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 [FEE REQUIRED]
For the fiscal year ended September 27, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ____________
Commission file number 0-8445
CONSOLIDATED PRODUCTS, INC.
(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:
Name of Exchange
Title of Each Class On Which Registered
------------------- -------------------
Common Stock, par value $.50 per share 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./ /
The aggregate market value of Common Stock held by persons not "affiliated" with
the registrant, based on the closing price of the Common Stock as of December 8,
2000, was approximately $148,106,658.
The number of shares of Common Stock outstanding at December 8, 2000 was
28,992,636.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS OF FORM 10-K INTO WHICH
IDENTITY OF DOCUMENT DOCUMENT IS INCORPORATED
Registrant's Annual Report to Shareholders
for fiscal year ended September 27, 2000 Parts II and IV
The definitive Proxy Statement to be filed
with respect to the 2000 Annual Meeting of
Shareholders of Registrant Part III
PART I.
ITEM 1. BUSINESS
GENERAL
The Company is engaged primarily in the ownership, operation and franchising of
Steak n Shake restaurants through its wholly-owned subsidiary, Steak n Shake,
Inc. Founded in 1934 in Normal, Illinois, Steak n Shake is one of the oldest
restaurant chains in the country. As of September 27, 2000, Steak n Shake had
313 Company-operated restaurants and 54 franchised restaurants, located in 16
midwestern and southeastern 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. During fiscal 2000, lunch and dinner
sales accounted for approximately 36% and 44% of sales, respectively, while
breakfast and late night sales accounted for 7% and 13% of sales, respectively.
THE STEAK N SHAKE CONCEPT
Management's key concept strategies are to:
CAPITALIZE ON DISTINCT MARKET NICHE. Steak n Shake occupies a distinct niche in
the restaurant industry. The restaurants offer 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 most fast-food restaurants, all food is freshly prepared,
cooked-to-order in view of the customer and served promptly on china with
flatware and glassware by friendly wait staff. Steak n Shake's prices are
considerably less than most casual dining concepts with an average check of
approximately $5.60 per person, although the average check during the peak lunch
and dinner hours is approximately $5.55 and $5.80, respectively. The Company
believes that Steak n Shake offers more compelling value and core menu items
with a higher level of quality than competitive fast food and casual dining
chains.
FOCUS ON CORE MENU ITEMS WHILE OFFERING VARIETY. For over 66 years, Steak n
Shake's menu has featured core items, which include Steakburgers, thin and
crispy French fries and hand-dipped Milk Shakes. The Company believes that its
focus on certain menu items has allowed it to serve consistent, high quality
food, which, in turn, has built brand loyalty with its customers. Menu items are
prepared in accordance with the Company's strict specifications using high
quality ingredients such as 100% pure U.S. beef, including cuts of T-bone, strip
and sirloin steaks, in its Steakburgers. Over the years, Steak n Shake has
responded to changing customer tastes with greater menu variety without losing
its focus or customer appeal, by making carefully planned menu additions such as
chicken breast sandwiches, beef and chicken taco salads, desserts and various
homestyle soups and salads.
EMPHASIZE CUSTOMER SATISFACTION. Steak n Shake's reputation and long-standing
customer loyalty have been earned over many years by the consistent quality of
the dining experience. The success of Steak n Shake depends on its employees'
commitment to consistently exceed the customer's expectations. All restaurant
employees participate in a formal training program that focuses on enhancing
customer satisfaction and includes classroom and on-the-job instruction.
Restaurant managers are required to complete a comprehensive eight-week training
program on restaurant operating procedures, employee relations, and customer
service. In order to ensure consistent execution of the Company's standards for
service, self-stamped and addressed customer comment cards are placed in every
restaurant, and management performs periodic on-site visits and formal
inspections.
RESTAURANT DESIGN
Steak n Shake restaurants have a distinctive exterior appearance and interior
decor. The exterior design of a Steak n Shake restaurant has the individual
character of a branded logo, embracing building shape, awning detail, building
graphics and pylon signage. The interior decor is reminiscent of the nostalgic
diner era using chrome, glass, neon and tile in a contemporary manner. Food
preparation takes place in view of the customer, as reflected by Steak n Shake's
slogan, "In Sight It Must Be Right-Registered Trademark-". The kitchen area is
designed to allow for efficiency of workflow, thereby minimizing the amount of
space required.
All Steak n Shake restaurants are freestanding structures except for nine units,
of which four are part of travel centers. The majority of restaurants are
generally 3,800 square feet in area and seat approximately 100 customers while a
minimal percentage of restaurants vary in size and seat from 39 to 138
customers. The travel center units are located
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in complexes that typically include a fuel service area and a convenience store.
These units are located on interstate highways and serve both the general
traveler and truck traffic. The travel center unit exteriors and interiors are
similar to those of the freestanding units.
EXPANSION STRATEGY
Controlled growth into new trade areas has been a focus over the last five
years. For fiscal year 2000, 37 Company-operated units were opened. Due to
the increasingly tight labor market that resulted from the unprecedented low
unemployment in fiscal year 2000, the Company has experienced pressure on
staffing and wages. In the face of these challenges, the Company has shifted
its focus from new unit development to increasing same store sales,
controlling costs, and developing new initiatives in employee retention.
Accordingly, the Company now expects to open 25 to 30 Company - operated
Steak n Shake restaurants in fiscal year 2001.
The Company's controlled expansion program is based upon a market penetration
plan focused on clustering restaurants in existing or contiguous geographic
areas to capitalize on name recognition, increase customer convenience and
achieve media efficiency. The addition of Company-operated restaurants in
markets where the Company's television marketing effort has been implemented
allows the Company to leverage its advertising costs over more units and to
benefit from management efficiencies. In existing media markets, the Company's
advertising expenditures create higher levels of customer recognition and
greater market acceptance for new units. During fiscal 2000, the Company opened
its first restaurants in the Mobile and Montgomery, Alabama markets while
continuing its expansion in the Ohio, Florida and Michigan markets.
A second element of the Company's expansion is to link existing major Steak n
Shake markets by developing Steak n Shake units along the connecting interstate
highways. Since the beginning of fiscal 1995, 99 Company-operated and 26
franchised restaurants have been opened at locations along interstate highways.
Franchising is another element of the Company's expansion program. The Company's
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 its continuing planning process, management reviews the
relationship of the number of Company-operated to franchised restaurants and the
selection of areas for development by the Company and by franchisees. The
Company's expansion plan contemplates the controlled addition of franchised
restaurants with the current franchisees. See "Franchising."
SITE SELECTION
Management believes the site selection process is critical to the success of its
restaurants, and senior management devotes significant time and resources in
analyzing each prospective site. A variety of factors are considered in the site
selection process, including local market demographics, site visibility and
accessibility, highway interchanges and proximity to significant generators of
potential customers such as major retailers, regional malls, shopping centers,
office complexes, and hotel and entertainment centers including stadiums, arenas
and multi-screen theaters.
The Company's Vice President of Real Estate and the real estate managers
identify and research sites for review by the Company's senior management prior
to final authorization for purchase or lease approval. Upon identification of a
site, its success, including the potential return on investment, is assessed by
utilization of financial models, which evaluate the unit's projected sales and
earnings.
3
RESTAURANT LOCATIONS
The following table lists, as of September 27, 2000, the locations of the 367
Steak n Shake restaurants, including 54 franchised, the number of units in each
state and the number of units in each city if more than one unit: (* denotes
franchised units)
FLORIDA (62) (CONT. OHIO) (CONT. IOWA) MISSOURI (54)
Boynton Beach Medina Davenport Arnold
Bradenton Mentor Waterloo * Branson
Cape Coral Middletown * Cape Girardeau
Clearwater - 2 Milford INDIANA (57) * Columbia - 2
Daytona Beach Pickerington Anderson Eureka
Ft. Pierce Sandusky Avon * Farmington
Gainesville -2 Springfield Bloomington - 3 Fenton
Green Acres Toledo -2 Carmel - 2 Festus
Jacksonville - 2 Troy * Clarksville Independence
Kissimmee Zanesville Columbus * Jefferson City
Lakeland - 3 Elkhart Joplin
Lake Buena Vista ILLINOIS (59) * Evansville - 2 Kansas City
Lake Mary Alton Ft. Wayne - 3 Lees Summit
Largo Aurora Goshen * Poplar Bluff
Leesburg Batavia Greenwood - 2 * Rolla
Merritt Island Belleville Indianapolis - 20 St. Louis - 32
Ocala - 2 Bloomington - 2 Kokomo - 2 Springfield - 4
Orange City Bradley Lafayette - 2 Sullivan
Orlando - 11 Bolingbrook Lawrenceburg Wentzville
Ormond Beach Carbondale Lebanon
Oviedo Champaign Marion GEORGIA (21)
Palm Coast Collinsville Merrillville Albany
Pensacola Danville - 2 Michigan City * Atlanta - 12
Port Charlotte Decatur - 2 Mishawaka * Brunswick
Port Richey DeKalb Muncie Columbus
Sanford Downers Grove Noblesville * Dalton
Sarasota East Peoria Plainfield Macon - 2
Spring Hill Edwardsville Richmond Tifton
St. Augustine Effingham Schererville Valdosta
St. Petersburg -2 Elgin Seymour Warner Robins
Stuart Fairview Heights South Bend
Tallahassee - 2 Forsythe Terre Haute TENNESSEE (15)
Tampa - 8 Galesburg Valparaiso Antioch
Vero Beach Glendale Heights * Chattanooga - 2
West Melbourne Gurnee MICHIGAN (18) Clarksville
Wildwood Hoffman Estates Auburn Hills Cleveland
Winter Haven * Jacksonville Battle Creek Cookeville
Joliet - 2 Benton Harbor Franklin
KENTUCKY (14) Lake In the Hills Grand Rapids - 3 * Jackson
* Bowling Green * Lincoln Grandville Knoxville - 2
* Elizabethtown Marion Holland * Memphis
Florence - 2 Mattoon Jackson Murfreesboro
Frankfort McHenry Kalamazoo Nashville -3
Lexington Moline Lansing - 2
* Louisville - 5 Mt. Prospect Livonia KANSAS (4)
* Owensboro Mt. Vernon Portage Lawrence
Paducah Naperville Sterling Heights Olathe
Richmond Normal - 2 Waterford Overland Park
O'Fallon Woodhaven Topeka
OHIO (44) Oswego Ypsilanti
Akron - 2 Pekin ALABAMA (6)
Brooklyn Peoria - 4 NORTH CAROLINA (4) Decatur
Cincinnati - 7 Peru * Burlington Dothan
Columbus - 11 * Quincy * Charlotte - 2 Mobile - 2
Dayton - 5 Rockford * Greensboro Montgomery
Elyria Rosemont Prattville
Findlay * Springfield - 4 MISSISSIPPI (1)
Forest Park Tinley Park * Southaven WISCONSIN (3)
Lancaster Urbana - 2 Janesville
Lima ARKANSAS (2) Madison
Mansfield IOWA (3) Jonesboro Racine
Marion Cedar Rapids Little Rock
4
RESTAURANT MANAGEMENT
The operation of the restaurants is the responsibility of the Senior Vice
President of Operations and National General Manager, the Vice President of
Operations and Deputy National General Manager, nine division managers, fifty
district managers and the unit-level restaurant management teams.
The divisions and the number of units in each are as follows:
NUMBER OF
DIVISION UNITS
-------- ---------
Missouri 52
Indiana 50
Illinois 59
Florida 59
Michigan 17
Ohio 20
Central Ohio 27
Tennessee 14
Southeastern 15
---
313
---
Division managers are responsible for the operation of the restaurants in the
division as well as supervision of the division support team, which includes
district managers, human resource managers, training managers, training
supervisors, and maintenance and administration staff. District managers
generally have responsibility for the operating performance of six to eight
restaurants. The management team of a typical Steak n Shake restaurant consists
of a general manager, a restaurant manager and three 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 is
the key contributor to the success of a Steak n Shake restaurant. An
experienced, well-trained general manager promotes compliance with the Company's
high standards for food quality and customer service. Steak n Shake seeks to
employ restaurant managers who are customer service oriented and who manage the
restaurant from the dining room. Steak n Shake recognizes the important role of
a seasoned, well-trained and properly motivated restaurant team. The Company has
initiated innovative programs that involve hiring, training and career
development, and a wide variety of benefits to reward and recognize adherence to
Steak n Shake's high standards.
Recruiting and hiring programs have been intensified to seek the qualified
people required to support the Company's growth plan. The philosophy of the
Company has always been to build the field operations culture with a "promote
from within" approach. In fiscal 2000, 333 hourly employees were promoted to
Manager. In the last year, 143 General Managers were promoted from within to
their positions. In addition, 12 General Managers were promoted to District
Manager. In order to develop the talented bench strength needed for continued
internal promotions, people development is one of the highest priorities of the
Company. Organization-wide evaluations of individual development progress are
routinely conducted. As part of the Company's commitment to improving its
standards of execution, emphasis is placed upon strengthening the skills and
capabilities of each restaurant team through innovative selection, development,
evaluation, and reward systems. Employees are encouraged to learn new skills to
foster their professional growth and to create greater opportunities for
advancement.
Aggressive college recruiting programs designed to provide the future leadership
for our growth is another major corporate priority. The Company has created a
focus on an intensified college recruiting effort to increase the Company's
restaurant management quality and staffing levels, thereby providing the
management bench strength to support the Company's growth program. The increased
management staffing depth will also enhance the Company's ability to deliver
dining experiences that exceed customers' expectations, as well as reduce
management turnover.
The Company believes that offering competitive compensation, including incentive
bonus plans tied to performance goals for all levels of restaurant management
personnel, is important to attracting and retaining competent and highly
motivated managers. Awards under the Incentive Bonus Plan are based upon
attainment of defined operating performance standards. Accelerated growth
continues as one of the Company's primary attractions by providing many
5
new opportunities for qualified employees to grow within the organization. The
Employee Stock Purchase Plan also provides an opportunity for employees to
purchase shares of the Company's stock at a discounted price and without the
cost of any brokerage fees. This provides an enhanced opportunity for employees
to become shareholders of the Company and invest in its future.
TRAINING
Each restaurant team member participates in a formal training program that
utilizes work station video presentations, training manuals, a scheduled
evaluation process and recognition awards which signify proficiency in specific
areas. This training process, which takes place within the restaurant, is
continuously reinforced and monitored.
Steak n Shake's goal is to continue to develop strong restaurant management
teams by providing carefully designed leadership training programs. Each
geographic division designates specific restaurants where intensified on-the-job
management training occurs under careful supervision by experienced restaurant
managers. Restaurant managers are required to complete a comprehensive
eight-week training program during which time they are instructed in subjects
such as the standards of food quality and preparation, customer service and
employee relations. Restaurant managers also are provided with video training
presentations and operations manuals relating to food preparation, customer
service standards, restaurant operation practices and Company procedures. During
fiscal 2000, 937 individuals entered this training program, approximately 35% of
whom were promoted from within the Company.
The general managers, together with division personnel, are responsible for
hiring the hourly employees for each restaurant. Each restaurant employs
approximately 40 to 80 hourly employees, many of whom work part-time. Prior to
the opening of a restaurant, the Company's division management assembles a team
of experienced employees to train and educate the new employees. The training
period for new employees lasts approximately two weeks and includes one week of
general training prior to opening and one week of on-the-job supervision at the
restaurant. Ongoing employee training remains the responsibility of the
restaurant general manager under the supervision of a division training manager.
CUSTOMER SATISFACTION AND QUALITY CONTROL
Management believes that employee commitment to consistently exceed customer
expectations is critical to the success of Steak n Shake. The Company intends to
continue to develop and implement standards of execution that will result in the
efficient delivery of high quality, great-tasting food served by friendly,
competent wait staff.
Restaurant management is responsible for ensuring that the restaurants are
operated in accordance with strict operational procedures and quality
requirements. Compliance for Company-operated units is monitored through the use
of customer comment cards, a mystery shopping program, periodic on-site visits
and formal inspections by the division and district managers as well as division
training personnel, and for franchised units through periodic inspections by the
Company's franchise field operations personnel and a mystery shopping program.
Unfavorable comment cards are responded to by division management.
PURCHASING AND DISTRIBUTION CENTER OPERATIONS
Steak n Shake operates 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 99 Company-operated and 17 franchised restaurants located in parts of the
Midwest (primarily in Illinois, Missouri and Iowa). The Company's 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 and parts of the Midwest, obtain food
products and supplies that meet the Company's quality standards and
specifications from an independent distributor with locations in Tampa, Florida
and Bloomington, Indiana.
Purchases are negotiated centrally for most food and beverage products and
supplies to ensure uniform quality, adequate quantities and competitive prices.
Forward buying contracts are utilized to facilitate the availability of products
pursuant to the Company's specifications and to even out 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. The Company has not experienced any significant delays
in receiving food and beverage products, restaurant supplies or equipment.
RESTAURANT REPORTING
6
Systems and technology are essential for the management oversight needed to
monitor Steak n Shake's high standards for quality and to achieve proper
operating margins. Operational and financial controls are maintained through the
use of point of sale systems in each restaurant, personal computers in the
division offices and an automated data processing system at the corporate
office. The management accounting system polls data from the point of sale
system by way of local and wide area networks and generates daily reports of
sales, sales mix, customer counts, check average, cash, labor and food cost.
Inventories are taken of key products daily and at the end of each four-week
accounting period. Management utilizes this data to monitor the effectiveness of
controls and to prepare periodic financial and management reports. The system is
also utilized for financial and budget analysis, planning and analysis of sales
by revenue center and product mix and labor utilization. Planned system
developments include additional enhancements, such as a sales forecasting and
labor scheduling system. Cash is controlled through frequent deposits in local
bank operating accounts followed by transfers to the principal corporate
operating account.
MARKETING
For over sixty-six years, our commitment to customer service satisfaction has
been the most effective approach to attracting and retaining guests. New
restaurants benefit from loyalty to the Steak n Shake brand and the Company's
strategy of locating multiple restaurants within a market area. Steak n Shake's
marketing thrust is directed towards building brand loyalty and is not price
driven or reliant on low price discount marketing. Value at Steak n Shake is
based on exceeding our customers' expectations by delivering freshly prepared,
cooked-to-order, quality food with a unique taste that our friendly,
well-trained staff serves promptly in an attractive, clean environment.
This niche value positioning is communicated to the consumer via a branded
non-price differentiation marketing strategy. Television marketing platforms are
product benefit directed, showing why Steak n Shake is superior to fast food
alternatives with a fun, irreverent, tongue-in-cheek humorous approach. This
"voice of the restaurant" defines a brand personality that recalls the nostalgic
diner days 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 and a Shake. Print, outdoor, radio, and most other media forms are
utilized, but the most effective and efficient media form remains television as
it sells Steak n Shake with sight, sound, motion, and emotion.
Our web site at www.steaknshake.com provides a worldwide presence that
communicates the brand, the menu, our history, and location addresses by market.
A strong emphasis on investor information allows potential investors to learn
about the Company including the latest public relations and financial
information. The web site also serves as an effective recruiting tool.
Additional marketing activities designed to build brand awareness and loyalty,
create new customer trials and introduce new products include quarterly
freestanding newspaper inserts and seasonal in-store offerings centered around
short-term, special promotions or product introductions. The fully integrated
marketing program also utilizes menu clip-ons, table cards, ceiling danglers and
signage. During fiscal 2000, the Company expended 3.0% of revenues on media and
marketing materials.
FRANCHISING
GENERAL. The Company's franchising program is designed to extend the brand name
recognition of Steak n Shake to areas where the Company has no current
development plan and to derive additional revenues without substantial
investment by the Company. The Company contemplates the controlled addition of
franchised restaurants over the next five years with a very selective screening
standard.
As of September 27, 2000, the Company had 54 franchised Steak n Shake
restaurants operated by 15 franchisees, located in Georgia, Illinois, Indiana,
Kentucky, Mississippi, Missouri, North Carolina and Tennessee. These restaurants
are located in areas contiguous to markets in which there are Company-operated
restaurants. The Company currently has commitments from existing franchisees for
the development of additional franchised restaurants.
PRINCIPAL FRANCHISEES. Steak n Shake's principal franchise relationship is with
Kelley Restaurants, Inc. ("KRI"). KRI operates twelve Steak n Shake restaurants
in the Atlanta market and two units in the Charlotte market. KRI is controlled
by E. W. Kelley, the Chairman of the Company.
7
APPROVAL. Franchisees undergo a selection process supervised by the Senior Vice
President in charge of franchising, and require final approval by senior
management. Steak n Shake seeks franchisees with significant experience in the
restaurant business who have demonstrated the financial and management
capabilities required to develop and operate a franchised restaurant. The
Company initially enters into an agreement with the franchisee for the
development of one unit. After the franchisee has demonstrated the ability to
operate that unit in accordance with Company standards, the Company will
consider entering into a broader franchise relationship.
TRAINING AND DEVELOPMENT. Steak n Shake assists franchisees with both the
development and the ongoing operation of their restaurants. Steak n Shake
management personnel assist with site selection, approve all franchise sites and
provide franchisees with prototype plans and specifications for construction of
their restaurants. The Company's training staff provides both on-site and
off-site instruction to franchised restaurant management employees. Managers of
franchised restaurants are required to obtain the same training as managers of
Company-operated units. Steak n Shake's support continues after a restaurant
opening with periodic training programs, the provision of manuals and updates
relating to product specifications, customer service and quality control
procedures, advertising and marketing materials and assistance with particular
advertising and marketing needs. Steak n Shake also makes available to
franchisees certain accounting services and management information reports
prepared at the corporate office for a monthly fee based on Steak n Shake's
actual costs. Steak n Shake has three franchise field representatives who
monitor franchise operations.
OPERATIONS. All franchised restaurants are required, pursuant to their
respective franchise agreements, to serve Steak n Shake approved menu items. In
addition, although not required to do so, franchisees served by Steak n Shake's
distribution center purchase food, supplies and smallwares at Steak n Shake's
cost, plus a markup to cover its cost of operation including freight for
delivery. Steak n Shake's point-of-sale systems are also available for purchase
by franchisees. Access to these services enables franchisees to benefit from
Steak n Shake's purchasing power and assists Steak n Shake in monitoring
compliance with its standards and specifications for uniform quality. See
"Purchasing and Distribution Center Operations".
FRANCHISE AGREEMENT. The standard Steak n Shake franchise agreement currently
has an initial term of 20 years. Among other obligations, the agreement
generally requires franchisees to pay an initial franchise fee of $30,000 for
the first unit in a market, $25,000 for each subsequent unit and a continuing
royalty of 4% of monthly gross sales. The current franchise agreement also
requires the franchisee to pay 5% of monthly gross sales to the Company for
advertising, of which 80% is to be spent on local, regional or national
marketing and 20% is to be used by Steak n Shake for creative and promotional
development, outside independent marketing agency fees and technical and
professional marketing advice.
FRANCHISING ASSISTANCE. In certain circumstances, the Company's financing
subsidiary, SNS Investment Company, Inc., will assist qualified franchisees in
financing the development of one or more franchised units 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 rates in effect
in the franchised area. Through September 27, 2000, seven restaurants had been
financed through this subsidiary.
CONSOLIDATED SPECIALTY RESTAURANTS, INC. ("CSR")
CSR, a wholly owned subsidiary of the Company, operated eleven theme restaurants
located in Illinois and Indiana. In September of 2000, the Company announced its
decision to dispose of the specialty Restaurant segment comprised of eleven
specialty casual dining restaurants operated by CSR. The Company has reported
the disposal of CSR as a discontinued operation.
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. The Company's competitors include national,
regional and local chains as well as local, owner-operated establishments. There
are established competitors with financial and other resources greater than
those of the Company in all of the Company's current and proposed future market
areas. The Company faces competition for sites on which to locate new
restaurants and for personnel, as well as for customers.
8
SEASONAL ASPECTS
The Company has substantial fixed costs, which do not decline as a result of a
decline in sales. The Company's second fiscal quarter, which falls during the
winter months, usually reflects lower average weekly unit volumes, and sales can
be adversely affected by severe winter weather.
EMPLOYEES
As of September 27, 2000, the Company had approximately 18,000 employees, the
majority of which are employed by Steak n Shake. Approximately two-thirds of the
Company's hourly employees are part-time.
The Company has experienced higher labor costs in part due to tight labor
markets in many of the markets served by the Company. Wage rates increased by
4.4% during fiscal 2000 due to these tight labor markets. The Company also
experienced an increase in manager training costs of $1,300,000 over fiscal 1999
resulting from the Company's significantly intensified manager recruiting
programs.
TRADEMARKS
"Steak n Shake-Registered Trademark-", "Takhomasak-Registered Trademark-",
"Famous For Steakburgers-Registered Trademark-", "FAXASAK-Registered
Trademark-", "In Sight It Must Be Right-Registered Trademark-", "Its a
Meal-Registered Trademark-" and the "Wing and Circle-Registered Trademark-" logo
are federally registered trademarks and servicemarks. CSR holds federal
registrations for "The Charley Horse-Registered Trademark-" and "Colorado
Steakhouse-Registered Trademark-" as well as other federal and state trademarks
and servicemarks applicable to its restaurant businesses in addition to state
registrations. The Company is not aware of any infringing uses that could
materially affect its business. The Company will protect its trademark rights by
appropriate legal action whenever necessary.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws affecting its
business. Each of the Company's 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, and alcoholic beverage control in the case of CSR. The development and
construction of additional restaurants will be 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.
The Company's restaurant operations are also subject to federal and state
minimum wage laws and laws governing such matters as working conditions,
overtime and tip credits. Many of the Company's restaurant employees are paid at
rates related to the federal minimum wage and, accordingly, further increases in
the minimum wage would increase the Company's labor costs.
Steak n Shake currently has franchise operations in eight states -- Georgia,
Illinois, Indiana, Kentucky, Mississippi, Missouri, North Carolina and Tennessee
- -- and is subject to certain federal and state laws controlling the offering and
conduct of its franchise business in those states. In addition, the Company is
subject to franchise registration requirements in several states in which it is
now conducting or will in the future conduct its franchise business.
The federal Americans with Disabilities Act prohibits discrimination in public
accommodations and employment on the basis of disability. The Company builds all
new restaurants to standards that comply with the Act, and has reviewed its
employment policies and practices for compliance with the Act.
GEOGRAPHIC CONCENTRATION
During fiscal 1999, approximately 66% of the Company's net sales were derived
from six markets: St. Louis, Missouri (17%); Indianapolis, Indiana (14%);
Central Florida (19%), Western and Central Ohio (10%) and Chicago, Illinois
(6%), respectively. As a result, the Company's results of operations may be
materially affected by weather, economic or business conditions within these
markets. Also, given the Company's present geographic concentration, adverse
publicity relating to Steak n Shake restaurants could have a more pronounced
adverse effect on the Company's overall sales than might be the case if the
Company's restaurants were more broadly dispersed.
THE RESTAURANT INDUSTRY
Historically, the restaurant industry has been 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 and the type, number and location
of competing restaurants. In the future, factors such as inflation, increased
food, labor and employee benefit costs and the lack of availability of qualified
9
management personnel and hourly employees could adversely affect the restaurant
industry in general and the Company's restaurants in particular.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are contained in this Report and may be made
by Company spokespersons based on current expectations of management. Those
statements include, but may not be limited to, the discussions of the Company's
expansion strategy, expectations concerning its future profitability, capital
sources and needs, marketing plans and franchising programs. Investors in the
Common Stock are cautioned that reliance on any forward-looking statement
involves risks and uncertainties. Those risks and uncertainties include, but are
not limited to, changes in competitive, economic or legal factors, changes in
the tax laws and changes in accounting standards, as well as changes in internal
and business combinations. Although the Company believes that the assumptions on
which our forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate, and as a result, the forward-looking
statements could be incorrect. In light of these and other uncertainties, the
inclusion of a forward-looking statement herein should not be regarded as a
representation by the Company that the Company's plans and objectives will be
achieved.
EXECUTIVE OFFICERS OF THE REGISTRANT
10
The following table sets forth the names, ages, 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
------ ----- ----------------------- -------
E.W. Kelley(1)(2) 83 Chairman -
Consolidated Products, Inc. 1984
Steak n Shake, Inc. 1984
Consolidated Specialty Restaurants, Inc. 1990
S. Sue Aramian(1) 68 Vice Chairwoman -
Consolidated Products, Inc. 1990
Steak n Shake, Inc. 1990
Consolidated Specialty Restaurants, Inc. 1990
Alan B. Gilman(1)(2) 70 President and Chief Executive Officer -
Consolidated Products, Inc. 1992
Steak n Shake, Inc. 1992
Vice Chairman -
Consolidated Specialty Restaurants, Inc. 1992
James W. Bear(3) 55 Senior Vice President, Chief Financial Officer -
Consolidated Products, Inc. 1991
Steak n Shake, Inc. 1991
Consolidated Specialty Restaurants, Inc. 1993
Kevin F. Beauchamp 43 Vice President -
Consolidated Products, Inc. 1993
Vice President and Deputy National General Manager -
Steak n Shake, Inc. 1997
B. Charlene Boog(3) 68 Associate Vice President
Consolidated Products, Inc. 1997
Kevin E. Dooley 57 Vice President -
Steak n Shake, Inc. 1993
Consolidated Specialty Restaurants, Inc. 1993
Duane E. Geiger 38 Vice President and Assistant Treasurer -
Consolidated Products, Inc. 1995
Robert L. Grimm(3) 48 Vice President -
Consolidated Products, Inc. 1997
William H. Hart 51 Vice President -
Steak n Shake, Inc. 1991
Consolidated Specialty Restaurants, Inc. 1990
Mary E. Ham 52 Vice President and General Counsel -
Consolidated Products, Inc. 1995
Steak n Shake, Inc. 1995
Consolidated Specialty Restaurants, Inc. 1995
Secretary -
Consolidated Products, Inc. 1999
Steak n Shake, Inc. 1999
Consolidated Specialty Restaurants, Inc. 1999
Scott C. Norrick 35 Vice President -
Consolidated Products, Inc. 2000
Steak n Shake, Inc. 2000
Consolidated Specialty Restaurants, Inc. 2000
Mark A. Paul 32 Controller -
Consolidated Products, Inc. 2000
Steak n Shake, Inc. 2000
Consolidated Specialty Restaurants, Inc. 2000
Gary T. Reinwald 52 Senior Vice President -
Consolidated Products, Inc. 1996
Senior Vice President and National General Manager -
Steak n Shake, Inc. 1996
11
Gary S. Walker 40 Senior Vice President -
Consolidated Products, Inc. 1998
Steak n Shake, Inc. 1998
Consolidated Specialty Restaurants, Inc. 1998
Victor F. Yeandel 44 Vice President -
Consolidated Products, Inc. 1995
(1) Member of the Board of Directors of the Company
(2) Member of the Executive Committee of the Company
(3) Member of the Personnel/Benefits Committee of the Company
Mr. Kelley has been a Director of the Company since 1981 and Chairman since
1984. Since 1974, he has been a Managing General Partner of Kelley & Partners,
Ltd., a Florida limited partnership which holds investments in companies engaged
in snack food distribution and restaurant operations, and is a principal
shareholder of the Company. Prior to 1981, Mr. Kelley was the Chief Executive
Officer of Fairmont Foods Company, a large consumer goods company listed on the
New York Stock Exchange.
Ms. Aramian has been Vice Chairwoman since 1990 and a Director since 1981. She
served as Secretary from 1995 to 1999 and as Vice President from 1984 to 1990.
Ms. Aramian has been a Managing General Partner of Kelley & Partners, Ltd. since
1974 and is involved in all administrative matters, including those of related
companies. Prior to 1981, Ms. Aramian was an executive officer of Fairmont Foods
Company.
Mr. Gilman was elected President and a Director on July 13, 1992 and assumed the
additional position of Chief Executive Officer effective October 1, 1992. From
1985 to 1992, Mr. Gilman was a private investor, and from 1980 to 1985, he
served as President of Murjani International, Ltd., an international marketing
firm. From 1968 to 1980, Mr. Gilman served as a principal executive of various
divisions of Federated Department Stores, Inc., concluding as Chairman and Chief
Executive Officer of the Abraham & Straus Division in New York.
Mr. Bear was elected Senior Vice President, Finance and Treasurer in 1991. Prior
thereto, he served as Vice President and Treasurer of the Company from 1980 to
1991.
Mr. Beauchamp was appointed Vice President, Operations and Deputy National
General Manager of Steak n Shake, Inc. effective March 1, 1997. Mr. Beauchamp
joined the Company as Vice President and Controller in 1993. From 1990 to 1993,
Mr. Beauchamp was Director of Accounting for a division of The Limited, Inc.
Ms. Boog was elected Associate Vice President in 1997. Prior thereto, she served
as Assistant Vice President and Assistant Secretary from 1991 to 1997. Ms. Boog
is also a Vice President of Kelley & Partners, Ltd.
Mr. Dooley joined Steak n Shake and CSR as Vice President in 1993 and is
responsible for engineering and construction. Prior thereto and since 1991, Mr.
Dooley was a Director of Engineering with Wendys, Inc.
Mr. Geiger was appointed Vice President, Information Systems, Financial Planning
and Audit in 1995. From 1993 to 1995, Mr. Geiger served as Director of Financial
Planning and Audit and Assistant Treasurer for the Company. Prior to such time,
Mr. Geiger served in various capacities at Ernst & Young LLP, over a period of
eight years, and ultimately served as a Manager.
Mr. Grimm joined the Company as Vice President - Human Resources in November
1997. For the previous twelve years, Mr. Grimm was an executive with May
Department Stores Company. Lastly, he served as Corporate Vice President,
Executive Development and Training.
Mr. Hart has been Vice President, Purchasing of Steak n Shake and CSR since 1991
and was Vice President of Operations of CSR from 1990 to 1991
Ms. Ham was appointed Vice President in December 1996, General Counsel in 1995
and Secretary in 1999. She served as Associate Secretary from 1994 to 1999. From
1994 to 1995, Ms. Ham served as the Company's Associate General Counsel for Real
Estate and Franchising. From 1992 to 1994, Ms. Ham served as Associate City
Attorney for the city of South Bend, Indiana, and was previously General Counsel
for the Indiana Toll Road.
Mr. Norrick joined the Company as Vice President in 2000 and is responsible
primarily for real estate. From 1996 to
12
2000, Mr. Norrick had been an executive with LinksCorp, owner of high quality
golf clubs and resorts, lastly as Corporate Vice President, Acquisitions. Prior
to 1996, Mr. Norrick was with Walt Disney Company in various senior financial
planning and analysis positions.
Mr. Paul was appointed Controller in August 2000 after joining the Company as
Assistant Controller in March 2000. From 1997 to 2000, Mr. Paul served in
various controllership functions for Bank One Mortgage Corporation, lastly as
Vice President of Finance. Prior to 1997, Mr. Paul served in various capacities
at Coopers and Lybrand LLP, (a predecessor to PricewaterhouseCoopers LLP), over
a period of seven years.
Mr. Reinwald was appointed Senior Vice President, Operations and National
General Manager of Steak n Shake, Inc. in December 1996. Prior thereto, Mr.
Reinwald was Vice President, Operations and National General Manager of Steak n
Shake since 1983, and served in various capacities in the Company for 19 years
prior to that date.
Mr. Walker joined the Company as Senior Vice President in 1998 and is
responsible for franchising, purchasing and distribution and legal matters and
the general management of Consolidated Specialty Restaurants, Inc. From 1994 to
1998, Mr. Walker was Vice President of Marketing - Home Care Division for
DowBrands L.P. Prior thereto, Mr. Walker served in various brand management
positions with The Proctor & Gamble Company.
Mr. Yeandel joined the Company as Vice President in 1995. From 1992 to 1995, Mr.
Yeandel served as Vice President, Franchise Development for Long John Silver's,
Inc. Prior thereto and since 1987, Mr. Yeandel held various marketing positions
with Long John Silver's, Inc.
Officers are elected annually at the annual meeting of the Board of Directors.
13
ITEM 2. PROPERTIES
The Company currently leases 34,620 square feet of executive office space in
Indianapolis, Indiana, under a lease expiring December 31, 2005.
STEAK N SHAKE, INC.
As of September 27, 2000, Steak n Shake operated 188 leased and 125 owned
restaurants in Indiana, Illinois, Michigan, Missouri, Florida, Georgia, Iowa,
Ohio, Kansas, Kentucky, Tennessee, Arkansas, Alabama and Wisconsin. Steak n
Shake restaurant leases for land and building typically are non-cancelable, have
an initial term of 18 to 25 years and renewal terms aggregating twenty years or
more and require Steak n Shake to pay real estate taxes, insurance and
maintenance costs. Of these leases, 138 contain percentage of sales rental
clauses in addition to base rent requirements.
The majority of restaurants are generally 3,800 square feet and seat
approximately 100 customers while a minimal percentage of restaurants have a
similar architectural style but seat 39 to 138 customers and occupy between
1,010 and 6,000 square feet.
Steak n Shake has lease obligations on 15 former restaurant locations in
Georgia, Ohio, Illinois, Kentucky and Texas all of which have been subleased to
others as of September 27, 2000. These obligations primarily relate to
restaurant locations disposed of in the late 1970's, and the sublease rentals
cover substantially all of the Company's obligations under the primary leases.
Steak n Shake also has a complex of three buildings located in Bloomington,
Illinois, where it owns 38,900 square feet of office/warehouse space in two
separate buildings, one of which has cold storage facilities, and leases a
26,300 square foot distribution center and division office facility. Steak n
Shake also leases division offices in Orlando, Florida; Franklin, Ohio;
Columbus, Ohio; Brighton, Michigan, Elk Grove Village, IL and Tallahasee,
Florida and a division office and administrative facility in Indianapolis,
Indiana. In addition, Steak n Shake owns a division office facility in St.
Louis, Missouri. At September 27, 2000, Steak n Shake owns one restaurant
location that has been leased to a third party. In addition, there were eight
restaurants under construction and the Company owned two parcels of land, that
are being held for future development.
CONSOLIDATED SPECIALTY RESTAURANTS, INC.
As of September 27, 2000, CSR operated ten facilities in Illinois and Indiana,
of which six are leased facilities and four are owned. In addition, CSR has a
lease obligation on one former restaurant located in Indiana. The leases for
land and building are typically non-cancelable agreements with initial terms of
10 to 15 years and three five-year renewal terms. All of the leases except two
have percentage of sales rental clauses in addition to base rent requirements.
The leases require CSR to pay real estate taxes, insurance and maintenance
costs. These units have approximately 6,000 to 8,000 square feet and seat 150 to
225 customers. In September 2000 the Company announced that CSR's operations
would be discontinued and its properties disposed of. To date, two of the CSR
restaurants have been sold while three units have been closed or the lease
terminated. The remaining units are expected to be disposed of by the end of
fiscal year 2001.
SNS INVESTMENT COMPANY, INC.
SNS Investment Company, Inc. ("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 seven properties as the
primary lessee. These leases typically have an initial term of 18 years and
renewal options aggregating 20 years or more and require SIC to pay real estate
taxes, insurance and maintenance costs. As of September 27, 2000, 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 had a
land and building lease for a property in Little Rock, Arkansas which was
operated by Steak n Shake, Inc.
14
RESTAURANT LEASE EXPIRATIONS
Restaurant leases are scheduled to expire as follows, assuming the exercise of
all renewal options:
NUMBER OF LEASES EXPIRING
-------------------------
PERIOD SNS CSR SIC
------ --- --- ---
2001 - 2005 2 2 0
2006 - 2010 9 2 0
2011 - 2015 3 1 0
2016 - 2020 9 1 0
2021 - 2025 18 0 0
Beyond 147 1 7
--- - -
188 7 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.
15
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET PRICE RANGE/STOCK TRADING
The Common Stock of Consolidated Products, Inc. is traded on the New York Stock
Exchange (NYSE) under the symbol COP. 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 New York Stock
Exchange for each quarter of the Company's past two fiscal years, are shown
below:
2000 1999(1)
-----------------------------------------------
HIGH LOW HIGH LOW
---- --- ---- ---
First Quarter $ 11 1/4 $ 7 11/16 $ 16 9/16 $ 11 1/2
Second Quarter $ 11 7/8 $ 9 $ 19 $ 14 1/2
Third Quarter $ 10 1/16 $ 9 $ 18 1/16 $ 15 11/16
Fourth Quarter $ 9 7/16 $ 7 3/4 $ 16 1/8 $ 9 3/16
(1) THE SALES PRICES HAVE BEEN ADJUSTED TO REFLECT THE 10% STOCK DIVIDEND
DECLARED IN DECEMBER 1999.
16
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for each of the Company's five most recent fiscal years,
set forth in the Company's 2000 Annual Report under "Selected Financial and
Operations Data (Unaudited)," are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis of results of operations and financial
condition set forth in the Company's 2000 Annual Report under "Management's
Discussion and Analysis", are 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. 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 27, 2000, a
hypothetical 100 basis point increase in short-term interest rates would have an
immaterial impact on the Company's earnings.
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 The Report of Independent Auditors set forth in the Company's 2000 Annual
Report are incorporated herein by reference.
Information on quarterly results of operations, set forth in the Company's 2000
Annual Report under "Quarterly Financial Data (Unaudited)" is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
17
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information included under the caption "Election of Directors" in the
Company's definitive Proxy Statement relating to its 2001 Annual Meeting of
Shareholders to be filed pursuant to Rule 14a-6(c) 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", "Stock
Option Grants in Fiscal 2000", "Aggregated Stock Option Exercises in Fiscal 2000
and Fiscal Year End Option Values", "Long Term Incentive Plan - Awards in Last
Fiscal Year", "Report of the Executive Committee" and "Company Performance" in
the Company's definitive Proxy Statement relating to its 2001 Annual Meeting of
Shareholders to be filed pursuant to Rule 14a-6(c) 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 2001 Annual Meeting of
Shareholders to be filed pursuant to Rule 14a-6(c) is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Management Relationships and
Related Transactions" in the Company's definitive Proxy Statement relating to
its 2001 Annual Meeting of Shareholders to be filed pursuant to Rule 14a-6(c) is
incorporated herein by reference.
18
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(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 27, 2000
and September 29, 1999
For the years ended September 27, 2000, September 29, 1999 and
September 30, 1998:
- Consolidated Statements of Earnings
- Consolidated Statements of Cash Flows
- Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Report of Independent Auditors
2. FINANCIAL STATEMENT SCHEDULES.
All schedules for the years ended September 27, 2000, September 29,
1999 and September 30, 1998 have been omitted for the reason that they
are not required or 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.
3.01 Restated Articles of Incorporation of Steak n Shake, Inc.,
filed April 1, 1977.
3.02 Attachment to Joint Agreement of Merger, between Franklin
Corporation and Steak n Shake, Inc., filed October 31, 1983
(Incorporated by reference to Exhibit 3.2 to the
Registrant's Form 10-K Report for the year ended September
28, 1983).
3.03 Articles of Amendment to Articles of Incorporation of Steak
n Shake, Inc. filed May 15, 1984 changing the name of the
Registrant to "Consolidated Products, Inc." (Incorporated by
reference to Exhibit 3.4 to the Registrant's Form 10-K
Report for the year ended September 26, 1984).
3.04 Articles of Amendment to the Articles of Incorporation of
Consolidated Products, Inc. filed May 11, 1998.
(Incorporated by reference to Exhibit 3.05 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
April 8, 1998.)
3.05 Bylaws of Consolidated Products, Inc., as amended through
October 30, 1996.
4.01 Specimen certificate representing Common Stock of
Consolidated Products, Inc. (formerly Steak n Shake, Inc.).
(Incorporated by reference to Exhibit 4.01 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
April 9, 1997).
4.02 Amended and Restated Credit Agreement by and Between
Consolidated Products, Inc. and Bank One, Indianapolis, N.A.
dated December 30, 1994 (amending that earlier credit
agreement between parties dated as of March 10, 1994 and
effective as of February 23, 1994, relating to a $5,000,000
revolving line of credit which was not filed pursuant to
Rule 601 of the Securities and Exchange Commission),
relating to a $30,000,000 revolving line of credit.
(Incorporated by reference to Exhibit 4.06 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
December 21, 1994).
19
4.03 Note Purchase Agreement By and Between Consolidated
Products, Inc. and The Prudential Insurance Company of
America dated as of September 27 1995 related to $39,250,000
senior note agreement and private shelf facility.
(Incorporated by reference to Exhibit 4.1 to the
Registrant's Form 8-K Report dated September 26, 1995).
4.04 Amendment To Note Purchase and Private Shelf Agreement by
and between Consolidated Products, Inc. and The Prudential
Insurance Company of America dated as of April 21, 1999
related to senior note agreement and private shelf facility.
(Incorporated by reference to Exhibit 4.10 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
April 14, 1999).
4.05 Seventh Amendment to Amended and Restated Credit Agreement
by and between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A. dated May 31, 2000. (Incorporated by
reference to Exhibit 4.12 to the Registrant's Form 10-Q
Report for the fiscal quarter ended July 5, 2000).
10.01 Consolidated Products, Inc. Executive Incentive Bonus Plan.
(Incorporated by reference to Exhibit 19.1 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 1, 1992).
10.02 Steak n Shake, Inc. Executive Incentive Bonus Plan.
(Incorporated by reference to Exhibit 19.2 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 1, 1992).
10.03 Consultant Agreement by and between James Williamson, Jr.
and the Registrant dated November 20, 1990. (Incorporated by
reference to Exhibit 19.5 to the Registrant's Form 10-Q
Report for the fiscal quarter July 1, 1992).
10.04 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).
10.05 Consolidated Products, Inc. 1992 Employee Stock Purchase
Plan. (Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated January 13,
1993 related to its 1993 Annual Meeting of Shareholders).
10.06 Consolidated Products, Inc. 1992 Employee Stock Option Plan.
(Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated January 13,
1993 related to its 1993 Annual Meeting of Shareholders).
10.07 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).
10.08 Consolidated Products, Inc. 1996 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated January
15, 1996 related to the 1996 Annual Meeting of
Shareholders).
10.09 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).
10.10 Consolidated Products, Inc. 1997 Capital Appreciation 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).
20
10.11 Amendment to Consolidated Products, Inc. 1992 Employee Stock
Purchase 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).
10.12 Consolidated Products, Inc. 1997 Nonemployee Director 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).
10.13 Amendment to Consolidated Products, Inc. 1992 Employee Stock
Purchase Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated December
22, 1997 related to the 1998 Annual Meeting of
Shareholders).
10.14 Consolidated Products, Inc. 1998 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to
the Registrant's definitive Proxy Statement dated December
22, 1997 related to the 1998 Annual Meeting of
Shareholders).
10.15 Form of option agreement related to 1999 Nonemployee
Director Stock Option Program and schedule relating thereto.
(Incorporated by reference to Exhibit 10.21 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 5, 2000).
10.16 Form of option agreement related to 2000 Nonemployee
Director Stock Option Program and schedule relating thereto.
(Incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-Q Report for the fiscal quarter ended
July 5, 2000).
13.01 Portions of the Annual Report to Shareholders for the Year
Ended September 27, 2000 incorporated by reference into this
Form 10-K.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young LLP.
27.01 Financial Data Schedule.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
21
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 22, 2000.
CONSOLIDATED PRODUCTS, INC.
By: /s/ Mark A. Paul
--------------------------
Mark A. Paul
Controller
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 22, 2000.
/s/ E. W. Kelley Director
- -----------------------------
E. W. Kelley
/s/ S. Sue Aramian Director
- -----------------------------
S. Sue Aramian
/s/ Alan B. Gilman President, Chief Executive
- ----------------------------- Officer and Director
Alan B. Gilman (Principal Executive Officer)
/s/ James W. Bear Senior Vice President Finance
- ----------------------------- and Treasurer
James W. Bear (Principal Financial Officer)
/s/ Mark A. Paul Controller
- ----------------------------- (Principal Accounting Officer)
Mark A. Paul
/s/ Stephen Goldsmith Director
- -----------------------------
Stephen Goldsmith
/s/ Charles E. Lanham Director
- -----------------------------
Charles E. Lanham
/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.
22
CONSOLIDATED PRODUCTS INC. AND SUBIDIARIES
Index to Exhibits
NUMBER DESCRIPTION
------ -----------
(3) 3.01 Restated Articles of Incorporation of Steak n Shake, Inc., filed
April 1, 1977.
3.02 Attachment to Joint Agreement of Merger between Franklin
Corporation and Steak n Shake, Inc., filed October 31, 1983
(Incorporated by reference to Exhibit 3.2 to the Registrant's
Form 10-K Report for the year ended September 28, 1983).
3.03 Articles of Amendment to Articles of Incorporation of Steak n
Shake, Inc. filed May 15, 1984 changing the name of the
Registrant to "Consolidated Products, Inc." (Incorporated by
reference to Exhibit 3.4 to the Registrant's Form 10-K Report for
the year ended September 26, 1984).
3.04 Articles of Amendment to the Articles of Incorporation of
Consolidated Products, Inc. filed May 11, 1998. (Incorporated by
reference to Exhibit 3.05 to the Registrant's Form 10-Q Report
for the fiscal quarter ended April 8, 1998.)
3.05 Bylaws of Consolidated Products, Inc., as amended through October
30, 1996.
(4) 4.01 Specimen certificate representing Common Stock of Consolidated
Products, Inc. (formerly Steak n Shake, Inc.). (Incorporated by
reference to Exhibit 4.01 to the Registrant's Form 10-Q Report
for the fiscal quarter ended April 9, 1997).
4.02 Amended and Restated Credit Agreement By and Between Consolidated
Products, Inc. and Bank One, Indianapolis, N.A. dated December
30, 1994 (amending that earlier credit agreement between parties
dated as of March 10, 1994 and effective as of February 23, 1994,
relating to a $5,000,000 revolving line of credit which was not
filed pursuant to Rule 601 of the Securities and Exchange
Commission), relating to a $30,000,000 revolving line of credit.
(Incorporated by reference to Exhibit 4.06 to the Registrant's
10-Q Report for the fiscal quarter ended December 21, 1994).
4.03 Note Purchase Agreement by and Between Consolidated Products,
Inc. and The Prudential Insurance Company of America dated as of
September 27 1995 related to $39,250,000 senior note agreement
and private shelf facility. (Incorporated by reference to Exhibit
4.1 to the Registrant's Form 8-K Report dated September 26,
1995).
4.04 Amendment To Note Purchase and Private Shelf Agreement by and
between Consolidated Products, Inc. and The Prudential Insurance
Company of America dated as of April 21, 1999 related to senior
note agreement and private shelf facility. (Incorporated by
reference to Exhibit 4.10 to the Registrant's Form 10-Q Report
for the fiscal quarter ended April 14, 1999).
4.05 Seventh Amendment to Amended and Restated Credit Agreement by and
between Consolidated Products, Inc. and Bank One, Indianapolis,
N.A. dated May 31, 2000. (Incorporated by reference to Exhibit
4.12 to the Registrant's Form 10-Q Report for the fiscal quarter
ended July 5, 2000).
(9) No exhibit.
(10) 10.01 Consolidated Products, Inc. Executive Incentive Bonus Plan.
(Incorporated by reference to Exhibit 19.1 to the Registrant's
Form 10-Q Report for the fiscal quarter
23
ended July 1, 1992).
10.02 Steak n Shake, Inc. Executive Incentive Bonus Plan. (Incorporated
by reference to Exhibit 19.2 to the Registrant's Form 10-Q Report
for the fiscal quarter ended July 1, 1992).
10.03 Consultant Agreement by and between James Williamson, Jr. and the
Registrant dated November 20, 1990. (Incorporated by reference to
Exhibit 19.5 to the Registrant's Form 10-Q Report for the fiscal
quarter July 1, 1992).
10.04 Letter from the Registrant to Alan B. Gilman dated June 27, 1992.
(Incorporated by reference to Exhibit 19.13 to the Registrant's
Form 10-Q Report for the fiscal quarter ended July 1, 1992).
10.05 Consolidated Products, Inc. 1992 Employee Stock Purchase Plan.
(Incorporated by reference in to the Appendix to the Registrant's
definitive Proxy Statement dated January 13, 1993 related to its
1993 Annual Meeting of Shareholders).
10.06 Consolidated Products, Inc. 1992 Employee Stock Option Plan.
(Incorporated by reference to the Appendix to the Registrant's
definitive Proxy Statement dated January 13, 1993 related to its
1993 Annual Meeting of Shareholders).
10.07 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).
10.08 Consolidated Products, Inc. 1996 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated January 15, 1996
related to the 1996 Annual Meeting of Shareholders).
10.09 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).
10.10 Consolidated Products, Inc. 1997 Capital Appreciation 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).
10.11 Amendment to Consolidated Products, Inc. 1992 Employee Stock
Purchase 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).
10.12 Consolidated Products, Inc. 1997 Nonemployee Director 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).
10.13 Amendment to Consolidated Products, Inc. 1992 Employee Stock
Purchase Plan. (Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated December 22, 1997
related to the 1998 Annual Meeting of Shareholders).
10.14 Consolidated Products, Inc. 1998 Nonemployee Director Stock
Option Plan. (Incorporated by reference to the Appendix to the
Registrant's definitive Proxy Statement dated December 22, 1997
related to the 1998 Annual Meeting of Shareholders).
24
10.15 Form of option agreement related to 1999 Nonemployee Director
Stock Option Program and schedule relating thereto. (Incorporated
by reference to Exhibit 10.21 to the Registrant's Form 10-Q
Report for the fiscal quarter ended July 5, 2000).
10.16 Form of option agreement related to 2000 Nonemployee Director
Stock Option Program and schedule relating thereto. (Incorporated
by reference to Exhibit 10.22 to the Registrant's Form 10-Q
Report for the fiscal quarter ended July 5, 2000).
(11) No exhibit.
(12) No exhibit.
(13) 13.01 Portions of the Annual report to Shareholders for the Year Ended
September 27, 2000 incorporated by reference into this Form 10-K.
(16) No exhibit.
(18) No exhibit.
(21) 21.01 Subsidiaries of the Registrant.
(22) No exhibit.
(23) 23.01 Consent of Ernst & Young LLP.
(24) No exhibit.
(27) 27.01 Financial Data Schedule.
(99) No exhibit.
25