Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 29, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-8445
THE STEAK N SHAKE COMPANY
(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)
36 S. PENNSYLVANIA STREET, SUITE 500
Indianapolis, Indiana 46204
(317) 633-4100
(Address and telephone number
of registrant's principal executive offices)
Securities registered pursuant to Sec. 12(b) of the Act:
Title of Each Class on Which Registered Name of Exchange
- ------------------------------------------------ ------------------
Common Stock, stated value $.50 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Sec. 12(g) of the Act: None.
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
--
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ X ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act rule 12b-2). Yes X No
--
The aggregate market value of Common Stock held by persons not "affiliated" with
the registrant, based on the closing price of the Common Stock at April 7, 2004,
was approximately $524,695,120.
The number of shares of Common Stock outstanding at December 1, 2004 was
27,622,964.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS OF FORM 10-K INTO WHICH
IDENTITY OF DOCUMENT DOCUMENT IS INCORPORATED
Registrant's Annual Report to Part II
Shareholders for fiscal year
ended September 29, 2004
The definitive Proxy Statement to Part III
be filed with respect to the 2005
Annual Meeting of Shareholders of
Registrant
PART I.
ITEM 1. BUSINESS
GENERAL
The Steak n Shake Company ("Steak n Shake" or the "Company") is engaged
primarily in the ownership, operation and franchising of Steak n Shake
restaurants. Founded in 1934 in Normal, Illinois, Steak n Shake is one of the
oldest restaurant chains in the country. As of September 29, 2004, we had 365
Company-owned restaurants and 60 franchised restaurants, located in 19
Midwestern and Southern states. Steak n Shake restaurants are generally open 24
hours a day, seven days a week, and in addition to the core menu, offer a
breakfast menu during breakfast hours. Lunch and dinner sales account for
approximately 36.4% and 45.1% of sales, respectively, while breakfast and late
night sales account for 6.9% and 11.6% of sales, respectively.
Our fiscal year ends on the last Wednesday in September. Accordingly, every
five or six years, our fiscal year contains fifty-three weeks. Fiscal year 2004
contained fifty-three weeks, while fiscal years 2003 and 2002 contained
fifty-two weeks. Our first, third, and fourth quarters contain twelve weeks and
the second quarter contains sixteen weeks (except in fiscal years when there are
fifty-three weeks, in which case the fourth quarter contains thirteen weeks).
THE STEAK N SHAKE CONCEPT
We strive to be the best restaurant in the world at providing guests a genuine,
classic community diner experience with STEAKBURGER sandwiches and hand-dipped
milk shakes. We occupy a distinct niche in the restaurant industry by offering
full-service dining with counter and dining room seating, as well as drive-thru
and carryout service. Counter and dining room sales represent approximately
two-thirds of the sales mix, while sales for off-premises dining represent
approximately one-third of the sales mix. Unlike some fast-food restaurants,
all Steak n Shake food is freshly prepared, cooked-to-order in view of the
guest, and served promptly on china with flatware and glassware by a friendly
team of wait staff. Our prices are generally less than most casual dining and
family-style concepts with an average check of approximately $6.37 per person.
The average check during the peak lunch and dinner hours is approximately $6.34
and $6.63, respectively.
We believe that Steak n Shake offers more compelling value and core menu items
with a higher level of quality than competitor fast food and casual dining
chains. For 70 years, Steak n Shake's menu has featured core items including
STEAKBURGER sandwiches, thin and crispy french fries and hand-dipped milk
shakes. We believe that our focus on certain menu items has allowed us to serve
consistent, high-quality food, that has built brand loyalty with our guests.
Menu items are prepared in accordance with our strict specifications using
high-quality ingredients such as 100% pure U.S. beef, including cuts of T-bone,
strip and sirloin steaks, in our STEAKBURGER sandwiches. Over the years, we
have responded to changing guest tastes by providing greater menu variety
without losing our focus or guest appeal. During the current year, we expanded
our menu by offering Side-by-Side Milk Shakes and hot fudge shots for our milk
shakes.
EXPANDING THE CONCEPT
Controlled growth into both new and existing trade areas has been a focus over
the last several years. During fiscal year 2004, we opened sixteen new units and
franchisees opened three new units, with the new Company-owned units being
opened in Alabama, Arkansas, Illinois, Indiana, Missouri, Ohio, Pennsylvania,
Tennessee, Texas being built in the Ohio and Texas markets. This level of
expansion has allowed us to build field organizational quality and stability
while focusing on improving each and every guest experience through
hospitality initiatives; improve the depth of the field organization through
improved recruitment and higher retention; enhance training and staff
development; and aggressively market the brand through unique differentiation
brand marketing. The Company currently expects to open between eighteen and
twenty-four Company-owned Steak n Shake restaurants in fiscal year 2005.
The actual number of openings will depend on many factors, including the
ability to locate appropriate sites, negotiate acceptable purchase or lease
terms, obtain necessary local governmental permits, complete construction,
and recruit and train restaurant management and hourly associates.
Our controlled expansion program is based upon a market penetration strategy
focused on clustering restaurants in current or contiguous trade areas to
capitalize on our name recognition, increase guest convenience and achieve media
and operating efficiencies. The addition of Company-owned restaurants in
markets where our television marketing efforts have already been implemented,
allows us to leverage our advertising costs over more units and to benefit from
management efficiencies. In existing media markets, our advertising expenditures
create higher levels of customer recognition and greater market acceptance for
new units.
We believe the site selection process is critical to the success of our
restaurants, and senior management devotes significant time and resources to
analyzing each prospective site. We consider a variety of factors in the site
selection process, including local market demographics, site visibility and
accessibility, highway interchanges and proximity to significant generators of
potential guests such as major retailers, housing communities and businesses.
A final element of our expansion program is franchising. Our franchising
program is designed to extend brand name recognition of Steak n Shake and derive
additional revenues without substantial investment by the Company. As part of
our continual planning process, management reviews the relationship of the
number of Company-owned to franchised restaurants and the selection of areas for
development by the Company and our franchisees. Our expansion plans include
selectively seeking new franchisees to help grow the Steak n Shake brand by
focusing on areas where the Company does not currently have plans to build
enough stores to merit the infrastructure necessary to support those markets.
(See "Franchising")
Restaurant Locations
The following table lists the locations of the 425 Steak n Shake restaurants,
including 60 franchised units, as of September 29, 2004:
COMPANY-OWNED FRANCHISED TOTAL
Alabama. . . . 6 - 6
Florida. . . . 72 - 72
Georgia. . . . 7 16 23
Iowa . . . . . 4 - 4
Illinois . . . 57 6 63
Indiana. . . . 59 3 62
Kansas . . . . 4 - 4
Kentucky . . . 6 8 14
Michigan . . . 19 - 19
Mississippi. . - 1 1
Missouri . . . 43 14 57
North Carolina - 6 6
Ohio . . . . . 60 - 60
Oklahoma . . . - 1 1
Pennsylvania . 3 - 3
South Carolina 2 - 2
Tennessee. . . 9 5 14
Texas. . . . . 13 - 13
Wisconsin. . . 1 - 1
_____ _____ _____
Total. . . . 365 60 425
RESTAURANT OPERATIONS
The key to growing our customer base is to ensure our guests have an enjoyable
dining experience when they step through our doors or visit our drive-thru
windows. To ensure a positive guest experience, we must have competent and
skilled restaurant management at each of our locations. The management team of a
typical Steak n Shake restaurant consists of a general manager, a restaurant
manager and assistant managers. The number of assistant managers varies
depending upon the volume of the unit. The general manager of each restaurant
has primary responsibility for the day-to-day operations of the restaurant and
is responsible for maintaining Company-established operating standards and
procedures. The general manager holds the responsibility for the profitability
of each unit and his/her bonus is derived from the store level profitability
against the financial plan. In addition to the day-to-day operations, the
general manager is very involved with the planning and budgeting for each
restaurant. An experienced, well-trained general manager promotes compliance
with our high standards for food quality and guest service, and ensures that all
health and safety requirements are met and that the restaurant complies with
applicable state labor laws. We seek to employ managers who are guest service
oriented and who manage the restaurant from the dining room. We recognize the
important role of a seasoned, well-trained and properly motivated restaurant
team.
The competition for attracting new managers is intense. Therefore, we foster a
"promote from within" approach. To develop the talented bench strength needed
for continued internal promotions, people development is one of our highest
priorities. As part of our commitment to improving our standards of execution,
we emphasize strengthening the skills and capabilities of each restaurant team
through innovative selection, development, evaluation, and reward systems.
Associates are encouraged to learn new skills to foster their professional
growth and to create greater opportunities for advancement. The management
development process ensures that we not only meet our current management needs,
but that we are also able to meet our future growth needs.
GUEST SATISFACTION AND QUALITY CONTROL
For 70 years, our reputation and long-standing guest loyalty have been earned by
the consistent quality of the dining experience. The success of Steak n Shake
depends on our associates' consistent commitment to exceed the guests'
expectations. During the current year, we have initiated a new guest
satisfaction measurement tool, which provides guests the opportunity to evaluate
us on delivering a quality dining experience. The information received from the
guests is real-time, and allows us to address issues in an expeditious and
effective manner.
Restaurant management is responsible for ensuring the restaurants are operated
in accordance with strict operational procedures and quality requirements.
Compliance for Company-owned units is monitored through the use of guest comment
cards, guest satisfaction surveys, a mystery shopping program, frequent on-site
visits and formal inspections by management and training personnel. Franchised
restaurants are monitored through periodic inspections by the Company's
franchise field operations personnel and a mystery shopping program, in addition
to their own internal management oversight.
PURCHASING AND DISTRIBUTION CENTER OPERATIONS
We operate a distribution center in Bloomington, Illinois from which food
products (except for items purchased by the restaurants locally such as bakery
goods, produce and dairy products) and restaurant supplies are delivered to 113
Company-owned and 16 franchised restaurants. The restaurants served are located
in parts of the Midwest (primarily in Illinois, Missouri, Iowa and Wisconsin).
Our semi-trailers have the capability to handle refrigerated and frozen products
along with dry goods in the same delivery trip. The remaining Steak n Shake
restaurants, located primarily in the Southeast, Texas, and parts of the Midwest
(primarily Indiana, Ohio, Michigan, and Tennessee) obtain food products and
supplies that meet the Company's quality standards and specifications from two
separate independent distributors; one with locations in Orlando, Florida and
Pryor, Oklahoma, and the other with a location in Zanesville, Ohio.
Purchases are negotiated centrally for most food and beverage products and
supplies to ensure uniform quality, adequate quantities and competitive prices.
Short-term forward buying contracts are utilized to facilitate the availability
of products pursuant to our specifications and to lessen our exposure to
fluctuating prices. Food and supply items undergo ongoing research, development
and testing in an effort to maintain the highest quality products and to be
responsive to changing consumer tastes.
BRANDING
For 70 years we have embraced our heritage by offering a core product mix of
STEAKBURGER sandwiches and hand-dipped milk shakes to our guests. As times have
changed, we have enhanced our menu to offer new menu offerings to our guests.
For instance, during the current year we added the innovative Side-by-Side milk
shakes, which allows the guest to choose any two flavors of milk shakes and have
them served side-by-side in one glass. This new concept has been well received
by guests. Also introduced during fiscal year 2004 were the Sippable Sundae,
which includes adding hot fudge to any milk shake and the branded TAKHOMACARD
gift card.
We communicate our niche value positioning to the consumer via a branded
differentiation marketing strategy. Marketing platforms are product benefit
directed and explain why Steak n Shake is superior to fast food alternatives by
using a fun, irreverent, tongue-in-cheek humorous approach in our advertising
campaigns. This "voice of the restaurant" defines our brand personality,
recalling a day when life was simpler, friendlier, and less stressful. By
coupling this branding approach with real consumer benefits, existing guests are
encouraged to visit more often and new guests are encouraged to try a
STEAKBURGER sandwich and a milk shake. Print, outdoor and local marketing
promotions are also utilized, but the most effective and efficient media form
remains television, as it sells Steak n Shake with sight, sound, motion, and
emotion.
Our marketing thrust is driven by new product news and is directed towards
building brand loyalty and increasing purchase frequency. Value at Steak n
Shake is based on exceeding guests' expectations by delivering freshly prepared,
cooked-to-order, quality food served promptly by a friendly, well-trained staff.
FRANCHISING
We designed our franchising program to extend the brand name recognition of
Steak n Shake to areas where we have no current development plans, and to derive
additional revenues without substantial investment. Our expansion plans include
selectively seeking new franchisees to help grow the Steak n Shake brand, along
with expanding relationships with current franchisees.
As of September 29, 2004, we had 60 franchised Steak n Shake restaurants
operated by 15 franchisees, located in Georgia, Illinois, Indiana, Kentucky,
Mississippi, Missouri, North Carolina, Oklahoma, and Tennessee. These
restaurants are located in areas contiguous to markets in which there are
Company-owned restaurants. As of September 29, 2004, we have commitments from
existing franchisees for the development of five additional franchised
restaurants in fiscal 2005.
Franchisees undergo a selection process supervised by the Vice President,
Franchising, and require final approval by senior management. We seek
franchisees with the financial resources necessary to fund successful
development (minimum of $1,500,000 net worth, $500,000 liquid assets) and
significant experience in the restaurant/retail business who have demonstrated
the financial and management capabilities required to operate a franchised
restaurant effectively.
We assist franchisees with both the development and the ongoing operation of
their restaurants. Our management personnel assist with site selection, approve
all franchise sites and provide franchisees with prototype plans and
specifications for construction of their restaurants. Our training staff
provides both on-site and off-site instruction to franchised restaurant
management associates. Managers of franchised restaurants are required to
obtain the same training as managers of Company-owned units. Our support
continues after a restaurant opening with periodic training programs, providing
manuals and updates relating to product specifications, guest service and
quality control procedures, advertising and marketing materials and assisting
with particular advertising and marketing needs. Franchise field
representatives visit all franchisees quarterly to support the successful
operation of their restaurants. We also make available to franchisees certain
accounting services and management information reports prepared at the corporate
office for a monthly fee, based on our actual costs.
All franchised restaurants are required, pursuant to their respective franchise
agreements, to serve Steak n Shake approved menu items. Although not required
to do so, franchisees served by our distribution center purchase food, supplies
and smallwares at our cost, plus a markup to cover the cost of operation,
including freight for delivery. Our point-of-sale systems are also available
for purchase by franchisees. Access to these services enables franchisees to
benefit from our purchasing power and assists us in monitoring compliance with
our standards and specifications for uniform quality.
The standard Steak n Shake franchise agreement generally has an initial term of
20 years. Among other obligations, the agreement requires franchisees to pay an
initial franchise fee of $40,000 for the first restaurant in a market, $35,000
for the second unit, and $30,000 for each subsequent unit, and a continuing
royalty of 4% of monthly gross receipts. The standard franchise agreement also
requires the franchisee to pay 5% of monthly gross sales to the Company for
advertising, of which 80% is spent on local, regional or national marketing and
20% is used by Steak n Shake for creative and promotional development, outside
independent marketing agency fees and technical and professional marketing
advice.
In certain circumstances, our financing subsidiary, SNS Investment Company,
Inc., will assist qualified franchisees in financing the development of one or
more franchised restaurants by purchasing or leasing approved sites from third
parties, constructing the restaurant and leasing or subleasing the finished
facility to the franchisee. The lease terms and rentals, including a surcharge
by the Company for administrative services, are negotiated based on prevailing
real estate and construction costs in effect in the franchised area. As of
September 29, 2004, six restaurants were financed through this subsidiary.
For more information on franchising opportunities, visit our website at
www.steaknshake.com/franchise.
COMPETITION
The restaurant business is one of the most intensely competitive industries in
the United States, with price, menu offerings, location and service all being
significant competitive factors. Our competitors include national, regional and
local chains, as well as local establishments. In all of our current and
proposed future market areas, there are established competitors with financial
and other resources, which are greater than our resources. We face competition
for sites on which to locate new restaurants, as well as for restaurant
associates and guests. The restaurant business is often affected by changes in
consumer tastes and by national, regional and local economic conditions and
demographic trends. The performance of individual restaurants may be affected
by factors such as traffic patterns, demographic factors, harsh weather
conditions, and the type, number and location of competing restaurants.
Additional factors that may adversely affect the restaurant industry in general,
and our restaurants in particular, are inflation of food, labor and associate
benefit costs, negative publicity surrounding food quality or safety issues, and
difficulty in attracting qualified management personnel and hourly associates.
SEASONAL ASPECTS
We have substantial fixed costs, which do not decline as a result of a decline
in sales. Our first and second fiscal quarters, which include the winter
months, usually reflect lower average weekly unit volumes as compared to the
third and fourth fiscal quarters. Additionally, sales in the first two fiscal
quarters can be adversely affected by severe winter weather. We also may be
negatively affected by adverse weather during the first and fourth fiscal
quarters as hurricanes and tropical storms may impact the Southeastern portion
of the United States, where we have a significant number of restaurants.
EMPLOYEES
As of September 29, 2004, we employed approximately 20,000 associates, of which
approximately two-thirds are part-time hourly associates. We consider our
employee relations to be good and believe that we provide working conditions and
wages that compare favorably with the industry.
TRADEMARKS
"Steak n Shake ", "Takhomasak ", "Famous For Steakburgers ", "FAXASAK ",
"Original Steakburger ", "In Sight It Must Be Right ", "Steak n Shake - It's a
Meal ", "The Original Steakburger ", "The "Wing and Circle" logo", "Steak n
Shake Famous For Steakburgers ", "Steak n Shake In Sight it Must be Right ",
"Takhomacup ", "Takhomasak ", and the Company's "storefront design" are among
the federally registered trademarks and servicemarks owned by the Company.
"Takhomacard ", "Banawberry ", "Banocolate ", "Chocawberry ", "High-n-Low ",
"Orangilla ", "Side-by-Side ", "Sippable Sundaes ", "Strawnilla ", "Up-n-Down ",
"Vanawberry ", "Vanocha " and "Vanocolate " are among the trademarks and service
marks owned by the Company for which federal registration applications are
currently pending. The Company protects its trademark rights by appropriate
legal action whenever necessary.
GOVERNMENT REGULATION
We are subject to various federal, state and local laws effecting our business.
Each of our restaurants is subject to licensing and regulation by a number of
governmental authorities, including health and safety and fire agencies in the
state and municipality in which the restaurant is located. The development and
construction of restaurants is subject to compliance with applicable zoning,
land use and environmental regulations. Difficulties in obtaining, or failure to
obtain, the required licenses or approvals could delay or prevent the
development of a new restaurant in a particular area.
Our restaurant operations are also subject to federal and state minimum wage
laws and laws governing such matters as working conditions, child labor,
overtime and tip credits. Many of our restaurant associates are paid at rates
related to the federal and state minimum wage laws, and accordingly, further
increases in the minimum wage would increase our labor costs.
As of September 29, 2004, we have franchise operations in nine states --
Georgia, Illinois, Indiana, Kentucky, Mississippi, Missouri, North Carolina,
Oklahoma, and Tennessee -- and are subject to certain federal and state laws
controlling the offering and conduct of our franchise business in those states.
In addition, we are subject to franchise registration requirements in several
states in which we are now conducting or will conduct franchise business in the
future.
GEOGRAPHIC CONCENTRATION
During fiscal 2004, approximately 47.6% of our net sales were derived from five
markets: St. Louis, Missouri (13.4%); Indianapolis, Indiana (12.7%); Orlando,
Florida (7.6%); Chicago, Illinois (7.4%); and Tampa, Florida (6.5%). As a
result, our results of operations may be materially affected by weather,
economic or business conditions within these markets. Also, given our present
geographic concentration, adverse publicity relating to Steak n Shake
restaurants could have a more pronounced overall adverse effect on our sales
than might be the case if our restaurants were more broadly dispersed.
SHAREHOLDER RIGHTS PLAN
On May 16, 2001, the Company's Board of Directors adopted a Shareholder Rights
Plan (the "Plan"). Under the Plan, rights have been attached to the outstanding
shares of Common Stock at the rate of one right for each share of Common Stock
held by shareholders of record at the close of business on May 31, 2001. The
rights will become exercisable only if a person or group of affiliated persons
(an "Acquiring Person") acquires 15% or more of the Company's Common Stock or
announces a tender offer or exchange offer that would result in the acquisition
of 30% or more of the outstanding Common Stock. At that time, the rights may be
redeemed at the election of the Board of Directors. If not redeemed, then prior
to the acquisition by the Acquiring Person of 50% or more of the outstanding
Common Stock of the Company, the Company may exchange the rights (other than
rights owned by the Acquiring Person, which would have become void) for Common
Stock (or other securities) of the Company on a one-for-one basis. If not
exchanged, the rights may be exercised and the holders may acquire one
one-hundredth of a share of Preferred Stock of the Company for $40.00. Each one
one-hundredth of a share of Preferred Stock carries the same voting rights as
one share of Common Stock. Each right may also be exchanged for shares of the
Company's Common Stock having a value of tow times the exercise price. If the
Acquiring Person engages in a merger or other business combination with the
Company, the rights would entitle the holders to acquire shares of the Acquiring
Person having a market value equal to twice the exercise price of the rights.
The Plan will expire in May 2011. The Plan is intended to protect the interests
of the Company's shareholders against certain coercive tactics sometimes
employed in takeover attempts.
INFORMATION AVAILABLE ON OUR WEB SITE
We make available through our web site, free of charge, our filings with the
Securities and Exchange Commission ("SEC") as soon as reasonably practicable
after we file them electronically with, or furnish them to, the SEC. The
reports we make available include annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, proxy statements, registration
statements, and any amendments to those documents. In addition, corporate
governance documents such as our Corporate Governance Guidelines, Code of
Business Conduct and Ethics, Whistleblower Policy, Nominating and Corporate
Governance Committee Charter, Compensation Committee Charter, and Audit
Committee Charter are posted on our web site and are available without charge
upon written request. The Company web site link is www.steaknshake.com and the
link to SEC filings and corporate governance documents is
www.steaknshake.com/investing.html. The Company's website and the information
contained therein or connected thereto are not intended to be incorporated into
this report on Form 10-K.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of September 29, 2004, the names, ages, and
positions held with the Company and its subsidiaries, and the date on which
service in such capacities began, of the executive officers of the Company and
its subsidiaries:
Name Age Position with Company Since
- ---------------------------------- ---- ------------------------------------ -----
Kevin F. Beauchamp. . . . . . . . . . . 47 Vice President -
The Steak n Shake Company 1993
Steak n Shake Operations, Inc. 1997
Jeffrey A. Blade. . . . . . . . . . . . 43 Senior Vice President,
Chief Financial Officer -
The Steak n Shake Company 2004
Steak n Shake Operations, Inc. 2004
B. Charlene Boog. . . . . . . . . . . . 72 Associate Vice President -
The Steak n Shake Company 1997
Roxanne Crosby. . . . . . . . . . . . . 51 Senior Vice President -
The Steak n Shake Company 2003
Steak n Shake Operations, Inc. 2003
Kevin E. Dooley . . . . . . . . . . . . 61 Vice President -
Steak n Shake Operations, Inc. 1993
Peter M. Dunn(1) . . . . . . . . . . . 49 President -
The Steak n Shake Company 2002
Steak n Shake Operations, Inc. 2002
Chief Executive Officer -
The Steak n Shake Company 2004
Steak n Shake Operations, Inc. 2004
Kenneth L. Faulkner . . . . . . . . . . 41 Vice President -
The Steak n Shake Company 2004
Steak n Shake Operations, Inc. 2004
Duane E. Geiger . . . . . . . . . . . . 41 Vice President -
The Steak n Shake Company 2000
Steak n Shake Operations, Inc. 2000
Alan B. Gilman(1) . . . . . . . . . . . 74 Chairman -
The Steak n Shake Company 2003
Steak n Shake Operations, Inc. 2003
William H. Hart . . . . . . . . . . . . 55 Vice President -
Steak n Shake Operations, Inc. 1991
Bradley Manns . . . . . . . . . . . . . 35 Vice President -
The Steak n Shake Company 2004
Steak n Shake Operations, Inc. 2004
David C. Milne. . . . . . . . . . . . . 37 General Counsel -
The Steak n Shake Company 2003
Steak n Shake Operations, Inc. 2003
Secretary -
The Steak n Shake Company 2004
Steak n Shake Operations, Inc. 2004
Gary T. Reinwald. . . . . . . . . . . . 56 Executive Vice President -
The Steak n Shake Company 2004
Steak n Shake Operations, Inc. 2004
Gary S. Walker. . . . . . . . . . . . . 44 Senior Vice President -
The Steak n Shake Company 1998
Steak n Shake Operations, Inc. 1998
Douglas D. Willard. . . . . . . . . . . 45 Vice President -
The Steak n Shake Company 2003
Steak n Shake Operations, Inc. 2003
(1) Member of the Board of Directors of the Company
Mr. Beauchamp was appointed Vice President, Operations in 1997. Mr. Beauchamp
joined the Company as Vice President and Controller in 1993.
Mr. Blade joined the Company as Senior Vice President and Chief Financial
Officer in 2004. From 1999 to 2004, Mr. Blade was Vice President of Finance for
the U.S. operations of Cott Corporation. Prior thereto, Mr. Blade served in
various financial roles for the Kraft Foods Corporation from 1988 to 1999.
Ms. Boog was appointed Associate Vice President in 1997. Prior thereto, she
served as Assistant Vice President and Assistant Secretary from 1991 to 1997.
Ms. Crosby joined the Company as Senior Vice President, Human Resources in 2003.
From 2002 to 2003, Ms. Crosby was a consultant. Prior thereto, Ms. Crosby
worked as Vice President Human Resources for the Borden Foods Corporation from
1995 to 2001.
Mr. Dooley joined Steak n Shake Operations, Inc. as Vice President in 1993 and
is responsible for engineering and construction.
Mr. Dunn joined the Company in 2002 as President and Chief Operating Officer,
and was subsequently appointed Chief Executive Officer in 2004. From 1993 to
2002, Mr. Dunn was President of Borden Foods Corporation. Prior thereto, he
served in several capacities for Kraft General Foods, including General Manager
for Claussen Pickle Company and the Marketing Manager for Oscar Mayer.
Mr. Faulkner was appointed Vice President, Operations in 2004. Prior thereto,
Mr. Faulkner served as Indiana Division Manager from 1994 to 2004 and served in
various operational capacities since 1981.
Mr. Geiger was appointed Vice President Planning and Internal Audit in 2004.
Prior thereto, Mr. Geiger was Vice President, Information Systems, Financial
Planning and Treasurer and served in other various capacities within the Company
since 1993.
Mr. Gilman was elected Chairman during 2003 and has been a Director of the
Company since 1992. He served as Chief Executive Officer until 2004 and as
President until 2002.
Mr. Hart has been Vice President, Purchasing of Steak n Shake Operations, Inc.
since 1991.
Mr. Manns was appointed Vice President, Franchising in 2004. Prior thereto, Mr.
Manns has served in various management capacities for the Company in the
operations, human resources, and legal functions.
Mr. Milne was promoted to General Counsel in 2003 and Secretary in 2004 after
joining the Company in 2000. From 1996 to 2000, Mr. Milne was in private
practice with the firm of Scopelitis, Garvin, Light and Hanson.
Mr. Reinwald was appointed Executive Vice President of the Company in 2004.
Prior thereto, Mr. Reinwald was Senior Vice President, Operations and National
General Manager of Steak n Shake Operations, Inc., and served in various
capacities with the Company for more than 40 years.
Mr. Walker joined the Company as Senior Vice President in 1998 and is
responsible for operations support, purchasing and distribution. From 1994 to
1998, Mr. Walker was Vice President of Marketing - Home Care Division for
DowBrands L.P.
Mr. Willard joined the Company in 2003 as Vice President, Consumer Insight and
Innovation. Prior to joining the Company, Mr. Willard served as an independent
consultant. From 1992 to 2001, Mr. Willard served in various management
capacities with Borden Foods Corporation in the business development and
marketing functions.
Officers are elected annually at a meeting of the Board of Directors.
ITEM 2. PROPERTIES
We currently lease 36,715 square feet of executive office space in Indianapolis,
Indiana, under a lease expiring June 30, 2013.
STEAK N SHAKE OPERATIONS, INC.
As of September 29, 2004, we operated 224 leased and 141 owned restaurants.
Restaurant leases for land and building typically are non-cancelable, have an
initial term of 18 to 25 years, renewal terms aggregating twenty years or more
and require us to pay real estate taxes, insurance and maintenance costs. Of
these leases, 175 contain percentage of sales rental clauses in addition to base
rent requirements. Restaurants are generally 3,900 square feet and seat
approximately 100 customers, while a minimal percentage of restaurants have a
similar architectural style but seat 54 to 198 customers and occupy between
1,000 and 6,000 square feet. We have lease obligations on two former restaurant
locations which have been subleased to others as of September 29, 2004. These
obligations primarily relate to restaurant locations disposed of in the late
1970's, and the sublease rentals cover substantially all of our obligations
under the primary leases.
We also have a complex of three buildings located in Bloomington, Illinois,
where we own 38,900 square feet of office/warehouse space in two separate
buildings, one of which has cold storage facilities, and lease a 26,300 square
foot distribution center and division office facility. We also lease division
offices in Orlando, Florida; Cincinnati, Ohio; Columbus, Ohio; Detroit,
Michigan; Chicago, Illinois; and a division office and administrative facility
in Indianapolis, Indiana. In addition, we own a division office facility in St.
Louis, Missouri. At September 29, 2004, we owned one restaurant location that
had been leased to a third party. In addition, there were 10 restaurants under
construction and we owned 7 parcels of land that are being held for future
development at September 29, 2004.
SNS INVESTMENT COMPANY
SNS Investment Company ("SIC"), a wholly owned subsidiary of the Company,
assists qualified franchisees with financing by purchasing or leasing land,
constructing the restaurant and then leasing or subleasing the land and building
to the franchisee. SIC leases the land and building for these properties as the
primary lessee. These leases typically have an initial term of 18 years,
renewal options aggregating 20 years or more, and require SIC to pay real estate
taxes, insurance and maintenance costs. As of September 29, 2004, SIC had six
land and building leases for properties located in Louisville and Elizabethtown,
Kentucky; Chattanooga, Tennessee; Clarksville, Indiana and Columbia, Missouri
which are being operated by franchisees pursuant to sublease agreements. All
lease and sublease agreements between SIC and its franchisees specifically
include triple net lease provisions whereby the franchisee is responsible for
all real estate taxes, insurance and maintenance costs. Additionally, SIC has a
ground lease for a property in Bloomington, Indiana, and owns a property in
Indianapolis, Indiana, which are subleased and leased, respectively, to third
parties.
RESTAURANT LEASE EXPIRATIONS
Restaurant leases are scheduled to expire as follows, assuming the exercise of
all renewal options:
Number of Leases Expiring
-------------------------
Calendar Year SNS SIC
- ------------- --- ---
2005 - 2009 5 0
2010 - 2014 2 0
2015 - 2019 5 0
2020 - 2024 13 0
2025 - 2029 14 0
Beyond 185 7
--- ---
224 7
=== ===
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings against the Company, which, if adversely
resolved, would have a material effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth quarter of
the fiscal year covered by this Report.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET PRICE RANGE/STOCK TRADING
The Common Stock of The Steak n Shake Company is traded on the New York Stock
Exchange ("NYSE") under the symbol SNS. Stock price quotations can be found in
major daily newspapers and in The Wall Street Journal. The high and low closing
sales prices for the Company's Common Stock, as reported on the NYSE for each
quarter of the Company's past two fiscal years, are shown below:
2004 2003
---- ----
HIGH LOW High Low
------ ------ ------ ------
First Quarter. $18.13 $14.50 $11.63 $ 9.97
Second Quarter $21.70 $17.21 $10.52 $ 8.89
Third Quarter. $20.38 $17.04 $15.25 $ 9.60
Fourth Quarter $18.51 $16.38 $16.04 $14.05
The Company did not pay cash dividends on its Common Stock during the two fiscal
years reflected in the table. As of December 1, 2004, there were 13,500 record
holders of the Common Stock.
See Item 12 for "Equity Compensation Plan Information".
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for each of the Company's five most recent fiscal
years, set forth in the Company's 2004 Annual Report to Shareholders under
"Selected Financial and Operating Data (Unaudited)" is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial conditions and results of
operations set forth in the Company's 2004 Annual Report to Shareholders under
"Management's Discussion and Analysis" is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure with regard to financial instruments
is to changes in interest rates. The Company invests excess cash primarily in
cash equivalents due to their relative low credit risk. Interest rates on these
securities are based upon market rates at the time of purchase and remain fixed
until maturity. 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 September 29, 2004, a hypothetical 100 basis point
increase in short-term interest rates would have an immaterial impact on the
Company's earnings.
The Company purchases certain food products, which may be affected by volatility
in commodity prices due to weather conditions, supply levels, and other market
conditions. The Company utilizes various purchasing and contract pricing
techniques to minimize volatility, but does not enter into financial derivative
contracts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Statements of Earnings, Consolidated Statements of
Financial Position, Consolidated Statements of Cash Flows, Consolidated
Statements of Shareholders' Equity, Notes to Consolidated Financial Statements
and Reports of Independent Registered Public Accounting Firms set forth in the
Company's 2004 Annual Report to Shareholders are incorporated herein by
reference.
Information on quarterly results of operations, set forth in the Company's 2004
Annual Report to Shareholders under "Quarterly Financial Data (Unaudited)" is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
As previously reported by the Company in its current report on Form 8-K filed on
February 19, 2003, the Audit Committee decided to change the Company's
independent registered public accountants and replaced Ernst & Young LLP with
Deloitte & Touche LLP. There were no disagreements or reportable events with
the Company's auditors during the two-year period ended September 29, 2004.
ITEM 9A. CONTROLS AND PROCEDURES
Based on an evaluation of the Company's disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(c)) as of September 29, 2004,
the Company's Chief Executive Officer and Chief Financial Officer have concluded
that the Company's disclosures controls and procedures are effective in timely
alerting the Company's management to material information required to be
included in this Form 10-K and other Exchange Act filings. There have been no
changes in the Company's internal controls over financial reporting that
occurred during the quarter ended September 29, 2004 that have materially
effected, or are reasonably likely to materially effect, the Company's internal
control over financial reporting.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information included under the captions "Election of Directors", "Committees
and Meetings of the Board of Directors", "Section 16(a) Beneficial Ownership
Reporting Compliance", and "Miscellaneous - Code of Business Conduct and Ethics"
in the Company's definitive Proxy Statement relating to its 2005 Annual Meeting
of Shareholders is incorporated herein by reference. Certain information
relating to the Company's executive officers is included in Part I of this Form
10-K under "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information included under the captions "Compensation of Directors",
"Compensation of Executive Officers", "Summary Compensation Table",
"Options/SAR Grants in Last Fiscal Year", "Aggregated Option Exercises in Fiscal
2004 and Fiscal Year End Option Values", "Long Term Incentive Plans - Awards in
Last Fiscal Year", "Report of the Compensation Committee", and "Company
Performance" in the Company's definitive Proxy Statement relating to its 2005
Annual Meeting of Shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained under the caption "Ownership of Common Stock" in the
Company's definitive Proxy Statement relating to its 2005 Annual Meeting of
Shareholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement relating to its 2005
Annual Meeting of Shareholders is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information included in Appendix A in the Company's definitive Proxy
Statement relating to its 2005 Annual Meeting of Shareholders is incorporated
herein by reference.
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as a part of this report:
-----------------------------------------------
1. Financial Statements. The following table sets forth the
----------------------
financial statements filed as a part of this report:
Consolidated Statements of Financial Position at September 29,
2004 and September 24, 2003
For the years ended September 29, 2004, September 24, 2003 and
September 25, 2002:
Consolidated Statements of Earnings
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms
2. Financial Statement Schedules.
--------------------------------
All schedules for the years ended September 29, 2004, September
24, 2003 and September 25, 2002 have been omitted for the reason that they are
not required, are not applicable, or the required information is set forth in
the financial statements or notes thereto.
3. Exhibits. The following exhibits are filed as a part of this
---------
Annual Report on Form 10-K.
Amended and Restated Articles of Incorporation of The Steak n Shake
Company, filed March 27, 2002. (Incorporated by reference to the
Registrant's definitive Proxy Statement dated December 19, 2001,
related to the 2002 Annual Meeting of Shareholders).
3.02 Restated Bylaws of The Steak n Shake Company, as amended, dated July
6, 2004.
4.01 Specimen certificate representing Common Stock of The Steak n Shake
Company. (Incorporated by reference to Exhibit 4.01 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 11, 2001).
4.02 Amended and Restated Note Purchase and Private Shelf Agreement by and
between The Steak n Shake Company and The Prudential Insurance Company
of America dated as of September 20, 2002 related to the $75,000,000
senior note agreement and private shelf facility. (Incorporated by
reference to Exhibit 4.02 to the Registrant's Annual Report on Form
10-K for the year ended September 25, 2002).
4.03 Amendment No. 1 to Amended and Restated Note Purchase Agreement by and
between The Steak n Shake Company and The Prudential Insurance
Company of America dated as of December 18, 2002 related to the $75,000,000
senior note agreement and private shelf facility. (Incorporated by
reference to Exhibit 4.03 to the Registrant's Annual Report on Form
10-K for the year ended September 25, 2002).
4.04 Rights Agreement dated as of May 16, 2001 between The Steak n Shake
Company and Computershare Investor Services, LLC, as Rights Agent.
(Incorporated by reference to Exhibit 4.01 to the Registrant's current
report on Form 8-K filed May 17, 2001).
4.05 Credit Agreement by and between The Steak n Shake Company and Fifth
Third Bank, Indiana (Central) dated November 16, 2001, relating to a
$30,000,000 revolving line of credit. (Incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the
year ended September 26, 2001).
4.06 First Amendment to Credit Agreement by and Between The Steak n Shake
Company and Fifth Third Bank, Indiana (Central) dated October 17, 2002
relating to a $30,000,000 revolving line of credit. (Incorporated by
reference to Exhibit 10.15 to the Registrant's Annual Report on
Form 10-K for the year ended September 25, 2002).
4.07 Second Amendment to Credit Agreement by and Between The Steak n Shake
Company and Fifth Third Bank, Indiana (Central) dated December 18, 2002
relating to a $30,000,000 revolving line of credit. (Incorporated by
reference to Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the year ended September 25, 2002).
4.08 Amendment No. 2 dated May 21, 2003 to the Amended and Restated Note
Purchase and Private Shelf Agreement dated September 20, 2002.
(Incorporated by reference to Exhibit 10.16 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 9, 2003)
4.09 Third Amendment to Credit Agreement by and between The Steak n Shake
Company and Fifth Third Bank, Indiana (Central) dated May 22, 2003
related to a $30,000,000 revolving line of credit. (Incorporated by
reference to Exhibit 10.17 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 9, 2003).
4.10 Amendment No. 3 dated September 17, 2003 to the Amended and Restated
Note Purchase and Private Shelf Agreement dated September 20, 2002.
10.01* Letter from the Registrant to Alan B. Gilman dated June 27, 1992.
(Incorporated by reference to Exhibit 19.13 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 1, 1992).
10.02* Retirement Agreement by and between S. Sue Aramian and the
Registrant dated August 15, 2001. (Incorporated by reference to Exhibit
10.05 to the Registrant's Annual Report on Form 10-K for the year ended
September 26, 2001).
10.03* 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).
10.04* 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).
10.05* Amendment No. 1 to The Steak n Shake Company's (formerly
Consolidated Products, Inc.) 1997 Employee Stock Option Plan.
(Incorporated by reference to the Appendix to the Registrant's
definitive Proxy Statement dated December 19, 2001 related to the
2002 Annual Meeting of Shareholders).
10.06* Form of option agreement related to 2000 Non-employee Director Stock
Option Program and schedule relating thereto. (Incorporated by
reference to Exhibit 10.22 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 5, 2000).
10.07* Form of option agreement related to 2002 Non-employee Director Stock
Option Program and schedule relating thereto.(Incorporated by reference
to Exhibit 10.22 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 19, 2001).
10.08* The Steak n Shake Company Incentive Bonus Plan approved by the
Company's Board of Directors on February 12, 2003. (Incorporated by
reference to Exhibit 10.15 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 9, 2003).
10.09* The Steak n Shake Company's 2003 Director Stock Option Plan
(Incorporated by reference to Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended September 24,
2003).
10.10* Letter from Registrant to Peter Dunn dated July 25, 2002.
(Incorporated by reference to Exhibit 10.13 to the Registrant's
Annual Report on Form 10-K for the year ended September 24, 2003).
10.11* The Steak n Shake Company Amended and Restated 1997 Capital
Appreciation Plan. (Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated December 19, 2003 related
to the 2004 Annual Meeting of Shareholders).
10.12* The Steak n Shake Company 2004 Director Stock Option Plan.
(Incorporated by reference to the Appendix to the Registrant's
definitive Proxy Statement dated December 19, 2003 related to
the 2004 Annual Meeting of Shareholders).
10.13* Form of The Steak n Shake Company Capital Appreciation Agreement.
10.14* Form of The Steak n Shake Company Stock Option Agreement.
13.01 Portions of the Annual Report to Shareholders for the Year Ended
September 29, 2004 incorporated by reference into this Form
10-K
14.01 The Steak n Shake Company Conflicts of Interest and Standards of
Business Ethics Policy. (Incorporated by reference to Exhibit
14.01 to the Registrant's Annual Report on Form 10-K for the year ended
September 24, 2003).
21.01 Subsidiaries of the Registrant.
23.01 Consent of Independent Registered Public Accounting Firm, Deloitte &
Touche LLP.
23.02 Consent of Independent Registered Public Accounting Firm, Ernst &
Young LLP.
31.01 Rule 13(a)-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.02 Rule 13(a)-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.01 Section 1350 Certifications.
* Indicates management contract or compensatory plans or arrangements required
to be filed as an Exhibit.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 December 3, 2004.
THE STEAK N SHAKE COMPANY
By: /s/ Jeffrey A. Blade
------------------------
Jeffrey A. Blade
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated, on December 3, 2004.
/s/ Jeffrey A. Blade. . . Senior Vice President and Chief Financial Officer
- -------------------------
Jeffrey A. Blade. . . . . (Principal Financial Officer and Principal Accounting Officer)
/s/ Peter M. Dunn . . . . Chief Executive Officer and Director
- -------------------------
Peter M. Dunn . . . . . . (Principal Executive Officer)
/s/ Alan B. Gilman. . . . Chairman and Director
- -------------------------
Alan B. Gilman
/s/ Stephen Goldsmith . . Director
- -------------------------
Stephen Goldsmith
/s/ Wayne L. Kelley . . . Director
- -------------------------
Wayne L. Kelley
/s/ Charles E. Lanham . . Director
- -------------------------
Charles E. Lanham
/s/ Ruth J. Person. . . . Director
- -------------------------
Ruth J. Person
/s/ J. Fred Risk. . . . . Director
- -------------------------
J. Fred Risk
/s/ Dr. John W. Ryan. . . Director
- -------------------------
Dr. John W. Ryan
/s/ James Williamson, Jr. Director
- -------------------------
James Williamson, Jr.
THE STEAK N SHAKE COMPANY AND SUBIDIARIES
Index to Exhibits
Number Description
------ -----------
(3) 3.01 Amended and Restated Articles of Incorporation of The
Steak n Shake Company, filed March 27, 2002. (Incorporated by reference to
the Registrant's definitive Proxy Statement dated December 19, 2001 related
to the 2002 Annual Meeting of Shareholders).
3.02 Restated Bylaws of The Steak n Shake Company, as amended,
dated July 16, 2004.
(4) 4.01 Specimen certificate representing Common Stock of The
Steak n Shake Company (formerly Consolidated Products, Inc.). (Incorporated by
reference to Exhibit 4.01 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 11, 2001).
4.02 Amended and Restated Note Purchase and Private Shelf Agreement
by and between The Steak n Shake Company and The Prudential
Insurance Company of America dated as of September 20, 2002
related to $75,000,000 senior note agreement and private shelf
facility. (Incorporated by reference to Exhibit 4.02 to the
Registrant's Annual Report on Form 10-K for the year ended
September 25, 2002).
4.03 Amendment No. 1 to Amended and Restated Note Purchase
Agreement by and between The Steak n Shake Company and The Prudential Insurance
Company of America dated as of December 18, 2002 related to the $75,000,000
senior note agreement and private shelf facility. (Incorporated by reference to
Exhibit 4.03 to the Registrant's Annual Report on Form 10-K for the year ended
September 25, 2002).
4.04 Rights Agreement dated as of May 16, 2001 between The Steak n
Shake Company and Computershare Investor Services, LLC, as
Rights Agent. (Incorporated by reference to Exhibit 4.01
to the Registrant's current report on Form 8-K
filed May 17, 2001).
4.05 Credit Agreement by and between The Steak n Shake Company and
Fifth Third Bank, Indiana (Central) dated November 16, 2001, relating to a
$30,000,000 revolving line of credit. (Incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report on Form 10-K for the year ended
September 26, 2001).
4.06 First Amendment to Credit Agreement by and between The Steak n
Shake Company and Fifth Third Bank, Indiana (Central) dated
October 17, 2002, relating to a $30,000,000 revolving line of
credit. (Incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the year
ended September 25, 2002).
4.07 Second Amendment to Credit Agreement by and between The
Steak n Shake Company and Fifth Third Bank, Indiana
(Central) dated December 18, 2002, relating to a
$30,000,000 revolving line of credit. (Incorporated by
reference to Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the year ended September 25, 2002).
4.08 Amendment No. 2 dated May 21, 2003 to the Amended and
Restated Note Purchase and Private Shelf Agreement dated
September 20, 2002. (Incorporated by reference to Exhibit
10.16 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 9, 2003).
4.09 Third Amendment to Credit Agreement by and between The Steak
n Shake Company and Fifth Third Bank, Indiana (Central) dated
May 22, 2003 related to a $30,000,000 revolving line of
credit. (Incorporated by reference to Exhibit
10.17 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 9, 2003).
4.10 Amendment No. 3 dated September 17, 2003 to the Amended and
Restated Note Purchase and Private Shelf Agreement dated September 20, 2002.
(9) No exhibit.
(10) 10.01 * Letter from the Registrant to Alan B. Gilman dated
June 27, 1992. (Incorporated by reference to Exhibit 19.13 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 1992).
10.02 * Retirement Agreement by and between S. Sue Aramian and the
Registrant dated August 15, 2001. (Incorporated by reference to Exhibit 10.05
to the Registrant's Annual Report on Form 10-K for the year ended September 26,
2001).
10.03* 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).
10.04* 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).
10.05* Amendment No. 1 to The Steak n Shake Company's (formerly
Consolidated Products, Inc.) 1997 Employee Stock Option Plan. (Incorporated by
reference to the Appendix to the Registrant's definitive Proxy Statement dated
December 19, 2001 related to the 2002 Annual Meeting of Shareholders).
10.06* Form of option agreement related to 2000 Non-employee Director
Stock Option Program and schedule relating thereto.
(Incorporated by reference to Exhibit 10.22 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 5, 2000).
10.07* From of option agreement related to 2002 Non-employee Director
Stock Option Program and schedule relating thereto.
(Incorporated by reference to Exhibit 10.14 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 19, 2001).
10.08* The Steak n Shake Company Incentive Plan approved by the
Company's Board of Directors on February 12, 2003.
(Incorporated by reference to Exhibit 10.15 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
Quarter ended April 9, 2003).
10.09* The Steak n Shake Company's 2003 Director Stock Option Plan.
(Incorporated by reference to Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the year ended
September 24, 2003).
10.10* Letter from Registrant to Peter Dunn dated July 25, 2002.
(Incorporated by reference to Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for the year ended
September 24, 2003).
10.11* The Steak n Shake Company Amended and Restated 1997 Capital
Appreciation Plan. (Incorporated by reference to the
Appendix to the Registrant's definitive Proxy Statement
dated December 19, 2003 related to the 2004 Annual Meeting
of Shareholders).
10.12* The Steak n Shake Company 2004 Director Stock Option Plan.
(Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated December 19,
2003 related to the 2004 Annual Meeting of Shareholders).
10.13* Form of The Steak n Shake Company Capital Appreciation
Agreement.
10.14* Form of The Steak n Shake Company Stock Option Agreement.
(11) No exhibit.
(12) No exhibit.
(13) 13.01 Portions of the Annual Report to Shareholders for the
Year Ended September 29, 2004 incorporated by reference into this Form 10-K.
(14) 14.01 The Steak n Shake Company Conflicts of Interest and
Standards of Business Ethics Policy. (Incorporated by reference to Exhibit
14.01 to the Registrant's Annual Report on Form 10-K for the year ended
September 24, 2003).
(18) No exhibit.
(21) 21.01 Subsidiaries of the Registrant.
(22) No exhibit.
(23) 23.01 Consent of Independent Registered Public Accounting
Firm, Deloitte & Touche LLP.
23.02 Consent of Independent Registered Public Accounting Firm,
Ernst & Young LLP.
(24) No exhibit.
(27) No exhibit.
(31) 31.01 Rule 13(a)-14(a)/15d-14(a) Certification of Chief
Executive Officer.
32.02 Rule 13(a)-14(a)/15d-14(a) Certification of Chief
Financial Officer.
(32) 32.01 Section 1350 Certifications.
* Indicates management contracts or compensatory plans or arrangements required
to be filed as an Exhibit.
EXHIBIT 13.01 - ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED SEPTEMBER 29,
2004
SELECTED FINANCIAL AND OPERATING DATA (UNAUDITED)
The Steak n Shake Company
(All dollar amounts in thousands, except per share data)
2004 2003 2002 2001 2000
-------- ---------- -------- -------- -----------
Statement of Earnings Data :
Revenues. . . . . . . . . . . . . . . . . . $553,692 $ 499,104 $459,014 $445,191 $ 406,047
Earnings from continuing operations. . . . . . 27,662 20,939(1) 23,089 20,796 21,467
Discontinued operations. . . . . . . . . . . . - - - - (3,715)(2)
Net earnings . . . . . . . . . . . . . . . . . $ 27,662 $ 20,939 $ 23,089 $ 20,796 $ 17,752
-------- ---------- -------- -------- -----------
Per Share Data:
Basic Earnings Per Common Share:
Continuing operations . . . . . . . . . . $ 1.01 $ .78 $ .83 $ .72 $ .73
Discontinued operations . . . . . . . . . - - - - (.13) (2)
Basic earnings per share. . . . . . . . . $ 1.01 $ .78 $ .83 $ .72 $ .60
-------- ---------- -------- -------- -----------
Diluted Earnings Per Common and
Common Equivalent Share:
Continuing operations . . . . . . . . . . $ 1.00 $ .77 $ .83 $ .72 $ .73
Discontinued operations . . . . . . . . . - - - - (.13) (2)
Diluted earnings per share. . . . . . . . . $ 1.00 $ .77 $ .83 $ .72 $ .60
-------- ---------- -------- -------- -----------
Basic Weighted Average Shares (in thousands) . 27,385 27,010 27,814 28,707 29,263
Diluted Weighted Average
Shares and Share Equivalents (in thousands) 27,711 27,110 27,986 28,716 29,339
Statement of Financial Position Data:
Total assets. . . . . . . . . . . . . . . . $433,463 $ 414,636 $395,895 $371,415 $ 346,375
Long-term debt:
Obligations under leases. . . . . . . . . 141,972 145,125 148,531 135,916 113,441
Revolving line of credit. . . . . . . . . - - - - 12,695
Senior notes. . . . . . . . . . . . . . . 9,429 16,203 24,419 28,379 25,522
Shareholders' equity. . . . . . . . . . . . $219,715 $ 188,615 $167,055 $162,004 $ 149,316
SELECTED FINANCIAL AND OPERATING DATA (UNAUDITED)
The Steak n Shake Company
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Other Data: (3)
Number of Restaurants:
Company-owned. . . . 365 356 348 332 313
Franchised . . . . . 60 57 56 56 54
------ ------ ------ ------ ------
425 413 404 388 367
Number of Employees . . 20,000 20,000 20,000 19,000 18,000
Number of Shareholders. 13,500 13,500 12,500 11,500 12,000
(1) In 2003, the Company recorded a charge of $5,200 ($3,360 net of income
taxes or $.13 per diluted share) related to the disposal of nine
under-performing restaurants.
(2) In 2000, the Company recorded a charge for the loss on disposal of
discontinued operations of the Specialty Restaurant segment of $3,715 ($2,400
net of income taxes or $.08 per diluted share).
(3) Data presented is not required by generally accepted accounting
principles but provides an important measure of Company performance.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Steak n Shake Company
(Years ended September 29, 2004, September 24, 2003 and September 25, 2002)
(Amounts in $000s, except per share data)
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.
For an understanding of the significant factors that influenced the performance
of the Company during the past three fiscal years, the following discussion
should be read in conjunction with the consolidated financial statements and
related notes found elsewhere in this Annual Report.
OVERVIEW
The Steak n Shake Company reported higher revenues, net income and diluted
earnings per share in the year ended September 29, 2004 as compared to the prior
year. The Company's revenues increased by 10.9% to $553,692 compared to
$499,104 for the same period last year. Net earnings increased 32.1% to $27,662
from $20,939 in the prior year, while diluted earnings per share increased to
$1.00 from $0.77 (prior year period included a $3,400 charge, net of tax, or
$.13 per dilute share, for closing nine underperforming restaurants).
The key to the Company's revenue growth was a 7.7% increase in same store sales
(excluding the impact of an additional week in fiscal 2004). The same store
sales growth is primarily attributable to increasing guest counts by 3.9% and a
higher average check of 3.8%, which was aided by a 2.9% menu price increase.
These sales gains helped offset higher food costs in beef, poultry, and dairy
products.
Management continues to focus on five key operating strategies that are linked
in a "virtuous cycle" which include: developing effective field leaders;
improving associate satisfaction and training; growing guest counts; improving
margins; and expanding the brand. Management believes that these efforts are
the key factors driving seven consecutive quarters of positive same store sales.
For fiscal year 2005, the Company anticipates opening 18-24 new Company-owned
restaurants and diluted earnings per share in the range of $1.08 - $1.11.
The Company has a 52/53 week fiscal year ending on the last Wednesday in
September. Fiscal year 2004, which ended on September 29, 2004, contained 53
weeks while fiscal years 2003 and 2002, which ended on September 24, 2003 and
September 25, 2002, respectively, each contained 52 weeks.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to use its judgment to make estimates and assumptions that can have a
material impact on the results of operations and reported amounts of assets and
liabilities. The Company evaluates its assumptions and estimates on an ongoing
basis based on historical experience and various other factors that are believed
to be relevant under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
The Company believes that, of its significant accounting policies, the
following policies involve a higher degree of risk, judgment and/or complexity.
Property and Equipment
Property and equipment are recorded at cost with depreciation and
amortization being recognized on the straight-line method over the estimated
useful lives of the assets (15 to 25 years for building and land improvements, 3
to 10 years for equipment, and the shorter of the estimated useful life or the
lease term for leasehold improvements). The Company reviews its restaurants for
impairment on a restaurant-by-restaurant basis when events or circumstances
indicate a possible impairment. The Company tests for impairment by comparing
the carrying value of the asset to the future cash flows expected to be
generated by the asset. If the total estimated future cash flows are less than
the carrying amount of the asset, the carrying amount is written down to the
estimated fair value, and a loss is recognized in earnings. Because
depreciation and amortization expense is based upon useful lives of assets and
the net salvage value at the end of their lives, significant judgment is
required in estimating this expense. Additionally, the future cash flows
expected to be generated by an asset requires significant judgment regarding
future performance of the asset, fair market value if the asset were to be sold,
and other financial and economic assumptions. Accordingly, management believes
that accounting estimates related to property and equipment are critical.
Insurance Reserves
The Company self-insures a significant portion of expected losses under its
workers' compensation, general liability, and auto liability insurance programs.
The Company purchases reinsurance for individual and aggregate claims that
exceed predetermined limits. The Company records a liability for all unresolved
claims and its estimate of incurred but not reported ("IBNR") claims at the
anticipated cost to the Company. The liability estimate is based on information
received from insurance companies, combined with management's judgments
regarding frequency and severity of claims, claims development history, and
settlement practices. Significant judgment is required to estimate IBNR claims
as parties have yet to assert a claim and therefore the degree to which injuries
have been incurred, and the related costs, have not yet been determined.
Additionally, estimates about future costs involve significant judgment
regarding legislation, case jurisdictions and other matters. Accordingly,
management believes that estimates related to self-insurance reserves are
critical. The Company's reserve for self-insured liabilities at September 29,
2004 and September 24, 2003 was $4,298 and $3,519, respectively. If the Company
were to change its assumptions used in estimating the reserve by 10%, the impact
on net earnings would be approximately $724 of additional expense.
Income Taxes
The Company records deferred tax assets or liabilities based on differences
between financial reporting and tax bases of assets and liabilities using
currently enacted rates and laws that will be in effect when the differences are
expected to reverse. Management records deferred tax assets to the extent it
believes there will be sufficient future taxable income to utilize those assets
prior to their expiration. To the extent deferred tax assets would be unable to
be utilized, management would record a valuation allowance against the
unrealizable amount, and record that amount as a charge against earnings. Due
to changing tax laws and state income tax rates, significant judgment is
required to estimate the effective tax rate expected to apply to tax differences
that are expected to reverse in the future. Management must also make estimates
about the sufficiency of taxable income in future periods to offset any
deductions related to deferred tax assets currently recorded. Accordingly,
management believes estimates related to income taxes are critical. Based on
2004 results, a change of 1% in the annual effective tax rate would have an
impact of $425 on net earnings.
RESULTS OF OPERATIONS
In the following table is set forth the percentage relationship to total
revenues, unless otherwise noted, of items included in the Company's
consolidated statements of earnings for the periods indicated:
2004 2003 2002
------- ------- -------
Revenues
Net sales . . . . . . . . . . . . 99.2% 99.2% 99.2%
Franchise fees. . . . . . . . . . .8 .8 .8
100.0 100.0 100.0
------- ------- -------
Costs and Expenses
Cost of sales . . . . . . . . . . 23.6(1) 22.9(1) 23.1(1)
Restaurant operating costs. . . . 49.2(1) 49.6(1) 48.8(1)
General and administrative. . . . 7.7 7.6 7.5
Depreciation and amortization . . 4.5 4.8 5.0
Marketing . . . . . . . . . . . . 4.2 3.8 3.5
Interest. . . . . . . . . . . . . 2.3 2.7 2.9
Rent. . . . . . . . . . . . . . . 1.6 1.7 1.8
Provision for restaurant closings (.1) 1.0 -
Pre-opening costs . . . . . . . . .4 .4 .5
Other income, net . . . . . . . . (.4) (.4) (.4)
------- ------- -------
Earnings Before Income Taxes . . . . . 7.7 6.5 7.8
Income Taxes . . . . . . . . . . . . . 2.7 2.3 2.8
------- ------- -------
Net Earnings . . . . . . . . . . . . . 5.0% 4.2% 5.0%
------- ------- -------
(1) Cost of sales and restaurant operating costs are expressed as a percentage
of net sales.
(Amounts in $000s)
YEAR ENDED SEPTEMBER 29, 2004 TO YEAR ENDED SEPTEMBER 24, 2003
Revenues
Net sales increased $53,853 (10.9%) to $549,130, due to a 7.7% increase in
same store sales and an additional week in the current year which netted $9,500
in incremental sales. The increase in same store sales is due to increased
customer counts of 3.9% and increased check average of 3.8%. The increase in
same store sales is attributed to increased television advertising spending in
select markets as well as gains from new menu items such as the Side-by-Side
Milk Shakes. The increase in check average resulted primarily from a 2.9%
weighted average menu price increase compared to the prior year. The Company
had 365 Company-owned Steak n Shake restaurants operating at September 29, 2004,
compared to 356 at September 24, 2003.
Costs and Expenses
Cost of sales increased $15,962 (14.1%) to $129,458 due to the increase in
net sales and higher food commodity prices. As a percentage of net sales, cost
of sales increased from 22.9% to 23.6%. The increase as a percentage of net
sales is attributable to increased commodity prices for beef, dairy products,
and chicken compared to the prior year.
Restaurant operating costs increased $24,533 (10.0%) to $270,057 due to
increased sales and the opening of 16 new Company-owned restaurants. As a
percentage of net sales, restaurant operating costs decreased to 49.2%, compared
to 49.6% for the prior year. The decrease as a percentage of net sales is
primarily attributed to improved labor utilization and higher sales volumes,
compared to the prior year.
General and administrative expenses increased $4,455 (11.8%) to $42,364,
and as a percentage of revenue increased from 7.6% to 7.7%. The overall
increase in general and administrative expenses reflected increased investments
of $1,600 in consumer research, new product development and guest satisfaction,
combined with an additional $900 in legal and professional fees. Also impacting
the increase was a $700 non-recurring gain on sale of property in 2003.
Depreciation and amortization expense increased $540 (2.2%) to $24,710.
The increase is primarily due to the opening of 16 Company-owned restaurants in
the current year.
Marketing expense increased $4,250 (22.5%) to $23,106, principally as a
result of adding 16 new television markets in the current year. Over 90% of our
restaurants are now supported by television advertising.
Interest expense decreased $559 (4.2%) to $12,832 due to a decline in
weighted average borrowings outstanding from principal repayments on long-term
debt and capital lease obligations of $11,737 during the year.
Rent expense increased $603 (7.3%) to $8,912 as a result of increased
percentage rents over the prior year due to increased net sales.
The Company recorded a reduction in its provision for restaurant closings
of $394 during the current year as proceeds from the disposal of restaurants
exceeded previous estimates.
Pre-opening costs increased $209 (11.1%) to $2,098 as the Company opened 16
Company-owned restaurants in the current year compared to 13 new openings in the
prior year.
Other income, net decreased $66 (3.2%) to $1,998 due to reduced interest
income from lower cash and investment balances than the prior year.
Income Taxes
The Company's effective income tax rate decreased from 35.4% in the prior
year to 35.0% in the current year. The change in the effective rate is primarily
due to increased WOTC and FICA tax credits and lower state income taxes.
YEAR ENDED SEPTEMBER 24, 2003 TO YEAR ENDED SEPTEMBER 25, 2002
Revenues
Net sales increased $39,918 (8.8%) to $495,277, due to a 4.9% increase in
same-store sales, coupled with the opening of thirteen new Company-owned
restaurants. The strong sales growth is mainly attributable to system-wide
acceptance of credit cards in the first quarter, increased television and
promotional marketing throughout the year, and the introduction of three new
shake flavors in the third quarter. These efforts had the effect of increasing
customer counts by 2.8% and check average by 2.0%. The increased check average
was also partially caused by a 1.3% weighted-average menu price increase. The
Company had 356 Company-owned Steak n Shake restaurants operating at September
24, 2003, compared to 348 at September 25, 2002.
Costs and Expenses
Cost of sales increased $8,171 (7.8%) to $113,496 primarily due to the
increase in net sales. As a percentage of net sales, cost of sales decreased to
22.9% from 23.1% based on menu price increases and decreases in dairy product
costs compared to 2002.
Restaurant operating costs increased $23,090 (10.4%) to $245,524 due to
increased sales and opening of new restaurants. As a percentage of net sales,
restaurant operating costs increased to 49.6% from 48.8% as credit card
processing fees were incurred in 2003, but not in 2002. Additionally, market
conditions caused the Company's property taxes and insurance premiums to
increase 16.3%.
General and administrative expenses increased $3,694 (10.8%) to $37,909 in
2003, and as a percentage of revenue increased to 7.6% in 2003 from 7.5% in
2002. This increase in general and administrative expenses is attributable to
increased staffing and training to support new and growing markets, and
incremental investments in consumer research, mystery shopping, and training.
Depreciation and amortization expense increased $1,075 (4.7%) to $24,170
primarily from property and equipment additions due to opening thirteen new
Company-owned restaurants in 2003.
Marketing expense increased $2,794 (17.4%) to $18,856, and as a percentage
of revenue increased to 3.8% from 3.5% in 2002. This increase is primarily
attributable to additional television marketing in several key Midwestern and
Southeastern markets, combined with increased promotional marketing.
Interest expense decreased $681 (4.8%) to $13,391 due to principal
repayments on long-term debt and capital leases of $7,214 during 2003.
Rent expense increased $901 (12.2%) to $8,309 as increased sales resulted
in higher percentage rent payments.
The provision for restaurant closings of $5,200 relates to the decision to
dispose of nine under-performing units in 2003.
Pre-opening costs in 2003 were $323 less than 2002 as thirteen
Company-owned restaurants were opened in 2003, compared to sixteen new
restaurants in 2002.
Other income, net increased $211 (11.4%) over 2002 to $2,064 primarily due
to increased interest income on higher average investment balances in 2003.
Income Taxes
The Company's effective tax rate decreased to 35.4% in 2003 from 35.9% in
2002 primarily due to lower state income taxes.
RESTAURANT CLOSINGS
During 2003, the Company identified nine under-performing restaurants for
disposal and recorded a charge of $5,200 ($3,360 net of income taxes, or $.13
per diluted share). Included in the charge was a write-down of related property
and equipment to its estimated fair value, lease termination costs, and closing
costs. During 2004, the Company recorded a reduction in this provision of $394
as proceeds from disposal of restaurants exceeded previous estimates. The
Company is currently seeking buyers for the remaining four properties, and
anticipates completing the disposal of the properties within the next six to
nine months. The Company does not anticipate any significant additional future
payments related to the store closings, other than the amounts accrued.
EFFECTS OF GOVERNMENTAL REGULATIONS AND INFLATION
Most Steak n Shake employees are paid hourly rates related to federal and
state minimum wage laws. Any increase in the legal minimum wage would directly
increase our operating costs. We are also subject to various federal, state and
local laws related to zoning, land use, safety standards, working conditions,
and accessibility standards. Any changes in these laws that require
improvements to our restaurants would increase our operating costs. In
addition, we are subject to franchise registration requirements and certain
related federal and state laws regarding franchise operations. Any changes in
these laws could affect our ability to attract and retain franchisees.
Inflation in food, labor, fringe benefits and other operating costs
directly affect our operations. Our results of operations have not been
significantly affected by inflation during the last three fiscal years.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $47,390 in cash flows from operations during 2004,
primarily due to $27,662 in net earnings and depreciation and amortization
charges of $24,710. Increases in receivables, inventories and other assets, due
to an increased restaurant base, offset $5,079 of the net income and
depreciation and amortization amounts. Cash flows from operations in 2003 were
primarily due to $20,939 in net earnings, depreciation and amortization charges
of $24,170, and a non-cash charge for restaurant closings of $5,200. Modest
increases in receivables, inventories and other assets were offset by similar
increases in accounts payable and accrued liabilities, most of which is
attributable to the increase in Company-owned restaurants over 2002 and timing
of vendor and tax payments.
Net cash used in investing activities of $38,016 during 2004 resulted from
capital expenditures of $46,278, offset by proceeds from the sale of long-term
investments of $5,095 and proceeds from disposals of $2,684. The capital
expenditures included the cost of sixteen new and two remodeled restaurants.
Net cash used in investing activities in 2003 totaled $24,413. Capital
expenditures of $30,707 resulted primarily from the opening of thirteen new,
three rebuilt, and two relocated restaurants offset by proceeds from long-term
investments of $5,000 and proceeds from disposals of $1,632. The Company
expects to open eighteen to twenty-four Company-owned Steak n Shake restaurants
during 2005 at an average cost of approximately $2,000, which includes the land,
site improvements, building, and equipment. Additionally, the Company plans to
rebuild or replace several existing restaurants. The new store openings will
allow the Company to continue its expansion in newer markets such as Texas,
while also further penetrating existing markets in the Midwest and Florida.
This level of expansion will allow the Company to grow the business in a
controlled manner while still focusing on improving each and every guest
experience. The Company intends to fund future capital expenditures and meet
its working capital needs by using existing cash and investments and anticipated
cash flows from operations in addition to its borrowing facilities.
On November 5, 2004, the Company entered into an agreement to purchase
Kelley Restaurants, Inc. for approximately $17,500. Kelley Restaurants, Inc.
operates 16 Steak n Shake restaurants in the Atlanta, Georgia and Charlotte,
North Carolina markets. The transaction is anticipated to close at the end of
December 2004, and will be funded by existing cash and investments.
As of September 29, 2004, the Company had outstanding borrowings of $16,204
under its Senior Note Agreement and Private Shelf Facility ("Senior Note
Agreement") and $75,000 of additional borrowing capacity available. Borrowings
under the Senior Note Agreement bear interest at an average fixed rate of 7.6%.
At September 24, 2003 the Company had outstanding borrowings of $24,418.
The Company also maintains a $30,000 Revolving Credit Agreement ("Revolving
Credit Agreement") that bears interest based on LIBOR plus 75 basis points, or
the prime rate, at the election of the Company, and matures in January 2005.
The Company is currently negotiating with several banks to obtain a new
revolving line of credit with similar provisions, and anticipates completing the
negotiations prior to the expiration of the existing facility in January 2005.
There were no borrowings under the Revolving Credit Agreement at September 29,
2004 and September 24, 2003, but the Company had $3,022 in standby letters of
credit outstanding at September 29, 2004. The Company's debt agreements contain
restrictions, which, among other things, require the Company to maintain certain
financial ratios. During 2004 and 2003, the Company was in compliance with the
covenants, and anticipates compliance in future periods based on anticipated
earnings and debt repayments terms.
CONTRACTUAL OBLIGATIONS
The Company's significant contractual obligations and commitments as of
September 29, 2004 are shown in the following table.
PAYMENTS DUE BY PERIOD
CONTRACTUAL OBLIGATIONS LESS THAN 1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN 5 YEARS TOTAL
Long-term debt(1) $ 7,967 $ 7,345 $ 2,761 $ 773 $ 18,846
Capital leases and finance obligations(1) 15,749 30,826 30,405 113,094 190,074
Operating leases 7,292 14,374 13,307 32,788 67,761
Purchase commitments (2) 3,289 - - - -
------- ------- ------- -------- --------
Total $34,297 $52,545 $46,473 $146,655 $279,970
======= ======= ======= ======== ========
(1) Payments included principal and interest.
(2) Primarily represents cost of sales components in which minimum volume is
defined in contract terms.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
Certain statements in this report and in other reports and proxy statements
the Company files with the SEC contain forward-looking information. In general,
forward-looking statements include estimates of future revenues, cash flows,
capital expenditures, or other financial items, and assumptions underlying any
of the foregoing. Forward-looking statements reflect management's current
expectations regarding future events and use words such as "anticipate",
"believe", "expect", "may", "will", and other similar terminology. These
statements speak only as of the date they are made and involve a number of risks
and uncertainties that could cause actual results to differ materially from
those expressed in the forward-looking statements. Several factors, many beyond
our control, could cause actual results to differ materially from our
expectations. Some of these factors are as follows:
Our ability to attract and retain guests to our restaurants is dependent
upon our ability to execute our operating initiatives effectively. If we do not
deliver an enjoyable dining experience to our guests they may not return to our
restaurants, and our results may be negatively affected.
Changes in economic conditions may impact our guests' discretionary
spending. If guests choose not to spend money on dining at our restaurants, our
results may be negatively affected.
Our unique advertising and marketing programs are an essential part of our
plan to attract and retain guests. If these programs do not continue to be as
effective at attracting guests in the future as they have been in the past, our
results may be negatively affected.
Many of our restaurants are located in the Midwest and Southeast portions
of the United States. During the first and second fiscal quarters, many
restaurants may face harsh winter weather conditions in the Midwest. During the
first and fourth fiscal quarters, many restaurants in the Southeast may face
harsh weather associated with hurricanes or tropical storms. These harsh
weather conditions may make it more difficult for guests to visit our
restaurants, or may necessitate the closure of our restaurants for a period of
time. If guests are unable to visit our restaurants, our sales and operating
results may be negatively affected.
Our associates are essential to the operation of our restaurants and our
ability to deliver an enjoyable dining experience to our guests. If we are
unable to attract and retain enough qualified restaurant personnel at a
reasonable cost, and if they do not deliver an enjoyable dining experience, our
results may be negatively affected.
Our menu offerings include STEAKBURGER sandwiches, chicken sandwiches,
french fries, and hand-dipped Milk Shakes. If consumer tastes change and we are
unable to meet these changes in demand, our results may be negatively affected.
Our menu offerings include beef, poultry, and dairy products. If concerns
or negative publicity arise surrounding food safety or food-borne illnesses,
consumer behavior may change related to our products, and our sales and
operating results may be negatively affected.
A significant component of our costs is related to food commodities. If
there is a substantial increase in food commodity prices, and we are unable to
offset those increases with changes in our menu prices, our results may be
negatively affected.
Our expansion plans are based on identifying opportunities for new
restaurants in new and existing markets. Our plans also involve identifying new
franchisees and expanding relationships with current franchisees. If the
Company and its franchisees are unable to locate suitable sites for new
restaurants, negotiate acceptable lease or purchase terms, and meet construction
schedules, our expansion plans may be negatively affected.
Many of our associates are paid wages that relate to federal and state
minimum wage rates. Any increases in minimum wage rates may significantly
increase our restaurant operating costs.
Changes in accounting standards promulgated by the Financial Accounting
Standards Board, the Securities and Exchange Commission, and the American
Institute of Certified Public Accountants may affect our reported financial
results.
The foregoing list of important factors is not intended to be all-inclusive as
other general market, industry, economic, and political factors, terrorist acts,
weather and other acts of God may also impact our operations. Readers are
cautioned not to place undue reliance on our forward-looking statements, which
speak only as of the date of this report, as we assume no obligation to update
forward-looking statements.
FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED STATEMENTS OF EARNINGS
- ---------------------------------------------------------------------------
The Steak n Shake Company
(Years ended September 29, 2004, September 24, 2003 and September 25, 2002)
(Amounts in $000s except share and per share data)
2004 2003 2002
(53 weeks) (52 weeks) (52 weeks)
- ----------- ------------ ------------
Revenues:
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 549,130 $ 495,277 $ 455,359
Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,562 3,827 3,655
------------ ------------ ------------
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . 553,692 499,104 459,014
Costs and Expenses:
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,458 113,496 105,325
Restaurant operating costs . . . . . . . . . . . . . . . . . . . . . . . 270,057 245,524 222,434
General and administrative . . . . . . . . . . . . . . . . . . . . . . . 42,364 37,909 34,215
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 24,710 24,170 23,095
Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,106 18,856 16,062
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,832 13,391 14,072
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,912 8,309 7,408
Provision for restaurant closings. . . . . . . . . . . . . . . . . . . . (394) 5,200 -
Pre-opening costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,098 1,889 2,212
Other income, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,998) (2,064) (1,853)
------------ ------------ ------------
Total costs and expenses. . . . . . . . . . . . . . . . . . . . . . . 511,145 466,680 422,970
------------ ------------ ------------
Earnings Before Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . 42,547 32,424 36,044
Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,885 11,485 12,955
------------ ------------ ------------
Net Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,662 $ 20,939 $ 23,089
============ ============ ============
Basic Earnings Per Common and
Common Equivalent Share. . . . . . . . . . . . . . . . . . . . . . . . . $ 1.01 $ .78 $ .83
Diluted Earnings Per Common and
Common Equivalent Share. . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00 $ .77 $ .83
Weighted Average Shares and Equivalents:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,385,447 27,010,024 27,814,482
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,710,643 27,110,065 27,985,911
See accompanying notes.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
The Steak n Shake Company
(September 29, 2004 and September 24, 2003)
(Amounts in $000s except share and per share data)
2004 2003
---------- ----------
Assets:
Current Assets
Cash, including cash equivalents of $23,590 in 2004
and $22,975 in 2003 . . . . . . . . . . . . .. . . . . . . . . . $ 25,150 $ 24,795
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . 466 949
Receivables, net. . . . . . . . . . . . . . . . . . . . . . . . . . 4,123 3,471
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,204 5,757
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 2,755 2,470
Assets held for sale. . . . . . . . . . . . . . . . . . . . . . . . 1,756 -
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . 4,946 1,814
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . 45,400 39,256
---------- ----------
Property and Equipment
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,818 134,779
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,101 137,399
Land and leasehold improvements . . . . . . . . . . . . . . . . . . 95,234 91,793
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,409 142,195
Construction in progress. . . . . . . . . . . . . . . . . . . . . . 11,048 8,274
---------- ----------
549,610 514,440
Less accumulated depreciation and amortization. . . . . . . . . . . (166,742) (149,840)
---------- ----------
Net property and equipment. . . . . . . . . . . . . . . . . . . . . 382,868 364,600
---------- ----------
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,195 10,780
---------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . $ 433,463 $ 414,636
========== ==========
Liabilities and Shareholders' Equity:
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,563 $ 17,461
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 29,872 32,718
Current portion of senior note. . . . . . . . . . . . . . . . . . . 6,775 8,215
Current portion of obligations under leases . . . . . . . . . . . . 3,730 3,401
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . 58,940 61,795
---------- ----------
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 3,391 2,876
Deferred Credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 22
Obligations Under Leases. . . . . . . . . . . . . . . . . . . . . . . . . 141,972 145,125
Senior Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,429 16,203
Commitments and Contingencies
Shareholders' Equity:
Common stock - $.50 stated value, 50,000,000 shares
authorized - shares issued: 30,332,839 in 2004
and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,166 15,166
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . 123,787 123,180
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,776 88,114
Less: Unamortized value of restricted shares. . . . . . . . . . . . . . . (1,393) (195)
Treasury stock - at cost: 2,846,560 shares in 2004;
3,264,165 shares in 2003. . . . . . . . . . . . . . . . . . . . . . . (33,621) (37,650)
---------- ----------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . 219,715 188,615
---------- ----------
Total liabilities and shareholders'equity . . . . . . . . . . $ 433,463 $ 414,636
========== ==========
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Steak n Shake Company
(Years ended September 29, 2004, September 24, 2003 and September 25, 2002)
(Amounts in $000s)
2004 2003 2002
(53 Weeks) (52 Weeks) (52 Weeks)
- ----------- ----------- -----------
Operating Activities:
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,662 $ 20,939 $ 23,089
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 24,710 24,170 23,095
Provision for deferred income taxes. . . . . . . . . . . . . . . . . . 230 (1,892) (1,297)
Provision for restaurant closings. . . . . . . . . . . . . . . . . . . (394) 5,200 -
(Gain) loss on disposal of property. . . . . . . . . . . . . . . . . . 732 (457) 289
Changes in receivables and inventories . . . . . . . . . . . . . . . . (1,099) (1,067) 2,116
Changes in other assets. . . . . . . . . . . . . . . . . . . . . . . . (3,980) (2,443) (1,501)
Changes in accounts payable and accrued expenses . . . . . . . . . . . (471) 6,253 9,224
----------- ----------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . . . 47,390 50,703 55,015
----------- ----------- ---------
Investing Activities:
Additions of property and equipment . . . . . . . . . . . . . . . . . . . (46,278) (30,707) (41,351)
Proceeds from property and equipment disposals. . . . . . . . . . . . . . 2,684 1,632 2,352
Proceeds from sale of short-term investments. . . . . . . . . . . . . . . 1,104 171 9,270
Purchase of short-term investments. . . . . . . . . . . . . . . . . . . . (621) (509) (6,380)
Purchase of long-term investments . . . . . . . . . . . . . . . . . . . . - - (10,000)
Proceeds from long-term investments called or sold. . . . . . . . . . . . 5,095 5,000 -
----------- ----------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (38,016) (24,413) (46,109)
----------- ----------- ---------
Financing Activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (8,215) (3,960) (3,960)
Proceeds from equipment and property leases . . . . . . . . . . . . . . . 600 - 13,511
Principal payments on lease obligations . . . . . . . . . . . . . . . . . (3,522) (3,254) (3,358)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . 851 167 125
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (989) (19,702)
Proceeds from employee stock purchase plan. . . . . . . . . . . . . . . . 1,267 1,255 1,049
----------- ----------- ---------
Net cash used in financing activities . . . . . . . . . . . . . . . . . . (9,019) (6,781) (12,335)
----------- ----------- ---------
Increase (Decrease) in Cash and Cash Equivalents. . . . . . . . . . . . . . 355 19,509 (3,429)
Cash and Cash Equivalents at Beginning of Year. . . . . . . . . . . . . . . 24,795 5,286 8,715
----------- ----------- ---------
Cash and Cash Equivalents at End of Year. . . . . . . . . . . . . . . . . . $ 25,150 $ 24,795 $ 5,286
=========== =========== =========
See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ---------------------------------------------------
The Steak n Shake Company
(Years ended September 29, 2004, September 24, 2003 and September 25, 2002)
(Amounts in $000s except share data)
Unamortized
Additional Value of
Common Paid-In Retained Restricted Treasury Stock
Stock Capital Earnings Shares Shares Amount
----------- ----------- --------- ---------- -------- ----------
Balance at September 26, 2001 $15,075 $122,522 44,087 $(927) 1,982,201 $(18,752)
Net earnings 23,089
Shares exchanged to exercise stock options 136,556 (1,863)
Shares reissued to exercise stock options (229,480) 1,988
Shares repurchased under Stock Buyback Program 1,488,329 (19,702)
Shares granted under Capital Appreciation Plan (32) (3,000) 32
Changes in unamortized value of shares granted
under Capital Appreciation Plan 635
Tax effect relating to stock options (147)
Shares issued for Employee Stock Purchase Plan 91 959
--------------------------------------------------------------------------------
Balance at September 25, 2002 15,166 123,334 67,176 (324) 3,374,606 (38,297)
Net earnings 20,939
Shares exchanged to exercise stock options 126,577 (1,787)
Shares reissued to exercise stock options (168,214) 1,954
Shares repurchased under Stock Buyback Program 98,800 (989)
Shares granted under Capital Appreciation Plan (214) (20,000) 214
Changes in unamortized value of shares granted
under Capital Appreciation Plan 343
Tax effect relating to stock options (154)
Shares issued for Employee Stock Purchase Plan (147,604) 1,255
Other (1)
--------------------------------------------------------------------------------
Balance at September 24, 2003 15,166 123,180 88,114 (195) 3,264,165 (37,650)
Net earnings 27,662
Shares exchanged to exercise stock options 173,449 (3,198)
Shares reissued to exercise stock options (321,267) 4,050
Shares granted under Capital Appreciation Plan (2,104) (136,000) 2,104
Shares forfeited under Capital Appreciation Plan 194 13,000 (194)
Changes in unamortized value of shares granted
under Capital Appreciation Plan 712
Tax effect relating to stock options 607
Shares issued for Employee Stock Purchase Plan (146,787) 1,267
--------------------------------------------------------------------------------
Balance at September 29, 2004 $15,166 $123,787 $115,776 $(1,393) 2,846,560 $(33,621)
================================================================================
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Steak n Shake Company
(Years ended September 29, 2004, September 24, 2003 and September 25, 2002)
(Amounts in $000s except share and per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Steak n Shake Company's (the "Company") principal business is the
operation, development and franchising of full service, casual dining
restaurants. As of September 29, 2004, the Company operated 425 Steak n Shake
restaurants, including 60 franchised restaurants, through its wholly owned
subsidiary Steak n Shake Operations, Inc. The Company's business, operating and
franchising Steak n Shake restaurants, constitutes a single segment pursuant to
the provisions of Statement of Financial Accounting Standards No. 131,
Disclosure About Segments of an Enterprise and Related Information.
FISCAL YEAR
The Company's fiscal year ends on the last Wednesday in September. Fiscal
year 2004 contains 53 weeks, while fiscal years 2003 and 2002 contain 52 weeks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of The Steak n Shake Company (parent) and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
The Company's policy is to invest cash in excess of operating requirements
in income-producing investments. Cash equivalents primarily consist of bank
repurchase agreements, U.S. Government securities, and money market accounts,
all of which have maturities of three months or less. Short-term investments at
September 29, 2004 and September 24, 2003 primarily consisted of commercial
papers, which were available for sale. Cash equivalents and short-term
investments are carried at cost, which approximates market value due to their
short maturities.
RECEIVABLES
The Company carries its accounts receivable at cost less an allowance for
doubtful accounts which is based on a history of past write-offs and collections
and current credit conditions. The allowance for doubtful accounts was $104 at
September 29, 2004 and $121 at September 24, 2003.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market, and consist primarily of restaurant food items and supply inventory.
ASSETS HELD FOR SALE
Assets held for sale consists of property and equipment related to the
under-performing restaurants identified for disposal in 2003, and is comprised
of the following: Land and Buildings - $1,546; Leasehold Improvements - $146;
and Equipment - $64. Assets held for sale are reported at estimated fair value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are recognized on the straight-line
method over the estimated useful lives of the assets (15 to 25 years for
buildings and land improvements, and 3 to 10 years for equipment). Leasehold
improvements are amortized on the straight-line method over the shorter of the
estimated useful lives of the improvements or the term of the related leases.
Interest costs associated with the construction of new restaurants are
capitalized. Major improvements are also capitalized while repairs and
maintenance are expensed as incurred. The Company reviews for impairment its
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. For purposes of assessment,
assets are evaluated on a restaurant-by-restaurant basis, the lowest level for
which there are identifiable cash flows. If the future undiscounted cash flows
of an asset are less than the recorded value, an impairment is recorded for the
difference between the carrying value and the estimated fair value of the asset.
REVENUE RECOGNITION
The Company records revenues from restaurant sales at the time of sale, net
of discounts. Revenues from the sale of gift cards are deferred at the time of
sale and recognized upon redemption of the gift cards by the customer.
FRANCHISE FEES
Unit franchise fees and area development fees are recorded as revenue when
the related restaurant begins operations. Royalty fees based on franchise sales
are recognized as revenue on the accrual basis of accounting.
INSURANCE RESERVES
The Company self-insures a significant portion of its expected losses under
its workers' compensation, general liability, and auto liability insurance
programs, and records a reserve for its estimated losses on all unresolved open
claims and its estimated incurred but not reported claims at the anticipated
cost to the Company.
EARNINGS PER SHARE
Earnings per share of common stock is based on the weighted average number
of shares outstanding during the year. The following table presents a
reconciliation of basic and diluted weighted average common shares as required
by Statement of Financial Accounting Standards No. 128, Earnings Per Share.
2004 2003 2002
---------- ---------- ----------
Basic earnings per share:
Weighted average common shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 27,385,447 27,010,024 27,814,482
========== ========== ==========
Diluted earnings per share:
Weighted average common shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 27,385,447 27,010,024 27,814,482
Dilutive effect of stock options. . . . . . . . . . . . . . . . . . . . . . . . . 325,196 100,041 171,429
---------- ---------- ----------
Weighted average common and incremental shares. . . . . . . . . . . . . . . . . . 27,710,643 27,110,065 27,985,911
========== ========== ==========
Number of stock options excluded from the calculation
of earnings per share as the options' exercise prices
were greater than the average market price of the Company's
common stock 54,372 919,922 557,917
========== ========= =========
STOCK-BASED COMPENSATION
The Company accounts for its Stock Option and Employee Stock Purchase Plans
under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees. No stock-based employee compensation
cost for options issued is reflected in net earnings, as all options are granted
under those plans at an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effect on net earnings and earnings per share if the Company had applied the
fair value recognition provisions of Financial Accounting Standards Board
("FASB") Statement No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
(Amounts in $000s, except per share data) 2004 2003 2002
-------- -------- --------
Net earnings, as reported . . . . . . . . . . . $27,662 $20,939 $23,089
Less proforma compensation expense, net of tax. (1,483) (1,156) (1,588)
-------- -------- --------
Proforma net earnings . . . . . . . . . . . . . $26,179 $19,783 $21,501
======== ======== ========
Basic earnings per share, as reported . . . . . $ 1.01 $ .78 $ .83
Proforma basic earnings per share . . . . . . . $ .96 $ .73 $ .77
Diluted earnings per share, as reported . . . . $ 1.00 $ .77 $ .83
Proforma diluted earnings per share . . . . . . $ .94 $ .73 $ .77
The impact of applying FASB Statement No. 123 in this proforma disclosure is not
necessarily indicative of future results.
EMPLOYEES' 401(K) AND PROFIT SHARING PLAN
The Steak n Shake Company Employees' 401(k) and Profit Sharing Plan (the
"Plan") is a defined contribution plan covering substantially all employees of
the Company after they have attained age 21 and completed one year of service
and allows employees to defer up to 20% of their salaries. Company profit
sharing contributions to the Plan, which are subject to the discretion of the
Board of Directors, amounted to $1,854 paid in for 2004, $1,858 paid in 2003,
and $1,695 paid in 2002. During 2004, the Board of Directors authorized a
non-discretionary Company matching contribution equal to 50% of each
participants' first 6% of compensation deferred. As of September 29, 2004, the
Company accrued, but had not yet paid, $677 in contributions to the Plan.
MARKETING EXPENSES
Advertising costs are charged to expense at the latter of the date the
expenditure is incurred, or the date the promotional item is first communicated.
USE OF ESTIMATES
Preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that effect the amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from the estimates.
RECLASSIFICATIONS
Certain amounts in the 2002 and 2003 financial statements have been
reclassified to conform to the 2004 presentation.
2. RESTAURANT CLOSINGS
During the fourth quarter of fiscal year 2003, the Company identified nine
under-performing restaurants for disposal. In connection with the decision to
dispose of these restaurants, the Company recorded a charge of $5,200 for
property and equipment write-downs, lease termination costs, and closing costs.
During fiscal year 2004, the Company disposed of five of these restaurants.
Proceeds received from these disposed restaurants exceeded previous estimates by
$394, resulting in an adjustment to the reserve during the year. The Company is
currently seeking buyers for the remaining four properties, which are classified
as assets held for sale, and anticipates completing the disposal of these
properties within the next six to nine months.
Activity related to the provision for restaurant closings is as follows:
(amounts in $000's)
Balance at Non-cash Adjustments Balance at
September charges Cash charges to estimates September
24, 2003 during 2004 during 2004 during 2004 29, 2004
-------------- ------------ --------------- ------------- ------------
Asset write-downs $4,860 $(1,413) - $(389) $3,058
Lease termination costs 225 - $(225) - -
Closing costs 115 - (86) (5) 24
-------- -------- ------ ------ ------
Total $5,200 $(1,413) $(311) $(394) $3,082
========= ======== ====== ====== ======
3. OTHER ASSETS
(amounts in $000s) 2004 2003
------- -------
Long-term investments - $ 5,001
Other assets $4,000 4,464
Intangible assets 1,195 1,315
------ -------
$5,195 $10,780
====== =======
Long-term investments consisted of U.S. Government guaranteed debt
securities with a fair value of $5,293 at September 24, 2003. Gross unrealized
gains on held-to-maturity securities were $292 at September 24, 2003. During
2004, the Company sold the held-to-maturity securities prior to their maturity
for $5,095 and recorded a gain of $95 on the sale. Intangible assets consist of
a $1,480 right to operate that is recorded at cost and is being amortized $120
per year over its estimated life of twelve years. Accumulated amortization
totaled $285 at September 29, 2004 and $165 at September 24, 2003.
4. ACCRUED EXPENSES
(amounts in $000s) 2004 2003
------ ------
Salaries and wages $ 6,831 $10,329
Taxes payable 13,041 12,309
Insurance accruals 4,298 3,519
Other 5,702 6,561
------- -------
$29,872 $32,718
======= =======
======
5. INCOME TAXES
The components of the provision for income taxes consist of the following:
(amounts in $000s) 2004 2003 2002
-------- -------- --------
Current:
Federal $12,801 $11,465 $12,341
State 1,854 1,912 2,333
Deferred 230 (1,892) (1,719)
-------- --------- ---------
Total income taxes $14,885 $11,485 $12,955
======== ======== ========
The reconciliation of effective income tax is:
2004 2003 2002
-------- -------- --------
Tax at U.S. statutory rates $14,891 $11,348 $12,615
State income taxes, net of federal benefit 1,277 1,243 1,376
Employer's FICA tax credit (1,030) (942) (676)
Jobs tax credit (401) (237) (260)
Other 148 73 (100)
-------- --------- ---------
Total income taxes $14,885 $11,485 $12,955
======== ======== ========
Income taxes paid totaled $13,815 in 2004, $13,615 in 2003, and $11,810 in 2002.
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the currently enacted tax rates, and laws that will be in effect when the
differences are expected to reverse. The Company's net deferred tax liability
consists of the following:
(amounts in $000s) 2004 2003
--------- --------
Deferred tax assets:
Insurance reserves $ 1,504 $ 1,390
Provision for restaurant closings 1,077 1,840
Capital leases 74 171
Capital appreciation plans 447 582
Accrued vacation 1,106 712
Other 164 825
--------- --------
Total deferred tax assets 4,372 5,520
-------- --------
Deferred tax liabilities:
Depreciation 4,919 5,894
Other 89 32
--------- --------
Total deferred tax liabilities 5,008 5,926
--------- --------
Net deferred tax liability (636) (406)
Less current portion 2,755 2,470
--------- --------
Long-term liability ($3,391) $(2,876)
========= ========
6. LEASED ASSETS AND LEASE COMMITMENTS
The Company leases certain of its physical facilities under non-cancelable
lease agreements. Steak n Shake restaurant leases typically have initial terms
of eighteen to twenty-five years and renewal terms aggregating twenty years or
more. These leases require the Company to pay real estate taxes, insurance and
maintenance costs. Certain leased facilities, which are no longer operated by
the Company's subsidiaries, but have been subleased to third parties, are
classified below as non-operating properties. Minimum future rental payments
for non-operating properties have not been reduced by minimum sublease rentals
of $663 related to operating leases receivable under non-cancelable subleases.
The property and equipment cost related to the finance obligations and capital
leases as of September 29, 2004, is as follows: $72,534 buildings, $60,459 land,
$32,350 land and leasehold improvements, and $32,870 accumulated depreciation.
At September 29, 2004, obligations under non-cancelable finance obligations,
capital leases, and operating leases (excluding real estate taxes, insurance and
maintenance costs) require the following minimum future rental payments:
Finance Capital Operating
(Amounts in $000's) Obligations Leases Leases
----------- ------ ------
Operating Operating Operating Non-Operating
Property Property Total Property Property
--------- --------- -------- --------- --------------
Year
- ----
2005 . . . . . . . . . . . . . . . . . . . . . $ 14,716 $ 1,033 $ 15,749 $ 7,176 $ 116
2006 . . . . . . . . . . . . . . . . . . . . . 14,738 701 15,439 7,091 116
2007 . . . . . . . . . . . . . . . . . . . . . 14,760 627 15,387 7,051 116
2008 . . . . . . . . . . . . . . . . . . . . . 14,650 626 15,276 6,916 116
2009 . . . . . . . . . . . . . . . . . . . . . 14,512 617 15,129 6,214 61
After 2009 . . . . . . . . . . . . . . . . . . 109,651 3,443 113,094 32,650 138
--------- --------- -------- --------- -----------------
Total minimum future rental payments . . . . . 183,027 7,047 190,074 $ 67,098 $ 663
========= =================
Less amount representing interest. . . . . . . 121,290 3,394 124,684
--------- --------- --------
Total principal obligations under leases . . . 61,737 3,653 65,390
Less current portion . . . . . . . . . . . . . 3,282 448 3,730
--------- --------- --------
Non-current principal obligations under leases 58,455 3,205 61,660
Residual value at end of lease term. . . . . . 80,312 - 80,312
--------- --------- --------
Obligations under leases . . . . . . . . . . . $ 138,767 $ 3,205 $141,972
========= ========= ========
During 2004, the Company received net proceeds from sale and leaseback
transactions aggregating $600 involving one property.
Contingent rent totaling $697 in 2004, $556 in 2003, and $468 in 2002 is
recorded in rent expense in the accompanying consolidated statements of
earnings.
7. DEBT
REVOLVING CREDIT AGREEMENT
The Company's $30,000 Revolving Credit Agreement matures in January 2005
and bears interest at a rate based on LIBOR plus 75 basis points or the prime
rate, at the election of the Company. There were no outstanding borrowings
under the Revolving Credit Agreement at September 29, 2004, but the Company had
$3,022 in stand-by letters of credit outstanding, which reduced the borrowing
limit. The Company is currently negotiating with several banks to obtain a new
revolving line of credit with similar provisions, and anticipates completing the
negotiations prior to the expiration of the existing facility in January 2005.
SENIOR NOTE AGREEMENT
The Company's amended and restated Senior Note Agreement and Private Shelf
Facility (the "Senior Note Agreement") allows for additional borrowing of up to
$75,000 until September 20, 2005. As of September 29, 2004, the Company had
borrowings of $16,204 with an average interest rate of 7.6% under its original
$75,000 Senior Note Agreement. Interest rates are fixed based upon market rates
at the time of borrowing. Amounts maturing in fiscal years 2005 through 2009 are
as follows: $6,775, $3,857, $2,429, $1,714 and $714, respectively.
Interest capitalized in connection with financing additions to property and
equipment amounted to $502 and $476 in 2004 and 2003, respectively. Interest
paid on debt amounted to $1,829 in 2004, $2,181 in 2003, and $2,428 in 2002.
The carrying amounts for debt reported in the consolidated statement of
financial position do not differ materially from their fair market values at
September 29, 2004.
The Revolving Credit Agreement and Senior Note Agreement are unsecured and
contain restrictions, which among other things, require the Company to maintain
certain financial ratios. The Company is in compliance with all restrictive
covenants under these borrowing agreements at September 29, 2004.
8. RELATED PARTY TRANSACTIONS
A member of the Board of Directors is the President of Kelley Restaurants,
Inc. ("KRI"), a franchisee. In accordance with its franchise agreement, the
Company collects initial franchise fees, royalty fees, and advertising fees from
its franchisees. The Company recorded revenues from KRI totaling $1,706,
$1,392, and $1,208, during 2004, 2003, and 2002, respectively. Amounts
receivable from KRI at September 29, 2004 and September 24, 2003 were $450 and
$361 and are recorded in receivables, net in the consolidated statements of
financial position. See Note 12 "Subsequent Event."
9. COMMON STOCK PLANS
CAPITAL APPRECIATION PLAN
The 1997 Capital Appreciation Plan provides for tandem awards of Common
Stock (restricted shares) and book units of up to 1,067,187 shares and related
units. These awards are restricted for a period of three years and are
returnable to the Company if the grantee is not employed (except for reasons of
retirement, permanent disability or death) by the Company at the end of the
period. The stock is valued at 100% of market value at the date of grant, and
the book units, which are granted in an equal number to the shares of stock,
provide for a cash payment at the end of the three-year period equal to the sum
of the net change in book value per share and the common stock dividends paid
per share during the period, as adjusted for stock dividends/splits. The total
value of the stock grant (based upon market value at the date of the grant) is
recorded to unamortized value of restricted shares and is amortized to
compensation expense ratably over the three-year period. The total number of
shares and book units granted under the 1997 Plan for which restrictions have
not lapsed was 146,000 at September 29, 2004, 122,500 at September 24, 2003, and
102,500 at September 25, 2002. At September 29, 2004, 526,622 shares were
reserved for future grants. The average remaining period for which restrictions
had not lapsed at September 29, 2004 was 1.88 years. The amount charged to
expense under the Plans was $860 in 2004, $452 in 2003, and $799 in 2002.
EMPLOYEE STOCK OPTION PLAN
The 1997 Employee Stock Option Plan (the "1997 Plan") provides for the
granting of up to 1,745,313 stock options. The 1997 Plan provides that the
options are exercisable as to 20% on the date of grant and 20% on each
anniversary of the date of grant thereafter until fully exercisable. The
options expire either five or ten years from the date of grant and are issued
with an exercise price equal to the fair market value of the underlying stock on
the date of issuance. Options are granted under the 1997 Plan to officers and
key employees selected by the Stock Option Committee. As of September 29, 2004,
1,355,012 options have been granted under the 1997 Plan and 831,184 are
exercisable.
The 1995 Employee Stock Option Plan (the "1995 Plan") provides for the
granting of up to 686,297 stock options. Options granted under the 1995 Plan are
primarily incentive stock options exercisable on the same terms as the 1997
Plan. Options were granted under the 1995 Plan to officers and key employees
selected by the Stock Option Committee. At September 29, 2004, 634,543 options
have been granted under the 1995 Plan and 19,876 are exercisable.
The following table summarizes the options activity under the 1997 and 1995
Shares Weighted Average Price
---------- -----------------------
Outstanding at September 26, 2001 1,011,036 $ 12.27
Fiscal 2002 Activity:
Granted . . . . . . . . . 591,646 12.67
Exercised . . . . . . . . (203,957) 8.69
Canceled. . . . . . . . . (19,277) 10.74
----------
Outstanding at September 25, 2002 1,379,448 12.99
Fiscal 2003 Activity:
Granted . . . . . . . . . 100,424 13.80
Exercised . . . . . . . . (114,382) 11.63
Canceled. . . . . . . . . (135,501) 14.35
----------
Outstanding at September 24, 2003 1,229,989 13.03
Fiscal 2004 Activity:
Granted . . . . . . . . . 391,052 17.32
Exercised . . . . . . . . (311,467) 12.63
Canceled. . . . . . . . . (63,044) 13.39
----------
Outstanding at September 29, 2004 1,246,530 $ 14.38
Plans:
NONEMPLOYEE DIRECTOR STOCK OPTION PLANS
The Company's Nonemployee Director Stock Option Plans provide for the grant
of nonqualified stock options at a price equal to the fair market value of the
Common Stock on the date of the grant. Options outstanding under each Plan are
exercisable as to 20% on the date of grant and 20% on each anniversary of the
date of grant thereafter until fully exercisable. The options expire five years
from the date of grant.
The following table summarizes information about the Nonemployee Director
Stock Option Plans.
Shares Weighted Average Price
-------- -----------------------
Outstanding at September 26, 2001 19,800 $ 11.08
Fiscal 2002 Activity:
Granted . . . . . . . . . 35,000 9.99
--------
Outstanding at September 25, 2002 54,800 10.38
Fiscal 2003 Activity:
Granted . . . . . . . . . 46,000 9.97
Exercised . . . . . . . . (3,300) 11.08
--------
Outstanding at September 24, 2003 97,500 10.17
Fiscal 2004 Activity:
Granted . . . . . . . . . 43,000 17.98
Exercised . . . . . . . . (10,000) 9.98
--------
Outstanding at September 29, 2004 130,500 $ 12.75
The following table summarizes information regarding stock options
outstanding at September 29, 2004 under the employee and nonemployee director
stock option plans.
Options Outstanding Options Exercisable
------------------- -------------------
Number Weighted Average Weighted
Range of Outstanding at Remaining Weighted Average Number Exercisable at Average
Exercise Prices September 29, 2004 Contractual Life Exercise Price September 29, 2004 Exercise Price
- --------------- ------------------ ---------------- ---------------- --------------------- -----------------
$5 - $10. . . . . . . . . 310,696 1.98 years $9.73 193,056 $9.61
$10 - $15 . . . . . . . . 338,324 2.57 years $13.02 308,324 $12.98
$15 - $20 . . . . . . 710,087 4.14 years $16.60 391,257 $16.42
$20 - $21 . . . . . . . . 17,923 4.41 years $20.48 17,923 $20.48
- --------------- ----------------- ---------------- ---------------- ---------------------- -----------------
$5 - $21. . . . . . . . 1,377,030 3.27 years $14.22 910,560 $13.89
At September 24, 2003, 948,108 options were exercisable at a weighted
average exercise price of $13.21, and at September 25, 2002, 963,538 options
were exercisable at a weighted average exercise price of $13.11. Stock options
are issued pursuant to the employee and nonemployee director stock option plans
with exercise prices equal to the market value on the date of grant. As
discussed in Note 1, the Company measures stock compensation in accordance with
APB Opinion No. 25. Had the Company measured stock compensation in accordance
with fair value provisions of SFAS No. 123, the effect on net earnings and
earnings per share would have been as summarized in Note 1. In calculating the
impact of options granted, the Company has estimated the fair value of each
grant using the Black-Scholes option-pricing model.
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options. The fair value estimates are
based on the following assumptions:
2004 2003 2002
-------- -------- --------
Risk-free interest rate 2.0% 2.0% 2.0%
Dividend yield. . . . . 0.0% 0.0% 0.0%
Expected volatility . . 38% 42% 42%
Expected life in years. 5 years 5 years 5 years
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan, a maximum of 1,852,545 shares of
Common Stock are available for issuance to all eligible employees of the Company
as determined by the Board of Directors (125,821 per year for 1993 to 1997;
154,688 per year for 1998 to 2002; and 150,000 per year for 2003 to 2005).
Unissued shares in any given calendar year are available to increase the annual
maximum number of shares issuable in subsequent years. Employees may purchase
shares of Common Stock through payroll deductions from 2% to 10% of compensation
up to a maximum fair market value of $10 or 1,000 shares per year. Shares are
purchased at a 15% discount from the lesser of the share price on the first or
last day of the year. Shares purchased under the plan were 146,787 in 2004,
147,604 in 2003, and 181,222 in 2002.
10. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal matters in the normal course of
business. In the opinion of management, the ultimate outcome of these matters
will not have a material adverse effect on the financial position or results of
operations of the Company.
11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
During fiscal 2004, the Company issued 136,000 shares of restricted stock
totaling $2,104. During 2003 and 2002, the Company issued 20,000 shares valued
at $214 and 3,000 shares valued at $32, respectively. During 2004, the Company
entered into capital leases for equipment of $250, and for building and land
improvements of $821.
12. SUBSEQUENT EVENT
On November 5, 2004, the Company entered into an agreement to purchase
Kelley Restaurants, Inc., its largest franchisee, for approximately $17,500.
Kelley Restaurants, Inc. operates 16 Steak n Shake restaurants in the Atlanta,
Georgia and Charlotte, North Carolina markets. This transaction is subject to
completion of due diligence, approval of the shareholders of Kelley Restaurants,
Inc. and other contingencies and is expected to close by the end of December
2004. The President of Kelley Restaurants, Inc. is a member of the Company's
Board of Directors. See Note 8.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter(1)
(amounts in $000s excepts per share data) First Second Third Fourth(2)
----------- -------- -------- ----------
2004 (53 weeks)
- ---------------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 114,473 $163,790 $130,627 $ 144,802
Costs and Expenses . . . . . . . . . . . . . . . . . . . 107,386 151,430 119,285 133,044
Earnings Before Income Taxes . . . . . . . . . . . . . . 7,087 12,360 11,342 11,758
Net Earnings . . . . . . . . . . . . . . . . . . . . . . 4,590 8,007 7,417 7,648
Diluted Earnings per Common and Common Equivalent Share. $ .17 $ .29 $ .27 $ .28
2003 (52 weeks)
- ---------------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 102,055 $149,672 $121,269 $ 126,108
Costs and Expenses . . . . . . . . . . . . . . . . . . . 96,765 139,018 110,209 120,688
Earnings Before Income Taxes . . . . . . . . . . . . . . 5,290 10,655 11,059 5,420
Net Earnings . . . . . . . . . . . . . . . . . . . . . . 3,402 6,839 7,089 3,609
Diluted Earnings per Common and Common Equivalent Share $ .13 $ .25 $ .26 $ .13
(1) The Company's fiscal year includes quarters consisting of 12, 16, 12 and
12 weeks, respectively. In 2004, the fourth quarter includes 13 weeks.
(2) In the fourth quarter of 2003, the Company recorded a charge of $5,200
($3,360 net of income taxes or $.13 per diluted share) related to the disposal
of nine under-performing restaurants.
MANAGEMENT'S REPORT
- --------------------
The Steak n Shake Company
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of The Steak n Shake Company is responsible for the
preparation, integrity and objectivity of the Company's financial statements and
the other financial information in this report. The financial statements were
prepared in conformity with accounting principles generally accepted in the
United States of America and reflect in all material respects the Company's
consolidated results of operations and the financial position for the periods
shown based upon management's best estimates and judgments.
In addition, management maintains internal control systems which are
adequate to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and which produce records adequate for the preparation of
financial information. There are limits inherent in all systems of internal
accounting control based on the recognition that the cost of such systems should
not exceed the benefits to be derived. We believe the Company's systems provide
the appropriate balance. The effectiveness of the control systems is supported
by the selection and training of qualified personnel, an organizational
structure that provides an appropriate division of responsibility and a strong
budgetary system of control. Deloitte & Touche LLP, our independent registered
public accountants, has been engaged to express an opinion regarding the fair
presentation of the Company's financial condition and operating results. As
part of its audit of the Company's financial statements, Deloitte & Touche LLP
considered the Company's system of internal controls to the extent it deemed
necessary to determine the nature, timing and extent of its audit tests.
The Audit Committee of the Board of Directors, which is composed of four
outside directors, serves in an oversight role to assure the integrity and
objectivity of the Company's financial reporting process. The Committee meets
periodically with representatives of management and the independent registered
public accounting firms to review matters of a material nature related to
auditing, financial reporting, internal accounting controls and audit results.
The independent registered public accountants have free access to the Audit
Committee. The Audit Committee is also responsible for the selection of the
independent registered public accountants.
/s/ Peter M. Dunn /s/ Jeffrey A. Blade
-------------------- --------------------
President and Senior Vice President
Chief Executive Officer and Chief Financial Officer
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
The Steak n Shake Company
We have audited the accompanying consolidated statements of financial
position of The Steak n Shake Company and subsidiaries (the "Company") as of
September 29, 2004 and September 24, 2003, and the related consolidated
statements of earnings, shareholders' equity and cash flows for the years ended
September 29, 2004 and September 24, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the 2004 and 2003 consolidated financial statements present
fairly, in all material respects, the consolidated financial position of The
Steak n Shake Company and subsidiaries at September 29, 2004 and September 24,
2003, and the results of their operations, and their cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touche LLP
November 22, 2004
Indianapolis, Indiana
- ------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- -------------------------------------------------------------
Shareholders and Board of Directors
The Steak n Shake Company
We have audited the accompanying consolidated statements of earnings,
shareholders' equity and cash flows of The Steak n Shake Company for the year
ended September 25, 2002. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
The Steak n Shake Company for the year ended September 25, 2002, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Indianapolis, Indiana
December 3, 2002
EXHIBIT 3.02
RESTATED BY-LAWS
OF
THE STEAK N SHAKE COMPANY
ARTICLE I
SECTION 1. NAME. The name of the corporation is The Steak n Shake Company
---------- ----
("Corporation").
SECTION 2. PRINCIPAL OFFICE AND RESIDENT AGENT. The post-office address
----------- ------------------------------------
of the principal office of the Corporation is 500 Century Building, 36 South
Pennsylvania Street, Indianapolis, Indiana 46204, and the name and post-office
address of its Resident Agent in charge of such office is C T Corporation
System, 36 South Pennsylvania Street, Suite 700, Indianapolis, Indiana 46204.
SECTION 3. SEAL. The seal of the Corporation shall be circular in form
----------- ----
and mounted upon a metal die, suitable for impressing the same upon paper.
About the upper periphery of the seal shall appear the words "The Steak n Shake
Company" and about the lower periphery thereof the word "Indiana". In the
center of the seal shall appear the word "Seal".
ARTICLE II
The fiscal year of the Corporation shall end on the last Wednesday in September
of each calendar year.
ARTICLE III
CAPITAL STOCK
SECTION 1. NUMBER OF SHARES AND CLASSES OF CAPITAL STOCK. The total
----------- ---------------------------------------------------
number of shares of common stock which the Corporation shall have authority to
issue is 50,000,000 shares, which shall consist of 50,000,000 common shares
without par value. In addition, the Corporation shall have the authority to
issue 10,000,000 shares of Preferred Stock on the terms and conditions set forth
in the amendment to the Articles of Incorporation adopted May 16, 2001.
SECTION 2. CONSIDERATION FOR NO PAR SHARES. The shares of stock of the
----------- ----------------------------------
Corporation without par value shall be issued or sold in such manner and for
such amount of consideration as may be fixed from time to time by the Board of
Directors, such shares of stock shall be fully paid and nonassessable.
SECTION 3. CONSIDERATION FOR TREASURY SHARES. Treasury shares may be
----------- -------------------------------------
disposed of by the Corporation for such consideration as may be determined from
time to time by the Board of Directors.
SECTION 4. PAYMENT FOR SHARES. The consideration for the issuance of
----------- ---------------------
shares of capital stock of the Corporation may be paid, in whole or in part, in
money, in other property, tangible or intangible, or in labor actually performed
for, or services actually rendered to the Corporation which is transferred to
stated capital upon the issuance of shares as a share dividend shall be deemed
to be the consideration for the issuance of such shares. When payment of the
consideration for which a share was authorized to be issued shall have been
received by the Corporation, or when surplus shall have been transferred to
stated capital upon the issuance of a share dividend, such share shall be
declared and taken to be fully paid and not liable to any further call or
assessment, and the holder thereof shall not be liable for any further payments
thereon. In the absence of actual fraud in the transaction, the judgment of the
Board of Directors as to the value of such property, labor or services received
as consideration, or the value placed by the Board of Directors upon the
corporate assets in the event of a share dividend, shall be conclusive.
Promissory notes, uncertified checks, or future services shall not be accepted
in payment or part payment of the capital stock of the Corporation, except as
permitted by The Indiana Business Corporation Law.
SECTION 5. CERTIFICATES FOR SHARES. Each holder of capital stock of the
----------- -------------------------
Corporation shall be entitled to a stock certificate, signed by the Chairman or
a Vice President and the Secretary or any Assistant Secretary of the
Corporation, with the seal of the Corporation thereto affixed, stating the name
of the registered holder, the number of shares represented by such certificate,
the par value of each share of stock or that such shares of stock are without
par value, and that such shares are not fully paid and nonassessable. If such
shares are not fully paid, and as further payments are made, the certificate
shall be stamped accordingly.
If the Corporation is authorized to issue shares of more than one class,
every certificate shall state the kind and class of shares represented thereby,
and the relative rights, interests, preferences and restrictions of such class,
or a summary thereof, provided, that such statement may be omitted from the
certificate if it shall be set forth upon the face or back of the certificate
that such statement, in full, will be furnished by the Corporation to any
shareholder upon written request and without charge.
SECTION 6. FACSIMILE SIGNATURES. If a certificate is countersigned by the
---------- ---------------------
written signature of a transfer agent other than the Corporation or its
employee, the signatures of the officers of the Corporation may be facsimiles.
If a certificate is countersigned by the written signature of a registrar other
than the Corporation or its employee, the signatures of the transfer agent and
the officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of its issue.
SECTION 7. TRANSFER OF SHARES. The share of capital stock of the
----------- ---------------------
Corporation shall be transferable only on the books of the Corporation upon
---
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney or
accompanied by proper evidence of succession, assignment or authority to
transfer.
SECTION 8. CANCELLATION. Every certificate surrendered to the Corporation
---------- -------------
for exchange or transfer shall be canceled, and no new certificate or
certificates shall be issued in exchange for any existing certificate until such
existing certificate shall have been so canceled, except in cases provided for
in Section 10 of this Article III.
SECTION 9. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
----------- --------------------------------
appoint a transfer agent and a registrar for each class of capital stock of the
Corporation and may require all certificates representing such shares to bear
the signature of such transfer agent and registrar. Shareholders shall be
responsible for notifying the transfer agent and registrar for the class of
stock held by such shareholder in writing of any changes in their addresses from
time to time, and failure so to do shall relieve the Corporation, its
shareholders, directors, officers, transfer agent and registrar of liability for
failure to direct notices, dividends, or other documents or property to an
address other than the one appearing upon the records of the transfer agent and
registrar of the Corporation.
SECTION 10. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
------------ -------------------------------------------
Directors may authorize the transfer agent and a registrar to issue replacement
---
shares for Corporation stock alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Corporation may, in its
discretion and as a condition of precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum and in such
form as it may direct to indemnify against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed or the issuance of such new certificate. The Corporation,
at its discretion, may authorize the issuance of such new certificates without
any bond when in its judgment it is proper to do so.
SECTION 11. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to
----------- ------------------------
recognize the exclusive right of a person registered on its books as the owner
of such shares to receive dividends, to vote as such owner, to hold liable for
calls and assessments, and to treat as owner in all other respects, and shall
not be bound to recognize any equitable or other claims to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Indiana.
SECTION 12. OPTIONS TO OFFICERS AND EMPLOYEES. The issuance, including
------------ ------------------------------------
the consideration of rights or options to officers or employees of the
Corporation, and not to the shareholders generally, to purchase from the
Corporation shares of its capital stock shall be approved by the affirmative
vote of the holders of a majority of the shares entitled to vote thereon or
shall be authorized by and consistent with a plan approved by such a vote of the
shareholders. The price to be received for any shares having a par value other
than treasury shares to be issued upon the exercise of such rights or options,
shall not be less than the par value thereof.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of shareholders of the Corporation
----------- -----------------
shall be held at such place, within or without the State of Indiana, as may from
time to time be designated by the Board of Directors, or as may be specified in
the notices or waivers of notice of such meetings.
SECTION 2. ANNUAL MEETING. The annual meeting of shareholders for the
----------- ----------------
election of Directors, and for the transaction of such other business as may
properly come before the meeting, shall be held on the second Wednesday of
February of each year, unless in any year the Board of Directors establishes a
different date as the date of the annual meeting. Failure to hold the annual
meeting at the designated time shall not work any forfeiture or dissolution of
the Corporation, and shall not affect otherwise valid corporate acts.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for any
---------- -----------------
purpose or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, may be called by the Board of Directors or the Chairman and
shall be called by the Chairman or the Secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing of shareholders
holding of record not less than one-fourth of all the shares outstanding and
entitled by the Articles of Incorporation to vote on the business for which the
meeting is being called.
SECTION 4. NOTICE OF MEETINGS. A written or printed notice, stating the
----------- --------------------
place, day and hour of the meeting, and in case of a special meeting, or when
required by any other provision of the Indiana Business Corporation Law, or of
the Articles of Incorporation, as now or hereafter amended, or these By-Laws,
the purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary, or by the officers or persons calling the meeting, to
each shareholder of record entitled by the Articles of Incorporation, as now or
hereafter amended, and by The Indiana Business Corporation Law to vote at such
meeting, at such address as appears upon the records of the Corporation, at
least ten (10) days before the date of the meeting. Notice of any such meeting
may be waived in writing by any shareholder, if the waiver sets forth in
reasonable detail the purpose or purposes for which the meeting is called, and
the time and place thereof. Attendance at any meeting in person, or by proxy,
shall constitute a waiver of notice of such meeting. Each shareholder, who has
in the manner above provided waived notice of shareholders' meeting, or who
personally attends a shareholders' meeting, or is conclusively presumed to have
been given due notice of such meeting. Notice of any adjourned meeting of
stockholders shall not be required to be given if the time and place thereof are
announced at the meeting at which the adjournment is taken, except as may be
expressly required by law.
SECTION 5. ADDRESSES OF SHAREHOLDERS. The address of any shareholder
----------- ----------------------------
appearing upon the records of the Corporation shall be deemed to be the latest
address of such shareholder for the class of stock held by such shareholder.
SECTION 6. VOTING AT MEETINGS.
----------- ---------------------
(a) Quorum. The holders of record of a majority of the issued and
- --- -------
outstanding stock of the Corporation entitled to vote at such meeting, present
- --- -
in person or by proxy, shall constitute a quorum at all meetings of stockholders
for the transaction of business, except where otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the absence of a quorum, any
officer entitled to preside at, or act as Secretary of, such meeting shall have
the power to adjourn the meeting from time to time until a quorum shall be
constituted. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the original
meeting, but only those stockholders entitled to vote at the original meeting
shall be entitled to vote at any adjournment or adjournments thereof unless a
new record date is fixed by the Board of Directors for the adjourned meeting.
(b) Voting Rights. Except as otherwise provided by law or by the provisions
- --- -------------
of the Articles of Incorporation, every shareholder shall have the right at
every shareholders' meeting to one vote for each share of stock having voting
power, registered in his name on the books of the Corporation on the date for
the determination of shareholders entitled to vote, on all matters coming before
the meeting including the election of directors. At any meeting of the
shareholders, every shareholder having the right to vote shall be entitled to
vote in person, or by proxy executed in writing by the shareholder or a duly
authorized attorney in fact and bearing a date not more than eleven months prior
to its execution, unless a longer time is expressly provided therein.
(c) Required Vote. When a quorum is present at any meeting, the vote of the
- --- -------------
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of The Indiana
Business Corporation Law or the Articles of Incorporation or by these By-Laws, a
greater vote is required, in which case such express provision shall govern and
control the decision of such question.
SECTION 7. VOTING LIST. The Transfer Agent of the Corporation shall make,
---------- ------------
at least five days before each election of directors, a complete list of the
shareholders entitled by the Articles of Incorporation, as now or hereafter
amended, to vote at such election, arranged in alphabetical order, with the
address and number of shares so entitled to vote held by each, which list shall
be on file at the principal office of the Corporation and subject to inspection
by any shareholder. Such list shall be produced and kept open at the time and
place of election and subject to the inspection of any shareholder during the
holding of such election. The original stock registrar or transfer book, or a
duplicate thereof kept in the State of Indiana, shall be the only evidence as to
who are the shareholders entitled to examine such list or the stock ledger or
transfer book or to vote at any meeting of the shareholders.
SECTION 8. FIXING OF RECORD DATE TO DETERMINE SHAREHOLDERS ENTITLED TO
----------- --------------------------------------------------------------
VOTE. The Board of Directors may prescribe a period not exceeding 70 days prior
--
to meetings of the shareholders, during which stock on the books of the
Corporation may not be transferred; or, in lieu of prohibiting the transfer of
stock may set a date and time as the time at which shareholders entitled to
notice of, and to vote at, such meeting shall be determined, and all persons who
are holders of record of voting stock at such time, and no others, shall be
entitled to notice of, and to vote at, such meeting. Said date and time shall
not be more than 70 days prior to any shareholders' meeting. In the absence of
such determination, such date shall be 10 days prior to the date of such
meeting.
SECTION 9. SHAREHOLDER PROPOSALS AND NOMINATIONS. For any shareholder
----------- ----------------------------------------
proposal to be presented in connection with an annual meeting of shareholders of
the Company, including any proposal relating to the nomination of a director to
be elected to the Board of Directors of the Company, the shareholder must have
given timely notice thereof in writing to the Secretary of the Company (the
"Notice") and must have been a shareholder of record entitled to vote at the
meetings at the time of giving of such notice. To be timely, a Notice must be
delivered to or, if mailed, received at the principal executive offices of the
Company not less than one hundred twenty (120) calendar days in advance of the
date the Company's proxy statement was released to shareholders in connection
with the annual meeting of shareholders; provided, however, that in the event
that no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than thirty (30) days from the date of the
previous year's meeting, to be timely, Notice must be received by the Company's
Secretary at the principal office of the Company not later than the close of
business on the later of one hundred twenty (120) calendar days in advance of
such annual meeting or ten (10) calendar days following the date on which public
announcement of the date of the meeting is first made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or reelection as a director, (i) a statement of the
qualifications of such person, (ii) all information relating to such person that
is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(iii) a description of all arrangements or understandings among the shareholder
and such person and (iv) the written consent of such person to being named in
the proxy statement as a nominee and to serving as a director if elected; (b) as
to any other business that the shareholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and of the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the shareholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (i) the name and address of such shareholder, as they appear
on the Company's books, and of such beneficial owner and (ii) the class and
number of shares of stock of the Company which are owned beneficially and of
record by such shareholders and such beneficial owner. Notwithstanding the
foregoing, in order to include information with respect to a shareholder
proposal in the proxy statement and form of proxy for a shareholder's meeting,
shareholders must provide notice as required by the regulations promulgated
under the Exchange Act.
ARTICLE V
BOARD OF DIRECTORS
SECTION 1. ELECTION, NUMBER AND TERM OF OFFICE. Directors shall be
----------- -----------------------------------------
elected at the annual meeting of shareholders, or, if not so elected, at a
-
special meeting of shareholders for that purpose, by the holders of the shares
of stock entitled by the Articles of Incorporation to elect Directors.
The number of Directors of the Corporation to be elected by the holders of
the shares of stock entitled by the Articles of Incorporation to elect Directors
shall be eight (8) unless changed by amendment to this section.
All Directors elected by the holders of such shares; except in the case of
earlier resignation, removal or death, shall hold office until their respective
successors are chosen and qualified. Directors need not be shareholders of the
Corporation.
Any vacancy on the Board of Directors caused by an increase in the number
of Directors shall be filled by a majority of the members of the Board of
Directors, until the next annual or special meeting of shareholders or, at the
discretion of the Board of Directors, such vacancy may be filled by vote of the
shareholders at a special meeting called for that purpose. No decrease in the
number of Directors shall have the effect of shortening the term of any
incumbent Director.
SECTION 2. VACANCIES. Any vacancy occurring in the Board of Directors
----------- ----------
caused by resignation, death or other incapacity shall be filled by a majority
vote of the remaining members of the Board of Directors, until the next annual
meeting of shareholders. If the vote of the remaining members of the Board
shall result in a tie, such vacancy, at the discretion of the Board of
Directors, may be filled by vote of the shareholders at a special meeting for
that purpose.
SECTION 3. ANNUAL MEETING OF DIRECTORS. The Board of Directors shall meet
---------- ----------------------------
each year, at the place where such meeting of the shareholders has been held
either within or without the State of Indiana, for the purpose of organization,
election of officers, and consideration of any other business that may properly
come before the meeting. No notice of any kind to either old or new members of
the Board of Directors for such meeting shall be necessary.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
----------- ------------------
shall be held at such times and places, either within or without the State of
Indiana, as may be fixed by the Directors. Such regular meetings of the Board
of Directors may be held without notice or upon such notice as may be fixed by
the Directors.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
----------- ------------------
may be called by the Chairman of the Board, the President, or by not less than a
majority of the members of the Board of Directors. Notice of the time and
place, either within or without the State of Indiana, of a special meeting shall
be served upon or telephoned to each Director at least twenty-four hours, or
mailed, telegraphed or cabled to each Director at his usual place of business or
residence at least forty-eight hours, prior to the tie of the meeting.
Directors, in lieu of such notice, may sign a written waiver of notice either
before the time of the meeting, at the meeting or after the meeting. Attendance
by a director in person at any such special meeting shall constitute a waiver of
notice.
SECTION 6. QUORUM. A majority of the actual number of Directors elected
----------- -------
and qualified, from time to time, shall be necessary to constitute a quorum for
the transaction of any business except the filing of vacancies, and the act of a
majority of the Directors present at the meeting, at which a quorum is present,
shall be the act of the Board of Directors, unless the act of a greater number
is required by The Indiana Business Corporation Law, by the Articles of
Incorporation, or these By-Laws. A Director, who is present at a meeting of the
Board of Directors, at which action on any corporate matter is taken, shall be
deemed to have voted in favor of the action, unless (a) his dissent shall be
affirmatively stated by him at and before the adjournment of such meeting (in
which event the fact of such dissent shall be entered by the secretary of the
meeting in the minutes of the meeting), or (b) he shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. The right of dissent provided for by either clause
(a) or clause (b) of the immediately preceding sentence shall not be available,
in respect of any matter, if the Director did not change his vote prior to the
time the result of the vote on such matter was announced by the Chairman of such
meeting.
SECTION 7. CONSENT ACTION BY DIRECTORS. Any action required or permitted
---------- -----------------------------
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is signed
by all members of the Board of Directors or such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Board of Directors or committee.
SECTION 8. REMOVAL OF DIRECTORS. Any or all members of the Board of
----------- -----------------------
Directors may be removed, with or without cause, at a meeting of shareholders
called expressly for that purpose by a vote of the holders of not less than a
majority of the outstanding shares of capital stock then entitled at an election
of directors.
SECTION 9. DIVIDENDS. The Board of Directors shall have power, subject to
---------- ----------
any restrictions contained in The Indiana Business Corporation Law or in the
Articles of Incorporation and out of funds legally available therefor, to
declare and pay dividends upon the outstanding capital stock of the Corporation
as and when they deem expedient. Before declaring any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time in their absolute discretion
deem proper for working capital, or as a reserve or reserves to meet
contingencies or for such other purposes as the Board of Directors shall deem
conducive to the interests of the Corporation and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
SECTION 10. FIXING OF RECORD DATE TO DETERMINE SHAREHOLDERS ENTITLED TO
------------ -------------------------------------------------------------
RECEIVE CORPORATE BENEFITS. The Board of Directors may fix a day and hour not
---------------------------
exceeding 50 days preceding the date fixed for payment of any dividend or for
the delivery of evidence of rights, or for the distribution or other corporate
benefits, or for a determination of shareholders entitled to receive any such
dividend, rights or distribution, and in such case only shareholders of record
at the time so fixed shall be entitled to receive such dividend, rights or
distribution. If no record date is fixed for the determination of shareholders
entitled to receive payment of a dividend, the end of the day on which the
resolution of the Board of Directors declaring such dividend is adopted shall be
the record date for such determination.
SECTION 11. INTEREST OF DIRECTORS IN CONTRACTS. Any contract or other
------------ --------------------------------------
transaction between the Corporation of any corporation which this Corporation
owns a majority of the capital stock shall be valid and binding, notwithstanding
that the directors and officers of this Corporation are identical or that some
or all of the directors or officers, or both, are also directors or officers of
such other corporation.
Any contract or other transaction between the Corporation and one or more of its
directors or members or employees, or between the Corporation and any firm of
which one or more of its directors are members or employees or in which they are
interested, or between the Corporation and any corporation or association of
which one or more of its directors are stockholders, members, directors,
officers or employees or in which they are interested, shall be valid for all
purposes, notwithstanding the presence of such director or directors at the
meeting of the Board of Directors of the Corporation which acts upon, or in
reference to, such contract or transaction and notwithstanding his or their
participation in such action, if the fact of such interest shall be disclosed or
known to the Board of Directors and the Boards of Directors shall authorize,
approve and ratify such contract or transaction by a vote of a majority of the
directors present, such interested director or directors to be counted in
determining whether a quorum is present, but not to be counted in calculating
the majority of such quorum necessary to carry such vote. This Section shall
not be construed to invalidate any contract or other transaction, which would
otherwise be valid under the common and statutory law applicable thereto.
SECTION 12. COMMITTEES. The Board of Directors may, by resolution adopted
----------- -----------
by a majority of the actual number of Directors elected and qualified, from time
to time designate from among its members, an executive committee and one or more
other committees and may delegate to each such committee such authority and
power of the Board of Directors as shall be specified in such resolution, but no
such committee shall have the authority of the Board of Directors in reference
to amending the Articles of Incorporation, adopting an agreement or plan of
merger or consolidation proposing a special corporate transaction, recommending
to the shareholders a voluntary dissolution of the Corporation or a revocation
thereof, or amending these By-Laws. No member of any such committee shall
continue to be a member thereof after he ceases to be a Director of the
Corporation. The calling and holding of meetings of such committee and its
method of procedure shall be as determined by the Board of Directors.
ARTICLE VI
OFFICERS
SECTION 1. PRINCIPAL OFFICERS. The principal officers of the Corporation
----------- -------------------
shall be a Chairman, a President, one or more Vice Presidents, a Treasurer and a
Secretary. The Corporation may also have, at the discretion of the Board of
Directors; such other subordinate officers as may be appointed in accordance
with the provisions of these By-Laws. Any two or more offices may be held by
the same person, except the office of Chairman shall not be given to an
individual who is not a Director of the Corporation.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Board of Directors shall
----------- --------------------------
designate a Chief Executive Officer who shall be either the Chairman or
---
President. The Chief Executive Officer shall hold those powers and authorities
---
normally accorded such position and shall be the senior officer accountable to
the Board for principles and policies of the Corporation.
SECTION 3. ELECTION AND TERM OF OFFICE. The principal officers of the
----------- -------------------------------
Corporation shall be chosen annually by the Board of Directors at the annual
meeting thereof. Each such officer shall hold office until his successor shall
have been duly chosen and qualified, or until his death, or he shall resign, or
shall have been removed in the manner hereinafter provided.
SECTION 4. REMOVAL. Any principal officer may be removed either with or
----------- --------
without cause, at any time by resolution adopted at any meeting of the Board of
Directors elected and qualified from time to time.
SECTION 5. SUBORDINATE OFFICERS. In addition to the principal officers
----------- ----------------------
enumerated in Section 1 of this Article VI, the Corporation may have a
Controller, one or more Assistant Controllers, one or more Assistant Secretaries
and such other officers, agents and employees as the Board of Directors may deem
necessary, each of whom shall hold office for such period, may be removed with
or without cause, have such authority and perform such duties as Chairman, the
President, or the Board of Directors may from time to time determine. The Board
of Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officers, agents or employees.
SECTION 6. RESIGNATIONS. Any officer may resign at any time by giving
----------- --------------
written notice to the Chairman, the Board of Directors, the President or to the
Secretary. Any such resignation shall take effect upon receipt of such notice
or at any later time specified therein, and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 7. VACANCIES. Any vacancy in any office for any cause may be
----------- ----------
filled for the unexpired portion of the term in the manner prescribed in these
By-Laws for election or appointment to such office for such term.
SECTION 8. CHAIRMAN. The Chairman, who shall be chosen from among the
----------- ---------
Directors, shall have general supervision of the affairs of the Corporation,
subject to the control of the Board of Directors. He shall be an ex officio
member of all standing committees. The Chairman shall preside at all meetings
of the shareholders and at all meetings of the Board of Directors. Subject to
the control and direction of the Board of Directors, the Chairman may enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation. In general, he shall perform all duties and have all powers
as, from time to time may be herein defined, and all such other duties and
powers as, from time to time may be assigned to him by the Board of Directors.
SECTION 9. PRESIDENT. The President shall be responsible to the Chairman
----------- ----------
in the performance of his duties, and shall, in the absence or disability of the
Chairman, perform the duties and exercise the power of the Chairman. The
President shall perform such duties and have such powers as the Board of
Directors may, from time to time assign.
SECTION 10. VICE PRESIDENTS. The other Vice Presidents in the order of
------------ -----------------
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President. They shall perform such other duties and have such
other powers as the Chairman and President and the Board of Directors may, from
time to time assign.
SECTION 11. TREASURER. The Treasurer shall have charge and custody of,
------------ ----------
and be responsible for, all funds and securities of the Corporation and shall
deposit all such funds and securities of the Corporation in such banks or other
depositories as shall be selected by the Board of Directors. He shall, upon
request, exhibit at all reasonable times, his books of account and records to
any of the directors of the Corporation where such books and records shall be
kept; shall render upon request by the Board of Directors, a statement of the
condition of the finances of the Corporation at any time requested by the Board
of Directors or at the annual meeting of shareholders; shall receive, and give
receipt for moneys due and payable to the Corporation from any source
whatsoever; and in general, shall perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Chairman, the President or the Board of Directors.
SECTION 12. SECRETARY. The Secretary shall keep or cause to be kept in
------------ ----------
the books provided for that purpose, the minutes of the meetings of the
Shareholders and of the Board of Directors; shall duly give and serve all
notices required to be given in accordance with the provisions of these By-Laws
and by the Indiana Business Corporation Law; shall be custodian of the records
and of the seal of the Corporation and see that the seal is affixed to all
documents, the executing of which on behalf of the Corporation under its seal is
duly authorized in accordance with the provisions of these By-Laws; and, in
general, shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned to him by the Chairman, the
President or the Board of Directors.
SECTION 13. SALARIES. The salaries of the principal officers shall be
------------ ---------
fixed from time to time by the Board of Directors and the salaries of any
subordinate officers may be fixed by the President.
SECTION 14. GENERAL POWERS OF OFFICERS.The Chairman and the President and
------------ ---------------------------
each are authorized and empowered for and on behalf of the Corporation and in
its name, singly and without the joinder of any other officer, to execute and
deliver any and all contracts, leases, notes, mortgages, receipts, deeds,
commitments, power of attorney, authorizations and any and all documents in
addition to, but not limited to the ones therefore described which said offices,
or any of them believe to be necessary and advisable in carrying on the business
of the Corporation. The Treasurer and the Secretary of the Corporation are
hereby authorized to execute and deliver any and all documents which relate to
the routine discharge of the responsibilities of each of said offices and such
other documents as either the Chairman or the President shall specifically
authorize said officers to execute or deliver only such documents, or general
types of classes of documents, with respect to which they have received specific
authorization from either the Chairman, the President or the Board of Directors.
SECTION 15. VOTING CORPORATION'S SECURITIES. Unless otherwise ordered by
------------ --------------------------------
the Board of Directors, the Chairman, President and Secretary and each of them,
are appointed attorneys and agents of the Corporation, and shall have full power
and authority in the securities entitled to be voted at any meetings of security
holders of corporations, or associations in which the Corporation may hold
securities, in person, or by proxy, as a stockholder or otherwise and at such
meetings shall possess and may exercise any and all rights and powers incident
to the ownership of such securities, and which as the owner thereof of the
Corporation might have possessed and exercised, if present, or to consent in
writing to any action by and such other corporation or association. The Board
of Directors by resolution from time to time, may confer like powers upon any
other person or persons.
ARTICLE VII
INDEMNIFICATION
INDEMNIFICATION
Section 1. Rights to Indemnification and Advancement of Expenses.
---------- ---------------------------------------------------------
(a) The Corporation shall indemnify as a matter of right every person made a
party to a proceeding because such person is or was
(i) a member of the Board of Directors of the Corporation,
(ii) an officer of the Corporation, or
(iii) while a director or officer of the Corporation, serving at the
Corporation's request as a director, officer, partner, member, manager, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan, or other
enterprise, whether for profit or not, (each an "Indemnitee") against all
liability incurred by such person in connection with the proceeding; provided
that it is determined in the specific case that indemnification of such person
is permissible in the circumstances because such person has met the standard of
conduct for indemnification specified in the Act. The Corporation shall pay for
or reimburse the reasonable expenses incurred by an Indemnitee in connection
with any such proceeding in advance of final disposition thereof in accordance
with the procedures and subject to the conditions specified in the Act. The
Corporation shall indemnify as a matter of right an Indemnitee who is wholly
successful, on the merits or otherwise, in the defense of any such proceeding,
against reasonable expenses incurred by the Indemnitee in connection with the
proceeding without the requirement of a determination as set forth in the first
sentence of this paragraph.
(b) Upon demand by a person for indemnification or advancement of
expenses, as the case may be, the Corporation shall expeditiously determine
whether the person is entitled thereto in accordance with this Article and the
procedures specified in the Act.
(c) The indemnification provided under this Article shall apply to any
proceeding arising from acts or omissions occurring before or after the adoption
of this Article.
Section 2. Other Rights Not Affected. Nothing contained in this Article
---------- --------------------------
shall limit or preclude the exercise or be deemed exclusive of any right under
the law, by contract or otherwise, relating to indemnification of or advancement
of expenses to any individual who is or was a director, officer, employee or
agent of the Corporation, or the ability of the Corporation to otherwise
indemnify or advance expenses to any such individual. It is the intent of this
Article to provide indemnification to directors and officers to the fullest
extent now or hereafter permitted by law consistent with the terms and
conditions of this Article. Therefore, indemnification shall be provided in
accordance with this Article irrespective of the nature of the legal or
equitable theory upon which a claim is made, including without limitation
negligence, breach of duty, mismanagement, corporate waste, breach of contract,
breach of warranty, strict liability, violation of federal or state securities
laws, violation of the Employee Retirement Income Security Act of 1974, as
amended, or violation of any other state or federal laws.
Section 3. Definitions. For purposes of this Article:
---------- -----------
The term "director" means an individual who is or was a member of the Board
of Directors of the Corporation or an individual who, while a director of the
Corporation, is or was serving at the Corporation's request as a director,
officer, partner, member, manager, trustee, employee, or agent of another
foreign or domestic corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan, or other enterprise, whether for profit
or not. A director is considered to be serving an employee benefit plan at the
Corporation's request if the director's duties to the Corporation also impose
duties on, or otherwise involve services by, the director to the plan or to
participants in or beneficiaries of the plan. The term "director" includes,
unless the context requires otherwise, the estate or personal representative of
a director.
The term "expenses" includes all direct and indirect costs (including
without limitation counsel fees, retainers, court costs, transcripts, fees of
experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, all other
disbursements or out-of-pocket expenses) actually incurred in connection with
the investigation, defense, settlement or appeal of a proceeding or establishing
or enforcing a right to indemnification under this Article, applicable law or
otherwise.
The term "liability" means the obligation to pay a judgment, settlement,
penalty, fine, excise tax (including an excise tax assessed with respect to an
employee benefit plan), or reasonable expenses incurred with respect to a
proceeding.
(d) The term "party" includes an individual who was, is or is
threatened to be made a named defendant or respondent in a proceeding.
(e) The term "proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
ARTICLE VIII
AMENDMENTS
The power to make, alter, amend or repeal these By-Laws is invested in the
Board of Directors, but the affirmative vote of a majority of the actual number
of directors elected and qualified, from time to time, shall be necessary to
effect any alteration, amendment or repeal of the By-Laws.
64
EXHIBIT 10.13
FORM OF THE STEAK N SHAKE COMPANY
CAPITAL APPRECIATION AGREEMENT
THIS AGREEMENT made this day of , between THE STEAK N
SHAKE COMPANY, (hereinafter referred to as "Company"), and
, hereinafter referred to as "Employee").
As additional consideration for Employee's continuing employment with the
Company in a key executive capacity, the Company grants to Employee shares of
the common stock of the Company, stated value $.50 per share ("Restricted
Shares"), and book value units ("Book Units"), as hereinafter set forth, and the
Company and employee hereby agrees as follows:
1. GRANTS
- -- ------
Company hereby grants to Employee ______Restricted Shares and an equal
number of Book Units subject to the terms and conditions of the 1997 Capital
Appreciation Plan of the Company, as amended, and set forth herein.
2. RESTRICTED SHARES
- -- ------------------
Company shall promptly issue to Employee, stock certificate(s) representing
the number of Restricted Shares granted above, which shall be duly endorsed in
blank by Employee and returned to Company for safekeeping for a period of three
(3) years from the date hereof ("Forfeiture Period"). Employee shall be
entitled to all ownership rights thereto upon issuance, including the receipt of
dividends, if any, and voting rights, except that the Restricted Shares granted
hereunder may not be sold, transferred or pledged by Employee during the said
Forfeiture Period. At the conclusion of the Forfeiture Period, and if the
forfeiture has not occurred under Paragraph 4 herein, the stock certificate(s)
held by the Company shall be delivered to Employee with all ownership rights
attendant thereto.
3. BOOK UNITS
- -- -----------
The Book Units granted hereunder shall be valued based upon the book value
as determined under generally accepted accounting principles employed by the
Company, of one share of the Company's $.50 stated value common stock as of the
last day of the Company's fiscal quarter immediately preceding the date of grant
hereunder ("Value Date"), multiplied by the number of Book Units granted
hereunder. If the Book Units have not been forfeited under Paragraph 4 herein,
the said Book Units shall be similarly valued on the third anniversary of the
Value Date ("Accumulation Period") and any increase in said book value during
the Accumulation Period, plus an amount equal to the dividends paid during the
Accumulation Period on an equal number of real shares of the $.50 stated value
common stock of the Company, shall be paid in cash by Company to Employee within
ninety (90) days following expiration of the Accumulation Period. The Board of
Directors of the Company shall have the right, in its sole and absolute
discretion, to proportionately adjust such book values for sales or purchases by
the
Company of its common stock, acquisitions or divestitures, accounting changes or
other actions of the Company taken during the Accumulation Period affecting book
value, to whatever extent the Board of Directors determines that any such action
equitably requires an adjustment.
4. FORFEITURE:
-----------
(a) In the event of termination of Employee's employment with the
Company during the said Forfeiture Period or Accumulation Period for any reason
other than death, disability, retirement under the normal or disability
provisions of a retirement plan of the Company, or retirement under the early
retirement provisions of such retirement plan with the consent of Company, the
Restricted Shares and the Book Units granted hereunder shall be immediately
forfeited by Employee. In such event, the stock certificate(s) held by Company
shall be transferred to Company and Company shall have no further obligation to
Employee hereunder.
(b) In the event of Employee's death, disability, retirement under the
normal or disability provisions of a retirement plan of Company, or retirement
under the early retirement provisions of such retirement plan with the consent
of the Company, during the said Forfeiture Period or Accumulation Period, the
Employee or Employee's beneficiary or estate shall be entitled to retain that
number of Restricted Shares and Book Units granted hereunder determined as
though such Employee's employment had continued, multiplied by a fraction, the
numerator of which is the number of months Employee was employed during the said
Forfeiture Period or Accumulation Period (including the month during which
death, disability or retirement occurred), and the denominator of which is
thirty-six (36), being the number of months of the said Forfeiture Period or
Accumulation Period. In such event, the stock certificate(s) held by the
Company shall be transferred to the Company, and the Company shall reissue an
appropriate stock certificate to Employee or Employee's beneficiary or estate
for the number of Restricted Shares to be retained under the computation herein.
The Book Units shall thereupon be valued as of the last day of Company's fiscal
quarter immediately preceding the date of Employee's death, disability or
retirement hereunder, and the amount of any increase in book value plus
dividends shall be paid in cash to Employee or Employee's beneficiary or estate
in the same manner as in Paragraph 2 herein.
(c) Any stock issuance or payment made with respect to an Employee who has
died shall be made or paid to the beneficiary now or hereafter designated by
Employee to receive the proceeds of any group life insurance coverage provided
for Employee by the Company. If no beneficiary has been so designated by
Employee, or if Employee wishes to designate a different beneficiary hereunder,
Employee may file with the Board of Directors (to the attention of the Corporate
Secretary), a written designation of beneficiary under this Agreement, which
designation may be revoked or changed at any time in writing only by the
Employee. If no designation of beneficiary has been made under such life
insurance coverage or filed with the Board of Directors, it is specifically
agreed that distribution of the Restricted Shares and proceeds applicable to the
Book Units hereunder shall be made by the Company to Employee's spouse, if
surviving, and if not, to Employee's estate.
5. ADJUSTMENTS
-----------
(a) In the event that there are changes in the capitalization of the
Company during the Forfeiture Period or Accumulation Period affecting in any
manner the number or kind of outstanding shares of common stock of the Company,
whether such changes have been occasioned by declaration of stock dividends,
stock split-ups, reclassification or recapitalization of such stock, or because
the Company has merged or consolidated with another corporation, or for any
reason whatsoever, then the number of Restricted Shares and Book Units granted
hereunder shall be proportionately adjusted by the Board of Directors of the
Company to whatever extent the Board of Directors determines, in its sole and
absolute discretion, that any such change equitably requires an adjustment.
(b) If the Company at any time should elect to dissolve, undergo a
reorganization of split-up of its stock or merge or consolidate with any other
corporation and the Company is not the surviving corporation, then (unless in
the case of a reorganization, stock split-up, merger or consolidation, one or
more of the surviving corporations assumes the obligations to the Employee
hereunder or replaces this Agreement with a reasonably equivalent agreement),
the Board of Directors of Company may thereupon accelerate grants of Restricted
Shares and Book Units hereunder, reduce the applicable Forfeiture Period and
Accumulation Period, or take such other action as the Board of Directors, in its
sole and absolute discretion, deems equitable.
6. EMPLOYMENT
- -- ----------
Nothing in the grant herein shall confer upon the Employee any right to
continue in the employ of Company or affect in any way the right of Company to
terminate Employee's employment at any time.
7. TRANSFERABILITY
- -- ---------------
This Agreement is not transferable by Employee otherwise than by will or
the laws of descent and distribution. This Agreement shall be binding upon and
inure to the benefit of any successor to the Company and all persons lawfully
claiming under Employee.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by
its officers thereunto duly authorized, and Employee has executed this
Agreement, all on the day and year first above written.
ATTEST: THE STEAK N SHAKE COMPANY
By: By:
Secretary Peter M. Dunn, President and
Chief Executive Officer
EMPLOYEE:
By:
EXHIBIT 10.14
FORM OF THE STEAK N SHAKE COMPANY
STOCK OPTION AGREEMENT
THIS AGREEMENT, made this _________ by and between THE STEAK N SHAKE COMPANY, an
Indiana corporation with its principal office at 36 South Pennsylvania Street,
Indianapolis, Indiana (hereinafter called "Company") and ___________,
------------
(hereinafter called "Grantee") pursuant to the terms, conditions and limitations
contained in the Company's Employee Stock Option Plan (hereinafter called the
"Plan").
WITNESSETH THAT:
WHEREAS, in the interests of affording an incentive to the Grantee to give his
best efforts to the Company as a key employee, the Company wishes to provide
that the Grantee shall have an option to buy shares of the common stock, without
par value, ("Common Stock") of the Company:
NOW, THEREFORE, it is hereby mutually agreed as follows:
1. The Company hereby grants to the Grantee the right and option to
purchase, on the terms and conditions hereinafter set forth, all or any part of
an aggregate of _____ shares (hereinafter called "Subject Shares") of the
-----
presently authorized, but unissued, or treasury Common Stock of the Company at a
purchase price of _____per share, exercisable in whole or in part from time to
-----
time subject to the limitation that no option may be exercised with respect to
fewer than one hundred (100) shares unless there are fewer than one hundred
(100) shares then subject to purchase hereunder, in which event any exercise
must be as to all such shares and subject to the further limitation that the
options represented by this Agreement shall be exercisable only at such times
and in such amounts as are set forth on Schedule I, attached hereto and made a
part hereof. The option shall expire as to all Subject Shares on the _____
-----
anniversary date of this Agreement if not exercised on or before such date.
2. This option may not be exercised until all applicable federal and state
securities requirements pertaining to the offer and sale of the securities
issued pursuant to the Plan have been met and the Company has been advised by
counsel that all applicable requirements have been met.
3. Subject to the limitation specified in Section 2 and Schedule I hereof,
the Grantee may from time to time exercise this option by delivering a written
notice of exercise and subscription agreement to the Secretary of the Company
specifying the number of whole shares to be purchased, accompanied by payment in
cash, by certified check, or bank cashier's check, of the aggregate option price
of such number of shares; provided, however, that the Grantee may, with the
approval of the Company's Executive Committee (the "Committee"), make payment in
the form of delivery to the Company of Common Stock of the Company owned by the
Grantee, the fair market value of which equals the aggregate option price, or by
payment partially in cash and partially in Common Stock of the aggregate option
price. For this purpose, any shares so tendered by the Grantee shall be deemed
to have a fair market value equal to the average of the closing sales price for
the shares on the New York Stock Exchange for the five trading days preceding
the date of the exercise of the option. Upon the date of exercise of an option
by tendering shares hereunder, the Grantee shall be awarded a new option to
purchase that number of shares equal to the shares so tendered at an option
price equal to the fair market value on the date of such exercise (the "Reload
Option"). A Reload Option shall not apply to a subsequent exercise of a Reload
Option by tendering shares. Such exercise shall be effective upon receipt by
the Secretary of such written notice, subscription agreement and payment of the
purchase price. Only the Grantee may exercise the option during the lifetime of
the Grantee. No fractional shares may be purchased at any time hereunder.
4. If the Grantee ceases to be an employee of the Company or any of its
subsidiaries for any reason other than retirement, permanent and total
disability, or death, this option shall forthwith terminate. If the Grantee's
employment by the Company or any of its subsidiaries is terminated by reason of
retirement (which means such termination of employment as shall entitle the
Grantee to benefits under the Company's 401k Plan or any successor plan of the
Company or one of its subsidiaries), the Grantee may exercise this option in
whole or in part at any time within three months after such retirement, but not
later than the date upon which this option would otherwise expire. If the
Grantee ceases to be an employee of the Company or any of its subsidiaries
because of permanent or total disability, the Grantee may exercise this option
in whole or in part at any time within one year after such termination of
employment by reason of such disability, but not later than the date upon which
this option would otherwise expire. The foregoing exercise provisions apply
whether or not this option was otherwise vested at the date of the Grantee's
retirement or termination of employment because of permanent and total
disability.
5. If the Grantee dies while employed by the Company or any of its
subsidiaries, within three months after the termination of his employment
because of retirement, or within one year after the termination of his
employment because of permanent or total disability, this option may be
exercised in whole or in part by the executor, administrator, or estate
beneficiaries of the Grantee at any time after the date of the Grantee's death
but not later than the date upon which this option would otherwise expire. The
foregoing exercise provisions apply whether or not this option was otherwise
vested at the date of the Grantee's death.
6. Upon the effective exercise of the option, or any part thereof,
certificates representing the shares so purchased, marked fully paid and
non-assessable shall be delivered to the person who exercised the option. Until
certificates representing such shares shall have been issued and delivered, the
Grantee shall not have any of the rights or privileges of a shareholder of the
Company in respect of any of such shares.
7. In the event that prior to the delivery by the Company of all the Subject
Shares, there shall be an increase or reduction in the number of shares of
Common Stock of the Company issued and outstanding by reason of any subdivision
or consolidation of the Common Stock or any other capital adjustment, the number
of shares then subject to this option shall be increased or decreased as
provided in Section 9 of the Plan.
8. The option and the rights and privileges conferred by this Option
Agreement shall not be assigned or transferred by the Grantee in any manner
except by will or under the laws of descent and distribution. In the event of
any attempted assignment or transfer in violation of this paragraph, the option,
rights and privileges conferred by this Stock Option Agreement shall become null
and void.
9. Nothing herein contained shall be deemed to create any limitation or
restriction upon such rights as the
Company would otherwise have to terminate a person as an employee of the
Company.
10. Any notices to be given or served under the terms of this Option
Agreement shall be addressed to the Secretary of the Company at 36 South
Pennsylvania Street, Indianapolis, Indiana, 46204, and to the Grantee at the
address set forth on page one of this Stock Option Agreement, or such other
address or addresses as either party may hereafter designate in writing to the
other. Any such notice shall be deemed to have been duly given or served, if
and when enclosed in a properly sealed envelope or wrapper addressed as
aforesaid, postage prepaid, and deposited in the United States mail.
11. The interpretation by the Committee of any provisions of the Plan or of
this Stock Option Agreement shall be final and binding on the
Grantee unless otherwise determined by the Company's Board of Directors.
12. This option is subject to all the terms, provisions and conditions of
the Plan, which is incorporated herein by reference and to
such regulations as may from time to time be adopted by the Committee. A copy of
the Plan has been furnished to the Grantee and an additional copy may be
obtained from the Company. In the event of any conflict between the provisions
of the Plan and the provisions of this Stock Option Agreement, the terms,
conditions and provisions of the Plan shall control, and this Stock Option
Agreement shall be deemed to be modified accordingly.
13. This Stock Option Agreement is intended to grant an option which meets
the requirements of stock options as defined in Section 422A of the Internal
Revenue Code. Subject to and upon the terms, conditions and provisions of the
Plan, each and every provision of this Stock Option Agreement shall be
administered, construed and interpreted so that the option granted herein shall
qualify as an incentive stock option.
14. This Stock Option Agreement shall be governed by the laws of the State
of Indiana.
IN WITNESS WHEREOF, the Company and the Grantee have signed this Stock Option
Agreement as of the day and year first above written.
"COMPANY"
By: ___________________________________
ATTEST:
_________________________________ "GRANTEE"
By: ___________________________________
SCHEDULE I
STOCK OPTION AGREEMENT OF
_______________
Name of Grantee
Number of Shares Exercisable After Installment Cumulative
- ------------------ ------------------ ----------- ----------
Available
- ---------
EXHIBIT 21.01
THE STEAK N SHAKE COMPANY
State of
Wholly-owned Subsidiaries Incorporation or Organization
----------------------------------- -------------------------------
Steak n Shake Operations, Inc. Indiana
SNSTM, Inc. * Delaware
Steak n Shake, LP ** Indiana
Consolidated Specialty Restaurants, Inc. Indiana
SNS Investment Company Indiana
* Wholly-owned subsidiary of Steak n Shake Operations, Inc.
** Limited partnership owned 99% by Steak n Shake Operations, Inc. and 1% by The
Steak n Shake Company
EXHIBIT 23.01
THE STEAK N SHAKE COMPANY
CONSENT OF DELOITTE & TOUCHE LLP
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements No.
333-115727 on Form S-3 and No. 333-115728 on Form S-8 of our report dated
November 22, 2004, incorporated by reference in the Annual Report on Form 10-K
of The Steak n Shake Company for the year ended September 29, 2004.
/s/ Deloitte & Touche LLP
Indianapolis, Indiana
December 3, 2004
EXHIBIT 23.02
THE STEAK N SHAKE COMPANY
CONSENT OF ERNST & YOUNG LLP
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-115728) pertaining to the Amended and Restated 1997 Capital
Appreciation Plan, and the 2000, 2002, 2003 and 2004 Director Stock Option Plans
and (Form S-3 No. 333-115727) and related prospectus for the public offering
for sale of 53,832 shares of common stock and related preferred stock purchase
rights of our report dated December 3, 2002, with respect to the consolidated
financial statements of The Steak n Shake Company incorporated by reference in
the Annual Report (Form 10-K) for the year ended September 29, 2004.
/s/ Ernst & Young LLP
Indianapolis, Indiana
December 3, 2004
EXHIBIT 31.01
CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I, Peter M. Dunn, certify that:
1. I have reviewed this annual report on Form 10-K of The Steak n Shake
Company;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: December 3, 2004
/s/ Peter M. Dunn
--------------------
Peter M. Dunn
President and Chief Executive Officer
EXHIBIT 31.02
CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I, Jeffrey A. Blade, certify that:
1. I have reviewed this annual report on Form 10-K of The Steak n Shake
Company;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: December 3, 2004
/s/ Jeffrey A. Blade
-------------------------------
Jeffrey A. Blade
Senior Vice President and
Chief Financial Officer
EXHIBIT 32.01
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Steak n Shake Company (the
"Company") on Form 10-K for the period ending September 29, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant
to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Peter M. Dunn
- --------------------
Peter M. Dunn, President and Chief Executive Officer
December 3, 2004
/s/ Jeffrey A. Blade
- -----------------------
Jeffrey A. Blade, Senior Vice President and
Chief Financial Officer
December 3, 2004