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 June 29, 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 June 29, 1994:
53,424,000 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
June 29, June 30,
1994 1993
Restaurant sales $114,777,000 101,277,000
Operating expenses:
Food and beverage 46,812,000 42,509,000
Payroll and benefits 31,183,000 28,088,000
Depreciation 4,266,000 3,731,000
Amortization of pre-opening
costs 625,000 510,000
Other operating expenses 13,391,000 11,094,000
Total operating expenses 96,277,000 85,932,000
General and administrative
expenses 4,583,000 3,577,000
Interest expense 190,000 14,000
Revenues from franchised
restaurants (80,000) (675,000)
Other income (204,000) (58,000)
Earnings before income taxes 14,011,000 12,487,000
Income taxes 5,184,000 4,559,000
Net earnings $8,827,000 7,928,000
Net earnings per common and
common equivalent share $ .16 .15
Weighted average shares 53,598,000 53,642,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Six Months Ended
June 29, June 30,
1994 1993
Restaurant sales $221,669,000 191,665,000
Operating expenses:
Food and beverage 89,954,000 79,386,000
Payroll and benefits 61,166,000 53,443,000
Depreciation 8,434,000 7,286,000
Amortization of pre-opening
costs 1,285,000 934,000
Other operating expenses 26,245,000 21,188,000
Total operating expenses 187,084,000 162,237,000
General and administrative
expenses 9,420,000 7,217,000
Interest expense 292,000 74,000
Revenues from franchised
restaurants (153,000) (1,403,000)
Other income (523,000) (404,000)
Earnings before income taxes 25,549,000 23,944,000
Income taxes 9,453,000 8,852,000
Net earnings $16,096,000 15,092,000
Net earnings per common and
common equivalent share $ .30 .28
Weighted average shares 53,628,000 53,701,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
June 29, December 29,
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 214,000 1,946,000
Receivables 1,920,000 1,851,000
Inventories 2,885,000 2,684,000
Deferred income taxes 1,469,000 1,469,000
Other current assets 1,500,000 1,562,000
Total current assets 7,988,000 9,512,000
Property and equipment:
Land and improvements 81,848,000 77,601,000
Buildings 182,228,000 170,236,000
Equipment 126,015,000 116,357,000
Construction in progress 32,462,000 27,525,000
422,553,000 391,719,000
Less accumulated depreciation 80,156,000 71,866,000
Net property and equipment 342,397,000 319,853,000
Other assets 4,806,000 4,156,000
$355,191,000 333,521,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 57,900,000 58,100,000
Accounts payable 11,990,000 10,944,000
Income taxes payable 183,000 1,303,000
Accrued liabilities 20,228,000 14,515,000
Total current liabilities 90,301,000 84,862,000
Deferred income taxes 10,048,000 9,953,000
Shareholders' equity:
Common stock of $1.00 par value;
authorized 100,000,000 shares;
issued 53,424,000 shares in
1994 and 53,415,000 shares
in 1993 53,424,000 53,415,000
Additional paid-in capital 6,544,000 6,513,000
Retained earnings 194,874,000 178,778,000
Total shareholders' equity 254,842,000 238,706,000
$355,191,000 333,521,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 29, June 30,
1994 1993
Cash flows from operating activities:
Net earnings $16,096,000 15,092,000
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 10,319,000 8,550,000
Gain on sale of property and equipment (162,000) (67,000)
Decrease (increase) in:
Receivables (69,000) (148,000)
Inventories (201,000) (403,000)
Other current assets (1,246,000) (1,442,000)
Other assets (654,000) 1,000
Increase (decrease) in:
Accounts payable 1,046,000 2,859,000
Income taxes (1,120,000) (850,000)
Accrued liabilities 5,713,000 2,798,000
Deferred income taxes 95,000 89,000
Net cash provided by operating
activities 29,817,000 26,479,000
Cash flows from investing activities:
Proceeds from sale of property
and equipment 431,000 295,000
Capital expenditures (31,820,000) (34,647,000)
Net cash used in investing activities (31,389,000) (34,352,000)
Cash flows from financing activities:
Net proceeds from (repayment of)
notes payable (200,000) 6,000,000
Proceeds from issuance of common stock 40,000 343,000
Net cash provided by (used in)
financing activities (160,000) 6,343,000
Net decrease in cash and cash
equivalents (1,732,000) (1,530,000)
Cash and cash equivalents -
beginning of period 1,946,000 1,730,000
Cash and cash equivalents -
end of period $ 214,000 200,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
I. For the Quarter ended June 29, 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 - - 16,096,000 16,096,000
Issuance of common stock
under Stock Option Plans 9,000 31,000 - 40,000
Balances at June 29, 1994 $53,424,000 6,544,000 194,874,000 254,842,000
II. For the Quarter ended June 30, 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 - - 15,092,000 15,092,000
Issuance of common stock
under Stock Option Plans 68,000 275,000 - 343,000
Balances at June 30, 1993 $53,405,000 6,381,000 165,328,000 225,114,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 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 and the six months ended June 29,
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 consolidated 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 June 29, 1994 versus June 30, 1993
The Company experienced strong sales growth during the
second quarter of 1994 with restaurant sales up 13% over the
comparable quarter of 1993. Substantially all of the
increase resulted from the 15% unit growth of Company-owned
restaurants, which totaled 202 at June 29, 1994 and 178 at
June 30, 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, declined 1.1% during the quarter compared to a
2.8% decline during the second quarter of 1993.
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 83.9% during the second quarter of 1994 compared
to 84.8% in 1993. In 1994, the Company benefited from
favorable beef and chicken prices, resulting in 1.2%
reduction in food costs, as a percent of sales, during the
quarter. Payroll and benefits decreased to 27.2% of sales
in 1994 from 27.7% in 1993 due to improved controls over
store-level payroll and lower workers' compensation costs.
All other operating costs, including depreciation and
amortization of pre-opening costs, increased to 15.9% of
sales in 1994 compared to 15.1% in 1993 due to higher
utility, repairs and maintenance and store-based promotional
costs. Also, it should be noted that many other operating
costs, including depreciation and amortization of pre-
opening costs, are fixed costs, and a decline in same-store
sales would increase their impact on margins. Based on
these factors, the Company's gross operating margins at the
restaurant level were 16.1% and 15.2% for the second
quarters of 1994 and 1993, respectively.
General and administrative expenses increased to 4.0% of
sales compared to 3.5% in 1993. Higher personnel costs were
the principal reason underlying the increase. It should
again be noted that many general and administrative expenses
are fixed costs, and a decline in same-store sales would
increase their impact on margins.
Revenues from franchised restaurants, which numbered 31 at
June 29, 1994 and 36 at June 30, 1993, decreased by
$595,000 due principally to the nonrecognition
of royalty income from the Company's largest franchisee,
Family Steak Houses of Florida, Inc. ("Family"). Through
June 29, 1994, this franchisee had not paid any royalty fees
since August 1993. Following extensive negotiations,
partial payments on the past-due balance and current royalty
payments were made by Family in July 1994 and again in
August 1994. All future payments from Family will
recognized as revenue on a cash basis after satisfaction of
the current net outstanding receivable balance, which
amounted to approximately $114,000 after application of the
aforementioned payments. Based on projected payment dates,
management anticipates that no significant amounts of
royalty income will be included in the Company's financial
results until the fourth quarter of 1994. However, in spite
of recent developments, there can be no assurance that
either the remaining past due or future royalty fees will be
collected.
Interest expense increased by $176,000, to
0.2% of sales, resulting principally from less capitalized
interest, which reflects 1994's lower level of construction
activity in relation to the Company's outstanding debt.
Also, the Company's effective average interest rate
increased to 4.4% in 1994 compared to 3.5% in 1993.
The effective income tax rates used for the second quarters
of 1994 and 1993 were 37.0% and 36.5%, respectively. It
should be noted that in August 1993 the "Omnibus Budget
Reconciliation Act of 1993" was enacted, raising the Federal
corporate tax rate 1% to 35%
Net earnings for the second quarter of 1994 amounted to $8.8
million compared to $7.9 million in 1993.
Six Months June 29, 1994 versus June 30, 1993
For the six months ended June 29, 1994, revenues were up 16%
compared to the same period in 1993, principally due to 15%
average unit growth. Same-store sales declined 0.6% during
the first six months of 1994 compared to a 3.7% decline in
1993.
Six-month costs and expenses as detailed above were 84.4%
and 84.6% of Company-owned restaurant sales for 1994 and
1993, respectively. During the first six months of 1994,
costs and expenses were most affected by the following
offsetting factors: (1) the decrease in food and beverage
costs (see second quarter discussion above) and (2) the
negative leverage of fixed costs resulting from the decline
in same-store sales. Depreciation, amortization of pre-
opening costs and other operating expenses increased to
16.2% in 1994 compared to 15.3% in 1993. Based on these
factors, the Company's gross operating margins at the
restaurant level were 15.6% and 15.4% for the second six
months of 1994 and 1993, respectively.
General and administrative expenses as a percentage of total
revenues were 4.2% in 1994 and 3.8% in 1993. Revenues from
franchised restaurants decreased by $1,250,000
due principally to the nonrecognition of royalty income from
the Company's largest franchisee, Family Steak Houses of
Florida, Inc. (see second quarter discussion above).
Effective income tax rates used for the six-month periods
were 37.0% in both 1994 and 1993.
Net earnings for the first six months of 1994 amounted to
$16.1 million compared to $15.1 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 June 29, 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 $57.9 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 $29.8 million for the six
months ended June 29, 1994.
Total capital expenditures for the first six months of 1994
amounted to $31.8 million. During 1994, Ryan's plans to
build and open 20 new restaurants and install scatter bars
in approximately 40 restaurants. During the quarter, Ryan's
opened 5 new restaurants and closed 1 unprofitable store.
Total capital expenditures for 1994 are estimated at $62
million. Management estimates that external funding
requirements for 1994 will range from $5 million to $7
million. The Company has formal and informal bank lines of
credit totaling $85 million at floating short-term rates, of
which $57.9 million was utilized and classified as current
debt at June 29, 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. 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, and 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.
None reportable.
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
August 12, 1994 Charles D. Way
Chairman, President and Chief Executive Officer
/s/Fred T. Grant, Jr.
August 12, 1994 Fred T. Grant, Jr.
Vice President-Finance and Treasurer
/s/Richard D. Sieradzki
August 12, 1994 Richard D. Sieradzki
Controller