030914 Lone Star Steakhouse & Saloon EarningsSeptember 30, 2003
Wichita, KS - Lone Star Steakhouse & Saloon, Inc. announced preliminary unaudited operating results for the twelve week third quarter ended September 9, 2003.
Revenue from continuing operations increased 1.9% to $136,394,000 from $133,798,000 for the quarter and year-to-date increased 0.9% to $424,167,000 from $420,504,000 last year.
Third quarter comparable store sales growth (decline) was (1.2%) for domestic Lone Star Steakhouse & Saloon restaurants, 9.6% for Sullivan's Steakhouse restaurants and 17.9% for Del Frisco's Double Eagle Steak House (“Del Frisco's”) restaurants bringing year-to-date comparable store sales growth (decline) to (0.7%), 5.2% and 8.8%, respectively. As previously described, the calendar shift caused by our fiscal quarters resulted in Father's Day, an extraordinary sales day for our domestic Lone Star restaurants, falling in fiscal quarter two this year as compared to fiscal quarter three last year. A calendar adjusted comparable store sales for the third quarter would reflect sales growth of 1.0% compared to the reported sales decline of 1.2% for the domestic Lone Star restaurants. 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 growth (decline) was 9.0% for the quarter and (1.1%) year-to-date. Australian comparable store sales growth (decline) was 1.2% for the quarter and (1.7%) year-to-date.
Net income for the third quarter was $3,664,000 or $.18 per share ($.15 diluted) down from $8,198,000 or $.37 per share ($.32 diluted) last year. Year-to-date net income was $20,022,000 or $.96 per share ($.84 diluted) down from $26,448,000 or $1.11 per share ($.97 diluted) in 2002. Year-to-date income from discontinued operations was $531,000, primarily from the gain on sale of closed restaurant properties.
Income from continuing operations for the third quarter was $3,668,000 or $.18 per share ($.15 diluted) down from $8,245,000 or $.37 per share ($.32 diluted) last year. Year-to-date income from continuing operations was $19,491,000 or $.94 per share ($.82 diluted) down from $27,189,000 or $1.14 per share ($1.00 diluted) last year.
Included as a charge against pre-tax income from continuing operations for both the third quarter of fiscal 2003 and 2002 was non-cash stock compensation of $75,000 and $711,000, respectively. The year- to-date expense for non-cash stock compensation was $1,201,000 in 2003 and $2,273,000 in 2002. Included in income from continuing operations for 2002 year-to-date was $2,967,000 for abandoned merger expense, which resulted in an after-tax reduction in net income of $1,854,000.
Lone Star's Chief Executive Officer, Jamie Coulter, stated, “I am very pleased with our top line results, especially for our two upscale concepts. On the Lone Star front, we launched an exciting product promotion in mid-July that we believe is driving sales and helping offset higher operating costs. We expect that remodeling will begin on five Lone Star restaurants soon and anticipate that these initial tests will provide the results necessary to formulate and launch a broad remodeling program for the entire Lone Star system.
“The cost environment remains difficult. Beef prices remain significantly higher than last year. We cannot predict how long this trend will continue, but still believe that our market-based purchasing of beef produces the lowest cost over time. Other costs that have increased significantly year-over-year include insurance, employee benefits and utilities.”
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 decrease net income for the 2002 third quarter $5,375,000 and increase net income $14,017,000 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 of $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, Accounting for the Impairment or Disposal of Long- Lived Assets, 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 September 25, 2003, the Board of Directors declared the Company's quarterly cash dividend of $.165 per share payable October 20, 2003 to shareholders of record on October 6, 2003.
Lone Star owns and operates 249 domestic and 19 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.