The Steak N Shake Company Reports Full Year and Fiscal Fourth Quarter 2008 Results

The Steak n Shake Company (NYSE:SNS) today announced its results for the full year and fiscal fourth quarter 2008, which ended September 24, 2008.

Selected Results from Fiscal 2008:

- Total revenues of $610.1 million

- General and administrative expense reduction of $7.1 million or 12.3%

- Improved cash and investment balance by $5.4 million

- Reduction of $15.3 million on credit facilities and long-term debt

- Cash flow from operations of $24.4 million

In fiscal 2008, total revenues decreased 6.7% to $610.1 million as compared to $654.1 million in fiscal 2007. Same-store sales declined by 7.1% during fiscal 2008. The net loss for fiscal 2008 was $23.0 million, or $0.81 per diluted share, compared to net earnings of $11.8 million, or $0.42 per diluted share in the prior year. The fiscal 2008 results included $14.9 million ($9.2 million, or $0.33 per diluted share, net of tax) of non-cash impairment charges and store closing costs, including charges related to a group of stores that we closed in the fourth quarter of fiscal 2008 and restaurants that were impaired because the carrying values of their underlying assets exceeded their expected future cash flows. Also included is a store closure charge of $0.5 million arising from early termination of a lease on a property. In comparison, fiscal 2007 included an impairment charge of $5.4 million ($3.3 million, or $0.12 per diluted share, net of tax), which was offset by a $0.2 million gain on the sale of two units closed during a prior year.

Fiscal Fourth Quarter 2008 Results

Total revenues for the fiscal 2008 fourth quarter decreased 8.1% to $138.9 million from $151.1 million in the comparable period last year. During the fiscal 2008 fourth quarter, same-store sales declined by 7.4%. The net loss for the fiscal 2008 fourth quarter was $9.2 million, or $0.32 per diluted share as compared with net earnings of $1.5 million, or $0.05 per diluted share in the fourth quarter of the prior year.

Under new management and with a change in strategic direction during the fourth quarter of fiscal 2008, the Company decided to forgo certain initiatives developed under prior leadership and to implement new initiatives designed to generate cash. Moreover, several personnel changes resulted in severance expense in the quarter. A summary of significant non-cash write-offs and other expenditures incurred in the fiscal 2008 fourth quarter resulting from these strategic changes is listed below:

  (Amounts in $000s)

   Non-cash charges:

       Disposal of software and

        architectural designs                     $2,190

       Disposal of uniforms                          400

       Other non-cash charges                      1,036

                                                                    $3,626



   Other expenses:

       Severance (1)                              $1,450

       Proxy fees                                    500

       Consulting fees for a fixed

        asset tax study                              435

       Accelerate repairs and maintenance            355

                                                                    $2,740



                                  Total                             $6,366



                                  Net of tax                        $4,074



   (1) The fiscal 2007 fourth quarter included $1.1 million of severance

Strategic, operational, and financial initiatives are discussed in the Chairman's letter dated October 21, 2008 which may be accessed at www.steaknshake.com. At the end of the fourth quarter cash and cash equivalents were $6.9 million, and total obligations under credit facilities and long-term debt were $30.7 million. The Company owns the land and buildings of 150 properties. The Company also has for sale 14 improved properties and 20 parcels, which were previously purchased for development. Management's plan is to maximize free cash flows and maintain a strong balance sheet.

During the fiscal 2008 fourth quarter, the Company identified indicators that require management to further evaluate the carrying value of goodwill. Management is in the process of performing a detailed analysis, but does not currently believe the analysis will result in any impairment.

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