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 April 3, 1996
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)
864-879-1000
(Registrant's telephone number, including area code)
- ------------------------------------------------------------
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 April 3, 1996:
52,434,000 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 per share data)
Quarter Ended
April 3, March 29,
1996 1995
Restaurant sales $130,849 117,266
Operating expenses:
Food and beverage 52,238 47,592
Payroll and benefits 36,934 33,973
Depreciation and amortization 5,692 5,014
Other operating expenses 16,671 14,409
Total operating expenses 111,535 100,988
General and administrative expenses 6,190 5,302
Interest expense 555 431
Revenues from franchised restaurants (402) (463)
Other income, net (529) (600)
Earnings before income taxes 13,500 11,608
Income taxes 4,996 4,295
Net earnings $8,504 7,313
Net earnings per common and common
equivalent share $ .16 .14
Weighted average shares 53,378 53,434
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
April 3, January 3,
1996 1995
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 522 1,299
Receivables 1,674 1,731
Inventories 3,970 4,045
Deferred income taxes 2,923 2,923
Other current assets 1,636 1,491
Total current assets 10,725 11,489
Property and equipment:
Land and improvements 96,816 95,093
Buildings 241,793 233,674
Equipment 151,437 144,638
Construction in progress 39,146 31,311
529,192 504,716
Less accumulated depreciation 97,858 92,495
Net property and equipment 431,334 412,221
Other assets 7,109 7,119
$449,168 430,829
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 82,900 72,200
Accounts payable 21,242 16,975
Income taxes payable 5,169 745
Accrued liabilities 23,285 23,761
Total current liabilities 132,596 113,681
Deferred income taxes 14,504 14,454
Shareholders' equity:
Common stock of $1.00 par value;
authorized 100,000,000 shares;
issued 52,434,000 shares in 1996 and
53,462,000 shares in 1995 52,454 53,462
Additional paid-in capital - 6,751
Retained earnings 249,634 242,481
Total shareholders' equity 302,068 302,694
$449,168 430,829
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Quarter Ended
April 3, March 29,
1996 1995
Cash flows from operating activities:
Net earnings $8,504 7,313
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 5,777 5,145
Gain on sale of property and equipment (58) (100)
Decrease (increase) in:
Receivables 57 26
Inventories 75 (410)
Other current assets (558) (438)
Other assets 9 33
Increase (decrease) in:
Accounts payable 4,267 1,479
Income taxes payable 4,424 4,118
Accrued liabilities (476) (253)
Deferred income taxes 50 43
Net cash provided by operating activities 22,071 16,956
Cash flows from investing activities:
Proceeds from sale of property and equipment 395 319
Capital expenditures (24,813) (18,680)
Net cash used in investing activities (24,418) (18,361)
Cash flows from financing activities:
Net borrowings of notes payable 10,700 900
Proceeds from the issuance of common stock 11 35
Purchases of common stock (9,141) -
Net cash provided by financing activities 1,570 935
Net decrease in cash and cash equivalents (777) (470)
Cash and cash equivalents - beginning
of period 1,299 695
Cash and cash equivalents - end
of period $ 522 225
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
I. For the Quarter ended April 3, 1996
(Unaudited)
$1 Par ValueAdditional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at January 3, 1996 $53,462 6,751 242,481 302,694
Net earnings - - 8,504 8,504
Issuance of common stock
under Stock Option Plans 3 8 - 11
Purchases of common stock (1,031) (6,759) (1,351) (9,141)
Balances at April 3, 1996 $52,434 - 249,634 302,068
II. For the Quarter ended March 29, 1995
(Unaudited)
$1 Par ValueAdditional
Common Paid-In Retained
Stock Capital Earnings Total
Balances at December 28, 1994 $53,434 6,599 209,322 269,355
Net earnings - - 7,313 7,313
Issuance of common stock
under Stock Option Plans 6 29 - 35
Balances at March 29, 1995 $53,440 6,628 216,635 276,703
See accompanying notes to consolidated financial statements.
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 3, 1996
(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 three months ended April 3, 1996 are not
necessarily indicative of the results that may be expected
for the fiscal year ending January 1, 1997. 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 January 3, 1996.
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 1995 amounts in the accompanying consolidated
financial statements have been reclassified to conform to
the 1996 presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended April 3, 1996 versus March 29, 1995
The Company experienced strong sales growth during the first
quarter of 1996 with restaurant sales up 12% over the
comparable quarter of 1995. Substantially all of the
increase resulted from the 9% unit growth of company-owned
restaurants, which totaled 238 at April 3, 1996 and 215 at
March 29, 1995. The 1996 store count was comprised of 233
Ryan's restaurants and 5 other restaurants, representing 3
different test concepts (see "Liquidity and Capital
Resources"). The 1995 store count was comprised of 213
Ryan's and 2 of the test concept restaurants. Same-store
sales at the Ryan's restaurants, or average unit sales in
units that have been open for at least 18 months and
operating during comparable weeks during the current and
prior year, increased 0.3% during the quarter compared to a
0.2% increase during the first quarter of 1995. The first
quarter of 1996 represents the sixth consecutive quarter in
which same-store sales have increased.
Restaurant sales in 1996 were significantly impacted by
severe winter weather during January that affected most
Ryan's in the southeast and midwest United States. Same-
store sales were down 6% during January, but rebounded
strongly during February and March, increasing 4% on average
during the two-month period. Management attributes the
improvement principally to the Company's installation of scatter
bars in its restaurants. The scatter bar format breaks the
Mega Bar into five island bars for easier customer access
and more food variety. During the first quarter of 1996,
scatter bars were installed in 18 restaurants, thereby
completing the installation of scatter bars in substantially
all company-owned units. Management also attributes a
portion of the sales improvement to the
customer service improvement programs implemented throughout
1995 (see the Company's annual report on Form 10-K for the
fiscal year ended January 3, 1996 under "Management's
Discussion and Analysis of Financial Condition and Results
of Operations: Results of Operations - 1995 Compared to
1994") and increased media advertising (see second
succeeding paragraph).
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 85.2% during the first quarter of 1996 compared
to 86.1% in 1995. In 1996, food and beverage costs
decreased from 40.6% in 1995 to 39.9% in 1996 due to lower
beef and produce prices and better store-level operating
procedures. Payroll and benefits decreased to 28.2% of
sales compared to 29.0% in 1995 due to higher average unit
sales volumes, better labor scheduling procedures and lower
workers' compensation costs. All other operating costs,
including depreciation and amortization of pre-opening
costs, increased to 17.1% of sales in 1996 compared to 16.6%
in 1995 due principally to higher utility and paper costs.
Based on these factors, the Company's gross operating
margins at the restaurant level were 14.8% and 13.9% for the
first quarters of 1996 and 1995, respectively.
General and administrative expenses increased to 4.7% of
sales in 1996 compared to 4.5% in 1995 due principally to
increased media advertising costs, which amounted to 0.3% of
sales in 1996 compared to an insignificant amount in 1995.
The Company has significantly expanded its media advertising
program in 1996 with plans to run campaigns in 10 markets
during selected periods in 1996 compared to 2 markets during
1995. Total media advertising costs are expected to amount
to 0.3% of sales in 1996 versus 0.1% in 1995.
Interest expense increased by $124,000, amounting to 0.4% of
sales in both 1996 and 1995, due principally to increased
outstanding debt, which increased from $72.2 million at
January 3, 1996 to $82.9 million at April 3, 1996. This
increase in debt resulted principally from a common stock
repurchase program implemented in March 1996 (see "Liquidity
And Capital Resources"). The Company's effective average
interest rate decreased to 5.9% in 1996 compared to 6.4% in
1995.
Franchise revenues for the first quarter of 1996 decreased
by 13%, amounting to $402,000, or 0.3% of sales, compared to
$463,000 (0.4% of sales) in 1995, due principally to a
lesser number of franchised restaurants. At April 3, 1996,
there were 26 franchised Ryan's compared to 30 at March 29,
1995.
An effective income tax rate of 37.0% was used for the first
quarters of both 1996 and 1995.
Net earnings for the first quarter of 1996 increased 16% to
$8.5 million compared to $7.3 million in 1995.
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 April 3, 1996, the Company's working capital was a $121.9
million deficit compared to a $102.2 million deficit at
January 3, 1996. Included in these amounts are borrowings
of $82.9 million and $72.2 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 $22.1 million for
the three months ended April 3, 1996 and $61.8 million for
the year ended January 3, 1996.
Total capital expenditures for the first three months of
1996 amounted to $24.8 million. The Company opened 7 new
Ryan's restaurants during the first three months of 1996
and, for the remainder of 1996, plans to open 23 additional
Ryan's for a total of 30 new restaurants (all Ryan's).
During 1995, the Company opened 24 restaurants (21 Ryan's
and 3 test concepts).. Total capital expenditures for 1996
are estimated at approximately $75 million. expansion will
occur in states within or contiguous to the Company's
current 21-state operating area The Company currently does
not plan any international expansion of Company-owned
stores.
The Company is also actively testing several casual-dining
concepts. As noted earlier, the restaurant count at April
3, 1996 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. Further expansion of these concepts will be
limited pending review of their operating results.
The Company is currently concentrating its efforts on
Company-owned stores and is not actively pursuing any
additional franchised locations, either domestically or
internationally.
On March 13, 1996, management announced its intention to
repurchase an aggregate 6.4 million shares of the Company's
common stock through December 1998. Through April 3, 1996,
the Company had repurchased approximately 1.0 million shares
at an aggregate cost of approximately $9.1 million. As part
of the multi-year plan, management expects that 1996
aggregate repurchase transactions will amount to
approximately $25 million. Repurchases have and will be
made from time to time on the open market or in privately
negotiated transactions in accordance with applicable
securities regulations, depending on market conditions,
share price and other factors.
Management estimates that external funding requirements in
1996 will range from $40 million to $44 million. The
remainder of the Company's funding requirements are expected
to be met by internally generated cash from operations. The
Company currently has several uncommitted bank lines
totaling $140 million at various short-term rates of which
$82.9 million was utilized at April 3, 1996. Management
intends to refinance this outstanding short-term debt and to
finance a portion of its 1996 needs with long-term bank debt
and is currently finalizing such arrangements with a bank
group. The closing date of this financing transaction is
expected to occur during early-June 1996. Management
believes that the Company's anticipated overall borrowing
arrangements, which are expected to include uncommitted bank
lines in addition to the long-term bank debt at both fixed
and floating interest rates, will be sufficient to meet its
1996 requirements.
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. Other
changes to the minimum wage may also be legislated at the
state level.
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)
May 17, 1996 /s/Charles D. Way
Charles D. Way
Chairman, President and Chief Executive
Officer
May 17, 1996 /s/Fred T. Grant, Jr.
Fred T. Grant, Jr.
Vice President-Finance and Treasurer
May 17, 1996 /s/Richard D. Sieradzki
Richard D. Sieradzki
Controller