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 October 1, 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
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(Address of principal executive offices) (zip code)
(813) 961-0944
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(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 14, 2000
----- --------------------------------
Common stock, $.01 par value 4,454,015
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
<S> <C>
Part I - Financial Information Page Number
Item 1 - Financial Statements
Consolidated Balance Sheets as of October 1, 2000 (Unaudited)
and January 2, 2000 3
Consolidated Statements of Operations (Unaudited) for the 13 and
39 Weeks ended October 1, 2000 and October 3, 1999 4
Consolidated Statements of Cash Flows (Unaudited) for the 39
weeks ended October 1, 2000 and October 3, 1999 5
Notes to Consolidated Financial Statements - (Unaudited) 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 1, 2000 January 2, 2000
--------------- ---------------
<S> <C> <C>
ASSETS
Cash $ 3,228,190 $ 2,940,919
Inventories 1,070,517 1,029,324
Other current assets 462,885 703,548
Receivables from related parties 136,645 191,528
Deferred tax asset, net 638,000 94,551
--------------- ---------------
Total current assets 5,536,237 4,959,870
Property and equipment, net 13,553,779 18,314,555
Prepaid rent 485,386 544,093
Other assets 454,290 691,894
Goodwill 2,938,348 3,092,995
Deferred tax asset, net 316,710 3,064,449
--------------- ---------------
TOTAL ASSETS $ 23,284,750 $ 30,667,856
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 2,508,857 $ 3,755,225
Accrued expenses 5,130,837 3,742,582
Sales tax payable 409,921 469,061
Current portion of long-term debt 1,737,554 917,728
--------------- ---------------
Total current liabilities 9,787,169 8,884,596
Deferred rent 1,994,225 1,791,625
Long-term debt, less current portion 4,181,406 5,656,493
--------------- ---------------
Total liabilities 15,962,800 16,332,714
Minority partner interest 460,418 589,583
--------------- ---------------
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) (7,344,018) (459,991)
--------------- ---------------
Total stockholders' equity 6,861,532 13,745,559
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,284,750 $ 30,667,856
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------------------- -------------------------------------
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
REVENUES: $ 22,205,978 $ 22,809,170 $ 72,517,108 $ 74,822,088
--------------- ----------------- --------------- -----------------
COST AND EXPENSES:
Cost of revenues 8,670,028 8,503,258 27,073,553 26,836,809
Labor and other related expenses 7,190,630 6,644,948 21,970,854 21,464,202
Other restaurant operating expenses 6,026,892 5,085,268 16,066,970 15,909,397
General and administrative expenses 1,698,170 1,816,696 5,341,913 5,427,898
Depreciation and amortization 702,857 857,122 2,060,053 2,437,322
Pre-opening expenses - - - 214,864
Provision for asset impairment 3,978,000 - 3,978,000 -
--------------- ----------------- --------------- -----------------
28,266,577 22,907,292 76,491,343 72,290,492
--------------- ----------------- --------------- -----------------
INCOME (LOSS) FROM OPERATIONS (6,060,599) (98,122) (3,974,235) 2,531,596
--------------- ----------------- --------------- -----------------
OTHER INCOME (EXPENSE):
Interest expense (256,835) (221,372) (745,347) (698,892)
Interest income 70,433 34,327 171,382 109,362
Other income (expense), net (5,477) 20,063 189,008 (33,091)
--------------- ----------------- --------------- -----------------
(191,879) (166,982) (384,957) (622,621)
--------------- ----------------- --------------- -----------------
INCOME (LOSS) BEFORE ELIMINATION OF MINORITY
PARTNER INTEREST AND INCOME TAXES (6,252,478) (265,104) (4,359,192) 1,908,975
ELIMINATION OF MINORITY PARTNER INTEREST (53,042) (39,024) (220,835) (160,889)
--------------- ----------------- --------------- -----------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (6,305,520) (304,128) (4,580,027) 1,748,086
(PROVISION) BENEFIT FOR INCOME TAXES (1,734,000) 109,000 (2,304,000) (639,000)
--------------- ----------------- --------------- -----------------
NET INCOME (LOSS) $ (8,039,520) $ (195,128) $ (6,884,027) $ 1,109,086
=============== ================= =============== =================
BASIC NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ (1.81) $ (0.04) $ (1.55) $ 0.25
=============== ================= =============== =================
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 (LOSS) PER SHARE OF COMMON STOCK $ (1.81) $ (0.04) $ (1.55) $ 0.24
=============== ================= =============== =================
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 4,454,015 4,454,015 4,454,015 4,552,925
=============== ================= =============== =================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
--------------------------------------------
OPERATING ACTIVITIES: October 1, 2000 October 3, 1999
------------------ -------------------
<S> <C> <C>
Net income (loss) $ (6,884,027) $ 1,109,086
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,060,053 2,437,322
Minority partner interest (129,165) (3,368)
Loss on impairment of assets 3,978,000
Changes in assets and liabilities:
(Increase) decrease in inventories (41,193) 11,705
Decrease (Increase) in receivables from related parties 54,883 (81,224)
Decrease in other assets 478,267 276,242
Decrease in prepaid rent 58,707 58,706
Decrease in deferred tax asset 2,204,290 16,000
Decrease in accounts payable (1,246,368) (2,940,365)
Increase in accrued expenses 1,388,255 188,164
Decrease in sales tax payable (59,140) (12,054)
Increase in income taxes payable - 23,790
Increase in deferred rent 202,600 198,539
------------------ -------------------
Total adjustments 8,949,189 173,457
------------------ -------------------
Net cash provided by operating activities 2,065,162 1,282,543
------------------ -------------------
INVESTING ACTIVITIES:
Purchase of property and equipment (1,122,630) (2,759,290)
------------------ -------------------
Net cash used in investing activities (1,122,630) (2,759,290)
------------------ -------------------
FINANCING ACTIVITIES:
Proceeds from debt financing 245,532 655,000
Repayment of debt (900,793) (651,314)
------------------ -------------------
Net cash (used in) provided by financing activities (655,261) 3,686
------------------ -------------------
Net increase (decrease) in cash 287,271 (1,473,061)
CASH AT BEGINNING OF PERIOD 2,940,919 4,723,121
------------------ -------------------
CASH AT END OF PERIOD $ 3,228,190 $ 3,250,060
================== ===================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 675,794 $ 611,615
Cash paid for income taxes $ 99,710 $ 599,210
</TABLE>
See Notes to Consolidated Financial Statements.
5
<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. The Company's
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. PROVISION FOR IMPAIRMENT OF ASSETS
In accordance with SFAS No. 121, the Company identified certain long-lived
assets as impaired. The impairment was recognized when the future undiscounted
cash flows of certain assets were estimated to be less than the assets' related
carrying value. As such, the carrying values were written down to the Company's
estimates of fair value based on the best information available making whatever
estimates, judgments, and projections were deemed necessary.
In the third quarter of Fiscal 2000, the Company recorded a provision of
$3,978,000 for the write-down of certain impaired assets in accordance with SFAS
No. 121. The write-down related to 19 restaurants of which 14 were in the
Midwest markets. The write-downs were necessitated by the current period
operating losses as well as the projected cash flows of the restaurants. The
Company has closed two of these units during the fourth quarter of 2000.
3. EARNINGS PER SHARE
The following table represents the computation of basic and diluted earnings
(loss) per share of common stock as required by Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share":
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (8,039,520) $ (195,128) $ (6,884,027) $ 1,109,086
=============================================================================
Weighted common shares outstanding 4,454,015 4,454,015 4,454,015 4,454,015
Basic net income (loss) per share of common stock $ (1.81) $ (0.04) $ (1.55) $ 0.25
=============================================================================
Effect of dilutive securities:
Warrants - - - 96,104
Stock options - - - 2,806
-----------------------------------------------------------------------------
Diluted weighted common shares outstanding 4,454,015 4,454,015 4,454,015 4,552,925
-----------------------------------------------------------------------------
Diluted net income (loss) per share of common stock $ (1.81) $ (0.04) $ (1.55) $ 0.24
=============================================================================
</TABLE>
6
<PAGE>
The earnings per share calculations excluded options and warrants to purchase
1,607,486 shares of common stock during the 13 and 39 week periods ended October
1, 2000 and options and warrants to purchase 1,409,376 and 627,627 shares of
common stock during the 13 and 39 week periods ended October 3, 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.
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 Operations bear to total
revenues.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------------------- -------------------------------------
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales 99.5% 99.6% 99.6% 99.6%
Management fees 0.5% 0.4% 0.4% 0.4%
------------------------------------- -------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0%
------------------------------------- -------------------------------------
Costs and expenses:
Cost of revenues 39.0% 37.3% 37.3% 35.9%
Labor and other related expenses 32.4% 29.1% 30.3% 28.7%
Other restaurant operating expenses 27.1% 22.3% 22.2% 21.3%
General and administrative expenses 7.6% 8.0% 7.4% 7.3%
Depreciation and amortization 3.2% 3.8% 2.8% 3.3%
Pre-opening expenses 0.0% 0.0% 0.0% 0.3%
Provision for asset impairment 17.9% 0.0% 5.5% 0.0%
------------------------------------- -------------------------------------
127.2% 100.5% 105.5% 96.8%
------------------------------------- -------------------------------------
Income (loss) from operations -27.2% -0.5% -5.5% 3.2%
------------------------------------- -------------------------------------
Other income (expense):
Interest expense -1.2% -1.0% -1.0% -0.9%
Interest income 0.3% 0.2% 0.2% 0.1%
Other income (expense), net 0.0% 0.1% 0.3% 0.0%
------------------------------------- -------------------------------------
-0.9% -0.7% -0.5% -0.8%
------------------------------------- -------------------------------------
Income (loss) before elimination of minority
partner interest and income taxes -28.1% -1.2% -6.0% 2.4%
Elimination of minority partner interest -0.2% -0.2% -0.3% -0.2%
------------------------------------- -------------------------------------
Income (loss) before income taxes -28.3% -1.4% -6.3% 2.2%
(Provision) benefit for income taxes -7.8% 0.5% -3.2% -0.9%
------------------------------------- -------------------------------------
Net income (loss) -36.1% -0.9% -9.5% 1.3%
===================================== =====================================
</TABLE>
8
<PAGE>
13 weeks ended October 1, 2000 and October 3, 1999
Revenues. Total revenues for the 13 weeks ended October 1, 2000 were $22,206,000
as compared to $22,809,000 for the 13 weeks ended October 3, 1999. The $603,000,
or 2.6% decrease in revenues primarily was due to the 13.8% decrease in sales
per unit in the Midwest restaurants and the closing of one restaurant in
September 1999, partially offset by a 3.6% increase in sales per unit in the
Florida restaurants. Same store sales decreased 2.6% as compared with 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
39.0% for the third quarter of 2000 from 37.3% for the third quarter of 1999.
This increase primarily was due to the rising commodity costs of seafood,
primarily shrimp and crab products, coupled with the implementation, during the
middle of the third quarter of 1999, of happy hour discounting for alcoholic
beverages throughout the chain. The Company is continually attempting to
anticipate and react 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
32.4% of revenues during the third quarter of 2000 as compared to 29.1% for the
third 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 in both the Florida and
the Midwest markets.
Other restaurant operating expenses. Other restaurant operating expenses
increased to 27.1% of revenues for the third quarter of 2000 as compared with
22.3% for the third quarter of 1999. Other restaurant operating expenses for the
third quarter of 2000 included a $984,000 charge related to restaurant closure
and property related expenses on a number of restaurant properties that either
closed or are being targeted for closure. Exclusive of the $984,000 charge,
other restaurant operating expenses were 22.7% of revenues. The increases in
other restaurant operating expenses included higher utility costs due to
increases in natural and propane gas rates as well as higher credit card fees
due to an increase in the percentage of customers utilizing credit cards.
General and administrative expenses. General and administrative expenses
decreased to 7.6% of revenues for the third quarter of 2000 as compared with
8.0% for the third quarter of 1999. The decrease was due to fewer managers in
training during the third quarter of 2000 as compared with the comparable period
in 1999.
Depreciation and amortization. Depreciation and amortization expense as a
percentage of revenues decreased to 3.2% for the third quarter of 2000 from 3.8%
in the third quarter of 1999. The decrease primarily was due to the reduced
basis of property and equipment resulting from the recognition of an asset
impairment charge in the fourth quarter of 1999.
Provision for impairment of assets. The Company recorded a $3,978,000 charge
relating to the write-down of impaired assets to their estimated fair value in
accordance with Statement of Financial Accounting Standards No. 121. The asset
impairment charge related to 19 restaurants, 14 restaurants in the Midwest and
five restaurants in Florida. 11 of the 19 restaurants had incurred previous
write-downs in the fourth quarter of 1999; however, the recent cash flow results
and revised projections of these restaurants necessitated further write-downs.
The Company has closed two restaurants during the fourth quarter of 2000 and
continues to scrutinize many of the remaining under-performing units for
disposition.
Provision (benefit) for income taxes. A provision for income taxes of $1,734,000
was recognized for the third quarter of 2000 as compared to a benefit from
income taxes of $109,000 in the third quarter of 1999. The $1,734,000 was
attributed to a reduction in the valuation allowance related to the uncertainty
of realizing certain tax assets.
9
<PAGE>
Income (loss) from operations and net income (loss). As a result of the factors
discussed above, the Company's loss from operations increased $5,963,000 to
$6,061,000 for the third quarter of 2000 from $98,000 for the third quarter of
1999. The net loss increased to $8,040,000 for the third quarter of 2000 from
$195,000 for the third quarter of 1999.
Exclusive of the non-recurring items, the net loss for the third quarter of 2000
was $1,344,000.
39 weeks ended October 1, 2000 and October 3, 1999
Revenues. Total revenues for the 39 weeks ended October 1, 2000 were $72,517,000
as compared to $74,822,000 for the 39 weeks ended October 3, 1999. The
$2,305,000 or 3.1% decrease primarily was due to the 15.9% decrease in sales per
unit in the Midwest restaurants and the closing of one restaurant in September
1999, partially offset by a 3.9% increase in sales per unit in the Florida
restaurants. Same store sales decreased 0.7% as compared with last year.
Cost of revenues. The cost of revenues as a percentage of revenues increased to
37.3% for the 39 weeks ended October 1, 2000 from 35.9% for the same period in
1999. This increase primarily was due to the rising commodity costs of seafood,
primarily shrimp and crab products, coupled with the implementation, during the
middle of the thrid quarter of 1999, of happy hour discounting for alcoholic
beverages throughout the chain.
Labor and other related expenses. Labor and other related expenses increased to
30.3% as a percentage of revenues for the 39 weeks ended October 1, 2000 as
compared to 28.7% 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 in both
the Florida and the Midwest markets.
Other restaurant operating expenses. Other restaurant operating expenses
increased to 22.2% as a percentage of revenues for the 39 weeks ended October 1,
2000 as compared with 21.3% for the same period in 1999. The increase was
attributed to a $984,000 charge related to restaurant closure and property
related expenses. Exclusive of the $984,000 charge, other restaurant operating
expenses decreased slightly to 20.8% of revenues. The decreases as compared with
last year were attributed 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 7.4% as a percentage of revenues for the 39 weeks ended October 1,
2000 as compared with 7.3% 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 in fiscal 2000.
Depreciation and amortization. Depreciation and amortization expenses as a
percentage of revenues decreased to 2.8% for the 39 weeks ended October 1, 2000
as compared with 3.3% 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 charge in the fourth quarter of 1999.
Pre-opening expenses. Pre-opening expenses decreased to zero in 2000 from
$215,000 for the 39 weeks ended October 3, 1999 as there were no new restaurant
openings during 2000.
Other income (expense), net. The other income of $189,000 for the 39 weeks ended
October 1, 2000 as compared with other expense of $33,000 for the same period in
1999 is primarily 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 $2,304,000 was
recognized for the 39 weeks ended October 1, 2000 as compared to $639,000 for
the same period in 1999. The $2,304,000 was primarily attributed to a
10
<PAGE>
$1,734,000 reduction in the valuation allowance related to the uncertainty of
realizing certain tax assets.
Income (loss) from operations and net income (loss). As a result of the factors
discussed above, the Company's results from operations decreased $6,506,000 to a
loss from operations of $3,974,000 for the 39 weeks ended October 1, 2000 as
compared with income from operations of $2,532,000 for the same period in 1999.
The net loss for the 39 weeks ended October 1, 2000 was $6,884,000 as compared
with net income of $1,109,000 for the same period in 1999.
Exclusive of the non-recurring items, the net loss for the 39 weeks ended
October 1, 2000 was $188,000.
LIQUIDITY AND CAPITAL RESOURCES
As of October 1, 2000, the Company's current liabilities of $9,787,000 exceeded
its current assets of $5,536,000, resulting in a working capital deficiency of
$4,251,000. 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 39 weeks ended October 1, 2000
was $2,065,000 as compared with $1,283,000 for the same period in 1999. The net
increase of $782,000 during 2000 was primarily attributable to greater decreases
in accounts payable during 1999 as compared with 2000.
The cash used in investing activities decreased to $1,123,000 for the 39 weeks
ended October 1, 2000 as compared with $2,759,000 for the same period in 1999.
The decrease of $1,636,000 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 $655,000 for the 39 weeks ended
October 1, 2000 as compared with cash provided by financing activities of $4,000
during the same period in 1999. The decrease was due to $409,000 less borrowings
and $250,000 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 or closures both in and outside of
Florida. Because of the seasonality of the Company's business and the impact of
new restaurant openings or closures, 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
Exhibit
Number Exhibit Description
------ -------------------
27 Financial Data Schedule (for SEC use only)
Reports on Form 8-K
The Company filed a current report on Form 8-K, Item 4, regarding a change
in the Company's certifying accountants dated September 13, 2000.
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)
<TABLE>
<CAPTION>
<S> <C>
/s/ Warren R. Nelson
--------------------------- ----------------------------------------------------
Date November 14, 2000 Warren R. Nelson
Executive Vice President and Chief Financial Officer
</TABLE>
13
