Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-14311
FAMILY STEAK HOUSES OF FLORIDA, INC.
(exact name of registrant as specified in its charter)
Florida No. 59-2597349
(State of Incorporation) (I.R.S. Employer Identification)
2113 Florida Boulevard
Neptune Beach, Florida 32266
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (904) 249-4197
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)
______________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
[ ]
Indicate by check mark whether registrant is an accelerated filer (as
defined by Rule 126-2 of the Act.
YES [ ] NO [ X ]
As of February 28, 2003, 3,706,200 shares of Common Stock of the
registrant were outstanding. The aggregate market value of such voting
Common Stock (based upon the closing sale price of the registrant's Common
Stock on the NASDAQ SmallCap Market System on February 28, 2003, as reported
in The Wall Street Journal) held by non-affiliates of the registrant was
approximately $636,400.
Documents Incorporated by Reference
Portions of the registrant's 2002 Annual Report to Shareholders are
incorporated by reference into Part II. Portions of the Proxy Statement for
the registrant's 2003 Annual Meeting of Shareholders are incorporated by
reference into Part III.
PART I
ITEM 1. BUSINESS
General
Family Steak Houses of Florida, Inc. ("Family" or the
"Company"), is the sole franchisee of Ryan's Family Steak House
restaurants ("Ryan's restaurants") in the State of Florida.
The Company's first Ryan's restaurant was opened in
Jacksonville, Florida, in May 1982. The Company presently
operates 22 Ryan's restaurants in Florida.
A Ryan's restaurant is a family-oriented restaurant serving
high-quality, reasonably-priced food in a casual atmosphere with
server-assisted service. The restaurants feature self-service
scatter bars with a variety of over 100 fruit, vegetable and
meat entree items, bakery and dessert bar, drink refills and
table service. Several restaurants feature a display cooking
area, where guests can have grilled-to-order steaks, chicken,
pork chops and other items, all of which is included in the
price of the buffet. The Company believes that its operating
strategy of selling top-quality meals at reasonable prices
creates a perception of value to its customers.
The Company operates its Ryan's restaurants under a
Franchise Agreement with Ryan's Properties, Inc., ("Ryan's", or
the "Franchisor") which grants the Company the right to operate
Ryan's Family Steak House restaurants throughout North and
Central Florida.
Company History
The Company was formed by the combination, effective
September 1985, of six limited partnerships, each of which owned
and operated a Ryan's restaurant franchise. In April 1986, the
Company issued 853,200 shares of its common stock in exchange
for the assets and liabilities of the predecessor partnerships
and 1,134,000 shares of its common stock to Eddie L. Ervin, Jr.,
in consideration for Mr. Ervin assigning to the Company all of
his rights under the Franchise Agreement, as defined below. The
Company completed its initial public offering of 900,000 shares
of its common stock in 1986 resulting in net proceeds to the
Company of approximately $4,145,000.
2
Franchise Agreement
The Company operates its Ryan's restaurants under a
Franchise Agreement between the Company and Ryan's dated as of
September 16, 1987, which amended and consolidated all previous
franchise agreements (as amended, the "Franchise Agreement").
The Franchise Agreement extends through December 31, 2010 and
provides for two additional ten-year renewal options. The
renewal options are subject to certain conditions, including the
condition that the Company has performed its obligations under
the Franchise Agreement during its original term.
In October 1996, the Company amended the Franchise
Agreement with Ryan's. The amended Franchise Agreement requires
the Company to pay a monthly royalty fee of 3.0% through
December 2001 and 4.0% thereafter on the gross receipts of each
Ryan's Family Steak House restaurant. Total royalty fee expenses
were $1,681,600, $1,260,300 and $1,197,600 for fiscal years
2002, 2001 and 2000 respectively.
The Franchise Agreement granted the Company the exclusive
right to open Ryan's restaurants in North and Central Florida.
In order to maintain this exclusivity, the Company was required
to have a total of 25 Ryan's restaurants operating on December
31, 2001. At December 31, 2001, the Company was only operating
23 restaurants. On January 4, 2002, the Company was notified by
Ryan's that it had exercised its option to terminate the
exclusive nature of the Company's franchise rights within North
and Central Florida. Management believes that if Ryan's builds
restaurants in the Company's territories, it could limit the
Company's potential to locate and develop suitable restaurant
sites in the future.
The following schedule outlines the number of Ryan's
restaurants required to be operated by the Company as of
December 31 of each year under the amended Franchise Agreement.
Failure to maintain the required number of restaurants is a
default under the agreement, and could result in the Company
losing the right to operate under the Ryan's name.
3
Number of
Restaurants Required to
End of Fiscal Year be in Operation
2002 22
2003 24
2004 25
2005 27
2006 28
The Company was in compliance with this schedule as of the
year ended January 1, 2003. However, based on management's
current plan to sell or sublease certain under-performing
restaurants, it is unlikely that the company will meet the
requirement as of fiscal year end 2003. Management has
attempted to negotiate a potential solution with Ryan's to resolve
this issue, and has inquired as to whether Ryan's will consider a
shortage in restaurants a default under the Franchise Agreement.
However, no agreement has been reached to date with Ryan's, and
Ryan's has not responded as to its position on a possible
default under the Franchise Agreement.
Ryan's has the option to declare the Company in default of
the Franchise Agreement beginning January 1, 2004 if the minimum
number of restaurants is not maintained. The Company believes
that it has complied with all other provisions of the Franchise
Agreement, and that the closure of certain restaurants is a
prudent and necessary business decision, which should not be
considered a default. However, if Ryan's declares the Company
in default, it could demand that the Company stop using the
Ryan's name for its restaurants. The Company would then have to
decide whether to comply with such a demand and change the name
of all its restaurants, or attempt to have the default notice
overturned by legal action through binding arbitration
provisions stipulated by the Franchise Agreement. If the Company
is forced to change the name of its restaurants, management does
not believe that such action would have a material effect on the
Company's profitability. However, there can be no assurance
that a name change would not result in a material decline in
sales and profitability.
The Franchise Agreement as amended also clarifies that the
Franchisor's consent is needed for certain kinds of
transactions. The transactions include (1) a person's (or
group's) acquisition of 25% of the Company's common stock (other
than a person who owned 15% of the Company's common stock as of
December 15, 1998), (2) turnover during any consecutive 12-month
period of more than a majority of the Company's board of
directors unless the new directors are approved by a two-thirds
vote of the directors then still in office who either were
4
directors at the beginning of the 12-month period or whose
election or nomination for election was previously so approved;
and (3) the Company's or any affiliates' ownership, engagement
in or interest in the operation of any other family-oriented
steak house restaurant.
The Franchise Agreement contains provisions relating to the
operation of the Company's Ryan's restaurants. Upon the
Company's failure to comply with such provisions, the Franchisor
may terminate the Franchise Agreement if such default is not
cured within 30 days of notice from the Franchisor. Termination
of the Franchise Agreement would result in the loss of the
Company's right to use the "Ryan's Family Steak House" name and
concept and could result in the sale of the physical assets of
the Company to the Franchisor pursuant to a right of first
refusal. Termination of the Company's rights under the
Franchise Agreement could result in the disruption of the
Company's operations. The Company believes that it has operated
and maintained each of its Ryan's Family Steak House restaurants
in accordance with the operational procedures and standards set
forth in the Franchise Agreement.
Operations of Ryan's Restaurants
Format. As of February 28, 2003, 20 of the Company's Ryan's
restaurants are located in free-standing buildings which vary in
size from 7,500 to 12,000 square feet. Two of the Company's
Ryan's restaurants are located in shopping malls. Each
restaurant is constructed of brick or stucco walls, interior and
exterior, with exposed woodwork. The interior of each Ryan's
restaurant contains a dining room, a customer ordering area, and
a kitchen. The dining rooms seat between 270 and 500 persons
and highlight centrally located, illuminated scatter bars and a
fresh bakery and dessert bar. Six restaurants include a display
cooking area with a charcoal grill and a flat grill for grilled-
to-order steaks, pork chops and chicken items, a rotisserie
chicken broiler, a pizza oven and a wok for preparation of
Chinese food items. Each Ryan's restaurant has parking for
approximately 100 to 175 cars on lots of overall size of
approximately 50,000 to 70,000 square feet.
The Ryan's restaurants operate seven days a week. Typical
hours of operation are from 11:00 a.m. to 9:00 p.m., Sunday
through Thursday, and from 11:00 a.m. to 10:00 p.m., Friday and
Saturday. Restaurants that serve breakfast open at 8:00 a.m.
Saturday and Sunday. In a Ryan's restaurant, the customer enters
the restaurant, orders from the menu, and then enters the dining
room. Beverages are brought to the table by servers. Entrees are
cooked to order at most locations. The customer ordering the
buffet is given unlimited access to the scatter bars and the
5
bakery and dessert bar. Customers receive table service of the
entree and beverage refills except at stores with display
cooking, which offer buffet only. For the fiscal year ended
January 1, 2003, the average weekly customer count per
restaurant was approximately 5,159 and the average meal price
(including beverage) was approximately $7.03.
Restaurant Management and Supervision. The Company manages
the Ryan's restaurants pursuant to a standardized operating and
control system together with comprehensive recruiting and
training of personnel to maintain food and service quality. In
each Ryan's restaurant, the management group consists of a
general manager, a manager and one to three assistant managers,
depending on sales volume. The Company requires at least two
members of the management group on duty during all peak serving
periods. Management-level personnel usually begin employment at
the manager trainee or assistant manager level, depending on
prior restaurant management experience. All new management-level
personnel must complete the Company's five-week training program
prior to being placed in a management position.
Each restaurant management group reports to a supervisor.
Presently, the supervisors each oversee the operations of four
to seven restaurants. The supervisors report directly to the
Office of the President. Communication and support from all
departments in the Company are designed to assist the
supervisors in responding promptly to local problems and
opportunities.
All restaurant managers and supervisors participate in
incentive programs based upon the profitability of their
restaurants and upon the achievement of certain pre-set goals.
The Company believes these incentive programs enable it to
operate more efficiently and to attract qualified managers. The
Company has an operating partner program for certain managers to
provide them with an additional career path and give them
increased incentive to maximize the profitability of their
restaurants. The Company currently has two operating partners
participating in this program.
Purchasing, Quality and Cost Control. The Company has a
centralized purchase control program which is designed to ensure
uniform product quality in all restaurants. The program also
helps to maintain reduced food, beverage, and supply costs. The
Company purchases approximately 90% of the products used by the
Company's restaurants through the centralized purchase control
program. USDA choice or select grain-fed beef, the Company's
primary commodity, is closely monitored by the Company for
advantageous purchasing and quality control. The Company
purchases beef through various producers and brokers both on a
6
contract basis and on a spot basis. Beef and other products are
generally delivered directly to the restaurants three times
weekly, except for fresh produce, which is delivered three to
six times per week. The Company has in the past obtained
satisfactory sources of supply for all the items it regularly
uses and believes it will be able to do so in the future.
The Franchise Agreement requires that all suppliers of
Ryan's restaurants are subject to approval by the Franchisor.
Through its relationship with the Franchisor, the Company has
obtained favorable pricing on the purchase of food products from
several suppliers. The Company has used Alliant Foodservice,
Inc. as its primary supplier since 1991. Alliant was purchased
by U.S. Foods, Inc. in 2001. The U.S. Foods agreement is
cancelable at any time with 90 days notice.
The Company maintains centralized financial and accounting
controls for its restaurants. On a daily basis, restaurant
managers forward customer counts, sales information and supplier
invoices to Company headquarters. On a weekly basis, restaurant
managers forward summarized sales reports and payroll data.
Physical inventories of all food and supply items are taken
weekly, and meat is inventoried daily.
Development
General. The Company operated 22 Ryan's restaurants as of
February 28, 2003.
Site Location and Construction. The Company considers the
specific location of a restaurant to be important to its long-
term success. The Company's Franchisor has in the past assisted
the Company in selection of new restaurant sites. The site
selection process focuses on a variety of factors, including
trade area demographics (such as population density and
household income level), an evaluation of site characteristics
(such as visibility, accessibility, and traffic volume),
proximity to large retailers and an analysis of the potential
competition. In addition, site selection is influenced by the
general proximity of a site to other Ryan's restaurants in order
to improve the efficiency of the Company's field supervisors and
potential marketing programs. The Company generally locates its
restaurants near or adjacent to residential areas in an effort
to capitalize on repeat business from such areas as opposed to
transient business.
For most of the Company's restaurants built in recent
years, the Company used a general contractor selected from
several solicited bids. For the Company's newest restaurant,
opened in December 2001, the Company used its construction
7
subsidiary as the general contractor in order to expedite the
process of obtaining building permits. New Ryan's restaurants
are usually completed within four months of the date on which
construction is commenced.
Management of New Restaurants. When a new Ryan's restaurant
is opened, the principal restaurant management positions are
staffed primarily with management personnel who have prior
experience in a management position at another of the Company's
restaurants and who have undergone special training. Prior to
opening, all staff personnel at the new location undergo one
week of intensive training conducted by a training team. Such
training includes pre-opening drills in which test meals are
served to the invited public. Both the staff at the new
location and personnel experienced in store openings at other
locations participate in the training and drills.
Proprietary Trade Marks
The name "Ryan's Family Steak House," along with all
ancillary signs, building design and other symbols used in
conjunction with the name, are the primary trademarks and
service marks of the Franchisor. Such marks are registered in
the United States. All of these registrations and the goodwill
associated with the Franchisor's trademarks are of material
importance to the Company's business and are licensed to the
Company under the Franchise Agreement.
Competition
The food service business in Florida is highly competitive
and is often affected by changes in the taste and eating habits
of the public, economic conditions affecting spending habits,
local demographics, traffic patterns and local and national
economic conditions. The principal bases of competition in the
industry are the quality and price of the food products offered.
Location, speed of service and attractiveness of the facilities
are also important factors. The Company's restaurants are in
competition with restaurants operated or franchised by national,
regional and local restaurant companies offering a similar menu,
many of which have greater resources than the Company. The
Company is also in competition with specialty food outlets and
other vendors of food. With the termination of the Company's
exclusive rights in North and Central Florida, the Company could
experience competition from its franchisor.
The amount of new competition near Company restaurants has
increased significantly in the past few years. In some cases,
competitors have opened new restaurants with superior facilities
close to the Company's restaurants. In addition, in the past
8
several years, many restaurants have remodeled their restaurants
so that they are similar to the scatter bar format used by the
Company. Management has developed strategies to attempt to
reduce the negative impact on sales from new competition, but
there can be no assurance that sales trends will improve. In
addition, the Franchisor recently exercised its option to build
restaurants in the Company's territory, (see preceding
discussion under "Franchise Agreement") and does operate three
restaurants in West Florida in its existing territory.
Employees
As of January 1, 2003, the Company employed approximately
1,150 persons, of whom approximately 50% are considered by
management as part-time employees. No labor unions currently
represent any of the Company's employees. The Company has not
experienced any work stoppages attributable to labor disputes
and considers employee relations to be good.
Executive Officers
The following persons were executive officers of the
Company effective January 1, 2003:
Edward B. Alexander, age 44, has been Executive Vice
President since September 1999, and has been Chief Financial
Officer of the Company since 1990. In addition, Mr. Alexander
served on the Company's Board of Directors from May 1996 to July
1999.
Government Regulation
The Company is subject to the Fair Labor Standards Act
which governs such matters as minimum wage requirements,
overtime and other working conditions. A large number of the
Company's restaurant personnel are paid at or slightly above the
federal minimum wage level and, accordingly, any change in such
minimum wage will affect the Company's labor costs. Costs of
food, beverage, and labor are the expenses most affected by
inflation in the Company's business. Although inflation in
recent years has been low and accordingly has not had a
significant impact on the Company, there can be no assurance
that inflation will not increase and impact the Company in the
future.
A significant portion of the Company's employees are paid
by the federally established statutory minimum wage. Although no
minimum wage increases have been signed into law, various
proposals are presently being considered in the United States
Congress. Such changes in the federal minimum wage would impact
9
the Company's payroll and benefits costs. The Company is
typically able to increase its menu prices to cover most of the
payroll rate increases; however, there can be no assurance that
menu price increases will be able to offset labor cost increases
in the future. Annual sales price increases have consistently
ranged from 1.0% to 3.0%.
The Company is also subject to the Equal Employment
Opportunity Act and a variety of federal and state statutes and
regulations. Any new legislation or regulation that may require
the Company to pay more in health insurance premiums may
adversely affect the Company's labor costs. The Company's
restaurants are constructed to meet local and state building
requirements and are operated in accordance with state and local
regulations relating to the preparation and service of food.
More stringent and varied requirements of local governments with
respect to land use, zoning and environmental factors may in
some cases delay the Company's construction of new restaurants
or remodels of existing ones.
The Company believes that it is in substantial compliance
with all applicable federal, state and local statutes,
regulations and ordinances including those related to protection
of the environment and that compliance has had no material
effect on the Company's capital expenditures, earnings or
competitive position, and such compliance is not expected to
have a material adverse effect upon the Company's operations.
The Company, however, cannot predict the impact of possible
future legislation or regulation on its operations.
Sources and Availability of Raw Materials
The Company procures its food and other products from a
variety of suppliers, and follows a policy of obtaining its food
and products from several major suppliers under competitive
terms. A substantial portion of the beef used by the Company is
obtained from one supplier, although the Company believes
comparable beef meeting its specifications is available in
adequate quantities from other suppliers. To ensure against
interruption in the flow of food supplies due to unforeseen or
catastrophic events, to take advantage of favorable purchasing
opportunities, and to ensure that meat received by the Company
is properly aged, the Company maintains a two to six-week supply
of beef.
Working Capital Requirements
Substantially all of the Company's revenues are derived
from cash sales. Inventories are purchased on credit and are
converted rapidly to cash. The Company does not maintain
10
significant receivables or inventories. Therefore, with the
exception of debt service, working capital requirements for
continuing operations are not significant.
Long-Term Debt
In December 1996, the Company entered into a series of loan
agreements with FFCA Mortgage Corporation, (now know as GE
Capital Franchise Finance Corporation ("GE Capital"). As of
January 1, 2003, the outstanding balance due under the Company's
various loans with GE Capital was $20,247,700. The weighted
average interest rate for the GE Capital loans is 7.40% at
January 1, 2003. The Company used the proceeds of the GE
Capital loans primarily to refinance its debt and to fund
construction of new restaurants.
The Company used the proceeds of the GE Capital loans in
1996 to retire its Notes with Cerberus Partners, L.P.
("Cerberus") and its loans with the Daiwa Bank Limited and
SouthTrust Bank of Alabama, N.A. In addition, the Company
retired Warrants for 210,000 shares of the Company's common
stock previously held by Cerberus. Cerberus continues to hold
warrants to purchase 140,000 shares of the Company's common
stock at an exercise price of $2.00 per share. The Warrants
expire October 1, 2003.
Seasonality
The Company's operations are subject to seasonal
fluctuations. Revenues per restaurant generally increase from
January through April and decline from September through
December.
Research
The Company relies primarily on the Franchisor to maintain
ongoing research programs relating to the development of new
products and evaluation of marketing activities. Although
research and development activities are important to the
Company, no expenditures for research and development have been
incurred by the Company.
Customers
No material part of the Company's business is dependent
upon a single customer or a few customers.
11
Information as to Classes of Similar Products or Services
The Company operates in only one industry segment. All
significant revenues and pre-tax earnings relate to retail sales
of food to the general public through restaurants owned and
operated by the Company. The Company has no operations outside
the continental United States.
ITEM 2. PROPERTIES
Location Date Opened
-------- -----------
(1)Jacksonville May 1982
Ocala September 1986
Lakeland February 1987
Lakeland March 1987
Winter Haven August 1987
Apopka September 1987
Gainesville December 1987
New Port Richey May 1988
Tampa June 1988
Tallahassee August 1988
Daytona Beach September 1988
(1)Tampa November 1988
Orlando February 1989
Melbourne October 1989
Lake City March 1991
(1)Brooksville January 1997
(1)Leesburg June 1998
Deland April 1999
(1)Tampa September 1999
St. Cloud December 2000
Titusville May 2001
Jacksonville December 2001
(1) Leased property
As of February 28, 2003, the Company operated 22 Ryan's
restaurants. The specific rate at which the Company is able to
open new restaurants will be determined, among other factors, by
its ability to locate suitable sites on satisfactory terms,
raise the necessary capital, secure appropriate governmental
permits and approvals and recruit and train management
personnel.
As of January 1, 2003, the Company owned the real property
on which 17 of its restaurants were located. All of these
properties are subject to mortgages securing the GE Capital
notes.
12
The Company leases the real property on which five of its
restaurants are located. Those restaurants are located in
Jacksonville, Brooksville, Leesburg, and two in Tampa, Florida.
The Company also leases two buildings in Jacksonville, Florida
for its executive offices.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject from time to time to various pending
legal proceedings arising in the normal course of business. In
the opinion of management, based on the advice of legal counsel,
the ultimate disposition of currently pending claims and
litigation will not have material adverse effect on the
financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information contained under the caption "Common Stock
Data" in the Company's 2002 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Five Year
Financial Summary" in the Company's 2002 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information contained under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 2002 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK
The information contained under the caption "Quantitative
and Qualitative Disclosure About Risk" in the Company's 2002
Annual Report to Shareholders is incorporated herein by
reference.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The Consolidated Financial Statements of the Company and
the Report of Independent Certified Public Accountants as
contained in the Company's 2002 Annual Report to Shareholders
are incorporated herein by reference.
Supplementary Data
Following is a summary of the quarterly results of operations
for the years ended January 1, 2003 and January 2, 2002:
Fiscal Quarter
$ In thousands, First Second Third Fourth Total
except per share
amounts:
2002
Sales $ 12,535 $ 10,795 $ 9,526 $ 9,194 $ 42,050
Earnings (loss) from
operations 893 97 (253) (1,259)(1) (522)
Net earnings (loss) 514 (299) (654) (1,661) (2,100)
Basic earnings (loss)
per share .16 (.08) (.18) (.45) (.59)
Diluted earnings (loss)
per share .16 (.08) (.18) (.45) (.59)
2001
Sales $ 11,540 $ 10,637 $10,099 $ 9,777 $ 42,053
Earnings (loss) from
operations 784 249 (59) (147) 827
Net earnings (loss) 268 (582) (397) (575) (1,286)
Basic earnings (loss)
per share .11 (.24) (.16) (.18) (.49)
Diluted earnings (loss)
per share .11 (.24) (.16) (.18) (.49)
(1) During the quarter ended January 1, 2003, the Company
recorded an asset impairment charge of $728,000 relating to one
closed restaurant and one restaurant under lease.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors contained under the
caption "Election of Directors" in the Company's Proxy Statement
for the 2003 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission by May 1, 2003, is
incorporated herein by reference.
The information regarding executive officers is set forth
in Item 1 of this report under the caption "Executive Officers."
The information regarding reports required under section
16(a) of the Securities Exchange Act of 1934 contained under
caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's proxy statement for the 2003 Annual
Meeting of Shareholders, which will be filed with Securities and
Exchange Commission by May 1, 2003 is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Pay"
in the Company's Proxy Statement for the 2003 Annual Meeting of
Shareholders, which will be filed with the Securities and
Exchange Commission by May 1, 2003, is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained under the captions "Security
Ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement for the 2003 Annual Meeting of
Shareholders, which will be filed with the Securities and
Exchange Commission by May 1, 2003, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the captions "Election of
Directors - Certain Relationships and Related Transactions" and
"Compensation Committee Interlocks and Insider Participation" in
the Company's Proxy Statement for the 2003 Annual Meeting of
Shareholders, which will be filed with the Securities and
Exchange Commission by May 1, 2003, is incorporated herein by
reference.
15
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. As
required by Rule 13a-15 under the Securities Exchange Act of
1934 (the "Exchange Act"), within the 90 days prior to the
filing date of this report, the Company carried out an
evaluation of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. This
evaluation was carried out under the supervision and with the
participation of the Company's management, including the
Company's Chairman (who serves as the principal executive
officer), Chief Financial Officer (who serves as the principal
financial and accounting officer), Controller and another member
of the Office of the President. Based upon that evaluation, the
Company's Chairman, Chief Financial Officer and Controller have
concluded that the Company's disclosure controls and procedures
are effective in alerting them to material information regarding
the Company's financial statement and disclosure obligation in
order to allow the Company to meet its reporting requirements
under the Exchange Act in a timely manner.
(b) Changes in internal control. There have been no changes
in internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a)1. The financial statements listed below are filed with
this report on Form 10-K or are incorporated herein by
reference from the Company's 2002 Annual Report to
Shareholders. With the exception of the pages listed
below, the 2002 Annual Report to Shareholders is not
deemed "filed" as a part of this report on Form 10-K.
16
Page
Reference
Form 2002
10-K Annual Report
--------------------
Consent of Independent Certified
Public Accountants 29
Independent Auditors' Report 37
Consolidated Statements of Operations 15
Consolidated Balance Sheets 16
Consolidated Statements of Share-
holders' Equity 17
Consolidated Statements of Cash Flows 18
Notes to Consolidated Financial
Statements 19
Common Stock Data 40
Five-Year Financial Summary 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 5
Quantitative and Qualitative
Disclosures About Risk 14
(a)2. No financial statement schedules have been included
since the required information is not applicable or the
information required is included in the financial
statements, the notes thereto, or Item 8 of this
report.
(a)3. The following exhibits are filed as part of this report
on Form 10-K, and this list comprises the Exhibit
Index.
No. Exhibit
3.01 Articles of Incorporation of Family Steak Houses of
Florida, Inc. (Exhibit 3.01 to the Company's
Registration Statement on Form S-1, Registration No.
33-1887, is incorporated herein by reference.)
3.02 Bylaws of Family Steak Houses of Florida, Inc.
(Exhibit 3.02 to the Company's Registration Statement
on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
3.03 Articles of Amendment to the Articles of
Incorporation of Family Steak Houses of Florida, Inc.
(Exhibit 3.03 to the Company's Registration Statement
on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
17
3.04 Articles of Amendment to the Articles of
Incorporation of Family Steak Houses of Florida, Inc.
(Exhibit 3.04 to the Company's Registration Statement
on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
3.05 Amended and Restated Bylaws of Family Steak Houses of
Florida, Inc. (Exhibit 4 to the Company's Form 8-A,
filed with the Commission on March 19, 1997, is
incorporated herein by reference.)
3.06 Articles of Amendment to the Articles of
Incorporation of Family Steak Houses of Florida, Inc.
(Exhibit 3 to the Company's Form 8-A filed with the
Commission on March 19, 1997, is incorporated herein
by reference.)
3.07 Articles of Amendment to the Articles of
Incorporation of Family Steak Houses of Florida, Inc.
(Exhibit 3.08 to the Company's Annual Report on Form
10-K filed with the Commission on March 31, 1998 is
incorporated herein by reference.)
3.08 Amendment to Bylaws of Family Steak Houses of
Florida, Inc. (Exhibit 3.08 to the Company's Annual
Report on Form 10-K filed with the Commission on
March 15, 2000 is incorporated herein by reference.)
4.01 Specimen Stock Certificate for shares of the
Company's Common Stock (Exhibit 4.01 to the Company's
Registration Statement on Form S-1, Registration No.
33-1887, is incorporated herein by reference.)
10.01 Amended Franchise Agreement between Family Steak
Houses of Florida, Inc. and Ryan's Family Steak
Houses, Inc., dated September 16, 1987. (Exhibit
10.01 to the Company's Registration Statement on Form
S-1, filed with the Commission on October 2, 1987,
Registration No. 33-17620, is incorporated herein by
reference.)
10.02 Lease regarding the restaurant located at 3549
Blanding Boulevard, Jacksonville, Florida (Exhibit
10.03 to the Company's Registration Statement on Form
S-1, Registration No. 33-1887, is incorporated herein
by reference.)
10.03 Amended and Restated Warrant to Purchase Shares of
Common Stock, void after October 1, 2003, which
represents warrants issued to The Phoenix Insurance
18
Company, The Travelers Indemnity Company, and The
Travelers Insurance Company, (subsequently
transferred to Cerberus Partners, L.P.) (Exhibit
10.07 to the Company's Annual Report on Form 10-K,
filed with the Commission on March 28, 1995, is
incorporated herein by reference.)
10.04 Warrant to Purchase Shares of Common Stock, void
after October 1, 2003, which represents warrants
issued to The Phoenix Insurance Company, The
Travelers Indemnity Company, and The Travelers
Insurance Company (subsequently transferred to
Cerberus Partners, L.P.). (Exhibit 10.08 to the
Company's Annual Report on Form 10-K, filed with the
Commission on March 28, 1995, is incorporated herein
by reference.)
10.05 Amendment of Franchise Agreement between Ryan's
Family Steak Houses, Inc. and the Company dated July
11, 1994. (Exhibit 10.17 to the Company's Annual
Report on Form 10-K, filed with the Commission on
March 28, 1995, is incorporated herein by reference.)
10.06 Agreement between the Company and Kraft Foodservice,
Inc. (now U.S. Foods), as the Company's primary food
product distribution. (Exhibit 10.06 to the Company's
Quarterly Report on Form 10-Q, filed with the
Commission on August 9, 1995, is incorporated herein
by reference.)
10.07 Lease Agreement between the Company and CNL American
Properties Fund, Inc., dated as of September 18,
1996. (Exhibit 10.02 to the Company's Quarterly
Report on Form 10-Q, filed with the Commission on
November 18, 1996 is hereby incorporated by
reference.)
10.08 Rent Addendum to Lease Agreement between the Company
and CNL American Properties Fund, Inc., dated as of
September 18, 1996. (Exhibit 10.04 to the Company's
Quarterly Report on Form 10-Q, filed with the
Commission on November 18, 1996 is hereby
incorporated by reference.)
10.09 Amendment of Franchise Agreement between the Company
and Ryan's Family Steak Houses, Inc. dated October 3,
1996. (Exhibit 10.15 to the Company's Annual Report
on Form 10-K, filed with the Commission on April 1,
1997 is hereby incorporated by reference.)
19
10.10 $15.36m Loan Agreement, between the Company and FFCA
Mortgage Corporation, dated December 18, 1996.
(Exhibit 10.18 to the Company's Annual Report on Form
10-K, filed with the Commission on April 1, 1997 is
hereby incorporated by reference.)
10.11 $4.64m Loan Agreement, between the Company and FFCA
Mortgage Corporation, dated December 18, 1996.
(Exhibit 10.19 to the Company's Annual Report on Form
10-K, filed with the Commission on April 1, 1997 is
hereby incorporated by reference.)
10.12 Form of Promissory Note between the Company and FFCA
Mortgage Corporation, dated December 18, 1996.
(Exhibit 10.20 to the Company's Annual Report on Form
10-K, filed with the Commission on April 1, 1997 is
hereby incorporated by reference.)
10.13 Form of Mortgage between the Company and FFCA
Mortgage Corporation, dated December 18, 1996
(Exhibit 5 to the Company's Schedule 14D-9, filed
with the Commission on March 19, 1997 is hereby
incorporated by reference.)
10.14 Form of Mortgage between the Company and FFCA
Mortgage Corporation, dated March 18, 1996. (Exhibit
10.22 to the Company's Annual Report on Form 10-K,
filed with the Commission on April 1, 1997 is hereby
incorporated by reference.)
10.15 Lease agreement dated January 29, 1998 between the
Company and Excel Realty Trust, Inc. (Exhibit 10.19
to the Company's Annual Report on Form 10-K, filed
with the Commission on March 31, 1998 is hereby
incorporated by reference.)
10.16 Lease between the Company and Stuart S. Golding
Company dated February 3, 1999. (Exhibit 10.23 to the
Company's Annual Report on Form 10-K, filed with the
Commission on March 24, 1999 is hereby incorporated
by reference).
10.17 Amendment of Franchise Agreement between the Company
and Ryan's Family Steak Houses, Inc. dated August 31,
1999. (Exhibit 10.19 to the Company's Annual Report
on Form 10-K filed with the Commission on March 15,
2000 is incorporated herein by reference.)
10.18 Stock option agreement between the Company and
director Jay Conzen, dated November 3, 1999. (Exhibit
10.20 to the Company's Annual Report on Form 10-K
20
filed with the Commission on March 15, 2000 is
incorporated herein by reference.)
10.19 Amendment to Franchise Agreement between the Company
and Ryan's Properties, Inc. dated January 30, 2002.
(Exhibit 10.19 to the Company's Annual Report on Form
10-K filed with the Commission on March 29, 2002 is
incorporated herein by reference.)
10.20 Contract for sale and leaseback of restaurant
property between the Company and After Ours, LLC,
dated June 10, 2002. (Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q filed with the
Commission on August 16, 2002 is incorporated herein
by reference.)
10.21 Lease agreement for restaurant property between the
Company and After Ours, LLC, dated July 12, 2002.
(Exhibit 10.02 to the Company's Quarterly Report on
Form 10-Q filed with the Commission on August 16,
2002 is incorporated herein by reference.)
10.22 Lease Agreement between the Company and E.D.I.
Investments, Inc. for a restaurant property, dated
August 5, 2002. (Exhibit 10.03 to the Company's
Quarterly Report on Form 10-Q filed with the
Commission on August 16, 2002 is incorporated herein
by reference.)
10.23 Form of Amended and Restated Mortgage Agreement
between the Company and GE Capital Franchise Finance
Corporation dated October 21, 2002. (Exhibit 10.01
to the Company's Quarterly Report on Form 10-Q filed
with the Commission on November 15, 2002 is
incorporated herein by reference.)
10.24 Form of Promissory Note between the Company and GE
Capital Franchise Finance Corporation dated October
21, 2002. (Exhibit 10.02 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on
November 15, 2002 is incorporated herein by
reference.)
10.25 Form of Loan Agreement between the Company and GE
Capital Franchise Finance Corporation dated October
21, 2002. (Exhibit 10.03 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on
November 15, 2002 is incorporated herein by
reference.)
21
10.26 Lease Agreement between the Company and Barnhill's
Buffet, Inc. for a restaurant property in Orange
Park, Florida. (Exhibit 10.04 to the Company's
Quarterly Report on Form 10-Q filed with the
Commission on November 15, 2002 is incorporated
herein by reference.)
10.27 Lease Agreement between the Company and Barnhill's
Buffet, Inc. for a restaurant property in Neptune
Beach, Florida. (Exhibit 10.05 to the Company's
Quarterly Report on Form 10-Q filed with the
Commission on November 15, 2002 is incorporated
herein by reference.)
10.28 Contract between the Company and Barnhill's Buffet,
Inc. for sale of a restaurant.
13.01 2002 Annual Report to Shareholders.
21.01 Subsidiaries of the Company.
23.0l Independent Auditors' Consent
99.01 Certifications of Glen F. Ceiley
99.02 Certifications of Edward B. Alexander
(b) None.
(c) See (a)3. above for a list of all exhibits filed herewith
and the Exhibit Index.
(d) None.
22
CERTIFICATIONS
I, Glen F. Ceiley, certify that:
1. I have reviewed this annual report on Form 10-K of
Family Steak Houses of Florida, Inc.
2. Based on my knowledge, this annual report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent function):
23
a) All significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this annual report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation,
including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 19, 2003
/s/ Glen F. Ceiley
Glen F. Ceiley
Chairman of the Board
Principal Executive Officer
24
I, Edward B. Alexander, certify that:
1. I have reviewed this annual report on Form 10-K of
Family Steak Houses of Florida, Inc.
2. Based on my knowledge, this annual report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
25
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this annual report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation,
including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 19, 2003
/s/ Edward B. Alexander
Edward B. Alexander
Executive Vice President
Chief Financial Officer
26
Exhibit 99.1: Certification of Periodic Reports
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Family Steak Houses of Florida, Inc.'s
(the "Company") Annual Report on Form 10-K for the period ending
January 1, 2003, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Glen F. Ceiley,
Principal Executive Officer/Chairman of the Board of the
Company, certify pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that,:
(1). The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended; and
(2). The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 19, 2003 By: /s/ Glen F. Ceiley
Glen F. Ceiley
Principal Executive Officer/
Chairman of the Board
27
Exhibit 99.2: Certification of Periodic Reports
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Family Steak Houses of Florida, Inc.'s
(the "Company") Annual Report on Form 10-K for the period ending
January 1, 2003, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Edward B.
Alexander, Executive Vice President/ Chief Financial Officer of
the Company, certify pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that,:
(1). The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended; and
(2). The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 19, 2003 By: /s/ Edward B. Alexander
Edward B. Alexander
Executive Vice President/
Chief Financial Officer
28
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Annual
Report of Family Steak Houses of Florida, Inc. on Form 10-K and
in Registration Statement Nos. 33-11684, 33-12556, 33-12556 and
333-98327 of Family Steak Houses of Florida, Inc. on Forms S-8
of our report dated February 28, 2003, appearing in the 2002
Annual Report to Shareholders of Family Steak Houses of Florida,
Inc.
Deloitte & Touche LLP
Certified Public Accountants
Jacksonville, Florida
March 19, 2003
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FAMILY STEAK HOUSES OF FLORIDA, INC.
Date: March 19, 2003 By: /s/ Glen F. Ceiley
Glen F. Ceiley
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant in the capacities and on the date
indicated.
Signature Title Date
/s/ Edward B. Alexander Executive Vice President 3/19/03
Edward B. Alexander (Principal Financial and
Accounting Officer)
/s/ Glen F. Ceiley Chairman of the Board 3/19/03
Glen F. Ceiley
/s/ Steve Catanzaro Director 3/19/03
Steve Catanzaro
/s/ Jay Conzen Director 3/19/03
Jay Conzen
/s/ William Means Director 3/19/03
William Means
30