1
EXHIBIT 99.2
CASA BONITA INCORPORATED AND
SUBSIDIARIES
Consolidated Financial Statements
April 1, 1996 and April 3, 1995
(With Independent Auditors' Report Thereon)
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
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)
ASSETS June 24, 1996
(unaudited) April 1, 1996 April 3, 1995
------------- ------------- -------------
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
======= ======= =======
See accompanying notes to consolidated financial statements.
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)
June 24, 1996 June 26, 1995
(unaudited) (unaudited) April 1, 1996 April 3, 1995
------------- ------------- ------------- -------------
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
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
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)
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
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
=== ====== ====== =======
See accompanying notes to consolidated financial statements.
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)
June 24, 1996 June 26, 1995
(unaudited) (unaudited) April 1, 1996 April 3, 1995
------------- ------------- ------------- -------------
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
======= ====== ======= =======
See accompanying notes to consolidated financial statements.
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
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):
USEFUL LIFE RANGE APRIL 1, 1996 APRIL 3, 1995
----------------- --------------- -------------
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
============= =============
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
9
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
Labor and related costs $1,700 $1,652
Insurance 1,982 3,311
Sales taxes 423 193
Other 391 462
------------- -------------
$4,496 $5,618
============= =============
(4) LONG-TERM DEBT
A summary of long-term debt follows (in thousands):
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
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
============= =============
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
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
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):
YEARS ENDED
----------------------------
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
Current:
Federal $ 669 $1,488
State 11 24
Deferred - federal (171) (683)
------------ ------------
Total $ 509 $ 829
============ ============
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):
YEARS ENDED
----------------------------
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
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
============ ============
The tax effects of the primary temporary differences giving rise to the
deferred federal income tax assets and liabilities are as follows (in
thousands):
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
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
============= =============
5
12
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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
============= =============
Included in the consolidated balance sheets (in thousands):
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
Current deferred tax asset $1,328 $1,368
Noncurrent deferred tax asset 327 117
------------- -------------
Net deferred tax asset $1,655 $1,485
============= =============
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):
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
Buildings and leasehold improvements $2,120 $2,220
Less accumulated depreciation
and amortization 1,384 1,391
------------- -------------
$ 736 $ 829
============= =============
6
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):
YEARS ENDED
----------------------------
APRIL 1, 1996 APRIL 3, 1995
------------- -------------
Minimum rentals $1,299 $1,353
Contingent rentals 96 94
------ ------
$1,395 $1,447
====== ======
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):
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
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
============
7
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
15
CASA BONITA INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
NUMBER OF
SARS
---------
Issued 1,422
Forfeited (122)
-----
Outstanding at April 3, 1995 1,300
Issued 190
Forfeited (7)
-----
Outstanding at April 1, 1996 1,483
=====
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