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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 25, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-6054
STAR BUFFET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C>
DELAWARE 84-1433454
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
440 LAWNDALE DRIVE
SALT LAKE CITY, UTAH 84115
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (801) 463-5500
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
(TITLE OF EACH CLASS):
COMMON STOCK
$.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of April 16, 1999, was $12,538,000.
The number of shares outstanding of the registrant's common stock was
2,950,000 shares as of April 16, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the Company's
directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert E. Wheaton.......... 47 Chief Executive Officer, President and Chairman
Ronald E. Dowdy............ 42 Group Controller, Treasurer and Secretary
Jack M. Lloyd.............. 48 Director
Thomas G. Schadt........... 57 Director
Phillip "Buddy" Johnson.... 46 Director
Craig B. Wheaton........... 41 Director
</TABLE>
Robert E. Wheaton has served as the Chief Executive Officer and President
and as a director of the Company since its formation in July 1997. Mr. Wheaton
has been Chairman of the Board since September 1998. Mr. Wheaton served as
Executive Vice President of CKE from January 1996 through January 1999. From
April 1995 to January 1996, he served as Vice President and Chief Financial
Officer of Denny's Inc., a subsidiary of Flagstar Corporation. From 1991 to
1995, Mr. Wheaton served as President and Chief Executive Officer, and from 1989
to 1991 as Vice President and Chief Financial Officer of The Bekins Company.
Ronald E. Dowdy has served as the Group Controller since June 1998 and as
Treasurer and Secretary since February 1999. Mr. Dowdy served as Controller to
Holiday House Corporation for nineteen years prior to joining Star Buffet.
Thomas G. Schadt has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Mr.
Schadt has been the Chief Executive Officer of a privately-held beverage
distribution company, Bear Creek, L.L.C., since 1995. From 1976 to 1994, he held
several positions with PepsiCo, Inc., most recently, Vice President of Food
Service.
Jack M. Lloyd has served as a director of the Company since the completion
of the Company's initial public offering in September 1997. Mr. Lloyd has served
as Chairman of the Board of DenAmerica Corp. since July 9, 1996 and as
President, Chief Executive Officer and a director of DenAmerica Corp. since
March 29, 1996. Mr. Lloyd served as Chairman of the Board and Chief Executive
Officer of Denwest Restaurant Corp. ("DRC") from 1987 until the March 1996
merger of DRC and DenAmerica and as President of DRC from 1987 until November
1994. Mr. Lloyd engaged in commercial and residential real estate development
and property management as President of First Federated Investment Corporation
during the early and mid-1980's. Mr. Lloyd also currently serves as a director
of Action Performance Companies, Inc.
Phillip "Buddy" Johnson has served as a Director of the Company since
February 1999 and as President of the BuddyFreddys Division since it was
acquired in April 1998. From 1980 until 1998, he was the founding Chairman and
CEO of BuddyFreddys Enterprises. From 1991 to 1996, Mr. Johnson served as
Republican floor leader in the Florida House of Representatives. Mr. Johnson
also served on the executive committee of The Foundation for Florida's Future, a
non-profit corporation established in 1995 by Jeb Bush.
Craig B. Wheaton has served as a director of the Company since February
1999. Mr. Wheaton is a partner in the law firm Kilpatrick Stockton LLP. His main
areas of practice include employee benefits, executive compensation and general
corporate law. Mr. Wheaton received his B.A. degree, with honors, from the
University of Virginia and his J.D. degree from Wake Forest University. Mr.
Wheaton was a member of the Tax Council of the North Carolina Bar Association
Section on Taxation ('93-'98) and chair of its Employee Benefits Committee
('95-'97). He is a member and former president of the Triangle Benefits Forum.
He is a member of the Southern Employee Benefits Conference, the Employee
Benefits Committee of the American Bar Association's Section of Taxation, the
National Pension Assistance Project's National Lawyers Network, and the National
Association of Stock Plan Professionals. Mr. Wheaton is the brother of Robert E.
Wheaton, the Company's Chairman, President and Chief Executive Officer.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires Star's
executive officers and directors, and persons who own more than 10% of a
registered class of star's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than 10% stockholders are required by
SEC regulations to furnish Star with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, Star believes that, during fiscal 1999, all filing
requirements applicable to its executive officers, directors and greater than
10% stockholders were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Company was incorporated on July 28, 1997, through the reorganization
of direct or indirect wholly-owned subsidiaries of CKE. Prior to the Company's
incorporation, the Company's Executive Officers have been employed by CKE or its
subsidiaries, and all or substantially all of their compensation paid prior to
July 28, 1997 was paid by CKE or its subsidiaries primarily for services
rendered to CKE or its subsidiaries. In connection with the organization of the
Company, the Company and CKE established an allocated annual base salary of
$187,000 for Robert E. Wheaton, Chairman of the Board, Chief Executive Officer
and President of the Company. The following table sets forth the compensation
awarded to, earned by or paid to the Company's executive officer for each of the
three fiscal years ended January 27, 1997, January 26, 1998 and January 25,
1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS
NAME AND TITLE YEAR ($) ($) ($)(4) ($) (#)(5)
-------------- ------- ------- ------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Wheaton................... 1999(1) 221,155 -- 4,658 --
Chairman of the Board, President
and 1998(2) 61,298 -- -- 239,237
Chief Executive Officer 1997(3) 200,000 70,000 9,344 30,000
</TABLE>
- ---------------
(1) Mr. Wheaton's annual salary was $250,000 in fiscal 1999. In August 1998, Mr.
Wheaton's employment agreement with CKE was modified to provide that Star
pays 100% of his base salary.
(2) Excludes the following amounts earned by Mr. Wheaton from CKE during fiscal
1998: (i) salary in the amount of $160,721, (ii) bonus in the amount of
$80,354, (iii) other annual compensation in the amount of $8,820 and (iv)
16,500 options to purchase CKE's common stock. In September 1997, Mr.
Wheaton's employment agreement with CKE was modified to provide that CKE
pays 25% of his base salary and Star pays the remaining 75%.
(3) Represents compensation paid by CKE or its subsidiaries to Mr. Wheaton in
his capacity as Executive Vice President of CKE.
(4) "Other Annual Compensation" represents auto related payments to Mr. Wheaton.
(5) Represents options to purchase shares of CKE's common stock for fiscal 1997,
and represents options to purchase shares of Star's common stock for fiscal
1998.
STOCK OPTIONS
There were no stock options granted to the Named Executive Officers during
the fiscal year ended January 25, 1999.
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OPTION EXERCISES AND HOLDINGS
No options were exercised by any of the Named Executive Officers during the
fiscal year ended January 25, 1999. The following table sets forth the fiscal
year end options values for all options held by the Company's Named Executive
Officer.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert E. Wheaton.......................... 159,492 79,745 -- --
</TABLE>
COMPENSATION OF DIRECTORS
For their services as directors in fiscal 1999, each non-employee director
received $2,000 per meeting of the Board of Directors and $500 per committee
meeting. In addition, all directors are entitled to participate in Star's 1997
Stock Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 25, 1999, no executive officer of the
Company, except for Mr. Foley, who was Chairman of the Board of the Company and
served as a member of the Compensation Committee thereof until the date of his
resignation from the Board of Directors on November 2, 1998, served as a member
of the compensation committee or as a director of any other entity, one of whose
executive officers serves on the Compensation Committee or is a director of the
Company. Mr. Foley is the Chairman of the Board and Chief Executive Officer of
CKE.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR THE FISCAL YEAR
ENDED JANUARY 25, 1999.
The Compensation Committee (the "Committee"), comprised of three
non-employee directors, is responsible for administering the executive
compensation policies, administering the various management incentive programs
(including option plans), and making recommendations to the Board of Directors
with respect to these policies and programs. In addition, the Committee makes
annual recommendations to the Board of Directors concerning the compensation
paid to the Chief Executive Officer and to each of the other executive officers
of Star (each, an "Executive Officer"). As discussed below, the Company began
its independent corporate existence on July 28, 1997 through the reorganization
of direct or indirect wholly-owned subsidiaries of CKE. The Committee was not
formed until after the first meeting of the Board following the formation of the
Company. Since there was no Committee at the time of the first Board meeting, it
was necessary for the non-employee directors of the Board to decide all
compensation issues at that meeting. In addition, certain compensation
arrangements were established by the Compensation Committee of the Board of
Directors of CKE while the Company was a wholly-owned subsidiary of CKE.
The following is a summary of the policies which the Board of Directors
analyzed in determining the compensation for the Executive Officers of the
Company. The Committee intends to follow the same general policies in
determining the compensation for the Executive Officers of the Company in fiscal
2000, but may, in its discretion, alter such policies to take into consideration
the applicable circumstances at the time.
Compensation Policies Towards Executive Officers. The Committee believes
that the most effective executive compensation program is one that provides
incentives to achieve both current and long-term strategic management goals,
with the ultimate objective of enhancing stockholder value. In this regard, the
Committee believes executive compensation should be comprised of cash as well as
equity-based programs. Base salaries are generally set at market levels in order
to attract and retain qualified executives. With respect to equity-based
compensation, the Committee believes that an integral part of Star's
compensation program is
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the ownership and retention of Star's Common Stock by its Executive Officers. By
providing Executive Officers with a meaningful stake in Star, the value of which
is dependent on Star's long-term success, a commonality of interests between
Star's Executive Officers and its stockholders is fostered.
Relationship of Performance to Compensation. Compensation that may be
earned by the Executive Officers in any fiscal year consists primarily of base
salary, cash bonus and stock options. The significant factors that were
considered in establishing the components of each Executive Officer's
compensation package for the fiscal year ended January 25, 1999 are summarized
below. The Committee, in its discretion, may apply different factors,
particularly different measures of financial performance, in setting executive
compensation for future fiscal years, but all compensation decisions will be
designed to further the general compensation policies indicated above.
Base Salary. The base salary for each Executive Officer is set on the basis
of personal performance, the salary levels in effect for comparable positions
with Star's principal competitors (including, but not limited to, Star's
self-determined peer group set forth in the "Stock Performance Graph"), and
Star's financial performance relative to such competitors. Factors relating to
individual performance that are assessed in setting base compensation are based
on the particular duties and areas of responsibility of the individual Executive
Officer. Factors relating to Star's financial performance that may be related to
increasing or decreasing base salary include revenues and earnings. The
establishment of base compensation involves a subjective assessment and weighing
of the foregoing criteria and is not based on any specific formula.
Cash Bonus. Annual bonuses are earned by each Executive Officer on the
basis of Star's achievement of pre-tax income targets established at the start
of the fiscal year and on the basis of the particular Executive Officer's duties
and areas of responsibility. Bonus amounts are established based on various
levels of performance against such targets. Following the completion of the
fiscal year, the Committee assesses Star and individual performance against the
established targets and provides for annual bonuses based on the targeted
performance of levels actually achieved.
Stock Options. Stock option grants motivate Executive Officers to manage
the business to improve long-term Star performance, and align the interests of
Executive Officers with stockholder value. Customarily, option grants are made
with exercise prices equal to the fair market value of the shares on the grant
date and will be of no value unless the market price of Star's outstanding
shares appreciates, thereby aligning a substantial part of the Executive
Officer's compensation package with the return realized by the stockholders.
Options generally vest in equal installments over a period of time, contingent
upon the Executive Officer's continued employment with Star. Accordingly, an
option will provide a return to the Executive Officer only if the Executive
Officer remains employed by Star and the market price of the underlying shares
appreciates over the option term. The size of an option grant is designed to
create a meaningful opportunity for stock ownership and is based upon the
individual's current position with Star, internal comparability with option
grants made to other Star executives and the individual's potential for future
responsibility and promotion over the option term. The Committee has established
an award program which takes into account the level of responsibility in the
organization, and total compensation compared to comparable companies, in making
option grants to the Executive Officers in an attempt to target a fixed number
of unvested option shares based upon the individual's position with Star and the
Executive Officer's existing holdings of unvested options. As such, the award of
stock options requires subjective judgment as to the amount of the option.
However, the Committee does not adhere strictly to these guidelines and will
occasionally vary the size of the option grant, if any, made to each Executive
Officer as circumstances warrant.
Chief Executive Officer Compensation. Robert E. Wheaton became Star's Chief
Executive Officer upon the Company's formation in July 1997. Prior to the
Company's initial public offering in September 1997, Mr. Wheaton's annual base
compensation was established at $250,000 for the fiscal year ended January 25,
1999, based on the philosophy described above.
Corporate Deduction for Compensation. Section 162(m) of the Code generally
limits to $1.0 million the corporate deduction for compensation paid to certain
executive officers, unless certain requirements are met. Star's 1997 Stock
Incentive Plan is structured so that any compensation deemed paid to an
executive officer upon exercise of an option, with an exercise price equal to
the fair market value of the underlying shares on the
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grant date, will qualify as performance-based compensation that will not be
limited by Section 162(m). The Committee intends to monitor regulations issued
pursuant to Section 162(m) and to take such actions with respect to the
executive compensation program as are reasonably necessary to preserve the
corporate tax deduction for executive compensation paid.
Thomas G. Schadt
Jack M Lloyd
Craig B. Wheaton
The report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Annual Report on Form 10-K into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that Star specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
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STOCKHOLDER PERFORMANCE GRAPH
COMPARISON OF 16 MONTH CUMULATIVE TOTAL RETURN*
AMONG STAR BUFFET, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE DOW JONES RESTAURANTS INDEX
<TABLE>
<CAPTION>
9/97 1/98 1/99
---- ---- ----
<S> <C> <C> <C>
Star Buffet Inc............. 100.00 102.08 48.96
Peer Group.................. 100.00 76.47 58.58
Nasdaq Stock Market (U.S.).. 100.00 96.95 151.70
Dow Jones Restaurants ...... 100.00 98.33 153.16
</TABLE>
* $100 INVESTED ON 9/25/97 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JANUARY 31.
The Peer Group includes the following stocks: Garden Fresh Restaurants
(LTUS), Roadhouse Grill (GRLL), Sizzler International (SZ), Fresh Foods Inc.
(FOOD), Shell's Seafood (SHLL) and Fresh Choice (SALD). All are listed on NASDAQ
except for Sizzler International, which is on the New York Stock Exchange. The
Peer Group stocks are all small capitalization stocks in the family dining
segment which is more relative of the business in which Star Buffet operates.
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Annual Report on Form
10-K into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent that Star specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Star's Common Stock as of May 19, 1999, by (i) each person who is
known by Star to beneficially own more than five percent of the outstanding Star
Common Stock, (ii) each director of Star, (iii) each Named Executive Officer of
Star identified in the Summary Compensation Table and (iv) all current directors
and executive officers of Star as a group. Except as otherwise indicated,
beneficial ownership includes both voting and investment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(%)(1)
------------------------------------ ----------------------- -----------
<S> <C> <C>
Robert E. Wheaton................................... 942,192(2) 30.3%
Jack M. Lloyd....................................... 7,500(3) *
Thomas G. Schadt.................................... 7,500(3) *
Phillip "Buddy" Johnson............................. 200(4) *
Craig B. Wheaton.................................... 6,500 *
Robert Fleming, Inc................................. 523,075(5) 17.7%
320 Park Avenue -- 11th Floor
New York, NY 10022
Kennedy Capital Management, Inc. ................... 358,700(6) 12.2%
10829 Olive Blvd.
St. Louis, MO 63141
Dresdner RCM Global Investors LLC................... 300,000(7) 10.2%
Four Embarcadero Center
San Francisco, CA 94111
All executive officers and directors as a group (5
persons).......................................... 963,892(8) 30.9%
</TABLE>
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* Less than one percent.
(1) Calculated based on 2,950,000 shares of Star Common Stock outstanding May
19, 1999.
(2) Includes 159,492 shares subject to presently exercisable options or options
that become exercisable within 60 days of May 19, 1999.
(3) Includes 7,500 shares subject to presently exercisable options or options
that become exercisable within 60 days of May 19, 1999.
(4) Does not include 20,000 shares subject to options that will become
immediately exercisable upon grant in fiscal year 2000 pursuant to an
employment agreement entered into between Phillip "Buddy" Johnson and the
Company on March 20, 1998.
(5) Robert Fleming, Inc. has shared power to vote 523,075 of such shares and has
shared power to dispose of all such shares. Robert Fleming, Inc. claims
beneficial ownership with respect to all such shares. The information
relating to the beneficial ownership of Robert Fleming, Inc. has been
derived from the Schedule 13G dated February 5, 1999 filed by Robert
Fleming, Inc. with the Securities and Exchange Commission. The number of
shares beneficially owned by Robert Fleming, Inc. is stated as of December
31, 1998.
(6) Kennedy Capital Management, Inc. has sole power to vote 337,450 of such
shares and sole power to dispose 358,700 of such shares. Kennedy Capital
Management, Inc. claims beneficial ownership with respect to all such
shares. The information relating to the beneficial ownership of Kennedy
Capital Management, Inc. has been derived from the Schedule 13G dated
February 5, 1999 filed by Kennedy Capital Management, Inc. with the
Securities and Exchange Commission. The number of shares beneficially owned
by Kennedy Capital Management, Inc. is stated as of December 31, 1998.
(7) Dresdner RCM Global Investors LLC ("Dresdner LLC") has sole power to vote
and sole power to dispose of all 300,000 shares. Dresdner LLC claims
beneficial ownership with respect to all such 300,000 shares. Dresdner LLC
is a wholly owned subsidiary of Dresdner Bank AG, an international banking
organization headquartered in Frankfurt, Germany. Dresdner Bank AG also
claims beneficial ownership with respect to all such 300,000 shares, but
only to the extent that Dresdner Bank AG may be deemed to have beneficial
ownership of securities deemed to be beneficially owned by Dresdner LLC.
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The information relating to the beneficial ownership of Dresdner LLC and
Dresdner Bank AG has been derived from their respective Schedule 13G's,
dated January 8, 1999, as filed by Dresdner LLC and Dresdner Bank AG with
the Securities and Exchange Commission. The number of shares beneficially
owned by Dresdner LLC and Dresdner Bank AG is stated as of December 31,
1998.
(8) Includes 174,492 shares subject to presently exercisable options or options
that become exercisable within 60 days of May 19, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STAR BUFFET, INC.
(Registrant)
May 25, 1999 By: /s/ ROBERT E. WHEATON
------------------------------------
Robert E. Wheaton
President and Chief Executive
Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT E. WHEATON President and Chief Executive May 25, 1999
- ----------------------------------------------------- Officer and Director
Robert E. Wheaton
/s/ RONALD E. DOWDY Group Controller, Treasurer May 25, 1999
- ----------------------------------------------------- and Secretary
Ronald E. Dowdy
/s/ JACK M. LLOYD Director May 25, 1999
- -----------------------------------------------------
Jack M. Lloyd
/s/ THOMAS G. SCHADT Director May 25, 1999
- -----------------------------------------------------
Thomas G. Schadt
/s/ PHILLIP "BUDDY" JOHNSON Director May 25, 1999
- -----------------------------------------------------
Phillip "Buddy" Johnson
/s/ CRAIG B. WHEATON Director May 25, 1999
- -----------------------------------------------------
Craig B. Wheaton
</TABLE>
10
