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 June 28, 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 (29650)
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 June 28, 1995:
53,442,000 shares of common stock, $1.00 Par Value
<TABLE>
PART I. FINANCIAL INFORMATION
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
Quarter Ended
June 28, June 29,
1995 1994
<S> <C> <C>
Restaurant sales $131,363 114,777
Operating expenses:
Food and beverage 53,699 46,812
Payroll and benefits 37,016 31,183
Depreciation 4,722 4,266
Amortization of pre-opening costs 533 625
Other operating expenses 15,500 13,391
Total operating expenses 111,470 96,277
General and administrative expenses 5,433 4,583
Interest expense 455 190
Revenues from franchised restaurants (432) (80)
Other expense (income), net 63 (204)
Earnings before income taxes 14,374 14,011
Income taxes 5,318 5,184
Net earnings $9,056 8,827
Net earnings per common and common
equivalent share $ .17 .16
Weighted average shares 53,443,000 53,425,000
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
Six Months Ended
June 28, June 29,
1995 1994
<S> <C> <C>
Restaurant sales $248,629 221,669
Operating expenses:
Food and beverage 101,291 89,954
Payroll and benefits 70,989 61,166
Depreciation 9,237 8,434
Amortization of pre-opening costs 1,032 1,285
Other operating expenses 29,909 26,245
Total operating expenses 212,458 187,084
General and administrative expenses 10,735 9,420
Interest expense 886 292
Revenues from franchised restaurants (895) (153)
Other income, net (537) (523)
Earnings before income taxes 25,982 25,549
Income taxes 9,613 9,453
Net earnings $16,369 16,096
Net earnings per common and common
equivalent share $ .31 .30
Weighted average shares 53,441,000 53,423,000
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 28, December 28,
1995 1994
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $415 695
Receivables 1,722 1,665
Inventories 3,337 2,843
Deferred income taxes 2,563 2,563
Other current assets 1,701 1,227
Total current assets 9,738 8,993
Property and equipment:
Land and improvements 89,704 86,154
Buildings 213,645 200,997
Equipment 132,255 137,968
Construction in progress 36,918 27,845
472,522 452,964
Less accumulated depreciation 82,643 87,988
Net property and equipment 389,879 364,976
Other assets 5,744 5,787
$405,361 379,756
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 67,500 65,700
Accounts payable 17,593 12,615
Income taxes payable - 438
Accrued liabilities 23,927 21,174
Total current liabilities 109,020 99,927
Deferred income taxes 10,570 10,474
Shareholders' equity:
Common stock of $1.00 par value;
authorized 100,000,000 shares;
issued 53,442,000 shares in 1995
and 53,434,000 shares in 1994 53,442 53,434
Additional paid-in capital 6,638 6,599
Retained earnings 225,691 209,322
Total shareholders' equity 285,771 269,355
$405,361 379,756
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 28, June 29,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net earnings $16,369 16,096
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 10,662 10,319
Loss (gain) on sale of property
and equipment 69 (162)
Decrease (increase) in:
Receivables (57) (69)
Inventories (494) (201)
Other current assets (1,505) (1,246)
Other assets 36 (654)
Increase (decrease) in:
Accounts payable 4,978 1,046
Income taxes (438) (1,120)
Accrued liabilities 2,753 5,713
Deferred income taxes 96 95
Net cash provided by operating
activities 32,469 29,817
Cash flows from investing activities:
Proceeds from sale of property and
equipment 1,193 431
Capital expenditures (35,789) (31,820)
Net cash used in investing
activities (34,596) (31,389)
Cash flows from financing activities:
Net borrowings (repayment) of notes
payable 1,800 (200)
Proceeds from the issuance of
common stock 47 40
Net cash provided (used) by
financing activities 1,847 (160)
Net decrease in cash and cash
equivalents (280) (1,732)
Cash and cash equivalents - beginning
of period 695 1,946
Cash and cash equivalents - end
of period $415 214
Supplemental disclosure -
Cash paid during the year for:
Interest, net of amount capitalized $796 212
Income taxes $10,146 10,518
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
I. For the Six Months ended June 28, 1995
(Unaudited)
$1 Par Value Additional
Common Paid-In Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C>
Balances at December 28, 1994 $53,434 6,599 209,322 269,355
Net earnings - - 16,369 16,369
Issuance of common stock
under Stock Option Plans 8 39 - 47
Balances at June 28, 1995 $53,442 6,638 225,691 285,771
II. For the Six Months ended June 29, 1994
(Unaudited)
$1 Par Value Additional
Common Paid-In Retained
Stock Capital Earnings Total
<C> <C> <C> <C> <C>
Balances at December 29, 1993 $53,415 6,513 178,778 238,706
Net earnings - - 16,096 16,096
Issuance of common stock
under Stock Option Plans 9 31 - 40
Balances at June 29, 1994 $53,424 6,544 194,874 254,842
See accompanying notes to consolidated financial statements.
</TABLE>
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 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 and the six months ended June 28,
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 consolidated 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 June 28, 1995 versus June 29, 1994
The Company experienced strong sales growth during the
second quarter of 1995 with restaurant sales up 14% over the
comparable quarter of 1994. A significant portion of the
increase resulted from the 9% unit growth of Company-owned
restaurants, which totaled 222 at June 28, 1995 and 202 at
June 29, 1994. The 1995 store count was comprised of 219
Ryan's restaurants and 3 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 3.0% during the
quarter compared to a 1.1% decrease during the second
quarter of 1994.
Sales results for 1995 were favorably affected by the
continuing rollout of scatter bars into the Company's Ryan's
restaurants. This format breaks the Mega Bar into five
island bars for easier customer access and more food
variety. At June 28, 1995, scatter bars had been installed
in 166 Ryan's, or 76% of all company-owned units. Included
in these installations were 123 retrofits, of which 98 were
completed during the preceding 12 months. All new
restaurants since late-1993 have opened with scatter bars.
Management anticipates that most Ryan's will have scatter
bars by mid-1996.
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 84.9% during the second quarter of 1995 compared
to 83.9% in 1994. In 1995, payroll and benefits increased
to 28.2% of sales compared to 27.2% in 1994 due to new
customer service programs involving both increased
restaurant staffing and various training programs. Although
1995's food costs increased only slightly to 40.9% compared
to 40.8% in 1994, higher produce prices (lettuce in
particular), resulting from the winter flooding in
California, adversely affected 1995's costs by an estimated
$800,000, or 0.6% of sales. Lettuce prices have returned to
normal with the arrival of new crops, and, absent any
unforeseen abnormal price fluctuations, management believes
that food costs for the remaining 6 months of 1995 should
compare favorably to 1994. All other operating costs,
including depreciation and amortization of pre-opening
costs, decreased slightly to 15.8% of sales in 1995 compared
to 15.9% in 1994. Based on these factors, the Company's
gross operating margins at the restaurant level were 15.1%
and 16.1% for the second quarters of 1995 and 1994,
respectively.
General and administrative expenses increased slightly to
4.1% of sales in 1995 compared to 4.0% in 1994 due
principally to higher manager training wages and legal fees.
Interest expense increased by $265,000 to 0.3% 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 6.5%
in 1995 compared to 4.4% in 1994.
Franchise revenues for the second quarter of 1995 increased
significantly, amounting to $432,000, or 0.3% of sales,
compared to $80,000 (0.1% of sales) in 1994, due principally
to restored royalty fee payments from the Company's largest
franchisee, Family Steak Houses of Florida, Inc. 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 second quarter of 1994 were not
recognized as revenue at June 29, 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 June 28, 1995, there were 28 franchised Ryan's
compared to 31 at June 29, 1994.
Other expense (income) is normally additive to net earnings,
but was a net charge (deductive) amounting to $63,000 in
1995 compared to net income (additive) of $204,000 in 1994.
In 1995, a combined loss on sale of excess property
amounting to $170,000 resulted in the net charge for the
quarter.
An effective income tax rate of 37.0% was used for the
second quarters of both 1995 and 1994.
Net earnings for the second quarter of 1995 amounted to
$9.06 million compared to $8.83 million in 1994.
Six Months Ended June 28, 1995 versus June 29, 1994
For the six months ended June 28, 1995, restaurant sales
were up 12% compared to the same period in 1994, principally
due to 9% average unit growth. Same-store sales increased
1.6% during the first six months of 1995 compared to a 0.6%
decline in 1994.
Six-month costs and expenses as detailed above were 85.5%
and 84.4% of sales for 1995 and 1994, respectively. During
the first six months of 1995, costs and expenses were most
affected by factors similar to those noted in the second
quarter discussion, namely higher food and payroll costs (up
0.2% and 1.0% of sales, respectively). Depreciation,
amortization of pre-opening costs and other operating
expenses decreased slightly to 16.1% in 1995 compared to
16.2% in 1994. Based on these factors, the Company's gross
operating margins at the restaurant level were 14.5% and
15.6% for the first six months of 1995 and 1994,
respectively.
General and administrative expenses as a percentage of sales
were 4.3% in 1995 and 4.2% in 1994. Interest expense
increased by $594,000 to 0.4% of sales due to the same
factors noted in the second quarter discussion. Revenues
from franchised restaurants increased by $742,000 due
principally to the restoration of royalty income from the
Company's largest franchisee (see second quarter
discussion). Effective income tax rates used for the six-
month periods were 37.0% in both 1995 and 1994.
Net earnings for the first six months of 1995 amounted to
$16.4 million compared to $16.1 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 June 28, 1995, the Company's working capital was a $99.3
million deficit compared to a $90.9 million deficit at
December 28, 1994. Included in these amounts are borrowings
of $67.5 million and $65.7 million, respectively, under bank
lines of credit (see fifth succeeding 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 $32.5 million for
the six months ended June 28, 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 June 28, 1995 includes 3 such units, each
representing a different concept. Two of these restaurants
were converted from existing Ryan's, while the other was new
construction. All three restaurants are currently serving
as test units, and further expansion of these concepts will
be limited pending review of their operating results.
Total capital expenditures for the first six months of 1995
amounted to $35.8 million. For the first six months of 1995,
the Company opened 13 new restaurants and closed 3
underperforming stores as follows:
<TABLE>
New Restaurants
Test
Quarter Ryan'sConcepts Closed Net
<S> <C> <C> <C> <C>
First 6 0 (3) 3
Second 6 1 (0) 7
Year-to-date 12 1 (3) 10
</TABLE>
For remainder of 1995, Ryan's plans to open 10 additional
Ryan's and 2 other restaurants, each being a second unit of
one of the existing test concepts, for a total of 25 new
restaurants (22 Ryan's and 3 test concepts). All such
expansion will occur in states within or contiguous to the
Company's current 20-state operating area. The Company
currently does not plan any international expansion of
Company-owned stores.
The Company is currently concentrating its efforts on
Company-owned stores and is not actively pursuing any
additional franchised locations, either domestically or
internationally.
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 $115 million at floating short-
term rates, of which $67.5 million was utilized and
classified as current debt at June 28, 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.
Shareholder Rights Agreement
On January 26, 1995, the Company's Board of Directors
adopted a Shareholder Rights Agreement (the "Agreement") and
declared a dividend of one Common Stock Purchase Right (a
"Right") for each outstanding share of Common Stock to
shareholders of record on February 10, 1995. Such Rights
only become exercisable ten business days after (i) a public
announcement that a person or group, except for certain
exempt persons specified in the Agreement, (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of
the Company's Common Stock; or (ii) a person or group
commences or publicly announces its intention to commence a
tender or exchange offer for an amount of the Company's
Common Stock that would result in the ownership by such
person or group of 15% or more of the Common Stock.
Each Right may initially be exercised to acquire a one-half
share of the Company's Common Stock at an exercise price of
$25, subject to adjustment. Thereafter, upon the occurrence
of certain events specified in the Agreement (for example,
if the Company is the surviving corporation of a merger with
an Acquiring Person), the Rights entitle holders other than
the Acquiring Person to acquire upon exercise Common Stock
having a market value of twice the exercise price of the
Rights. Alternatively, upon the occurrence of certain other
events specified in the Agreement (for example, if the
Company is acquired in a merger or other business
combination transaction in which the Company is not the
surviving corporation), the Rights would entitle holders
other than the Acquiring Person to acquire upon exercise
Common Stock of the acquiring company having a market value
of twice the exercise price of the Rights.
The Rights may be redeemed by the Company at a redemption
price of $.001 per Right at any time prior to the tenth
business day following public announcement that a 15%
position has been acquired and before the final expiration
date of the Rights. After the redemption period has
expired, the Company's right of redemption may be
reinstalled under certain circumstances outlined in the
Agreement. The Rights will expire on February 10, 2005.
IMPACT OF INFLATION
The Company's operating costs that may be affected by
inflation consist principally of food, payroll and utility
costs. 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.
None reportable.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) None.
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)
August 14, 1995 /s/Charles D. Way
Charles D. Way
Chairman, President and Chief Executive
Officer
August 14, 1995 /s/Fred T. Grant, Jr.
Fred T. Grant, Jr.
Vice President-Finance and Treasurer
August 14, 1995 /s/Richard D. Sieradzki
Richard D. Sieradzki
Controller
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> QTR-2
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<PERIOD-END> JUN-28-1995
<CASH> 415
<SECURITIES> 0
<RECEIVABLES> 1,855
<ALLOWANCES> 133
<INVENTORY> 3,337
<CURRENT-ASSETS> 9,738
<PP&E> 472,522
<DEPRECIATION> 82,643
<TOTAL-ASSETS> 405,361
<CURRENT-LIABILITIES> 109,020
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<COMMON> 53,442
0
0
<OTHER-SE> 232,329
<TOTAL-LIABILITY-AND-EQUITY> 405,361
<SALES> 248,629
<TOTAL-REVENUES> 250,061
<CGS> 172,280
<TOTAL-COSTS> 223,193
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 886
<INCOME-PRETAX> 25,982
<INCOME-TAX> 9,613
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</TABLE>
