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The Steak N Shake Company Reports Fiscal Fourth Quarter 2007 Results

Posted on: Thursday, 15 November 2007, 18:00 CST

INDIANAPOLIS, Nov. 15 /PRNewswire-FirstCall/ -- The Steak n Shake Company today announced its revenues and earnings for the fourth quarter 2007 ended September 26, 2007.

(Logo: http://www.newscom.com/cgi-bin/prnh/20000606/STEAKLOGO ) Highlights of the fiscal fourth quarter include: -- Total revenues of $151.1 million compared to $152.0 million in 2006 -- Diluted earnings per share of $0.05 after $0.02 per share charge for non-operating expenses -- Same store sales for Company-owned stores declined 3.9% Highlights for fiscal 2007 include: -- Total revenues increased 2.4% to $654.1 million -- Same store sales for Company-owned stores declined 3.8% -- Completed the opening of 16 new Company owned and six new franchise restaurants Fiscal Fourth Quarter 2007 Results

Total revenues for the 2007 fiscal fourth quarter were $151.1 million compared to $152.0 in the same quarter last year. During the fourth quarter, same store sales declined by 3.9% as guest traffic was impacted by store level execution and the continuing challenges facing consumers related to various housing issues and rising consumer costs.

Net earnings for the 2007 fiscal fourth quarter were $1.5 million, or $0.05 per diluted share, compared to $7.5 million, or $0.27 per diluted share in the prior year. During the 2007 fiscal fourth quarter a $1.1 million pre- tax charge ($0.7 million, or $0.02 per share net of tax) was recorded for non- operating expenses related to evolution of the organization. In addition, earnings for the quarter were also impacted by higher commodity costs and minimum wage increases, partially offset by a favorable effective tax rate.

Fiscal 2007 Full Year Results

For the fiscal year 2007, total revenues increased 2.4% to $654.1 million compared to $638.8 million in the prior year. Same store sales decreased 3.8% for Company-owned units during fiscal 2007. Diluted earnings per share were $0.42 versus $1.00 in the prior year. Net earnings were $11.8 million, including $1.9 million of pre tax, non-operating expenses related to evolution of the organization and a $5.4 million pre tax, non-cash impairment charge related primarily to 14 underperforming restaurants. Diluted earnings per share includes a $0.04 per share impact of non-operating expenses and $0.12 per share of non-cash impairment charges.

Alan Gilman, Acting Chief Executive Officer and Chairman commented, "Fiscal 2007 was a very challenging year for the Steak n Shake Company related primarily to issues of store level brand execution, compounded by a difficult on-going consumer environment. We are clearly disappointed with the operating results and are working with a sense of urgency to address these business challenges. As we begin fiscal 2008, the management team is focused on simplifying business initiatives, intensifying the focus on field leadership and store level execution, as well as critically reviewing the Company's cost structure"

"The Company expects a difficult cost environment in fiscal 2008, including rapidly rising commodity costs, especially dairy, as well as the incremental annual impact of minimum wage increases. We are attempting to aggressively manage through this cost environment with prudent price increases, labor management efficiencies and supply chain cost savings initiatives. In addition, during the fourth quarter we took actions that will lower net general & administrative expenses for fiscal 2008 by approximately $8.1 million, reflecting our initiatives focused on store level execution."

Mr. Gilman concluded, "Despite the current challenging operating environment, we remain confident about the future of this great brand as we intensify our focus on improving store level execution and its role in delighting our loyal customers. While this important work takes time, it is fundamental to the future success of Steak n Shake."

Fiscal 2008 Guidance

The Company is issuing 2008 full year fiscal diluted earnings per share guidance ranging from $0.32 to $0.42. This guidance is based on annual same store sales of down 1.0% to 5.0%, given the continued difficult operating environment and the resulting impact on same stores sales performance. The Company expects that same store sales will improve throughout the year with the first quarter reflecting the current challenging business environment and the impact of an incremental coupon value event in fiscal 2007 that was not repeated in the current year, partially offset by a November fiscal 2008 price increase.

The Company anticipates opening approximately nine Company-owned and six franchised stores during fiscal 2008. The Company will also rebuild two older units and remodel four to six units utilizing an updated restaurant design which adds the historic winged logo to the building exterior. The updated design will be used for new unit construction beginning in fiscal 2009. As of September 26, 2007, there were 491 Steak n Shake restaurants operating in 21 states, including 435 Company-owned restaurants and 56 franchised units.

As previously announced during August, the Company appointed a Special Committee of independent directors to examine all potential strategic opportunities to increase shareholder value. The Special Committee continues to work with Merrill Lynch & Co. which was retained as its financial advisor. The work of this Committee is on-going and any future decisions that may arise from this work will be shared at the appropriate time.

Investor Conference Call and Webcast

The Steak n Shake Company will broadcast its investor conference call live over the Internet at 5:00 p.m. Eastern Time, 4:00 p.m. Central Time today. Hosting the call will be Alan B. Gilman, Interim CEO and Chairman and Jeffrey A. Blade, Executive Vice President and Chief Administrative & Financial Officer. Interested investors and other parties may listen to a simultaneous webcast of the conference call by logging onto the Company's website at http://www.steaknshake.com/. The on-line replay will be available for a limited time immediately following the call.

The call can also be accessed live over the phone by dialing (800) 289-0494, or for international callers, (913) 981-5520. A replay will be available one hour after the call and can be accessed by dialing (888) 203- 1112, or for international callers, (719) 457-0820. The passcode for the replay is 3466357. The replay will be available until November 22, 2007.

About Steak n Shake

Steak n Shake is a full service, casual dining restaurant serving a core menu of its famous STEAKBURGER(TM) sandwiches, thin 'n crispy french fries, old fashioned hand-dipped milk shakes, chili, home style soups, fresh salads, a variety of desserts and breakfast. All of the food is prepared to the guest's order and served by friendly, well-trained associates. Steak n Shake restaurants feature fullservice dining areas, counter service and drive-thru windows and are open 24 hours a day, seven days a week.

Risks Associated with Forward-Looking Statements

Certain statements contained in this press release represent forward- looking statements. 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 were made and involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements. Several factors, many beyond our control, could cause actual results to differ significantly from our expectations, such as the following: the effectiveness of our planned expansion; the poor performance or closing of even a small number of restaurants; our ability to attract and retain guests; changes in guest preferences, tastes and dietary habits; minimum wage rates; the availability and cost of qualified personnel; fluctuations in food commodity prices and the availability of food commodities; harsh weather conditions; unfavorable publicity relating to food safety or food borne illness; our ability to comply with existing and future governmental regulations; our ability to adequately protect our trademarks, service marks, and other components of our brand; and the other risks identified in the periodic reports we file with the SEC. Further, the Special Committee's evaluation of strategic alternatives may not result in a change in business strategy or an increase in shareholder value. Additional risks and uncertainties not currently known to us or that are currently deemed immaterial may also become important factors that may harm our business, financial condition, results of operations or cash flows. We assume no obligation to update forward-looking statements except as required in our periodic reports and we do not intend to comment on the status of the Special Committee's evaluation of strategic alternatives unless and until there is a material development to report.

THE STEAK N SHAKE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS TWELVE WEEKS ENDED (Amounts in $000's, 9/26/2007 9/27/2006 except share and per share data) (UNAUDITED) (UNAUDITED) Revenues Net sales $150,203 99.4% $151,105 99.4% Franchise fees 936 0.6% 919 0.6% Total revenue 151,139 100.0% 152,024 100.0% Costs and Expenses Cost of sales (1) 35,710 23.8% 33,841 22.4% Restaurant operating costs (1) 79,822 53.1% 77,068 51.0% General and administrative (2) 13,722 9.1% 11,329 7.5% Depreciation and amortization 7,557 5.0% 7,058 4.6% Marketing 6,016 4.0% 5,613 3.7% Interest 3,326 2.2% 2,948 1.9% Rent 3,349 2.2% 2,881 1.9% Pre-opening costs 362 0.2% 803 0.5% Provision for store closings 0 0.0% 0 0.0% Other income, net (553) -0.4% (689) -0.5% 149,311 98.8% 140,852 92.7% Earnings Before Income Taxes 1,828 1.2% 11,172 7.3% Income Taxes 301 0.2% 3,676 2.4% Net Earnings $1,527 1.0% $7,496 4.9% Net Earnings Per Common and Common Equivalent Share: Basic $0.05 $0.27 Diluted $0.05 $0.27 Weighted Average Shares and Equivalents: Basic 28,070,158 27,763,004 Diluted 28,216,741 28,026,831 FIFTY-TWO WEEKS ENDED (Amounts in $000's, except 9/26/2007 9/27/2006 share and per share data) (UNAUDITED) (UNAUDITED) Revenues Net sales $650,416 99.4% $634,941 99.4% Franchise fees 3,726 0.6% 3,881 0.6% Total revenue 654,142 100.0% 638,822 100.0% Costs and Expenses Cost of sales (1) 150,286 23.1% 143,360 22.6% Restaurant operating costs (1) 336,955 51.8% 319,070 50.3% General and administrative (2) 57,525 8.8% 52,949 8.3% Depreciation and amortization 32,185 4.9% 28,967 4.5% Marketing 28,644 4.4% 27,473 4.3% Interest 14,015 2.1% 11,373 1.8% Rent 13,961 2.1% 12,233 1.9% Pre-opening costs 2,689 0.4% 3,579 0.6% Provision for store closings 5,176 0.8% (103) 0.0% Other income, net (2,165) -0.3% (2,371) -0.4% 639,271 97.7% 596,530 93.4% Earnings Before Income Taxes 14,871 2.3% 42,292 6.6% Income Taxes 3,063 0.5% 14,291 2.2% Net Earnings $11,808 1.8% $28,001 4.4% Net Earnings Per Common and Common Equivalent Share: Basic $0.42 $1.01 Diluted $0.42 $1.00 Weighted Average Shares and Equivalents: Basic 28,018,014 27,723,282 Diluted 28,215,647 28,038,545 (1) Cost of sales and restaurant operating costs are expressed as a percentage of net sales. All other items are expressed as a percentage of revenues. (2) General and administrative expenses include $1,100 and $1,900 for the twelve and fifty-two weeks ended September 26, 2007, respectively related to severance, recruiting, and relocation expenses associated with the evolution of the organization and completion of major IT projects. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 9/26/2007 9/27/2006 (Amounts in $000's) (UNAUDITED) (UNAUDITED) Assets Current assets $48,197 $30,920 Property and equipment - net 492,610 490,142 Other assets 24,407 21,459 Total assets $565,214 $542,521 Liabilities and Shareholders' Equity Current liabilities $94,167 $83,083 Deferred income taxes and other long term liabilities 10,761 9,605 Obligations under capital leases 139,900 143,996 Long term debt 16,522 18,802 Shareholders' equity 303,864 287,035 Total liabilities and shareholders' equity $565,214 $542,521 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FIFTY-TWO WEEKS ENDED 9/26/2007 9/27/2006 (UNAUDITED) (UNAUDITED) (Amounts in $000's) Net cash provided by operating activities 43,431 69,578 Net cash used in investing activities (60,110) (87,314) Net cash provided by financing activities 13,356 19,493 (Decrease) Increase in Cash and Cash Equivalents (3,323) 1,757

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20000606/STEAKLOGOAP Archive: http://photoarchive.ap.org/PRN Photo Desk, photodesk@prnewswire.com

The Steak n Shake Company

CONTACT: Jeffrey A. Blade, The Steak n Shake Company, +1-317-633-4100,Jeff.blade@steaknshake.com

Web site: http://www.steaknshake.com/

Source: PRNewswire-FirstCall

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