- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-K (Mark One) (x ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended January 1, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission File No. 0-14311 FAMILY STEAK HOUSES OF FLORIDA, INC. (exact name of registrant as specified in its charter) Florida No. 59-2597349 (State of Incorporation) (I.R.S. Employer Identification) 2113 Florida Boulevard Neptune Beach, Florida 32266 (Address of Principal Executive Offices) Registrant's telephone number, including area code: (904) 249-4197 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 Par Value (Title of Class) -------------------- 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__ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. YES__ NO (X) As of March 7, 1997, 10,954,960 shares of Common Stock of the registrant were outstanding. The aggregate market value of such voting Common Stock (based upon the closing sale price of the registrant's Common Stock on the NASDAQ National Market System on March 7, 1997, as reported in The Wall Street Journal) held by non-affiliates of the registrant was approximately $10,758,319. Documents Incorporated by Reference Portions of the registrant's 1996 Annual Report to Shareholders are incorporated by reference into Part II. Portions of the Proxy Statement for the registrant's 1997 Annual Meeting of Shareholders are incorporated by reference into Part III. PART I ITEM 1. BUSINESS General Family Steak Houses of Florida, Inc. ("Family" or the "Company"), is the sole franchisee of Ryan's Family Steak House restaurants ("Ryan's restaurants") in the State of Florida. The Company's first Ryan's restaurant was opened in Jacksonville, Florida, in May 1982. As of January 1, 1997, the Company operated 25 Ryan's restaurants in Florida, including nine in north Florida and sixteen in central and west Florida. A Ryan's restaurant is a family-oriented restaurant serving high-quality, reasonably-priced food in a casual atmosphere with server-assisted service. Ryan's restaurants serve lunch and dinner seven days a week and offer a variety of charbroiled entrees, including various cuts of beef, chicken, and seafood. Most of the restaurants serve a brunch on weekends only. Each restaurant features a diverse selection of items from either a series of "scatter bars" or a 65-foot, self-service, all-you-can-eat Mega Bartm, and a separate fresh bakery and dessert bar. In addition to traditional salad bar items, the scatter bars or Mega Barstm offer hot meats, pre-made salads, soups, baked potatoes with toppings, cheeses and a variety of vegetables. The Company believes that its operating strategy of selling top-quality meals at reasonable prices, at food costs to the Company which are higher than the industry average, creates a perception of value to its customers. The Company operates its Ryan's restaurants under a Franchise Agreement with Ryan's Family Steak Houses, Inc., ("Ryan's", or the "Franchisor") which grants the Company the right to operate Ryan's Family Steak House restaurants throughout North and Central Florida. Company History The Company was formed by the combination, effective February 1986, of six limited partnerships, each of which owned and operated a Ryan's restaurant franchise. In April 1986, the Company issued 4,266,000 shares of its common stock in exchange for the assets and liabilities of the predecessor partnerships and 1,134,000 shares of its common stock to Eddie L. Ervin, Jr., in consideration for Mr. Ervin assigning to the Company all of his rights under the Franchise Agreement, as defined below. The Company completed its initial public offering of 4,500,000 shares of its common stock in 1986 resulting in net proceeds to the Company of approximately $4,145,000. 2 Franchise Agreement The Company operates its Ryan's restaurants under a Franchise Agreement between the Company and the Franchisor dated as of September 16, 1987, which Franchise Agreement amended and consolidated all previous franchise agreements (as amended, the "Franchise Agreement"). The Franchise Agreement extends through December 31, 2010 and provides for two additional ten-year renewal options. The renewal options are subject to certain conditions, including the condition that the Company has fully and faithfully performed its obligations under the Franchise Agreement during its original term. Under the terms of the Franchise Agreement, the Company has the right to use the registered mark "Ryan's Family Steak House" and the right to use the Franchisor's techniques in the operation of Ryan's Family Steak House restaurants. In 1996, the Company and the Franchisor amended the Franchise Agreement. The amended agreement requires the Company to pay a royalty fee of 3.0% through December 2001 and 4.0% thereafter on the gross receipts of each Ryan's Family Steak House restaurant. Total royalty fee expenses were $1,138,600, $1,263,200, and $1,561,100 for the years ended January 1, 1997, January 3, 1996 and December 28, 1994, respectively. The Franchise Agreement requires the Company to operate a minimum number of Ryan's restaurants on December 31 of each year. Failure to operate the minimum number could result in the loss of exclusivity rights to the Ryan's concept in the Company's Florida territory. The following schedule outlines the number of Ryan's restaurants required to be operated by the Company on December 31 of each year under the Franchise Agreement: Number of Restaurants Required to End of Fiscal Year be in Operation - ------------------ --------------- 1997 25 1998 26 1999 27 2000 28 2001 and subsequent years Increases by one each year 3 Prior to July 1994, the Company held exclusive franchise rights to build Ryan's restaurants in the State of Florida, with the exception of Panama City, Florida and Escambia County, Florida, where the Franchisor has the right to operate Ryan's restaurants. In July 1994 the Company relinquished the franchise rights to most counties in northwest Florida and south Florida in exchange for forgiveness of $500,000 in past due royalty fees. The Company has the right to repurchase the exclusive franchise rights to these counties for $500,000 at any time prior to June 30, 1998. In addition, the Franchisor agreed not to develop any Ryan's restaurants in the south Florida territory prior to June 30, 1996. Ryan's has not developed any restaurants in Florida as of March 13, 1997. In July 1994, the Company executed and delivered a note to the Franchisor for payment of $800,000 in past due royalty fees. (See Note 5 to the Consolidated Financial Statements in the Company's 1996 Annual Report to Shareholders). The Franchise Agreement contains provisions relating to the operation of the Company's Ryan's restaurants. Upon the Company's failure to comply with such provisions, the Franchisor may terminate the Franchise Agreement if such default is not cured within 30 days of notice from the Franchisor. Termination of the Franchise Agreement would result in the loss of the Company's right to use the "Ryan's Family Steak House" name and concept and could result in the sale of the physical assets of the Company to the Franchisor pursuant to a right of first refusal. Termination of the Company's rights under the Franchise Agreement may result in the disruption, and possibly the discontinuance, of the Company's operations. The Company believes that it has operated and maintained each of its Ryan's Family Steak House restaurants in accordance with the operational procedures and standards set forth in the Franchise Agreement, as amended. Operations of Ryan's Restaurants Format. As of March 5, 1997, 24 of the Company's Ryan's Restaurants are located in free-standing buildings which vary in size from 7,500 to 12,000 square feet. One of the Company's Ryan's restaurants is located in a mall. Each restaurant is constructed of brick or stucco walls, interior and exterior, with exposed woodwork. The interior of each Ryan's restaurant contains a dining room, a customer ordering area, and a kitchen. The dining rooms seat a total of between 270 and 500 persons and highlight centrally located, illuminated scatter bars or Mega Bars[tm] and a fresh bakery bar. Each Ryan's restaurant has parking for approximately 100 to 175 cars on lots of overall size of approximately 50,000 to 70,000 square feet. The Ryan's restaurants operate seven days a week. Typical hours of operation are from 11:00 a.m. to 9:00 p.m., Sunday through Thursday, and from 11:00 a.m. to 10:00 p.m., Friday and Saturday. Restaurants that open for brunch open at 8:00 a.m. Saturday and Sunday. In a Ryan's restaurant, the customer enters the restaurant, orders from the menu, and then enters the dining room. Beverages are brought to the table by servers. Entrees are cooked to order. The customer ordering the salad bar is given unlimited access to the scatter bars or Mega Barstm and the bakery dessert bar. Customers receive table service of the entree and beverage refills. For the year ended January 1, 1997, the average weekly customer count per restaurant was approximately 5,200 and the average cost of a meal, with beverage, was approximately $5.90. 4 Restaurant Management and Supervision. The Company manages the Ryan's restaurants pursuant to a standardized operating and control system together with comprehensive recruiting and training of personnel to maintain food and service quality. In each Ryan's restaurant, the management group consists of a general manager, a manager and one to three assistant managers, depending on sales volume. The Company requires at least two members of the management group on duty during all peak serving periods. Management- level personnel usually begin employment at the manager trainee or assistant manager level, depending on prior restaurant management experience. All new management-level personnel must complete the Company's six-week training period prior to being placed in a management position. Each restaurant management group reports to a supervisor. Presently, the supervisors each oversee the operations of six to seven restaurants. The supervisors report directly to the Vice President of Operations. Communication and support from all departments in the Company are designed to assist the supervisors in responding promptly to local problems and opportunities. All restaurant managers and supervisors participate in incentive programs based upon the profitability of their restaurants and upon the achievement of certain pre-set goals. The Company believes these incentive programs enable it to operate more efficiently and to attract qualified managers. Purchasing, Quality and Cost Control. The Company has a centralized purchase control program which is designed to ensure uniform product quality in all restaurants. The program also helps to maintain reduced food, beverage, and supply costs. The Company purchases approximately 90% of the products used by the Company's restaurants through the centralized purchase control program. USDA choice grain-fed beef, the Company's primary commodity, is closely monitored by the Company for advantageous purchasing and quality control. The Company purchases beef through various producers and brokers both on a contract basis and on a spot basis. Beef and other products are generally delivered directly to the restaurants three times weekly, except for fresh produce, which is delivered three to five times per week. The Company believes that satisfactory sources of supply are available for all the items it regularly uses. 5 The Franchise Agreement requires that all suppliers to Ryan's restaurants are subject to approval by the Franchisor. Through its relationship with the Franchisor, the Company has obtained favorable pricing on the purchase of food products from several suppliers. In June 1995, the Company renewed its agreement with Kraft Foodservice, Inc. to serve as its primary supplier. Kraft was subsequently purchased by Alliant Foodservice, Inc. The Alliant agreement has a five-year term and is cancellable at any time with 60 days notice. The Company maintains centralized financial and accounting controls for its restaurants. On a daily basis, restaurant managers forward customer counts, sales information and supplier invoices to Company headquarters. On a weekly basis, restaurant managers forward summarized sales reports and payroll data. Physical inventories of all food and supply items are taken weekly, and meat is inventoried daily. Development General. The Company operated 25 Ryan's restaurants as of March 5, 1997. Site Location and Construction. The Company considers the specific location of a restaurant to be important to its long-term success. The site selection process focuses on a variety of factors, including trade area demographics (such as population density and household income level), an evaluation of site characteristics (such as visibility, accessibility, and traffic volume), and an analysis of the potential competition. In addition, site selection is influenced by the general proximity of a site to other Ryan's restaurants in order to improve the efficiency of the Company's field supervisors and potential marketing programs. The Company generally locates its restaurants near or adjacent to residential areas in an effort to capitalize on repeat business from such areas as opposed to transient business. 6 The Company constructs its Ryan's restaurants using its contracting subsidiary. Management believes that by performing site selection and restaurant construction internally, the Company can maintain better control of site selection, real estate cost and construction performance. While the Company has not required performance and payment bonds, it undertakes to closely supervise and monitor all construction and confirm payment of subcontractors and suppliers. New Ryan's restaurants generally are completed within three months of the date on which construction is commenced. Management of New Restaurants. When a new Ryan's restaurant is opened, the principal restaurant management positions are staffed with personnel who have prior experience in a management position at another of the Company's restaurants and who have undergone special training. Prior to opening, all staff personnel at the new location undergo one week of intensive training conducted by a training team. Such training includes preopening drills in which test meals are served to the invited public. Both the staff at the new location and personnel experienced in store openings at other locations participate in the training and drills. Joint Venture In December 1994, the Company formed a new subsidiary, Family Steak JV, Inc. which acquired a 50% ownership in a Florida limited liability company, Cross Creek Barbeque, L.C. ("Cross Creek"), for the purpose of opening a new restaurant. The Company contributed certain furnishings, fixtures, and equipment owned by its Wrangler's Roadhouse, Inc. subsidiary ("Wrangler's") to Cross Creek and the other 50% owner of Cross Creek contributed the cash necessary to remodel and open the new Cross Creek restaurant. As a result of unsatisfactory operational performance, the Company sold its interest in the Cross Creek restaurant in July 1995. Wrangler's leased the land and building to Cross Creek until May 1996, when it sold them at a gain of approximately $5,000. Proprietary Trade Marks The name "Ryan's Family Steak House," along with all ancillary signs, building design and other symbols used in conjunction with the name, and the name "Mega Bar", are the primary trademarks and service marks of the Franchisor. Such marks are registered in the United States. All of these registrations and the goodwill associated with the Franchisor's trademarks are of material importance to the Company's business and are licensed to the Company under the Franchise Agreement. 7 Competition The food service business in Florida is highly competitive and is often affected by changes in the taste and eating habits of the public, economic conditions affecting spending habits, local demographics, traffic patterns and local and national economic conditions. The principal bases of competition in the industry are the quality and price of the food products offered. Location, speed of service and attractiveness of the facilities are also important factors. The Company's restaurants are in competition with restaurants operated or franchised by national, regional and local restaurant companies offering a similar menu, many of which have greater resources than the Company. The Company also is in competition with specialty food outlets and other vendors of food. The amount of new competition near Company restaurants increased significantly in 1996, and is expected to continue to increase in 1997. The increased competition had a significant negative impact on sales in 1996. Management has developed a plan to attempt to reduce the negative impact on sales from new competition in 1997, but there can be no assurance that sales trends will improve. In addition, the Franchisor has the right to operate restaurants in several other west Florida and south Florida counties. Employees As of January 1, 1997, the Company employed approximately 1,400 persons, of whom approximately 50% are considered by management as part-time employees. No labor unions currently represent any of the Company's employees. The Company has not experienced any work stoppages attributable to labor disputes and considers employee relations to be good. Executive Officers The following persons were executive officers of the Company effective January 1, 1997: Lewis E. Christman, Jr., age 77, has been President and Chief Executive Officer of the Company since April 1994. Mr. Christman was hired as a consultant to oversee and direct the Company's purchasing program in January 1994 and has been a Director of the Company since May 1993. In addition, Mr. Christman serves as President of each of the Company's subsidiaries. Mr. Christman has been a partner in East Coast Marketing since 1990. From 1979 to 1989, Mr. Christman served as Chairman of the Board of Neptune Marketing, Inc., a food brokerage company. 8 Edward B. Alexander, age 38, has been Vice President of Finance since December 1996, and was Secretary and Treasurer of the Company from November 1990 to December 1996. In addition, Mr. Alexander was appointed to the Board of Directors in May 1996, and serves as Secretary of each of the Company's subsidiaries. Mr. Alexander served as controller of the Company from January 1989 to April 1990. From April 1985 until December 1988, Mr. Alexander was employed as controller for Mac Papers, Inc., a wholesale paper products distributor. Prior to April 1985, Mr. Alexander served as a senior accountant for the accounting firm of Touche Ross & Co. Michael J. Walters, age 34, has been Secretary of the Company since December 1996. Mr. Walters has served as Controller of the Company since September 1990. From May 1987 to September 1990, Mr. Walters was employed as an accountant for the accounting firm of Deloitte & Touche. Government Regulation The Company is subject to the Fair Labor Standards Act which governs such matters as minimum wage requirements, overtime and other working conditions. A large number of the Company's restaurant personnel are paid at or slightly above the federal minimum wage level and, accordingly, any change in such minimum wage will affect the Company's labor costs. The Company is also subject to the Equal Employment Opportunity Act and a variety of federal and state statutes and regulations. The Company's restaurants are constructed to meet local and state building requirements and are operated in accordance with state and local regulations relating to the preparation and service of food. The Company believes that it is in substantial compliance with all applicable federal, state and local statutues, regulations and ordinances and that compliance has had no material effect on the Company's capital expenditures, earnings or competitive position, and such compliance is not expected to have a material adverse effect upon the Company's operations. The Company, however, cannot predict the impact of possible future legislation or regulation on its operations. Sources and Availability of Raw Materials The Company procures its food and other products from a variety of suppliers, and follows a policy of obtaining its food and products from several major suppliers under competitive terms. A substantial portion of the beef used by the Company is obtained from one supplier, although the Company believes comparable beef meeting its specifications is available in adequate quantities from other suppliers. To ensure against interruption in the flow of food supplies due to unforeseen or catastrophic events, to take advantage of favorable purchasing opportunities, and to insure that meat received by the Company is properly aged, the Company maintains a two to six week supply of beef. 9 Working Capital Requirements Substantially all of the Company's revenues are derived from cash sales. Inventories are purchased on credit and are converted rapidly to cash. The Company does not maintain significant receivables and inventories. Therefore, with the exception of debt service, working capital requirements for continuing operations are not significant. In December 1996, the Company entered into a Loan Agreement with FFCA Mortgage Corporation ("FFCA"). The Loan Agreement governs eighteen Promissory Notes payable to FFCA. Each note is secured by a mortgage on a Company restaurant property with a total outstanding principal balance of $15,360,000 as of January 1, 1997. The Promissory Notes provide for a term of twenty years and an interest rate equal to the thirty-day LIBOR rate plus 3.75%, adjusted monthly. The Loan Agreement provides for various covenants, including the maintenance of prescribed debt service coverages. The Company used the proceeds of the Promissory Notes to retire its notes with Cerberus Partners, L.P. and its loan with the Daiwa Bank Limited and SouthTrust Bank of Alabama, N.A. The Company realized a discount on the retirement of the Cerberus notes, which was partially offset by unamortized debt issuance costs. The resulting gain of $348,500 net of income taxes, has been accounted for as an extraordinary item. In addition, the Company retired Warrants for 1,050,000 shares of the Company's common stock previously held by Cerberus. Cerberus continues to hold Warrants to purchase 700,000 shares of the Company's common stock at an exercise price of $.40 per share. Also in December 1996, the Company entered into a separate loan agreement with FFCA under which it may borrow up to an additional $4,640,000 in 1997. This additional financing would be evidenced by four additional Promissory Notes secured by mortgage on four Company restaurant properties. The terms and interest rate of this loan agreement are identical to the loan agreement described above. 10 Seasonality The Company's operations are subject to some seasonal fluctuations. Revenues per restaurant generally increase from January through April and decline from September through December. Research The Company relies primarily on the Franchisor to maintain ongoing research programs relating to the development of new products and evaluation of marketing activities. Although research and development activities are important to the Company, no expenditures for research and development have been incurred by the Company. Customers No material part of the Company's business is dependent upon a single customer or a few customers. Information as to Classes of Similar Products or Services The Company operates in only one industry segment. All significant revenues and pre-tax earnings relate to retail sales of food to the general public through restaurants owned and operated by the Company. The Company has no operations outside the continental United States. ITEM 2. PROPERTIES Location Date Opened -------- ----------- Jacksonville May 1982 Jacksonville May 1983 Jacksonville November 1983 Orange Park May 1984 Jacksonville May 1985 Jacksonville July 1985 Ocala September 1986 Neptune Beach November 1986 Lakeland February 1987 Lakeland March 1987 Winter Haven August 1987 Apopka September 1987 Gainesville December 1987 Hudson February 1988 New Port Richey May 1988 Tampa June 1988 Tallahassee August 1988 Daytona Beach September 1988 Tampa November 1988 Orlando January 1989 Orlando February 1989 Clearwater August 1989 Melbourne November 1989 Lake City March 1991 Brooksville January 1997 11 As of March 5, 1997, the Company operated 25 Ryan's restaurants. The specific rate at which the Company is able to open new restaurants will be determined by its ability to locate suitable sites on satisfactory terms, raise the necessary capital, secure appropriate governmental permits and approvals and recruit and train management personnel. As of January 1, 1997, the Company owned the real property on which 22 of its restaurants were located. Eighteen of these properties were subject to mortgages securing the FFCA Notes. The Company leases the real property on which three of its restaurants are located. Those restaurants are located in Jacksonville, Florida, Clearwater, Florida and Brooksville, Florida. The executive offices of the Company, consisting of approximately 3,500 square feet, are leased at a monthly rental rate of $2,680, plus sales tax, from Barbara Smith, the wife of the late William Stanley Smith, Jr., a former officer and director of the Company. The Company paid $34,254 in rental payments to Mr. and Mrs. Smith in fiscal year 1996. The Company currently leases 2,800 square feet of mixed warehouse and office space from Eddie L. Ervin, Jr., a former officer and director of the Company. The aggregate monthly payment due is approximately $1,495, plus sales tax. The Company paid $20,065 in rental payments to Mr. Ervin in fiscal year 1996. ITEM 3. LEGAL PROCEEDINGS The Company is subject to various pending legal proceedings arising in the normal course of business. In the opinion of management, based on the advice of legal counsel, the ultimate disposition of these claims and litigation will not have material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 12 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information contained under the caption "Common Stock Data" in the Company's 1996 Annual Report to Shareholders is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information contained under the caption "Five-Year Financial Summary" in the Company's 1996 Annual Report to Shareholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1996 Annual Report to Shareholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of the Company and the Report of Independent Certified Public Accountants as contained in the Company's 1996 Annual Report to Shareholders are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding directors contained under the caption "Election of Directors" in the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 1, 1997, is incorporated herein by reference. Securities and Exchange Commission Rules under Section 16(a) of the Securities Exchange Act of 1934 require the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the National Association of Securities Dealers and to furnish the Company with copies of all Section 16(a) forms they file. 13 Based solely on its review of the copies of such forms received by it or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during the 1996 fiscal year, all filing requirements applicable to its officers, directors, and greater-than-10% beneficial owners were complied with on a timely basis, except as set forth under the caption "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Company's Proxy Statement for the 1996 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 1, 1997, which is incorporated herein by reference. The information regarding executive officers is set forth in Item 1 of this report under the caption "Executive Officers." ITEM 11. EXECUTIVE COMPENSATION The information contained under the caption "Executive Pay" in the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 1, 1997, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Company's Proxy Statement for the 1996 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 1, 1997, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the caption "Election of Directors - Certain Relationships and Related Transactions" in the Company's Proxy Statement for the 1996 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission prior to May 1, 1997, is incorporated herein by reference. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)1. The financial statements listed below are filed with this report on Form 10-K or are incorporated herein by reference from the Company's 1996 Annual Report to Shareholders. With the exception of the pages listed below, the 1996 Annual Report to Shareholders is not deemed "filed" as a part of this report on Form 10-K. Page Reference --------- Form 1996 10-K Annual Report ---- ------------- Consent of Independent Certified Public Accountants F-1 Independent Auditors' Report 24 Consolidated Statements of Operations 10 Consolidated Balance Sheets 11 Consolidated Statements of Share- holders' Equity 12 Consolidated Statements of Cash Flows 13 Notes to Consolidated Financial Statements 14 (a)2. No financial statement schedules have been included since the required information is not applicable or the information required is included in the financial statements or the notes thereto. (a)3. The following exhibits are filed as part of this report on Form 10-K, and this list comprises the Exhibit Index. No. Exhibit --- ---------------------------------------------------------------------- 3.01 Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.01 to the Company's Registration Statement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.) 3.02 Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.02 to the Company's Registration Statement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.) 15 3.03 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.03 to the Company's Registration Statement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.) 3.04 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.04 to the Company's Registration Statement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.) 3.05 Amended and Restated Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 4 to the Company's Form 8-A, filed with the Commission on March 19, 1997, is incorporated herein by reference.) 3.06 Shareholder Rights Agreement, dated March 19, 1997, by and between Family Steak Houses of Florida, Inc. and Chase Mellon Shareholder Services, LLC (Exhibit 1 to the Company's Form 8- A, filed with the Commission on March 19, 1997, is incorporated herein by reference.) 3.07 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3 to the Company's Form 8-A, is incorporated herein by reference.) 4.01 Specimen Stock Certificate for shares of the Company's Common Stock (Exhibit 4.01 to the Company's Registration Statement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.) 10.01 Amended Franchise Agreement between Family Steak Houses of Florida, Inc. and Ryan's Family Steak Houses, Inc., dated September 16, 1987. (Exhibit 10.01 to the Company's Registration Statement on Form S-1, filed with the Commission on October 2, 1987, Registration No. 33-17620, is incorporated herein by reference.) 10.02 Lease regarding the restaurant located at 3549 Blanding Boulevard, Jacksonville, Florida (Exhibit 10.03 to the Company's Registration Statement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.) 10.03 Lease, dated May 18, 1989, between the Company and Stoneybrook Associates, Ltd., for a restaurant located in Clearwater, Florida. (Exhibit 10.25 to the Company's Registration Statement on Form S-1, filed with the Commission on September 29, 1989, Registration No. 33-17620, is incorporated herein by reference.) 16 10.04 Amended and Restated Warrant to Purchase Shares of Common Stock, void after October 1, 2003, which represents warrants issued to The Phoenix Insurance Company, The Travelers Indemnity Company, and The Travelers Insurance Company, (subsequently transferred to Cerberus Partners, L.P.) (Exhibit 10.07 to the Company's Annual Report on Form 10-K, filed with the Commission on March 28, 1995, is incorporated herein by reference). 10.05 Warrant to Purchase Shares of Common Stock, void after October 1, 2003, which represents warrants issued to The Phoenix Insurance Company, The Travelers Indemnity Company, and The Travelers Insurance Company. (subsequently transferred to Cerberus Partners, L.P.) (Exhibit 10.08 to the Company's Annual Report on Form 10-K, filed with the Commission on March 28, 1995, is incorporated herein by reference). 10.06 Lease dated March 1, 1994 between the Company and Eddie L. Ervin, Jr., for corporate office and warehouse space in Neptune Beach, Florida. (Exhibit 10.15 to the Company's Annual Report on Form 10-K, filed with the Commission on March 28, 1995, is incorporated herein by reference). 10.07 Lease dated March 1, 1994 between the Company and William Stanley Smith, Jr., for executive offices in Neptune Beach, Florida. (Exhibit 10.16 to the Company's Annual Report on Form 10-K, filed with the Commission on March 28, 1995, is incorporated herein by reference). 10.08 Amendment of Franchise Agreement between Ryan's Family Steak Houses, Inc. and the Company dated July 11, 1994. (Exhibit 10.17 to the Company's Annual Report on Form 10-K, filed with the Commission on March 28, 1995, is incorporated herein by reference). 10.09 Agreement between the Company and Kraft Foodservice, Inc., as the Company's primary food product distribution. (Exhibit 10.06 to the Company's Annual Report on Form 10-Q, filed with the Commission on August 9, 1995, is incorporated herein by reference). 10.10 Employment agreement between the Company and Edward B. Alexander, dated as of October 1, 1996. (Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q, filed with the Commission on November 18, 1996, is incorporated herein by reference). 17 10.11 Lease Agreement between the Company and CNL American Properties Fund, Inc., dated as of September 18, 1996. (Exhibit 10.02 to the Company's Quarterly Report on Form 10-Q, filed with the Commission on November 18, 1996 is hereby incorporated by reference). 10.12 Construction Addendum between the Company and CNL American Properties Fund, Inc., dated as of September 18, 1996. (Exhibit 10.03 to the Company's Quarterly Report on Form 10-Q, filed with the Commission on November 18, 1996 is hereby incorporated by reference). 10.13 Rent Addendum to Lease Agreement between the Company and CNL American Properties Fund, Inc., dated as of September 18, 1996. (Exhibit 10.04 to the Company's Quarterly Report on Form 10-Q, filed with the Commission on November 18, 1996 is hereby incorporated by reference). 10.14 Amendment of Franchise Agreement between the Company and Ryan's Family Steak Houses, Inc. dated October 3, 1996. 10.15 Employment agreement between the Company and Lewis E. Christman, Jr., dated as of December 30, 1996. (Exhibit 2 to the Company's Schedule 14D-9, filed with the Commission on March 19, 1997 is hereby incorporated by reference.) 10.16 Consulting agreement between the Company and Robert J. Martin, dated as of January 8, 1997. (Exhibit 4 to the Company's Schedule 14D-9, filed with the Commission on March 19, 1997 is hereby incorporated by reference.) 10.17 $15.36m Loan Agreement, between the Company and FFCA Mortgage Corporation, dated December 18, 1996. 10.18 $4.64m Loan Agreement, between the Company and FFCA Mortgage Corporation, dated December 18, 1996. 10.19 Form of Promissory Note between the Company and FFCA Mortgage Corporation, dated December 18, 1996. 18 10.20 Form of Mortgage between the Company and FFCA Mortgage Corporation, dated December 18, 1996 (Exhibit 5 to the Company's Schedule 14D-9, filed with the Commission on March 19, 1997 is hereby incorporated by reference.) 10.21 Form of Environmental Agreement between the Company and FFCA Mortgage Corporation, dated March 18, 1996. 13.01 1996 Annual Report to Shareholders. 21.01 Family Rustic Investments, Inc., a Florida corporation, Steak House Construction Corporation, a Florida corporation, Wrangler's Roadhouse, Inc., a Florida corporation and Steak House Realty Corporation, a Florida corporation, are wholly owned subsidiaries of the Company. 23.0l Consent of Independent Certified Public Accountants - Deloitte & Touche LLP. 27.00 Financial data schedules (electronic filing only). (b) None. (c) See (a)3. above for a list of all exhibits filed herewith and the Exhibit Index. (d) None. 19 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT We consent to the incorporation by reference in this Annual Report of Family Steak Houses of Florida, Inc. on Form 10-K of our report dated February 27, 1997, appearing in the 1996 Annual Report to Shareholders of Family Steak Houses of Florida, Inc. We additionally consent to the incorporation by reference in Registration Statement No. 33-11684 pertaining to the 1986 Employee Incentive Stock Option Plan of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated February 27, 1997 appearing in and incorporated by reference in this Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January 1, 1997. We further consent to the incorporation by reference in Registration Statement No. 33-12556 pertaining to the 1986 Stock Option Plan for Non-Employee Directors of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated February 27, 1997 appearing in and incorporated by reference in this Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January 1, 1997. We further consent to the incorporation by reference in Registration Statement No. 33-62101 pertaining to the 1996 Long Term Incentive Plan of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated February 27, 1997 appearing in and incorporated by reference in this Annual Report on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended January 1, 1997. Deloitte & Touche LLP Jacksonville, Florida March 25, 1997 F-1 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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. Date: March 26, 1997 BY: /s/ Lewis E. Christman, Jr. --------------------------- Lewis E. Christman, Jr., President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the date indicated. Signature Title Date - --------- ----- ---- /s/ Lewis E. Christman, Jr. President (Principal March 26, 1997 Lewis E. Christman, Jr. Executive Officer and Director) /s/ Edward B. Alexander Vice President and Director March 26, 1997 Edward B. Alexander (Principal Financial and Accounting Officer) /s/ Robert J. Martin Director March 26, 1997 Robert J. Martin /s/ Michael J. Walters Controller March 26, 1997 Michael J. Walters /s/ Joseph M. Glickstein, Jr. Director March 26, 1997 Joseph M. Glickstein, Jr. /s/ Richard M. Gray Director March 26, 1997 Richard M. Gray