<PAGE> 1
United States
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
Commission file number 0-19924
Longhorn Steaks, Inc.
(Exact name of registrant as specified in its charter)
Georgia 58-1498312
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
8215 Roswell RD; Bldg 200; Atlanta, GA 30350
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(Address of principal executive offices) (Zip Code)
(770) 399-9595
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
XX 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 as of August 13, 1996
----- ---------------------------------
Common Stock, no par value 8,467,650 shares
<PAGE> 2
Longhorn Steaks, Inc.
Index
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets-
December 31, 1995 and June 30, 1996 1
Consolidated Statements of Earnings-
For the three months ended
June 30, 1995 and June 30, 1996 2
Consolidated Statements of Earnings-
For the six months ended
June 30, 1995 and June 30, 1996 3
Consolidated Statement of Stockholders' Equity
For the six months ended
June 30, 1996 4
Consolidated Statements of Cash Flows-
For the six months ended
June 30, 1995 and June 30, 1996 5
Notes to the Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Part II - Other Information
Item 1. Legal Proceedings 12-13
Item 4. Submission of Matters to a Vote of Security Holders 13-14
Item 6. Exhibits and Reports on Form 8-K 14-16
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
Longhorn Steaks, Inc.
Balance Sheets
<TABLE>
<CAPTION>
(unaudited)
Assets 12/31/95 06/30/96
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,444,604 $ 25,515,638
Receivables:
Trade 1,560,180 2,439,511
Employees 40,733 7,685
Inventories 4,061,750 3,859,328
Other prepaid expenses 827,571 796,756
Pre-opening costs, net 1,497,668 1,784,906
---------- -----------
Total current assets 9,432,506 34,403,824
Property & equipment, net 51,390,919 61,922,339
Goodwill, net 5,352,244 6,276,281
Property acquired, held for resale 679,630 679,630
Deferred income taxes 101,000 101,000
Other assets 962,740 1,139,125
----------- ------------
Total assets $67,919,039 $104,522,199
=========== ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 3,477,273 2,922,300
Accrued expenses 4,795,766 3,632,892
Deferred income taxes 442,000 442,000
-------- -----------
Total current liabilities 8,715,039 6,997,192
Line of credit 5,000,000 ---
---------- -----------
Total liabilities 13,715,039 6,997,192
Minority interest 615,224 2,505,184
Stockholders' equity:
Preferred stock --- ---
Common stock 41,201,508 79,428,260
Additional paid in capital 919,306 919,306
Retained earnings 11,467,962 14,672,257
----------- ------------
Total stockholders' equity 53,588,776 95,019,823
----------- ------------
Total liabilities and
stockholders' equity $67,919,039 $104,522,199
=========== ============
</TABLE>
See accompanying notes to the financial statements.
1
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Longhorn Steaks, Inc.
Statements of Earnings
For the Three Months Ended June 30, 1995 and 1996
(unaudited)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Revenues:
Restaurant sales $24,177,635 $34,511,335
Wholesale meat sales 1,231,319 914,215
Franchise revenues 139,322 68,789
----------- -----------
Total revenues 25,548,276 35,494,339
Cost of sales:
Cost of restaurant sales 8,621,496 12,633,646
Cost of wholesale meat sales 1,161,168 903,829
Operating expenses-restaurants 11,346,948 15,226,436
Depreciation and amortization - restaurants 953,291 1,764,520
Operating expenses-meat division 182,713 68,684
General and administrative expenses 2,010,829 2,477,087
----------- -----------
Total costs and expenses 24,276,445 33,074,202
----------- -----------
Operating income 1,271,831 2,420,137
Interest income 134,329 297,820
----------- -----------
Earnings before taxes and
minority interest 1,406,160 2,717,957
Minority interest 3,494 197,772
Income tax expense 490,000 756,000
----------- -----------
Net earnings $ 912,666 $ 1,764,185
=========== ===========
Net earnings per share $0.14 $0.20
===== =====
Weighted average shares outstanding 6,749,000 8,992,000
</TABLE>
See accompanying notes to the financial statements.
2
<PAGE> 5
Longhorn Steaks, Inc.
Consolidated Statements of Earnings
For the Six Months Ended June 30, 1995 and 1996
(unaudited)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Revenues:
Restaurant sales $46,387,888 $66,433,054
Wholesale meat sales 2,080,319 2,547,452
Franchise revenues 299,891 158,681
----------- -----------
Total revenues 48,768,098 69,139,187
Cost of sales:
Cost of restaurant sales 16,515,433 24,046,353
Cost of wholesale meat sales 1,956,168 2,491,435
Operating expenses-restaurants 21,874,471 29,326,032
Depreciation and amortization - restaurants 1,898,009 3,483,807
Operating expenses-meat division 369,663 234,121
General and administrative expenses 3,994,528 4,895,609
----------- -----------
Total costs and expenses 46,608,272 64,477,357
----------- -----------
Operating income 2,159,826 4,661,830
Interest income 305,877 242,012
----------- -----------
Earnings before taxes and
minority interest 2,465,703 4,903,842
Minority interest 2,066 265,847
Income tax expense 867,000 1,433,700
----------- -----------
Net earnings $ 1,596,637 $ 3,204,295
=========== ===========
Net earnings per share $0.24 $0.40
===== =====
Weighted average shares outstanding 6,523,000 8,024,000
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 6
<PAGE> 7
Longhorn Steaks, Inc.
Statements of Stockholders' Equity
for the six months ended June 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Shares,
Net of Additional Net
Preferred Treasury Paid-In Retained Stockholders'
Stock Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 --- 6,627,333 41,201,508 919,306 11,467,962 53,588,776
Issuance of shares pursuant
to exercise of stock options --- 58,467 588,697 --- --- 588,697
Issuance of shares pursuant
to public offering --- 1,781,250 37,638,055 --- --- 37,638,055
Net Earnings --- --- --- --- 3,204,295 3,204,295
------ --------- ---------- ------- ---------- ----------
Balance, June 30, 1996 --- 8,467,050 79,428,260 919,306 14,672,257 95,019,823
====== ========= ========== ======= ========== ==========
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE> 8
Longhorn Steaks, Inc.
Statements of Cash Flows
For the three months ended June 30, 1995 and 1996
(unaudited)
<TABLE>
<CAPTION>
1995 1996
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,596,637 $ 3,204,295
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,034,954 3,867,132
Minority interest 2,066 265,847
Pre-opening expenses (759,303) (1,487,159)
Change in:
Trade receivables (318,294) (879,331)
Inventories (596,214) 202,422
Prepaid expenses and other assets (436,895) (145,570)
Prepaid income taxes 507,381 ---
Accounts payable and accrued expenses (486,988) (1,717,847)
----------- -----------
Net cash provided by operating activities 1,543,344 3,309,789
Cash flows from investing activities:
Purchase of property and equipment (6,939,406) (11,576,425)
Purchase of Lone Star Steaks (2,096,107) ---
Purchase of land (469,191) (735,947)
Decrease (increase) in loans to employees (23,047) 33,048
----------- -----------
Net cash used in investing activities (9,527,751) (12,279,324)
Cash flows from financing activities:
Repayment of line of credit, net of borrowings --- (5,000,000)
Proceeds from public offering, net of expenses --- 37,638,055
Minority partners' contributions 200,000 225,000
Distributions to minority partners (27,958) (411,183)
Proceeds from exercise of stock options 13,975 588,697
----------- -----------
Net cash provided by financing activities 186,017 33,040,569
Net increase/(decrease) in cash and cash equivalents (7,798,390) 24,071,034
Cash and cash equivalents at January 1, 1995 and 1996 17,045,981 1,444,604
----------- -----------
Cash and cash equivalents at June 30, 1995 and 1996 $ 9,247,591 $25,515,638
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE> 9
Longhorn Steaks, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The financial statements for the six months ended June 30, 1996 and for the six
months ended June 30, 1995 were prepared by the Company in accordance with the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, these quarterly statements include all adjustments which are of
a normal and recurring nature necessary to present a fair presentation of the
results for such periods. Certain information and footnote disclosures normally
presented in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to these rules and
regulations. Company management believes the disclosures are sufficient for
interim financial reporting purposes. These financial statements should be read
in conjunction with the financial statements of the Company for the year ended
December 31, 1995.
2. Income Taxes
Income tax expense for the three months has been provided for based on the
estimated effective tax rate expected to be applicable for the full 1996 fiscal
year. The income tax rate of 31% for the six months ended June 30, 1996 differs
from applying the statutory federal income tax rate of 34% to pre-tax income
primarily due to employee FICA tip tax credits (a reduction in income tax
expense) offset by state income taxes.
3. Stockholder's Equity
During the first three months of 1996, the Company undertook a public offering
which closed on April 1, resulting in proceeds to the Company, net of offering
expenses, of approximately $31,642,000. The offering consisted of 1,875,000
shares of common stock, 1,500,000 of which were offered by the Company and the
balance of which were offered by certain shareholders of the Company. The
Company also granted its underwriters the option to purchase up to 281,250
additional shares of common stock to cover over-allotments. This option was
exercised in full on April 12. The proceeds from this additional issuance of
common stock were $5,996,250.
4. Merger With Bugaboo Creek Steak House, Inc.
During the second three months of 1996, the Company signed a definitive
agreement to merge with Bugaboo Creek Steak House, Inc. ("Bugaboo"). Bugaboo
owns and operates 14 Bugaboo Creek Steaks Houses and 4 Capital Grille
restaurants primarily in the northeastern United States. The agreement provides
for the issuance of up to 2,939,062 shares of the Company's common stock to the
stockholders of Bugaboo. In conjunction with the Bugaboo merger, the Company
has signed definitive agreements to acquire three other restaurants and certain
related real estate for up to approximately 240,000 shares of the Company's
common stock. Completion of the merger, which has been approved by the Boards
of Directors of the Company and Bugaboo, is subject to approval by the
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<PAGE> 10
stockholders of Bugaboo and the Company, certain regulatory approvals and other
conditions. The merger is expected to be accounted for as a pooling of interests
and to be a tax free exchange for purposes of determining federal income taxes
of Bugaboo's stockholders. The Company expects the merger to be completed in
September of 1996. Excluding estimated transaction costs, the Company does not
believe the merger will have a material impact on the Company's earnings per
share for 1996. However, the Company feels the foregoing merger will be additive
to earnings per share for 1997.
7
<PAGE> 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the Three Month Period Ended June 30, 1996
Compared to
The Three Month Period Ended June 30, 1995
Results of Operations:
The Company derives substantially all of its revenues from restaurant sales,
wholesale meat sales to franchises and unrelated parties, and franchise
revenues. Total revenues increased 38.9% to $35,494,000 for the second three
months of 1996 compared to $25,548,000 for the second three months of 1995.
Restaurant sales increased 42.7% to $34,511,000 for the second three months of
1996 compared to $24,178,000 in the corresponding period of the prior year. The
increase in restaurant sales resulted from the opening of new restaurants
coupled with a 2.3% increase in same store sales. Same store sales for the
three month period ended June 30, 1996 consists of sales at restaurants opened
prior to January 1, 1995. Wholesale meat sales decreased 25.8% to $914,000 for
the second three months of 1996 compared to $1,231,000 in the corresponding
period of the prior year as a new meat distribution system was put in place
during the period. Revenues (and costs) attributable to wholesale meat sales
are expected to cease permanently in the second half of 1996. This new meat
distribution system was fully implemented during the last period thereby
eliminating the need for a separate meat production and distribution facility
on a go-forward basis. Franchise revenues decreased 50.4% to $69,000 in the
1996 period compared to $139,000 in the 1995 period due to the Company's
acquisition of five franchised restaurants and the closure of two franchised
restaurants.
Cost of restaurant sales as a percentage of restaurant sales increased to 36.6%
for the second three months of 1996 from 35.7% in the corresponding period of
the prior year. After eliminating the inter-company gross profits from the meat
division, restaurant cost of sales only increased slightly from 36.7% in
1995 to 36.8% for 1996.
Restaurant operating expenses as a percentage of restaurant revenues decreased
to 44.1% for the second three months of 1996 from 46.9% in 1995. This was due
to a reduction in payroll and other controllable costs coupled with stronger
unit sales. Restaurant depreciation and amortization increased 85.2% to
$1,765,000 from $953,000 in the corresponding period of the prior year due the
construction of new restaurants. Meat division operating expenses as a
percentage of total revenues decreased to 0.2% from 0.7%; this increase was
attributable to the cessation of meat-cutting operations at the meat company
during the first three months of 1996 and closure of the facility during the
current period.
General and administrative expenses as a percentage of total revenues decreased
to 7.0% from 7.9%. This decrease was largely attributable to fixed corporate
expenses increasing at a slower rate than revenues.
As a result of the relationships between revenues and expenses discussed
above, operating income increased to $2,420,000 for the second three months of
1996 as compared to $1,272,000 in the corresponding period of the prior year.
8
<PAGE> 12
Interest income is attributable to the investment of available cash; interest
income is reported net of interest expense, which is attributable to borrowings
under the Company's revolving line of credit, net of interest capitalized for
construction costs of new units not yet opened. Net interest income was
$298,000 for the second three months of 1996 as compared to $134,000 in the
corresponding period of the prior year as a result of the increase in funds
invested.
Income tax expense of $756,000 or 30.0% of earnings before income taxes was
recognized for the second three months of 1996, as compared to $490,000 or
35.0% of earnings before income taxes for the second three months of 1995,
reflecting an estimated 30.0% 1996 annual effective tax rate. The Company's
effective income tax rate differs from applying the statutory federal income
tax rate of 34% to pre-tax income primarily due to employee FICA tip tax
credits and state income taxes.
Net earnings increased to $1,764,000 for the second three months of 1996 as
compared to $913,000 in the corresponding period of the prior year.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the Six Month Period Ended June 30, 1996
Compared to
The Six Month Period Ended June 30, 1995
Results of Operations:
The Company derives substantially all of its revenues from restaurant sales,
wholesale meat sales both to franchises and unrelated parties and franchise
revenues. Total revenues increased 41.8% to $69,139,000 for the first six
months of 1996 compared to $48,768,000 for the first six months of 1995.
Restaurant sales increased 43.2% to $66,433,000 for the first six months of
1996 compared to $46,388,000 in the corresponding period of the prior year. The
increase in restaurant sales resulted from the opening of new restaurants
coupled with a 4.2% increase in same store sales. The same store sales increase
was attributable in part to the 1996 period having an extra day due to leap
year. Same store sales consists of sales at restaurants opened prior to October
1, 1994. Wholesale meat sales increased 22.5% to $2,547,000 for the first six
months of 1996 compared to $2,080,000 in the corresponding period of the prior
year due an increase in sales to unaffiliated customers partially offset by a
decrease in sales to franchises and the new meat distribution system being put
in place during the period. Revenues (and costs) attributable to wholesale meat
sales are expected to cease permanently during 1996 due to a new distribution
system being fully implemented during that period eliminating the need for a
separate meat production and distribution facility. Franchise revenues
decreased 47.0% to $159,000 in the 1996 period compared to $300,000 in the
1995 period due to the Company's acquisition of five franchised restaurants and
the closure of two franchised restaurants.
Cost of restaurant sales as a percentage of restaurant sales increased to
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36.2% for the first six months of 1996 from 35.6% in the corresponding
period of the prior year. After eliminating the inter-company gross profits
from the meat division (which was closed during the period), restaurant level
cost of sales decreased from 36.6% in 1995 to 36.2% for 1996.
Restaurant operating expenses as a percentage of restaurant revenues decreased
to 44.1% for the first six months of 1996 from 47.2% in 1995. This was due to a
reduction in payroll and other controllable costs as well as stronger unit
sales. Restaurant depreciation and amortization increased 83.6% to $3,484,000
from $1,898,000 in the corresponding period of the prior year due to the
construction of new restaurants. Meat division operating expenses as a
percentage of total revenues decreased to 0.3% from 0.8%; this was attributable
to the cessation of meat-cutting operations at the meat company during the
first three months of 1996 and closure of the facility during the current
period.
General and administrative expenses as a percentage of total revenues decreased
to 7.1% from 8.2%. This decrease was largely attributable to fixed corporate
expenses increasing at a slower rate than revenues.
As a result of the relationships between revenues and expenses discussed above,
operating income increased to $4,662,000 for the first six months of 1996 as
compared to $2,160,000 in the corresponding period of the prior year.
Interest income is attributable to the investment of available cash; interest
income is reported net of interest expense, which is attributable to borrowings
under the Company's revolving line of credit, net of interest capitalized for
construction costs of new units not yet opened. Net interest income was
$242,000 for the first six months of 1996 as compared to $306,000 in the
corresponding period of the prior year as a result of the increase in funds
invested.
Income tax expense of $1,434,000 or 30.9% of earnings before income taxes was
recognized for the first six months of 1996, as compared to $867,000 or 35.2%
of earnings before income taxes for the first six months of 1995. The Company's
effective income tax rate for 1996 is expected to be 30.0% which differs from
applying the statutory federal income tax rate of 34% to pre-tax income
primarily due to employee FICA tip tax credits and state income taxes.
Net earnings increased to $3,204,000 for the first six months of 1996 as
compared to $1,597,000 in the corresponding period of the prior year.
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Liquidity and Capital Resources:
The following table presents a summary of the Company's cash flows for the six
months ended June 30, 1995 and June 30, 1996.
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 1,715,386 $ 3,309,789
Net cash used in investing activities (9,527,751) (12,279,324)
Net cash provided by financing activities 13,975 33,040,569
------------ ------------
Net increase/(decrease) in cash and
cash equivalents $(7,798,390) $24,071,034
=========== ===========
</TABLE>
The Company requires capital primarily for the development of new restaurants,
selected acquisitions and the remodeling of existing restaurants. Capital
expenditures for new and improved facilities totaled approximately $6,939,000
for the first six months of 1995 and $11,576,000 for the first six months of
1996. During the period, an offering of the Company's stock was closed
resulting in net proceeds to the Company of approximately $37,638,055. For the
first six months of 1996, the Company funded all of its expansion with
internally generated funds, borrowings under the Company's revolving line of
credit and proceeds from the stock offering. Upon receipt of the proceeds, the
Company paid off the line of credit and invested the remainder of the proceeds
in a combination of interest bearing cash accounts and short-term investments.
These funds, along with those generated by Company operations, are expected to
fund the Company's expansion plans through 1997, if the Bugaboo Creek Steak
House, Inc. acquisition does not progress; if the acquisition noted above
transpires, these funds, along with those generated by the consolidated
Company, would be expected to fund expansion plans through mid-1997.
The Company opened twelve Company-owned and joint venture restaurants during
1995 and acquired four. The Company intends to open approximately fifteen
Company-owned and joint venture restaurants in 1996. The Company estimates that
its capital expenditures (net of contributions from joint venture partners)
will be approximately $23,000,000 in fiscal 1996. The Company expects the 1996
average cost per restaurant to be slightly lower than 1995 due to lower
pre-opening expenses and better cost control and engineering. During the first
six months of 1996, the Company negotiated with two of its existing franchises
to form a joint venture to own and operate the three franchised restaurants in
Charlotte, North Carolina and Columbia, South Carolina and the Company's two
Longhorn Steakhouse restaurants in Greensboro and High Point, North Carolina.
This transaction closed on April 1.
As of June 30, 1996 the Company had approximately $25.5 million in cash on
hand.
11
<PAGE> 15
Part II - Other Information
Item 1. Legal Proceedings
On February 10, 1994 Linda Upton, a shareholder of the Company, filed a
putative class action against the Company, several of its directors and the two
managing underwriters of its previous public offerings of Common Stock. The
lawsuit is styled Linda Upton v. George W. McKerrow, Jr., Ronald P. Sheean,
Ronald W. San Martin, J. William Norman, George W. McKerrow, Sr., J. C.
Bradford & Co., The Robinson-Humphrey Company, Inc., and Longhorn Steaks, Inc.,
Civil Action No. 1:94-CV-0353-MHS, U. S. District Court for the Northern
District of Georgia, Atlanta Division. The Plaintiff purports to represent a
class of all persons who purchased the Common Stock of the Company between July
27, 1992 and June 17, 1993. The complaint alleges that during this interval the
defendants made material misrepresentations and omissions in connection with
the financial condition of the Company which had the effect of artificially
inflating the market price of the Company's Common Stock. The complaint
alleges that by virtue of this conduct defendants violated Section 10(b) of the
Securities Exchange Act of 1934 (the 1934 "Act") and SEC Rule 10b-5 thereunder.
The complaint also alleges that defendants Longhorn Steaks, Inc., George W.
McKerrow, Jr., Ronald W. San Martin, J. William Norman, and George W. McKerrow,
Sr. were each controlling persons within the meaning of Section 20 of the 1934
Act and are therefore liable to the plaintiffs on that basis as well. The
complaint seeks compensatory damages along with pre- and post-judgment
interest, reasonable attorney's fees, expert witness fees, and other costs. The
complaint also seeks relief in the form of "extraordinary equitable and/or
injunctive relief as permitted by law, equity and the federal statutory
provisions sued hereunder, including attaching, impounding, imposing a
constructive trust upon or otherwise restricting the proceeds of defendants'
trading activities or their other assets so as to ensure that plaintiff has an
effective remedy..."
In the plaintiff's answers to mandatory interrogatories filed under the Court's
rules, the plaintiff states that, although this is a matter for experts, at
this point, it appears that "class-wide damages likely total in excess of $40
million."
Under the indemnification agreements with each of them and the provisions of
the Company's Bylaws, the Company is advancing to each of the above named
directors their costs of defense of the claims against them in this action. The
Company has made a claim under its officers and directors liability insurance
policy with respect to this litigation and has reached an interim agreement
with the insurer (subject to renegotiation at the conclusion of the case) for
the insurer to advance payment of a portion of the aggregate cost of defending
the Company and the named directors once the Company has incurred insured
defense costs equal to the $250,000 retainage under the policy. The Company has
incurred expenses to date in excess of this retainage, and a portion of the
costs of the Company in its defense and that of the directors will be paid by
the Company's insurer.
In addition, the Company has certain indemnification agreements with the
underwriter defendants and has agreed on an interim basis (subject to
renegotiation at the conclusion of the case) to advance a portion of the costs
of the underwriters incurred in defending this litigation.
Notwithstanding the contribution of the insurance company to the costs of the
defense, the cost of defending litigation of this type can be
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<PAGE> 16
significant and the portion of these costs that will be borne by the
Company, including the Company's indemnification obligations to the
underwriters, will be an expense in future periods until the matter is
resolved. The Company cannot estimate the amount of the expense.
The Company believes that the claims of the plaintiff in the lawsuit are
unfounded and completely without merit. The Company denies any liability with
respect to these claims and intends to vigorously defend them. In April 1994,
the defendants filed motions to dismiss the complaint for failure to state a
claim on which relief can be granted. On March 30, 1995, the court granted the
defendants' motions as to certain of the plaintiff's allegations of
misstatements and the court denied the defendant's motions as it relates to
certain other alleged misstatements. The plaintiff filed an amended complaint
in response to the Court's March 30, 1995 order and the defendants filed
motions to dismiss the amended complaint for failure to state a claim on which
relief can be granted. The Court has entered an order denying the defendants'
motions to dismiss the amended complaint. The defendants have answered the
complaint, denying liability and intend to continue to defend the action
vigorously. The plaintiff has filed a motion for class certification, which the
defendants have opposed. The Court has not yet ruled on the motion.
This action remains at an early procedural stage and it is not possible at this
time to determine the outcome of the lawsuit or the effect of its resolution on
the Company's financial position or operating results. Management believes the
Company's defenses have merit and that the resolution of this matter will not
have a material adverse effect on the Company's financial position; however,
there can be no assurance that the Company will be successful in its defense or
that this litigation will not have a material adverse effect on the Company's
results of operations for some period or on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of Shareholders of the Company was held on May 8, 1996.
Holders of 6,644,333 shares of the Company's common stock were entitled to vote
at that meeting. At the Annual meeting, the shareholders elected three Class I
directors with term to expire at the 1999 Annual Meeting. As to each of the
following named individuals, the holders of the indicated number of shares of
the Company's common stock voted for his election and the holders of the
indicated number of shares withheld authority to vote for his election and
there were no broker non-votes:
<TABLE>
<CAPTION>
Shares Voting Shares Withholding
For Authority
<S> <C> <C>
Class I
Donald L. Chapman 5,340,920 354,895
George W. McKerrow, Sr. 5,340,920 354,895
John C. Metz 5,340,920 354,895
</TABLE>
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The following directors' terms of office continue after the meeting and expire
at the annual meeting of shareholders in the year indicated.
<TABLE>
<S> <C>
Class II
George McKerrow, Jr. 1997
Richard E. Rivera 1997
Class III
John G. Pawley 1998
Ronald W. San Martin 1998
</TABLE>
There is currently a vacant director's position in both Class II and Class III.
The shareholders approved the proposal to amend the Longhorn Steaks, Inc.
Amended and Restated 1992 Incentive Plan. The holders of 3,953,852 shares of
common stock voted in favor of the approval, holders of 1,008,799 shares voted
against and holders of 10,326 shares abstained. There were 722,838 broker
non-votes.
The shareholders approved the proposal of the 1996 stock plan for outside
directors. The holders of 4,663,012 shares of common stock voted in favor of
the approval, holders of 351,645 shares voted against and holders of 14,231
shares abstained. There were 666,927 broker non-votes.
The shareholders also ratified the selection of KPMG Peat Marwick as
independent auditors for the Company for 1996. The holders of 5,688,770 shares
of common stock voted in favor of the ratification, holders of 3,745 shares
voted against and holders of 3,300 shares abstained. There were no broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of June
14, 1996, by and among Longhorn Steaks, Inc.,
Bugaboo Creek Steak House, Inc. and Whip Merger
Corporation (incorporated by reference from Exhibit
2.1 of the Registrant's Registration Statement on
Form S-4, Registration No. 333-08053 (the
"Registration Statement")).
2.1.1 Amendment No. 1 to Agreement and Plan of Merger,
dated July 29, 1996, by and among Longhorn
Steaks, Inc., Bugaboo Creek Steak House, Inc. and
Whip Merger Corporation (incorporated by reference
from Exhibit 2.1.1 of the Registration Statement).
2.2 Agreement and Plan of Merger, dated June 14,
1996, by and among Bentley's Restaurant, Inc.,
Longhorn Steaks, Inc. and Whip Pooling Corporation
(incorporated by reference from Exhibit 2.2 of the
Registration Statement).
14
<PAGE> 18
2.2.1 Amendment No. 1 to Agreement and Plan of
Merger, dated July 29, 1996, by and among Bentley's
Restaurant, Longhorn Steaks, Inc. and Whip Pooling
Corporation (incorporated by reference from Exhibit
2.2.1 of the registration Statement).
2.3 Agreement and Plan of Merger, dated June 14,
1996, by and among Hemenway Sea Foods, Inc.,
Longhorn Steaks, Inc. and Whip Pooling Corporation
(incorporated by reference from Exhibit 2.3 of the
Registration Statement).
2.3.1 Amendment No. 1 to Agreement and Plan of Merger,
dated July 29, 1996, by and among Hemenway
Sea Foods, Inc., Longhorn Steaks, Inc. and Whip
Pooling Corporation (incorporated by reference from
Exhibit 2.3.1 of the Registration Statement).
2.4 Agreement and Plan of Merger, dated June 14,
1996, by and among Old Grist Mill Tavern, Inc.,
Longhorn Steaks, Inc. and Whip Pooling Corporation
(incorporated by reference from Exhibit 2.4 of the
Registration Statement).
2.4.1 Amendment No. 1 to Agreement and Plan of Merger,
dated July 29, 1996, by and among Old Grist
Mill Tavern, Inc., Longhorn Steaks, Inc. and Whip
Pooling Corporation (incorporated by reference from
Exhibit 2.4.1 of the Registration Statement).
2.5 Agreement and Plan of Merger, dated June 14,
1996 by and among GOS Properties Limited Liability
Company, Longhorn Steaks, Inc. and Whip Pooling
Corporation (incorporated by reference from Exhibit
2.5 of the Registration Statement).
2.5.1 Amendment No. 1 to Agreement and Plan of
Merger, dated July 29, 1996, by and among GOS
Properties limited Liability Company, Longhorn
Steaks, Inc. and Whip Pooling Corporation
(incorporated by reference from Exhibit 2.5.1 of the
Registration Statement).
2.6 Purchase and Sale Agreement, dated June 14,
1996, by and between Edward P. Grace, III and Samuel
J. Orr, Jr. as Sellers and Whip Pooling Corporation
(incorporated by reference from Exhibit 2.6 of the
Registration Statement).
2.6.1 Amendment No. 1 to Purchase and Sale Agreement,
dated July 29, 1996, by and between Edward P. Grace,
III and Samuel J. Orr, Jr. as Sellers and Whip
Pooling Corporation (incorporated by reference from
Exhibit 2.6.1 of the Registration Statement).
15
<PAGE> 19
3.1 Amended and Restated Articles of Incorporation
of the Registrant (incorporated by reference from
Exhibit 3(a) of the Registration Statement on Form
S-1, Registration No. 33-57942).
3.2 Amended and Restated By-Laws of the Registrant
(incorporated by reference from Exhibit 3(b) to
Registration Statement on Form S-1, Registration No.
33-45695).
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Amended and Restated Articles of Incorporation and
By-Laws of the Registrant defining rights of holders
of Common Stock of the Registrant.
27 Financial Data Schedule (for SEC use only)
(b) Reports filed on Form 8-K.
None.
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.
Longhorn Steaks, Inc.
Date: August 14, 1996 /s/Anne D. Huemme
- ------------------------ ----------------------------
Anne D. Huemme
Chief Financial Officer and
Officer (Principal Financial
Officer and Principal
Accounting Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996, AND THE CONSOLIDATED STATEMENT OF
EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 25,515,638
<SECURITIES> 0
<RECEIVABLES> 2,439,511
<ALLOWANCES> 0
<INVENTORY> 3,859,328
<CURRENT-ASSETS> 34,403,824
<PP&E> 61,922,339<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 104,522,199
<CURRENT-LIABILITIES> 6,997,192
<BONDS> 0
0
0
<COMMON> 79,428,260
<OTHER-SE> 15,591,563
<TOTAL-LIABILITY-AND-EQUITY> 104,522,199
<SALES> 68,980,506
<TOTAL-REVENUES> 69,139,187
<CGS> 26,537,788
<TOTAL-COSTS> 26,537,788
<OTHER-EXPENSES> 33,043,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,903,842
<INCOME-TAX> 1,433,700
<INCOME-CONTINUING> 3,204,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,204,295
<EPS-PRIMARY> .43<F2>
<EPS-DILUTED> .40
<FN>
<F1>ASSET VALUES REPRESENT NET AMOUNTS.
<F2>PRIMARY EPS IS CALCULATED USING A WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING OF 7,530,925.
</FN>
</TABLE>
