10-Q

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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Twelve Weeks Ended December 19, 2001

or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-8445

THE STEAK N SHAKE COMPANY
(Exact name of registrant as specified in its charter)

INDIANA	37-0684070
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
500 Century Building, 36 S. Pennsylvania Street Indianapolis, Indiana 46204 (317) 633-4100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

        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 / /

        Number of shares of Common Stock outstanding at January 22, 2002: 27,898,724

The Index to Exhibits is located at Page 11. Total Pages 17

THE STEAK N SHAKE COMPANY

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION
	ITEM 1.	FINANCIAL STATEMENTS
		Consolidated Statements of Financial Position— December 19, 2001 (Unaudited) and September 26, 2001	3
		Consolidated Statements of Earnings (Unaudited) Twelve Weeks Ended December 19, 2001 and December 20, 2000	4
		Consolidated Statements of Cash Flows (Unaudited) Twelve Weeks Ended December 19, 2001 and December 20, 2000	5
		Notes to Consolidated Financial Statements (Unaudited)	6
	ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	7
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	10
PART II.	OTHER INFORMATION
	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	11

2

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

The Steak n Shake Company
Consolidated Statements of Financial Position

			December 19, 2001			September 26, 2001
			(Unaudited)
Assets:
Current Assets
	Cash and cash equivalents of $11,525,000 in 2002 and $5,129,000 in 2001		$	16,519,621		$	8,715,136
	Short term investments			3,496,534			3,491,598
	Receivables			3,526,911			5,139,890
	Properties under sale and leaseback contract			2,880,348			7,994,212
	Inventory			4,858,245			5,205,906
	Deferred income taxes			293,000			293,000
	Other current assets			1,787,128			3,327,352
	Total current assets			33,361,787			34,167,094
Property and Equipment
	Land			59,072,918			58,060,867
	Buildings			55,305,755			54,239,105
	Leasehold improvements			53,030,310			51,955,953
	Equipment			128,004,791			126,251,628
	Construction in progress			7,348,956			6,790,412
				302,762,730			297,297,965
	Less accumulated depreciation and amortization			(94,126,433	)		(90,279,573	)
	Net property and equipment			208,636,307			207,018,392
Net Leased Property				1,039,534			1,091,723
Other Assets				3,022,283			2,788,946
			$	246,059,911		$	245,066,155
Liabilities and Shareholders' Equity:
Current Liabilities
	Accounts payable		$	14,828,020		$	13,989,304
	Accrued expenses			19,044,371			20,492,283
	Current portion of senior notes			3,906,317			3,960,317
	Current portion of obligations under capital leases			507,422			563,896
	Total current liabilities			38,340,150			39,005,800
Deferred Income Taxes				5,994,000			5,994,000
Deferred Credits				5,124,885			4,620,856
Obligations Under Capital Leases				1,166,633			1,270,763
Senior Note				26,561,429			28,378,889
Shareholders' Equity
	Common stock—$50 stated value, 50,000,000 shares authorized—shares issued 30,151,617			15,075,809			15,075,809
	Additional paid-in capital			122,522,345			122,522,345
	Retained earnings			52,224,780			47,877,738
	Less: Unamortized value of restricted shares			(767,907	)		(927,791	)
		Treasury stock—at cost 2,112,893 shares in fiscal 2002, 1,982,201 shares in fiscal 2001		(20,182,213	)		(18,752,254	)
	Total shareholders' equity			168,872,814			165,795,847
			$	246,059,911		$	245,066,155

See accompanying notes.

3

The Steak n Shake Company
Consolidated Statements of Earnings
(Unaudited)

		Twelve Weeks Ended
		December 19, 2001		December 20, 2000
Revenues:
	Net sales	$	99,875,464	$	95,078,380
	Franchise fees		869,386		816,583
	Other, net		341,490		668,411
			101,086,340		96,563,374
Costs and Expenses:
	Cost of sales		23,643,884		22,588,981
	Restaurant operating costs		49,498,940		48,324,817
	General and administrative		7,934,609		7,088,192
	Rent		4,888,945		4,118,516
	Depreciation and amortization		4,208,160		3,864,393
	Marketing		3,255,456		2,910,834
	Pre-opening costs		423,934		954,550
	Interest		427,367		548,226
			94,281,295		90,398,509
Earnings Before Income Taxes			6,805,045		6,164,865
Income Taxes			2,458,000		2,203,000
Net Earnings		$	4,347,045	$	3,961,865
Net Earnings Per Common and Common Equivalent Share:
	Basic	$	.15	$	.14
	Diluted	$	.15	$	.14
Weighted Average Shares and Equivalents:
	Basic		28,141,259		29,015,468
	Diluted		28,223,784		29,015,494

See accompanying notes.

4

The Steak n Shake Company
Consolidated Statements of Cash Flows
(Unaudited)

				Twelve Weeks Ended
				December 19, 2001			December 20, 2000
Operating Activities:
	Net earnings			$	4,347,045		$	3,961,865
		Adjustments to reconcile net earnings to net cash provided by operating activities:
			Depreciation and amortization		4,208,160			3,864,393
			Loss (gain) on disposal of property		109,114			(165,665	)
			Changes in receivables and inventories		1,929,336			987,089
			Changes in other assets		(11,828	)		(543,560	)
			Changes in income taxes payable		1,559,804			2,000,636
			Changes in accounts payable and accrued expenses		(2,208,367	)		(4,397,334	)
	Net cash provided by operating activities				9,933,264			5,707,424
Investing Activities:
	Additions of property and equipment				(7,773,350	)		(10,163,388	)
	Net proceeds from sale/leasebacks and other disposals				9,018,005			4,056,434
	Net cash provided by (used in) investing activities				1,244,655			(6,106,954	)
Financing Activities:
	Principal payments on debt and capital lease obligations				(1,930,877	)		(144,344	)
	Lease payments on subleased properties				(104,481	)		(152,728	)
	Proceeds from long-term debt				—			5,120,000
	Proceeds from equipment and property leases				91,883			141,084
	Proceeds from exercise of stock options				3,830			—
	Treasury stock repurchases				(1,433,789	)		(4,074,793	)
	Net cash (used in) provided by financing activities				(3,373,434	)		889,219
Increase in Cash and Cash Equivalents					7,804,485			489,689
Cash and Cash Equivalents at Beginning of Year					8,715,136			2,177,780
Cash and Cash Equivalents at End of Period				$	16,519,621		$	2,667,469

See accompanying notes.

5

The Steak n Shake Company
Notes to Consolidated Financial Statements
(Unaudited)

Basis of Presentation

        The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

        In the opinion of the Company, all adjustments (consisting of only normal recurring accruals) considered necessary to present fairly the consolidated financial position as of December 19, 2001, the consolidated statements of earnings for the twelve weeks ended December 19, 2001 and December 20, 2000 and the consolidated statements of cash flows for the twelve weeks ended December 19, 2001 and December 20, 2000 have been included.

        The consolidated statements of earnings for the twelve weeks ended December 19, 2001 and December 20, 2000 are not necessarily indicative of the consolidated statements of earnings for the entire year. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended September 26, 2001.

Seasonal Aspects

        The Company has substantial fixed costs which do not decline as a result of a decline in sales. The Company's first and second fiscal quarters, which include the winter months, usually reflect lower average weekly unit volumes, and sales can be adversely affected by severe winter weather.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        In the following discussion, the term "same store sales" refers to the sales of only those units open eighteen months as of the beginning of the current fiscal period being discussed and which remained open through the end of the fiscal period.

Results of Operations

        The following table sets forth the percentage relationship to total revenues, unless otherwise indicated, of items included in the Company's consolidated statements of earnings for the periods indicated:

		Twelve Weeks Ended
		12/19/01		12/20/00
Revenues
	Net sales	98.8	%	98.5	%
	Franchise fees	0.9		0.9
	Other, net	0.3		0.6
		100.0		100.0
Costs and Expenses
	Cost of sales	23.7	(1)	23.8	(1)
	Restaurant operating costs	49.6	(1)	50.8	(1)
	General and administrative	7.8		7.3
	Rent	4.8		4.3
	Depreciation and amortization	4.2		4.0
	Marketing	3.2		3.0
	Pre-opening costs	0.4		1.0
	Interest	0.4		0.6
		93.3		93.6
Earnings Before Income Taxes		6.7		6.4
Income Taxes		2.4		2.3
Net Earnings		4.3	%	4.1	%

(1)

Cost of sales and restaurant operating costs are expressed as a percentage of net sales.

Comparison of Twelve Weeks Ended December 19, 2001 to Twelve Weeks Ended December 20, 2000

Revenues

        Net sales increased $4,797,000, or 5.0%, to $99,875,000 due primarily to a 5.6% increase in the number of Company-operated Steak n Shake restaurants. Same store sales were up 2.0% due to a 2.3% increase in check average partially offset by a 0.3% decrease in customer counts. The number of Company-operated Steak n Shake restaurants increased to 337 at December 19, 2001 as compared to 319 at December 20, 2000. The increase in check average is primarily the result of a 3.4% weighted average menu price increase.

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Costs and Expenses

        Cost of sales increased $1,055,000, or 4.7%, as a result of sales increases. As a percentage of net sales, cost of sales decreased to 23.7% from 23.8%, primarily as a result of the menu price increases, somewhat offset by increased dairy costs.

        Restaurant operating costs increased $1,174,000, or 2.4%, primarily due to the increased sales volume. Restaurant operating costs, as a percentage of net sales, decreased to 49.6% from 50.8% because of lower wage rates and reduced employee turnover resulting from the softening labor market, a 0.4% reduction in supply and gas heating costs, as a percentage of net sales, partially offset by an increase in fringe benefit costs.

        General and administrative expenses increased $846,000 or 11.9%. As a percentage of revenues, general and administrative expenses increased to 7.8% from 7.3%. The increase is due in part to new technology initiatives supporting human resources and payroll and a sales forecasting and labor scheduling system. In addition, a major reorganization of field operation management occurred during the quarter. Three new field organizations were established to better support key core markets like St. Louis, Chicago and South Florida.

        Rent expense increased $770,000, or 18.7%, primarily as a result of the completion of the sale and leaseback of twenty-three Company-owned properties since the beginning of second quarter fiscal 2001.

        The $344,000, or 8.9%, increase in depreciation and amortization expense was attributable to the net depreciable capital additions since the beginning of fiscal 2001.

        Marketing expense increased $345,000, or 11.8%. As a percentage of revenues, marketing expense increased slightly from 3.0% to 3.2%. Marketing expenses increased primarily due to the commencement of television advertising in the Nashville and Grand Rapids markets in the second quarter of last year, the utilization of radio advertising and increased local marketing activities.

        Pre-opening costs decreased $531,000, or 55.6% due to timing of new store openings.

        Interest expense decreased $121,000 due to decreased average net borrowings under the Company's senior note agreement and the revolving line of credit.

Income Taxes

        The Company's effective income tax rate as a percentage of earnings before income taxes increased to 36.1% from 35.7% for the quarter ended December 19, 2001. A valuation allowance against gross deferred tax assets has not been provided based upon the expectation of future taxable income.

Net Earnings

        Net earnings were $4,347,000 ($.15 per diluted share) up 9.7% compared to the prior year.

Liquidity and Capital Resources

        Five Company-operated and one franchised Steak n Shake restaurants were opened during the quarter ended December 19, 2001. Subsequent to the end of the first quarter, the Company opened its first Steak n Shake restaurant in Dallas, Texas. Two additional Company-operated units are currently under construction. For the quarter ended December 19, 2001, capital expenditures totaled $7,773,000 as compared to $10,163,000 for the comparable prior year period.

        The Company expects to open 18 Steak n Shake restaurants in fiscal year 2002. This level of expansion allows management to continue its focus on improving each and every guest experience through hospitality initiatives, especially in newer markets; to improve the quality and depth of the field

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organization through enhanced training and staff development; and to aggressively market the brand through unique differentiation marketing. This development plan allows management to seek more highly productive new sites that will yield above average results. The average cost of a new Company-operated Steak n Shake restaurant, including land, site improvements, building and equipment to date in fiscal 2002 is $1,600,000. The Company intends to fund capital expenditures, its stock repurchase program and meet working capital needs using existing resources and anticipated cash flows from operations, together with additional capital generated by sale and leaseback transactions involving newly acquired properties.

        During the twelve weeks ended December 19, 2001, cash provided by operations totaled $9,933,000, while cash generated by sale and leaseback transactions and other disposals of property totaled $9,018,000. During the twelve weeks ended December 20, 2000, cash provided by operations totaled $5,707,000, while cash generated by sale and leaseback transactions and other disposals of property totaled $4,056,000. At December 19, 2001 the Company had additional sale and leaseback properties under contract which, when closed, will generate approximately $2,880,000 in proceeds.

        Net cash used in financing activities for the twelve weeks ended December 19, 2001 totaled $3,373,000 compared to net cash provided of $889,000 in the comparable prior year period.

        As of December 19, 2001, the Company had outstanding borrowings of $30,522,000 under its $75,000,000 Senior Note Agreement and Private Shelf Facility (the "Senior Note Agreement") which expires on April 21, 2002. Consequently, the Company has borrowings of $40,000,000 available under the Senior Note Agreement at interest rates based upon market rates at the time of borrowing. Borrowings under the Senior Note bear interest at an average fixed rate of 7.6%.

        There were no borrowings under the Company's $30,000,000 Revolving Credit Agreement (the "Revolving Credit Agreement") at December 19, 2001. The Company's Revolving Credit Agreement bears interest based on LIBOR plus 75 basis points, or the prime rate, at the election of the Company. During the quarter, the Company entered into a new $30 million Revolving Credit Agreement with a different lender which expires January 2005. The Company's debt agreements contain restrictions, which among other things require the Company to maintain certain financial ratios. At December 20, 2000, the Company had borrowings of $17,815,000 outstanding under the previous $30,000,000 Revolving Credit Agreement.

        The Company has a stock repurchase program which calls for the purchase of up to 4,000,000 shares of its outstanding common stock. During the twelve weeks ended December 19, 2001, the Company repurchased a total of 136,700 shares for $1,434,000 bringing the total number of shares purchased under the program to 1,926,260. The repurchased shares will be used principally to fund the Company's employee stock plans.

Effect of Governmental Regulations and Inflation

        Since most of the Company's employees are paid hourly rates related to federal and state minimum wage laws, increases in the legal minimum wage directly increase the Company's operating costs. Inflation in food, labor and other operating costs directly affects the Company's operations.

Impact of Recently Issued Accounting Standards

        In June 2001 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business Combinations" and No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets." The requirements of Statement 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. The Company has not effected any business combination transactions since June 30, 2001 and is not affected by SFAS No. 141. With respect to goodwill and intangible assets acquired prior to July 1,

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2001, companies are required to adopt SFAS No. 142 in its fiscal year beginning after December 15, 2001. The Company currently believes that the adoption of SFAS No. 142 will not have a material effect on the Company's results of operations.

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 factors such as changes in business strategies and the impact of restructurings and business combinations. Although the Company believes that the assumptions on which its 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.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE 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 December 19, 2001 a hypothetical 100 basis point increase in short-term interest rates would not have had a material impact on the Company's earnings.

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PART II. OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits
	(3)	3.01	Restated Articles of Incorporation of Steak n Shake, Inc., filed April 1, 1977. (Incorporated by reference to Exhibit 3.01 to the Registrant's Form 10-K Report for the year ended September 27, 2000).
		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 increases the number of authorized shares of common Stock to 50,000,000 shares. (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	Articles of Amendment to the Articles of Incorporation of Consolidated Products, Inc. filed February 7, 2001 changing the name of the Registrant to "The Steak n Shake Company." (Incorporated by reference to Exhibit 3.05 to the Registrant's Form 10-Q Report for the fiscal quarter ended April 11, 2001.)
		3.06	Articles of Amendment of the Articles of Incorporation of The Steak n Shake Company filed May 16, 2001 authorizing Preferred Stock (Incorporated by reference to Exhibit 3.01 to The Steak n Shake Company's current report on Form 8-K filed May 17, 2001).
		3.07	Articles of Amendment of the Articles of Incorporation of The Steak n Shake Company filed May 16, 2001 designating terms of Series A Preferred Stock (Incorporated by reference to Exhibit 3.02 to The Steak n Shake Company's current report on Form 8-K filed May 17, 2001.)
		3.08	Restated Bylaws of The Steak n Shake Company as of May 16, 2001. (Incorporated by reference to Exhibit 3.08 to the Registrant's Form 10-K Report for the year ended September 26, 2001.)
	(4)	4.01	Specimen certificate representing Common Stock of The Steak n Shake Company (formerly Consolidated Products, Inc.). (Incorporated by reference to Exhibit 4.01 to the Registrant's Form 10-Q Report for the fiscal quarter ended April 11, 2001).
		4.02	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).

11

	4.03	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).
	4.04	Rights Agreement dated as of May 16, 2001 between The Steak n Shake Company and Computershare Investor Services, LLC, as Rights Agent (Incorporated by reference to Exhibit 4.01 to The Steak n Shake Company's current report on Form 8-K filed May 17, 2001.)
(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 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	Retirement Agreement by and between S. Sue Aramian and the Registrant dated August 15, 2001. (Incorporated by reference to Exhibit 10.05 to the Registrant's Form 10-K Report for the year ended September 26, 2001.)
	10.06	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).
	10.07	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).
	10.08	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).
	10.09	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).

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		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	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).
		10.12	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).
		10.13	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).
		10.14	Form of option agreement related to 2001 Nonemployee Director Stock Option Program and schedule relating thereto.
		10.15	Credit Agreement by and between The Steak n Shake Company and Fifth Third Bank, Indiana (Central) dated November 16, 2001, relating to a $30,000,000 revolving line of credit. (Incorporated by reference to Exhibit 10.17 to the Registrant's Form 10-K Report for the year ended September 26, 2001.)
(b)	Reports on Form 8-K.

        No reports on Form 8-K were filed during the period covered by this report.

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SIGNATURE

        Pursuant to the requirements 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 January 31, 2002.

THE STEAK N SHAKE COMPANY
	(Registrant)
/s/  JOHN E. HIATT
By	John E. Hiatt Vice President and Controller On Behalf of the Registrant and as Principal Accounting Officer

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Financial Position
Consolidated Statements of Earnings (Unaudited)
Consolidated Statements of Cash Flows (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURE

EX-10.14

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EXHIBIT 10.14

FORM OF OPTION AGREEMENT RELATED TO 2001
NON EMPLOYEE DIRECTOR STOCK OPTION PROGRAM

THE STEAK N SHAKE COMPANY
NONEMPLOYEE DIRECTOR STOCK OPTION AGREEMENT

THIS AGREEMENT, made this                        day of            , 20    by and between THE STEAK N SHAKE COMPANY, an Indiana corporation with its principal office at 36 South Pennsylvania Street, Indianapolis, Indiana (hereinafter called "Company") and                        , (hereinafter called "Grantee") pursuant to the terms, conditions and limitations contained in the Company's Nonemployee Director Stock Option Plan (hereinafter called the "Plan").

WITNESSETH THAT:

WHEREAS, in the interests of affording an incentive to the Grantee to give his best efforts to the Company as a director, the Company wishes to provide that the Grantee shall have an option to buy shares of the common stock, without par value, ("Common Stock") of the Company:

NOW, THEREFORE, it is hereby mutually agreed as follows:

        1.    The Company hereby grants to the Grantee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of             shares (hereinafter called "Subject Shares") of the presently authorized, but unissued, or treasury Common Stock of the Company at a purchase price of $            per share, exercisable in whole or in part from time to time subject to the limitation that no option may be exercised with respect to fewer than one hundred (100) shares unless there are fewer than one hundred (100) shares then subject to purchase hereunder, in which event any exercise must be as to all such shares and subject to the further limitation that the options represented by this Agreement shall be exercisable only at such times and in such amounts as are set forth on Schedule I, attached hereto and made a part hereof. The option shall expire as to all Subject Shares on the fifth anniversary date of this Agreement if not exercised on or before such date.

        2.    This option may not be exercised until all applicable federal and state securities requirements pertaining to the offer and sale of the securities issued pursuant to the Plan have been met and the Company has been advised by counsel that all applicable requirements have been met.

        3.    Subject to the limitation specified in Section 2 and Schedule I hereof, the Grantee may from time to time exercise this option by delivering a written notice of exercise and subscription agreement to the Secretary of the Company specifying the number of whole shares to be purchased, accompanied by payment in cash, of the aggregate option price of such number of shares; provided, however, that the Grantee may make payment in the form of delivery to the Company of Common Stock of the Company owned by the Grantee, the fair market value of which equals the aggregate option price, or by payment partially in cash and partially in Common Stock of the aggregate option price. For this purpose, any shares so tendered by the Grantee shall be deemed to have a fair market value equal to the average of the closing sales price for the shares on any national securities exchange on which such shares are listed (or, if listed on more than one such exchange, then on the one located in New York City), or, if not so listed, the average of the high and low prices reported on the National Association of Securities Dealers, Inc., Automated Quotations System (NASDAQ), for the five trading days preceding the date of the exercise of the option. Such exercise shall be effective upon receipt by the Secretary of such written notice, subscription agreement and payment of the purchase price. Only the

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Grantee may exercise the option during the lifetime of the Grantee. No fractional shares may be purchased at any time hereunder.

        4.    If the Grantee ceases to be a director of the Company or any of its subsidiaries for any reason other than permanent and total disability or death, this option shall forthwith terminate. A leave of absence approved by the Board of Directors shall not be considered a termination of directorship. If the Grantee ceases to be a director of the Company or any of its subsidiaries because of permanent or total disability, the Grantee may exercise this option in whole or in part at any time within one year after such termination of directorship by reason of such disability, but not later than the date upon which this option would otherwise expire. The foregoing exercise provisions apply whether or not this option was otherwise exercisable at the date of the Grantee's termination of directorship because of permanent and total disability.

        5.    If the Grantee dies while a director of the Company or any of its subsidiaries, within one year after the termination of his directorship because of permanent or total disability, this option may be exercised in whole or in part by the executor, administrator, or estate beneficiaries of the Grantee at any time after the date of the Grantee's death but not later than the date upon which this option would otherwise expire. The foregoing exercise provisions apply whether or not this option was otherwise exercisable at the date of the Grantee's death.

        6.    Upon the effective exercise of the option, or any part thereof, certificates representing the shares so purchased, marked fully paid and non-assessable shall be delivered to the person who exercised the option. Until certificates representing such shares shall have been issued and delivered, the Grantee shall not have any of the rights or privileges of a shareholder of the Company in respect of any of such shares.

        7.    In the event that prior to the delivery by the Company of all the Subject Shares, there shall be an increase or reduction in the number of shares of Common Stock of the Company issued and outstanding by reason of any subdivision or consolidation of the Common Stock or any other capital adjustment, the number of shares then subject to this option and the option price shall be increased or decreased as provided in Section 8 of the Plan.

        8.    The option and the rights and privileges conferred by this Option Agreement shall not be assigned or transferred by the Grantee in any manner except by will or under the laws of descent and distribution. In the event of any attempted assignment or transfer in violation of this Section 8, the option, rights and privileges conferred by this Stock Option Agreement shall become null and void.

        9.    By executing this Stock Option Agreement, the Grantee thereby represents that this option is being acquired by him in good faith for investment purposes and not with a view to, or for sale in connection with, any distribution thereof, and that any shares the Grantee or his legal representatives acquire pursuant to this option will be acquired in good faith for investment purposes and not with a view to, or for sale in connection with, any distribution thereof unless such shares are registered under the applicable federal and state securities laws.

        10.  Certificates evidencing shares issued upon exercise of this option may bear a legend setting forth among other things, such restrictions on the disposition or transfer with the above representation or as appropriate to comply with federal and state securities laws.

        11.  Any notices to be given or served under the terms of this Option Agreement shall be addressed to the Secretary of the Company at 36 South Pennsylvania Street, Indianapolis, Indiana, 46204, and to the Grantee at such address or addresses as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given or served, if and when enclosed in a properly sealed envelope addressed as aforesaid, postage prepaid, and deposited in the United States mail.

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        12.  The interpretation by the Board of Directors of any provisions of the Plan or of this Stock Option Agreement shall be final and binding on the Grantee.

        13.  This option is subject to all the terms, provisions and conditions of the Plan, which are incorporated herein by reference and to such regulations as may from time to time be adopted by the Board of Directors. A copy of the Plan has been furnished to the Grantee and an additional copy may be obtained from the Company. In the event of any conflict between the provisions of the Plan and the provisions of this Stock Option Agreement, the terms, conditions and provisions of the Plan shall control, and this Stock Option Agreement shall be deemed to be modified accordingly.

        14.  This Incentive Stock Option Agreement is intended to grant an option which meets the requirements of incentive stock options as defined in Section 422A of the Internal Revenue Code. Subject to and upon the terms, conditions and provisions of the Plan, each and every provision of this Incentive Stock Option Agreement shall be administered, construed and interpreted so that the option granted herein shall qualify as an incentive stock option.

        15.  This Stock Option Agreement shall be governed by the laws of the State of Indiana.

        IN WITNESS WHEREOF, the Company and the Grantee have signed this Stock Option Agreement as of the day and year first above written.

	"COMPANY"
	By:
ATTEST:
	"GRANTEE"
	By:

SCHEDULE I

NON EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT OF

Name of Grantee

	Number of Shares
Exercisable After	Installment	Cumulative Available

Schedule pursuant to rule 12b31

Grantee	Number of Shares Granted	Date of Grant	Option Price	Expiration Date
E.W. Kelley	5,000	October 8, 2001	9.99	October 8, 2006
S.Sue Aramian	5,000	October 8, 2001	9.99	October 8, 2006
Stephen Goldsmith	5,000	October 8, 2001	9.99	October 8, 2006
Charles E. Lanham	5,000	October 8, 2001	9.99	October 8, 2006
J. Fred Risk	5,000	October 8, 2001	9.99	October 8, 2006
John W. Ryan	5,000	October 8, 2001	9.99	October 8, 2006
James Williamson, Jr.	5,000	October 8, 2001	9.99	October 8, 2006

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