SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE SIXTEEN WEEKS ENDED APRIL 11, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-8445
THE STEAK N SHAKE COMPANY
(Exact name of registrant as specified in its charter)
INDIANA 37-0684070
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
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36 S. PENNSYLVANIA STREET, SUITE 500
INDIANAPOLIS, INDIANA 46204
(317) 633-4100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Number of shares of Common Stock outstanding at May 11, 2001: 28,728,183
THE STEAK N SHAKE COMPANY
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Position -
April 11, 2001 (Unaudited) and September 27, 2000 3
Consolidated Statements of Earnings (Unaudited)
Sixteen and Twenty-Eight Weeks Ended April 11, 2001
and April 12, 2000 4
Consolidated Statements of Cash Flows (Unaudited)
Twenty-Eight Weeks Ended April 11, 2001 and
April 12, 2000 5
Notes to Consolidated Financial Statements (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 12
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE STEAK N SHAKE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
APRIL 11, SEPTEMBER 27, APRIL 11, SEPTEMBER 27,
2001 2000 2001 2000
----------- ------------ ----------- ------------
(Unaudited) (Unaudited)
ASSETS: LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT ASSETS CURRENT LIABILITIES
Cash, including cash equivalents Accounts payable $ 12,756,939 $ 16,031,451
of $4,650,000 in 2001 and Accrued expenses 20,907,708 20,200,716
$0 in 2000 $7,749,373 $ 2,177,780 Current portion of senior note 3,960,317 3,960,317
Receivables 4,660,773 3,192,384 Current portion of obligations
Properties under sale and under capital leases 737,385 905,453
leaseback contract 3,091,528 3,593,023 ------------ -------------
Total current liabilities 38,362,349 41,097,937
Inventories 5,239,950 5,484,670
Deferred income taxes 400,000 400,000 DEFERRED INCOME TAXES
Other current assets 4,018,638 3,769,898 AND CREDITS 7,873,800 7,504,485
------------ -------------
Total current assets 25,160,262 18,617,755
------------ -------------
OBLIGATIONS UNDER
PROPERTY AND EQUIPMENT CAPITAL LEASES 1,496,775 1,839,244
Land 63,998,044 63,688,394
Buildings 58,230,027 56,011,693 REVOLVING LINE OF CREDIT 10,000,000 12,695,000
Leasehold improvements 54,059,930 51,746,799
Equipment 119,039,451 114,286,577
Construction in progress 10,243,591 14,584,748 SENIOR NOTE 30,521,746 25,521,746
------------ -------------
305,571,043 300,318,211
Less accumulated depreciation
and amortization (85,871,100) (80,620,128)
------------ -------------
Net property and equipment 219,699,943 219,698,083
------------ ------------- SHAREHOLDERS' EQUITY
Common stock -- $.50 stated value
50,000,000 shares authorized --
shares issued: 30,151,984 in
2001; 29,920,608 in 2000 15,075,992 14,960,304
Additional paid-in capital 122,679,491 121,412,602
NET LEASED PROPERTY 1,221,118 1,453,428 Retained earnings 36,083,885 26,082,398
Less: Unamortized value of
restricted shares (1,383,475) (1,307,031)
Treasury stock -- at cost
1,433,969 shares in 2001;
819,238 shares in 2000 (13,660,732) (9,039,834)
------------ -------------
OTHER ASSETS 968,508 997,585 Total shareholders' equity 158,795,161 152,108,439
------------ ------------- ------------ -------------
$247,049,831 $240,766,851 $247,049,831 $240,766,851
============== ============= ============= ============
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SEE ACCOMPANYING NOTES.
THE STEAK N SHAKE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
SIXTEEN TWENTY-EIGHT
WEEKS ENDED WEEKS ENDED
------------------------------------ ------------------------------------
APRIL 11, APRIL 12, APRIL 11, APRIL 12,
2001 2000 2001 2000
---------------- ---------------- ---------------- ----------------
REVENUES
Net sales $ 134,002,776 $ 115,881,910 $ 229,081,155 $ 203,823,307
Franchise fees 1,104,255 1,053,001 1,920,838 1,801,946
Other - net 706,078 862,076 1,374,492 1,500,965
-------------- -------------- ---------------- ----------------
135,813,109 117,796,987 232,376,485 207,126,218
-------------- -------------- ---------------- ----------------
COSTS AND EXPENSES
Cost of sales 31,350,070 27,832,287 53,939,051 49,156,349
Restaurant operating costs 67,307,750 56,527,563 115,632,567 98,977,095
General and administrative 10,169,136 9,298,007 17,257,297 15,937,622
Depreciation and amortization 5,216,265 4,606,662 9,080,658 7,984,679
Rent 5,717,259 4,992,141 9,835,775 8,523,700
Marketing 5,172,163 3,654,753 8,082,997 6,221,203
Pre-opening costs 623,787 1,234,655 1,578,337 2,373,244
Interest 856,091 420,803 1,404,316 627,389
-------------- ------------- ---------------- ----------------
126,412,521 108,566,871 216,810,998 189,801,281
-------------- -------------- ---------------- ----------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 9,400,588 9,230,116 15,565,487 17,324,937
INCOME TAXES 3,361,000 3,348,000 5,564,000 6,271,000
-------------- -------------- ---------------- ----------------
EARNINGS FROM CONTINUING OPERATIONS 6,039,588 5,882,116 10,001,487 11,053,937
DISCONTINUED OPERATIONS:
LOSS FROM OPERATIONS, NET OF
INCOME TAXES - (400,325) - (642,646)
-------------- -------------- ---------------- ----------------
NET EARNINGS $ 6,039,588 $ 5,481,791 $ 10,001,487 $ 10,411,291
============== ============== ================ ================
BASIC EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
From Continuing Operations $ .21 $ .20 $ .35 $ .37
Discontinued Operations - (.01) - (.02)
-------------- ------------- ---------------- ----------------
Basic earnings per share $ .21 $ .19 $ .35 $ .35
============== ============= ================ ==============
DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
From Continuing Operations $ .21 $ .20 $ .35 $ .37
Discontinued Operations - (.01) - (.02)
-------------- -------------- ---------------- ----------------
Diluted earnings per share $ .21 $ .19 $ .35 $ .35
============== ============== ================ ================
WEIGHTED AVERAGE SHARES
AND EQUIVALENTS:
Basic 28,633,593 29,294,658 28,797,254 29,330,171
Diluted 28,633,593 29,408,776 28,797,265 29,440,067
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SEE ACCOMPANYING NOTES.
THE STEAK N SHAKE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWENTY-EIGHT WEEKS ENDED
---------------------------------------------
APRIL 11, APRIL 12,
2001 2000
---------------- -----------------
OPERATING ACTIVITIES
Net earnings $ 10,001,487 $ 10,411,291
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 9,080,658 8,512,257
Changes in receivables and inventories 892,975 1,966,251
Changes in other assets 687,441 (366,027)
Changes in income taxes payable 1,953,738 1,423,663
Changes in accounts payable
and accrued expenses (5,693,304) (4,815,058)
Loss (gain) on disposal of property 109,455 (284,529)
-------------- ---------------
Net cash provided by operating activities 17,032,450 16,847,848
-------------- --------------
INVESTING ACTIVITIES
Additions of property and equipment (21,451,704) (38,597,307)
Net proceeds from sale/leasebacks and
Other disposals 11,909,337 11,844,573
-------------- --------------
Net cash used in investing activities (9,542,367) (26,752,734)
--------------- --------------
FINANCING ACTIVITIES
Principal payments on debt
and capital lease obligations (336,069) (500,401)
Proceeds from long-term debt 5,000,000 -
Net proceeds from revolving line of credit (2,695,000) 10,230,000
Proceeds from equipment and property leases 338,150 358,599
Lease payments on subleased properties (346,902) (336,379)
Cash paid in lieu of fractional shares - (12,372)
Proceeds from exercise of stock options - 254,332
Proceeds from employee stock purchase plan 1,259,781 1,237,782
Treasury stock repurchases (5,138,450) (3,659,263)
---------------- ---------------
Net cash (used in) provided by financing activities (1,918,490) 7,572,298
---------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,571,593 (2,332,588)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,177,780 4,005,187
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,749,373 $ 1,672,599
============== ==============
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SEE ACCOMPANYING NOTES.
THE STEAK N SHAKE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.
In the opinion of the Company, all adjustments (consisting of only normal recurring accruals) considered necessary to present fairly the consolidated financial position as of April 11, 2001, the consolidated statements of earnings for the sixteen and twenty-eight weeks ended April 11, 2001 and April 12, 2000 and the consolidated statements of cash flows for the twenty-eight weeks ended April 11, 2001 and April 12, 2000 have been included.
The consolidated statements of earnings for the sixteen and twenty-eight weeks ended April 11, 2001 and April 12, 2000 are not necessarily indicative of the consolidated statements of earnings for the entire year. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended September 27, 2000.
SEASONAL ASPECTS
The Company has substantial fixed costs which do not decline as a result of a decline in sales. The Company's first and second fiscal quarters, which include the winter months, usually reflect lower average weekly unit volumes. Sales in these quarters can be adversely affected by severe winter weather.
DISCONTINUED OPERATIONS
In September 2000, the Company announced its decision to dispose of the Specialty Restaurant segment of the business comprised of its Consolidated Specialty Restaurants, Inc. (CSR) subsidiary. The Company has reported the disposal of the Specialty Restaurant segment as a disposal of a segment of the business and has reported it as a discontinued operation in accordance with APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The loss from operations and the estimated loss on disposal, net of applicable income taxes, are shown below Earnings from Continuing Operations. In addition, all amounts relating to CSR have been reclassified to discontinued operations for all years presented.
SUBSEQUENT EVENT
On May 16, 2001, The Company's Board of Directors' adopted a Shareholder Rights Agreement. The Board's action followed approval by the Company's shareholders of an amendment to its Articles of Incorporation authorizing a new class of Preferred Stock, which will form the basis for the Rights Agreement. To implement to Rights Agreement, the Board declared a dividend of one purchase Right for each share of outstanding Common Stock held by shareholders of record on May 31, 2001 (the Record Date). Each Right entitles the shareholder to purchase from the Company one one-hundredth of a share of Preferred Stock under circumstances described in the Rights Agreement.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Diluted earnings per common and common equivalent share is computed by dividing net earnings by the weighted average number of outstanding and common equivalent shares. Common equivalent shares include shares subject to purchase under stock options.
The following table presents information necessary to calculate basic and diluted earnings per common and common equivalent share:
SIXTEEN TWENTY-EIGHT
WEEKS ENDED WEEKS ENDED
--------------------------- ----------------------------
APRIL 11, APRIL 12, APRIL 11, APRIL 12,
2001 2000 2001 2000
----------- ------------ ------------ -----------
Weighted average shares outstanding-Basic 28,633,593 29,294,658 28,797,254 29,330,171
Share equivalents -- 114,118 11 109,896
----------- ----------- ----------- -----------
Weighted average shares and equivalents-Diluted 28,633,593 29,408,776 28,797,265 29,440,067
=========== =========== =========== ===========
Net earnings for basic and diluted
earnings per share computation $ 6,039,588 $ 5,481,791 $10,001,487 $10,411,291
=========== =========== =========== ===========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the following discussion, the term "same store sales" refers to the sales of only those units open eighteen months as of the beginning of the current fiscal period being discussed and which remained open through the end of the fiscal period.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenues, unless otherwise indicated, of items included in the Company's consolidated statements of earnings for the periods indicated:
SIXTEEN TWENTY-EIGHT
WEEKS ENDED WEEKS ENDED
---------------------- ---------------------
4/11/01 4/12/00 4/11/01 4/12/00
------- ------- ------- -------
REVENUES
Net sales 98.7% 98.4% 98.6% 98.4%
Franchise fees 0.8 0.9 0.8 0.9
Other, net 0.5 0.7 0.6 0.7
----- ----- ----- -----
100.0 100.0 100.0 100.0
----- ----- ----- -----
COSTS AND EXPENSES
Cost of sales 23.4(1) 24.0(1) 23.5(1) 24.1(1)
Restaurant operating costs 50.2(1) 48.8(1) 50.5(1) 48.6(1)
General and administrative 7.5 7.9 7.4 7.7
Depreciation and amortization 3.8 3.9 3.9 3.9
Rent 4.2 4.2 4.2 4.1
Marketing 3.8 3.1 3.5 3.0
Pre-opening costs 0.5 1.0 0.7 1.1
Interest 0.6 0.4 0.6 0.3
----- ----- ----- -----
93.1 92.2 93.9 92.0
----- ----- ----- -----
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 6.9 7.8 6.7 8.4
INCOME TAXES 2.5 2.8 2.4 3.0
----- ----- ----- -----
EARNINGS FROM CONTINUING OPERATIONS 4.4 5.0 4.3 5.3
DISCONTINUED OPERATIONS:
LOSS FROM OPERATIONS, NET OF
INCOME TAXES -- (0.3) -- (0.3)
----- ----- ----- -----
NET EARNINGS 4.4% 4.7% 4.3% 5.0%
===== ===== ===== ======
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(1) Cost of sales and restaurant operating costs are expressed as a percentage of net sales.
COMPARISON OF SIXTEEN WEEKS ENDED APRIL 11, 2001 TO SIXTEEN WEEKS ENDED
APRIL 12, 2000
REVENUES
Net sales increased $18,121,000 to $134,003,000, or 15.6%, due to a 10.0% increase in the number of Company-operated Steak n Shake restaurants and a 6.1% increase in same store sales. The increase in same store sales was attributable to a 2.7% increase in check average and a 3.4% increase in customer counts. The number of Company-operated Steak n Shake restaurants increased to 322 at April 11, 2001 as compared to 293 at April 12, 2000. Steak n Shake instituted weighted average menu price increases of approximately 2.1%, 0.4% and 2.8% in the third quarter of fiscal 2000, first quarter and second quarter of fiscal 2001, respectively.
COSTS AND EXPENSES
Cost of sales increased $3,518,000, or 12.6%, primarily as a result of sales increases. As a percentage of net sales, cost of sales decreased to 23.4% from 24.0%, primarily as a result of the menu price increases, somewhat offset by an increase in beef costs.
Restaurant operating costs increased $10,780,000, or 19.1%, due to an increase in labor costs and other operating costs resulting primarily from the increased sales volume. Restaurant operating costs, as a percentage of net sales, increased to 50.2% from 48.8%. Restaurant operating costs were higher because wage rates increased 3.0% due to tight labor markets, increases in fringe benefit costs and higher gas heating costs.
General and administrative expenses increased $871,000, or 9.4%. The increase in expenses was attributable to increased field personnel in connection with the addition of new units. As a percentage of revenues, general and administrative expenses decrease to 7.5% from 7.9%.
The $610,000, or 13.2%, increase in depreciation and amortization expense was attributable to the net depreciable capital additions since the beginning of fiscal 2000.
Rent expense increased $725,000, or 14.5%, primarily as a result of the completion of the sale and leaseback of sixteen Company-owned properties since the beginning of the third quarter of fiscal 2000.
Marketing expense increased $1,517,000, or 41.5%. As a percentage of revenues, marketing expense increased to 3.8% from 3.1%. The increased marketing expense reflects the Company's investment in programs to heighten brand awareness and expand the marketing reach. This expanded marketing includes the introduction of television advertising in the Chicago, Illinois; Columbus, Ohio; Grand Rapids, Michigan and Nashville, Tennessee markets, cable television in Florida and the introduction of direct mail marketing initiatives.
Pre-opening costs decreased $611,000, or 49.5%, due to fewer store openings in the second quarter of 2001 compared to the second quarter of 2000.
Interest expense increased $435,000 due to increased average net borrowings under the Company's senior note agreement and the revolving line of credit.
INCOME TAXES
The Company's effective income tax rate decreased to 35.8% from 36.3% for the quarter ended April 11, 2001. A valuation allowance against gross deferred tax assets has not been provided based upon the expectation of future taxable income.
EARNINGS FROM CONTINUING OPERATIONS
Earnings from continuing operations increased $157,000, or 2.7%.
DISCONTINUED OPERATIONS
In September 2000, the Company announced its decision to dispose of the Specialty Restaurants segment of the business comprised of its Consolidated Specialty Restaurants, Inc. (CSR) subsidiary, which operated 11 specialty casual dining restaurants, primarily Colorado Steakhouses. Accordingly, the Company recorded a one-time charge for the estimated loss on disposal of discontinued operations of $3,750,000, ($2,400,000 net of income taxes or $.08 per diluted share), in the fourth quarter of fiscal 2000. The loss from operations and the estimated loss on disposal, net of applicable income taxes, are shown below Earnings from Continuing Operations. In addition, all amounts relating to CSR have been reclassified to discontinued operations for all years presented. To date, six of the eleven specialty casual dining restaurants have been sold or the lease terminated and one other specialty restaurant has been closed. Proceeds on the sale of closed units were approximately $657,000.
NET EARNINGS
Net earnings were $6,040,000 ($.21 per diluted share) up 10.2% compared to the prior year quarter.
COMPARISON OF TWENTY-EIGHT WEEKS ENDED APRIL 11, 2001 TO TWENTY-EIGHT WEEKS ENDED APRIL 12, 2001
REVENUES
Net sales increased $25,258,000 to $229,081,000, or 12.4%, due to a 10.0%
increase in the number of Company-operated Steak n Shake restaurants and a 3.6%
increase in same store sales. The increase in same store sales was attributable
to a 2.3% increase in check average and a 1.3% increase in customer counts. Same
store sales, year-to-date, were adversely affected by December weather
conditions, as same store sales
were down 10% in the last two weeks of the first quarter. The number of Company-operated Steak n Shake restaurants increased 322 at April 11, 2001 as compared to 293 at April 12, 2000. Steak n Shake instituted weighted average menu price increases of approximately 1.2%, 2.1%, 0.4% and 2.8% in the second and third quarter of fiscal 2000 and the first quarter and second quarter of fiscal 2001, respectively.
COSTS AND EXPENSES
Cost of sales increased $4,783,000, or 9.7%, primarily as a result of sales increases. As a percentage of net sales, cost of sales decreased to 23.5% from 24.1%, primarily as a result of menu price increases, somewhat offset by an increase in the cost of beef.
Restaurant operating costs increased $16,655,000, or 16.8%, due to an increase in labor costs and other operating costs resulting primarily from the increased sales volume. Restaurant operating costs, as a percentage of net sales, increased to 50.5% from 48.6%. Restaurant operating costs were higher because wage rates increased 3.0% due to tight labor markets, increases in fringe benefit costs and higher gas heating costs.
General and administrative expenses increased $1,320,000, or 8.3%. The increase in expenses was attributable to increased field personnel in connection with the addition of new units and the effect of inflation on salaries. As a percentage of revenues, general and administrative expenses decreased to 7.4% from 7.7%.
The $1,096,000, or 13.7%, increase in depreciation and amortization expense was attributable to the net depreciable capital additions since the beginning of fiscal 2000.
Rent expense increased $1,312,000, or 15.4%, as a result of the completion of the sale and leaseback of twenty-seven Company-owned properties since the beginning of fiscal 2000.
Marketing expense increased $1,862,000, or 30.0%. As a percentage of revenues, marketing expense increased to 3.5% from 3.0%. The increased marketing expense reflects the Company's investment in programs to heighten brand awareness and expand the marketing reach. The expanded marketing includes the introduction of television advertising in the Chicago, Illinois; Columbus, Ohio; Grand Rapids, Michigan and Nashville, Tennessee markets, cable television in Florida and the introduction of direct mail marketing initiatives.
Pre-opening costs decreased $795,000, or 33.5%, due to fewer store openings in the first half of 2001 as compared to the first half of 2000.
Interest expense increased $777,000 due to increased average net borrowings under the Company's senior note agreement and the revolving line of credit.
INCOME TAXES
The Company's effective income tax rate decreased to 35.7% from 36.2% for the twenty-eight weeks ended April 11, 2001. A valuation allowance against gross deferred tax assets has not been provided based upon the expectation of future taxable income.
EARNINGS FROM CONTINUING OPERATIONS
Earnings from continuing operations decreased $1,052,000, or 9.5% primarily due to the severe December weather conditions and increased gas heating costs.
DISCONTINUED OPERATIONS
In September 2000, the Company announced its decision to dispose of the Specialty Restaurants segment of the business comprised of its Consolidated Specialty Restaurants, Inc. (CSR) subsidiary, which operated 11 specialty casual dining restaurants, primarily Colorado Steakhouses. Accordingly, the Company recorded a one-time charge for the estimated loss on disposal of discontinued operations of $3,750,000, ($2,400,000 net of income taxes or $.08 per diluted share), in the fourth quarter of fiscal 2000. The loss from operations and the estimated loss on disposal, net of applicable income taxes, are shown below Earnings from Continuing Operations. In addition, all amounts relating to CSR have been reclassified to discontinued operations for all years presented. To date, six of the eleven specialty casual dining restaurants have been
sold or the lease terminated and one other specialty restaurant has been closed. Proceeds on the sale of closed units were approximately $657,000.
NET EARNINGS
Net earnings were $10,001,000, ($.35 per share), down 4.0% compared to the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Eleven Steak n Shake restaurants including one franchised Steak n Shake restaurant were opened during the twenty-eight weeks ended April 11, 2001. Subsequent to the end of the second quarter, one Company-operated Steak n Shake restaurant was opened. Thirteen Steak n Shake restaurants, including two franchised units, are currently under construction. For the twenty-eight weeks ended April 11, 2001, capital expenditures totaled $21,452,000 as compared to $38,597,000 for the comparable prior year period.
The Company expects to open 20 to 25 Steak n Shake restaurants in fiscal year 2001. This reduction in new unit openings from the prior year reflects an intensified focus on consistently providing high levels of hospitality and customer satisfaction, especially in newer markets, in order to increase same store sales. The reduction will also allow management to focus development resources on higher quality sites. The average cost of a new Company-operated Steak n Shake restaurant, including land, site improvements, building and equipment to date in fiscal 2001 is $1,500,000. The Company intends to fund capital expenditures and its stock repurchase program and to meet working capital needs using existing resources and anticipated cash flows from operations, together with additional capital generated by sale and leaseback transactions involving newly acquired properties and bank borrowings.
During the twenty-eight weeks ended April 11, 2001, cash provided by operations totaled $17,032,000, while cash generated by sale and leaseback transactions and other disposals of property totaled $11,909,000. During the twenty-eight weeks ended April 12, 2000, cash provided by operations totaled $16,848,000, while cash generated by sale and leaseback transactions and other disposals of property totaled $11,845,000. At April 11, 2001 the Company had sale and leaseback properties under contract which, when closed, will generate approximately $3,092,000 in proceeds.
Net cash used in financing activities for the twenty-eight weeks ended April 11, 2001, totaled $1,918,000 compared to net cash provided of $7,572,000 in the comparable prior period .
The Company has a stock repurchase program that allows the purchase of up to 2,000,000 shares of its outstanding common stock. During the twenty-eight weeks ended April 11, 2001, the Company repurchased a total of 687,060 shares at a cost of $5,138,000. The repurchased shares will be used in part to fund the Company's Stock Option Plan, Capital Appreciation Plan and Employees' Stock Purchase Plan.
As of April 11, 2001, the Company had outstanding borrowings of $34,482,000 under its $75,000,000 Senior Note Agreement and Private Shelf Facility (the "Senior Note Agreement"). The Company has borrowings of $40,000,000 available under the Senior Note Agreement over the period ending April 21, 2002 at interest rates based upon market rates at the time of borrowing. Outstanding borrowings under the Senior Note bear interest at an average fixed rate of 7.3%.
There were borrowings of $10,000,000 under the Company's $30,000,000 Revolving Credit Agreement (the "Revolving Credit Agreement") at April 11, 2001 and $12,695,000 at April 12, 2000. The Company's Revolving Credit Agreement bears interest based on LIBOR plus 75 basis points, or the prime rate, at the election of the Company. The Revolving Credit Agreement matures on January 31, 2002. The Company expects to be able to secure a new revolving credit facility upon expiration of the current agreement. The Company's debt agreements contain restrictions, which among other things, require the Company to maintain certain financial ratios.
EFFECTS OF GOVERNMENTAL REGULATIONS AND INFLATION
Since most of the Company's employees are paid hourly rates related to federal and state minimum wage laws, increases in the legal minimum wage directly increase the Company's operating costs. Inflation in food, labor and other operating costs directly affects the Company's operations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities" in the first quarter of fiscal year 2001. The adoption of SFAS No. 133 did not have a material effect on the Company's results of operations.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are contained in this Report and may be made by Company spokespersons based on current expectations of management. Those statements include, but may not be limited to, the discussions of the Company's expansion strategy, expectations concerning its future profitability, capital sources and needs, marketing plans and franchising programs. Investors in the Common Stock are cautioned that reliance on any forward-looking statement involves risks and uncertainties. Those risks and uncertainties include, but are not limited to, changes in competitive, economic or legal factors, changes in the tax laws and changes in accounting standards, as well as changes in internal and business conditions. Although the Company believes that the assumptions on which its forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements could be incorrect. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's plans and objectives will be achieved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure with regard to financial instruments is to changes in interest rates. Pursuant to the terms of the Senior Note Agreement, the Company may from time to time issue notes in increments of at least $5,000,000. The interest rate on the notes is based upon market rates at the time of the borrowing. Once the interest rate is established at the time of the initial borrowing, the interest rate remains fixed over the term of the underlying note. The Revolving Credit Agreement bears interest at a rate based upon LIBOR plus 75 basis points or the prime rate, at the election of the Company. Historically, the Company has not used derivative financial instruments to manage exposure to interest rate changes. At April 11, 2001, a hypothetical 100 basis point increase in short-term interest rates would have an immaterial impact on the Company's earnings.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders of Consolidated Products, Inc. (the "Company") held February 7, 2001, the following actions were taken:
1. Eight directors were elected to serve until the next annual meeting and until their successors are duly elected and qualified, as follows:
NAME VOTES FOR ABSTENTIONS
---- ------------ -----------
S. Sue Aramian 25,515,324 763,186
Alan B. Gilman 24,399,785 1,878,725
Stephen Goldsmith 23,937,534 2,340,976
E. W. Kelley 25,507,058 771,452
Charles E. Lanham 25,517,619 760,891
J. Fred Risk 25,499,905 778,605
John W. Ryan 25,507,971 770,539
James Williamson, Jr. 25,519,270 759,240
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2. Amendment to the Articles of Incorporation changing the name of the Company to The Steak n Shake Company was approved by the vote of 26,033,232 shares FOR, 205,545 shares AGAINST and 39,733 shares ABSTAIN.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
(3) 3.01 Restated Articles of Incorporation of Steak n Shake, Inc.,
filed April 1, 1977. (Incorporated by reference to Exhibit
3.01 to the Registrant's Form 10-K Report for the year ended
September 27, 2000).
3.02 Attachment to Joint Agreement of Merger between Franklin
Corporation and Steak n Shake, Inc., filed October 31, 1983
(Incorporated by reference to Exhibit 3.2 to the
Registrant's Form 10-K Report for the year ended September
28, 1983).
3.03 Articles of Amendment to Articles of Incorporation of Steak
n Shake, Inc. filed May 15, 1984 changing the name of the
Registrant to "Consolidated Products, Inc." (Incorporated by
reference to Exhibit 3.4 to the Registrant's Form 10-K
Report for the year ended September 26, 1984).
3.04 Articles of Amendment to the Articles of Incorporation of
Consolidated Products, Inc. filed May 11, 1998.
(Incorporated by reference to Exhibit 3.05 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
April 8, 1998.)
3.05 Articles of Amendment to the Articles of Incorporation of
Consolidated Products, Inc. filed February 7, 2001 changing
the name of the Registrant to "The Steak n Shake Company."
3.06 Bylaws of Consolidated Products, Inc., as amended through
October 30, 1996. (Incorporated by reference to Exhibit 3.05
to the Registrant's Form 10-K Report for the year ended
September 27, 2000).
(4) 4.01 Specimen certificate representing Common Stock of The
Steak n Shake Company (formerly Consolidated Products,
Inc.).
4.02 Amended and Restated Credit Agreement By and Between
Consolidated Products, Inc. and Bank One, Indianapolis,
N.A. dated December 30, 1994 (amending that earlier credit
agreement between parties dated as of March 10, 1994 and
effective as of February 23, 1994, relating to a $5,000,000
revolving line of credit which was not filed pursuant to
Rule 601 of the Securities and Exchange Commission),
relating to a $30,000,000 revolving line of credit.
(Incorporated by reference to Exhibit 4.06 to the
Registrant's 10-Q Report for the fiscal quarter ended
December 21, 1994).
4.03 Note Purchase Agreement by and Between Consolidated
Products, Inc. and The Prudential Insurance Company of
America dated as of September 27 1995 related to $39,250,000
senior note agreement and private shelf facility.
(Incorporated by reference to Exhibit 4.1 to the
Registrant's Form 8-K Report dated September 26, 1995).
4.04 Amendment To Note Purchase and Private Shelf Agreement by
and between Consolidated Products, Inc. and The Prudential
Insurance Company of America dated as of April 21, 1999
related
14
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to senior note agreement and private shelf facility.
(Incorporated by reference to Exhibit 4.10 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
April 14, 1999).
4.05 Seventh Amendment to Amended and Restated Credit Agreement
by and between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A. dated May 31, 2000. (Incorporated by
reference to Exhibit 4.12 to the Registrant's Form 10-Q
Report for the fiscal quarter ended July 5, 2000).
(10) 10.01 Consolidated Products, Inc. Executive Incentive Bonus Plan.
(Incorporated by reference to Exhibit 19.1 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 1, 1992).
10.02 Steak n Shake, Inc. Executive Incentive Bonus Plan.
(Incorporated by reference to Exhibit 19.2 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 1, 1992).
10.03 Consultant Agreement by and between James Williamson, Jr.
and the Registrant dated November 20, 1990. (Incorporated by
reference to Exhibit 19.5 to the Registrant's Form 10-Q
Report for the fiscal quarter July 1, 1992).
10.04 Letter from the Registrant to Alan B. Gilman dated June 27,
1992. (Incorporated by reference to Exhibit 19.13 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 1, 1992).
10.05 Consolidated Products, Inc. 1992 Employee Stock Purchase
Plan. (Incorporated by reference in to the Appendix to the
Registrant's definitive Proxy Statement dated January 13,
1993 related to its 1993 Annual Meeting of Shareholders).
10.06 Consolidated Products, Inc. 1992 Employee Stock Option Plan.
(Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated January 13,
1993 related to its 1993 Annual Meeting of Shareholders).
10.07 Consolidated Products, Inc. 1995 Employee Stock Option Plan.
(Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated January 12,
1995 related to the 1995 Annual Meeting of Shareholders).
10.08 Consolidated Products, Inc. 1996 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated January
15, 1996 related to the 1996 Annual Meeting of
Shareholders).
10.09 Consolidated Products, Inc. 1997 Employee Stock Option Plan.
(Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated December 24,
1996 related to the 1997 Annual Meeting of Shareholders).
10.10 Consolidated Products, Inc. 1997 Capital Appreciation Plan.
(Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated December 24,
1996 related to the 1997 Annual Meeting of Shareholders).
15
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10.11 Amendment to Consolidated Products, Inc. 1992 Employee Stock
Purchase Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated December
24, 1996 related to the 1997 Annual Meeting of
Shareholders).
10.12 Consolidated Products, Inc. 1997 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated December
24, 1996 related to the 1997 Annual Meeting of
Shareholders).
10.13 Amendment to Consolidated Products, Inc. 1992 Employee Stock
Purchase Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated December
22, 1997 related to the 1998 Annual Meeting of
Shareholders).
10.14 Consolidated Products, Inc. 1998 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated December
22, 1997 related to the 1998 Annual Meeting of
Shareholders).
10.15 Form of option agreement related to 1999 Nonemployee
Director Stock Option Program and schedule relating thereto.
(Incorporated by reference to Exhibit 10.21 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 5, 2000).
10.16 Form of option agreement related to 2000 Nonemployee
Director Stock Option Program and schedule relating thereto.
(Incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 5, 2000).
(13) 13.01 Portions of the Annual report to Shareholders for the Year
Ended September 27, 2000 incorporated by reference into this
Form 10-K. (Incorporated by reference to Exhibit 13.01 to
the Registrant's Form 10-K Report for the year ended
September 27, 2000).
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(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the period covered by this report.
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, on May 23, 2001.
THE STEAK N SHAKE COMPANY
(Registrant)
/s/ James W. Bear
---------------------------------------
By James W. Bear
Senior Vice President, Administration
and Finance, Treasurer
On Behalf of the Registrant and as
Principal Accounting Officer
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Exhibit 3.05
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
of
CONSOLIDATED PRODUCTS INC
I, SUE ANNE GILROY, Secretary of State of Indiana, hereby certify that Articles of Amendment of the above For-Profit Domestic Corporation have been presented to me at my office, accompanied by the fees prescribed by law and that the documentation presented conforms to law as prescribed by the provisions of the Indiana Business Corporation Law.
The name following said transaction will be:
THE STEAK N SHAKE COMPANY
NOW, THEREFORE, with this document I certify that said transaction will become effective Wednesday, February 07, 2001.
In Witness Whereof, I have caused to be affixed my signature and the seal of the State of Indiana, at the City of Indianapolis, February 7, 2001.
[SEAL OF THE STATE OF INDIANA] /s/ Sue Anne Gilroy
SUE ANNE GILROY,
SECRETARY OF STATE
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[SEAL OF THE STATE OF INDIANA] ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
State Form 38333 (R8 / 12-96)
Approved by State Board of Accounts 1995
APPROVED
AND
FILED
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IND. SECRETARY OF STATE
INSTRUCTIONS: USE 8 1/2" X 11" WHITE PAPER FOR INSERTS.
PRESENT ORIGINAL AND TWO COPIES TO ADDRESS IN UPPER RIGHT HAND
CORNER OF THIS.
PLEASE TYPE OR PRINT.
SUE ANNE GILROY
SECRETARY OF STATE
CORPORATIONS DIVISION
302 W. Washington St., Rm. E018
Indianapolis, IN 46204
Telephone: (317) 232-6576
Indiana Code 23-1-38-1 ET SEQ.
FILING FEE: $30.00
Name of Corporation Date of incorporation Consolidated Products, Inc. December 15, 1976 ------------------------------------------------------------------------------- |
The undersigned officers of the above referenced Corporation (HEREINAFTER
REFERRED TO AS THE "CORPORATION") existing pursuant to the provisions of:
(INDICATE APPROPRIATE ACT)
/X/ Indiana Business Corporation Law / / Indiana Professional Corporation Act of 1983
(NOTE: IF AMENDING THE NAME OF CORPORATION, WRITE ARTICLE "I" IN SPACE ABOVE AND WRITE "THE NAME OF THE CORPORATION IS ____________________." BELOW.)
The name of the Corporation is amended to be:
THE STEAK N SHAKE COMPANY
RECEIVED
INDIANA SECRETARY
OF STATE
2001 FEB -7 AM 9:41
Amendment adopted by Board of Directors of the Company -- November 15, 2000
Approved by the shareholders of the Company -- February 7, 2001
A. Vote of such shareholders during a meeting called by the Board of Directors. The result of such vote is as follows:
-------------------------------------------------------- 29,024,070 Shares entitled to vote. -------------------------------------------------------- 26,241,784 Number of shares represented at the meeting. -------------------------------------------------------- 25,996,506 Shares voted in favor. -------------------------------------------------------- 205,545 Shares voted against. -------------------------------------------------------- |
Signature of current officer or Printed name of officer or chairman of the board chairman of the board /s/ Mary E. Ham Mary E. Ham ------------------------------------------------------------------------------- Signature's title Vice President, Secretary and General Counsel ------------------------------------------------------------------------------- |
CONSENT TO USE OF NAME
The undersigned hereby consents to the use of the name The Steak n Shake Company by its parent corporation, formerly known as Consolidated Products, Inc., and to the filing of any documents with any appropriate governmental agency or department, either within or outside of the State of Indiana, necessary to effect the change of the name of Consolidated Products, Inc. to "The Steak n Shake Company."
Dated: February 7, 2001
STEAK N SHAKE OPERATIONS, INC.
Formerly Steak n Shake, Inc.
By: /s/ Mary E. Ham
---------------------------
Mary E. Ham, Vice President,
Secretary & General Counsel
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The undersigned, Steak n Shake, L.P., an Indiana limited partnership, hereby consents to the use of the name The Steak n Shake Company by its limited partner formerly known as Consolidated Products, Inc. and to the filing of any documents with any governmental agency or department, either within or outside the State of Indiana, necessary to change the name of "Consolidated Products, Inc." to "The Steak n Shake Company."
Dated: February 7, 2001
STEAK N SHAKE, L.P.
By Steak n Shake Operations, Inc.
(Formerly Steak n Shake, Inc.), its
General Partner
By: /s/ Mary E. Ham
---------------------------------
Mary E. Ham, Vice President,
Secretary and General Counsel
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Exhibit 4.01
COMMON STOCK COMMON STOCK
[STEAK n SHAKE LOGO]
NUMBER SHARES
SNS THE STEAK n SHAKE COMPANY
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF INDIANA CERTAIN DEFINITIONS
CUSIP 857873 10 3
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THIS CERTIFIES THAT
IS THE OWNER OF
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
The Steak n Shake Company transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. The holder hereof, by accepting this certificate, expressly assents to and is bound by all provisions of the Articles of Incorporation, and by the By-Laws of the Corporation, and all amendments thereto respectively from time to time, to all of which reference is hereby made with the same force and effect as if the same were herein set forth in full. This certificate is valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the seal of the Corporation and the signatures of its duly authorized officers.
Dated
[THE STEAK n SHAKE COMPANY SEAL]
/s/ Mary E. Ham /s/ E.W. Kelley
Secretary Chairman
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THIS CERTIFICATE IS TRANSFERABLE EITHER
IN CHICAGO, IL. OR IN NEW YORK, N.Y.
Countersigned and Registered:
COMPUTERSHARE INVESTOR SERVICES, LLC
Transfer Agent
and Registrar
By Authorized Signature
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT--_____ Custodian ______ UNIF TRAN MIN ACT--______ Custodian _____
TEN ENT -- as tenants by the entireties (Cust) (Minor) (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors under Uniform Transfers to Minors
survivorship and not as tenants in Act ______ Act ______
common (State) (State)
TOD -- transfer on death direction in event
of owner's death, to person named on
face subject to STA TOD rules
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Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ___________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
----------------------------------------------------------------------- SHARES OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
---------------------------------------------------------------------- ATTORNEY TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
Signature
In presence of:
------------------ --------------------------------------
NOTE: THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME OF
THE STOCKHOLDER(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANK, STOCKBROKER, SAVINGS AND LOAN
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ASSOCIATION OR CREDIT UNION WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17 Ad-15.