May 14, 1996
OFIS Filer Support
SEC Operations Center
6842 General Green Way
Alexandria, VA 22312-2413
Dear Sirs:
Pursuant to regulatations of the Securities and Exchange
Commission, submitted herewith for filing on behalf of
Family Steak Houses of Florida, Inc. is the Company's
Quarterly Report on Form 10-Q for the Fiscal Quarter ended
April 3, 1996.
This filing is being effected by direct transmission to the
Commission's Edgar System.
Very truly yours,
Edward B. Alexander
Secretary/Treasurer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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. 0-14311
FAMILY STEAK HOUSES OF
FLORIDA, INC.
Incorporated under the laws of IRS Employer Identification
Florida No. 59-2597349
2113 FLORIDA BOULEVARD
NEPTUNE BEACH, FLORIDA 32266
Registrant's Telephone No. (904) 249-4197
Indicate by check mark whether the registrant has filed all
reports required to be filed by Section 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_____
Title of each class Number of shares outstanding
Common Stock 10,892,900
$.01 par value As of May 3, 1996
FAMILY STEAK HOUSES OF FLORIDA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 3, 1996
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions
to Form 10-Q, and do not include all 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 of the results for
the interim period have been included. Operating results for the
thirteen week period 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 financial statements and footnotes included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 3,
1996.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany profits, transactions and balances have been
eliminated.
Note 2. Earnings Per Share
Earnings per share for the thirteen weeks ended April 3, 1996
and March 29, 1995 were computed based on the weighted average
number of common and common equivalent shares outstanding.
Common equivalent shares are represented by shares under option
and stock warrants.
Item 2. 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 a decrease in sales during the first
thirteen weeks of 1996 compared to the first thirteen weeks of
1995, as a result of lower same-store sales (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). Same-store sales decreased 8.7% to $10,359,700 from
$11,342,100 for the same period in 1995, compared to an increase
of 1.1% in 1995.
Management believes that the decrease in same-store sales is
primarily due to the effects of increasing competition, including
several new or remodeled restaurants opened by competitors in
areas close to Company restaurants. Management is seeking to
improve sales trends by focusing on improved restaurant
operations, increasing marketing expenditures, and devising
competitive strategies to offset the effects of new competition.
The costs and expenses of the Company's restaurants include
food and beverage, payroll, payroll taxes and employee benefits,
depreciation and amortization, repairs, maintenance, utilities,
supplies, advertising, insurance, property taxes, rents, and
licenses. The Company's food, beverage, payroll, and employee
benefit costs as a percentage of sales are believed to be higher
than the industry average, due to the Company's philosophy of
providing customers with high value of food and service for every
dollar a customer spends. In total, food and beverage, payroll
and benefits, depreciation and amortization and other operating
expenses as a percentage of sales increased to 85.7% in the first
quarter of 1996 from 82.5% in same quarter of 1995.
Food and beverage costs increased as a percentage of sales
from 39.2% in 1995 to 40.1% in 1996, due primarily to higher
produce costs. Payroll and benefit costs as a percentage of sales
increased to 26.9% in 1996 from 25.7% in 1995, primarily due to
the decrease in same-store sales, which resulted in lower
efficiencies in labor scheduling.
Depreciation and amortization expenses increased as a
percentage of sales in the first quarter of 1996, compared to the
same period of 1995, primarily as a result of lower same-store
sales.
General and administrative expenses as a percentage of sales
were decreased to 5.1% in the first quarter of 1996 from 5.3% in
the same quarter in 1995. This decrease was primarily due to
costs associated with settlement of a lawsuit in 1995.
Interest expense decreased to $391,000 in the first quarter
of 1996 versus $449,700 in the same quarter of 1995. The decrease
was due primarily to lower outstanding principal balances,
resulting from principal payments made throughout the last twelve
months.
The effective income tax rate for the first three months of
1996 was 25.0%, compared to 15.0% in 1995. The lower than
statutory rates are due to the realization of deferred tax assets
for which a reserve had been provided in prior periods.
Net earnings were $261,100 and $578,600 in the first
quarters of 1996 and 1995, respectively. Earnings per share for
the quarter were 2 cents in 1996 compared to 5 cents in 1995.
The Company's operations are subject to some seasonal
fluctuations. Revenues per restaurant generally increase from
January through April and decline September through December.
Operating results for the quarter ended April 3, 1996 are not
necessarily indicative of the results that may be expected for
the fiscal year ending January 1, 1997.
Recent Developments
In April 1996, the Company signed a letter of intent to
purchase land on which the Company intends to construct a Ryan's
restaurant. The purchase of the property is contingent upon
approval of the site by Ryan's Family Steak Houses, Inc., (the
"Franchisor"), in accordance with the Company's amended Franchise
Agreement, and the Company's ability to obtain suitable financing
for the construction. The Company believes the Franchisor will
approve the site and that suitable sales leaseback financing will
be obtained so that the new restaurant will be completed and
become operational during the third quarter of 1996.
In May 1996, Wrangler's Roadhouse, Inc., the Company's
wholly owned subsidiary, sold the building which it had
previously leased to Cross Creek Barbeque. The Company recognized
a gain of approximately $7,000 on the sale.
In March 1995, the Company entered into amended and
restructured debt agreements with its lenders. For a complete
discussion of the debt restructure, see "Liquidity and Capital
Resources" below.
Liquidity and Capital Resources
Substantially all of the Company's revenues are derived from
cash sales. Inventories are purchased on credit and are converted
rapidly to cash. Therefore, the Company does not carry
significant receivables or inventories and, other than repayment
of debt, working capital requirements for continuing operations
are not significant.
At April 3, 1996, the Company had a working capital deficit
of $2,954,900 compared to a working capital deficit of $3,284,900
at January 3, 1996. The decrease in the working capital deficit
during the first three months in 1996 was due primarily to net
earnings generated in the first quarter of 1996.
Cash provided by operating activities decreased 5.7% to
$1,213,500 in the first quarter of 1996 from $1,286,200 in the
first quarter of 1995, primarily due to reduced earnings in 1996.
The Company spent approximately $192,900 in the first
quarter of 1996 and $821,000 in the first quarter of 1995 for
equipment and improvements. Capital expenditures for 1996 and
1997 are estimated to be $750,000 and $900,000 respectively. The
Company projects that cash generated from operations will be
sufficient to fund these improvements.
In March 1995, the Company entered into an Amended and
Restated Note Agreement, dated as of February 1, 1995, with The
Travelers Insurance Company and certain of its affiliates (the
"Note Agreement"), pursuant to which existing notes of the
Company were renewed, amended and restated (as amended and
restated, the "Notes"). In August 1995, the Note Agreement was
sold to Cerberus Partners, L.P. The Notes are due May 30, 1998
and provides for an interest rate of 9.0% with $65,000 monthly in
principal reductions beginning January 1, 1996. As of April 3,
1996, the outstanding balance due under the Notes was
$11,412,790.
The Note Agreement includes detachable Warrants for
purchases of up to 1,750,000 shares of the Company's common stock
at an exercise price of $.40 per share. The Notes are secured by
second mortgages on twenty-two Company restaurant properties. The
Note Agreement provides for various convenants including
prepayment options, the maintenance of prescribed debt service
coverages, limitations on the declaration of cash dividends, sale
of assets, and certain other restrictions.
Also in March 1995, the Company entered into an Amended and
Restated Loan Agreement with The Daiwa Bank, Limited, and
SouthTrust Bank of Alabama, National Association (the "Bank
Loan") which extends the maturity date of the Bank Loan until May
30, 1998. The Bank Loan bears interest at prime rate plus 0.50%,
with monthly principal payments of $41,250 beginning April 1,
1995 ($67,100 prior to April 1, 1995). The Bank Loan is secured
by first mortgages on twenty-two of the Company's restaurant
properties, and provides for various covenants substantially
consistent with those of the Note Agreement. As of April 3, 1996,
the outstanding balance under the Bank Loan was $4,039,296.
Impact of Inflation
Costs of food, beverage, and labor are the expenses most
affected by inflation in the Company's business. Althrough
inflation has not been a major factor for the past several years,
there can be no assurance that it will not be in the future. A
significant number of the Company's personnel are paid at the
federally established minimum wage level, which was last
increased April 2, 1991. Any increase in the minimum wage will
increase the Company's labor costs, necessitating an increase to
the Company's sales prices. Sale prices were last increased
approximately 2.5% in 1995.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of
this report of Form 10-Q and this list comprises
the Exhibit Index.
No. Exhibit
27.00 Financial Data Schedule.
SIGNATURES
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.
FAMILY STEAK HOUSES OF FLORIDA, INC.
(Registrant)
/s/ Lewis E. Christman, Jr.
Date: May 10, 1996 Lewis E. Christman, Jr.
President
(Chief Executive Officer)
/s/ Edward B. Alexander
Date: May 10, 1996 Edward B. Alexander
Director of Finance
(Principal Financial and Accounting
Officer)
/s/ Michael J. Walters
Date: May 10, 1996 Michael J. Walters
Controller
Financial Statements
Family Steak Houses of Florida, Inc.
Consolidated Statements of Earnings
(Unaudited)
For The Quarter Ended
-------------------------
April 3, March 29
1996 1995
------------ ------------
Sales $10,359,700 $11,342,100
Cost and expenses:
Food and beverage 4,150,200 4,443,800
Payroll and benefits 2,783,300 2,917,000
Depreciation and amortization 425,300 440,600
Other operating expenses 1,524,900 1,553,100
General and administrative expenses 528,800 606,300
Franchise fees 310,600 340,300
Loss from disposition of equipment 18,600 25,000
Loss from joint venture -- 26,700
------------ ------------
9,741,700 10,352,800
Earnings from operations 618,000 989,300
Interest and other income 121,100 141,000
Interest expense (391,000) (449,700)
------------ ------------
Earnings before income taxes 348,100 680,600
Provision for income taxes 87,000 102,000
------------ ------------
Net earnings $261,100 $578,600
============ ============
Net earnings per common and equivalent
share $0.02 $0.05
============ ============
Weighted average common
shares and equivalents 12,122,000 11,084,000
============ ============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Balance Sheets
(Unaudited)
April 3,
1996
-------------
Cash and cash equivalents $1,467,300
Investments 600,300
Receivables 54,500
Current portion of note and mortgages receivable 172,000
Inventories 232,100
Prepaids and other current assets 171,300
-------------
Total current assets 2,697,500
Note and mortgages receivable 1,214,500
Property and equipment:
Land 9,249,700
Buildings and improvements 18,815,200
Equipment 12,017,100
-------------
40,082,000
Accumulated depreciation (13,585,300)
-------------
Net property and equipment 26,496,700
Property held for resale 552,800
Other assets, principally deferred charges,
net of accumulated amortization 536,400
-------------
$31,497,900
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,547,300
Accrued liabilities 2,482,700
Income taxes payable 67,400
Current portion of long-term debt 1,555,000
-------------
Total current liabilities 5,652,400
Long-term debt 14,064,300
Deferred revenue 49,400
-------------
Total liabilities 19,766,100
Commitments and contingencies
Shareholders' equity:
Preferred stock of $.01 par;
authorized 10,000,000 shares;
none issued --
Common stock of $.01 par;
authorized 20,000,000 shares;
outstanding 10,874,000 108,700
Additional paid-in capital 8,134,100
Retained earnings 3,489,000
-------------
Total shareholders' equity 11,731,800
-------------
$31,497,900
=============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Balance Sheet
(Unaudited)
January 3,
1996
-------------
Current assets:
Cash and cash equivalents $711,400
Investments 600,300
Receivables 73,900
Current portion of note and mortgages receivable 155,700
Inventories 247,400
Prepaids and other current assets 256,600
-------------
Total current assets 2,045,300
Note and mortgages receivable 1,262,700
Property and equipment:
Land 9,342,200
Buildings and improvements 18,774,500
Equipment 11,940,900
-------------
40,057,600
Accumulated depreciation (13,220,900)
-------------
Net property and equipment 26,836,700
Property held for resale 552,800
Other assets, principally deferred charges,
net of accumulated amortization 562,200
-------------
$31,259,700
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,250,700
Accrued liabilities 2,494,100
Income taxes payable 5,400
Current portion of long-term debt 1,580,000
-------------
Total current liabilities 5,330,200
Long-term debt 14,420,400
Deferred revenue 49,400
-------------
Total liabilities 19,800,000
Shareholders' equity:
Preferred stock of $.01 par;
authorized 10,000,000 shares;
none issued --
Common stock of $.01 par;
authorized 20,000,000 shares;
outstanding 10,845,000 108,500
Additional paid-in capital 8,123,300
Retained earnings 3,227,900
-------------
Total shareholders' equity 11,459,700
-------------
$31,259,700
=============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Statements of
Cash Flows
For the Quarter Ended
(Unaudited)
April 3,
1996
------------
Operating activities:
Net earnings $261,100
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 425,300
Directors' fees in the form of stock options 5,000
Loss from joint venture --
Amortization of loan discount 13,900
Amortization of loan fees 22,400
Loss on disposition of equipment 18,600
Decrease (increase) in:
Receivables 19,400
Income tax receivable --
Inventories 15,300
Prepaids and other current assets 85,300
Increase (decrease) in:.
Accounts payable 296,600
Accrued liabilities (11,400)
Income taxes payable 62,000
Other non-current liabilities --
------------
Net cash provided by operating activities 1,213,500
Investing activities:
Net proceeds from sale of property held for resale --
Proceeds from sale of property and equipment 92,400
Proceeds from notes receivable 31,900
Capital expenditures (192,900)
------------
Net cash used by investing activities (68,600)
Financing activities:
Payments on long-term debt (395,000)
Proceeds from the issuance of common stock 6,000
------------
Net cash used by financing activities (389,000)
Net increase in cash and cash equivalents 755,900
Cash and cash equivalents - beginning of period 711,400
------------
Cash and cash equivalents - end of period $1,467,300
Supplemental disclosures of cash flow information:
Cash paid during the quarter for interest $356,700
============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Statements of
Cash Flows
For the Quarter Ended
(Unaudited)
March 29,
1995
------------
Operating activities:
Net earnings $578,600
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 440,600
Directors' fees in the form of stock options 12,500
Loss from joint venture 26,700
Amortization of loan discount 33,000
Amortization of loan fees 18,000
Loss on disposition of equipment 25,000
Decrease (increase) in:
Receivables (28,400)
Income tax receivable 149,700
Inventories 11,300
Prepaids and other current assets 278,900
Increase (decrease) in:.
Accounts payable 329,600
Accrued liabilities (639,300)
Income taxes payable --
Other non-current liabilities 50,000
------------
Net cash provided by operating activities 1,286,200
Investing activities:
Net proceeds from sale of property held for resale 471,000
Proceeds from sale of property and equipment 106,600
Proceeds from notes receivable 9,100
Capital expenditures (821,000)
------------
Net cash used by investing activities (234,300)
Financing activities:
Payments on long-term debt (518,000)
Proceeds from the issuance of common stock 600
------------
Net cash used by financing activities (517,400)
Net increase in cash and cash equivalents 534,500
Cash and cash equivalents - beginning of period 1,603,100
------------
Cash and cash equivalents - end of period $2,137,600
Supplemental disclosures of cash flow information:
Cash paid during the quarter for interest $420,500
===========
Non-cash transactions:
Mortgage receivable as partial proceeds on proper $835,000
============
Warrants issued $81,000
============
Accrued interest reclassed to long-term debt $100,000
============
See accompanying notes to consolidated financial statements.