WICHITA, Kan., July 7, 2003 (PRIMEZONE) -- Lone Star Steakhouse & Saloon, Inc. (Nasdaq:STAR) ("Lone Star" or "Company") announced preliminary unaudited operating results for the twelve week second quarter ended June 17, 2003.
Income from continuing operations for the second quarter was $7,082,000 or $.34 per share ($.30 diluted) up from $6,202,000 or $.25 per share ($.22 diluted) last year. Year-to-date net income from continuing operations was $15,812,000 or $.76 per share ($.66 diluted) down from $18,922,000 or $.77 per share ($.67 diluted) last year.
Net income for the second quarter was $7,628,000 or $.37 per share ($.32 diluted) up 25.9% from $6,057,000 or $.24 per share ($.21 diluted) last year. Year-to-date net income was $16,358,000 or $.78 per share ($.68 diluted) down from $18,250,000 or $.75 per share ($.65 diluted) in 2002. Income from discontinued operations in the second quarter was primarily from the gain on sale of closed restaurant properties.
Included in income from continuing operations for both the second quarter of fiscal 2003 and 2002 was non-cash stock compensation of $733,000 and $753,000, respectively, which net of applicable income taxes, had the effect of reducing net income by $233,000 and $611,000, respectively. The year-to-date net effect of non-cash stock compensation was $430,000 in 2003 and $965,000 in 2002. Included in income from continuing operations for the 2002 second quarter and year-to-date periods was a pre-tax charge of $2,967,000 for abandoned merger expense, which resulted in an after-tax reduction in net income of $1,854,000.
Revenue from continuing operations increased 3.3% to $143,673,000 from $139,118,000 for the quarter and year-to-date increased 0.4% to $288,151,000 from $287,026,000 last year. Revenue and comparable store sales for the second quarter increased by approximately $1,800,000 due to the inclusion of Father's Day sales in 2003. In 2002, Father's Day was in the Company's fiscal third quarter.
Second quarter comparable store sales growth was 2.2% for domestic Lone Star Steakhouse & Saloon restaurants, 7.5% for Sullivan's Steakhouse restaurants and 6.7% for Del Frisco's Double Eagle Steak House restaurants bringing year-to-date comparable store sales increase (decline) to (0.4)%, 3.2%, and 5.0%, respectively. Del Frisco's comparable sales growth continues to be driven by increased sales in the New York restaurant. Excluding New York, Del Frisco's comparable store sales were (2.3)% for the quarter and (5.2)% year-to-date. Australian comparable store sales were (2.0)% for the quarter and (3.2)% year-to-date.
Lone Star's Chief Executive Officer, Jamie Coulter, stated, "Beef prices have increased significantly compared to early 2002. Although our beef costs normally reach their seasonal peak in the second quarter, this year's costs were impacted by the supply disruption brought on by the Canadian import ban. Taking that supply out of the market during a high demand season had a magnifying effect. We cannot predict how long this will impact us, but we still believe that our market-based purchasing of beef produces the lowest cost over time.
"On the marketing front, we have an exciting new product promotion beginning mid-July that we believe will help drive sales and improve margins.
"The permitting process for our remodel testing has taken longer than initially planned, however, we anticipate that construction will begin on five Lone Star restaurants during the third quarter and believe that this initial test will provide the results needed to launch a full scale remodeling effort throughout the Company. Construction on two new prototype units will also begin soon.
"We are proud to announce that Mark Mednansky, formerly Director of Upscale Restaurants, has been promoted to Vice President of Operations for Sullivan's/Del Frisco's concepts. Bill Pintner, formerly a Regional Manager for Lone Star Restaurants, has been promoted to Vice President of Operations for the Lone Star concept. These gentlemen have extensive experience both prior to and since joining the Company and are strong leaders."
During the quarter, the Company spent $18,454,000 to repurchase 891,000 shares of common stock. The current repurchase authorization has 191,000 shares remaining.
In December 2002, the FASB issued SFAS No. 148 Accounting for Stock Based Compensation Transition and Disclosure, an amendment of SFAS No. 123. Accordingly, effective with the first quarter of fiscal 2002, the Company changed its method of accounting as the Company adopted the fair value recognition provision of SFAS No. 123 for employee stock based compensation. The Company now values stock options based upon an option pricing model and recognizes their value as an expense over the period in which options vest. The Company elected to apply the retroactive restatement method as provided in SFAS No. 148 and as a result all prior periods presented have been restated to reflect the compensation expense that would have been recognized had SFAS No. 123 been applied to all awards granted to employees after January 1, 1995. The effect of this change was to increase net income for the 2002 second quarter $3,373,000 and $19,392,000 for the 2002 year-to-date period.
In addition, during the first quarter of fiscal 2002, the Company adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets requiring that goodwill and intangible assets deemed to have indefinite lives will no longer be amortized. The application of the impairment provisions resulted in a charge for the cumulative effect of an accounting change $318,000 or $.01 per share, net of income taxes of $190,000, to reflect impairment of certain goodwill related to Australian investments.
During 2002, the Company adopted SFAS No. 144 as required, and as a result, the operations of certain restaurants have been reclassified to income or loss from discontinued operations on a historical basis.
On July 3, 2003, Lone Star Steakhouse & Saloon, Inc. announced that the Board of Directors declared the Company's quarterly cash dividend of $.165 per share payable July 28, 2003 to shareholders of record on July 14, 2003.
For interested parties, there will be a conference call with management at 9:00 AM Central Time on Tuesday, July 8, 2003 to discuss this second quarter earnings release. The call in number is (719)-457-2657 and the confirmation code is 195444. A recorded replay of the conference call will be available from 12:00 PM on July 8, 2003 thru midnight July 22, 2003. The replay call in number is (719)-457-0820 and the confirmation code is 195444. A listen only connection to the conference call, as well as the replay, will be available on the internet through the Company's website, www.lonestarsteakhouse.com.
Lone Star owns and operates 249 domestic and 20 international Lone Star Steakhouse & Saloon restaurants; 15 Sullivan's Steakhouse restaurants; five Del Frisco's Double Eagle Steak House restaurants and one Frankie's Italian Grille restaurant. Licensees operate three domestic and one international Lone Star restaurants, and one domestic Del Frisco's Double Eagle Steak House restaurant.
This press release 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. Although the Company believes the assumptions underlying the forward-looking statements contained herein, including 2003 operating performance, and comparable sales of the Company, are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements contained in the press release will prove to be accurate.
Lone Star Steakhouse & Saloon, Inc. Preliminary Unaudited Summary Financial Data for the Second Quarter 2003 (In thousands except for per share amounts) June 17, Dec. 31, 2003 2002 ----------- ----------- Current Assets: Cash and cash equivalents $ 74,293 $ 65,369 Other current assets 22,700 21,702 ---------- ---------- 96,993 87,071 Property and equipment, net 329,114 338,735 Intangibles and other assets 50,926 47,507 ---------- ---------- $ 477,033 $ 473,313 ---------- ---------- ---------- ---------- Current liabilities $ 43,627 $ 42,496 Noncurrent liabilities 16,152 11,058 Stockholders' equity 417,254 419,759 ---------- ---------- $ 477,033 $ 473,313 ---------- ---------- ---------- ---------- For the second quarter ended ---------------------------- June 17, 2003 June 11, 2002(A) -------------- --------------- 12 Weeks 12 Weeks -------- -------- $ % $ % -------- ----- -------- ----- Net Sales $143,673 $139,118 Costs and expenses: Costs of sales 50,131 34.9 45,719 32.9 Restaurant operating expenses 66,883 46.6 63,278 45.5 Depreciation and amortization 5,000 3.5 5,901 4.2 -------- ---- -------- ---- Restaurant costs and expenses 122,014 85.0 114,898 82.6 -------- ---- -------- ---- Restaurant operating income 21,659 15.0 24,220 17.4 General and administrative expenses 11,322 7.9 13,930 10.0 Non-cash stock-based compensation 733 0.5 753 0.5 -------- ---- ------- ---- Income from operations 9,604 6.6 9,537 6.9 Other income 357 0.3 264 0.2 -------- ---- ------- ---- Income -- continuing -- before income taxes 9,961 6.9 9,801 7.1 Provision for income taxes 2,879 2.0 3,599 2.6 -------- ---- ------- ---- Income -- continuing operations 7,082 4.9 6,202 4.5 Income (loss) from discontinued operations -- Net of tax 546 0.4 (145) (0.1) Cumulative effect of accounting change -------- ---- ------- ---- Net income $ 7,628 5.3 $ 6,057 4.4 -------- ---- ------- ---- -------- ---- ------- ---- Basic income per share: Continuing operations $0.34 $0.25 Discontinued operations 0.03 (0.01) Cumulative effect of accounting change -------- ------- Basic income per share $0.37 $0.24 -------- ------- -------- ------- Diluted income per share: Continuing operations $0.30 $0.22 Discontinued operations 0.02 (0.01) Cumulative effect of accounting change -------- ------- Diluted income per share $0.32 $0.21 -------- ------- -------- ------- Average shares outstanding -- Basic 20,717 24,747 Average shares outstanding -- Diluted 23,740 28,472 Restaurants included at end of period 290 295 Comparable sales growth 2.9% 0.7% For the two quarters ended -------------------------- June 17, 2003 June 11, 2002(A) -------------- --------------- 24 Weeks 24 Weeks -------- -------- $ % $ % -------- ---- -------- ---- Net Sales $288,151 $287,026 Costs and expenses: Costs of sales 99,368 34.5 93,736 32.7 Restaurant operating expenses 133,244 46.2 126,351 44.0 Depreciation and amortization 10,287 3.6 11,794 4.1 -------- ---- -------- ---- Restaurant costs and expenses 242,899 84.3 231,881 80.8 -------- ---- -------- ---- Restaurant operating income 45,252 15.7 55,145 19.2 General and administrative expenses 21,368 7.4 23,896 8.3 Non-cash stock-based compensation 1,126 0.4 1,562 0.5 -------- ---- -------- ---- Income from operations 22,758 7.9 29,687 10.4 Other income 475 0.2 646 0.2 -------- ---- -------- ---- Income -- continuing -- before Income taxes 23,233 8.1 30,333 10.6 Provision for income taxes 7,421 2.6 11,411 4.0 -------- ---- -------- ---- Income -- continuing operation 15,812 5.5 18,922 6.6 Income (loss) from discontinued operations -- Net of tax 546 0.2 (354) (0.1) Cumulative effect of accounting change (318) (0.1) -------- ---- ------- ---- Net income $ 16,358 5.7 $18,250 6.4 -------- ---- ------- ---- -------- ---- ------- ---- Basic income per share: Continuing operations $0.76 $0.77 Discontinued operations 0.03 (0.01) Cumulative effect of accounting change (0.01) -------- ------- Basic income per share $0.78 $0.75 -------- ------- -------- ------- Diluted income per share: Continuing operations $0.66 $0.67 Discontinued operations 0.02 (0.01) Cumulative effect of accounting change (0.01) -------- ------- Diluted income per share $0.68 $0.65 -------- ------- -------- ------- Average shares outstanding -- Basic 20,888 24,473 Average shares outstanding -- Diluted 23,959 28,048 Restaurants included at end of period 290 295 Comparable sales growth 0.2% 0.6% (A) Information for the periods ended June 11, 2002 have been restated to reflect the change in accounting for stock-based compensation as previously described.