-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwpgmljKhjC9OgWxw0FRpU2kmXS8iQhzBwfv6bS+soyPpeUtgBycvke6vIk7NXCT NlCxaMVIBC58UpV1nZJNiQ== 0001012709-02-000731.txt : 20020514 0001012709-02-000731.hdr.sgml : 20020514 ACCESSION NUMBER: 0001012709-02-000731 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020403 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAMILY STEAK HOUSES OF FLORIDA INC CENTRAL INDEX KEY: 0000784539 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 592597349 STATE OF INCORPORATION: FL FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14311 FILM NUMBER: 02647543 BUSINESS ADDRESS: STREET 1: 2113 FLORIDA BLVD STREET 2: STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 BUSINESS PHONE: 9042494197 MAIL ADDRESS: STREET 1: 2113 FLORIDA BLVD STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 10-Q 1 x10q-502.txt FAMILY STEAK HOUSES OF FLORIDA, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended April 3, 2002 Commission File No. 0-14311 FAMILY STEAK HOUSES OF FLORIDA, INC. Incorporated under the laws of IRS Employer Identification Florida No. 59-2597349 2113 FLORIDA BOULEVARD NEPTUNE BEACH, FLORIDA 32266 Registrant's Telephone No. (904) 249-4197 Indicate by check mark whether the registrant 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 [ ] Title of each class Number of shares outstanding ------------------- ---------------------------- Common Stock 3,271,200 $.01 par value As of May 6, 2002
FAMILY STEAK HOUSES OF FLORIDA, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) For The Quarter Ended ----------------------------- April 3, April 4, 2002 2001 ------------ ------------ Revenues: Sales $ 12,535,000 $ 11,539,800 Vending revenue 50,900 56,800 ------------ ------------ Total revenues 12,585,900 11,596,600 ------------ ------------ Costs and expenses: Food and beverage 4,632,500 4,379,500 Payroll and benefits 3,460,100 3,296,300 Depreciation and amortization 576,600 538,100 Other operating expenses 1,711,600 1,543,700 General and administrative expenses 747,100 670,000 Franchise fees 501,000 345,900 Loss on store closings and disposition of equipment 64,200 39,400 ------------ ------------ Total costs and expenses 11,693,100 10,812,900 ------------ ------------ Earnings from operations 892,800 783,700 Investment gain (loss) 17,800 (82,300) Interest and other income 20,300 34,200 Interest expense (416,500) (467,100) ------------ ------------ Earnings before income taxes 514,400 268,500 Provision for income taxes -- -- Net earnings $ 514,400 $ 268,500 ============ ============ Basic earnings per share $ 0.16 $ 0.11 ============ ============ Diluted earnings per share $ 0.16 $ 0.11 ============ ============
See accompanying notes to consolidated financial statements. 2
FAMILY STEAK HOUSES OF FLORIDA, INC. Consolidated Balance Sheets (Unaudited) April 3, January 2, 2002 2002 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 407,700 $ 183,100 Investments 2,400 2,100 Receivables 101,500 159,800 Current portion of mortgages receivable 351,100 13,400 Inventories 314,300 319,800 Prepaid and other current assets 256,100 284,400 ------------ ------------ Total current assets 1,433,100 962,600 Mortgages receivable 0 342,000 Certificate of deposit 10,000 10,000 Property and equipment: Land 9,316,900 9,317,000 Buildings and improvements 24,928,400 24,661,700 Equipment 12,533,300 12,543,200 ------------ ------------ 46,778,600 46,521,900 Accumulated depreciation (17,485,500) (16,940,100) ------------ ------------ Net property and equipment 29,293,100 29,581,800 Property held for sale 2,523,700 2,523,700 Other assets, principally deferred charges, net of accumulated amortization 827,000 841,000 ------------ ------------ $ 34,086,900 $ 34,261,100 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 1,707,100 1,571,300 Accounts payable - construction 4,400 715,500 Securities sold, not yet purchased 127,200 159,500 Accrued liabilities 2,231,500 2,362,800 Current portion of long-term debt 683,800 663,400 Current portion of obligation under capital lease 18,200 17,700 ------------ ------------ Total current liabilities 4,772,200 5,490,200 Long-term debt 19,930,100 19,902,500 Obligation under capital lease 1,022,100 1,025,800 ------------ ------------ Total liabilities 25,724,400 26,418,500 Shareholders' equity: Preferred stock of $.01 par; authorized 10,000,000 shares; none issued -- -- Common stock of $.01 par; authorized 4,000,000 shares; outstanding 2,421,600 and 2,414,400 shares 32,700 32,500 Additional paid-in capital 9,471,600 9,466,600 Accumulated deficit (1,143,400) (1,657,800) Accumulated other comprehensive income 1,600 1,300 ------------ ------------ Total shareholders' equity 8,362,500 7,842,600 ------------ ------------ $ 34,086,900 $ 34,261,100 ============ ============
See accompanying notes to consolidated financial statements. 3
FAMILY STEAK HOUSES OF FLORIDA, INC. Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended ----------------------------- April 03, April 04, 2002 2001 ------------ ------------ Operating activities: Net earnings $ 514,400 $ 268,500 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 576,600 538,100 Directors' fees in the form of stock options 5,000 1,300 Net realized (gains) losses on investments (17,800) 82,300 Amortization of loan fees 9,600 9,000 Loss on disposition of equipment 16,000 25,800 Decrease (increase) in: Receivables 58,300 (10,700) Inventories 5,500 (17,700) Prepaids and other current assets 28,300 (95,100) Other assets 1,600 (4,800) Increase (decrease) in: Accounts payable 135,800 (180,600) Accrued liabilities (131,300) (554,900) ------------ ------------ Net cash provided by operating activities 1,202,000 61,200 ------------ ------------ Investing activities: Net purchase of investments (14,500) 0 Principal receipts on mortgages receivable 4,300 162,800 Proceeds from sale of investments 0 250,100 Capital expenditures (1,012,200) (846,800) ------------ ------------ Net cash used in investing activities (1,022,400) (433,900) ------------ ------------ Financing activities: Payments on long-term debt (161,000) (126,100) Proceeds from issuance of long-term debt 209,000 787,300 Payments of investment margin debt 0 (165,100) Payments on capital lease (3,200) (900) Proceeds from the issuance of common stock 200 0 ------------ ------------ Net cash provided by (used in) financing activities 45,000 (807,300) ------------ ------------ Net increase in cash and cash equivalents 224,600 442,100 Cash and cash equivalents - beginning of period 183,100 747,300 ------------ ------------ Cash and cash equivalents - end of period $ 407,700 $ 1,189,400 ============ ============ Noncash investing and financing activities: Net change in unrealized gain (loss) $ 300 $ (86,500) ============ ============ Supplemental disclosures of cash flow information: Cash paid during the quarter for interest $ 419,300 $ 461,000 ============ ============
See accompanying notes to consolidated financial statements. 4 FAMILY STEAK HOUSES OF FLORIDA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 3, 2002 (Unaudited) Note 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q, and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the interim period have been included. Operating results for the thirteen week period ended April 3, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2003. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2002. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany profits, transactions and balances have been eliminated. Note 2. Earnings Per Share Basic earnings per share for the thirteen weeks ended April 3, 2002 and April 4, 2001 were computed based on the weighted average number of common shares outstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive shares are represented by shares under option and stock warrants. Note 3. Reclassifications Certain items in the prior year financial statements have been reclassified to conform to the 2002 presentation. 5 Note 4. New Accounting Pronouncements In June 2001, the FASB issued SFAS 141, "Business Combinations," SAFS 142, "Goodwill and Other Intangible Assets," and SFAS 143, "Accounting for Asset Retirement Obligations." In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 141 requires companies to apply the purchase method of accounting for all business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interest method. SFAS 142 changes the method by which companies may recognize intangible assets in purchase business combinations and generally requires identifiable intangible assets to be recognized separately from goodwill. In addition, it eliminates the amortization of all existing and newly acquired goodwill on a prospective basis and requires companies to assess goodwill for impairment, at least annually, based on the fair value of the reporting unit associated with the goodwill. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS 144 addressed financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 141 on July 1, 2001. The adoption of SFAS 141 did not have a material effect on the Company's financial position, results of operations or cash flows. The Company adopted SFAS 142 and SFAS 144 on January 3, 2002. The adoption of SFAS 142 and SFAS 144 did not have a material effect on the Company's financial position, results of operations or cash flows. The Company will adopt SFAS 143 effective January 2, 2003. It does not appear the adoption of SFAS 143 will have a material impact on the Company's financial position, results of operations or cash flows. Note 5. Subsequent Event On May 6, 2002, the Company closed its restaurant in Neptune Beach, Florida. After this closure, the Company has 22 operating restaurants. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Quarter Ended April 3, 2002 versus April 4, 2001 The Company experienced an increase of 8.6% in sales during the first thirteen weeks of 2002 compared to the first thirteen weeks of 2001, due primarily to new stores opened in Titusville and Jacksonville. Same-store sales (average weekly sales in restaurants that have been operating for at least 18 months) in the first quarter of 2002 decreased 2.7% from the same period in 2001, compared to an increase of 2.5% from 2001 as compared to 2000. The decrease in same-store sales was primarily due to significant declines at certain restaurants which faced new competition compared to 2001. Management is seeking to continue to improve sales trends by focusing on improved restaurant operations, devising competitive strategies to offset the effects of new competition, increased television advertising and making capital improvements to certain restaurants. In 2001, the Company added display cooking areas to three of its restaurants, and experienced improved sales trends at these locations. Management intends to continue to evaluate the results of these restaurants to determine whether to make similar additions to restaurants in 2002. The Company tested television advertising in 2001, and experienced some sales improvements. Management has implemented additional television advertising in the first quarter of 2002 and is evaluating the results. If television advertising proves successful, management will continue the Company's marketing strategy to place more focus on television advertising in 2002. The costs and expenses of the Company's restaurants include food and beverage, payroll, payroll taxes and employee benefits, depreciation and amortization, repairs, maintenance, utilities, supplies, advertising, insurance, property taxes, rents, and licenses. In total, food and beverage, payroll and benefits, depreciation and amortization and other operating expenses as a percentage of sales decreased to 82.8% in the first quarter of 2002 from 84.6% in same quarter of 2001. Food and beverage costs as a percentage of sales decreased to 37.0% in 2002 from 38.0% in 2001, primarily due to menu price increases implemented by the Company in 2001. Payroll and benefit costs as a percentage of sales decreased to 27.6% in 2002 from 28.6% in 2001, due to decreased health insurance costs and lower manager salary costs as a percentage of sales. 7 Depreciation and amortization expenses were 4.6% in 2002 and 4.7% in 2001. General and administrative expenses as a percentage of sales increased to 6.0% in the first quarter of 2002 from 5.8% in the same quarter in 2001, primarily due to the addition of a full-time consultant in 2002. Interest expense was $416,500 in the first quarter of 2002 compared to $467,100 in the same quarter of 2001, due to a decrease in interest rates in 2002. The Company capitalized interest expense of $3,900 in 2002, compared to $14,700 in 2001. The effective income tax rate for the first three months of 2001 and 2002 was 0.0%. The 0% rate in both years was due to the use of net operating loss carryforwards to offset taxable income. The results for the first quarter of 2002 include realized gains from marketable securities of $17,800, compared to realized losses of $82,300 in 2001. Net earnings for the first quarter of 2002 were up 91.6% to $514,400 from $268,500 in the first quarter of 2001. Earnings per share assuming dilution for the quarter were 16 cents in 2002 compared to 11 cents in 2001. The Company's operations are subject to some seasonal fluctuations. Revenues per restaurant generally increase from January through April and decline September through December. Operating results for the quarter ended April 3, 2002 are not indicative of the results that may be expected for the fiscal year ending January 1, 2003. LIQUIDITY AND CAPITAL RESOURCES Substantially all of the Company's revenues are derived from cash sales. Inventories are purchased on credit and are converted rapidly to cash. Therefore, the Company does not carry significant receivables or inventories and, other than repayment of debt, working capital requirements for continuing operations are not significant. At April 3, 2002, the Company had a working capital deficit of $3,339,100 compared to a working capital deficit of $4,527,600 at January 2, 2002. Cash provided by operating activities increased to $1,202,000 in the first quarter of 2002 from $61,200 in the first quarter of 2001, due to increased earnings and timing differences in payment of accounts payable and accrued liabilities. 8 The Company spent $1,012,200 in the first quarter of 2002 for property and equipment. Total capital expenditures for 2002, based on present costs and plans for capital improvements, are estimated to be approximately $2.5 million. This amount is based on budgeted expenditures for building improvements and equipment for one new restaurant in 2002, remodels of several restaurants, and normal recurring equipment purchases and minor building improvements ("Capital Maintenance Items"). The Company projects cash generated from operations may only be sufficient to cover the estimated Capital Maintenance Items. The Company's ability to open the new restaurant and complete the remodels will be contingent upon its ability to obtain additional financing. The Company currently does not have a commitment for such additional financing. The Company's ability to open new restaurants is also dependent upon its ability to locate suitable locations at acceptable prices, and upon certain other factors beyond its control, such as obtaining building permits from various government agencies. The sufficiency of the Company's cash to fund operations and necessary Capital Maintenance Items will depend on, among other things, changes in same-store sales results, the status of the Company's efforts to sell properties held for sale, and the continuing favorable results from the new restaurants. On October 1, 2001, the Company completed a Rights Offering ("the Offering") for its shareholders of record as of August 10, 2001. The Company raised $838,100 net of offering costs from the Offering, and issued 827,583 shares of common stock to shareholders exercising rights. Glen F. Ceiley, the chairman of the Company's board of directors, Bisco Industries, Inc., a company for which Mr. Ceiley is the sole shareholder and president and other affiliates of Mr. Ceiley purchased 822,280 shares in the Offering. In April 2002, the Company completed a private placement with Bisco for 435,000 shares at $0.92 per share, which was primarily based on the average closing price of the Company's common stock on the ten trading days prior to the sale. The Company plans to use this $400,200 raised to fund the remodels discussed above. Beginning in December 1996, the Company entered into a series of loan agreements with FFCA Mortgage Corporation, which is now known as GE Capital Franchise Finance Corporation ("GE Capital"). As of April 3, 2002, the outstanding balance due under the Company's various loans with GE Capital was $20,613,900. The weighted average interest rate for the GE Capital loans is 7.47%. The Company used the proceeds of the GE Capital loans primarily to refinance its debt and to fund construction of new restaurants. 9 Management estimates the cost of opening one new restaurant during 2002 will be $2,800,000. The Company's previous financing with GE Capital provided only $1,700,000. The Company currently has no financing commitment from GE Capital. Management plans to fund any new restaurant construction either by sales leaseback financing, developer-funded leases, refinancing existing restaurants, or attempting to get additional financing from GE Capital or other lenders. In 2001 the Company paid franchise fees of 3% of gross sales. The franchise agreement required that the franchise fee increase to 4% beginning January 3, 2002. The increase cost the Company an additional $125,000 in the first quarter of 2002, and management projects that it will increase the Company's franchise fee expense by more than $400,000 per year. The preceding discussion of liquidity and capital resources contains certain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, and in addition to the factors discussed herein, among the other factors that could cause actual results to differ materially are the following: failure of facts to conform to necessary management estimates and assumptions; the willingness of GE Capital or other lenders to extend financing commitments; repairs or similar expenditures required for existing restaurants due to weather or acts of God; the Company's ability to identify and secure suitable locations on acceptable terms and open new restaurants in a timely manner; the Company's success in selling restaurants listed for sale; the economic conditions in the new markets into which the Company expands; changes in customer dining patterns; competitive pressure from other national and regional restaurant chains and other food vendors; business conditions, such as inflation or a recession, and growth in the restaurant industry and general economy; and other risks identified from time to time in the Company's SEC reports, registration statements and public announcements. However, this list is not a complete statement of all potential risks or uncertainties. These forward-looking statements are made as of the date hereof based on management's current expectations, and the Company does not undertake any obligation to update such statements, whether as a result of new information, future events or otherwise. 10 RECENT DEVELOPMENTS Status of Company's Stock with NASDAQ On March 22, 2002, the Company received notice from NASDAQ that the Company's closing bid price had declined below $1.00 per share. Accordingly, NASDAQ informed the Company that in order to continue the listing of the Company's securities on the Nasdaq SmallCap Market, the Company would have to meet the following conditions - on or before March 17, 2003, the closing bid price of the Company's common stock must be a minimum of $1.00 per share for 10 consecutive trading days. In the event the Company fails to meet this condition, the Company's securities will be delisted from the NASDAQ SmallCap Market. The Company has received such a notification on two prior occasions, and avoided delisting. However, there can be no assurance that the Company will be able to comply with the requirement and remain listed. If the Company's stock is delisted from NASDAQ, trading in the Common Stock would thereafter be conducted on the over-the-counter markets in the so-called "pink sheets" or the National Association of Securities Dealers, Inc.'s "Electronic Bulletin Board". Consequently, the liquidity of the Company's securities could be impaired, not only in the number of shares that could be bought and sold, but also as a result of delays in the timing of the transactions, and the news media's coverage of the Company, lower prices for the Company's securities than might otherwise be attained and a larger spread between the bid and asked prices for the Company's securities. In addition, if the Company's securities were to be delisted from the NASDAQ SmallCap Market, the Company's securities could become subject to Rule 15g-9 under the Securities Exchange Act of 1934 relating to penny stocks, which imposes additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and "accredited investors" (generally, individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses). SEC regulations define a "penny stock" to be any equity security that is not listed on The NASDAQ Stock Market or a national securities exchange and that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If the Company's securities were subject to the rules on penny stocks, the market liquidity for the Company's securities could be adversely affected. 11 Closure of Restaurant On May 6, 2002, the Company closed its restaurant in Neptune Beach, Florida. After this closure, the Company has 22 operating restaurants. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK There have been no significant changes in the Company's exposure to market risk during the first fiscal quarter of 2002. For discussion of the Company's exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2002. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to, or threatened with, litigation from time to time, in the normal course of its business. Management, after reviewing all pending and threatened legal proceedings, considers that the aggregate liability or loss, if any, resulting from the final outcome of these proceedings will not have a material effect on the financial position or operation of the Company. The Company will, from time to time when appropriate in management's estimation, record adequate reserves in the Company's financial statements for pending litigation. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of the report on Form 10-Q, and the list comprises the Exhibit Index. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FAMILY STEAK HOUSES OF FLORIDA, INC. (Registrant) /s/ Glen F. Ceiley --------------------------------- Date: May 10, 2002 Glen F. Ceiley Principal Executive Officer /s/ Edward B. Alexander --------------------------------- Date: May 10, 2002 Edward B. Alexander Executive Vice President (Principal Financial and Accounting Officer) 14 EX-11.1 3 ex11-502.txt COMPUTATION OF EARNINGS PER SHARE Exhibit 11.1 The table below details the number of shares and common stock equivalents used in the computation of basic and diluted earnings per share: Three Months Ended April 3, 2002 April 4, 2001 ------------ ------------ Basic: Weighted average common shares outstanding used in computing basic earnings per share 3,257,900 2,419,800 ============ ============ Basic earnings per share $ 0.16 $ 0.11 ============ ============ Diluted: Weighted average common shares outstanding 3,257,900 2,419,800 Effects of shares issuable under stock plans using the treasury method 13,200 3,600 ------------ ------------ Shares used in computing diluted earnings per share 3,271,100 2,423,400 ============ ============ $ 0.16 $ 0.11 ============ ============ -----END PRIVACY-ENHANCED MESSAGE-----