa Bonita Incorporated and Subsidiaries as
of April 1, 1996 and April 3, 1995 and the related consolidated statements of
earnings, stockholder's equity and cash flows for the years then ended.
/s/ KPMG PEAT MARWICK LLP
October 16, 1996
Dallas, Texas
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
FOR: CKE Restaurants, Inc.
CONTACT: Suzi Brown
Public Relations Manager
(714) 490-3686
FOR IMMEDIATE RELEASE
CKE RESTAURANTS, INC. ANNOUNCES ACQUISITION OF CASA BONITA
INCORPORATED AND SEMI-ANNUAL CASH DIVIDEND
ANAHEIM, Calif. -- October 2, 1996 -- CKE Restaurants, Inc. (NYSE:CKR) announced
that on October 1, 1996 it completed its acquisition of Casa Bonita Incorporated
from a subsidiary of Unigate PLC, a publicly held London Stock Exchange company
based in the United Kingdom.
Under the purchase agreement, CKE assigned its rights to a new entity,
CBI Restaurants, Inc., of which CKE will hold an 80 percent interest in the Casa
Bonita Incorporated restaurant concepts. CBI Restaurants, Inc. paid $42 million
in cash for Casa Bonita Incorporated's 109 Taco Bueno quick-service Mexican
restaurants, two Casa Bonita theme restaurants and three Crystal's pizzerias.
This acquisition was financed by short-term loans to CBI Restaurants, Inc. of $9
million from CKE, $8 million from Fidelity National Financial, Inc., and $5
million from GIANT GROUP, LTD. The balance of the purchase price, which is equal
to $20 million, will form the equity of CBI Restaurants, of which CKE will
maintain an 80 percent ownership interest and Fidelity National Financial, Inc.
will hold the remaining 20 percent stake. CKE, through CBI Restaurants, Inc.,
will be responsible for operating the restaurants.
--MORE--
<PAGE> 2
CKE Restaurants
Page 2
Tom Thompson, president and chief operating officer of CKE Restaurants,
commented, "I'm extremely excited about the acquisition of Casa Bonita
Incorporated and am looking forward to working with a strong management team
led by Frank Morales, executive vice president. We believe the Taco Bueno chain
provides significant growth opportunity, as demonstrated by their year-to-date
same store sales growth of 8 percent and outstanding store level margins,
currently at 18 percent. The purchase of Casa Bonita Incorporated also presents
CKE Restaurants with an opportunity to expand into Texas and Oklahoma."
CKE also announced that its board of directors has declared a $.04 per
share semi-annual dividend, payable on October 25, 1996, to stockholders of
record on October 11, 1996.
CKE Restaurants, Inc. is the parent of Carl Karcher Enterprises, Inc.,
and Summit Family Restaurants Inc. Carl Karcher Enterprises, along with its
franchisees and licensees, operates approximately 665 Carl's Jr. and 27 Rally's
quick-service restaurants, primarily located in California, Nevada, Oregon,
Arizona, Mexico and the Pacific Rim. Summit Family Restaurants Inc. has
restaurant operations in nine western states including 76 company-operated and
24 franchised JB's Restaurants, 6 Galaxy Diner restaurants and 16 HomeTown
Buffet restaurants.
# # #
<PAGE> 1
EXHIBIT 99.2
CASA BONITA INCORPORATED AND
SUBSIDIARIES
Consolidated Financial Statements
April 1, 1996 and April 3, 1995
(With Independent Auditors' Report Thereon)
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Casa Bonita Incorporated:
We have audited the accompanying consolidated balance sheets of Casa Bonita
Incorporated and subsidiaries as of April 1, 1996 and April 3, 1995 and the
related consolidated statements of earnings, stockholder's equity, and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Casa Bonita
Incorporated and subsidiaries as of April 1, 1996 and April 3, 1995 and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Dallas, Texas
September 23, 1996, except
as to notes 4 and 11 which
are as of October 1, 1996
<PAGE> 3
CASA BONITA INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
June 24, 1996 (unaudited), April 1, 1996 and April 3, 1995
(In thousands, except share and per share data)
<TABLE>
ASSETS June 24, 1996
(unaudited) April 1, 1996 April 3, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current assets:
Cash $ 993 $ 1,338 $ 1,145
Receivables:
Trade accounts 76 18 109
Affiliates, net (notes 4 and 10) 16,981 14,800 11,128
Inventories 707 714 742
Prepaid expenses and other current assets 114 179 156
Deferred income taxes (note 7) 1,328 1,328 1,368
------- ------- -------
Total current assets 20,199 18,377 14,648
Property and equipment, net (note 2) 35,124 35,804 39,118
Deferred income taxes (note 7) 327 327 117
Other assets (note 6) 456 457 386
------- ------- -------
$56,106 $54,965 $54,269
======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments:
Long-term debt (note 4) $ 262 $ 262 $ 236
Capital lease obligations (note 8) 135 130 114
Accounts payable 1,613 1,038 1,673
Accrued liabilities (note 3) 4,337 4,496 5,618
Reserve for restaurant closures (note 5) 1,393 1,396 421
Income taxes payable 1,290 1,066 401
------- ------- -------
Total current liabilities 9,030 8,388 8,463
Long-term debt, less current installments (note 4) 31,326 31,326 31,588
Capital lease obligations, less current installments (note 8) 1,233 1,267 1,399
Other long-term liabilities (note 5) 421 421 355
------- ------- -------
Total liabilities 42,010 41,402 41,805
------- ------- -------
Stockholder's equity:
Common stock, $.01 par value. Authorized 10,000,000 shares;
issued and outstanding 434,480 shares 4 4 4
Additional paid-in capital 7,778 7,778 7,778
Retained earnings 6,314 5,781 4,682
------- ------- -------
Total stockholder's equity 14,096 13,563 12,464
Commitments and contingencies (notes 8 and 9)
------- ------- -------
$56,106 $54,965 $54,269
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
CASA BONITA INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Earnings
12 week periods ended June 24, 1996 (unaudited) and June 26, 1995
(unaudited) and the years ended April 1, 1996 and April 3, 1995
(In thousands)
<TABLE>
<CAPTION> June 24, 1996 June 26, 1995
(unaudited) (unaudited) April 1, 1996 April 3, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $19,927 $18,875 $80,381 $80,763
------- ------- ------- -------
Restaurant costs and expenses:
Cost of sales 5,649 5,242 22,392 22,452
Operating expenses 10,847 10,364 43,507 43,785
Depreciation, amortization and accretion 964 1,056 4,419 4,686
Provision for restaurant closures (note 5) -- -- 1,275 421
------- ------- ------- -------
Total restaurant costs and expenses 17,460 16,662 71,593 71,344
------- ------- ------- -------
General and administrative expenses (note 10) 923 988 4,409 4,383
------- ------- ------- -------
Operating income 1,544 1,225 4,379 5,036
Interest expense (notes 2 and 4) 692 739 3,180 3,027
Other income, net (note 10) (8) (16) (409) (226)
------- ------- ------- -------
Earnings before income taxes 860 502 1,608 2,235
Income tax expense (note 7) 327 205 509 829
------- ------- ------- -------
Net earnings $ 533 $ 297 $ 1,099 $ 1,406
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
CASA BONITA INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
12 week period ended June 24, 1996 (unaudited) and the
years ended April 1, 1996 and April 3, 1995
(In thousands)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at March 28, 1994 $ 4 $7,778 $3,276 $11,058
Net earnings -- -- 1,406 1,406
--- ------ ------ -------
Balance at April 3, 1995 4 7,778 4,682 12,464
Net earnings -- -- 1,099 1,099
--- ------ ------ -------
Balance at April 1, 1996 4 7,778 5,781 13,563
Net earnings (unaudited) -- -- 533 533
--- ------ ------ -------
Balance at June 24, 1996
(unaudited) $ 4 $7,778 $6,314 $14,096
=== ====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
CASA BONITA INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
12 weeks ended June 24, 1996 (unaudited) and June 26, 1995 (unaudited)
and the years ended April 1, 1996 and April 3, 1995
(In thousands)
<TABLE>
<CAPTION>
June 24, 1996 June 26, 1995
(unaudited) (unaudited) April 1, 1996 April 3, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 533 $ 297 $ 1,099 $ 1,406
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, amortization and accretion 964 1,056 4,419 4,686
Gain on disposition of assets -- -- (362) (26)
Provision for restaurant closures -- -- 1,275 421
Deferred income taxes -- (719) 171 683
Changes in assets and liabilities:
Receivables -- trade (58) (42) 91 134
Inventories 7 4 28 (29)
Prepaid expenses and other current assets 65 (19) (23) 318
Other assets 1 1 (71) 424
Accounts payable 575 (122) (635) (1,277)
Accrued liabilities (159) 364 (1,122) (1,569)
Income taxes 224 (386) 665 (1,528)
Other long-term liabilities (3) (4) 66 355
------- ------ ------- -------
Net cash provided by operating activities 2,149 430 5,601 3,998
------- ------ ------- -------
Cash flows from investing activities:
Additions to property and equipment (284) (411) (1,390) (3,968)
Proceeds from sales of assets -- -- 5 129
------- ------ ------- -------
Net cash used in investing activities (284) (411) (1,385) (3,839)
------- ------ ------- -------
Cash flows from financing activities:
Payments of long-term debt obligations -- -- (236) (213)
Payments of capital lease obligations (29) (28) (115) (228)
Advances (to) from affiliate (2,181) (1) (3,672) 167
------- ------ ------- -------
Net cash used in financing activities (2,210) (29) (4,023) (274)
------- ------ ------- -------
Net increase (decrease) in cash (345) (10) 193 (115)
Cash at beginning of year 1,338 1,145 1,145 1,260
------- ------ ------- -------
Cash at end of year $ 993 $1,135 $ 1,338 $ 1,145
======= ====== ======= =======
Supplemental cash flow information:
Interest paid, net of amount capitalized $ 1,963 $1,800 $ 3,039 $ 2,555
======= ====== ======= =======
Income taxes paid, net of refunds $ -- $ -- $ 792 $ 1,735
======= ====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 1, 1996 and April 3, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Casa Bonita
Incorporated and subsidiaries (collectively, the Company). All significant
intercompany transactions and balances have been eliminated in
consolidation.
The Company is a subsidiary of Casa Bonita Holdings, Inc. (CBHI - formerly
Black-eyed Pea Holdings, Inc.), which is wholly owned by Casa Bonita
Restaurants, Inc. (CBRI) and operates 115 restaurants as of April 1, 1996,
primarily located in Texas and Oklahoma.
DEFINITION OF FISCAL YEAR
The Company's fiscal year ends on the Monday closest to March 31. Fiscal
years 1996 and 1995 are comprised of fifty-two and fifty-three weeks,
respectively.
INVENTORIES
Inventories, consisting mainly of food, beverages and supplies, are stated
at the lower of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
is provided for in amounts sufficient to relate the cost of depreciable
assets to operations over their estimated useful lives (see note 2),
principally on a straight-line basis for financial reporting purposes,
while accelerated methods are used for tax purposes. Leasehold
improvements are amortized over the lives of the respective leases or the
service lives of the improvements, whichever is shorter. Lease renewal
option periods are included in determining leasehold improvement useful
lives when, in management's opinion, such renewal options will be
exercised.
Leasehold interests are amortized on a straight-line basis over the
remaining life of the leases.
Repairs and maintenance are charged to operations as incurred. Remodeling
costs are generally capitalized.
PREOPENING COSTS
Labor costs and costs of hiring and training personnel and certain other
costs relating to the opening of new restaurants are expensed as incurred.
INCOME TAXES
The Company files a consolidated U.S. federal income tax return with CBRI
and its subsidiaries. The Company computes federal income taxes on a
separate return basis.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
1
<PAGE> 8
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
ADVERTISING EXPENSES
The Company expenses advertising production costs and media costs as
incurred. Advertising expenses were approximately $4,917,000 and
$4,437,000 during fiscal years 1996 and 1995, respectively.
USE OF ESTIMATES
The preparation of the consolidated 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 consolidated financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of June 24, 1996 and for the 12
week periods ended June 24, 1996 and June 26, 1995 are unaudited. In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Certain information and footnote disclosure normally included in
the consolidated financial statements have been condensed or omitted from
the interim consolidated financial statements. The results for the interim
period ended June 24, 1996 are not necessarily indicative of the results to
be obtained for the full year.
(2) PROPERTY AND EQUIPMENT
A summary of property and equipment and the range of useful lives used in
the calculation of depreciation and amortization follows (in thousands):
<TABLE>
<CAPTION>
USEFUL LIFE RANGE APRIL 1, 1996 APRIL 3, 1995
----------------- --------------- -------------
<S> <C> <C> <C>
Land $14,606 $ 14,606
Buildings and leasehold improvements 5 to 20 years 56,995 57,449
Equipment, furniture and fixtures 2 to 15 years 24,069 24,904
Leasehold interest 5 to 20 years 3,965 3,965
Construction-in-progress 24 31
Furniture and equipment held for
future restaurants 24 26
------------- -------------
99,683 100,981
Less accumulated depreciation and
amortization 63,879 61,863
------------- -------------
$35,804 $ 39,118
============= =============
</TABLE>
Leasehold interests represent the present value of favorable operating lease
terms at the dates certain subsidiaries were acquired.
Capitalized interest related to construction-in-progress was approximately
$77,000 in fiscal year 1995 (none in fiscal year 1996).
2
<PAGE> 9
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Labor and related costs $1,700 $1,652
Insurance 1,982 3,311
Sales taxes 423 193
Other 391 462
------------- -------------
$4,496 $5,618
============= =============
</TABLE>
(4) LONG-TERM DEBT
A summary of long-term debt follows (in thousands):
<TABLE>
<CAPTION>
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Note payable to CBHI, at 11% interest, originally
payable in 20 annual installments of principal
and interest through maturity date, March 20, 2012 $ 9,030 $ 9,266
Note payable to CBHI, interest payable at prime
rate (8.25% at April 1, 1996), principal and
interest originally payable at maturity, April 1, 1997 22,558 22,558
------------- -------------
31,588 31,824
Less current installments 262 236
------------- -------------
$31,326 $31,588
============= =============
</TABLE>
In connection with the sale of the Company (see note 11), both of the above
notes were contributed to the Company after offsetting the affiliate
receivable.
Interest incurred on the notes payable to CBHI was approximately $2,995,000
in fiscal year 1996 and $2,863,000 in fiscal year 1995. The accrued
interest on these notes was approximately $1,983,000 and $1,821,000 at
April 1, 1996 and April 3, 1995, respectively, and such amounts are netted
against receivables due from affiliates in the consolidated balance sheets.
The fair values of the notes payable to CBHI are estimated based on the
amount of future cash flows discounted using the Company's current
borrowing rate for loans of comparable maturity. The estimated fair value
of the note payable to CBHI maturing on March 20, 2012
3
<PAGE> 10
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
approximates $10,586,000 at April 1, 1996. The carrying amount of the
$22,558,000 note payable to CBHI approximates estimated fair value at
April 1, 1996. The carrying values of other financial instruments
including cash, receivables and payables approximate fair values because of
the short maturity of those instruments.
(5) RESERVE FOR RESTAURANT CLOSURES
The Company periodically evaluates for closure restaurants which are
generally unprofitable and, in the opinion of management, are unlikely to
become profitable or meet earnings expectations. Upon making this
determination and committing the Company to a closure plan for such
restaurants, a reserve for restaurant closures is recorded to recognize the
estimated exit costs associated with the planned closings, including the
write-off of net assets (net of estimated salvage value), operating costs
from the estimated closing date through the estimated date of disposition,
and other qualifying disposal costs. The reserve for restaurant closures
is presented as a current liability as determined by Company management
based on projected restaurant closure dates and costs to be incurred.
During the year ended April 1, 1996, the Company charged to operations
$1,275,000 to provide for costs of closing two Taco Buenos, one Rigatony's
and one Crystal's restaurant. For the year ended April 1, 1996, revenues
for the restaurants identified for closure approximate $1,823,000. During
the year ended April 3, 1995, the Company charged to operations $421,000 to
provide for the costs of closing one Taco Bueno and one Crystal's
restaurants.
(6) EMPLOYEE RETIREMENT PLANS
CBHI has a qualified defined contribution retirement plan covering eligible
employees of CBHI and subsidiaries who have reached the age of twenty-one
and completed one year of service. On April 1, 1990, CBHI and subsidiaries
adopted a nonqualified defined contribution retirement plan for highly
compensated employees (HCE Plan), as defined. Under these plans, the
Company makes discretionary contributions each year. Expense charged in
the form of contributions by the Company for these plans for the years
ended April 1, 1996 and April 3, 1995 aggregated approximately $146,000 and
$242,000, respectively.
The Company has a Rabbi Trust to fund HCE Plan benefits and accrued
benefits are included in other long-term liabilities. As of April 1, 1996
and April 3, 1995, assets of the trust aggregated approximately $324,000
and $258,000 and are included in other assets, respectively. Assets of the
trust are primarily invested in equities and fixed income instruments.
On April 1, 1990, a subsidiary of CBRI adopted a nonqualified defined
benefit plan (SERP Plan) in order to supplement retirement benefits of
specified employees. The benefits are based on years of service and the
employees' average annual earnings, as defined, and are reduced by certain
other retirement benefits. The net periodic pension cost is funded on an
annual basis. The Company's allocated portion of the net periodic pension
expense (income) was approximately $(6,000) and $70,000 in fiscal years
1996 and 1995, respectively. An allocated curtailment gain of
approximately $60,000 in 1996 (none in 1995) is reflected in net periodic
pension income for fiscal year 1996.
In addition to the above retirement benefits, the Company provides certain
health care and life insurance benefits to certain active employees.
Postretirement benefits are not provided by the Company. The health care
benefits in excess of certain limits and the life insurance benefits are
insured. The Company recognizes the cost of providing these benefits by
expensing
4
<PAGE> 11
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
the insurance premiums and estimated costs of claims incurred. The cost of
providing these benefits for the Company's active employees was
approximately $1,329,000 in fiscal year 1996 and $622,000 in fiscal year
1995. At April 1, 1996, there were approximately 369 active full-time
employees receiving the benefits.
(7) INCOME TAXES
Components of income tax (benefit) expense are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Current:
Federal $ 669 $1,488
State 11 24
Deferred - federal (171) (683)
------------ ------------
Total $ 509 $ 829
============ ============
</TABLE>
Actual income tax expense differs from the "expected" income tax expense
(computed by applying the U.S. federal corporate tax rate of 35% to
earnings before income taxes for the years ended April 1, 1996 and April 3,
1995) as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Computed "expected" income tax expense $563 $782
State income taxes, net of federal benefit 7 16
Targeted jobs tax credit -- (80)
FICA tax on tips credit (20) (20)
Other, net (41) 131
------------ ------------
Actual income tax expense $509 $829
============ ============
</TABLE>
The tax effects of the primary temporary differences giving rise to the
deferred federal income tax assets and liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Deferred tax assets:
Reserve for self-insurance in excess of claims
paid $ 684 $1,157
Deferred lease liabilities 688 698
Provision for restaurant closures 577 147
Vacation accrual 128 121
Accrued pension and profit sharing 161 147
------------- -------------
Total deferred tax assets $2,238 $2,270
============= =============
</TABLE>
5
<PAGE> 12
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<S> <C> <C>
Deferred tax liabilities:
Basis in property and equipment $ 458 $ 673
Miscellaneous items 125 112
------------- -------------
Total deferred tax liabilities 583 785
------------- -------------
Net deferred tax asset $1,655 $1,485
============= =============
</TABLE>
Included in the consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Current deferred tax asset $1,328 $1,368
Noncurrent deferred tax asset 327 117
------------- -------------
Net deferred tax asset $1,655 $1,485
============= =============
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Realization of the Company's deferred tax
assets (in excess of deferred tax liabilities) is dependent upon the
generation of future taxable income. Management believes the Company will
continue to generate taxable income in the future and, accordingly,
management has concluded on a more likely than not basis that net deferred
tax assets will be realized.
(8) LEASES
At April 1, 1996, the Company operates 44 restaurants which are leased
under operating leases and 9 under capital leases. Administrative offices
(see note 10) and certain equipment are also leased.
CAPITAL LEASES
The Company leases certain property under various leases which are
classified as capital leases. These leases cover initial periods of three
to twenty years and substantially all of these leases contain renewal
options of five to ten years.
Property under capital leases included in property and equipment by major
class is as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Buildings and leasehold improvements $2,120 $2,220
Less accumulated depreciation
and amortization 1,384 1,391
------------- -------------
$ 736 $ 829
============= =============
</TABLE>
6
<PAGE> 13
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
OPERATING LEASES
The Company leases certain restaurant facilities, administrative offices,
and certain equipment under operating leases covering initial periods of
three to twenty years and substantially all of real property leases contain
renewal options of five to ten years. In addition to fixed lease
obligations, the Company pays a percentage of sales for various restaurants
and additional costs for property taxes and certain other expenses. A
summary of rental expense for all operating leases follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
<S> <C> <C>
Minimum rentals $1,299 $1,353
Contingent rentals 96 94
------ ------
$1,395 $1,447
====== ======
</TABLE>
COMMITMENTS
The present value of capital lease payments and the future minimum lease
payments under operating leases with an initial or remaining noncancellable
lease term in excess of one year at April 1, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
Fiscal year:
1997 $ 298 $1,387
1998 298 1,244
1999 299 1,209
2000 274 1,041
2001 188 929
Later years 1,223 3,268
------------ --------------
Total minimum lease payments 2,580 $9,078
==============
Less amounts representing interest 1,183
------------
Present value of minimum lease payments 1,397
Less current installments 130
------------
$1,267
============
</TABLE>
7
<PAGE> 14
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) CONTINGENCIES
The Company is engaged in various legal proceedings and has certain
unresolved claims pending. The ultimate liability, if any, for the
aggregate amounts claimed cannot be determined at this time. Management of
the Company, based upon consultation with legal counsel, is of the opinion
that there are no matters pending or threatened which are expected to have
a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
(10) TRANSACTIONS WITH AFFILIATES
The Company's corporate administrative functions, including accounting and
data processing, are combined with the administrative functions of an
affiliate. The cost of these administrative functions is allocated to the
companies in proportion to the budgeted net revenues of each company.
Management believes this allocation method is reasonable; however, such
allocated costs may not necessarily be indicative of the cost of obtaining
such services if the Company operated on a stand alone basis. General and
administrative expenses include approximately $3,907,000 in fiscal year
1996 and $3,905,000 in fiscal year 1995 of these allocated expenses.
Included in these allocated expenses is office rent expense which
approximated $675,000 in fiscal year 1996 and $621,000 in fiscal year 1995.
The Company participates in a cash sharing arrangement with affiliates,
whereby cash is combined for investing or borrowing purposes. This
arrangement resulted in a net affiliates receivable (net of accrued
interest) for the Company at April 1, 1996 and April 3, 1995. Funding
activities under this arrangement bear interest at the prime rate. The
Company recorded interest income on a net basis of approximately $151,000
in fiscal year 1996 and $98,000 in fiscal year 1995 under this arrangement
(included in other income, net in the consolidated statements of
operations).
Effective April 1, 1994, the board of directors of CBRI adopted the 1994
Stock Appreciation Rights Plan (the Plan). The Plan provides for the
granting of stock appreciation rights (SARs) to key employees of CBRI and
subsidiaries subject to certain conditions and limitations, as defined by
the Plan. The Plan provides, in the aggregate, a maximum of 1,780,000
SARs. SARs permit the option holder to surrender an exercisable SAR for an
amount equal to the excess of the value assigned to a share of common stock
of CBRI over the value assigned to the SAR as of the grant date. The value
of a share of common stock of CBRI is to be determined by an independent
valuation two times per fiscal year. A summary of SAR activity follows (in
thousands):
8
<PAGE> 15
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
NUMBER OF
SARS
---------
<S> <C>
Issued 1,422
Forfeited (122)
-----
Outstanding at April 3, 1995 1,300
Issued 190
Forfeited (7)
-----
Outstanding at April 1, 1996 1,483
=====
</TABLE>
The outstanding SARs vest equally on each of the first four anniversaries
of the date of grant, and 677,000 are vested at April 1, 1996. All SARs
which have not been exercised will expire ten years from the date of grant.
No expense was incurred or allocated to the Company for the Plan during
fiscal years 1996 and 1995 as the value assigned to a share of common stock
of CBRI during such fiscal years did not exceed the value assigned to the
SARs as of the respective grant dates.
(11) SALE OF COMPANY
On August 27, 1996, CBHI entered into a Stock Purchase Agreement (the
Agreement) with CKE Restaurants, Inc., an unrelated third party, to sell
CBHI's interest in the Company. The final closing of the sale occurred on
October 1, 1996 at which time CBI Restaurants, Inc., a newly-formed
corporaton in which CKE Restaurants, Inc. holds an 80.0% equity interest,
exchanged $42 million cash for CBHI's interest in the Company. Any
obligation associated with the SAR's will not be transferred to CBI
Restaurants, Inc. The terms of the Agreement will substantially affect the
Company's current affiliate debt and cash sharing arrangements as well as
the availability of existing corporate administrative facilities shared by
the Company.
9
<PAGE> 1
EXHIBIT 99.3
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following Unaudited Pro Forma Combined Condensed Financial Statements
are based upon the consolidated financial statements of the Company and are
adjusted to give effect to the acquisitions of Casa Bonita Incorporated and
subsidiaries ("Casa Bonita") and Summit Family Restaurants Inc. and
subsidiaries ("Summit") by the Company (the "Acquisitions").
The Company acquired an 80.0% equity interest in Casa Bonita on October 1,
1996. Casa Bonita currently operates 108 Taco Bueno restaurants located in Texas
and Oklahoma. The acquisition was effected by CBI Restaurants, Inc. ("CBI"), a
newly-formed corporation in which the Company holds an 80.0% equity interest.
CBI paid $42.0 million in cash, which was financed by short-term loans of $9.0
million from the Company, $8.0 million from Fidelity National Financial, Inc.
("Fidelity"), and $5.0 million from Giant Group, Ltd. The balance of the
purchase price, $20.0 million, was financed through the Company's investment of
$16.0 million in cash for an 80.0% interest in CBI, and Fidelity's investment of
$4.0 million in cash for the remaining 20.0% interest in CBI. The Company's
investments in CBI were funded out of borrowings in the principal amount of
$25.0 million under the Company's credit facility.
On July 15, 1996, the Company acquired Summit for a total purchase price of
$29.1 million, of which $17.7 million was paid in cash and the balance was paid
by the issuance of 501,388 shares of the Company's Common Stock.
The Unaudited Pro Forma Combined Condensed Balance Sheet as of August 12,
1996 gives effect to the Casa Bonita acquisition as if it had occurred on such
date and was prepared based upon the consolidated balance sheets of the Company
(including Summit) as of August 12, 1996 and of Casa Bonita as of June 24, 1996.
The Unaudited Pro Forma Combined Condensed Statements of Operations for the
fiscal year ended January 31, 1996 and for the 28 weeks ended August 12, 1996
give effect to the Acquisitions as if they had occurred at the beginning of each
period presented. The Unaudited Pro Forma Combined Condensed Statement of
Operations for the fiscal year ended January 31, 1996 was prepared based upon
the consolidated statements of operations of the Company for the fiscal year
ended January 31, 1996, of Summit for the 52 weeks ended March 11, 1996 and of
Casa Bonita for the fiscal year ended April 1, 1996. The Unaudited Pro Forma
Combined Condensed Statement of Operations for the 28 weeks ended August 12,
1996 was prepared based upon the consolidated statements of operations of the
Company for the 28 weeks ended August 12, 1996, of Summit for the 26 weeks ended
July 15, 1996 and of Casa Bonita for the 28 weeks ended June 24, 1996. The
Company's fiscal year is the 52- or 53-week period ending on the last Monday of
January in each year. For clarity of presentation, the fiscal year of the
Company presented herein is as if the fiscal year ended on January 31.
The Unaudited Pro Forma Combined Condensed Financial Statements are
provided for comparative purposes only and are not necessarily indicative of the
results of operations or financial position of the combined companies that would
have occurred had the Acquisitions occurred at the beginning of the periods
presented or on the date indicated, nor are they necessarily indicative of
future operating results or financial position. The unaudited pro forma
adjustments are based upon currently available information and upon certain
assumptions that management of the Company believes are reasonable under the
circumstances.
The Acquisitions were or will be accounted for using the purchase method of
accounting. Accordingly, the Company's cost to acquire Summit and Casa Bonita
were or will be allocated to the assets acquired and liabilities assumed
according to their respective fair values. The allocation is dependent upon
certain valuations and other studies that have not progressed to a stage where
there is sufficient information to make a definitive allocation. Accordingly,
the purchase allocation adjustments made in connection with the preparation of
the Unaudited Pro Forma Combined Condensed Financial Statements are preliminary,
and have been made solely for the purpose of preparing such Unaudited Pro Forma
Combined Condensed Financial Statements.
The Unaudited Pro Forma Combined Condensed Financial Statements do not
reflect certain cost savings that the Company expects to be realized primarily
through elimination of certain duplicative administrative costs. No assurances
can be made as to the amount of cost savings, if any, that actually will be
realized.
<PAGE> 2
CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF AUGUST 12, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------- PRO FORMA
CKE AT CASA BONITA ACQUISITION
8/12/96 AT 6/24/96 COMBINED ADJUSTMENTS PRO FORMA
------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents..... $ 18,333 $ 993 $ 19,326 $ -- $ 19,326
Accounts receivable........... 7,025 76 7,101 -- 7,101
Related party notes receivable 1,360 16,981 18,341 (16,981)(d) 1,360
Inventories................... 7,973 707 8,680 -- 8,680
Deferred income taxes, net.... 15,088 1,328 16,416 -- 16,416
Other current assets and
prepaid expenses........... 7,193 114 7,307 -- 7,307
--------- -------- --------- -------- ---------
Total current assets.... 56,972 20,199 77,171 (16,981) 60,190
Property and equipment, net... 169,077 34,409 203,486 8,750(g) 212,236
Property under capital
leases, net................ 34,257 715 34,972 -- 34,972
Long-term investments......... 26,041 -- 26,041 -- 26,041
Notes receivable.............. 7,713 -- 7,713 -- 7,713
Related party notes receivable 715 -- 715 -- 715
Other assets.................. 11,682 783 12,465 5,647(h) 18,112
--------- -------- --------- -------- ---------
Total assets............ $ 306,457 $ 56,106 $ 362,563 $ (2,584) $ 359,979
========= ======== ========= ======== =========
LIABILITIES
Current portion of long-term
debt.................... $ 3,486 $ -- $ 3,486 $ 13,000(f) $ 16,486
Current portion of capital
lease obligations....... 4,666 135 4,801 -- 4,801
Accounts payable.............. 22,611 1,613 24,224 -- 24,224
Other current liabilities..... 48,488 7,020 55,508 1,100(h) 56,608
--------- -------- --------- -------- ---------
Total current liabilities 79,251 8,768 88,019 14,100 102,119
Long-term debt................ 30,230 -- 30,230 25,000(e) 55,230
Capital lease obligations..... 48,171 1,233 49,404 -- 49,404
Related party notes payable... -- 31,588 31,588 (31,588)(d) --
Other long-term liabilities... 25,279 421 25,700 -- 25,700
--------- -------- --------- -------- ---------
Total liabilities....... 182,931 42,010 224,941 7,512 232,453
Minority interest............. -- -- -- 4,000(j) 4,000
STOCKHOLDERS' EQUITY.......... 123,526 14,096 137,622 (14,096)(c) 123,526
--------- -------- --------- -------- ---------
Total liabilities and
stockholders' equity.... $ 306,457 $ 56,106 $ 362,563 $ (2,584) $ 359,979
========= ======== ========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
2
<PAGE> 3
CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
CKE SUMMIT CASA BONITA
FISCAL YEAR 52 WEEKS FISCAL YEAR PRO FORMA
ENDED ENDED ENDED ACQUISITION
1/31/96 3/11/96 4/1/96 COMBINED ADJUSTMENTS PRO FORMA
----------- ------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES.......................... $ 465,437 $ 120,897 $ 80,381 $ 666,715 $ -- $ 666,715
OPERATING COSTS AND EXPENSES:
Company-operated restaurants:
Food and packaging................. 121,029 39,563 22,392 182,984 -- 182,984
Payroll and other employee
benefits......................... 109,942 41,977 23,457 175,376 (1,600)(a) 173,776
Occupancy and other operating
expenses........................ 82,095 32,208 20,711 135,014 103 (g) 135,117
Franchised and licensed
restaurants........................ 68,839 194 -- 69,033 -- 69,033
Advertising expenses................. 19,940 3,316 5,033 28,289 -- 28,289
General and administrative expenses.. 37,857 9,845 4,409 52,111 265(b)(h) 52,376
---------- --------- ----------- ----------- ----------- ---------
Total operating costs and
expenses..................... 439,702 127,103 76,002 642,807 (1,232) 641,575
---------- --------- ----------- ----------- ----------- ---------
Operating income (loss)................. 25,735 (6,206) 4,379 23,908 1,232 25,140
Interest expense........................ (10,004) (1,375) (3,180) (14,559) (55)(d)(e)(f) (14,614)
Gain on sale of long-term investment.... -- 3,959 -- 3,959 -- 3,959
Other income, net....................... 2,222 400 409 3,031 (151)(d) 2,880
---------- --------- ----------- ----------- ----------- ---------
Income (loss) before income taxes....... 17,953 (3,222) 1,608 16,339 1,026 17,365
Income tax expense (benefit)............ 7,001 900 509 8,410 (1,464)(i) 6,946
---------- --------- ----------- ----------- ----------- ---------
Net income (loss) before
minority interest.................... 10,952 (4,122) 1,099 7,929 2,490 10,419
Minority interest....................... -- -- -- -- (370)(j)(k) (370)
---------- --------- ----------- ----------- ----------- ---------
Net income (loss)....................... $ 10,952 $ (4,122) $ 1,099 $ 7,929 $ 2,120 $ 10,049
========== ========= =========== =========== =========== =========
Net income per share.................... $ 0.59 $ 0.52
========== =========
Common and common equivalent shares used
in computing per share amounts....... 18,679 19,181
========== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
3
<PAGE> 4
CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE 28 WEEKS ENDED AUGUST 12, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
CKE SUMMIT CASA BONITA
28 WEEKS 26 WEEKS 28 WEEKS PRO FORMA
ENDED ENDED ENDED ACQUISITION
8/12/96 7/15/96 6/24/96 COMBINED ADJUSTMENTS PRO FORMA
-------- --------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES........................ $ 281,057 $ 68,732 $ 43,806 $393,595 $ -- $ 393,595
OPERATING COSTS AND EXPENSES:
Company-operated restaurants:
Food and packaging............... 73,967 22,150 12,366 108,483 -- 108,483
Payroll and other employee
benefits...................... 65,012 23,662 13,081 101,755 (1,600)(a) 100,155
Occupancy and other operating
expenses...................... 48,736 18,981 10,704 78,421 56 (g) 78,477
Franchised and licensed
restaurants...................... 39,155 130 -- 39,285 -- 39,285
Advertising expenses............... 13,470 389 2,855 16,714 -- 16,714
General and administrative expenses 20,549 6,060 2,214 28,823 142 (b)(h) 28,965
---------- --------- --------- -------- ----------- ---------
Total operating costs and
expenses................... 260,889 71,372 41,220 373,481 (1,402) 372,079
Operating income (loss)............... 20,168 (2,640) 2,586 20,114 1,402 21,516
Interest expense...................... (4,744) (711) (1,649) (7,104) (88)(d)(e)(f) (7,192)
Other income, net..................... 1,850 242 93 2,185 (107)(d) 2,078
---------- --------- --------- -------- ----------- ---------
Income (loss) before income taxes..... 17,274 (3,109) 1,030 15,195 1,207 16,402
Income tax expense (benefit).......... 6,749 (200) 430 6,979 (418)(i) 6,561
---------- --------- --------- -------- ----------- ---------
Net income (loss) before
minority interest.................. 10,525 (2,909) 600 8,216 1,625 9,841
Minority interest..................... -- -- -- -- (191)(j)(k) (191)
---------- --------- --------- -------- ----------- ---------
Net income (loss)..................... $ 10,525 $ (2,909) $ 600 $ 8,216 $ 1,434 $ 9,650
========== ========= ========= ======== =========== =========
Net income per share.................. $ 0.55 $ 0.49
========== =========
Common and common equivalent
shares used in computing per
share amounts...................... 19,220 19,638
========== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
4
<PAGE> 5
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL DATA
(IN THOUSANDS)
Summit Pro Forma Acquisition Adjustments
(a) To exclude $1,600 of change of control and severance costs for
employees of Summit who have been terminated and which are included in
Summit's results of operations for the 52 weeks ended March 11, 1996
and the 26 weeks ended July 15, 1996, respectively, as a
non-recurring charge.
(b) To record the impact to goodwill amortization expense of $77 and $41
for the fiscal year ended January 31, 1996 and the 28 weeks ended
August 12, 1996, respectively, for the recording of $2,300 of excess of
consideration paid over fair value of net assets acquired (included in
the August 12, 1996 Unaudited Pro Forma Combined Condensed Balance
Sheet) amortized over thirty years.
Casa Bonita Pro Forma Acquisition Adjustments
(c) The Unaudited Pro Forma Combined Condensed Balance Sheet has been
adjusted to eliminate the stockholder's equity of Casa Bonita.
(d) To eliminate the related party note receivable of $16,981 and notes
payable of $31,588 cancelled prior to the acquisition as well as to
exclude the related interest income of $151 and $107 and the related
interest expense of $2,995 and $1,554 for the fiscal year ended January
31, 1996 and the 28 weeks ended August 12, 1996, respectively.
(e) To record long-term borrowings by the Company of $25,000 which
bear interest at 7.0% per annum and to record interest expense of
$1,750 and $942 for the fiscal year ended January 31, 1996 and the 28
weeks ended August 12, 1996, respectively.
(f) To record short-term borrowings by CBI of $13,000 which bear interest
at 10.0% per annum and to record interest expense of $1,300 and $700
for the fiscal year ended January 31, 1996 and the 28 weeks ended
August 12, 1996, respectively.
(g) To increase land by $5,688 and buildings by $3,062 to their respective
estimated fair values, and to record the impact to depreciation expense
of $103 and $56 for the fiscal year ended January 31, 1996 and the 28
weeks ended August 12, 1996, respectively, for the estimated increase
in the building value depreciated over thirty years.
(h) To record $5,647 for the excess of consideration paid over the fair
value of net assets acquired and reserve $1,100 for estimated store
closure reserves ($800) and relocation costs ($300), and to record the
goodwill amortization of $188 and $101 for the fiscal year ended
January 31, 1996 and the 28 weeks ended August 12, 1996, respectively,
amortized over thirty years.
(i) To record the income tax effects of the pro forma adjustments and
consolidation of the entities so as to affect a pro forma tax rate of
40.0%.
(j) To record the 20.0% minority interest investment in Casa Bonita
($4,000) and the minority interest in Casa Bonita's historical net
income ($220 and $120 for the fiscal year ended January 31, 1996 and
the 28 weeks ended August 12, 1996, respectively).
(k) To record the 20.0% minority interest for adjustments (d), (f), (g) and
(h) above, tax effected at 40.0%.
5