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 September 27, 1995
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 (29650)
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 September 27, 1995:
53,454,000 shares of common stock, $1.00 Par Value
PART I. FINANCIAL INFORMATION
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
Quarter Ended
September 27,September 28,
1995 1994
Restaurant sales $131,786 115,011
Operating expenses:
Food and beverage 53,789 46,591
Payroll and benefits 37,255 31,972
Depreciation 4,997 4,427
Amortization of pre-opening costs 526 583
Other operating expenses 16,219 14,104
Total operating expenses 112,786 97,677
General and administrative expenses 5,493 4,938
Interest expense 445 217
Revenues from franchised restaurants (460) (110)
Other income, net (253) (157)
Earnings before income taxes 13,775 12,446
Income taxes 5,097 4,606
Net earnings $8,678 7,840
Net earnings per common and common
equivalent share $ .16 .15
Weighted average shares 53,454,000 53,429,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
Nine Months Ended
September 27,September 28,
1995 1994
Restaurant sales $380,415 336,680
Operating expenses:
Food and beverage 155,080 136,545
Payroll and benefits 108,244 93,138
Depreciation 14,234 12,861
Amortization of pre-opening costs 1,558 1,868
Other operating expenses 46,128 40,349
Total operating expenses 325,244 284,761
General and administrative expenses 16,228 14,358
Interest expense 1,331 509
Revenues from franchised restaurants (1,355) (263)
Other income, net (790) (680)
Earnings before income taxes 39,757 37,995
Income taxes 14,710 14,059
Net earnings $25,047 23,936
Net earnings per common and common
equivalent share $ .47 .45
Weighted average shares 53,445,000 53,425,000
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 27,December 28,
1995 1994
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $1,635 695
Receivables 1,389 1,665
Inventories 3,644 2,843
Deferred income taxes 2,563 2,563
Other current assets 1,680 1,227
Total current assets 10,911 8,993
Property and equipment:
Land and improvements 92,089 86,154
Buildings 223,258 200,997
Equipment 138,469 137,968
Construction in progress 31,363 27,845
485,179 452,964
Less accumulated depreciation 87,333 87,988
Net property and equipment 397,846 364,976
Other assets 6,846 5,787
$415,603 379,756
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 67,500 65,700
Accounts payable 17,712 12,615
Income taxes payable 2,282 438
Accrued liabilities 22,973 21,174
Total current liabilities 110,467 99,927
Deferred income taxes 10,621 10,474
Shareholders' equity:
Common stock of $1.00 par value;
authorized 100,000,000 shares;
issued 53,454,000 shares in 1995
and 53,434,000 shares in 1994 53,454 53,434
Additional paid-in capital 6,692 6,599
Retained earnings 234,369 209,322
Total shareholders' equity 294,515 269,355
$415,603 379,756
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Quarter Ended
September 27, September 28,
1995 1994
Cash flows from operating activities:
Net earnings $25,047 23,936
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 16,480 15,650
Loss (gain) on sale of property
and equipment 251 (232)
Decrease (increase) in:
Receivables 276 (351)
Inventories (801) (343)
Other current assets (2,010) (1,628)
Other assets (1,070) (1,375)
Increase (decrease) in:
Accounts payable 5,097 1,522
Income taxes 1,844 (832)
Accrued liabilities 1,799 5,324
Deferred income taxes 147 141
Net cash provided by operating
activities 47,060 41,812
Cash flows from investing activities:
Proceeds from sale of property
and equipment 3,456 2,928
Capital expenditures (51,489) (48,909)
Net cash used in investing
activities (48,033) (45,981)
Cash flows from financing activities:
Net borrowings of notes payable 1,800 2,400
Proceeds from the issuance of
common stock 113 65
Net cash provided by
financing activities 1,913 2,465
Net increase (decrease) in cash and
cash equivalents 940 (1,704)
Cash and cash equivalents - beginning
of period 695 1,946
Cash and cash equivalents - end
of period $1,635 242
Supplemental disclosure -
Cash paid during the year for:
Interest, net of amount capitalized $1,130 417
Income taxes $12,761 15,527
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
I. For the Nine Months ended September 27, 1995
(Unaudited)
$1 Par Value Additional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at December 28, 1994 $53,434 6,599 209,322 269,355
Net earnings - - 25,047 25,047
Issuance of common stock
under Stock Option Plans 20 93 - 113
Balances at September 27, 1995 $53,454 6,692 234,369 294,515
II. For the Nine Months ended September 28, 1994
(Unaudited)
$1 Par Value Additional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at December 29, 1993 $53,415 6,513 178,778 238,706
Net earnings - - 23,936 23,936
Issuance of common stock
under Stock Option Plans 15 50 - 65
Balances at September 28, 1994 $53,430 6,563 202,714 262,707
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 27, 1995
(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 nine months ended September
27, 1995 are not necessarily indicative of the results that
may be expected for the fiscal year ending January 3, 1996.
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 28,
1994.
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 1994 amounts in the accompanying consolidated
financial statements have been reclassified to conform to
the 1995 presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended September 27, 1995 versus September 28, 1994
The Company experienced strong sales growth during the third
quarter of 1995 with restaurant sales up 15% over the
comparable quarter of 1994. A significant portion of the
increase resulted from the 9% unit growth of Company-owned
restaurants, which totaled 228 at September 27, 1995 and 208
at September 28, 1994. The 1995 store count was comprised
of 223 Ryan's restaurants and 5 other restaurants,
representing 3 different test concepts (see "Liquidity and
Capital Resources"). The 1994 store count was comprised
entirely of Ryan's restaurants. Same-store sales, or
average unit sales in restaurants that have been open for at
least 18 months and operating during comparable weeks during
the current and prior year, increased 3.4% during the
quarter compared to a 2.0% decrease during the third quarter
of 1994.
Sales results for 1995 were favorably affected by the
continuing rollout of scatter bars into the Company's Ryan's
restaurants. This format breaks the Mega Bar into five
island bars for easier customer access and more food
variety. At September 27, 1995, scatter bars had been
installed in 185 Ryan's, or 83% of all company-owned units.
Included in these installations were 137 retrofits, which
had average sales increases of 6% during the third quarter.
All new restaurants since late-1993 have opened with scatter
bars. Management anticipates that all Ryan's will have
scatter bars by mid-1996.
Total operating 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 85.6% during the third quarter of 1995 compared
to 84.9% in 1994. In 1995, payroll and benefits increased
to 28.3% of sales compared to 27.8% in 1994 due to new
customer service programs involving both increased
restaurant staffing and various training programs. Also,
higher potato prices and certain product upgrades, such as
carved ham and turkey, increased food and beverage costs to
40.8% compared to 40.5% in 1994. All other operating costs,
including depreciation and amortization of pre-opening
costs, decreased slightly to 16.5% of sales in 1995 compared
to 16.6% in 1994. Based on these factors, the Company's
gross operating margins at the restaurant level were 14.4%
and 15.1% for the third quarters of 1995 and 1994,
respectively.
General and administrative expenses decreased slightly to
4.2% of sales in 1995 compared to 4.3% in 1994 due
principally to the favorable impact of higher same-store
sales on this mostly fixed cost category.
Interest expense increased by $228,000 to 0.3% of sales,
resulting principally from less capitalized interest, which
reflects 1995's lower level of construction activity in
relation to the Company's outstanding debt. Also, the
Company's effective average interest rate increased to 6.3%
in 1995 compared to 5.0% in 1994.
Franchise revenues for the third quarter of 1995 increased
significantly, amounting to $460,000, or 0.3% of sales,
compared to $110,000 (0.1% of sales) in 1994, due
principally to restored royalty fee payments from the
Company's largest franchisee, Family Steak Houses of
Florida, Inc. Prior to the third quarter of 1994, this
franchisee had not paid any royalty fees since August 1993.
In July 1994, an agreement with the franchisee regarding
both future and past-due royalty fees was reached, and
payments recommenced, initially satisfying an adjusted
outstanding receivable balance. The details of this
agreement are noted in the Company's annual report on Form
10-K for the fiscal year ended December 28, 1994 under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations: Results of Operations - 1994
Compared to 1993." All required payments subsequent to the
agreement have been made in a timely manner, and,
accordingly, the revenue recognition, albeit on a cash
basis, has been restored. At September 27, 1995, there were
26 franchised Ryan's compared to 30 at September 28, 1994.
An effective income tax rate of 37.0% was used for the third
quarters of both 1995 and 1994.
Net earnings for the third quarter of 1995 increased 11% to
$8.7 million compared to $7.8 million in 1994.
Nine Months Ended September 27, 1995 versus September 28,
1994
For the nine months ended September 27, 1995, restaurant
sales were up 13% compared to the same period in 1994,
principally due to 7% average unit growth. Same-store sales
increased 2.2% during the first nine months of 1995 compared
to a 1.0% decline in 1994.
Nine-month operating expenses as detailed above were 85.5%
and 84.6% of sales for 1995 and 1994, respectively. During
the first nine months of 1995, costs and expenses were most
affected by higher payroll costs (up 0.8% of sales) as noted
in the third quarter discussion. Depreciation, amortization
of pre-opening costs and other operating expenses decreased
slightly to 16.2% in 1995 compared to 16.4% in 1994. Based
on these factors, the Company's gross operating margins at
the restaurant level were 14.5% and 15.4% for the first nine
months of 1995 and 1994, respectively.
General and administrative expenses as a percentage of sales
were 4.3% in both 1995 and 1994. Interest expense increased
by $822,000 to 0.3% of sales due to the same factors noted in
the third quarter discussion. Revenues from franchised
restaurants increased by $1,092,000 due principally to the
restoration of royalty income from the Company's largest
franchisee (see third quarter discussion). Effective income
tax rates used for the nine-month periods were 37.0% in both
1995 and 1994.
Net earnings for the first nine months of 1995 amounted to
$25.0 million compared to $23.9 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's restaurant sales are primarily derived from
cash. 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 September 27, 1995, the Company's working capital was a
$99.6 million deficit compared to a $90.9 million deficit at
December 28, 1994. Included in these amounts are borrowings
of $67.5 million and $65.7 million, respectively, under bank
lines of credit (see fifth succeeding 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 $47.1 million for
the nine months ended September 27, 1995 and $54.7 million
for the year ended December 28, 1994.
The Company is also actively progressing with several casual-
dining concepts. As noted earlier, the 1995 restaurant
count at September 27, 1995 includes 5 such units,
representing 3 different concepts. Three of these
restaurants were converted from existing Ryan's, while the
other 2 units were new construction. All five restaurants
are currently serving as test units, and further expansion
of these concepts will be limited pending review of their
operating results.
Total capital expenditures for the first nine months of 1995
amounted to $51.5 million. For the first nine months of
1995, the Company opened 20 new restaurants and closed 4
underperforming stores as follows:
New Restaurants
Test
Quarter Ryan'sConcepts Closed Net
First 6 0 (3) 3
Second 6 1 (0) 7
Third 5 2 (1) 6
Year-to-date 17 3 (4) 16
For remainder of 1995, Ryan's plans to open 4 additional
Ryan's, for a total of 24 new restaurants (21 Ryan's and 3
test concepts). In addition, the Company closed one
underperforming store in October. All such expansion will occur
in states within or contiguous to the Company's current
20-state operating area. The Company currently does not
plan any international expansion of Company-owned stores.
The Company is currently concentrating its efforts on
Company-owned stores and is not actively pursuing any
additional franchised locations, either domestically or
internationally.
Total capital expenditures for 1995 are estimated at
approximately $70 million. Management estimates that
external funding requirements in 1995 will range from $10
million to $15 million. The Company has formal and informal
bank lines of credit totaling $140 million at floating short-
term rates, of which $67.5 million was utilized and
classified as current debt at September 27, 1995. The
Company owns all of its property and equipment and is under
no significant lease obligations other than for four parcels
of land which are under lease for at least 30 years.
Shareholder Rights Agreement
On January 26, 1995, the Company's Board of Directors
adopted a Shareholder Rights Agreement (the "Agreement") and
declared a dividend of one Common Stock Purchase Right (a
"Right") for each outstanding share of Common Stock to
shareholders of record on February 10, 1995. Such Rights
only become exercisable ten business days after (i) a public
announcement that a person or group, except for certain
exempt persons specified in the Agreement, (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of
the Company's Common Stock; or (ii) a person or group
commences or publicly announces its intention to commence a
tender or exchange offer for an amount of the Company's
Common Stock that would result in the ownership by such
person or group of 15% or more of the Common Stock.
Each Right may initially be exercised to acquire a one-half
share of the Company's Common Stock at an exercise price of
$25, subject to adjustment. Thereafter, upon the occurrence
of certain events specified in the Agreement (for example,
if the Company is the surviving corporation of a merger with
an Acquiring Person), the Rights entitle holders other than
the Acquiring Person to acquire upon exercise Common Stock
having a market value of twice the exercise price of the
Rights. Alternatively, upon the occurrence of certain other
events specified in the Agreement (for example, if the
Company is acquired in a merger or other business
combination transaction in which the Company is not the
surviving corporation), the Rights would entitle holders
other than the Acquiring Person to acquire upon exercise
Common Stock of the acquiring company having a market value
of twice the exercise price of the Rights.
The Rights may be redeemed by the Company at a redemption
price of $.001 per Right at any time prior to the tenth
business day following public announcement that a 15%
position has been acquired and before the final expiration
date of the Rights. After the redemption period has
expired, the Company's right of redemption may be
reinstalled under certain circumstances outlined in the
Agreement. The Rights will expire on February 10, 2005.
IMPACT OF INFLATION
The Company's operating costs that may be affected by
inflation consist principally of food, payroll and utility
costs. Additionally, a significant number of the Company's
restaurant employees are paid at the minimum wage and,
accordingly, legislated changes to the minimum wage will
affect the Company's payroll costs. The Federal minimum
wage last increased in April 1991, and while no additional
increases have been legislated, the topic continues to be
actively debated within the Federal government. Finally,
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)
November 13, 1995 /s/Charles D. Way
Charles D. Way
Chairman, President and Chief Executive
Officer
November 13, 1995 /s/Fred T. Grant, Jr.
Fred T. Grant, Jr.
Vice President-Finance and Treasurer
November 13, 1995 /s/Richard D. Sieradzki
Richard D. Sieradzki
Controller