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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 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
(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)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1996, CKE Restaurants, Inc. (the "Company") acquired Summit
Family Restaurants Inc. ("Summit"). Summit has restaurant operations in nine
western states, including 77 company-operated and 24 franchised JB's
Restaurants, 16 HomeTown Buffet restaurants and six Galaxy Diner restaurants.
The acquisition was effected by the merger of Summit Merger, Inc., a
wholly-owned subsidiary of the Company, with and into Summit (the "Merger"),
with Summit surviving the Merger as a wholly-owned subsidiary of the Company. In
the Merger, each of the 4,809,446 outstanding shares of Summit Common Stock was
converted into the right to receive 0.1043 shares of the Company's Common Stock
(and cash in lieu of fractional shares) and cash in the amount of $2.63, subject
to the rights of the holders thereof to exercise appraisal rights under
applicable Delaware law. Accordingly, the aggregate number of shares of Common
Stock of the Company issued or to be issued by the Company in the Merger will
not exceed 501,625. The sources of funds for the cash portion of the Merger
consideration were cash on hand and borrowings under the Company's revolving
credit facilities.
The foregoing descriptions of the acquisition of Summit and the Merger are
qualified in their entirety by reference to the Agreement and Plan of Merger and
Reorganization, dated as of November 30, 1995, among the Company, Summit and
Summit Merger, Inc., which is attached as Appendix A to the Proxy
Statement/Prospectus, dated June 10, 1996, of the Company and Summit, a copy of
which was filed with the Commission pursuant to Rule 424(b) under the
Securities Act of 1933, as amended, on June 11, 1996 (the "Proxy
Statement/Prospectus").
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired. The following financial
statements of Summit are incorporated by reference herein from pages F-2 through
F-20 of the Proxy Statement/Prospectus.
Page
----
Report of Independent Auditors .................................................................. F-2
Consolidated Balance Sheets as of September 26, 1994, September 25, 1995
and March 11, 1996 (unaudited)................................................................ F-3
Consolidated Statements of Operations for the fiscal years ended September
27, 1993, September 26, 1994 and September 25, 1995 and for the
twenty-four weeks ended
March 13, 1995 and March 11, 1996 (unaudited)................................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended
September 27, 1993, September 26, 1994 and September 25, 1995 and for the
twenty-four weeks ended March 11, 1996 (unaudited)............................................ F-5
Consolidated Statements of Cash Flows for the fiscal years ended September
27, 1993, September 26, 1994 and September 25, 1995 and for the
twenty-four weeks ended
March 13, 1995 and March 11, 1996 (unaudited)................................................. F-6
Notes to Consolidated Financial Statements....................................................... F-8
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(b) Pro Forma Financial Information.
The following Unaudited Pro Forma Combined Condensed Financial
Statements are based upon the consolidated financial statements of the Company
and Summit combined and adjusted to give effect to the acquisition of Summit by
the Company (the "Summit Acquisition"). In connection with the Summit
Acquisition, each of the 4,809,446 then outstanding shares of Summit Common
Stock was converted into the right to receive cash in the amount of $2.63 and
0.1043 shares of the Company's Common Stock, and cash in lieu of fractional
shares.
The Unaudited Pro Forma Combined Condensed Balance Sheet at May 20,
1996 gives effect to the Summit Acquisition as if it had occurred on such date
and was prepared based upon the consolidated balance sheets of the Company as of
May 20, 1996 and of Summit as of March 11, 1996. The Unaudited Pro Forma
Combined Condensed Statements of Operations for the fiscal year ended January
31, 1996 and for the 16 weeks ended May 20, 1996 give effect to the Summit
Acquisition as if it 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 and of
Summit for the 24 weeks ended March 11, 1996 and the 28 weeks ended September
25, 1995. The Unaudited Pro Forma Combined Condensed Statement of Operations for
the sixteen weeks ended May 20, 1996 was prepared based upon the consolidated
statements of operations of the Company for the 16 weeks ended May 20, 1996 and
of Summit for the 12 weeks ended March 11, 1996.
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 company that would
have occurred had the Summit Acquisition 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 certain assumptions included in the notes to the
Unaudited Pro Forma Combined Condensed Financial Statements. The Company
believes the pro forma assumptions are reasonable under the circumstances. The
Unaudited Pro Forma Combined Condensed Financial Statements are further based on
the assumption that none of the former holders of Summit Common Stock, if any,
who may be entitled to appraisal rights under the Delaware General Corporation
Law will seek to perfect such rights.
The Summit Acquisition will be accounted for using the purchase method
of accounting. Accordingly, the Company's cost to acquire Summit (the "Purchase
Consideration"), calculated to be $29.0 million, will be allocated to the assets
acquired and liabilities assumed according to their respective fair values. The
final allocation of the Purchase Consideration is dependent upon certain
valuations and other studies that have not progressed to a stage where there is
sufficient information to make such an allocation. Many operational and
strategic decisions with respect to the combined companies have not been made.
The Company currently intends to sell the JB's Restaurants. However, the Company
has not entered into any agreements providing for any such sale and there can be
no assurance that the Company will be able to sell such restaurants.
Accordingly, the purchase allocation adjustments made in connection with the
development of the Unaudited Pro Forma Combined Condensed Financial Statements
are preliminary, assume all Summit restaurants will be operated by the Company,
and have been made solely for the purpose of developing such Unaudited Pro Forma
Combined Condensed Financial Statements. Acquisition costs, including fees
payable to Summit's financial advisor, have been included in the 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.
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MAY 20, 1996
(IN THOUSANDS)
HISTORICAL
------------------------------------------------ PRO FORMA
CKE AT SUMMIT AT ACQUISITION
5/20/96 3/11/96 COMBINED ADJUSTMENTS PRO FORMA
--------- --------- --------- ----------- ---------
ASSETS
Cash and cash equivalents...... $ 19,219 $ 1,875 $ 21,094 $(13,606) (a)(f)(g) $ 7,488
Notes receivable............... 1,030 190 1,220 -- 1,220
Other receivables.............. 5,427 584 6,011 -- 6,011
Inventories.................... 7,208 1,466 8,674 -- 8,674
Current deferred taxes, net.... 10,005 -- 10,005 -- 10,005
Prepaid expenses and other..... 6,449 189 6,638 -- 6,638
--------- -------- --------- -------- ---------
Total current assets....... 49,338 4,304 53,642 (13,606) 40,036
Property, building and
equipment, net............. 123,305 44,636 167,941 (4,778) (d) 163,163
Real property and equipment
under capitalized leases... 27,662 7,091 34,753 -- 34,753
Notes receivable............... 6,319 2,241 8,560 -- 8,560
Related party notes
receivable................. 900 -- 900 -- 900
Long-term investments.......... 31,386 1,430 32,816 (4,989) (j) 27,827
Other assets................... 7,425 2,693 10,118 -- 10,118
--------- -------- --------- --------- ---------
Total assets............... $ 246,335 $ 62,395 $ 308,730 $ (23,373) $ 285,357
========= ======== ========= ========= =========
LIABILITIES
Current maturities of
long-term debt.............. $ 11,193 $ 871 $ 12,064 $ -- $ 12,064
Accounts payable............... 15,028 5,358 20,386 -- 20,386
Accrued liabilities............ 36,479 7,136 43,615 1,887 (c)(e)(f) 45,502
--------- -------- --------- --------- ---------
Total current liabilities... 62,700 13,365 76,065 1,887 77,952
Obligations under capitalized
leases...................... 39,369 9,981 49,350 -- 49,350
Long-term debt................. 23,066 345 23,411 -- 23,411
Other liabilities.............. 14,645 -- 14,645 -- 14,645
Deferred taxes, net............ -- 468 468 -- 468
Deferred compensation.......... -- 1,564 1,564 -- 1,564
--------- -------- --------- --------- ---------
Total liabilities........... 139,780 25,723 165,503 1,887 167,390
STOCKHOLDERS' EQUITY........... 106,555 36,672 143,227 (25,260) (a)(b)(j) 117,967
--------- -------- --------- --------- ---------
Total liabilities and
stockholders' equity........ $ 246,335 $ 62,395 $ 308,730 $ (23,373) $ 285,357
========= ======== ========= ========= =========
See accompanying notes to unaudited pro forma combined condensed
financial statements.
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JANUARY 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
------------------------------------
CKE SUMMIT
FISCAL YEAR 52 WEEKS PRO FORMA
ENDED ENDED ACQUISITION
1/31/96 3/11/96 COMBINED ADJUSTMENTS PRO FORMA
---------- ---------- --------- ------------- ----------
TOTAL REVENUES........................ $ 465,437 $ 120,897 $ 586,334 $ -- $ 586,334
OPERATING COSTS AND EXPENSES:
Restaurant Operations:
Food and packaging............... 121,029 39,563 160,592 -- 160,592
Payroll and other employee
benefits......................... 109,942 41,977 151,919 (1,600)(i) 150,319
Occupancy and other operating
expenses...................... 82,095 32,208 114,303 -- 114,303
Franchised and licensed
restaurants...................... 68,839 194 69,033 -- 69,033
Advertising........................ 19,940 3,316 23,256 -- 23,256
General and administrative......... 37,857 9,845 47,702 (478)(d) 47,224
---------- ---------- --------- ----------- ----------
Total operating costs and
expenses................... 439,702 127,103 566,805 (2,078) 564,727
---------- ---------- --------- ----------- ----------
Operating income (loss)............... 25,735 (6,206) 19,529 2,078 21,607
Interest expense...................... (10,004) (1,375) (11,379) -- (11,379)
Gain on sale of long-term
investment......................... -- 3,959 3,959 -- 3,959
Other income, net..................... 2,222 400 2,622 -- 2,622
---------- ---------- --------- ----------- ----------
Income (loss) before income taxes..... 17,953 (3,222) 14,731 2,078 16,809
Income tax expense (benefit).......... 7,001 900 7,901 (1,177)(h) 6,724
---------- ---------- --------- ----------- ----------
Net income (loss)..................... $ 10,952 $ (4,122) $ 6,830 $ 3,255 $ 10,085
========== ========== ========= =========== ==========
Net income per share.................. $ 0.59 $ 0.52
========== ==========
Weighted average shares
outstanding........................ 18,679 19,399
========== ==========
See accompanying notes to unaudited pro forma combined condensed
financial statements.
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE 16 WEEKS ENDED MAY 20, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
------------------------------------
CKE SUMMIT
16 WEEKS 12 WEEKS PRO FORMA
ENDED ENDED ACQUISITION
5/20/96 3/11/96 COMBINED ADJUSTMENTS PRO FORMA
---------- ---------- --------- ------------- ----------
TOTAL REVENUES........................ $ 152,934 $ 27,397 $ 180,331 $ -- $ 180,331
OPERATING COSTS AND EXPENSES:
Restaurant Operations:
Food and packaging............... 39,755 8,782 48,537 -- 48,537
Payroll and other employee
benefits......................... 35,631 9,287 44,918 (1,600) (i) 43,318
Occupancy and other operating
expenses...................... 26,539 7,241 33,780 -- 33,780
Franchised and licensed
restaurants...................... 22,176 85 22,261 -- 22,261
Advertising........................ 7,571 680 8,251 -- 8,251
General and administrative......... 11,186 3,219 14,405 (147) (d) 14,258
---------- ---------- --------- ------------- ----------
Total operating costs and
expenses................... 142,858 29,294 172,152 (1,747) 170,405
Operating income (loss)............... 10,076 (1,897) 8,179 1,747 9,926
Interest expense...................... (2,595) (282) (2,877) -- (2,877)
Other income, net..................... 1,274 121 1,395 -- 1,395
---------- ---------- --------- ------------- ----------
Income (loss) before income taxes..... 8,755 (2,058) 6,697 1,747 8,444
Income tax expense (benefit).......... 3,422 (200) 3,222 156 (h) 3,378
---------- ---------- --------- ------------- ----------
Net income (loss)..................... $ 5,333 $ (1,858) $ 3,475 $ 1,591 $ 5,066
========== ========== ========= ============= ==========
Net income per share.................. $ 0.28 $ 0.26
========== ==========
Weighted average shares
outstanding........................ 19,109 19,611
========== ==========
See accompanying notes to unaudited pro forma combined
condensed financial statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(a) The pro forma combined condensed balance sheet and statements of
operations have been prepared to reflect the acquisition of Summit by the
Company for an aggregate estimated purchase price comprised of $17.6 million in
cash and shares of Common Stock having an aggregate fair market value of $11.4
million. The cash portion of the purchase price includes cash in the amount of
$5.0 million paid by the Company for the purchase of Summit preferred stock on
April 4, 1996; however, the pro forma cash acquisition adjustments exclude the
$5.0 million paid.
(b) The pro forma combined condensed balance sheet has been adjusted to
eliminate the stockholders' equity of Summit. See note (j) below.
(c) To record anticipated additional change of control and severance
costs of $1.3 million for employees of Summit expected to be terminated after
consummation of the Summit Acquisition. See note (i) below.
(d) To write down $1.2 million of certain leasehold improvements,
property and equipment which will not be used by the Company after the Summit
Acquisition, to allocate $3.6 million, the remaining excess of fair value of net
assets acquired over consideration paid, in accordance with APB No. 16 and to
record the related $0.5 million and $0.1 million impact on depreciation and
amortization expense calculated over ten years for the fiscal year ended January
31, 1996 and the 16 weeks ended May 20, 1996, respectively.
(e) To record reserves for the excess of master lease payments over
anticipated sublease rents of $0.3 million for Summit's corporate office lease,
$0.2 million for computer and equipment lease commitments and $0.2 million for
other integration costs.
(f) To record the use of cash of $0.7 million for investment banking
fees to be paid upon the closing of the Summit Acquisition and to reduce
liabilities by $0.1 million, representing investment banking fees previously
accrued by Summit.
(g) To record the use of $0.2 million in cash for the cancellation
of Summit options whose exercise price is below the market value of the Summit
Common Stock.
(h) To record the income tax effects of the pro forma adjustments at an
assumed rate of 40.0% and to utilize Summit's current net operating losses so
as to affect a pro forma tax rate of 40.0%.
(i) To exclude $1.6 million of change of control and severance costs,
for employees of Summit who have already been terminated and which are included
in Summit's results of operations for the 52 week and 12 week periods ended
March 11, 1996, as a non-recurring charge.
(j) To eliminate in consolidation the Company's $5.0 million investment
in Summit preferred stock.
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(c) Exhibits.
Exhibit Number
2.1 Agreement and Plan of Merger and Reorganization
dated as of November 30, 1995, by and among CKE
Restaurants, Inc., Summit Merger, Inc. and Summit
Family Restaurants Inc. (incorporated herein by
reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (Registration
No. 333-05305)).
23.1 Consent of KPMG Peat Marwick LLP
99.1 Press Release dated July 16, 1996
99.2 Financial Statements of Summit Family Restaurants
Inc. listed in Item 7 (a) above
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CKE RESTAURANTS, INC.
Date: July 26, 1996 By: /s/ JOSEPH N. STEIN
-------------------
Joseph N. Stein,
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
The following exhibits are attached hereto and incorporated herein by
reference:
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- -------------
2.1 Agreement and Plan of Merger and Reorganization --
dated as of November 30, 1995, by and among CKE
Restaurants, Inc., Summit Merger, Inc. and Summit
Family Restaurants Inc. (incorporated herein by
reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (Registration
No. 333-05305)).*
23.1 Consent of KPMG Peat Marwick LLP
99.1 Press Release dated July 16, 1996
99.2 Financial Statements of Summit Family Restaurants
Inc. listed in Item 7 (a) above
- -------------------
* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.