sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For quarter ended Commission file number
March 19, 2002 0-19907
-------------- -------
LONE STAR STEAKHOUSE & SALOON, INC.
(Exact name of registrant as specified in its charter)
Delaware 48-1109495
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
224 East Douglas, Suite 700
Wichita, Kansas 67202
(Address of principal executive offices) (Zip code)
(316) 264-8899
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all documents and
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. /X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 26, 2002
Common Stock, $.01 par value 24,754,980 shares
Lone Star Steakhouse & Saloon, Inc.
Index
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at March 19, 2002 and December 25, 2001 2
Condensed Consolidated Statements of
Operations for the twelve weeks ended
March 19, 2002 and March 20, 2001 3
Condensed Consolidated Statements of
Cash Flows for the twelve weeks ended
March 19, 2002 and March 20, 2001 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative
Disclosures about Market Risks 13
PART II. OTHER INFORMATION
-------- -----------------
Items 1 through 5 have been omitted
since the items are either inapplicable or the
answer is negative
Item 6. Exhibits and Reports on Form 8-K 14
-1-
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 19, 2002 December 25, 2001
-------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 102,046 $ 82,919
Inventories 12,316 12,466
Other current assets 6,637 8,302
--------- ---------
Total current assets 120,999 103,687
Property and equipment 524,660 526,371
Less accumulated depreciation and amortization (161,863) (156,488)
--------- ---------
362,797 369,883
Other assets:
Deferred income taxes 20,453 9,253
Intangible and other assets, net 32,289 32,206
--------- ---------
Total assets $ 536,538 $ 515,029
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,488 $ 16,516
Other current liabilities 37,642 38,887
--------- ---------
Total current liabilities 52,130 55,403
Long term liabilities, principally defered compensation obligations 7,612 5,187
Stockholders' equity:
Preferred stock -- --
Common stock 243 240
Additional paid-in capital 235,368 205,982
Retained earnings 254,215 261,660
Accumulated other comprehensive loss (13,030) (13,443)
--------- ---------
Total stockholders' equity 476,796 454,439
--------- ---------
Total liabilities and stockholders' equity $ 536,538 $ 515,029
========= =========
See accompanying notes.
-2-
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Operations
(In thousands, except for per share amounts)
(Unaudited)
For the twelve weeks ended
--------------------------
March 19, 2002 March 20, 2001
-------------- --------------
Net sales $ 148,808 $ 143,753
Costs and expenses:
Costs of sales 48,830 49,703
Restaurant operating expenses 64,103 67,904
Depreciation and amortization 5,998 6,455
--------- --------
Restaurant costs and expenses 118,931 124,062
--------- --------
Restaurant operating income 29,877 19,691
General and administrative expenses 9,246 9,158
Non-cash stock compensation expense 26,197 --
--------- --------
Income (loss) from operations (5,566) 10,533
Other income, net 383 1,699
--------- --------
Income (loss) before income taxes and cumulative effect of
accounting change (5,183) 12,232
Provision (benefit) for income taxes (1,675) 3,992
--------- --------
Income (loss) before cumulative effect of accounting change (3,508) 8,240
Cumulative effect of accounting change, net of tax (318) --
--------- --------
Net income (loss) $ (3,826) $ 8,240
========= ========
Basic earnings (loss) per share:
Income (loss) before cumulative effect of accounting change $ (0.15) $ 0.34
Cumulative effect of accounting change (0.01) --
--------- --------
Basic earnings (loss) per share $ (0.16) $ 0.34
========= ========
Diluted earnings (loss) per share:
Income (loss) before cumulative effect of accounting change $ (0.15) $ 0.34
Cumulative effect of accounting change (0.01) --
--------- --------
Diluted earnings (loss) per share $ (0.16) $ 0.34
========= ========
Pro forma amounts assuming retroactive application of
accounting change:
Net income (loss) $ (3,508) $ 8,040
========= ========
Pro forma basic earnings (loss) per share $ (0.15) $ 0.33
========= ========
Pro forma diluted earnings (loss) per share $ (0.15) $ 0.33
========= ========
See accompanying notes.
-3-
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the twelve weeks ended
--------------------------
March 19, 2002 March 20, 2001
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ (3,826) $ 8,240
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 6,876 7,383
Non-cash stock compensation expense 26,197 --
Gain on sale of assets -- (1,381)
Cumulative effect of accounting change 508 --
Deferred income taxes (11,200) 62
Net change in operating assets and liabilities:
Change in operating assets 1,830 1,096
Change in operating liabilities (1,653) (1,062)
--------- ---------
Net cash provided by operating activities 18,732 14,338
Cash flows from investing activities:
Purchases of property and equipment (403) (459)
Proceeds from sale of assets 1,151 1,780
Other (28) 17
--------- ---------
Net cash provided by investing activities 720 1,338
Cash flows from financing activities:
Net proceeds from issuance of common stock 3,193 12
Common stock repurchased and retired -- (2,265)
Cash dividends (3,619) (3,004)
--------- ---------
Net cash used in financing activities (426) (5,257)
Effect of exchange rate on cash 101 5
--------- ---------
Net increase in cash and cash equivalents 19,127 10,424
Cash and cash equivalents at beginning of period 82,919 29,029
--------- ---------
Cash and cash equivalents at end of period $ 102,046 $ 39,453
========= =========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 4,773 $ 257
========= =========
See accompanying notes.
-4-
Lone Star Steakhouse & Saloon, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
1. Basis of Presentation
---------------------
The unaudited condensed consolidated financial statements include all
adjustments, consisting of normal, recurring accruals, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for the periods presented. The results for the twelve
weeks ended March 19, 2002 are not necessarily indicative of the results to be
expected for the full year ending December 31, 2002. This quarterly report on
Form 10-Q should be read in conjunction with the Company's audited consolidated
financial statements in its annual report on Form 10-K for the year ended
December 25, 2001.
Certain amounts for the prior year have been reclassified to conform with
the current year's presentation.
2. Comprehensive Income
--------------------
Comprehensive income (loss) is comprised of the following:
For the twelve weeks ended
--------------------------
March 19, 2002 March 20, 2001
-------------- --------------
Net income (loss) $(3,826) $8,240
Foreign currency translation adjustments 413 (1,903)
------- ------
Comprehensive income (loss) $(3,413) $6,337
======= ======
3. Earnings Per Share
------------------
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding. For purposes of diluted
computations, the number of shares that would be issued from the exercise of
stock options has been reduced by the number of shares which could have been
purchased from the proceeds at the average market price of the Company's stock
or price of the Company's stock on the exercise date if options were exercised
during the period presented.
The weighted average shares outstanding for the periods presented are as
follows (in thousands):
For the twelve weeks ended
--------------------------
March 19, 2002 March 20, 2001
-------------- --------------
Basic average shares outstanding 24,198 24,033
Diluted average shares outstanding 24,198(a) 24,435
(a) Basic and diluted shares outstanding are the same for the twelve-week period
ended March 19, 2002, since the diluted share computations would be
antidilutive.
-5-
4. Long - Term Revolver
--------------------
The Company has a credit facility pursuant to an unsecured revolving
credit agreement with a group of banks led by SunTrust Bank. The credit facility
allows the Company to borrow up to $50,000. The commitment terminates at June
30, 2004; however, it is subject to acceleration in the event of a change of
control of the Company as that term is defined in the credit agreement. At the
time of each borrowing, the Company may elect to pay interest at either SunTrust
Bank's published prime rate or a rate determined by reference to the Adjusted
LIBOR rate. The Company is required to achieve certain financial ratios and to
maintain certain net worth amounts as defined in the credit agreement. The
Company is required to pay on a quarterly basis a facility fee equal to .25% per
annum on the daily unused amount of the credit facility. At March 19, 2002 and
on December 25, 2001, there were no borrowings outstanding pursuant to the
credit facility.
The Company also has entered into a $5,000 revolving term loan agreement
with a bank, under which no borrowings were outstanding at March 19, 2002 and on
December 25, 2001. The loan commitment matures in August 2004 and requires
interest only payments through April 2003, at which time the loan will convert
to a term note with monthly principal and interest payments sufficient to
amortize the loan over its remaining term. The interest rate is at .50% below
the daily prime rate as published in the Wall Street Journal. In addition, the
Company pays a facility fee of .25% per annum on the daily unused portion of the
credit facility.
5. Treasury Stock Transactions
---------------------------
The Board of Directors has from time to time authorized the Company to
purchase shares of the Company's common stock in the open market or in privately
negotiated transactions. The Company made no purchases of its common stock
during the twelve weeks ended March 19, 2002, and purchased 245,700 shares of
its common stock during the twelve weeks ended March 20, 2001, at an average
price of $9.22 per share. The Company is accounting for the purchases using the
constructive retirement method of accounting wherein the aggregate par value of
the stock is charged to the common stock account and the excess of cost over par
value is charged to paid-in capital.
6. Stock Based Compensation
------------------------
Financial Accounting Standards Board (FASB) Interpretation No. 44 (FIN
44), Accounting for Certain Transactions Involving Stock Compensation, an
Interpretation of APB No. 25, became effective July 1, 2000. FIN 44 requires,
among other things, that stock options, which have been modified after December
15, 1998 to reduce the exercise price, be accounted for as variable. Under
variable plan accounting, compensation expense is adjusted for increases or
decreases in the fair market value of the Company's common stock based upon the
changes in the common stock price from the value of $10.125 per share which was
the initial base period fair value used to measure the non-cash stock
compensation charge or benefit for variable options outstanding at July 1, 2000.
Variable plan accounting is applied to the modified awards until the options are
exercised, forfeited or expire unexercised. The Company repriced options in
fiscal 1999 and 2000, which are subject to the accounting provisions of FIN 44,
and at March 19, 2002, outstanding options to purchase approximately 4,543,000
shares were affected by this accounting requirement. As a result of the
application of FIN 44, the Company recorded non-cash stock compensation expense
of $26,197 for the twelve weeks ended March 19, 2002 and none for the twelve
weeks ended March 20, 2001. In future periods, the Company will record an
additional non-cash charge or benefit related to the repriced options then
outstanding based upon the change in the Company's common stock price as
-6-
compared to the last reporting period. If the Company's common stock price at
the beginning and end of any reporting period is less than $10.125, no charge or
benefit will be reflected.
7. Accounting Changes
------------------
In June 2001, the FASB issued Statement of Financial Accounts Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets, requiring that goodwill
and intangible assets deemed to have indefinite lives will no longer be
amortized, but will be subject to annual impairment tests in accordance with
SFAS No. 142. The Company adopted the provisions of SFAS No. 142 in its
financial statements as required effective December 26, 2001. The effect of the
application of the non-amortization rules on accounting for goodwill and other
intangible assets was to increase net income for the twelve weeks ended March
19, 2002 by $200 or $0.01 per share. In addition, the Company completed the
measurement tests for measurement of impairment loss for both goodwill and
indefinite lived intangible assets, which resulted in a charge for the
cumulative effect of an accounting change of $318 or $0.01 per share, net of
income taxes of $190 to reflect impairment of certain goodwill related to its
Australian investments.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and resolves significant implementation issues that had
evolved since the issuance of SFAS No. 121. SFAS No. 144 also establishes a
single accounting model for long-lived assets to be disposed of by sale. The
Company adopted SFAS No. 144 effective December 26, 2001. Adoption of SFAS No.
144 did not have a significant impact on the Company's consolidated results of
operations or financial position.
8. Dividend Declaration
--------------------
The Board of Directors declared the Company's quarterly cash dividend of
$.15 per share payable April 24, 2002 to stockholders of record on April 10,
2002.
9. Letter of Intent for Sale and Merger of the Company
---------------------------------------------------
The Company has entered into a non-binding Letter of Intent with Bruckmann,
Rosser, Sherrill & Co., Inc, (Buyer) with respect to the proposed
acquisition of all of the outstanding shares of common stock of the Company for
$20.50 per share. The Letter of Intent was unanimously approved by the Board of
Directors of the Company. The Letter of Intent granted the Buyer a 30-day
exclusivity period to negotiate and sign a definitive agreement which expired on
April 27, 2002, and which was subsequently extended to May 4, 2002. The
transaction is subject to a number of conditions, including confirmatory due
diligence, receipt of proceeds from sale and leaseback transactions and debt
financing, as well as various regulatory and corporate approvals, including the
approval of the Company's shareholders.
There can be no assurance that a definitive agreement will be entered into
or that any such transaction will be consummated.
-7-
Lone Star Steakhouse & Saloon, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements including the notes thereto
included elsewhere in this Form 10-Q.
In May 1998, the Company temporarily suspended development of Lone Star
restaurants other than properties which had been committed for or were under
construction. The Company opened one restaurant in 1999, one in 2000 and eleven
in fiscal 2001.
In addition, the Company owns two sites that are available for future
development. There were 249 operating domestic Lone Star restaurants as of March
19, 2002. In addition, a licensee operates three Lone Star restaurants in
California. The Company closed one domestic Lone Star restaurant in February
2002, and a domestic Lone Star restaurant was destroyed by fire in March 2002.
The Company currently operates five Del Frisco's restaurants. In addition,
a licensee operates one Del Frisco's restaurant. The Company currently operates
fifteen Sullivan's restaurants.
Internationally, the Company currently operates 25 Lone Star Steakhouse
& Saloon restaurants in Australia and a licensee operates one restaurant in
Guam. The Company closed five restaurants in Australia in January 2001 and one
additional Australian restaurant in December 2001.
-8-
Lone Star Steakhouse & Saloon, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth for the periods indicated (i) the
percentages which certain items included in the condensed consolidated statement
of operations bear to net sales, and (ii) other selected operating data:
Twelve Weeks Ended (1)
----------------------
March 19, 2002 March 20, 2001
-------------- --------------
(dollars in thousands)
Statement of Operations Data:
Net sales ............................................. 100.0% 100.0%
Costs and expenses:
Costs of sales .................................. 32.8 34.6
Restaurant operating expenses ................... 43.1 47.2
Depreciation and amortization ................... 4.0 4.5
---- ----
Restaurant costs and expenses .............. 79.9 86.3
---- ----
Restaurant operating income ........................... 20.1 13.7
General and administrative expenses ................... 6.2 6.4
Non-cash stock compensation expense .................. 17.6 --
---- ----
Income (loss) from operations ......................... (3.7) 7.3
Other income, net ..................................... 0.2 1.2
---- ----
Income (loss) before income taxes and cumulative effect
of accounting change ................................ (3.5) 8.5
Provision (benefit) for income taxes .................. (1.1) 2.8
---- ----
Income (loss) before cumulative effect of accounting
change .............................................. (2.4) 5.7
Cumulative effect of accounting change ................ (0.2) --
---- ----
Net income (loss) ..................................... (2.6)% 5.7%
==== ====
Restaurant Operating Data:
Average sales per restaurant on an annualized basis (2) $2,173 $2,149
Number of restaurants at end of the period 294 289
(1) The Company operates on a fifty-two or fifty-three week fiscal year ending
the last Tuesday in December. The fiscal quarters for the Company consist
of accounting periods of twelve, twelve, twelve and sixteen or seventeen
weeks, respectively.
(2) Average sales per restaurant on an annualized basis are computed by
dividing a restaurant's total sales for full accounting periods open
during the reporting period, and annualizing the result.
-9-
LONE STAR STEAKHOUSE & SALOON, INC.
Twelve weeks ended March 19, 2002 compared to Twelve weeks ended March 20, 2001
(Dollar amounts in thousands, except per share amounts)
Net sales increased $5,055 or 3.5% to $148,808 for the twelve weeks ended
March 19, 2002, compared to $143,753 for the twelve weeks ended March 20, 2001.
The increase was principally attributable to incremental sales of $4,715 from
nine new domestic Lone Star restaurants opened since March 2001. Same store
sales increased 0.6% compared with the comparable prior year period.
Costs of sales, primarily food and beverages, decreased as a percentage of
net sales to 32.8% from 34.6% due primarily to a decrease in beef costs. The
decrease was partially offset by the impact of promotional pricing from the
Company's direct mail campaigns initiated late in the second quarter of fiscal
2001.
Restaurant operating expenses for the twelve weeks ended March 19, 2002
decreased $3,801 to $64,103 for the twelve weeks ended March 19, 2002 compared
to $67,904 in the comparable prior period, but decreased as a percentage of net
sales from 47.2% to 43.1%. The decrease is attributable to improved labor costs
resulting both from increased sales volumes and improved labor controls,
decreases in broadcast media costs, decreases in pre-opening expenses and
decreases in natural gas costs. The decrease in restaurant operating expenses
was partially offset by increased costs for print media advertising costs, and
certain insurance costs.
Depreciation and amortization decreased $457 for the twelve weeks ended
March 19, 2002 compared with the comparable period. The decrease is attributable
primarily to the impact of the non-amortization rules on accounting for goodwill
and certain other intangibles.
General and administrative expenses increased $88 for the twelve weeks
ended March 19, 2002 compared to the comparable period. The increase is due
primarily to increased costs in legal and professional fees and increased costs
for directors and officers liability insurance. The increases were largely
offset by reductions in consulting costs related to information technology and
by decreases in travel and recruiting expenses.
Non-cash stock compensation expense for the twelve weeks ended March 19,
2002 was $26,197. Financial Accounting Standards Board Interpretation No. 44
(FIN 44), "Accounting for Certain Transactions Involving Stock Compensation, an
Interpretation of APB No. 25" became effective July 1, 2000. FIN 44 requires,
among other things, that stock options, which have been modified after December
15, 1998 to reduce the exercise price, be accounted for as variable. Under
variable plan accounting, compensation expense is adjusted for increases or
decreases in the fair market value of the Company's common stock based upon the
changes in the common stock price from the value of $10.125 per share at July 1,
2000, which was the initial base period fair value used to measure the non-cash
stock compensation charge or benefit. Variable plan accounting is applied to the
modified awards until the options are exercised, forfeited or expire
unexercised. The Company repriced options in fiscal 1999 and 2000, which are
subject to the accounting provisions of FIN 44, and at March 20, 2002,
outstanding options to purchase approximately 4,543,000 shares were affected by
this accounting requirement. In each subsequent period, the Company will record
an additional non-cash expense or benefit related to the repriced options then
outstanding based upon the change in the Company's common stock price as
compared to the price at the beginning of the last reporting period.
Other income, net for the twelve weeks ended March 20, 2002 was $383
compared to $1,699 for the comparable period. The decrease is primarily
attributable to a decrease in gain on sale of assets.
The effective income tax rates for the twelve weeks ended March 20, 2002
and March 19, 2001 were 32.3% and 32.6% respectively.
The cumulative effect of accounting change reflects the effect of adoption
of the provision of SFAS No. 142, "Goodwill and Other Intangible Assets." The
-10-
Company adopted the provisions of SFAS No. 142 effective December 26, 2001. The
cumulative effect of the change in accounting resulted in a one-time charge of
$318, net of income taxes to reflect the impairment of goodwill related to its
Australia operations (see Note 7 to the Notes to Condensed Consolidated
Financial Statements for additional information.)
-11-
Impact of inflation
The primary inflationary factors affecting the Company's operations
include food and labor costs. A number of the Company's restaurant personnel are
paid at the federal and state established minimum wage levels and, accordingly,
changes in such wage levels affect the Company's labor costs. However, since the
majority of personnel are tipped employees, minimum wage changes will have
little effect on overall labor costs. During the first quarter of fiscal 2001,
the Company experienced significant increases in utility costs, particularly
natural gas. Historically as costs of food, labor, and most recently utility
costs have increased, the Company has been able to offset these increases
through menu price increases and economies of scale; however, there may be
delays in the implementation of such menu price increases or in effecting timely
economies of scale, as well as competitive pressures which may limit the
Company's ability to recover any cost increases in its entirety. To date,
inflation has not had a material impact on operating margins.
Liquidity and Capital Resources
The following table presents a summary of the Company's cash flows for
each of the twelve weeks ended March 19, 2002 and March 20, 2001 (in thousands):
Twelve weeks ended
------------------
March 19, 2002 March 20, 2001
-------------- --------------
Net cash provided by operating activities...... $ 18,732 $ 14,338
Net cash provided by investment activities..... 720 1,338
Net cash used in financing activities ......... (426) (5,257)
Effect of exchange rate on cash ............... 101 5
-------- --------
Net increase in cash .......................... $ 19,127 $ 10,424
======== ========
During the twelve week period ended March 19, 2002, the Company's
investment in property and equipment was $403 compared to $459 for the same
period in 2001. In the twelve week period ended March 19, 2002, the Company
received $1,151 in proceeds from the sale of assets compared to $1,780 in fiscal
2001.
The Company does not have significant receivables or inventory.
At March 19, 2002, the Company had $102,046 in cash and cash equivalents.
The Company has available $55,000 in unsecured revolving credit facilities. At
March 19, 2002, the Company has no outstanding borrowings. See Note 4 to the
Notes to Condensed Consolidated Financial Statements in the Form 10-Q for a
further description of the Company's credit facilities.
The Company's Board of Directors has authorized the purchase of shares of
the Company's common stock from time to time in the open market or in privately
negotiated transactions. During the twelve weeks ended March 19, 2002, the
Company did not purchase any common stock and in the twelve week period ended
March 20, 2001 purchased 245,700 shares at a cost of $2,265.
The Company has paid quarterly cash dividends on its common stock since
the second quarter of fiscal 2000. In January 2002, the Company increased its
quarterly cash dividend from $.125 to $.15 per share. During the twelve weeks
ended March 19, 2002, the Company paid out dividends of $3,619 or $.15 per share
as compared to $3,004 or $.125 per share in fiscal 2001.
The Company from time to time may utilize derivative financial instruments
in the form of live beef cattle futures contracts to manage market risks and
reduce its exposure resulting from fluctuations in the price of meat. Realized
-12-
and unrealized changes in the fair values of the derivative instruments are
recognized in income in the period in which the change occurs. Realized and
unrealized gains and losses for the period were not significant. As of March 19,
2002, the Company had no positions in futures contracts.
As described in Note 6 to the Notes to the Condensed Consolidated
Financial Statements, the Company has options outstanding to purchase
approximately 4,543,000 shares subject to variable plan accounting. The Company
may incur significant volatility in reporting earnings in future periods as
fluctuations in market prices of its common stock may greatly impact reported
non-cash compensation expenses on a periodic basis.
As previously reported, the Company engaged UBS Warburg to advise the Board
of Directors on strategic alternatives for enhancing stockholder value. As a
result of those efforts, the Company has entered into a non-binding Letter of
Intent with Bruckmann, Rosser, Sherrill & Co., Inc. (Buyer) with respect to
the proposed acquisition of all of the outstanding shares of common stock of the
Company for $20.50 per share. The Letter of Intent was unanimously approved by
the Board of Directors of the Company. The Letter of Intent granted the buyer a
30-day exclusivity period to negotiate and sign a definitive agreement which
expired on April 27, 2002, and which was subsequently extended to May 4, 2002.
The transaction is subject to a number of conditions, including confirmatory due
diligence, receipt of proceeds from sale and leaseback transactions and debt
financing, as well as various regulatory and corporate approvals, including the
approval of the Company's shareholders.
There can be no assurance that a definitive agreement will be entered into
or that any such transaction will be consummated.
Forward looking statements
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Stockholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to open new restaurants, general market
conditions, the ability to consummate the Letter of Intent, competition and
pricing and other risks set forth in the Company's Annual Report on Form 10-K
for the fiscal year ended December 25, 2001. Although the Company believes the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements contained in the report will
prove to be accurate.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
-----------------------------------------------------------
The Company's exposure to market risks was not significant during
the twelve weeks ended March 19, 2002.
-13-
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Reports on Form 8-K - None
-14-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Lone Star Steakhouse & Saloon, Inc.
(Registrant)
Date May 3, 2002 /s/ Randall H. Pierce
-------------------------------------
Randall H. Pierce
Chief Financial Officer