May 10, 2000
OFIS Filer Support
SEC Operations Center
6842 General Green Way
Alexandria, VA 22312-2413
Dear Sirs,
Pursuant to regulations of the Securities and Exchange Commission,
submitted herewith for filing on behalf of Family Steak Houses of
Florida, Inc. is the Company's Quarterly Report on Form 10-Q for the
Fiscal Quarter ended March 29, 2000.
This filing is being effected by direct transmission to the
Commission's Edgar System.
Very truly yours,
Stephanie M. Highsmith
Controller
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter ended March 29, 2000
Commission File No. 0-14311
FAMILY STEAK HOUSES OF
FLORIDA, INC.
Incorporated under the laws of IRS Employer Identification
Florida No. 59-2597349
2113 FLORIDA BOULEVARD
NEPTUNE BEACH, FLORIDA 32266
Registrant's Telephone No. (904) 249-4197
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No_____
Title of each class Number of shares outstanding
Common Stock 2,414,432
$.01 par value As of May 5, 2000
FAMILY STEAK HOUSES OF FLORIDA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 29, 2000
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q, and do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation of the results for the interim period have been
included. Operating results for the thirteen week period ended
March 29, 2000 are not indicative of the results that may be expected
for the fiscal year ending January 3, 2001. For further information,
refer to the financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1999.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany profits, transactions and balances have been eliminated.
Note 2. Earnings Per Share
Basic earnings per share for the thirteen weeks ended March 29,
2000 and March 31, 1999 were computed based on the weighted average
number of common shares outstanding. Diluted earnings per share for
those periods have been computed based on the weighted average number
of common shares outstanding, giving effect to all dilutive potential
common shares that were outstanding during the period. Dilutive
shares are represented by shares under option and stock warrants.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Quarter Ended March 29, 2000 versus March 31, 1999
The Company experienced an increase in total sales during the first
thirteen weeks of 2000 compared to the first thirteen weeks of 1999.
Same-store sales (average unit sales in restaurants that have been open
for at least 18 months and operating during comparable weeks during the
current and prior year) in the first quarter of 2000 increased 2.8%
from the same period in 1999, compared to a decrease of 1.1% from 1999
as compared to 1998.
The increase in same-store sales was primarily due to menu price
increases implemented at all restaurants in 1999. Management is seeking
to further improve sales trends by focusing on improved restaurant
operations and devising competitive strategies to offset the effects of
new competition. Beginning in 1999, management implemented a plan to
sell restaurants which are not meeting sales and profit expectations.
To this end, the Company sold one operating restaurant and one
previously closed restaurant in the first quarter of 2000. Two
other closed restaurants are currently listed for sale. Proceeds from
any sales of restaurants would be used either to reduce long-term debt
or build new restaurants with more competitive facilities in superior
locations.
The costs and expenses of the Company's restaurants include food and
beverage, payroll, payroll taxes and employee benefits, depreciation
and amortization, repairs, maintenance, utilities, supplies,
advertising, insurance, property taxes, rents, and licenses. The
Company's food, beverage, payroll, and employee benefit costs as a
percentage of sales are believed to be higher than the industry average,
due to 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
84.4% in the first quarter of 2000 from 86.0% in the same quarter
of 1999.
Food and beverage costs as a percentage of sales decreased to 38.6%
in 2000 from 38.9% in 1999, primarily due to menu price increases
implemented by the Company in 1999. Payroll and benefit costs as a
percentage of sales decreased to 27.1% in 2000 from 27.8% in 1999, due
to lower workers' compensation expense and to higher average sales per
restaurant.
Depreciation and amortization expenses decreased to 4.8% in 2000 from
5.0% in 1999, primarily due to the sale of three restaurants which had
sales volumes lower than the Company's average.
General and administrative expenses as a percentage of sales increased
to 6.2% in the first quarter of 2000 from 5.7% in the same quarter in
1999, primarily due to increased legal costs and increased credit card
and banking charges.
Interest expense increased to $467,200 in the first quarter of 2000
from $382,400 in the same quarter of 1999. The increase was due to
higher interest rates in 2000. Also, the Company capitalized interest
expense of $33,600 in 1999, whereas no interest expense was
capitalized in the first quarter of 2000.
The effective income tax rates for the first three months of 1999
and 2000 were 0.0%. The 0% rate in both years was due to the use of
net operating loss carryforwards to offset taxable income.
The results for the first quarter of 2000 include realized gains
of $181,500 from the sale of marketable securities, which are included
in interest and other income. There were no such gains in the first
quarter of 1999.
Net earnings were $538,300 and $233,800 in the first quarters of
2000 and 1999, respectively. Earnings per share assuming dilution for
the quarter were 22 cents in 2000 compared to 10 cents in 1999.
The Company's operations are subject to some seasonal fluctuations.
Revenues per restaurant generally increase from January through April
and decline September through December. Operating results for the
quarter ended March 29, 2000 are not indicative of the results that may
be expected for the fiscal year ending January 3, 2001.
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 repayment of debt, working capital
requirements for continuing operations are not significant.
At March 29, 2000, the Company had a working capital deficit
of $1,526,100 compared to a working capital deficit of $2,491,100 at
December 29, 1999. The increase in working capital during the first
three months in 2000 was due primarily to cash provided by operating
activities.
Cash provided by operating activities increased to $1,305,100
in the first quarter of 2000 from $1,039,600 in the first quarter
of 1999, due to increased net earnings in 2000.
The Company spent approximately $197,000 in the first quarter
of 2000 for property and equipment. Total capital expenditures for
equipment in 2000, based on present costs and plans for capital
improvements, are estimated to be $5,450,000. This amount is based
on budgeted expenditures for land, buildings and equipment for two
new restaurants in 2000, plus normal recurring equipment purchases
and minor building improvements ("capital maintenance items"). The
Company projects that proceeds from the Company's financing agreements
(described below) and cash generated from operations will be sufficient
to fund these improvements. The Company's ability to construct and
open the two restaurants is also dependent upon certain other factors
beyond its control, such as obtaining building permits from various
government agencies.
In December 1996, the Company entered into two loan agreements
with FFCA Mortgage Corporation ("FFCA"). Pursuant to the first Loan
Agreement (the "$15.36 Million Loan Agreement"), the Company borrowed
$15.36 million, which loans are evidenced by fifteen Promissory Notes
payable to FFCA. Each Note is secured by a mortgage on a Company
restaurant property. The Promissory Notes provide for a term of twenty
years and an interest rate equal to the thirty-day LIBOR rate plus
3.75%, adjusted monthly. The $15.36 million Loan Agreement provides
for various covenants, including the maintenance of prescribed debt
service coverages. As of March 29, 2000, the outstanding balance due
under the loan was $11,748,300.
The Company used the proceeds of the $15.36 million loan agreement to
retire its Notes with Cerberus Partners, L.P. ("Cerberus") and its
loans with the Daiwa Bank Limited and SouthTrust Bank of Alabama, N.A.
In addition, the Company retired warrants for 210,000 shares of the
Company's common stock previously held by Cerberus. Cerberus continues
to hold Warrants to purchase 140,000 shares of the Company's common
stock at an exercise price of $2.00 per share.
Pursuant to the second loan agreement with FFCA, the Company borrowed
an additional $2,590,000 in 1998. This additional financing is
evidenced by three additional Promissory Notes secured by mortgages on
three Company restaurant properties. The terms and conditions of this
loan agreement are substantially identical to those of the $15.36
million Loan Agreement. As of March 29, 2000, the outstanding balance
under this loan was $2,502,800.
In October 1998, the Company received two commitments for new
financing from FFCA. The Company borrowed a total of $2.6 million in
1999 under the first commitment, which is secured by mortgages on two
Company restaurant properties. As of March 29, 1999, the outstanding
balance under this loan was $2,561,000. The second commitment was for
construction financing for two new restaurants to be built in 2000.
Terms of this commitment include funding of a maximum of $1,600,000
per restaurant. Other terms and conditions of these loan agreements are
substancially identical to those of the $15.36 million Loan Agreement.
The preceding discussion of liquidity and capital resources contains
certain forward-looking statements. Forward-looking statements involve
a number of risks and uncertainties, and in addition to the factors
discussed herein, among the other factors that could cause actual
results to differ materially are the following: failure of facts to
conform to necessary management estimates and assumptions; the
willingness of FFCA to extend financing commitments; repairs or
similar expenditures required for existing restaurants due to weather
or acts of God; the Company's ability to identify and secure suitable
locations on acceptable terms and open new restaurants in a timely
manner; the Company's success in selling restaurants listed for sale;
the economic conditions in the new markets into which the Company
expands; changes in customer dining patterns; competitive pressures
from other national and regional restaurant chains and other food
vendors; business conditions, such as inflation or a recession, and
growth in the restaurant industry and the general economy; and other
risks identified from time to time in the Company's SEC reports,
registration statements and public announcements.
INFORMATION SYSTEMS AND THE YEAR 2000
In November 1999, the Company completed implementation of its final
computer system changes necessary to ensure that all systems were Year
2000 compliant. The Company has experienced no problems with any of its
systems or suppliers as a result of the Year 2000 compliance technology
issue, with the exception of a credit card software error which affected
customers at one restaurant for a three-day period. The error resulted
from a software error by the credit card processing company, but did
not cause significant problems at the restaurant. The error has been
corrected, and the Company does not anticipate any other problems
associated with the Year 2000 technology issue. The Company spent
approximately $50,000 in 1999 to modify its systems to achieve year
2000 compliance.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to, or threatened with, litigation from time to
time, in the normal course of its business. Management, after reviewing
all pending and threatened legal proceedings, considers that the
aggregate liability or loss, if any, resulting from the final outcome
of these proceedings will not have a material effect on the financial
position or operation of the Company. The Company will, from time to
time when appropriate in management's estimation, record adequate
reserves in the Company's financial statements for pening litigation.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of the report on
Form 10-Q, and the list comprises the Exhibit Index.
Exhibit 11.1
The table below details the number of shares and common stock
equivalents used in the computation of basic and diluted earnings
per share:
<TABLE>
Three Months Ended
<CAPTION> March 29, 2000 March 31,1999
<C> <C>
<S>
Basic:
Weighted average common shares
outstanding used in computing
basic earnings per share 2,409,300 2,386,200
=========== ===========
Basic earnings per share $ 0.22 $ 0.10
Diluted: =========== ===========
Weighted average common shares
outstanding 2,409,300 2,386,200
Effects of shares issuable under
stock plans using the treasury
method 10,100 10,400
Shares used in computing diluted
earnings per share 2,419,400 2,396,600
=========== ===========
$ 0.22 $ 0.10
=========== ===========
</TABLE>
27.01 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FAMILY STEAK HOUSES OF FLORIDA, INC.
(Registrant)
/s/ Glen F. Ceiley
__________________
Date: May 12, 2000 Glen F. Ceiley
Principal Executive Officer
/s/ Edward B. Alexander
_______________________
Date: May 12, 2000 Edward B. Alexander
Executive Vice President
(Principal Financial and Accounting
Officer)
Family Steak Houses of Florida, Inc.
Consolidated Results of Operations
(Unaudited)
<TABLE>
For The Quarters Ended
------------------------
<CAPTION> March 29, March 31,
2000 1999
----------- -----------
<C> <C>
<S>
Revenues:
Sales $10,591,300 $10,146,400
Vending Revenue 72,400 38,800
___________ ___________
10,663,700 10,185,200
Cost and expenses:
Food and beverage 4,091,000 3,942,200
Payroll and benefits 2,870,900 2,824,900
Depreciation and amortization 508,100 507,000
Other operating expenses 1,473,300 1,454,200
General and administrative expenses 658,100 581,700
Franchise fees 317,400 304,000
Loss on store closings and
disposition of equipment 39,200 14,700
----------- ----------
9,958,000 9,628,700
Earnings from operations 705,700 556,500
Interest and other income 215,200 59,700
Gain on sale of property 84,600 --
Interest expense (467,200) (382,400)
----------- ----------
Earnings before income taxes 538,300 233,800
----------- ----------
Net earnings $538,300 $233,800
=========== ==========
Basic earnings per share $0.22 $0.10
=========== ==========
Diluted earnings per share $0.22 $0.10
=========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
Family Steak Houses of Florida, Inc.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
March 29, December 29,
<CAPTION> 2000 1999
-------------- ---------------
<C> <C>
<S>
ASSETS
Current assets:
Cash and cash equivalents $1,189,400 $747,300
Investments 771,700 92,300
Receivables 92,800 125,000
Current portion of mortgages receivable 329,200 77,800
Inventories 265,700 285,400
Prepaid and other current assets 208,000 204,800
-------------- ---------------
Total current assets 2,856,800 1,532,600
Mortgages receivable 364,600 159,800
Certificate of deposit 10,700 10,800
Investments held to maturity 500,000 500,000
Property and equipment:
Land 7,373,400 7,537,300
Buildings and improvements 20,484,500 21,156,000
Equipment 11,507,200 11,908,100
-------------- ---------------
39,365,100 40,601,400
Accumulated depreciation (15,039,300) (15,340,500)
-------------- ---------------
Net property and equipment 24,325,800 25,260,900
Property held for sale 1,906,200 2,488,700
Other assets, principally deferred charges,
net of accumulated amortization 803,300 806,400
-------------- ---------------
$30,767,400 $30,759,200
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,593,100 $1,275,300
Accrued liabilities 2,320,000 2,363,600
Investment margin debt 98,400 --
Current portion of long-term debt 368,000 381,400
Current portion of obligation-capital lease 3,400 3,400
-------------- ---------------
Total current liabilities 4,382,900 4,023,700
Long-term debt 16,444,100 17,335,600
Obligation under capital lease 1,048,500 1,049,300
Deferred revenue 13,300 15,200
-------------- ---------------
Total liabilities 21,888,800 22,423,800
Shareholders' equity:
Preferred stock of $.01 par;
authorized 10,000,000 shares;
none issued -- --
Common stock of $.01 par;
authorized 4,000,000 shares; outstanding
2,414,000 shares in 2000 and
2,409,000 shares in 1999 24,100 24,100
Additional paid-in capital 8,626,400 8,624,700
Accumulated other comprehensive income 15,100 11,900
Retained earnings (accumulated deficit) 213,000 (325,300)
-------------- ---------------
Total shareholders' equity 8,878,600 8,335,400
-------------- ---------------
$30,767,400 $30,759,200
============== ===============
See accompanying notes to consolidated financial statements.
</TABLE>
Family Steak Houses of Florida, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
For the Three Months
================================
<CAPTION> March 29, March 31,
2000 1999
============ =============
<C> <C>
<S>
Operating activities:
Net Earnings $538,300 $233,800
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 508,100 507,000
Directors' fees in form of stock options 1,700 7,500
Amortization of loan fees 7,500 6,900
Loss on disposition of equipment 20,400 14,700
Gain on sale of restaurants (84,600) --
Decrease (increase) in:
Receivables 32,200 (17,200)
Inventories 19,700 64,900
Prepaids and other current assets (3,200) 41,100
Other assets (7,300) (35,600)
Increase (decrease) in:
Accounts Payable 317,800 195,900
Accrued liabilities (43,600) 18,600
Deferred Revenue (1,900) 2,000
__________ _________
Net cash provided by operating activities 1,305,100 1,039,600
__________ _________
Investing activities:
Net purchase of investments (676,100) --
Principal receipts on mortgage receivable 18,800 17,200
Proceeds from sale of restaurants 691,100 --
Proceeds from sale of property held for sale 582,500 --
Issuance of mortgages receivable (475,000) --
Capital expenditures (197,000) (910,700)
__________ _________
Net cash used by investing activities (55,700) (893,500)
Financing activities:
Payments on long-term debt (904,900) (101,100)
Proceeds from issuance of long-term debt -- 1,300,000
Proceeds from investment margin debt 98,400 --
Payments on capital lease (800) (700)
Proceeds from issuance of common stock -- 400
__________ __________
Net cash (used in) provided by financing
activities (807,300) 1,198,600
__________ __________
Net increase in cash and cash equivalents 442,100 1,344,700
Cash and cash equivalents - beginning
of period 747,300 1,910,200
__________ __________
Cash and cash equivalents - end of period $1,189,400 $3,254,900
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for interest $461,000 $409,100
=========== ==========
Cash paid during the quarter for income
taxes -- --
=========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information
extracted from the Company's Form 10Q for the quarter ended March 29,
2000 and is qualified in its entirety by refeence to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-2001
<PERIOD-END> MAR-29-2000
<CASH> 1189400
<SECURITIES> 771700
<RECEIVABLES> 92800
<ALLOWANCES> 0
<INVENTORY> 265700
<CURRENT-ASSETS> 2856800
<PP&E> 39365100
<DEPRECIATION> 15039300
<TOTAL-ASSETS> 30767400
<CURRENT-LIABILITIES> 4382900
<BONDS> 16444100
0
0
<COMMON> 24100
<OTHER-SE> 8854500
<TOTAL-LIABILITY-AND-EQUITY> 30767400
<SALES> 10591300
<TOTAL-REVENUES> 10663700
<CGS> 4091000
<TOTAL-COSTS> 9958000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467200
<INCOME-PRETAX> 538300
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 538300
<EPS-BASIC> .22
<EPS-DILUTED> .22
</TABLE>
