<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 2, 1997
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 13, 1997: 16,535,125
The Index to Exhibits is located at Page 12. Total Pages 17
<PAGE>
CONSOLIDATED PRODUCTS, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Position -
July 2, 1997 (Unaudited) and September 25, 1996 3
Consolidated Statements of Earnings (Unaudited) -
Twelve and Forty Weeks Ended July 2, 1997
and July 3, 1996 4
Consolidated Statements of Cash Flows (Unaudited) -
Forty Weeks Ended July 2, 1997 and
July 3, 1996 5
Notes to Consolidated Financial Statements (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 11
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
JULY 2, SEPTEMBER 25,
1997 1996
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS
Cash, including cash equiva-
lents of $550,000 in 1997
and $190,000 in 1996 $ 1,340,264 $ 630,362
Receivables 3,779,284 3,301,499
Sale and leaseback properties
under contract - 2,231,000
Inventories 4,479,247 3,940,075
Deferred income taxes 1,248,000 1,248,000
Other current assets 4,395,517 3,792,620
--------------- ---------------
Total current assets 15,242,312 15,143,556
--------------- ---------------
PROPERTY AND EQUIPMENT
Land 40,023,256 30,579,097
Buildings 36,801,894 29,417,926
Leasehold improvements 41,718,903 37,235,370
Equipment 63,305,216 52,920,755
Construction in progress 10,027,608 7,496,456
--------------- ---------------
191,876,877 157,649,604
Less accumulated depreciation
and amortization (53,868,224) (46,987,316)
--------------- ---------------
Net property and equipment 138,008,653 110,662,288
--------------- ---------------
LEASED PROPERTY
Leased property under capital
leases, less accumulated amorti-
zation of $9,823,169 in 1997
and $9,628,062 in 1996 2,833,807 3,252,642
Net investment in direct
financing leases 1,294,751 1,782,993
--------------- ---------------
Net leased property 4,128,558 5,035,635
--------------- ---------------
OTHER ASSETS 513,770 574,023
--------------- ---------------
$ 157,893,293 $ 131,415,502
--------------- ---------------
--------------- ---------------
JULY 2, SEPTEMBER 25,
1997 1996
---- ----
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 13,360,776 $ 13,529,119
Accrued expenses 20,318,938 17,473,046
Current portion of senior note 738,889 5,000,000
Current portion of obligations
under capital leases 1,357,148 1,302,523
--------------- ---------------
Total current liabilities 35,775,751 37,304,688
--------------- ---------------
DEFERRED INCOME TAXES 325,000 325,000
OBLIGATIONS UNDER
CAPITAL LEASES 5,702,091 6,956,882
REVOLVING LINE OF CREDIT 16,000,000 4,000,000
SENIOR NOTE 29,261,111 25,000,000
SHAREHOLDERS' EQUITY
Common stock -- $.50 stated value
25,000,000 shares authorized --
shares issued: 15,634,069 in 1997;
14,045,486 in 1996 7,817,035 7,022,743
Additional paid-in capital 75,165,717 51,766,742
Retained earnings (deficit) (9,957,704) 1,262,066
Less: Unamortized value of
restricted shares (906,136) (1,416,851)
Treasury stock -- at cost
108,879 shares in 1997:
78,288 shares in 1996 (1,289,572) (805,768)
--------------- ---------------
Total shareholders' equity 70,829,340 57,828,932
--------------- ---------------
$ 157,893,293 $ 131,415,502
--------------- ---------------
--------------- ---------------
SEE ACCOMPANYING NOTES.
3
<PAGE>
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE FORTY
WEEKS ENDED WEEKS ENDED
----------- -----------
JULY 2, JULY 3, JULY 2, JULY 3,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 64,173,847 $ 55,202,677 $ 195,603,671 $ 167,228,075
Franchise fees 842,603 687,423 2,353,309 2,069,903
Other, net 708,262 547,208 1,602,734 1,806,896
--------------- --------------- --------------- ---------------
65,724,712 56,437,308 199,559,714 171,104,874
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES
Cost of sales 16,732,165 14,634,607 51,481,806 44,395,668
Restaurant operating costs 28,599,552 24,508,604 87,567,081 75,557,185
General and administrative 4,954,117 4,269,071 16,031,364 14,015,958
Depreciation and amortization 2,479,538 2,034,250 7,928,365 6,412,317
Marketing 2,011,481 1,710,799 6,038,581 5,316,211
Rent 2,020,523 1,701,539 6,321,870 5,536,519
Amortization of pre-opening costs 812,072 760,982 2,672,323 2,373,716
Interest 879,633 786,175 2,870,232 2,426,473
--------------- --------------- --------------- ---------------
58,489,081 50,406,027 180,911,622 156,034,047
--------------- --------------- --------------- ---------------
EARNINGS BEFORE INCOME TAXES 7,235,631 6,031,281 18,648,092 15,070,827
INCOME TAXES 2,680,000 2,325,000 7,060,000 5,785,000
--------------- --------------- --------------- ---------------
NET EARNINGS $ 4,555,631 $ 3,706,281 $ 11,588,092 $ 9,285,827
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ .29 $ .24 $ .74 $ .60
WEIGHTED AVERAGE SHARES
AND EQUIVALENTS 15,766,308 15,581,750 15,720,859 15,498,382
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED
-----------------
JULY 2, JULY 3,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 11,588,092 $ 9,285,827
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 7,928,365 6,412,317
Amortization of pre-opening costs 2,672,323 2,373,716
Changes in receivables and inventories (977,166) (1,594,040)
Changes in other assets (3,100,577) (2,709,617)
Changes in income taxes payable 1,797,025 1,925,602
Changes in accounts payable
and accrued expenses 886,804 4,013,569
Loss on disposal of property 2,932 217,362
--------------- ---------------
Net cash provided by operating activities 20,797,798 19,924,736
--------------- ---------------
INVESTING ACTIVITIES
Additions of property and equipment (42,521,847) (35,098,437)
Net proceeds from disposal of
property and equipment 10,244,861 5,562,468
--------------- ---------------
Net cash used in investing activities (32,276,986) (29,535,969)
--------------- ---------------
FINANCING ACTIVITIES
Principal payments on debt
and capital lease obligations (5,721,684) (4,899,911)
Proceeds from issuance of senior note 5,000,000 5,000,000
Net proceeds from revolving line of credit 12,000,000 9,000,000
Proceeds from equipment and property leases 552,200 595,930
Lease payments on subleased properties (571,164) (553,963)
Cash dividends paid in lieu of fractional shares (20,519) (13,062)
Proceeds from exercise of stock options 203,961 508,370
Proceeds from employee stock purchase plan 746,296 538,668
--------------- ---------------
Net cash provided by financing activities 12,189,090 10,176,032
--------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS 709,902 564,799
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 630,362 1,350,139
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,340,264 $ 1,914,938
--------------- ---------------
--------------- ---------------
</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 2, 1997, the consolidated statements of earnings
for the twelve and forty weeks ended July 2, 1997 and July 3, 1996 and the
consolidated statements of cash flows for the forty weeks ended July 2, 1997 and
July 3, 1996 have been included. Certain 1996 items have been reclassified to
conform to the 1997 presentation.
The consolidated statements of earnings for the twelve and forty weeks ended
July 2, 1997 and July 3, 1996 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 25, 1996.
SEASONAL ASPECTS
The Company has substantial fixed costs which do not decline as a result of a
decline in sales. The Company's second fiscal quarter, which falls during the
winter months, usually reflects lower average weekly unit volumes, and sales can
be adversely affected by severe winter weather.
INTEREST AND INCOME TAXES PAID
Cash payments for interest during the forty weeks ended July 2, 1997 and July
3, 1996 amounted to $3,200,000 and $2,981,000, respectively. Cash payments for
income taxes during the forty weeks ended July 2, 1997 and July 3, 1996 amounted
to $5,265,000 and $3,804,000, respectively.
DEBT
On April 28, 1997, the Company amended its Senior Note Agreement and Private
Shelf Facility increasing the borrowing capacity to $50,000,000. During the
second quarter of 1997, the Company amended its $30,000,000 Revolving Credit
Facility to extend the maturity date to December 1998.
SHAREHOLDERS' EQUITY
The number of shares issued as of July 2, 1997 as reported in the consolidated
statement of financial position includes 1,402,298 shares which were distributed
on January 20, 1997 to shareholders of record on January 6, 1997 pursuant to a
10% stock dividend declared on December 18, 1996.
On May 21, 1997, the Company filed with the Securities and Exchange Commission
a registration statement for 1,000,000 shares of its common stock to be offered
for sale, subject to market conditions, through Company-directed transactions.
Subsequent to July 2, 1997, the Company sold the 1,000,000 shares of common
stock pursuant to this offering generating proceeds, net of agent fees, of
approximately $16,900,000. The proceeds were utilized to repay indebtedness.
6
<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 for at least six months prior to the beginning of the
fiscal periods being compared and which remained open through the end of the
fiscal period.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenues,
unless otherwise indicated, of items included in the Company's consolidated
statements of earnings for the periods indicated:
<TABLE>
<CAPTION>
TWELVE FORTY
WEEKS ENDED WEEKS ENDED
----------------- -------------------
7/2/97 7/3/96 7/2/97 7/3/96
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Net sales 97.6% 97.8% 98.0% 97.7%
Franchise fees 1.3 1.2 1.2 1.2
Other, net 1.1 1.0 0.8 1.1
----- ----- ----- -----
100.0 100.0 100.0 100.0
----- ----- ----- -----
COSTS AND EXPENSES
Cost of sales 26.1 (1) 26.5 (1) 26.3 (1) 26.5 (1)
Restaurant operating costs 44.6 (1) 44.4 (1) 44.8 (1) 45.2 (1)
General and administrative 7.5 7.6 8.0 8.2
Depreciation and amortization 3.8 3.6 4.0 3.7
Marketing 3.1 3.0 3.0 3.1
Rent 3.1 3.0 3.2 3.2
Amortization of pre-opening
costs 1.2 1.3 1.3 1.4
Interest 1.3 1.4 1.4 1.4
----- ----- ----- -----
89.0 89.3 90.7 91.2
----- ----- ----- -----
EARNINGS BEFORE INCOME TAXES 11.0 10.7 9.3 8.8
INCOME TAXES 4.1 4.1 3.5 3.4
----- ----- ----- -----
NET EARNINGS 6.9% 6.6% 5.8% 5.4%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- - ----------------
(1) Cost of sales and restaurant operating costs are expressed as a
percentage of net sales.
COMPARISON OF TWELVE WEEKS ENDED JULY 2, 1997 TO TWELVE WEEKS ENDED JULY 3, 1996
REVENUES
Net sales increased $8,971,000 to $64,174,000, or 16.3%, due to an increase
in Steak n Shake's net sales of $9,254,000. The 18.1% increase in net sales of
Steak n Shake was due to the opening of new units pursuant to the Company's
expansion plan (non-same stores) partially offset by a 3.3% decrease in same
store sales. The number of Company-operated Steak n Shake restaurants increased
20% to 187 at July 2, 1997 as compared to 156 at July 3, 1996. The decrease in
same store sales was attributable to a decrease of 5.0% in customer counts
partially offset by a 1.7% increase in check average. Steak n Shake instituted
price increases of 1.3% and 1.0% in October 1996 and March 1997, respectively.
After excluding units in close proximity (generally three miles) to the new
units opened during the periods, Steak n Shake same store sales were flat with
the prior year quarter.
Franchise fees increased $156,000 to $843,000, as a result of an increase
in franchise royalties of $76,000 due to the opening of 8 Steak n Shake
franchised units since the end of the third quarter of fiscal 1996 and an
increase in initial and renewal franchise fees of $80,000. Four franchised
units opened during the third quarter of 1997 compared to two franchised units
in the third quarter 1996.
Other revenues increased $161,000 primarily due to a $151,000 loss on the
disposal of property in the prior year third quarter related to the rebuilding
of two restaurants and the disposal of a closed unit.
7
<PAGE>
COSTS AND EXPENSES
Cost of sales increased $2,098,000, or 14.3%, as a result of sales
increases. As a percentage of net sales, cost of sales decreased to 26.1% from
26.5%, primarily as a result of the higher mix of Company-operated restaurant
sales as compared to product sales to franchisees, menu price increases and
tight management controls over food costs partially offset by inflationary
pressures on food cost, in particular, beef costs.
Restaurant operating costs increased $4,091,000, or 16.7%, due to increased
labor costs and other operating costs resulting from the higher sales volume and
the effect of the minimum wage increase partially offset by a decrease in fringe
benefit costs. Restaurant operating costs, as a percentage of net sales,
increased to 44.6% from 44.4%.
General and administrative expenses increased $685,000 or 16.0%. The
increase in expenses was attributable to personnel related costs, which included
costs for additional management and training personnel in connection with the
development of new restaurants. As a percentage of revenues, general and
administrative expenses decreased to 7.5% from 7.6%.
The $445,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1996.
Marketing expense increased $301,000, or 17.6%. As a percentage of
revenues, marketing expense increased slightly to 3.1% from 3.0% due to
increased outdoor and television advertising.
Rent expense increased $319,000, or 18.7%, as a result of sale and
leaseback transactions since the beginning of the third quarter of fiscal 1996
involving 12 company-owned properties and a net increase in the number of other
leased properties.
The $51,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new company-operated units opened
since the end of the second quarter of 1996.
Interest expense increased $93,000 as a result of the increased borrowings
under the Company's revolving line of credit and senior note agreements to fund
the Company's expansion plan, offset by lower average costs of borrowing and the
reduction in capital lease obligations.
INCOME TAXES
The Company's effective income tax rate decreased to 37.0% from 38.5% for
the quarter ended July 3, 1996 and from 37.8% for the year ended September 25,
1996. The decrease in the Company's effective income tax rate resulted
principally from lower state income taxes. A valuation allowance against gross
deferred tax assets has not been provided based upon the expectation of future
taxable income.
NET EARNINGS
Net earnings increased $849,000, or 22.9%, primarily as a result of the
increase in Steak n Shake's operating earnings. Fully diluted earnings per
share increased from $.24 to $.29.
8
<PAGE>
COMPARISON OF FORTY WEEKS ENDED JULY 2, 1997 TO FORTY WEEKS ENDED JULY 3, 1996
REVENUES
Net sales increased $28,376,000 to $195,604,000, or 17.0%, due to an
increase in Steak n Shake's net sales of $28,996,000. The 18.9% increase in net
sales of Steak n Shake was due to the opening of new units pursuant to the
Company's expansion plan (non-same stores), partially offset by a 0.8% decrease
in same store sales and the closure of three low-volume units. The number of
Company-operated Steak n Shake restaurants increased 20% to 187 at July 2, 1997
as compared to 156 at July 3, 1996. The decrease in same store sales was
attributable to a decrease of 2.2% in customer counts partially offset by a 1.4%
increase in check average. Steak n Shake instituted price increases of 1.4%,
1.3%, and 1.0% in January 1996, October 1996, and March 1997, respectively.
After excluding units in close proximity (generally three miles) to the new
units opened during the periods, Steak n Shake same store sales increased 2.3%.
Franchise fees increased $283,000 to $2,353,000, as a result of an increase
in franchise royalties of $363,000 due to the opening of 8 Steak n Shake
franchised units since the end of the third quarter of fiscal 1996 partially
offset by a decrease in initial and renewal franchise fees of $80,000. Six
franchised units opened during the forty weeks ended July 2, 1997 compared to
eleven franchised units in the prior year period.
Other revenues decreased $204,000 due to lease buyout costs of
approximately $487,000 during the forty weeks ended July 2, 1997 associated with
the disposition of two leased properties, partially offset by losses of
approximately $217,000 on the disposal of property during the prior year and
revenue generated by an increase in the number of properties leased to
franchisees by the Company's franchise financing subsidiary.
COSTS AND EXPENSES
Cost of sales increased $7,086,000, or 16.0%, as a result of sales
increases. As a percentage of net sales, cost of sales decreased to 26.3% from
26.5%.
Restaurant operating costs increased $12,010,000, or 15.9%, due to
increased labor costs and other operating costs resulting from the higher sales
volume and the effect of the minimum wage increase. Restaurant operating costs,
as a percentage of net sales, decreased to 44.8% from 45.2%, primarily as a
result of a decrease in fringe benefit costs.
General and administrative expenses increased $2,015,000 or 14.4%. The
increase in expenses was attributable to personnel related costs, which included
costs for additional management and training personnel in connection with the
development of new restaurants. As a percentage of revenues, general and
administrative expenses decreased to 8.0% from 8.2%.
The $1,516,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1996.
Marketing expense increased $722,000, or 13.6%. As a percentage of
revenues, marketing expense decreased to 3.0% from 3.1% due to the Company's
market intensification strategy.
Rent expense increased $785,000, or 14.2%, as a result of sale and
leaseback transactions since the beginning of fiscal 1996 involving 15 Company-
owned properties and a net increase in the number of other leased properties.
The $299,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new Company-operated units opened
since the beginning of fiscal 1996.
Interest expense increased $444,000 as a result of the increased borrowings
under the Company's revolving line of credit and senior note agreements to fund
the Company's expansion plan, offset by lower average costs of borrowing and the
reduction in capital lease obligations.
9
<PAGE>
INCOME TAXES
The Company's effective income tax rate decreased to 37.9% from 38.4% for
the forty weeks ended July 3, 1996 and increased from 37.8% for the year ended
September 25, 1996. A valuation allowance against gross deferred tax assets has
not been provided based upon the expectation of future taxable income.
NET EARNINGS
Net earnings increased $2,302,000, or 24.8%, primarily as a result of the
increase in Steak n Shake's operating earnings. Fully diluted earnings per
share increased from $.60 to $.74.
LIQUIDITY AND CAPITAL RESOURCES
Seven Company-operated Steak n Shake restaurants were opened during the
twelve weeks ended July 2, 1997. A total of twenty-six Company-operated Steak n
Shake restaurants and six franchised Steak n Shake restaurants were opened
during the forty weeks ended July 2, 1997. Subsequent to the end of the third
quarter, five Company-operated Steak n Shake restaurants were opened. Eleven
additional units, including four franchised units, are currently under
construction. For the forty weeks ended July 2, 1997, capital expenditures
totaled $42,522,000 as compared to $35,098,000 for the comparable prior year
period.
The Company's five-year expansion plan has an ongoing objective of an
annual increase of at least 20% in the number of Company-operated Steak n Shake
restaurants. The Company intends to fund capital expenditures and meet working
capital needs using existing resources and anticipated cash flows from
operations, together with additional capital generated by sale and leaseback
transactions involving newly acquired properties, bank borrowings, and the
issuance of equity and/or debt securities.
During the forty weeks ended July 2, 1997, cash provided by operations
totaled $20,798,000, while cash generated by sale and leaseback transactions and
other disposals of property totaled $10,245,000. During the forty weeks ended
July 3, 1996, cash provided by operations totaled $19,925,000, while cash
generated by sale and leaseback transactions and other disposals of property
totaled $5,562,000.
Net cash provided by financing activities for the forty weeks ended July 2,
1997 totaled $12,189,000. Net borrowings under the Revolving Credit Agreement
and the Senior Note Agreement and Private Shelf Facility totaled $12,000,000 and
$5,000,000, respectively, during the forty weeks ended July 2, 1997. The
proceeds from the borrowings were used to fund the Company's current expansion
plan and refinance borrowings under the prior senior note agreement.
As of July 2, 1997, the Company had borrowed $25,000,000 under its ten-year
Senior Note Agreement and Private Shelf Facility. Borrowings under this
facility bear interest at an average fixed rate of 7.7%. On April 28, 1997, the
Company amended the Senior Note Agreement and Private Shelf Facility increasing
borrowing capacity to $50,000,000. The Company's $30,000,000 Revolving Credit
Agreement bears interest based on LIBOR plus 87.5 basis points or the prime
rate, at the election of the Company. During the second quarter of 1997, the
Company amended the Revolving Credit Agreement to extend the maturity date to
December 1998. The amount outstanding under the Revolving Credit Agreement was
$16,000,000 as of July 2, 1997. The Company expects to be able to secure a new
revolving credit facility upon expiration of the current agreement. The
Company's debt agreements contain restrictions, which among other things require
the Company to maintain certain financial ratios.
On May 21, 1997, the Company filed with the Securities and Exchange
Commission a registration statement for 1,000,000 shares of its common stock to
be offered for sale, subject to market conditions, through Company-directed
transactions. Subsequent to July 2, 1997, the Company sold the 1,000,000 shares
of common stock pursuant to this offering generating proceeds, net of agent
fees, of approximately $16,900,000. The proceeds were utilized to repay
borrowings under the Revolving Credit Agreement.
10
<PAGE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." For
its fiscal year beginning September 25, 1997, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating basic earnings
per share, the dilutive effect of stock options will be excluded. The change is
expected to result in no effect to the primary (basic) earnings per share for
both the twelve weeks ended July 2, 1997 and July 3, 1996, and an increase of
$.01 per share for both the forty weeks ended July 2, 1997 and July 3, 1996.
The adoption of SFAS No. 128 will have no effect on diluted earnings per share
for the same periods.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This Report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Those statements include, but may not be limited to, the discussions of the
Company's expansion strategy, expectations concerning its future profitability,
capital sources and needs and franchising program. Investors in the Common
Stock are cautioned that reliance on any forward-looking statement involves
risks and uncertainties, and that although the Company believes that the
assumptions on which the forward-looking statements contained herein are
reasonable, any of those assumptions could prove to be inaccurate, and as a
result, the forward-looking statements based on those assumptions also could be
incorrect. The uncertainties in this regard include, but are not limited to,
those identified above. In light of these and other uncertainties, the inclusion
of a forward-looking statement herein should not be regarded as a representation
by the Company that the Company's plans and objectives will be achieved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable until the Company's fiscal year beginning October 1,
1998.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(2) Not Applicable
(3) 3.01 Articles of Incorporation of Consolidated Products,
Inc. (formerly Steak n Shake, Inc.), as amended through
November 1, 1981. (Incorporated by reference to the
Exhibits to Registration Statement No. 2-75094).
3.02 Attachment to Joint Agreement of Merger dated
October 31, 1983, between Franklin
Corporation and Steak n Shake, Inc.
(Incorporated by reference to the Exhibits to
Registrant's Annual Report on Form 10-K for
the year ended September 28, 1983).
3.03 Bylaws of Consolidated Products, Inc.
(formerly Steak n Shake, Inc.) in effect at
December 26, 1990. (Incorporated by
reference to the Exhibits to Registration
Statement of Form S-2 filed with the
Commission on August 6, 1992, file no. 33-
50568).
3.04 Articles of Amendment to Articles of
Incorporation of Steak n Shake, Inc. dated
May 15, 1984. (Incorporated by reference to
the Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended
September 26, 1984).
(4) 4.01 Specimen certificate representing Common
Stock of Consolidated Products, Inc.
(Incorporated by reference to the Exhibits to
the Registrant's Quarterly Report on Form 10-
Q for the fiscal quarter ended April 9,
1997).
4.02 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 Rule
601 of the Securities and Exchange
Commission), relating to a $30,000,000
revolving line of credit. (Incorporated by
reference to the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal
quarter ended December 21, 1994).
4.03 Note Purchase and Private Shelf Agreement by
and Between Consolidated Products, Inc. and
The Prudential Insurance Company of America
dated as of September 27 1995 related to
$39,250,000 senior note agreement and private
shelf facility. (Incorporated by reference to
the Exhibits to the Registrant's Current
Report on Form 8-K dated September 26, 1995).
4.04 First Amendment to Amended and Restated
Credit Agreement by and between Consolidated
Products, Inc. and Bank One, Indianapolis,
N.A. dated September 26, 1995.(Incorporated
by reference to the Exhibits to the
Registrant's Current Report on Form 8-K dated
September 26 1995).
12
<PAGE>
4.05 Second Amendment to Amended and Restated
Credit Agreement by and between Consolidated
Products, Inc. and Bank One, Indianapolis,
N.A. effective January 31, 1997.
(Incorporated by reference to the Exhibits to
the Registrant's Quarterly Report on Form 10-
Q for the fiscal quarter ended April 9,
1997).
4.06 Amendment No. 1 to Note Purchase and Private
Shelf Agreement by and between Consolidated
Products, Inc. and The Prudential Insurance
Company of America dated as of April 28, 1997
related to senior note agreement and private
shelf facility. (Incorporated by reference
to the Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter
ended April 9, 1997).
(10) 10.01 Consolidated Products, Inc. Executive Incentive
Bonus Plan. (Incorporated by reference to the
Exhibits to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 1,
1992).
10.02 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).
10.03 Consultant Agreement by and between James
Williamson, Jr. and the Registrant dated
November 20, 1990. (Incorporated by reference
to the Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter
ended July 1, 1992).
10.04 Memorandum agreement between Neal Gilliatt
and the Registrant dated July 30, 1991.
(Incorporated by reference to the Exhibits to
the Registrant's Quarterly Report on Form 10-
Q for the fiscal quarter ended July 1, 1992).
10.05 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 Exhibits to the
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 1, 1992).
10.06 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 Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 1992).
10.07 Letter from the Registrant to Alan B. Gilman
dated June 27, 1992. (Incorporated by
reference to the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 1992).
10.08 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 the 1993 Annual Meeting of
Shareholders).
13
<PAGE>
10.09 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 the 1993 Annual Meeting of
Shareholders).
10.10 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).
10.11 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 the 1994 Annual Meeting of
Shareholders).
10.12 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).
10.13 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).
10.14 Consolidated Products, Inc. 1996 Nonemployee
Director Stock Option Plan. (Incorporated by
reference to the Appendix to the Registrant's
definitive Proxy Statement dated January 15,
1996 related to the 1996 Annual Meeting of
Shareholders).
10.15 Consolidated Products, Inc. 1997 Employee
Stock Option Plan. (Incorporated by reference
to the Appendix to the Registrant's
definitive Proxy Statement dated December 24,
1996 related to the 1997 Annual Meeting of
Shareholders).
10.16 Consolidated Products, Inc. 1997 Capital
Appreciation Plan. (Incorporated by reference
to the Appendix to the Registrant's
definitive Proxy Statement dated December 24,
1996 related to the 1997 Annual Meeting of
Shareholders).
10.17 Amendment to Consolidated Products, Inc. 1992
Employee Stock Purchase Plan. (Incorporated
by reference to the Appendix to the
Registrant's definitive Proxy Statement dated
December 24, 1996 related to the 1997 Annual
Meeting of Shareholders).
10.18 Consolidated Products, Inc. 1997 Nonemployee
Director Stock Option Plan. (Incorporated by
reference to the Appendix to the Registrant's
definitive Proxy Statement dated December 24,
1996 related to the 1997 Annual Meeting of
Shareholders).
(11) 11.01 Computation of Earnings Per Share.
(15) Not applicable.
(18) Not applicable.
(19) Not applicable.
14
<PAGE>
(22) Not applicable.
(23) Not applicable.
(24) Not applicable.
(27) 27.01 Financial data schedule. (Electronic filing only).
(99) Not applicable.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the twelve weeks ended July
2, 1997.
15
<PAGE>
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 14, 1997.
CONSOLIDATED PRODUCTS, INC.
(Registrant)
/s/ Gregory G. Fehr
----------------------------------------
By Gregory G. Fehr
Vice President and Controller
On Behalf of the Registrant and as
Principal Accounting Officer
16
<PAGE>
EXHIBIT 11.01
CONSOLIDATED PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary and fully diluted 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. Common equivalent shares include
shares subject to purchase under stock options.
Net earnings per common and common equivalent share and weighted
average shares and equivalents for the twelve and forty weeks ended July 3,
1996 have been restated to give effect to the 10% stock dividend declared on
December 18, 1996.
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 2, JULY 3, JULY 2, JULY 3,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding 15,520,539 15,239,749 15,446,124 15,142,444
Share equivalents 245,769 342,001 274,735 355,938
----------- ----------- ----------- -----------
Weighted average shares and equivalents 15,766,308 15,581,750 15,720,859 15,498,382
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully Diluted:
Weighted average shares outstanding 15,520,539 15,239,749 15,446,124 15,142,444
Share equivalents 271,266 342,066 308,863 368,754
----------- ----------- ----------- -----------
Weighted average shares and equivalents 15,791,805 15,581,815 15,754,987 15,511,198
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings:
Net earnings for primary and fully diluted
earnings per share computation $ 4,555,631 $ 3,706,281 $11,588,092 $ 9,285,827
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF JULY 2, 1997 AND THE
CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWELVE AND FORTY WEEKS ENDED
JULY 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-24-1997
<PERIOD-START> SEP-26-1996
<PERIOD-END> JUL-02-1997
<CASH> 1,340,264<F1>
<SECURITIES> 0
<RECEIVABLES> 3,779,284
<ALLOWANCES> 0
<INVENTORY> 4,479,247
<CURRENT-ASSETS> 15,242,312
<PP&E> 191,876,877
<DEPRECIATION> 53,868,224
<TOTAL-ASSETS> 157,893,293
<CURRENT-LIABILITIES> 35,775,751
<BONDS> 0
0
0
<COMMON> 7,817,035
<OTHER-SE> 63,012,305
<TOTAL-LIABILITY-AND-EQUITY> 157,893,293
<SALES> 195,603,671
<TOTAL-REVENUES> 199,559,714
<CGS> 51,481,806
<TOTAL-COSTS> 139,048,887<F2>
<OTHER-EXPENSES> 16,922,558<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,870,232
<INCOME-PRETAX> 18,648,092
<INCOME-TAX> 7,060,000
<INCOME-CONTINUING> 11,588,092
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,588,092
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
<FN>
<F1>CASH INCLUDES CASH EQUILAVENTS OF $550,000.
<F2>INCLUDES RESTAURANT OPERATING COSTS OF $87,567,081.
<F3>INCLUDES DEPRECIATION AND AMORTIZATION AND RENT OF $10,600,688 AND 6,321,870,
RESPECTIVELY.
</FN>
</TABLE>
