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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 0-10943

Ryan’s Family Steak Houses, Inc.

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     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 þ          No o

     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.     þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2.     Yes þ          No o

     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 July 2, 2003, was $573,505,000.

     The number of shares outstanding of the registrant’s Common Stock, $1.00 Par Value, was 42,226,000 at March 3, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

PART I

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 owns and operates restaurants located principally in the southern and midwestern United States. At December 31, 2003, the Company owned and operated 312 Ryan’s restaurants. In addition, the Company owned and operated 22 Fire Mountain restaurants. A Fire Mountain restaurant offers a selection of foods similar to a Ryan’s restaurant with display cooking and also features updated interior furnishings, an upscale food presentation and a lodge-look exterior. Therefore, in total, at December 31, 2003, the Company owned and operated 334 restaurants. In addition, at December 31, 2003, 18 Ryan’s restaurants were owned and operated by an unrelated third-party under a franchise agreement with the Company. 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 Company maintains an Internet website at www.ryansinc.com. This website offers free access to the Company’s press releases and filings with the Securities and Exchange Commission, including its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after these reports are filed with or furnished to the SEC.

      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 ended December 31, 2003:

Restaurant Operations

      General. The Company’s restaurants are family-oriented restaurants serving a wide variety of foods from centrally located scatter bars known collectively as the Mega Bar® buffet, as well as grilled entrees such as charbroiled steaks, hamburgers, chicken and seafood. The Mega Bar® 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 restaurants also offer a variety of non-alcoholic beverages. All restaurants have their Mega Bars® in a scatter bar format. This format breaks the Mega Bar® into island bars for easier customer access and more food variety.

      The Company’s current restaurant design features a display-style 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 to 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 2003, 160 of the Company’s restaurants operated with the display cooking format. In 2004, all new restaurants will open with display cooking, and current plans call for the conversion of 25 to 30 Ryan’s restaurants to the display cooking format.

      Most of the Company’s restaurants 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

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      The average customer count per restaurant during 2003 was approximately 6,200 per week, and the average meal price per person was $7.66, including beverage. Management believes that the average table turns over every 30 to 45 minutes.

      Each Company-owned restaurant is located in a free-standing masonry building that is typically about 10,000 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. The focal points of the main dining room are the Mega Bar® 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 cars.

      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 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 nine 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 managers and Restaurant Supervision participate in various incentive bonus programs. These individuals all participate in a bonus program that compares certain non-financial and financial measurements to pre-defined standards set by senior management (all measurements are collectively referred to hereafter as “Operations Standards”). General managers and managers are paid additional monthly bonuses based on the sales volumes of their individual restaurants with deductions for excess spending in key expense items. District managers are paid additional quarterly bonuses based principally on same-store sales, profitability and certain qualitative factors. Regional director bonuses are also paid quarterly and are based on the Operations Standards 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 the Company’s common stock, a general manager is promoted to Operating Partner and then receives cash bonuses based on both the operating profit and profit improvement of the restaurant. The investment in the Company’s stock is made by each participant either by purchase in the open market or by the exercise of previously granted stock options with payment either from personal funds or through a loan program arranged by the Company with a commercial bank. At December 31, 2003, Operating Partners were managing 161 restaurants. The Company’s long-term goal is to have Operating Partners in approximately two-thirds of its restaurants.

      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 the Company’s common stock (similar to the Operating Partner Program), a district manager is promoted to District Partner and then receives cash bonuses based on both the operating profit and profit improvement of the restaurants under his or her supervision. At December 31, 2003, there were 20 District

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      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 the Company’s common stock (similar to the Operating Partner Program), a regional director is promoted to Regional Partner and then receives cash bonuses based on 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” (service feedback) scores, profit improvement and certain qualitative factors. At December 31, 2003, there was one Regional Partner supervising 55 restaurants.

      Advertising. The Company does not rely extensively on advertising, spending less than one percent of restaurant sales during each of the years 2003, 2002 and 2001 on advertising. The Company’s advertising efforts consisted principally of billboard advertising, newspaper ads and a store-level local marketing program. 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 2004, current plans are to continue to emphasize billboard advertising, newspaper ads and the local marketing program. The Company reviews its overall marketing 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, current advertising cost levels and market penetration.

Expansion of Company-Owned Restaurants

      General. At December 31, 2003, the Company owned and operated 334 restaurants of which 312 were Ryan’s brand and 22 were Fire Mountain brand restaurants. During 2004, the Company plans to open 18 to 20 new Company-owned Fire Mountain restaurants, including five potential relocations. Target sites for these new restaurants are within or contiguous to the Company’s current 23-state operating area. Management defines a relocation as a restaurant opened within six months after closing another restaurant in the same market area. A relocation represents a redeployment of assets within a market. The following table summarizes the Company’s openings, closings, conversions (same site) and relocations during 2003, 2002 and 2001:

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      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 Company-owned restaurant is its proximity to other Company-owned 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 Company project manager to perform the actual construction work. In addition to selecting and scheduling subcontractors, a Company project manager also procures materials, if necessary, and provides general oversight of the construction project. A Company 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 or Fire Mountain restaurant (land, building and equipment) constructed in 2003 was approximately $2.9 million.

      Restaurant Opening. When a new 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 closed each year, net of openings, and the total number of franchised restaurants open at each year-end during the 5-year period ending December 31, 2003:

      At December 31, 2003, the Company’s sole franchise agreement was with Family Steak Houses of Florida, Inc. (“FSH”) which, at that date, operated 18 Ryan’s restaurants in central and northern Florida.

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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 needs for food and other products from a variety of major suppliers under competitive terms. These contracts are then assigned to the Company’s third-party distributor, U.S. Foodservice (“USF”), which orders products for the Company’s restaurants. USF’s orders are based on restaurant-generated orders, historical usage patterns and usage estimates from the Company’s management. Purchases are delivered to one of three warehouses operated by USF, which in turn delivers products to the restaurants. Management does not believe that the Company is substantially dependent on the contract with USF. If the distribution contract with USF was terminated or not renewed, the Company believes that it could obtain comparably-priced distribution services from other national distribution companies, although a sudden, unexpected termination could cause a temporary increase in the Company’s supply costs and, potentially, a temporary disruption in distribution.

      The beef used by the Company is obtained from seven midwestern suppliers based on price and availability of product. To ensure against interruption in the flow of beef supplies due to unforeseen or catastrophic events, USF maintains up to eight weeks supply of beef at its warehouses. The remaining 10% of the Company’s products (principally fresh produce) are purchased locally by restaurant management. 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 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’s®”, “Ryan’s Family Steak House®”, “Mega Bar®” and “Fire Mountain®”, and their related designs with the United States Patent and Trademark Office. All trademarks and service marks have stated expiration dates ranging from September 2007 to June 2012. 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. The Company’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 or Fire Mountain formats, particularly the Mega Bar® and, most recently, display cooking. The Company also competes with many specialty food outlets and other food vendors.

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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 approximately 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 Bar® and grill 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 and various family leave mandates. 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 $6.65 per hour was introduced in the U.S. Senate in early 2003. Although the proposed legislation was not passed in 2003, it is likely that Congress will consider the issue in 2004. 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 or the discovery of currently unknown conditions at any of its properties.

Employees

      At March 3, 2004, the Company employed approximately 22,600 persons, of whom approximately 22,300 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. All part-time employees 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 December 31, 2003, the Company had no operations outside the continental United States.

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      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 December 31, 2003, all restaurant sites, except 17 properties under ground leases and one restaurant under an operating lease for the building and its underlying land, were owned by the Company.

      A listing of the number of the Company’s restaurant locations by state as of December 31, 2003 appears in the next paragraph. A detailed listing of restaurant locations may be obtained without charge by writing to the Company’s Corporate Secretary at its corporate office.

      As of December 31, 2003, the Company owned and operated 334 restaurants in 23 states as follows:

      The Company’s corporate offices consist of three office buildings (30,000, 16,000 and 2,000 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 December 31, 2003, six closed restaurant properties were offered for sale, and one restaurant property in operation was under contract to sell. 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.

      In November 2002, a lawsuit was filed in the United States District Court, Middle District of Tennessee, Nashville Division, on behalf of three plaintiffs alleging various wage and hour violations by the Company of the Fair Labor Standards Act of 1938. The plaintiffs’ attorneys are seeking collective-action status on this complaint. In October 2003, the presiding judge denied the Company’s request to enforce the arbitration agreements signed by the plaintiffs and also ordered the Company to turn over certain employee addresses to the plaintiffs’ attorneys. The Company has appealed this decision. As part of the appeal process, the presiding judge stayed the order regarding employee addresses. Due to the evolving nature of this case, the potential financial impact to the Company’s financial results cannot be estimated at this time. Accordingly, no accrual for a loss contingency has been made in the accompanying consolidated financial statements.

      In addition, from time to time, the Company is involved in various legal claims and litigation arising in the normal course of business. Based on currently-known legal actions, management believes that, as a result of its legal defenses and insurance arrangements, none of these other actions should have a material adverse effect on the Company’s business or financial condition, taken as a whole.

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      None.

PART II

      The information regarding the quarterly market prices of the Company’s common stock for each quarterly period in the 2003 and 2002 fiscal years is set forth below. The common stock is listed on The Nasdaq Stock Market under the symbol RYAN. The Company has never paid cash dividends on its common stock and does not expect to pay such dividends in the foreseeable future. At March 3, 2004, the Company’s common stock was held by approximately 4,000 stockholders of record. The closing price quotation of the Company’s common stock on March 3, 2004 was $16.69 per share. The following table lists the high and low prices of the Company’s common stock for each quarter during 2003 and 2002:

      All amounts have been restated to reflect the 3-for-2 stock split in May 2002.

      As further described in Item 7A, the Company is party to long-term credit agreements that prohibit the payment of cash dividends but permit the payment of dividends solely in the Company’s common stock.

      The following table provides information on the number of securities to be issued upon the exercise of outstanding options, warrants and rights and the number of securities remaining available for future issuance.

Equity Compensation Plan Information at Last Fiscal Year-End

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      The following table summarizes the Company’s selected historical consolidated financial information for each of the last five years. The selected financial information under the captions “Consolidated Statements of Earnings Data” and “Selected Other Consolidated Data” has been derived from the Company’s audited consolidated financial statements and internal records. This table should be read in conjunction with the Company’s other financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements included elsewhere in this document.

(a)	Indicates a 53-week period
(b)	All amounts have been restated to reflect the 3-for-2 stock split in May 2002.

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Company Overview

      The Company’s principal business is the ownership and operation of family dining restaurants with grill/buffet formats under the “Ryan’s” and “Fire Mountain” brand names. At December 31, 2003, the Company operated 334 restaurants (312 Ryan’s brand and 22 Fire Mountain brand) in 23 states. The principal product for both brands is a self-service buffet, which features hand-carved and other meats, vegetables, pizza, soups, fresh and prepared salads, fruit, bakery products and soft-serve ice cream and yogurt. About one-half of the Ryan’s restaurants and all of the Fire Mountain restaurants also have the display cooking format, which involves a glass-enclosed grill and cooking area that extends into the dining room. At restaurants with the display cooking format, a variety of meats, such as steak, chicken and seafood, are grilled daily and available to customers as part of the buffet price. Plated, grilled entrée selections are also available at the Ryan’s restaurants without the display cooking format. Both brands are characterized by their friendly and attentive service and affordable prices.

      The Company’s revenues are derived principally from food and beverage sales at its restaurants. Sales are generally transacted in cash, checks or credit/debit cards. The latter item is essentially as liquid as cash as it is generally available for use by the Company within two days. Sales made on accounts receivable are not significant. Inventories are purchased on credit and are rapidly converted to cash. Therefore, the Company does not maintain significant receivables or inventories, and other working capital requirements for operations are not significant.

      Material opportunities for the Company focus on growing its restaurant base in a profitable manner and increasing sales at its existing restaurants. Management considers its store-level managers to be key factors in achieving both of these objectives and believes that controlled growth in the number of its restaurants at a rate of approximately 4% per year is optimal for training and maintaining strong store-level management teams. The Company also strengthens these teams by striving to keep the teams intact at each restaurant and by continuous training programs. Unit-level sales are also impacted by hourly staff training and local marketing programs. In addition, sales at existing Ryan’s restaurants have been favorably impacted by conversion to the display cooking format under the Fire Mountain name.

      Restaurant sales can be impacted by changes in personal income levels, changes in consumers’ preference for family dining and food safety concerns by consumers. In 2003, the average ticket, or sale, per customer at Ryan’s and Fire Mountain combined was $7.66. The Company’s restaurants are especially popular with families and senior citizens, and management strives to attract and retain these customer groups by serving good food at affordable prices. Management believes that this pricing policy helps the Company’s restaurants remain a favorable dining choice even when its customers undergo economic hardships.

      Management also recognizes the increase in restaurant choices for consumers and the growing popularity of casual-dining restaurants over the past ten years. The Ryan’s brand, which was started in 1978, has undergone many format changes over the years. About one-half of the Ryan’s restaurants have a traditional family steakhouse format, which is characterized by customers carrying their drinks and silverware to their tables and a la carte entrée selections that are available in addition to the buffet described above. The display cooking format is not available at these restaurants. The format in the other Ryan’s restaurants has been modified to feature display cooking, and drinks and silverware are brought to the tables by servers. The only menu selection available to customers is the buffet. The Fire Mountain brand incorporates the changes made to the modified Ryan’s and also features updated interior furnishings, an upscale food presentation and a lodge-look exterior. By providing more complete table service and surroundings that are more visually interesting, management believes that the Fire Mountain brand gives consumers an affordable alternative to other casual-dining concepts. Growth plans for the Ryan’s and Fire Mountain brands are described below in “Liquidity and Capital Resources”.

      Also, food safety concerns by consumers can affect sales. Accordingly, food safety is a top priority for the Company. Food vendors are held to the highest standards, and all store managers are certified and periodically recertified through the ServSafe® food safety training program, which was developed by the National Restaurant Association Educational Foundation and is administered by the Company’s in-house trainers.

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      Sales and profit growth can be impacted if the Company cannot recruit and retain store managers. To meet this challenge, the Company pays competitive salaries and bonuses and, through its store growth, offers excellent opportunities for future promotions. In addition, many managers are on a rotating four-day weekly work schedule, and manager transfers are made only for special circumstances. The Company also offers an Operating Partner plan for qualified senior managers, who, upon invitation and then joining the plan, can stay in their respective restaurants for a five-year period. Operating Partners receive cash bonuses based on both the operating profit and profit improvement of their respective restaurants and also receive a deferred cash bonus at the end of the five-year period. At December 31, 2003, there were 161 Operating Partners in place, representing 48% of the Company’s restaurants at that date. The Company’s long-term goal is to have Operating Partners at approximately two-thirds of its restaurants.

      Principal risks to the Company’s sales and profit growth plans include unsuitable locations for new or existing restaurants, significant increases in product costs and ineffective controls over restaurant operating costs. Sites for new restaurants are evaluated using both demographic software and on-site visits. Consumer income, population density, traffic patterns and retail proximity are important factors used in site selection. Also, executive management visits and approves all sites prior to purchase. Existing sites are also periodically reviewed for long-term suitability, and restaurants may be relocated to new sites within the same market area if changing retail conditions have made an existing site unsuitable for long-term growth prospects. During 2003, the Company relocated three restaurants, resulting in average sales increases at the new sites in excess of 70% over the prior year. Significant increases in product costs may also adversely affect store-level profits. Fortunately, due to the wide variety of products offered at the restaurants, there are typically decreases in the cost of other products to offset many cost increases. Subject to competitive factors, menu price increases can be implemented to maintain profit levels. However, this step is normally taken as a last measure by the Company in order to maintain affordable pricing for its customers. Finally, the Company maintains strong cost controls supplemented by an incentive bonus system that rewards managers for good sales and cost containment performance. Food and payroll costs are measured weekly, and store-level profits provide the basis for certain bonus payments for store managers as well as for their related supervisory personnel.

Critical Accounting Policies

      Critical accounting policies are defined as those that have a significant impact on the Company’s financial statements and involve difficult or subjective estimates of future events by management. Management’s estimates could differ significantly from actual results, leading to possible significant adjustments to future financial results. The following policies are considered by management to involve estimates that most critically impact reported financial results.

      Property and equipment are recorded at cost, less accumulated depreciation. Buildings and land improvements are depreciated over estimated useful lives ranging from 25 to 39 years, and equipment is depreciated over estimated useful lives ranging from 3 to 20 years. Depreciation expense for financial statement purposes is calculated using the straight-line method. Management is responsible for estimating the initial useful lives and any revisions thereafter and bases its estimates principally on historical usage patterns of the assets. Material differences in the amount of reported depreciation could result if different assumptions were used.

      Long-lived assets, which consist principally of restaurant properties, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews restaurants for possible impairment if the restaurant has had cash flows of $50,000 or less in the aggregate over the previous 12 months or if it has been selected for relocation and the new site is under construction. For restaurants that will continue to be operated, the carrying amount is compared to the undiscounted future cash flows, including proceeds from future disposal, over the remaining useful life of the restaurant. The estimate of future cash flows is based on management’s review of historical and current sales and cost trends of both the subject and similar restaurants. The estimate of proceeds from future disposal is based on management’s knowledge of current and planned development near the restaurant

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      The Company self-insures a significant portion of expected losses from its workers’ compensation, general liability and team member medical programs. See note 6 in the accompanying consolidated financial statements for the aggregate amount of these liabilities. For workers’ compensation and general liability claims, the portion of any individual claim that exceeds $250,000 is covered by insurance purchased by the Company. Accrued liabilities are recorded for the estimated, undiscounted future net payments, or ultimate costs, to settle both reported claims and claims that have been incurred but not reported. On a quarterly basis, management reviews claim values as estimated by a third-party claims administrator (“TPA”) and then adjusts these values for estimated future increases in order to record ultimate costs. Both current and prior years’ claims are reviewed because estimated claim values are frequently adjusted by the TPA as new information, such as updated medical reports or settlements, is received. Management reviews the relationship between historical claim estimates and payment history, overall number of accidents and historical claims experience in order to make an ultimate value estimate. For team member medical claims, the portion of any individual claim that exceeds $300,000 is covered by insurance purchased by the Company. Accruals are based on management’s review of historical claim experience. Unexpected changes in any of these factors could result in costs that are materially different than initially reported.

Net Earnings

      The following table presents items in the consolidated statements of earnings as a percentage of restaurant sales and the percentage change of the dollar amounts between years:

2003 Compared to 2002

      Total restaurant sales increased by $31.2 million, or 4.0%, to $805.0 million in 2003 from $773.8 million in 2002. The sales increase resulted principally from incremental sales, amounting to approximately $38.3 million, from new restaurants opened in 2003 and 2002, partially offset by an estimated $7.1 million loss in sales associated with the temporary closing of 27 stores for conversion to the display cooking format with a

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      Same-store sales for the year increased 0.1%. In computing same-store sales, the Company averages weekly sales for those units operating for at least 18 months. All converted or relocated stores are included in the same-store sales calculation, provided that their underlying stores were operating for at least 18 months. Same-store sales and related factors in 2003 compared to 2002 and 2002 compared to 2001 were as follows:

Same-store sales during 2003 improved as the year progressed, ranging from down 4.2% during the first quarter to up 4.0% during the fourth quarter. Same-store customer counts also improved during 2003, with a 7.2% decline during the first quarter and a 0.8% increase during the fourth quarter. The menu factor principally represents year-over-year menu price increases.

      Management attributes this sales trend principally to an improving retail environment, the Company’s lodge-look conversions and the implementation of a store-level local marketing program. During 2003, 26 restaurants were reopened after their conversions to the display cooking format with a lodge-look exterior. Average same-store sales gains at these restaurants following their conversions were in excess of 15%. Implemented in April 2003, the Company’s local marketing program trains and encourages store management to get the Ryan’s and Fire Mountain brand names in front of potential customers through the use of both external merchandising and community marketing. While the impact from any company-wide marketing program is difficult to evaluate, there were sales gains during the year at the Ryan’s restaurants that had not been remodeled with the display cooking format, leading management to conclude that local marketing efforts were effective.

      During 2003, the Company opened 12 new and relocated three restaurants. All new restaurants in 2003 were opened with the display cooking format and lodge-look exterior and achieved first-year annualized sales volumes that averaged $3.5 million per restaurant. Five restaurants were closed during 2003, three of which were relocations. Management defines a relocation as a restaurant opened within 6 months after the closing of another restaurant in the same market area. A relocation generally results in an opening and a closing in the same year. Accordingly, at the end of 2003 and 2002, the Company owned and operated 334 and 324 restaurants, respectively.

      Total cost of sales increased 4.7% to $682.1 million in 2003 from $651.7 million in 2002. Such costs, as a percentage of sales, were 84.7% for 2003 and 84.2% for 2002. Thus, the Company’s operating margins at the restaurant level were 15.3% and 15.8% of sales in 2003 and 2002, respectively. These costs are presented in a tabular format in the “Net Earnings” section above and discussed more fully in the following paragraphs.

      Food and beverage costs decreased to 35.2% of sales in 2003 from 35.6% of sales in 2002 resulting principally from lower seafood, poultry and pork prices partially offset by higher beef costs. Menu price increases and an increased store-level focus by managers, particularly when beef prices were 30% higher during the fourth quarter of 2003, also contributed to lower food costs as a percent of sales. Beef prices have decreased during the first part of 2004, largely due to lower export demand resulting from a December 2003 occurrence of bovine spongiform encephalopathy (“Mad Cow” disease) in Washington state. Management estimates that 2004 beef prices will increase by approximately 5% over average 2003 levels. The Company has not seen any reduced demand for its steaks or other beef products by its customers.

      Payroll and benefits increased to 31.5% of sales in 2003 from 31.2% of sales in 2002 due to higher store management salaries and payroll tax expense, partially offset by well-controlled hourly labor costs. All other restaurant costs, including depreciation, increased to 18.0% of sales in 2003 compared to 17.4% of sales in 2002 due to higher natural gas, depreciation, store opening and local store advertising costs.

      General and administrative expenses increased to 5.2% of sales in 2003 from 4.9% of sales in 2002 due principally to higher 2003 performance-based bonuses.

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      Interest expense amounted to $10.2 million in 2003 (1.3% of sales) compared to $9.3 million in 2002 (1.2% of sales). The Company’s weighted average interest rate was 5.5% for both 2003 and 2002. Interest expense in 2003 was impacted by an $8.1 million increase in average debt levels during 2003 as higher cash balances were maintained during much of the year due to the timing of payments related to the Company’s revolving credit facility (see “Liquidity and Capital Resources”).

      Royalties from franchised restaurants decreased to $1.5 million in 2003 from $1.7 million in 2002 due principally to Family Steak Houses of Florida (“FSH”), the Company’s sole franchisee, operating fewer stores in the current year. In December 2003, the Company and FSH amended their franchise agreement so that over the following 18 months, FSH will either sell, close or convert to a non-affiliated brand its current 18 Ryan’s restaurants, and the existing franchise relationship will be terminated by no later than June 30, 2005. Management plans to open Company-owned restaurants in FSH’s former territory, starting in 2005.

      Based upon the above changes to revenues and expenses, earnings before income taxes decreased to $74.9 million in 2003 from $79.0 million in 2002.

      The effective income tax rate for 2003 decreased to 33.5% compared to 36.2% in 2002 due to higher federal and state tax credits and lower state income tax expense based on revised estimates made during the fourth quarter of 2003. For 2004, management expects an effective income tax rate of around 33.8%, subject to the reauthorization of the Work Opportunity Tax Credit by the U.S. Congress. This credit expired on December 31, 2003 and has a 2% impact on the Company’s effective tax rate. This credit has been reauthorized in past years, and management believes that this year’s reauthorization is likely given the favorable impact the credit has on economically-disadvantaged individuals.

      Net earnings decreased to $49.8 million in 2003 (6.2% of sales) from $50.4 million in 2002 (6.5% of sales). Diluted weighted-average shares decreased by 3.9% to 43,754,000 in 2003 compared to 45,518,000 in 2002 due to the Company’s stock repurchase program. Accordingly, diluted earnings per share (“DEPS”) increased 2.7% to $1.14 in 2003 from $1.11 in 2002. All weighted-average shares and DEPS have been restated to reflect the Company’s 3-for-2 stock split in May 2002 (see “Stock Split”).

2002 Compared to 2001

      Total restaurant sales increased by $28.6 million, or 3.8%, to $773.8 million in 2002 from $745.2 million in 2001. Incremental sales from restaurants opened in 2002 and 2001 amounted to approximately $38.6 million and were partially offset by a 0.7% decrease in same-store sales. Same-store sales and related factors in 2002 compared to 2001 and 2001 compared to 2000 were as follows:

      Same-store sales in 2002 were up 1.0% during the first five months of the year and then became progressively weaker during the remaining seven months with an overall 1.7% decrease during that period. Same-store sales at restaurants with the Company’s traditional family steakhouse format and at those restaurants with the display cooking format showed a similar trend and ended the year with an overall 3.2% decrease and a 1.1% increase, respectively. Management attributed this sales trend principally to an overall weak economic environment that appeared to deteriorate during the year.

      During 2002, the Company opened 13 new and relocated seven restaurants. Accordingly, at the end of 2002 and 2001, the Company owned and operated 324 and 313 restaurants, respectively.

      Total cost of sales increased 3.6% to $651.7 million in 2002 from $628.7 million in 2001. Such costs, as a percentage of sales, were 84.2% for 2002 and 84.4% for 2001. Thus, the Company’s operating margins at the restaurant level were 15.8% and 15.6% of sales in 2002 and 2001, respectively. These costs are presented in a tabular format in the “Net Earnings” section above and discussed more fully in the following paragraph.

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      Food and beverage costs decreased to 35.6% of sales in 2002 from 36.2% in 2001 resulting from menu price increases and lower seafood and pork prices, partially offset by higher soybean oil products and distribution costs. Payroll and benefits increased to 31.2% of sales in 2002 from 30.5% of sales in 2001 due to higher store management wages and workers’ compensation costs. All other restaurant costs, including depreciation, decreased to 17.4% of sales in 2002 compared to 17.7% of sales in 2001 due to lower natural gas and store closing costs. In 2001, store closing costs included approximately $1.2 million of additional depreciation charges associated with the closing of a leased property in January 2002.

      General and administrative expenses amounted to 4.9% of sales in 2002 and 5.2% of sales in 2001. Lower performance-based bonuses and manager recruiting costs were incurred during 2002.

      Interest expense amounted to $9.3 million in 2002 (1.2% of sales) compared to $11.7 million in 2001 (1.6% of sales). The decrease resulted from a decrease in the Company’s weighted average interest rate to 5.5% in 2002 from 7.2% in 2001. Debt levels increased by $24.0 million in 2002 as additional purchases of the Company’s common stock during 2002 made under the Company’s stock repurchase program decreased cash available for debt repayment purposes.

      Based upon the above changes to revenues and expenses, earnings before income taxes increased to $79.0 million in 2002 from $70.4 million in 2001.

      The effective income tax rate for 2002 increased to 36.2% compared to 36.0% in 2001 due to changes to various state tax laws and procedures.

      Net earnings increased to $50.4 million in 2002 (6.5% of sales) from $45.0 million in 2001 (6.0% of sales). Diluted weighted-average shares decreased by 4.2% to 45,518,000 in 2002 compared to 47,519,000 in 2001 due to the Company’s stock repurchase program. Accordingly, DEPS increased 16.8% to $1.11 in 2002 from $0.95 in 2001.

Liquidity and Capital Resources

      The Company’s principal source of liquidity is from its restaurants sales, which, as noted above, are primarily derived from cash, checks or credit/debit cards. Principal uses of cash are operating expenses, which have been discussed in the preceding sections, capital expenditures and share repurchases.

      A comparison of the Company’s sources and uses of funds for 2003 and 2002 follow (in millions):

      Net cash provided by operating activities increased due to a $7.5 million decrease in income tax payments resulting from larger differences between book and tax depreciation related to bonus depreciation rules and larger federal tax credits related principally to the Work Opportunity Tax Credit program. Other factors causing the operating cash increase include higher depreciation and amortization and higher accrued liabilities, both of which are related principally to the growth in the number of the Company’s restaurants in operation. At December 31, 2003, the Company’s working capital amounted to a $25.0 million deficit compared to a $25.2 million deficit at January 1, 2003. The Company does not anticipate any adverse effect from the current working capital deficit due to the significant and steady level of cash flow provided by operations.

      Net cash used in investing activities decreased by $1.1 million. Total capital expenditures increased to $76.9 million in 2003 from $74.1 million in 2002 due principally to higher land and remodeling expenditures. Proceeds from the sale of property and equipment increased by $3.8 million in 2003. These sales typically involve closed restaurant properties and excess land and occur on an irregular basis during any given year.

      During 2004, the Company plans to build and open 18 to 20 new restaurants, including five potential relocations, with an average unit cost (including land) of approximately $2.9 million. These restaurants will

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      Net cash used in financing activities decreased by $3.5 million due principally to a $33.5 million decrease in share repurchases offset by a $30 million change in net borrowings. In addition to a $100 million repayment associated with the Company’s issuance of $100 million of 4.65% senior notes in July 2003, net borrowings under the Company’s revolving credit facility decreased by $6 million in 2003 compared to a $24 million increase in 2002.

      The Company began its stock repurchase program in March 1996 and is currently authorized to repurchase up to an aggregate 55 million shares of its common stock through December 2004. Through December 31, 2003, approximately 43.2 million shares, or 54% of total shares outstanding at the beginning of the repurchase program, had been purchased at an average cost of $7.28 per share, amounting to $314.6 million in total. Repurchases may be made from time to time on the open market or in privately negotiated transactions in accordance with applicable securities regulations, depending on market conditions, share price and other factors. The Company’s current credit agreements generally limit share repurchases to 50% of net earnings. Additional repurchases are allowed based on capital expenditure levels. Management intends to actively proceed with the repurchase program through 2004, subject to the continued availability of capital, the aforementioned limitations imposed by the credit agreements, applicable securities regulations and the other factors described in “Forward-Looking Information”.

      The Company’s contractual obligations at December 31, 2003 were as follows:

The Company’s long-term debt and operating leases are described in footnotes 3 and 5, respectively, of the accompanying consolidated financial statements. Construction obligations represent commitments for store construction ($5.5 million) and land purchases ($1.0 million). The Company has also entered into various contracts for food and other restaurant supply purchases that set pricing and product specifications, but do not specify any minimum purchase quantities.

      At December 31, 2003, the Company’s debt consisted of $75 million of 9.02% senior notes, $100 million of 4.65% senior notes and a $100 million revolving credit facility of which $21 million was outstanding. During 2003, the Company issued the 4.65% senior notes, using the proceeds to repay $100 million in borrowings under the revolving credit facility. At the same time, the maximum level of the revolving credit facility was reduced from $200 million to $100 million.

      After allowances for letters of credit and other items, there was approximately $68 million in funds available under the revolving credit facility at December 31, 2003. During 2004, management estimates that cash generated from operations will exceed the Company’s capital expenditure requirements and plans to use this excess cash for stock repurchases. Additional debt may be incurred in order to meet the Company’s share

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      The Company’s ability to draw on these funds may be limited by restrictions in the agreements governing both sets of senior notes and the revolving credit facility. Management believes that, based on current plans, these restrictions will not impair the Company’s operations during 2004. The current revolving credit facility expires in January 2005, and management intends to refinance the facility during 2004. Based on preliminary discussions with banks, management believes that the facility will be refinanced in a manner that appropriately supports the Company’s current operations and growth plans. However, since final negotiations have not commenced, there can be no assurance that the refinancing will occur on anticipated terms or at all.

      Management believes that its current capital structure is sufficient to meet its 2004 requirements. The Company has entered into interest rate hedging transactions in the past, and although no such agreements are currently outstanding, management intends to continue monitoring the interest rate environment and may enter into such transactions in the future if deemed advantageous.

Stock Split

      On May 1, 2002, the Company’s board of directors approved a 3-for-2 stock split of the Company’s common shares in the form of a 50% stock dividend. Accordingly, shareholders of record on May 15, 2002 received an additional common share for every two shares they held. The additional shares were distributed on May 29, 2002. All share and per share amounts in this annual report have been restated to reflect the stock split.

Legal Contingencies

      In November 2002, a lawsuit was filed in the United States District Court, Middle District of Tennessee, Nashville Division, on behalf of three plaintiffs alleging various wage and hour violations by the Company of the Fair Labor Standards Act of 1938. The plaintiffs’ attorneys are seeking collective-action status on this complaint. In October 2003, the presiding judge denied the Company’s request to enforce the arbitration agreements signed by the plaintiffs and also ordered the Company to turn over certain employee addresses to the plaintiffs’ attorneys. The Company has appealed this decision. As part of the appeal process, the presiding judge stayed the order regarding the employee addresses. Due to the evolving nature of this case, the potential impact to the Company’s financial results cannot be estimated at this time. Accordingly, no accrual for a loss contingency has been made in the accompanying consolidated financial statements.

      In addition, from time to time, the Company is involved in various legal claims and litigation arising in the normal course of business. Based on currently-known legal actions, management believes that, as a result of its legal defenses and insurance arrangements, none of these other actions should have a material adverse effect on the Company’s business or financial condition, taken as a whole.

New Accounting Pronouncements

      The following recent accounting pronouncements could potentially impact the Company’s financial results.

      The Financial Accounting Standards Board (“FASB”) issued Statement of Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” in June 2001. SFAS 143 applies to legal obligations associated with the retirement of certain tangible long-lived assets. This statement is effective for fiscal years beginning after June 15, 2002. Accordingly, the Company adopted this statement on January 2, 2003. The adoption of SFAS 143 has not had a material impact on the Company’s financial statements.

      In July 2002, the FASB issued SFAS No. 146, “Accounting for Obligations Associated with Disposal Activities,” which addresses financial reporting and accounting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS 146 requires that a liability be recognized for such costs only when the liability is incurred, which is in contrast to EITF 94-3, which requires the recognition of a liability upon the commitment

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      In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” which amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has adopted the disclosure provision of this statement.

      In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 addresses the requirements for financial statement disclosures to be made by a guarantor about its obligations under certain guarantees and clarifies that a guarantor is required to recognize a liability upon issuing a guarantee for the fair value of the obligation. The Company will apply FIN 45 to any guarantees issued or modified after December 31, 2002. The impact to the Company’s financial results has been immaterial. The Company had no material guarantees at December 31, 2003.

      On May 15, 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” The Statement requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. Generally, the Statement is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The Company adopted the provisions of the Statement on July 3, 2003. The Company did not have any financial instruments within the scope of SFAS 150 at any time during 2003.

      In December 2003, the FASB revised Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities,” which was originally issued in January 2003, to provide guidance regarding issues arising from the implementation of FIN 46. This interpretation addresses the consolidation by business enterprises of variable interest entities, as defined in the interpretation, and sets forth additional disclosure regarding such interests. FIN 46 applies immediately to variable interest entities created, or in which the Company obtains an interest, after January 31, 2003, and became effective as of December 31, 2003 for all variable interest entities held by the Company prior to that date. Management has evaluated the impact of FIN 46 and does not expect it will have a material effect on the Company’s consolidated financial statements.

Impact of Inflation

      The Company’s operating costs that may be affected by inflation consist principally of food, payroll and utility costs. A significant number of the Company’s restaurant team members are paid at the Federal minimum wage and accordingly, legislated changes to the minimum wage affect the Company’s payroll costs. Although no minimum wage increases have been signed into law, legislation proposing to increase the minimum wage by $1.50 to $6.65 per hour was introduced in the U.S. Senate in early 2003. Although the proposed legislation was not passed in 2003, it is likely that Congress will consider the issue in 2004. The Company is typically able to increase menu prices to cover most of the payroll rate increases.

      The Company considers its current price structure to be very competitive. This factor, among others, is considered by the Company when passing cost increases on to its customers. Sales prices were increased by 2.8% in 2003 and 3.9% in 2002.

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 Company plans or strategies, 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

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      The Company’s exposure to market risk relates primarily to changes in interest rates. On January 28, 2000, the Company obtained 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%. At the same time, a separate transaction involved the private placement of $75 million of senior notes due in 2008 with principal payments commencing in 2005, bearing interest at 9.02%. On July 25, 2003, the Company completed a private placement of $100 million of its 4.65% senior notes due 2013 with principal payments beginning in 2007, bearing interest at 4.65%. In connection with this transaction, the revolving credit facility’s credit limit was permanently reduced from $200 million to $100 million. All loans are secured by the stock of the Company’s wholly-owned subsidiaries.

      While the Company has entered into derivative financial instrument agreements in the past, there were no such agreements outstanding during the year ended December 31, 2003. The Company has never entered 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 December 31, 2003. 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”) at December 31, 2003 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 December 31, 2003 due to the variable rate provisions of the related debt instruments. During 2003, the variable rate debt had an average interest rate of 2.8%. 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 December 31, 2003.

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RYAN’S FAMILY STEAK HOUSES, INC. AND SUBSIDIARIES