SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 25, 2001
/ / 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 0-19907
LONE STAR STEAKHOUSE & SALOON, INC.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
224 East Douglas, Suite 700
Wichita, Kansas 67202
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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. Yes /X/ No / /
As of March 19, 2002, the aggregate market value of the Registrant's
Common Stock held by non-affiliates of the Registrant was $435,980,483. Solely
for the purpose of this calculation, shares held by directors and officers of
the Registrant have been excluded. Such exclusion should not be deemed a
determination by or an admission by the Registrant that such individuals are, in
fact, affiliates of the Registrant.
As of March 19, 2001, there were 24,333,233 shares outstanding of
the Registrant's Common Stock.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Directors
of the Company:
Clark R. Mandigo 58
John D. White 54
Fred B. Chaney 65
William B. Greene, Jr. 64
Guy W. Adams 50
Thomas C. Lasorda 74
Michael A. Ledeen 60
Mark G. Saltzgaber 34
Clark R. Mandigo has been the Chairman of the Board of the Company
since July 2001 and a Director of the Company since March 1992. Mr. Mandigo has
been a Papa John's Pizza franchisee since 1995. From 1986 to 1991, he was
President, Chief Executive Officer and Director of Intelogic Trace, Inc., a
corporation engaged in the sale, lease and support of computer and
communications systems and equipment. From 1985 to 1997, Mr. Mandigo served on
the Board of Directors of Physician Corporation of America, a managed health
care company and from 1993 to 1997, Mr. Mandigo served on the Board of Palmer
Wireless, Inc., a cellular telephone system operator. Mr. Mandigo currently
serves on the Board of Directors of Horizon Organic Holdings Corporation and as
a Trustee of Accolade Funds.
John D. White is Executive Vice President, Treasurer and a Director
of the Company, and was the Chief Financial Officer from 1992 to 1999. Prior to
joining the Company, Mr. White was employed as Senior Vice President of Finance
for Coulter Enterprises, Inc. Prior to that, Mr. White was a senior manager or
principal with Arthur Young & Company and taught management development and
computer auditing seminars in their National Training Program. Mr. White earned
a BBA in accounting from Wichita State University in 1970 and is a graduate of
the Stanford Executive Program.
Fred B. Chaney, Ph.D., has been a director of the Company since May,
1995. Dr. Chaney was President and Chief Executive Officer of TEC's parent
company, Vedax Sciences Corporation, until March, 1998 when he sold his
interest. Dr. Chaney through the TEC organization had formed a network of
various management organizations in several countries, including the United
States where approximately 4,000 presidents of companies meet on a quarterly
basis. Dr. Chaney's early business career was with the Boeing Company and
Rockwell, where he implemented management systems and quality motivational
programs. In 1968 he co-authored the book Human Factors in Quality Assurance
with Dr. D. H. Harris. Dr. Chaney has authored numerous publications and
professional papers and has taught management classes for the University of
Southern California. Dr. Chaney previously served as a Director of Rusty Pelican
William B. Greene, Jr. has been a member of the Board of Directors
since August 1999. At the age of 26, Mr. Greene was the youngest bank President
and CEO in the United States and formed the first statewide banking organization
in the history of Tennessee, United Tennessee Bancshares Corporation. He also
served as a director of the Northwestern Financial Corporation that spearheaded
the first major banking consolidation in America with the merger of Northwestern
Bank and First Union Bank now referred to as the First Union Corporation, soon
to become Wachovia. Mr. Greene is Chairman of the Wake Forest University Board
of Trustees and Chairman of the Wake Forest University Trustee Investment Policy
Committee for the last eight years, which oversees the University's
billion-dollar endowment. Mr. Greene is also a member of the Board of Trustees
of Milligan College where he recently received his Honorary Doctor of Economics.
Mr. Greene was a member of the Young Presidents' Organization for eighteen years
and in 1998 served as International President of the World Presidents'
Organization, the graduate school of YPO. Mr. Greene is a graduate of Wake
Forest University with a B.S. Degree in Philosophy, Psychology and History. Mr.
Greene did post graduate work at Wake Forest University, the University of
Illinois, and Harvard University. He is a graduate of the Bank Marketing and
Public Relations School at Northwestern University, and a graduate of the
Stonier Graduate School of Banking at Rutgers University. Mr. Greene is a
Director of the JDN Corporation, a Real Estate Investment Trust on the New York
Stock Exchange where he is Chairman of the Compensation Committee.
Guy W. Adams has been a Director of the Company since July 2001. Mr.
Adams is President and Owner of GWA Capital (1996 to present), a Sole
Proprietorship, investing his own capital in public and private equity
transactions. Mr. Adams also consults with entities seeking to refinance or
recapitalize. Previously, Mr. Adams served as an Investment Manager and
Financial Advisor to Pacific Theatres Corporation and its affiliates (1989 -
1995) investing in public and private equity transactions. The Corporation is
privately owned by the Forman family (formerly, Forbes: 400 Richest People in
America). He is a graduate of Louisiana State University, Bachelor of Science in
Engineering, 1974 and Harvard Graduate School of Business Masters of Business
Thomas C. Lasorda has been a Director of the Company since November
2001. Mr. Lasorda, a member of the Baseball Hall of Fame, has been a Senior Vice
President of the Los Angeles Dodgers since February 1998 and prior thereto was a
Vice President of such team since July 1996. He was the manager of the gold
medal winning United States Baseball Team for the 2000 Summer Olympic Games in
Sydney, Australia and was the manager of the Los Angeles Dodgers for 20 years.
Michael A. Ledeen has been a director of the Company since November
2001. Mr. Ledeen has been a resident scholar in the Freedom Chair at the
American Enterprise Institute since 1989 and the Vice Chairman of the U.S.-China
Security Review Commission since 2001. An expert in contemporary history and
international affairs, Mr. Ledeen is a frequent contributor to the Wall Street
Journal, the Weekly Standard, National Review, and Commentary and serves as a
foreign affairs editor of the American Spectator. During the Reagan
administration, from 1981 to 1987, Mr. Ledeen held numerous positions including
a consultant to the National Security Adviser, the Office of the Secretary of
Defense, and the State Department and was a special adviser to the Secretary of
State. Mr. Ledeen is the author of seventeen books, including most recently
Tocqueville on American Character (St. Martin's Press, 2000).
Mark G. Saltzgaber has been a director of the Company since November
2001. Mr. Saltzgaber is an experienced investment banker, advisor and private
equity investor in the restaurant industry. He is currently an independent
consultant to emerging restaurant chains and a venture partner of Dorset Capital
Management, LLC, a consumer-focused private equity firm he co-founded in 1999.
Prior to Dorset Capital, Mr. Saltzgaber was a Managing Director in the Equity
Capital Markets Department at Montgomery Securities where he was responsible for
advising consumer growth companies. Prior to that, Mr. Saltzgaber was also a
Principal and Co-Director of the restaurant investment banking practice group at
Montgomery Securities. Mr. Saltzgaber is currently a director of Pasta Pomodoro,
In addition to Mr. White, the other Executive Officers of the
Company are as follows:
Jamie B. Coulter, 61, has served as Chief Executive Officer of the
Company since January 1992, served as President of the Company from January,
1992 to June, 1995 and served as Chairman from January 1992 to July 2001. Mr.
Coulter received the Nation's Restaurant News Golden Chain Award in 1995 and its
Hot Concept Award in 1997. Mr. Coulter was inducted into the Pizza Hut Hall of
Fame in 1993, received INC. Magazine's Midwest Region Master Entrepreneur of the
Year in 1993, and was Restaurants & Institutions CEO of the Year in 1996.
Mr. Coulter currently serves as a director of the Federal Law
Enforcement Foundation and Empower America. Mr. Coulter has previously served as
Chairman of the Board of Directors of the Young Presidents' Organization. Mr.
Coulter received a BS degree in Business from Wichita State University in 1963
and was a graduate of the Stanford University Executive Program in 1990.
Tomlinson D. O'Connell, 33, joined the Company in 1995, and has been
Senior Vice President of Operations - Lone Star Steakhouse & Saloon, Inc.
since December of 1999. Mr. O'Connell is currently responsible for the operation
of 249 domestic Lone Star Steakhouse & Saloon restaurants. Mr. O'Connell was
with the Ritz-Carlton Hotel Company from 1992 to 1995. During his tenure there
the company was awarded the Malcolm Baldrige Award. Additionally, Mr. O'Connell
was selected to be a member of the opening team for the Ritz-Carlton Hotel in
Seoul, Korea. Mr. O'Connell graduated from the University of Nevada at Las Vegas
in 1992 with a Bachelor of Science degree in Hotel Administration.
Gerald T. Aaron, 61, has been Senior Vice President - Counsel and
Secretary of the Company since January 1994. From November 1991 to January 1994,
Mr. Aaron was employed as General Counsel for Coulter Enterprises, Inc. From
March 1989 to November 1991, Mr. Aaron operated a franchise consultant practice.
From 1969 to 1984 Mr. Aaron was Vice President - Counsel for Pizza Hut, Inc. and
from 1984 to 1989, Mr. Aaron was President of International Pizza Hut Franchise
Jeff Bracken, 36, has been Vice President of Operations - Lone Star
Steakhouse & Saloon since May 1999. Mr. Bracken has worked for the Company
since 1996, previously as a Regional Manager.
Deidra Lincoln, 42, has been Vice President of Operations -- Del
Frisco's since January, 2000. Ms. Lincoln is the co-founder of Del Frisco's
Double Eagle Steak House ("Del Frisco's"), which was acquired by the Company in
1995. Since 1995, Ms. Lincoln has served in various managerial capacities and is
responsible for all of the Company's Del Frisco's operations.
Randall H. Pierce, 62, has been Chief Financial Officer of the
Company since February, 2000. Mr. Pierce is a CPA and was a partner of Ernst
& Young, LLP from 1974 to 1997. During Mr. Pierce's tenure in the Wichita,
Kansas office with Ernst & Young, LLP, Mr. Pierce served as an Audit
Engagement Partner from 1974 to 1997 and Office Managing Partner from 1996 to
1997. Mr. Pierce served as Office Director of Accounting and Auditing from 1974
through 1997. Mr. Pierce's duties included serving clients in both the public
and private sectors in matters related to accounting, auditing and business
matters as well as providing technical advice and consultation to other
accounting professionals in the office. From 1997 through January, 2000, Mr.
Pierce served as a financial and business consultant focusing on advising and
negotiating merger and acquisition transactions, sale and disposition
transactions and general business strategies.
Item 11. EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer
("CEO") and the four most highly compensated executive officers of the Company
(collectively with the CEO the "Named Executive Officers") other than the CEO
whose salary and bonus exceeded $100,000 with respect to the fiscal year ended
December 25, 2001.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Annual Number of Securities
Compensation Underlying Options All Other
Name and Principal Position Year Salary Bonus($) (1) (# of Shares) Compensation(2)
--------------------------- ---- ------ -------- ------------- ------------------ ---------------
Jamie B. Coulter 2001 $750,000 $226,500(3) $97,473 - $97,650
Chief Executive Officer 2000 $750,000 $226,642(4) - - $72,265
1999 $300,000 - - - $ 7,219
John D. White 2001 $600,000 $181,500(3) - - $78,150
Executive Vice President 2000 $600,000 $181,500(4) - - $57,842
Treasurer 1999 $283,000 - - - $ 6,681
Tomlinson D. O'Connell 2001 $200,000 $301,500(3) - _ $50,150
Senior Vice President of Operations 2000 $200,000 $53,753(4) - _ $23,106
1999 $139,773 $45,000(5) - 81,479 $ 3,381
Gerald T. Aaron 2001 $250,000 $76,500(3) - - $25,000
Senior Vice President 2000 $250,000 $76,500(4) - - $24,039
Counsel & Secretary 1999 $228,000 - - - $ 3,946
Jeff Bracken 2001 $175,000 $89,000(3) - - $50,150
Vice President of Operations - 2000 $175,000 $93,914(4) - - $29,875
Lone Star Steakhouse Saloon 1999 $145,000 - - 106,429 $ 3,381
(1) As to Named Executive Officers, perquisites and other personal
benefits, securities or property received by each Named Executive
Officer did not exceed the lesser of $50,000 or 10% of such Named
Executive Officer's annual salary and bonus with the exception of
the CEO who received benefits primarily relating to tax and
accounting services provided by Company personnel ($67,700) and the
balance was for reimbursement for certain medical (i) insurance
premiums and (ii) expenses.
(2) Represents fifty percent matching contributions by the Company
pursuant to the Company's Deferred Compensation Plan which became
effective October 7, 1999.
(3) Such bonus was paid in 2002 for services performed in 2001.
(4) Such bonus was paid in 2001 for services performed in 2000.
(5) Such bonus was paid in 2000 for services performed in 1999.
Option Grants in Last Fiscal Year
No options were granted to the CEO or any Named Executive Officer
for services rendered during the fiscal year ended December 25, 2001.
Option Exercise Table
No options were exercised by the CEO and the other Named Executive
Officers during the fiscal year ended December 25, 2001 except for T.D.
O'Connell. The following table sets forth certain information concerning
unexercised options held as of December 25, 2001 by the CEO and the other Named
Executive Officers. At December 24, 2001 (the market was closed on December 25,
2001), the closing price of the Company's Common Stock, as reported by the
Nasdaq National Market, was $14.37.
FISCAL YEAR-END OPTION VALUES
Shares Acquired Number of Securities Value of Unexercised
on Value Realized Underlying Unexercised In-the-Money Options at
Exercise (1) Options at December 25, 2001 December 25, 2001 ($)
-------- --- ---------------------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------
Jamie B. Coulter -- -- 2,600,000 -0- $15,343,250 -0-
John D. White -- -- 1,000,000 -0- $ 5,901,250 -0-
Tomlinson D. O'Connell 12,794 $31,768 98,258 102,985 $ 586,777 $585,410
Gerald T. Aaron -- -- 575,000 -0- $ 3,393,219 -0-
Jeff Bracken -- -- 86,430 39,999 $ 507,018 $224,374
(1) Based on the difference between the exercise price of the options
and the closing price of a share of Common Stock on April 19, 2001,
the date of exercise, as reported on the Nasdaq National Market.
Directors who are not employees of the Company receive an annual fee
of $5,000 and a fee of $1,250 for each Board of Directors meeting attended and
are reimbursed for their expenses. Employees who are Directors are not entitled
to any compensation for their service as a Director. Non-employee Directors are
also entitled to receive grants of options under the Company's 1992 Directors
Stock Option Plan the ("Director's Plan"). Upon election to the Board of
Directors, each director who is not an executive officer is granted a one-time
stock option to acquire 40,000 shares of Common Stock and receives an annual
grant of 6,800 shares one day after the end of the Company's fiscal year. The
exercise price for such shares is equal to the closing sale price of the Common
Stock as reported on the NASDAQ National Market on the date of grant. The
Directors Plan has expired and the Company has not made a determination as to
whether to adopt a new plan, subject to requisite approval. Currently, options
to purchase an aggregate of 488,400 shares of Common Stock are outstanding under
the Directors Plan at exercise prices ranging from $6.688 per share to $18.81
per share. On December 26, 2001, the Company's outside Directors were
automatically granted options to purchase an aggregate of 47,600 shares of
Common Stock under the Directors Plan at an exercise price of $14.80 per share.
The Company has entered into separate employment agreements, with
each of Messrs. White, Aaron, O'Connell and Bracken, dated as of March 22, 2000,
providing for the employment of such individuals as Executive Vice President,
Senior Vice President - Counsel and Senior Vice President of Operations - Lone
Star Steakhouse & Saloon, Vice President of Operations - Lone Star
Steakhouse & Saloon, Inc., respectively. Each employment agreement provides
that the officer shall devote substantially all of his professional time to the
business of the Company. The Employment Agreements provide base salaries in the
amount of $600,000, $228,000, $200,000 and $175,000, respectively, for Messrs.
White, Aaron, O'Connell and Bracken, subject to increases as determined by the
Board of Directors. Each agreement terminates in March, 2003, but the Company
has the option to extend the term annually for additional one year periods. Each
agreement contains non-competition, confidentiality and non-solicitation
provisions which apply for twenty-four months after cessation of employment.
Mr. Coulter has also entered into a non-competition, confidentiality
and non-solicitation agreement with the Company.
The Company has entered into a Change of Control Contract with Jamie
B. Coulter, dated as of January 3, 2001 that provides for severance pay and
incidental benefits if there is a change in control of the Company (as defined
in the Change of Control Contract). The payment is a lump sum payment equal to
2.99 times one year's annual compensation. The agreement also provides Mr.
Coulter with the right to replace all stock options whether vested or not with
fully vested stock options (all of Mr. Coulter's stock options are fully
vested), or alternatively the right to receive a cash payment for surrendering
the options equal to the difference between the full exercise price of each
option surrendered and the greater of the price per share paid by the acquirer
in the change of control transaction or the market price of the Company's Common
Stock on the date of the change of control. The benefits also include
transferring ownership of any Company automobile which is primarily used by Mr.
Coulter and life and medical insurance coverage for up to two years or such
longer period if previously agreed to. Finally, the agreement provides that if
any excise taxes are imposed on Mr. Coulter by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company will make him whole.
The Company has also entered into Change of Control Contracts with Messrs.
White, Aaron, O'Connell and Bracken. Unlike Mr. Coulter's Change of Control
Contract, severance payments and benefits (other than the stock option benefit)
require a second event to occur within 730 days from the change of control
before severance payments are due. The second event includes any of the
following, involuntary termination (other than for cause, death or disability),
relocation or a diminution in the responsibility, authority or compensation of
the executive officer. If there is a change of control and any such second event
occurs, Messrs. White, Aaron, O'Connell and Bracken have the right to receive
benefits substantially similar to those described above.
Compensation Committee Interlocks
The Compensation Committee consists of Messrs. Chaney, Mandigo and
Greene. See "Certain Relationships and Related Transactions" for a description
of a transaction between Mr. Mandigo's son and the Company.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of
the Company's Common Stock, as of April 5, 2002, by each person known by the
Company to be the beneficial owner of more than five percent of the Company's
Common Stock, $.01 par value (the "Common Stock") each director, each executive
officer as defined in Item 402(a)(3) of Regulation S-K and by all directors and
executive officers of the Company as a group. Unless otherwise indicated, the
address for five percent stockholders, directors and executive officers of the
Company is 224 East Douglas, Suite 700, Wichita, Kansas 67202-3414.
Name and Address of Beneficial Owner Beneficially Held Percentage of Class
------------------------------------ ----------------- -------------------
Jamie B. Coulter 4,995,393(1) 18.5%
John D. White 1,148,025(2) 4.5%
Gerald T. Aaron 612,707(3) 2.5%
Tomlinson D. O'Connell 126,418(4) *
Jeff Bracken 95,096(5) *
Fred B. Chaney 74,135(6) *
William B. Greene, Jr. 34,968(7) *
Clark R. Mandigo 126,401(8) *
Guy W. Adams 1,100 *
Mark G. Saltzgaber - -
Thomas Lasorda - -
Michael Ledeen - -
Dimensional Fund Advisors Inc. 2,006,900(9) 8.2%
Barclays Global Investors, N.A. 1,247,579(10) 5.1%
Pioneer Investment Management, Inc. 1,309,700(11) 5.4%
Pioneer Global Asset Management 1,318,000(12) 5.4%
All directors and executive officers as
a group (14) persons (1-8) 7,498,889(13) 25.7%
* Less than 1%
(1) Includes presently exercisable options to purchase 2,600,000 shares
of Common Stock.
(2) Includes presently exercisable options to purchase 1,000,000 shares
of Common Stock.
(3) Includes presently exercisable options to purchase 575,000 shares of
(4) Includes presently exercisable options to purchase 125,418 shares of
(6) Includes presently exercisable options to purchase 93,096 shares of
(6) Includes presently exercisable options to purchase 70,135 shares of
(7) Includes presently exercisable options to purchase 33,468 shares of
(8) Includes presently exercisable options to purchase 96,401 shares of
(9) Based on a Schedule 13G filed in December, 2001, Dimensional Fund
Advisors Inc. beneficially holds 2,026,300 shares of the Company's
Common Stock. The address of Dimensional Fund Advisors Inc. is 1299
Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(10) Based on a Schedule 13G filed in February 2002, Barclays Global
Investors, N.A. beneficially holds 1,247,579 shares of the Company's
Common Stock. The address of Barclays Global Investors, N.A. is 45
Fremont Street, San Francisco, CA 94105.
(11) Based on a Schedule 13G filed in January 2001, Pioneer Investment
Management, Inc. beneficially holds 1,309,700 shares of the
Company's Common Stock. The address of Pioneer Investment
Management, Inc. is 60 State Street, Boston, MA 02109.
(12) Based on a Schedule 13G filed in December 2001, Pioneer Global Asset
Management beneficially holds 1,318,000 shares of the Company's
Common Stock. The address of Pioneer Global Asset Management is
Galleria San Carlo 6, 20122 Milan Italy.
(13) Includes presently exercisable options to purchase 4,870,379 shares
of Common Stock, which includes presently exercisable options to
purchase 276,861 shares of Common Stock held by executive officers,
who are not specifically identified in the Security Ownership Table
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The adult sons of each of Clark R. Mandigo and Gerald T. Aaron are
employed by the Company as a general manager and district manager, respectively.
The Company has a total of 280 general managers and 31 district managers. Total
compensation in 2001 payable to the adult sons of Messrs. Mandigo and Aaron were
$91,546.01 and $75,749.96, respectively.
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.
LONE STAR STEAKHOUSE & SALOON, INC.
By: /s/ John D. White
John D. White, Executive
Dated: April 23, 2002