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THE WAIT IS OVER.
[PHOTO]
RYAN'S FAMILY STEAK HOUSES, INC.
2000 ANNUAL REPORT
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Company Profile For 22 years, America has looked to Ryan's Family Steak Houses,
Inc. to provide delicious food at reasonable prices.
Ryan's "Steaks, Buffet and Bakery" concept has shown the industry that quality
is its own reward. The proof is in the numbers: as of March 7, 2001,
the Ryan's family included 303 company-owned and 23 franchised restaurants,
operating in 22 states. Company-owned restaurants showed sales of $705 million
in 2000, compared with $665 million in 1999. Add in franchised restaurants and
system-wide sales jump to $745 million in 2000,
up from $704 million in 1999. Ryan's common stock trades on the Nasdaq Stock
Market(R) under the symbol RYAN. Each of the roughly 19,000 team
members employed by Ryan's contributed to the success and achievements the
company has enjoyed over the last year.
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RYAN'S FAMILY STEAK HOUSES, INC.
A Letter to Our Shareholders
[GRAPH]
RESTAURANT SALES
IN MILLIONS OF DOLLARS
[GRAPH]
NET EARNINGS
IN MILLIONS OF DOLLARS
DISPLAYING OUR BEST
AT EVERY OPPORTUNITY
From the very start of the new millennium, Ryan's demonstrated once
again that innovative thinking and new product development are very rewarding --
for our shareholders, our customers and our team members. Anticipation became
reality in 2000 as we developed and implemented exciting new ideas and
strengthened existing successful programs. Our new Display Cooking stores proved
to be well worth the wait as they have exceeded expectations in both sales and
customer response. Our Operating Partner Program continued to build higher sales
and instill a greater sense of dedication in experienced managers. We opened 13
new restaurants, and our share repurchase program enjoyed continued success,
with the promise of even greater value for our shareholders in the future.
Sales for the year increased to $704.6 million, up from $664.7 million
in 1999. Net earnings were $42.0 million, compared with $41.6 million in 1999.
Going into 2000, we were backed by a four-year trend of increases in earnings
per share of 15% or more -- now a five-year trend thanks to earnings per share
that reached $1.27, up from $1.10 in 1999. The fourth quarter of 2000 was
affected by a series of severe winter storms, with the resulting loss of sales
adversely impacting labor and benefit costs. In accordance with our standard
accounting policies, a 53rd week was included in the Company's fiscal year 2000
and added an estimated $.05 to earnings per share in the fourth quarter.
Overall, we are pleased that both our sales and earnings increased, even under
difficult circumstances.
While these numbers are impressive, we will not stop to rest on our
laurels. We are dedicated to building upon this foundation of success and moving
ahead full-force with a mix of innovative new programs and tried-and-true
methods aimed at placing Ryan's at the forefront of our industry.
DISPLAYING QUALITY,
ACHIEVING RESULTS
Perhaps the most exciting of our programs is our Display Cooking
concept. Eleven new Ryan's restaurants have opened as Display Cooking stores
since May 2000. Five existing units have been converted to accommodate this
unique dining concept, and more renovations are in the works for the coming
year. In total, 15 additional Display Cooking restaurants are slated to open by
April 2001. The success of this new concept is indisputable, with each store
opening to record-breaking sales and retaining very strong figures to date.
Display Cooking stores provide an incredible value to the customer. At
an increase of just $1 over Ryan's standard Mega Bar(R) dinner pricing, guests
can choose from all-you-can-eat grilled-to-order steaks and a variety of carved
meats, as well as Ryan's traditional buffet and bakery offerings. With Display
Cooking's open grill and an "Express Entry" designed for maximum efficiency, our
customers no longer have to wait to place their food orders, restaurant
operations are streamlined and productivity is higher than ever before. For
restaurants not yet designed as Display Cooking units, our all-you-can-eat Steak
Night promotion continues to positively impact sales.
DISPLAYING OUR COMMITMENT
TO TEAM MEMBERS
In 2000, Ryan's aggressively continued to seek the best management
teams in the industry and to develop innovative new ways to keep them on board.
With an outstanding benefits package already in place, we formulated an addition
to our plan to attract and retain the most talented, experienced management
professionals. By developing a new work week with 25 stores currently closed on
Monday, a day which traditionally yields a smaller margin of profit than any
other day of the week, we have created a more team-member-friendly working
environment. We believe that this day off can effectively decrease team member
turnover by resolving important quality-of-life issues.
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RYAN'S FAMILY STEAK HOUSES, INC.
[GRAPH]
EARNINGS PER SHARE
DILUTED/IN CENTS
[GRAPH]
RESTAURANTS
OPEN AT YEAR-END
DISPLAYING SALES GROWTH
In 2000, 13 new Ryan's restaurants were opened, bringing our total to
301 Company-owned and operated restaurants and 23 franchised stores. New
restaurants opened in 2000 averaged over $3.0 million per unit in annualized
sales, the highest level ever. Also, our efforts to relocate some stores to more
vital, profitable locations within the same markets have continued to pay off.
An additional four restaurants were relocated in 2000 to areas that are thriving
as shopping and dining centers. Relocations continue to produce approximately
30% higher sales per unit than their previous sites. With numbers like these, it
only makes sense that we continue relocating restaurants, with an estimated four
moving in 2001.
A DISPLAY OF ABILITY
Individual managers continue to gain more control over the earnings
potential of their stores -- a decision that has paid off at every level. Our
Operating Partner Program continues to build strong results by giving managers
more incentive to increase sales and decrease operating costs. Nominated for
acceptance only after obtaining significant experience and successful results,
managers who become Operating Partners invest $10,000 in Ryan's stock and agree
to remain at their store for a period of five years. With the first group of
Operating Partners approaching the five-year mark, we have seen an excellent
rise in achievement among the participants. An added bonus of the program has
been its ability to generate excitement and enthusiasm among managers at every
level by offering a goal obtainable through hard work and results.
Our advertising efforts have shifted toward our store managers as well.
By allocating a local marketing budget for each store, we actively involve
individual managers in seeking the best ways to promote their stores within
their communities. From sponsoring sports teams to offering coupons to schools
and local businesses, Ryan's restaurants have found new ways to create and
maintain community awareness above and beyond more traditional forms of
advertising. Again, these innovative initiatives help build each store's
commitment to success as dedicated members of the communities we serve.
DISPLAY OF CONFIDENCE
IN THE YEARS TO COME
Ryan's Share Repurchase Program continues to be very successful. In
2000 alone, we repurchased approximately $43.8 million of stock, compared with
the purchase of $41.3 million in 1999. Our average cost for year 2000 purchases
was $9.16 per share. Of the 30 million shares currently authorized for
repurchase, 23.7 million shares have been retired during the past five years.
Looking ahead we have every confidence that, over time, this program will lead
to added shareholder value.
In closing, let me say that, after 21 years with Ryan's, I am more
excited about the future of our company and the strength of our concept than
ever before. With so many new and promising innovations being implemented and
the continued hard work of our team members, we are poised to set higher
standards within our industry while enjoying unparalleled success in the years
to come.
Thank you for your continued support.
Sincerely,
/s/ Charles D. Way
Charles D. Way
Chairman, President and Chief Executive Officer
March 7, 2001
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RYAN'S FAMILY STEAK HOUSES, INC.
OUR TASTES ARE EXPANDING
[MAP]
ALABAMA - 19
ARKANSAS - 10
FLORIDA - 25
(2 Company-Owned;
23 Franchised)
GEORGIA - 38
ILLINOIS - 8
INDIANA - 15
IOWA - 4
KANSAS - 3
KENTUCKY - 12
LOUISIANA - 21
MICHIGAN - 9
MISSISSIPPI - 11
MISSOURI - 16
NORTH CAROLINA - 21
OHIO - 16
OKLAHOMA - 4
PENNSYLVANIA - 2
SOUTH CAROLINA - 30
TENNESSEE - 24
TEXAS - 25
VIRGINIA - 9
WEST VIRGINIA - 2
TOTAL - 324
301 COMPANY-OWNED
23 FRANCHISED
as of January 3, 2001
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RYAN'S FAMILY STEAK HOUSES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Shown for the years indicated are (i) items in the consolidated statements
of earnings as a percentage of restaurant sales, (ii) the number of restaurants
open at the end of each year, and (iii) the percentage change between years.
PERCENTAGE OF RESTAURANT SALES PERCENTAGE CHANGE
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2000 1999 1998 2000/1999 1999/1998
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Restaurant sales 100.0% 100.0 100.0 6.0% 4.3
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Operating expenses
Food and beverage 37.4 38.2 39.1 3.8 2.1
Payroll and benefits 30.1 29.6 29.3 7.8 5.5
Depreciation 3.9 4.0 4.0 4.6 4.5
Other operating expenses 12.8 12.5 12.5 8.7 3.7
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Total operating expenses 84.2 84.3 84.9 6.0 3.6
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General and administrative expenses 4.9 5.0 4.6 5.0 11.9
Interest expense 2.0 1.2 1.1 74.1 17.4
Revenues from franchised restaurants (0.2) (0.2) (0.2) 0.3 2.1
Other income, net (0.2) (0.3) (0.3) 29.3 (3.7)
- ---------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 9.3 10.0 9.9 (0.8) 5.4
Income taxes 3.3 3.7 3.6 (3.6) 9.1
- ---------------------------------------------------------------------------------------------------------------------------
Net earnings 6.0% 6.3 6.3 0.9% 3.2
===========================================================================================================================
RESTAURANTS OPEN AT END OF YEAR PERCENTAGE CHANGE
- ---------------------------------------------------------------------------------------------------------------------------
Company-owned 301 289 280 4.2% 3.2
Franchised 23 23 26 -- (11.5)
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Total 324 312 306 3.8% 2.0
===========================================================================================================================
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RYAN'S FAMILY STEAK HOUSES, INC.
RESULTS OF OPERATIONS
2000 COMPARED TO 1999
Total restaurant sales increased by $39.9 million, or 6.0%, to $704.6 million in
2000 from $664.7 million in 1999. Incremental sales from restaurants opened in
2000 and 1999 amounted to approximately $32.1 million, or 80% of the sales
increase. Also, in accordance with the Company's accounting policies, the 2000
reporting period consisted of 53 weeks compared to a 52-week period in 1999.
Sales during the additional week in 2000 amounted to approximately $12.4
million. These sales gains were partially offset by a 0.2% decrease in
same-store sales. In computing same-store sales, the Company averages weekly
sales for those units operating for at least 18 months.
During 2000, the Company opened 13 new and relocated four Ryan's restaurants.
Management defines a relocation as a restaurant opened within 12 months after
the closing of another restaurant in the same marketing area. A relocation
generally results in an opening and a closing in the same year. However, one
restaurant that was closed during 2000 for relocation has reopened in early
2001. Accordingly, at the end of 2000 and 1999, the Company owned and operated
301 and 289 restaurants, respectively.
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Total operating expenses increased 6.0% to $593.6 million in 2000 from $560.2
million in 1999. Such costs, as a percentage of sales, were 84.2% for 2000 and
84.3% for 1999. Thus, the Company's operating margins at the restaurant level
were 15.8% and 15.7% of sales in 2000 and 1999, respectively.
Food and beverage costs decreased to 37.4% of sales in 2000 from 38.2% in 1999
resulting principally from menu price increases and lower seafood, poultry,
vegetable and soybean oil prices, partially offset by higher beef and pork
costs. Payroll and benefits increased to 30.1% of sales in 2000 from 29.6% of
sales in 1999 due principally to general wage pressures affecting both hourly
and store management wages. All other operating costs, including depreciation,
increased to 16.7% of sales in 2000 compared to 16.5% of sales in 1999 due to
higher natural gas, credit card processing and store closing costs.
General and administrative expenses amounted to 4.9% of sales in 2000 and 5.0%
in 1999. Higher professional fees and legal costs were offset by lower
performance-based bonuses and media advertising costs. Media advertising
amounted to 0.2% of sales in 2000 and 0.3% in 1999.
Interest expense amounted to $13.9 million in 2000 (2.0% of sales) compared to
$8.0 million in 1999 (1.2% of sales). The increase resulted from higher debt
levels incurred during 2000 in connection with the Company's common stock
repurchase program (see "Liquidity and Capital Resources"). Interest expense was
also impacted by an increase in the Company's effective average interest rate to
8.2% in 2000 from 5.8% in 1999. In January 2000, the Company closed on two loan
transactions that refinanced all existing debt and increased its credit
availability (see "Liquidity and Capital Resources").
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The Company's effective average interest rate increased in 2000 due to the
negotiated rates in the new loan packages as well as from an overall higher
interest rate environment.
Based upon the above changes to revenues and expenses, earnings before income
taxes decreased to $65.8 million in 2000 from $66.4 million in 1999.
The effective income tax rate for 2000 decreased to 36.2% compared to 37.3% in
1999 due to lower state income taxes.
Net earnings increased to $42.0 million in 2000 (6.0% of sales) from $41.6
million in 1999 (6.3% of sales). Diluted weighted-average shares decreased by
12.6% to 33,095,000 in 2000 compared to 37,874,000 in 1999 due to the Company's
stock repurchase program (see "Liquidity and Capital Resources"). Accordingly,
diluted earnings per share ("DEPS") increased 15% to $1.27 in 2000 from $1.10 in
1999.
As noted in the beginning of this section, the 2000 reporting period consists
of 53 weeks. In order to facilitate comparisons with 1999, management estimates
that the additional, or 53rd, week added approximately $3.3 million to store
operating profits, $1.7 million to net earnings and five cents to DEPS.
1999 COMPARED TO 1998
Total restaurant sales increased by $27.7 million, or 4.3%, to $664.7 million in
1999 from $637.0 million in 1998. Approximately 90% of the sales increase
resulted from the incremental sales from restaurants opened in 1999 and 1998.
A 1.3% increase in same-store sales also contributed to the higher sales levels.
Management attributes the higher same-store sales to the implementation
of carving bars during the first and second quarters of 1998, continuing impact
from the Operating Partner program and other promotional activities. The carving
bars offer at least three hand-carved meats, such as roast beef, ham and turkey,
nightly and all day Sunday to those customers who purchase the buffet as either
an entree or a side item.
During 1999, the Company opened 12 new and relocated six Ryan's restaurants.
Three underperforming restaurants were also closed during the year. Accordingly,
at the end of 1999 and 1998, the Company owned and operated 289 and 280
restaurants, respectively.
Total operating expenses increased 3.6% to $560.2 million in 1999 from $540.6
million in 1998. Such costs, as a percentage of sales, were 84.3% during 1999
and 84.9% during 1998. Thus, the Company's operating margins at the restaurant
level were 15.7% of sales in 1999 and 15.1% in 1998.
The decrease in 1999's operating expenses as a percentage of sales resulted
principally from lower food and beverage costs with a partial offsetting effect
from higher payroll and benefits. Food and beverage costs decreased to 38.2%
of sales in 1999 from 39.1% in 1998 due to menu price increases as well as from
lower dairy, produce, pork and soybean oil prices. Payroll and benefits
increased to 29.6% of sales in 1999 from 29.3% in 1998 due principally to higher
hourly labor costs. All other operating costs, including depreciation, stayed
level
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at 16.5% of sales in both 1999 and 1998. Other operating expenses in 1998
included the write-off of unamortized preopening costs, amounting to $790,000
(0.1% of sales), taken in accordance with the American Institute of Certified
Public Accountants' Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities". In accordance with SOP 98-5, all 1999 pre-opening costs
were charged to expense as incurred, and all prior years' amounts in the
accompanying consolidated financial statements were similarly reclassified.
General and administrative expenses increased to 5.0% of sales ($33.2 million)
in 1999 from 4.6% of sales ($29.7 million) in 1998, resulting principally from
higher manager training charges, information technology compensation and travel
costs. Media advertising amounted to 0.3% of sales during both 1999 and 1998.
Interest expense amounted to $8.0 million in 1999 (1.2% of sales) compared to
$6.8 million in 1998 (1.1% of sales). The increase resulted from higher debt
levels incurred during 1999 in connection with the Company's common stock
repurchase program (see "Liquidity and Capital Resources"). Interest expense was
also impacted by a decrease in the Company's effective average interest rate to
5.8% in 1999 from 6.0% in 1998.
Based upon the above changes to revenues and expenses, earnings before income
taxes increased to $66.4 million in 1999 from $63.0 million in 1998.
The effective income tax rate for 1999 increased slightly to 37.3% compared to
36.0% in 1998 due to higher state income taxes.
Net earnings increased to $41.6 million in 1999 (6.3% of sales) from $40.3
million in 1998 (6.3% of sales). Diluted weighted-average shares decreased by
11.7% to 37,874,000 in 1999 compared to 42,881,000 in 1998 due to the Company's
stock repurchase program (see "Liquidity and Capital Resources"). Accordingly,
DEPS increased 17% to $1.10 in 1999 from 94 cents in 1998.
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 January 3, 2001, the Company's working capital amounted to a $31.6 million
deficit compared to a $30.9 million deficit at December 29, 1999. Total capital
expenditures increased to $58.4 million in 2000 from $53.2 million in 1999 due
principally to an increase in land acquisitions. The Company does not anticipate
any adverse effect from the current working capital deficit due to significant
cash flow provided by operations, which amounted to $79.4 million in 2000 and
$74.8 million in 1999.
During 2001, the Company plans to build and open 14 to 16 new restaurants,
including four relocations. Current plans call for all new restaurants to open
with Ryan's Display Cooking
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[PHOTO]
format. This format was introduced in 2000 and involves a glass-enclosed grill
and cooking area that extends into the dining room. A variety of meats are
grilled daily and available to customers as part of the buffet price.
Customers go to the grill and can get hot, cooked-to-order steak, chicken or
other meat placed directly from the grill onto their plate. Subject to the
results from current test stores, management also intends to remodel
approximately 30 restaurants with the Display Cooking format. Total 2001 capital
expenditures are estimated at $63 million. The Company is currently
concentrating its efforts on Company-owned Ryan's restaurants and is not
actively pursuing any additional franchised locations, either domestically or
internationally.
The Company began a stock repurchase program in March 1996 and is currently
authorized to repurchase up to 30 million shares of the Company's common stock
through December 2002. Repurchases may 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. Through January 3, 2001, approximately 23.6 million shares, or 44% of
total shares available at the beginning of the repurchase program, had been
purchased at an aggregate cost of $221.9 million. From January 4, 2001 through
March 1, 2001, another 114,600 shares were purchased at an aggregate cost of
$1.0 million. Management intends to actively proceed with the repurchase program
through 2002, subject to the continued availability of capital, the limitations
imposed by the Company's current credit agreements, applicable securities
regulations and the other factors described in
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"Forward-Looking Information". The Company is prohibited from repurchasing stock
after 2002 per the provisions of the credit agreement related to a revolving
credit facility (see next paragraph).
Management estimates that cash generated from operations will exceed the
Company's 2001 capital expenditure requirements and plans to use this excess
cash for stock repurchases. Additional debt may be incurred in order to meet the
Company's share repurchase objectives. Based on current target debt levels, a
maximum repurchase scenario would require approximately $40 million of
additional borrowings during 2001. At January 3, 2001, the Company's outstanding
debt consisted of $75 million of 9.02% senior notes and a $200 million revolving
credit facility of which $117 million was borrowed at that date. After
allowances for letters of credit and other items, there was approximately $74
million in funds available under the revolving credit facility. The Company's
ability to draw on these funds may be limited by restrictions in the agreements
governing both the senior notes and the revolving credit facility.
Management believes that its current capital structure is sufficient to meet its
2001 requirements. The Company has entered into interest rate hedging
transactions in the past, and although no such agreements are currently
outstanding, management intends to continue monitoring the interest rate
environment and may enter into such transactions in the future if deemed
advantageous.
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[PHOTO]
IMPACT OF INFLATION
The Company's operating costs that may be affected by inflation consist
principally of food, payroll and utility costs. A significant number of the
Company's restaurant team members are paid at the Federal minimum wage, and
accordingly, legislated changes to the minimum wage affect the Company's payroll
costs. Although no minimum wage increases have been signed into law, potential
legislation proposing to increase the minimum wage by $1.00 to $6.15 per hour
has recently been discussed in the U.S. Congress. The Company is typically able
to increase menu prices to cover most of the payroll rate increases.
The Company considers its current price structure to be very competitive. This
factor, among others, is considered by the Company when passing cost increases
on to its customers. Sales prices were increased approximately 4.2% in 2000 and
2.4% in 1999.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement standardizes the accounting
for derivative instruments, including derivative instruments embedded in other
contracts. Under SFAS No. 133, entities are required to carry all derivative
instruments as either assets or liabilities on the balance sheet at fair value.
The accounting for changes in the fair value (i.e., gains and losses) of a
derivative instrument depends on its intended use. The provisions of SFAS No.
133 are effective at the beginning of 2001. The Company was not a party to any
interest rate swap or other derivative instrument agreements at January 3, 2001.
Accordingly, this statement does not currently impact the Company's financial
condition or results of operation. Any future impact will depend upon the amount
and terms of any derivative instrument agreement entered into by the Company.
The Company does not enter into derivative instrument agreements for trading or
speculative purposes.
FORWARD-LOOKING INFORMATION
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions that the statements in this
annual report and elsewhere that are forward-looking involve risks and
uncertainties that may impact the Company's actual results of operations. All
statements other than statements of historical fact that address activities,
events or developments that the Company expects or anticipates will or may occur
in the future, including such things as deadlines for completing projects,
expected financial results and other such matters, are forward-looking
statements. The words "estimates", "plans", "anticipates", "expects", "intends",
"believes" and similar expressions are intended to identify forward-looking
statements. All forward-looking information reflects the Company's best judgment
based on current information.
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[PHOTO]
However, there can be no assurance that other factors will not affect the
accuracy of such information. While it is not possible to identify all factors,
the following could cause actual results to differ materially from expectations:
general economic conditions; competition; developments affecting the public's
perception of buffet-style restaurants; real estate availability; food and labor
supply costs; food and labor availability; weather fluctuations; interest rate
fluctuations; stock market conditions; and other risks and factors described
from time to time in the Company's reports filed with the Securities and
Exchange Commission, including the Company's annual report on Form 10-K for the
fiscal year ended January 3, 2001. The ability of the Company to open new
restaurants depends upon a number of factors, including its ability to find
suitable locations and negotiate acceptable land acquisition and construction
contracts, its ability to attract and retain sufficient numbers of restaurant
managers and team members, and the availability of reasonably priced capital.
The extent of the Company's stock repurchase program during 2001 and future
years depends upon the financial performance of the Company's restaurants, the
investment required to open new restaurants, share price, the availability of
reasonably priced capital, the financial covenants contained in the agreements
governing both the senior notes and the revolving credit facility, and the
maximum debt and share repurchase levels authorized by the Company's Board of
Directors.
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RYAN'S FAMILY STEAK HOUSES, INC.
FIVE-YEAR FINANCIAL SUMMARY
-----------------------------------------------------------------------------
(In thousands, except earnings per share) 2000(a) 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS DATA
Restaurant sales $ 704,624 664,681 637,003 599,169 565,465
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Food and beverage 263,799 254,052 248,903 237,066 225,888
Payroll and benefits 212,108 196,847 186,565 171,390 160,529
Depreciation 27,668 26,456 25,317 23,821 21,900
Asset valuation charge -- -- -- -- 13,300
Other operating expenses 90,051 82,823 79,838 75,384 73,357
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 593,626 560,178 540,623 507,661 494,974
- ---------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 34,855 33,191 29,670 27,301 24,763
Interest expense 13,905 7,986 6,802 5,867 3,354
Revenues from franchised restaurants (1,171) (1,167) (1,143) (1,273) (1,483)
Other income, net (2,413) (1,866) (1,938) (1,489) (1,381)
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 65,822 66,359 62,989 61,102 45,238
Income taxes 23,839 24,742 22,669 21,892 16,678
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 41,983 41,617 40,320 39,210 28,560
=================================================================================================================================
Earnings per share
Basic $ 1.28 1.12 .95 .83 .55
Diluted 1.27 1.10 .94 .82 .55
=================================================================================================================================
Weighted-average shares
Basic 32,797 37,253 42,227 47,335 51,477
Diluted 33,095 37,874 42,881 47,761 51,810
=================================================================================================================================
SELECTED OTHER CONSOLIDATED DATA
Working capital deficit $ (31,632) (30,866) (111,666) (52,763) (64,634)
Current ratio 0.3/1 0.3/1 0.1/1 0.2/1 0.2/1
Cash provided by operations $ 79,420 74,780 73,036 64,624 68,875
Property and equipment additions 58,369 53,198 43,682 47,456 89,769
Total assets 556,061 525,827 509,393 495,554 477,626
Long-term debt 192,000 172,375 81,374 93,000 93,000
Total current and long-term debt 192,000 172,375 165,400 121,300 128,300
Purchase of common stock 43,758 41,315 80,549 18,151 38,151
Shareholders' equity 282,429 283,393 280,372 317,061 293,976
Company-owned restaurants open at end of year 301 289 280 270 261
=================================================================================================================================
(a) Indicates a 53-week period
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RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended
---------------------------------------------------------
January 3, December 29, December 30,
(In thousands, except earnings per share) 2001 1999 1998
- --------------------------------------------------------------------------------------------------------
Restaurant sales $ 704,624 664,681 637,003
- --------------------------------------------------------------------------------------------------------
Operating expenses
Food and beverage 263,799 254,052 248,903
Payroll and benefits 212,108 196,847 186,565
Depreciation 27,668 26,456 25,317
Other operating expenses 90,051 82,823 79,838
- --------------------------------------------------------------------------------------------------------
Total operating expenses 593,626 560,178 540,623
- --------------------------------------------------------------------------------------------------------
General and administrative expenses 34,855 33,191 29,670
Interest expense 13,905 7,986 6,802
Revenues from franchised restaurants (1,171) (1,167) (1,143)
Other income, net (2,413) (1,866) (1,938)
- --------------------------------------------------------------------------------------------------------
Earnings before income taxes 65,822 66,359 62,989
Income taxes 23,839 24,742 22,669
- --------------------------------------------------------------------------------------------------------
Net earnings $ 41,983 41,617 40,320
========================================================================================================
Earnings per share
Basic $ 1.28 1.12 .95
Diluted 1.27 1.10 .94
========================================================================================================
Weighted-average shares
Basic 32,797 37,253 42,227
Diluted 33,095 37,874 42,881
========================================================================================================
See accompanying notes to consolidated financial statements.
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RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED BALANCE SHEETS
January 3, December 29,
(In thousands) 2001 1999
- ---------------------------------------------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 2,098 642
Receivables 3,631 3,027
Inventories 5,085 4,663
Deferred income taxes 4,806 4,342
Other current assets 820 500
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 16,440 13,174
- ---------------------------------------------------------------------------------------------------------------------
Property and equipment
Land and improvements 126,362 119,950
Buildings 358,415 333,337
Equipment 193,013 177,857
Construction in progress 37,054 35,074
- ---------------------------------------------------------------------------------------------------------------------
714,844 666,218
Less accumulated depreciation 182,379 157,439
- ---------------------------------------------------------------------------------------------------------------------
Net property and equipment 532,465 508,779
- ---------------------------------------------------------------------------------------------------------------------
Other assets 7,156 3,874
- ---------------------------------------------------------------------------------------------------------------------
Total assets $556,061 525,827
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 11,003 11,891
Income taxes payable 3,263 2,997
Accrued liabilities 33,806 29,152
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 48,072 44,040
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt 192,000 172,375
Deferred income taxes 30,628 24,735
Other long-term liabilities 2,932 1,284
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 273,632 242,434
- ---------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock of $1.00 par value; authorized 100,000,000 shares;
issued 31,192,000 shares in 2000 and 35,855,000 shares in 1999 31,192 35,855
Additional paid-in capital 89 703
Retained earnings 251,148 246,835
- ---------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 282,429 283,393
- ---------------------------------------------------------------------------------------------------------------------
Commitments
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $556,061 525,827
=====================================================================================================================
See accompanying notes to consolidated financial statements.
15
18
RYAN'S FAMILY STEAK HOUSES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
--------------------------------------------------
January 3, December 29, December 30,
(In thousands) 2001 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net earnings $ 41,983 41,617 40,320
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 29,403 28,299 28,947
Gain on sale of property and equipment (132) (197) (51)
Decrease (increase) in:
Receivables (604) (352) 81
Inventories (422) (336) (33)
Other current assets (320) 46 (1,721)
Other assets (1,597) (704) (253)
Increase (decrease) in:
Accounts payable (888) 5,080 (2,519)
Income taxes payable 266 (762) 3,159
Accrued liabilities 4,654 (291) 3,809
Deferred income taxes 5,429 2,084 1,297
Other long-term liabilities 1,648 296 --
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 79,420 74,780 73,036
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment 5,292 9,179 4,768
Capital expenditures (58,369) (53,198) (43,682)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (53,077) (44,019) (38,914)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from (repayment of) notes payable (91,000) 18,600 44,100
Repayment of long-term debt (81,375) (11,625) --
Proceeds from issuance of senior notes 75,000 -- --
Net proceeds from revolving credit facility 117,000 -- --
Debt issuance costs (1,565) -- --
Proceeds from issuance of common stock 811 2,719 3,540
Purchase of common stock (43,758) (41,315) (80,549)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (24,887) (31,621) (32,909)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,456 (860) 1,213
Cash and cash equivalents--beginning of period 642 1,502 289
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents--end of period $ 2,098 642 1,502
===================================================================================================================
Supplemental disclosure
Cash paid during the year for:
Interest, net of amount capitalized $ 11,125 8,647 6,229
Income taxes 18,681 22,851 17,583
===================================================================================================================
See accompanying notes to consolidated financial statements.
16
19
RYAN'S FAMILY STEAK HOUSES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ryan's Family Steak Houses, Inc. operates a chain of 301 Company-owned and 23
franchised (as of January 3, 2001) restaurants located principally in the
southern and midwestern United States. The Company was organized in 1977,
opened its first restaurant in 1978 and completed its initial public offering
in 1982.
CONSOLIDATION 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.
FISCAL YEAR The Company's fiscal year ends on the Wednesday nearest December 31,
resulting in years of either 52 or 53 weeks. The year ended January 3, 2001
comprises 53 weeks, and the years ended December 29, 1999 and December 30, 1998
each comprise 52 weeks.
CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and short-term
investments with initial maturities of three months or less that are stated at
cost plus accrued interest which approximates market value.
INVENTORIES Inventories consist of menu ingredients and restaurant supplies and
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.
OTHER CURRENT ASSETS Other current assets consist of prepaid expenses. Prior to
December 30, 1998, other current assets also included unamortized pre-opening
costs, which represented certain costs, including team member training, that
were incurred before a restaurant was opened. These costs were capitalized when
incurred and then expensed over the first 52 weeks of the restaurant's
operations. At December 30, 1998, the Company adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities". SOP 98-5
requires pre-opening costs to be expensed as incurred. Accordingly, all
unamortized pre-opening costs at December 30, 1998, amounting to $790,000, were
charged to 1998 other operating expenses in the accompanying consolidated
financial statements.
PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation
is calculated principally on the straight-line method over the following
estimated useful lives: buildings and land improvements -- 25 to 39 years and
equipment -- 3 to 10 years. Buildings and land improvements on leased property
are amortized straight-line over the shorter of the expected lease term or
estimated useful life of the asset.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of", the Company reviews long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If an asset is considered to be impaired, an impairment loss is
recognized equal to the amount by which the carrying amount of the asset
exceeds its fair value. Assets to be disposed of are reported at the lower of
carrying amount or fair value less costs to sell.
OTHER ASSETS Other assets consist principally of the cash surrender
values of officer life insurance policies, unamortized debt issuance costs, a
long-term prepayment of land rent and other long-term receivables.
DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial
instruments to reduce its exposure to interest rate fluctuations. The Company
does not enter into financial instrument agreements for trading or speculative
purposes. Amounts currently due to or from interest rate swap counterparties
are recorded in interest expense in the period in which they accrue. The
premiums paid to purchase other interest rate agreements, such as caps or
collars, are included in other assets and are amortized to interest expense
over the shorter of the term of the interest rate agreement or the life of the
underlying debt instrument. There were no financial instrument agreements
outstanding as of January 3, 2001.
FRANCHISE REVENUES The Company grants franchises to operators who in turn pay
initial fees and royalties for each restaurant. The initial franchise fee is
recorded as income when each restaurant commences operations. Franchise
royalties, which are based on a percentage of monthly sales, are recognized as
income on the accrual basis. In the event that a franchisee experiences payment
difficulties or, in management's opinion, may be susceptible to such
difficulties, franchise royalties may be recognized as income on the cash
basis.
INCOME TAXES Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
STOCK OPTIONS As allowed by SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company accounts for its stock option plans in accordance
with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations. As
such, compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeds the exercise price. The additional
pro forma disclosure required by SFAS No. 123 can be found in Note 9.
EARNINGS PER SHARE Basic earnings per share ("EPS") excludes dilution and is
computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities of other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings of
the entity. Common equivalent shares are represented by shares under option.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS Certain prior year amounts in the accompanying consolidated
financial statements have been reclassified to conform to the 2000
presentation.
17
20
RYAN'S FAMILY STEAK HOUSES, INC.
NOTE 2. INCOME TAXES
Income tax expense for the years ended January 3, 2001, December 29, 1999 and
December 30, 1998 consists of:
------------------------------------------------------------
(In thousands) 2000 1999 1998
- --------------------------------------------------------------------------------------------------
Current
U.S. Federal $16,901 20,568 20,267
State and local 1,508 2,090 1,105
- --------------------------------------------------------------------------------------------------
Total current 18,409 22,658 21,372
- --------------------------------------------------------------------------------------------------
Deferred
U.S. Federal 5,004 1,420 1,342
State and local 426 664 (45)
- --------------------------------------------------------------------------------------------------
Total deferred 5,430 2,084 1,297
- --------------------------------------------------------------------------------------------------
Total income taxes $23,839 24,742 22,669
==================================================================================================
Income taxes differ from the amounts computed by applying the U.S. Federal
statutory corporate rate of 35 percent to earnings before income taxes as
follows:
---------------------------------------------------
(In thousands) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
Tax at Federal statutory rate $23,038 23,226 22,046
Increase (decrease) in taxes due to:
State income taxes, net of Federal income tax benefit 1,257 1,790 689
Other (456) (274) (66)
- -----------------------------------------------------------------------------------------------------------------------------
Total income taxes $23,839 24,742 22,669
=============================================================================================================================
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at January 3, 2001 and
December 29, 1999 are presented in the following table:
-------------------------------------
(In thousands) 2000 1999
- -----------------------------------------------------------------------------------------------------------
Deferred tax assets
Self-insurance reserves $ 4,161 3,563
Deferred compensation 1,259 290
Other 643 777
- -----------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 6,063 4,630
- -----------------------------------------------------------------------------------------------------------
Less valuation allowance -- --
- -----------------------------------------------------------------------------------------------------------
Net deferred tax assets 6,063 4,630
- -----------------------------------------------------------------------------------------------------------
Deferred tax liabilities
Building and equipment (31,765) (24,902)
Other (120) (121)
- -----------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities (31,885) (25,023)
- -----------------------------------------------------------------------------------------------------------
Net deferred taxes $(25,822) (20,393)
===========================================================================================================
The Company did not establish a valuation allowance for deferred tax assets as
of January 3, 2001 or December 29, 1999. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment and, accordingly, believes it is more likely than not
that the results of future operations will generate sufficient taxable income
to realize the benefits of these deductible differences at January 3, 2001.
18
21
RYAN'S FAMILY STEAK HOUSES, INC.
NOTE 3. LONG-TERM DEBT
Long-term debt at January 3, 2001 and December 29, 1999 consists of the
following:
(In thousands)
-----------------------
2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Revolving credit facility with banks due January 2005, with weighted average
interest of 7.61% at January 3, 2001; secured by the common stock of the Company's
wholly-owned subsidiaries $117,000 --
Senior notes payable bearing interest at 9.02%; payable in annual installments of $18,750,000
commencing January 2005, final installment due January 2008; secured by the common stock
of the Company's wholly-owned subsidiaries 75,000 --
Term loan agreement with banks; repaid in January 2000 -- 81,375
Notes payable to banks; repaid in January 2000 -- 91,000
- -------------------------------------------------------------------------------------------------------------------------------
192,000 172,375
Less current installments -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total long-term debt $192,000 172,375
===============================================================================================================================
On January 28, 2000, the Company closed on two loan transactions that
refinanced all outstanding debt balances and added to the Company's credit
availability. The first transaction involved a $200 million revolving credit
facility due in 2005, bearing interest at various floating interest rates plus
a variable spread that ranges from 0.875% to 1.625%. Interest is paid at least
quarterly and is generally based on the London Interbank Offered Rate. Unused
fees ranging from 0.225% to 0.375% of the average unused portion of the
facility are also paid quarterly. The variable spread and the unused fee rate
amounted to 1.375% and 0.325%, respectively, at January 3, 2001. Both
percentages are based on the ratio of funded debt to EBITDA and are reviewed
quarterly. The second transaction involved the private placement of $75 million
of senior notes due in 2008 with principal payments commencing in 2005.
Interest accrues at a fixed rate of 9.02% and is paid semiannually. Both loans
are secured by the stock of the Company's wholly-owned subsidiaries.
The revolving credit facility also includes a $20 million subfacility for
letters of credit of which approximately $8.2 million was outstanding at
January 3, 2001. The Company uses letters of credit principally for
self-insurance purposes.
The loan agreements contain minimum net worth requirements and maximum leverage
ratios as well as restrictions on future stock repurchase, dividends, capital
expenditures, investments and sales of assets. As of January 3, 2001, the
Company exceeded the most restrictive minimum net worth requirement in the
agreements by $43.8 million.
The aggregate amount of installments due on long-term debt for each of the five
years subsequent to January 3, 2001 are as follows: $0 in 2001; $0 in 2002; $0
in 2003; $0 in 2004; and $135.8 million in 2005.
The fair value of all long-term debt, except for the 9.02% senior notes,
approximates its carrying amount as of January 3, 2001 and December 29, 1999
due to the variable interest rate provisions of the various debt instruments.
Based on the borrowing rates available to the Company for notes with similar
terms and average maturities, the fair value of the 9.02% senior notes is
approximately $76,400,000 at January 3, 2001.
NOTE 4. INTEREST COST
The Company capitalizes interest cost as a component of the cost of new
restaurant construction. A summary of interest cost incurred follows:
-------------------------------------------
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Interest cost capitalized $ 2,972 2,055 2,093
Interest cost charged to income 13,905 7,986 6,802
- -------------------------------------------------------------------------------------------------------------------
Total interest cost incurred $ 16,877 10,041 8,895
===================================================================================================================
NOTE 5. LEASES
The Company has several noncancelable operating land leases for restaurant
sites with initial terms that expire over the next 1 to 11 years. These leases
contain renewal options for periods ranging from 3 to 30 years and require the
Company to pay all executory costs such as property taxes, utilities and
insurance. Rental payments are based on contractual amounts as set forth in the
lease agreements and do not include any contingent rentals. The Company also
leases dishwashing equipment at certain restaurants under agreements with
five-year terms that are cancelable by the Company after the first 12 months.
Total rental expense for operating leases amounted to $1,605,000 in 2000,
$1,277,000 in 1999 and $1,062,000 in 1998.
19
22
RYAN'S FAMILY STEAK HOUSES, INC.
Future lease payments under the noncancelable operating leases as of January 3,
2001, are:
(In thousands)
- ------------------------------------------------------------------------------
Year End
2001 $ 840
2002 819
2003 714
2004 653
2005 644
Later years, through 2011 1,967
- ------------------------------------------------------------------------------
Future lease payments $5,637
==============================================================================
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
-------------------------
(In thousands) 2000 1999
- -------------------------------------------------------------------------------------------------
Self-insurance accruals $ 11,050 9,010
Accrued taxes (other than income) 7,793 7,442
Accrued compensation 6,641 6,725
Accrued interest 3,166 708
Outstanding gift certificates 2,052 2,132
Deferred product allowances 1,037 1,045
Other accrued expenses 2,067 2,090
- -------------------------------------------------------------------------------------------------
Total accrued liabilities $ 33,806 29,152
=================================================================================================
NOTE 7. SHAREHOLDERS' EQUITY
The components of shareholders' equity are as follows:
--------------------------------------------
$1 Par Value Additional Retained
(In thousands) Common Stock Paid-In Capital Earnings
- -------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 46,978 457 269,626
- -------------------------------------------------------------------------------------------------------------------
Net earnings -- -- 40,320
Net issuance of common stock under Stock Option Plans 462 2,418 --
Tax benefit from exercise of nonqualified stock options -- 660 --
Purchases of common stock (8,282) (2,261) (70,006)
- -------------------------------------------------------------------------------------------------------------------
Balances at December 30, 1998 39,158 1,274 239,940
- -------------------------------------------------------------------------------------------------------------------
Net earnings -- -- 41,617
Issuance of common stock under Stock Option Plans 308 1,842 --
Tax benefit from exercise of nonqualified stock options -- 569 --
Purchases of common stock (3,611) (2,982) (34,722)
- -------------------------------------------------------------------------------------------------------------------
Balances at December 29, 1999 35,855 703 246,835
- -------------------------------------------------------------------------------------------------------------------
Net earnings -- -- 41,983
Issuance of common stock under Stock Option Plans 112 610 --
Tax benefit from exercise of nonqualified stock options -- 89 --
Purchases of common stock (4,775) (1,313) (37,670)
- -------------------------------------------------------------------------------------------------------------------
Balances at January 3, 2001 $ 31,192 89 251,148
===================================================================================================================
On January 26, 1995, the 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.
20
23
RYAN'S FAMILY STEAK HOUSES, INC.
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.
The Company's Board of Directors has authorized the repurchase of up to 30
million shares of the Company's common stock through December 2002. At January
3, 2001, approximately 23.6 million shares had been purchased at an aggregate
cost of $221.9 million since the beginning of the program in March 1996. Future
repurchase transactions 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.
NOTE 8. TEAM MEMBER RETIREMENT PLANS
The Company maintains a defined contribution retirement plan, which covers all
team members who have at least one year of service and have attained 21 years
of age. Participating team members may contribute from 1% to 15% of their
compensation to the plan with the first 6% of compensation matched by the
Company at a 40% rate. The Company's match for participants with 20 or more
years of service increases to 100%. All plan assets are invested in a
nationally recognized family of mutual funds. Retirement plan expense,
including administrative costs, amounted to $1,320,000 in 2000, $1,103,000 in
1999 and $1,280,000 in 1998.
In 1999 the Company implemented a nonqualified deferred compensation plan that
provides benefits payable to officers and certain key executives or their
designated beneficiaries at specified future dates or upon the termination of
employment or death. Participants in the plan have the opportunity to (i) defer
up to 100% of their compensation in excess of the Social Security wage base and
(ii) receive a matching contribution comparable to the Company's defined
contribution retirement plan without the restrictions and limitations in the
Internal Revenue Code. Participant deferrals and the Company's match are
deposited each month in Company-owned insurance contracts that give each
participant the opportunity to select various investment options. The return on
these underlying investments determines the amount of earnings credit. The
Company has the right to amend or terminate the plan. The amount of expense
related to the deferred compensation plan amounted to $381,000 in 2000 and
$93,000 in 1999.
NOTE 9. STOCK OPTION PLAN
In 1998, the Company's shareholders approved a stock option plan ("Plan")
pursuant to which the Company's Board of Directors may grant options to
officers and team members. The Plan authorized grants of options to purchase up
to 3,000,000 shares of authorized but unissued common stock. Under the terms of
the Plan, which expires in 2007, a committee of non-employee directors has the
authority to determine the eligibility, tax treatment, term, vesting schedule
and exercise price. However, the Plan states that the exercise price of the
option cannot be less than the fair market value, based on the closing market
price, of the Company's common stock on the day of the grant. Historically, the
Company has always granted options at fair market value on the day of grant,
used various vesting schedules, and set expiration dates generally ten years
from the date of grant. At January 3, 2001, there were also outstanding options
granted under predecessor stock option plans.
At January 3, 2001, there were 1,213,000 additional shares available for grant
under the Plan and a predecessor plan. The per share weighted-average fair
values of stock options issued during 2000, 1999 and 1998 were $2.84, $3.80 and
$3.38, respectively. The fair value of each option grant was estimated using the
Black-Scholes option-pricing model based on the following weighted-average
assumptions:
----------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Risk-free interest rate 5.8% 6.2 4.9
Expected life (years) 5.1 5.1 5.1
Expected volatility .29 .28 .31
Expected dividend yield 0% 0 0
===================================================================================================================
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated on the following table:
21
24
RYAN'S FAMILY STEAK HOUSES, INC.
--------------------------------------
(In thousands, except earnings per share) 2000 1999 1998
- --------------------------------------------------------------------------------------
Net earnings
As reported $ 41,983 41,617 40,320
Pro forma 40,805 40,341 39,119
Earnings per share
Basic:
As reported $ 1.28 1.12 .95
Pro forma 1.24 1.08 .93
Diluted:
As reported 1.27 1.10 .94
Pro forma 1.23 1.07 .91
======================================================================================
Pro forma net earnings and earnings per share reflect only options granted after
December 28, 1994. Therefore, the full impact of calculating compensation cost
for stock options under SFAS No. 123 is not reflected in the pro forma amounts
presented above because compensation cost is reflected over the options' vesting
period and compensation cost for options granted prior to December 29, 1994 is
not considered.
A summary of the status of the Company's current and predecessor stock option
plans as of January 3, 2001, December 29, 1999 and December 30, 1998 and changes
during the years ended on those dates is presented below:
2000 1999 1998
----------------------------------------------------------------------------------------------
Weighted-Average Weighted-Average Weighted-Average
(Shares in thousands) Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 3,438 $ 8.88 3,198 $ 8.37 2,351 $ 7.41
Granted 792 7.66 783 10.24 1,503 9.34
Exercised (119) 6.16 (307) 6.96 (465) 6.99
Forfeited (402) 9.13 (236) 8.99 (191) 7.77
------ ------ ------
Outstanding at end of year 3,709 8.67 3,438 8.88 3,198 8.37
====================================================================================================================================
Exercisable at year-end 2,488 2,089 1,858
====================================================================================================================================
The following table summarizes information about stock options outstanding at
January 3, 2001:
(Shares in thousands) Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted-Average
--------------------------------------
Range of Number Outstanding Remaining Number Exercisable Weighted-Average
Exercise Prices at 1/3/01 Contractual Life Exercise Price at 1/3/01 Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
$6 to $8 2,084 7.0 years $ 7.38 1,372 $ 7.28
$8 to $9 208 3.1 8.24 208 8.24
$10 to $11 838 7.1 10.18 508 10.21
$11 to $14 579 7.8 11.30 400 11.35
====================================================================================================================================
$6 to $14 3,709 7.0 $ 8.67 2,488 $ 8.61
====================================================================================================================================
NOTE 10. Earnings Per Share
Basic and diluted earnings per share ("EPS") are calculated as follows:
----------------------------------------------------
(In thousands, except earnings per share) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Numerator--net earnings a $ 41,983 41,617 40,320
- -----------------------------------------------------------------------------------------------------------------------------------
Denominator
Weighted-average common shares b 32,797 37,253 42,227
Stock options 298 621 654
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted weighted-average common shares c 33,095 37,874 42,881
- -----------------------------------------------------------------------------------------------------------------------------------
Basic EPS a/b $ 1.28 1.12 .95
Diluted EPS a/c 1.27 1.10 .94
===================================================================================================================================
22
25
RYAN'S FAMILY STEAK HOUSES, INC.
NOTE 11. Quarterly Consolidated Financial Data (Unaudited)
Quarterly consolidated financial results for 2000 and 1999 are summarized as
follows:
Quarter
---------------------------------------------------------
(In thousands, except earnings per share) First Second Third Fourth Total Year
- --------------------------------------------------------------------------------------------------------------------------
2000 (a)
Restaurant sales $ 168,272 180,960 177,797 177,595 704,624
Restaurant operating profit (b) 26,198 30,772 27,116 26,912 110,998
Net earnings 10,098 11,937 9,877 10,071 41,983
Earnings per share:
Basic $ 0.29 0.37 0.31 0.32 1.28
Diluted 0.29 0.36 0.31 0.32 1.27
==========================================================================================================================
1999 (a)
Restaurant sales $ 159,579 174,248 170,478 160,376 664,681
Restaurant operating profit (b) 24,395 29,178 26,469 24,461 104,503
Net earnings 10,221 11,257 10,872 9,267 41,617
Earnings per share:
Basic $ .26 .30 .30 .26 1.12
Diluted .26 .29 .29 .26 1.10
==========================================================================================================================
(a) Fiscal 2000 consisted of 53 weeks, while fiscal 1999 was a 52-week period.
(b) Restaurant sales less operating expenses. Operating expenses are comprised
of costs and expenses associated directly with or allocated to products sold at
the Company's restaurants.
NOTE 12. Disclosures About the Fair Value of Financial Instruments
The Company's significant financial instruments are cash and cash equivalents,
receivables, notes payable, accounts payable, accrued liabilities and long-term
debt. Except for long-term debt, the fair values of these financial instruments
approximate their carrying values due to their short maturities. The fair value
of the long-term debt is discussed in note 3.
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Ryan's Family Steak Houses, Inc.:
We have audited the accompanying consolidated balance sheets of Ryan's Family
Steak Houses, Inc. and subsidiaries as of January 3, 2001 and December 29, 1999,
and the related consolidated statements of earnings and cash flows for each of
the years in the three-year period ended January 3, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ryan's Family Steak
Houses, Inc. and subsidiaries at January 3, 2001 and December 29, 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended January 3, 2001, in conformity with accounting
principles generally accepted in the United States of America.
Greenville, South Carolina KPMG LLP
January 31, 2001
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RYAN'S FAMILY STEAK HOUSES, INC.
DIRECTORS
CHARLES D. WAY JAMES D. COCKMAN BARRY L. EDWARDS BRIAN S. MACKENZIE
Chairman, President & Investor Executive Vice President Chief Operating Officer
Chief Executive Officer and Chief Financial Officer Samling Strategic Corporation
F.Y.I., Incorporated SDN BHD
Chief Executive Officer
G. EDWIN MCCRANIE HAROLD K. ROBERTS, JR. JAMES M. SHOEMAKER, JR. Paper Space, Inc.
Executive Vice President President & Member
Chief Executive Officer Wyche, Burgess, Freeman &
Statewide Title, Inc. Parham, P.A.
OFFICERS
[PHOTO] [PHOTO] [PHOTO] [PHOTO]
CHARLES D. WAY G. EDWIN MCCRANIE FRED T. GRANT, JR. ALAN E. SHAW
Chairman, President and Executive Vice President Sr. Vice President-Finance Sr. Vice President-
Chief Executive Officer and Chief Financial Officer Operations
[PHOTO] [PHOTO] [PHOTO] [PHOTO]
JANET J. GLEITZ MORGAN A. GRAHAM JAMES R. HART ILENE T. TURBOW
Corporate Secretary Vice President- Vice President- Vice President-Marketing
Construction Human Resources
[PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO]
WILLIAM R. DALTON RICHARD B. ERWIN PHILIP J. FRANKLIN MICHAEL RICK KIRK WILLIAM J. O'BRIEN
Regional Vice President Regional Vice President Regional Vice President Regional Vice President Regional Vice President
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OUR MISSION STATEMENT
To be an innovative, profitable, growth company, committed to customer
satisfaction by always providing high quality food at affordable prices
with friendly service in clean and pleasant surroundings.
WE STRIVE -- To put people first -- customers and team members. -- To attract
and maintain a strong team of individuals recognized as standouts in each
area of focus. -- To promote safety, responsibility and a high level of ethics
in our workplace. -- To be environmentally aware and work to preserve our
natural resources. -- To utilize materials and services that provide the best
cost/value ratio without sacrificing quality. -- To enhance long-term
shareholder wealth.
CORPORATE INFORMATION
EXECUTIVE OFFICES
Ryan's Family Steak Houses, Inc.
405 Lancaster Avenue (29650)
Post Office Box 100
Greer, South Carolina 29652
(864) 879-1000
GENERAL COUNSEL
Wyche, Burgess, Freeman & Parham, P.A.
Greenville, South Carolina
TRANSFER AGENT
EQUISERVE
P.O. Box 8218
Boston, Massachusetts 02266-8218
(800) 633-4236
INDEPENDENT AUDITORS
KPMG LLP
Greenville, South Carolina
FORM 10-K
A copy of the Company's annual report
on Form 10-K for fiscal 2000, as filed with
the Securities and Exchange Commission,
may be obtained without charge by writing
to the Corporate Secretary at the executive
offices of the Company.
ANNUAL MEETING
The annual meeting will be held at the
Greenville/Spartanburg Airport Marriott,
Greenville, South Carolina, on Wednesday,
May 2, 2001 at 11:00 a.m. All shareholders are
cordially invited to attend.
COMMON STOCK DATA
The Company's common stock trades on
The Nasdaq Stock Market(R) under the symbol
RYAN. The Company has never paid
cash dividends on its common stock and
does not expect to pay such dividends in
the foreseeable future.
QUARTERLY FINANCIAL
INFORMATION
AND OTHER NEWS RELEASES
In order to provide Ryan's shareholders and
prospective investors with timely and accurate
information, quarterly financial information
and other news releases can be obtained on
the internet at www.ryansinc.com.
MARKET PRICE OF COMMON STOCK
2000
-----------------------------------
Quarter High Low
-----------------------------------
First $ 9.94 8.19
Second 10.38 8.19
Third 10.06 7.28
Fourth 10.00 7.38
1999
-----------------------------------
Quarter High Low
-----------------------------------
First $13.81 11.38
Second 12.56 10.25
Third 11.81 9.25
Fourth 10.47 8.19
The closing price quotation of the Company's common stock on March 7, 2001
was $10.50 per share.
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[RYAN'S LOGO]
405 LANCASTER AVENUE (29650)
Post Office Box 100
Greer, South Carolina 29652
(864) 879-1000
2