UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the third quarterly period ended September 30, 1996
GIANT GROUP, LTD.
150 El Camino Drive, Suite 303, Beverly Hills, California 90212
Registrant's telephone number: (310) 273-5678
Commission File Number: 1-4323
I.R.S. Employer Identification Number: 23-0622690
State of Incorporation: Delaware
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]
On November 5, 1996, the latest practicable date, there were
3,639,255 shares of common stock outstanding.
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GIANT GROUP, LTD.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Consolidated Statements of Operations
(Unaudited) - Three and Nine-Month
Periods Ended September 30, 1995 and 1996 3
Consolidated Balance Sheets - September 30,
1996 (Unaudited) and December 31, 1995 4
Consolidated Statements of Cash Flows
(Unaudited) - Nine-Month Periods Ended
September 30, 1995 and 1996 5
Notes to Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Submission of Matters to a Vote of
Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
(a) Exhibits
(b) Reports on Form 8-K
Signature 18
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
GIANT GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and nine-month periods ended September 30, 1995 and 1996
(Unaudited)
($ in thousands, except per share amounts)
Three-months ended Nine-months ended
September 30, September 30,
1995 1996 1995 1996
---------- ---------- ---------- ----------
Revenue:
Investment income $ 853 $ 591 $ 2,866 $ 2,155
Gains from sale of investments --- 2,219 --- 4,705
Other income 6 5 18 19
---------- ---------- ---------- ----------
Total revenue 859 2,815 2,884 6,879
Costs and expenses:
General and administrative 885 1,207 2,837 3,195
Proxy contest and related legal --- --- --- 736
Exchange Offer and related expenses --- --- --- 518
Interest expense 23 1 107 33
Depreciation 93 105 275 282
---------- ---------- ---------- ----------
Total costs and expenses 1,001 1,313 3,219 4,764
---------- ---------- ---------- ----------
Gain on sale of investment in
affiliate --- --- --- 3,197
Equity in income (loss) of
affiliate (8,207) 88 (10,489) 317
---------- ---------- ---------- ----------
Income (loss) from operations
before (expense) benefit for
income taxes (8,349) 1,590 (10,824) 5,629
Expense (benefit) for income taxes --- 51 --- (8,512)
---------- ---------- ---------- ----------
Net income (loss) $(8,349) $ 1,539 $(10,824) $14,141
========== ========== ========== ==========
Earnings (loss) per common
share and common equivalent
share $ (1.64) $ 0.33 $ (2.11) $ 2.71
========== ========== ========== ==========
Weighted average common
shares and common
equivalent shares 5,104,000 4,887,000 5,119,000 5,244,000
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
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GIANT GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1995 1996
------------ ------------
(Unaudited)
($ in thousands,
except per share amounts)
ASSETS
Current assets
Cash and cash equivalents $ 16,991 $ 21,950
Short-term investments available-for-sale 25,650 10,682
Income tax receivables --- 8,925
Note and other receivables 712 5,214
Prepaid expenses and other current assets 1,618 598
--------- ---------
Total current assets 44,971 47,369
Investment in affiliate 3,423 3,884
Property and equipment, net 3,267 3,662
Other assets 20 20
--------- ---------
Total assets $ 51,681 $ 54,935
========= =========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $ 706 $ 1,101
Current maturities of long-term debt 1,671 44
Income taxes payable 3,469 3,210
--------- ---------
Total current liabilities 5,846 4,355
Deferred income taxes 690 942
--------- ---------
Total liabilities 6,536 5,297
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized
2,000,000 shares, none issued --- ---
Common stock, $.01 par value; authorized
12,500,000 shares, issued 7,266,000 shares
at September 30 and 6,966,000 at December 31 69 73
Capital in excess of par value 33,508 37,229
Unrealized holdings gains (losses) on short-
term investments (1,328) 378
Retained earnings 29,796 43,937
--------- ---------
62,045 81,617
Less common stock in treasury; 3,626,000 shares
at September 30 and 1,952,000 at December 31,
at cost 16,900 31,979
--------- ---------
Total stockholders' equity 45,145 49,638
--------- ---------
Total liabilities and stockholders' equity $ 51,681 $ 54,935
========= =========
See accompanying notes to consolidated financial statements.
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GIANT GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine-month periods ended September 30, 1995 and 1996
(Unaudited)
1995 1996
--------- ---------
($ in thousands)
CASH FLOWS USED BY OPERATING ACTIVITIES:
Net income (loss) $(10,824) $ 14,141
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation 275 282
Gain on sale of short-term investments --- (4,705)
Accretion of discounts on short-term investments --- (226)
Gain on sale of investment in affiliate --- (3,197)
Equity in (gain) loss of affiliate 10,489 (317)
Changes in operating assets and liabilities:
(Increases) decreases in assets
Income tax receivables --- (8,512)
Note and other receivables --- 85
Prepaid expenses and other (373) 84
Increases (decreases) in liabilities
Accounts payable and accrued expenses (630) 395
Income tax payable 272 (259)
--------- ---------
Net cash used by operating activities (791) (2,229)
--------- ---------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Proceeds from sale of affiliate's debt securities --- 17,692
Proceeds from sale of investment in affiliate --- 4,751
Sales and maturities of short-term investments,
net of purchases 30,584 5,103
Loan to non-affiliate company --- (5,000)
Tax payments relating to discontinued operations (22,238) ---
Purchases of property and equipment (61) (677)
--------- ---------
Net cash provided by investing activities 8,285 21,869
--------- ---------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Proceeds from the exercise of stock options --- 2,025
Repayment of short-term borrowings (2,012) (1,627)
Purchase of treasury stock (694) (15,079)
--------- ---------
Net cash used by financing activities (2,706) (14,681)
--------- ---------
Increase in cash and cash equivalents 4,788 4,959
Cash and cash equivalents:
Beginning of period 23,472 16,991
--------- ---------
End of period $ 28,260 $ 21,950
========= =========
Supplemental disclosure of cash paid for:
Income taxes $ 22,364 $ 459
Interest 133 33
See accompanying notes to consolidated financial statements.
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GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with Form 10-Q
instructions and in the opinion of management contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of
September 30, 1996, the results of operations for the three
and nine-month periods ended September 30, 1996 and 1995 and
cash flows for the nine-months ended September 30, 1996 and
1995. These results have been determined on the basis of
generally accepted accounting principles and practices
applied consistently with those used in the preparation of
the Company's 1995 Annual Report on Form 10-K. Certain 1995
amounts have been reclassified to conform to the 1996
presentation. Operating results for the three and nine-
month periods ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the full
year. It is suggested that the accompanying consolidated
financial statements be read in conjunction with the
financial statements and notes in the Company's 1995 Annual
Report on Form 10-K.
2. EARNINGS PER SHARE
Earnings (loss) per common share and common equivalent
share was computed in accordance with APB No. 15 using the
weighted average common shares and common equivalent shares
outstanding in all periods presented and the dilutive effect
of outstanding stock options in periods when the Company is
in a net income position. During the three and nine-month
periods ended September 30, 1996, the dilutive effect of
stock options was an increase of approximately 1,108,000 and
1,002,000, respectively, in weighted average common shares.
3. PROMISSORY NOTE
On September 27, 1996, the Company advanced $5,000 on a
short-term note, to CBI Restaurants, Inc. an affiliate of
CKE Restaurants Inc. (see note 4 of the Notes to the Conso-
lidated Financial Statements), which is guarantor on the
note. This note is payable in full on March 31, 1997. The
interest rate on the promissory note is 10% and accrued
interest is payable on December 31, 1996 and March 31, 1997.
The note may be prepaid at any time without penalty and is
callable by GIANT any time after November 30, 1996.
4. INVESTMENT IN AFFILIATE
GIANT's investment in Rally's Hamburgers, Inc.
("Rally's") of $3,884 and $3,423 at September 30, 1996 and
December 31, 1995, represents approximately 21% and 48%,
respectively, of Rally's outstanding common stock. At
September 30, 1996 and December 31, 1995, the Company owned
approximately 4,313,000 and 7,430,000 shares of Rally's
outstanding common stock, the quoted market value of which
was approximately $13,344 and $7,198.
On September 5, 1996, by prospectus, Rally's distri-
buted transferable subscription rights to holders of record
of Rally's common stock on July 31, 1996. For each 3.25
rights held, a holder is entitled to purchase one unit for
$2.25. A unit consists of one share of Rally's common stock
and one warrant to purchase an additional share of Rally's
common stock for $2.25. On September 16, 1996, GIANT
transferred 4,313,000 rights to an unaffiliated third party,
which committed to GIANT that it would exercise the rights.
On May 3, 1996, pursuant to a Purchase and Standstill
Agreement dated April 26, 1996 (the "Agreement"), GIANT sold
approximately 768,000 shares of Rally's common stock to
Fidelity National Financial, Inc. ("Fidelity") and approxi-
mately 2,350,000 shares of Rally's common stock to CKE
Restaurants, Inc. ("CKE"), a Fidelity affiliate. In
addition, GIANT granted irrevocable options to Fidelity and
CKE to each purchase an additional 1,175,214 shares of
Rally's common stock, at exercise prices ranging from $3.00
to $4.00 per share of Rally's common stock, through April
1998. Including the shares issued in connection with
Rally's subscription rights offering, but not including
shares issuable upon the exercise of the warrants, and if
all the irrevocable options that were granted to Fidelity
and CKE were exercised, GIANT's ownership percentage in
Rally's would be reduced to 10%.
During the third quarter of 1996, Rally's increase in
stockholders' equity due to the subscription rights
offering, as previously discussed, has been reflected as an
increase of $1,699 in GIANT's investment in affiliate and an
increase in capital in excess of par value.
In connection with GIANT's sale of Rally's stock to
Fidelity and CKE, as previously discussed, GIANT received
cash of $4,751 and recognized a pre-tax gain, for financial
statement purposes, of $3,197 in the second quarter of 1996.
Additionally, because of a higher tax basis for the stock,
the Company has recorded a tax benefit for the expected
refund of taxes paid in prior years, net of current
activity, of $8,512. This benefit would be received in cash
in 1997 and would be reduced by additional income generated
during the remainder of 1996.
On January 29, 1996, Rally's purchased $22,000
principal amount of its 9.875% Senior Notes directly from
GIANT. The Company had purchased $26,424 in principal
during 1995 for $14,051 and recorded these Senior Notes as
investments available-for-sale. GIANT received cash of
$11,053, including accrued interest of $266, and a $4,145
short-term note bearing interest at prime rate. The Company
deferred the resulting gain of $2,958 in the first quarter
of 1996 and recognized the gain as the note was paid. On
September 30, 1996, the short-term note was paid in full.
Rally's installment payments were all made before the
respective due dates. The Company recognized $886 of the
resulting gain in the second quarter of 1996 and the
remaining gain of $2,072 in the third quarter of 1996.
During the second quarter of 1996, GIANT sold $3,500
face value of its investment in Rally's 9.875% Senior Notes
through the open market, recognizing a pre-tax gain of $478.
On January 22, 1996, the Company disclosed that it
intended to offer to exchange a new series of GIANT partici-
pating, non-voting preferred stock for Rally's common stock
(the "Exchange Offer"). Upon successful completion of the
Exchange Offer, GIANT would have owned 79.9% of Rally's
outstanding common stock. On April 22, 1996, Rally's board
of directors, after discussions between a special committee
of the Rally's board and Donald E. Doyle, president and
chief executive officer of Rally's, requested that GIANT
terminate the Exchange Offer. The termination was requested
to retain sufficient market capitalization to allow Rally's
easier access to the capital markets to raise capital in the
future. GIANT agreed to the request and terminated the
proposed exchange offer.
On February 1, 1996, GIANT agreed to provide Rally's
with a short-term credit facility of up to $2,000 to provide
for certain seasonal financing requirements. The interest
on this facility was calculated at prime and accrued
interest was payable on a monthly basis. In the first
quarter of 1996, $500 was advanced to Rally's under this
credit facility. This $500 advance was repaid in the second
quarter of 1996 and no other advances have been made. This
facility has now been canceled.
On February 23, 1996, GIANT entered into two letters of
credit, on behalf of Rally's, with a major bank. The
balance of the outstanding letters of credit could not
exceed $793. The letters of credit had a maximum maturity
date of 365 days but could not extend beyond the agreement's
expiration date of February 28, 1997. The letters of credit
were secured by certain cash equivalents of GIANT. The
Company was reimbursed by Rally's for costs related to
issuance of these letters of credit. As of September 30,
1996, these letters of credit totaled $793. In October,
these letters of credit, on behalf of Rally's were canceled
and the cash equivalents were reinvested by GIANT.
Summarized financial information for Rally's is as follows:
Operating Results:
Three Months Ended Nine Months Ended
----------------------- -----------------------
10/01/95 9/29/96 10/01/95 9/29/96
-------- -------- -------- --------
Revenues $ 49,851 $ 38,781 $142,164 $128,050
Income (loss) from
operations (14,803) 2,632 (14,591) 1,676
Extraordinary gain, net of
income taxes --- 302 --- 4,824
Net income (loss) (17,316) 414 (22,069) 1,363
GIANT's share of non-cash
equity gain (loss) in
Rally's net income (loss) (8,207) 88 (10,489) 317
5. STOCK OPTION PLANS
On July 12, 1996, GIANT's stockholders approved the
following two new stock option plans for the Company. The
following are certain features of the plans; these features
are explained fully in the plans' document which are
included in the Notice of the 1996 Annual Meeting of Stock-
holders filed with the Securities and Exchange Commission on
June 7, 1996.
The 1996 Employee Stock Option Plan (the "1996 Plan")
promotes the interest of GIANT and its subsidiary and
stockholders by encouraging selected key employees of the
Company to acquire a proprietary interest in GIANT. The
aggregate number of shares to be delivered upon the exercise
of all options granted under the 1996 Plan shall not exceed
250,000 shares of the Company's $.01 par value Common Stock.
The Option Committee of the Board of Directors will
determine, based on factors as stated in the plan document,
the employees that will receive the options, the number of
options and whether Incentive (as defined in section 422A of
the Internal Revenue Code) or Non-Qualified options will be
granted. The options, in general, may be exercised in whole
or in part any time after the date of grant and terminate 10
years from the grant date. In most cases, options shall have
an exercise price equal to the fair market value of the
Common Stock on the date of grant. On September 19, 1996,
200,000 options were granted to GIANT's Chairman of the
Board at an exercise price of $8.25 and terminate five years
from the grant date.
The 1996 Stock Option Plan for Non-Employee Directors
(the "Director Plan") promotes the interest of GIANT and its
subsidiary and stockholders by encouraging Non-Employee
directors of the Company to acquire a proprietary interest
in GIANT. The aggregate number of shares to be delivered
upon the exercise of all options granted under the Director
Plan shall not exceed 250,000 shares of the Company's $.01
par value Common Stock. Pursuant to the Director Plan, each
Non-Employee director is entitled to receive an option to
purchase 10,000 shares on May 20, 1996 (the adoption date),
10,000 shares upon the initial appointment to the Board and
an option to purchase 10,000 shares upon subsequent
reelection to the Board. Upon election to the Executive
Committee, the Non-Employee director will receive an
additional option to purchase 10,000 shares. The options
may be exercised in whole or in part any time after the date
of grant and terminate five years from the grant date. All
options shall have an exercise price equal to the fair
market value of the Common Stock on the date of grant. To
date, 50,000 options were granted to the three Non-Employee
members of the current Board of Directors. The exercise
prices are $7.625 for 20,000 options and $7.75 for 30,000
options.
6. EXERCISE OF STOCK OPTIONS
On February 7, 1996, the Chairman of the Board of GIANT
exercised 300,000 options, which were granted under the 1985
Non-Qualified Stock Option Plan which was canceled in August
1995, to purchase GIANT Common Stock at an exercise price of
$6.75 per share. As a result of this transaction, the
Company received cash of $2,025.
7. CLASS A COMMON STOCK, $.01 PAR VALUE
On July 12, 1996, GIANT's stockholders approved an
amendment to the Company's Certificate of Incorporation
which would authorize 5,000,000 shares of Class A Common
Stock, $.01 par value per share. This Class A Common Stock
is identical in all respects to the $.01 par value Common
Stock except that the Class A Common Stock, except in
limited situations, have no voting rights. Presently, there
are no plans or commitments for this Class A Common Stock.
8. STOCKHOLDERS RIGHTS PLAN
On January 4, 1996, GIANT declared a dividend of one
preferred share purchase right ("Right") for each share of
GIANT Common Stock outstanding on January 16, 1996 and
authorized the issuance of additional Rights for GIANT
Common Stock issued after that date.
Each Right will entitle the holder to buy 1/1,000th of
a share of Series A Junior Participating Preferred Stock at
an exercise price of $30 for each 1/1,000th share. The
Rights will be exercisable and will trade separately from
the GIANT Common Stock (1) ten days after a public announce-
ment that a person or group of persons has become the
beneficial owner of 15% or more of the GIANT Common Stock
(an "Acquiring Person") or (2) ten business days (or such
later date as may be determined by the Board of Directors)
after commencement or announcement of an intention to make a
tender or exchange offer, the consummation of which would
result in such person or group of persons becoming the
beneficial owner of 15% or more of GIANT Common Stock;
provided however, because Mr. Sugarman, Chairman and Chief
Executive Officer of the Company, beneficially owned in
excess of 15% of GIANT Common Stock on the date the Stock-
holders Rights Plan was adopted, Mr. Sugarman will become an
Acquiring Person only upon the acquisition by Mr. Sugarman
of additional shares of GIANT Common Stock, other than
acquisitions through stock dividends, stock option plans,
GIANT compensation or employee benefit plans and other
similar arrangements.
If any person does become an Acquiring Person (subject
to certain exceptions), the other holders of GIANT Common
Stock will be able to exercise the Rights and buy GIANT
Common Stock having twice the value of the exercise price of
the Rights. GIANT may, at its option, substitute fractional
interests of a share of Series A Junior Participating
Preferred Stock for each share of GIANT Common Stock to be
issued upon exercise of the Rights. Additionally, if GIANT
is involved in certain mergers where its shares are
exchanged or certain major sales of its assets occur,
holders of GIANT Common Stock will be able to purchase for
the exercise price, shares of stock of the Acquiring Person
having twice the value of the exercise price of the Rights.
The Rights may be redeemed by GIANT at any time prior
to the time any person becomes an Acquiring Person for a
price of $.01 per Right. Unless exercised, the Rights
expire on January 4, 2006.
The Rights could have the effect of discouraging a
third party from making a tender offer or otherwise
attempting to obtain control of GIANT. In addition, because
the Rights may discourage accumulations of large blocks of
GIANT Common Stock by purchasers whose objective is to take
control of GIANT, the Rights could tend to reduce the
likelihood of fluctuations in the market price of GIANT
Common Stock that might result from accumulations of large
blocks of stocks.
9. TREASURY STOCK
During the nine months ended September 30, 1996, the
Company acquired 1,674,000 shares of its Common Stock at an
aggregate cost of $15,079. Included in these totals are
200,000 shares acquired from the Company's Chairman of the
Board in the third quarter of 1996 at an aggregate cost of
$1,652 and 705,000 shares purchased pursuant to the Agree-
ment with Fidelity and CKE (see notes 4,11,12 of the Notes
to the Consolidated Financial Statements) at an aggregate
cost of $6,085 directly from Fidelity.
10. ACCOUNTING CHANGE
In October 1995, the Financial Accounting Standards
Board issued FASB 123, "Accounting for Stock-Based Compensa-
tion" ("SFAS 123"). SFAS 123 is effective for fiscal years
beginning after December 15, 1995 and encourages, but does
not require a fair value based method of accounting for
employee stock options or similar equity instruments. It
also allows an entity to elect to continue to measure
compensation cost under Accounting Principles Board Opinion
No.25 ("APB 25"), but requires pro forma disclosures of net
income and earnings per share as if the fair value based
method of accounting had been applied. GIANT has adopted
SFAS 123 in 1996 and has elected to continue to measure
compensation cost under APB 25 and comply with the pro forma
disclosure requirements. There is no adjustment required to
reflect the adoption of SFAS 123.
11. FIDELITY NATIONAL FINANCIAL INC. MERGER OFFER
On February 14, 1996, Fidelity made an offer to acquire
the Company in a friendly merger by which the Company's
stockholders would receive Fidelity common stock valued by
Fidelity at $12.00 for each outstanding share of GIANT
Common Stock. At that date, Fidelity had acquired an
investment of approximately 14.8% of the Company. The
Company's Board of Directors determined that the Company was
not for sale and unconditionally rejected the merger offer.
On April 26, 1996, in connection with the settlement of all
litigation involving GIANT and Fidelity and pursuant to the
Agreement (see notes 4 and 12 of the Notes to Consolidated
Financial Statements of this Form 10-Q and Item 3 "Legal
Proceedings" as reported in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995), Fidelity
agreed, among other things, to sell their entire investment
in GIANT to the Company.
12. COMMITMENTS AND CONTINGENCIES
In January and February 1994, two putative class action
lawsuits were filed, purportedly on behalf of the stock-
holders of Rally's in the United States District Court for
the Western District of Kentucky, against Rally's, Burt
Sugarman and GIANT and certain Rally's present and former
officers and directors and its auditors. The complaints
allege defendants violated the Securities Exchange Act of
1934, among other claims, by issuing inaccurate public
statements about Rally's in order to arbitrarily inflate the
price of Rally's common stock, and seek unspecified damages.
On April 15, 1994, Rally's filed a motion to dismiss and a
motion to strike. On April 5, 1995, the Court struck
certain provisions of the complaint but otherwise denied
Rally's motion to dismiss. In addition, the Court denied
plaintiffs' motion for class certification; the plaintiffs'
renewed this motion, and, on April 16, 1996, the Court
certified the class. In October 1995, the plaintiffs filed
a motion to disqualify Christensen, White, Miller, Fink,
Jacobs, Glaser & Shapiro, LLP ("Christensen, White") as
counsel for defendants based on a purported conflict of
interest allegedly arising from the representation of
multiple defendants as well as Ms. Glaser's position as both
a Director of Rally's and a partner in Christensen, White.
That motion was denied on September 19, 1996. The action
briefly was stayed between May 30 and June 21, 1996 to
facilitate settlement discussions. One settlement
conference has been conducted; no others are currently
scheduled. Management is unable to predict the outcome of
this matter at the present time or whether or not certain
available insurance coverages will apply. Rally's and the
Company deny all wrong-doing and intend to defend themselves
vigorously in this matter.
In December 1995, GIANT filed an action (the "Foley
Lawsuit") in the United States District Court for the
Central District of California against William P. Foley II
("Foley"), CKE Restaurants, Inc. ("CKE"), Fidelity National
Financial, Inc. ("Fidelity"), William Davenport and Robert
Martyn ("Defendants"). GIANT subsequently amended its
complaint to include additional allegations and to seek both
injunctive relief and damages. This action arose from an
attempted hostile takeover of Rally's and GIANT, by Fidelity
and Foley, which indirectly owns and/or controls "Carl's
Jr.", a competing fast-food restaurant chain. In January
1996, Foley and Fidelity filed a counterclaim against GIANT
and its board of directors and subsequently amended the
counterclaim. Foley and Fidelity alleged, among other
claims, that GIANT's directors breached their fiduciary
duties in conjunction with certain enumerated transactions.
The parties settled their dispute on April 26, 1996. A
request for dismissal of all claims and counterclaims has
been filed pursuant to the Agreement executed in connection
with the settlement, and as a result, GIANT acquired 705,000
shares of its Common Stock from Fidelity for $6,085;
Fidelity and CKE acquired an aggregate of approximately
3,118,000 shares of Rally's common stock from GIANT for
$4,751; GIANT granted Fidelity and CKE options to each
purchase 1,175,214 shares of Rally's common stock at prices
ranging from $3.00 to $4.00 per share; Fidelity agreed to a
10 year standstill with respect to GIANT and its Common
Stock; two designees of CKE and Fidelity were elected to
Rally's Board; and the parties exchanged mutual releases.
In February 1996, Harbor Finance Partners ("Harbor")
commenced a derivative action, purportedly on behalf of
Rally's, against GIANT, Burt Sugarman, David Gotterer, and
certain of Rally's other officers and directors before the
Delaware Chancery Courts. Harbor named Rally's as a nominal
defendant. Harbor claims that the directors and officers of
both Rally's and GIANT, along with GIANT, breached their
fiduciary duties to the public stockholders of Rally's by
causing Rally's to repurchase certain Rally's Senior Notes
at an inflated price. Harbor seeks unspecified damages,
along with rescission of the repurchase transaction. In
April 1996, Rally's filed a Motion to Dismiss in which GIANT
has joined. The motion has been fully briefed and a hearing
has been scheduled for November 26, 1996. GIANT denies all
wrongdoing and intends to vigorously defend itself in this
action. It is not possible to predict the outcome of this
action at this time.
In February 1996, Michael Shores on behalf of himself
and purportedly all other stockholders of the Company
commenced a putative class action against the Company, and
the Company's directors, Burt Sugarman, David Gotterer,
Terry Christensen and Robert Wynn (the "Directors"). The
complaint, filed before the Los Angeles County Superior
Courts, alleges that the Directors breached their fiduciary
duties by adopting a stockholder rights plan, by causing
GIANT to sell certain Rally's Senior Notes back to Rally's,
by causing GIANT to repurchase certain amounts of its own
Common Stock pursuant to its stock repurchase program and by
agreeing to the Exchange Offer. The complaint claims that
these actions were undertaken to entrench management rather
than for the benefit of the Company and its stockholders.
The complaint seeks unspecified damages, injunctive relief
and a recovery of attorneys' fees and costs. Although the
Company and the Directors are not yet required to respond
formally to these allegations, the Company denies all
wrongdoing and intends to vigorously defend itself in this
action. Parties are presently in settlement discussions.
It is not possible to predict the outcome of the action at
this time.
Since management does not believe that the previously
mentioned lawsuits contain meritorious claims, management
believes that the ultimate resolution of the lawsuits will
not materially and adversely affect the Company's financial
condition or annual results of operations.
13. SUBSEQUENT EVENTS
PROPOSED ACQUISITION
On October 28, 1996, the Company announced the signing
of a definitive agreement to acquire 81% of the operating
assets of Horizon Fabrics Inc. (Horizon) and 81% of the
stock of Hirschberg, Schutz & Co. (Hirschberg) for $32,400
in cash, long-term notes and the assumption of certain
liabilities. The remaining interest in the companies will
continue to be owned by the companies' senior management and
founders. The agreement will be finalized upon the comple-
tion of successful due diligence and is expected to be
completed before year-end.
Horizon and Hirschberg together are the leading
supplier of specialty fabrics, ribbons and trims to the
consumer segment of the craft industry. The company is
headquartered in Union, New Jersey and employs 75 people.
FORMATION OF NEW SUBSIDIARY
On October 31, 1996, the Company announced the
formation of a new, wholly-owned subsidiary, GIANT MARINE
GROUP, LTD., to formulate, develop and implement a unique
concept in the boating world. As part of this plan, the
Company has acquired two boats at a cost of approximately
$21,000. The Company paid cash of approximately $10,600 and
the balance will be paid in installments of $1,000,
beginning in January 1997, with the balance due on March 15,
1997. One of the boats will be delivered shortly to a
shipyard for renovations. When the boats are ready for full
utilization and international marketing, complete details of
the plan will be announced.
<page-12>
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
RESULTS OF OPERATIONS FOR THE THREE AND NINE-MONTHS ENDED
SEPTEMBER 30, 1996 VERSUS THE COMPARABLE 1995 PERIOD
Total revenue for the three and nine-month periods ended
September 30, 1996 and 1995 increased to $2,815 from $859 and to
$6,879 from $2,884, respectively. These increases resulted from
the gain on the sale of the Company's investments previously
classified as available-for-sale. This increase was offset by
lower income earned on the reduced levels of investment in short-
term U.S. government obligations.
General and administrative expenses for the three and nine-
months ended September 30, 1996 and 1995 increased to $1,207 from
$885 and to $3,195 from $2,837, respectively. This increase is
primarily due to higher travel expenses of $135 and legal
expenses of $130 for the nine months ended September 30, 1996.
Travel and legal expenses increased due to costs incurred related
to the review of possible acquisitions.
The Company's results from operations were impacted by
certain one-time expenses. The Company incurred, for the nine-
month period ended September 30, 1996, legal and administrative
expenses of $736 consisting of proxy and related legal expenses
in connection with the Fidelity/Foley litigation (see note 12 of
the Notes to Consolidated Financial Statements). In addition,
for the nine-months ended September 30, 1996, the Company
incurred $518 in legal, accounting and administrative expenses
incurred by the Exchange Offer, which was terminated on April 22,
1996 (see note 4 of the Notes to the Consolidated Financial
Statements).
Interest expense for the three and nine-month periods ended
September 30, 1996 and 1995 decreased to $1 from $23 and
decreased to $33 from $107, as a result of the prepayment in
February 1996 of the Company's 9.25% Term Note, due December 18,
1996.
GIANT's investment in Rally's Hamburgers, Inc. ("Rally's")
at September 30, 1996 and December 31, 1995, represents approxi-
mately 21% and 48%, respectively, of Rally's outstanding common
stock. The investment percentage decreased because GIANT did not
participate in Rally's subscription rights plan and transferred
their 4,313,000 subscription rights to purchase Rally's common
stock to an unaffiliated third party, which committed to GIANT
that it would exercise the subscription rights and the sale by
GIANT, on May 3, 1996 of approximately 768,000 shares of Rally's
common stock to Fidelity National Financial, Inc. ("Fidelity")
and approximately 2,350,000 shares of Rally's common stock to CKE
Restaurants, Inc. ("CKE"), a Fidelity affiliate. These two
transactions are explained further in the Liquidity and Capital
Resources section of Item 2 of this Form 10-Q. For the three-
months ended September 30, 1996 and 1995, GIANT's non-cash equity
income in Rally's increased to $88 from a loss of $8,207 in 1995.
Rally's net income for the three-months ended September 30, 1996
and 1995 increased to $414 from a loss of $17,316 in 1995. This
increase in net income resulted primarily from significant
reductions in expenses across all major categories. Addition-
ally, Rally's net loss for the third quarter of 1995 included
charges related to the planned closing of 25 poorly performing
restaurants and the planned divestment of excess real estate and
modular buildings. For the nine-months ended September 30, 1996
and 1995, GIANT's non-cash equity income in Rally's increased to
$317 from a loss of $10,489 in 1995. Rally's net income for the
nine-months ended September 30, 1996 and 1995 increased to $1,363
from a loss of $22,069 in 1995. This increase in Rally's net
income resulted primarily from product cost reductions and an
extraordinary gain recorded in the first quarter of 1996, net of
income tax, of $4,522 related to the early retirement of $22,000
principal amount of their 9.875% Senior Notes (see note 4 of the
Notes to Consolidated Financial Statements).
The Company's net income for the three and nine-months ended
September 30, 1996 and 1995 increased to $1,539 from a loss of
$8,349 and to $14,141 from a loss of $10,824. For the nine
months ended September 30, 1996, the increase in net income
resulted primarily from the gain of $3,197 on the sale of Rally's
common stock and related tax benefit of $8,512 and gains from the
sales of investments previously classified as available-for-sale
of $4,705. In addition, GIANT recorded non-cash equity income in
Rally's of $317 in 1996 compared to a loss of $10,489 in 1995.
However, this increase in GIANT'S net income was lowered by one-
time expenses of the terminated Exchange Offer and expenses
incurred in connection with the Fidelity/Foley litigation settled
in the second quarter of 1996 and lower income earned on the
reduced levels of investments in short-term U.S. government
obligations.
The Company's consolidated financial statements reflect
valuation allowances of $11,058 and $19,697, at September 30,
1996 and December 31, 1995, respectively, as it is not likely, as
defined in SFAS No. 109 "Accounting for Income Taxes" ("SFAS
109") that these tax benefits will be realized in the near
future. The decrease in the allowance relates primarily to the
expected tax benefit of $8,512 related to the sale of Rally's
stock, previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, investments available-for-sale,
income tax receivables and note and other receivables totaled
$46,771 at September 30, 1996 compared with $43,353 at December
31, 1995. On September 27, 1996, the Company advanced $5,000 on
a short-term note, to CBI Restaurants, Inc., an affiliate of CKE
Restaurants, Inc. which is guarantor on the note. This note is
payable in full on March 31, 1997. The interest rate on the
promissory note is 10% and accrued interest is payable on
December 31, 1996 and March 31, 1997. The note maybe prepaid at
any time without penalty and is callable by GIANT any time after
November 30, 1996. Both the lines and the letters of credit
previously extended to Rally's were canceled. Additionally,
Rally's note receivable issued in connection with their purchase
of their Senior Notes in the first quarter of 1996 was paid in
full. Income tax receivables at September 30, 1996 primarily
consist of an expected refund of $8,512 applicable to GIANT's
sale of Rally's common stock, as previously discussed. At
September 30, 1996 and December 31, 1995, the Company had working
capital of $43,014 and $39,125 with current ratios of 11 and 8 to
1, respectively.
As of September 30, 1996 and December 31, 1995, GIANT owned
approximately 4,313,000 and 7,430,000 shares, respectively, of
Rally's outstanding common stock, which it acquired from 1987 to
1994. At September 30, 1996 and December 31, 1995, GIANT's
$3,884 and $3,423 investment in Rally's represents approximately
21% and 48%, respectively, of Rally's outstanding common stock,
the quoted market value of which was $13,344 and $7,198. On
September 5, 1996, by prospectus, Rally's distributed transfer-
able subscription rights to holders of record of Rally's common
stock on July 31, 1996. For each 3.25 rights held, a holder is
entitled to purchase one unit for $2.25. A unit consists of one
share of Rally's common stock and one warrant to purchase an
additional share of Rally's common stock for $2.25. Rally's
increase in stockholders' equity, due to the subscription rights
offering, has been reflected as an increase of $1,699 in GIANT's
investment in affiliate and an increase in capital in excess of
par value. On September 16, 1996, GIANT transferred 4,313,000
rights to an unaffiliated third party, which committed to GIANT
that it would exercise the rights. On May 3, 1996, pursuant to a
Purchase and Standstill Agreement dated April 26, 1996 (the
"Agreement"), GIANT sold approximately 768,000 shares of Rally's
common stock to Fidelity National Financial, Inc. ("Fidelity")
and approximately 2,350,000 shares of Rally's common stock to CKE
Restaurants, Inc. ("CKE"), a Fidelity affiliate. In addition,
GIANT granted irrevocable options to Fidelity and CKE to each
purchase an additional 1,175,214 shares of Rally's common stock,
at exercise prices ranging from $3.00 to $4.00 per share of
Rally's common stock, through April 1998. Including the shares
issued in connection with Rally's subscription rights offering,
but not including shares issuable upon the exercise of the
warrants, and if all the irrevocable options that were granted to
Fidelity and CKE were exercised, GIANT's ownership percentage in
Rally's would be reduced to 10%. In connection with GIANT's sale
of Rally's stock to Fidelity and CKE, as previously discussed,
GIANT received cash of $4,751 and recognized a pre-tax gain, for
financial statement purposes, of $3,197 in the second quarter of
1996. Additionally, because of a higher tax basis for the stock,
the Company has recorded a tax benefit for the expected refund of
taxes paid in prior years, net of current activity, of $8,512.
This benefit would be received in cash in 1997 and would be
reduced by additional income generated during the remainder of
1996.
On October 28, 1996, the Company announced the signing of a
definitive agreement to acquire 81% of the operating assets of
Horizon Fabrics Inc. (Horizon) and 81% of the stock of
Hirschberg, Schutz & Co. (Hirschberg) for $32,400 in cash, long-
term notes and the assumption of certain liabilities. The
remaining interest in the companies will continue to be owned by
the companies' senior management and founders. The agreement
will be finalized upon the completion of successful due diligence
and is expected to be completed before year-end.
On October 31, 1996, the Company announced the formation of
a new, wholly-owned subsidiary, GIANT MARINE GROUP, LTD., to
formulate, develop and implement a unique concept in the boating
world. As part of this plan, the Company has acquired two boats
at a cost of approximately $21,000. The Company paid cash of
approximately $10,600 and the balance will be paid in install-
ments of $1,000, beginning in January 1997, with the balance due
on March 15, 1997. One of the boats will be delivered shortly to
a shipyard for renovations. When the boats are ready for full
utilization and international marketing, complete details of the
plan will be announced.
The Company's current liquidity is provided by investment
income and the liquidation of short-term investments. Management
believes that this liquidity, its capital resources and its
ability to obtain financing at favorable rates are sufficient to
cover the Company's short and long-term cash requirements,
including any acquisitions.
At September 30, 1996 and December 31, 1995, the Company's
consolidated balance sheets included a liability related to a
proposed assessment by the State of California made as a result
of their audit of the tax years 1989 through 1991. GIANT has
disputed this assessment and has provided documents to support
the Company's position during meetings with the New York office
of the California State Franchise Tax Board during 1995. The
Company has received a preliminary proposed adjustment from the
New York office which indicates that the assessment will be
reduced. The Company made payments of $259 during 1996 related
to this assessment. The ultimate resolution will be based on the
final review and official notice from the California office of
the Franchise Tax Board, which has not yet been received.
Net cash used by operating activities for the nine-months
ended September 30, 1996 was $2,229 compared to net cash used by
operating activities of $791 for the comparable period in 1995.
This increase in cash used was attributable to the changes in
operating assets and liabilities and expenses incurred related to
the Exchange Offer and proxy litigation.
Net cash provided by investing activities for the nine-
months ended September 30, 1996 was $21,869 compared to net cash
provided by investing activities of $8,285 for the comparable
period in 1995. On January 29, 1996, Rally's purchased directly
from GIANT $22,000 principal amount of its 9.875% Senior Notes.
The Company had purchased $26,424 in principal during 1995 for
$14,051 and recorded these Senior Notes as investments available-
for-sale. GIANT received cash of $11,053, including accrued
interest of $266, and a $4,145 short-term note bearing interest
at prime rate. Proceeds from the sale of affiliates's debt
securities include all of Rally's installment payments, made
before the respective due dates, of $4,145. On February 1, 1996,
GIANT agreed to provide Rally's with a short-term credit facility
of up to $2,000 to provide for certain seasonal financing
requirements. The first quarter advance of $500 has been paid in
full and the facility has been canceled. During the second
quarter of 1996, the Company sold an additional $3,500 face value
Senior Notes, through the open market, and received proceeds of
$2,760. On May 3, 1996, as previously discussed, GIANT received
proceeds of $4,751 from the sale of Rally's stock to CKE and
Fidelity. During the nine-months ended September 30, 1996, the
Company sold securities previously classified as investments
available-for-sale receiving proceeds of $15,805 and also
purchased securities, classified as investments available-for-
sale at September 30, 1996, at a cost of $10,702. Additionally,
on September 27, 1996, as previously discussed, the Company
advanced $5,000 to CBI Restaurants, Inc. In 1995, the Company
paid income taxes in the amount of $22,238 related to the profit
on the sale of the Company's cement business and received $30,584
from the sales and maturities, net of purchases, of marketable
securities.
Net cash used by financing activities for the nine-months
ended September 30, 1996 was $14,681 compared to $2,706 for the
comparable period in 1995. On February 7, 1996, the Chairman of
the Board of GIANT exercised 300,000 options to purchase GIANT
Common Stock at an exercise price of $6.75 per share. As a
result of this transaction, the Company received cash of $2,025.
On February 29, 1996, the Company made a payment of $1,623 to
pre-pay in full its 9.25% Term Note. The Company incurred no
additional expenses in connection with this prepayment. Addi-
tionally, the Company's Board of Directors has reaffirmed its
commitment to its ongoing stock repurchase program through the
open market and private purchases of its common stock. During
the nine-months ended September 30, 1996, the Company acquired
1,674,000 shares of its common stock at an aggregate cost of
$15,079. Included in these shares are 200,000 shares acquired
from the Company's Chairman of the Board in the third quarter of
1996 at an aggregate cost of $1,652 and 705,000 shares of its
Common Stock, purchased directly from Fidelity, for an aggregate
price of $6,085 in connection with the general release given to
all parties in the lawsuit involving GIANT and Fidelity (see
notes 4, 11 and 12 of the Notes to the Consolidated Financial
Statements of this Form 10-Q and Item 3 "Legal Proceedings' as
reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
FIDELITY NATIONAL FINANCIAL INC. MERGER OFFER
On February 14, 1996, Fidelity made an offer to acquire the
Company in a friendly merger by which the Company's stockholders
would acquire Fidelity common stock valued by Fidelity at $12.00
for each outstanding share of GIANT Common Stock. At that date,
Fidelity had acquired an investment of approximately 14.8% of the
Company. The Company's Board of Directors determined that the
Company was not for sale and unconditionally rejected the merger
offer. On April 26, 1996, in connection with the general
release, pursuant to the Agreement, given to all parties in the
lawsuit involving GIANT and Fidelity (see notes 4 and 12 of the
Notes to Consolidated Financial Statements of this Form 10-Q and
Item 3 "Legal Proceedings" as reported in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995),
Fidelity, among other things, agreed to sell their entire
investment in GIANT to the Company.
EXCHANGE OFFER
On January 22, 1996, the Company disclosed that it intended
to offer to exchange a new series of GIANT participating, non-
voting preferred stock for Rally's common stock (the "Exchange
Offer"). Upon successful completion of the Exchange Offer, GIANT
would have owned 79.9% of Rally's outstanding common stock. On
April 22, 1996, Rally's board of directors, after discussions
between a special committee of the Rally's board and Donald E.
Doyle, president and chief executive officer of Rally's,
requested that GIANT terminate the Exchange Offer. The termina-
tion was requested to retain sufficient market capitalization to
allow Rally's easier access to the capital markets to raise
capital in the future. GIANT has agreed to the request and has
terminated the proposed exchange offer.
ACCOUNTING CHANGE
In October 1995, the Financial Accounting Standards Board
issued FASB 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 is effective for fiscal years beginning after
December 15, 1995 and encourages, but does not require a fair
value based method of accounting for employee stock options or
similar equity instruments. It also allows an entity to elect to
continue to measure compensation cost under Accounting Principles
Board Opinion No.25 ("APB 25"), but requires pro forma
disclosures of net income and earnings per share as if the fair
value based method of accounting had been applied. GIANT has
adopted SFAS 123 in 1996 and has elected to continue to measure
compensation cost under APB 25 and comply with the pro forma
disclosure requirements. There is no adjustment required to
reflect the adoption of SFAS 123.
STOCK OPTION PLANS
On July 12, 1996, GIANT's stockholders approved the follow-
ing two new stock option plans for the Company. The following
are certain features of the plans; these features are explained
fully in the plans' document which are included in the Notice of
the 1996 Annual Meeting of Stockholders filed with the Securities
and Exchange Commission on June 7, 1996.
The 1996 Employee Stock Option Plan (the "1996 Plan")
promotes the interest of GIANT and its subsidiary and stock-
holders by encouraging selected key employees of the Company to
acquire a proprietary interest in GIANT. The aggregate number of
shares to be delivered upon the exercise of all options granted
under the 1996 Plan shall not exceed 250,000 shares of the
Company's $.01 par value Common Stock. The Option Committee of
the Board of Directors will determine, based on factors as stated
in the plan document, the employees that will receive the
options, the number of options and whether Incentive (as defined
in section 422A of the Internal Revenue Code) or Non-Qualified
options will be granted. The options, in general, may be
exercised in whole or in part any time after the date of grant
and terminate 10 years from the grant date. In most cases,
options shall have an exercise price equal to the fair market
value of the Common Stock on the date of grant. On September 19,
1996, 200,000 options were granted to GIANT's Chairman of the
Board at an exercise price of $8.25 and terminate five years from
the grant date.
The 1996 Stock Option Plan for Non-Employee Directors (the
"Director Plan") promotes the interest of GIANT and its subsi-
diary and stockholders by encouraging Non-Employee directors of
the Company to acquire a proprietary interest in GIANT. The
aggregate number of shares to be delivered upon the exercise of
all options granted under the Director Plan shall not exceed
250,000 shares of the Company's $.01 par value Common Stock.
Pursuant to the Director Plan, each Non-Employee director is
entitled to receive an option to purchase 10,000 shares on May
20, 1996 (the adoption date), 10,000 shares upon the initial
appointment to the Board and an option to purchase 10,000 shares
upon subsequent reelection to the Board. Upon election to the
Executive Committee, the Non-Employee director will receive an
additional option to purchase 10,000 shares. The options maybe
exercised in whole or in part any time after the date of grant
and terminate five years from the grant date. All options shall
have an exercise price equal to the fair market value of the
Common Stock on the date of grant. To date, 50,000 options were
granted to the three Non-Employee members of the current Board of
Directors. The exercise prices are $7.625 for 20,000 options and
$7.75 for 30,000 options.
CLASS A COMMON STOCK, $.01 PAR VALUE
On July 12, 1996, GIANT's stockholders approved an amendment
to the Company's Certificate of Incorporation which would
authorize 5,000,000 shares of Class A Common Stock, $.01 par
value per share. This Class A Common Stock is identical in all
respects to the $.01 par value Common Stock except that the Class
A Common Stock, except in limited situations, have no voting
rights. Presently, there are no plans or commitments for this
Class A Common Stock.
<page-17>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For information regarding legal matters, see Note 12 of the Notes
to Consolidated Financial Statements on page 10 of this Form 10-Q
and Item 3 "Legal Proceedings" as reported in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
Item 2. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on July 12,
1996. The stockholders elected a Board of four directors,
approved the Company's 1996 Employee Stock Option Plan and 1996
Stock Option Plan for Non-Employee Directors, approved an
amendment to the Company's Certificate of Incorporation to
authorize a new class of non-voting Class A Common Stock, $.01
par value per share and ratified the appointment of Arthur
Andersen LLP as the Company's independent auditors.
Results of the voting in connection with each of the matters
submitted to the stockholders were as follows:
For Against No Vote
Board of Directors
Terry Christensen 2,905,592 - 625,406
David Gotterer 2,905,925 - 625,073
David Malcolm 2,905,925 - 625,073
Burt Sugarman 2,904,655 - 626,343
Company's 1996 Employee
Stock Option Plan 2,387,558 524,302 619,138
Company's 1996 Stock
Option Plan for Non-
Employee Directors 2,413,715 498,059 619,224
New class of non-voting
Class A Common Stock
$.01 par value 1,984,415 922,616 623,967
Arthur Andersen LLP as
Company's independent
auditors 3,366,258 160,296 4,444
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Promissory note ($5,000,000) between GIANT GROUP, LTD.
and CBI Restaurants, Inc., dated September 27, 1996.
10.2 Guaranty between GIANT GROUP, LTD. and CKE Restaurants,
Inc. on $5,000,000 promissory note, dated September 27,
1996.
11. Statement re: computation of per share earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company
during the third quarterly period ended September 30,
1996.
Items 2,3,4 and 5 are not applicable.
<page-18>
SIGNATURE
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 thereunto duly authorized.
GIANT GROUP, LTD. - Registrant
By: \s\ Cathy L. Wood
-------------------------
Cathy L. Wood
Vice President and Treasurer
Chief Financial Officer
Date: November 5, 1996