<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended September 28, 1997
__ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition Period from __________to __________
Commission File No. 0-28258
SHELLS SEAFOOD RESTAURANTS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 65-0427966
------------------------------- ------------------------------------
(State or other jurisdiction of (IRS) Employer Identification Number
incorporation or organization)
16313 North Dale Mabry Highway, Suite 100, Tampa, FL 33618
----------------------------------------------------------
(Address of principal executive offices) (zip code)
(813) 961-0944
--------------
(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. Yes x No ____
Class Outstanding at November 7, 1997
----- -------------------------------
Common stock, $.01 par value 4,226,018
1
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
Index
<TABLE>
<CAPTION>
Part I - Financial Information Page Number
Item 1 - Financial Statements
<S> <C> <C>
Consolidated Balance Sheets as of September 28, 1997 (Unaudited) and
December 29, 1996 3
Consolidated Statements of Income (Unaudited) for the 13 weeks and 39
weeks ended September 28, 1997 and September 29, 1996 4
Consolidated Statements of Cash Flows
(Unaudited) for the 39 weeks
ended September 28, 1997 and September 29, 1996 5
Notes to 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 12
Signatures 13
</TABLE>
2
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 28, 1997 December 29, 1996
------------------- ------------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,957,806 $ 3,033,851
Inventories 770,918 663,563
Other current assets 2,346,473 1,455,405
Receivables from related parties 176,710 132,048
------------ ------------
Total current assets 9,251,907 5,284,867
Property and equipment, net 12,187,195 8,655,149
Prepaid rent 336,921 374,721
Other assets 437,645 346,707
Goodwill 3,556,936 3,711,583
------------ ------------
TOTAL ASSETS $ 25,770,604 $ 18,373,027
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,793,835 $ 2,486,943
Accrued expenses 2,461,780 2,159,788
Sales tax payable 286,426 282,966
Income taxes payable 538,716 496,216
Current portion of notes payable - stockholders -- 1,000,000
Current portion of long-term debt 246,822 276,765
------------ ------------
Total current liabilities 6,327,579 6,702,678
Deferred rent 1,084,679 857,830
Long-term debt, less current portion 1,504,874 1,160,513
------------ ------------
Total liabilities 8,917,132 8,721,021
------------ ------------
Minority partner interest 498,948 511,810
------------ ------------
Shells, Inc. preferred shares subject to redemption,
$10 par value; authorized 10,000,000 shares; 148,250 and
185,312 issued and outstanding, respectively 1,353,352 1,668,476
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; authorized
2,000,000 shares; none issued or outstanding -- --
Common stock, $.01 par value; authorized 20,000,000
shares; 4,226,018 and 3,297,536 shares issued and
outstanding, respectively 42,260 32,975
Additional paid-in-capital 12,940,936 7,480,548
Retained earnings (deficit) 2,017,976 (41,803)
------------ ------------
Total stockholders' equity 15,001,172 7,471,720
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,770,604 $ 18,373,027
============ ============
</TABLE>
3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WEEKS AND 39 WEEKS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
Restaurant sales $ 16,501,055 $ 9,536,148 $ 49,754,246 $ 30,318,741
Management fees from related parties 94,753 94,182 310,007 304,502
------------ ------------ ------------ ------------
16,595,808 9,630,330 50,064,253 30,623,243
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of restaurant sales 5,956,085 3,436,731 17,679,831 10,720,749
Labor and other related expenses 4,492,442 2,570,044 13,183,254 7,687,648
Other restaurant operating expenses 3,378,830 2,072,032 9,813,136 6,256,629
General and administrative expenses 1,138,249 805,556 3,564,127 2,518,962
Depreciation 421,469 178,436 1,076,652 472,567
Amortization 513,398 111,383 1,288,462 376,986
------------ ------------ ------------ ------------
15,900,473 9,174,182 46,605,462 28,033,541
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 695,335 456,148 3,458,791 2,589,702
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 100,473 66,717 184,487 121,606
Interest expense (89,463) (65,390) (268,211) (255,098)
Other income (expense), net (2,004) 13,285 (25,837) (298,140)
------------ ------------ ------------ ------------
9,006 14,612 (109,561) (431,632)
------------ ------------ ------------ ------------
INCOME BEFORE ELIMINATION OF MINORITY
PARTNER INTEREST AND INCOME TAXES 704,341 470,760 3,349,230 2,158,070
ELIMINATION OF MINORITY PARTNER INTEREST (36,146) (46,397) (143,951) (158,823)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 668,195 424,363 3,205,279 1,999,247
PROVISION FOR INCOME TAXES (227,000) (131,000) (1,090,000) (619,000)
------------ ------------ ------------ ------------
NET INCOME 441,195 293,363 2,115,279 1,380,247
PREFERRED SHARES ACCRETION (18,500) (29,250) (55,500) (87,750)
------------ ------------ ------------ ------------
NET INCOME APPLICABLE TO COMMON STOCK $ 422,695 $ 264,113 $ 2,059,779 $ 1,292,497
============ ============ ============ ============
NET INCOME PER SHARE OF COMMON STOCK $ 0.08 $ 0.07 $ 0.42 $ 0.42
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 5,119,513 3,955,102 4,891,009 3,106,822
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
`
1997 1996
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,115,279 $ 1,380,247
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,365,114 849,553
Minority partner interest (12,862) 105,892
Changes in assets and liabilities:
(Increase) decrease in inventories (107,355) 12,894
Increase in receivables from related parties (44,662) (57,770)
Increase in other assets (2,115,821) (216,810)
Decrease in prepaid rent 37,800 37,799
Increase (decrease) in accounts payable 306,892 (1,049,430)
Increase in accrued expenses 301,992 555,059
Decrease in payable to related parties - (98,927)
Increase (decrease) in sales tax payable 3,460 (12,270)
Increase in income taxes payable 42,500 467,216
Increase in deferred rent 226,849 150,625
-------------- -------------
Total adjustments 1,003,907 743,831
-------------- -------------
Net cash provided by operating activities 3,119,186 2,124,078
-------------- -------------
INVESTING ACTIVITIES:
Purchase of property and equipment (4,608,698) (2,334,258)
-------------- -------------
Net cash used in investing activities (4,608,698) (2,334,258)
-------------- -------------
FINANCING ACTIVITIES:
Proceeds from the issuance of debt 576,050 389,340
Repayment of debt (1,261,632) (1,493,652)
Redemption of preferred shares (370,624) -
Proceeds from the issuance of common stock and warrants 5,469,673 6,125,055
-------------- -------------
Net cash provided by financing activities 4,413,467 5,020,743
-------------- -------------
Net increase in cash 2,923,955 4,810,563
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,033,851 776,779
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,957,806 $ 5,587,342
============== =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 329,049 $ 519,881
Cash paid for Income taxes $ 1,047,500 $ 151,784
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q and, therefore, these
statements do not include all of the information and footnotes required by
generally accepted accounting principles for annual financial statements. In the
opinion of management, all material adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto contained in the
Form 10-K filed with the Securities and Exchange Commission.
2. OTHER CURRENT ASSETS
Other current assets consist of the following:
September 28, 1997 December 29, 1996
Preopening costs, net $ 969,238 $ 1,050,898
Prepaid expenses 511,210 259,721
Accounts receivable 866,025 131,400
Other current assets - 13,386
===========================================
$ 2,346,473 $ 1,455,405
===========================================
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 28, 1997 December 29, 1996
Equipment $ 5,347,835 $ 4,273,529
Leasehold improvements 5,124,679 3,318,428
Furniture and fixtures 3,242,099 1,803,848
Land and buildings 1,449,165 1,422,871
Signs 645,425 357,665
Construction in progress - 19,500
----------------------------------------------
15,809,203 11,195,841
Accumulated depreciation (3,622,008) (2,540,692)
==============================================
$ 12,187,195 $ 8,655,149
==============================================
4. STOCKHOLDER'S EQUITY
Effective June 16,1997, the Company issued a Notice of Redemption of Common
Stock Purchase Warrants. This notice resulted in the exercise by holders of
warrants to purchase 917,000 shares of common stock prior to the warrant
redemption date of July 16, 1997, providing net proceeds to the Company of
$5,372,000.
6
<PAGE>
The exercise of warrants increased the pro forma weighted average number of
shares outstanding to 5,193,000 for the 13 and 39 weeks ended September 28, 1997
and to 4,752,000 and 4,755,000 for the 13 and 39 weeks ended September 29, 1996,
respectively. The pro forma weighted average number of shares assumes the
additional shares that were outstanding as of September 28, 1997 were
outstanding since January 1, 1996. The pro forma earnings per share reflecting
the increased pro forma weighted average number of shares outstanding were $0.08
and $0.40 for the 13 and 39 weeks ended September 28, 1997, respectively, as
compared with $0.06 and $0.27 for the 13 and 39 weeks ended September 29, 1996,
respectively.
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which
will be effective for the Company in the fourth quarter of 1997. SFAS No. 128
simplifies the computation for earnings per share by excluding the dilutive
effect of common stock equivalents from basic earnings per share and makes the
earnings per share calculation comparable to international standards. Early
adoption of this statement prior to the end of 1997 is not allowed.
The following table (in thousands except per share data) presents the effect of
SFAS No. 128 on the Company's net income per common share as if adopted for
current period disclosure.
<TABLE>
<CAPTION>
13 weeks ended 39 weeks ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net income $ 442 $ 293 $ 2,115 $ 1,380
Preferred share accretion (19) (29) (56) (87)
----------------------------------------------------------------------
Net income applicable to common share owners $ 423 $ 264 $ 2,059 $ 1,293
======================================================================
Basic average common shares outstanding 4,065 3,298 3,563 2,514
Net income per share applicable to
common share owners $ 0.10 $ 0.08 $ 0.58 $ 0.51
=====================================================================
Effect of dilutive securities:
Warrants 864 638 944 434
Stock options 154 73 123 47
Dilutive average common shares outstanding 5,083 4,009 4,630 2,995
Dilutive net income per share applicable ---------------------------------------------------------------------
to common share owners $ 0.08 $ 0.07 $ 0.44 $ 0.43
=====================================================================
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages which
the items in the Company's Consolidated Statements of Income bear to total
revenues, or where indicated, restaurant sales.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
----------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Restaurant sales 99.4% 99.0% 99.4% 99.0%
Management fees from related parties 0.6% 1.0% 0.6% 1.0%
---------------------------- -------------------------------------------------------
100.0% 100.0% 100.0% 100.0%
---------------------------- -------------------------------------------------------
COST AND EXPENSES:
Cost of restaurant sales (1) 36.1% 36.0% 35.5% 35.4%
Labor and other related expenses (1) 27.2% 27.0% 26.5% 25.4%
Other restaurant operating expenses (1) 20.5% 21.7% 19.7% 20.7%
---------------------------- -------------------------------------------------------
Total restaurant costs and expenses (1) 83.8% 84.7% 81.7% 81.5%
---------------------------- -------------------------------------------------------
General and administrative expenses 6.9% 8.4% 7.1% 8.2%
Depreciation 2.5% 1.9% 2.2% 1.5%
Amortization 3.1% 1.2% 2.6% 1.2%
---------------------------- -------------------------------------------------------
INCOME FROM OPERATIONS 4.2% 4.7% 6.9% 8.5%
---------------------------- -------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 0.6% 0.7% 0.4% 0.4%
Interest expense -0.5% -0.7% -0.5% -0.9%
Other expense, net 0.0% 0.1% -0.1% -1.0%
---------------------------- -------------------------------------------------------
0.1% 0.1% -0.2% -1.5%
---------------------------- -------------------------------------------------------
INCOME BEFORE ELIMINATION OF MINORITY
PARTNER INTEREST AND INCOME TAXES 4.3% 4.8% 6.7% 7.0%
ELIMINATION OF MINORITY PARTNER INTEREST -0.2% -0.5% -0.3% -0.5%
---------------------------- -------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 4.1% 4.3% 6.4% 6.5%
PROVISION FOR INCOME TAXES -1.4% -1.4% -2.3% -2.0%
============================ =======================================================
NET INCOME 2.7% 2.9% 4.1% 4.5%
============================ =======================================================
</TABLE>
(1) As a percentage of restaurant sales.
8
<PAGE>
13 weeks ended September 28, 1997 and September 29, 1996
Revenues. Total revenues for the 13 weeks ended September 28, 1997 were
$16,596,000 as compared to $9,630,000 for the 13 weeks ended September 29, 1996.
The $6,966,000 or 72.3% increase in revenues was due to the opening of nine new
restaurants during the fourth quarter of 1996, and the opening of six new
restaurants during the first nine months of 1997. Same store sales for the 13
weeks ended September 28, 1997 were unchanged from the comparable period in
1996.
Cost of restaurant sales. The cost of restaurant sales as a percentage of
restaurant sales increased to 36.1% for the 13 weeks ended September 28, 1997
from 36.0% for the 13 weeks ended September 29,1996. The availability of certain
types of seafood fluctuates from time to time, resulting in corresponding
fluctuations in prices. The Company has been able to anticipate and react to
fluctuations in food costs through purchasing seafood directly from numerous
suppliers, promoting certain alternative menu selections in response to price
and availability of supply and adjusting its menu prices, accordingly.
Labor and other related expenses. Labor and other related expenses as a
percentage of restaurant sales increased to 27.2% during the 13 weeks ended
September 28,1997 as compared to 27.0% for 13 weeks ended September 29,1996.
This increase was primarily attributed to the initial higher hourly labor costs
associated with the opening of new restaurants, including those in Midwest
markets. The Company expects to incur higher hourly labor costs as it continues
to expand into Midwest markets.
Other restaurant operating expenses. Other restaurant operating expenses as a
percentage of sales improved to 20.5% for the 13 weeks ended September 28, 1997
as compared with 21.7% for the 13 weeks ended September 29, 1996. The lower
operating expenses as a percentage of sales were attributed primarily to lower
occupancy costs related to two restaurants that were purchased subsequent to
September 29, 1996 as well as lower advertising expenses in 1997. The
advertising expenses were higher during the 13 weeks ended September 29, 1996
due to advertising production costs.
General and administrative expenses. General and administrative expenses
decreased to 6.9% as a percentage of revenues for the 13 weeks ended September
28, 1997 as compared with 8.4% for the 13 weeks ended September 29, 1996. The
improvement of 1.5% for the 13 weeks ended September 28, 1997 is attributed to
efficiencies realized through higher sales levels attributed to restaurants
opened since September 29, 1996.
Depreciation. Depreciation increased to 2.5% for the 13 weeks ended September 28
1997 from 1.9% for the same period in 1996. The increase was primarily due to
the larger number of new restaurant openings, the remodeling of existing
restaurants including purchases of restaurant equipment as well as the purchase
of two units subsequent to September 29, 1996.
Amortization. Amortization increased to 3.1% for the 13 weeks ended September
28, 1997 from 1.2% for the comparable period in 1996. The increase is due to
pre-opening amortization related to 15 restaurants during the 13 weeks ended
September 28, 1997 as compared with pre-opening amortization of three
restaurants during the same period in 1996.
Provision for income taxes. A provision for income taxes of $227,000 was
recognized for the 13 weeks ended September 28, 1997 as compared to $131,000
during the comparable period in 1996. The increase in the provision for income
taxes was attributed to higher income before taxes as well as to an increase in
the effective tax rate being utilized by the Company to 34% in Fiscal 1997 from
31% in Fiscal 1996. The effective tax rates are based on federal statutory rates
and state income tax rates coupled with the timing of the recognition of tax
assets and the utilization of the available net operating loss carryforward.
9
<PAGE>
Income from operations and net income. Income from operations increased $239,000
or 52% to $695,000 for the 13 weeks ended September 28, 1997 from $456,000 for
the 13 weeks ended September 29, 1996. Net income increased $148,000 or 51% to
$441,000 for the 13 weeks ended September 28, 1997 from $293,000 for the 13
weeks ended September 29, 1996.
39 weeks ended September 28, 1997 and September 29, 1996
Revenues. Total revenues for the 39 weeks ended September 28, 1997 were
$50,064,000 as compared to $30,623,000 for the 39 weeks ended September 29,
1996. The $19,441,000 or 63% increase primarily was due to the opening of nine
restaurants during the fourth quarter of 1996 and six restaurants during the 39
weeks ended September 28,1997 and, to a lesser extent, a 1.8% increase in same
store sales during the 39 weeks ended September 28, 1997 over the comparable
period in 1996. To the extent that the Company has already recognized
significant gains from improved operating efficiencies, the Company may not
experience same store sales increases at the same rate in the future.
Cost of restaurant sales. Cost of restaurant sales as a percentage of restaurant
sales increased to 35.5% for the 39 weeks ended September 28, 1997 as compared
to 35.4% for the same period in 1996. The availability of certain types of
seafood fluctuates from time to time, resulting in corresponding fluctuations in
prices. The Company has been able to anticipate and react to fluctuations in
food costs through purchasing seafood directly from numerous suppliers,
promoting certain alternative menu selections in response to price and
availability of supply and adjusting its menu prices accordingly.
Labor and other related expenses. Labor and other related expenses as a
percentage of restaurant sales increased to 26.5% for the 39 weeks ended
September 28,1997 as compared to 25.4% during the comparable period in 1996.
This increase was primarily attributed to the initial higher hourly labor costs
associated with the opening of new restaurants, including those in Midwest
markets.
Other restaurant operating expenses. Other restaurant operating expenses as a
percentage of sales improved to 19.7% for the 39 weeks ended September 28, 1997
as compared with 20.7% for the comparable period in 1996. The improvement was
attributed to lower occupancy costs related to two restaurants that were
purchased and opened in the fourth quarter of 1996 as well as lower advertising
expenses during the 39 weeks ended September 28,1997 attributed to advertising
production costs incurred during the 39 weeks ended September 29,1996.
General and administrative expenses. General and administrative expenses as a
percentage of revenues decreased to 7.1% for the 39 weeks ended September 28,
1997 as compared to 8.2% for the same period during 1996 due to efficiencies
realized through higher sales levels in 1997 as compared to 1996.
Other income (expenses). Other expenses were $26,000 for the 39 weeks ended
September 28, 1997 as compared to $298,000 for the comparable period in 1996.
The decrease was primarily attributable to non-recurring expenses during the 39
weeks ended September 29, 1996 related to an arbitration hearing and the
recognition of compensatory expense related to stock warrants issued during the
first quarter of 1996.
Provision for income taxes. A provision for income taxes of $1,090,000 was
recorded for the 39 weeks ended September 28, 1997 as compared to $619,000
during the comparable period in 1996. The increase in the provision for income
taxes was attributed to a higher level of income before taxes as well as to an
increase in the effective tax rate for the Company to 34% in Fiscal 1997 from
31% in Fiscal 1996. The effective tax rates are based on federal statutory rates
and state income tax rates, coupled with the timing of the recognition of tax
assets and the utilization of the available net operating loss carryforward.
10
<PAGE>
Income from operations and net income. Income from operations increased $869,000
or 34% to $3,459,000 for the 39 weeks ended September 28, 1997 from $2,590,000
for the comparable period in 1996. Net income increased $735,000 or 53% to
$2,115,000 for the 39 weeks ended September 29, 1997 from $1,380,000 for the
comparable period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 28, 1997, the Company's current assets of $9,252,000 exceeded its
current liabilities of $6,328,000, resulting in working capital of $2,924,000.
The improvement in working capital of $4,342,000 since December 29, 1996 is
primarily the result of proceeds from the exercise of common stock warrants and
net income through the 39 weeks ended September 28, 1997, which were offset in
part by the investment in property and equipment.
Cash provided by operating activities for the 39 weeks ended September 28, 1997
was $3,119,000 as compared with $2,124,000 for the same period in 1996. The
increase of $995,000 was primarily attributed to improved operating results for
the 39 weeks ended September 28, 1997 over the comparable period in 1996, as
reflected by the $735,000 increase in net income.
The cash used in purchasing property and equipment was $4,609,000 for the 39
weeks ended September 28, 1997 as compared with $2,334,000 for the comparable
period in 1996. The increase of $2,275,000 was attributed to the Company
engaging in certain remodelings, six restaurant openings, and construction costs
incurred on other restaurants which will open subsequent to September 28, 1997,
during the 39 weeks ended September 28, 1997 as compared to funding spent on
three remodelings and three new restaurants during the same period during 1996.
SEASONALITY
The restaurant industry in general is seasonal depending on the location and
type of food served. The Company has experienced fluctuations in its quarter to
quarter operating results due to various factors, including the seasonal nature
of its business, weather conditions in Florida and the health of Florida's
economy in general and the tourism industry in particular. The Company's sales
are generally higher from January through April and June through August, the
peaks of the Florida tourism season. Seasonality at the Company's restaurants is
magnified due to its present concentration in Florida and, in many cases,
locations in coastal cities. Because of the seasonality of the Company's
business and the impact of new restaurant openings, results for any quarter are
not generally indicative of the results that may be achieved for a full fiscal
year on an annualized basis and cannot be used to indicate financial performance
for the entire year.
11
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2 - Changes in Securities and use of Proceeds
None
Item 3 - Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
12
<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.
SHELLS SEAFOOD RESTAURANTS, INC.
(Registrant)
November 11, 1997 /s/ William E. Hattaway
- ---------------------------- -----------------------------------
Date William E. Hattaway
President and Chief Executive Officer
November 11, 1997 /s/ Warren R. Nelson
- ---------------------------- -----------------------------------
Date Warren R. Nelson
Vice President and Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and the consolidated statements of income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 5,957,806
<SECURITIES> 0
<RECEIVABLES> 176,710
<ALLOWANCES> 0
<INVENTORY> 770,918
<CURRENT-ASSETS> 2,346,473
<PP&E> 15,809,203
<DEPRECIATION> (3,622,008)
<TOTAL-ASSETS> 25,770,604
<CURRENT-LIABILITIES> 6,327,579
<BONDS> 0
0
1,353,352
<COMMON> 42,260
<OTHER-SE> 14,958,912
<TOTAL-LIABILITY-AND-EQUITY> 25,770,604
<SALES> 49,754,246
<TOTAL-REVENUES> 50,064,253
<CGS> 17,679,831
<TOTAL-COSTS> 28,925,631
<OTHER-EXPENSES> (169,788)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (83,724)
<INCOME-PRETAX> 3,205,279
<INCOME-TAX> (1,090,000)
<INCOME-CONTINUING> 2,115,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,115,279
<EPS-PRIMARY> $0.44
<EPS-DILUTED> $0.42
</TABLE>
