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
March 21, 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 April 14, 2000
----- -----------------------------
Common Stock, $.01 par value 26,354,322 shares
<PAGE>
Lone Star Steakhouse & Saloon, Inc.
Index
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at March 21, 2000 and December 28, 1999 2
Condensed Consolidated Statements of
Income for the twelve weeks ended
March 21, 2000 and March 23, 1999 3
Condensed Consolidated Statements of
Cash Flows for the twelve weeks ended
March 21, 2000 and March 23, 1999 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative
Disclosures about Market Risks 12
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 13
-1-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 21, 2000 December 28, 1999
-------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 40,282 $ 50,673
Inventories 12,105 11,440
Other current assets 6,304 7,256
--------- ---------
Total current assets 58,691 69,369
Property and equipment, net 433,811 430,482
Intangible and other assets, net 35,337 33,682
--------- ---------
Total assets $ 527,839 $ 533,533
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,196 $ 11,726
Other current liabilities 39,583 37,428
--------- ---------
Total current liabilities 55,779 49,154
Long-term debt 8,750 --
Stockholders' equity:
Preferred stock -- --
Common stock 269 299
Additional paid-in capital 211,698 238,000
Retained earnings 261,025 253,923
Accumulated other comprehensive loss (9,682) (7,843)
--------- ---------
Total stockholders' equity 463,310 484,379
--------- ---------
Total liabilities and stockholders' equity $ 527,839 $ 533,533
========= =========
</TABLE>
See accompanying notes.
-2-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Income
(In thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the twelve weeks ended
--------------------------------------
March 21, 2000 March 23, 1999
-------------- --------------
<S> <C> <C>
Net sales $139,254 $139,938
Costs and expenses:
Costs of sales 47,657 50,386
Restaurant operating expenses 63,109 61,630
Depreciation and amortization 6,550 7,232
-------- --------
Restaurant costs and expenses 117,316 119,248
-------- --------
Restaurant operating income 21,938 20,690
General and administrative expenses 11,342 8,289
-------- --------
Income from operations 10,596 12,401
Other income, principally interest 416 247
-------- --------
Income before income taxes 11,012 12,648
Provision for income taxes 3,910 4,867
-------- --------
Net income $ 7,102 $ 7,781
======== ========
Basic earnings per share $ 0.25 $ 0.21
======== ========
Diluted earnings per share $ 0.25 $ 0.21
======== ========
</TABLE>
See accompanying notes.
-3-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the twelve weeks ended
----------------------------------
March 21, 2000 March 23, 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,102 $ 7,781
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,350 7,232
Net change in operating assets and liabilities:
Change in operating assets 209 1,948
Change in operating liabilities 6,625 2,172
-------- --------
Net cash provided by operating activities 21,286 19,133
Cash flows from investing activities:
Purchases of property and equipment (11,709) (16,801)
Other (2,382) (408)
-------- --------
Net cash used in investing activities (14,091) (17,209)
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 12
Common stock repurchased and retired (26,332) (26,864)
Proceeds from long-term borrowings 8,750 --
-------- --------
Net cash used in financing activities (17,582) (26,852)
Effect of exchange rate on cash (4) 14
-------- --------
Net decrease in cash and cash equivalents (10,391) (24,914)
Cash and cash equivalents at beginning of period 50,673 89,847
-------- --------
Cash and cash equivalents at end of period $ 40,282 $ 64,933
======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 1,804 $ 2,713
======== ========
</TABLE>
-4-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 twelve
weeks ended March 21, 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 (in thousands):
For the twelve weeks ended
-------------------------------
March 21, 2000 March 23, 1999
-------------- --------------
Net income $ 7,102 $ 7,781
Foreign currency translation adjustments (1,839) 933
------- -------
Comprehensive income $ 5,263 $ 8,714
======= =======
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 (in thousands):
For the twelve weeks ended
------------------------------------
March 21, 2000 March 23, 1999
-------------- --------------
Basic average shares outstanding 28,376 37,514
Diluted average shares outstanding 28,567 37,681
-5-
<PAGE>
4. LONG - TERM DEBT
The Company has entered into a $20 million revolving term loan agreement
with a bank, under which $8.75 million was outstanding at March 21, 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 2,970,600
shares of its common stock during the twelve weeks ended March 21, 2000 at an
average price of $8.86 per share and 2,798,000 shares of its common stock during
the twelve weeks ended March 23, 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
On January 7, 2000, the Board of Directors approved the repricing of
options to purchase 4,591,757 shares of Common Stock held by certain current
employees, including officers of the Company with an exercise price in excess of
the closing price of the Company's Common Stock on that date of $8.47. Other
than the change in the exercise price, there was no other change in the terms of
the original options as granted (See Note 7).
During the twelve weeks ended March 21, 2000, the Company granted stock
options for 466,258 shares of common stock at an exercise price of $8.47 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 January 2, 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
-6-
<PAGE>
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 price of the stock 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 April 2000, the Board of Directors declared the Company's initial quarterly
cash dividend of $.125 per share payable May 10, 2000 to stockholders of record
on April 24, 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 conjuntion with
the condensed consolidated financial statements including the notes thereto
included elsewhere in this Form 10-Q.
In May 1998, the Company temporarily suspended development of new Lone
Star restaurants other than properties which had been committed for or were
under construction. During 1998, the Company substantially completed the
remodel/construction of twelve of these restaurants (including one that was
damaged by fire and rebuilt). The Company opened one of these restaurants in
1999 and plans to open one additional restaurant in the summer of 2000. There
are no immediate plans to open the remaining restaurants until such time as
management believes the restaurants can be adequately staffed and are capable of
operating effectively and efficiently. In addition, the Company has eight sites
available for future development, six of which are owned and two which are under
lease. During 1999, the Company closed two domestic Lone Star restaurants and in
December 1999, decided to close an additional 24 restaurants all of which were
closed in early January, 2000. There were 241 operating domestic Lone Star
restaurants as of March 21, 2000. In addition, licencees operate three Lone Star
restaurants in California and one in Guam.
The Company is currently operating four Del Frisco's restaurants,
including the New York City restaurant, which opened on March 7, 2000. There is
one Del Frisco's restaurant under construction in Las Vegas, Nevada which the
Company expects to open in the summer of 2000 and a licensee operates a Del
Frisco restaurant in Orlando, Florida.
As of March 21, 2000 the Company was operating fourteen Sullivan's
steakhouse restaurants. During 1999, Sullivan's steakhouse restaurants were
opened in Denver, Colorado, Palm Desert, California and Raleigh, North Carolina.
The Company expects to open a Sullivan's restaurant in the summer of 2000 in
Tucson, Arizona.
Although the Company believes considerable opportunities exist in the
upscale steakhouse market, the Company has temporarily curtailed the development
of its upscale concepts. There are no current commitments to open additional
upscale units beyond the one Del Frisco's restaurant and one Sullivan's
restaurant scheduled to open in summer of 2000.
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)
----------------------
March 21, 2000 March 23, 1999
-------------- --------------
(dollars in thousands)
<S> <C> <C>
Income Statement Data:
Net sales 100.0% 100.0%
Costs and expenses:
Costs of sales.......................................................... 34.2 36.0
Restaurant operating expenses........................................... 45.3 44.0
Depreciation and amortization........................................... 4.7 5.2
----- -----
Restaurant costs and expenses...................................... 84.2 85.2
----- -----
Restaurant operating income................................................... 15.8 14.8
General and administrative expenses........................................... 8.1 5.9
----- -----
Income from operations........................................................ 7.7 8.9
Other income, principally interest............................................ 0.3 0.2
----- -----
Income before provision for income taxes ..................................... 8.0 9.1
Provision for income taxes.................................................... 2.8 3.5
----- -----
Net income.................................................................... 5.2% 5.6%
===== =====
Restaurant Operating Data:
Average sales per restaurant on an annualized basis (2) $2,003 $ 1,877
Number of restaurants at end of the period 300 324
</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 MARCH 21, 2000 COMPARED TO TWELVE WEEKS ENDED MARCH 23, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales decreased $684 (0.5%) to $139,254 for the twelve weeks ended
March 21, 2000 compared to $139,938 for the twelve weeks ended March 23, 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 $2,387 from one new domestic Lone Star restaurant,
two Sullivan's restaurants and one new Del Frisco's restaurant opened since
March of 1999. Same store sales increased .5% compared with the comparable prior
year period.
Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 34.2% from 36.0% due primarily to lower prices on certain meat products
and lower prices on produce and dairy products.
Restaurant operating expenses for the twelve weeks ended March 21, 2000
increased $1,479 from $61,630 in 1999, to $63,109 and increased as a percentage
of net sales from 44.0% to 45.3%. The increase in restaurant operating expenses
is attributable primarily to a $1,223 increase in media advertising and a $1,066
increase in restaurant preopening expenses. These increases were offset in part
by the impact of the closed restaurants as well as decreases to various
operating costs including insurance and operating supplies.
Depreciation and amortization decreased $682 in the twelve weeks ended
March 21, 2000 compared to the twelve weeks ended March 23, 1999. The decrease
is attributable primarily to the 26 restaurants closed since March of 1999.
General and administrative expenses increased $3,053 as compared to the
same period in 1999. The increases in general and administrative expenses were
attributable primarily to increased (1) 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 travel costs.
Other income, principally interest, for the twelve weeks ended March 21,
2000 was $416, as compared to $247 in 1999. The increase is attributable to
better interest rates available for short term investment purposes.
The effective income tax rates for the twelve weeks ended March 21, 2000
and the twelve weeks ended March 23, 1999 were 35.5% and 38.4%, respectively.
The decrease in the effective tax rate is primarily attributable to the
reduction in valuation allowances associated with Australian losses.
-10-
<PAGE>
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, minimum wage changes will have
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.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for
each of the twelve weeks ended March 21, 2000 and March 23, 1999 (in thousands):
Twelve weeks ended
------------------
March 21, 2000 March 23, 1999
-------------- --------------
Net cash provided by operating activities ...... $ 21,286 $ 19,133
Net cash used in investment activities ......... (14,091) (17,209)
Net cash used in financing activities .......... (17,582) (26,852)
Effect of exchange rate on cash ................ (4) 14
-------- --------
Net decrease in cash ........................... $(10,391) $(24,914)
======== ========
During the twelve week period ended March 21, 2000, the Company's
investment in property and equipment was $11,709 compared to $17,209 for the
same period in 1999.
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 non-current capital expenditures.
At March 21, 2000, the Company had $40,282 in cash and cash equivalents.
The Company has entered into a $20,000 revolving term loan agreement with a
bank. At March 21, 2000 the Company had borrowed $8,750 and had available
borrowing capacity of $11,250 pursuant to the revolver. See Note 4 to Notes to
Condensed Consolidated Financial Statements. The Company is not actively
negotiating the purchase or lease of additional sites.
The Company's Board of Directors has authorized the purchase of shares of
the Company's common stock from time to time in the open market or in privately
negotiated transactions. During the twelve weeks ended March 21, 2000 the
Company has purchased 2,970,600 shares at a cost of $26,332.
In April 2000 the Board of Directors declared the Company's initial
quarterly cash dividend of $.125 per share payable May 10, 2000 to shareholders
of record on April 24, 2000.
-11-
<PAGE>
The Company utilizes derivative financial instruments in the form of
commodity futures contracts to manage market risks and reduce its exposure
resulting from fluctuations in the prices of meat. The Company uses live beef
cattle futures contracts 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 March 21, 2000, the
Company's exposure for open positions in futures contracts was not significant.
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 price of the stock 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 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
THE COMPANY'S EXPOSURE TO MARKET RISKS WAS NOT SIGNIFICANT
DURING THE TWELVE WEEKS ENDED MARCH 21, 2000.
-12-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT 27 FINANCIAL DATA SCHEDULE
EXHIBIT 99 LOAN AGREEMENT DATED APRIL 28, 2000
BETWEEN THE COMPANY AND INTRUST
BANK, N.A.
(B) REPORTS ON FORM 8-K NONE
-13-
<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 May 4, 2000 / s / Randall H. Pierce
---------------------------------
Randall H. Pierce
Chief Financial Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 21, 2000 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-26-2000
<PERIOD-START> DEC-29-1999
<PERIOD-END> MAR-21-2000
<CASH> 40,282
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 12,105
<CURRENT-ASSETS> 58,691
<PP&E> 433,811
<DEPRECIATION> 0
<TOTAL-ASSETS> 527,839
<CURRENT-LIABILITIES> 55,779
<BONDS> 0
0
0
<COMMON> 269
<OTHER-SE> 463,041
<TOTAL-LIABILITY-AND-EQUITY> 527,839
<SALES> 139,254
<TOTAL-REVENUES> 139,670
<CGS> 47,657
<TOTAL-COSTS> 128,658
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,012
<INCOME-TAX> 3,910
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,102
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
</TABLE>
LOAN AGREEMENT
THIS AGREEMENT, made and entered into this 28th day of April, 2000, by
and between the INTRUST BANK, N.A. (herein referred to as "Bank"), and LONE STAR
STEAKHOUSE & SALOON, INC. (herein referred to as "Borrower").
WITNESSETH:
WHEREAS, Borrower is indebted to bank on a term note and has requested
that it be consolidated into a new credit facility; and
WHEREAS, Bank has agreed to provide such credit facility under certain
terms and conditions.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the parties agree as follows:
ARTICLE I - NOTE
Section 1.1. REVOLVING CREDIT FACILITY. Bank agrees to establish a
revolving credit facility of $20,000,000 (the "Facility") in favor of Borrower
evidenced by a promissory note (the "Facility Note"), a copy of which is
attached hereto, which shall mature on April 10, 2005. A fee of one-quarter
(1/4) of one percent will be charged to Borrower on the amount of the unused
portion of the Facility. Such fee is calculated daily and billed on the last day
of each calendar quarter.
Section 1.2. TERMS OF PAYMENT ON CREDIT FACILITIES. Interest on the
Facility Note, or any advance thereunder, shall be adjusted daily to the Prime
Rate as published in the Money Rates section of the Wall Street Journal. Accrued
interest shall be due on the 10th day of each month commencing May 10, 2000,
until April 10, 2003, at which time the then balance of the Facility will
convert to a term note with monthly principal and interest payments amortized
over the remaining term.
Section 1.3. LIMITATIONS ON CREDIT FACILITIES. Borrower may borrow,
partially or wholly repay its borrowings, and re-borrow, by requesting advances
from the Facility; so long as:
(a) The Facility balance, including all principal and accrued interest,
does not exceed the amount of the Facility at any one time;
(b) None of the terms and conditions of this Agreement are in default
and Bank has not determined that there has been a material adverse change in the
financial condition of Borrower; and
(c) Borrower is not in default under any loan or any other financial
obligation, or any other agreement.
Section 1.4. USE OF PROCEEDS. The proceeds from the Facility shall be
used primarily to fund Borrower's repurchase of its common stock, to consolidate
the existing term note into the Facility, and general corporate purposes.
<PAGE>
Section 1.5. SECURITY. The Facility is unsecured.
Section 1.6. RENEWALS AND EXTENSIONS. Any renewal or extension of the
Facility Note, or any advance made pursuant to the terms of such note, or any
other indebtedness which Borrower may have with Bank in the future, shall be
subject to the terms of this Agreement. Bank is under no obligation to renew any
indebtedness when it matures.
Section 1.7. INDEBTEDNESS. Where the term "indebtedness" is used in
this Agreement, it shall include all debt of Borrower to Bank of every kind and
description, direct or indirect, primary or secondary, secured or unsecured
(including overdrafts), joint and several, absolute or contingent, due or to
become due, now existing or hereafter arising, regardless of how it may be
evidenced.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants, and so long as any
indebtedness from Borrower to the Bank remains outstanding, continuously
represents and warrants as follows:
Section 2.1. LEGAL STATUS. Borrower is a corporation duly organized and
existing under the laws of the State of Delaware, and is qualified to do
business, and is in good standing, in all jurisdictions in which it conducts its
business.
Section 2.2. NO VIOLATION. The making and performance by Borrower of
this Agreement does not violate any provision of law, or result in a breach of,
or constitute a default under, Borrower's articles of incorporation and bylaws,
or any Loan Documents, agreement, indenture or other instrument to which
Borrower may be a party or by which it may be bound.
Section 2.3. LITIGATION. There are no pending or threatened actions or
proceedings before any court or administrative agency against Borrower which may
adversely affect the financial condition or operation of Borrower other than
those heretofore disclosed to Bank in writing.
Section 2.4. CORRECTNESS OF FINANCIAL STATEMENTS. The financial
statements heretofore and hereafter delivered by Borrower to Bank present fairly
the financial condition of Borrower, and have been prepared in accordance with
generally accepted accounting principles consistently applied. As of the date of
each such financial statement, and since such date, there has been no material
adverse change in the condition or operation of Borrower, nor has Borrower
mortgaged, pledged or granted a security interest in, or encumbered, any assets
or properties since such date.
Section 2.5. AUTHORIZATION. The Loan Documents have been duly
authorized, executed and delivered by Borrower and are the legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms. As used in this Loan Agreement, "Loan Documents" shall mean and refer to
this Loan Agreement, all Notes and other documents and agreements required to be
executed herein, and as any of them may be extended, renewed, amended or
supplemented from time to time.
Section 2.6. NO SUBORDINATION. The obligations of Borrower under this
Agreement, are not subordinated in right of payment or in lien priority to any
obligation of Borrower.
2
<PAGE>
Section 2.7. PERMITS, FRANCHISES. The Borrower now possesses, and will
hereafter possess, all permits, memberships, franchises, contracts, and licenses
required and all trademark rights, trade names, trade name rights, patents,
patent rights, and fictitious name rights necessary to enable it to conduct its
business without conflict with the rights of others.
ARTICLE III - CONDITIONS PRECEDENT
The obligation of Bank to make any advance under any Note, is subject
to the fulfillment of the following conditions:
Section 3.1. APPROVAL OF BANK COUNSEL. All legal matters incidental to
all such advances hereunder shall be satisfactory to legal counsel of Bank.
Section 3.2. COMPLIANCE. The representations and warranties contained
herein shall be true as of the date of the signing of this Agreement and on the
date of any advance, no Event of Default, as defined in Article VI herein, and
no condition, event or act which, with the giving of notice or the lapse of time
or both, would constitute an Event of Default, shall have occurred.
Section 3.3. DOCUMENTATION. Borrower shall have delivered to Bank in
form and substance satisfactory to Bank the following described documents:
(a) This Agreement and other Loan Documents duly executed by Borrower;
(b) Certified copy of Corporate Resolution of Borrower ratifying this
Agreement and authorizing the execution of the Loan Documents; and
(c) Such other documentation as the Bank may reasonably require.
ARTICLE IV - AFFIRMATIVE COVENANTS
Borrower covenants that so long as Borrower is indebted to Bank under
this Agreement, Borrower will:
Section 4.1. PUNCTUAL PAYMENT. Punctually pay to Bank all payments
required to be made under this Loan Agreement and any Note.
Section 4.2. ACCOUNTING RECORDS. Maintain adequate books and accounts
in accordance with generally accepted accounting principles consistently
applied, so that any time, and from time to time, the true and complete
financial condition of Borrower is fairly presented and can be readily
determined, and permit any representative of Bank at any reasonable time, to
inspect, audit and examine such books and accounts of Borrower and permit Bank
to make and obtain copies of any such books and accounts, and to permit any
representative of Bank to inspect the properties of Borrower.
Section 4.3. FINANCIAL STATEMENTS: Furnish Bank:
(a) Not later than 120 days after, and as of the end of each calendar
year, an audited financial
3
<PAGE>
statement of Borrower to include balance sheet and income statement;
(b) Not later than 45 days after the end of each month, a balance sheet
and statement of income of Borrower in a form satisfactory to Bank, certified
correct by an officer of Borrower;
(c) Not later than 10 days after the end of each month, a summary of
the number of Borrower's shares repurchased the previous month and the average
cost per share of such repurchased shares, certified correct by an officer of
Borrower; and:
(d) From time to time such other information as Bank may reasonably
request.
Section 4.4. NOTICE TO ACCOUNTANTS. Notify Borrower's accountants in
writing that Bank intends to rely upon financial information prepared by such
accountants in behalf of Borrower in determining whether to make any extension
of credit covered by this Loan Agreement, including any advance, renewal or
extension thereto.
Section 4.5. EXISTENCE. Preserve and maintain the existence and all of
the rights, privileges and franchises of Borrower; conduct all business in an
orderly, efficient, and regular manner; and comply with the requirements of all
applicable laws, rules, regulations and orders of a governmental authority.
Section 4.6. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in the line of business similar to that
of Borrower, including fire, public liability, property damage, workers'
compensation, and carried with companies and in amounts satisfactory to Bank;
and Borrower shall deliver to Bank from time to time, at Bank's request,
schedules setting forth all insurance then in effect. Borrower shall maintain
and keep in force product liability insurance in such amounts deemed adequate
and economically feasible by the parties.
Section 4.7. FACILITIES. Keep all Borrower's properties in good repair
and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such properties shall be fully and efficiently
preserved and maintained. Borrower shall promptly satisfy any and all mechanic's
or materialmen's liens filed on any of its facilities.
Section 4.8. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments, and taxes of Borrower,
except such as it may in good faith contest or as to which a bona fide dispute
may arise.
Section 4.9. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower.
Section 4.10. NOTICE TO BANK. Promptly give notice in writing to Bank
of (a) the occurrence of any Event of Default, as defined in Article VI; (b) any
change in the name, identity or corporate structure of Borrower; or (c) any
uninsured or partially uninsured loss through fire, theft, liability or property
damage in excess of an aggregate of $100,000 to Borrower.
Section 4.11. FINANCIAL CONDITIONS. Maintain a minimum level of cash
and cash-equivalents, as determined by generally accepted accounting principles,
of $10,000,000.
4
<PAGE>
Section 4.12. PAYMENT OF COSTS AND EXPENSES. Borrower agrees to pay to
Bank, on demand, all reasonable and necessary costs and expenses as provided in
this Agreement and the other Loan Documents, and all costs and expenses
reasonably and necessarily incurred by Bank from time to time in connection with
this Agreement and the other Loan Documents, including, without limitation,
those reasonably and necessarily incurred in:
(a) preparing, negotiating, amending, waiving or granting consent with
respect to the terms of any or all of the Loan Documents;
(b) enforcing the Loan Documents;
(c) performing any of Borrower's duties under the Loan Documents upon
Borrower's failure to perform them;
(d) compromising, pursuing, or defending any controversy, action or
proceeding resulting, directly or indirectly, from Bank's relationship with
Borrower, regardless of whether Borrower is a party to such controversy, action
or proceeding and whether the controversy, action or proceeding occurs before or
after all indebtedness owing to Bank by Borrower has been paid in full;
provided, however, that Borrower shall not be liable to Bank for costs and
expenses resulting from the gross negligence or the willful misconduct of Bank
in connection therewith; and
(e) enforcing or collecting any part of the
indebtedness owing to Bank by Borrower contemplated under the Loan Documents;
Any amount due to Bank pursuant to this Section shall, if not paid upon demand,
accrue interest at the per annum rate of seven (7) percentage points over Bank's
base rate as adjusted from time to time.
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants that so long as Borrower is indebted to Bank,
Borrower will not, without prior written consent of Bank:
Section 5.1. OTHER INDEBTEDNESS. Except as to indebtedness owed Bank,
create, incur, or permit to exist any liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, or any liens, mortgages or
other encumbrances, other than indebtedness outstanding as of the date of this
Agreement. Nothing in this Section shall prevent Borrower from incurring
obligations in the ordinary course of business.
Section 5.2. MERGER, CONSOLIDATION, SALE OF ASSETS, MANAGEMENT CHANGE.
Merge into or consolidate with any corporation or other entity, or acquire all
or substantially all of the assets of any other corporation or entity; or sell,
lease, assign, transfer or otherwise dispose of all or substantially all of its
operating assets, or materially change or remove senior management.
Section 5.3. GUARANTEES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments in the
ordinary course of business) or accommodation for the debt or
5
<PAGE>
obligations of any person or entity.
Section 5.4. NEGATIVE PLEDGE. Pledge, assign, mortgage, transfer or
grant any security interest in any asset of Borrower.
ARTICLE VI - EVENTS OF DEFAULT
Section 6.1. EVENTS OF DEFAULT. Any of the following shall constitute
an Event of Default.
(a) Default by Borrower in any payment of principal or interest under
any indebtedness to Bank or any sum due in this Agreement; or
(b) Any representation or warranty made by Borrower hereunder which
shall prove to be at any time incorrect in any material respect; or
(c) Default by Borrower in the performance of any other term, covenant
or agreement contained herein, which default is not cured within 20 days from
its occurrence; or
(d) Default by Borrower under the terms of any agreement, note or other
instrument and such default having not been cured within 30 days; provided,
however, that if Borrower defaults in its performance under any other agreement,
note, or instrument and such default causes Borrower's obligations to be
immediately due and payable, then Bank, in its sole discretion, may immediately
exercise its rights under Section 6.2 herein; or
(e) The failure of Borrower to promptly pay and discharge any judgment,
levy of attachment, execution or other process against the assets of Borrower
and such judgment be not satisfied, or such levy or other process be not
removed, within 10 days after the entry of levy thereof; or
(f) Borrower shall be adjudicated a bankrupt or insolvent, or shall
consent to or apply for the appointment of a receiver, trustee or liquidator of
itself or any of its property, or shall admit in writing its inability to pay
its debts generally as they become due, or shall make a general assignment for
the benefit of creditors, or shall file a voluntary petition in bankruptcy or
voluntary petition or an answer seeking reorganization or arrangement in a
proceeding under any bankruptcy law; or
(g) There shall have occurred a material adverse change, as reasonably
determined by Bank, in the financial condition or results in operations of the
Borrower since the date of this Agreement including, but not limited to, a
change in ownership or management of Borrower; or
(h) An Event of Default (as defined in the other Loan Documents) occurs
in any of the other Loan Documents.
Section 6.2. ACCELERATION. If an Event of Default shall occur, any
indebtedness of Borrower under this Agreement or any Note, any term of such Note
to the contrary notwithstanding, shall, at Bank's option and without notice
become immediately due and payable without presentment, notice or demand, all of
which are hereby expressly waived by Borrower; and the obligation, if any, of
the Bank to permit further
6
<PAGE>
borrowings hereunder shall immediately cease and terminate.
ARTICLE VII - MISCELLANEOUS
Section 7.1. WAIVER. No delay or failure of Bank, in exercising any
right, power or privilege hereunder, shall affect such right, power or
privilege; nor shall any single or partial exercise thereof or any abandonment
or discontinuance of steps to enforce such a right, power or privilege
hereunder, shall affect such right, power or privilege. The rights and remedies
of Bank hereunder are cumulative and not exclusive. Any waiver, permit, consent
or approval of any kind to Bank, of any breach or default hereunder, or any such
waiver of any provisions or conditions hereof, must be in writing and shall be
effective only to the extent set forth in such writing.
Section 7.2. JURY WAIVER. Borrower expressly waives any right to a
trial by jury in any action or proceedings to enforce or defend any rights
hereunder or under any amendment, instrument, document or agreement delivered,
or which may hereafter be delivered, to Borrower.
Section 7.3. NOTICES. All notices, requests and demands given to or
made upon the respective parties shall be deemed to have been given or made when
deposited in the mail, postage prepaid, and addressed as follows:
Borrower: Randy Pierce, CFO
224 E. Douglas, Suite 700
Wichita, Kansas 67202
And copy to:
Jamie B. Coulter, Chairman & CEO
224 E. Douglas, Suite 700
Wichita, Kansas 67202
Bank: INTRUST Bank, N.A.
P.O. Box One
Attn: First Centre Dept.
Wichita, KS 67201
Section 7.4. WRITTEN AGREEMENTS. THIS LOAN AGREEMENT, TOGETHER WITH
OTHER WRITTEN AGREEMENTS OF THE PARTIES, IS THE FINAL EXPRESSION OF THE
AGREEMENT BETWEEN THE BANK AND THE BORROWER, AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT BETWEEN THE PARTIES. ANY
NON-STANDARD TERM MUST BE WRITTEN BELOW TO BE ENFORCEABLE.
BY SIGNING BELOW THE PARTIES AFFIRM THERE ARE NO UNWRITTEN AGREEMENTS
BETWEEN THEM.
7
<PAGE>
"BANK" "BORROWER"
INTRUST Bank, N.A. Lone Star Steakhouse & Saloon, Inc.
By ________________________________ By ______________________________
Mark Dennett, Vice President John D.. White, Executive Vice
President
By ______________________________
Randall H. Pierce, Chief
Financial Officer
Section 7.5. KANSAS LAW APPLICABLE. This Agreement shall be construed
in accordance with the laws of the State of Kansas, without regard to principles
of conflicts of laws, and applicable federal law. Borrower expressly agrees that
jurisdiction and venue for all legal proceedings filed in connection herewith
shall lie exclusively in Sedgwick County, Kansas.
Section 7.6. OTHER LOAN DOCUMENTS. Borrower understands and agrees that
it is additionally bound by the terms and conditions of the other Loan
Documents, which such terms and conditions are incorporated herein and made a
part of this Agreement. To the extent that any term or provision contained in
other Loan Documents conflicts with a term or provision of this Agreement, the
term or provision providing the Bank the most security or the greatest right
shall control.
Section 7.7. BINDING EFFECT. The rights and obligations of the parties
under this Agreement shall inure to the benefit of, and shall be binding upon
their successors and assigns.
Section 7.8. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
first above written.
"BANK" "BORROWER"
INTRUST Bank, N.A. Lone Star Steakhouse & Saloon, Inc.
By ________________________________ By ______________________________
Mark Dennett, Vice President John D.. White, Executive Vice
President
By ______________________________
Randall H. Pierce, Chief
Financial Officer
8
