<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 DECEMBER 22, 1999
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 January 24, 2000:
29,364,296
The Index to Exhibits is located at Page 12. Total Pages 16
<PAGE>
CONSOLIDATED PRODUCTS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Position -
December 22, 1999 (Unaudited) and September 29, 1999 3
Consolidated Statements of Earnings (Unaudited)
Twelve Weeks Ended December 22, 1999 and December 23, 1998 4
Consolidated Statements of Cash Flows (Unaudited)
Twelve Weeks Ended December 22, 1999 and December 23, 1998 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
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 22, SEPTEMBER 29,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash, including cash equiva-
lents of $935,000 in 2000
and $2,265,000 in 1999 $ 2,688,406 $ 4,055,187
Receivables 3,580,220 5,088,622
Properties under sale and
leaseback contract 2,925,217 6,011,486
Inventory 4,977,373 4,849,216
Deferred income taxes 1,133,000 1,133,000
Other current assets 4,890,274 3,989,204
------------ ------------
Total current assets 20,194,490 25,076,715
------------ ------------
PROPERTY AND EQUIPMENT
Land 53,298,159 49,691,470
Buildings 47,067,078 41,799,306
Leasehold improvements 47,590,208 45,079,229
Equipment 106,282,613 99,761,598
Construction in progress 14,196,515 20,109,301
------------ ------------
268,434,573 256,440,904
Less accumulated depreciation
and amortization (77,614,659) (74,530,108)
------------ ------------
Net property and equipment 190,819,914 181,910,796
------------ ------------
LEASED PROPERTY
Leased property under capital
leases, less accumulated amorti-
zation of $8,387,252 in 2000
and $8,287,813 in 1999 1,645,881 1,745,671
Net investment in direct
financing leases 296,495 379,262
------------ ------------
Net leased property 1,942,376 2,124,933
------------ ------------
OTHER ASSETS 1,325,318 1,359,207
------------ ------------
$214,282,098 $210,471,651
============ ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 22, SEPTEMBER 29,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable $ 19,243,237 $ 18,416,612
Accrued expenses 17,893,880 19,148,669
Current portion of senior note 2,734,365 2,734,365
Current portion of obligations
under capital leases 1,154,013 1,248,681
------------ ------------
Total current liabilities 41,025,495 41,548,327
------------ ------------
DEFERRED INCOME TAXES
AND CREDITS 6,435,475 6,226,172
OBLIGATIONS UNDER
CAPITAL LEASES 2,524,136 2,747,982
SENIOR NOTE 24,482,064 24,482,064
SHAREHOLDERS' EQUITY
Common stock -- $.50 stated value,
50,000,000 shares authorized --
shares issued: 29,596,961 in 2000;
29,587,890 in 1999 14,799,631 14,793,945
Additional paid-in capital 118,848,201 118,767,710
Retained earnings 12,382,050 7,452,544
Less: Unamortized value of
restricted shares (2,197,060) (2,498,091)
Treasury stock -- at cost
303,210 shares in 2000;
207,210 shares in 1999 (4,017,894) (3,049,002)
------------ ------------
Total shareholders' equity 139,814,928 135,467,106
------------ ------------
$214,282,098 $210,471,651
============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
---------------------------
DECEMBER 22, DECEMBER 23,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Net sales $ 91,870,138 $ 77,867,282
Franchise fees 748,945 704,361
Other, net 566,419 439,782
------------ ------------
93,185,502 79,011,425
------------ ------------
COSTS AND EXPENSES:
Cost of sales 22,754,697 19,882,043
Restaurant operating costs 44,481,236 36,434,450
General and administrative 6,848,120 5,617,372
Depreciation and amortization 3,603,158 3,060,077
Rent 3,652,707 2,941,090
Marketing 2,643,124 2,228,900
Pre-opening costs 1,138,589 888,521
Interest 349,365 533,841
------------ ------------
85,470,996 71,586,294
------------ ------------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 7,714,506 7,425,131
INCOME TAXES 2,785,000 2,708,000
------------ ------------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING 4,929,506 4,717,131
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR PRE-OPENING COSTS, NET OF INCOME
TAXES - (1,750,430)
------------ ------------
NET EARNINGS $ 4,929,506 $ 2,966,701
============ ============
BASIC NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Before cumulative effect of
accounting change $ .17 $ .16
Cumulative effect of change in
accounting for pre-opening costs - (.06)
------------ ------------
Basic earnings per share $ .17 $ .10
============ ============
DILUTED NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Before cumulative effect of
accounting change $ .17 $ .16
Cumulative effect of change in
accounting for pre-opening costs - (.06)
------------ ------------
Diluted earnings per share $ .17 $ .10
============ ============
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Basic 29,377,521 28,970,788
Diluted 29,481,788 29,423,859
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
CONSOLIDATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
---------------------------
DECEMBER 22, DECEMBER 23,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 4,929,506 $ 2,966,701
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 3,603,158 3,060,077
Cumulative effect of change in accounting
for pre-opening costs -- 1,750,430
Gain on disposal of property (114,164) (7,143)
Changes in receivables and inventories 1,390,119 54,681
Changes in other assets (592,386) (1,221,870)
Changes in income taxes payable 2,699,403 2,397,891
Changes in accounts payable
and accrued expenses (3,141,837) (5,726,777)
------------ ------------
Net cash provided by operating activities 8,773,799 3,273,990
------------ ------------
INVESTING ACTIVITIES:
Additions of property and equipment (16,387,384) (12,346,745)
Purchase of short term investments -- (1,000,000)
Net proceeds from sale/leasebacks and
other disposals 7,415,943 6,126,337
------------ ------------
Net cash used in investing activities (8,971,441) (7,220,408)
------------ ------------
FINANCING ACTIVITIES:
Principal payments on debt
and capital lease obligations (220,414) (203,465)
Lease payments on subleased properties (170,346) (113,064)
Cash dividends paid in lieu of fractional shares -- (19,313)
Proceeds from equipment and property leases 154,335 158,174
Proceeds from exercise of stock options 86,178 37,746
Treasury stock repurchases (968,892) --
------------ ------------
Net cash used in financing activities (1,119,139) (139,922)
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,316,781) (4,086,340)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,005,187 13,655,043
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,688,406 $ 9,568,703
============ ============
</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 December 22, 1999, the consolidated statements of
earnings for the twelve weeks ended December 22, 1999 and December 23, 1998
and the consolidated statements of cash flows for the twelve weeks ended
December 22, 1999 and December 23, 1998 have been included.
The consolidated statements of earnings for the twelve weeks ended
December 22, 1999 and December 23, 1998 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 29, 1999.
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 twelve weeks ended December 22, 1999
and December 23, 1998 amounted to $313,000 and $288,000, respectively. Cash
payments for income taxes during the twelve weeks ended December 22, 1999 and
December 23, 1998 amounted to $32,000 and $310,000, respectively.
CHANGE IN ACCOUNTING
During 1999, the Company adopted the provisions of American Institute of
Certified Public Accountants Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities" retroactive to the first quarter of fiscal
1999. This new accounting standard requires the Company to expense all
pre-opening costs as they are incurred. The Company previously deferred such
costs and amortized them over the one-year period following the opening of
each restaurant. The cumulative effect of this change in accounting, net of
income tax benefit, of $1,750,000 ($0.06 per diluted share) was recorded in
the first quarter of fiscal 1999.
STOCK DIVIDEND
The number of shares issued as of December 22, 1999 on the consolidated
statement of financial position includes 2,659,929 shares which were
distributed on January 12, 2000 pursuant to a 10% stock dividend declared on
December 15, 1999 to shareholders of record on December 29, 1999. Net
earnings per common and common equivalent share and weighted average shares
and equivalents for the twelve weeks ended December 23, 1998 have been
restated to give effect to the 10% stock dividend.
6
<PAGE>
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Diluted earnings per common and common equivalent share is computed by
dividing net earnings by the weighted average number of outstanding and
common equivalent shares. Common equivalent shares include shares subject to
purchase under stock options.
The following table presents information necessary to calculate basic and
diluted earnings per common and common equivalent share:
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
---------------------------
DECEMBER 22, DECEMBER 23,
1999 1998
------------ ------------
<S> <C> <C>
Weighted average shares outstanding - Basic 29,377,521 28,970,788
Share equivalents 104,267 453,071
------------ -------------
Weighted average shares and equivalents - Diluted 29,481,788 29,423,859
============ =============
Net earnings for basic and diluted earnings
per share computation $ 4,929,506 $ 2,966,701
============ =============
</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 eighteen months as of the beginning of the
current fiscal period being discussed 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 WEEKS ENDED
--------------------------
12/22/99 12/23/98
-------- --------
<S> <C> <C>
REVENUES
Net sales 98.6% 98.6%
Franchise fees 0.8 0.9
Other, net 0.6 0.5
-------- --------
100.0 100.0
-------- --------
COSTS AND EXPENSES
Cost of sales 24.8(1) 25.5(1)
Restaurant operating costs 48.4(1) 46.8(1)
General and administrative 7.3 7.1
Depreciation and amortization 3.9 3.9
Rent 3.9 3.7
Marketing 2.8 2.8
Pre-opening costs 1.2 1.1
Interest 0.4 0.7
-------- --------
91.7 90.6
-------- --------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING 8.3 9.4
INCOME TAXES 3.0 3.4
-------- --------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING 5.3 6.0
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR PRE-OPENING COSTS - 2.2
-------- --------
NET EARNINGS 5.3% 3.8%
======== ========
</TABLE>
_______________________________
(1) Cost of sales and restaurant operating costs are expressed as a percentage
of net sales.
COMPARISON OF TWELVE WEEKS ENDED DECEMBER 22, 1999
TO TWELVE WEEKS ENDED DECEMBER 23, 1998
REVENUES
Net sales increased $14,003,000 to $91,870,000, or 18.0%, due to an
increase in Steak n Shake's net sales. The increase of $14,053,000, or 19.0%,
in net sales of Steak n Shake was due to the opening of 44 new units within
the last year pursuant to the Company's expansion plan (non-same stores) and
a 3.0% increase in same store sales. The number of Company-operated Steak n
Shake restaurants increased 18% to 283 at December 22, 1999 as compared to
239 at December 23, 1998. The increase in same store sales was attributable
to a 4.6% increase in check average, partially offset by a 1.6% decrease in
customer counts. Steak n Shake instituted menu price increases of
approximately 1.0% and 3.0% in the second and fourth quarters, respectively,
of fiscal 1999. The increased same store sales continues a trend of eight
consecutive quarters of increased same store sales.
8
<PAGE>
COSTS AND EXPENSES
Cost of sales increased $2,873,000, or 14.4%, as a result of sales
increases. As a percentage of net sales, cost of sales decreased to 24.8%
from 25.5%, primarily as a result of the menu price increases.
Restaurant operating costs increased $8,047,000, or 22.1%, due to an
increase in labor costs and other operating costs resulting from the
increased sales volume and increased manager staffing levels and manager
training costs over the prior year. Restaurant operating costs, as a
percentage of net sales, increased to 48.4% from 46.8%. The increased manager
staffing levels and manager training costs reflect the significant progress
made towards the Company's previously announced goal to increase management
quality and staffing levels to develop the bench strength to support the
Company's growth program and anticipate management staffing needs arising
from turnover. Restaurant management levels, inclusive of managers currently
in the Company's management training program, are approaching the Company's
goal. The significantly increased investment in field management recruiting
and training programs and higher management staffing levels is an essential
part of the Company's ongoing effort to meet its five-year controlled growth
objective of 300 additional new Steak n Shake restaurants. Increased
management staffing quality greatly enhances the Company's ability to
consistently deliver its commitment to exceed customer expectations by
providing a high quality dining experience on every visit. With higher
staffing levels, managers enjoy a better quality of life, thereby reducing
turnover. A 5.5% increase in wage rates arising from tight labor markets also
contributed to higher labor costs.
Operating margins for the twelve weeks ended December 22, 1999 were less
than the prior year primarily as a result of the aforementioned increased
manager staffing levels and manager training costs and increased wage rates.
General and administrative expenses increased $1,231,000 or 21.9%. The
increase in expenses was attributable to personnel related costs, which
included costs for additional recruiting, training and management support
personnel in connection with the development of new restaurants and the
Company's intensified management programs, and other costs resulting from the
increased number of restaurants. As a percentage of revenues, general and
administrative expenses increased to 7.3% from 7.1%.
The $543,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1999.
Rent expense increased $712,000, or 24.2%, as a result of the completion
of the sale and leaseback of twenty-six Company-owned properties since the
beginning of fiscal 1999.
Marketing expense increased $414,000, or 18.5%, with increased costs of
television advertising in existing markets. As a percentage of revenues,
marketing expense was constant at 2.8%.
Pre-opening costs increased $250,000, or 28.1%. The increase in
pre-opening costs is attributable to the timing and the number of new units
opened.
Interest expense decreased $184,000 due to decreased average net
borrowings under the Company's senior note agreement and the reduction in
capital lease obligations.
EARNING BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
Exclusive of the increased investment in management recruiting and
training and the increase in pre-opening costs, earnings before income taxes
and cumulative effect of change in accounting increased 14%.
INCOME TAXES The Company's effective income tax rate decreased to 36.1%
from 36.5% for the quarter ended December 23, 1998 principally as a result of
higher federal tax credits. A valuation allowance against gross deferred tax
assets has not been provided based upon the expectation of future taxable
income.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR PRE-OPENING COSTS
During 1999, the Company adopted the provisions of American Institute of
Certified Public Accountants Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities" retroactive to the first quarter of
9
<PAGE>
fiscal 1999. This new accounting standard requires the Company to expense all
pre-opening costs as they are incurred. The Company previously deferred such
costs and amortized them over the one-year period following the opening of
each restaurant. The cumulative effect of the change in accounting for
pre-opening costs, net of income tax benefit, of $1,750,000 ($0.06 per
diluted share) was recorded in the first quarter of fiscal 1999.
NET EARNINGS
Net earnings were $4,930,000 ($.17 per diluted share) up 66.2% compared to
the prior year. The prior year quarter included the cumulative effect of the
change in accounting for pre-opening costs which reduced net earnings by
$1,750,000 ($.06 per diluted share). Exclusive of the one-time cumulative
effect of the change in accounting for pre-opening costs, net earnings
increased 4.5%.
LIQUIDITY AND CAPITAL RESOURCES
Five Company-operated Steak n Shake restaurants and one franchised Steak n
Shake restaurant were opened during the quarter ended December 22, 1999.
Subsequent to the end of the first quarter, two old, under-performing
Company-operated Steak n Shake restaurants were closed. Thirteen additional
units are currently under construction. For the quarter ended December 22,
1999, capital expenditures totaled $16,387,000 as compared to $12,347,000 for
the comparable prior year period.
The Company expects to open 40 Steak n Shake restaurants in fiscal year
2000. The Company's five-year controlled growth objective contemplated
opening 300 additional Steak n Shake restaurants. The average cost of a new
Company-operated Steak n Shake restaurant, including land, site improvements,
building and equipment, was $1,480,000 during fiscal 1999. 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 and bank borrowings.
During the twelve weeks ended December 22, 1999, cash provided by
operations totaled $8,774,000, while cash generated by sale and leaseback
transactions and other disposals of property totaled $7,416,000. During the
twelve weeks ended December 23, 1998, cash provided by operations totaled
$3,274,000, while cash generated by sale and leaseback transactions and other
disposals of property totaled $6,126,000. At December 22, 1999 the Company
had additional sale and leaseback properties under contract which, when
closed, will generate approximately $2,925,000 in proceeds.
Net cash used in financing activities for the twelve weeks ended December
22, 1999 totaled $1,119,000 compared to net cash used of $140,000 in the
comparable prior year period.
The Company has a stock repurchase program which calls for the purchase of
up to 2,000,000 shares of its outstanding common stock. During the twelve
weeks ended December 22, 1999, the Company repurchased a total of 96,000
shares for $969,000. The repurchased shares will be used in part to fund the
Company's Stock Option Plan and Employees' Stock Purchase Plan.
As of December 22, 1999, the Company had outstanding borrowings of
$27,216,000 under its $75,000,000 Senior Note Agreement and Private Shelf
Facility (the "Senior Note Agreement"). Consequently, the Company has
borrowings of $47,784,000 available under the Senior Note Agreement over the
period ending April 21, 2002 at interest rates based upon market rates at the
time of borrowing. Borrowings under the Senior Note bear interest at an
average fixed rate of 7.6%.
There were no borrowings under the Company's $30,000,000 Revolving Credit
Agreement (the "Revolving Credit Agreement") at December 22, 1999 and
December 23, 1998. The Company's Revolving Credit Agreement matures in
December 2000 and bears interest based on LIBOR plus 75 basis points, or the
prime rate, at the election of the Company. 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.
10
<PAGE>
EFFECTS OF GOVERNMENTAL REGULATIONS AND INFLATION
Since most of the Company's employees are paid hourly rates related to
federal and state minimum wage laws, increases in the legal minimum wage
directly increase the Company's operating costs. Inflation in food, labor and
other operating costs directly affects the Company's operations.
YEAR 2000
As of February 1, 2000, the Company's information technology and
non-information technology systems were operating with no apparent Year 2000
issues. At this time, the Company believes that all material Year 2000 issues
have been resolved. The costs solely related to addressing the Year 2000
compliance issues did not have a material effect on the Company's earnings or
financial condition.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities." In June 1999,
the FASB issued Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133," which defers the effective date of
SFAS No. 133 until the Company's first quarter financial statements of fiscal
2001. The Company currently believes that the adoption of SFAS No. 133 will
not have a material effect on the Company's results of operations.
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 of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. 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, marketing plans 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 DISCLOSURE ABOUT MARKET RISK
The Company's primary market risk exposure with regard to financial
instruments is to changes in interest rates. Pursuant to the terms of the
Senior Note Agreement, the Company may from time to time issue notes in
increments of at least $5,000,000. The interest rate on the notes is based
upon market rates at the time of the borrowing. Once the interest rate is
established at the time of the initial borrowing, the interest rate remains
fixed over the term of the underlying note. The Revolving Credit Agreement
bears interest at a rate based upon LIBOR plus 75 basis points or the prime
rate, at the election of the Company. Historically, the Company has not used
derivative financial instruments to manage exposure to interest rate changes.
At December 22, 1999, a hypothetical 100 basis point increase in short-term
interest rates would not have a material impact on the Company's earnings.
The Company enters into commitments to purchase defined quantities of certain
food commodities at fixed prices based upon prevailing market prices at that
time. Purchase arrangements for items such as french fries, chili beans and
coffee contain contractual features that limit the price paid by establishing
certain price floors or caps and provides adequate supply for the Company's
forecasted needs. Since commodity price aberrations are generally short term
in nature the Company does not use financial instruments to hedge commodity
prices because these purchase arrangements help control the ultimate cost
paid.
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 the Registrant's Form 10-K Annual Report 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 on 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 Form
10-K Annual Report for the year ended September 26,
1984).
3.05 Articles of Amendment to Articles of Incorporation of
Consolidated Products, Inc. dated May 8, 1998.
(Incorporated by reference to the Exhibits to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended April 8, 1998.)
4) 4.01 Specimen certificate representing Common Stock of
Consolidated Products, Inc. (formerly Steak n Shake,
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 Report on Form 10-Q
for the fiscal quarter ended December 21, 1994).
4.03 Note Purchase 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 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
12
<PAGE>
26, 1995. (Incorporated by reference to the Exhibits
to the Registrant's Report on Form 8-K dated
September 26 1995).
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
quarterly period 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 and private
shelf facility. (Incorporated by reference to the
Exhibits to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended April 9, 1997).
4.07 Third Amendment to Amended and Restated Credit
Agreement by and between Consolidated Products, Inc.
and Bank One, Indianapolis, N.A. dated September 18,
1997. (Incorporated by reference to the Exhibits to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended September 24, 1997).
4.08 Fourth Amendment to Amended and Restated Credit
Agreement by and between Consolidated Products, Inc.
and Bank One, Indianapolis, N.A. dated February 9,
1998. (Incorporated by reference to the Exhibits to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended April 8, 1998).
4.09 Fifth Amendment to Amended and Restated Credit
Agreement by and between Consolidated Products, Inc.
and Bank One, Indianapolis, N.A. dated February 24,
1999. (Incorporated by reference to the Exhibits to the
Registrant's Quarterly Report in Form 10-Q for the
fiscal quarter ended April 14, 1999).
4.10 Amendment To Note Purchase and Private Shelf Agreement
by and between Consolidated Products, Inc. and The
Prudential Insurance Company of America dated as of
April 21, 1999 related to senior note agreement and
private shelf facility. (Incorporated by reference to
the Exhibits to the Registrant's Quarterly Report in
Form 10-Q for the fiscal quarter ended April 14, 1999).
(9) No exhibit.
(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).
13
<PAGE>
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 in to the
Appendix to the Registrant's definitive Proxy Statement
dated January 13, 1993 related to its 1993 Annual
Meeting of Shareholders).
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 its 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 in to the
Appendix to the Registrant's definitive Proxy Statement
dated January 13, 1994 related to its 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).
14
<PAGE>
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).
10.19 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 22, 1997 related to the 1998 Annual
Meeting of Shareholders).
10.20 Consolidated Products, Inc. 1998 Nonemployee Director
Stock Option Plan. (Incorporated by reference to the
Appendix to the Registrant's definitive Proxy Statement
dated December 22, 1997 related to the 1998 Annual
Meeting of Shareholders).
(11) No exhibit.
(15) Not applicable.
(18) Not applicable.
(19) Not applicable.
(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 period covered by this
report.
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 February 4, 2000.
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 22, 1999 AND THE
CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWELVE WEEKS ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000093859
<NAME> CONSOLIDATED PRODUCTS, INC.
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-27-2000
<PERIOD-START> SEP-30-1999
<PERIOD-END> DEC-22-1999
<CASH> 2,688,406<F1>
<SECURITIES> 0
<RECEIVABLES> 6,505,437
<ALLOWANCES> 0
<INVENTORY> 4,977,373
<CURRENT-ASSETS> 20,194,490
<PP&E> 268,434,573
<DEPRECIATION> 77,614,659
<TOTAL-ASSETS> 214,282,098
<CURRENT-LIABILITIES> 41,025,495
<BONDS> 0
0
0
<COMMON> 14,799,631
<OTHER-SE> 125,015,297
<TOTAL-LIABILITY-AND-EQUITY> 214,282,098
<SALES> 91,870,138
<TOTAL-REVENUES> 93,185,502
<CGS> 22,754,697
<TOTAL-COSTS> 67,235,933<F2>
<OTHER-EXPENSES> 8,394,454<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 349,365
<INCOME-PRETAX> 7,714,506
<INCOME-TAX> 2,785,000
<INCOME-CONTINUING> 4,929,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,929,506
<EPS-BASIC> .17
<EPS-DILUTED> .17
<FN>
<F1>Cash includes equivalents of $935,000.
<F2>Includes restaurant operating costs of $44,481,236.
<F3>Includes depreciation and amortization, rent and pre-opening costs of
$3,603,158, $3,652,707 and $1,138,589 respectively.
</FN>
</TABLE>
