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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
(x )[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 1,December 31, 1997
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__[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__YES [ ] NO (X)[X]
As of March 7, 1997, 10,954,9605, 1998, 2,367,768 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 7, 1997,5, 1998, as reported in The Wall Street Journal) held by
non-affiliates of the registrant was approximately $10,758,319.$3,462,823.
Documents Incorporated by Reference
Portions of the registrant's 19961997 Annual Report to Shareholders are incorporated
by reference into Part II. Portions of the Proxy Statement for the registrant's
19971998 Annual Meeting of Shareholders are incorporated by reference into Part III.
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 1,December 31, 1997, the Company operated 25 Ryan's restaurants
in Florida, including nine in north Florida and sixteen 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 Bartm, and a separate fresh bakery
and dessert bar. In addition to traditional salad bar items, the scatter bars or
Mega Barstm 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 exclusive right to operate Ryan's Family Steak House
restaurants throughout North and Central 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.
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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 1996, the Company and the Franchisor amended the Franchise Agreement.
The amended agreement requires the Company to pay a royalty fee of 3.0% through
December 2001 and 4.0% thereafter on the gross receipts of each Ryan's Family
Steak House restaurant. Total royalty fee expenses were $1,108,400, $1,138,600,
$1,263,200,
and $1,561,100$1,263,200, for the fiscal years ended December 31, 1997, January 1, 1997,
and January 3, 1996, and December
28, 1994, respectively.
The Franchise Agreement requires the Company to operate a minimum number of
Ryan's restaurants on December 31 of each year. The Company has listed six
restaurants for sale. Failure to operate the minimum number of restaurants could
result in the loss of exclusivity rights to the Ryan's concept in the Company's
north and central Florida territory. 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:
Number of
Restaurants Required to
End of Fiscal Year be in Operation
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1997 25
1998 26
1999 27
2000 28
2001 and subsequent years Increases by one each year
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Prior to July 1994, 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. In July 1994 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.
Ryan's has not developed any restaurants in Florida as of March 13, 1997.
In July 1994, 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 1996 Annual Report to
Shareholders).1998.
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 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, 1997,1998, 24 of the Company's Ryan's Restaurantsrestaurants 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 500 persons and highlight centrally located, illuminated scatter
bars or Mega Bars[tm]Barstm 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. Typical hours of
operation are from 11:00 a.m. to 9:00 p.m., Sunday through Thursday, and from
11:00 a.m. to 10:00 p.m.,
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Friday and Saturday. Restaurants that open forserve 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 then 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 Barstm and the bakery
dessert bar. Customers receive table service of the entree and beverage refills.
For the fiscal year ended January 1,December 31, 1997, the average weekly customer count
per restaurant was approximately 5,2004,730 and the average cost of a meal with beverage,price (including
beverage) was approximately $5.90.
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$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 to three 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- levelManagement-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.
Each restaurant management group reports to a supervisor. Presently, the
supervisors each oversee the operations of six to seven restaurants. The
supervisors report directly to the Vice PresidentDirector 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%95% of the products used by
the Company'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
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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.
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The Franchise Agreement requires that all suppliers to Ryan's restaurants
are subject to approval 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
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.
Development
General. The Company operated 25 Ryan's restaurants as of March 5, 1997.17, 1998.
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 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.
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The Company generally constructs its Ryan's restaurants using its
contracting subsidiary. For a new restaurant scheduled to be opened in 1998, the
Company may engage the Franchisor to serve as its general contractor to enable
the Company to take advantage of the Franchisor's purchasing power with respect
to construction material, and labor and its expertise in restaurant
construction. Management
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believes that by performing site selection and restaurant construction
internally or through the Franchisor, 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 a 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.
Joint Venture
In December 1994, the Company formed a new subsidiary, Family Steak JV,
Inc. which acquiredaquired a 50% ownership in a Florida limited liability company, Cross
Creek Barbeque,Barbeqe, 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 ("Wrangler's") to Cross Creek
and the other 50% owner of Cross Creek contributed the cash necessary to remodel
and open the new Cross Creek restaurant. As a result of unsatisfactory
operational performance, the Company sold its interest in the Cross Creek
restaurant in July 1995. Wrangler's leased the land and building to Cross Creek
until May 1996, when it sold them at a gain of approximately $5,000.
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.
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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.
The amount of new competition near Company restaurants increased
significantly in 1996, and is expected to continue to increase in 1997. The increased competition had a significant negative
impact on sales in 1996.1997. Management has developed a plan to attempt to reduce
the negative impact on sales from new competition, in 1997, but there can be no assurance
that sales trends will improve. In addition, the Franchisor has the right to
operate restaurants in several other west Florida and south Florida counties.
Employees
As of January 1,December 31, 1997, the Company employed approximately 1,4001,300 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 1,December 31, 1997:
Lewis E. Christman, Jr., age 77,78, 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.
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Edward B. Alexander, age 38,39, has been Vice President of Finance since
December 1996, and was Secretary and Treasurer
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of the Company from November 1990 to December 1996. In addition, Mr. Alexander
was appointed to the Board of Directors in May 1996, and serves as Secretary of
each of the Company's subsidiaries. Mr. Alexander served as controller of the
Company from January 1989 to 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.
Michael J. Walters, age 34, has been Secretary of the Company since
December 1996. Mr. Walters has served as Controller of the Company since
September 1990. From May 1987 to September 1990, Mr. Walters was employed as an
accountant for the accounting firm of Deloitte & Touche.
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,statutes, 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 meat received by the
Company is properly aged, the Company maintains a two to six week supply of
beef.
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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 December 1996, the Company entered into a Loan Agreement with FFCA
Mortgage Corporation ("FFCA"). The Loan Agreement governs eighteen Promissory
Notes payable to FFCA.FFCA totaling $14,681,400 at December 31, 1997. Each note is
secured by a mortgage on a Company restaurant property with a total outstanding principal balance of $15,360,000 as
of January 1, 1997.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. In November 1997, the Company prepaid
one of the Notes in full in the amount of approximately $440,000. The Loan
Agreement provides for various covenants, including the maintenance of
prescribed debt service coverages.
The Company used the proceeds of the Promissory Notes to retire its notes
with Cerberus Partners, L.P. ("Cerberus") and its loan with the Daiwa Bank
Limited and SouthTrust Bank of Alabama, N.A. The Company realized a discount on
the retirement of the Cerberus notes, which was partially offset by unamortized
debt issuance costs. The resulting gain of $348,500 net of income taxes, has beenwas
accounted for in 1996 as an extraordinary item. In addition, the Company retired
Warrantswarrants for 1,050,000210,000 shares of the Company's common stock previously held by
Cerberus. Cerberus continues to hold Warrantswarrants to purchase 700,000140,000 shares of the
Company's common stock at an exercise price of $.40$2.00 per share.
Also in December 1996, the Company entered into a separate loan agreement
with FFCA under which it may borrow up to an additional $4,640,000 in 1997.$4,640,000. This
additional financing would be evidenced by four additional Promissory Notes
secured by mortgage on four Company restaurant properties. The terms and
interest rate of this loan agreement are identical to the loan agreement
described above. 10
The Company borrowed $1,290,000 under this agreement in
February 1998, secured by a mortgage on one restaurant property. The
availability of new borrowings under this agreement is currently scheduled to
expire in June 1998.
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 primarily 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
Location Date Opened
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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
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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
Brooksville January 1997
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In January 1998, the Company entered into a lease agreement for a new
restaurant expected to be opened in June 1998. The Company has also entered into
an agreement, subject to its ability to obtain a building permit, to purchase
land for $590,000 for another restaurant scheduled to open sometime in 1998.
As of March 5, 1997,17, 1998, the Company operated 25 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 1,December 31, 1997, the Company owned the real property on which 22 of
its restaurants were located. EighteenSeventeen of these properties were subject to
mortgages securing the FFCA Notes.notes.
The Company leases the real property on which three of its restaurants are
located. Those restaurants are located in Jacksonville, Florida, Clearwater
Florida and
Brooksville, Florida. The Company also leases two buildings in Jacksonville,
Florida for its executive officesoffices.
On May 13, 1997, the Company received notice from Aetna Life Insurance
Company, the mortgage holder of the mall property at which the Company's
Clearwater, Florida restaurant is located, that Aetna intended to foreclose on
the property due to a default by the landlord on the mortgage. In September
1997, Aetna was granted a Motion for
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Summary Judgement of Foreclosure by the Circuit Court of the Sixth Judicial
Court in Pinellas County. This Motion indicates that Aetna's rights under the
mortgage are superior to the Company's leasehold interest. It is uncertain
whether this action could allow Aetna to evict the Company consistingfrom the Clearwater
location. An eviction would result in a write-off of approximately 3,500
square feet, are leased at a monthly rental rate$350,000 of
$2,680, plus sales tax, from
Barbara Smith, the wife of the late William Stanley Smith, Jr., a former officer
and director of the Company.leasehold improvements. The Company paid $34,254intends to vigorously defend its interest in
rental payments to Mr.
and Mrs. Smiththis matter. However, there can be no assurance that the Company will be
successful in fiscal year 1996.
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 $20,065 in rental payments to Mr. Ervin in fiscal year
1996.this defense.
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 thesecurrently pending claims and
litigation will not have 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.
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(a) On February 24, 1998, the Company held a Special Meeting of
Shareholders to approve a one-for-five reverse split of the Company's
Common Stock.
(b) The following table sets forth the number of votes for, against or
withheld regarding the proposal:
For Against Abstain
6,930,517 1,162,674 38,377
The proposal obtained a majority vote of the Company's outstanding
shares, and therefore was passed.
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 19961997 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 19961997 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 19961997
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 19961997
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 19971998 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission
prior to May 1, 1997, 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.
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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 1996 fiscal
year, all filing requirements applicable to its officers, 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 1996 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
Commission prior to May 1, 1997, whichApril 30, 1998, is incorporated herein by reference.
The information regarding executive officers is set forth in Item 1 of this
report under the caption "Executive Officers."
The information regarding reports required under section 16(a) of the
Securities Exchange Act of 1934 contained under caption "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's proxy statement for
the 1998 Annual Meeting of Shareholders, which will be filed with Securities and
Exchange Commission prior to April 10, 1998 is incorporated herein by reference.
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ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Pay" in the
Company's Proxy Statement for the 19971998 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission prior to May 1, 1997,April 30,
1998, 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 19961998
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission prior to May 1, 1997,April 30, 1998, 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
19961998 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission prior to May 1, 1997,April 30, 1998, is incorporated herein by
reference.
14
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
19961997 Annual Report to Shareholders. With the exception of the pages
listed below, the 19961997 Annual Report to Shareholders is not deemed
"filed" as a part of this report on Form 10-K.
Page
Reference
-------------------------------
Form 19961997
10-K Annual Report
---- -------------
Consent of Independent Certified
Public Accountants F-1
Independent Auditors'Auditors Report 2427
Consolidated Statements of Operations 10
Consolidated Balance Sheets 11
-15-
Consolidated Statements of Share-
holders' Equity 12
Consolidated Statements of Cash Flows 13
Notes to Consolidated Financial
Statements 14
(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.)
15
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.)
3.05 Amended and Restated Bylaws of Family Steak Houses of
Florida, Inc. (Exhibit 4 to the Company's Form 8-A, filed
with the Commission on March 19, 1997, is incorporated
herein by reference.)
3.06 Shareholder Rights Agreement, dated March 19, 1997, by and
between Family Steak Houses of Florida, Inc. and Chase
Mellon Shareholder Services, LLC (Exhibit 1 to the Company's
Form 8- A,8-A, filed with the Commission on March 19, 1997, is
incorporated herein by reference.)
-16-
3.07 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3 to the
Company's Form 8-A filed with the Commission on March 19,
1997, is incorporated herein by reference.)
3.08 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc.
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.)
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,
is incorporated herein by reference.)
16
10.04 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,
(subsequently transferred to Cerberus Partners, L.P.)
(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).
10.05 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. (subsequently
transferred to
-17-
Cerberus Partners, L.P.) (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).
10.06 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).
10.07 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).
10.08 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).
10.0910.07 Agreement between the Company and Kraft Foodservice, Inc.,
as the Company's primary food product distribution. (Exhibit
10.06 to the Company's AnnualQuarterly 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 Edward B. Alexander,
dated as of October 1, 1996. (Exhibit 10.01 to the Company's Quarterly
Report on Form 10-Q, filed with the Commission on November 18, 1996,
is incorporated herein by reference).
17
10.1110.08 Lease Agreement between the Company and CNL American
Properties Fund, Inc., dated as of September 18, 1996.
(Exhibit 10.02 to the Company's Quarterly Report on Form
10-Q, filed with the Commission on November 18, 1996 is
hereby incorporated by reference).
10.12 Construction Addendum between the Company and CNL American Properties
Fund, Inc., dated as of September 18, 1996. (Exhibit 10.03 to the
Company's Quarterly Report on Form 10-Q, filed with the Commission on
November 18, 1996 is hereby incorporated by reference).
10.1310.09 Rent Addendum to Lease Agreement between the Company and CNL
American Properties Fund, Inc., dated as of September 18,
1996. (Exhibit 10.04 to the Company's Quarterly Report on
Form 10-Q, filed with the Commission on November 18, 1996 is
hereby incorporated by reference).
10.1410.10 Amendment of Franchise Agreement between the Company and
Ryan's Family Steak Houses, Inc. dated October 3, 1996.
10.15 Employment agreement between the Company and Lewis E. Christman, Jr.,
dated as of December 30, 1996. (Exhibit 210.15 to the Company's Schedule
14D-9,Annual Report on Form 10-K,
filed with the Commission on March 19,April 1, 1997 is hereby
incorporated by reference.)
10.16 Consulting agreement between the Company and Robert J. Martin, dated
as of January 8, 1997. (Exhibit 4 to the Company's Schedule 14D-9,
filed with the Commission on March 19, 1997 is hereby incorporated by
reference.)
10.17reference).
10.11 $15.36m Loan Agreement, between the Company and FFCA
Mortgage Corporation, dated December 18, 1996. (Exhibit
10.18 to the Company's Annual Report on Form 10-K, filed
with the Commission on April 1, 1997 is hereby incorporated
by reference).
10.12 $4.64m Loan Agreement, between the Company and FFCA Mortgage
Corporation, dated December 18, 1996. (Exhibit 10.19 to the
Company's Annual Report on Form 10-K, filed with the
Commission on April 1, 1997 is hereby incorporated by
reference).
-18-
10.13 Form of Promissory Note between the Company and FFCA
Mortgage Corporation, dated December 18, 1996. 18
(Exhibit
10.20 to the Company's Annual Report on Form 10-K, filed
with the Commission on April 1, 1997 is hereby incorporated
by reference).
10.14 Form of Mortgage between the Company and FFCA Mortgage
Corporation, dated December 18, 1996 (Exhibit 5 to the
Company's Schedule 14D-9, filed with the Commission on March
19, 1997 is hereby incorporated by reference.)
10.21reference).
10.15 Form of Environmental AgreementMortgage between the Company and FFCA Mortgage
Corporation, dated March 18, 1996. (Exhibit 10.22 to the
Company's Annual Report on Form 10-K, filed with the
Commission on April 1, 1997 is hereby incorporated by
reference).
10.16 Employment agreement between the Company and Edward B.
Alexander, dated as of January 26, 1998.
10.17 Employment agreement between the Company and Lewis E.
Christman, Jr., dated as of January 26, 1998.
10.18 Standstill and Settlement Agreement between the Company and
Bisco Industries, Inc. (and affiliates) dated February 24,
1998. (The Company's Form 8-K filed with the Commission on
March 6, 1998 is hereby incorporated by reference).
10.19 Lease agreement dated January 29, 1998 between the Company
and Excel Realty Trust, Inc. for a new restaurant scheduled
to be opened in 1998.
10.20 Contract dated April 29, 1997 between the Company and
sellers for purchase of land for a new restaurant scheduled
to be opened in 1998.
13.01 19961997 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 schedules (electronic filing only).
-19-
(b) None.
(c) See (a)3. above for a list of all exhibits filed herewith and the Exhibit
Index.
(d) None.
19
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 27,
1997,March 6, 1998,
appearing in the 19961997 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
February 27, 1997March 6, 1998 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 1,December
31, 1997.
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
27, 1997March 6,
1998 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 1,December 31,
1997.
We further consent to the incorporation by reference in Registration Statement
No. 33-62101 pertaining to the 1996 Long Term Incentive Plan of Family Steak
Houses of Florida, Inc. on Form S-8 of our report dated February 27, 1997March 6, 1998 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 1,December 31, 1997.
Deloitte & Touche LLP
Jacksonville, Florida
March 25, 199730, 1998
F-1
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 26, 19971998 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.
Signature Title Date
- --------- ----- ----
/s/ Lewis E. Christman, Jr. President (Principal March 26, 19971998
- --------------------------- Executive Officer
Lewis E. Christman, Jr. Executive Officer and Director)
/s/ Edward B. Alexander Vice President and Director March 26, 19971998
- ----------------------- (Principal Financial and
Edward B. Alexander (Principal Financial and Accounting Officer)
/s/ Robert J. Martin Director March 26, 19971998
- --------------------
Robert J. Martin
/s/ Michael J. Walters Controller March 26, 1997
Michael J. Walters
/s/ Joseph M. Glickstein, Jr. Director March 26, 19971998
- -----------------------------
Joseph M. Glickstein, Jr.
/s/ Richard M. Gray Director March 26, 19971998
- -------------------
Richard M. Gray
/s/ Glen F. Ceiley Director March 26, 1998
- ------------------
Glen F. Ceiley
/s/ Jay Conzen Director March 26, 1998
- --------------
Jay Conzen