ANAHEIM — An arbitrator has ruled that Carl Karcher Enterprises must pay $3 million to a group of investors that had been negotiating to buy several Carl's Jr. restaurants.
The payment will result in a net loss of about 5 cents a share for the fourth quarter ended Jan. 31, company officials said Wednesday. Final fourth-quarter and annual financial figures will be released in about a month.
Karcher Enterprises reported a loss of 73 cents a share for the same period a year earlier, a loss that was driven by a corporate restructuring.
"The award will have no effect on the company's (profitable operations) or on the progress we are making in pursuing our corporate growth objectives," Karcher Enterprises President Donald E. Doyle said Wednesday. "We are surprised and extremely disappointed with the outcome, since the company believed it had a solid defense."
Company officials would not identify the disgruntled investors, who alleged that Karcher Enterprises failed to comply with terms of a contract dealing with the planned acquisition of several Carl's Jr. restaurants. The investors brought suit in California Superior Court in October, 1992, and the company agreed to transfer the matter to binding arbitration in September, 1993.
The arbitrator agreed with the investors, who maintained that Karcher Enterprises failed to comply with "verbal modifications" to the contract made by a company executive. A Karcher Enterprises spokesman maintained that the written contract with the investors "was clear" and that "conditions for finalizing the agreement were not fulfilled."
In a related development, Karcher Enterprises on Wednesday approved an employment agreement that officially returns founder Carl N. Karcher to the company as chairman emeritus. Karcher was forced out as chairman in October during a bitter dispute over the company's strategic direction.