<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 TWELVE WEEKS ENDED JULY 5, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-8445
CONSOLIDATED PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 37-0684070
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
500 CENTURY BUILDING, 36 S. PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204
(317) 633-4100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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
--- ---
Number of shares of Common Stock outstanding at August 2, 1995: 12,272,530
The Index to Exhibits is located at Page 13. Total Pages 15
<PAGE>
CONSOLIDATED PRODUCTS, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Position -
July 5, 1995 (Unaudited) and September 28, 1994 3
Consolidated Statements of Earnings (Unaudited)
Twelve and Forty Weeks Ended July 5, 1995
and July 6, 1994 4
Consolidated Statements of Cash Flows (Unaudited)
Forty Weeks Ended July 5, 1995 and July 6, 1994 5
Notes to Consolidated Financial Statements (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JULY 5 SEPTEMBER 28
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including cash equivalents of $ 760,000 in 1995
and $9,012,000 in 1994 $ 1,687,032 $ 10,326,159
Receivables 2,334,107 2,165,177
Sale and leaseback properties
under contract 2,149,144 --
Inventory 3,423,633 3,009,516
Deferred income taxes 801,000 801,000
Other current assets 4,067,769 3,112,136
------------- -------------
Total current assets 14,462,685 19,413,988
------------- -------------
PROPERTY AND EQUIPMENT
Land 18,915,657 12,352,930
Buildings 17,899,244 14,200,657
Leasehold improvements 30,465,777 25,568,627
Equipment 50,457,056 42,934,328
Construction in progress 3,619,499 3,334,106
------------- -------------
121,357,233 98,390,648
Less accumulated depreciation
and amortization (50,440,937) (46,735,270)
------------- -------------
Net property and equipment 70,916,296 51,655,378
------------- -------------
LEASED PROPERTY
Leased property under capital
leases, less accumulated amorti-
zation of $9,240,145 in 1995
and $9,378,291 in 1994 4,073,681 4,540,791
Net investment in direct
financing leases 2,282,824 2,718,537
------------- -------------
Net leased property 6,356,505 7,259,328
------------- -------------
DEFERRED INCOME TAXES 758,000 758,000
OTHER ASSETS 813,892 1,241,390
------------- -------------
$ 93,307,378 $ 80,328,084
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
JULY 5 SEPTEMBER 28
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,443,581 $ 7,246,178
Accrued expenses
Salaries and wages 3,973,167 3,682,695
Insurance 2,006,890 2,521,690
Property taxes 1,736,965 1,695,990
Other 6,605,814 4,702,137
Current portion of obligations
under capital leases 1,174,648 1,140,864
Current portion of senior note 4,250,000 3,500,000
------------- -------------
Total current liabilities 28,191,065 24,489,554
------------- -------------
OBLIGATIONS UNDER
CAPITAL LEASES 8,743,010 9,885,522
REVOLVING LINE OF CREDIT 7,500,000 --
SENIOR NOTE 10,000,000 14,250,000
SUBORDINATED CONVERTIBLE
DEBENTURES -- 11,988,400
SHAREHOLDERS' EQUITY
Common stock -- $.50 stated value,
25,000,000 shares authorized --
shares issued: 12,471,879 in 1995;
7,490,818 in 1994 6,235,940 3,745,409
Additional paid-in capital 30,930,039 14,696,829
Retained earnings 3,263,342 3,004,530
Less treasury stock -- at cost:
201,987 shares in 1995;
265,690 shares in 1994 (1,556,018) (1,732,160)
------------- -------------
Total shareholders' equity 38,873,303 19,714,608
------------- -------------
$ 93,307,378 $ 80,328,084
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE FORTY
WEEKS ENDED WEEKS ENDED
----------- -----------
JULY 5 JULY 6 JULY 5 JULY 6
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 45,391,171 $ 38,860,831 $139,732,927 $118,212,259
Franchise fees 402,302 283,436 1,331,207 844,935
Other, net 330,710 360,327 1,093,997 1,060,329
------------ ------------ ------------ ------------
46,124,183 39,504,594 142,158,131 120,117,523
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Cost of sales 11,719,510 10,152,164 36,793,610 31,068,719
Restaurant operating costs 20,306,476 17,707,138 64,309,191 54,574,793
Selling, general and administrative 5,137,951 4,411,237 15,760,358 13,666,333
Depreciation and amortization 1,615,820 1,340,112 5,129,283 4,475,131
Amortization of pre-opening costs 489,920 413,049 1,465,164 1,148,242
Rent 1,453,778 1,142,012 4,485,909 3,463,895
Interest 583,454 826,558 2,354,476 2,782,535
Interest - capital leases 208,850 231,970 715,705 796,533
------------ ------------ ------------ ------------
41,515,759 36,224,240 131,013,696 111,976,181
------------ ------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES 4,608,424 3,280,354 11,144,435 8,141,342
INCOME TAXES 1,760,000 1,250,000 4,260,000 3,100,000
------------ ------------ ------------ ------------
NET EARNINGS $ 2,848,424 $ 2,030,354 $ 6,884,435 $ 5,041,342
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary $ .23 $ .25 $ .69 $ .62
Fully diluted $ .23 $ .18 $ .57 $ .45
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 12,624,400 8,172,743 9,966,489 8,096,639
Fully diluted 12,624,889 12,438,686 12,634,459 12,402,904
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED
-----------------
JULY 5 JULY 6
1995 1994
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 6,884,435 $ 5,041,342
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 5,129,283 4,475,131
Amortization of pre-opening costs 1,465,164 1,148,242
Provision for deferred income taxes -- 750,000
Changes in receivables and inventories (587,617) (1,088,319)
Changes in other assets (2,078,358) (2,493,644)
Changes in income taxes payable 1,655,848 1,807,363
Changes in accounts payable
and accrued expenses 1,126,003 3,357,588
Gain on disposal of property 10,587 (115,428)
------------- -------------
Net cash provided by operating activities 13,605,345 12,882,275
------------- -------------
INVESTING ACTIVITIES
Additions of property and equipment (29,539,801) (14,319,094)
Net proceeds from disposal of
property and equipment 3,441,405 5,365,643
------------- -------------
Net cash used in investing activities (26,098,396) (8,953,451)
------------- -------------
FINANCING ACTIVITIES
Principal payments on debt
and capital lease obligations (4,144,102) (3,443,412)
Lease payments on subleased properties (531,685) (576,108)
Proceeds from revolving line of credit 7,500,000 --
Proceeds from equipment and property leases 579,859 657,886
Proceeds from exercise of stock options 69,010 321,992
Proceeds from employee stock purchase plan 393,850 343,918
Cash paid in lieu of fractional shares (4,260) --
Cash dividends paid (8,748) (8,790)
------------- -------------
Net cash provided by (used in) financing activities 3,853,924 (2,704,514)
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,639,127) 1,224,310
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 10,326,159 $ 8,822,935
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,687,032 $ 10,047,245
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
CONSOLIDATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements.
In the opinion of the Company, all adjustments (consisting of only normal
recurring accruals) considered necessary to present fairly the consolidated
financial position as of July 5, 1995, the consolidated statements of earnings
for the twelve and forty weeks ended July 5, 1995 and July 6, 1994 and the
consolidated statement of cash flows for the forty weeks ended July 5, 1995 and
July 6, 1994 have been included. Certain 1994 items have been reclassified to
conform to the 1995 presentation.
The consolidated statements of earnings for the twelve and forty weeks ended
July 5, 1995 and July 6, 1994 are not necessarily indicative of the consolidated
statements of earnings for the entire year. For further information, refer to
the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended September 28, 1994.
SEASONALITY
Historically, the influence of the seasonal factor on sales has not been
significant. However, profitability may be influenced by fluctuations in sales
volume because of the nature of the Company's fixed costs.
REVOLVING LINE OF CREDIT
The Company replaced its $5,000,000 revolving line of credit with a
$30,000,000 unsecured revolving line of credit with a borrowing rate based on
LIBOR plus 125 basis points (87.5 basis points since the call of the Company's
10% Subordinated Convertible Debentures on April 4, 1995) or the prime rate of
interest. The revolving line of credit agreement, which expires in December
1996, includes the right to convert borrowings under the agreement into a five-
year term loan with a ten-year amortization schedule. Borrowings under this line
of credit totaled $7,500,000 at July 5, 1995.
SUBORDINATED CONVERTIBLE DEBENTURES
On April 4, 1995, the Company completed the call of its 10% Subordinated
Convertible Debentures due November 20, 2002 ("the Debentures"). Holders of the
Debentures ("Holders") electing conversion of their Debentures into common stock
received one share of the Company's common stock for each $2.82 of Debenture
principal held on the date of conversion plus cash for any remaining fractional
portion. Holders electing redemption of their Debentures received cash in the
principal amount of the Debentures, plus accrued interest up to April 4, 1995.
The call of the Company's Debentures eliminated $10,860,600 of the Company's
long-term debt.
INTEREST AND INCOME TAXES PAID
Cash payments for interest during the forty weeks ended July 5, 1995 and July
6, 1994 amounted to $2,554,000 and $2,673,000, respectively. Cash payments for
income taxes during the forty weeks ended July 5, 1995 and July 6, 1994 amounted
to $2,606,000 and $1,393,000, respectively.
6
<PAGE>
SHAREHOLDERS' EQUITY
The number of shares issued as of July 5, 1995 on the statement of financial
position includes 767,174 shares which were distributed on January 20, 1995
pursuant to a 10% stock dividend declared on December 20, 1994.
As a result of Holders electing conversion of their outstanding Debenture
principal to the Company's common stock, the Company issued 3,798,754 shares of
common stock thereby increasing total shareholder's equity by $10,468,000.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary earnings per common and common equivalent share are computed by
dividing net earnings by the weighted average number of common shares and common
equivalent shares outstanding. Common equivalent shares include shares subject
to purchase under stock options and stock warrants. The decrease in primary
earnings per share results from an increase in the number of shares outstanding
arising from the conversion of the Debentures into the Company's common stock
effective April 3, 1995.
Prior to the conversion of the Debentures on April 3, 1995, fully diluted
earnings per common and common equivalent share assumes, in addition to the
above, that the Debentures were converted at the date of issuance, and that net
earnings are increased by the actual amount of interest expense, net of income
taxes, related to the Debentures.
Net earnings per common and common equivalent share and weighted average
shares outstanding for the twelve and forty weeks ended July 6, 1994 have been
restated to give effect to the 10% stock dividend declared on December 20, 1994.
Additionally, the conversion price on the Debentures was adjusted from $3.10 to
$2.82 as a result of the stock dividend.
The following table presents information necessary to calculate net earnings
per common and common equivalent share:
<TABLE>
<CAPTION>
TWELVE FORTY
WEEKS ENDED WEEKS ENDED
--------------------------- ---------------------------
JULY 5 JULY 6 JULY 5 JULY 6
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY:
Shares outstanding:
Weighted average shares outstanding 12,261,113 7,858,385 9,653,357 7,748,663
Share equivalents 363,287 314,358 313,132 347,976
------------ ------------ ------------ ------------
Adjusted shares outstanding 12,624,400 8,172,743 9,966,489 8,096,639
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
FULLY DILUTED:
Shares outstanding:
Weighted average shares outstanding 12,261,113 7,858,385 9,653,357 7,748,663
Share equivalents 363,776 315,083 374,111 377,275
Conversion of Debentures -- 4,265,218 2,606,991 4,276,966
------------ ------------ ------------ ------------
Adjusted shares outstanding 12,624,889 12,438,686 12,634,459 12,402,904
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net earnings:
Net earnings for primary earnings
per share computation $ 2,848,424 $ 2,030,354 $ 6,884,435 $ 5,041,342
Add - interest expense, net of income
taxes, applicable to Debentures -- 166,415 333,003 556,257
------------ ------------ ------------ ------------
Net earnings as adjusted for fully
diluted earnings per share computation $ 2,848,424 $ 2,196,769 $ 7,217,438 $ 5,597,599
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In the following discussion, the term "same store sales" refers to the
sales of only those units open at the beginning of both of the fiscal years
discussed and which remained open throughout both years, and the term "non-same
store sales" refers to the sales of units either opened or closed at any time
during the fiscal years discussed.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to revenues of
items included in the Company's consolidated statements of earnings for the
periods indicated:
<TABLE>
<CAPTION>
TWELVE FORTY
WEEKS ENDED WEEKS ENDED
------------------ -------------------
7/5/95 7/6/94 7/5/95 7/6/94
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Net sales 98.4% 98.4% 98.3% 98.4%
Franchise fees .9 .7 .9 .7
Other, net .7 .9 .8 .9
----- ----- ----- -----
100.0 100.0 100.0 100.0
----- ----- ----- -----
COSTS AND EXPENSES
Cost of sales 25.4 25.7 25.9 25.8
Restaurant operating costs 44.0 44.8 45.2 45.4
Selling, general
and administrative 11.1 11.1 11.1 11.4
Depreciation and amortization 3.5 3.4 3.6 3.7
Amortization of pre-opening costs 1.1 1.1 1.0 1.0
Rent 3.1 2.9 3.2 2.9
Interest 1.3 2.1 1.7 2.3
Interest-capital leases .5 .6 .5 .7
----- ----- ----- -----
90.0 91.7 92.2 93.2
----- ----- ----- -----
EARNINGS BEFORE INCOME TAXES 10.0 8.3 7.8 6.8
INCOME TAXES 3.8 3.2 3.0 2.6
----- ----- ----- -----
NET EARNINGS 6.2% 5.1% 4.8% 4.2%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
COMPARISON OF TWELVE WEEKS ENDED JULY 5, 1995 TO TWELVE WEEKS ENDED JULY 6, 1994
REVENUES
Revenues increased $6,620,000, or 16.8%, due primarily to an increase in
Steak n Shake's net sales of $6,410,000. The increase in net sales of Steak n
Shake was due to an increase of 3.0% in same store sales and the opening of
twenty-one new units since the second quarter of fiscal 1994, partially offset
by the closure of two low-volume units. The same store sales increase was
attributable to increases of 0.5% in customer counts and 2.5% in check average.
The increase in net sales of $120,000 in the specialty restaurants resulted from
an 8.2% increase in same store sales, somewhat offset by the closure of a
specialty restaurant in the first quarter of fiscal 1995. The increase in same
store sales was attributable to increases of 3.2% in customer counts and 5.1% in
check average, which were a result of the conversion of three additional units
to the Colorado Steakhouse concept since the second quarter of fiscal 1994.
Franchise fees increased $119,000 due to the opening of seven Steak n Shake
franchised units since the second quarter of fiscal 1994.
COSTS AND EXPENSES
Cost of sales increased $1,567,000, or 15.4%, as a result of sales
increases. As a percentage of revenues, cost of sales decreased to 25.4% from
25.7%, primarily as a result of a menu price increase and lower beef costs.
8
<PAGE>
Restaurant operating costs increased $2,599,000, or 14.7%, due to higher
labor costs and other operating costs resulting from the increased sales volume.
Restaurant operating costs, as a percentage of revenues, decreased to 44.0% from
44.8%, primarily as a result of the increase in sales.
Selling, general and administrative expenses increased $727,000 or 16.5%.
As a percentage of revenues, selling, general and administrative expenses
remained unchanged at 11.1%. Marketing expense, as a percentage of revenues,
increased to 3.0% from 2.9% and accounted for $263,000 of the increase.
Additionally, the increase in expenses was attributable to personnel related
costs, which included costs for additional staffing in connection with the
development of new restaurants.
The $276,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the second quarter
of fiscal 1994.
The $77,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new company-operated units opened.
Rent expense increased $312,000, or 27.3%, as a result of sale and
leaseback transactions since the second quarter of fiscal 1994 involving six
company-owned properties and a net increase in the number of other leased
properties.
Interest expense decreased $266,000 as a result of the conversion of the
Debentures on April 3, 1995 and reductions in the senior debt and capital lease
obligations, partially offset by borrowings from the revolving line of credit.
INCOME TAXES
The Company's effective income tax rate increased to 38.2% from 38.1% for
the quarter ended July 6, 1994 and from 36.7% for the year ended September 28,
1994. The increase from the prior year and from the fiscal year ended September
28, 1994 resulted from a decrease in federal tax credits.
A valuation allowance against gross deferred tax assets has not been
provided based upon the expectation of future taxable income from the following
sources: (a) future tax deductions that reverse in a carryback period during
which the Company was a taxpaying entity; (b) existing taxable temporary
differences reversing in future periods; and (c) future taxable income. The
Company has a strong earnings history and anticipates future earnings to be at a
level that will be more than adequate to realize any remaining deferred tax
assets. Uncertainties relating to future taxable income could include a decline
in sales and reduction in taxable income; however, in management's opinion, it
is more likely than not that the gross deferred tax assets reflected on the
Consolidated Statements of Financial Position will be realized.
NET EARNINGS
Net earnings increased $818,000, or 40.3%, primarily as a result of the
increase in Steak n Shake's operating earnings. The decrease in primary
earnings per share results from an increase in the number of shares outstanding
arising from the conversion of the Debentures into the Company's common stock
effective April 3, 1995.
9
<PAGE>
COMPARISON OF FORTY WEEKS ENDED JULY 5, 1995 TO FORTY WEEKS ENDED JULY 6, 1994
REVENUES
Revenues increased $22,041,000, or 18.4%, due primarily to an increase in
Steak n Shake's net sales of $20,213,000. The increase in net sales of Steak n
Shake was due to an increase of 5.9% in same store sales and the opening of
twenty-six new units since the beginning of fiscal 1994, partially offset by the
closure of two low-volume units. The same store sales increase was attributable
to increases of 3.1% in customer counts and 2.6% in check average. The increase
in net sales of $1,308,000 in the specialty restaurants resulted from a 15.5%
increase in same store sales, somewhat offset by the closure of a specialty
restaurant in the second quarter of fiscal 1995. The increase in same store
sales was attributable to increases of 7.2% in customer counts and 7.7% in check
average, which were a result of the conversion of three additional units to the
Colorado Steakhouse concept since the beginning of fiscal 1994.
Franchise fees increased $486,000 due to the opening of ten Steak n Shake
franchised units since the beginning of fiscal 1994.
COSTS AND EXPENSES
Cost of sales increased $5,725,000, or 18.4%, as a result of sales
increases. As a percentage of revenues, cost of sales increased slightly to
25.9% from 25.8%.
Restaurant operating costs increased $9,734,000, or 17.8%, due to higher
labor costs and other operating costs resulting from the increased sales volume.
Restaurant operating costs, as a percentage of revenues, decreased slightly to
45.2% from 45.4%.
Selling, general and administrative expenses increased $2,094,000, or
15.3%. As a percentage of revenues, selling, general and administrative
expenses decreased to 11.1% from 11.4%. Marketing expense, as a percentage of
revenues, increased to 2.8% from 2.7% and accounted for $790,000 of the
increase. Additionally, the increase in expenses was attributable to personnel
related costs, which included costs for additional staffing in connection with
the development of new restaurants.
The $654,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1994.
The $317,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new company-operated units opened.
Rent expense increased $1,022,000, or 29.5%, as a result of sale and
leaseback transactions since the beginning of fiscal 1994 involving ten company-
owned properties and a net increase in the number of other leased properties.
Interest expense decreased $509,000 as a result of the conversion of the
Debentures on April 3, 1995 and reductions in the senior debt and capital lease
obligations, partially offset by borrowings from the revolving line of credit.
INCOME TAXES
The Company's effective income tax rate increased to 38.2% from 38.1% for
the forty weeks ended July 6, 1994 and from 36.7% for the year ended September
28, 1994. The increase from the prior year and from the fiscal year ended
September 28, 1994 resulted from a decrease in federal tax credits.
10
<PAGE>
A valuation allowance against gross deferred tax assets has not been
provided based upon the expectation of future taxable income from the following
sources: (a) future tax deductions that reverse in a carryback period during
which the Company was a taxpaying entity; (b) existing taxable temporary
differences reversing in future periods; and (c) future taxable income. The
Company has a strong earnings history and anticipates future earnings to be at a
level that will be more than adequate to realize any remaining deferred tax
assets. Uncertainties relating to future taxable income could include a decline
in sales and reduction in taxable income; however, in management's opinion, it
is more likely than not that the gross deferred tax assets reflected on the
Consolidated Statements of Financial Position will be realized.
NET EARNINGS
Net earnings increased $1,843,000, or 36.6%, primarily as a result of the
increase in Steak n Shake's operating earnings.
LIQUIDITY AND CAPITAL RESOURCES
Twenty-two Steak n Shake restaurants, including seven franchised units,
have been opened during this fiscal year and fifteen additional units, including
six franchised units, are currently under construction. For the forty weeks
ended July 5, 1995, capital expenditures totaled $29,540,000 as compared to
$14,319,000 for the comparable prior year period.
In February 1995, the Company announced an expansion of its Steak n Shake
growth strategy. The growth plan objective is to open 295 Steak n Shake
restaurants, including 135 franchised restaurants, over the five-year period
1996-2000.
For the forty weeks ended July 5, 1995, the Company's capital expenditures
were funded by the Company's existing cash and cash equivalents, cash flows from
operations and debt borrowings.
On April 4, 1995, the Company completed the call of the Debentures.
Holders electing conversion of their Debentures into common stock received one
share of the Company's common stock for each $2.82 of Debenture principal held
on the date of conversion plus cash for any remaining fractional portion.
Holders electing redemption of their Debentures received cash in the principal
amount of the Debentures, plus accrued interest up to April 4, 1995. The call
of the Company's Debentures eliminated $10,860,600 of the Company's long-term
debt. As a result of Holders electing conversion of their outstanding Debenture
principal to the Company's common stock, the Company issued 3,798,754 shares of
common stock with an aggregate market value on April 3, 1995 of $44,635,000.
The Company expects to fund capital expenditures, including the development
of the 160 Company-operated units contemplated by the expansion plan, and the
interest and principal payments with respect to its indebtedness using existing
resources and anticipated cash flow from operations, together with additional
capital generated by sale and leaseback transactions involving newly acquired
properties, bank borrowings under the $30,000,000 revolving line of credit and
the issuance of equity and/or debt securities.
The Company's Senior Note Agreement and the bank commitment for an
unsecured line of credit contain restrictions which, among other things, require
the Company and Steak n Shake to maintain certain financial ratios and specified
levels of net worth, restrict the payment of cash dividends and limit capital
expenditures to certain specified amounts in each of the fiscal years 1995
through 1997.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
See Index to Exhibits.
(b) REPORTS ON FORM 8-K.
MAY 5, 1995 - THE FOLLOWING EVENT WAS REPORTED.
Item 5. Redemption and conversion of the Company's
10% Subordinated Convertible Debentures on
April 4, 1995.
No financial statements were filed as a part of this report on
Form 8-K.
SIGNATURE
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, on August 15, 1995.
CONSOLIDATED PRODUCTS, INC.
(Registrant)
/s/ Kevin F. Beauchamp
----------------------------
By Kevin F. Beauchamp
Vice President and Controller
On Behalf of the Registrant and as
Principal Accounting Officer
12
<PAGE>
CONSOLIDATED PRODUCTS, INC.
INDEX TO FORM 10-Q EXHIBITS
Exhibit Page Number
Number in
Assigned in Sequential
Regulation Numbering
S-K Item 601 Description of Exhibit System
------------ ---------------------- ----------
(2) Not applicable.
(4) 4.01 Specimen certificate representing Common Stock of
Consolidated Products, Inc. (formerly Steak n
Shake, Inc.). (Incorporated by reference to
Exhibit 4.1 to Registration Statement No. 2-80542
on Form S-8 filed with the Commission on April 7,
1989).
4.02 Note Agreement among Steak n Shake, Inc.,
Consolidated Products, Inc. and The Prudential
Insurance Company of America dated as of November
1, 1990, related to $23,750,000 12.44% Senior
Notes of Steak n Shake, Inc. due October 31, 1997.
(Incorporated by reference to Exhibit 2.1 to the
Registrant's Report on Form 8-K dated November 27,
1990, file no. 0-8445).
4.03 Steak n Shake, Inc. 12.44% Senior Note Due October
31, 1997 dated November 27, 1990. (Incorporated by
reference to Exhibit 4.03 to Registration
Statement on Form S-2 filed with the Commission on
August 6, 1992, file no. 33-50568).
4.04 Pledge Agreement between Consolidated Products,
Inc. and The Prudential Insurance Company of
America dated as of November 1, 1990.
(Incorporated by reference to Exhibit 4.04 to
Registration Statement on Form S-2 filed with the
Commission on August 6, 1992, file no. 33-50568).
4.05 Amended and Restated Credit Agreement by and
between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A. dated December 30, 1994
(amending that earlier credit agreement between
parties dated as of March 10, 1994 and effective
as of February 23, 1994, relating to a $5,000,000
revolving line of credit which was not filed
pursuant to Reg. 299.601(b)(4)(iii) of the
Securities and Exchange Act of 1934), relating to
a $30,000,000 revolving line of credit.
(10) 10.01 Consolidated Products, Inc. 1991 Stock Option Plan
for Nonemployee Directors. (Incorporated by
reference to the Appendix to the Registrant's
definitive Proxy Statement dated January 10, 1992
related to its 1992 Annual Meeting of Shareholders
filed with the Commission on January 14, 1992,
file no. 0-8445).
10.02 Consolidated Products, Inc. 1991 Capital
Appreciation Plan. (Incorporated by reference to
the Appendix to the Registrant's definitive Proxy
Statement dated January 16, 1991 related to its
1991 Annual Meeting of Shareholders filed with the
Commission on January 20, 1991, file no. 0-8445).
10.03 Consolidated Products, Inc. Executive Incentive
Bonus Plan. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.04 Steak n Shake, Inc. Executive Incentive Bonus
Plan. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
13
<PAGE>
Exhibit Page Number
Number in
Assigned in Sequential
Regulation Numbering
S-K Item 601 Description of Exhibit System
------------ ---------------------- ----------
10.05 Employment Agreement by and between Richard C. May
and the Registrant dated July 19, 1991.
(Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.06 Consultant Agreement by and between James
Williamson, Jr. and the Registrant dated November
20, 1990. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.07 Memorandum agreement between Neal Gilliatt and the
Registrant dated July 30, 1991. (Incorporated by
reference to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 1,
1992 filed with the Commission on August 3, 1992,
file no. 0-8445).
10.08 Area Development Agreement by and between Steak n
Shake, Inc. and Consolidated Restaurants
Southeast, Inc. (currently Kelley Restaurants,
Inc.) dated June 12, 1991 for Charlotte, North
Carolina area. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.09 Area Development Agreement by and between Steak n
Shake, Inc. and Consolidated Restaurants
Southeast, Inc. (currently Kelley Restaurants,
Inc.) dated June 12, 1991 for Atlanta, Georgia
area. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.10 Letter agreement between Ladenburg, Thalmann & Co.
Inc. and the Registrant dated May 15, 1991 and
related warrant agreement dated September 26,
1991. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.11 Letter agreement between the Prudential Insurance
Company of America and the Registrant dated August
3, 1992. (Incorporated by reference to Exhibit
10.18 to Registration Statement on Form S-2 filed
with the Commission on August 6, 1992, file no.
33-50568).
10.12 Letter from the Registrant to Alan B. Gilman dated
June 27, 1992. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 1992 filed with the
Commission on August 3, 1992, file no. 0-8445).
10.13 Consolidated Products, Inc. 1992 Employee Stock
Purchase Plan. (Incorporated by reference to the
Appendix to the Registrant's definitive Proxy
Statement dated January 12, 1993 related to its
1993 Annual Meeting of Shareholders filed with the
Commission on January 13, 1993, file no. 0-8445).
14
<PAGE>
Exhibit Page Number
Number in
Assigned in Sequential
Regulation Numbering
S-K Item 601 Description of Exhibit System
------------ ---------------------- ----------
10.14 Consolidated Products, Inc. 1992 Employee Stock
Option Plan. (Incorporated by reference to the
Appendix to the Registrant's definitive Proxy
Statement dated January 12, 1993 related to its
1993 Annual Meeting of Shareholders filed with the
commission on January 13, 1993, file no. 0-8445).
10.15 Consolidated Products, Inc. 1994 Capital
Appreciation Plan. (Incorporated by reference to
the Appendix to the Registrant's definitive Proxy
Statement dated January 13, 1994 related to the
1994 Annual Meeting of Shareholders filed with the
Commission on January 14, 1994, file no. 0-8445).
10.16 Consolidated Products, Inc. 1994 Nonemployee
Director Stock Option Plan. (Incorporated by
reference to the Appendix to the Registrant's
definitive Proxy Statement dated January 13, 1994
related to its 1994 Annual Meeting of Shareholders
filed with the Commission on January 14, 1994,
file no. 0-8445).
10.17 Consolidated Products, Inc. 1995 Employee Stock
Option Plan. (Incorporated by reference to the
Appendix to the Registrant's definitive Proxy
Statement dated January 12, 1995 related to the
1995 Annual Meeting of Shareholders filed with the
Commission on January 17, 1995, file no. 0-8445).
10.18 Consolidated Products, Inc. 1995 Nonemployee
Director Stock Option Plan. (Incorporated by
reference to the Appendix to the Registrant's
definitive Proxy Statement dated January 12, 1995
related to the 1995 Annual Meeting of Shareholders
filed with the Commission on January 17, 1995,
file no. 0-8445).
(11) 11.01 Computation of Earnings Per Share. (Incorporated
by reference to the Notes to the Consolidated
Financial Statements included as a part of this
Report).
(15) Not applicable.
(18) Not applicable.
(19) Not applicable.
(22) Not applicable.
(23) Not applicable.
(24) Not applicable.
(27) 27.01 Financial Data Schedule. 16
(99) Not applicable.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF JULY 5, 1995 AND THE
CONSOLIDATED STATEMENT OF EARNINGS FOR THE FORTY WEEKS ENDED JULY 5, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-27-1995
<PERIOD-START> SEP-29-1994
<PERIOD-END> JUL-05-1995
<CASH> 1,687,032<F1>
<SECURITIES> 0
<RECEIVABLES> 2,334,107
<ALLOWANCES> 0
<INVENTORY> 3,423,633
<CURRENT-ASSETS> 14,462,685
<PP&E> 121,357,233
<DEPRECIATION> (50,440,937)
<TOTAL-ASSETS> 93,307,378
<CURRENT-LIABILITIES> 28,191,065
<BONDS> 0
<COMMON> 6,235,940
0
0
<OTHER-SE> 32,637,363
<TOTAL-LIABILITY-AND-EQUITY> 93,307,378
<SALES> 139,732,927
<TOTAL-REVENUES> 142,158,131
<CGS> 36,793,610<F2>
<TOTAL-COSTS> 101,102,801<F3>
<OTHER-EXPENSES> 11,079,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,070,181
<INCOME-PRETAX> 11,144,435
<INCOME-TAX> 4,260,000
<INCOME-CONTINUING> 6,884,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,884,435
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.57
<FN>
<F1>CASH INCLUDES CASH EQUIVALENTS OF $760,000.
<F2>INCLUDES RESTAURANT OPERATING COSTS OF $64,309,191.
<F3>INCLUDES DEPRECIATION AND AMORTIZATION AND RENT OF $6,594,447 AND
$4,485,909, RESPECTIVELY.
</FN>
</TABLE>
