FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter ended March 30, 1994
Commission File No. 0-10943
RYAN'S FAMILY STEAK HOUSES, INC.
(Exact name of registrant as specified in its charter)
South Carolina No. 57-0657895
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
405 Lancaster Avenue
P. O. Box 100
Greer, South Carolina 29652
(Address of principal executive
offices, including zip code)
803-879-1000
(Registrant's telephone number, including area code)
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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 ________
The number of shares outstanding of each of the registrant's
classes of common stock as of March 30, 1994:
53,421,000 shares of common stock, $1.00 Par Value
PART I. FINANCIAL INFORMATION
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Quarter Ended
March 30, March 31,
1994 1993
Restaurant sales $106,892,000 90,388,000
Operating expenses:
Food and beverage 43,142,000 36,877,000
Payroll and benefits 29,983,000 25,355,000
Depreciation 4,168,000 3,555,000
Amortization of pre-opening costs 660,000 424,000
Other operating expenses 12,854,000 10,094,000
Total operating expenses 90,807,000 76,305,000
General and administrative expenses 5,388,000 3,640,000
Interest expense 102,000 60,000
Revenues from franchised restaurants (624,000) (728,000)
Other income (319,000) (346,000)
Earnings before income taxes 11,538,000 11,457,000
Income taxes 4,269,000 4,293,000
Net earnings $7,269,000 7,164,000
Net earnings per common and common
equivalent share $ .14 .13
Weighted average shares 53,658,000 53,759,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
March 30, December 29,
1994 1993
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $2,835,000 1,946,000
Receivables 1,796,000 1,851,000
Inventories 2,899,000 2,684,000
Prepaid expenses 1,542,000 1,562,000
Deferred income taxes 1,469,000 1,469,000
Total current assets 10,541,000 9,512,000
Property and equipment:
Land and improvements 78,051,000 77,601,000
Buildings 172,893,000 170,236,000
Equipment 120,461,000 116,357,000
Construction in progress 37,588,000 27,525,000
408,993,000 391,719,000
Less accumulated depreciation 75,528,000 71,866,000
Net property and equipment 333,465,000 319,853,000
Other assets 4,830,000 4,156,000
$348,836,000 333,521,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 56,400,000 58,100,000
Accounts payable 13,208,000 10,944,000
Income taxes 3,996,000 1,303,000
Accrued liabilities 19,236,000 14,515,000
Total current liabilities 92,840,000 84,862,000
Deferred income taxes 9,996,000 9,953,000
Shareholders' equity:
Common stock of $1.00 par value;
authorized 100,000,000 shares;
issued 53,421,000 shares in 1994
and 53,415,000 shares in 1993 53,421,000 53,415,000
Additional paid-in capital 6,532,000 6,513,000
Retained earnings 186,047,000 178,778,000
Total shareholders' equity 246,000,000 238,706,000
$348,836,000 333,521,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
March 30, March 31,
1994 1993
Cash flows from operating activities:
Net earnings $7,269,000 7,164,000
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 5,041,000 4,119,000
Gain on sale of property and
equipment - (67,000)
Decrease (increase) in:
Receivables 55,000 46,000
Inventories (215,000) (291,000)
Other current assets (640,000) (602,000)
Other assets (676,000) -
Increase (decrease) in:
Accounts payable 2,264,000 2,764,000
Income taxes 2,693,000 3,249,000
Accrued liabilities 4,721,000 (200,000)
Deferred income taxes 43,000 43,000
Net cash provided by
operating activities 20,555,000 16,225,000
Cash flows from investing activities:
Proceeds from sale of property and
equipment - 295,000
Capital expenditures (17,991,000) (17,456,000)
Net cash used in investing activities (17,991,000) (17,161,000)
Cash flows from financing activities:
Net repayment of notes payable (1,700,000) -
Proceeds from the issuance of
common stock 25,000 135,000
Net cash provided (used) by financing
activities (1,675,000) 135,000
Net increase (decrease) in cash and
cash equivalents 889,000 (801,000)
Cash and cash equivalents-beginning
of period 1,946,000 1,730,000
Cash and cash equivalents-end of
period $2,835,000 929,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
I. For the Quarter ended March 30, 1994
(Unaudited)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at December 29, 1993 $53,415,000 6,513,000 178,778,000 238,706,000
Net earnings - - 7,269,000 7,269,000
Issuance of common stock
under Stock Option Plans 6,000 19,000 - 25,000
Balances at March 30, 1994 $53,421,000 6,532,000 186,047,000 246,000,000
II. For the Quarter ended March 31, 1993
(Unaudited)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at December 30, 1992 $53,337,000 6,106,000 150,236,000 209,679,000
Net earnings - - 7,164,000 7,164,000
Issuance of common stock
under Stock Option Plans 29,000 106,000 - 135,000
Balances at March 31, 1993 $53,366,000 6,212,000 157,400,000 216,978,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 30, 1994
(Unaudited)
Note 1. Basis of Presentation
The consolidated financial statements include the financial
statements of Ryan's Family Steak Houses, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principals for interim financial information and the instructions
to Form 10-Q and do not include all of 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 have been included. Consolidated
operating results for the quarter ended March 30, 1994 are not
necessarily indicative of the results that may be expected for the
fiscal year ending December 28, 1994. 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, 1993.
Note 2. Earnings Per Share
Earnings per share are computed based on the weighted average
number of common and common equivalent shares outstanding during
the period. Common equivalent shares are represented by shares
under option.
Note 3. Reclassifications
Certain 1993 amounts in the accompanying consolidated financial
statements have been reclassified to conform to the 1994
presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended March 30, 1994 versus March 31, 1993
The Company experienced strong sales growth during the first
quarter of 1994 with restaurant sales up 18% over the comparable
quarter of 1993. Substantially all of the increase resulted from
the 18% unit growth of Company-owned restaurants, which totaled 198
at March 30, 1994 and 170 at March 31, 1993. Same-store sales, or
average unit sales in restaurants that have been open for at least
18 months and operated during comparable weeks during the current
and prior years, were flat during the quarter compared to a 4.6%
decline during the first quarter of 1993. During 1994, sales gains
in February and March offset much of the unfavorable impact from
January's severe winter storms.
Total costs and expenses of Company-owned restaurants include food
and beverage, payroll, payroll taxes and employee benefits,
depreciation and amortization, repairs, maintenance, utilities,
supplies, advertising, insurance, property taxes and licenses.
Such costs, as a percentage of sales, were 85.0% during the first
quarter of 1994 compared to 84.4% in 1993. In 1994, the Company
benefited from favorable beef prices, resulting in 0.4% reduction
in food costs, as a percent of sales, during the quarter. Payroll
and benefits remained at 28.1% of sales during both 1994 and 1993.
All other operating costs, including depreciation and amortization
of pre-opening costs, increased to 16.6% of sales in 1994 compared
to 15.6% in 1993 due to higher utility, insurance and store-based
promotional costs. Based on these factors, the Company's gross
operating margins at the restaurant level were 15.0% and 15.6% for
the first quarters of 1994 and 1993, respectively.
General and administrative expenses increased to 5.0% of sales
compared to 4.0% in 1993. Approximately one-half of the increase
resulted from a $551,000 addition to bad debt expense due to the
uncertainty surrounding the payment of royalty fees from the
Company's Florida franchisee (see next paragraph). Higher training
and supervision costs were the principal reasons underlying the
remaining increase.
Franchise revenues decreased 14.3% due to less franchised
restaurants, which totaled 33 at March 30, 1994 and 36 at March 31,
1993, and a slightly lower overall effective royalty rate. In
accordance with the Company's accounting policies, all franchise
royalties earned were recognized as income during the quarter.
This income includes royalties due from the Company's largest
franchisee, Family Steak Houses of Florida, Inc. ("Family"), which
has been unable to pay its royalty fees since August 1993. The
Company has held extensive negotiations with Family over the past
several months and has further meetings scheduled with Family's new
management. As noted in the previous paragraph, bad debt reserves
were increased by $551,000, which equals the first quarter
royalties due from Family under current contractual terms. There
can be no assurance that either the past due or current royalty
fees will be collected.
The effective income tax rates used for the first quarters of 1994
and 1993 were 37.0% and 37.5%, respectively.
Net earnings for the first quarter of 1994 amounted to $7.3 million
compared to $7.2 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are primarily derived from cash sales.
Inventories are purchased on credit and are rapidly converted to
cash. Therefore, the Company does not maintain significant
receivables or inventories, and other working capital requirements
for operations are not significant.
At March 30, 1994, the Company's working capital was a $82.3
million deficit compared to a $75.4 million deficit at December 29,
1993. Included in these amounts are borrowings of $56.4 million
and $58.1 million, respectively, under bank lines of credit (see
next paragraph). The Company does not anticipate any adverse
effects from the current working capital deficit due to significant
cash flow provided by operations, which amounted to $20.6 million
for the quarter ended March 30, 1994.
Total capital expenditures for the first quarter of 1994 amounted
to $18.0 million. During 1994, Ryan's plans to build and open 20
new restaurants and remodel approximately 40 restaurants. All
remodel projects are planned to include the installation of a
scatter bar format. During the quarter, Ryan's opened 6 new
restaurants and closed 2 unprofitable stores. Total capital
expenditures for 1994 are estimated at $63 million. Management
estimates that external funding requirements for 1994 will not
exceed $5 million. The Company has formal and informal bank lines
of credit totaling $85 million at floating short-term rates, of
which $56.4 million was utilized and classified as current debt at
March 30, 1994. The Company owns all of its property and equipment
and is under no significant lease obligations other than for three
parcels of land which are under lease for at least 35 years.
IMPACT OF INFLATION
The Company's operating costs that may be affected by inflation
consist principally of food, payroll and utilities costs. Food
costs are expected to increase slightly during the second and third
quarters of 1994 as beef prices begin their normal seasonal upward
trend. Also, a significant number of the Company's restaurant
employees are paid at the minimum wage and, accordingly, changes in
the Federal minimum wage affect the Company's payroll costs. The
Federal minimum wage last increased in April 1991. No further
increases have been legislated. Future benefit costs may be
affected by future legislated changes in medical insurance
coverage.
The Company considers its current price structure to be very
competitive. This factor, among others, is considered by the
Company when passing increased costs on to its customers. Annual
menu price increases have consistently ranged from 1% to 3%.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None reportable.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Registrant's Annual Meeting of Shareholders was
held on April 28, 1994.
(b) All members of the Board of Directors, consisting of
Mssrs. Way, MacKenzie, McCranie, Shoemaker, Edwards
and Roberts were re-elected as Directors. Mr.
Cockman was elected a Director for the first time.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) None.
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.
RYAN'S FAMILY STEAK HOUSES, INC.
(Registrant)
/s/Charles D. Way
May 9, 1994 Charles D. Way
Chairman, President and Chief Executive
Officer
/s/Fred T. Grant, Jr.
May 9, 1994 Fred T. Grant, Jr.
Vice President-Finance and Treasurer
/s/Richard D. Sieradzki
May 9, 1994 Richard D. Sieradzki
Controller