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 JULY 2, 2000
[ ] 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 AUGUST 15, 2000
----- ------------------------------
COMMON STOCK, $.01 PAR VALUE 4,454,015
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NUMBER
ITEM 1 - FINANCIAL STATEMENTS
<S> <C>
CONSOLIDATED BALANCE SHEETS AS OF JULY 2, 2000 (UNAUDITED)
AND JANUARY 2, 2000 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE 13 AND
26 WEEKS ENDED JULY 2, 2000 AND JULY 4, 1999 4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE 26
WEEKS ENDED JULY 2, 2000 AND JULY 4, 1999 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-10
PART II - OTHER INFORMATION 11
SIGNATURES 12
</TABLE>
2
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JULY 2, 2000 JANUARY 2, 2000
------------ ---------------
<S> <C> <C>
ASSETS
Cash $ 5,955,463 $ 2,940,919
Inventories 1,172,263 1,029,324
Other current assets 1,125,731 703,548
Receivables from related parties 242,574 191,528
Deferred tax asset, net 314,551 94,551
------------ ------------
Total current assets 8,810,582 4,959,870
Property and equipment, net 17,505,857 18,314,555
Prepaid rent 504,955 544,093
Other assets 734,452 691,894
Goodwill 2,989,897 3,092,995
Deferred tax asset, net 2,363,159 3,064,449
------------ ------------
TOTAL ASSETS $ 32,908,902 $ 30,667,856
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 4,318,048 $ 3,755,225
Accrued expenses 4,485,603 3,742,582
Sales tax payable 488,079 469,061
Current portion of long-term debt 2,866,998 917,728
------------ ------------
Total current liabilities 12,158,728 8,884,596
Deferred rent 1,920,087 1,791,625
Long-term debt, less current portion 3,436,659 5,656,493
------------ ------------
Total liabilities 17,515,474 16,332,714
Minority partner interest 492,376 589,583
------------ ------------
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; 4,454,015 shares issued and outstanding 44,540 44,540
Additional paid-in-capital 14,161,010 14,161,010
Retained earnings (deficit) 695,502 (459,991)
------------ ------------
Total stockholders' equity 14,901,052 13,745,559
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,908,902 $ 30,667,856
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
------------------------------- -------------------------------
JULY 2, 2000 JULY 4, 1999 JULY 2, 2000 JULY 4, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES: $ 24,460,211 $ 25,394,251 $ 50,311,130 $ 52,012,918
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of revenues 9,142,357 9,079,211 18,403,525 18,333,551
Labor and other related expenses 7,380,213 7,238,104 14,780,224 14,819,254
Other restaurant operating expenses 5,109,952 5,374,586 10,040,078 10,824,129
General and administrative expenses 1,831,306 1,821,210 3,643,743 3,611,202
Depreciation and amortization 680,647 793,655 1,357,196 1,580,200
Pre-opening expenses -- -- -- 214,864
------------ ------------ ------------ ------------
24,144,475 24,306,766 48,224,766 49,383,200
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 315,736 1,087,485 2,086,364 2,629,718
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (261,900) (252,414) (488,512) (477,520)
Interest income 65,452 36,619 100,949 75,035
Other income (expense), net 205,848 (23,688) 194,485 (53,154)
------------ ------------ ------------ ------------
9,400 (239,483) (193,078) (455,639)
------------ ------------ ------------ ------------
INCOME BEFORE ELIMINATION OF MINORITY
PARTNER INTEREST AND INCOME TAXES 325,136 848,002 1,893,286 2,174,079
ELIMINATION OF MINORITY PARTNER INTEREST (71,830) (58,528) (167,793) (121,865)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 253,306 789,474 1,725,493 2,052,214
PROVISION FOR INCOME TAXES (84,000) (284,000) (570,000) (748,000)
------------ ------------ ------------ ------------
NET INCOME $ 169,306 $ 505,474 $ 1,155,493 $ 1,304,214
============ ============ ============ ============
BASIC NET INCOME PER SHARE OF COMMON STOCK $ 0.04 $ 0.11 $ 0.26 $ 0.29
============ ============ ============ ============
BASIC WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 4,454,015 4,454,015 4,454,015 4,454,015
============ ============ ============ ============
DILUTED NET INCOME PER SHARE OF COMMON STOCK $ 0.04 $ 0.11 $ 0.26 $ 0.28
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 4,462,099 4,576,535 4,457,001 4,588,675
============ ============ ============ ============
</TABLE>
4
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS ENDED
-------------------------------
JULY 2, 2000 JULY 4, 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,155,493 $ 1,304,214
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,357,196 1,580,200
Minority partner interest (97,207) (27,391)
Changes in assets and liabilities:
Increase in inventories (142,939) (85,502)
Increase in receivables from related parties (51,046) (66,676)
(Increase) decrease in other assets (464,741) 737,110
Decrease in prepaid rent 39,138 39,137
Decrease in deferred tax asset 481,290 16,000
Increase (decrease) in accounts payable 562,823 (3,291,313)
Increase in accrued expenses 743,021 153,750
Increase in sales tax payable 19,018 98,063
Increase in income taxes payable -- 154,021
Increase in deferred rent 128,462 107,078
----------- -----------
Total adjustments 2,575,015 (585,523)
----------- -----------
Net cash provided by operating activities 3,730,508 718,691
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (445,400) (2,344,282)
----------- -----------
Net cash used in investing activities (445,400) (2,344,282)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from debt financing 245,532 655,000
Repayment of debt (516,096) (466,028)
----------- -----------
Net cash (used in) provided by financing activities (270,564) 188,972
----------- -----------
Net increase (decrease) in cash 3,014,544 (1,436,619)
CASH AT BEGINNING OF PERIOD 2,940,919 4,723,121
----------- -----------
CASH AT END OF PERIOD $ 5,955,463 $ 3,286,502
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 469,851 $ 435,520
Cash paid for income taxes $ 88,710 $ 577,979
</TABLE>
5
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
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 of Shells Seafood Restaurants, Inc. (the
"Company") should be read in conjunction with the audited consolidated financial
statements and notes thereto contained in the Form 10-K for the year ended
January 2, 2000 filed with the Securities and Exchange Commission. Company
management believes that the disclosures are sufficient for interim financial
reporting purposes. Certain prior year amounts have been reclassified in the
accompanying consolidated financial statements to conform with the current year
presentation.
2. EARNINGS PER SHARE
The following table represents the computation of basic and diluted earnings per
share of common stock as required by Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share":
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
JULY 2, 2000 JULY 4, 1999 JULY 2, 2000 JULY 4, 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 169,306 $ 505,474 $1,155,493 $1,304,214
=========================================================
Weighted common shares outstanding 4,454,015 4,454,015 4,454,015 4,454,015
Basic net income per share of common stock $ 0.04 $ 0.11 $ 0.26 $ 0.29
=========================================================
Effect of dilutive securities:
Warrants -- 116,794 -- 131,360
Stock options 8,084 5,726 2,986 3,300
---------------------------------------------------------
Diluted weighted common shares outstanding 4,462,099 4,576,535 4,457,001 4,588,675
---------------------------------------------------------
Diluted net income per share of common stock $ 0.04 $ 0.11 $ 0.26 $ 0.28
=========================================================
</TABLE>
The earnings per share calculations excluded options and warrants to purchase
1,444,376 and 732,043 shares of common stock during the 13 week periods ended
July 2, 2000 and July 4, 1999, respectively, and options and warrants to
purchase 1,615,376 and 731,043 shares of common stock during the 26 week periods
ended July 2, 2000 and July 4, 1999, respectively, as they were anti-dilutive.
3. NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative (that is gains and
losses) depends upon the intended use of the derivative and the resulting
designation. SFAS No. 133, as amended, will be effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133 is
not expected to materially affect the Company's consolidated financial
statements.
6
<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.
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
---------------------------------------
JULY 2, JULY 4, JULY 2, JULY 4,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues
Restaurant sales 99.6% 99.6% 99.6% 99.6%
Management fees 0.4% 0.4% 0.4% 0.4%
---------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of sales 37.4% 35.8% 36.6% 35.2%
Labor and other related expenses 30.2% 28.5% 29.4% 28.5%
Other restaurant operating expenses 20.9% 21.2% 20.0% 20.8%
General and administrative expenses 7.5% 7.2% 7.2% 6.9%
Depreciation and amortization 2.8% 3.1% 2.7% 3.0%
Pre-opening expenses 0.0% 0.0% 0.0% 0.4%
---------------------------------------
Income from operations 1.2% 4.2% 4.1% 5.2%
Other income (expense), net 0.9% 0.0% 0.4% -0.2%
Interest income 0.3% 0.1% 0.2% 0.1%
Interest expense -1.1% -1.0% -1.0% -1.0%
---------------------------------------
Income before elimination of minority partner
interest and income taxes 1.3% 3.3% 3.8% 4.1%
Elimination of minority partner interest -0.3% -0.2% -0.3% -0.2%
--------------------------------------
Income before provision for income taxes 1.0% 3.1% 3.4% 3.9%
Income taxes -0.3% -1.1% -1.1% -1.4%
--------------------------------------
Net income 0.7% 2.0% 2.3% 2.5%
======================================
</TABLE>
7
<PAGE>
13 WEEKS ENDED JULY 2, 2000 AND JULY 4, 1999
REVENUES. Total revenues for the 13 weeks ended July 2, 2000 were $24,460,000 as
compared to $25,394,000 for the 13 weeks ended July 4, 1999. The $934,000, or
3.7% decrease in revenues primarily was due to the 11.1% decrease in sales per
unit in the Midwest restaurants and the closing of one restaurant in September
1999, partially offset by a 3.1% increase in sales per unit in the Florida
restaurants. Same store sales increased 0.3% over last year. Comparisons of same
store sales include only stores which were open during the entire periods being
compared and, due to the time needed for a restaurant to become established and
fully operational, at least six months prior to the beginning of that period.
COST OF REVENUES. The cost of revenues as a percentage of revenues increased to
37.4% for the second quarter of 2000 from 35.8% for the second quarter of 1999.
This increase primarily was due to the rising commodity costs of seafood coupled
with the implementation, during the second half of 1999, of happy hour
discounting for alcoholic beverages throughout the chain. The Company is
continually anticipating and reacting to fluctuations in food costs by, among
other things, 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 to control the cost of
revenues.
LABOR AND OTHER RELATED EXPENSES. Labor and other related expenses increased to
30.2% of revenues during the second quarter of 2000 as compared to 28.5% for the
second quarter of 1999. This increase was primarily attributable to labor
inefficiencies resulting from lower sales volumes in the Company's Midwest
restaurants and general increases in hourly wage rates.
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating expenses
decreased to 20.9% of revenues for the second quarter of 2000 as compared with
21.2% for the second quarter of 1999. The decrease primarily was due to reduced
advertising expenses throughout many of the markets in which the Company
operates. The second quarter of 2000 advertising strategy included the use of
free standing inserts in many of the markets that were not media efficient. The
majority of the expense related to the free standing inserts was recognized in
the form of coupon redemptions and accounted for as a reduction of revenues. The
Company is continuing to evaluate its advertising expenses and strategies in all
markets, particularly in those markets which are not media efficient.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to 7.5% of revenues for the second quarter of 2000 as compared with
7.2% for the second quarter of 1999. The increase was due to increased salaries
and wages resulting from the hiring of two directors of operations for the
Florida market and the increased costs of recruiting operations management.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a
percentage of revenues decreased to 2.8% for the second quarter of 2000 from
3.1% in the second quarter of 1999. The decrease primarily was due to the
reduced basis of property and equipment resulting from the recognition of an
asset impairment in the fourth quarter of 1999.
INTEREST EXPENSES, NET. The net interest expense decreased to $196,000 from
$216,000 during the second quarter of 1999. The decrease was due to larger
average cash balances resulting from reduced capital expenditures during the
second quarter of 2000.
OTHER INCOME (EXPENSE), NET. The other income of $206,000 for the second quarter
of 2000 as compared with other expense of $24,000 for the same quarter of 1999
is attributable to the $238,000 gain realized upon the disposition of a
leasehold interest in the Company's Western Hills restaurant. The restaurant was
closed during September 1999 with the corresponding leasehold interest being
transferred during the second quarter of 2000.
PROVISION FOR INCOME TAXES. A provision for income taxes of $84,000 was
recognized for the second quarter of 2000 as compared to $284,000 during the
same quarter in 1999. The decrease related to a decrease in income before
8
<PAGE>
income taxes as well as a reduction in the effective tax rate to 33% for 2000 as
compared with 36% in 1999.
INCOME FROM OPERATIONS AND NET INCOME. As a result of the factors discussed
above, the Company's income from operations decreased $771,000 to $316,000 for
the second quarter of 2000 from $1,087,000 for the second quarter of 1999. Net
income decreased to $169,000 for the second quarter of 2000 from $505,000 for
the second quarter of 1999.
26 WEEKS ENDED JULY 2, 2000 AND JULY 4, 1999
REVENUES. Total revenues for the 26 weeks ended July 2, 2000 were $50,311,000 as
compared to $52,013,000 for the 26 weeks ended July 4, 1999. The $1,702,000 or
3.3% decrease primarily was due to the 15.2% decrease in sales per unit in the
Midwest restaurants and the closing of one restaurant in September 1999,
partially offset by a 4.0% increase in sales per unit in the Florida
restaurants. Same store sales increased 1.0% over last year.
COST OF REVENUES. The cost of revenues as a percentage of revenues increased to
36.6% for the 26 weeks ended July 2, 2000 from 35.2% for the same period in
1999. This increase primarily was due to the rising commodity costs of seafood
coupled with the implementation, during the second half of 1999, of happy hour
discounting for alcoholic beverages throughout the chain.
LABOR AND OTHER RELATED EXPENSES. Labor and other related expenses increased to
29.4% as a percentage of revenues for the 26 weeks ended July 2, 2000 as
compared to 28.5% for the same period in 1999. This increase was primarily
attributable to labor inefficiencies resulting from lower sales volumes in the
Company's Midwest restaurants and general increases in hourly wage rates.
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating expenses
decreased to 20.0% as a percentage of revenues for the 26 weeks ended July 2,
2000 as compared with 20.8% for the same period in 1999. The decrease was
directly related to the reduction in advertising expenses throughout many of the
markets in which the Company operates where media efficiency was not achievable.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to 7.2% as a percentage of revenues for the 26 weeks ended July 2,
2000 as compared with 6.9% for the same period in 1999. The increase was due to
increased salaries and wages resulting from the hiring of two directors of
operations for the Florida market, increased costs associated with the
recruiting of operations management and, to a lesser extent, severance payments
incurred during the 26 weeks ended July 2, 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses as a
percentage of revenues decreased to 2.7% for the 26 weeks ended July 2, 2000 as
compared with 3.0% for the same period in 1999. The decrease primarily was due
to the reduced basis of property and equipment resulting from the recognition of
an asset impairment in the fourth quarter of 1999.
PRE-OPENING EXPENSES. Pre-opening expenses decreased to zero in 2000 from
$215,000 for the 26 weeks ended July 4, 1999 as there were no new restaurant
openings during 2000.
INTEREST EXPENSES, NET. The net interest expense decreased to $388,000 from
$402,000 during the 26 weeks ended July 2, 2000 as compared with the same period
in 1999. The decrease was due to larger average cash balances resulting from
reduced capital expenditures during 2000.
OTHER INCOME (EXPENSE), NET. The other income of $194,000 for the 26 weeks ended
July 2, 2000 as compared with other expense of $53,000 for the same period in
1999 is attributable to the $238,000 gain realized upon the disposition of a
leasehold interest in the Company's Western Hills restaurant. The restaurant was
closed during September 1999
9
<PAGE>
with the corresponding leasehold interest being transferred during the second
quarter of 2000.
PROVISION FOR INCOME TAXES. A provision for income taxes of $570,000 was
recognized for the 26 weeks ended July 2, 2000 as compared to $748,000 during
the same period in 1999. The decrease was directly attributable to lower income
before taxes as well as a reduction in the effective tax rate to 33% in 2000 as
compared with 36% for 1999.
INCOME FROM OPERATIONS AND NET INCOME. As a result of the factors discussed
above, the Company's income from operations decreased $544,000 to $2,086,000 for
the 26 weeks ended July 2, 2000 from $2,630,000 for the same period in 1999.
This decrease was $759,000 exclusive of the effect of pre-opening expenses. The
Company's net income decreased to $1,155,000 for the 26 weeks ended July 2, 2000
from $1,304,000 for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of July 2, 2000, the Company's current liabilities of $12,159,000 exceeded
its current assets of $8,811,000, resulting in a working capital deficiency of
$3,348,000. Historically, the Company has generally operated with minimal or
negative working capital as a result of the investing of current assets into
non-current property and equipment as well as the turnover of restaurant
inventory relative to more favorable vendor terms in accounts payable.
The cash provided by operating activities for the 26 weeks ended July 2, 2000
was $3,731,000 as compared with $719,000 for the same period in 1999. The net
increase of $3,012,000 during 2000 was primarily attributable to 1999 activity
being unusually high due to decreases in accounts payable during 1999 which were
partially offset by decreases in receivables from U.S. Foodservice, the
Company's distributor.
The cash used in investing activities decreased to $445,000 for the 26 weeks
ended July 2, 2000 as compared with $2,344,000 for the same period in 1999. The
decrease of $1,899,000 was due to the Company opening one new restaurant as well
as the $855,000 purchase of a previously leased restaurant site during 1999, as
compared to expenditures consisting primarily of minor renovations and equipment
purchases during 2000.
The cash used in financing activities was $271,000 for the 26 weeks ended July
2, 2000 as compared with cash provided by financing activities of $189,000
during the same period in 1999. The decrease in cash was due to $409,000 less
borrowings and $50,000 in additional debt repayments during 2000 as compared
with 1999.
SEASONALITY
The restaurant industry in general is seasonal, depending on restaurant location
and the type of food served. The Company has experienced fluctuations in its
quarter-to-quarter operating results due primarily to its high concentration of
restaurants in Florida. Business in Florida is influenced by seasonality due to
various factors which include but are not limited to weather conditions in
Florida relative to other areas of the U.S. and the health of Florida's economy
in general and the tourism industry in particular. The Company's Midwest
restaurants are also influenced by weather conditions and other seasonal
factors. The Company's restaurant sales are generally highest from January
through April and June through August, the peaks of the Florida tourism season,
and generally lower from September through mid-December. In many cases,
locations are in coastal cities, where sales are significantly dependent on
tourism and its seasonality patterns.
In addition, quarterly results have been, and in the future could be, affected
by the timing of new restaurant openings both in and outside of Florida. 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.
10
<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
At the Company's Annual Meeting of Stockholders held on May 17, 2000, the
stockholders voted (i) to amend the Company's 1995 Employee Stock Option Plan to
increase the number of shares that can be issued thereunder from 340,000 to
540,000 shares, (ii) to amend the Non-employee Director Stock Option Plan to
increase the annual grant provided for thereunder from options to purchase 2,000
shares of common stock to options to purchase 4,000 shares of common stock, and
(iii) against the proposal to hold future annual meetings in Tampa, Florida. The
adoption of the amendment to the 1995 Employee Stock Option Plan was approved by
the vote of 2,820,591 shares for, 404,528 shares against, 9,828 shares
abstaining and 1,219,068 shares representing broker non-votes. The adoption of
the amendment to the Non-employee Director Stock Option Plan was approved by the
vote of 3,004,783 shares for, 220,602 shares against, 9,562 shares abstaining
and 1,219,068 shares representing broker non-votes. The proposal to hold future
annual meetings in Tampa, Florida was rejected by the vote of 438,531 shares
for, 2,256,083 shares against, 48,390 shares abstaining and 1,711,011 shares
representing broker non-votes.
In addition, at the Annual Meeting of Stockholders held on May 17, 2000,
the following directors were nominated and elected by the votes indicated:
Frederick R. Adler: 2,938,956 For, 295,991 Against or Withheld, 0 Abstaining
Philip R. Chapman: 2,946,756 For, 288,191 Against or Withheld, 0 Abstaining
William E. Hattaway: 2,940,554 For, 294,393 Against or Withheld, 0 Abstaining
Christopher D. Illick: 2,947,356 For, 287,591 Against or Withheld, 0 Abstaining
Richard A. Mandell: 2,947,456 For, 287,491 Against or Withheld, 0 Abstaining
Jay S. Nickse: 2,947,356 For, 287,591 Against or Withheld, 0 Abstaining
Item 5 - Other Information
None
Item 6 - (a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
11
<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)
/s/ WARREN R. NELSON
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Date August 15, 2000 Warren R. Nelson
Executive Vice President and Chief Financial Officer
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