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 19, 2005
RYAN'S ANNOUNCES THIRD QUARTER 2005 RESULTS
______________________
GREER, SOUTH CAROLINA - - Ryan's Restaurant Group, Inc.
(NASDAQ:RYAN) reported third quarter 2005 results today.
Third quarter restaurant sales were $202,967,000 in 2005
compared to $205,331,000 for the comparable quarter in 2004. Net
earnings for the quarter amounted to $4,164,000 in 2005 and
$9,226,000 in 2004. Earnings per share (diluted) amounted to 10
cents in 2005 compared to 22 cents in 2004.
For the nine months ended September 28, 2005, restaurant
sales amounted to $628,116,000 compared to $633,534,000 for the
comparable period in 2004. Net earnings were $22,237,000 in 2005
and $38,756,000 in 2004. Earnings per share (diluted) were 52
cents in 2005 compared to 89 cents in 2004.
Commenting on the quarter, Charles D. Way, CEO of the
Company, said "Ryan's was challenged during the third quarter
with lower sales and higher costs. Same-store sales decreased by
3.7% during the quarter. We believe that high gasoline and
utility costs continue to adversely affect our customers'
disposable income, resulting in lower dining-out expenditures.
Furthermore, third quarter sales were impacted by Hurricanes
Katrina and Rita, not only in the areas of immediate landfall but
also in many of our other operating areas. During the quarter,
we lost 243 restaurant-days, representing less than 1.0% of total
available restaurant-days, at 41 locations due to the hurricanes.
Except for three locations that are still closed, the affected
restaurants re-opened quickly and have generally enjoyed very
good business since that time due to high demand from repair and
emergency crews and returning residents. We are very grateful
for the heroic efforts of our construction and maintenance
personnel and our dedicated restaurant managers and hourly team
members, many of whom also suffered significant property loss
from the hurricanes. Restaurant sales in southern and mid-
Atlantic states generally were adversely affected by the heavy
storms that resulted after the immediate landfalls and by
gasoline pricing and shortages. We believe that these factors as
well as the related extensive television coverage decreased
dining visits by our customers."
"Our third quarter's profits were also impacted by higher
cost of sales, particularly higher payroll, utility and store
closing costs. Food and beverage costs decreased compared to the
prior year's comparable quarter aided by lower beef costs, which
decreased year-over-year by 9%. However, similar to the first
and second quarters of 2005, hourly labor increased by 1% of
sales as we increased staffing at our restaurants to improve
customer service and retain sales. We also paid over $200,000 of
disaster assistance to store personnel at restaurants closed by
the hurricanes. Utility costs also continued their rise, and we
saw electricity and natural gas costs increase by a combined 0.6%
of sales due to higher unit prices and warmer temperatures.
Finally, we had property write-downs amounting to $2.6 million
($1.9 million in accelerated depreciation and $700,000 in other
restaurant expenses) during the quarter related to five
underperforming stores, which have been closed. These write-
downs were partially offset by a $700,000 net change in the gain
on sale of closed properties, which is reflected in "Other
income, net" in the accompanying financial statements."
"As we look at the remainder of 2005 and 2006, we are
concerned about the forecasted significant increases in utility
costs that have been publicized by the media and the related
impact on consumer spending. Over time we believe that consumers
will adjust their spending and eat out more often since dining-
out is so ingrained in many daily routines and represents a
relatively inexpensive form of entertainment, especially with the
excellent price/value relationship at Ryan's. Our plan for
building and retaining sales is to provide great dining
experiences to our customers so that we are top-of-mind when they
choose a restaurant. As mentioned earlier, our increased
restaurant staffing levels are designed to improve customer
service. Also, we are implementing weekend seafood nights and
are aggressively continuing to add weekend breakfast at our
restaurants. We are particularly excited about breakfast as it
represents an excellent means to increase sales at existing
locations with minimal capital investment. At the end of
September, there were 38 locations serving breakfast, and our
plans call for breakfast at approximately 160 locations by year-
end."
"Our plans for 2006 and 2007 focus on building sales at
existing locations. We intend to reduce the number of new
restaurants to around four new restaurants per year for these two
years so that our operations management can concentrate their
efforts on operational improvements and local marketing
initiatives. Our remodeling efforts will be slightly scaled back
to about 12 locations per year as we refine and test our
conversion designs. We are also aggressively looking for
opportunities to reduce costs, both at our restaurants and at our
corporate office. These measures should significantly increase
our free cash flow, enabling us to reduce our outstanding debt.
Current projections indicate we can reduce debt from current
levels by approximately $75 million, including scheduled debt
payments, through the end of 2007. Our Board of Directors and
senior management enthusiastically endorse this plan and look
forward to being well-positioned to pursue growth opportunities
in the future."
Management notes that it is continuing discussions with the
Company's lenders to amend current debt agreements in light of
the Company not meeting covenant requirements regarding the fixed
charge coverage ratio calculation. The Company was not in
compliance with this ratio requirement at the end of the second
quarter, and, as anticipated by all parties, this non-compliance
continued at the end of the third quarter. Management is
optimistic that an agreement with the Company's lenders will be
reached, and that such agreement will permit the capital
expenditure plans for 2006 and 2007 as noted above. Until the
credit agreements are amended, the Company's outstanding debt
must be classified as a current liability in accordance with
generally accepted accounting principles and is presented as such
in the accompanying financial statements. Management expects
that the amendments will be executed prior to the filing of the
Company's quarterly report on Form 10-Q with the U.S. Securities
and Exchange Commission on or around November 2, 2005.
At September 28, 2005, the Company owned and operated 339
restaurants, including the three locations that continue to be
closed as a result of Hurricane Katrina.
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, utility 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
September 28, September 29,
2005 2004
<s> <c> <c>
Restaurant sales $ 202,967,000 205,331,000
Cost of sales:
Food and beverage 70,169,000 72,880,000
Payroll and benefits 68,187,000 67,455,000
Depreciation 10,524,000 8,857,000
Other restaurant expenses 35,190,000 29,879,000
Total cost of sales 184,070,000 179,071,000
General and administrative
expenses 11,270,000 10,185,000
Interest expense 2,378,000 2,598,000
Royalties from franchised
restaurants (35,000) (265,000)
Other income, net (1,127,000) (238,000)
Earnings before income taxes 6,411,000 13,980,000
Income taxes 2,247,000 4,754,000
Net earnings $4,164,000 9,226,000
Net earnings per common share:
Basic $ .10 .22
Diluted .10 .22
Weighted-average shares:
Basic 41,934,000 41,679,000
Diluted 42,592,000 42,849,000
</table>
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Nine Months Ended
September 28, September 29,
2005 2004
<s> <c> <c>
Restaurant sales $ 628,116,000 633,534,000
Cost of sales:
Food and beverage 219,133,000 221,653,000
Payroll and benefits 205,915,000 203,500,000
Depreciation 27,661,000 25,602,000
Other restaurant expenses 100,654,000 88,046,000
Total cost of sales 553,363,000 538,801,000
General and administrative
expenses 37,501,000 30,762,000
Interest expense 7,143,000 8,032,000
Royalties from franchised
restaurants (344,000) (951,000)
Other income, net (2,889,000) (1,697,000)
Earnings before income taxes 33,342,000 58,587,000
Income taxes 11,105,000 19,831,000
Net earnings $22,237,000 38,756,000
Net earnings per common share:
Basic $ .53 .93
Diluted .52 .89
Weighted-average shares:
Basic 41,941,000 41,800,000
Diluted 42,742,000 43,339,000
</table>
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
September 28, December 29,
2005 2004
ASSETS (Unaudited)
Current assets:
<s> <c> <c>
Cash and cash equivalents $ 11,117,000 7,354,000
Receivables 4,700,000 4,639,000
Inventories 5,663,000 5,611,000
Prepaid expenses 1,569,000 1,016,000
Deferred income taxes 7,277,000 5,110,000
Total current assets 30,326,000 23,730,000
Property and equipment:
Land and improvements 170,267,000 162,082,000
Buildings 508,584,000 480,781,000
Equipment 285,424,000 271,431,000
Construction in progress 30,923,000 31,531,000
995,198,000 945,825,000
Less accumulated depreciation 319,574,000 295,852,000
Net property and equipment 675,624,000 649,973,000
Other assets 10,593,000 10,643,000
Total assets $716,543,000 684,346,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 6,681,000 5,963,000
Current portion oflong-term
debt 180,250,000 18,750,000
Income taxes payable 2,989,000 1,842,000
Accrued liabilities 51,655,000 42,569,000
Total current liabilities 241,575,000 69,124,000
Long-term debt - 164,250,000
Other long-term liabilities 5,714,000 7,692,000
Deferred income taxes 50,826,000 47,674,000
Total liabilities 298,115,000 288,740,000
Shareholders' equity:
Common stock of $1.00 par
value; authorized
100,000,000 shares; issued
41,977,000 shares in 2005
and 41,890,000 shares
in 2004 41,977,000 41,890,000
Additional paid-in capital 4,376,000 3,878,000
Retained earnings 372,075,000 349,838,000
Total shareholders' equity 418,428,000 395,606,000
Commitments and contingencies
Total liabilities and
shareholders' equity $716,543,000 684,346,000
</table>
<table>
RYAN'S RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 28, September 29,
2005 2004
Cash flows from operating
activities:
<s> <c> <c>
Net earnings $22,237,000 38,756,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and
amortization 29,012,000 26,936,000
Loss (gain) on sale of
property and equipment (622,000) 253,000
Tax benefit from exercise
of stock options 789,000 2,820,000
Deferred income taxes 985,000 252,000
Decrease (increase) in:
Receivables (61,000) 285,000
Inventories (52,000) (338,000)
Prepaid expenses (553,000) 111,000
Other assets (94,000) (2,066,000)
Increase (decrease) in:
Accounts payable 718,000 2,251,000
Income taxes payable 1,147,000 2,026,000
Accrued liabilities 9,086,000 2,051,000
Other long-term liabilities (1,978,000) 506,000
Net cash provided by operating
activities 60,614,000 73,843,000
Cash flows from investing activities:
Proceeds from sale of property
and equipment 6,854,000 6,403,000
Capital expenditures (60,751,000)(51,108,000)
Net cash used in investing
activities (53,897,000)(44,705,000)
Cash flows from financing activities:
Repayment of senior notes (18,750,000) -
Net borrowings from
(repayment of) revolving
credit facility 16,000,000 (9,000,000)
Proceeds from stock options
exercised 1,648,000 5,360,000
Purchase of common stock (1,852,000)(18,207,000)
Net cash used in financing
activities (2,954,000)(21,847,000)
Net increase in cash and cash
equivalents 3,763,000 7,291,000
Cash and cash equivalents -
beginning of period 7,354,000 8,617,000
Cash and cash equivalents -
end of period $ 11,117,000 15,908,000
Supplemental disclosures
Cash paid during period for:
Interest, net of amount
capitalized $ 9,032,000 9,853,000
Income taxes 8,751,000 15,413,000
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