UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 5, 2004
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THE STEAK N SHAKE COMPANY
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(Exact name of registrant as specified in its charter)
INDIANA 000-08445 37-0684070
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
36 SOUTH PENNSYLVANIA STREET, SUITE 500
INDIANAPOLIS, INDIANA 46204
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 633-4100
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On November 5, 2004, Steak n Shake Operations, Inc., a wholly owned
subsidiary of the Registrant ("SNS Operations"), entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Kelley Restaurants, Inc. the
Registrant's largest franchisee ("KRI"), and SNS Merger Corp, a wholly owned
subsidiary of SNS Operations ("Subcorp"), pursuant to which Subcorp will merge
with and into KRI, with KRI being the surviving company (the "Merger"). If the
Merger is completed, KRI will become a wholly owned subsidiary of SNS
Operations.
Pursuant to the Merger Agreement, the shares of KRI common stock will be
converted into the right to receive cash having an aggregate value of
approximately $20.5 million at closing, subject to adjustment. The net value
transferred at closing is anticipated to be approximately $17.5 million, which
includes adjustments for debt repayment, working capital and other items. SNS
Operations will deposit ten percent (10%) of the adjusted purchase price in
escrow, which amount shall be held for up to 24 months from the closing of the
transaction.
The Merger Agreement includes various customary representations, warranties
and covenants of the parties for transactions of this kind. The obligations of
the parties to complete the Merger are subject to various closing conditions,
including, without limitation, (i) the satisfactory completion of the
Registrant's due diligence review of KRI, (ii) the final approval of the
Registrant's Acquisition Committee, (iii) the approval of the Merger Agreement
by the KRI stockholders, and (iv) the execution of employment agreements with
certain officers of KRI.
As indicated above, the consummation of the Merger is conditioned upon SNS
Operations entering into employment agreements with Wayne Kelley and Steve
McArthur, the President and Chief Financial Officer, respectively, of KRI. Mr.
Kelley serves on the Board of Directors for both the Registrant and SNS
Operations. Pursuant to his employment agreement, Mr. Kelley would remain a
full-time employee of KRI for a period of two years and sixteen weeks after the
date of the closing of the Merger. During this time, Mr. Kelley will receive an
annual salary of $205,000 and shall be entitled to a bonus of $57,000 if he is
still employed at the end of the employment period. Under his employment
agreement, Mr. McArthur would remain a full-time employee of KRI for a period of
two years. During this time Mr. McArthur will receive an annual salary of
$121,500 per year and shall be entitled to a bonus of $13,500 per year if he is
still employed at the end of each of the years in the employment period.
The proposed merger is also disclosed in the press release attached as
Exhibit 99.1 to this report and the information set forth therein is
incorporated herein by reference and constitutes a part of this report.
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 10, 2004, The Steak n Shake Company (the "Registrant") reported
its results of operations for its fiscal year 2004 fourth quarter and full year
results. The Registrant's earnings release is attached as Exhibit 99.1 and the
information set forth therein is incorporated herein by reference and
constitutes a part of this report.
The Registrant is furnishing the information contained in this report,
including the Exhibits, pursuant to Item 2.02 of Form 8-K promulgated by the
Securities and Exchange Commission (the "SEC"). This information shall not be
deemed to be "filed" with the SEC or incorporated by reference into any other
filing with the SEC. By filing this report on Form 8-K and furnishing this
information, the Registrant makes no admission as to the materiality of any
information in this report, including the Exhibits.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press Release, dated November 10, 2004, issued by the Registrant.
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.
Dated: November 10, 2004
THE STEAK n SHAKE COMPANY
By:_/s/ Jeffrey A. Blade_____________________
Jeffrey A. Blade, Senior Vice President
and Chief Financial Officer
Exhibit 99.1
THE STEAK N SHAKE COMPANY REPORTS FISCAL FOURTH QUARTER & FULL YEAR 2004 RESULTS
FOURTH QUARTER SAME STORE SALES INCREASE 5.2%, FULL YEAR NET EARNINGS REACH
$1.00 PER DILUTED SHARE
COMPANY TO PURCHASE LARGEST FRANCHISE GROUP
INDIANAPOLIS, November 10, 2004 /PRNewswire -- The Steak n Shake Company
(NYSE:SNS) today announced its revenues and earnings for the fiscal fourth
quarter and full year ended September 29, 2004.
Highlights of the fourth quarter include:
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- Total revenues increased 14.8% to $144.8 million versus $126.1 million
- Same store sales for Company-owned restaurants rose 5.2% (excluding the
impact of an additional week in fiscal 2004)
- Diluted earnings per share were $0.28 compared to $0.13 (prior year period
included a $3.4 million charge, net of tax, or $0.13 per diluted
share, for closing nine underperforming restaurants)
Highlights of the full year include:
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- Total revenues increased 10.9% to $553.7 million versus $499.1 million
- Same store sales for Company-owned restaurants rose 7.7% (excluding the
impact of an additional week in fiscal 2004)
- Diluted earnings per share were $1.00 compared to $0.77 (prior year period
included a $3.4 million charge, net of tax, or $0.13 per diluted
share, for closing nine underperforming restaurants)
FISCAL FOURTH QUARTER 2004 RESULTS
Total revenues for the fiscal fourth quarter 2004 grew 14.8% to $144.8 million
compared to the same quarter last year. The fiscal fourth quarter 2004 included
an additional week compared to the prior year. Same-store sales for
Company-owned restaurants during the fiscal fourth quarter increased 5.2%,
excluding the impact of the extra week.
Net earnings for the fiscal fourth quarter 2004 were $7.6 million, or $0.28 per
diluted share, compared to $3.6 million, or $0.13 per diluted share, in the
prior year period. The prior year period included a $3.4 million charge, net of
taxes, for closing nine underperforming restaurants.
Peter Dunn, President and Chief Executive Officer commented, "We are pleased
with the continued progress we achieved in the fourth quarter, which reflects
the outstanding contributions of our entire team in a less than optimal
operating environment."
FISCAL 2004 RESULTS
For the 53-week period ended September 29, 2004, total revenues increased 10.9%
to $553.7 million, compared to $499.1 million in the prior year 52-week period.
Same-store sales for Company-owned restaurants during fiscal 2004 increased
7.7%, exclusive of the additional operating week. Net earnings for fiscal 2004
were $27.7 million, or $1.00 per diluted share, compared to $20.9 million, or
$0.77 per diluted share in fiscal 2003. As noted above, the prior year period
included a $3.4 million charge, net of taxes, for closing nine underperforming
restaurants. For the fiscal year, the Company opened 19 new restaurants,
including three franchised units.
Mr. Dunn continued, "Over the last two years, our focus on the Virtuous Cycle
has enabled us to lower manager and associate turnover, increase guest
satisfaction, introduce successful new products, and generate strong same store
sales gains. During fiscal year 2005 we will continue to focus on the
fundamentals of the Virtuous Cycle while making critical investments in store
level leadership and infrastructure. This will lead to accelerated store
expansion, that should support sustained earnings growth over the long-term."
As of September 29, 2004, there were 425 Steak n Shake restaurants operating in
19 states, including 365 Company-owned restaurants and 60 franchised units.
During the quarter, the Company opened eight new restaurants, primarily in Ohio,
Indiana, Illinois and Texas.
ACQUISITION OF LARGEST FRANCHISEE
On November 5, 2004, subsequent to the end of the 2004 fiscal fourth quarter,
the Company entered into an agreement to merge Kelley Restaurants, Inc., its
largest franchisee, into one of the Company's subsidiaries for a net
consideration of approximately $17.5 million. Kelley Restaurants, Inc. operates
16 Steak n Shake restaurants in the Atlanta, Georgia and Charlotte, North
Carolina markets. The transaction is subject to completion of due diligence,
Kelley Restaurants, Inc. shareholder approval, and other contingencies. The
transaction is expected to close by the end of December. The Company
anticipates the acquisition will contribute diluted earnings per share in the
range of $0.01 to $0.02 in fiscal 2005.
Mr. Dunn concluded, "Although we have not historically grown through
acquisition, the opportunity to purchase this high performing franchisee group
in two under-penetrated markets is consistent with our intent to continue
expanding the Steak n Shake brand. Steak n Shake has a loyal customer following
in Atlanta and Charlotte. We plan to build on the well-deserved reputation
Kelley Restaurants, Inc. has cultivated for the brand and expand our presence in
these two major markets."
2005 GUIDANCE
For the fiscal year 2005, the Company anticipates diluted earnings per share in
the range of $1.08-$1.11, inclusive of the acquisition. Same store sales growth
is expected to be between 2% - 3%. As previously announced, the Company
anticipates opening 18-24 new Company-owned restaurants throughout fiscal year
2005.
INVESTOR CONFERENCE CALL AND WEBCAST
The Steak n Shake Company will broadcast its investor conference call live over
the Internet at 5:00 p.m. Eastern Time, 4:00 p.m. Central Time today, Wednesday,
November 10, 2004. Hosting the call will be Peter Dunn, President and Chief
Executive Officer, and Jeffrey A. Blade, Senior Vice President and Chief
Financial Officer. Interested investors and other parties may listen to a
simultaneous webcast of the conference call by logging onto the Company's
website at www.steaknshake.com or by dialing 1-877-297-4509.
ABOUT STEAK N SHAKE
Steak n Shake is a full service, casual dining restaurant serving a core menu of
its famous Steakburger sandwiches, thin 'n crispy french fries, old fashioned
hand-dipped milk shakes, chili, home style soups, fresh salads, a variety of
desserts and breakfast. All of the food is prepared to the guest's order and
served by friendly, well-trained associates. Steak n Shake restaurants feature
full-service dining areas, counter service and drive-thru windows and are open
24 hours a day, seven days a week.
This press release contains forward-looking information. In general,
forward-looking statements include estimates of future revenues, cash flows,
capital expenditures, or other financial items, and 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", "will", and other similar terminology. These
statements speak only as of the date they were made and involve a number of
risks and uncertainties that could cause actual results to differ materially
from those expressed in forward-looking statements. Several factors, many
beyond our control, could cause actual results to differ significantly from our
expectations, such as the following: effectiveness of operating initiatives;
changes in economic conditions; effectiveness of advertising and marketing
initiatives; harsh weather conditions, primarily in the first and second
quarters; availability and cost of qualified restaurant personnel; changes in
consumer tastes; changes in consumer behavior based on publicity or concerns
relating to food safety or food-borne illnesses; effectiveness of our expansion
plans; changes in minimum wage rates; changes in food commodity prices;
completion of merger or acquisitions and successful integration of those
transactions; and changes in applicable accounting policies and practices. The
foregoing list of important factors is not intended to be all-inclusive as other
general market, industry, economic, and political factors may also impact our
operations. Readers are cautioned not to place undue reliance on our
forward-looking statements, as we assume no obligation to update forward-looking
statements. For further information, refer to the Company's Annual Report on
Form 10-K for the year ended September 24, 2003.
Contact: Jeffrey A. Blade
Jeff.blade@steaknshake.com
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www.steaknshake.com
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(317) 633-4100
THE STEAK N SHAKE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(AMOUNTS IN $000'S, EXCEPT SHARE AND PER SHARE DATA)
THIRTEEN TWELVE FIFTY-THREE FIFTY-TWO
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
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9/29/2004 9/24/2003
(UNAUDITED) (UNAUDITED) 9/29/2004 9/24/2003
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REVENUES
Net sales. . . . . . . . . . . . . . . . . . . . . . $ 143,576 $ 125,109 $ 549,130 $ 495,277
Franchise fees . . . . . . . . . . . . . . . . . . . 1,226 999 4,562 3,827
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144,802 126,108 553,692 499,104
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COSTS AND EXPENSES
Cost of sales. . . . . . . . . . . . . . . . . . . . 34,436 29,379 129,458 113,496
Restaurant operating costs . . . . . . . . . . . . . 70,527 62,052 270,057 245,524
General and administrative . . . . . . . . . . . . . 10,341 8,628 42,364 37,909
Depreciation and amortization. . . . . . . . . . . . 6,077 5,799 24,710 24,170
Marketing. . . . . . . . . . . . . . . . . . . . . . 6,339 4,721 23,106 18,856
Interest . . . . . . . . . . . . . . . . . . . . . . 2,906 3,039 12,832 13,391
Rent . . . . . . . . . . . . . . . . . . . . . . . . 2,226 2,001 8,912 8,309
Provision for store closings . . . . . . . . . . . . 0 5,200 (394) 5,200
Pre-opening costs. . . . . . . . . . . . . . . . . . 775 427 2,098 1,889
Other income, net. . . . . . . . . . . . . . . . . . (583) (558) (1,998) (2,064)
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133,044 120,688 511,145 466,680
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EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . . . . 11,758 5,420 42,547 32,424
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 4,110 1,811 14,885 11,485
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NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . $ 7,648 $ 3,609 $ 27,662 $ 20,939
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NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Basic. . . . . . . . . . . . . . . . . . . . . . . . $ 0.28 $ 0.13 $ 1.01 $ 0.78
Diluted. . . . . . . . . . . . . . . . . . . . . . . $ 0.28 $ 0.13 $ 1.00 $ 0.77
WEIGHTED AVERAGE SHARES
AND EQUIVALENTS:
Basic. . . . . . . . . . . . . . . . . . . . . . . . 27,481,743 27,052,774 27,385,447 27,010,024
Diluted. . . . . . . . . . . . . . . . . . . . . . . 27,730,189 27,279,788 27,710,643 27,110,065
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
9/29/2004 9/24/2003
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ASSETS
Current assets . . . . . . . . . . . . . . . . . . . $ 45,400 $ 39,256
Property and equipment - net . . . . . . . . . . . . 382,868 364,600
Other assets . . . . . . . . . . . . . . . . . . . . 5,195 10,780
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Total assets . . . . . . . . . . . . . . . . . . . . $ 433,463 $ 414,636
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities. . . . . . . . . . . . . . . . . $ 58,940 $ 61,795
Deferred income taxes and credits. . . . . . . . . . 3,407 2,898
Obligations under capital leases . . . . . . . . . . 141,972 145,125
Senior note. . . . . . . . . . . . . . . . . . . . . 9,429 16,203
Shareholders' equity . . . . . . . . . . . . . . . . 219,715 188,615
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Total liabilities and shareholders' equity . . . . . $ 433,463 $ 414,636
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