UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 2, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____
Commission File Number 0-10943
RYAN'S FAMILY STEAK HOUSES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0657895
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
405 Lancaster Avenue, Greer, South Carolina 29650
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (864) 879-1000
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of class) (Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
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 the 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. [ X ]
The aggregate market value of the voting stock held by non-affiliates
(shareholders holding less than 20% of the outstanding common stock,
excluding directors and officers), computed by reference to the average
high and low prices of such stock, as of March 6, 2002, was $700,513,000.
The number of shares outstanding of the registrant's Common Stock,
$1.00 Par Value, was 29,533,000 at March 6, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Portions of 2001 Annual Report of Shareholders Parts I and II
Portions of Proxy Statement dated March 28, 2002 Part III
PART I
ITEM 1. BUSINESS.
General
Ryan's Family Steak Houses, Inc., the registrant (together with its
subsidiaries, referred to hereafter as the "Company"), is a South
Carolina corporation that operates a chain of restaurants located
principally in the southern and midwestern United States. At January
2, 2002, 312 Company-owned and 23 franchised Ryan's Family Steakhouse
restaurants were in operation. In addition, the Company operates one
Fire Mountain restaurant. Therefore, in total, at January 2, 2002,
the Company owned and operated 313 and franchised 23 restaurants, all
of which used the Ryan's Family Steakhouse format. All Company-owned
and operated restaurants are referred to hereafter as "Ryan's" or
"Ryan's restaurant(s)". System-wide sales, which include sales by
franchised restaurants, were approximately $787 million in 2001 and
$745 million in 2000. Sales by Company-owned restaurants amounted
to approximately $745 million in 2001 and $705 million in 2000. The
Company, headquartered in Greer, South Carolina, was organized in
1977, opened its first restaurant in 1978 and completed its initial
public offering in 1982. It has no revenues or assets outside the
U.S.
The following table indicates the number of Company-owned
restaurants opened each year, net of closings, and the total number of
Company-owned restaurants open at each year-end during the 5-year
period ending January 2, 2002:
Restaurant Total Open
Year Openings, Net at Year-End
1997 9 270
1998 10 280
1999 9 289
2000 12 301
2001 12 313
Restaurant Operations
General. A Ryan's restaurant is a family-oriented restaurant
serving a wide variety of foods from its centrally located scatter
bars known collectively as the Mega Barr buffet, as well as grilled
entrees such as charbroiled steaks, hamburgers, chicken and seafood.
The Mega Barr includes fresh and pre-made salad items, soups, cheeses,
a variety of hot meats and vegetables, and hot yeast rolls prepared
and baked daily on site. All entree purchases include a trip to a
bakery bar. Bakery bars feature hot and fresh-from-the-oven cookies,
brownies and other bakery products as well as various dessert
selections, such as ice cream, frozen yogurt, fresh fruit, cakes,
cobblers and several dessert toppings. All Ryan's also offer a
variety of non-alcoholic beverages. All restaurants have their Mega
Barsr in a scatter bar format. This format breaks the Mega Barr into
island bars for easier customer access and more food variety.
The newest Ryan's design features a display-style grill and cooking
area that is in the dining room and very visible and easily accessible
to customers. A variety of meats are grilled daily and available to
customers as part of the buffet price. Customers go the grill and can
get hot, cooked-to-order steak, chicken or other grilled items placed
directly from the grill onto their plate. This format was first
implemented during 2000, and at the end of 2001, 60 Ryan's restaurants
operated with the display cooking format. All new restaurants open
with display cooking, and current plans call for the conversion of 30
to 40 restaurants to the display cooking format in 2002.
Most Ryan's are open seven days a week with typical hours of
operation being 11:00 a.m. to 9:30 p.m. Sunday through Thursday and
11:00 a.m. to 10:30 p.m. Friday and Saturday. The Company is
implementing a program in which new restaurants, restaurants that have
been converted to the display cooking format and certain other
restaurants are closed on Mondays. All other hours of operation
remain consistent with all other Ryan's. At January 2, 2002,
approximately 30% of the Company's restaurants were on this program.
Management believes that the Monday-closing program results in less
manager turnover, better overall restaurant operations and no
significant loss of restaurant sales.
The average customer count per restaurant during 2001 was
approximately 6,500 per week, and the average meal price per person
was $7.14, including beverage. Management believes that the average
table turns over every 30 to 45 minutes.
Each Company-owned Ryan's is located in a free-standing masonry
building that is typically about 10,000 square feet. Certain older
restaurants may have sizes ranging from approximately 8,000 to 12,500
square feet. The interior of most restaurants generally contains two
or three dining rooms with seating for approximately 400 customers in
total, an area where customers both order and pay for their meals and
a kitchen area. Certain older restaurants may seat up to 500 persons.
The focal points of the main dining room are the Mega Barr and a
bakery bar. In restaurants with display cooking, the display-style
grill is prominently visible from where customers enter the
restaurant. Parking lots at the restaurants vary in size, with
available parking ranging from 125 to 200 spaces.
Restaurant Management and Supervision. The Company emphasizes
standardized operating and control systems together with comprehensive
recruiting and training programs in order to maintain food and service
quality. In each Ryan's restaurant, the management team typically
consists of a general manager or operating partner (under the
Operating Partner Program described below), a manager, an assistant
manager and an associate manager. Management personnel begin
employment at the manager trainee level and complete a formal four-
week training program at the Company's management training center in
Greer, South Carolina prior to being placed in associate manager
positions. All restaurant managers continue their training through
various training manuals and classes developed by the Company.
Each restaurant management team reports to a district manager or
district partner (under the District Partner Program described below).
Individuals in these positions normally oversee the operations of four
to eight restaurants and report to one of eight regional directors or
regional partners (under the Regional Partner Program described
below), positions that may be at the Vice President level and, in
every case, report to the Senior Vice President-Operations.
Communication and support from all corporate office departments are
designed to assist all restaurant supervisory personnel (collectively
referred to as "Restaurant Supervision") in responding promptly to
local concerns.
All Restaurant Supervision as well as general managers, operating
partners and managers participate in incentive bonus programs.
Bonuses paid to general managers and managers are based on the monthly
sales volume of their individual restaurant with deductions for excess
spending in key expense items, such as food cost, payroll and cash
shortages. The bonus program for district managers and regional
directors is based principally on same-store sales, profitability,
"hidden shopper" (service feedback) scores and certain qualitative
factors.
In 1997, the Company initiated an Operating Partner Program in
order to provide general managers with an additional career path and
an opportunity to share in the profitability of their stores. After
being selected and upon a $10,000 investment in Ryan's common stock, a
general manager is promoted to Operating Partner and then shares in
any profit improvement and overall profitability of the restaurant.
At January 2, 2002, Operating Partners were managing 178 restaurants.
The Company's goal is to have Operating Partners in approximately two-
thirds of its restaurants at the end of 2002.
In 1999, the Company initiated a District Partner Program in order
to reward top-performing district managers who were ready to assume
additional responsibilities. After being selected and upon a $15,000
investment in Ryan's common stock, a district manager is promoted to
District Partner and then shares in any profit improvement and overall
profitability of the restaurants under his or her supervision. At
January 2, 2002, there were 20 District Partners supervising 132
restaurants. The Company's goal is to have an additional five to
eight District Partners in place at the end of 2002.
In 2000, the Company initiated a Regional Partner Program in order
to reward top-performing regional directors who had demonstrated the
ability to assume additional responsibilities. After being selected
and upon a $20,000 investment in Ryan's common stock, a regional
director is promoted to Regional Partner and then shares in the
overall profitability of the restaurants under his or her supervision.
A Regional Partner's compensation is also affected by same-store
sales, "hidden shopper" scores, profit improvement and certain
qualitative factors. At January 2, 2002, there was one Regional
Partner supervising 58 restaurants. The Company's goal is to have one
or two additional Regional Partners in place at the end of 2002.
Advertising. The Company does not rely extensively on advertising,
spending less than one percent of restaurant sales during each of the
years 2001, 2000 and 1999 on advertising. In 2001, the Company's
advertising efforts consisted principally of billboard advertising,
newspaper ads and local marketing efforts. Local marketing focuses on
building customer relationships through community involvement and may
include activities such as sponsoring a youth sports team,
providing a meeting place for organizations or providing food for a
special community event. The emphasis is on building relationships at
the restaurant level that lead to word-of-mouth advertising and, in
turn, to increased restaurant sales. In 2000, the Company ran media
advertising campaigns, using spot television, cable television and
radio, in 20 markets covering 89 Ryan's restaurants. Newspaper ads
and billboards were used in various other markets.
In 2002, current plans call for the continued emphasis on billboard
advertising and local marketing efforts. The Company reviews its
overall advertising plans annually and may or may not utilize
television or radio advertising in the future depending on various
factors such as historical sales results from advertising, current and
planned restaurant programs and current advertising cost levels.
Expansion of Company-Owned Restaurants
General. At January 2, 2002, the Company owned and operated 313
Ryan's restaurants. During 2002, current plans call for 17 to 19 new
Company-owned Ryan's, including five or six relocations. Target sites
for these new restaurants are spread throughout or contiguous to the
Company's current 23-state operating area. Management defines a
relocation as a restaurant opened within 12 months after closing
another restaurant in the same marketing area. A relocation
represents a redeployment of assets within a market. The following
table summarizes the Company's openings, closings and relocations
during 2001, 2001 and 1999:
2001 2000 1999
Beginning of year 301 289 280
New restaurants 11 13 12
Relocations - opened 5 4 6
Relocations - closed (4) (5) (6)
Closings - - (3)
End of year 313 301 289
Site Selection. The Company employs a real estate manager and uses
in-house real estate representatives to locate potential new sites and
to perform all preliminary site investigative work. Final approval is
made by the Company's executive management. Important factors in site
selection include population, demographics, proximity to both business
and residential areas, traffic count and site accessibility. Another
factor in site selection for a Ryan's restaurant is its proximity to
other Ryan's restaurants because this proximity improves the
efficiency of the Company's Restaurant Supervision, advertising
programs and distribution network.
Construction. The Company presently acts as the general contractor
for the construction of all of its restaurants. The Company's in-
house architectural staff draws up the detailed construction plans
that are used by subcontractors selected by a Ryan's project manager
to perform the actual construction work. In addition to selecting and
scheduling subcontractors, a Ryan's project manager also procures
materials, if necessary, and provides general oversight of the
construction project. A Ryan's construction superintendent is on site
during the construction of each restaurant and closely supervises the
progress and workmanship of the project. New restaurants are
generally completed approximately four to five months from the
commencement of construction. The average cost of a new Ryan's
restaurant (land, building and equipment) constructed in 2001 was
approximately $2.8 million.
Restaurant Opening. When a new Ryan's restaurant is opened, all
restaurant management positions are staffed with personnel who have
had prior management experience in another of the Company's
restaurants. Prior to opening, all staff personnel at the new
location undergo one week of intensive training conducted by a new
store opening team.
Franchising. While the Company has granted Ryan's franchises in
the past, management has not actively pursued new franchisees in
recent years in order to concentrate on the operation and development
of Company-owned restaurants. Future consideration may be given to
new franchisees proposing to operate in regions significantly outside
of the Company's existing or contemplated operating areas.
The following table indicates the number of franchised restaurants
opened each year, net of closings, and the total number of franchised
restaurants open at each year-end during the 5-year period ending
January 2, 2002:
Net
Restaurants Total Open
Year Opened (Closed) at Year-End
1997 - 25
1998 1 26
1999 (3) 23
2000 - 23
2001 - 23
At January 2, 2002, the Company's sole franchise agreement was with
Family Steak Houses of Florida, Inc. ("Family") which, at that date,
operated 23 Ryan's restaurants in central and northern Florida. The
present franchise agreement expires in 2010. If Family is in
compliance with the franchise agreement at that time and agrees to
certain remodeling requirements, Family then has the option to extend
the agreement for up to two 10-year renewal periods. The agreement
provides that the Company will furnish Family with all the necessary
information to construct, equip, manage and operate restaurants under
the Ryan's Family Steakhouse name or derivative thereof. It further
provides for exclusive territorial protection in certain Florida
counties as long as Family operates a specified number of Ryan's
restaurants.
The franchise agreement with Family was amended in August 1999 in
order to revise the number of Ryan's restaurants required to be in
operation by Family. A comparison of the old and current requirements
follow:
Restaurants in Operation
Old Current
Year-End Requirement Requirement
2001 29 25
2002 30 27
2003 31 29
2004 32 31
Subsequent years +1/year +2/year
At January 2, 2002, Family was required to have 25 restaurants in
operation, but operated only 23 restaurants at that date. Under the
terms of the agreement, this noncompliance does not constitute a
default, but does result in Family losing its exclusive territorial
protection. Family still has the right to build and operate
additional restaurants in its franchise area. However, the Company
also has the right to either sell franchises to other franchisees or
operate Company-owned Ryan's restaurants in that area. The Company
intends to explore real estate options in Family's area of operation
during 2002 and may open one or two Company-owned restaurants there in
2003.
Also, in accordance with an October 1996 amendment to the franchise
agreement, the royalty rate charged to Family by the Company increased
to 4% of sales from 3%, effective January 3, 2002. The 4% rate is
consistent with the rate prior to the temporary rate reduction stated
in a May 1992 amendment to the franchise agreement. If the franchise
agreement had never been amended, Family's royalty rate would have been 5% for
all of its franchised Ryan's restaurants for 1991 and onward.
Sources and Availability of Raw Materials
The Company has a centralized purchasing program which is designed
to provide uniform product quality in all restaurants as well as
reduced food, beverage and supply costs. The Company's management
establishes contracts for approximately 90% of its food and other
products from a variety of major suppliers under competitive terms.
Purchases under these contracts are delivered to one of three
warehouses operated by the Company's principal distributor and then
delivered to the restaurants by the distributor. The remaining 10% of
the Company's products (principally fresh produce) are purchased
locally by restaurant management. The beef used by the Company is
obtained from four western suppliers based on price and availability
of product. To ensure against interruption in the flow of beef
supplies due to unforeseen or catastrophic events, the distributor
maintains up to eight weeks supply of beef at its warehouses. The
Company believes that satisfactory sources of supply are generally
available for all the items used regularly in its operations.
Working Capital Requirements
Working capital requirements for continuing operations are not
significant. The Company's restaurant sales are primarily derived
from cash sales, and inventories are purchased on credit and are
rapidly converted to cash. Therefore, the Company does not maintain
significant receivables or inventories.
Trademarks and Service Marks
The Company has registered various trademarks and service marks,
including "Ryan'sr", "Ryan's Family Steak Houser" and "Mega Barr", and
their related designs with the United States Patent and Trademark
Office. All trademarks and service marks have stated expiration dates
ranging from August 2002 to November 2008. However, they are
renewable for an unlimited number of additional 10-year terms at the
option of the Company.
Competition
The food service business is highly competitive and is often
impacted by changes in the taste and eating habits of the public,
economic and political conditions affecting spending habits,
population and traffic patterns. 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 facilities
are also important factors. Ryan's restaurants compete with many
units operated or franchised by national, regional and local
restaurant companies that offer steak or buffet-style meals. Although
the Company believes that its price/value to its customers places it
in an excellent competitive position, during the last few years many
operators have upgraded their restaurants to more closely match the
Ryan's format, particularly the Mega Barr. The Company also competes
with many specialty food outlets and other food vendors.
Seasonality
The Company's operations are subject to some seasonal fluctuations.
Average sales per restaurant run approximately 5% less than the
company-wide annual per-restaurant average during the first and fourth
quarters and 5% more than the company-wide annual average during the
second and third quarters.
Research
The Company maintains ongoing research programs relating to the
development of new products and evaluation of marketing activities.
The Company's management staff includes a Director of Research and
Development, whose responsibilities include enhancing and updating the
Mega Barr selections. While research and development activities are
important to the Company, past expenditures have not been and future
expenditures are not expected to be material to the Company's
financial results.
Customers
No material part of the Company's business is dependent upon a
single customer or a specific group of customers.
Regulation
The Company is subject to licensing and regulation by health,
sanitation, safety and fire agencies in the states and/or
municipalities in which its restaurants are located. The Company's
restaurants are constructed to meet local and state building code
requirements and are operated in material accordance with state and
local regulations relating to the preparation and service of food.
Generally the Company has not encountered significant obstacles to
opening new restaurants as a result of difficulties or failures in
obtaining the required licenses or approvals. However, more stringent
or varied requirements of local and state governmental bodies could
delay or prevent development of new restaurants in particular
locations.
The Company is subject to the Fair Labor Standards Act, which
regulates matters such as minimum wage requirements, overtime and
other working conditions, along with the Americans with Disabilities
Act, various family leave mandates and other laws affecting
employment. 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,
legislation proposing to increase the minimum wage by $1.50 to $6.55
per hour has recently been introduced in the U.S. Congress. The
Company has typically been able to increase menu prices to cover most
of the payroll rate increases.
Environmental Matters
While the Company is not aware of any federal, state or local
environmental regulations that will materially affect its operations,
earnings or competitive position or result in material capital
expenditures, it cannot predict the impact of possible future
legislation or regulation on its operations.
Employees
At March 6, 2002, the Company employed approximately 21,300
persons, of whom approximately 21,000 were restaurant personnel. The
Company strives to maintain low turnover by offering all full-time
employees (defined as working at least 30 hours per week) a
competitive benefit package, which includes several health insurance
plans, life insurance, vacation pay and a defined contribution
retirement plan. Part-time employees who work at least 20 hours per
week are eligible to participate in certain health insurance plans and
also receive vacation pay.
None of the Company's employees are represented by a union. The
Company has experienced no work stoppages attributable to labor
disputes and considers its employee relations to be good.
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 and
beverages to the general public through either Company-operated or
franchised restaurants. At January 2, 2002, the Company had no
operations outside the continental United States.
Information regarding the Company's restaurant sales and assets is
included in the Company's financial statements, which are incorporated
by reference into Part II, Item 8 of this Form 10-K.
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, expected regulatory environment 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. 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 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; weather fluctuations; interest rate
fluctuations; stock market conditions; political environment; and
other risks and factors described from time to time in the Company's
reports filed with the Securities and Exchange Commission, including
this Form 10-K. 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 2002 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
Company's loan agreements that govern the senior notes and the
revolving credit facility, and the maximum debt and share repurchase
levels authorized by the Company's Board of Directors.
ITEM 2. PROPERTIES.
The Company owns substantially all of its restaurant properties,
each of which is a free-standing masonry building of approximately
8,000 to 12,500 square feet, with seating for approximately 300 to 500
persons and parking for approximately 125 to 200 cars on sites of
approximately 75,000 to 130,000 square feet. At January 2, 2002, all
restaurant sites, except 16 properties under land leases, were owned
by the Company. The Company is also a party to one operating lease
for a restaurant building and its underlying land.
A listing of the number of Ryan's restaurant locations by state as
of January 2, 2002 appears on page 5 of the Company's 2001 Annual
Report to Shareholders and is incorporated by reference. A detailed
listing of Ryan's restaurant locations may be obtained without charge
by writing to the Company's corporate office, Attention: Secretary.
The Company's corporate office consists of two office buildings
(30,000 square feet and 16,000 square feet) and a 10,000 square foot
warehouse facility, all of which are located in Greer, South Carolina.
The office buildings (land and building) are owned by the Company.
The warehouse facility is leased with annual renewal terms ending in
October 2005.
From time to time, the Company offers for sale excess land that was
acquired in connection with its restaurant properties. Also, at
January 2, 2002, five closed restaurant properties were offered for
sale. The Company believes that the eventual disposition or non-
disposition of all such properties will not materially affect its
business or financial condition, taken as a whole.
ITEM 3. LEGAL PROCEEDINGS.
In September 2001 the Company received a proposed assessment from
the South Carolina Department of Revenue ("DOR") in connection with
the DOR's audits of the Company's state tax returns for the years 1994
through 1999. The Company disagrees strongly with the DOR's findings,
intends to vigorously contest the assessment and has in fact filed
refund claims for substantially all of the years under audit. The DOR
has not yet issued a final determination. Management has engaged
legal counsel to represent the Company before the DOR and beyond, if
necessary. At this time, it is not possible to estimate the ultimate
financial outcome to the Company. In the event of an unfavorable
outcome, payment of the assessment, including any interest and
penalties, by the Company to the DOR would not affect the Company's
ability to meet its obligations or conduct its business.
In addition, from time to time, the Company is a defendant in legal
actions arising in the normal course of its business. Based on those
legal actions currently known to its management, the Company believes
that, as a result of its legal defenses and insurance arrangements,
none of these actions, if decided adversely, would have a material
effect on its business or financial condition, taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information regarding trading of the Company's common stock,
quarterly market prices and dividends appears under "Common Stock
Data" and "Market Price of Common Stock" on page 25 of the Company's
2001 Annual Report to Shareholders and is incorporated by reference.
At March 6, 2002, the Company's common stock was held by
approximately 12,000 stockholders of record including holdings through
nominee or street name accounts with brokers.
As further described in Item 7A, the Company is party to a long-
term credit agreement involving a revolving credit facility, expiring
in January 2005, that prohibits the payment of cash dividends.
However, the payment of dividends solely in the Company's common stock
is permitted under the terms of the agreement.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the last five years is included in the
"Five-Year Financial Summary" on page 13 of the Company's 2001 Annual
Report to Shareholders and is incorporated by reference. The Company
has never paid cash dividends on its common stock and does not expect
to pay such dividends in the foreseeable future.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" is included on pages 6 through 11 of the
Company's 2001 Annual Report to Shareholders and is incorporated by
reference.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's exposure to market risk relates primarily to changes
in interest rates. Foreign currencies are not used in the Company's
operations, and commodities used in the preparation of food at the
Company's restaurants are not under purchase contract for more than
one year in advance. On January 28, 2000, the Company closed on two
loan transactions that refinanced all existing debt balances and added
to the Company's credit availability. The first transaction involved
the private placement with several insurance companies of $75 million
of senior notes due in 2008 with principal payments commencing in
2005, bearing interest at 9.02%. The second transaction involved a
$200 million revolving credit facility with several banks due in 2005,
bearing interest at various floating interest rates plus a variable
spread currently set at 1.375%. Both loans are secured by the stock
of the Company's wholly-owned subsidiaries and affiliates.
While the Company has entered into derivative financial instrument
agreements in the past, there were no such agreements outstanding as
of January 2, 2002. The Company does not enter into financial
instrument agreements for trading or speculative purposes.
The following table presents information regarding the Company's
outstanding long-term debt based on total outstanding debt balances as
of January 2, 2002. The contractually required principal repayments
and their related average interest rates by maturity date are
presented in the table. For the variable rate debt, average interest
rate is based on the two-month London Interbank Offered Rate ("LIBOR")
as of January 2, 2002 plus the current applicable margin of 1.375%.
The applicable margin is subject to increase up to a maximum of 1.675%
or decrease to a minimum of 0.875% in future years depending upon
changes to the Company's ratio of funded debt to EBITDA. The fair
value of the variable rate debt approximates its carrying amount at
January 2, 2002 due to the variable rate provisions of the related
debt instruments. During 2001, the variable rate debt had an average
interest rate of 6.1%. The fair value of the fixed rate debt is based
on borrowing rates available to the Company for notes with similar
terms and average maturities at January 2, 2002.
As of January 2, 2002
Expected Maturity Dates
There- Fair
2002 2003 2004 2005 2006 after Total Value
Liabilities (in millions)
Long-term debt -
Variable rate - - - $103.0 - - 103.0 103.0
Average interest rate
3.2% 3.2% 3.2% 3.2% - - 3.2%
Fixed rate - - - $18.8 18.8 37.4 75.0 79.7
Average interest rate
9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's financial statements, unaudited quarterly financial
information and the independent auditors' report are included on pages
14 through 23 of the Company's 2001 Annual Report to Shareholders and
are incorporated 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 required under this item is incorporated by
reference to the Ryan's Family Steak Houses, Inc. Proxy Statement for
the Annual Meeting of Shareholders to be held May 1, 2002 under the
headings "Election of Directors", "Executive Officers" and "Section
16(a) Beneficial Ownership Reporting Compliance."
ITEM 11.EXECUTIVE COMPENSATION.
The information required under this item is incorporated by
reference to the Ryan's Family Steak Houses, Inc. Proxy Statement for
the Annual Meeting of Shareholders to be held May 1, 2002 under the
headings "Election of Directors - Compensation of Directors",
"Executive Compensation and Other Information", "Report of the
Compensation Committee" and "Performance Graph."
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required under this item is incorporated by
reference to the Ryan's Family Steak Houses, Inc. Proxy Statement for
the Annual Meeting of Shareholders to be held May 1, 2002 under the
headings "Election of Directors", "Certain Beneficial Owners of Common
Stock" and "Executive Officers."
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required under this item is incorporated by
reference to the Ryan's Family Steak Houses, Inc. Proxy Statement for
the Annual Meeting of Shareholders to be held May 1, 2002 under the
headings "Election of Directors" and "Executive Compensation and Other
Information - Deferred Compensation - Salary Continuation Agreement."
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-
K.
(a)1-2Financial statements filed as part of this Form 10-K are
listed in the "Index to Financial Statements", at page 16.
(a)3 Exhibits (numbered in accordance with Item 601 of Regulation
S-K):
Exhibit # Description
3.1 Articles of Incorporation of the Company,
as amended through April 24, 1986: Incorporated by
reference to Exhibit 4(a) to the Registration
Statement of the Company filed with the SEC on Form S-
3 (Commission file no. 33-7245) (the "Form S-3").
3.1.1 Articles of Amendment to the Articles of
Incorporation, dated April 22, 1987: Incorporated by
reference to Exhibit 3.2 to the Annual Report on Form
10-K for the period ended January 1, 1992 (Commission
file no. 0-10943) (the "1991 10-K").
3.1.2 Articles of Amendment to the Articles of
Incorporation, dated May 25, 1989: Incorporated by
reference to Exhibit 4.3 to the Registration
Statement of the Company filed with the SEC on Form S-
8 (Commission file no. 33-53834).
3.2 Bylaws of the Company: Incorporated by
reference to Exhibit 4(b) to the Form S-3.
3.2.1 Amendment to By-Laws of the Company, dated
October 25, 1990: Incorporated by reference to
Exhibit 3.3 to the 1991 10-K.
3.2.2 Amendment to By-Laws of the Company, dated
January 28, 1999: Incorporated by reference to
Exhibit 3.2.2 to the Annual Report on Form 10-K for
the period ended December 29, 1999 (Commission file
no. 0-10943) (the "1999 10-K").
4.1 Specimen of Company common stock
certificate: Incorporated by reference to Exhibit
4.1 to the 1991 10-K.
4.2 See Exhibits 3.1, 3.1.1, 3.1.2, 3.2, 3.2.1
and 3.2.2.
4.3 See Exhibit 10.22, 10.23, 10.23.1 and
10.24.
*10.1 Ryan's Family Steak Houses, Inc. 1987
Stock Option Plan: Incorporated by reference to
Exhibit 4 to the Registration Statement of the
Company filed with the SEC on Form S-8 (Commission
file no. 33-15924).
*10.2 Ryan's Family Steak Houses, Inc. 1991
Stock Option Plan: Incorporated by reference to
Exhibit 4.4 to the Registration Statement of the
Company filed with the SEC on Form S-8 (Commission
file no. 33-53834).
*10.3 Ryan's Family Steak Houses, Inc. 1998
Stock Option Plan: Incorporated by reference to
Exhibit 99.1 to the Registration Statement of the
Company filed with the SEC on Form S-8 (Commission
file no. 333-67165).
*10.4+ Ryan's Family Steak Houses, Inc. 2002
Stock Option Plan.
*10.5 Ryan's Employee Retirement Savings Plan,
dated March 1, 1992: Incorporated by reference to
Exhibit 10.4 to the 1991 10-K.
*10.6 Salary Continuation Agreement, dated April
22, 1987, between the Company and Alvin A. McCall,
Jr.; as amended on October 26, 1989: Incorporated by
reference to Exhibit 10.5 to the 1991 10-K.
*10.7 Deferred Compensation - Salary
Continuation Agreement, dated April 22, 1987, between
the Company and Charles D. Way: Incorporated by
reference to Exhibit 10.6 to the 1991 10-K.
10.8 Agreement and Plan of Restructuring:
Incorporated by reference to Exhibit A to the Proxy
Statement of the Company, dated March 25, 1993, filed
with respect to the Annual Meeting of Shareholders to
be held on April 28, 1993 (Commission file no. 0-
10943).
*10.9 Split Dollar Agreement by and between the
Company and Charles D. Way dated September 1, 1993:
Incorporated by reference to Exhibit 10.8 to the
Annual Report on Form 10-K for the period ended
December 29, 1993 (Commission file no. 0-10943) (the
"1993 10-K").
*10.10 Split Dollar Agreement by and between the
Company and G. Edwin McCranie dated November 12,
1993: Incorporated by reference to Exhibit 10.9 to
the 1993 10-K.
*10.11 Split Dollar Agreement by and between the
Company and James R. Hart dated August 8, 1993:
Incorporated by reference to Exhibit 10.11 to the
1993 10-K.
*10.12 Split Dollar Agreement by and between the
Company and Fred T. Grant, Jr. dated November 12,
1993: Incorporated by reference to Exhibit 10.12 to
the 1993 10-K.
*10.13 Split Dollar Agreement by and between the
Company and Alan E. Shaw dated November 12, 1993:
Incorporated by reference to Exhibit 10.13 to the
1993 10-K.
*10.14 Split Dollar Agreement by and between the
Company and Morgan A. Graham dated November 12, 1993:
Incorporated by reference to Exhibit 10.15 to the
Annual Report on Form 10-K for the period ended
December 31, 1997 (Commission file no. 0-10943) (the
"1997 10-K").
*10.15 Split Dollar Agreement by and between the
Company and Janet J. Gleitz dated November 12, 1993:
Incorporated by reference to Exhibit 10.16 to the
1997 10-K.
*10.16 Split Dollar Agreement by and between the
Company and Ilene T. Turbow dated November 12, 1995:
Incorporated by reference to Exhibit 10.17 to the
1997 10-K.
*10.17 Deferred Compensation Plan by and between
the Company and Morgan A. Graham dated November 1,
1997: Incorporated by reference to Exhibit 10.18 to
the 1997 10-K.
*10.18 Deferred Compensation Plan by and between
the Company and Janet J. Gleitz dated November 1,
1997: Incorporated by reference to Exhibit 10.19 to
the 1997 10-K.
*10.19 Deferred Compensation Plan by and between
the Company and Ilene T. Turbow dated November 1,
1997: Incorporated by reference to Exhibit 10.20 to
the 1997 10-K.
*10.20 Executive Bonus Plan, commencing in fiscal
year 1998: Incorporated by reference to Exhibit
10.23 to the 1997 10-K.
10.21+ Franchise Agreement between Ryan's Family
Steak Houses, Inc. (later assigned to Ryan's
Properties, Inc.) and Family Steak Houses of Florida,
Inc. dated September 16, 1987.
10.21.1+ Amendment to the Franchise Agreement
referred to at Exhibit 10.21, dated as of May 29,
1992.
10.21.2 Agreement between Ryan's Properties, Inc.
and Family Steak Houses of Florida, Inc. dated July
11, 1994: Incorporated by reference to Exhibit 10.15
to the Annual Report on Form 10-K for the period ended
December 28, 1994 (Commission file no. 0-10943).
10.21.3 Amendment dated October 3, 1996 to the
Agreement between Ryan's Properties, Inc. and Family
Steak Houses of Florida, Inc. dated July 11, 1994:
Incorporated by reference to Exhibit 10.22.1 to the
1999 10-K.
10.21.4 Amendment dated August 31, 1999 to the
Agreement between Ryan's Properties, Inc. and Family
Steak Houses of Florida, Inc. dated July 11, 1994 and
amended on October 17, 1994 and October 3, 1996:
Incorporated by reference to Exhibit 10.22.2 to the
1999 10-K.
10.21.5+ Amendment to the Franchise Agreement
referred to at Exhibit 10.21, dated as of January 30,
2002.
10.22 Ryan's Family Steak Houses, Inc. and
Wachovia Bank of North Carolina, N.A., as Rights
Agent, Shareholder Rights Agreement dated as of
January 26, 1995: Incorporated by reference to
Exhibit 2 to the report on Form 8-K filed with the
Commission on February 9, 1995 (Commission file no. 0-
10943).
10.23 Credit Agreement dated as of January 28,
2000 among Ryan's Family Steak Houses, Inc. (the
"Borrower"), the domestic subsidiaries of the
Borrower, as Guarantors, Bank of America, N.A., as
Administrative Agent, First Union National Bank, as
Syndication Agent, Wachovia Bank, N.A., as
Documentation Agent, SunTrust Bank, Atlanta, as
Senior Managing Agent, and certain other banks
signatory thereto: Incorporated by reference to
Exhibit 10.24 to the 1999 10-K.
10.23.1+ First Amendment to the Credit Agreement
referred to at Exhibit 10.23, dated as of November 9,
2001.
10.24 Note Purchase Agreement between Ryan's
Family Steak Houses, Inc. and various lenders for
$75,000,000 of 9.02% Senior Notes due January 28,
2008: Incorporated by reference to Exhibit 10.25 to
the 1999 10-K.
*10.25 Form of Split-Dollar Life Insurance
Agreement by and between the Company and each of
Messrs. Way, McCranie, Graham, Grant, Hart and Shaw
and Ms. Gleitz and Ms. Turbow: Incorporated by
reference to Exhibit 10.26 to the 1999 10-K.
*10.26 Deferred Compensation Plan, effective as of
August 1, 1999: Incorporated by reference to Exhibit
10.27 to the 1999 10-K.
*10.27 Form of Employment, Noncompetition and
Severance Agreement by and between the Company and
each of Messrs. Way, McCranie, Grant, Graham, and
Hart and Ms. Gleitz and Ms. Turbow: Incorporated by
reference to Exhibit 10.28 to the Annual Report on
Form 10-K for the period ended January 3, 2001
(Commission file no. 0-10943).
13.1+ Ryan's Family Steak Houses, Inc. 2001
Report to Shareholders (except for those portions
that are expressly incorporated by reference in this
Report on Form 10-K, this exhibit is furnished for
the information of the Commission and is not deemed
to be filed as a part hereof).
21.1+ Subsidiaries of the Company.
23.1+ Consent of Independent Auditors.
* This is a management contract or
compensatory plan or arrangement.
+ Filed with this Form 10-K.
(b) On October 9, 2001, November 13, 2001, December 10, 2001 and
January 7, 2002, the Company filed reports on Form 8-K
regarding sales information for September 2001, October 2001,
November 2001 and December 2001, respectively.
(c) The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) The response to this portion of Item 14 is submitted as a
separate section of this report.
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.
RYAN'S FAMILY STEAK HOUSES, INC.
March 28, 2002
By:/s/Fred T. Grant, Jr.
Fred T. Grant, Jr.
Senior Vice President -
Finance, Treasurer and
Assistant Secretary
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/Charles D. Way Chairman, President and March 28, 2002
Charles D. Way Chief Executive Officer
/s/G. Edwin McCranie Director and Executive March 28, 2002
G. Edwin McCranie Vice President
/s/James D. Cockman Director March 28, 2002
James D. Cockman
/s/Barry L. Edwards Director March 28, 2002
Barry L. Edwards
/s/Brian S. MacKenzie Director March 28, 2002
Brian S. MacKenzie
/s/Harold K. Roberts, Jr. Director March 28, 2002
Harold K. Roberts, Jr.
/s/James M. Shoemaker, Jr. Director March 28, 2002
James M. Shoemaker, Jr.
/s/Fred T. Grant, Jr. Senior Vice President - Finance, March 28,
2002
Fred T. Grant, Jr. Treasurer and Assistant
Secretary (Principal Financial
and Accounting Officer)
RYAN'S FAMILY STEAK HOUSES, INC.
INDEX TO FINANCIAL STATEMENTS
The following financial statements of the Registrant included in
the Annual Report to Shareholders for the year ended January 2, 2002,
are incorporated herein by reference. With the exception of the pages
listed below and other information incorporated in this report on Form
10-K, the 2001 Annual Report to Shareholders is not deemed "filed" as
part of this report.
Page Reference
in Annual Report
Independent Auditors' Report 23
Consolidated Statements of Earnings 14
Consolidated Balance Sheets 15
Consolidated Statements of Cash Flows 16
Notes to Financial Statements 17-23
All financial statement schedules have been omitted since the
required information is not applicable or the information required is
included in the consolidated financial statements or the notes
thereto.