Press Release 405 Lancaster Avenue
Greer, South Carolina 29650
(864) 879-1000
Contact: Fred T. Grant, Jr. For Immediate Release
Senior Vice President - Finance October 20, 2004
RYAN'S ANNOUNCES THIRD QUARTER 2004 RESULTS
______________________
GREER, SOUTH CAROLINA - - Ryan's Restaurant Group, Inc.
(NASDAQ:RYAN) reported third quarter 2004 results today.
Third quarter restaurant sales were $205,331,000 in 2004
compared to $205,686,000 for the third quarter of 2003. Net
earnings for the quarter amounted to $9,226,000 in 2004 and
$10,997,000 in 2003. Earnings per share (diluted) amounted to 22
cents in 2004 compared to 25 cents in 2003.
For the nine months ended September 29, 2004, restaurant
sales increased to $633,534,000 compared to $607,382,000 for the
first nine months of 2003. Net earnings for the nine months
amounted to $38,756,000 in 2004 compared to $37,424,000 in 2003.
Earnings per share (diluted) amounted to 89 cents in 2004
compared to 86 cents in 2003.
Commenting on the quarter, Charles D. Way, CEO of the
Company, said, "We had a very difficult third quarter which was
characterized by both weak sales trends and higher costs. Same-
store sales decreased by 3.1% for the quarter compared to a 1.2%
increase during the third quarter of 2003. We believe that sales
continue to be principally impacted by declining consumer
confidence levels. Gasoline prices continue to be high, and
employment reports are very inconsistent. In addition, sales
were adversely impacted by storms and power outages related to
five different hurricanes or tropical storms during the quarter.
We estimate that these very abnormal weather patterns impacted
same-store sales by approximately 0.6%."
Our third quarter margins were unfavorably impacted by the
lower sales levels. Store-level payroll costs increased by
almost 1% of sales due principally to the fixed-cost components
of hourly and management wages and benefits. This category was
also affected by increased workers' compensation costs due to
higher average claim costs. Other store-level costs were
impacted by higher electricity and gas costs (up 0.4% of sales
collectively), substantially offset by lower pre-opening
expenses. Food costs remained essentially flat for the quarter
with year-over-year beef cost comparisons improving from +19% in
July to +7% in September. General and administrative costs
increased by 0.3% of sales due to the impact of lower sales on
this largely fixed-cost category."
Compared to 2003, our effective income tax rate for the
third quarter continued to benefit from certain federal income
tax credit hiring programs, such as the Work Opportunity Tax
Credit program, and from lower state income tax expense.
Although these tax credit programs expired at the end of 2003, we
continue to benefit from credits resulting from our 2003 new
hires. However, as we have progressed through 2004, the flow-
through impact from these credits has decreased, resulting in a
34.0% effective tax rate for the third quarter of 2004 compared
to the 33.8% rate used during the first half of the year.
Fortunately, these tax credit programs were re-enacted in early-
October and will be retroactively applied to all eligible 2004
new hires. Therefore, we will recognize the estimated amount of
these credits for all of 2004 in the fourth quarter and
anticipate an effective tax rate of around 32.6% for the quarter,
resulting in an overall 2004 rate of around 33.6%."
We believe that during the next six months we will continue
to operate in a difficult business environment. Consumer
confidence will very likely be impacted by higher oil prices and
the related media attention, and we will also be up against same-
store sales comparisons that averaged +4.4% over the six-month
period. Our objective over this period will be to operate at our
best, ensuring that each customer has a great dining experience
at Ryan's and at Fire Mountain. We are very excited to have new
leadership for our restaurant operations. During the third
quarter, Ed McCranie and Rick Kirk were named President and Vice
President - Operations, respectively, and took on this leadership
role. Ed and Rick each have 24 years of direct experience with
Ryan's, and both have contributed significantly to our success.
They are committed to building sales through excellent
operations, and we look forward to their contributions."
At September 29, 2004, the Company owned and operated 338
and was franchiser of 10 restaurants.
In connection with this press release, members of Ryan's
executive management will be holding a conference call with
investment analysts today at 4:00 p.m. EDT. The public can
listen to a live webcast of this call by logging on to the web at
either www.ryansinc.com or www.prnewswire.com and following the
appropriate links.
Certain matters discussed in this press release are forward-
looking statements within the meaning of the federal securities
laws and are subject to uncertainties and risks, including, but
not limited to, general economic conditions, including consumer
confidence levels; competition; developments affecting the
public's perception of buffet-style restaurants; real estate
availability; food and labor supply costs; food and labor
availability; an adverse food safety event; weather fluctuations;
interest rate fluctuations; stock market conditions; political
environment (including acts of terrorism and wars); and other
such risks described from time to time in the Company's reports
filed with the Securities and Exchange Commission.
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RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Quarter Ended
September 29, October 1,
2004 2003
<s> <c> <c>
Restaurant sales $ 205,331,000 205,686,000
Cost of sales:
Food and beverage 72,880,000 73,185,000
Payroll and benefits (1) 67,455,000 65,767,000
Depreciation 8,857,000 8,049,000
Other restaurant expenses 29,879,000 29,820,000
Total cost of sales 179,071,000 176,821,000
General and administrative
expenses (1) 10,185,000 9,561,000
Interest expense 2,598,000 2,764,000
Royalties from franchised
restaurants (265,000) (358,000)
Other income, net (238,000) (339,000)
Earnings before income taxes 13,980,000 17,237,000
Income taxes 4,754,000 6,240,000
Net earnings $9,226,000 10,997,000
Net earnings per common share:
Basic $ .22 .26
Diluted .22 .25
Weighted-average shares:
Basic 41,679,000 42,210,000
Diluted 42,849,000 43,881,000
(1) Certain 2003 incentive bonus amounts for store
management and hourly team members have been
reclassified to store-level payroll and benefits from
general and administrative expenses to conform to the
2004 presentation. These costs amounted to
$1,093,000 in 2004 and $868,000 in 2003. This
reclassification does not change either net earnings
or shareholders' equity for 2003.
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RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Nine Months Ended
September 29, October 1,
2004 2003
<s> <c> <c>
Restaurant sales $ 633,534,000 607,382,000
Cost of sales:
Food and beverage 221,653,000 214,991,000
Payroll and benefits (1) 203,500,000 191,784,000
Depreciation 25,602,000 24,046,000
Other restaurant expenses 88,046,000 85,124,000
Total cost of sales 538,801,000 515,945,000
General and administrative
expenses (1) 30,762,000 28,214,000
Interest expense 8,032,000 7,492,000
Royalties from franchised
restaurants (951,000) (1,165,000)
Other income, net (1,697,000) (1,763,000)
Earnings before income taxes 58,587,000 58,659,000
Income taxes 19,831,000 21,235,000
Net earnings $38,756,000 37,424,000
Net earnings per common share:
Basic $ .93 .89
Diluted .89 .86
Weighted-average shares:
Basic 41,800,000 42,279,000
Diluted 43,339,000 43,752,000
(1) Certain 2003 incentive bonus amounts for store management
and hourly team members have been reclassified to store-level
payroll and benefits from general and administrative expenses to
conform to the 2004 presentation. These costs amounted to
$3,900,000 in 2004 and $2,328,000 in 2003. This reclassification
does not change either net earnings or shareholders' equity for
2003.
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RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
September 29,December 31,
2004 2003
ASSETS (Unaudited)
Current assets:
<s> <c> <c>
Cash and cash equivalents $ 15,908,000 8,617,000
Receivables 4,008,000 4,293,000
Inventories 5,986,000 5,648,000
Prepaid expenses 1,647,000 1,758,000
Deferred income taxes 5,150,000 5,150,000
Total current assets 32,699,000 25,466,000
Property and equipment:
Land and improvements 159,231,000 154,528,000
Buildings 470,212,000 449,561,000
Equipment 265,999,000 252,611,000
Construction in progress 27,726,000 25,789,000
923,168,000 882,489,000
Less accumulated
depreciation 287,325,000 264,339,000
Net property and equipment 635,843,000 618,150,000
Other assets 9,962,000 8,073,000
Total assets $678,504,000 651,689,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,831,000 6,580,000
Current portion of
long-term debt 34,750,000 -
Income taxes payable 3,314,000 1,288,000
Accrued liabilities 44,641,000 42,590,000
Total current liabilities 91,536,000 50,458,000
Long-term debt 152,250,000 196,000,000
Deferred income taxes 43,076,000 42,824,000
Other long-term liabilities 5,973,000 5,467,000
Total liabilities 292,835,000 294,749,000
Shareholders' equity:
Common stock of $1.00 par
value; authorized
100,000,000 shares; issued
41,706,000 shares in 2004
and 41,843,000 shares in 2003 41,706,000 41,843,000
Additional paid-in capital 2,295,000 1,412,000
Retained earnings 341,668,000 313,685,000
Total shareholders' equity 385,669,000 356,940,000
Commitments and contingencies
Total liabilities and
shareholders' equity $678,504,000 651,689,000
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<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 29, October 1,
2004 2003
Cash flows from operating activities:
<s> <c> <c>
Net earnings $38,756,000 37,424,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 26,936,000 25,538,000
Loss (gain) on sale of property
and equipment 253,000 (110,000)
Tax benefit from exercise of
stock options 2,820,000 631,000
Deferred income taxes 252,000 213,000
Decrease (increase) in:
Receivables 285,000 94,000
Inventories (338,000) (579,000)
Prepaid expenses 111,000 (338,000)
Income taxes receivable - 2,739,000
Other assets (2,066,000) (893,000)
Increase (decrease) in:
Accounts payable 2,251,000 (413,000)
Income taxes payable 2,026,000 6,167,000
Accrued liabilities 2,051,000 3,587,000
Other long-term liabilities 506,000 714,000
Net cash provided by operating
activities 73,843,000 74,774,000
Cash flows from investing
activities:
Proceeds from sale of property
and equipment 6,403,000 5,845,000
Capital expenditures (51,108,000)(56,814,000)
Net cash used in investing
activities (44,705,000)(50,969,000)
Cash flows from financing
activities:
Proceeds from issuance of
senior notes - 100,000,000
Debt issuance costs - (158,000)
Net repayment of revolving
credit facility (9,000,000)(100,000,000)
Proceeds from stock options
exercised 5,360,000 1,684,000
Purchase of common stock (18,207,000) (7,841,000)
Net cash used in financing
activities (21,847,000) (6,315,000)
Net increase in cash and cash
equivalents 7,291,000 17,490,000
Cash and cash equivalents -
beginning of period 8,617,000 2,654,000
Cash and cash equivalents -
end of period $ 15,908,000 20,144,000
Supplemental disclosures
Cash paid during period for:
Interest, net of amount
capitalized $ 9,853,000 8,870,000
Income taxes 15,413,000 12,084,000
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