INDIANAPOLIS, Aug. 11 /PRNewswire-FirstCall/ -- The Steak n Shake Company
(NYSE: SNS) today announced its results for the fiscal 2008 third quarter
ended July 2, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000606/STEAKLOGO )
Selected results from the fiscal third quarter 2008:
-- Total revenues of $144.3 million
-- General and administrative expense reduction of $2.0 million or 16.0%
-- Debt reduction of $20.4 million
-- Cash flow from operations of $9.7 million
Fiscal Third Quarter 2008 Results
Total revenues for the fiscal 2008 third quarter decreased 6.1% to $144.3
million compared to $153.6 million in the comparable period last year. During
the third quarter, same-store sales declined by 5.8%. The Net loss for the
fiscal 2008 third quarter was $9.8 million, or $0.35 per diluted share. These
figures compare to net earnings of $0.1 million, or $0.00 per diluted share in
the third quarter of the prior year. Current third quarter results included
$14.1 million ($8.7 million, or $0.31 per diluted share, net of tax) of
non-cash impairment charges, which include $4.8 million related to a group of
12 stores that we plan to close in the fourth quarter of fiscal 2008, and $8.8
million related to 18 restaurants that were impaired because the carrying
values of their underlying assets were more than the expected future cash
flows. An additional $0.5 million related to three stores involved in a
sale-leaseback whose net book values exceeded their fair values. We completed
10 sale-leasebacks generating $14.8 million in proceeds, which were applied to
paying down the line of credit. As a result, the Company now owns 154
properties, both land and building. Total debt under our credit facilities at
the end of the third quarter was $27.0 million.
Our cash flow from operations in the third quarter was $9.7 million. Our
capital expenditures were $4.7 million, which included the rollout of the
point of sale system, recent store openings, and maintenance. In the fourth
quarter capital spending will be largely limited to maintenance capital
expenditures.
We are presently undergoing a comprehensive examination of the company and
are in the process of implementing a restructuring program. We are intent on
maximizing cash flows and are therefore undertaking many initiatives such as
the following:
-- Closing underperforming locations
-- Reducing general and administrative expenses further
-- Shortening hours of operation in many locations
-- Tax planning to recover a substantial amount of taxes paid in fiscal
2006
-- Limiting capital spending to maintenance - no new Company store
openings
In addition, we are working with a sense of urgency to revive our
operations. We believe the lack of store-level execution in recent years has
significantly contributed to a decline in our guest count. In addition to the
downturn in sales in the third fiscal quarter, the Company experienced
deterioration in operating margins because of aggressive discounting,
increases in commodity prices, and minimum wage rates. We will continue to
take action to manage our costs while concurrently investing in our future by
improving unit economics. We are managing the business with the goal of
increasing the per-share value in order to create substantial and sustainable
shareholder wealth.
In the upcoming shareholder letter, we will provide an update on expected
savings in general and administrative for fiscal 2009. We believe cost
inefficiencies are besetting the organization; therefore, we are carefully
examining the Company's cost structure.
Sardar Biglari, Chairman and Chief Executive Officer, stated, 'In my view,
our poor performance is not the result of poor economic conditions. Much of
our operating shortfall, I believe, is the result of our own lack of
execution. As a company that began in the midst of the Great Depression, we
have a deep heritage from one of the great American brands and are fortunate
to have attracted committed and passionate employees, benefits that we believe
will allow us once again to become a thriving chain.'
Communication with Investors
In lieu of a conference call, we plan to communicate with shareholders
through an Investor Day to be held within the next 90 days. The date of the
gathering will be released shortly. In addition, in the next 60 days a
shareholder letter will be issued to elaborate on our plans. To be fair to all
shareholders as well as to be efficient with our time, Investor Day is a
stand-in for one-on-one communication. We will hold the informative meeting so
shareholders can confer with management and spend as much time as needed to
address questions. Our goal is to manage the business based on the long-term,
and we will communicate in a manner consistent with attracting shareholders
with a similar time horizon.
About Steak n Shake
Steak n Shake is a full-service restaurant famous for its
STEAKBURGERS(TM), thin 'n crispy French fries, old fashioned hand-dipped milk
shakes, and chili. All of the food is fresh, prepared to the guest's order,
and served by friendly associates. Steak n Shake restaurants feature
full-service dining areas, counter service, and drive-thru windows. As of July
2, 2008, there were 505 Steak n Shake restaurants operating in 21 states,
including 436 Company-owned and 69 franchised units.
Risks Associated with Forward-Looking Statements
Certain statements contained in this press release represent
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In general, forward-looking statements include
estimates of future revenues, cash flows, capital expenditures or other
financial items, as well as assumptions underlying any of the foregoing.
Forward-looking statements reflect management's current expectations regarding
future events and use words such as 'anticipate,' 'believe,' 'expect,' 'may'
and other similar terminology. A forward-looking statement is neither a
prediction nor a guarantee of future events or circumstances, and those future
events or circumstances may not occur. Investors should not place undue
reliance on the forward-looking statements, which speak only as of the date of
this report. These forward-looking statements are based on currently available
operating, financial and competitive information and are subject to various
risks and uncertainties. Our actual future results and trends may differ
materially depending on a variety of factors, many beyond our control,
including, but not limited to: the poor performance or closing of even a small
number of restaurants; our ability to attract and retain guests; the ability
of our franchisees to operate profitable restaurants; changes in guest
preferences, tastes and dietary habits; minimum wage rates; the availability
and cost of qualified personnel; fluctuations in food commodity prices and the
availability of food commodities; harsh weather conditions; unfavorable
publicity relating to food safety or food borne illness; our ability to comply
with the restrictions and covenants to our debt agreements; our ability to
renegotiate our debt agreements and refinance our current debt at similar
rates; our ability to comply with existing and future governmental
regulations; our ability to adequately protect our trademarks, service marks
and other components of our brand; and other risks identified in the periodic
reports we file with the Securities and Exchange Commission. Additional risks
and uncertainties not currently known to us or that are currently deemed
immaterial may also become important factors that may harm our business,
financial condition, results of operations or cash flows. We assume no
obligation to update forward-looking statements except as required in our
periodic reports.
THE STEAK N SHAKE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in $000s, except share and per share data)
Twelve Weeks Ended
July 2, July 4,
2008 2007
(UNAUDITED) (UNAUDITED)
Revenues:
Net sales $143,303 99.3 % $152,700 99.4 %
Franchise fees 990 0.7 % 886 0.6 %
Total revenues 144,293 100.0 % 153,586 100.0 %
Costs and Expenses:
Cost of sales (1) 35,527 24.8 % 35,318 23.1 %
Restaurant operating costs (1) 79,241 55.3 % 79,882 52.3 %
General and administrative (2) 10,671 7.4 % 12,697 8.3 %
Depreciation and amortization 7,812 5.4 % 7,577 4.9 %
Marketing 6,666 4.6 % 7,054 4.6 %
Interest 3,263 2.3 % 3,314 2.2 %
Rent 3,379 2.3 % 3,309 2.2 %
Pre-opening costs 112 0.1 % 581 0.4 %
Asset impairments and provision
for restaurant closings 14,089 9.8 % 5,369 3.5 %
Other income, net (288) -0.2 % (668) -0.4 %
Total costs and expenses 160,472 111.2 % 154,433 100.6 %
(Loss) Earnings Before Income
Taxes (16,179) -11.2 % (847) -0.6 %
Income Taxes (6,382) -4.4 % (971) -0.6 %
Net (Loss) Earnings $(9,797) -6.8 % $124 0.1 %
Basic (Loss) Earnings Per
Common and Common Equivalent
Share $(0.35) $0.00
Diluted (Loss) Earnings Per
Common and Common Equivalent
Share $(0.35) $0.00
Weighted Average Shares
and Equivalents:
Basic 28,288,330 28,067,417
Diluted 28,288,330 28,255,645
Forty Weeks Ended
July 2, July 4,
2008 2007
(UNAUDITED) (UNAUDITED)
Revenues:
Net sales $468,071 99.3 % $500,213 99.4 %
Franchise fees 3,105 0.7 % 2,790 0.6 %
Total revenues 471,176 100.0 % 503,003 100.0 %
Costs and Expenses:
Cost of sales (1) 115,658 24.7 % 114,576 22.9 %
Restaurant operating costs (1) 259,090 55.4 % 257,133 51.4 %
General and administrative (2) 35,174 7.5 % 43,803 8.7 %
Depreciation and amortization 25,925 5.5 % 24,628 4.9 %
Marketing 23,043 4.9 % 22,628 4.5 %
Interest 10,816 2.3 % 10,689 2.1 %
Rent 11,107 2.4 % 10,612 2.1 %
Pre-opening costs 1,243 0.3 % 2,327 0.5 %
Asset impairments and provision
for restaurant closings 14,089 3.0 % 5,176 1.0 %
Other income, net (1,263) -0.3 % (1,612) -0.3 %
Total costs and expenses 494,882 105.0 % 489,960 97.4 %
(Loss) Earnings Before Income
Taxes (23,706) -5.0 % 13,043 2.6 %
Income Taxes (9,912) -2.1 % 2,762 0.5 %
Net (Loss) Earnings $(13,794) -2.9 % $10,281 2.0 %
Basic (Loss) Earnings Per
Common and Common Equivalent
Share $(0.49) $0.37
Diluted (Loss) Earnings Per
Common and Common Equivalent
Share $(0.49) $0.36
Weighted Average Shares and
Equivalents:
Basic 28,274,193 28,002,370
Diluted 28,274,193 28,217,828
(1) Cost of sales and restaurant operating costs are expressed as a
percentage of net sales. All other items are expressed as a percentage
of revenues.
(2) General and administrative expenses for the 40 weeks ended July 2,
2008 included $1.0 million of incremental non-operating pre-tax
expenses related to advisory, proxy, and other professional services,
and severance.
Condensed Consolidated Statements of Financial Position
The Steak n Shake Company
(Amounts in $000s except share and per share data)
July 2, September 26,
2008 2007
(Unaudited) (Unaudited)
Assets:
Current Assets
Cash and cash equivalents $1,621 $1,497
Receivables, net 4,484 6,289
Inventories 7,276 7,226
Deferred income taxes 3,449 3,616
Assets held for sale 21,742 18,571
Other current assets 13,950 10,998
Total current assets 52,522 48,197
Net property and equipment 450,446 492,610
Goodwill 14,503 14,503
Other intangible assets, net 1,809 1,959
Deferred income taxes 123 -
Other assets 9,500 7,945
Total assets $528,903 $565,214
Liabilities and Shareholders' Equity:
Current Liabilities
Accounts payable $29,538 $28,195
Accrued expenses 31,528 32,624
Current portion of long-term debt 1,330 2,390
Line of credit 9,180 27,185
Current portion of obligations under leases 3,980 4,180
Total current liabilities 75,556 94,574
Deferred income taxes - 5,060
Other long-term liabilities 7,514 5,701
Obligations under leases 136,357 139,493
Long-term debt 16,502 16,522
Commitments and Contingencies
Shareholders' Equity:
Common stock - $0.50 stated value,
50,000,000 shares authorized - shares
issued: 30,332,839 15,166 15,166
Additional paid-in capital 127,213 126,415
Retained earnings 170,918 185,024
Treasury stock - at cost: 1,632,246 shares
as of July 2, 2008; 1,959,931 shares as
of September 26, 2007 (20,323) (22,741)
Total shareholders' equity 292,974 303,864
Total liabilities and shareholders' equity $528,903 $565,214
Condensed Consolidated Statements of Cash Flows
The Steak n Shake Company
(Amounts in $000s)
Forty Weeks Ended
July 2, July 4,
2008 2007
(Unaudited) (Unaudited)
Operating Activities:
Net (loss) earnings $(13,794) $10,281
Adjustments to reconcile net (loss) earnings
to net cash provided by operating
activities:
Depreciation and amortization 25,925 24,628
Provision for deferred income taxes (4,714) (1,621)
Asset impairments and provision for
restaurant closings 14,089 5,176
Non-cash expense for stock-based compensation
and deferred rent 2,676 3,535
(Gain) loss on disposal of property (372) 498
Changes in receivables and inventories 1,720 (1,524)
Changes in other assets (3,299) (5,260)
Changes in accounts payable and accrued
expenses 1,340 750
Net cash provided by operating activities 23,571 36,463
Investing Activities:
Additions of property and equipment (28,512) (56,193)
Proceeds from property and equipment disposals 11,531 5,956
Net cash used in investing activities (16,981) (50,237)
Financing Activities:
Net payments on line of credit facility (18,005) (1,465)
Proceeds from issuance of long-term debt - 15,000
Principal payments on long-term debt (1,080) (1,062)
Proceeds from equipment and property sale-
leasebacks 14,817 800
Principal payments on direct financing lease
obligations (3,336) (2,401)
Proceeds from exercise of stock options 132 660
Excess tax benefits from stock-based awards 10 62
Repurchase of employee shares for tax
withholding (8) -
Proceeds from employee stock purchase plan 1,004 1,234
Net cash (used in) provided by financing
activities (6,466) 12,828
Increase (decrease) in Cash and Cash
Equivalents 124 (946)
Cash and Cash Equivalents at Beginning of
Period 1,497 4,820
Cash and Cash Equivalents at End of Period $1,621 $3,874
SOURCE The Steak n Shake Company
