FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter ended March 29, 1995
Commission File No. 0-10943
RYAN'S FAMILY STEAK HOUSES, INC.
(Exact name of registrant as specified in its charter)
South Carolina No. 57-0657895
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
405 Lancaster Avenue
P. O. Box 100
Greer, South Carolina 29652
(Address of principal executive
offices, including zip code)
803-879-1000
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 ________
The number of shares outstanding of each of the registrant's classes
of common stock as of March 29, 1995:
53,440,000 shares of common stock, $1.00 Par Value
<TABLE>
PART I. FINANCIAL INFORMATION
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Quarter Ended
March 29, March 30,
1995 1994
<S> <C> <C>
Restaurant sales $117,266,000 106,892,000
Operating expenses:
Food and beverage 47,592,000 43,142,000
Payroll and benefits 33,973,000 29,983,000
Depreciation 4,515,000 4,168,000
Amortization of pre-opening costs 499,000 660,000
Other operating expenses 14,409,000 12,854,000
Total operating expenses 100,988,000 90,807,000
General and administrative expenses 5,302,000 4,837,000
Interest expense 431,000 102,000
Revenues from franchised restaurants (463,000) (73,000)
Other income (600,000) (319,000)
Earnings before income taxes 11,608,000 11,538,000
Income taxes 4,295,000 4,269,000
Net earnings $7,313,000 7,269,000
Net earnings per common and common
equivalent share $ .14 .14
Weighted average shares 53,440,000 53,415,000
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
March 29, December 28,
1995 1994
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 225,000 695,000
Receivables 1,639,000 1,665,000
Inventories 3,253,000 2,843,000
Deferred income taxes 2,563,000 2,563,000
Other current assets 1,166,000 1,227,000
Total current assets 8,846,000 8,993,000
Property and equipment:
Land and improvements 87,256,000 86,154,000
Buildings 206,303,000 200,997,000
Equipment 140,549,000 137,968,000
Construction in progress 37,315,000 27,845,000
471,423,000 452,964,000
Less accumulated depreciation 92,629,000 87,988,000
Net property and equipment 378,794,000 364,976,000
Other assets 5,751,000 5,787,000
$393,391,000 379,756,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 66,600,000 65,700,000
Accounts payable 14,094,000 12,615,000
Income taxes payable 4,556,000 438,000
Accrued liabilities 20,921,000 21,174,000
Total current liabilities 106,171,000 99,927,000
Deferred income taxes 10,517,000 10,474,000
Shareholders' equity:
Common stock of $1.00 par value;
authorized 100,000,000 shares;
issued 53,440,000 shares in 1995
and 53,434,000 shares in 1994 53,440,000 53,434,000
Additional paid-in capital 6,628,000 6,599,000
Retained earnings 216,635,000 209,322,000
Total shareholders' equity 276,703,000 269,355,000
$393,391,000 379,756,000
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
March 29, March 30,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 7,313,000 7,269,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 5,145,000 5,041,000
Gain on sale of property and equipment (100,000) -
Decrease (increase) in:
Receivables 26,000 55,000
Inventories (410,000) (215,000)
Other current assets (438,000) (640,000)
Other assets 33,000 (676,000)
Increase (decrease) in:
Accounts payable 1,479,000 2,264,000
Income taxes 4,118,000 2,693,000
Accrued liabilities (253,000) 4,721,000
Deferred income taxes 43,000 43,000
Net cash provided by operating activities 16,956,000 20,555,000
Cash flows from investing activities:
Proceeds from sale of property and equipment 319,000 -
Capital expenditures (18,680,000) (17,991,000)
Net cash used in investing activities (18,361,000) (17,991,000)
Cash flows from financing activities:
Net borrowings (repayment) of notes payable 900,000 (1,700,000)
Proceeds from the issuance of common stock 35,000 25,000
Net cash provided (used) by financing activities 935,000 (1,675,000)
Net increase (decrease) in cash and cash equivalents (470,000) 889,000
Cash and cash equivalents - beginning of period 695,000 1,946,000
Cash and cash equivalents - end of period $ 225,000 2,835,000
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
I. For the Quarter ended March 29, 1995
(Unaudited)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C>
Balances at December 28, 1994 $53,434,000 6,599,000 209,322,000 269,355,000
Net earnings - - 7,313,000 7,313,000
Issuance of common stock
under Stock Option Plans 6,000 29,000 - 35,000
Balances at March 29, 1995 $53,440,000 6,628,000 216,635,000 276,703,000
II. For the Quarter ended March 30, 1994
(Unaudited)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at December 29, 1993 $53,415,000 6,513,000 178,778,000 238,706,000
Net earnings - - 7,269,000 7,269,000
Issuance of common stock
under Stock Option Plans 6,000 19,000 - 25,000
Balances at March 30, 1994 $53,421,000 6,532,000 186,047,000 246,000,000
</TABLE>
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 29, 1995
(Unaudited)
Note 1. Basis of Presentation
The consolidated financial statements include the
financial statements of Ryan's Family Steak Houses,
Inc. and its wholly owned subsidiaries. All
significant intercompany balances and transactions have
been eliminated in consolidation.
The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principals for interim
financial information and the instructions to Form 10-Q
and do not include all of the information and footnotes
required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Consolidated
operating results for the quarter ended March 29, 1995
are not necessarily indicative of the results that may
be expected for the fiscal year ending January 3, 1996.
For further information, refer to the financial
statements and footnotes included in the Company's
annual report on Form 10-K for the fiscal year ended
December 28, 1994.
Note 2. Earnings Per Share
Earnings per share are computed based on the weighted
average number of common and common equivalent shares
outstanding during the period. Common equivalent
shares are represented by shares under option.
Note 3. Reclassifications
Certain 1994 amounts in the accompanying consolidated
financial statements have been reclassified to conform
to the 1995 presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended March 29, 1995 versus March 30, 1994
The Company experienced strong sales growth during the
first quarter of 1995 with restaurant sales up 10% over
the comparable quarter of 1994. Substantially all of
the increase resulted from the 9% unit growth of
Company-owned restaurants, which totaled 215 at March
29, 1995 and 198 at March 30, 1994. The 1995 store
count was comprised of 213 Ryan's restaurants and 2
other restaurants, each representing a different test
concept (see "Liquidity and Capital Resources"). The
1994 store count was comprised entirely of Ryan's
restaurants. Same-store sales, or average unit sales
in restaurants that have been open for at least 18
months and operating during comparable weeks during the
current and prior year, increased 0.2% during the
quarter compared to a 0.0% change during the first
quarter of 1994.
Sales results for 1995 were favorably affected by the
rollout of scatter bars into its Ryan's restaurants.
This format breaks the Mega Bar into five island bars
for easier customer access and more food variety. At
March 29, 1995, scatter bars had been installed in 136
Ryan's, or 64% of all company-owned units. Included in
these installations were 99 retrofits, of which 74 were
completed after the first half of 1994. All new
restaurants since late-1993 have opened with scatter
bars. Management anticipates that most Ryan's will
have scatter bars by the end of 1995.
Total costs and expenses of Company-owned restaurants
include food and beverage, payroll, payroll taxes and
employee benefits, depreciation and amortization,
repairs, maintenance, utilities, supplies, advertising,
insurance, property taxes and licenses. Such costs, as
a percentage of sales, were 86.1% during the first
quarter of 1995 compared to 85.0% in 1994. In 1995,
payroll and benefits increased to 29.0% of sales
compared to 28.0% in 1994 due to new customer service
programs involving both increased restaurant staffing
and various training programs. Food costs increased
slightly to 40.6% of sales compared to 40.4% in 1994
due to higher produce costs occurring late in the
quarter as a result of flooding in California. All
other operating costs, including depreciation and
amortization of pre-opening costs, decreased slightly
to 16.5% of sales in 1995 compared to 16.6% in 1994.
Based on these factors, the Company's gross operating
margins at the restaurant level were 13.9% and 15.0%
for the first quarters of 1995 and 1994, respectively.
General and administrative expenses remained steady at
4.5% of sales during both 1995 and 1994.
Interest expense increased by $329,000 to 0.4% of
sales, resulting principally from less capitalized
interest, which reflects 1995's lower level of
construction activity in relation to the Company's
outstanding debt. Also, the Company's effective
average interest rate increased to 6.4% in 1995
compared to 3.6% in 1994.
Franchise revenues for the first quarter of 1995
increased significantly, amounting to $463,000, or 0.4%
of sales, compared to $73,000 (0.1% of sales) in 1994,
due principally to restored royalty fee payments from
the Company's largest franchisee. Prior to the third
quarter of 1994, this franchisee had not paid any
royalty fees since August 1993, and, accordingly,
royalty fees earned during the first quarter of 1994
were not recognized as revenue at March 30, 1994. In
July 1994, an agreement with the franchisee regarding
both future and past-due royalty fees was reached. The
details of this agreement are noted in the Company's
annual report on Form 10-K for the fiscal year ended
December 28, 1994 under "Management's Discussion and
Analysis of Financial Condition and Results of
Operations: Results of Operations - 1994 Compared to
1993." All required payments subsequent to the
agreement have been made in a timely manner, and,
accordingly, the revenue recognition, albeit on a cash
basis, has been restored. At March 29, 1995, there
were 30 franchised Ryan's compared to 33 at March 30,
1994.
An effective income tax rate of 37.0% was used for the
first quarters of both 1995 and 1994.
Net earnings for the first quarter of 1995 amounted to
$7.31 million compared to $7.27 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's restaurant sales are primarily derived
from cash. Inventories are purchased on credit and are
rapidly converted to cash. Therefore, the Company does
not maintain significant receivables or inventories,
and other working capital requirements for operations
are not significant.
At March 29, 1995, the Company's working capital was a
$97.3 million deficit compared to a $90.9 million
deficit at December 28, 1994. Included in these
amounts are borrowings of $66.6 million and $65.7
million, respectively, under bank lines of credit (see
next paragraph). The Company does not anticipate any
adverse effects from the current working capital
deficit due to significant cash flow provided by
operations, which amounted to $17.0 million for the
quarter ended March 29, 1995 and $54.7 million for the
year ended December 28, 1994.
The Company is also actively progressing with several
casual-dining concepts. As noted earlier, the 1995
restaurant count at March 29, 1995 includes 2 such
units, each representing a different concept. One of
these restaurants was converted from an existing
Ryan's, while the other was new construction. Both
restaurants are currently serving as test units, and
further expansion of these concepts will be limited
pending review of their operating results. The Company
plans to test another concept, which will open during
the second quarter of 1995.
Total capital expenditures for the first quarter of
1995 amounted to $18.7 million. During the quarter,
Ryan's opened 6 new restaurants and closed 3
underperforming stores. For 1995, Ryan's plans to open
24 restaurants, remodel another 20 restaurants and
install scatter bars in approximately 75 to 100
restaurants. Total capital expenditures for 1995 are
estimated at approximately $70 million. Management
estimates that external funding requirements in 1995
will range from $10 million to $15 million. The
Company has formal and informal bank lines of credit
totaling $95 million at floating short-term rates, of
which $66.6 million was utilized and classified as
current debt at March 29, 1995. The Company owns all
of its property and equipment and is under no
significant lease obligations other than for three
parcels of land which are under lease for at least 35
years.
IMPACT OF INFLATION
The Company's operating costs that may be affected by
inflation consist principally of food, payroll and
utility costs. Produce costs are expected to be higher
than normal during the second quarter due to lower
supplies resulting from recent floods in California.
Beef costs are also expected to increase slightly
during the second and third quarters in response to
normal seasonal trends. Additionally, a significant
number of the Company's restaurant employees are paid
at the minimum wage and, accordingly, legislated
changes to the minimum wage will affect the Company's
payroll costs. The Federal minimum wage last increased
in April 1991, and while no additional increases have
been legislated, the topic continues to be actively
debated within the Federal government. Finally, future
benefit costs may be affected by future legislated
changes in medical insurance coverage.
The Company considers its current price structure to be
very competitive. This factor, among others, is
considered by the Company when passing increased costs
on to its customers. Annual menu price increases have
consistently ranged from 1% to 3%.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None reportable.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security
Holders.
(a) The Registrant's Annual Meeting of
Shareholders was held on April 27, 1995.
(b) All members of the Board of Directors,
consisting of Messrs. Way, Cockman,
Edwards, MacKenzie, McCranie, Roberts
and Shoemaker were re-elected as
Directors.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) On February 9, 1995, the Company filed a
report on Form 8-K regarding the
adoption of a Shareholder Rights
Agreement.
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.
RYAN'S FAMILY STEAK HOUSES,
INC.
(Registrant)
/s/Charles D. Way
May 10, 1995 Charles D. Way
Chairman, President and Chief
Executive Officer
/s/Fred T. Grant, Jr.
May 10, 1995 Fred T. Grant, Jr.
Vice President-Finance and
Treasurer
/s/Richard D. Sieradzki
May 10, 1995 Richard D. Sieradzki
Controller
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<FISCAL-YEAR-END> JAN-03-1996
<PERIOD-END> MAR-29-1995
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<ALLOWANCES> 95
<INVENTORY> 3,253
<CURRENT-ASSETS> 8,846
<PP&E> 471,423
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<TOTAL-ASSETS> 393,391
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0
0
<OTHER-SE> 223,263
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</TABLE>
