UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended Commission file number
September 3, 1996 0-19907
----------------- -------
LONE STAR STEAKHOUSE & SALOON, INC.
(Exact name of registrant as specified in its charter)
Delaware 48-1109495
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
224 EAST DOUGLAS, SUITE 700
WICHITA, KANSAS 67202
(Address of principal executive offices) (Zip code)
(316) 264-8899
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
documents and 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.
/x/ YES / / NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 4, 1996
-----
COMMON STOCK, $.01 PAR VALUE 40,665,320 SHARES
-1-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 3, 1996 AND DECEMBER 26, 1995 2
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE TWELVE WEEKS ENDED
SEPTEMBER 3, 1996 AND SEPTEMBER 5, 1995 3
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE THIRTY-SIX WEEKS ENDED
SEPTEMBER 3, 1996 AND SEPTEMBER 5, 1995 4
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE THIRTY-SIX WEEKS ENDED
SEPTEMBER 3, 1996 AND SEPTEMBER 5, 1995 5
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5 HAVE BEEN OMITTED
SINCE THE ITEMS ARE EITHER INAPPLICABLE OR THE
ANSWER IS NEGATIVE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 3, 1996 December 26, 1995
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 164,929,404 $ 67,424,884
Accounts receivable 3,294,743 1,308,865
Inventories 5,637,858 4,156,355
Pre-opening costs - net 7,598,141 10,328,686
Refundable income taxes -- 5,006,856
Other current assets 351,762 90,092
------------- -------------
Total current assets 181,811,908 88,315,738
Property and equipment, net 303,812,862 245,334,956
Intangible and other assets, net 25,202,407 24,567,805
------------- -------------
Total assets $ 510,827,177 $ 358,218,499
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,136,019 $ 9,245,331
Income taxes payable 3,288,639 --
Other current liabilities 19,991,563 19,189,962
------------- -------------
Total current liabilities 35,416,221 28,435,293
Deferred income taxes 3,868,760 3,966,968
Other non-current liabilities 2,660,327 3,005,695
Stockholders' Equity:
Preferred stock -- --
Common stock 404,951 375,879
Additional paid-in capital 337,407,787 228,578,790
Retained earnings 131,017,789 94,140,238
Translation adjustment 51,342 (284,364)
------------- -------------
Total stockholders' equity 468,881,869 322,810,543
------------- -------------
Total liabilities and stockholders' equity $ 510,827,177 $ 358,218,499
============= =============
</TABLE>
See accompanying notes.
-2-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Twelve Weeks Ended
------------------------------
September 3, 1996 September 5, 1995
------------- -------------
<S> <C> <C>
Net sales $ 113,746,124 $ 81,632,746
Costs and expenses:
Costs of sales 39,953,800 28,613,775
Restaurant operating expenses 38,020,727 27,849,468
Depreciation and amortization 6,894,996 4,600,552
------------- -------------
Restaurant costs and expenses 84,869,523 61,063,795
------------- -------------
Restaurant operating income 28,876,601 20,568,951
General and administrative expenses 4,395,194 3,300,086
Loss on divestiture of European Joint Venture -- --
------------- -------------
Income from operations 24,481,407 17,268,865
Other income, principally interest 1,073,302 1,211,647
------------- -------------
Income before income taxes and minority interest 25,554,709 18,480,512
Provision for income taxes (9,609,313) (6,575,686)
Minority interest (106,924) 111,343
------------- -------------
Net income $ 15,838,472 $ 12,016,169
============= =============
Primary net income per share $ 0.38 $ 0.31
============= =============
Fully diluted net income per share $ 0.38 $ 0.31
============= =============
Unaudited pro forma information
based on providing for income
taxes on pooled S-Corporations
prior to acquisition at the
estimated effective tax rate:
Income before income taxes $ 18,591,855
Pro forma provision for income taxes (6,747,239)
-------------
Pro forma net income $ 11,844,616
=============
Pro forma primary net income per share $ 0.31
=============
Pro forma fully diluted net income per share $ 0.31
=============
</TABLE>
See accompanying notes
-3-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Consolidated Statements of Income
(Unaudited)
For the Thirty-six Weeks Ended
------------------------------
September 3, 1996 September 5, 1995
------------- -------------
Net sales $ 327,889,840 $ 222,721,001
Costs and expenses:
Costs of sales 115,732,240 79,167,680
Restaurant operating expenses 112,077,657 75,362,066
Depreciation and amortization 19,658,085 12,753,670
------------- -------------
Restaurant costs and expenses 247,467,982 167,283,416
------------- -------------
Restaurant operating income 80,421,858 55,437,585
General and administrative expenses 14,294,254 8,952,072
Loss on divestiture of European Joint Venture 8,557,176 --
------------- -------------
Income from operations 57,570,428 46,485,513
Other income, principally interest 2,428,523 2,005,159
------------- -------------
Income before income taxes and minority interest 59,998,951 48,490,672
Provision for income taxes (23,724,998) (17,439,057)
Minority interest 603,598 111,343
------------- -------------
Net income $ 36,877,551 $ 31,162,958
============= =============
Primary net income per share $ 0.92 $ 0.83
============= =============
Fully diluted net income per share $ 0.92 $ 0.83
============= =============
Unaudited pro forma information
based on providing for income
taxes on pooled S-Corporations
prior to acquisition at the
estimated effective tax rate:
Income before income taxes $ 48,602,015
Pro forma provision for income taxes (18,272,250)
-------------
Pro forma net income $ 30,329,765
=============
Pro forma primary net income per share $ 0.81
=============
Pro forma fully diluted net income per share $ 0.81
=============
See accompanying notes
-4-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Consolidated Statements of Cash Flows
Increase (decrease) in cash and cash equivalents
(Unaudited)
<TABLE>
<CAPTION>
For the thirty-six weeks ended
-----------------------------
September 3, 1996 September 5, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 36,877,551 $ 31,162,958
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,658,085 12,753,670
Non-cash losses on divestiture of European Joint Venture 8,337,176 --
Net change in operating assets and liabilities:
Change in operating assets (6,646,607) (1,886,748)
Change in operating liabilities 6,537,352 3,392,679
------------- -------------
Net cash provided by operating activities 64,763,557 45,422,559
Cash flows from investing activities:
Purchases of property and equipment (73,680,097) (61,476,088)
Other (634,602) 1,453,555
------------- -------------
Net cash used in investing activities (74,314,699) (60,022,533)
Cash flows from financing activities:
Net proceeds from issuance of common stock 107,055,662 85,906,914
Payment of notes payable on company acquired -- (4,317,522)
Dividends on prior S-Corporation Income -- (1,554,759)
------------- -------------
Net cash provided by financing activities 107,055,662 80,034,633
------------- -------------
Net increase in cash and cash equivalents 97,504,520 65,434,659
Cash and cash equivalents at beginning of period 67,424,884 45,861,351
------------- -------------
Cash and cash equivalents at end of period $ 164,929,404 $ 111,296,010
============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ -- $ 74,987
Cash paid for income taxes $ 14,538,771 $ 10,261,745
</TABLE>
See accompanying notes
-5-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 1) BASIS OF PRESENTATION
The unaudited Condensed Consolidated Financial Statements include all
adjustments, consisting of normal, recurring accruals, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for the periods presented. The results of the thirty-six
weeks ended September 3, 1996, are not necessarily indicative of the results to
be expected for the full year ending December 31, 1996. This quarterly report on
Form 10-Q should be read in conjunction with the Company's audited consolidated
financial statements in its 1995 Form 10-K.
(NOTE 2) STOCK OPTIONS
During the thirty-six week period ended September 3, 1996, the Company
granted stock options for 1,534,891 shares of Common Stock at exercise prices
ranging from $30.72 to $41.63 per share pursuant to its 1992 stock option plan
for employees.
(NOTE 3) ADDITIONAL PUBLIC OFFERINGS
On June 4, 1996 the Company completed an offering of 2,500,000 shares of
its Common Stock (the "1996 Public Offering") at $40.13 per share. Total net
proceeds to the Company of approximately $96,000,000 are being used for
restaurant development. On June 27, 1996, the underwriters exercised their
over-allotment option and acquired additional shares including 150,000 shares
for which the Company received net proceeds of approximately $6,000,000.
(NOTE 4) EARNINGS PER SHARE
Primary earnings per share amounts are computed based on the weighted
average number of shares actually outstanding plus the shares that would be
outstanding assuming exercise of dilutive stock options which are considered to
be common stock equivalents. The number of shares that would be issued from the
exercise of stock options has been reduced by the number of shares that could
have been purchased from the proceeds at the average market price of the
company's stock. The number of shares resulting from this computation for the
twelve weeks ended September 3, 1996 and September 5, 1995 was 41,649,960 and
38,776,302, respectively. The number of shares resulting from this computation
for the thirty-six weeks ended September 3, 1996 and September 5, 1995 was
39,967,438 and 37,357,522, respectively.
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 4) EARNINGS PER SHARE (CONTINUED)
For purposes of fully diluted computations, the number of shares that
would be issued from the exercise of stock options has been reduced by the
number of shares which could have been purchased from the proceeds at the market
price of the Company's common stock on the last day of the period because that
price was higher than the average market prices during the period. The number of
shares resulting from this computation of fully diluted earnings per share for
the twelve weeks ended September 3, 1996 and September 5, 1995 was 41,649,885,
and 38,813,302, respectively. The number of shares resulting from this
computation of fully diluted earnings per share for the thirty-six weeks ended
September 3, 1996 and September 5, 1995 was 39,971,237 and 37,449,522,
respectively.
(NOTE 5) ACQUISITION OF GROUND ROUND RESTAURANT SITES
On October 11, 1996, the Company partially closed the contract of sale
dated June 28, 1996, with Ground Round Restaurants, Inc. by acquiring nine
restaurant locations (three fee properties and six leasehold properties) for a
total acquisition price of $9,909,000. The Company anticipates acquiring up to
four additional Ground Round locations in the near future.
The Company did not acquire the business interests from Ground Round, as
the facilities acquired will be retro-fitted to be operated as Lone Star
Steakhouse & Saloon restaurants.
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto included elsewhere in this Form 10-Q.
The Company continues its rapid expansion under which it has opened 168
restaurants since 1991, including 47 in 1995, and 20 during the thirty-six week
period ended September 3, 1996. In August 1995, the Company completed an
acquisition, pursuant to which it acquired 11 licensed Lone Star Steakhouse &
Saloon restaurants as well as three additional restaurants, one Italian, and two
Mexican, from a group of related entities which were operated under common
control, (collectively, the "CCC Group"). The transaction was accounted for as a
pooling of interests and, accordingly, the accompanying consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations have been restated to include the accounts and operations
of CCC Group for all periods prior to the acquisition.
Pre-opening costs include labor costs, costs of hiring and training
personnel and certain other costs relating to opening new restaurants, and are
capitalized and amortized over a 12 month period, beginning in the period that
the restaurants open.
The Company is expanding its entry into the upper-end steakhouse market,
where average checks are $60 or more, by developing the Del Frisco's Double
Eagle Steak House concept ("Del Frisco's") in addition to its Lone Star
Steakhouse & Saloon restaurants. The Company acquired an existing Del Frisco's
location in September 1995, opened the second Del Frisco's in Fort Worth, Texas,
in April and expects to open one additional Del Frisco's in 1996.
The Company has also developed an upscale steak restaurant concept under
the tradename Sullivan's Steakhouse. The average check per Sullivan's Steakhouse
customer has been and is anticipated to be $35 to $40. The Company opened the
first Sullivan's Steakhouse in May 1996 and expects to develop one additional
Sullivan's restaurant in 1996.
Internationally, the Company, through a joint venture, operates twelve
Lone Star Steakhouse & Saloon restaurants in Australia and expects to open an
additional three units in 1996. In June 1996, the Company terminated its
European joint venture by divesting its interest in three existing restaurants
and one under construction. This divestiture resulted in a charge to earnings of
$5,964,664 net of the tax benefit of $2,592,512. Such restaurants no longer
operate as Lone Star Steakhouse & Saloon restaurants.
-8-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) the
percentages which certain items included in the Condensed Consolidated Statement
of Income bear to net sales, and (ii) other selected operating data:
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED (1) THIRTY-SIX WEEKS, ENDED
SEPTEMBER 3, SEPTEMBER 5, SEPTEMBER 3, SEPTEMBER 5,
1996 1995 1996 1995
----- ----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Costs of sales.......................................... 35.1 35.1 35.3 35.5
Restaurant operating expenses........................... 33.4 34.1 34.2 33.8
Depreciation and amortization........................... 6.1 5.6 6.0 5.8
----- ----- ----- -----
Restaurant costs and expenses...................... 74.6 74.8 75.5 75.1
----- ----- ----- -----
Restaurant operating income................................... 25.4 25.2 24.5 24.9
General and administrative expenses........................... 3.9 4.0 4.4 4.0
Loss on divesture of European Joint Venture................... - - 2.5 -
----- ----- ----- -----
Income from operations........................................ 21.5 21.2 17.6 20.9
Other income, principally interest, and minority interest..... 0.9 1.5 0.8 0.9
----- ----- ----- -----
Income before provision for income taxes (2).................. 22.4 22.7 18.4 21.8
Provision for income taxes.................................... 8.5 8.2 7.2 8.2
----- ----- ----- -----
Net income (Pro forma for 1995)............................... 13.9% 14.5% 11.2% 13.6%
===== ===== ===== =====
RESTAURANT OPERATING DATA:
Average sales per restaurant on an annualized basis (3) $2,528 $2,596 $2,578 $2,562
Number of restaurants at end of the period 201 142 201 142
</TABLE>
(1) The Company operates on a fifty-two or fifty-three week fiscal year ending
the last Tuesday in December. The fiscal quarters for the Company consist
of accounting periods of twelve, twelve, twelve and sixteen or seventeen
weeks, respectively.
(2) Gives pro forma effect to providing for income taxes on pooled
S-Corporations of CCC Group prior to the August, 1995, acquisition at the
estimated effective tax rate.
(3) Average sales per restaurant on an annualized basis are computed by
dividing a restaurant's total sales for full accounting periods open
during the period by the number of full accounting periods open, and
multiplying the result by thirteen.
-9-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
TWELVE WEEKS ENDED SEPTEMBER 3, 1996 COMPARED TO TWELVE WEEKS ENDED SEPTEMBER 5,
1995
Net sales increased $32,113,000 (39.3%) for the twelve weeks ended
September 3, 1996 compared to the twelve weeks ended September 5, 1995
principally attributable to $27,784,000 in sales from the 44 new domestic Lone
Star restaurants opened since September 1995, additional sales from the
Sullivan's and Del Frisco's restaurants opened in 1996 and sales from the
Australian joint venture. Same store sales were down 2.8% in the third quarter.
Costs of sales, primarily food and beverages were consistent, at 35.1% of
sales for both periods. During these periods, the Company purchased beef under
contracted prices which are now extended through September 1997.
Restaurant operating expenses for the twelve weeks ended September 3, 1996
increased $10,171,000 (36.5%) from $27,849,000 in the twelve weeks ended
September 5, 1995 to $38,021,000, and such expenses decreased as a percentage of
net sales from 34.1% to 33.4%. Most of this improvement is attributable to
improved labor controls in the domestic Lone Star Steakhouse & Saloon
restaurants.
Depreciation and amortization increased $2,294,000 (49.9%) in the twelve
weeks ended September 3, 1996 over the twelve weeks ended September 5, 1995,
principally reflecting the amortization of capitalized pre-opening expenses
relating to the opening of 44 new restaurants since September 1995 and increases
in depreciation relating to additional owned properties. General and
administrative expenses for the twelve weeks ended September 3, 1996, increased
$1,095,000 (33.2%) from the comparable period in 1995. The increase reflects the
consolidation in the foreign joint venture administration expenses as well as
the costs associated with additional multi-unit supervisors.
Certain accounting and administrative services are contracted from Coulter
Enterprises, Inc, a restaurant management services company owned by the
Company's Chairman of the Board and Chief Executive Officer. The service
agreement provides for specified accounting and administration services to be
provided on a cost pass-through basis under which the Company paid a fixed
annual charge of $837,000, plus an additional fee of $406 per restaurant per
28-day accounting period and reimbursement of out-of-pocket costs and expenses
during the fiscal year ended December 26, 1995. The service agreement was
renewed for fiscal 1996 with the fixed annual charge increasing to $1,272,000
and the per restaurant, per accounting period fee increasing to $416. Should the
service agreement not be renewed in the future, the Company would incur direct
costs for accounting and administration, personnel, rent and other costs
associated with a separate office; however, the Company believes that such
direct costs would not be materially different than the costs under the
contractual arrangement.
Other income, principally interest, for the twelve weeks ended September
3, 1996, was $1,073,000 a $138,000 decrease from the comparable period in 1995.
The effective income tax rate for the twelve weeks ended September 3, 1996
and the effective pro forma income tax rate for the twelve weeks ended September
5, 1995 was 37.8% and 36.3%, respectively. The increase in the rate is primarily
due to a decrease in interest income nontaxable at the federal level.
-10-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
THIRTY-SIX WEEKS ENDED SEPTEMBER 3, 1996 COMPARED TO THIRTY-SIX WEEKS ENDED
SEPTEMBER 5, 1995
Net sales increased $105,169,000 (47.2%) for the thirty-six weeks ended
September 3, 1996 compared to the thirty-six weeks ended September 5, 1995
principally attributable to $64,199,000 in sales from the 44 new domestic Lone
Star restaurants opened since September 1995, additional sales from the
Sullivan's and Del Frisco's restaurants opened in 1996 and sales from the
Australian and European joint ventures. Same store sales were down 0.6% during
the period.
Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 35.3% for the thirty-six weeks ended September 3, 1996, from 35.5% in
the thirty-six weeks ended September 5, 1995 due to slightly lower beef prices.
Restaurant operating expenses for the thirty-six weeks ended September 3,
1996 increased $36,716,000 (48.7%) to $112,078,000 from $75,362,000 in the
thirty-six weeks ended September 5, 1995, and such expenses increased as a
percentage of net sales from 33.8% to 34.2%, The consolidation of the foreign
joint venture operations with their higher labor and occupancy ratios accounted
for most of the increase.
Depreciation and amortization increased $6,904,000 (54.1%) in the
thirty-six weeks ended September 3, 1996 over the comparable period in 1995,
principally reflecting the amortization of capitalized pre-opening expenses
relating to the opening of 44 new restaurants since September 1995 and increases
in depreciation related to additional owned properties. General and
administrative expenses for the thirty-six weeks ended September 3, 1996,
increased $5,342,000 (59.7%) from the comparable period in 1995, reflecting
costs associated with additional multi-unit supervisors as well as an increase
from the consolidation of the foreign joint venture operations with their higher
general and administrative expense ratio.
Pursuant to the Company's service agreement with Coulter Enterprises,
Inc., for the current fiscal year the Company will pay a fixed annual charge of
$1,272,000, plus an additional fee of $416 per restaurant per 28 day accounting
period and reimbursement of out-of-pocket costs and expenses.
In June of 1996 the Company divested its interest in an European Joint
Venture that operated three Lone Star Steakhouse & Saloon restaurants with one
additional restaurant under construction. The divestiture resulted in a charge
to earnings of $5,964,664 net of the tax benefit totaling $2,592,512.
Other income, principally interest, for the thirty-six weeks ended
September 3, 1996, was $2,429,000 a $423,000 increase from the comparable period
in 1995, reflecting higher average balances invested for the thirty-six weeks
ended September 3, 1996 compared to the same period in 1995.
The effective income tax rate for the thirty-six weeks ended September 3,
1996 and the effective pro forma income tax rate for the thirty-six weeks ended
September 5, 1995 was 39.1 % and 37.6%, respectively. The increase in the rate
is primarily due to the inability to recognize for tax purposes, the entire loss
on the write-off of the European Joint Venture.
-11-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
IMPACT OF INFLATION
The primary inflationary factors affecting the Company's operations
include food and labor costs. A large number of the Company's restaurant
personnel are paid at the federal and state established minimum wage levels and,
accordingly, changes in such wage levels affect the Company's labor costs. Since
the majority of personnel are tipped employees the recent minimum wage changes
will have very little effect on labor costs. As costs of food and labor have
increased, the Company has historically been able to offset these increases
through economies of scale, although there is no assurance that such offsets
will continue. To date, inflation has not had a material impact on operating
margins.
FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, amended. Stockholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to open new restaurants, general market
conditions, competition and pricing. Although the Company believes the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements contained in the report will
prove to be accurate.
-12-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for
each of the thirty-six weeks ended September 3, 1996 and September 5, 1995.
Thirty-six weeks ended
September 3, September 5,
1996 1995
----------- -----------
Net cash provided by operating activities..... $64,763,557 $45,422,559
Net cash used in investment activities........ (74,314,699) (60,022,533)
Net cash provided by financing
activities.............................. 107,055,662 80,034,633
Net increase in cash.......................... 97,504,520 65,434,659
During the thirty-six week period ended September 3, 1996, the Company's
investment in property and equipment was $73,680,000.
The Company has opened 151 restaurants in the past four fiscal years of
which 45 opened in 1995 and an additional twenty opened during the thirty-six
weeks ended September 3, 1996. The Company does not have significant receivables
or inventory and receives trade credit based upon negotiated terms in purchasing
food and supplies. Because funds available from cash sales are not needed
immediately to pay for food and supplies, or to finance inventory, they may be
considered as a source of financing for noncurrent capital expenditures.
At September 3, 1996, the Company had $164,929,404 in cash and cash
equivalents. While the Company has not established a credit facility, the
Company believes it could establish a facility on suitable terms. As of
September 3, 1996, the Company has acquired 27 sites for future development,
four of which are leased. In addition, as of such date the Company had entered
into one new lease and 19 contracts to purchase sites. The Company was also
actively negotiating to purchase or lease approximately nine additional sites.
In the future, the Company anticipates that a greater proportion of its new
restaurant locations will be purchased rather than leased. The Company expects
to expend approximately $40,000,000 to open new restaurants through the
remainder of fiscal 1996. In addition, on October 11, 1996, the Company
partially closed the contract of sale dated June 28, 1996, with Ground Round
Restaurants, Inc. by acquiring three fee properties and six leasehold properties
for a total acquisition price of $9,909,000. The Company anticipates acquiring
up to four additional Ground Round locations in the near future.
-13-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11.1 Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
(b) Forms on 8-K...............None
-14-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
LONE STAR STEAKHOUSE & SALOON, INC.
(Registrant)
/s/ John D. White
----------------------------------------
John D. White
Chief Financial and Principal Accounting
Officer, Executive Vice President,
Treasurer and Director
-15-
Exhibit 11.1
<TABLE>
<CAPTION>
Computation of Per Share Earnings
For the Twelve Weeks Ended For the Thirty-six Weeks Ended
----------------------------------------------------------
September 3, September 5, September 3, September 5,
1996 1995 1996 1995
------- ------- ------- -------
(in thousands, except (in thousands, except
per share amounts) per share amounts)
<S> <C> <C> <C> <C>
Primary:
Average weighted shares outstanding 40,611 37,349 38,766 34,290
Net effect of dilutive stock options-based
on the treasury stock method using
average market price 1,039 1,427 1,202 3,067
------- ------- ------- -------
Total 41,650 38,776 39,967 37,358
======= ======= ======= =======
Net Income $15,838 $11,845 $36,878 $30,330
======= ======= ======= =======
Per share amount $ 0.38 $ 0.31 $ 0.92 $ 0.81
======= ======= ======= =======
Fully Diluted:
Average weighted shares outstanding 40,611 37,349 38,766 34,290
Net effect of dilutive stock options-based
on the treasury stock method using
period-end market price, if higher
than average market price 1,039 1,464 1,206 3,159
------- ------- ------- -------
Total 41,650 38,813 39,971 37,450
======= ======= ======= =======
Net Income $15,838 $11,845 $36,878 $30,330
======= ======= ======= =======
Per share amount $ 0.38 $ 0.31 $ 0.92 $ 0.81
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 3, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUN-12-1996
<PERIOD-END> SEP-03-1996
<CASH> 164,929
<SECURITIES> 0
<RECEIVABLES> 3,295
<ALLOWANCES> 0
<INVENTORY> 5,638
<CURRENT-ASSETS> 181,812
<PP&E> 303,813
<DEPRECIATION> 0
<TOTAL-ASSETS> 510,827
<CURRENT-LIABILITIES> 35,416
<BONDS> 0
0
0
<COMMON> 404,951
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 510,827
<SALES> 113,746
<TOTAL-REVENUES> 113,746
<CGS> 39,954
<TOTAL-COSTS> 84,870
<OTHER-EXPENSES> 4,395
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,073)
<INCOME-PRETAX> 25,555
<INCOME-TAX> (9,609)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,838
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
