Ryan's Announces Second Quarter 2005 Results GREER, S.C., July 20
/PRNewswire-FirstCall/ -- - Ryan's Restaurant Group, Inc.
(NASDAQ:RYAN) reported second quarter 2005 results today. Second
quarter restaurant sales were $215,510,000 in 2005 compared to
$216,546,000 for the comparable quarter in 2004. Net earnings for
the quarter amounted to $6,260,000 in 2005 and $14,170,000 in 2004.
Earnings per share (diluted) amounted to 15 cents in 2005 compared
to 33 cents in 2004. For the six months ended June 29, 2005,
restaurant sales amounted to $425,149,000 compared to $428,203,000
for the comparable period in 2004. Net earnings were $18,073,000 in
2005 and $29,530,000 in 2004. Earnings per share (diluted) were 42
cents in 2005 compared to 68 cents in 2004. Commenting on the
quarter, Charles D. Way, CEO of the Company, said, "Our financial
results for the second quarter were affected by weak sales and
higher costs. During the quarter, we also took a $5 million charge
to reflect the estimated minimum settlement of ongoing wage/hour
litigation. In spite of promising sales results during the second
quarter's holiday periods, we were disappointed with our same-store
sales, which decreased by 4% for the quarter. While we believe that
our customers' discretionary spending continues to be adversely
impacted by high energy costs, we also understand that we must
continually examine our strategies in order to attract and retain
customers. Accordingly, our operations leadership team has held
numerous meetings to re- focus on our restaurant operations
standards, particularly those concerning staffing and exterior
appearance. We continue to implement "theme nights" at our
restaurants and are testing a buffet breakfast on Saturdays and
Sundays at selected locations. We believe that breakfast represents
an excellent way to increase sales that produce good margins
without a significant investment, and we are excited about its
potential impact on sales and profits." Restaurant-level margins
for the second quarter were impacted by higher hourly labor charges
as well as by higher energy and general liability insurance costs.
We continue to believe that higher staffing levels, which we
implemented at the beginning of 2005, contribute to better customer
service, which is obviously important for customer retention. Just
like our customers, Ryan's is also impacted by higher electricity
and natural gas costs. General liability insurance costs, which are
based largely on the estimated future costs of claims, increased
due to higher cost projections and by a $750,000 favorable
adjustment in the second quarter of 2004. Restaurant-level costs
were also affected by an $838,000 impairment charge related to an
under- performing restaurant, which we have decided to close and
sell. This charge is included in other restaurant expenses in the
accompanying consolidated financial statements. Food costs
increased slightly from the second quarter of 2004. Beef costs
decreased slightly during the quarter, and we are very encouraged
by the recent U.S. Circuit Court decision that may allow Canadian
beef imports in the future. This development could potentially
increase beef supplies and therefore lower our operating costs."
General and administrative expenses increased principally due to a
$5 million charge to reflect the estimated minimum settlement for a
wage/hour lawsuit that was filed in November 2002. Additional
information about this case can be found in our reports filed with
the Securities and Exchange Commission. At this time, we are
negotiating a potential settlement with the plantiffs' attorney in
order to avoid lengthy and costly court proceedings and will soon
enter into a mediation process in hopes of reaching a mutually
acceptable settlement. However, there can be no assurance that we
will reach an agreement as a result of the mediation process, and
it is not possible to predict this case's ultimate outcome."
Regarding our balance sheet, as a result of lower net earnings in
this and prior quarters, we have not met the fixed charge coverage
ratio covenants in our various debt agreements. At June 29, 2005,
our fixed charge coverage ratio, which is defined consistently in
all of our debt agreements, was 2.05 times compared to the minimum
requirement of 2.25 times. We have been in contact with our lenders
throughout the quarter regarding this possibility and have been
informed that they intend to grant us a waiver for this covenant
violation. Based on our projections, it appears likely that we will
not be able to meet the 2.25 times requirement for the next several
quarters. We met all other debt covenants at June 29, 2005 and do
not anticipate having any trouble complying with the other
covenants in our debt agreements in the foreseeable future. Our
lenders have indicated that they will work with us to amend the
minimum fixed charge coverage ratio requirement and possibly other
requirements and limitations for our third quarter and forward.
Until the credit agreements are amended, our debt will be
classified as current on our balance sheet." So far in 2005 we have
opened nine restaurants, including two relocations, and plan to
open another six restaurants, including two potential relocations,
during the remainder of the year for a total of 15 new restaurants
during 2005. All six restaurants planned for the remainder of 2005
are currently under construction. For 2006, we plan to build nine
new restaurants, including three potential relocations. We believe
that this reduction in new store expenditures will not only
conserve cash flow, but will also allow us to spend more time to
focus on building same-store sales at our existing restaurants." At
June 29, 2005, the Company owned and operated 346 restaurants. As
disclosed in the Company's reports filed with the Securities and
Exchange Commission, the franchise relationship with the Company's
remaining franchisee terminated on June 30, 2005. Accordingly,
there will be no franchised restaurants operating after the second
quarter of 2005. In connection with this press release, members of
Ryan's executive management will be holding a conference call with
investment analysts today at 4:00 p.m. EDT. The public can listen
to a live webcast of this call by logging on to the web at
http://www.ryans.com/ and following the appropriate links. Certain
matters discussed in this press release are forward-looking
statements within the meaning of the federal securities laws and
are subject to uncertainties and risks, including, but not limited
to, general economic conditions, including consumer confidence
levels; competition; developments affecting the public's perception
of buffet-style restaurants; real estate availability; food and
labor supply costs; food and labor availability; an adverse food
safety event; weather fluctuations; interest rate fluctuations;
stock market conditions; political environment (including acts of
terrorism and wars); and other such risks described from time to
time in the Company's reports filed with the Securities and
Exchange Commission. RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED
STATEMENTS OF EARNINGS (Unaudited) Quarter Ended June 29, June 30,
2005 2004 Restaurant sales $215,510,000 216,546,000 Cost of sales:
Food and beverage 76,351,000 76,273,000 Payroll and benefits
69,737,000 69,175,000 Depreciation 8,684,000 8,188,000 Other
restaurant expenses 33,944,000 29,355,000 Total cost of sales
188,716,000 182,991,000 General and administrative expenses
15,761,000 10,255,000 Interest expense 2,405,000 2,749,000
Royalties from franchised restaurants (135,000) (323,000) Other
income, net (562,000) (531,000) Earnings before income taxes
9,325,000 21,405,000 Income taxes 3,065,000 7,235,000 Net earnings
$6,260,000 14,170,000 Net earnings per common share: Basic $.15 .34
Diluted .15 .33 Weighted-average shares: Basic 41,952,000
41,639,000 Diluted 42,770,000 43,258,000 RYAN'S RESTAURANT GROUP,
INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Six Months
Ended June 29, June 30, 2005 2004 Restaurant sales $425,149,000
428,203,000 Cost of sales: Food and beverage 148,964,000
148,773,000 Payroll and benefits 137,728,000 136,045,000
Depreciation 17,137,000 16,745,000 Other restaurant expenses
65,464,000 58,167,000 Total cost of sales 369,293,000 359,730,000
General and administrative expenses 26,231,000 20,577,000 Interest
expense 4,765,000 5,434,000 Royalties from franchised restaurants
(309,000) (686,000) Other income, net (1,762,000) (1,459,000)
Earnings before income taxes 26,931,000 44,607,000 Income taxes
8,858,000 15,077,000 Net earnings $18,073,000 29,530,000 Net
earnings per common share: Basic $.43 .71 Diluted .42 .68
Weighted-average shares: Basic 41,945,000 41,860,000 Diluted
42,818,000 43,584,000 RYAN'S RESTAURANT GROUP, INC. CONSOLIDATED
BALANCE SHEETS June 29, December 29, 2005 2004 ASSETS (Unaudited)
Current assets: Cash and cash equivalents $16,508,000 7,354,000
Receivables 4,633,000 4,639,000 Inventories 6,558,000 5,611,000
Prepaid expenses 1,403,000 1,016,000 Deferred income taxes
5,580,000 5,110,000 Total current assets 34,682,000 23,730,000
Property and equipment: Land and improvements 169,193,000
162,082,000 Buildings 501,437,000 480,781,000 Equipment 281,236,000
271,431,000 Construction in progress 27,303,000 31,531,000
979,169,000 945,825,000 Less accumulated depreciation 311,082,000
295,852,000 Net property and equipment 668,087,000 649,973,000
Other assets 10,535,000 10,643,000 Total assets $713,304,000
684,346,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable 8,932,000 5,963,000 Current portion
of long-term debt 180,250,000 18,750,000 Income taxes payable
2,403,000 1,842,000 Accrued liabilities 52,460,000 42,569,000 Total
current liabilities 244,045,000 69,124,000 Long-term debt -
164,250,000 Deferred income taxes 47,661,000 47,674,000 Other
long-term liabilities 8,105,000 7,692,000 Total liabilities
299,811,000 288,740,000 Shareholders' equity: Common stock of $1.00
par value; authorized 100,000,000 shares; issued 41,911,000 shares
in 2005 and 41,890,000 shares in 2004 41,911,000 41,890,000
Additional paid-in capital 3,671,000 3,878,000 Retained earnings
367,911,000 349,838,000 Total shareholders' equity 413,493,000
395,606,000 Commitments and contingencies Total liabilities and
shareholders' equity $713,304,000 684,346,000 RYAN'S RESTAURANT
GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six
Months Ended June 29, June 30, 2005 2004 Cash flows from operating
activities: Net earnings $18,073,000 29,530,000 Adjustments to
reconcile net earnings to net cash provided by operating
activities: Depreciation and amortization 18,413,000 17,635,000
Loss (gain) on sale of property and equipment (78,000) 502,000 Tax
benefit from exercise of stock options 292,000 2,679,000 Deferred
income taxes (483,000) 107,000 Decrease (increase) in: Receivables
6,000 (80,000) Inventories (947,000) (913,000) Prepaid expenses
(387,000) 71,000 Other assets 12,000 (410,000) Increase (decrease)
in: Accounts payable 2,969,000 3,048,000 Income taxes payable
561,000 (446,000) Accrued liabilities 9,891,000 6,215,000 Other
long-term liabilities 413,000 434,000 Net cash provided by
operating activities 48,735,000 58,372,000 Cash flows from
investing activities: Proceeds from sale of property and equipment
4,099,000 3,302,000 Capital expenditures (40,452,000) (35,055,000)
Net cash used in investing activities (36,353,000) (31,753,000)
Cash flows from financing activities: Repayment of senior notes
(18,750,000) - Net borrowings from (repayment of) revolving credit
facility 16,000,000 (5,000,000) Proceeds from stock options
exercised 1,074,000 5,008,000 Purchase of common stock (1,552,000)
(18,207,000) Net cash used in financing activities (3,228,000)
(18,199,000) Net increase in cash and cash equivalents 9,154,000
8,420,000 Cash and cash equivalents - beginning of period 7,354,000
8,617,000 Cash and cash equivalents - end of period $16,508,000
17,037,000 Supplemental disclosures Cash paid during period for:
Interest, net of amount capitalized $5,481,000 5,488,000 Income
taxes 8,488,000 12,737,000 DATASOURCE: Ryan's Restaurant Group
CONTACT: Fred T. Grant, Jr., Senior Vice President - Finance of
Ryan's Restaurant Group, Inc., +1-864-879-1000 Web site:
http://www.ryansrg.com/
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