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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JANUARY 3, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. 0-14311
FAMILY STEAK HOUSES OF FLORIDA, INC.
(exact name of registrant as specified in its charter)
FLORIDA NO. 59-2597349
(State of Incorporation) (I.R.S. Employer Identification)
2113 FLORIDA BOULEVARD
NEPTUNE BEACH, FLORIDA 32266
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (904) 249-4197
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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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
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 NO X
As of March 8, 1996, 10,860,033 shares of Common Stock of the registrant
were outstanding. The aggregate market value of such voting Common Stock (based
upon the closing sale price of the registrant's Common Stock on the NASDAQ
National Market System on March 8, 1996, as reported in The Wall Street Journal)
held by non-affiliates of the registrant was approximately $7,466,300.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1995 Annual Report to Shareholders are
incorporated by reference into Part II. Portions of the Proxy Statement for the
registrant's 1996 Annual Meeting of Shareholders are incorporated by reference
into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
Family Steak Houses of Florida, Inc. ("Family" or the "Company"), is the
sole franchisee of Ryan's Family Steak House restaurants ("Ryan's restaurants")
in the State of Florida.
The Company's first Ryan's restaurant was opened in Jacksonville, Florida,
in May 1982. As of January 3, 1996, the Company operated 24 Ryan's restaurants
in Florida, including nine in north Florida and fifteen in central and west
Florida.
A Ryan's restaurant is a family-oriented restaurant serving high-quality,
reasonably-priced food in a casual atmosphere with server-assisted service.
Ryan's restaurants serve lunch and dinner seven days a week and offer a variety
of charbroiled entrees, including various cuts of beef, chicken, and seafood.
Most of the restaurants serve a brunch on weekends only. Each restaurant
features a diverse selection of items from either a series of "scatter bars" or
a 65-foot, self-service, all-you-can-eat Mega Bar<tm>, and a separate fresh
bakery and dessert bar. In addition to traditional salad bar items, the
scatter bars or Mega Bars<tm> offer hot meats, pre-made salads, soups, baked
potatoes with toppings, cheeses and a variety of vegetables.
The Company believes that its operating strategy of selling top-quality
meals at reasonable prices, at food costs to the Company which are higher than
the industry average, creates a perception of value to its customers.
The Company operates its Ryan's restaurants under a Franchise Agreement
with Ryan's Family Steak Houses, Inc., ("Ryan's", or the "Franchisor") which
grants the Company the right to operate Ryan's Family Steak House restaurants
throughout most of the State of Florida.
COMPANY HISTORY
The Company was formed by the combination, effective February 1986, of six
limited partnerships, each of which owned and operated a Ryan's restaurant
franchise. In April 1986, the Company issued 4,266,000 shares of its common
stock in exchange for the assets and liabilities of the predecessor
partnerships and 1,134,000 shares of its common stock to Eddie L. Ervin, Jr.,
in consideration for Mr. Ervin assigning to the Company all of his rights under
the
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Franchise Agreement (as defined below). The Company completed its initial
public offering of 4,500,000 shares of its common stock in 1986 resulting
in net proceeds to the company of approximately $4,145,000.
RECENT DEVELOPMENTS
In March 1995, the Company entered into amended and restructured debt
agreements with its lenders. In August 1995, the Company received a notice from
The Travelers Insurance Company that it had sold its notes and certain warrants
it held for purchases of the Company's common stock to Cerberus Partners, L.P.
For a complete discussion of the debt restructure, see Note 5 to the
Consolidated Financial Statements in the Company's 1995 Annual Report to
Shareholders.
FRANCHISE AGREEMENT
The Company operates its Ryan's Restaurants under a Franchise Agreement
between the Company and the Franchisor dated as of September 16, 1987, which
Franchise Agreement amended and consolidated all previous franchise agreements
(as amended, the "Franchise Agreement"). The Franchise Agreement extends
through December 31, 2010 and provides for two additional ten-year renewal
options. The renewal options are subject to certain conditions, including the
condition that the Company has fully and faithfully performed its obligations
under the Franchise Agreement during its original term. Under the terms of the
Franchise Agreement, the Company has the right to use the registered mark
"Ryan's Family Steak House" and the right to use the Franchisor's techniques in
the operation of Ryan's Family Steak House restaurants.
In July 1994, the Company and the Franchisor amended the Franchise
Agreement. The amended agreement requires the Company to pay a royalty fee of
3.0% through May 1997 and 4.0% thereafter on the gross receipts of each Ryan's
Family Steak House restaurant. The Company paid royalty fees of 4.5% prior to
May 1994. Total royalty fee expenses were $1,263,200, $1,561,100 and $2,406,400
for the years ended January 3, 1996, December 28, 1994 and December 29, 1993,
respectively.
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The Franchise Agreement requires the Company to operate a minimum number
of Ryan's restaurants on December 31 of each year. Failure to operate the
minimum number will result in the loss of exclusivity rights to the Ryan's
concept in Florida. The following schedule outlines the number of Ryan's
restaurants required to be operated by the Company on December 31 of each year
under the Franchise Agreement:
<TABLE>
<CAPTION>
Number of
Restaurants Required to
End of Fiscal Year be in Operation
<S> <C>
1994-1996 24
1997 25
1998 26
1999 27
2000 28
2001 and subsequent years Increases by one each year
</TABLE>
Prior to the June 1994 amendment to the Franchise Agreement, the Company
held exclusive franchise rights to build Ryan's restaurants in the State of
Florida, with the exception of Panama City, Florida and Escambia County,
Florida, where the Franchisor has the right to operate Ryan's restaurants.
Under the July 1994 Amendment to the Franchise Agreement, the Company
relinquished the franchise rights to most counties in northwest Florida and
south Florida in exchange for forgiveness of $500,000 in past due
royalty fees. The Company has the right to repurchase the exclusive franchise
rights to these counties for $500,000 at any time prior to June 30, 1998. In
addition, the Franchisor agreed not to develop any Ryan's restaurants in the
south Florida territory prior to June 30, 1996.
In conjunction with the execution of the July 1994 amendment to the
Franchise Agreement, the Company executed and delivered a note to the
Franchisor for payment of $800,000 in past due royalty fees. (See Note 5 to
the Consolidated Financial Statements in the Company's 1995 Annual Report to
Shareholders).
The Franchise Agreement contains provisions relating to the operation of
the Company's Ryan's restaurants. Upon the Company's failure to comply with
such provisions, the Franchisor may terminate the Franchise Agreement if such
default is not cured within 30 days of notice from the Franchisor. Termination
of the Franchise Agreement would result in the loss of the Company's right to
use the "Ryan's Family Steak House" name and concept and could result in the
sale of the physical assets of the Company to the Franchisor pursuant to a
right of first refusal. Termination of the Company's rights under the
Franchise Agreement may result in
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the disruption, and possibly the discontinuance, of the Company's operations.
The Company believes that it has operated and maintained each of its Ryan's
Family Steak House restaurants in accordance with the operational procedures
and standards set forth in the Franchise Agreement, as amended.
OPERATIONS OF RYAN'S RESTAURANTS
FORMAT. As of March 5, 1996, 23 of the Company's Ryan's Restaurants are
located in free-standing buildings which vary in size from 7,500 to 12,000
square feet. One of the Company's Ryan's restaurants is located in a mall.
Each restaurant is constructed of brick or stucco walls, interior and exterior,
with exposed woodwork. The interior of each Ryan's restaurant contains a
dining room, a customer ordering area, and a kitchen. The dining rooms seat a
total of between 270 and 420 persons and highlight centrally located,
illuminated scatter bars or Mega Bars<tm> and a fresh bakery bar. Each Ryan's
restaurant has parking for approximately 100 to 175 cars on lots of overall
size of approximately 50,000 to 70,000 square feet.
The Ryan's restaurants operate seven days a week. Hours of operation are
from 11:00 a.m. to 10:00 p.m., Sunday through Thursday, and from 11:00 a.m. to
11:00 p.m., Friday and Saturday. Restaurants that open for brunch open at 8:00
a.m. Saturday and Sunday. In a Ryan's restaurant, the customer enters the
restaurant, orders from the menu, and enters the dining room. Beverages are
brought to the table by servers. Entrees are cooked to order. The customer
ordering the salad bar is given unlimited access to the scatter bars or Mega
Bars<tm> and the bakery dessert bar. Customers receive table service of the
entree and beverage refills. For the year ended January 3, 1996, the average
weekly customer count per restaurant was approximately 5,520 and the average
cost of a meal, with beverage, was approximately $6.00.
RESTAURANT MANAGEMENT AND SUPERVISION. The Company manages the Ryan's
restaurants pursuant to a standardized operating and control system together
with comprehensive recruiting and training of personnel to maintain food and
service quality. In each Ryan's restaurant, the management group consists of a
general manager, a manager and one or two assistant managers, depending on
sales volume. The Company requires at least two members of the management
group on duty during all peak serving periods. Management-level personnel
usually begin employment at the manager trainee or assistant manager level,
depending on prior restaurant management experience. All new management-level
personnel must complete the Company's six-week training period prior to being
placed in a management position.
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Each restaurant management group reports to a supervisor. Presently, the
supervisors each oversee the operations of five to seven restaurants. The
supervisors report directly to the Vice President of Operations. Communication
and support from all departments in the Company are designed to assist the
supervisors in responding promptly to local problems and opportunities.
All restaurant managers and supervisors participate in incentive programs
based upon the profitability of their restaurants and upon the achievement of
certain pre-set goals. The Company believes these incentive programs enable it
to operate more efficiently and to attract qualified managers.
PURCHASING, QUALITY AND COST CONTROL. The Company has a centralized
purchase control program which is designed to ensure uniform product quality
in all restaurants. The program also helps to maintain reduced food, beverage,
and supply costs. The Company purchases approximately 90% of the products used
by the Company's Ryan's restaurants through the centralized purchase control
program. USDA choice grain-fed beef, the Company's primary commodity, is
closely monitored by the Company for advantageous purchasing and quality
control. The Company purchases beef through various producers and brokers both
on a contract basis and on a spot basis. Beef and other products are generally
delivered directly to the restaurants three times weekly, except for fresh
produce, which is delivered three to five times per week. The Company believes
that satisfactory sources of supply are available for all the items it
regularly uses.
The Franchise Agreement requires that all suppliers to Ryan's restaurants
be approved by the Franchisor. Through its relationship with the Franchisor,
the Company has obtained favorable pricing on the purchase of food products
from several suppliers. In June 1995, the Company renewed its agreement with
Kraft Foodservice, Inc. to serve as its primary supplier. Kraft was
subsequently purchased by Alliant Foodservice, Inc. The Alliant agreement has a
five-year term and is cancellable at any time with 60 days notice.
The Company maintains centralized financial and accounting controls for
its Ryan's restaurants. On a daily basis, restaurant managers forward customer
counts, sales information and supplier invoices to Company headquarters. On a
weekly basis, restaurant managers forward summarized sales reports and payroll
data. Physical inventories of all food and supply items are taken weekly, and
meat is inventoried daily.
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DEVELOPMENT
GENERAL. The Company operated 24 Ryan's restaurants as of January 3, 1996.
SITE LOCATION AND CONSTRUCTION. The Company considers the specific
location of a restaurant to be important to its long-term success. The site
selection process focuses on a variety of factors, including trade area
demographics (such as population density and household income level), an
evaluation of site characteristics (such as visibility, accessibility, and
traffic volume), and an analysis of the potential competition. In addition,
site selection is influenced by the general proximity of a site to other Ryan's
restaurants in order to improve the efficiency of the Company's field
supervisors and potential marketing programs. The Company obtains its new
restaurant sites using its real estate subsidiary. The Company generally
locates its restaurants near or adjacent to residential areas in an effort to
capitalize on repeat business from such areas as opposed to transient business.
The Company constructs its Ryan's restaurants using its contracting
subsidiary. Management believes that by performing site selection and
restaurant construction internally, the Company can maintain better control of
site selection, real estate cost and construction performance. While the
Company has not required performance and payment bonds, it undertakes to
closely supervise and monitor all construction and confirm payment of
subcontractors and suppliers. New Ryan's restaurants generally are completed
within three months of the date on which construction is commenced.
MANAGEMENT OF NEW RESTAURANTS. When a new Ryan's restaurant is opened,
the principal restaurant management positions are staffed with personnel who
have prior experience in a management position at another of the Company's
restaurants and who have undergone special training. Prior to opening, all
staff personnel at the new location undergo one week of intensive training
conducted by the Company's restaurant training team. Such training includes
preopening drills in which test meals are served to the invited public. Both
the staff at the new location and personnel experienced in store openings at
other locations participate in the training and drills.
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JOINT VENTURE
In December 1994, the Company formed a new subsidiary, Family Steak JV,
Inc. which acquired a 50% ownership in a Florida limited liability company,
Cross Creek Barbeque, L.C. ("Cross Creek"), for the purpose of opening a new
restaurant. The Company contributed certain furnishings, fixtures, and
equipment owned by its Wrangler's Roadhouse, Inc. subsidiary to Cross Creek and
the other 50% owner of Cross Creek contributed the cash necessary to remodel
and open the new Cross Creek restaurant. Wrangler's Roadhouse, Inc. leases the
land and building it formerly occupied to Cross Creek. The Cross Creek
restaurant opened in January 1995. As a result of unsatisfactory operational
performance, the Company sold its interest in the Cross Creek restaurant in
July 1995.
PROPRIETARY TRADE MARKS
The name "Ryan's Family Steak House," along with all ancillary signs,
building design and other symbols used in conjunction with the name, and the
name "Mega Bar", are the primary trademarks and service marks of the
Franchisor. Such marks are registered in the United States. All of these
registrations and the goodwill associated with the Franchisor's trademarks are
of material importance to the Company's business and are licensed to the
Company under the Franchise Agreement.
COMPETITION
The food service business in Florida is highly competitive and is often
affected by changes in the taste and eating habits of the public, economic
conditions affecting spending habits, local demographics, traffic patterns and
local and national economic conditions. The principal bases of competition in
the industry are the quality and price of the food products offered. Location,
speed of service and attractiveness of the facilities are also important
factors. The Company's restaurants are in competition with restaurants
operated or franchised by national, regional and local restaurant companies
offering a similar menu, many of which have greater resources than the Company.
The Company also is in competition with specialty food outlets and other
vendors of food.
In addition, the Franchisor has the right to operate one Ryan's restaurant
in Panama City, Florida, one Ryan's restaurant in Pensacola, Florida, and
operate additional Ryan's restaurants in Escambia County, Florida if such
restaurants are not located within five miles of a Ryan's restaurant operated
by the Company. Even though the Company believes that such five mile location
restriction will prevent direct competition between a restaurant owned by the
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Company and a restaurant owned by the Franchisor, competition with restaurants
owned by the Franchisor could occur. In addition, beginning in June 1996, the
Franchisor has the right to operate restaurants in several other west Florida
and south Florida counties.
EMPLOYEES
As of January 3, 1996, the Company employed approximately 1,320 persons,
of whom approximately 50% are considered by management as part-time employees.
No labor unions currently represent any of the Company's employees. The
Company has not experienced any work stoppages attributable to labor disputes
and considers employee relations to be good.
EXECUTIVE OFFICERS
The following persons were executive officers of the Company effective
January 3, 1996:
Lewis E. Christman, Jr., age 76, has been President and Chief Executive
Officer of the Company since April 1994. Mr. Christman was hired as a
consultant to oversee and direct the Company's purchasing program in January
1994 and has been a Director of the Company since May 1993. In addition, Mr.
Christman serves as President of each of the Company's subsidiaries. Mr.
Christman has been a partner in East Coast Marketing since 1990. From 1979 to
1989, Mr. Christman served as Chairman of the Board of Neptune Marketing, Inc.,
a food brokerage company.
Edward B. Alexander, age 37, has been Secretary and Treasurer of the
Company since November 1990. In addition, Mr. Alexander serves as Secretary of
each of the Company's subsidiaries. Mr. Alexander served as controller of the
Company from January 1989 to April 1990 and as Director of Finance since April
1990. From April 1985 until December 1988, Mr. Alexander was employed as
controller for Mac Papers, Inc., a wholesale paper products distributor. Prior
to April 1985, Mr. Alexander served as a senior accountant for the accounting
firm of Touche Ross & Co.
Bob Martin, age 67, has been Vice President of Family Steak Houses,
Inc. since April 1994. In addition, Mr. Martin has been Vice President of
Steak House Construction since 1986. Mr. Martin was project manager and
construction supervisor for all of the Company's restaurants. Prior to 1981,
Mr. Martin was Vice President of Universal Environmental Control Construction
Inc. from 1973 to 1981.
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Robert Scott, age 43, has been Vice President of Operations for the
Company since July 1994. From May 1983 to July 1994, Mr. Scott was employed by
Golden Corral Family Restaurants as a District Manager, responsible for 35
restaurants in his division. From November 1978 to April 1982, Mr. Scott was
employed as the Manager of Operations for Hardwicke Corporation (Restaurants
and Pubs). Prior to 1978, Mr. Scott was General Manager of a Ground Round
Restaurant.
William Stanley Smith, Jr., age 59, has been Executive Vice President of
the Company since April 1995. From June 1994 to April 1995, Mr. Smith was a
consultant to the Company. From October 1985 to June 1994, Mr. Smith served as
Vice President of Development of the Company. In addition, Mr. Smith serves as
Vice President of each of the Company's subsidiaries.
GOVERNMENT REGULATION
The Company is subject to the Fair Labor Standards Act which governs such
matters as minimum wage requirements, overtime and other working conditions. A
large number of the Company's restaurant personnel are paid at or slightly
above the federal minimum wage level and, accordingly, any change in such
minimum wage will affect the Company's labor costs. The Company is also subject
to the Equal Employment Opportunity Act and a variety of federal and state
statutes and regulations. The Company's restaurants are constructed to meet
local and state building requirements and are operated in accordance with state
and local regulations relating to the preparation and service of food.
The Company believes that it is in substantial compliance with all
applicable federal, state and local statutues, regulations and ordinances and
that compliance has had no material effect on the Company's capital
expenditures, earnings or competitive position, and such compliance is not
expected to have a material adverse effect upon the Company's operations. The
Company, however, cannot predict the impact of possible future legislation or
regulation on its operations.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company procures its food and other products from a variety of
suppliers, and follows a policy of obtaining its food and products from several
major suppliers under competitive terms. A substantial portion of the beef
used by the Company is obtained from one supplier, although the Company
believes comparable beef meeting its specifications is available in adequate
quantities from other suppliers. To ensure against interruption in the flow of
food supplies due to unforeseen or catastrophic events, to take advantage of
favorable purchasing opportunities, and to insure that
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meat received by the Company is properly aged, the Company maintains a two to
six week supply of beef.
WORKING CAPITAL REQUIREMENTS
Substantially all of the Company's revenues are derived from cash sales.
Inventories are purchased on credit and are converted rapidly to cash. The
Company does not maintain significant receivables and inventories. Therefore,
with the exception of debt service, working capital requirements for continuing
operations are not significant.
In March 1995, the Company entered into an Amended and Restated Note
Agreement, dated as of February 1, 1995, with The Travelers Insurance Company
and certain of its affiliates ("the Note Agreement"). In August 1995, the
Travelers Notes were sold to Cerberus Partners, L.P. The Cerberus Notes are due
May 30, 1998 and provide for an interest rate of 9.0%, and monthly principal
reductions of $65,000 beginning January 1, 1996. As of January 3, 1996, the
outstanding balance due under the Cerberus Notes was $11,607,800.
The Note Agreement includes detachable Warrants for purchases of up to
1,750,000 shares of the Company's common stock at an exercise price of $.40 per
share. The Cerberus Notes are secured by second mortgages on twenty-two of the
Company's restaurant properties. The Note Agreement provides for various
covenants including prepayment options, the maintenance of prescribed debt
service coverages, limitations on the declaration of cash dividends, sale of
assets, and certain other restrictions.
Also in March 1995, the Company entered into an Amended and Restated Loan
Agreement with The Daiwa Bank, Limited, and SouthTrust Bank of Alabama,
National Association (the "Bank Loan"), which extends the maturity date of its
secured term loan with the banks until May 30, 1998. The Bank Loan bears
interest at prime rate plus 0.50%, with monthly principal payments of $41,250
beginning April 1, 1995 ($67,100 prior to April 1, 1995). The Bank Loan is
secured by first mortgages on twenty-two of the Company's restaurant
properties, and provides for various covenants substantially consistent with
those of the Travelers Agreement. As of January 3, 1996, the outstanding
balance under the Bank Loan was $4,163,000.
SEASONALITY
The Company's operations are subject to some seasonal fluctuations.
Revenues per restaurant generally increase from January through April and
decline from September through December.
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RESEARCH
The Company relies on the Franchisor to maintain ongoing research programs
relating to the development of new products and evaluation of marketing
activities. Although research and development activities are important to the
Company, no expenditures for research and development have been incurred by the
Company.
CUSTOMERS
No material part of the Company's business is dependent upon a single
customer or a few customers.
INFORMATION AS TO CLASSES OF SIMILAR PRODUCTS OR SERVICES
The Company operates in only one industry segment. All significant
revenues and pre-tax earnings relate to retail sales of food to the general
public through restaurants owned and operated by the Company. The Company has
no operations outside the continental United States.
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
Location Date Opened
-------- -----------
<S> <C>
Jacksonville May 1982
Jacksonville May 1983
Jacksonville November 1983
Orange Park May 1984
Jacksonville May 1985
Jacksonville July 1985
Ocala September 1986
Neptune Beach November 1986
Lakeland February 1987
Lakeland March 1987
Winter Haven August 1987
Apopka September 1987
Gainesville December 1987
Hudson February 1988
New Port Richey May 1988
Tampa June 1988
Tallahassee August 1988
Daytona Beach September 1988
Tampa November 1988
Orlando January 1989
Orlando February 1989
Clearwater August 1989
Melbourne November 1989
Lake City March 1991
</TABLE>
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As of March 1995, the Company operated 24 Ryan's restaurants. The specific
rate at which the Company is able to open new restaurants will be determined by
its ability to locate suitable sites on satisfactory terms, raise the necessary
capital, secure appropriate governmental permits and approvals and recruit and
train management personnel.
As of January 3, 1996, the Company owned the real property on which 22 of
its restaurants were located. All of these properties were subject to first
and second mortgages securing the Cerberus Notes and the Bank Loan.
The Company leases the real property on which two of its restaurants are
located. Those restaurants are located at 3546 Blanding Boulevard,
Jacksonville, Florida and in Clearwater, Florida.
The executive offices of the Company, consisting of approximately 3,500
square feet, are leased at a monthly rental rate of $2,680, plus sales tax,
from William Stanley Smith, Jr., an officer and director of the Company. The
Company paid $35,995 in rental payments to Mr. Smith in fiscal year 1995.
The Company currently leases 2,800 square feet of mixed warehouse and
office space from Eddie L. Ervin, Jr., a former officer and director of the
Company. The aggregate monthly payment due is approximately $1,495, plus sales
tax. The Company paid $20,151 in rental payments to Mr. Ervin in fiscal year
1995.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various pending legal proceedings arising in the
normal course of business. In the opinion of management, based on the advice
of legal counsel the ultimate disposition of these claims and litigation will
not have a material adverse effect on the financial position or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information contained under the caption "Common Stock Data" in the
Company's 1995 Annual Report to Shareholders is incorporated herein by
reference.
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ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Five-Year Financial Summary"
in the Company's 1995 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
1995 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company and the Report of
Independent Certified Public Accountants as contained in the Company's 1995
Annual Report to Shareholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors contained under the caption "Election
of Directors" in the Company's Proxy Statement for the 1996 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission
prior to May 2, 1996, is incorporated herein by reference.
Securities and Exchange Commission Rules under Section 16(a) of the
Securities Exchange Act of 1934 require the Company's officers and directors,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the National Association of Securities
Dealers and to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the 1995 fiscal
year, all filing requirements applicable to its officers,
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directors, and greater-than-10% beneficial owners were complied with on a
timely basis, except as set forth under the caption "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Company's Proxy Statement
for the Annual Meeting of Shareholders, which will be filed with the Securities
and Exchange Commission prior to May 2, 1996, which is incorporated herein by
reference.
The information regarding executive officers is set forth in Item 1 of
this report under the caption "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Pay" in the
Company's Proxy Statement for the 1996 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission prior to May 2, 1996,
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 1996
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission prior to May 2, 1996, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Election of Directors -
Certain Relationships and Related Transactions" in the Company's Proxy
Statement for the 1996 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission prior to May 2, 1996, is incorporated
herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)1. The financial statements listed below are filed with this report on
Form 10-K or are incorporated herein by reference from the Company's
1995 Annual Report to Shareholders. With the exception of the pages
listed below, the 1995 Annual Report to Shareholders is not deemed
"filed" as a part of this report on Form 10-K.
<TABLE>
<CAPTION>
Page
Reference
---------
Form 1995
10-K Annual Report
---- -------------
<S> <C> <C>
Consent of Independent Certified
Public Accountants F-1
Report of Independent Certified
Public Accountants 21
Consolidated Statements of Operations 8
Consolidated Balance Sheets 9
Consolidated Statements of Share-
holders' Equity 11
Consolidated Statements of Cash Flows 10
Notes to Consolidated Financial
Statements 12
</TABLE>
(a)2. No financial statement schedules have been included since the required
information is not applicable or the information required is included
in the financial statements or the notes thereto.
(a)3. The following exhibits are filed as part of this report on Form 10-K,
and this list comprises the Exhibit Index.
No. Exhibit
3.01 Articles of Incorporation of Family Steak Houses of Florida,
Inc. (Exhibit 3.01 to the Company's Registration Statement on Form
S-1, Registration No. 33-1887, is incorporated herein by reference.)
3.02 Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.02
to the Company's Registration Statement on Form S-1, Registration
No. 33-1887, is incorporated herein by reference.)
16
<PAGE> 17
3.03 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.03 to the Company's
Registration Statement on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
3.04 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.04 to the Company's
Registration Statement on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
4.01 Specimen Stock Certificate for shares of the Company's Common
Stock (Exhibit 4.01 to the Company's Registration Statement on Form
S-1, Registration No. 33-1887, is incorporated herein by reference.)
10.01 Amended Franchise Agreement between Family Steak Houses of
Florida, Inc. and Ryan's Family Steak Houses, Inc., dated September
16, 1987. (Exhibit 10.01 to the Company's Registration Statement on
Form S-1, filed with the Commission on October 2, 1987, Registration
No. 33-17620, is incorporated herein by reference.)
10.02 Lease regarding the restaurant located at 3549 Blanding
Boulevard, Jacksonville, Florida (Exhibit 10.03 to the Company's
Registration Statement on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
l0.03 Lease, dated May 18, 1989, between the Company and Stoneybrook
Associates, Ltd., for a restaurant located in Clearwater, Florida.
(Exhibit 10.25 to the Company's Registration Statement on Form S-1,
filed with the Commission on September 29, 1989, Registration No.
33-17620, is incorporated herein by reference.)
10.04 Amended and Restated Loan Agreement, dated March 14, 1995,
by the Company and certain of its subsidiaries, as borrowers,
in favor of The Daiwa Bank, Limited, and SouthTrust Bank of
Alabama, National Association, as lenders. (Exhibit 10.04 to the
Company's Annual Report on Form 10-K, filed with the Commission on
March 28, 1995, is incorporated herein by reference).
17
<PAGE> 18
10.05 Second Amended and Restated Renewal Mortgage and Security
Agreement and Mortgage Spreading Agreement, dated March 14,
1995, by the Company as mortgagor, and The Daiwa Bank, Limited
and SouthTrust Bank of Alabama, National Association, as lenders.
(Exhibit 10.05 to the Company's Annual Report on Form 10-K,
filed with the Commission on March 28, 1995, is incorporated herein
by reference).
10.06 Amended and Restated Senior Note Agreement, dated as of
February 1, 1995, by the Company and certain of its subsidiaries, as
maker, and The Phoenix Insurance Company, The Travelers Indemnity
Company, and The Travelers Insurance Company, as noteholders.
(Exhibit 10.06 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 28, 1995, is incorporated herein by
reference).
10.07 Amended and Restated Warrant to Purchase Shares of Common
Stock, void after October 1, 2003, which represents warrants issued
to The Phoenix Insurance Company, The Travelers Indemnity Company,
and The Travelers Insurance Company. (Exhibit 10.07 to the Company's
Annual Report on Form 10-K, filed with the Commission on March 28,
1995, is incorporated herein by reference).
10.08 Warrant to Purchase Shares of Common Stock, void after
October 1, 2003, which represents warrants issued to The
Phoenix Insurance Company, The Travelers Indemnity Company, and
The Travelers Insurance Company. (Exhibit 10.08 to the Company's
Annual Report on Form 10-K, filed with the Commission on March 28,
1995, is incorporated herein by reference).
10.09 Employment agreement between the Company and William
Stanley Smith, Jr., dated as of June 20, 1995. (Exhibit 10.01 to
the Company's Quarterly Report on Form 10-Q, filed with the
Commission on August 9, 1995, is incorporated herein by reference).
10.10 Employment agreement between the Company and Lewis E.
Christman, Jr., dated as of June 20, 1995. (Exhibit 10.02 to the
Company's Quarterly Report on Form 10-Q, filed with the Commission on
August 9, 1995, is incorporated herein by reference).
18
<PAGE> 19
10.11 Employment agreement between the Company and Edward B.
Alexander, dated as of April 1, 1995. (Exhibit 10.03 to the Company's
Quarterly Report on Form 10-Q, filed with the Commission on August 9,
1995, is incorporated herein by reference).
10.12 Employment agreement between the Company and Robert J.
Martin, dated as of June 20, 1995. (Exhibit 10.04 to the Company's
Quarterly Report on Form 10-Q, filed with the Commission on August 9,
1995, is incorporated herein by reference).
10.13 Employment agreement between the Company and Robert
Scott, dated as of June 20, 1995. (Exhibit 10.05 to the Company's
Quarterly Report on Form 10-Q, filed with the Commission on August 9,
1995, is incorporated herein by reference).
10.14 Lease dated March 1, 1994 between the Company and Eddie L.
Ervin, Jr., for corporate office and warehouse space in Neptune
Beach, Florida. (Exhibit 10.15 to the Company's Annual Report on Form
10-K, filed with the Commission on March 28, 1995, is incorporated
herein by reference).
10.15 Lease dated March 1, 1994 between the Company and William
Stanley Smith, Jr., for executive offices in Neptune Beach, Florida.
(Exhibit 10.16 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 28, 1995, is incorporated herein by
reference).
10.16 Amendment of Franchise Agreement between Ryan's Family
Steak Houses, Inc. and the Company dated July 11, 1994. (Exhibit
10.17 to the Company's Annual Report on Form 10-K, filed with the
Commission on March 28, 1995, is incorporated herein by reference).
10.17 Agreement between the Company and Kraft Foodservice, Inc., as
the Company's primary food product distribution. (Exhibit 10.06 to
the Company's Annual Report on Form 10-Q, filed with the Commission
on August 9, 1995, is incorporated herein by reference).
10.18 Second Amended and Restated Renewal Promissory Note,
dated March 14, 1995, by the Company and certain of its
subsidiaries, as maker, in favor of SouthTrust Bank of Alabama,
National Association. (Exhibit 10.18 to the Company's Annual Report
Form 10-K, filed with the Commission on March 28, 1995, is
incorporated herein by reference).
19
<PAGE> 20
10.19 Second Amended and Restated Renewal Promissory Note, dated
March 14, 1995, by the Company and certain of its subsidiaries,
as maker, in favor of The Daiwa Bank, Limited. (Exhibit 10.19
to the Company's Annual Report on Form 10-K, filed with the
Commission on March 28, 1995, is incorporated herein by reference).
10.20 Mortage and Security Agreement, dated March 14, 1995, by
the Company, as Mortgagor, in favor of The Travelers Insurance
Company, as collateral agent. (Exhibit 10.20 to the Company's
Annual Report on Form 10-K, filed with the Commission on March 28,
1995, is incorporated herein by reference).
10.21 Amended and Restated 9.0% Senior Notes, due June 1, 1998, by
the Company, as maker, in favor of TRAL & CO., an affiliate
of The Travelers Insurance Company, dated as of February 1, 1995.
(Exhibit 10.21 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 28, 1995, is incorporated herein by
reference).
10.22 Agreement regarding termination of consulting services between
the Company and Eddie L. Ervin, Jr., dated April 17, 1995.
10.23 Letter of notification to the Company from The Travelers
Insurance Company regarding its sale of Senior Notes and Warrants to
Cerberus Partners, L.P.
13.01 1995 Annual Report to Shareholders.
21.01 Family Rustic Investments, Inc., a Florida
corporation, Steak House Construction Corporation, a Florida
corporation, Wrangler's Roadhouse, Inc., a Florida corporation and
Steak House Realty Corporation, a Florida corporation, are wholly
owned subsidiaries of the Company.
23.0l Consent of Independent Certified Public Accountants - Deloitte
& Touche LLP.
27.00 Financial data schedule (electronic filing only).
(b) None.
(c) See (a)3. above for a list of all exhibits filed herewith and the
Exhibit Index.
(d) None.
20
<PAGE> 21
SIGNATURES
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.
FAMILY STEAK HOUSES OF FLORIDA, INC.
Date: March 20, 1996 BY: /s/ Lewis E. Christman, Jr.
---------------------------
Lewis E. Christman, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Lewis E. Christman, Jr. President (Principal March 18, 1996
- --------------------------- Executive Officer
Lewis E. Christman, Jr. and Director)
/s/ Edward B. Alexander Secretary and Treasurer March 18, 1996
- ----------------------- (Principal Financial and
Edward B. Alexander Accounting Officer).
/s/ Robert J. Martin Vice President and March 18, 1996
- -------------------- Director
Robert J. Martin
/s/ William S. Smith, Jr. Executive Vice President March 18, 1996
- ------------------------- and Director
William S. Smith, Jr.
/s/ Michael J. Walters Controller March 18, 1996
- ----------------------
Michael J. Walters
/s/ Joseph M. Glickstein, Jr. Director March 18, 1996
- -----------------------------
Joseph M. Glickstein, Jr.
/s/ Richard M. Gray Director March 18, 1996
- -------------------
Richard M. Gray
</TABLE>
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --- ----------------------
<S> <C>
3.01 Articles of Incorporation of Family Steak Houses of Florida, Inc.
(Exhibit 3.01 to the Company's Registration Statement on Form S-1,
Registration No. 33-1887, is incorporated herein by reference.)
3.02 Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.02 to the
Company's Registration Statement on Form S-1, Registration No.
33-1887, is incorporated herein by reference.)
3.03 Articles of Amendment to the Articles of Incorporation of Family Steak
Houses of Florida, Inc. (Exhibit 3.03 to the Company's Registration
Statement on Form S-1, Registration No. 33-1887, is incorporated
herein by reference.)
3.04 Articles of Amendment to the Articles of Incorporation of Family Steak
Houses of Florida, Inc. (Exhibit 3.04 to the Company's Registration
Statement on Form S-1, Registration No. 33-1887, is incorporated
herein by reference.)
4.01 Specimen Stock Certificate for shares of the Company's Common Stock
(Exhibit 4.01 to the Company's Registration Statement on Form S-1,
Registration No. 33-1887, is incorporated herein by reference.)
10.01 Amended Franchise Agreement between Family Steak Houses of Florida,
Inc., and Ryan's Family Steak Houses, Inc., dated September 16, 1987.
(Exhibit 10.01 to the Company's Registration Statement on Form S-1,
filed with the Commission on October 2, 1987, Registration
No. 33-17620, is incorporated herein by reference.)
10.02 Lease regarding the restaurant located at 3549 Blanding Boulevard,
Jacksonville, Florida (Exhibit 10.03 to the Company's Registration
Statement on Form S-1, Registration No. 33-1887, is incorporated
herein by reference.)
</TABLE>
<PAGE> 23
10.03 Lease, dated May 18, 1989, between the Company and Stoneybrook
Associates, Ltd., for a restaurant located in Clearwater, Florida.
(Exhibit 10.25 to the Company's Registration Statement on Form S-1,
filed with the Commission on September 29, 1989, Registration
No. 33-17620, incorporated herein by reference.)
10.04 Amended and Restated Loan Agreement, dated March 14, 1995, by the
Company and certain of its subsidiaries, as borrowers, in favor
of The Daiwa Bank, Limited, and SouthTrust Bank of Alabama, National
Association, as lenders. (Exhibit 10.04 to the Company's Annual Report
on Form 10-K, filed with the Commission on March 28, 1995, is
incorporated herein by reference).
10.05 Second Amended and Restated Renewal Mortgage and Security Agreement
and Mortgage Spreading Agreement, dated March 14, 1995, by the
Company as mortgagor, and The Daiwa Bank, Limited, and SouthTrust
Bank of Alabama, National Association, as lenders. (Exhibit 10.05 to
the Company's Annual Report on Form 10-K, filed with the Commission on
March 28, 1995, is incorporated herein by reference).
10.06 Amended and Restated Senior Note Agreement, dated as of February 1,
1995, by the Company and certain of its subsidiaries, as maker, and The
Phoenix Insurance Company, The Travelers Indemnity Company, and The
Travelers Insurance Company, as noteholders. (Exhibit 10.06 to the
Company's Annual Report on Form 10-K, filed with the Commission on
March 28, 1995, is incorporated herein by reference).
10.07 Amended and Restated Warrant to Purchase Shares of Common Stock, void
after October 1, 2003, which represents warrants issued to The Phoenix
Insurance Company, The Travelers Indemnity Company, and The Travelers
Insurance Company. (Exhibit 10.07 to the Company's Annual Report on
Form 10-K, filed with the Commission on March 28, 1995, is
incorporated herein by reference).
10.08 Warrant to Purchase Shares of Common Stock, void after October 1,
2003, which represents warrants issued to The Phoenix Insurance
Company, The Travelers Indemnity Company, and The Travelers Insurance
Company. (Exhibit 10.08 to the Company's Annual Report on Form 10-K,
with the Commission on March 28, 1995, is incorporated herein by
reference).
<PAGE> 24
10.09 Employment agreement between the Company and William Stanley Smith,
Jr., dated as of June 20, 1995. (Exhibit 10.01 to the Company's Annual
Report on Form 10-Q, filed with the Commission on August 9, 1995, is
incorporated herein by reference).
10.10 Employment agreement between the Company and Lewis E. Christman,
Jr., dated as of June 20, 1995. (Exhibit 10.02 to the Company's
Annual Report on Form 10-Q, filed with the Commission on August 9,
is incorporated herein by reference).
10.11 Employment agreement between the Company and Edward B. Alexander,
dated as of April 1, 1995. (Exhibit 10.03 to the Company's Annual
Report on Form 10-Q, filed with the Commission on August 9, 1995, is
incorporated herein by reference).
10.12 Employment agreement between the Company and Robert J. Martin, dated
as of June 20, 1995. (Exhibit 10.04 to the Company's Annual Report
on Form 10-Q, filed with the Commission on August 9, 1995, is
incorporated herein by reference).
10.13 Employment agreement between the Company and Robert Scott, dated
as of June 20, 1995. (Exhibit 10.05 to the Company's Annual Report on
Form 10-Q, filed with the Commission on August 9, 1995, is
incorporated by reference).
10.14 Lease dated March 1, 1994 between the Company and Eddie L. Ervin,
Jr., for corporate office and warehouse space in Neptune Beach,
Florida. (Exhibit 10.15 to the Company's Annual Report on Form 10-K,
filed with the Commission on March 28, 1995, is incorporated herein
by reference.
10.15 Lease dated March 1, 1994 between the Company and William Stanley
Smith, Jr., for executive offices in Neptune Beach, Florida. (Exhibit
10.16 to the Company's Annual Report on Form 10-K, filed with the
Commission on March 28, 1995, is incorporated herein by reference).
10.16 Amendment of Franchise Agreement between Ryan's Family Steak Houses,
Inc. and the Company dated July 11, 1994. (Exhibit 10.17 to the
Company's Annual Report on Form 10-K, filed with the Commission on
March 28 1995, is incorporated herein by reference).
<PAGE> 25
10.17 Agreement between the Company and Kraft Foodservice, Inc., as the
Company's primary food product distribution. (Exhibit 10.06 to the
Company's Annual Report on Form 10-Q, filed with the Commission on
August 9, 1995, is incorporated herein by reference).
10.18 Second Amended and Restated Renewal Promissory Note, dated March
14, 1995, by the Company and certain of its subsidiaries, as maker, in
favor of SouthTrust Bank of Alabama, National Association. (Exhibit
10.18 to the Company's Annual Report on Form 10-K, filed with the
Commission on March 28, 1995, is incorporated herein by reference).
10.19 Second Amended and Restated Renewal Promissory Note, dated March 14,
1995, by the Company and certain of its subsidiaries, as maker, in
favor of The Daiwa Bank, Limited. (Exhibit 10.19 to the Company's
Annual Report on Form 10-K, filed with the Commission on March 28,
1995, is incorporated herein by reference).
10.20 Mortage and Security Agreement, dated March 14, 1995, by the Company,
as Mortgagor, in favor of The Travelers Insurance Company, as
collateral agent. (Exhibit 10.20 to the Company's Annual Report on Form
10-K, filed with the Commission on March 28, 1995, is incorporated
herein by reference).
10.21 Amended and Restated 9.0% Senior Notes, due June 1, 1998, by the
Company, as maker, in favor of TRAL & CO., an affiliate of The
Travelers Insurance Company, dated as of February 1, 1995. (Exhibit
10.21 to the Company's Annual Report on Form 10-K, filed with the
Commission March 28, 1995, is incorporated herein by reference).
10.22 Agreement regarding termination of consulting services between the
Company and Eddie L. Ervin, Jr., dated April 17, 1995.
10.23 Letter of notification to the Company from The Travelers Insurance
Company regarding its sale of Senior Notes and Warrants to Cerberus
Partners, L.P..
13.01 1995 Annual Report to Shareholders.
<PAGE> 26
21.01 Family Rustic Investments, Inc., a Florida corporation, Steak House
Construction Corporation, a Florida corporation, Wrangler's Roadhouse,
Inc., a Florida corporation, Family Steak JV, Inc., a Florida
corporation, and Steak House Realty Corporation, a Florida corporation,
are wholly owned subsidiaries of the Company.
23.01 Consent of Independent Certified Public Accountants - Deloitte &
Touche LLP.
27.00 Financial Data Schedule (electronic filing only).
(b) None.
(c) See (a)3. above for a list of all exhibits filed herewith and the
Exhibit Index.
(d) None.
<PAGE> 1
EXHIBIT 10.22
AGREEMENT REGARDING TERMINATION OF CONSULTING SERVICES
THIS AGREEMENT REGARDING TERMINATION OF CONSULTING SERVICES
("Agreement") is entered into by and between Family Steak Houses of Florida,
Inc., a Florida corporation (the "Company"), and Eddie L. Ervin, Jr., ("Ervin")
as of this 17th day of April, 1995.
RECITALS
A. The Company and Ervin entered into a Consulting Agreement
dated as of June 16, 1994 (the "Consulting Agreement"), pursuant to which Ervin
is to furnish certain services to the Company and receive in consideration
thereof certain payments from the Company.
B. The Company and Ervin now desire to terminate the Consulting
Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
1. TERMINATION OF CONSULTING AGREEMENT. The Consulting Agreement
and all obligations of the parties thereunder are hereby terminated. In full
and complete satisfaction of its obligations under the Consulting Agreement,
the Company does hereby pay and deliver to Ervin the sum of One Hundred Fifty
One Thousand Five Hundred Dollars ($151,500.00) in cash, plus the Stock
Consideration and Additional Consideration, as hereinafter defined.
2. STOCK OPTIONS. The Company hereby confirms its previous grant
to Ervin under the Consulting Agreement of an option to purchase 100,000 shares
of the Company's common stock at an exercise price of $.40 per share (the
"Stock Consideration"), subject only to shareholder approval of the 1995 Long
Term Incentive Plan or other corporate action necessary to authorize the
issuance of additional shares sufficient to permit exercise of the option.
The Company agrees to use its reasonable best efforts to obtain shareholder
approval of the 1995 Long Term Incentive Plan, or otherwise authorize shares
sufficient to permit exercise of the option, prior to the expiration of the
option. The option shall be exercisable in whole or in part and from time to
time for a period expiring June 16, 1999 and the award of the option shall be
evidenced by an agreement containing usual and customary provisions.
3. ADDITIONAL CONSIDERATION. As additional consideration, the Company
agrees to (i) reimburse Ervin the cost of reasonable car insurance through
May, 1996, (ii) enter into an agreement for a two year extension of the
existing lease between the Company and Ervin (the "Lease") on the same terms as
the present lease except that the monthly rental shall be increased to $1,570
beginning March 1, 1996, and the purchase option is hereby deleted, and (iii)
pay insurance premiums through May 1996 for substantially the same coverage
presently enjoyed
<PAGE> 2
by Ervin, including comprehensive dental, life and medical insurance, including
one free physical examination per year (collectively, the "Additional
Consideration").
4. RELEASE OF CLAIMS BY ERVIN. (a) In consideration of the
foregoing and except as set forth in Section 4(b) below, Ervin, for himself,
his heirs, successors and assigns, does hereby release, remise, acquit,
exonerate, satisfy and forever discharge the Company, its affiliates,
successors and assigns, and their respective shareholders, directors, officers,
employees and agents, (collectively, the "Company Parties") from and with
respect to any and all actions, causes of action, suits, disputes,
controversies, claims, debts, sums of money, offset rights, defenses,
agreements, promises, covenants, losses, damages, judgments and demands of any
nature whatsoever, known or unknown, whether in contract, in tort, or
otherwise, at law or in equity, which have accrued or may accrue, may have been
had, may now be possessed or may or shall be possessed in the future by Ervin
against the Company Parties, however and whenever arising ("collectively, the
"Ervin Claims").
(b) PROVIDED, HOWEVER, the foregoing release by Ervin shall not
operate to release the Company Parties from any Ervin Claims, whether in
contribution, indemnification or otherwise, which Ervin may now or hereafter
possess against the Company and which arise (i) from claims by third parties
against Ervin and to which Ervin is entitled to indemnification under that
certain Indemnity Agreement between Ervin and the Company dated as of April 11,
1994, or (ii) from claims under this Agreement or the Lease.
5. RELEASE OF CERTAIN CLAIMS BY THE COMPANY. (a) In
consideration of the foregoing and except as set forth in Section 5(b) below,
the Company, for itself, its successors and assigns, does hereby release,
remise, acquit, exonerate, satisfy and forever discharge Ervin, his heirs and
assigns (collectively, the "Ervin Parties") from and with respect to any and
all actions, causes, causes of action, suits, disputes, controversies, claims,
debts, sums of money, offset rights, defenses, agreements, promises, covenants,
losses, damages, judgments and demands of any nature whatsoever, known or
unknown, whether in contract, in tort, or otherwise, at law or in equity, which
have accrued or may accrue, may have been had, may now be possessed or may or
shall be possessed in the future by the Company against the Ervin Parties,
however and whenever arising (collectively, the "Company Claims").
(b) PROVIDED, HOWEVER, the foregoing release by the Company shall
not operate to release the Ervin Parties from any Company Claims, whether in
contribution, indemnification or otherwise, which the Company may now or
hereafter possess against the Ervin Parties and which arise (i) from claims by
third parties against any of the Company Parties, or (ii) from claims under
this Agreement or the Lease.
6. CONFIDENTIALITY. Ervin and the Company acknowledge that the
terms of this Agreement are to remain confidential and agree not to disclose the
terms of this Agreement to any third party, except as may be required by
applicable securities laws, or to such accountants or attorneys as the Company
or Ervin may employ in connection with their business affairs, as affected by
this Agreement.
<PAGE> 3
7. MISCELLANEOUS.
(a) The parties hereto acknowledge that this Agreement is the
result of a compromise and shall not be considered an admission of liability or
wrongdoing on the part of any party.
(b) This Agreement shall be construed and governed in accordance
with Florida law.
(c) This Agreement may be executed in any number of counterparts,
each of which shall constitute an original but all of which taken together
shall constitute one and the same instrument.
(d) Should any provision of this Agreement be declared or determined
by any court to be illegal or invalid, the entire Agreement shall be invalid.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
FAMILY STEAK HOUSES OF FLORIDA, INC.
By:/s/ Lewis E. Christman, Jr.
-------------------------------------
Lewis E. Christman, Jr.
President and Chief Executive Officer
/s/Eddie L. Ervin, Jr.
----------------------------------------
Eddie L. Ervin, Jr.
<PAGE> 1
EXHIBIT 10.23
TRAVELERS Insurance
A Member of Travelers Group
August 29, 1995
Mr. Lewis E. Christman, Jr.
President & CEO
Family Steak Houses of Florida, Inc.
2113 Florida Blvd.
Neptune Beach, FL 32266
Dear Mr. Christman:
This letter is intended to give you formal notice that The Travelers
Insurance Company, The Travelers Indemnity Company, and The Phoenix Insurance
Company ("The Travelers Companies") have on August 14, 1995, sold all of their
holdings in 9% Notes ($11,672,770) and all Warrants (for 1,750,000 common
shares of RYFL) to Cerberus Partners, L. P.
As we closed with accrued interest paid to The Travelers Companies for
the stub period August 1-13, I have suggested to Ed Alexander that you direct
the entire September 1 interest payment directly to Cerberus Partners, L.P.
The person at Cerberus most familiar with Family Steak is Joyce
Johnson, who can be reached at 212-421-6300; an alternate is Steven Feinberg
at 212-421-2600.
I hope you and your company prosper and the relations with Cerberus are
all good ones.
Sincerely,
/s/ A. William Carnduff
------------------------
A. William Carnduff
2nd Vice President
The Travelers Companies
<PAGE> 1
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
FIVE YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995(1) 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Sales $42,105 $44,849 $ 48,525 $49,693 $ 48,518
Cost and expenses:
Food and beverage 16,591 18,174 19,534 20,153 19,549
Payroll and benefits 11,412 12,097 13,372 13,303 12,429
Depreciation and amortization 1,720 1,961 2,560 2,544 2,509
Other operating expenses 6,412 6,412 7,055 6,607 6,296
General and administrative expenses 2,348 2,899 2,159 1,903 2,014
Franchise fees 1,263 1,561 2,207 2,406 2,425
(Income) costs from closed restaurants (303) 1,392 2,557 -- --
Loss on disposition of equipment 198 86 21 -- 5
Loss from joint venture 5 -- -- -- --
------- ------- -------- ------- --------
39,646 44,582 49,465 46,916 45,227
------- ------- -------- ------- --------
Earnings (loss) from operations 2,459 267 (940) 2,777 3,291
Interest and other income 536 123 79 69 151
Gain on sale of restaurant 159 -- -- -- --
Gain on sale of property held for resale 31 -- -- -- --
Write-down of property held for resale -- (465) (91) -- (119)
Interest expense (1,694) (1,980) (2,110) (2,380) (2,653)
------- ------- -------- ------- --------
Earnings (loss) before income taxes and effect
of accounting change 1,491 (2,055) (3,062) 466 670
Provision (benefit) for income taxes 147 (274) (978) 175 294
------- ------- -------- ------- --------
Earnings (loss) before accounting change 1,344 (1,781) (2,084) 291 376
Cumulative effect of accounting change -- -- -- 90 --
------- ------- -------- ------- --------
Net earnings (loss) $ 1,344 $(1,781) $ (2,084) $ 381 $ 376
======== ======== ========= ======== =========
PER COMMON AND EQUIVALENT SHARE:
Earnings (loss) earnings before accounting change $ 0.11 $ (0.17) $ (0.19) $ 0.03 $ 0.04
Cumulative effect of accounting change -- -- -- 0.01 --
------- ------- -------- ------- --------
Net earnings (loss) $ 0.11 $ (0.17) $ (0.19) $ 0.04 $ 0.04
======== ======== ========= ======== =========
Weighted average common shares and equivalents 11,831 10,773 10,952 10,704 10,681
======== ======== ========= ======== =========
SELECTED BALANCE SHEET DATA:
Land and net property and equipment $26,837 $26,896 $ 29,505 $32,045 $ 33,489
Total assets 31,260 32,809 35,095 37,523 39,577
Long-term debt 14,420 16,305 14 16,335 22
Current portion of long-term debt 1,580 851 17,269 2,809 21,732
Shareholders' equity 11,460 9,993 11,743 13,800 13,370
SELECTED OPERATING DATA:
Current ratio 0.4 0.6 0.1 0.3 0.1
Working capital (deficit) $(3,285) $(2,673) $(20,089) $(4,633) $(23,179)
Cash provided by operating activities 2,135 3,096 3,979 3,284 3,303
Property and equipment additions 2,600 1,796 1,558 648 2,926
</TABLE>
- ---------------
(1) Fifty-three week period.
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FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Shown for the years indicated are (i) items in the statements of operations as a
percent of total sales, (ii) operating expense items in the statements of
operations as a percent of sales and (iii) the number of restaurants open at the
end of each year.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Percentage
Change Versus
Prior Year
---------------
1995 1994
vs vs
1995 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $42,105,400 $44,848,800 $48,525,300 (6.1)% (7.6)%
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Net Change
In Percentage
---------------
Percent of Sales 1995 1994
--------------------------------------- vs vs
1995 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost and expenses:
Operating expenses 85.8% 86.2% 87.7% (0.4) (1.5)
General and administrative
expenses 5.6 6.5 4.4 (0.9) 2.1
Franchise fees 3.0 3.5 4.6 (0.5) (1.1)
Closed restaurant costs (0.7) 3.1 5.3 (3.8) (2.2)
Loss on disposition of property
and equipment 0.5 0.2 -- 0.3 0.2
----------- ----------- ----------- ---- ----
94.2 99.5 102.0 (5.3) (2.5)
----------- ----------- ----------- ---- ----
Earnings (loss) from operations 5.8 0.5 (2.0) 5.3 2.5
Interest and other income 1.4 0.3 0.2 1.1 0.1
Gain on sale of restaurant 0.4 -- -- 0.4 --
Write-down of property held for
resale -- (1.0) (0.2) 1.0 (0.8)
Interest expense (4.0) (4.4) (4.3) 0.4 (0.1)
----------- ----------- ----------- ---- ----
Earnings (loss) before income
taxes 3.6 (4.6) (6.3) 8.2 1.7
Provision (benefit) for income
taxes 0.4 (0.6) (2.0) 1.0 1.4
----------- ----------- ----------- ---- ----
Net earnings (loss) 3.2% (4.0)% (4.3)% 7.2% 0.3%
============ ============ ============ ==== ====
Operating expenses:
Food and beverage 39.4% 40.5% 40.3% (1.1)% 0.2%
Payroll and benefits 27.1 27.0 27.6 0.1 (0.6)
Depreciation and amortization 4.1 4.4 5.3 (0.3) (0.9)
Other operating expenses 15.2 14.3 14.5 0.9 (0.2)
----------- ----------- ----------- ---- ----
85.8% 86.2% 87.7% (0.4)% (1.5)%
============ ============ ============ ==== ====
Restaurants open at end of year 24 24 29
============ ============ ============
</TABLE>
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FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1995 Compared to 1994
For the year ended January 3, 1996, total sales decreased 6.1% compared to 1994,
due to declines in same-store sales and lost revenues from closed restaurants.
The sales decline in 1995 compared to 1994 consisted of the following
components:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1995 1994 Change % Change
from 1994
Total Sales
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Closed Restaurants $ 0 $ 2,310,500 $(2,310,500) (5.2)%
Same-Store Sales 41,361,900 42,538,300 (1,176,400) (2.6)%
Extra Week Sales* 743,500 0 743,500 1.7%
----------- ----------- ----------- -----
Total Sales $42,105,400 $44,848,800 $(2,743,400) (6.1)%
============ ============ ============ =========
</TABLE>
- ---------------
* 1995 was a 53-week period, 1994 was a 52-week period.
Management believes that the decrease in comparable store sales is primarily due
to the effects of increasing competition, including several new or remodeled
restaurants opened by competition in areas close to Company restaurants.
Management plans to attempt to improve sales trends by focusing on improved
restaurant operations, increasing marketing expenditures, and by making
improvements such as new in-restaurant bars for carving high quality fresh
meats.
The operating expenses of the Company's restaurants include food and beverage,
payroll and benefits, depreciation and amortization, repairs, maintenance,
utilities, supplies, advertising, insurance, property taxes, rents and licenses.
The Company's food, beverage, payroll and benefit costs are believed to be
higher than the industry average as a percentage of sales as a result of the
Company's philosophy of providing customers with high value of food and service
for every dollar a customer spends. In total, food and beverage, payroll and
benefits, depreciation and amortization and other operating expenses as a
percentage of sales decreased to 85.8% in 1995 from 86.2% in 1994, primarily due
to reductions in food and beverage costs as a percentage of sales.
Food and beverage costs as a percentage of sales decreased to 39.4% in 1995 from
40.5% in 1994, primarily due to lower beef costs and sales price increases
implemented in 1994 and 1995. Payroll and benefits as a percentage of sales
increased from 27.0% in 1994 to 27.1% in 1995, primarily due to increases in
compensation to restaurant managers. Other operating expenses as a percentage of
sales increased from 14.3% in 1994 to 15.2% in 1995, primarily due to higher
advertising costs and the decline in same-store sales. Depreciation and
amortization decreased as a percentage of sales in 1995 compared to 1994, as a
result of certain assets becoming fully depreciated or amortized.
General and administrative expenses as a percentage of sales decreased to 5.6%
in 1995 from 6.5% in 1994, primarily due to professional services expenses
incurred in 1994 associated with the Company's debt restructuring negotiations.
Franchise fees decreased beginning in 1994 in accordance with the Company's
amended Franchise Agreement
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<PAGE> 4
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
with Ryan's Family Steak Houses, Inc. (the "Franchisor"). (See Note 3 to the
financial statements).
In April 1994, the Company closed a restaurant in Ft. Pierce, Florida resulting
in pre-tax charges to 1994 earnings totaling $986,000. The charge consisted of a
write-down in value of the property as determined by appraisal and other costs
associated with closing the restaurant. Also in 1994, the Company closed its
Wrangler's Roadhouse location, resulting in write-downs of property and
equipment totaling $355,000. Total closed restaurant costs in 1994 were
$1,392,400. In 1995 the Company recognized $303,200 in income from the favorable
settlement of two restaurant leases. The remaining lease costs at the time of
store closure were included in closed restaurant costs in 1993.
During the first fiscal week of 1995, the Company closed and sold a restaurant
located in Jacksonville, Florida. The Company received approximately 20% of the
purchase price in cash and recorded a mortgage receivable for the balance of the
sale. The Company recognized the gain of approximately $152,000 in 1995. Total
gains on sales of property were $159,000 in 1995.
Interest and other income increased due to the recognition of interest income in
1995 from two mortgages and due to income from toy vending machines installed in
Company restaurants in 1995.
Interest expense decreased from $1,980,100 during 1994 to $1,693,800 in 1995.
The decrease was due primarily to lower outstanding principal balances,
resulting from principal payments made throughout the last twelve months, and
due to a lower interest rate on the Company's obligations to Cerberus Partners,
L.P. (notes formerly held by The Travelers Insurance Company).
The effective income tax rates for the year ended January 3, 1996 and December
28, 1994 were 9.9% and (13.3%), respectively. The 1994 benefit was less than the
statutory tax rate due to the uncertainty of realization of certain deferred tax
assets at that time. Certain of these assets were utilized in 1995, resulting in
the reduced effective rate for 1995.
Net earnings for 1995 were $1,344,200, compared to a net loss of $1,785,900 in
1994. Earnings per share were $.11 for 1995, compared to a loss per share of
$.17 in 1994.
1994 Compared to 1993
For the year ended December 28, 1994, total sales decreased 7.6% compared to the
same period of 1993, primarily due to declines in same-store sales and lost
revenues from closed restaurants. The sales decline in 1994 compared to 1993
consisted of the following components:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1994 1993 Change % reduction
from 1994
Total Sales
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Closed Restaurants $ 0 $ 3,570,700 $(3,570,700) (7.4)%
Same-Store Sales 43,923,200 44,449,800 (526,600) (1.1)%
New Restaurant* 925,600 504,800 420,800 .9%
----------- ----------- ----------- -------
$44,848,800 $48,525,300 $(3,676,500) (7.6)%
=========== =========== =========== =======
</TABLE>
- ---------------
* Wrangler's Roadhouse Restaurant Opened August 1993
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<PAGE> 5
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Food and beverage costs for the year ended December 28, 1994 was 40.5%, compared
to 40.3% in 1993, due primarily to higher than Company average costs at the
Company's Wrangler's Roadhouse location. Payroll and benefits decreased to 27.0%
in 1994 from 27.6% in 1993, primarily due to a reduction in workers'
compensation costs.
For the year ended December 28, 1994, other operating expenses decreased to
14.3% from 14.5% in 1993, primarily due to the elimination of building rent
expense at three closed restaurants which were leased in 1993. Depreciation and
amortization decreased as a percentage of sales for the year ended December 28,
1994, compared to 1993, as a result of certain assets in older restaurants
becoming fully depreciated or amortized. Franchise fees decreased in 1994 in
accordance with our amendment to the Company's Amended Franchise Agreement.
For the year ended December 28, 1994, general and administrative expenses
increased to 6.5% of sales from 4.4% for 1993, primarily due to costs incurred
in 1994 associated with the Company's debt restructuring negotiations.
In 1993, the Company closed a restaurant and established a reserve to close two
additional restaurants in 1994 (resulting in a total closed restaurant cost of
$2,557,300 in 1993). In April 1994, the Company closed a restaurant in Ft.
Pierce, Florida which had not been included in the 1993 restaurant closing
reserve. The April 1994 restaurant closing resulted in pre-tax charges to 1994
earnings totaling $986,000, reflecting a reduction in market value of the
property as determined by appraisal, in addition to costs associated with
closing the restaurant. Also in 1994, the Company closed its Wrangler's
Roadhouse location, resulting in write-downs of property and equipment totaling
$355,000. Total closed restaurant costs in 1994 were $1,392,400.
Based on the results of appraisals of Company properties held for resale, done
in 1994, the Company wrote-down the value of several such properties by a total
of $465,000 in 1994. The Company wrote-down property held for resale by $91,000
in 1993.
Interest expense decreased in 1994 to $1,980,100 from $2,110,400 in 1993, due to
reduced principal balances compared to 1993.
Net loss for the year ended December 28, 1994, was $1,780,900 or $.17 per share,
compared to net losses of $2,084,000 or $.19 per share for the same period in
1993.
RECENT DEVELOPMENTS
On August 14, 1995, the Company received a notice from The Travelers Insurance
Company that it had sold the Travelers Notes and certain warrants it held for
purchases of the Company's common stock (see discussion at Liquidity and Capital
Resources below) to Cerberus Partners, L.P.
LIQUIDITY AND CAPITAL RESOURCES
Substantially all of the Company's revenues are derived from cash sales.
Inventories are purchased on credit and are converted rapidly to cash.
Therefore, the Company does not carry significant receivables or inventories
and, other than the repayment of debt, working capital requirements for
continuing operations are not significant.
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<PAGE> 6
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
At January 3, 1996, the Company had a working capital deficit of $3,284,900
compared to a working capital deficit of $2,673,300 at December 28, 1994. The
increase in the working capital deficit in 1995 was primarily due to an increase
in the current portion of long-term debt payable.
Cash provided by operating activities decreased 31.0% to $2,135,300 from
$3,095,800 in 1994, primarily due to reductions in accrued liabilities in 1995
as a result of timing differences in payments. Cash provided by operating
activities decreased 22.2% in 1994 from $3,979,200 in 1993 due to reductions in
accrued liabilities and increases in prepaid expenses in 1994 as a result of
timing differences in payments.
The Company spent approximately $2,600,000 in 1995, $1,656,000 in 1994 and
$1,446,000 in 1993 for restaurant remodeling and equipment. Capital expenditures
for 1996 and 1997, based on present costs and plans for capital improvements,
are estimated to be $750,000 and $900,000 respectively. The Company projects
that cash generated from operations will be sufficient to fund these
improvements.
In March 1995, the Company entered into an Amended and Restated Note Agreement,
dated as of February 1, 1995, with The Travelers Insurance Company and certain
of its affiliates. In August 1995 the Travelers Notes were sold to Cerberus
Partners, L.P. The Cerberus Notes are due May 30, 1998 and provide for an
interest rate of 9.0% and $65,000 monthly in principal reductions beginning
January 1, 1996. As of January 3, 1996, the outstanding balance due under the
Cerberus Notes was $11,607,800.
The Note Agreement includes detachable Warrants for purchases of up to 1,750,000
shares of the Company's common stock at an exercise price of $.40 per share. The
Cerberus Notes are secured by second mortgages on twenty-two of the Company's
restaurant properties. The Note Agreement provides for various covenants
including prepayment options, the maintenance of prescribed debt service
coverages, limitations on the declaration of cash dividends, sale of assets, and
certain other restrictions.
Also in March 1995, the Company entered into an Amended and Restated Loan
Agreement with The Daiwa Bank, Limited, and SouthTrust Bank of Alabama, National
Association (the "Bank Loan") which extends the maturity date of the Bank Loan
until May 30, 1998. The Bank Loan bears interest at prime rate plus 0.50%, with
monthly principal payments of $41,250 beginning April 1, 1995 ($67,100 prior to
April 1, 1995). The Bank Loan is secured by first mortgages on twenty-two of the
Company's restaurant properties, and provides for various covenants
substantially consistent with those of the Travelers Agreement. As of January 3,
1996, the outstanding balance under the Bank Loan was $4,163,000.
IMPACT OF INFLATION
Costs of food, beverage, and labor are the expenses most affected by inflation
in the Company's business. Although inflation has not been a major factor for
the past several years, there can be no assurance that it will not be in the
future. A significant number of the Company's personnel are paid at the
federally established minimum wage level, which was last increased in April
1991. Sales prices were increased approximately 2.5% in 1995, 4.0% in 1994 and
0% in 1993.
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<PAGE> 7
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
For The Years Ended
-----------------------------------------
January 3, December 28, December 29,
1996 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $42,105,400 $ 44,848,800 $ 48,525,300
Cost and expenses:
Food and beverage 16,591,300 18,173,900 19,534,000
Payroll and benefits 11,411,700 12,096,500 13,372,000
Depreciation and amortization 1,719,900 1,961,300 2,559,500
Other operating expenses 6,411,700 6,412,300 7,054,900
General and administrative expenses 2,348,200 2,898,600 2,159,200
Franchise fees 1,263,200 1,561,100 2,207,400
(Income) costs from closed restaurants (303,200) 1,392,400 2,557,300
Loss on disposition of equipment 197,800 86,200 21,000
Loss from joint venture 5,400 -- --
----------- ------------ ------------
39,646,000 44,582,300 49,465,300
----------- ------------ ------------
Earnings (loss) from operations 2,459,400 266,500 (940,000)
Interest and other income 535,600 123,300 79,200
Gain on sale of restaurant 158,600 -- --
Gain on sale of property held for resale 31,500 -- --
Write-down of property held for resale -- (465,000) (91,000)
Interest expense (1,693,800) (1,980,100) (2,110,400)
----------- ------------ ------------
Earnings (loss) before income taxes 1,491,300 (2,055,300) (3,062,200)
Provision (benefit) for income taxes 147,100 (274,400) (978,200)
----------- ------------ ------------
Net earnings (loss) $ 1,344,200 $ (1,780,900) $ (2,084,000)
=========== =========== ===========
Earnings (loss) per common share and
equivalents $ 0.11 $ (0.17) $ (0.19)
=========== =========== ===========
Weighted average common shares and equivalents 11,831,000 10,773,000 10,952,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 8
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
January 3, December 28,
1996 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 711,400 $ 1,603,100
Investments 600,300 710,700
Receivables 73,900 104,900
Income taxes receivable -- 332,200
Current portion of mortgage receivable 155,700 32,500
Inventories 247,400 324,800
Prepaids and other current assets 256,600 475,500
----------- ------------
Total current assets 2,045,300 3,583,700
Mortgages and note receivable 1,262,700 537,500
Property and equipment:
Land 9,342,200 9,677,800
Buildings and improvements 18,774,500 18,726,800
Equipment 11,940,900 11,139,500
----------- ------------
40,057,600 39,544,100
Accumulated depreciation (13,220,900) (12,648,200)
----------- ------------
Net property and equipment 26,836,700 26,895,900
Investment in joint venture -- 100,000
Property held for resale 552,800 1,039,300
Other assets, principally deferred charges, net of accumulated
amortization 562,200 652,200
----------- ------------
$31,259,700 $ 32,808,600
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,250,700 1,462,900
Accrued liabilities 2,494,100 3,942,900
Income taxes payable 5,400 --
Current portion of long-term debt 1,580,000 851,200
----------- ------------
Total current liabilities 5,330,200 6,257,000
Long-term debt 14,420,400 16,304,800
Deferred revenue 49,400 55,200
Other non-current liabilities -- 198,300
----------- ------------
Total liabilities 19,800,000 22,815,300
Commitments and contingencies (Note 10)
Shareholders' equity:
Preferred stock of $.01 par; authorized 10,000,000 shares; none
issued -- --
Common stock of $.01 par; authorized 20,000,000 shares;
outstanding 10,845,000 in 1995 and 10,725,200 shares in 1994 108,500 107,300
Additional paid-in capital 8,123,300 8,002,300
Retained earnings 3,227,900 1,883,700
----------- ------------
Total shareholders' equity 11,459,700 9,993,300
----------- ------------
$31,259,700 $ 32,808,600
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 9
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
For the Years Ended
-------------------------------------------
January 3, December 28, December 29,
1996 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings (loss) $ 1,344,200 $(1,780,900) $(2,084,000)
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization 1,719,900 1,961,300 2,559,500
Directors' fees in the form of stock options 40,000 30,000 27,000
Amortization of loan discount 74,700 132,000 132,000
Amortization of loan fees 85,400 96,600 150,000
(Income) costs from closed restaurants (303,200) 1,392,400 2,557,300
Write-down of property held for resale -- 465,000 91,000
Gain on sale of restaurant (158,600) -- --
Gain on sale of property held for resale (31,500) -- --
Loss on disposition of property and equipment 197,800 86,200 21,000
Loss from joint venture 5,400 -- --
Decrease (increase) in:
Receivables 27,800 80,800 107,600
Inventories 63,100 (12,300) (15,600)
Income taxes receivable 332,200 (6,300) (325,900)
Prepaids and other current assets 218,900 (196,500) (16,100)
Other assets (275,900) (43,100) (182,000)
Increase (decrease) in:
Accounts payable (212,200) (109,400) (13,400)
Accrued liabilities (794,000) 1,091,500 1,826,600
Income taxes payable 5,400 -- (11,100)
Deferred revenue (5,800) 25,000 (6,300)
Other non-current liabilities (198,300) (116,500) 150,000
Deferred income taxes -- -- (988,400)
----------- ------------ ------------
Net cash provided by operating activities 2,135,300 3,095,800 3,979,200
----------- ------------ ------------
Investing activities:
Proceeds from sale of property held for resale 518,000 -- 382,400
Proceeds from sale of investments 110,400 -- --
Proceeds from sale of restaurant 107,900 114,100 --
Principal receipts on mortgages and note receivable 84,400 -- --
Purchase of investments -- (405,700) (205,000)
Capital expenditures (2,599,600) (1,655,800) (1,445,600)
----------- ------------ ------------
Net cash used by investing activities (1,778,900) (1,947,400) (1,268,200)
----------- ------------ ------------
Financing activities:
Payments on long-term debt (1,249,300) (1,059,500) (1,992,600)
Proceeds from the issuance of common stock 1,200 1,000 300
----------- ------------ ------------
Net cash used by financing activities (1,248,100) (1,058,500) (1,992,300)
----------- ------------ ------------
Net (decrease) increase in cash and cash equivalents (891,700) 89,900 718,700
Cash and cash equivalents -- beginning of year 1,603,100 1,513,200 794,500
----------- ------------ ------------
Cash and cash equivalents -- end of year $ 711,400 $ 1,603,100 $ 1,513,200
=========== ============= =============
0
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 139,200 $ -- $ 384,700
=========== ============= =============
Cash paid during the year for interest $ 1,670,800 $ 1,482,900 $ 1,706,700
=========== ============= =============
Non-cash transactions:
Notes receivable as partial proceeds $ 932,800 $ 570,000 $ --
Interest forgiven in lieu of loan closing costs incurred 251,600 -- --
Warrants issued in connection with loan restructure 81,000 -- --
Accrued interest reclassed to long-term debt 100,000 -- --
Property acquired in simultaneous purchase and sale -- -- 753,000
Equipment and other current assets contributed to investment in JV -- 100,000 --
Franchise rights exchanged in lieu of franchise fees -- 500,000 --
Note payable issued in lieu of franchise fees -- 800,000 --
----------- ------------ ------------
$ 1,365,400 $ 1,970,000 $ 753,000
=========== ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 10
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years ended January 3, 1996, December 28, 1994 and December 29, 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Common Stock Additional
--------------------- Paid-in Retained
Shares Amount Capital Earnings Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 30, 1992 10,595,700 106,000 7,945,300 5,748,600 13,799,900
Net loss (2,084,000) (2,084,000)
Issuance of common stock under Incentive
Stock Option Plan, net 37,100 300 300
Directors' fees in the form of stock
options 27,000 27,000
---------- -------- ---------- ----------- -----------
Balance, December 29, 1993 10,632,800 106,300 7,972,300 3,664,600 11,743,200
Net loss (1,780,900) (1,780,900)
Issuance of common stock under Incentive
Stock Option Plan, net 92,400 1,000 1,000
Directors' fees in the form of stock
options 30,000 30,000
---------- -------- ---------- ----------- -----------
Balance, December 28, 1994 10,725,200 107,300 8,002,300 1,883,700 9,993,300
Net earnings 1,344,200 1,344,200
Issuance of common stock under Incentive
Stock Option Plan, net 119,800 1,200 1,200
Issuance of warrants 81,000 81,000
Directors' fees in the form of stock
options 40,000 40,000
---------- -------- ---------- ----------- -----------
Balance, January 3, 1996 10,845,000 $108,500 $8,123,300 $ 3,227,900 $11,459,700
========= ======== ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 11
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was organized under the laws of the State of Florida in September
1985 and is the sole Franchisee of Ryan's Family Steak House restaurants in the
State of Florida.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Steak House Construction, Family Rustic
Investments, Steak House Realty Corporation and Wrangler's Roadhouse, Inc. All
significant intercompany transactions and balances have been eliminated.
Fiscal Year
The fiscal year consists of a fifty-two or fifty-three week period ending on the
Wednesday nearest to December 31. Fiscal year 1995 consisted of fifty-three
weeks. Fiscal years 1994 and 1993 consisted of fifty-two weeks.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company has a cash management program which provides for the investment of
excess cash balances in short-term investments. These investments are stated at
cost which approximates market value and consist of money market instruments.
Investments
Investments represent certificates of deposit with maturities of less than one
year. These investments are pledged with various entities to support the
Company's workers' compensation liability, and certain utilities bonds. Interest
rates on the certificates vary from 5.6% to 6.1%.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of ingredients and supplies.
Property and Equipment
Property and equipment are stated at cost. Maintenance, repairs and betterments
which do not enhance the value of or increase the life of the assets are charged
to costs and expenses as incurred. Depreciation is provided for financial
reporting purposes principally on the straight-line method over the following
estimated
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<PAGE> 12
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
lives: buildings -- 25 years, land improvements -- 25 years and equipment -- 5-8
years. Leasehold improvements are amortized over the life of the related lease.
Property Held For Resale
Property held for resale consists of property parcels and buildings held for
sale. These parcels are stated at the lower of cost or estimated net realizable
value.
Deferred Charges
Certain costs incidental to the opening of a restaurant, consisting primarily of
employee training costs, are capitalized for each store opened and are amortized
over one year. Other deferred charges and related amortization periods are as
follows: financing costs -- term of the related loan, and initial franchise
rights -- 40 years.
Earnings Per Share
Earnings per share are computed based on the weighted average number of common
and common equivalent shares outstanding. Common equivalent shares are
represented by shares under option and outstanding warrants.
Income Taxes
Deferred income taxes are provided for temporary differences between financial
reporting basis and tax basis of the Company's assets and liabilities using
presently enacted income tax rates.
NOTE 2. CLOSED RESTAURANT COSTS
In 1993, the Company closed a restaurant and established a reserve to close two
additional restaurants in 1994 (resulting in a total closed restaurant cost of
$2,557,300 in 1993). In April 1994, the Company closed a restaurant in Ft.
Pierce, Florida which had not been included in the 1993 restaurant closing
reserve. The April 1994 restaurant closing resulted in pre-tax charges to 1994
earnings totaling $986,000, reflecting a reduction in market value of the
property as determined by appraisal, in addition to costs associated with
closing the restaurant. Also in 1994, the Company closed its Wrangler's
Roadhouse location, resulting in write-downs of property and equipment totaling
$355,000. Total closed restaurant costs in 1994 were $1,392,400. In 1995, the
Company recognized $303,200 income from favorable settlements of two restaurant
leases. These closed restaurant costs had been included in the 1993 reserve,
when the decision to close the restaurants was made.
The decisions to close certain restaurants were made as a result of poor
operating performance. Closed restaurant costs include loss on the sale of a
closed restaurant property, losses on leasehold improvements and equipment,
provisions for future obligations on restaurant leases and other costs of
closure.
NOTE 3. FRANCHISE AGREEMENT
In July 1994, the Company amended its Franchise Agreement with Ryan's Family
Steak Houses, Inc. The amended agreement requires the Company to pay a monthly
royalty fee of 3.0% from May 1994 through May 1997, and 4.0% thereafter of the
gross receipts of each Ryan's Family Steak House restaurant. The Company paid
royalty fees of 4.5% in 1993 and January through April 1994. Total royalty fee
expenses were
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13
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FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
$1,263,200, $1,561,100 and $2,207,400 for the years ended January 3, 1996,
December 28, 1994 and December 29, 1993.
The Franchise Agreement requires the Company to operate a minimum number of
Ryan's restaurants on December 31 of each year. Failure to operate the minimum
number could result in the loss of exclusive franchise rights to the Ryan's
concept in Florida.
The following schedule outlines the number of Ryan's restaurants required to be
operated by the Company as of December 31 each year under the amended franchise
agreement:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Number of
Restaurants Required to
End of Fiscal Year be in Operation
- -------------------------------------------------------------------------------------------------
<S> <C>
1994-1996 24
1997 25
1998 26
1999 27
2000 28
2001 and subsequent years Increases by
one each year
</TABLE>
Prior to the July 1994 amendment to the Franchise Agreement, the Company held
exclusive franchise rights to build Ryan's restaurants in the State of Florida,
with the exception of Panama City, Florida and Escambia County, Florida, where
the Franchisor has the right to operate Ryan's restaurants. Under the amended
Franchise Agreement the Company relinquished the franchise rights to most
counties in northwest Florida and south Florida to the Franchisor for $500,000
in forgiveness of past due royalty fees. The Company has the right to repurchase
the exclusive franchise rights to those counties for $500,000 at any time prior
to June 30, 1998. In addition, the Franchisor agreed not to develop any Ryan's
restaurants in the south Florida territory prior to June 30, 1996.
In conjunction with the execution of the July 1994 amendment to the Franchise
Agreement, the Company executed and delivered a note to the Franchisor for
payment of $800,000 in past due royalty fees. (See Note 5.)
NOTE 4. ACCRUED LIABILITIES
Accrued liabilities is summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll and Payroll Taxes $ 457,800 $ 439,900
Workers' compensation claims 1,247,700 1,174,100
Property taxes 211,500 506,700
Interest 12,000 498,300
Other 565,100 1,323,900
---------- ----------
$2,494,100 $3,942,900
========== ==========
</TABLE>
The Company self-insures workers' compensation losses up to certain limits. The
estimated liability for workers' compensation claims represents an estimate for
the ultimate cost of uninsured losses which are unpaid as of the balance sheet
date. These estimates are continually reviewed and adjustments to the Company's
estimated claim liabilities, if any, are reflected in current operations.
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14
<PAGE> 14
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
NOTE 5. LONG-TERM DEBT
Long-term debt consisting of Senior notes payable, a bank term loan and
unsecured notes payable, is summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Secured 9.0% Senior Notes payable to Cerberus Partners, L.P.
(payable to The Travelers Insurance Company and certain of its
affiliates prior to August 1995), interest payable monthly,
principal payments of $65,000 monthly beginning January 1996,
until balance due in May 1998 (less unamortized discount of
$129,800 and $123,500 in 1995 and 1994) $11,478,000 $11,668,000
Secured bank term loan, monthly principal payments of $67,100
through March 1995, then $41,250 beginning April 1995 until
balance due in May 1998, with interest at prime plus .50%
(9.25% at January 3, 1996) 4,163,000 4,798,700
Unsecured note payable to Franchisor, monthly principal payments
of $25,000 beginning August 1994 through March 1997, interest
at 6.0% 350,000 675,000
Other 9,400 14,200
----------- -----------
16,000,400 17,156,000
Less current portion: (1,580,000) (851,200)
----------- -----------
$14,420,400 $16,304,800
=========== ===========
</TABLE>
Total maturities of long-term debt are as follow:
<TABLE>
<S> <C>
1996 $ 1,580,000
1997 1,329,400
1998 13,220,800
Less unamortized discount (129,800)
-----------
$16,000,400
============
</TABLE>
In March 1995, the Company entered into an Amended and Restated Note Agreement,
dated as of February 1, 1995, with The Travelers Insurance Company and certain
of its affiliates. In August 1995 the Travelers Notes were sold to Cerberus
Partners, L.P. The Cerberus Notes are due May 30, 1998 and provide for an
interest rate of 9.0% and monthly principal reductions of $65,000 beginning
January 1, 1996. As of January 3, 1996, the outstanding balance due under the
Cerberus Notes was $11,607,800.
The Note Agreement includes detachable Warrants for purchases of up to 1,750,000
shares of the Company's common stock at an exercise price of $.40 per share. The
Cerberus Notes are secured by second mortgages on twenty-two Company restaurant
properties. The Note Agreement provides for various covenants including
prepayment options, the maintenance of prescribed debt service coverages,
limitations on the declaration of cash dividends, sale of assets, and certain
other restrictions.
Also in March 1995, the Company entered into an Amended and Restated Loan
Agreement with The Daiwa Bank, Limited, and SouthTrust Bank of Alabama, National
Association (the "Bank Loan") which extends the maturity date of its secured
term loan with the banks until May 30, 1998. The Bank Loan bears interest at
prime rate plus 0.50%, with monthly principal payments of $41,250 beginning
April 1, 1995 ($67,100 prior to April 1, 1995). The Bank Loan is secured by
first mortgages on twenty-two of the Company's restaurant
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15
<PAGE> 15
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
properties, and provides for various covenants substantially consistent with
those of the Cerberus Note Agreement. As of January 3, 1996, the outstanding
balance under the Bank Loan was $4,163,000.
NOTE 6. INCOME TAXES
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $147,100 $(274,400) $ 8,300
State -- -- 1,900
-------- --------- ---------
147,100 (274,400) 10,200
Deferred -- -- (988,400)
-------- --------- ---------
Provision (benefit) for income taxes $147,100 $(274,400) $(978,200)
========= ========== ==========
</TABLE>
Income taxes for the years ended January 3, 1996, December 28, 1994 and December
29, 1993 differ from the amount computed by applying the federal statutory
corporate rate to earnings before income taxes. The differences are reconciled
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax (benefit) at statutory rate $ 522,000 $(719,400) $(1,071,800)
Increase (decrease) in taxes due to:
Effect of graduated tax rates (14,900) 20,600 30,600
State tax net of federal benefit 53,700 (74,000) (110,200)
Change in deferred tax asset valuation allowance (319,600) 530,100 147,100
Other (94,100) (31,700) 26,100
--------- --------- -----------
Provision (benefit) for income taxes $ 147,100 $(274,400) $ (978,200)
========== ========== ============
</TABLE>
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<PAGE> 16
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
The components of deferred taxes at January 3, 1996 and December 28, 1994 are
summarized below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
January 3, December 28,
1996 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Capital loss not currently deductible $ 46,100 $ 22,300
Excess tax over book basis --
Property held for resale 256,800 257,900
Federal and state tax credits 471,900 592,100
Accruals not currently deductible 476,200 763,900
Unearned revenue, previously taxed 30,500 55,200
State net operating loss 14,300 70,600
---------- ----------
Total deferred tax asset 1,295,800 1,762,000
Valuation Allowance (357,600) (677,200)
---------- ----------
938,200 1,084,800
Deferred tax liability:
Excess of tax over book depreciation and amortization 938,200 1,084,800
---------- ----------
Net deferred taxes $ -0- $ -0-
========== ==========
</TABLE>
At January 3, 1996, the Company's federal and state tax credit was comprised of
unused general business tax credits of $38,000, expiring in the years 2006
through 2009, and alternative minimum tax credits of $433,900 which have no
expiration date. The Company's state net operating loss expires in 2009.
NOTE 7. CAPITAL STOCK, OPTIONS AND WARRANTS
The Company has a stock option plan for non-employee directors pursuant to which
up to an aggregate of 540,000 shares of the common stock are authorized to be
granted. All options expire five years after the date of grant or one year after
completion of term as a director.
The Company also had an employee incentive stock option plan pursuant to which
up to an aggregate of 900,000 shares of the common stock are authorized to be
granted. All options expire ten years after the date of grant or 90 days after
termination of employment. This plan expired as of November 30, 1995. All
options outstanding under this plan as of November 30, 1995 remain exercisable
pursuant to terms of the plan.
In 1995 the Company's shareholders approved a new employee incentive stock
option plan pursuant to which an additional 1,000,000 shares of common stock are
authorized to be granted. All options expire ten years after the date of grant
or 90 days after termination of employment.
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17
<PAGE> 17
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
The following table summarizes the changes in the total number of stock option
shares outstanding during the three years ended January 3, 1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of year $ 510,446 $ 630,908 $ 727,876
Options granted 1,075,552 223,227 172,870
Options exercised (119,852) (92,409) (37,064)
Options forfeited (155,946) (251,280) (232,774)
---------- --------- ---------
Options outstanding at end of year 1,310,200 510,446 630,908
========== ========= =========
Options exercisable at end of year 472,850 274,346 447,108
Common shares reserved for future grants at end of year 747,947 645,739 583,459
Option prices per common share:
Exercised during the year $.01 $.01 $.01
Outstanding at year end $.01 $.01 $.01
to to to
$5.75 $5.75 $5.75
</TABLE>
Cerberus Partners, L.P., in their capacity as Senior Note holders (see Note 5),
hold detachable warrants to purchase 1,750,000 shares of the Company's common
stock at $.40 per share at any time prior to October 1, 2003. The estimated fair
value of the warrants as of March 1995 (the date of the amendment to the Note
Agreement) of $171,500 was recorded as an increase to additional paid-in capital
and as debt discount to the Senior Notes.
The Company's Board of Directors is authorized to set the various rights and
preferences for the Company's Preferred Stock, including voting, conversion,
dividend and liquidation rights and preferences, at the time shares of Preferred
Stock are issued. As of January 3, 1996 there were no shares of Preferred Stock
issued.
NOTE 8. PROFIT SHARING AND RETIREMENT PLAN
Employees of the Company participate in a profit sharing and retirement plan
covering substantially all full-time employees at least twenty-one years of age
and with more than one year of service. The plan was established in August 1991.
Contributions are made to the plan at the discretion of the Company's Board of
Directors. No contributions have been made since the inception of the plan.
The profit sharing plan includes a 401(K) feature by which employees can defer,
by payroll deduction only, 1% to 15% of their annual compensation not to exceed
$9,500 in 1995.
The plan provides for a Company matching contribution of $.25 per dollar of the
first 6% of employee deferral. The Company's matching contribution was $43,173
in 1995, $38,400 in 1994 and $51,100 in 1993. Employees vest in Company
contributions based on the following schedule:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Years of Service Vesting Percentage
- -----------------------------------------------------------------------------------------------
<S> <C>
Less than 3 0%
3 20%
4 20%
5 60%
6 80%
7 100%
</TABLE>
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18
<PAGE> 18
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
NOTE 9. INVESTMENT IN JOINT VENTURES
In December 1994, the Company formed a new subsidiary, Family Steak JV, Inc.
which acquired a 50% ownership in a limited liability company, Cross Creek
Barbeque, L.C. ("Cross Creek"), for the purpose of opening a new restaurant. The
Company contributed the Wrangler's Roadhouse, Inc. equipment to Cross Creek and
the other 50% owner of Cross Creek contributed the cash necessary to remodel and
open the new Cross Creek restaurant. Wrangler's Roadhouse, Inc. leases the land
and building it formerly occupied to Cross Creek. The Cross Creek restaurant
opened January 1995. As a result of poor operating performance, the Company sold
its interest in the Cross Creek restaurant in July 1995.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Lease Obligations
At January 3, 1996, the Company is committed under the terms and conditions of
real and personal property operating leases for minimum rentals aggregating
$711,600 plus insurance, common area expenses and taxes. The Company has various
renewal options on these leases covering periods of five to twenty years.
Future minimum lease obligations are payable as follows:
<TABLE>
<S> <C>
1996 $198,100
1997 173,000
1998 140,400
1999 85,500
2000 38,400
2001-2002 76,200
--------
$711,600
=========
</TABLE>
Rental expense for the years ended January 3, 1996, December 28, 1994 and
December 29, 1993 was approximately $419,200, $447,100 and $689,000
respectively. Contingent rental payments, for the years ended January 3, 1996,
December 28, 1994 and December 29, 1993 were approximately $5,500, $7,000 and
$14,000 respectively.
Legal Matters
The Company, in the normal course of business, is subjected to claims and
litigation with respect to store operations. In the opinion of management, based
on the advice of legal counsel the ultimate disposition of these claims and
litigation will not have a material effect on the financial position or results
of operations of the Company.
NOTE 11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
In 1995, the Company adopted Statement of Financial Accounting Standards No.
107, "Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107").
This statement addresses disclosure of estimated fair values of certain
financial instruments. The estimated fair value amounts have been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required to
interpret market data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
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19
<PAGE> 19
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents. For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Investments. The Company's investments consist of certificates of
deposit for which the carrying amount is a reasonable estimate of fair
value.
Mortgage Receivables. The fair value of mortgage receivables is
estimated by discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities. The Company believes the carrying
amount is a reasonable estimate of fair value.
Debt. Interest rates that are currently available to the Company for
issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt instruments. The Company believes the carrying
amount is a reasonable estimate of such fair value.
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20
<PAGE> 20
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
FAMILY STEAK HOUSES OF FLORIDA, INC.
We have audited the accompanying consolidated balance sheets of Family Steak
Houses of Florida, Inc. and subsidiaries as of January 3, 1996 and December 28,
1994, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended January
3, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Family Steak Houses of Florida,
Inc. and subsidiaries as of January 3, 1996 and December 28, 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended January 3, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
February 23, 1996
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21
<PAGE> 21
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
COMPANY'S REPORT ON FINANCIAL STATEMENTS
Family Steak Houses of Florida, Inc. has prepared and is responsible for the
accompanying consolidated financial statements and related consolidated
financial information included in this report. These consolidated financial
statements were prepared in accordance with generally accepted accounting
principles and are appropriate in the circumstances. These consolidated
financial statements necessarily include amounts determined using management's
best judgements and estimates.
Family Steak Houses of Florida, Inc. maintains accounting and other control
systems which the Company believes provides reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Company, although there are inherent limitations in all internal control
structure elements, as well as cost/benefit considerations.
Family Steak Houses of Florida, Inc.'s independent certified public accountants,
Deloitte & Touche LLP, have audited the accompanying consolidated financial
statements for 1995. The objective of their audit, performed in accordance with
generally accepted auditing standards, is to express an opinion on the fairness,
in all material respects, of the Company's consolidated financial position,
results of its operations and its cash flows in accordance with generally
accepted accounting principles. They consider the internal control structure to
the extent considered necessary to determine the audit procedures required for
the purpose of expressing their opinion on the consolidated financial
statements.
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22
<PAGE> 22
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
CORPORATE DIRECTORS
AND OFFICERS
DIRECTORS:
Lewis E. Christman, Jr.
President, Chief Executive Officer
Joseph M. Glickstein, Jr.
Partner, Glickstein & Glickstein, P.A.
Richard M. Gray
Partner, Gray & Kelley
Robert J. Martin
Vice President
William S. Smith, Jr.
Executive Vice President
OFFICERS:
Lewis E. Christman, Jr.
President, Chief Executive Officer
William S. Smith, Jr.
Executive Vice President
Robert J. Martin
Vice President
Robert Scott
Vice President
Edward B. Alexander
Chief Financial Officer
Secretary and Treasurer
[PHOTO]
Left to right; Richard M. Gray, Robert
J. Martin,
Joseph M. Glickstein, Williams S.
Smith, Jr.
Seated; Lewis E. Christman, Jr.
[PHOTO]
Left to right; Robert Scott, Robert J.
Martin, Lewis E. Christman, Jr., William
S. Smith, Jr., Edward B. Alexander
[RYAN'S LOGO]
23
<PAGE> 23
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
CORPORATE INFORMATION
Annual Meeting
The annual meeting will be held at:
Sea Turtle Inn
One Ocean Boulevard
Atlantic Beach, FL 32233
Tuesday, June 18 at 10:00 a.m.
Independent Certified Public Accountants
Deloitte & Touche LLP
Suite 2801, Independent Square
One Independent Drive
Jacksonville, FL 32202-5034
General Counsel
Mahoney Adams & Criser, P.A.
3400 Barnett Center
50 North Laura Street
P.O. Box 4099
Jacksonville, FL 32201
Transfer Agent
Chemical Mellon Shareholder Services
Four Station Square
Third Floor
Pittsburg, PA 15219-1173
Executive Office
Family Steak Houses of Florida, Inc.
2113 Florida Boulevard
Neptune Beach, FL 32266
Form 10-K
A copy of the Company's Annual Report on Form 10-K
for fiscal 1995, as filed with the
Securities and Exchange Commission, may
be obtained by writing to:
Corporate Secretary
Family Steak Houses of Florida, Inc.
2113 Florida Boulevard
Neptune Beach, FL 32266
Common Stock Data
The Company's common stock is traded on the NASDAQ National Market System under
the trading symbol "RYFL". As of March 12, 1996, there were approximately 2,840
shareholders of record, not including individuals holding shares in street
names. The closing sale price for the Company's stock on March 12, 1996 was
$.66.
The Company has never paid cash dividends on its common stock and is not allowed
to pay dividends under its loan agreements. Management of the Company presently
intends to retain all available funds for expansion of the business.
The quarterly high and low closing prices of the Company's common stock are as
shown below:
<TABLE>
<CAPTION>
- ----------------------------------------------------
Market Price of Common Stock
- ----------------------------------------------------
1995 1994
Quarter High Low High Low
- ----------------------------------------------------
<S> <C> <C> <C> <C>
First 15/16 9/32 13/19 1/2
Second 15/16 9/16 9/16 1/4
Third 1 11/16 1/2 1/4
Fourth 1 3/16 5/8 7/16 1/4
</TABLE>
[RYAN'S LOGO]
24
<PAGE> 1
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
-------------------------------------------------
We consent to the incorporation by reference in this Annual Report of Family
Steak Houses of Florida, Inc. on Form 10-K of our report dated February 23,
1996, appearing in the 1995 Annual Report to Shareholders of Family Steak
Houses of Florida, Inc.
We additionally consent to the incorporation by reference in Registration
Statement No. 33-11684 pertaining to the 1986 Employee Incentive Stock Option
Plan of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated
March 15, 1996 appearing in and incorporated by reference in this Annual Report
on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January
3, 1996.
We further consent to the incorporation by reference in Registration Statement
No. 33-12556 pertaining to the 1986 Stock Option Plan for Non-Employee
Directors of Family Steak Houses of Florida, Inc. on Form S-8 of our report
dated February 23, 1996 appearing in and incorporated by reference in this
Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year
ended January 3, 1996.
We further consent to the incorporation by reference in Registration Statement
No. 33-62101 pertaining to the 1995 Long Term Incentive Plan of Family Steak
Houses of Florida, Inc. on Form S-8 of our report dated February 23, 1996
appearing in and incorporated by reference in this Annual Report on Form 10-K
of Family Steak Houses of Florida, Inc. for the year ended January 3, 1996.
Deloitte & Touche LLP
Jacksonville, Florida
March 25, 1996
F-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAMILY STEAK
HOUSES OF FLORIDA, INC'S. ANNUAL REPORT ON FORM 10-K, AS OF AND FOR THE YEAR
ENDED JANUARY 3, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1996
<PERIOD-END> JAN-03-1996
<CASH> 711,400
<SECURITIES> 600,300<F1>
<RECEIVABLES> 229,600
<ALLOWANCES> 0
<INVENTORY> 247,400
<CURRENT-ASSETS> 2,045,300
<PP&E> 40,057,600
<DEPRECIATION> (13,220,900)
<TOTAL-ASSETS> 31,259,700
<CURRENT-LIABILITIES> 5,330,200
<BONDS> 0
0
0
<COMMON> 108,500
<OTHER-SE> 11,351,200
<TOTAL-LIABILITY-AND-EQUITY> 31,259,700
<SALES> 42,105,400
<TOTAL-REVENUES> 42,105,400
<CGS> 16,591,300
<TOTAL-COSTS> 39,487,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,693,800)
<INCOME-PRETAX> 1,491,300
<INCOME-TAX> 147,100
<INCOME-CONTINUING> 1,344,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,344,200
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<FN>
<F1>REPRESENTS INVESTMENTS IN CERTIFICATES OF DEPOSITS WITH MATURITIES OF LESS THAN
ONE YEAR.
</FN>
</TABLE>
