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
June 13, 2000 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 July 21, 2000
Common Stock, $.01 par value 25,678,219 shares
<PAGE>
Lone Star Steakhouse & Saloon, Inc.
Index
Page
Number
------
PART I. FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at June 13, 2000 and December 28, 1999 2
Condensed Consolidated Statements of
Income for the twelve weeks ended
June 13, 2000 and June 15, 1999 3
Condensed Consolidated Statements of
Income for the twenty-four weeks ended
June 13, 2000 and June 15, 1999 4
Condensed Consolidated Statements of
Cash Flows for the twenty-four weeks ended
June 13, 2000 and June 15, 1999 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative
Disclosures about Market Risks 13
PART II. OTHER INFORMATION
-------- -----------------
Items 1, 3 and 5 have been omitted
since the items are either inapplicable or the
answer is negative
Item 2. Changes in Securities and Use of Proceeds 13
Item 4. Submission of Matters to a Vote of Stockholders 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 13, 2000 December 28, 1999
-------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,965 $ 50,673
Inventories 12,409 11,440
Other current assets 7,771 7,256
---------- ----------
Total current assets 45,145 69,369
Property and equipment, net 425,838 430,482
Intangible and other assets, net 35,272 33,682
---------- ----------
Total assets $ 506,255 $ 533,533
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,692 $ 11,726
Other current liabilities 32,050 37,428
---------- ----------
Total current liabilities 45,742 49,154
Long-term debt 6,955 -
Stockholders' equity:
Preferred stock - -
Common stock 257 299
Additional paid-in capital 200,062 238,000
Retained earnings 263,586 253,923
Accumulated other comprehensive loss (10,347) (7,843)
---------- ----------
Total stockholders' equity 453,558 484,379
---------- ----------
Total liabilities and stockholders' equity $ 506,255 $ 533,533
========== ==========
See accompanying notes.
</TABLE>
-2-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Income
(In thousands, except for per share amounts)
(Unaudited)
For the twelve weeks ended
---------------------------------
June 13, 2000 June 15, 1999
---------------- ---------------
Net sales $134,187 $134,753
Costs and expenses:
Costs of sales 47,228 47,805
Restaurant operating expenses 62,662 61,087
Depreciation and amortization 6,610 6,819
--------- ----------
Restaurant costs and expenses 116,500 115,711
--------- ----------
Restaurant operating income 17,687 19,042
General and administrative expenses 9,014 8,101
--------- ----------
Income from operations 8,673 10,941
Other income, net 393 333
--------- ----------
Income before income taxes 9,066 11,274
Provision for income taxes 3,208 4,191
--------- ----------
Net income $ 5,858 $ 7,083
========= ==========
Basic earnings per share $ 0.22 $ 0.20
========= ==========
Diluted earnings per share $ 0.22 $ 0.20
========= ==========
See accompanying notes.
-3-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Income
(In thousands, except for per share amounts)
(Unaudited)
For the twenty-four weeks ended
------------------------------------
June 13, 2000 June 15, 1999
--------------- -------------
Net sales $273,442 $274,691
Costs and expenses:
Costs of sales 94,885 98,191
Restaurant operating expenses 125,772 122,717
Depreciation and amoritzation 13,160 14,051
---------- ----------
Restaurant costs and expenses 233,817 234,959
---------- ----------
Restaurant operating income 39,625 39,732
General and administrative expenses 20,355 16,390
---------- ----------
Income from operations 19,270 23,342
Other income, net 809 580
---------- ----------
Income before income taxes 20,079 23,922
Provision for income taxes 7,118 9,057
---------- ----------
Net income $ 12,961 $ 14,865
========== ==========
Basic earnings per share $ 0.47 $ 0.41
========== ==========
Diluted earnings per share $ 0.47 $ 0.40
========== ==========
See accompanying notes.
-4-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the twenty-four weeks ended
------------------------------------
June 13, 2000 June 15, 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,961 $ 14,865
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 14,503 14,881
Net change in operating assets and liabilities:
Change in operating assets (1,591) 3,387
Change in operating liabilities (3,412) (6,440)
--------- -----------
Net cash provided by operating activities 22,461 26,693
Cash flows from investing activities:
Purchases of property and equipment (14,806) (25,344)
Proceeds from sale of assets 3,921 --
Other (2,956) (240)
--------- -----------
Net cash used in investing activities (13,841) (25,584)
Cash flows from financing activities:
Net proceeds from issuance of common stock 157 12
Common stock repurchased and retired (38,137) (26,864)
Proceeds from long-term borrowings 6,955 --
Cash dividends paid (3,298) --
--------- -----------
Net cash used in financing activities (34,323) (26,852)
Effect of exchange rate on cash (5) 48
--------- -----------
Net decrease in cash and cash equivalents (25,708) (25,695)
Cash and cash equivalents at beginning of period 50,673 89,847
--------- -----------
Cash and cash equivalents at end of period $ 24,965 $ 64,152
========= ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 10,984 $ 10,029
========= ===========
</TABLE>
See accompanying notes.
-5-
<PAGE>
Lone Star Steakhouse & Saloon, Inc.
Notes to Condensed Consolidated Financial Statements
(All amounts in thousands, except share data)
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 for the twenty-four
weeks ended June 13, 2000 are not necessarily indicative of the results to be
expected for the full year ending December 26, 2000. This quarterly report on
Form 10-Q should be read in conjunction with the Company's audited consolidated
financial statements in its 1999 Form 10-K.
2. Comprehensive Income
--------------------
Comprehensive income is comprised of the following:
<TABLE>
<CAPTION>
For the twelve weeks ended For the twenty-four weeks ended
-------------------------- -------------------------------
June 13, 2000 June 15, 1999 June 13, 2000 June 15, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 5,858 $ 7,083 $ 12,961 $ 14,865
Foreign currency translation
adjustments (665) 616 (2,504) 1,549
--------- ----------- -------- --------
Comprehensive income $ 5,193 $ 7,669 $ 10,457 $ 16,414
======== ======== ======= =======
</TABLE>
3. Earnings Per Share
------------------
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding. For purposes of 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 average market price of the Company's stock
or price of the Company's stock on the exercise date if options were exercised
during the period presented.
The weighted average shares outstanding for the periods presented are as
follows:
<TABLE>
<CAPTION>
For the twelve weeks ended For the twenty-four weeks ended
-------------------------- -------------------------------
June 13, 2000 June 15, 1999 June 13, 2000 June 15, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic average shares outstanding 26,232 35,813 27,304 36,663
Diluted average shares outstanding 27,148 36,078 27,834 36,843
</TABLE>
-6-
<PAGE>
4. Long - Term Debt
----------------
The Company has entered into a $20,000 revolving term loan agreement with
a bank, under which $6,955 was outstanding at June 13, 2000. The loan matures in
April 2005 and requires interest only payments through April 2003, at which time
the loan will convert to a term note with monthly principal and interest
payments sufficient to amortize the loan over its remaining term. The interest
rate is at the daily prime rate as published in the Wall Street Journal. In
addition, the Company pays a facility fee of 1/4 of one percent on the unused
portion of the facility.
5. Treasury Stock Transactions
---------------------------
The Board of Directors has authorized the Company to purchase shares of
the Company's common stock in the open market or in privately negotiated
transactions. Pursuant to the authorization, the Company purchased 4,134,600
shares of its common stock during the twenty-four weeks ended June 13, 2000 at
an average price of $9.22 per share and 2,798,000 shares of its common stock
during the twenty-four weeks ended June 15, 1999 at an average price of $9.60
per share. The Company is accounting for the purchases using the constructive
retirement method of accounting wherein the aggregate par value of the stock is
charged to the common stock account and the excess of cost over par value is
charged to paid-in capital.
6. Stock Options
-------------
During the twenty-four weeks ended June 13, 2000, the Company granted
stock options for 1,730,258 shares of common stock at exercise prices ranging
from $8.47 to $8.88 per share pursuant to its 1992 stock option plan for
employees.
7. Recently Issued Accounting Standards
------------------------------------
In June 1998 the Financial Accounting Statements Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities," which is required to be adopted
in years beginning after June 15, 2000. The statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. The Company expects
to adopt the new statement effective December 27, 2001. The statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives not considered hedges must be adjusted to fair value through
income. If a derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of the derivative will either be offset against the
change in fair value of the hedged asset, liability or firm commitment through
earnings, or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. The Company does not
anticipate the adoption of SFAS No. 133 will have a significant effect on its
results of operations or financial position.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation: An Interpretation of APB
Opinion No. 25" (the FASB Interpretation). The FASB Interpretation among other
things, requires that certain modifications to outstanding stock options as to a
direct change to the exercise price (repricings) or the number of shares or an
indirect change to the exercise price or number of shares (sometimes referred to
as "synthetic pricings") must be accounted for using variable-award accounting.
The FASB Interpretation, when adopted, requires compensation accounting for all
awards for which share repricings or synthetic pricings occurred after December
15, 1998. Imputed non-cash compensation expense is to be recognized on a
prospective basis only to the extent that the market prices of the stock after
July 1, 2000, exceeds the stock price on July 1, 2000, the FASB Interpretation's
effective date; consequently, the last measurement of compensation expense would
occur at the date the options are exercised. The Company has repriced options to
purchase approximately 4,740,000 shares of common stock during fiscal 1999 and
in January 2000 which will be subject to the FASB Interpretation. The impact of
the FASB Interpretation is not currently determinable.
8. Subsequent Event
----------------
In July 2000, the Board of Directors declared the Company's quarterly cash
dividend of $.125 per share payable August 3, 2000 to stockholders of record on
July 18, 2000.
-7-
<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 condensed consolidated financial statements including the notes thereto
included elsewhere in this Form 10-Q.
The Company recently opened one of the eleven completed Lone Star
Steakhouse & Saloon (Lone Star) restaurants and intends to try and open the
remaining unopened units during the current fiscal year; however, there can be
no assurance that these restaurants will be opened this fiscal year.
In March 2000, a Lone Star restaurant was destroyed by fire and will not
be reopened. In addition, the Company has eight sites available for future
development, six of which are owned and two which are under lease. There were
241 operating domestic Lone Star restaurants as of June 13, 2000. In addition,
licensees operate three Lone Star restaurants in California, and one in Guam.
The Company is currently operating four Del Frisco's Double Eagle Steak
Houses. There is one Del Frisco's Double Eagle Steak House restaurant under
construction in Las Vegas, Nevada which the Company expects to open in the
summer of 2000; a licensee operates a Del Frisco's Steak House in Orlando,
Florida.
As of June 13, 2000 the Company was operating fourteen Sullivan's
Steakhouse restaurants. The Company expects to open a Sullivan's Steakhouse
restaurant in the fall of 2000 in Tucson, Arizona.
The Company believes considerable opportunities exist in the upscale
steakhouse market; however, there are no current commitments to open additional
upscale units beyond the one Del Frisco's Double Eagle Steak House restaurant
and one Sullivan's Steakhouse restaurant scheduled to open in the summer and
fall of 2000, respectively.
Internationally, there are 40 Lone Star Steakhouse & Saloon restaurants
operated through a joint venture in Australia.
-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) Twenty-four Weeks Ended
---------------------- -----------------------
June 13, 2000 June 15, 1999 June 13, 2000 June 15, 1999
------------- ------------- ------------- -------------
(dollars in thousands) (dollars in thousand)
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales ................................................... 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Costs of sales ........................................ 35.2 35.5 34.7 35.7
Restaurant operating expenses ......................... 46.7 45.3 46.0 44.7
Depreciation and amortization ......................... 4.9 5.1 4.8 5.1
----- ----- ----- -----
Restaurant costs and expenses .................... 86.8 85.9 85.5 85.5
----- ----- ----- -----
Restaurant operating income ................................. 13.2 14.1 14.5 14.5
General and administrative expenses ......................... 6.7 6.0
7.5 6.0
----- ----- ----- -----
Income from operations ...................................... 6.5 8.1 7.0 8.5
Other income, net ........................................... 0.3 0.3 0.3 0.2
----- ----- ----- -----
Income before provision for income taxes .................... 6.8 8.4 7.3 8.7
Provision for income taxes .................................. 2.4 3.1 2.6 3.3
----- ----- ----- -----
Net income .................................................. 4.4% 5.3% 4.7% 5.4%
----- ----- ----- -----
Restaurant Operating Data:
Average sales per restaurant on an annualized basis (2) ..... $ 1,942 $ 1,811 $ 1,973 $ 1,843
Number of restaurants at end of the period .................. 299 322 299 322
</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) Average sales per restaurant on an annualized basis are computed by
dividing a restaurant's total sales for full accounting periods open
during the reporting period, and annualizing the result.
-9-
<PAGE>
Lone Star Steakhouse & Saloon, Inc.
Twelve Weeks Ended June 13, 2000 Compared to Twelve Weeks Ended June 15, 1999
(Dollar amounts in thousands)
Net sales decreased $566 (0.4%) to $134,187 for the twelve weeks ended
June 13, 2000, compared to $134,753 for the twelve weeks ended June 15, 1999.
The decrease was principally attributable to the closing of two restaurants in
fiscal 1999 and 24 restaurants in January 2000. The decrease was largely offset
by additional sales of $3,945 from one new domestic Lone Star restaurant, two
Sullivan's restaurants and one new Del Frisco's restaurant opened since June
1999. Same store sales increased 0.9% compared with the comparable prior year
period.
Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 35.2% from 35.5% due primarily to lower prices on certain commodities,
except beef, and lower prices on produce and dairy products.
Restaurant operating expenses for the twelve weeks ended June 13, 2000,
increased $1,575 from $61,087 in 1999, to $62,662 and increased as a percentage
of net sales from 45.3% to 46.7%. The increase in restaurant operating expenses
is primarily attributable to a $2,200 increase in media advertising. The
increase was offset in part by the impact of the closed restaurants and
decreases to various operating costs.
Depreciation and amortization decreased $209 in the twelve weeks ended
June 13, 2000, compared to the same period in 1999. The decrease is primarily
attributable to the 26 restaurants closed since March 1999.
General and administrative expenses increased $913 as compared to the same
period in 1999. The increases in general and administrative expenses were
primarily attributable to (1) increased salaries and wage related expenses
reflecting the costs associated with the new positions added to strengthen the
Company's corporate infrastructure, general salary increases and the Company
costs related to employee retirement benefit plans, (2) increased costs for
software amortization and (3) increased training and recruiting expenses.
Other income, net for the twelve weeks ended June 13, 2000 was $393, as
compared to $333 in 1999. The increase is attributable to an increase in the net
gain on the disposition of assets offset by an increase in interest expense.
The effective income tax rates for the twelve weeks ended June 13, 2000,
and the twelve weeks ended June 15, 1999 were 35.4% and 37.1%, respectively. The
decrease in the effective tax rate is primarily attributable to the reduction in
valuation allowances associated with Australian losses.
-10-
<PAGE>
Lone Star Steakhouse & Saloon, Inc.
Twenty-four Weeks Ended June 13, 2000 Compared to Twenty-four Weeks Ended
June 15, 1999
(Dollar amounts in thousands)
Net sales decreased $1,249 (0.5%) to $273,442 for the twenty-four weeks
ended June 13, 2000, compared to $274,691 for the twenty-four weeks ended June
15, 1999. The decrease was principally attributable to the closing of two
restaurants in fiscal 1999 and 24 restaurants in January 2000. The decrease was
partially offset by additional sales of $6,332 from one new domestic Lone Star
restaurant, two Sullivan's restaurants and one new Del Frisco's restaurant
opened since June 1999. Same store sales increased 0.7% compared with the
comparable prior year period.
Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 34.7% from 35.7% due primarily to lower prices on certain commodities,
except beef, and lower prices on produce and dairy products.
Restaurant operating expenses for the twenty-four weeks ended June 13,
2000, increased $3,055 from $122,717 in 1999, to $125,772 and increased as a
percentage of net sales from 44.7% to 46.0%. The increase in restaurant
operating expenses is primarily attributable to a $3,338 increase in media
advertising and a $1,025 increase in restaurant preopening expenses. These
increases were offset in part by the impact of the closed restaurants and
decreases to various operating costs.
Depreciation and amortization decreased $891 in the twenty-four weeks
ended June 13, 2000, compared to the same period in 1999. The decrease is
primarily attributable to the 26 restaurants closed since March 1999.
General and administrative expenses increased $3,965 as compared to the
same period in 1999. The increases in general and administrative expenses were
primarily attributable to (1) increased salaries and wage related expenses
reflecting the costs associated with the new positions added to strengthen the
Company's corporate infrastructure, general salary increases and the Company
costs related to employee retirement benefit plans, (2) increased costs for
software amortization and consulting costs related to the Company's information
systems and (3) increased training and recruiting expenses.
Other income, net for the twenty-four weeks ended June 13, 2000, was $809,
as compared to $580 in 1999. The increase is attributable to better interest
rates available for short term investment purposes and an increase in the net
gain on the disposition of assets.
The effective income tax rates for the twenty-four weeks ended June 13,
2000, and the twenty-four weeks ended June 15, 1999 were 35.4% and 37.9%,
respectively. The decrease in the effective tax rate is primarily attributable
to the reduction in valuation allowances associated with Australian losses.
-11-
<PAGE>
Impact of inflation
The primary inflationary factors affecting the Company's operations
include food and labor costs, utility rates, real estate taxes, and lease common
area maintenance charges. 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 adversely affect the Company's labor
costs. Many of the Company's personnel are tipped employees, consequently
increases in the minimum wage rate are mitigated. To date, inflation has had a
minor impact on operating margins.
Liquidity and Capital Resources
The following table presents a summary of the Company's cash flows for
each of the twenty-four weeks ended June 13, 2000 and June 15, 1999 (in
thousands):
Twenty-four weeks ended
-----------------------
June 13, 2000 June 15,1999
------------- ------------
Net cash provided by operating activities .......... $ 22,461 $ 26,693
Net cash used in investing activities .............. (13,841) (25,584)
Net cash used in financing activities .............. (34,323) (26,852)
Effect of exchange rate on cash .................... (5) 48
-------- --------
Net decrease in cash ............................... $(25,708) $(25,695)
======== ========
During the twenty-four week period ended June 13, 2000, the Company's
investment in property and equipment was $14,806 compared to $25,344 for the
same period in 1999.
The Company does not have significant receivables or inventory.
At June 13, 2000, the Company had $24,965 in cash and cash equivalents.
The Company has entered into a $20,000 revolving term loan agreement with a
bank. See Note 4 to Notes to Condensed Consolidated Financial Statements. At
June 13, 2000, the Company had borrowed $6,955 and had available borrowing
capacity of $13,045 pursuant to the revolver.
The Company's Board of Directors has authorized the repurchase of shares
of the Company's common stock from time to time in the open market or in
privately negotiated transactions. During the twenty-four weeks ended June 13,
2000, the Company purchased 4,134,600 shares at a cost of $38,137.
In April 2000, the Board of Directors declared the Company's initial
quarterly cash dividend of $.125 per share which was paid May 10, 2000, to
stockholders of record on April 24, 2000. An additional cash dividend of $.125
per share was declared in July 2000, payable August 3, 2000, to stockholders of
record on July 18, 2000.
From time to time the Company utilizes derivative financial instruments in
the form of commodity futures contracts to manage market risks and reduce its
exposure in the price of meat resulting from fluctuations in the market. The
Company uses live beef cattle futures contracts in an attempt to accomplish its
objective. Realized and unrealized changes in the fair values of the derivative
instruments are recognized in income in the period in which the change occurs.
Realized and unrealized gains and losses for the period were not significant. As
of June 13, 2000, the Company's exposure for open positions in futures contracts
was not significant.
-12-
<PAGE>
In March 2000, the FASB issued Interpretation No. 44 "Accounting for
Certain Transactions Involving Stock Compensation: An Interpretation of APB
Opinion No. 25" (the FASB Interpretation). The FASB Interpretation, among other
things, requires that certain modifications to outstanding stock options as to a
direct change to the exercise price (repricings) or the number of shares or an
indirect change to the exercise price or number of shares (sometimes referred to
as "synthetic pricings") must be accounted for using variable-award accounting.
The FASB Interpretation, when adopted, requires compensation accounting for all
awards for which share repricings or synthetic pricings occurred after December
15, 1998. Imputed non-cash compensation expense is to be recognized on a
prospective basis only to the extent that the market prices of the stock after
July 1, 2000, exceeds the stock price on July 1, 2000, the FASB Interpretation's
effective date; consequently, the last measurement of compensation expense would
occur at the date the options are exercised. The Company has repriced options to
purchase approximately 4,740,000 shares of common stocks during fiscal 1999 and
in January 2000, which will be subject to the FASB Interpretation when it
becomes effective. The Company may incur significant volatility in reporting of
earnings in future periods as fluctuations in market prices of its common stock
may greatly impact reported compensation expenses on a periodic basis.
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 and other risks set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended December 28, 1999. 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.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
As described in Item 4. - Submission of Matters to a Vote of Stockholders,
the Company's stockholders approved a proposal to amend the Company's Bylaws to
require that the majority of the Board be comprised of Independent Directors who
shall meet specific criteria. The Board of Directors has also amended the Bylaws
to provide an advance notice provision for stockholder nominations of Directors.
These amendments are contained in the Amended and Restated Bylaws of the Company
filed as an exhibit to this Form 10-Q
Item 3. Quantitative and Qualitative Disclosures About Market Risks
-----------------------------------------------------------
The Company's exposure to market risks was not significant during the
twenty-four weeks ended June 13, 2000.
-13-
<PAGE>
Item 4. Submission of Matters to a Vote of Stockholders
-----------------------------------------------
On June 9, 2000, the Company held its Annual Meeting of Stockholders (the
"Meeting"). At the Meeting the stockholders re-elected Clark R. Mandigo and John
D. White to the Board of Directors to serve until the 2003 Annual Meeting of
Stockholders and until their successors have been duly elected and qualified. As
to the newly re-elected Directors, there were 21,317,782 votes "For" and
3,189,979 votes "Withheld" for Clark R. Mandigo and 21,317,442 votes "For" and
3,190,319 votes "Withheld" for John D. White.
The stockholders approved an amendment to the Company's 1992 Directors'
Stock Option Plan to increase the number of shares of common stock subject to
options granted there- under from 400,000 to 700,000. As to the amendment to
increase the number of option shares there were 13,794,007 votes "For",
10,579,320 votes "Against" and, 134,434 votes "Abstained".
The stockholders ratified the appointment of Ernst & Young LLP as the
Company's independent auditors for the year ending December 26, 2000. As to the
ratification of auditors there were 24,195,267 votes "For", 257,896 votes
"Against" and 54,598 votes "Abstained".
The stockholders approved the proposal by California Public Employees'
Retirement System that the Company's bylaws be amended to require the majority
of the Board be comprised of Independent Directors, who shall meet specific
criteria. As to the proposal there were 12,996,278 votes "For", 7,114,369 votes
"Against" and 410,170 votes "Abstained".
The stockholders approved a non-binding proposal of The Amalgamated Bank
of New York Long View MidCap 400 Index that the Board of Directors take the
necessary steps to declassify the Board of Directors so that all directors are
elected annually. As to the proposal there were 14,218,263 votes "For",
5,877,813 votes "Against" and 414,741 votes "Abstained".
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
(i) Exhibit 3(a) Amended and Restated Bylaws
(ii) Exhibits 27 Financial Data Schedule
(b) Reports on Form 8-K None
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<PAGE>
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 thereunto duly authorized.
Lone Star Steakhouse & Saloon, Inc.
(Registrant)
Date July 28, 2000 /s/ Randall H. Pierce
---------------------- ------------------------------------
Randall H. Pierce
Chief Financial Officer
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