Press Release 405 Lancaster Avenue
Greer, South Carolina 29650
(864) 879-1000
Contact: Fred T. Grant, Jr. For Immediate Release
Senior Vice President - Finance July 20, 2005
RYAN'S ANNOUNCES SECOND QUARTER 2005 RESULTS
______________________
GREER, SOUTH CAROLINA - - Ryan's Restaurant Group, Inc.
(NASDAQ:RYAN) reported second quarter 2005 results today.
Second quarter restaurant sales were $215,510,000 in 2005
compared to $216,546,000 for the comparable quarter in 2004. Net
earnings for the quarter amounted to $6,260,000 in 2005 and
$14,170,000 in 2004. Earnings per share (diluted) amounted to 15
cents in 2005 compared to 33 cents in 2004.
For the six months ended June 29, 2005, restaurant sales
amounted to $425,149,000 compared to $428,203,000 for the
comparable period in 2004. Net earnings were $18,073,000 in 2005
and $29,530,000 in 2004. Earnings per share (diluted) were 42
cents in 2005 compared to 68 cents in 2004.
Commenting on the quarter, Charles D. Way, CEO of the
Company, said "Our financial results for the second quarter were
affected by weak sales and higher costs. During the quarter, we
also took a $5 million charge to reflect the estimated minimum
settlement of ongoing wage/hour litigation. In spite of
promising sales results during the second quarter's holiday
periods, we were disappointed with our same-store sales, which
decreased by 4% for the quarter. While we believe that our
customers' discretionary spending continues to be adversely
impacted by high energy costs, we also understand that we must
continually examine our strategies in order to attract and retain
customers. Accordingly, our operations leadership team has held
numerous meetings to re-focus on our restaurant operations
standards, particularly those concerning staffing and exterior
appearance. We continue to implement "theme nights" at our
restaurants and are testing a buffet breakfast on Saturdays and
Sundays at selected locations. We believe that breakfast
represents an excellent way to increase sales that produce good
margins without a significant investment, and we are excited
about its potential impact on sales and profits."
Restaurant-level margins for the second quarter were
impacted by higher hourly labor charges as well as by higher
energy and general liability insurance costs. We continue to
believe that higher staffing levels, which we implemented at the
beginning of 2005, contribute to better customer service, which
is obviously important for customer retention. Just like our
customers, Ryan's is also impacted by higher electricity and
natural gas costs. General liability insurance costs, which are
based largely on the estimated future costs of claims, increased
due to higher cost projections and by a $750,000 favorable
adjustment in the second quarter of 2004. Restaurant-level costs
were also affected by an $838,000 impairment charge related to an
under-performing restaurant, which we have decided to close and
sell. This charge is included in other restaurant expenses in
the accompanying consolidated financial statements. Food costs
increased slightly from the second quarter of 2004. Beef costs
decreased slightly during the quarter, and we are very encouraged
by the recent U.S. Circuit Court decision that may allow Canadian
beef imports in the future. This development could potentially
increase beef supplies and therefore lower our operating costs."
General and administrative expenses increased principally
due to a $5 million charge to reflect the estimated minimum
settlement for a wage/hour lawsuit that was filed in November
2002. Additional information about this case can be found in our
reports filed with the Securities and Exchange Commission. At
this time, we are negotiating a potential settlement with the
plantiffs' attorney in order to avoid lengthy and costly court
proceedings and will soon enter into a mediation process in hopes
of reaching a mutually acceptable settlement. However, there can
be no assurance that we will reach an agreement as a result of
the mediation process, and it is not possible to predict this
case's ultimate outcome."
Regarding our balance sheet, as a result of lower net
earnings in this and prior quarters, we have not met the fixed
charge coverage ratio covenants in our various debt agreements.
At June 29, 2005, our fixed charge coverage ratio, which is
defined consistently in all of our debt agreements, was 2.05
times compared to the minimum requirement of 2.25 times. We have
been in contact with our lenders throughout the quarter regarding
this possibility and have been informed that they intend to grant
us a waiver for this covenant violation. Based on our
projections, it appears likely that we will not be able to meet
the 2.25 times requirement for the next several quarters. We met
all other debt covenants at June 29, 2005 and do not anticipate
having any trouble complying with the other covenants in our debt
agreements in the foreseeable future. Our lenders have indicated
that they will work with us to amend the minimum fixed charge
coverage ratio requirement and possibly other requirements and
limitations for our third quarter and forward. Until the credit
agreements are amended, our debt will be classified as current on
our balance sheet."
So far in 2005 we have opened nine restaurants, including
two relocations, and plan to open another six restaurants,
including two potential relocations, during the remainder of the
year for a total of 15 new restaurants during 2005. All six
restaurants planned for the remainder of 2005 are currently under
construction. For 2006, we plan to build nine new restaurants,
including three potential relocations. We believe that this
reduction in new store expenditures will not only conserve cash
flow, but will also allow us to spend more time to focus on
building same-store sales at our existing restaurants."
At June 29, 2005, the Company owned and operated 346
restaurants. As disclosed in the Company's reports filed with
the Securities and Exchange Commission, the franchise
relationship with the Company's remaining franchisee terminated
on June 30, 2005. Accordingly, there will be no franchised
restaurants operating after the second quarter of 2005.
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
www.ryans.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.
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Quarter Ended
June 29, June 30,
2005 2004
<s> <c> <c>
Restaurant sales $ 215,510,000 216,546,000
Cost of sales:
Food and beverage 76,351,000 76,273,000
Payroll and benefits 69,737,000 69,175,000
Depreciation 8,684,000 8,188,000
Other restaurant expenses 33,944,000 29,355,000
Total cost of sales 188,716,000 182,991,000
General and administrative
expenses 15,761,000 10,255,000
Interest expense 2,405,000 2,749,000
Royalties from franchised
restaurants (135,000) (323,000)
Other income, net (562,000) (531,000)
Earnings before income taxes 9,325,000 21,405,000
Income taxes 3,065,000 7,235,000
Net earnings $6,260,000 14,170,000
Net earnings per common share:
Basic $ .15 .34
Diluted .15 .33
Weighted-average shares:
Basic 41,952,000 41,639,000
Diluted 42,770,000 43,258,000
</table>
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Six Months Ended
June 29, June 30,
2005 2004
<s> <c> <c>
Restaurant sales $ 425,149,000 428,203,000
Cost of sales:
Food and beverage 148,964,000 148,773,000
Payroll and benefits 137,728,000 136,045,000
Depreciation 17,137,000 16,745,000
Other restaurant expenses 65,464,000 58,167,000
Total cost of sales 369,293,000 359,730,000
General and administrative
expenses 26,231,000 20,577,000
Interest expense 4,765,000 5,434,000
Royalties from franchised
restaurants (309,000) (686,000)
Other income, net (1,762,000) (1,459,000)
Earnings before income taxes 26,931,000 44,607,000
Income taxes 8,858,000 15,077,000
Net earnings $18,073,000 29,530,000
Net earnings per common share:
Basic $ .43 .71
Diluted .42 .68
Weighted-average shares:
Basic 41,945,000 41,860,000
Diluted 42,818,000 43,584,000
</table>
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 29, December 29,
2005 2004
ASSETS (Unaudited)
Current assets:
<s> <c> <c>
Cash and cash equivalents $16,508,000 7,354,000
Receivables 4,633,000 4,639,000
Inventories 6,558,000 5,611,000
Prepaid expenses 1,403,000 1,016,000
Deferred income taxes 5,580,000 5,110,000
Total current assets 34,682,000 23,730,000
Property and equipment:
Land and improvements 169,193,000 162,082,000
Buildings 501,437,000 480,781,000
Equipment 281,236,000 271,431,000
Construction in progress 27,303,000 31,531,000
979,169,000 945,825,000
Less accumulated depreciation 311,082,000 295,852,000
Net property and equipment 668,087,000 649,973,000
Other assets 10,535,000 10,643,000
Total assets $713,304,000 684,346,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,932,000 5,963,000
Current portion of long-term
debt 180,250,000 18,750,000
Income taxes payable 2,403,000 1,842,000
Accrued liabilities 52,460,000 42,569,000
Total current liabilities 244,045,000 69,124,000
Long-term debt - 164,250,000
Deferred income taxes 47,661,000 47,674,000
Other long-term liabilities 8,105,000 7,692,000
Total liabilities 299,811,000 288,740,000
Shareholders' equity:
Common stock of $1.00 par
value; authorized 100,000,000
shares; issued 41,911,000
shares in 2005 and 41,890,000
shares in 2004 41,911,000 41,890,000
Additional paid-in capital 3,671,000 3,878,000
Retained earnings 367,911,000 349,838,000
Total shareholders' equity 413,493,000 395,606,000
Commitments and contingencies
Total liabilities and
shareholders' equity $713,304,000 684,346,000
</table>
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 29, June 30,
2005 2004
Cash flows from operating
activities:
<s> <c> <c>
Net earnings $18,073,000 29,530,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 18,413,000 17,635,000
Loss (gain) on sale of property
and equipment (78,000) 502,000
Tax benefit from exercise of
stock options 292,000 2,679,000
Deferred income taxes (483,000) 107,000
Decrease (increase) in:
Receivables 6,000 (80,000)
Inventories (947,000) (913,000)
Prepaid expenses (387,000) 71,000
Other assets 12,000 (410,000)
Increase (decrease) in:
Accounts payable 2,969,000 3,048,000
Income taxes payable 561,000 (446,000)
Accrued liabilities 9,891,000 6,215,000
Other long-term liabilities 413,000 434,000
Net cash provided by operating
activities 48,735,000 58,372,000
Cash flows from investing
activities:
Proceeds from sale of property
and equipment 4,099,000 3,302,000
Capital expenditures (40,452,000)(35,055,000)
Net cash used in investing
activities (36,353,000)(31,753,000)
Cash flows from financing
activities:
Repayment of senior notes (18,750,000) -
Net borrowings from
(repayment of) revolving credit
facility 16,000,000 (5,000,000)
Proceeds from stock options
exercised 1,074,000 5,008,000
Purchase of common stock (1,552,000)(18,207,000)
Net cash used in financing
activities (3,228,000)(18,199,000)
Net increase in cash and cash
equivalents 9,154,000 8,420,000
Cash and cash equivalents -
beginning of period 7,354,000 8,617,000
Cash and cash equivalents -
end of period $16,508,000 17,037,000
Supplemental disclosures
Cash paid during period for:
Interest, net of amount
capitalized $ 5,481,000 5,488,000
Income taxes 8,488,000 12,737,000
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