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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1997
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CKE RESTAURANTS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-13192 33-0602639
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1200 North Harbor Boulevard, Anaheim, California 92801
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 774-5796
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1997, CKE Restaurants, Inc., a Delaware corporation (the
"Company"), acquired Hardee's Food Systems, Inc., a North Carolina corporation
("Hardee's"), for $327.0 million (subject to adjustment) in cash from Imasco
Holdings, Inc. ("Imasco Holdings") pursuant to the Stock Purchase Agreement,
dated as of April 27, 1997 (the "Stock Purchase Agreement"), among the Company,
Hardee's and Imasco Holdings (the "Hardee's Acquisition"). Hardee's was founded
in 1961 and is the nation's fourth largest quick-service hamburger restaurant
chain, based on system-wide sales, with a leading market presence in the
Southeastern and Midwestern United States. As of March 31, 1997, the Hardee's
system included 3,152 restaurants, of which 788 were operated by Hardee's and
2,364 were operated by its franchisees and licensees. The Hardee's Acquisition
was financed by (i) a public offering of 8,337,500 shares of Common Stock of the
Company (including 1,087,500 shares issued upon the exercise of over-allotment
options granted to the underwriters), which generated net proceeds (after
underwriting discounts and estimated offering expenses) of $222.2 million (the
"Offering"); and (ii) borrowings of $133.9 million under the Company's New
Credit Facility described below.
Concurrently with the closing of Hardee's Acquisition, the Company
entered into a Credit Agreement with Banque Paribas, as Agent, and the lenders
identified therein (the "New Credit Facility"). The New Credit Facility consists
of a $75.0 million term loan facility and a $225.0 million revolving credit
facility.
Immediately prior to the closing of the Hardee's Acquisition, Hardee's
entered into three Supply Agreements with Fast Food Merchandisers, Inc. ("FFM")
and a Distribution Agreement with FFM, pursuant to which FFM will supply
Hardee's with substantially all of its requirements for certain food and other
products and will distribute such products, together with most other food
products sold or used by Hardee's in its restaurants, to Hardee's. FFM, formerly
a wholly-owned subsidiary of Hardee's, was transferred by Hardee's to Imasco
Holdings immediately prior to the closing of the Hardee's Acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired. The following financial
statements of Hardee's are incorporated by reference herein from pages F-29
through F-53 of the Company's Prospectus, dated July 9, 1997, a copy of which
was filed with the Commission pursuant to Rule 424(b) under the Securities Act
of 1933, as amended, on July 11, 1997.
Page
----
Independent Auditors' Report.................................................................... F-29
Combined Balance Sheets as of December 31, 1995 and 1996........................................ F-30
Combined Statements of Operations for each of the years in the three-year period ended
December 31, 1996............................................................................. F-31
Combined Statements of Shareholder's Equity for each of the years in the three-year period
ended December 31, 1996....................................................................... F-32
Combined Statements of Cash Flows for each of the years in the three-year period ended
December 31, 1996............................................................................. F-33
Notes to Combined Financial Statements.......................................................... F-35
Combined Balance Sheets as of December 31, 1996 and March 31, 1997 (unaudited).................. F-48
Combined Statements of Operations for the three months ended March 31, 1996 and
March 31, 1997 (unaudited).................................................................... F-49
Combined Statements of Shareholder's Equity for the year ended December 31, 1996 and the
three months ended March 31, 1997 (unaudited)................................................. F-50
Combined Statements of Cash Flows for the three months ended March 31, 1996 and
March 31, 1997 (unaudited).................................................................... F-51
Notes to Combined Financial Statements (unaudited).............................................. F-52
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(b) Pro Forma Financial Information.
The following unaudited pro forma combined condensed financial information
is based upon the historical consolidated financial statements of the Company
and has been prepared to illustrate the effects of the Hardee's Acquisition.
The unaudited pro forma combined condensed balance sheet as of May 19, 1997
gives effect to the Hardee's Acquisition and certain related transactions, the
application of the estimated net proceeds from the Offering and borrowings under
the New Credit Facility to finance the Hardee's Acquisition, as if all such
transactions had been completed on May 19, 1997 and was prepared based upon the
consolidated balance sheet of the Company as of May 19, 1997 and the combined
balance sheet of Hardee's as of March 31, 1997. The unaudited pro forma combined
condensed statements of operations for the fiscal year ended January 31, 1997
and for the 16 weeks ended May 19, 1997 give effect to the transactions
described above as if all such transactions had been completed on February 1,
1996. The unaudited pro forma combined condensed statement of operations for the
fiscal year ended January 31, 1997 was prepared based upon the consolidated
statement of income of the Company for the fiscal year ended January 31, 1997
and the combined statement of operations of Hardee's for the year ended December
31, 1996. The unaudited pro forma combined condensed statement of operations for
the 16 weeks ended May 19, 1997 was prepared based upon the consolidated
statement of income of the Company for the 16 weeks ended May 19, 1997 and the
combined statement of operations of Hardee's for the three months ended March
31, 1997.
The unaudited pro forma combined condensed financial information is
provided for comparative purposes only and is not indicative of the results of
operations or financial position of the combined companies that would have
occurred had the Hardee's Acquisition occurred at the beginning of the periods
presented or on the date indicated, nor is it indicative of future operating
results or financial position. The unaudited pro forma adjustments are based
upon currently available information and upon certain assumptions that
management of the Company believes are reasonable under the circumstances. The
unaudited pro forma combined condensed financial information and the related
notes thereto should be read in conjunction with the Company's historical
consolidated financial statements and with the combined financial statements of
Hardee's, and the related notes, listed in Item 7(a) above. In addition, the
unaudited pro forma combined condensed financial information does not reflect
certain cost savings that management believes may be realized following the
Hardee's Acquisition. These savings are expected to be realized primarily
through the rationalization of Hardee's operations and implementation of the
Company's management practices. Additionally, the Company believes the Hardee's
Acquisition will enable it to continue to achieve economies of scale, such as
enhanced purchasing power.
The historical combined statement of operations of Hardee's for the year
ended December 31, 1996 has been adjusted to reflect the continuing operations
of the 808 company-operated Hardee's restaurants open and operating as of
December 31, 1996. The historical combined statement of operations of Hardee's
for the three months ended March 31, 1997 has been adjusted to reflect the
continuing operations of the 788 company-operated Hardee's restaurants open and
operating as of March 31, 1997. The historical combined financial statements of
Hardee's also include (i) promotional costs in the amount of $5.6 million in
1996, which the Company believes will be non-recurring in future periods and
(ii) up to 114 under-performing company-operated restaurants which the Company
intends to sell or franchise to an independent third party. These 114
restaurants generated revenues of $74.2 million and operating losses of $13.0
million in 1996 and revenues of $18.0 million and operating losses of $2.8
million for the three months ended March 31, 1997.
The Hardee's Acquisition will be accounted for using the purchase method of
accounting. Accordingly, the Company's cost to acquire Hardee's will be
allocated to the assets acquired and liabilities assumed according to their
estimated fair values as of the date of acquisition after giving effect to the
purchase price adjustments required by the Stock Purchase Agreement. The
allocation is dependent upon certain valuations and other studies that have not
progressed to a stage where there is sufficient information to make a definitive
allocation. Accordingly, the purchase allocation adjustments made in connection
with the preparation of the unaudited pro forma combined condensed financial
information are preliminary, and have been made solely for the purpose of
preparing such unaudited pro forma combined condensed financial information;
however, no material effect on the statements of operations is anticipated.
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MAY 19, 1997
(DOLLARS IN THOUSANDS)
HISTORICAL
--------------------------------
CKE HARDEE'S
MAY 19, MARCH 31, PRO FORMA PRO FORMA
1997 1997 COMBINED ADJUSTMENTS COMBINED
-------- --------- --------- ----------- ---------
Current assets:
Cash and cash equivalents........................ $ 28,201 $ 2,867 $ 31,068 $ 29,080 A $ 60,148
Marketable securities............................ 573 0 573 573
Accounts receivable.............................. 6,752 18,406 25,158 (7,300)C 17,858
Related party receivables........................ 2,056 -- 2,056 2,056
Income tax receivables........................... -- 12,472 12,472 (12,472)D --
Inventories...................................... 9,058 12,101 21,159 21,159
Deferred income taxes, net....................... 7,214 -- 7,214 7,214
Other current assets and prepaid expenses........ 11,279 3,058 14,337 125 E 14,462
-------- -------- -------- --------- --------
Total current assets........................... 65,133 48,904 114,037 9,433 123,470
Property and equipment, net........................ 211,256 395,787 607,043 607,043
Property under capital leases, net................. 35,951 4,091 40,042 40,042
Long-term investments.............................. 47,119 -- 47,119 47,119
Notes receivable................................... 6,036 8,733 14,769 14,769
Related party receivables.......................... 6,078 -- 6,078 6,078
Costs in excess of net assets of businesses
acquired, net.................................... 24,331 -- 24,331 51,436 F 75,767
Other assets....................................... 14,077 35,688 49,765 (30,806)E,G 18,959
-------- -------- -------- --------- --------
Total assets.............................. $409,981 $493,203 $903,184 $ 30,063 $933,247
======== ======== ======== ========= ========
Current liabilities:
Current portion of long-term debt................ $ 758 $ 9,066 $ 9,824 $ 6,000 A,I $ 15,824
Current portion of capital lease obligations..... 4,960 561 5,521 5,521
Accounts payable................................. 25,165 16,599 41,764 41,764
Other current liabilities........................ 51,694 74,511 126,205 14,148 E,H,I 140,353
-------- -------- -------- --------- --------
Total current liabilities...................... 82,577 100,737 183,314 20,148 203,462
Long-term debt..................................... 34,055 21,405 55,460 99,164 A,I 154,624
Capital lease obligations.......................... 46,323 6,008 52,331 52,331
Other long-term liabilities........................ 21,610 27,378 48,988 21,225 J,K,L 70,213
Post retirement benefits........................... -- 22,641 22,641 (17,635)M 5,006
-------- -------- -------- --------- --------
Total liabilities......................... 184,565 178,169 362,734 122,902 485,636
Stockholders' equity............................... 225,416 315,034 540,450 (92,839)A,B 447,611
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity.................................. $409,981 $493,203 $903,184 $ 30,063 $933,247
======== ======== ======== ========= ========
See accompanying notes to unaudited pro forma
combined condensed financial information.
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
CKE HARDEE'S
FISCAL YEAR -------------------------------------- CKE &
ENDED YEAR ENDED DECEMBER 31, 1996 ADJUSTED
JANUARY 31, -------------------------------------- HARDEE'S PRO FORMA PRO FORMA
1997 HISTORICAL ADJUSTMENTS(Q) ADJUSTED COMBINED ADJUSTMENTS COMBINED
------------ ---------- -------------- -------- ---------- ----------- ----------
Total revenues.................... $614,080 $806,044 $(60,982) $745,062 $1,359,142 $ $1,359,142
Operating costs and expenses:
Restaurant operations:
Food and packaging............ 167,625 238,359 (18,800) 219,559 387,184 387,184
Payroll and other employee
benefits.................... 149,846 264,195 (26,591) 237,604 387,450 387,450
Occupancy and other
expenses.................... 112,689 175,892 (21,477) 154,415 267,104 267,104
Franchised and licensed
restaurants................... 71,986 34,174 1,001 35,175 107,161 107,161
Advertising expenses............ 28,291 44,075 (7,679) 36,396 64,687 64,687
General and administrative
expenses...................... 41,643 79,735 -- 79,735 121,378 1,285 F 122,663
-------- -------- -------- -------- ---------- --------- ----------
572,080 836,430 (73,546) 762,884 1,334,964 1,285 1,336,249
Operating income (loss)........... 42,000 (30,386) 12,564 (17,822) 24,178 (1,285) 22,893
Interest expense.................. (9,877) (6,981) -- (6,981) (16,858) (10,866)E,N (27,724)
Other income, net................. 4,587 9,508 -- 9,508 14,095 (9,508)O 4,587
-------- -------- -------- -------- ---------- --------- ----------
Income (loss) before income
taxes........................... 36,710 (27,859) 12,564 (15,295) 21,415 (21,659) (244)
Income tax expense (benefit)...... 14,408 -- -- -- 14,408 (14,506)P (98)
-------- -------- -------- -------- ---------- --------- ----------
Net income (loss)................. $ 22,302 $(27,859) $ 12,564 $(15,295) $ 7,007 $ (7,153) $ (146)
======== ======== ======== ======== ========== ========= ==========
Net income (loss) per common and
common equivalent share......... $ 0.73 $ (0.00)
======== ==========
Common and common equivalent
shares used in computing per
share amounts (000's)........... 30,414 37,792
======== ==========
See accompanying notes to unaudited pro forma
combined condensed financial information.
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE 16 WEEKS ENDED MAY 19, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
CKE HARDEE'S
SIXTEEN --------------------------------------
WEEKS THREE MONTHS ENDED CKE &
ENDED MARCH 31, 1997 ADJUSTED
MAY 19, -------------------------------------- HARDEE'S PRO FORMA PRO FORMA
1997 HISTORICAL ADJUSTMENTS(Q) ADJUSTED COMBINED ADJUSTMENTS COMBINED
---------- ---------- -------------- -------- -------- ----------- ---------
Total revenues........................ $235,470 $173,089 $ (944) $172,145 $407,615 $ $407,615
Operating costs and expenses:
Restaurant operations:
Food and packaging................ 65,302 50,308 132 50,440 115,742 115,742
Payroll and other employee
benefits........................ 59,606 59,657 (847) 58,810 118,416 118,416
Occupancy and other expenses...... 43,178 38,700 (1,333) 37,367 80,545 80,545
Franchised and licensed
restaurants....................... 22,496 6,218 -- 6,218 28,714 28,714
Advertising expenses................ 10,545 9,095 (953) 8,142 18,687 18,687
General and administrative
expenses.......................... 16,112 19,450 -- 19,450 35,562 396 F 35,958
-------- -------- -------- -------- -------- ------- --------
217,239 183,428 (3,001) 180,427 397,666 396 398,062
Operating income (loss)............... 18,231 (10,339) 2,057 (8,282) 9,949 (396) 9,553
Interest expense...................... (2,871) (823) -- (823) (3,694) (3,344)E,N (7,038)
Other income, net..................... 2,305 2,140 -- 2,140 4,445 (2,140)O 2,305
-------- -------- -------- -------- -------- ------- --------
Income (loss) before income taxes..... 17,665 (9,022) 2,057 (6,965) 10,700 (5,880) 4,820
Income tax expense (benefit).......... 7,079 -- -- -- 7,079 (5,151)P 1,928
-------- -------- -------- -------- -------- ------- --------
Net income (loss)..................... $ 10,586 $ (9,022) $ 2,057 $ (6,965) $ 3,621 $ (729) $ 2,892
======== ======== ======== ======== ======== ======= ========
Net income per common and common
equivalent share.................... $ 0.31 $ 0.07
======== ========
Common and common equivalent shares
used in computing per share amounts
(000's)............................. 34,300 42,638
======== ========
See accompanying notes to unaudited pro forma
combined condensed financial information.
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
A The unaudited pro forma combined condensed balance sheet has been prepared
to reflect the acquisition of Hardee's by CKE for an aggregate estimated
purchase price of $327,000, which is subject to adjustment and was financed
as follows:
Borrowings under New Credit Facility.............................. $133,885
Estimated Net Proceeds of Offering................................ 222,195
--------
Total................................................... $356,080
========
The excess of the foregoing amounts over the purchase price will be used
for general corporate purposes. The current portion of the New Credit
Facility is $15,000.
B The unaudited pro forma combined condensed balance sheet has been adjusted
to eliminate the shareholder's equity of Hardee's.
C To eliminate $7,300 of receivables not acquired by the Company.
D To eliminate $12,472 of federal and state income taxes receivable not
acquired by the Company.
E To record estimated acquisition costs of $1,875 and $3,500 of debt issuance
costs and $125 annual debt administration fee. The $3,500 debt issuance
costs are capitalized as other assets and amortized over 5 years.
Amortization of debt issuance costs is $700 for the fiscal year ended
January 31, 1997. Amortization for the 16 weeks ended May 19, 1997 for the
annual debt administration fee and for debt issuance costs is $254.
Acquisition costs are included as part of the costs in excess of net assets
of business acquired, net.
F To record $51,436 for the excess of consideration paid over the preliminary
estimate of the fair value of net assets acquired, to be amortized over 40
years, and to record goodwill amortization of $1,285 and $396 for the
fiscal year ended January 31, 1997 and the 16 weeks ended May 19, 1997,
respectively.
G To eliminate deferred income tax assets of $34,306 not available to the
Company.
H To record estimated severance liability of $11,400.
I To eliminate deferred income tax liabilities of $1,166, a deferred gain of
$1,586, short-term borrowings of $9,000 and long-term debt of $19,721 not
assumed by the Company.
J To record estimated store closure reserves, at the net present value of the
anticipated lease subsidy (excess of current rent over estimated sublease
income, discounted at 10%), of $22,200.
K To record a lease subsidy reserve for area offices of $5,000.
L To eliminate other long-term liabilities of $5,975 not assumed by the
Company.
M To eliminate post retirement benefits of $17,635 not assumed by the
Company.
N To record interest expense on borrowings under the New Credit Facility of
$10,041 and $3,090 for the fiscal year ended January 31, 1997 and the 16
weeks ended May 19, 1997, respectively using an estimated 7.5% interest
rate. A 0.125% increase/decrease in the estimated interest rate
incrementally increases/decreases income before income taxes by $167 and
$51 for the fiscal year ended January 31, 1997 and the 16 weeks ended May
19, 1997, respectively.
O To eliminate net management fee income of $9,508 and $2,140 received by
Hardee's from FFM (a related party) during the year ended December 31, 1996
and the three months ended March 31, 1997, respectively, which will not be
recurring.
P To record the income tax effects of the pro forma adjustments and
consolidation of the entities at a pro forma tax rate of 40.0%.
Q During the year ended December 31, 1996 and the three months ended March
31, 1997, Hardee's sold or closed 155 and 31 restaurants, respectively, the
revenues and expenses of which are included in the historical statement of
operations of Hardee's. Adjustments in this column remove the operating
results of these restaurants, as disclosed in Note 21 of Notes to Hardee's
Combined Annual Financial Statements, and Note 4 of Notes to Hardee's
Combined Interim Financial Statements, respectively. In addition, Hardee's
operating results for the year ended December 31, 1996 included a write
down of assets pursuant to Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and the reversal of a 1995 overaccrual relating
to the disposition of restaurants in certain non-core Hardee's markets.
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(c) Exhibits.
Exhibit Number
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23.1 Consent of Deloitte & Touche LLP.
99.1 Press Release of the Company dated July 16, 1997.
99.2 Credit Agreement, dated as of July 15, 1997, by and among the
Company, Banque Paribas, as agent, and the lenders party
thereto.*
99.3 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Forest City Division).*
99.4 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Monterey Division).*
99.5 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and QVS, Inc.*
99.6 Distribution Agreement, dated as of July 14, 1997, by and
among the Company, Hardee's Food Systems, Inc. and Fast Food
Merchandisers, Inc.*
99.7 Financial Statements of Hardee's Food Systems, Inc. listed in
Item 7(a) above.
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* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.
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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 28, 1997 By: /s/ CARL A. STRUNK
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Carl A. Strunk,
Executive 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
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23.1 Consent of Deloitte & Touche LLP.
99.1 Press Release of the Company dated July 16, 1997.
99.2 Credit Agreement, dated as of July 15, 1997, by and among the
Company, Banque Paribas, as agent, and the lenders party
thereto.*
99.3 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Forest City Division).*
99.4 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Monterey Division).*
99.5 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and QVS, Inc.*
99.6 Distribution Agreement, dated as of July 14, 1997, by and
among the Company, Hardee's Food Systems, Inc. and Fast Food
Merchandisers, Inc.*
99.7 Financial Statements of Hardee's Food Systems, Inc. listed in
Item 7(a) above.
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* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.